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SECOND DIVISION Pasig Land Development Corporation (Mid-Pasig) the

latters 3.1-hectare property in Pasig City. This property is


ROCKLAND CONSTRUCTION COMPANY, covered by Transfer Certificate of Title Nos. 469702 and
INC., 337158 under the control of the Presidential Commission on
Petitioner, Good Government (PCGG). Upon instruction of Mid-Pasig
to address the offer to the PCGG, Rockland wrote the PCGG
- versus - on April 15, 2000. The letter,[5] addressed to PCGG
Chairman Magdangal Elma, included Rocklands proposed
MID-PASIG LAND DEVELOPMENT terms and conditions for the lease. This letter was also
CORPORATION, received by Mid-Pasig on April 18, 2000, but Mid-Pasig
Respondent. made no response.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - -x Again, in another letter[6] dated June 8,
2000 addressed to the Chairman of Mid-Pasig, Mr. Ronaldo
DECISION Salonga, Rockland sent a Metropolitan Bank and Trust
Company Check No. 2930050168[7] for P1 million as a sign
QUISUMBING, J.:
of its good faith and readiness to enter into the lease
agreement under the certain terms and conditions stipulated
This petition for review seeks the reversal of the
in the letter. Mid-Pasig received this letter on July 28, 2000.
Decision[1] and Resolution[2] dated February 27,
2004 and July 21, 2004, respectively, of the Court of
In a subsequent follow-up letter[8] dated February 2,
Appeals in CA-G.R. CV No. 76370. The appellate court had
2001, Rockland then said that it presumed that Mid-Pasig
reversed and set aside the Decision[3] dated September 2,
had accepted its offer because the P1 million check it issued
2002 of the Regional Trial Court (RTC), Branch 67 of Pasig
had been credited to Mid-Pasigs account on December 5,
City, in Civil Case No. 68350; dismissed petitioners
2000.[9]
complaint; and held that there was no perfected contract of
lease between the parties.
Mid-Pasig, however, denied it accepted Rocklands
The antecedents facts, culled from the records, are as offer and claimed that no check was attached to the said
follows: letter. It also vehemently denied receiving the P1 million
Rockland Construction Company, Inc. (Rockland), in check, much less depositing it in its account.
a letter[4] dated March 1, 2000, offered to lease from Mid-
3. Ordering the defendant to execute a written lease
In its letter[10] dated February 6, 2001, Mid-Pasig contract in favor of the plaintiff containing the
replied to Rockland that it was only upon receipt of the principal terms and conditions mentioned in the
next-preceding paragraph, within sixty (60) days
latters February 2 letter that the former came to know where from finality of this judgment, and likewise
the check came from and what it was for. Nevertheless, it ordering the plaintiff to pay rent to the
defendant as specified in said terms and
categorically informed Rockland that it could not entertain conditions;
the latters lease application. Mid-Pasig reiterated its refusal 4. Ordering the defendant to keep and maintain the
of Rocklands offer in a letter[11] dated February 13, 2001. plaintiff in the peaceful possession and
enjoyment of the leased premises during the
term of said contract;
Rockland then filed an action for specific performance
docketed as Civil Case No. 68350 in the RTC, Branch 67 of 5. Ordering the defendant to pay plaintiff
Pasig City. Rockland sought to compel Mid-Pasig to execute [attorneys] fees in the sum of One Million Pesos
(P1,000,000.00), plus P2,000.00 for every
in Rocklands favor, a contract of lease over a 3.1-hectare appearance made by counsel in court;
portion[12] of Mid-Pasigs property in Pasig City.
6. The temporary restraining order dated April 2,
2001 is hereby made PERMANENT;
On September 2, 2002, the trial court rendered a
7. Dismissing defendants counterclaim.
decision, the dispositive portion of which reads in part:
With costs against the defendant.
WHEREFORE, judgment is rendered, as
follows: SO ORDERED.[13]
1. Declaring that the plaintiff and the defendant
have duly agreed upon a valid and enforceable
lease agreement of subject portions of On appeal, the Court of Appeals reversed and set aside the trial
[defendants] properties designated in Exh. A as courts decision on the following grounds: (1) there was no
areas A, B and C, comprising an area of 5,000
square meters, 11,000 square meters and 15,000 meeting of the minds as to the offer and acceptance between
square meters, or a total of 31,000 square meters; the parties; (2) there was no implied acceptance of the P1
2. Holding that the principal terms and conditions
of the aforesaid lease agreement are as stated in
million check as Mid-Pasig was not aware of its source at the
plaintiffs June 8, 2000 letter (Exh. D), to wit: time Mid-Pasig discovered the existence of the P1 million in
xxxx its account; and (3) Rocklands subsequent acts and/or
omissions contradicted its claim that there was already a
contract of lease, as it neither took possession of the property, Mid-Pasig counters that it never accepted Rocklands
nor did it pay for the corresponding monthly offer. It avers it immediately rejected Rocklands offer upon
learning of the mysterious deposit of the P1 million check in
rentals. Accordingly, the Court of Appeals
its account.
dismissed Rocklands complaint, as well as Mid-Pasigs
counterclaim. Rockland sought reconsideration, but it was Since the re-stated issues are intertwined, we shall
denied. discuss them jointly.

Petitioner Rockland now comes before us raising a A contract has three distinct stages: preparation,
perfection, and consummation. Preparation or negotiation
complex issue:
begins when the prospective contracting parties manifest
. . . WHETHER OR NOT RESPONDENTS ACT OF their interest in the contract and ends at the moment of their
DEPOSITING INTO ITS CORPORATE BANK agreement. Perfection or birth of the contract occurs when
ACCOUNT PETITIONERS P1 MILLION CHECK
AND COLLECTING THE PROCEEDS THEREOF: they agree upon the essential
(A) PRODUCES THE LEGAL EFFECT OF AN elements thereof. Consummation, the last stage, occurs when
ACCEPTANCE OF PETITIONERS OFFER AND the parties fulfill or perform the terms agreed upon in the
CONSIDERED AS CONSENT TO THE PAYMENT
FOR WHICH IT WAS INTENDED; AND/OR [(B)] contract, culminating in the extinguishment thereof.[15]
CONSTITUTES IN LEGAL CONTEMPLATION
ESTOPPEL IN PAIS, SUFFICIENT TO APPRECIATE Negotiation is formally initiated by an
RESPONDENTS CONSENT TO THE LEASE.[14] offer. Accordingly, an offer that is not accepted, either
expressly or impliedly,[16] precludes the existence of consent,
Simply stated, the issue may be rephrased into two which is one of the essential elements[17] of a
questions: Was there a perfected contract of contract. Consent, under Article 1319 of the Civil Code, is
lease? Had estoppel in pais set in? manifested by the meeting of the offer and acceptance upon
the thing which are to constitute a contract. To produce a
Rockland contends that the contract of lease had been contract, the offer must be certain and the acceptance
perfected and that Mid-Pasig is in estoppel in pais because it absolute.[18]
impliedly accepted its offer when the P1 million check was
credited to Mid-Pasigs account. A close review of the events in this case, in the light
of the parties evidence, shows that there was no perfected
contract of lease between the parties. Mid-Pasig was not had accepted Rocklands offer. Mid-Pasig consistently
aware that Rockland deposited the P1 million check in its rejected Rocklands offer. Further, Rockland never secured
account. It only learned of Rocklands check when it
the approval of Mid-Pasigs Board of Directors and the
received Rocklands February 2, 2001 letter. Mid-Pasig, upon
investigation, also learned that the check was deposited at PCGG to lease the subject property to Rockland. As noted
the Philippine National Bank (PNB) San Juan Branch, by the Court of Appeals, if indeed Rocklandbelieved that
instead of PNB Ortigas Branch where Mid-Pasig maintains Mid-Pasig impliedly accepted the offer, then it should have
its account. Immediately, Mid-Pasig taken possession of the property and paid the monthly
wrote Rockland on February 6, 2001 rejecting the offer, and rentals. But it did not. For estoppel to apply, the action
proposed that Rockland apply the P1 million to its other
giving rise thereto must be unequivocal and intentional
existing lease instead. These circumstances clearly show that
there was no concurrence of Rocklands offer and Mid-Pasigs because, if misapplied, estoppel may become a tool of
acceptance. injustice.[21]

WHEREFORE, the instant petition is DENIED. The


Mid-Pasig is also not in estoppel in pais. The doctrine
Decision and Resolution dated February 27, 2004 and July
of estoppel is based on the grounds of public policy, fair 21, 2004, respectively, of the Court of Appeals in CA-G.R.
dealing, good faith and justice, and its purpose is to forbid CV No. 76370 are AFFIRMED. Costs against the
one to speak against his own act, representations, or petitioner.
commitments to the injury of one to whom they were
directed and who reasonably relied thereon.[19] Since SO ORDERED.
estoppel is based on equity and justice, it is essential that
before a person can be barred from asserting a fact contrary
to his act or conduct, it must be shown that such act or
conduct has been intended and would unjustly cause harm to
those who are misled if the principle were not applied
against him.[20]

From the start, Mid-Pasig never falsely represented its


intention that could lead Rockland to believe that Mid-Pasig
Before us is a petition for review on certiorari of the
Decision[1] of the Court of Appeals (CA) in CA-G.R. No.
FIRST DIVISION 46153 which affirmed the decision[2] of the Regional Trial
Court (RTC), Branch 71, Pasig City, in Civil Case No.
58551, and its Resolution[3] denying the motion for
MANILA METAL CONTAINER G.R. No. 166862 reconsideration filed by petitioner Manila Metal Container
CORPORATION, Corporation (MMCC).
Petitioner,
Present:
REYNALDO C. TOLENTINO, The Antecedents
Intervenor, PANGANIBAN, C.J.,
Chairper Petitioner was the owner of a 8,015 square meter
son, parcel of land located in Mandaluyong (now a City), Metro
YNARES- Manila. The property was covered by Transfer Certificate of
SANTIA Title (TCT) No. 332098 of the Registry of Deeds of Rizal.
GO, To secure a P900,000.00 loan it had obtained from
respondent Philippine National Bank (PNB), petitioner
AUSTRIA-MARTINEZ,
executed a real estate mortgage over the lot.Respondent
- versus - CALLEJO, SR., and
PNB later granted petitioner a new credit accommodation
CHICO-NAZARIO, JJ.
of P1,000,000.00; and, on November 16, 1973, petitioner
PHILIPPINE NATIONAL BANK,
executed an Amendment[4] of Real Estate Mortgage over its
Respondent,
property. On March 31, 1981, petitioner secured another
DMCI-PROJECT DEVELOPERS, Promulgated:
loan of P653,000.00 from respondent PNB, payable in
INC.,
quarterly installments of P32,650.00, plus interests and other
Intervenor. December 20, 2006
charges.[5]
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
----------x
On August 5, 1982, respondent PNB filed a petition
for extrajudicial foreclosure of the real estate mortgage and
DECISION
sought to have the property sold at public auction
for P911,532.21, petitioners outstanding obligation to
CALLEJO, SR., J.:
respondent PNB as of June 30, 1982,[6] plus interests and
attorneys fees.
After due notice and publication, the property was 25, 1984 petitioners obligation amounted to P1,574,560.47.
sold at public auction on September 28, 1982 where This included the bid price of P1,056,924.50, interest,
respondent PNB was declared the winning bidder advances of insurance premiums, advances on realty taxes,
for P1,000,000.00. The Certificate of Sale[7] issued in its registration expenses, miscellaneous expenses and
favor was registered with the Office of the Register of Deeds publication cost.[14] When apprised of the statement of
of Rizal, and was annotated at the dorsal portion of the title account, petitioner remitted P725,000.00 to respondent PNB
on February 17, 1983. Thus, the period to redeem the as deposit to repurchase, and Official Receipt No. 978191
property was to expire on February 17, 1984. was issued to it.[15]

Petitioner sent a letter dated August 25, 1983 to respondent In the meantime, the SAMD recommended to the
PNB, requesting that it be granted an extension of time to management of respondent PNB that petitioner be allowed
redeem/repurchase the property.[8] In its reply dated August to repurchase the property for P1,574,560.00. In a letter
30, 1983, respondent PNB informed petitioner that the dated November 14, 1984, the PNB management informed
request had been referred to its Pasay City Branch for petitioner that it was rejecting the offer and the
appropriate action and recommendation.[9] recommendation of
the SAMD. It was suggested that petitioner purchase the
In a letter[10] dated February 10, 1984, petitioner reiterated its property for P2,660,000.00, its minimum market
request for a one year extension from February 17, value. Respondent PNB gave petitioner until December 15,
1984 within which to redeem/repurchase the property on 1984 to act on the proposal; otherwise, its P725,000.00
installment basis. It reiterated its request to repurchase the deposit would be returned and the property would be sold to
property on installment.[11] Meanwhile, some other interested buyers.[16]
PNB Pasay City Branch personnel informed petitioner that
as a matter of policy, the bank does not accept partial Petitioner, however, did not agree to
redemption.[12] respondent PNBs proposal. Instead, it wrote another letter
dated December 12, 1984 requesting for a
Since petitioner failed to redeem the property, the reconsideration. Respondent PNB replied in a letter
Register of Deeds cancelled TCT No. 32098 on June 1, dated December 28, 1984, wherein it reiterated its proposal
1984, and issued a new title in favor of respondent PNB. that petitioner purchase the property for P2,660,000.00. PNB
[13]
Petitioners offers had not yet been acted upon by again informed petitioner that it would return the deposit
respondent PNB. should petitioner desire to withdraw its offer to purchase the
property.[17] On February 25, 1985, petitioner, through
Meanwhile, the Special Assets Management Department counsel, requested that PNB reconsider its letter
(SAMD) had prepared a statement of account, and as of June dated December 28, 1984. Petitioner declared that it had
already agreed to the SAMDs offer to purchase the property Performance with Damages. To support its cause of action
for P1,574,560.47, and that was why it had for specific performance, it alleged the following:
paid P725,000.00. Petitioner warned respondent PNB that it
would seek judicial recourse should PNB insist on the 34. As early as June 25, 1984, PNB had accepted the
position.[18] down payment from Manila Metal in the substantial
amount of P725,000.00 for the
redemption/repurchase price of P1,574,560.47 as
On June 4, 1985, respondent PNB informed petitioner approved by its SMAD and considering the reliance
that the PNB Board of Directors had accepted petitioners made by Manila Metal and the long time that has
offer to purchase the property, but for P1,931,389.53 in cash elapsed, the approval of the higher management of
less the P725,000.00 already deposited with it.[19] On page the Bank to confirm the agreement of its SMAD is
two of the letter was a space above the typewritten name of clearly a potestative condition which cannot legally
prejudice Manila Metal which has acted and relied
petitioners President, Pablo Gabriel, where he was to affix
on the approval of SMAD. The Bank cannot take
his signature. However, Pablo Gabriel did not conform to the advantage of a condition which is entirely
letter but merely indicated therein that he had received it. dependent upon its own will after accepting and
[20]
Petitioner did not respond, so PNB requested petitioner in benefiting from the substantial payment made by
a letter dated June 30, 1988 to submit an amended offer to Manila Metal.
repurchase.
35. PNB approved the repurchase price
of P1,574,560.47 for which it accepted P725,000.00
from Manila Metal. PNB cannot take advantage of
Petitioner rejected respondents proposal in a letter its own delay and long inaction in demanding a
dated July 14, 1988. It maintained that respondent PNB had higher amount based on unilateral computation of
agreed to sell the property for P1,574,560.47, and that since interest rate without the consent of Manila Metal.
its P725,000.00 downpayment had been accepted,
respondent PNB was proscribed from increasing the Petitioner later filed an amended complaint and
purchase price of the property.[21] Petitioner averred that it supported its claim for damages with the following
had a net balance payable in the amount of P643,452.34. arguments:
Respondent PNB, however, rejected petitioners offer to pay
the balance of P643,452.34 in a letter dated August 1, 1989. 36. That in order to protect itself against the wrongful
[22] and malicious acts of the defendant Bank, plaintiff
is constrained to engage the services of counsel at
an agreed fee of P50,000.00 and to incur litigation
On August 28, 1989, petitioner filed a complaint expenses of at least P30,000.00, which the
against respondent PNB for Annulment of Mortgage and defendant PNB should be condemned to pay the
Mortgage Foreclosure, Delivery of Title, or Specific plaintiff Manila Metal.
37. That by reason of the wrongful and malicious e) Ordering the defendant PNB to pay the plaintiff
actuations of defendant PNB, plaintiff Manila Metal Manila Metals actual damages, moral and
suffered besmirched reputation for which defendant exemplary damages in the aggregate amount of not
PNB is liable for moral damages of at less than P80,000.00 as may be warranted by the
least P50,000.00. evidence and fixed by this Honorable Court in the
exercise of its sound discretion, and attorneys fees
38. That for the wrongful and malicious act of of P50,000.00 and litigation expenses of at
defendant PNB which are highly reprehensible, least P30,000.00 as may be proved during the trial,
exemplary damages should be awarded in favor of and costs of suit.
the plaintiff by way of example or correction for the
public good of at least P30,000.00.[23] Plaintiff likewise prays for such
further reliefs which may be deemed just and equitable
in the premises.[24]
Petitioner prayed that, after due proceedings,
judgment be rendered in its favor, thus: In its Answer to the complaint, respondent PNB
averred, as a special and affirmative defense, that it had
a) Declaring the Amended Real Estate Mortgage acquired ownership over the property after the period to
(Annex A) null and void and without any legal force redeem had elapsed. It claimed that no contract of sale was
and effect. perfected between it and petitioner after the period to
redeem the property had expired.
b) Declaring defendants acts of extra-judicially
foreclosing the mortgage over plaintiffs property
and setting it for auction sale null and void. During pre-trial, the parties agreed to submit the case
for decision, based on their stipulation of facts.[25] The
c) Ordering the defendant Register of Deeds to cancel parties agreed to limit the issues to the following:
the new title issued in the name of PNB (TCT NO.
43792) covering the property described in 1. Whether or not the June 4, 1985 letter of the
paragraph 4 of the Complaint, to reinstate TCT defendant approving/accepting plaintiffs offer to
No. 37025 in the name of Manila Metal and to purchase the property is still valid and legally
cancel the annotation of the mortgage in question at enforceable.
the back of the TCT No. 37025 described in
paragraph 4 of this Complaint. 2. Whether or not the plaintiff has waived its right to
purchase the property when it failed to conform
d) Ordering the defendant PNB to return and/or with the conditions set forth by the defendant in its
deliver physical possession of the letter dated June 4, 1985.
TCT No. 37025 described in paragraph 4 of this
Complaint to the plaintiff Manila Metal.
3. Whether or not there is a perfected contract of sale the P1,206,389.53 which respondent PNB had demanded. It
between the parties.[26] further declared that the P725,000.00 remitted by petitioner
to respondent PNB on June 4, 1985 was a deposit, and not a
downpayment or earnest money.
While the case was pending, respondent PNB
demanded, on September 20, 1989, that petitioner vacate the On appeal to the CA, petitioner made the following
property within 15 days from notice,[27] but petitioners allegations:
refused to do so.
I
On March 18, 1993, petitioner offered to repurchase THE LOWER COURT ERRED IN RULING THAT
the property for P3,500,000.00.[28] The offer was however DEFENDANT-APPELLEES LETTER DATED 4
rejected by respondent PNB, in a letter dated April 13, JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-
APPELLANTS OFFER TO PURCHASE THE
1993. According to it, the prevailing market value of the
SUBJECT PROPERTY IS NOT VALID AND
property was approximately P30,000,000.00, and as a matter ENFORCEABLE.
of policy, it could not sell the property for less than its
market value.[29] On June 21, 1993, petitioner offered to II
purchase the property for P4,250,000.00 in cash.[30] The offer THE LOWER COURT ERRED IN RULING THAT
was again rejected by respondent PNB on September 13, THERE WAS NO PERFECTED CONTRACT
OF SALE BETWEEN PLAINTIFF-APPELLANT
1993.[31]
AND DEFENDANT-APPELLEE.

On May 31, 1994, the trial court rendered judgment III


dismissing the amended complaint and THE LOWER COURT ERRED IN RULING THAT
respondent PNBs counterclaim. It ordered respondent PNB PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO
to refund the P725,000.00 deposit petitioner had made. PURCHASE THE SUBJECT PROPERTY WHEN IT
[32] FAILED TO CONFORM WITH CONDITIONS
The trial court ruled that there was no perfected contract
SET FORTH BY DEFENDANT-APPELLEE IN ITS
of sale between the parties; hence, petitioner had no cause of LETTER DATED 4 JUNE 1985.
action for specific performance against respondent.The trial
court declared that respondent had rejected petitioners offer IV
to repurchase the property. Petitioner, in turn, rejected the THE LOWER COURT ERRED IN DISREGARDING
terms and conditions contained in the June 4, 1985 letter of THE FACT THAT IT WAS THE DEFENDANT-
APPELLEE WHICH RENDERED IT DIFFICULT IF
the SAMD. While petitioner had offered to repurchase the
NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT
property per its letter of TO COMPLETE THE BALANCE OF THEIR
July 14, 1988, the amount of P643,422.34 was way below PURCHASE PRICE.
V The CA rendered judgment on May 11,
THE LOWER COURT ERRED IN DISREGARDING
2000 affirming the decision of the RTC.[37] It declared that
THE FACT THAT THERE WAS NO VALID
RESCISSION OR CANCELLATION OF SUBJECT petitioner obviously never agreed to the selling price
CONTRACT OF REPURCHASE. proposed by respondent PNB (P1,931,389.53) since
petitioner had kept on insisting that the selling price should
VI be lowered to P1,574,560.47. Clearly therefore, there was no
THE LOWER COURT ERRED IN DECLARING meeting of the minds between the parties as to the price or
THAT PLAINTIFF FAILED AND REFUSED TO
consideration of the sale.
SUBMIT THE AMENDED REPURCHASE OFFER.

VII The CA ratiocinated that petitioners original offer to


THE LOWER COURT ERRED IN DISMISSING THE purchase the subject property had not been accepted by
AMENDED COMPLAINT OF PLAINTIFF- respondent PNB. In fact, it made a counter-offer through
APPELLANT. its June 4, 1985 letter specifically on the selling price;
petitioner did not agree to the counter-offer; and the
VIII
THE LOWER COURT ERRED IN NOT AWARDING negotiations did not prosper. Moreover, petitioner did not
PLAINTIFF-APPELLANT ACTUAL, MORAL AND pay the balance of the purchase price within the sixty-day
EXEMPLARY DAMAGES, ATTOTRNEYS FEES period set in the June 4, 1985 letter of respondent
AND LITIGATION EXPENSES.[33] PNB. Consequently, there was no perfected contract of sale,
Meanwhile, on June 17, 1993, petitioners Board of and as such, there was no contract to rescind.
Directors approved Resolution No. 3-004, where it waived,
assigned and transferred its rights over the property covered According to the appellate court, the claim for
by TCT No. 33099 and TCT No. 37025 in favor damages and the counterclaim were correctly dismissed by
of Bayani Gabriel, one of its Directors. the court a quo for no evidence was presented to support
[34]
Thereafter, Bayani Gabriel executed a Deed of it. Respondent PNBs letter dated June 30, 1988 cannot
Assignment over 51% of the ownership and management of revive the failed negotiations between the parties.
the property in favor of Reynaldo Tolentino, who later Respondent PNB merely asked petitioner to submit an
moved for leave to intervene as plaintiff-appellant. On July amended offer to repurchase. While petitioner reiterated its
14, 1993, the CA issued a resolution granting the motion, request for a lower selling price and that the balance of the
[35]
and likewise granted the motion of repurchase be reduced, however, respondent rejected the
Reynaldo Tolentino substituting petitioner MMCC, as proposal in a letter dated August 1, 1989.
plaintiff-appellant, and his motion to withdraw as intervenor.
[36]
Petitioner filed a motion for reconsideration, which CONTRACT OF SALE BETWEEN THE
the CA likewise denied. PARTIES.

V. THE COURT OF APPEALS SERIOUSLY ERRED


Thus, petitioner filed the instant petition for review WHEN IT HELD THAT THE LETTERS OF
on certiorari, alleging that: PETITIONER-APPELLANT DATED MARCH
18, 1993 AND JUNE 21, 1993, OFFERING TO
I. THE COURT OF APPEALS ERRED ON A BUY THE SUBJECT PROPERTY AT
QUESTION OF LAW WHEN IT RULED DIFFERENT AMOUNT WERE PROOF THAT
THAT THERE IS NO PERFECTED THERE IS NO PERFECTED CONTRACT
CONTRACT OF SALE BETWEEN THE OF SALE.[38]
PETITIONER AND RESPONDENT.

II. THE COURT OF APPEALS ERRED ON A


The threshold issue is whether or not petitioner and
QUESTION OF LAW WHEN IT RULED
THAT THE AMOUNT OF PHP725,000.00 respondent PNB had entered into a perfected contract for
PAID BY THE PETITIONER IS NOT AN petitioner to repurchase the property from respondent.
EARNEST MONEY.
Petitioner maintains that it had accepted respondents
III. THE COURT OF APPEALS ERRED ON A offer made through the SAMD, to sell the property
QUESTION OF LAW WHEN IT RULED
for P1,574,560.00. When the acceptance was made in its
THAT THE FAILURE OF THE PETITIONER-
APPELLANT TO SIGNIFY ITS letter dated June 25, 1984; it then deposited P725,000.00
CONFORMITY TO THE TERMS with the SAMD as partial payment, evidenced by
CONTAINED IN PNBS JUNE 4, 1985 Receipt No. 978194 which respondent had issued. Petitioner
LETTER MEANS THAT THERE WAS NO avers that the SAMDs acceptance of the deposit amounted to
VALID AND LEGALLY ENFORCEABLE an acceptance of its offer to repurchase. Moreover, as
CONTRACT OF SALE BETWEEN THE
gleaned from the letter of SAMD dated June 4, 1985, the
PARTIES.
PNB Board of Directors had approved petitioners offer to
IV. THE COURT OF APPEALS ERRED ON A purchase the property. It claims that this was
QUESTION OF LAW THAT NON-PAYMENT the suspensive condition, the fulfillment of which gave rise
OF THE PETITIONER-APPELLANT OF THE to the contract. Respondent could no longer unilaterally
BALANCE OF THE OFFERED PRICE IN withdraw its offer to sell the property for P1,574,560.47,
THE LETTER OF PNB DATED JUNE 4, 1985,
since the acceptance of the offer resulted in a perfected
WITHIN SIXTY (60) DAYS FROM NOTICE
OF APPROVAL CONSTITUTES NO VALID contract of sale; it was obliged to remit to respondent the
AND LEGALLY ENFORCEABLE balance of the original purchase price of P1,574,560.47,
while respondent was obliged to transfer ownership and
deliver the property to petitioner, conformably with Article against it, in accordance with Section 27, Rule 130 of the
1159 of the New Civil Code. Revised Rules of Court.

Petitioner posits that respondent was proscribed from For its part, respondent contends that the parties never
increasing the interest rate after it had accepted respondents graduated from the negotiation stage as they could not agree
offer to sell the property for P1,574,560.00. Consequently, on the amount of the repurchase price of the property. All
respondent could no longer validly make a counter-offer that transpired was an exchange of proposals and counter-
of P1,931,789.88 for the purchase of the property. It likewise proposals, nothing more. It insists that a definite agreement
maintains that, although the P725,000.00 was considered as on the amount and manner of payment of the price are
deposit for the repurchase of the property in the receipt essential elements in the formation of a binding and
issued by the SAMD, the amount constitutes earnest money enforceable contract of sale. There was no such agreement
as contemplated in Article 1482 of the New Civil in this case. Primarily, the concept of suspensive condition
Code. Petitioner cites the rulings of this Court signifies a future and uncertain event upon the fulfillment of
in Villonco v. Bormaheco[39] and Topacio v. Court of which the obligation becomes effective. It clearly
[40]
Appeals. presupposes the existence of a valid and binding agreement,
the effectivity of which is subordinated to its
Petitioner avers that its failure to append its conformity to fulfillment. Since there is no perfected contract in the first
the June 4, 1984 letter of respondent and its failure to pay place, there is no basis for the application of the principles
the balance of the price as fixed by respondent within the governing suspensive conditions.
60-day period from notice was to protest respondents breach
of its obligation to petitioner. It did not amount to a rejection According to respondent, the Statement of Account prepared
of respondents offer to sell the property since respondent by SAMD as of June 25, 1984 cannot be classified as a
was merely seeking to enforce its right to pay the balance counter-offer; it is simply a recital of its total monetary
of P1,570,564.47. In any event, respondent had the option claims against petitioner.Moreover, the amount stated
either to accept the balance of the offered price or to cause therein could not likewise be considered as the counter-offer
the rescission of the contract. since as admitted by petitioner, it was only recommendation
which was subject to approval of the PNB Board of
Petitioners letters dated March 18, 1993 and June 21, Directors.
1993 to respondent during the pendency of the case in the
RTC were merely to compromise the pending lawsuit, they Neither can the receipt by the SAMD of P725,000.00 be
did not constitute separate offers to repurchase the regarded as evidence of a perfected sale contract. As gleaned
property. Such offer to compromise should not be taken from the parties Stipulation of Facts during the proceedings
in the court a quo, the amount is merely an acknowledgment
of the receipt of P725,000.00 as deposit to repurchase the or P1,206,389.00.Furthermore, while respondents Board of
property. The deposit of P725,000.00 was accepted by Directors accepted petitioners offer to repurchase the
respondent on the condition that the purchase price would property, the acceptance was qualified, in that it required a
still be approved by its Board of Directors. Respondent higher sale price and subject to specified terms and
maintains that its acceptance of the amount was qualified by conditions enumerated therein. This qualified acceptance
that condition, thus not absolute. Pending such approval, it was in effect a counter-offer, necessitating petitioners
cannot be legally claimed that respondent is already bound acceptance in return.
by any contract of sale with petitioner.
The Ruling of the Court
According to respondent, petitioner knew that the
SAMD has no capacity to bind respondent and that its The ruling of the appellate court that there was no perfected
authority is limited to administering, managing and contract of sale between the parties on June 4, 1985 is
preserving the properties and other special assets of correct.
PNB. The SAMD does not have the power to sell,
encumber, dispose of, or otherwise alienate the assets, since A contract is a meeting of minds between two persons
the power to do so must emanate from its Board of whereby one binds himself, with respect to the other, to give
Directors. The SAMD was not authorized by respondents something or to render some service. [41] Under Article 1318
Board to enter into contracts of sale with third persons of the New Civil Code, there is no contract unless the
involving corporate assets. There is absolutely nothing on following requisites concur:
record that respondent authorized the SAMD, or made it
appear to petitioner that it represented itself as having such (1) Consent of the contracting parties;
authority.
(2) Object certain which is the subject matter of the
contract;
Respondent reiterates that SAMD had informed petitioner
that its offer to repurchase had been approved by the Board (3) Cause of the obligation which is established.
subject to the condition, among others, that the selling price
shall be the total banks claim as of documentation date Contracts are perfected by mere consent which is manifested
x x x payable in cash (P725,000.00 already deposited) by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract.
[42]
Once perfected, they bind other contracting parties and
within 60 days from notice of approval. A new Statement of the obligations arising therefrom have the form of law
Account was attached therein indicating the total banks between the parties and should be complied with in good
claim to be P1,931,389.53 less deposit of P725,000.00, faith. The parties are bound not only to the fulfillment of
what has been expressly stipulated but also to the which takes place upon the concurrence of the essential
consequences which, according to their nature, may be in elements of the sale which are the meeting of the minds of
keeping with good faith, usage and law.[43] the parties as to the object of the contract and upon the price;
and (3) consummation, which begins when the parties
By the contract of sale, one of the contracting parties perform their respective undertakings under the contract of
obligates himself to transfer the ownership of and deliver a sale, culminating in the extinguishment thereof.
determinate thing, and the other to pay therefor a price
certain in money or its equivalent.[44] The absence of any of
the essential elements will negate the existence of a A negotiation is formally initiated by an offer, which,
perfected contract of sale. As the Court ruled in Boston however, must be certain.[50] At any time prior to the
Bank of the Philippines v. Manalo:[45] perfection of the contract, either negotiating party may stop
the negotiation. At this stage, the offer may be withdrawn;
A definite agreement as to the price is an essential the withdrawal is effective immediately after its
element of a binding agreement to sell personal or real manifestation. To convert the offer into a contract, the
property because it seriously affects the rights and acceptance must be absolute and must not qualify the terms
obligations of the parties. Price is an essential element of the offer; it must be plain, unequivocal, unconditional and
in the formation of a binding and enforceable contract
of sale. The fixing of the price can never be left to the without variance of any sort from the
decision of one of the contracting parties. But a price proposal. In Adelfa Properties, Inc. v. Court of Appeals,
[51]
fixed by one of the contracting parties, if accepted by the Court ruled that:
the other, gives rise to a perfected sale.[46]
x x x The rule is that except where a formal acceptance
A contract of sale is consensual in nature and is perfected is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced
upon mere meeting of the minds. When there is merely an by some acts or conduct communicated to the offeror, it
offer by one party without acceptance of the other, there is may be shown by acts, conduct, or words of the
no contract.[47] When the contract of sale is not perfected, it accepting party that clearly manifest a present intention
cannot, as an independent source of obligation, serve as a or determination to accept the offer to buy or sell. Thus,
binding juridical relation between the parties.[48] acceptance may be shown by the acts, conduct, or
words of a party recognizing the existence of the
contract of sale.[52]
In San Miguel Properties Philippines, Inc. v. Huang,[49] the
Court ruled that the stages of a contract of sale are as
A qualified acceptance or one that involves a new proposal
follows: (1) negotiation, covering the period from the time
constitutes a counter-offer and a rejection of the original
the prospective contracting parties indicate interest in the
offer. A counter-offer is considered in law, a rejection of the
contract to the time the contract is perfected; (2) perfection,
original offer and an attempt to end the negotiation between
the parties on a different basis.[53] Consequently, when [59]
There was no response to petitioners letters dated
something is desired which is not exactly what is proposed February 10 and 15, 1984.
in the offer, such acceptance is not sufficient to guarantee
consent because any modification or variation from the The statement of account prepared by the SAMD
terms of the offer annuls the offer.[54] The acceptance must stating that the net claim of respondent as of June 25,
be identical in all respects with that of the offer so as to 1984 was P1,574,560.47 cannot be considered an
produce consent or meeting of the minds. unqualified acceptance to petitioners offer to purchase the
property. The statement is but a computation of the amount
In this case, petitioner had until February 17, which petitioner was obliged to pay in case respondent
1984 within which to redeem the property. However, since it would later agree to sell the property, including interests,
lacked the resources, it requested for more time to advances on insurance premium, advances on realty taxes,
redeem/repurchase the property under such terms and publication cost, registration expenses and miscellaneous
conditions agreed upon by the parties.[55] The request, which expenses.
was made through a letter dated August 25, 1983, was
referred to the respondents main branch for appropriate There is no evidence that the SAMD was authorized
action.[56] Before respondent could act on the request, by respondents Board of Directors to accept petitioners offer
petitioner again wrote respondent as follows: and sell the property for P1,574,560.47. Any acceptance by
the SAMD of petitioners offer would not bind
1. Upon approval of our request, we will pay respondent. As this Court ruled in AF Realty Development,
your goodselves ONE HUNDRED & FIFTY Inc. vs. Diesehuan Freight Services, Inc.:[60]
THOUSAND PESOS (P150,000.00);

2. Within six months from date of approval of our


request, we will pay another FOUR HUNDRED Section 23 of the Corporation Code expressly
FIFTY THOUSAND PESOS (P450,000.00); and provides that the corporate powers of all corporations
shall be exercised by the board of directors. Just as a
3. The remaining balance together with the interest and natural person may authorize another to do certain acts
other expenses that will be incurred will be paid in his behalf, so may the board of directors of a
within the last six months of the one year grave corporation validly delegate some of its functions to
period requested for.[57] individual officers or agents appointed by it. Thus,
contracts or acts of a corporation must be made either
by the board of directors or by a corporate agent duly
When the petitioner was told that respondent did not authorized by the board. Absent such valid
allow partial redemption,[58] it sent a letter to respondents delegation/authorization, the rule is that the declarations
President reiterating its offer to purchase the property. of an individual director relating to the affairs of the
corporation, but not in the course of, or connected with ART. 1482. Whenever earnest money is given in
the performance of authorized duties of such director, a contract of sale, it shall be considered as part of the
are held not binding on the corporation. price and as proof of the perfection of the contract.

Thus, a corporation can only execute its powers and This contention is likewise negated by the stipulation
transact its business through its Board of Directors and of facts which the parties entered into in the trial court:
through its officers and agents when authorized by a board
8. On June 8, 1984, the Special Assets
resolution or its by-laws.[61] Management Department (SAMD) of PNB prepared an
updated Statement of Account showing MMCCs total
It appears that the SAMD had prepared a liability to PNB as of June 25, 1984 to be
recommendation for respondent to accept petitioners offer to P1,574,560.47 and recommended this amount as the
repurchase the property even beyond the one-year period; it repurchase price of the subject property.
recommended that petitioner be allowed to redeem the
9. On June 25, 1984, MMCC paid P725,000.00
property and pay P1,574,560.00 as the purchase to PNB as deposit to repurchase the property. The
price. Respondent later approved the recommendation that deposit of P725,000 was accepted by PNB on the
the property be sold to petitioner. But instead of condition that the purchase price is still subject to the
the P1,574,560.47 recommended by the SAMD and to approval of the PNB Board.[62]
which petitioner had previously conformed, respondent set
the purchase price at P2,660,000.00. In fine, respondents
acceptance of petitioners offer was qualified, hence can be at Thus, the P725,000.00 was merely a deposit to be
most considered as a counter-offer. If petitioner had accepted applied as part of the purchase price of the property, in the
this counter-offer, a perfected contract of sale would have event that respondent would approve the recommendation of
arisen; as it turns out, however, petitioner merely sought to SAMD for respondent to accept petitioners offer to purchase
have the counter-offer reconsidered. This request for the property for P1,574,560.47. Unless and until the
reconsideration would later be rejected by respondent. respondent accepted the offer on these terms, no perfected
contract of sale would arise. Absent proof of the
We do not agree with petitioners contention that concurrence of all the essential elements of a contract of
the P725,000.00 it had remitted to respondent was earnest sale, the giving of earnest money cannot establish the
money which could be considered as proof of the perfection existence of a perfected contract of sale.[63]
of a contract of sale under Article 1482 of the New Civil
Code. The provision reads: It appears that, per its letter to petitioner dated June 4, 1985,
the respondent had decided to accept the offer to purchase
the property for P1,931,389.53. However, this amounted to
an amendment of respondents qualified acceptance, or an be forfeited and the Bank is thenceforth authorized
amended counter-offer, because while the respondent to sell the property to other interested parties.
lowered the purchase price, it still declared that its
6. That the sale shall be subject to such other terms
acceptance was subject to the following terms and and conditions that the Legal Department may
conditions: impose to protect the interest of the Bank.[64]

It appears that although respondent requested


petitioner to conform to its amended counter-offer, petitioner
refused and instead requested respondent to reconsider its
1. That the selling price shall be the total Banks
claim as of documentation date (pls. see attached
amended counter-offer.Petitioners request was ultimately
statement of account as of 5-31-85), payable in rejected and respondent offered to refund its P725,000.00
cash (P725,000.00 already deposited) within sixty deposit.
(60) days from notice of approval;
In sum, then, there was no perfected contract of sale
2. The Bank sells only whatever rights, interests and between petitioner and respondent over the subject property.
participation it may have in the property and you
are charged with full knowledge of the nature and
extent of said rights, interests and participation
and waive your right to warranty against eviction.
IN LIGHT OF ALL THE FOREGOING, the
3. All taxes and other government imposts due or to petition is DENIED.
become due on the property, as well as expenses The assailed decision is AFFIRMED. Costs against
including costs of documents and science stamps, petitioner Manila Metal Container Corporation.
transfer fees, etc., to be incurred in connection
with the execution and registration of all covering
documents shall be borne by you; SO ORDERED.

4. That you shall undertake at your own expense and


account the ejectment of the occupants of the
property subject of the sale, if there are any;

5. That upon your failure to pay the balance of the


purchase price within sixty (60) days from receipt
of advice accepting your offer, your deposit shall
Republic of the Philippines "That I, IGNACIA T. REYNES, of legal age, Filipino, widow, with
SUPREME COURT residence and postal address at Mabolo, Cebu City,
Manila Philippines, for and in consideration of FORTY SEVEN
THOUSAND (P47,000.00) PESOS, Philippine Currency, to me
THIRD DIVISION in hand paid by RIDO MONTECILLO, of legal age, Filipino,
married, with residence and postal address at Mabolo, Cebu City,
G.R. No. 138018 July 26, 2002 Philippines, the receipt hereof is hereby acknowledged, have
sold, transferred, and conveyed, unto RIDO MONTECILLO, his
heirs, executors, administrators, and assigns, forever, a parcel of
RIDO MONTECILLO, petitioner,
land together with the improvements thereon, situated at Mabolo,
vs.
Cebu City, Philippines, free from all liens and encumbrances, and
IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA
more particularly described as follows:
ABUCAY, respondents.
A parcel of land (Lot 203-B-2-B of the subdivision plan
CARPIO, J.:
Psd-07-01-00 2370, being a portion of Lot 203-B-2,
described on plan (LRC) Psd-76821, L.R.C. (GLRO)
The Case Record No. 5988), situated in the Barrio of Mabolo, City of
Cebu. Bounded on the SE., along line 1-2 by Lot 206; on
On March 24, 1993, the Regional Trial Court of Cebu City, Branch 18, the SW., along line 2-3, by Lot 202, both of Banilad
rendered a Decision1 declaring the deed of sale of a parcel of land in Estate; on the NW., along line 4-5, by Lot 203-B-2-A of
favor of petitioner null and void ab initio. The Court of Appeals,2 in its July the subdivision of Four Hundred Forty Eight (448) square
16, 1998 Decision3 as well as its February 11, 1999 Order4 denying meters, more or less.
petitioners Motion for Reconsideration, affirmed the trial courts
decision in toto. Before this Court now is a Petition for Review on of which I am the absolute owner in accordance with the
Certiorari5 assailing the Court of Appeals decision and order. provisions of the Land Registration Act, my title being evidenced
by Transfer Certificate of Title No. 74196 of the Registry of Deeds
The Facts of the City of Cebu, Philippines. That This Land Is Not Tenanted
and Does Not Fall Under the Purview of P.D. 27."8 (Emphasis
Respondents Ignacia Reynes ("Reynes" for brevity) and Spouses Abucay supplied)
("Abucay Spouses" for brevity) filed on June 20, 1984 a complaint for
Declaration of Nullity and Quieting of Title against petitioner Rido Reynes further alleged that Montecillo failed to pay the purchase price
Montecillo ("Montecillo" for brevity). Reynes asserted that she is the after the lapse of the one-month period, prompting Reynes to demand
owner of a lot situated in Mabolo, Cebu City, covered by Transfer from Montecillo the return of the Deed of Sale. Since Montecillo refused
Certificate of Title No. 74196 and containing an area of 448 square to return the Deed of Sale,9 Reynes executed a document unilaterally
meters ("Mabolo Lot" for brevity). In 1981, Reynes sold 185 square revoking the sale and gave a copy of the document to Montecillo.
meters of the Mabolo Lot to the Abucay Spouses who built a residential
house on the lot they bought. Subsequently, on May 23, 1984 Reynes signed a Deed of Sale
transferring to the Abucay Spouses the entire Mabolo Lot, at the same
Reynes alleged further that on March 1, 1984 she signed a Deed of Sale time confirming the previous sale in 1981 of a 185-square meter portion
of the Mabolo Lot in favor of Montecillo ("Montecillos Deed of Sale" for of the lot. This Deed of Sale states:
brevity). Reynes, being illiterate,6 signed by affixing her thumb-mark7 on
the document. Montecillo promised to pay the agreed P47,000.00 "I, IGNACIA T. REYNES, of legal age, Filipino, widow and
purchase price within one month from the signing of the Deed of Sale. resident of Mabolo, Cebu City, do hereby confirm the sale of a
Montecillos Deed of Sale states as follows:
portion of Lot No. 74196 to an extent of 185 square meters to Deed of Sale, and order the cancellation of Certificate of Title No. 90805
Spouses Redemptor Abucay and Elisa Abucay covered by Deed in the name of Montecillo.
per Doc. No. 47, Page No. 9, Book No. V, Series of 1981 of
notarial register of Benedicto Alo, of which spouses is now in In his Answer, Montecillo, a bank executive with a B.S. Commerce
occupation; degree,12 claimed he was a buyer in good faith and had actually paid
the P47,000.00 consideration stated in his Deed of Sale. Montecillo,
That for and in consideration of the total sum of FIFTY however, admitted he still owed Reynes a balance of P10,000.00. He
THOUSAND (P50,000) PESOS, Philippine Currency, received in also alleged that he paid P50,000.00 for the release of the chattel
full and receipt whereof is herein acknowledged from SPOUSES mortgage which he argued constituted a lien on the Mabolo Lot. He
REDEMPTOR ABUCAY and ELISA ABUCAY, do hereby in these further alleged that he paid for the real property tax as well as the capital
presents, SELL, TRANSFER and CONVEY absolutely unto said gains tax on the sale of the Mabolo Lot.
Spouses Redemptor Abucay and Elisa Abucay, their heirs,
assigns and successors-in-interest the whole parcel of land In their Reply, Reynes and the Abucay Spouses contended that
together with improvements thereon and more particularly Montecillo did not have authority to discharge the chattel mortgage,
described as follows: especially after Reynes revoked Montecillos Deed of Sale and gave the
mortgagee a copy of the document of revocation. Reynes and the
TCT No. 74196 Abucay Spouses claimed that Montecillo secured the release of the
chattel mortgage through machination. They further asserted that
A parcel of land (Lot 203-B-2-B of the subdivision plan Montecillo took advantage of the real property taxes paid by the Abucay
psd-07-01-002370, being a portion of Lot 203-B-2, Spouses and surreptitiously caused the transfer of the title to the Mabolo
described on plan (LRC) Psd 76821, LRC (GLRO) Lot in his name.
Record No. 5988) situated in Mabolo, Cebu City, along
Arcilla Street, containing an area of total FOUR During pre-trial, Montecillo claimed that the consideration for the sale of
HUNDRED FORTY EIGHT (448) Square meters. the Mabolo Lot was the amount he paid to Cebu Ice and Cold Storage
Corporation ("Cebu Ice Storage" for brevity) for the mortgage debt of
of which I am the absolute owner thereof free from all liens and Bienvenido Jayag ("Jayag" for brevity). Montecillo argued that the release
encumbrances and warrant the same against claim of third of the mortgage was necessary since the mortgage constituted a lien on
persons and other deeds affecting said parcel of land other than the Mabolo Lot.
that to the said spouses and inconsistent hereto is declared
without any effect. Reynes, however, stated that she had nothing to do with Jayags
mortgage debt except that the house mortgaged by Jayag stood on a
In witness whereof, I hereunto signed this 23rd day of May, 1984 portion of the Mabolo Lot. Reynes further stated that the payment by
in Cebu City, Philippines."10 Montecillo to release the mortgage on Jayags house is a matter between
Montecillo and Jayag. The mortgage on the house, being a chattel
Reynes and the Abucay Spouses alleged that on June 18, 1984 they mortgage, could not be interpreted in any way as an encumbrance on the
received information that the Register of Deeds of Cebu City issued Mabolo Lot. Reynes further claimed that the mortgage debt had long
Certificate of Title No. 90805 in the name of Montecillo for the Mabolo prescribed since the P47,000.00 mortgage debt was due for payment on
Lot. January 30, 1967.

Reynes and the Abucay Spouses argued that "for lack of consideration The trial court rendered a decision on March 24, 1993 declaring the Deed
there (was) no meeting of the minds"11between Reynes and Montecillo. of Sale to Montecillo null and void. The trial court ordered the cancellation
Thus, the trial court should declare null and void ab initio Montecillos of Montecillos Transfer Certificate of Title No. 90805 and the issuance of
a new certificate of title in favor of the Abucay Spouses. The trial court
found that Montecillos Deed of Sale had no cause or consideration 2. "If there was none, is the Deed of Sale void from the beginning
because Montecillo never paid Reynes the P47,000.00 purchase price, or simply rescissible?"15
contrary to what is stated in the Deed of Sale that Reynes received the
purchase price. The trial court ruled that Montecillos Deed of Sale The Ruling of the Court
produced no effect whatsoever for want of consideration. The dispositive
portion of the trial courts decision reads as follows: The petition is devoid of merit.

"WHEREFORE, in view of the foregoing consideration, judgment First issue: manner of payment of the P47,000.00 purchase price.
is hereby rendered declaring the deed of sale in favor of
defendant null and void and of no force and effect thereby
Montecillos Deed of Sale does not state that the P47,000.00 purchase
ordering the cancellation of Transfer Certificate of Title No. 90805
price should be paid by Montecillo to Cebu Ice Storage. Montecillo failed
of the Register of Deeds of Cebu City and to declare plaintiff
to adduce any evidence before the trial court showing that Reynes had
Spouses Redemptor and Elisa Abucay as rightful vendees and
agreed, verbally or in writing, that the P47,000.00 purchase price should
Transfer Certificate of Title to the property subject matter of the
be paid to Cebu Ice Storage. Absent any evidence showing that Reynes
suit issued in their names. The defendants are further directed to
had agreed to the payment of the purchase price to any other party, the
pay moral damages in the sum of P20,000.00 and attorneys fees
payment to be effective must be made to Reynes, the vendor in the sale.
in the sum of P2,000.00 plus cost of the suit.
Article 1240 of the Civil Code provides as follows:
xxx"
"Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or
Not satisfied with the trial courts Decision, Montecillo appealed the same any person authorized to receive it."
to the Court of Appeals.
Thus, Montecillos payment to Cebu Ice Storage is not the payment that
Ruling of the Court of Appeals would extinguish16 Montecillos obligation to Reynes under the Deed of
Sale.
The appellate court affirmed the Decision of the trial court in toto and
dismissed the appeal13 on the ground that Montecillos Deed of Sale is It militates against common sense for Reynes to sell her Mabolo Lot
void for lack of consideration. The appellate court also denied for P47,000.00 if this entire amount would only go to Cebu Ice Storage,
Montecillos Motion for Reconsideration14 on the ground that it raised no leaving not a single centavo to her for giving up ownership of a valuable
new arguments. property. This incredible allegation of Montecillo becomes even more
absurd when one considers that Reynes did not benefit, directly or
Still dissatisfied, Montecillo filed the present petition for review on indirectly, from the payment of the P47,000.00 to Cebu Ice Storage.
certiorari.
The trial court found that Reynes had nothing to do with Jayags
The Issues mortgage debt with Cebu Ice Storage. The trial court made the following
findings of fact:
Montecillo raises the following issues:
"x x x. Plaintiff Ignacia Reynes was not a party to nor privy of the
1. "Was there an agreement between Reynes and Montecillo that obligation in favor of the Cebu Ice and Cold Storage Corporation,
the stated consideration of P47,000.00 in the Deed of Sale be the obligation being exclusively of Bienvenido Jayag and wife
paid to Cebu Ice and Cold Storage to secure the release of the who mortgaged their residential house constructed on the land
Transfer Certificate of Title?" subject matter of the complaint. The payment by the defendant to
release the residential house from the mortgage is a matter
between him and Jayag and cannot by implication or deception Montecillos Deed of Sale states that Montecillo paid, and Reynes
be made to appear as an encumbrance upon the land."17 received, the P47,000.00 purchase price on March 1, 1984, the date of
signing of the Deed of Sale. This is clear from the following provision of
Thus, Montecillos payment to Jayags creditor could not possibly the Deed of Sale:
redound to the benefit18 of Reynes. We find no reason to disturb the
factual findings of the trial court. In petitions for review on certiorari as a "That I, IGNACIA T. REYNES, x x x for and in consideration of
mode of appeal under Rule 45, as in the instant case, a petitioner can FORTY SEVEN THOUSAND (P47,000.00) PESOS, Philippine
raise only questions of law.19 This Court is not the proper venue to Currency, to me in hand paid by RIDO MONTECILLO xxx,
consider a factual issue as it is not a trier of facts. receipt of which is hereby acknowledged, have sold,
transferred, and conveyed, unto RIDO MONTECILLO, x x x a
Second issue: whether the Deed of Sale is void ab initio or only parcel of land x x x."
rescissible.
On its face, Montecillos Deed of Absolute Sale22 appears supported by a
Under Article 1318 of the Civil Code, "[T]here is no contract unless the valuable consideration. However, based on the evidence presented by
following requisites concur: (1) Consent of the contracting parties; (2) both Reynes and Montecillo, the trial court found that Montecillo never
Object certain which is the subject matter of the contract; (3) Cause of paid to Reynes, and Reynes never received from Montecillo,
the obligation which is established." Article 1352 of the Civil Code also the P47,000.00 purchase price. There was indisputably a total absence of
provides that "[C]ontracts without cause x x x produce no effect consideration contrary to what is stated in Montecillos Deed of Sale. As
whatsoever." pointed out by the trial court

Montecillo argues that his Deed of Sale has all the requisites of a valid "From the allegations in the pleadings of both parties and the oral
contract. Montecillo points out that he agreed to purchase, and Reynes and documentary evidence adduced during the trial, the court is
agreed to sell, the Mabolo Lot at the price of P47,000.00. Thus, the three convinced that the Deed of Sale (Exhibits "1" and "1-A") executed
requisites for a valid contract concur: consent, object certain and by plaintiff Ignacia Reynes acknowledged before Notary Public
consideration. Montecillo asserts there is no lack of consideration that Ponciano Alvinio is devoid of any consideration. Plaintiff Ignacia
would prevent the existence of a valid contract. Rather, there is only non- Reynes through the representation of Baudillo Baladjay had
payment of the consideration within the period agreed upon for payment. executed a Deed of Sale in favor of defendant on the promise
that the consideration should be paid within one (1) month from
Montecillo argues there is only a breach of his obligation to pay the full the execution of the Deed of Sale. However, after the lapse of
purchase price on time. Such breach merely gives Reynes a right to ask said period, defendant failed to pay even a single centavo of the
for specific performance, or for annulment of the obligation to sell the consideration. The answer of the defendant did not allege clearly
Mabolo Lot. Montecillo maintains that in reciprocal obligations, the injured why no consideration was paid by him except for the allegation
party can choose between fulfillment and rescission, 20or more properly that he had a balance of only P10,000.00. It turned out during the
cancellation, of the obligation under Article 119121 of the Civil Code. This pre-trial that what the defendant considered as the consideration
Article also provides that the "court shall decree the rescission claimed, was the amount which he paid for the obligation of Bienvenido
unless there be just cause authorizing the fixing of the period." Montecillo Jayag with the Cebu Ice and Cold Storage Corporation over
claims that because Reynes failed to make a demand for payment, and which plaintiff Ignacia Reynes did not have a part except that the
instead unilaterally revoked Montecillos Deed of Sale, the court has a subject of the mortgage was constructed on the parcel of land in
just cause to fix the period for payment of the balance of the purchase question. Plaintiff Ignacia Reynes was not a party to nor privy of
price. the obligation in favor of the Cebu Ice and Cold Storage
Corporation, the obligation being exclusively of Bienvenido Jayag
and wife who mortgaged their residential house constructed on
These arguments are not persuasive.
the land subject matter of the complaint. The payment by the
defendant to release the residential house from the mortgage is a
matter between him and Jayag and cannot by implication or A contract of sale is void and produces no effect whatsoever
deception be made to appear as an encumbrance upon the land. where the price, which appears thereon as paid, has in fact never
"23 been paid by the purchaser to the vendor (Ocejo, Perez & Co. vs.
Flores and Bas, 40 Phil. 921; Mapalo vs. Mapalo, L-21489, May
Factual findings of the trial court are binding on us, especially if the Court 19, 1966, 64 O.G. 331, 17 SCRA 114, 122). Such a sale is non-
of Appeals affirms such findings.24 We do not disturb such findings unless existent (Borromeo vs. Borromeo, 98 Phil. 432) or cannot be
the evidence on record clearly does not support such findings or such considered consummated (Cruzado vs. Bustos and Escaler, 34
findings are based on a patent misunderstanding of facts, 25 which is not Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28
the case here. Thus, we find no reason to deviate from the findings of SCRA 229)."
both the trial and appellate courts that no valid consideration supported
Montecillos Deed of Sale. Applying this well-entrenched doctrine to the instant case, we rule that
Montecillos Deed of Sale is null and void ab initio for lack of
This is not merely a case of failure to pay the purchase price, as consideration.
Montecillo claims, which can only amount to a breach of obligation with
rescission as the proper remedy. What we have here is a purported Montecillo asserts that the only issue in controversy is "the mode and/or
contract that lacks a cause - one of the three essential requisites of a manner of payment and/or whether or not payment has been
valid contract. Failure to pay the consideration is different from lack of made."30 Montecillo implies that the mode or manner of payment is
consideration. The former results in a right to demand the fulfillment or separate from the consideration and does not affect the validity of the
cancellation of the obligation under an existing valid contract 26 while the contract. In the recent case of San Miguel Properties Philippines, Inc.
latter prevents the existence of a valid contract v. Huang,31 we ruled that

Where the deed of sale states that the purchase price has been paid but "In Navarro v. Sugar Producers Cooperative Marketing
in fact has never been paid, the deed of sale is null and void ab initio for Association, Inc. (1 SCRA 1181 [1961]), we laid down the rule
lack of consideration. This has been the well-settled rule as early that the manner of payment of the purchase price is an
as Ocejo Perez & Co. v. Flores,27 a 1920 case. As subsequently essential element before a valid and binding contract of sale
explained in Mapalo v. Mapalo28 can exist. Although the Civil Code does not expressly state that
the minds of the parties must also meet on the terms or manner
"In our view, therefore, the ruling of this Court in Ocejo Perez & of payment of the price, the same is needed, otherwise there is
Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that no sale. As held in Toyota Shaw, Inc. v. Court of Appeals (244
case we ruled that a contract of purchase and sale is null and SCRA 320 [1995]), agreement on the manner of payment goes
void and produces no effect whatsoever where the same is into the price such that a disagreement on the manner of
without cause or consideration in that the purchase price which payment is tantamount to a failure to agree on the
appears thereon as paid has in fact never been paid by the price." (Emphasis supplied)
purchaser to the vendor."
One of the three essential requisites of a valid contract is consent of the
The Court reiterated this rule in Vda. De Catindig v. Heirs of Catalina parties on the object and cause of the contract. In a contract of sale, the
Roque,29 to wit parties must agree not only on the price, but also on the manner of
payment of the price. An agreement on the price but a disagreement on
"The Appellate Courts finding that the price was not paid or that the manner of its payment will not result in consent, thus preventing the
the statement in the supposed contracts of sale (Exh. 6 to 26) as existence of a valid contract for lack of consent. This lack of consent is
to the payment of the price was simulated fortifies the view that separate and distinct from lack of consideration where the contract
the alleged sales were void. "If the price is simulated, the sale is states that the price has been paid when in fact it has never been paid.
void . . ." (Art. 1471, Civil Code)
Reynes expected Montecillo to pay him directly the P47,000.00 purchase thereby denying her claim for payment of professional fees for
price within one month after the signing of the Deed of Sale. On the other
hand, Montecillo thought that his agreement with Reynes required him to
services rendered.
pay the P47,000.00 purchase price to Cebu Ice Storage to settle Jayags
mortgage debt. Montecillo also acknowledged a balance of P10,000.00 in The antecedent facts are as follows:
favor of Reynes although this amount is not stated in Montecillos Deed of
Sale. Thus, there was no consent, or meeting of the minds, between Petitioner Jazmin Soler is a Fine Arts graduate of the
Reynes and Montecillo on the manner of payment. This prevented the
existence of a valid contract because of lack of consent. University of Sto. Tomas, Manila. She is a well known
licensed professional interior designer. In November 1986, her
In summary, Montecillos Deed of Sale is null and void ab initio not only friend Rosario Pardo asked her to talk to Nida Lopez, who was
for lack of consideration, but also for lack of consent. The cancellation of manager of the COMBANK Ermita Branch for they were
TCT No. 90805 in the name of Montecillo is in order as there was no valid
contract transferring ownership of the Mabolo Lot from Reynes to planning to renovate the branch offices.[2]
Montecillo.
Even prior to November 1986, petitioner and Nida Lopez
WHEREFORE, the petition is DENIED and the assailed Decision dated knew each other because of Rosario Pardo, the latters
July 16, 1998 of the Court of Appeals in CA-G.R. CV No. 41349 is
AFFIRMED. Costs against petitioner.
sister. During their meeting, petitioner was hesitant to accept
the job because of her many out of town commitments, and
SO ORDERED. also considering that Ms. Lopez was asking that the designs be
submitted by December 1986, which was such a short notice.
FIRST DIVISION Ms. Lopez insisted, however, because she really wanted
petitioner to do the design for renovation.Petitioner acceded to
[G.R. No. 123892. May 21, 2001] the request. Ms. Lopez assured her that she would be
compensated for her services. Petitioner even told Ms. Lopez
JASMIN SOLER, petitioner, vs. COURT OF APPEALS, that her professional fee was ten thousand pesos (P10,000.00),
COMMERCIAL BANK OF MANILA, and NIDA to which Ms. Lopez acceded.[3]
LOPEZ, respondents.
During the November 1986 meeting between petitioner
DECISION and Ms. Lopez, there were discussions as to what was to be
renovated, which included a provision for a conference room,
PARDO, J.:
a change in the carpeting and wall paper, provisions for
Appeal via certiorari from a decision of the Court of bookshelves, a clerical area in the second floor, dressing up the
Appeals,[1] declaring that there was no perfected contract kitchen, change of the ceiling and renovation of the tellers
between petitioner Jazmin Soler and The Commercial Bank of booth. Ms. Lopez again assured petitioner that the bank would
Manila (COMBANK FOR BREVITY, formerly Boston Bank pay her fees.[4]
of the Philippines) for the renovation of its Ermita Branch,
After a few days, petitioner requested for the blueprint of On October 13, 1987, petitioner filed at the Regional Trial
the building so that the proper design, plans and specifications Court of Pasig, Branch 153 a complaint against COMBANK
could be given to Ms. Lopez in time for the board meeting in and Ms. Lopez for collection of professional fees and
December 1986. Petitioner then asked her draftsman Jackie damages.[8]
Barcelon to go to the jobsite to make the proper measurements
using the blue print. Petitioner also did her research on the In its answer, COMBANK stated that there was no
designs and individual drawings of what the bank contract between COMBANK and petitioner; [9] that Ms. Lopez
wanted. Petitioner hired Engineer Ortanez to make the merely invited petitioner to participate in a bid for the
electrical layout, architects Frison Cruz and De Mesa to do the renovation of the COMBANK Ermita Branch; that any
drafting. For the services rendered by these individuals, proposal was still subject to the approval of the COMBANKs
petitioner paid the engineer P4,000.00, architects Cruz and de head office.[10]
Mesa P5,000.00 and architect Barcelon P6,000.00. Petitioner
also contacted the suppliers of the wallpaper and the sash After due trial, on November 19, 1990, the trial court
makers for their quotation. So come December 1986, the lay rendered a decision, the dispositive portion of which reads:
out and the design were submitted to Ms. Lopez. She even told
petitioner that she liked the designs.[5] WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff and against defendants, ordering
Subsequently, petitioner repeatedly demanded payment for defendants jointly and severally, to pay plaintiff the following,
her services but Ms. Lopez just ignored the demands. In to wit:
February 1987, by chance petitioner and Ms. Lopez saw each
other in a concert at the Cultural Center of the 1. P15,000.00 representing the actual and compensatory
Philippines. Petitioner inquired about the payment damages or at least a reasonable compensation for the services
for her services, Ms. Lopez curtly replied that she was not rendered based on a quantum meruit;
entitled to it because her designs did not conform to the banks
policy of having a standard design, and that there was no 2. P5,000.00 as attorneys fees, and P2,000.00 as litigation
agreement between her and the bank.[6] expenses;

To settle the controversy, petitioner referred the matter to 3. P5,000.00 as exemplary damages; and
her lawyers, who wrote Ms. Lopez on May 20, 1987,
4. The cost of suit.
demanding payment for her professional fees in the amount of
P10,000.00 which Ms. Lopez ignored. Hence, on June 18, SO ORDERED.[11]
1987, the lawyers wrote Ms. Lopez once again demanding the
return of the blueprint copies petitioner submitted which Ms. On November 29, 1990, COMBANK, and Ms. Nida
Lopez refused to return.[7] Lopez, filed their notice of appeal. [12] On December 5, 1990, the
trial court ordered[13] the records of the case elevated to the was deferred because the commercial bank is for sale. It is
Court of Appeals.[14] under privatization. xxx

In the appeal, COMBANK reiterated that there was no At any rate, we find that the appellee failed to prove the
contract between petitioner, Nida Lopez and the bank. allegations in her complaint. xxx
[15]
Whereas, petitioner maintained that there was a perfected
contract between her and the bank which was facilitated WHEREFORE, premises considered, the appealed decision
through Nida Lopez. According to petitioner there was an offer (dated November 19, 1990) of the Regional Trial Court
and an acceptance of the service she rendered to the bank. [16] (Branch 153) in Pasig (now 55238, is hereby REVERSED. No
pronouncement as to costs.
On October 26, 1995, the Court of Appeals rendered its
decision the relevant portions of which state: SO ORDERED.[17]

After going over the record of this case, including the Hence, this petition.[18]
transcribed notes taken during the course of the trial, We are
convinced that the question here is not really whether the Petitioner forwards the argument that:
alleged contract purportedly entered into between the plaintiff
and defendant Lopez is enforceable, but whether a contract 1. The Court of Appeals erred in ruling that there was no
even exists between the parties. contract between petitioner and respondents, in the
absence of the element of consent;
Article 1318 of the Civil Code provides that there is no
contract unless the following requisites concur: 2. The Court of Appeals erred in ruling that respondents
merely invited petitioner to present her proposal;
(1) consent of the contracting parties;
3. The Court of Appeals erred in ruling that petitioner
(2) object certain which is the subject matter of the knew that her proposal was still subject to bidding and
contract; approval of the board of directors of the bank;

(3) cause of the obligation which is established. 4. The Court of Appeals erred in reversing the decision of
the trial court.
xxx
We find the petition meritorious.
The defendant bank never gave its imprimatur or consent to
the contract considering that the bidding or the question of We see that the issues raised boil down to whether or not
renovating the ceiling of the branch office of defendant bank there was a perfected contract between petitioner Jazmin Soler
and respondents COMBANK and Nida Lopez, and whether or (a) preparation, conception, or generation, which is the period of
not Nida Lopez, the manager of the bank branch, had authority negotiation and bargaining, ending at the moment of agreement
of the parties;
to bind the bank in the transaction.
(b) perfection or birth of the contract, which is the moment when
The discussions between petitioner and Ms. Lopez was to the parties come to agree on the terms of the contract; and
the effect that she had authority to engage the services of
petitioner. During their meeting, she even gave petitioner (c) consummation or death, which is the fulfillment or performance
specifications as to what was to be renovated in the branch of the terms agreed upon in the contract.[20]
premises and when petitioners requested for the blueprints of
In the case at bar, there was a perfected oral contract.
the building, Ms. Lopez supplied the same.
When Ms. Lopez and petitioner met in November 1986, and
Ms. Lopez was aware that petitioner hired the services of discussed the details of the work, the first stage of the contract
people to help her come up with the designs for the December, commenced. When they agreed to the payment of the ten
1986 board meeting of the bank. Ms. Lopez even insisted that thousand pesos (P10,000.00) as professional fees of petitioner
the designs be rushed in time for presentation to the and that she should give the designs before the December 1986
bank. With all these discussion and transactions, it was board meeting of the bank, the second stage of the contract
apparent to petitioner that Ms. Lopez indeed had authority to proceeded, and when finally petitioner gave the designs to Ms.
engage the services of petitioner. Lopez, the contract was consummated.

The next issue is whether there was a perfected contract Petitioner believed that once she submitted the designs she
between petitioner and the Bank. would be paid her professional fees. Ms. Lopez assured
petitioner that she would be paid.
A contract is a meeting of the minds between two persons
whereby one binds himself to give something or to render It is familiar doctrine that if a corporation knowingly
some service to bind himself to give something to render some permits one of its officers, or any other agent, to act within the
service to another for consideration. There is no contract scope of an apparent authority, it holds him out to the public as
unless the following requisites concur: 1. Consent of the possessing the power to do those acts; and thus, the
contracting parties; 2. Object certain which is the subject corporation will, as against anyone who has in good faith dealt
matter of the contract; and 3. Cause of the obligation which is with it through such agent, be estopped from denying the
established.[19] agents authority.[21]

A contract undergoes three stages: Also, petitioner may be paid on the basis of quantum
meruit. It is essential for the proper operation of the principle
that there is an acceptance of the benefits by one sought to be
charged for the services rendered under circumstances as
reasonably to notify him that the lawyer performing the task YNARES-SANTIAGO, J.:
was expecting to be paid compensation therefor. The doctrine
of quantum meruit is a device to prevent undue enrichment This is a petition for review under Rule 45 of the Rules of
based on the equitable postulate that it is unjust for a person to Court seeking to set aside the August 29, 1997 decision [1] and
retain benefit without paying for it.[22] the November 28, 1997 resolution[2] of the Court of
Appeals[3] in CA-G.R. SP No. 40031, affirming the
We note that the designs petitioner submitted to Ms. Lopez decision[4] of the Regional Trial Court of Caloocan City, Branch
were not returned. Ms. Lopez, an officer of the bank as branch 131, in Civil Case No. C-17033 which reversed the
manager used such designs for presentation to the board of the Decision[5] of the Metropolitan Trial Court of Caloocan, Branch
bank. Thus, the designs were in fact useful to Ms. Lopez for 53, in an ejectment suit docketed as Civil Case No. 21755.
she did not appear to the board without any designs at the time
of the deadline set by the board. The antecedent facts are as follows: Petitioner Yolanda
Palattao entered into a lease contract whereby she leased to
IN VIEW WHEREOF, the decision appealed from is private respondent a house and a 490-square-meter lot located
REVERSED and SET ASIDE. in 101 Caimito Road, Caloocan City, covered by Transfer
Certificate of Title No. 247536 and registered in the name of
The decision of the trial court [23] is REVIVED, petitioner. The duration of the lease contract was for three
REINSTATED and AFFIRMED. years, commencing from January 1, 1991, to December 31,
1993, renewable at the option of the parties.The agreed
No costs. monthly rental was P7,500.00 for the first year; P8,000.00 for
the second year; and P8,500.00 for the third year. The contract
SO ORDERED. gave respondent lessee the first option to purchase the leased
property.[6]
FIRST DIVISION
During the last year of the contract, the parties began
[G.R. No. 131726. May 7, 2002] negotiations for the sale of the leased premises to private
respondent. In a letter dated April 2, 1993, petitioner offered to
YOLANDA PALATTAO, petitioner, vs. THE COURT OF sell to private respondent 413.28 square meters of the leased
APPEALS, HON. ANTONIO J. FINEZA, as lot at P7,800.00 per square meter, or for the total amount of
Presiding Judge of the Regional Trial Court of P3,223,548.00.[7] Private respondent replied on April 15, 1993
Caloocan City, Branch 131 and MARCELO wherein he informed petitioner that he shall definitely exercise
CO, respondents. [his] option [to buy] the leased property.[8] Private respondent,
however, manifested his desire to buy the whole 490-square-
DECISION meter leased premises and inquired from petitioner the reason
why only 413.28 square meters of the leased lot were being
offered for sale.In a letter dated November 6, 1993, petitioner respondent further prayed for the issuance of a writ of
made a final offer to sell the lot at P7,500.00 per square meter preliminary injunction to prevent petitioner from filing an
with a downpayment of 50% upon the signing of the contract ejectment case upon the expiration of the lease contract on
of conditional sale, the balance payable in one year with a December 31, 1993.
monthly lease/interest payment of P14,000.00 which must be
paid on or before the fifth day of every month that the balance During the proceedings in the specific performance case,
is still outstanding.[9] On November 7, 1993, private respondent the parties agreed to maintain the status quo. After they failed
accepted petitioners offer and reiterated his request for to reach an amicable settlement, petitioner filed the instant
clarification as to the size of the lot for sale. [10] Petitioner ejectment case before the Metropolitan Trial Court of
acknowledged private respondents acceptance of the offer in Caloocan City, Branch 53.[14] In his answer,[15] private
his letter dated November 10, 1993. respondent alleged that he refused to vacate the leased
premises because there was a perfected contract of sale of the
Petitioner gave private respondent on or before November leased property between him and petitioner.Private respondent
24, 1993, within which to pay the 50% downpayment in cash argued that he did not abandon his option to buy the leased
or managers check. Petitioner stressed that failure to pay the property and that his proposal to renew the lease was but an
downpayment on the stipulated period will enable petitioner to alternative proposal to the sale. He further contended that the
freely sell her property to others. Petitioner likewise notified filing of the ejectment case violated their agreement to
private respondent that she is no longer renewing the lease maintain the status quo.
agreement upon its expiration on December 31, 1993.[11]
On July 28, 1995, the Metropolitan Trial Court rendered a
Private respondent did not accept the terms proposed by decision in favor of petitioner. The dispositive portion thereof
petitioner. Neither was there any documents of sale nor states:
payment by private respondent of the required
downpayment. Private respondent wrote a letter to petitioner WHEREFORE, judgment is hereby rendered in favor of
on November 29, 1993 manifesting his intention to exercise the plaintiff and against the defendant, ordering the defendant
his option to renew their lease contract for another three years, and all persons claiming right under him to pay the plaintiff as
starting January 1, 1994 to December 31, 1996. [12] This was follows:
rejected by petitioner, reiterating that she was no longer
renewing the lease. Petitioner demanded that private 1. P12,000.00 per month representing reasonable
respondent vacate the premises, but the latter refused. monthly rental from January 1, 1994 and months
thereafter until defendants shall vacate the subject
Hence, private respondent filed with the Regional Trial premises;
Court of Caloocan, Branch 127, a case for specific
performance, docketed as Civil Case No. 16287, [13] seeking to 2. P10,000.00 representing attorneys fee;
compel petitioner to sell to him the leased property.Private
3. To pay the cost of suit. THE RTC, CALOOCAN CITY, BRANCH 131, ERRED IN
DECLARING THAT THERE WAS A PERFECTED
SO ORDERED.[16] CONTRACT OF SALE BETWEEN THE PARTIES OVER
THE LEASED PROPERTY.[18]
On appeal, the Regional Trial Court reversed the assailed
decision, disposing as follows: The petition is impressed with merit.

WHEREFORE, in view of all the foregoing, the assailed The Court of Appeals ruled that petitioner was estopped
decision of the Metropolitan Trial Court, Branch 53, this City, from filing the instant ejectment suit against private respondent
rendered on July 28, 1995, is hereby REVERSED and SET by the alleged status quo agreement reached in the specific
ASIDE, with costs de officio. performance case filed by private respondent against
petitioner. A reading, however, of the transcript of
SO ORDERED.[17] stenographic notes taken during the January 21, 1994 hearing
discloses that the agreement to maintain the status
Aggrieved, petitioner filed a petition for review with the quo pertained only to the duration of the negotiation for an
Court of Appeals, which dismissed the petition. Likewise, the amicable settlement and was not intended to be operative until
motion for reconsideration was denied on August 29, the final disposition of the specific performance case. Thus:
1997. Hence, the instant petition anchored upon the following
grounds: xxxxxxxxx
I Court

THE COURT OF APPEALS AND RTC, CALOOCAN CITY, Before we go into the prayer for preliminary injunction and of the
BRANCH 131, ERRED IN DECLARING THAT merit of the case I want to see if I can make the parties settle their
PETITIONER IS GUILTY OF ESTOPPEL IN FILING AN differences.
EJECTMENT CASE AGAINST RESPONDENT CO.
Atty. Siapan
II
We will in the meantime maintain the status quo on the matter
pending further negotiation.
THE COURT OF APPEALS AND RTC, CALOOCAN CITY,
BRANCH 131, ERRED IN FINDING THAT AN Court
INJUNCTIVE SUIT WILL BAR THE FILING OF
EJECTMENT CASE AGAINST RESPONDENT CO. As a matter of injunction, are you willing to maintain a status
quo muna [?]
III
Atty. Mendez
Yes, your Honor. The foregoing agreement to maintain the status
quo pending negotiations was noted by the trial court in its
Court
January 21, 1994 Order postponing the hearing to enable the
How about Atty. Uy are you willing? parties to arrive at an amicable settlement, to wit:

Atty. Uy Upon agreement of the parties herein for postponement of


todays schedule as there might be some possibility of settling
Yes, your Honor. the claims herein, let the hearing today be cancelled.
Court
In the meantime this case is set for hearing on February 28,
I will not issue any injunction but there will be a status quo and we
1994 at 8:30 a.m., should the parties not arrive at any amicable
will concentrate our efforts on letting the parties to (sic) negotiate settlement.[21]
and enter into an agreement.[19]
It is beyond cavil therefore that the preservation of
xxxxxxxxx the status quo agreed upon by the parties applied only during
the period of negotiations for an amicable settlement and
I will give you the same facts of the case. I want to settle this and not cannot be construed to be effective for the duration of the
go into trial because in due time I will not finish the case, my stay
here is only Acting Presiding Judge and there are other judges pendency of the specific performance case. It is a settled rule
nominated for this sala and once the judge will be (sic) appointed that injunction suits and specific performance cases, inter alia,
then I go, let us get advantage of settling the matter. I will have your will not preclude the filing of, or abate, an ejectment
gentlemans agreement that there will be no adversarial attitude case. Unlawful detainer and forcible entry suits under Rule 70
among you will (sic) never arrive at any agreement.
are designed to summarily restore physical possession of a
Atty. Siapan piece of land or building to one who has been illegally or
forcibly deprived thereof, without prejudice to the settlement
In the meantime, we will move for a resetting of this case your of the parties' opposing claims of juridical possession in
Honor. appropriate proceedings. It has been held that these actions are
intended to avoid disruption of public order by those who
Court
would take the law in their hands purportedly to enforce their
Anyway, this is a gentlemans agreement that there will be no new claimed right of possession. In these cases, the issue is pure
movement but the status quo will be maintained. physical or de facto possession, and pronouncements made on
questions of ownership are provisional in nature. [22]
Atty. Siapan, Atty. Mendez & Atty. Uy.
In Wilmon Auto Supply Corporation, et al., v. Court of
Yes, your Honor. (simultaneously (sic) in saying)[20] Appeals, et al.,[23] the issue of whether or not an ejectment case
based on expiration of lease contract should be abated by an
action to enforce the right of preemption or prior purchase of SCRA 520 [1984]); Drilon v. Gaurana, 149 SCRA 352 [1987];
the leased premises was resolved in the negative. The Court Ching v. Malaya, 153 SCRA 412 [1987]; Philippine Feeds
Milling Co., Inc. v. C.A., 174 SCRA 108; Dante v. Sison, 174
outlined the following precedents: SCRA 517 [1989]; Guzman v. C.A. [annulment of sale and
reconveyance], 177 SCRA 604 [1989]; Demamay v. C.A., 186
1. Injunction suits instituted in the RTC by defendants in ejectment SCRA 608 [1990]; Leopoldo Sy v. C.A., et al., [annulment of
actions in the municipal trial courts or other courts of the first sale and reconveyance], G.R. No. 95818, Aug. 2, 1991).
level (Nacorda v. Yatco, 17 SCRA 920 [1966]) do not abate the
latter; and neither do proceedings on consignation of rentals 8. Neither do suits for annulment of sale, or title, or document
(Lim Si v. Lim, 98 Phil. 868 [1956], citing Pue, et al. v. affecting property operate to abate ejectment actions respecting
Gonzales, 87 Phil. 81 [1950]). the same property (Salinas v. Navarro [annulment of deed of
sale with assumption of mortgage and/or to declare the same an
2. An "accion publiciana" does not suspend an ejectment suit equitable mortgage], 126 SCRA 167 [1983]; Ang Ping v. RTC
against the plaintiff in the former (Ramirez v. Bleza, 106 SCRA [annulment of sale and title], 154 SCRA 153 [1987]; Caparros v.
187 [1981]). C.A. [annulment of title], 170 SCRA 758 [1989]; Dante v. Sison
[annulment of sale with damages], 174 SCRA 517; Galgala v.
3. A "writ of possession case" where ownership is concededly the Benguet Consolidated, Inc. [annulment of document], 177
principal issue before the Regional Trial Court does not SCRA 288 [1989]).
preclude nor bar the execution of the judgment in an unlawful
detainer suit where the only issue involved is the material The underlying reasons for the above ruling were that the
possession or possession de facto of the premises (Heirs of F.
Guballa, Sr. v. C.A., et al.; etc., 168 SCRA 518 [1988]). actions in the Regional Trial Court did not involve physical
or de facto possession, and, on not a few occasions, that the
4. An action for quieting of title to property is not a bar to an case in the Regional Trial Court was merely a ploy to delay
ejectment suit involving the same property (Quimpo v. de la disposition of the ejectment proceeding, or that the issues
Victoria, 46 SCRA 139 [1972]). presented in the former could quite as easily be set up as
5. Suits for specific performance with damages do not affect
defenses in the ejectment action and there resolved.
ejectment actions (e.g., to compel renewal of a lease contract)
(Desamito v. Cuyegkeng, 18 SCRA 1184 [1966]; Rosales v. Only in rare instances is suspension allowed to await the
CFI, 154 SCRA 153 [1987]; Commander Realty, Inc. v. C.A., outcome of the pending civil action. In Wilmon, the Court
161 SCRA 264 [1988]). recognized that Vda. De Legaspi v. Avendao[24] was an
exception to the general rule against suspension of an
6. An action for reformation of instrument (e.g., from deed of
absolute sale to one of sale with pacto de retro) does not ejectment proceeding.[25] Thus:
suspend an ejectment suit between the same parties (Judith v.
Abragan, 66 SCRA 600 [1975]). x x x [A]s regards the seemingly contrary ruling in Vda. de
Legaspi v. Avendano, 89 SCRA 135 (1977), this Court
7. An action for reconveyance of property or "accion observed in Salinas v. Navarro, 126 SCRA 167, 172-173
reivindicatoria" also has no effect on ejectment suits regarding
the same property (Del Rosario v. Jimenez, 8 SCRA 549 [1963]; (1983), that the exception to the rule in this case of Vda. de
Salinas v. Navarro, 126 SCRA 167; De la Cruz v. C.A., 133 Legaspi is based on strong reasons of equity not found in the
present petition. The right of the petitioner is not so seriously is not exactly what is proposed in the offer, such acceptance is
placed in issue in the annulment case as to warrant a deviation, not sufficient to generate consent because any modification or
on equitable grounds, from the imperative nature of the rule. In variation from the terms of the offer annuls the offer.[27]
the Vda. de Legaspi case, execution of the decision in the
ejectment case would also have meant demolition of the In the case at bar, while it is true that private respondent
premises, a factor not present in this petition. informed petitioner that he is accepting the latters offer to sell
the leased property, it appears that they did not reach an
In the case at bar, the continued occupation by private agreement as to the extent of the lot subject of the proposed
respondent of the leased premises is conditioned upon his right sale. This is evident from the April 15, 1993 reply-letter of
to acquire ownership over said property. The factual milieu private respondent to petitioner, to wit:
obtaining here, however, hardly falls within the aforecited
exception as the resolution of the ejectment suit will not result I would like to inform you that I shall definitely exercise my
in the demolition of the leased premises, as in the case of Vda. option as embodied in Provision F (First Option) of our
De Legaspi v. Avendao. Verily, private respondent failed to Contract of Lease dated December 21, 1990. As per
show strong reasons of equity to sustain the suspension or agreement, my first option covers the 490 square meters site
dismissal of the ejectment case. Argumentum a simili valet in which I am currently leasing from you at 101 Caimito Road,
lege. Precedents are helpful in deciding cases when they are on Caloocan City. Specifically, your Transfer Certificate of Title
all fours or at least substantially identical with previous #247536 delineates the property sizes as 492 square meters.
litigations.[26] Faced with the same scenario on which the
general rule is founded, and finding no reason to deviate Your offer, however, states only 413.28 square meters are for
therefrom, the Court adheres to the settled jurisprudence that sale to me. I trust that this is merely an oversight on your
suits involving ownership may not be successfully pleaded in part. Notwithstanding the rumors to the effect that part of the
abatement of an action for ejectment. property have already been sold to other parties, I would like
to believe that you still retain absolute ownership over the
Contracts that are consensual in nature, like a contract of entire property covered by my Contract of Lease. Kindly
sale, are perfected upon mere meeting of the minds. Once there enlighten me on this matter so that we can proceed with the
is concurrence between the offer and the acceptance upon the negotiations for the sale of your property to me. [28]
subject matter, consideration, and terms of payment, a contract
is produced. The offer must be certain. To convert the offer Likewise, in his November 7, 1993 reply-letter, private
into a contract, the acceptance must be absolute and must not respondent stated that:
qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the While it is true that you first offered your property for sale to
proposal. A qualified acceptance, or one that involves a new me last April 14, 1993, it is also equally true that you only
proposal, constitutes a counter-offer and is a rejection of the correspond with me on this matter again on October 27,
original offer. Consequently, when something is desired which 1993. I answered your April 14 offer with a registered mail on
April 15, 1993. In it, I stated that I am definitely exercising my exercise or avail of the option to renew their lease contract for
first option to purchase your property in accordance with another three years, starting January 1, 1994 to December 31,
Provisions F of our Contract of Lease dated December 21, 1996. Evidently, there was a subsequent mutual backing out
1990. Likewise, I requested you to explain the discrepancy from the contract of sale. Hence, private respondent cannot
between the size of the property being offered for sale (413.28 compel petitioner to sell the leased property to him.
square meters) as against the size stated in my option which is
492 square meters. However, I did not get any reply from you Considering that the lease contract was not renewed after
on this matter. Hence the negotiations got stalled. If anybody its expiration on December 31, 1991, private respondent has
should be blamed for the prolonged negotiation, then surely it no more right to continue occupying the leased
is not all mine alone.[29] premises. Consequently, his ejectment therefrom must be
sustained.
The foregoing letters reveal that private respondent did not
give his consent to buy only 413.28 square meters of the leased As to the monthly rental to be paid by private respondent
lot, as he desired to purchase the whole 490 square-meter- from the expiration of their contract of lease until the premises
leased premises which, however, was not what was exactly is vacated, we find that the P12,000.00 awarded by the
proposed in petitioners offer. Clearly, therefore, private Metropolitan Trial Court must be reduced to P8,500.00, it
respondents acceptance of petitioners offer was not absolute, being the highest amount of monthly rental stated in the lease
and will consequently not generate consent that would perfect contract.
a contract.
WHEREFORE, the petition is GRANTED. The August
Even assuming that the parties reached an agreement as to 29, 1997 decision and the November 28, 1997 resolution of the
the size of the lot subject of the sale, the records show that Court of Appeals in CA-G.R. SP No. 40031 are SET
there was subsequently a mutual withdrawal from the contract. ASIDE. The Decision of the Metropolitan Trial Court of
[30]
This is so because in the November 10, 1993 letter of Caloocan, Branch 53, in Civil Case No. 21755 is
petitioner, she gave private respondent until November 24, REINSTATED subject to the modification that the monthly
1993 to pay 50% of the purchase price, with the caveat that rental to be paid by private respondent from the date of the
failure to do so would authorize her to sell to others the leased termination of the lease contract until the leased premises is
premises. The period within which to pay the downpayment is vacated is reduced to P8,500.00.
a new term or a counter-offer in the contract which needs
acceptance by private respondent. The latter, however, failed to SO ORDERED.
pay said downpayment, or to at least manifest his conformity
to the period given by petitioner. Neither did private FIRST DIVISION
respondent ask for an extension nor insist on the sale of the
subject lot. What appears in the record is private respondents
November 29, 1993 letter informing petitioner that he shall
[G.R. No. 128690. January 21, 1999] however, that such right shall be exercised by ABS-CBN from
the actual offer in writing.

Viva, through defendant Del Rosario, offered ABS-CBN,


ABS-CBN BROADCASTING
through its vice-president Charo Santos-Concio, a list of three
CORPORATION, petitioners, vs. HONORABLE
(3) film packages (36 title) from which ABS-CBN may
COURT OF APPEALS, REPUBLIC exercise its right of first refusal under the afore-said agreement
BROADCASTING CORP., VIVA (Exhs. 1 par. 2, 2, 2-A and 2-B Viva). ABS-CBN, however
PRODUCTIONS, INC., and VICENTE DEL through Mrs. Concio, can tick off only ten (10) titles (from the
ROSARIO, respondents. list) we can purchase (Exh. 3 Viva) and therefore did not
accept said list (TSN, June 8, 1992, pp. 9-10). The titles ticked
DECISION off by Mrs. Concio are not the subject of the case at bar except
DAVIDE, JR., C.J.: the film Maging Sino Ka Man.
In this petition for review on certiorari, petitioners ABS-CBN For further enlightenment, this rejection letter dated January
Broadcasting Corp. (hereinafter ABS-CBN) seeks to reverse and set 06, 1992 (Exh 3 Viva) is hereby quoted:
aside the decision[1] of 31 October 1996 and the resolution [2] of 10
March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The
6 January 1992
former affirmed with modification the decision[3] of 28 April 1993 of
the Regional Trial Court (RTC) of Quezon City, Branch 80, in Civil
Case No. Q-12309. The latter denied the motion to reconsider the Dear Vic,
decision of 31 October 1996.
This is not a very formal business letter I am writing to you as
The antecedents, as found by the RTC and adopted by the Court of I would like to express my difficulty in recommending the
Appeals, are as follows:
purchase of the three film packages you are offering ABS-
CBN.
In 1990, ABS-CBN and VIVA executed a Film Exhibition
Agreement (Exh. A) whereby Viva gave ABS-CBN an
From among the three packages I can only tick off 10 titles we
exclusive right to exhibit some Viva films. Sometime in
can purchase. Please see attached. I hope you will understand
December 1991, in accordance with paragraph 2.4 [sic] of said
my position. Most of the action pictures in the list do not have
agreement stating that-
big action stars in the cast. They are not for primetime. In line
with this I wish to mention that I have not scheduled for
1.4 ABS-CBN shall have the right of first refusal to the next
telecast several action pictures in our very first contract
twenty-four (24) Viva films for TV telecast under such terms
because of the cheap production value of these movies as well
as may be agreed upon by the parties hereto, provided,
as the lack of big action stars. As a film producer, I am sure
you understand what I am trying to say as Viva produces only titles subject of the present case, as well as 104 re-runs
big action pictures. (previously aired on television) from which ABS-CBN may
choose another 52 titles, as a total of 156 titles, proposing to
In fact, I would like to request two (2) additional runs for these sell to ABS-CBN airing rights over this package of 52
movies as I can only schedule them in out non-primetime originals and 52 re-runs for P60,000,000.00 of
slots. We have to cover the amount that was paid for these which P30,000,000.00 will be in cash and P30,000,000.00
movies because as you very well know that non-primetime worth of television spots (Exh. 4 to 4-C Viva; 9 Viva).
advertising rates are very low. These are the unaired titles in
the first contract. On April 2, 1992, defendant Del Rosario and ABS-CBNs
general manager, Eugenio Lopez III, met at the Tamarind Grill
1. Kontra Persa [sic] Restaurant in Quezon City to discuss the package proposal of
2. Raider Platoon
3. Underground guerillas
VIVA. What transpired in that lunch meeting is the subject of
4. Tiger Command conflicting versions. Mr. Lopez testified that he and Mr. Del
5. Boy de Sabog Rosario allegedly agreed that ABS-CBN was granted exclusive
6. lady Commando film rights to fourteen (14) films for a total consideration
7. Batang Matadero of P36 million; that he allegedly put this agreement as to the
8. Rebelyon
price and number of films in a napkin and signed it and gave it
I hope you will consider this request of mine. to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8,
1992). On the other hand. Del Rosario denied having made any
The other dramatic films have been offered to us before and agreement with Lopez regarding the 14 Viva films; denied the
have been rejected because of the ruling of MTRCB to have existence of a napkin in which Lopez wrote something; and
them aired at 9:00 p.m. due to their very adult themes. insisted that what he and Lopez discussed at the lunch meeting
was Vivas film package offer of 104 films (52 originals and 52
As for the 10 titles I have choosen [sic] from the 3 packages re-runs) for a total price of P60 million. Mr. Lopez promising
please consider including all the other Viva movies produced [sic]to make a counter proposal which came in the form of a
last year, I have quite an attractive offer to make. proposal contract Annex C of the complaint (Exh. 1 Viva; Exh
C ABS-CBN).
Thanking you and with my warmest regards.
On April 06, 1992, Del Rosario and Mr. Graciano Gozon of
(Signed) RBS Senior vice-president for Finance discussed the terms and
Charo Santos-Concio conditions of Vivas offer to sell the 104 films, after the
rejection of the same package by ABS-CBN.
On February 27, 1992, defendant Del Rosario approached
ABS-CBNs Ms. Concio, with a list consisting of 52 original On April 07, 1992, defendant Del Rosario received through his
movie titles (i.e., not yet aired on television) including the 14 secretary , a handwritten note from Ms. Concio, (Exh. 5 Viva),
which reads: Heres the draft of the contract. I hope you find On 17 June 1992, after appropriate proceedings, the RTC issued
everything in order, to which was attached a draft exhibition an order[7] directing the issuance of a writ of preliminary injunction
agreement (Exh. C ABS-CBN; Exh. 9 Viva p. 3) a counter- upon ABS-CBNs posting of a P35 million bond. ABS-CBN moved for
the reduction of the bond,[8] while private respondents moved for
proposal covering 53 films, 52 of which came from the list
reconsideration of the order and offered to put up a counterbond.[9]
sent by defendant Del Rosario and one film was added by Ms.
Concio, for a consideration of P35 million. Exhibit C provides In the meantime, private respondents filed separate answer with
that ABS-CBN is granted film rights to 53 films and contains a counterclaim.[10] RBS also set up a cross-claim against VIVA.
right of first refusal to 1992 Viva Films. The said counter On 3 August 1992, the RTC issued an order[11] dissolving the writ
proposal was however rejected by Vivas Board of Directors [in of preliminary injunction upon the posting by RBS of a P30 million
the] evening of the same day, April 7, 1992, as Viva would not counterbond to answer for whatever damages ABS-CBN might suffer
sell anything less than the package of 104 films for P60 by virtue of such dissolution. However, it reduced petitioners
million pesos (Exh. 9 Viva), and such rejection was relayed to injunction bond to P15 million as a condition precedent for the
reinstatement of the writ of preliminary injunction should private
Ms. Concio. respondents be unable to post a counterbond.
On April 29, 1992, after the rejection of ABS-CBN and At the pre-trial[12] on 6 August 1992, the parties upon suggestion of
following several negotiations and meetings defendant Del the court, agreed to explore the possibility of an amicable
Rosario and Vivas President Teresita Cruz, in consideration settlement. In the meantime, RBS prayed for and was granted
reasonable time within which to put up a P30 million counterbond in
of P60 million, signed a letter of agreement dated April 24, the event that no settlement would be reached.
1992, granting RBS the exclusive right to air 104 Viva-
produced and/or acquired films (Exh. 7-A - RBS; Exh. 4 RBS) As the parties failed to enter into an amicable settlement, RBS
including the fourteen (14) films subject of the present case. [4] posted on 1 October 1992 a counterbond, which the RTC approved in
its Order of 15 October 1992.[13]
On 27 May 1992, ABS-CBN filed before the RTC a complaint for On 19 October 1992, ABS-CBN filed a motion for
specific performance with a prayer for a writ of preliminary injunction reconsideration[14] of the 3 August and 15 October 1992 Orders, which
and/or temporary restraining order against private respondents RBS opposed.[15]
Republic Broadcasting Corporation[5] (hereafter RBS), Viva Production
(hereafter VIVA), and Vicente del Rosario. The complaint was On 29 October, the RTC conducted a pre-trial.[16]
docketed as Civil Case No. Q-92-12309. Pending resolution of its motion for reconsideration, ABS-CBN
On 28 May 1992, the RTC issued a temporary restraining filed with the Court of Appeals a petition [17] challenging the RTCs
order[6] enjoining private respondents from proceeding with the airing, Order of 3 August and 15 October 1992 and praying for the issuance
broadcasting, and televising of the fourteen VIVA films subject of the of a writ of preliminary injunction to enjoin the RTC from enforcing
controversy, starting with the film Maging Sino Ka Man, which was said orders. The case was docketed as CA-G.R. SP No. 29300.
scheduled to be shown on private respondent RBS channel 7 at seven On 3 November 1992, the Court of Appeals issued a temporary
oclock in the evening of said date. restraining order[18] to enjoin the airing, broadcasting, and televising of
any or all of the films involved in the controversy.
On 18 December 1992, the Court of Appeals promulgated a the Board on 7 April 1992. Hence, there was no basis for ABS-CBNs
decision[19] dismissing the petition in CA-G.R. SP No. 29300 for being demand that VIVA signed the 1992 Film Exhibition
premature. ABS-CBN challenged the dismissal in a petition for review Agreement. Furthermore, the right of first refusal under the 1990 Film
filed with this Court on 19 January 1993, which was docketed s G.R. Exhibition Agreement had previously been exercised per Ms. Concios
No. 108363. letter to Del Rosario ticking off ten titles acceptable to them, which
would have made the 1992 agreement an entirely new contract.
In the meantime the RTC received the evidence for the parties in
Civil Case No. Q-92-12309. Thereafter, on 28 April 1993, it rendered a On 21 June 1993, this Court denied[21] ABS-CBNs petition for
decision[20] in favor of RBS and VIVA and against ABS-CBN review in G.R. No. 108363, as no reversible error was committed by
disposing as follows: the Court of Appeals in its challenged decision and the case had
become moot and academic in view of the dismissal of the main action
WHEREFORE, under cool reflection and prescinding from the by the court a quo in its decision of 28 April 1993.
foregoing, judgment is rendered in favor of defendants and Aggrieved by the RTCs decision, ABS-CBN appealed to the Court
against the plaintiff. of Appeals claiming that there was a perfected contract between ABS-
CBN and VIVA granting ABS-CBN the exclusive right to exhibit the
(1) The complaint is hereby dismissed; subject films.Private respondents VIVA and Del Rosario also appealed
(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the seeking moral and exemplary damages and additional attorneys fees.
following: In its decision of 31 October 1996, the Court of Appeals agreed
a) P107,727.00 the amount of premium paid by RBS to the with the RTC that the contract between ABS-CBN and VIVA had not
surety which issued defendants RBSs bond to lift the been perfected, absent the approval by the VIVA Board of Directors of
injunction; whatever Del Rosario, its agent, might have agreed with Lopez
b) P191,843.00 for the amount of print advertisement for III. The appellate court did not even believe ABS-CBNs evidence that
Maging Sino Ka Man in various newspapers; Lopez III actually wrote down such an agreement on a napkin, as the
same was never produced in court. It likewise rejected ABS-CBNs
c) Attorneys fees in the amount of P1 million; insistence on its right of first refusal and ratiocinated as follows:
d) P5 million as and by way of moral damages;
e) P5 million as and by way of exemplary damages;
As regards the matter of right of first refusal, it may be true
that a Film Exhibition Agreement was entered into between
(3) For the defendant VIVA, plaintiff ABS-CBN is ordered to Appellant ABS-CBN and appellant VIVA under Exhibit A in
pay P212,000.00 by way of reasonable attorneys fees.
1990 and that parag. 1.4 thereof provides:
(4) The cross-claim of defendant RBS against defendant VIVA is
dismissed. 1.4 ABS-CBN shall have the right of first refusal to the next
(5) Plaintiff to pay the costs. twenty-four (24) VIVA films for TV telecast under such terms
According to the RTC, there was no meeting of minds on the price as may be agreed upon by the parties hereto, provided,
and terms of the offer. The alleged agreement between Lopez III and however, that such right shall be exercised by ABS-CBN
Del Rosario was subject to the approval of the VIVA Board of within a period of fifteen (15) days from the actual offer in
Directors, and said agreement was disapproved during the meeting of writing (Records, p. 14).
[H]owever, it is very clear that said right of first refusal in the pecuniary loss which RBS has suffered as a result of the filing of
favor of ABS-CBN shall still be subjected to such terms as the complaint by ABS-CBN. As to the award of moral damages, the
may be agreed upon by the parties thereto, and that the said Court of Appeals found reasonable basis therefor, holding that RBSs
reputation was debased by the filing of the complaint in Civil Case No.
right shall be exercised by ABS-CBN within fifteen (15) days
Q-92-12309 and by the non-showing of the film Maging Sino Ka
from the actual offer in writing. Man. Respondent court also held that exemplary damages were
correctly imposed by way of example or correction for the public good
Said parag. 1.4 of the agreement Exhibit A on the right of first in view of the filing of the complaint despite petitioners knowledge
refusal did not fix the price of the film right to the twenty-four that the contract with VIVA had not been perfected. It also upheld the
(24) films, nor did it specify the terms thereof. The same are award of attorneys fees, reasoning that with ABS-CBNs act of
still left to be agreed upon by the parties. instituting Civil Case No. Q-92-12309, RBS was unnecessarily forced
to litigate. The appellate court, however, reduced the awards of moral
In the instant case, ABS-CBNs letter of rejection Exhibit 3 damages to P 2 million, exemplary damages to P2 million, and
(Records, p. 89) stated that it can only tick off ten (10) films, attorneys fees to P500,000.00.
and the draft contract Exhibit C accepted only fourteen (14) On the other hand, respondent Court of Appeals denied VIVA and
films, while parag. 1.4 of Exhibit A speaks of the next twenty- Del Rosarios appeal because it was RBS and not VIVA which was
four (24) films. actually prejudiced when the complaint was filed by ABS-CBN.
Its motion for reconsideration having been denied, ABS-CBN
The offer of VIVA was sometime in December 1991, (Exhibits filed the petition in this case, contending that the Court of Appeals
2, 2-A, 2-B; Records, pp. 86-88; Decision, p. 11, Records, p. gravely erred in
1150), when the first list of VIVA films was sent by Mr. Del I
Rosario to ABS-CBN. The Vice President of ABS-CBN, Mrs.
RULING THAT THERE WAS NO PERFECTED CONTRACT
Charo Santos-Concio, sent a letter dated January 6, 1992 BETWEEN PETITIONER AND PRIVATE RESPONDENT
(Exhibit 3, Records, p. 89) where ABS-CBN exercised its right VIVA NOTWITHSTANDING PREPONFERANCE OF
of refusal by rejecting the offer of VIVA. As aptly observed by EVIDENCE ADDUCED BY PETITIONER TO THE
the trial court, with the said letter of Mrs. Concio of January 6, CONTRARY.
1992, ABS-CBN had lost its right of first refusal. And even if II
We reckon the fifteen (15) day period from February 27, 1992 IN AWARDING ACTUAL AND COMPENSATORY
(Exhibit 4 to 4-C) when another list was sent to ABS-CBN DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS.
after the letter of Mrs. Concio, still the fifteen (15) day period III
within which ABS-CBN shall exercise its right of first refusal
IN AWARDING MORAL AND EXEMPLARY DAMAGES IN
has already expired.[22] FAVOR OF PRIVATE RESPONDENT RBS.
Accordingly, respondent court sustained the award factual IV
damages consisting in the cost of print advertisements and the IN AWARDING ATORNEYS FEES OF RBS.
premium payments for the counterbond, there being adequate proof of
ABS-CBN claims that it had yet to fully exercise its right of first wanton, fraudulent, or reckless; they arose by virtue only of the filing
refusal over twenty-four titles under the 1990 Film Exhibition of the complaint. An award of moral and exemplary damages is not
Agreement, as it had chosen only ten titles from the first list. It insists warranted where the record is bereft of any proof that a party acted
that we give credence to Lopezs testimony that he and Del Rosario met maliciously or in bad faith in filing an action. [27] In any case, free resort
at the Tamarind Grill Restaurant, discussed the terms and conditions of to courts for redress of wrongs is a matter of public policy. The law
the second list (the 1992 Film Exhibition Agreement) and upon recognizes the right of every one to sue for that which he honestly
agreement thereon, wrote the same on a paper napkin. It also asserts believes to be his right without fear of standing trial for damages
that the contract has already been effective, as the elements thereof, where by lack of sufficient evidence, legal technicalities, or a different
namely, consent, object, and consideration were established. It then interpretation of the laws on the matter, the case would lose ground.
concludes that the Court of Appeals pronouncements were not [28]
One who, makes use of his own legal right does no injury.[29] If
supported by law and jurisprudence, as per our decision of 1 December damage results from filing of the complaint, it is damnum absque
1995 in Limketkai Sons Milling, Inc. v. Court of Appeals,[23] which injuria.[30] Besides, moral damages are generally not awarded in favor
cited Toyota Shaw, Inc. v. Court of Appeals;[24] Ang Yu Asuncion v. of a juridical person, unless it enjoys a good reputation that was
Court of Appeals,[25] and Villonco Realty Company v. Bormaheco, Inc. debased by the offending party resulting in social humiliation.[31]
[26]

As regards the award of attorneys fees, ABS-CBN maintains that


Anent the actual damages awarded to RBS, ABS-CBN disavows the same had no factual, legal, or equitable justification. In sustaining
liability therefor. RBS spent for the premium on the counterbond of its the trial courts award, the Court of Appeals acted in clear disregard of
own volition in order to negate the injunction issued by the trial court the doctrine laid down in Buan v. Camaganacan[32] that the text of the
after the parties had ventilated their respective positions during the decision should state the reason why attorneys fees are being awarded;
hearings for the purpose. The filing of the counterbond was an option otherwise, the award should be disallowed. Besides, no bad faith has
available to RBS, but it can hardly be argued that ABS-CBN been imputed on, much less proved as having been committed by,
compelled RBS to incur such expense. Besides, RBS had another ABS-CBN. It has been held that where no sufficient showing of bad
available option, i.e., move for the dissolution of the injunction; or if it faith would be reflected in a partys persistence in a case other than an
was determined to put up a counterbond, it could have presented a erroneous conviction of the righteousness of his cause, attorneys fees
cash bond. Furthermore under Article 2203 of the Civil Code, the party shall not be recovered as cost.[33]
suffering loss injury is also required to exercise the diligence of a good
father of a family to minimize the damages resulting from the act or On the other hand, RBS asserts that there was no perfected
omission. As regards the cost of print advertisements, RBS had not contract between ABS-CBN and VIVA absent meeting of minds
convincingly established that this was a loss attributable to the non- between them regarding the object and consideration of the alleged
showing of Maging Sino Ka Man; on the contrary, it was brought out contract. It affirms that ABS-CBNs claim of a right of first refusal was
during trial that with or without the case or injunction, RBS would correctly rejected by the trial court. RBS insists the premium it had
have spent such an amount to generate interest in the film. paid for the counterbond constituted a pecuniary loss upon which it
may recover. It was obliged to put up the counterbond due to the
ABS-CBN further contends that there was no other clear basis for injunction procured by ABS-CBN. Since the trial court found that
the awards of moral and exemplary damages. The controversy ABS-CBN had no cause of action or valid claim against RBS and,
involving ABS-CBN and RBS did not in any way originate from therefore not entitled to the writ of injunction, RBS could recover from
business transaction between them. The claims for such damages did ABS-CBN the premium paid on the counterbond. Contrary to the
not arise from any contractual dealings or from specific acts claim of ABS-CBN, the cash bond would prove to be more expensive,
committed by ABS-CBN against RBS that may be characterized as as the loss would be equivalent to the cost of money RBS would
forego in case the P30 million came from its funds or was borrowed The amount of moral and exemplary damages cannot be said
from banks. to be excessive. Two reasons justify the amount of the award.
RBS likewise asserts that it was entitled to the cost of
advertisements for the cancelled showing of the film Maging Sino Ka The first is that the humiliation suffered by RBS, is national in
Man because the print advertisements were out to announce the extent. RBS operations as a broadcasting company is [sic]
showing on a particular day and hour on Channel 7, i.e., in its entirety nationwide. Its clientele, like that of ABS-CBN, consists of
at one time, not as series to be shown on a periodic basis. Hence, the those who own and watch television. It is not an exaggeration
print advertisements were good and relevant for the particular date of to state, and it is a matter of judicial notice that almost every
showing, and since the film could not be shown on that particular date
other person in the country watches television. The humiliation
and hour because of the injunction, the expenses for the
advertisements had gone to waste. suffered by RBS is multiplied by the number of televiewers
who had anticipated the showing of the film, Maging Sino Ka
As regards moral and exemplary damages, RBS asserts that ABS- Man on May 28 and November 3, 1992 but did not see it
CBN filed the case and secured injunctions purely for the purpose of owing to the cancellation. Added to this are the advertisers
harassing and prejudicing RBS. Pursuant then to Articles 19 and 21 of
the Civil Code, ABS-CBN must be held liable for such
who had placed commercial spots for the telecast and to whom
damages. Citing Tolentino,[34] damages may be awarded in cases of RBS had a commitment in consideration of the placement to
abuse of rights even if the done is not illicit, and there is abuse of show the film in the dates and times specified.
rights where a plaintiff institutes an action purely for the purpose of
harassing or prejudicing the defendant. The second is that it is a competitor that caused RBS suffer the
In support of its stand that a juridical entity can recover moral and
humiliation. The humiliation and injury are far greater in
exemplary damages, private respondent RBS cited People v. Manero, degree when caused by an entity whose ultimate business
[35]
where it was stated that such entity may recover moral and objective is to lure customers (viewers in this case) away from
exemplary damages if it has a good reputation that is debased resulting the competition.[36]
in social humiliation. It then ratiocinates; thus:
For their part, VIVA and Vicente del Rosario contend that the
There can be no doubt that RBS reputation has been debased findings of fact of the trial court and the Court of Appeals do not
by ABS-CBNs acts in this case. When RBS was not able to support ABS-CBNs claim that there was a perfected contract. Such
fulfill its commitment to the viewing public to show the film factual findings can no longer be disturbed in this petition for review
under Rule 45, as only questions of law can be raised, not questions of
Maging Sino Ka Man on the scheduled dates and times (and fact. On the issue of damages and attorneys fees, they adopted the
on two occasions that RBS advertised), it suffered serious arguments of RBS.
embarrassment and social humiliation. When the showing was
cancelled, irate viewers called up RBS offices and subjected The key issues for our consideration are (1) whether there was a
perfected contract between VIVA and ABS-CBN, and (2) whether
RBS to verbal abuse (Announce kayo ng announce, hindi RBS is entitled to damages and attorneys fees. It may be noted that
ninyo naman ilalabas, nanloloko yata kayo) (Exh. 3-RBS, that award of attorneys fees of P212,000 in favor of VIVA is not
par.3). This alone was not something RBS brought upon assigned as another error.
itself. It was exactly what ABS-CBN had planted to happen.
I met by a counter-offer which substantially varied the terms of the
The first issue should be resolved against ABS-CBN. A contract is offer.
a meeting of minds between two persons whereby one binds himself to ABS-CBNs reliance in Limketkai Sons Milling, Inc. v. Court of
give something or render some service to another [37] for a Appeals[41] and Villonco Realty Company v. Bormaheco, Inc.,[42] is
consideration. There is no contract unless the following requisites misplaced. In these cases, it was held that an acceptance may contain a
concur: (1) consent of the contracting parties; (2) object certain which request for certain changes in the terms of the offer and yet be a
is the subject of the contract; and (3) cause of the obligation, which is binding acceptance as long as it is clear that the meaning of the
established.[38] A contract undergoes three stages: acceptance is positively and unequivocally to accept the offer, whether
(a) preparation, conception, or generation, which is the period of such request is granted or not. This ruling was, however, reversed in
negotiation and bargaining, ending at the moment of the resolution of 29 March 1996,[43] which ruled that the acceptance of
agreement of the parties; an offer must be unqualified and absolute, i.e., it must be identical in
all respects with that of the offer so as to produce consent or meetings
(b) perfection or birth of the contract, which is the moment when
of the minds.
the parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance On the other hand, in Villonco, cited in Limketkai, the alleged
of the terms agreed upon in the contract.[39] changes in the revised counter-offer were not material but merely
clarificatory of what had previously been agreed upon. It cited the
Contracts that are consensual in nature are perfected upon mere statement in Stuart v. Franklin Life Insurance Co.[44] that a vendors
meeting of the minds. Once there is concurrence between the offer and change in a phrase of the offer to purchase, which change does not
the acceptance upon the subject matter, consideration, and terms of essentially change the terms of the offer, does not amount to a
payment a contract is produced. The offer must be certain. To convert rejection of the offer and the tender of a counter-offer.[45]However,
the offer into a contract, the acceptance must be absolute and must not when any of the elements of the contract is modified upon acceptance,
qualify the terms of the offer; it must be plain, unequivocal, such alteration amounts to a counter-offer.
unconditional, and without variance of any sort from the proposal. A
qualified acceptance, or one that involves a new proposal, constitutes a In the case at bar, ABS-CBN made no unqualified acceptance of
counter-offer and is a rejection of the original offer. Consequently, VIVAs offer hence, they underwent period of bargaining. ABS-CBN
when something is desired which is not exactly what is proposed in the then formalized its counter-proposals or counter-offer in a draft
offer, such acceptance is not sufficient to generate consent because any contract. VIVA through its Board of Directors, rejected such counter-
modification or variation from the terms of the offer annuls the offer.[40] offer. Even if it be conceded arguendo that Del Rosario had accepted
the counter-offer, the acceptance did not bind VIVA, as there was no
When Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the proof whatsoever that Del Rosario had the specific authority to do so.
Tamarind Grill on 2 April 1992 to discuss the package of films, said
package of 104 VIVA films was VIVAs offer to ABS-CBN to enter Under the Corporation Code,[46] unless otherwise provided by said
into a new Film Exhibition Agreement. But ABS-CBN, sent through Code, corporate powers, such as the power to enter into contracts, are
Ms. Concio, counter-proposal in the form a draft contract proposing exercised by the Board of Directors. However, the Board may delegate
exhibition of 53 films for a consideration of P35 million. This counter- such powers to either an executive committee or officials or contracted
proposal could be nothing less than the counter-offer of Mr. Lopez managers. The delegation, except for the executive committee, must be
during his conference with Del Rosario at Tamarind Grill for specific purposes.[47] Delegation to officers makes the latter agents
Restaurant. Clearly, there was no acceptance of VIVAs offer, for it was of the corporation; accordingly, the general rules of agency as to the
binding effects of their acts would apply.[48] For such officers to be
deemed fully clothed by the corporation to exercise a power of the rule that there can be no contract where there is no object
Board, the latter must specially authorize them to do so. that Del certain which is its subject matter (Art. 1318, NCC).
Rosario did not have the authority to accept ABS-CBNs counter-offer
was best evidenced by his submission of the draft contract to VIVAs THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit
Board of Directors for the latters approval. In any event, there was
testimony (Exh. D) States:
between Del Rosario and Lopez III no meeting of minds. The
following findings of the trial court are instructive:
We were able to reach an agreement. VIVA gave us the
A number of considerations militate against ABS-CBNs claim exclusive license to show these fourteen (14) films, and we
that a contract was perfected at that lunch meeting on April 02, agreed to pay Viva the amount of P16,050,000.00 as well as
1992 at the Tamarind Grill. grant Viva commercial slots worth P19,950,000.00. We had
already earmarked this P16,050,000.00.
FIRST, Mr. Lopez claimed that what was agreed upon at the
Tamarind Grill referred to the price and the number of films, which gives a total consideration of P36 million
which he wrote on a napkin. However, Exhibit C (P19,951,000.00 plus P16,050,000.00 equals P36,000,000.00).
contains numerous provisions which were not discussed at the
Tamarind Grill, if Lopez testimony was to be believed nor On cross-examination Mr. Lopez testified:
could they have been physically written on a napkin. There Q What was written in this napkin?
was even doubt as to whether it was a paper napkin or cloth
A The total price, the breakdown the known Viva movies, the 7
napkin. In short what were written in Exhibit C were not blockbuster movies and the other 7 Viva movies because the price
discussed, and therefore could not have been agreed upon, by was broken down accordingly. The none [sic] Viva and the seven
the parties. How then could this court compel the parties to other Viva movies and the sharing between the cash portion and the
sign Exhibit C when the provisions thereof were not concerned spot portion in the total amount of P35 million pesos.
previously agreed upon?
Now, which is which? P36 million or P35 million? This
SECOND, Mr. Lopez claimed that what was agreed upon as weakens ABS-CBNs claim.
the subject matter of the contract was 14 films. The complaint
in fact prays for delivery of 14 films. But Exhibit C mentions FOURTH. Mrs. Concio, testifying for ABS-CBN stated that
53 films as its subject matter. Which is which? If Exhibit C she transmitted Exhibit C to Mr. Del Rosario with a
reflected the true intent of the parties, then ABS-CBNs claim handwritten note, describing said Exhibit C as a draft. (Exh. 5
for 14 films in its complaint is false or if what it alleged in the Viva; tsn pp. 23-24, June 08, 1992). The said draft has a well
complaint is true, then Exhibit C did not reflect what was defined meaning.
agreed upon by the parties.This underscores the fact that there
was no meeting of the minds as to the subject matter of the Since Exhibit C is only a draft, or a tentative, provisional or
contract, so as to preclude perfection thereof. For settled is the preparatory writing prepared for discussion, the terms and
conditions thereof could not have been previously agreed upon
by ABS-CBN and Viva. Exhibit C could not therefore legally The above testimony of Mr. Lopez shows beyond doubt that he
bind Viva, not having agreed thereto. In fact, Ms. Concio knew Mr. Del Rosario had no authority to bind Viva to a
admitted that the terms and conditions embodied in Exhibit C contract with ABS-CBN until and unless its Board of Directors
were prepared by ABS-CBNs lawyers and there was no approved it. The complaint, in fact, alleges that Mr. Del
discussion on said terms and conditions. Rosario is the Executive Producer of defendant Viva which is a
corporation. (par. 2, complaint). As a mere agent of Viva, Del
As the parties had not yet discussed the proposed terms and Rosario could not bind Viva unless what he did is ratified by
conditions in Exhibit C, and there was no evidence whatsoever its Directors. (Vicente vs.Geraldez, 52 SCRA 210; Arnold vs.
that Viva agreed to the terms and conditions thereof, said Willets and Paterson, 44 Phil. 634). As a mere agent,
document cannot be a binding contract. The fact that Viva recognized as such by plaintiff, Del Rosario could not be held
refused to sign Exhibit C reveals only two [sic] well that it did liable jointly and severally with Viva and his inclusion as party
not agree on its terms and conditions, and this court has no defendant has no legal basis. (Salonga vs. Warner Barnes
authority to compel Viva to agree thereto. [sic],COLTA, 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556).

FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del The testimony of Mr. Lopez and the allegations in the
Rosario agreed upon at the Tamarind Grill was only complaint are clear admissions that what was supposed to have
provisional, in the sense that it was subject to approval by the been agreed upon at the Tamarind Grill between Mr. Lopez
Board of Directors of Viva. He testified: and Del Rosario was not a binding agreement. It is as it should
be because corporate power to enter into a contract is lodged in
Q Now, Mr. Witness, and after that Tamarinf meeting the second meeting the Board of Directors. (Sec. 23, Corporation Code). Without
wherein you claimed that you have the meeting of the minds between
you and Mr. Vic del Rosario, what happened? such board approval by the Viva board, whatever agreement
Lopez and Del Rosario arrived at could not ripen into a valid
A Vic Del Rosario was supposed to call us up and tell us specifically the
result of the discussion with the Board of Directors.
binding upon Viva (Yao Ka Sin Trading vs. Court of Appeals,
209 SCRA 763). The evidence adduced shows that the Board
Q And you are referring to the so-called agreement which you wrote in of Directors of Viva rejected Exhibit C and insisted that the
[sic] a piece of paper?
film package for 104 films be maintained (Exh. 7-1 Cica). [49]
A Yes, sir.
Q So, he was going to forward that to the board of Directors for approval? The contention that ABS-CBN had yet to fully exercise its right of
first refusal over twenty-four films under the 1990 Film Exhibition
A Yes, sir (Tsn, pp. 42-43, June 8, 1992) Agreement and that the meeting between Lopez and Del Rosario was a
Q Did Mr. Del Rosario tell you that he will submit it to his Board for continuation of said previous contract is untenable. As observed by the
approval? trial court, ABS-CBNs right of first refusal had already been exercised
when Ms. Concio wrote to Viva ticking off ten films. Thus:
A Yes, sir. (Tsn, p. 69, June 8, 1992).
[T]he subsequent negotiation with ABS-CBN two (2) Actual damages may likewise be recovered for loss or impairment
months after this letter was sent, was for an entirely of earning capacity in cases of temporary or permanent personal
different package. Ms. Concio herself admitted on cross- injury, or for injury to the plaintiffs business standing or commercial
credit.[55]
examination to having used or exercised the right of first
refusal. She stated that the list was not acceptable and was The claim of RBS for actual damages did not arise from contract,
indeed not accepted by ABS-CBN, (Tsn, June 8, 1992, pp. quasi-contract, delict, or quasi-delict. It arose from the fact of filing of
8-10). Even Mr. Lopez himself admitted that the right of the complaint despite ABS-CBNs alleged knowledge of lack of cause
of action. Thus paragraph 12 of RBSs Answer with Counterclaim and
first refusal may have been already exercised by Ms.
Cross-claim under the heading COUNTERCLAIM specifically
Concio (as she had). (TSN, June 8, 1992, pp. 71-75). Del alleges:
Rosario himself knew and understand [sic] that ABS-CBN
has lost its right of first refusal when his list of 36 titles 12. ABS-CBN filed the complaint knowing fully well that it has no
cause of action against RBS. As a result thereof, RBS suffered
were rejected (Tsn, June 9, 1992, pp. 10-11). [50] actual damages in the amount of P6,621,195.32.[56]
II Needless to state the award of actual damages cannot be
comprehended under the above law on actual damages. RBS could
However, we find for ABS-CBN on the issue of damages. We
only probably take refuge under Articles 19, 20, and 21 of the Civil
shall first take up actual damages. Chapter 2, Title XVIII, Book IV of
Code, which read as follows:
the Civil Code is the specific law on actual or compensatory
damages. Except as provided by law or by stipulation, one is entitled
to compensation for actual damages only for such pecuniary loss ART. 19. Every person must, in the exercise of hid rights and
suffered by him as he has duly proved.[51] The indemnification shall in the performance of his duties, act with justice, give
comprehend not only the value of the loss suffered, but also that of the everyone his due, and observe honesty and good faith.
profits that the obligee failed to obtain. [52] In contracts and quasi-
contracts the damages which may be awarded are dependent on ART. 20. Every person who, contrary to law, wilfully or
whether the obligor acted with good faith or otherwise. In case of good negligently causes damage to another shall indemnify the latter
faith, the damages recoverable are those which are the natural and for the same.
probable consequences of the breach of the obligation and which the
parties have foreseen or could have reasonably foreseen at the time of ART. 21. Any person who wilfully causes loss or injury to
the constitution of the obligation. If the obligor acted with fraud, bad
another in a manner that is contrary to morals, good customs or
faith, malice, or wanton attitude, he shall be responsible for all
damages which may be reasonably attributed to the non-performance public policy shall compensate the latter for the damage.
of the obligation.[53] In crimes and quasi-delicts, the defendants shall be
liable for all damages which are the natural and probable consequences It may further be observed that in cases where a writ of
of the act or omission complained of, whether or not such damages preliminary injunction is issued, the damages which the defendant may
have been foreseen or could have reasonably been foreseen by the suffer by reason of the writ are recoverable from the injunctive bond.
defendant.[54]
[57]
In this case, ABS-CBN had not yet filed the required bond; as a
matter of fact, it asked for reduction of the bond and even went to the
Court of Appeals to challenge the order on the matter. Clearly then, it
was not necessary for RBS to file a counterbond.Hence, ABS-CBN Moral damages are in the category of an award designed to
cannot be held responsible for the premium RBS paid for the compensate the claimant for actual injury suffered and not to impose a
counterbond. penalty on the wrongdoer.[62] The award is not meant to enrich the
complainant at the expense of the defendant, but to enable the injured
Neither could ABS-CBN be liable for the print advertisements for
party to obtain means, diversion, or amusements that will serve to
Maging Sino Ka Man for lack of sufficient legal basis. The RTC issued
obviate the moral suffering he has undergone. It is aimed at the
a temporary restraining order and later, a writ of preliminary injunction
restoration, within the limits of the possible, of the spiritual status quo
on the basis of its determination that there existed sufficient ground for
ante, and should be proportionate to the suffering inflicted. [63] Trial
the issuance thereof. Notably, the RTC did not dissolve the injunction
courts must then guard against the award of exorbitant damages; they
on the ground of lack of legal and factual basis, but because of the plea
should exercise balanced restrained and measured objectivity to avoid
of RBS that it be allowed to put up a counterbond.
suspicion that it was due to passion, prejudice, or corruption or the part
As regards attorneys fees, the law is clear that in the absence of of the trial court.[64]
stipulation, attorneys fees may be recovered as actual or compensatory
The award of moral damages cannot be granted in favor of a
damages under any of the circumstances provided for in Article 2208
corporation because, being an artificial person and having existence
of the Civil Code.[58]
only in legal contemplation, it has no feelings, no emotions, no
The general rule is that attorneys fees cannot be recovered as part senses. It cannot, therefore, experience physical suffering and mental
of damages because of the policy that no premium should be placed on anguish, which can be experienced only by one having a nervous
the right to litigate.[59] They are not to be awarded every time a party system.[65] The statement in People v. Manero[66] and Mambulao
wins a suit. The power of the court t award attorneys fees under Article Lumber Co. v. PNB[67] that a corporation may recover moral damages if
2208 demands factual, legal, and equitable justification. [60] Even when it has a good reputation that is debased, resulting in social humiliation
a claimant is compelled to litigate with third persons or to incur is an obiter dictum. On this score alone the award for damages must be
expenses to protect his rights, still attorneys fees may not be awarded set aside, since RBS is a corporation.
where no sufficient showing of bad faith could be reflected in a partys
The basic law on exemplary damages is Section 5 Chapter 3, Title
persistence in a case other than an erroneous conviction of the
XVIII, Book IV of the Civil Code. These are imposed by way of
righteousness of his cause.[61]
example or correction for the public good, in addition to moral,
As to moral damages the law is Section 1, Chapter 3, Title XVIII, temperate, liquidated, or compensatory damages.[68] They are
Book IV of the Civil Code. Article 2217 thereof defines what are recoverable in criminal cases as part of the civil liability when the
included in moral damages, while Article 2219 enumerates the cases crime was committed with one or more aggravating circumstances;
where they may be recovered. Article 2220 provides that moral [69]
in quasi-delicts, if the defendant acted with gross negligence; [70] and
damages may be recovered in breaches of contract where the in contracts and quasi-contracts, if the defendant acted in a wanton,
defendant acted fraudulently or in bad faith. RBSs claim for moral fraudulent, reckless, oppressive, or malevolent manner.[71]
damages could possibly fall only under item (10) of Article 2219,
It may be reiterated that the claim of RBS against ABS-CBN is
thereof which reads:
not based on contract, quasi-contract, delict, or quasi-delict. Hence, the
claims for moral and exemplary damages can only be based on
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, Articles 19, 20, and 21 of the Civil Code.
30, 32, 34 and 35.
The elements of abuse of right under Article 19 are the following:
(1) the existence of a legal right or duty, (2) which is exercised in bad
faith, and (3) for the sole intent of prejudicing or injuring REYNALDO VILLANUEVA, G.R. NO. 154493
another. Article 20 speaks of the general sanction for all provisions of Petitioner,
law which do not especially provide for their own sanction; while
Present:
Article 21 deals with acts contra bonus mores, and has the following
elements: (1) there is an act which is legal, (2) but which is contrary to
morals, good custom, public order, or public policy, and (3) and it is PANGANIBAN, C.J.
done with intent to injure.[72] (Chairperson)
Verily then, malice or bad faith is at the core of Articles 19, 20, YNARES-SANTIAGO,
and 21. Malice or bad faith implies a conscious and intentional design - versus - AUSTRIA-MARTINEZ,
to do a wrongful act for a dishonest purpose or moral obliquity. [73] Such CALLEJO, SR., and
must be substantiated by evidence.[74] CHICO-NAZARIO, JJ.
There is no adequate proof that ABS-CBN was inspired by malice
or bad faith. It was honestly convinced of the merits of its cause after it PHILIPPINE NATIONAL BANK
had undergone serious negotiations culminating in its formal (PNB),
submission of a draft contract. Settled is the rule that the adverse result
Respondent. Promulgated:
of an action does not per se make the action wrongful and subject the
actor to damages, for the law could not have meant impose a penalty December 6, 2006
on the right to litigate. If damages result from a persons exercise of a x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
right, it is damnum absque injuria.[75] ----------------x
WHEREFORE, the instant petition is GRANTED. The
challenged decision of the Court of Appeals in CA-G.R. CV No.
44125 is hereby REVERSED except as to unappealed award of DECISION
attorneys fees in favor of VIVA Productions, Inc.
No pronouncement as to costs. AUSTRIA-MARTINEZ, J.:
SO ORDERED.

Republic of the Philippines The Petition for Review on Certiorari under Rule
45 before this Court assails the January 29,
Supreme Court 2002 Decision[1] and June 27, 2002
Manila Resolution[2] of the Court of Appeals (CA) in CA-
G.R. CV No. 52008[3] which reversed and set
FIRST DIVISION aside the September 14, 1995 Decision[4] of the
Regional Trial Court, Branch 22, General Santos
City (RTC) in Civil Case No. 4553.
as part of the payment of the purchase price
only when his offer is accepted by PNB. At the
As culled from the records, the facts are as bottom of said letter there appears an unsigned
follows: marginal note stating that P400,000.00 was
deposited into Villanuevas account (Savings
The Special Assets Management Department Account No. 43612) with PNB-General Santos
(SAMD) of the Philippine National Bank (PNB) Branch. [7]
issued an advertisement for the sale thru
bidding of certain PNB properties PNB-General Santos Branch forwarded the June
in Calumpang, GeneralSantos City, including Lot 28, 1990 letter of Villanueva to Ramon Guevara
No. 17, covered by TCT No. T-15042, consisting (Guevara), Vice President, SAMD.[8] On July 6,
of 22,780 square meters, with an advertised 1990, Guevara informed Villanueva that only Lot
floor price of P1,409,000.00, and Lot No. 19, No. 19 is available and that the asking
covered by TCT No. T-15036, consisting of price therefor is P2,883,300.00.[9] Guevara
41,190 square meters, with an advertised floor further wrote:
price of P2,268,000.00.[5] Bidding was subject to
the following conditions: 1) that cash bids be
submitted not later than April 27, 1989; 2) that
said bids be accompanied by a 10% deposit in If our quoted price is acceptable
managers or cashiers check; and 3) that all to you, please submit a revised offer to
purchase. Sale shall be subject to
acceptable bids be subject to approval by PNB
our Board of Directors approval
authorities. and to other terms and conditions
imposed by the Bank on sale of
In a June 28, 1990 letter[6] to the Manager, acquired assets. [10] (Emphasis ours)
PNB-General Santos Branch, Reynaldo
Villanueva (Villanueva) offered to purchase Lot
Nos. 17 and 19 for P3,677,000.00. He also Instead of submitting a revised offer,
manifested that he was depositing P400,000.00 Villanueva merely inserted at the bottom of
to show his good faith but with the Guevaras letter a July 11, 1990 marginal note,
understanding that said amount may be treated which reads:
and public bidding of Lot No. 19, SAMD is
C O N F O R M E: deferringnegotiations with him over said
property and returning his deposit
PRICE OF P2,883,300.00
(downpayment of P600,000.00 and the of P580,000.00. [15]
Undaunted, Villanueva
balance payable in two (2) years at attempted to deliver postdated checks covering
quarterly amortizations.) [11] the balance of the purchase price but PNB
refused the same.

Villanueva paid P200,000.00 to PNB Hence, Villanueva filed with the RTC a
which issued O.R. No. 16997 to acknowledge Complaint[16] for specific performance and
receipt of the partial payment deposit on offer damages against PNB. In its September 14,
to purchase.[12] On the dorsal portion of Official 1995 Decision, the RTC granted the Complaint,
Receipt No. 16997, Villanueva signed a thus:
typewritten note, stating:
WHEREFORE, judgment is rendered in
This is a deposit made to show the favor of the plaintiff and against the
sincerity of my purchase offer with the defendant directing it to do the
understanding that it shall be returned following:
without interest if my offer is not
favorably considered or be forfeited if 1. To execute a deed of sale in favor of
my offer is approved but I fail/refuse to the plaintiff over Lot 19 comprising
push through the purchase.[13] 41,190 square meters situated
at Calumpang, General Santos City cov
ered by TCT No. T-15036 after payment
Also, on July 24, 1990, P380,000.00 was of the balance in cash in the amount
debited from Villanuevas Savings Account No. of P2,303,300.00;
43612 and credited to SAMD.[14]
2. To pay the
plaintiff P1,000,000.00 as moral
On October 11, 1990, however, Guevara
damages; P500,000.00 as attorneys
wrote Villanueva that, upon orders of the PNB fees, plus litigation expenses and costs
Board of Directors to conduct another appraisal of the suit.
given the go signal by the defendant to
SO ORDERED. [17]
improve Lot 19 because it was already
in effect sold to him and because of
that the defendant fenced the lot and
The RTC anchored its judgment on the finding completed his two houses on the
that there existed a perfected contract of sale property.[18]
between PNB and Villanueva. It found:
The RTC also pointed out that
The following facts are either admitted or
Villanuevas P580,000.00 downpayment was
undisputed:
actually in the nature of earnest money
xxx acceptance of which by PNB signified that there
was already a sale.[19] The RTC further cited
The defendant through Vice-President contemporaneous acts of PNB purportedly
Guevara negotiated with the plaintiff in indicating that, as early as July 25, 1990, it
connection with the offer of the plaintiff considered Lot 19 already sold, as shown by
to buy Lots 17 & 19. The offer of
Guevaras July 25, 1990 letter (Exh. H)[20] to
plaintiff to buy, however, was accepted
by the defendant only insofar as Lot 19 another interested buyer.
is concerned as exemplified by its
letter dated July 6, 1990 where the PNB appealed to the CA which reversed and set
plaintiff signified his concurrence after aside the September 14, 1995 RTC Decision,
conferring with the defendants vice- thus:
president. The conformity of the WHEREFORE, the appealed decision is
plaintiff was typewritten by the REVERSED and SET ASIDE and another
defendants own people where the rendered DISMISSING the complaint.
plaintiff accepted the price
of P2,883,300.00. The defendant also SO ORDERED.[21]
issued a receipt to the plaintiff on the
same day when the plaintiff paid the
amount of P200,000.00 to complete According to the CA, there was no
the downpayment of P600,000.00 perfected contract of sale because the July 6,
(Exhibit F & Exhibit I). With this 1990 letter of Guevara constituted a qualified
development, the plaintiff was also acceptance of the June 28, 1990 offer of
Villanueva, and to which Villanueva replied
on July 11, 1990 with a modified offer. The CA Appellees new proposal, which constitutes a
held: counter-offer, was not accepted by appellant, its
board having decided to have Lot 19
reappraised and sold thru public bidding.
In the case at bench, consent, in respect to the
price and manner of its payment, is lacking. The
record shows that appellant, thru Guevaras July
6, 1990 letter, made a qualified acceptance Moreover, it was clearly stated in Guevaras July
of appellees letter-offer dated June 28, 1990 by 6, 1990 letter that the sale shall be subject to
imposing an asking price of P2,883,300.00 in our Board of Directors approval and to other
cash for Lot 19. The letter dated July 6, 1990 terms and conditions imposed by the Bank on
constituted a counter-offer (Art. 1319, Civil
sale of acquired assets.[22]
Code), to which appellee made a new
proposal, i.e., to pay the amount
of P2,883,300.00 in staggered amounts, that
is, P600,000.00 as downpayment and the
balance within two years in quarterly
amortizations.
Villanuevas Motion for Reconsideration [23] was
denied by the CA in its Resolution of June 27,
A qualified acceptance, or one that involves a 2002.
new proposal, constitutes a counter-offer and a
rejection of the original offer (Art. 1319, id.).
Consequently, when something is desired which
is not exactly what is proposed in the offer, such Petitioner Villanueva now assails before this
acceptance is not sufficient to generate consent
because any modification or variation from the
Court the January 29, 2002 Decision and June
terms of the offer annuls the offer (Tolentino, 27, 2002 Resolution of the CA. He assigns five
Commentaries and Jurisprudence on the Civil issues which may be condensed into two: first,
Code of the Philippines, 6th ed., 1996, p. 450,
whether a perfected contract of sale exists
cited in ABS-CBN Broadcasting Corporation v.
Court of Appeals, et al., 301 SCRA 572). between petitioner and respondent PNB; and
second, whether the conduct and actuation of
respondent constitutes bad faith as to entitle material but motivating as well. Anything short
petitioner to moral and exemplary damages and of that level of mutuality produces not a
attorneys fees. contract but a mere counter-offer awaiting
acceptance.[26] More particularly on the matter
of the consideration of the contract, the offer
The Court sustains the CA on both issues. and its acceptance must be unanimous both on
the rate of the payment and on its term. An
acceptance of an offer which agrees to the rate
but varies the term is ineffective. [27]

Contracts of sale are perfected by mutual


consent whereby the seller obligates himself,
To determine whether there was mutual consent between the
for a price certain, to deliver and transfer
parties herein, it is necessary to retrace each offer and
ownership of a specified thing or right to the
acceptance they made.
buyer over which the latter agrees.[24] Mutual
consent being a state of mind, its existence may
only be inferred from the confluence of two acts
Respondent began with an invitation to bid issued in
of the parties: an offer certain as to the object
April 1989 covering several of its acquired assets in
of the contract and its consideration, and an
Calumpang, General Santos City, including Lot No. 19 for
acceptance of the offer which is absolute in that
which the floor price was P2,268,000.00. The offer was
it refers to the exact object and consideration
subject to the condition that sealed bids, accompanied by a
embodied in said offer.[25] While it is impossible
10% deposit in managers or cashiers check, be submitted not
to expect the acceptance to echo every nuance
later than 10 oclock in the morning of April 27, 1989.
of the offer, it is imperative that it assents to
those points in the offer which, under the
operative facts of each contract, are not only
On June 28, 1990, petitioner made an offer to buy Lot now P2,883,300.00. As the CA pointed out, this reply was
No. 17 and Lot No. 19 for an aggregate price certainly not an acceptance of the June 28, 1990 offer but a
of P3,677,000.00. It is noted that this offer exactly mere counter-offer. It deviated from the original offer on
corresponded to the April 1989 invitation to bid issued by three material points: first, the object of the proposed sale is
respondent in that the proposed aggregate purchase price for now only Lot No. 19 rather than Lot Nos. 17 and 19; second,
Lot Nos. 17 and 19 matched the advertised floor prices for the area of the property to be sold is still 41,190 sq. m but an
the same properties. However, it cannot be said that the June 8,797-sq. m portion is now part of a public road; and third,
28, 1990 letter of petitioner was an effective acceptance of the consideration is P2,883,300 for one lot rather
the April 1989 invitation to bid for, by its express terms, said than P3,677,000.00 for two lots. More important, this July 6,
invitation lapsed on April 27, 1989.[28] More than that, the 1990 counter-offer imposed two conditions: one, that
April 1989 invitation was subject to the condition that all petitioner submit a revised offer to purchase based on the
sealed bids submitted and accepted be approved by quoted price; and two, that the sale of the property be
respondents higher authorities. approved by the Board of Directors and subjected to other
terms and conditions imposed by the Bank on the sale of
acquired assets.
Thus, the June 28, 1990 letter of petitioner was an
offer to buy independent of the April 1989 invitation to
bid. It was a definite offer as it identified with certainty the In reply to the July 6, 1990 counter-offer,
properties sought to be purchased and fixed the contract petitioner signed his July 11, 1990 conformity to
the quoted price of P2,883,300.00 but inserted
price.
the term downpayment of P600,000.00 and the
balance payable in two years at quarterly
amortization. The CA viewed this July 11, 1990
However, respondent replied to the June 28, conformity not as an acceptance of the July 6,
1990 offer with a July 6, 1990 letter that only Lot No. 19 is 1990 counter-offer but a further counter-offer
for, while petitioner accepted the P2,883,300.00
available and that the price therefor is
price for Lot No. 19, he qualified his acceptance payment. Respondents July 6, 1990 counter-
by proposing a two-year payment term. offer quoted the price of P2,833,300.00 and was
also silent on the term of payment. Up to that
Petitioner does not directly impugn such point, the term or schedule of payment was not
reasoning of the CA. He merely questions it for on the negotiation table. Thus, when petitioner
taking up the issue of whether his July 11, suddenly introduced a term of payment in
1990 conformity modified the July 6, his July 11, 1990 counter-offer, he interjected
1990 counter-offer as this was allegedly never into the negotiations a new substantial
raised during the trial nor on appeal.[29] matter on which the parties had no prior
discussion and over which they must yet agree.
Such argument is not well taken. From [31]
Petitioners July 11, 1990 counter-offer,
beginning to end, respondent denied that a therefore, did not usher the parties beyond the
contract of sale with petitioner was ever negotiation stage of contract making towards its
perfected.[30] Its defense was broad enough to perfection. He made a counter-offer that
encompass every issue relating to the required acceptance by respondent.
concurrence of the elements of contract,
specifically on whether it consented to the As it were, respondent, through its Board
object of the sale and its consideration. There of Directors, did not accept this last counter-
was nothing to prevent the CA from inquiring offer. As stated in its October 11, 1990 letter to
into the offers and counter-offers of the parties petitioner, respondent ordered the reappraisal
to determine whether there was indeed a of the property, in clear repudiation not only of
perfected contract between them. the proposed price but also the term of
payment thereof.
Moreover, there is merit in the ruling of the
CA that the July 11, 1990 marginal note was a Petitioner insists, however, that
further counter-offer which did not lead to the the October 11, 1990 repudiation was belated
perfection of a contract of sale between the as respondent had already agreed to his July 11,
parties.Petitioners own June 28, 1990 offer 1990 counter-offer when it accepted
quoted the price of P3,677,000.00 for two lots his downpayment or earnest
but was silent on the term of money of P580,000.00. [32]
He cites Article 1482
of the Civil Code where it says that acceptance is a reasonable disclaimer considering the
of downpayment or earnest money presupposes corporate nature of respondent. [34]
the perfection of a contract. Moreover, petitioners payment of P200,000.00
was with the clear understanding that his July
Not so. Acceptance of petitioners 11, 1990 counter-offer was still subject to
payments did not amount to an implied approval by respondent. This is borne out by
acceptance of his last counter-offer. respondents Exhibits 2-a and 2-b, which
petitioner never controverted, where it appears
To begin with, PNB-General Santos Branch, on the dorsal portion of O.R. No. 16997 that
which accepted petitioners P380,000.00 petitioner acceded that the amount he paid was
payment, and PNB-SAMD, which accepted a mere x x x deposit made to show the sincerity
his P200,000.00 payment, had no authority to of [his] purchase offer with the understanding
bind respondent to a contract of sale with that it shall be returned without interest if [his]
petitioner.[33] Petitioner is well aware of this. To offer is not favorably considered x x x.[35] This
recall, petitioner sent his June 28, 1990 offer to was a clear acknowledgment on his part that
PNB-General Santos Branch. Said branch did not there was yet no perfected contract with
act on his offer except to endorse it respondent and that even with the payments he
to Guevarra. Thereafter, petitioner transacted had advanced, his July 11, 1990 counter-offer
directly with Guevarra. Petitioner then cannot was still subject to consideration by respondent.
pretend that PNB-General Santos Branch had
authority to accept his July 11, 1990 counter- Not only that, in the same Exh. 2-a as well as in
offer by merely accepting his P380,000.00 his June 28, 1990 offer, petitioner referred to his
payment. payments as mere deposits. Even O.R. No.
16997 refers to petitioners payment as mere
Neither did SAMD have authority to bind deposit. It is only in the debit notice issued by
PNB. In its April 1989 invitation to bid, as well as PNB-General Santos Branch where petitioners
its July 6, 1990 counter-offer, SAMD was always payment is referred to as downpayment. But
careful to emphasize that whatever offer is then, as we said, PNB-General Santos Branch
made and entertained will be subject to the has no authority to bind respondent by its
approval of respondents higher authorities. This
interpretation of the nature of the payment SECOND DIVISION
made by petitioner.
[G.R. No. 135929. April 20, 2001]

In sum, the amounts paid by petitioner were not LOURDES ONG LIMSON, petitioner, vs. COURT OF
in the nature of downpayment or earnest money APPEALS, SPOUSES LORENZO DE VERA and
but were mere deposits or proof of his interest ASUNCION SANTOS-DE VERA, TOMAS
in the purchase of Lot No. 19. Acceptance of CUENCA, JR., and SUNVAR REALTY
said amounts by respondent does not DEVELOPMENT CORPORATION, respondents.
presuppose perfection of any contract. [36]
DECISION
It must be noted that petitioner has expressly BELLOSILLO, J.:
admitted that he had withdrawn the entire
amount of P580,000.00 deposit from PNB- Filed under Rule 45 of the Rules of Court this Petition for
Review on Certiorari seeks to review, reverse and set aside
General Santos Branch.[37] the Decision[1] of the Court of Appeals dated 18 May 1998
reversing that of the Regional Trial Court dated 30 June
With the foregoing disquisition, the Court 1993. The petition likewise assails the Resolution[2] of the
foregoes resolution of the second issue as it is appellate court of 19 October 1998 denying petitioners Motion
evident that respondent acted well within its for Reconsideration.
rights when it rejected the last counter-offer of
Petitioner Lourdes Ong Limson, in her 14 May
petitioner. 1979 Complaint filed before the trial court,[3] alleged that in
In fine, petitioners petition lacks merit. July 1978 respondent spouses Lorenzo de Vera and Asuncion
Santos-de Vera, through their agent Marcosa Sanchez, offered
WHEREFORE, the petition is DENIED. The to sell to petitioner a parcel of land consisting of 48,260 square
Decision dated January 29, 2002 and meters, more or less, situated in Barrio San Dionisio,
Resolution dated June 27, 2002 of the Court of Paraaque, Metro Manila; that respondent spouses informed her
Appeals are AFFIRMED. that they were the owners of the subject property; that on 31
July 1978 she agreed to buy the property at the price of P34.00
No costs. per square meter and gave the sum of P20,000.00 to
respondent spouses as "earnest money;" that respondent
SO ORDERED. spouses signed a receipt therefor and gave her a 10-day option
period to purchase the property; that respondent Lorenzo de
Vera then informed her that the subject property was TCT No. S-72946. She also claimed that on the same day she
mortgaged to Emilio Ramos and Isidro Ramos; that respondent informed respondent Cuenca of her "contract" to purchase the
Lorenzo de Vera asked her to pay the balance of the purchase property.
price to enable him and his wife to settle their obligation with
the Ramoses. The Deed of Sale between respondent spouses and
respondent SUNVAR was executed on 15 September 1978 and
Petitioner also averred that she agreed to meet respondent TCT No. S-72377 was issued in favor of the latter on 26
spouses and the Ramoses on 5 August 1978 at the Office of the September 1978 with the Adverse Claim of petitioner
Registry of Deeds of Makati, Metro Manila, to consummate annotated thereon. Petitioner claimed that when respondent
the transaction but due to the failure of respondent Asuncion spouses sold the property in dispute to SUNVAR, her valid and
Santos-de Vera and the Ramoses to appear, no transaction was legal right to purchase it was ignored if not
formalized. In a second meeting scheduled on 11 August 1978 violated. Moreover, she maintained that SUNVAR was in bad
she claimed that she was willing and ready to pay the balance faith as it knew of her "contract" to purchase the subject
of the purchase price but the transaction again did not property from respondent spouses.
materialize as respondent spouses failed to pay the back taxes
of subject property. Subsequently, on 23 August 1978 Finally, for the alleged unlawful and unjust acts of
petitioner allegedly gave respondent Lorenzo de Vera three (3) respondent spouses, which caused her damage, prejudice and
checks in the total amount of P36,170.00 for the settlement of injury, petitioner claimed that the Deed of Sale, should be
the back taxes of the property and for the payment of the annuled and TCT No. S-72377 in the name of respondent
quitclaims of the three (3) tenants of subject land. The amount SUNVAR canceled and TCT No. S-72946 restored. She also
was purportedly considered part of the purchase price and insisted that a Deed of Sale between her and respondent
respondent Lorenzo de Vera signed the receipts therefor. spouses be now executed upon her payment of the balance of
the purchase price agreed upon, plus damages and attorneys
Petitioner alleged that on 5 September 1978 she was fees.
surprised to learn from the agent of respondent spouses that the
property was the subject of a negotiation for the sale to In their Answer[4] respondent spouses maintained that
respondent Sunvar Realty Development Corporation petitioner had no sufficient cause of action against them; that
(SUNVAR) represented by respondent Tomas Cuenca, Jr. On she was not the real party in interest; that the option to buy the
15 September 1978 petitioner discovered that although property had long expired; that there was no perfected contract
respondent spouses purchased the property from the Ramoses to sell between them; and, that petitioner had no legal capacity
on 20 March 1970 it was only on 15 September 1978 that TCT to sue. Additionally, respondent spouses claimed actual, moral
No. S-72946 covering the property was issued to respondent and exemplary damages, and attorneys fees against petitioner.
spouses. As a consequence, she filed on the same day
an Affidavit of Adverse Claim with the Office of the Registry On the other hand, respondents SUNVAR and Cuenca, in
of Deeds of Makati, Metro Manila, which was annotated on their Answer,[5] alleged that petitioner was not the proper party
in interest and/or had no cause of action against them. But, that they acted legally and validly, in all honesty and good
even assuming that petitioner was the proper party in interest, faith. According to them, respondent SUNVAR made a
they claimed that she could only be entitled to the return of any verification of the title with the Office of the Register of Deeds
amount received by respondent spouses. In the alternative, of Metro Manila District IV before the execution of the Deed
they argued that petitioner had lost her option to buy the of Absolute Sale. Also, they claimed that the Cross-Claim was
property for failure to comply with the terms and conditions of barred by a written waiver executed by respondent SUNVAR
the agreement as embodied in the receipt issued in their favor. Thus, respondent spouses prayed for actual
therefor. Moreover, they contended that at the time of the damages for the unjustified filing of the Cross-Claim, moral
execution of the Deed of Sale and the payment of damages for the mental anguish and similar injuries they
consideration to respondent spouses, they "did not know nor suffered by reason thereof, exemplary damages "to prevent
was informed" of petitioners interest or claim over the subject others from emulating the bad example" of respondents
property. They claimed furthermore that it was only after the SUNVAR and Cuenca, plus attorneys fees.
signing of the Deed of Sale and the payment of the
corresponding amounts to respondent spouses that they came After a protracted trial and reconstitution of the court
to know of the claim of petitioner as it was only then that they records due to the fire that razed the Pasay City Hall on 18
were furnished copy of the title to the property where January 1992, the Regional Trial Court rendered its 30 June
the Adverse Claim of petitioner was annotated. Consequently, 1993 Decision[7] in favor of petitioner. It ordered (a) the
they also instituted a Cross-Claim against respondent spouses annulment and rescission of the Deed of Absolute
for bad faith in encouraging the negotiations between them Sale executed on 15 September 1978 by respondent spouses in
without telling them of the claim of petitioner. The same favor of respondent SUNVAR; (b) the cancellation and
respondents maintained that had they known of the claim of revocation of TCT No. S-75377 of the Registry of Deeds,
petitioner, they would not have initiated negotiations with Makati, Metro Manila, issued in the name of respondent
respondent spouses for the purchase of the property. Thus, they Sunvar Realty Development Corporation, and the restoration
prayed for reimbursement of all amounts and monies received or reinstatement of TCT No. S-72946 of the same Registry
from them by respondent spouses, attorneys fees and expenses issued in the name of respondent spouses; (c) respondent
for litigation in the event that the trial court should annul spouses to execute a deed of sale conveying ownership of the
the Deed of Sale and deprive them of their ownership and property covered by TCT No. S-72946 in favor of petitioner
possession of the subject land. upon her payment of the balance of the purchase price agreed
upon; and, (d) respondent spouses to pay petitioner P50,000.00
In their Answer to the Cross-Claim[6] of respondents as and for attorneys fees, and to pay the costs.
SUNVAR and Cuenca, respondent spouses insisted that they
negotiated with the former only after the expiration of the On appeal, the Court of Appeals completely reversed the
option period given to petitioner and her failure to comply with decision of the trial court. It ordered (a) the Register of Deeds
her commitments thereunder. Respondent spouses contended of Makati City to lift the Adverse Claim and such other
encumbrances petitioner might have filed or caused to be
annotated on TCT No. S-75377; and, (b) petitioner to pay (1) purchase, but merely secures the privilege to buy.[8] It is not a
respondent SUNVAR P50,000.00 as nominal sale of property but a sale of the right to purchase. [9] It is simply
damages, P30,000.00 as exemplary damages and P20,000 as a contract by which the owner of property agrees with another
attorneys fees; (2) respondent spouses, P15,000.00 as nominal person that he shall have the right to buy his property at a fixed
damages, P10,000.00 as exemplary damages and P10,000.00 price within a certain time. He does not sell his land; he does
as attorneys fees; and, (3) the costs. not then agree to sell it; but he does sell something, i.e., the
right or privilege to buy at the election or option of the other
Petitioner timely filed a Motion for Reconsideration which party.[10] Its distinguishing characteristic is that it imposes no
was denied by the Court of Appeals on 19 October binding obligation on the person holding the option, aside from
1998. Hence, this petition. the consideration for the offer. Until acceptance, it is not,
properly speaking, a contract, and does not vest, transfer, or
At issue for resolution by the Court is the nature of the agree to transfer, any title to, or any interest or right in the
contract entered into between petitioner Lourdes Ong Limson subject matter, but is merely a contract by which the owner of
on one hand, and respondent spouses Lorenzo de Vera and the property gives the optionee the right or privilege of
Asuncion Santos-de Vera on the other. accepting the offer and buying the property on certain terms. [11]
The main argument of petitioner is that there was a On the other hand, a contract, like a contract to sell,
perfected contract to sell between her and respondent involves the meeting of minds between two persons whereby
spouses. On the other hand, respondent spouses and one binds himself, with respect to the other, to give something
respondents SUNVAR and Cuenca argue that what was or to render some service. [12] Contracts, in general, are perfected
perfected between petitioner and respondent spouses was a by mere consent,[13] which is manifested by the meeting of the
mere option. offer and the acceptance upon the thing and the cause which
are to constitute the contract. The offer must be certain and the
A scrutiny of the facts as well as the evidence of the parties acceptance absolute.[14]
overwhelmingly leads to the conclusion that the agreement
between the parties was a contract of option and not a contract The Receipt[15] that contains the contract between petitioner
to sell. and respondent spouses provides
An option, as used in the law of sales, is a continuing offer Received from Lourdes Limson the sum of Twenty Thousand
or contract by which the owner stipulates with another that the Pesos (P20,000.00) under Check No. 22391 dated July 31,
latter shall have the right to buy the property at a fixed price 1978 as earnest money with option to purchase a parcel of
within a time certain, or under, or in compliance with, certain land owned by Lorenzo de Vera located at Barrio San
terms and conditions, or which gives to the owner of the Dionisio, Municipality of Paraaque, Province of Rizal with an
property the right to sell or demand a sale. It is also sometimes area of forty eight thousand two hundred sixty square meters
called an "unaccepted offer." An option is not of itself a more or less at the price of Thirty Four Pesos (P34.00)[16] cash
subject to the condition and stipulation that have been agreed purchase price, while option money is the money given as a
upon by the buyer and me which will form part of the distinct consideration for an option contract; (b) earnest money
receipt. Should the transaction of the property not materialize is given only where there is already a sale, while option money
not on the fault of the buyer, I obligate myself to return the full applies to a sale not yet perfected; and, (c) when earnest
amount of P20,000.00 earnest money with option to buy or money is given, the buyer is bound to pay the balance, while
forfeit on the fault of the buyer. I guarantee to notify the buyer when the would-be buyer gives option money, he is not
Lourdes Limson or her representative and get her conformity required to buy,[18] but may even forfeit it depending on the
should I sell or encumber this property to a third person.This terms of the option.
option to buy is good within ten (10) days until the absolute
deed of sale is finally signed by the parties or the failure of the There is nothing in the Receipt which indicates that
buyer to comply with the terms of the option to buy as herein the P20,000.00 was part of the purchase price. Moreover, it
attached. was not shown that there was a perfected sale between the
parties where earnest money was given. Finally, when
In the interpretation of contracts, the ascertainment of the petitioner gave the "earnest money," the Receipt did not reveal
intention of the contracting parties is to be discharged by that she was bound to pay the balance of the purchase price. In
looking to the words they used to project that intention in their fact, she could even forfeit the money given if the terms of the
contract, all the words, not just a particular word or two, and option were not met. Thus, the P20,000.00 could only be
words in context, not words standing alone. [17] The money given as consideration for the option contract. That the
above Receipt readily shows that respondent spouses and contract between the parties is one of option is buttressed by
petitioner only entered into a contract of option; a contract by the provision therein that should the transaction of the property
which respondent spouses agreed with petitioner that the latter not materialize without fault of petitioner as buyer, respondent
shall have the right to buy the formers property at a fixed price Lorenzo de Vera obligates himself to return the full amount
of P34.00 per square meter within ten (10) days from 31 July of P20,000.00 "earnest money" with option to buy or
1978. Respondent spouses did not sell their property; they did forfeit the same on the fault of petitioner. It is further bolstered
not also agree to sell it; but they sold something, i.e., the by the provision therein that guarantees petitioner that she or
privilege to buy at the election or option of petitioner. The her representative would be notified in case the subject
agreement imposed no binding obligation on petitioner, aside property was sold or encumbered to a third person. Finally,
from the consideration for the offer. the Receipt provided for a period within which the option to
buy was to be exercised, i.e., "within ten (10) days" from 31
The consideration of P20,000.00 paid by petitioner to July 1978.
respondent spouses was referred to as "earnest money."
However, a careful examination of the words used indicates Doubtless, the agreement between respondent spouses and
that the money is not earnest money but option petitioner was an "option contract" or what is sometimes called
money."Earnest money" and "option money" are not the same an "unaccepted offer." During the option period the agreement
but distinguished thus: (a) earnest money is part of the was not converted into a bilateral promise to sell and to buy
where both respondent spouses and petitioner were then spouses ceased. The subsequent meetings and negotiations,
reciprocally bound to comply with their respective specifically on 11 and 23 August 1978, between the parties
undertakings as petitioner did not timely, affirmatively and only showed the desire of respondent spouses to sell their
clearly accept the offer of respondent spouses. property to petitioner. Also, on 14 September 1978 when
respondent spouses sent a telegram to petitioner demanding
The rule is that except where a formal acceptance is not full payment of the purchase price on even date simply
required, although the acceptance must be affirmatively and demonstrated an inclination to give her preference to buy
clearly made and evidenced by some acts or conduct subject property. Collectively, these instances did not indicate
communicated to the offeror, it may be made either in a formal that petitioner still had the exclusive right to purchase subject
or an informal manner, and may be shown by acts, conduct or property. Verily, the commencement of negotiations between
words by the accepting party that clearly manifest a present respondent spouses and respondent SUNVAR clearly
intention or determination to accept the offer to buy or manifested that their offer to sell subject property to petitioner
sell. But there is nothing in the acts, conduct or words of was no longer exclusive to her.
petitioner that clearly manifest a present intention or
determination to accept the offer to buy the property of We cannot subscribe to the argument of petitioner that
respondent spouses within the 10-day option period. The only respondent spouses extended the option period when they
occasion within the option period when petitioner could have extended the authority of their agent until 31 August 1978. The
demonstrated her acceptance was on 5 August 1978 when, extension of the contract of agency could not operate to extend
according to her, she agreed to meet respondent spouses and the option period between the parties in the instant case. The
the Ramoses at the Office of the Register of Deeds of extension must not be implied but categorical and must show
Makati. Petitioners agreement to meet with respondent spouses the clear intention of the parties.
presupposes an invitation from the latter, which only
emphasizes their persistence in offering the property to the As to whether respondent spouses were at fault for the
former. But whether that showed acceptance by petitioner of non-consummation of their contract with petitioner, we agree
the offer is hazy and dubious. with the appellate court that they were not to be blamed. First,
within the option period, or on 4 August 1978, it was
On or before 10 August 1978, the last day of the option respondent spouses and not petitioner who initiated the
period, no affirmative or clear manifestation was made by meeting at the Office of the Register of Deeds of
petitioner to accept the offer. Certainly, there was no Makati. Second, that the Ramoses failed to appear on 4 August
concurrence of private respondent spouses offer and petitioners 1978 was beyond the control of respondent spouses. Third, the
acceptance thereof within the option period. Consequently, succeeding meetings that transpired to consummate the
there was no perfected contract to sell between the parties. contract were all beyond the option period and, as declared by
the Court of Appeals, the question of who was at fault was
On 11 August 1978 the option period expired and the already immaterial. Fourth, even assuming that the meetings
exclusive right of petitioner to buy the property of respondent were within the option period, the presence of petitioner was
not enough as she was not even prepared to pay the purchase aware of the perfected sale between her and respondent
price in cash as agreed upon. Finally, even without the spouses, thus making respondent SUNVAR a buyer in bad
presence of the Ramoses, petitioner could have easily made the faith.
necessary payment in cash as the price of the property was
already set at P34.00 per square meter and payment of the Petitioner is not correct. The dates mentioned, at least 5
mortgage could very well be left to respondent spouses. and 15 September 1978, are immaterial as they were beyond
the option period given to petitioner. On the other hand, the
Petitioner further claims that when respondent spouses referral to sometime in August 1978 in the testimony of
sent her a telegram demanding full payment of the purchase Hermigildo Sanchez as emphasized by petitioner in her
price on 14 September 1978 it was an acknowledgment of their petition is very vague. It could be within or beyond the option
contract to sell, thus denying them the right to claim otherwise. period. Clearly then, even assuming that the meeting with
Marixi Prieto actually transpired, it could not necessarily mean
We do not agree. As explained above, there was no that she knew of the agreement between petitioner and
contract to sell between petitioner and respondent spouses to respondent spouses for the purchase of subject property as the
speak of. Verily, the telegram could not operate to estop them meeting could have occurred beyond the option period. In
from claiming that there was such contract between them and which case, no bad faith could be attributed to respondent
petitioner. Neither could it mean that SUNVAR. If, on the other hand, the meeting was within the
respondent spouses extended the option period. The telegram option period, petitioner was remiss in her duty to prove
only showed that respondent spouses were willing to give so. Necessarily, we are left with the conclusion that respondent
petitioner a chance to buy subject property even if it was no SUNVAR bought subject property from respondent spouses in
longer exclusive. good faith, for value and without knowledge of any flaw or
defect in its title.
The option period having expired and acceptance was not
effectively made by petitioner, the purchase of subject property The appellate court awarded nominal and exemplary
by respondent SUNVAR was perfectly valid and entered into damages plus attorneys fees to respondent spouses and
in good faith. Petitioner claims that in August 1978 Hermigildo respondent SUNVAR. But nominal damages are adjudicated to
Sanchez, the son of respondent spouses agent, Marcosa vindicate or recognize the right of the plaintiff that has been
Sanchez, informed Marixi Prieto, a member of the Board of violated or invaded by the defendant. [19] In the instant case, the
Directors of respondent SUNVAR, that the property was Court recognizes the rights of all the parties and finds no
already sold to petitioner. Also, petitioner maintains that on 5 violation or invasion of the rights of respondents by
September 1978 respondent Cuenca met with her and offered petitioner. Petitioner, in filing her complaint, only seeks relief,
to buy the property from her at P45.00 per square in good faith, for what she believes she was entitled to and
meter. Petitioner contends that these incidents, including the should not be made to suffer therefor. Neither should
annotation of her Adverse Claim on the title of subject property exemplary damages be awarded to respondents as they are
on 15 September 1978 show that respondent SUNVAR was imposed only by way of example or correction for the public
good and only in addition to the moral, temperate, liquidated
or compensatory damages.[20] No such kinds of damages were JOSE BASA, MANUEL BASA,
awarded by the Court of Appeals, only nominal, which was not LAURETA BASA, DELIA BASA,
justified in this case. Finally, attorneys fees could not also be JESUS BASA and ROSALINDA
recovered as the Court does not deem it just and equitable BASA, Heirs of the late MERCEDES
under the circumstances. CATALAN,
Respondents. July 31, 2007
WHEREFORE, the petition is DENIED. The Decision of
the Court of Appeals ordering the Register of Deeds of Makati x-----------------------------------------
City to lift the adverse claim and such other encumbrances -------x
petitioner Lourdes Ong Limson may have filed or caused to be
annotated on TCT No. S-75377 is AFFIRMED, with the
MODIFICATION that the award of nominal and exemplary
DECISION
damages as well as attorneys fees is DELETED.

SO ORDERED.
PUNO, C.J.:
FIRST DIVISION
This is a petition for review on certiorari under Rule
45 of the Revised Rules of Court of the Court of Appeals
CORAZON CATALAN, G.R. No. 159567 decision in CA-G.R. CV No. 66073, which affirmed the
LIBRADA CATALAN-LIM, judgment of the Regional Trial Court, Branch 69, Lingayen,
EULOGIO CATALAN, Pangasinan, in Civil Case No. 17666, dismissing the
MILA CATALAN-MILAN,
Complaint for Declaration of Nullity of Documents,
ZENAIDA CATALAN, Present:
ALEX CATALAN, DAISY Recovery of Possession and Ownership, and damages.
CATALAN, FLORIDA PUNO, C.J., Chairperson,
CATALAN and GEMMA SANDOVAL-GUTIERREZ, The facts, which are undisputed by the parties, follow:
CATALAN, Heirs of the late CORONA,
FELICIANO CATALAN, AZCUNA, and On October 20, 1948, FELICIANO CATALAN
Petitioners, GARCIA, JJ. (Feliciano) was discharged from active military service. The
- versus -
Board of Medical Officers of the Department of Veteran
Promulgated:
Affairs found that he was unfit to render military service due On December 11, 1953, Peoples Bank and Trust
to his schizophrenic reaction, catatonic type, which Company filed Special Proceedings No. 4563[6] before the
incapacitates him because of flattening of mood and affect, Court of First Instance of Pangasinan to declare Feliciano
preoccupation with worries, withdrawal, and sparce (sic) incompetent. On December 22, 1953, the trial court issued
and pointless speech.[1] its Order for Adjudication of Incompetency for Appointing
Guardian for the Estate and Fixing Allowance[7] of
On September 28, 1949, Feliciano married Corazon Feliciano. The following day, the trial court appointed
Cerezo.[2] Peoples Bank and Trust Company as Felicianos guardian.
[8]
Peoples Bank and Trust Company has been subsequently
On June 16, 1951, a document was executed, titled renamed, and is presently known as the Bank of the
Absolute Deed of Donation,[3] wherein Feliciano allegedly Philippine Islands (BPI).
donated to his sister MERCEDES CATALAN(Mercedes)
one-half of the real property described, viz: On November 22, 1978, Feliciano and Corazon
Cerezo donated Lots 1 and 3 of their property, registered
A parcel of land located at Barangay Basing,
Binmaley, Pangasinan. Bounded on the North by heirs
under Original Certificate of Title (OCT) No. 18920, to their
of Felipe Basa; on the South by Barrio Road; On the son Eulogio Catalan.[9]
East by heirs of Segundo Catalan; and on the West by
Roman Basa. Containing an area of Eight Hundred One On March 26, 1979, Mercedes sold the property in
(801) square meters, more or less.
issue in favor of her children Delia and Jesus Basa. [10] The
Deed of Absolute Sale was registered with the Register of
The donation was registered with the Register of Deeds of Pangasinan on February 20, 1992, and Tax
Deeds. The Bureau of Internal Revenue then cancelled Tax Declaration No. 12911 was issued in the name of
Declaration No. 2876, and, in lieu thereof, issued Tax respondents.[11]
Declaration No. 18080[4] to Mercedes for the 400.50 square
meters donated to her. The remaining half of the property On June 24, 1983, Feliciano and Corazon Cerezo
remained in Felicianos name under Tax Declaration No. donated Lot 2 of the aforementioned property registered
18081.[5] under OCT No. 18920 to their children Alex Catalan,
Librada Catalan and Zenaida Catalan. On February 14,
1983, Feliciano and Corazon Cerezo donated Lot 4 (Plan On December 7, 1999, the trial court found that the
Psu-215956) of the same OCT No. 18920 to Eulogio and evidence presented by the complainants was insufficient to
Florida Catalan.[12] overcome the presumption that Feliciano was sane and
competent at the time he executed the deed of donation in
On April 1, 1997, BPI, acting as Felicianos guardian,
favor of Mercedes Catalan. Thus, the court declared, the
filed a case for Declaration of Nullity of Documents,
presumption of sanity or competency not having been duly
Recovery of Possession and Ownership,[13] as well as
impugned, the presumption of due execution of the donation
damages against the herein respondents. BPI alleged that the
in question must be upheld.[14] It rendered judgment, viz:
Deed of Absolute Donation to Mercedes was void ab initio,
as Feliciano never donated the property to Mercedes. In WHEREFORE, in view of the foregoing
considerations, judgment is hereby rendered:
addition, BPI averred that even if Feliciano had truly
intended to give the property to her, the donation would still 1. Dismissing plaintiffs complaint;

be void, as he was not of sound mind and was therefore 2. Declaring the defendants Jesus Basa and
incapable of giving valid consent. Thus, it claimed that if the Delia Basa the lawful owners of the land in
question which is now declared in their
Deed of Absolute Donation was void ab initio, the names under Tax Declaration No. 12911
subsequent Deed of Absolute Sale to Delia and Jesus Basa (Exhibit 4);
should likewise be nullified, for Mercedes Catalan had no 3. Ordering the plaintiff to pay the defendants
right to sell the property to anyone.BPI raised doubts about Attorneys fees of P10,000.00, and to pay the
Costs.(sic)
the authenticity of the deed of sale, saying that its
registration long after the death of Mercedes Catalan SO ORDERED.[15]
indicated fraud. Thus, BPI sought remuneration for incurred Petitioners challenged the trial courts decision before
damages and litigation expenses. the Court of Appeals via a Notice of Appeal pursuant to Rule
41 of the Revised Rules of Court.[16] The appellate court
On August 14, 1997, Feliciano passed away. The affirmed the decision of the trial court and held, viz:
original complaint was amended to substitute his heirs in In sum, the Regional Trial Court did not commit
lieu of BPI as complainants in Civil Case No. 17666. a reversible error in disposing that plaintiff-appellants
failed to prove the insanity or mental incapacity of late
(sic) Feliciano Catalan at the precise moment when the
property in dispute was donated.
Thus, all the elements for validity of contracts SO ORDERED.[17]
having been present in the 1951 donation coupled with
compliance with certain solemnities required by the
Civil Code in donation inter vivos of real property
under Article 749, which provides: Thus, petitioners filed the present appeal and raised

xxx the following issues:


1. WHETHER OR NOT THE HONORABLE
Mercedes Catalan acquired valid title of COURT OF APPEALS HAS DECIDED CA-
ownership over the property in dispute. By virtue of her G.R. CV NO. 66073 IN A WAY PROBABLY
ownership, the property is completely subjected to her NOT IN ACCORD WITH LAW OR WITH
will in everything not prohibited by law of the THE APPLICABLE DECISIONS OF THE
concurrence with the rights of others (Art. 428, NCC). HONORABLE COURT IN HOLDING THAT
THE REGIONAL TRIAL COURT DID NOT
The validity of the subsequent sale dated 26 COMMIT A REVERSIBLE ERROR IN
March 1979 (Exhibit 3, appellees Folder of Exhibits) of DISPOSING THAT PLAINTIFF-
the property by Mercedes Catalan to defendant- APPELLANTS (PETITIONERS) FAILED TO
appellees Jesus Basa and Delia Basa must be PROVE THE INSANITY OR MENTAL
upheld.Nothing of the infirmities which allegedly INCAPACITY OF THE LATE FELICIANO
flawed its authenticity is evident much less apparent in CATALAN AT THE PRECISE MOMENT
the deed itself or from the evidence adduced. As WHEN THE PROPERTY IN DISPUTE WAS
correctly stated by the RTC, the fact that the Deed of DONATED;
Absolute Sale was registered only in 1992, after the
death of Mercedes Catalan does not make the sale void 2. WHETHER OR NOT THE CERTIFICATE OF
ab initio. Moreover, as a notarized document, the deed DISABILITY FOR DISCHARGE (EXHIBIT S)
of absolute sale carries the evidentiary weight conferred AND THE REPORT OF A BOARD OF
upon such public document with respect to its due OFFICERS CONVENED UNDER THE
execution (Garrido vs. CA 236 SCRA 450). In a PROVISIONS OF ARMY REGULATIONS
similar vein, jurisprudence has it that documents (EXHIBITS S-1 AND S-2) ARE ADMISSIBLE
acknowledged before a notary public have in their favor IN EVIDENCE;
the presumption of regularity, and to contradict the
same, there must be evidence that is clear, convincing 3. WHETHER OR NOT THE HONORABLE
and more than preponderant (Salame vs. CA, 239 COURT OF APPEALS HAS DECIDED CA-
SCRA 256). G.R. CV NO. 66073 IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH
WHEREFORE, foregoing premises considered, THE APPLICABLE DECISIONS OF THE
the Decision dated December 7, 1999 of the Regional HONORABLE COURT IN UPHOLDING THE
Trial Court, Branch 69, is hereby affirmed. SUBSEQUENT SALE OF THE PROPERTY
IN DISPUTE BY THE DONEE MERCEDES
CATALAN TO HER CHILDREN petitioners claim that the Deed of Absolute Sale executed
RESPONDENTS JESUS AND DELIA BASA;
AND- on March 26, 1979 by Mercedes Catalan and her children
Jesus and Delia Basa is simulated and fictitious. This is
4. WHETHER OR NOT CIVIL CASE NO.
17666 IS BARRED BY PRESCRIPTION AND allegedly borne out by the fact that the document was
LACHES.[18] registered only on February 20, 1992, more that 10 years
after Mercedes Catalan had already died. Since Delia Basa
Petitioners aver that the presumption of Felicianos and Jesus Basa both knew that Feliciano was incompetent to
competence to donate property to Mercedes had been enter into any contract, they cannot claim to be innocent
rebutted because they presented more than the requisite purchasers of the property in question.[20] Lastly, petitioners
preponderance of evidence.First, they presented the assert that their case is not barred by prescription or laches
Certificate of Disability for the Discharge of Feliciano under Article 1391 of the New Civil Code because they had
Catalan issued on October 20, 1948 by the Board of Medical filed their case on April 1, 1997, even before the four year
Officers of the Department of Veteran Affairs. Second, they period after Felicianos death on August 14, 1997 had begun.
[21]
proved that on December 22, 1953, Feliciano was judged an
incompetent by the Court of First Instance of Pangasinan, The petition is bereft of merit, and we affirm the
and put under the guardianship of BPI. Based on these two findings of the Court of Appeals and the trial court.
pieces of evidence, petitioners conclude that Feliciano had
been suffering from a mental condition since 1948 which A donation is an act of liberality whereby a person
incapacitated him from entering into any contract thereafter, disposes gratuitously a thing or right in favor of another,
until his death on August 14, 1997. Petitioners contend that who accepts it.[22] Like any other contract, an agreement of
Felicianos marriage to Corazon Cerezo on September 28, the parties is essential. Consent in contracts presupposes the
1948 does not prove that he was not insane at the time he following requisites: (1) it should be intelligent or with an
made the questioned donation. They further argue that the exact notion of the matter to which it refers; (2) it should be
donations Feliciano executed in favor of his successors free; and (3) it should be spontaneous.[23] The parties'
(Decision, CA-G.R. CV No. 66073) also cannot prove his intention must be clear and the attendance of a vice of
competency because these donations were approved and consent, like any contract, renders the donation voidable.[24]
confirmed in the guardianship proceedings.[19] In addition,
In order for donation of property to be valid, what is condition schizophrenia. According to medical references, in
crucial is the donors capacity to give consent at the time of persons with schizophrenia, there is a gradual onset of
the donation. Certainly, there lies no doubt in the fact that symptoms, with symptoms becoming increasingly bizarre as
insanity impinges on consent freely given.[25] However, the the disease progresses. The condition improves (remission
burden of proving such incapacity rests upon the person who or residual stage) and worsens (relapses) in
alleges it; if no sufficient proof to this effect is presented, cycles. Sometimes, sufferers may appear relatively normal,
capacity will be presumed.[26] while other patients in remission may appear strange
because they speak in a monotone, have odd speech habits,
A thorough perusal of the records of the case at bar
appear to have no emotional feelings and are prone to have
indubitably shows that the evidence presented by the
ideas of reference. The latter refers to the idea that random
petitioners was insufficient to overcome the presumption
social behaviors are directed against the sufferers.[27] It has
that Feliciano was competent when he donated the property
been proven that the administration of the correct medicine
in question to Mercedes. Petitioners make much ado of the
helps the patient. Antipsychotic medications help bring
fact that, as early as 1948, Feliciano had been found to be
biochemical imbalances closer to normal in a
suffering from schizophrenia by the Board of Medical
schizophrenic. Medications reduce delusions, hallucinations
Officers of the Department of Veteran Affairs. By itself,
and incoherent thoughts and reduce or eliminate chances of
however, the allegation cannot prove the incompetence of
relapse.[28] Schizophrenia can result in a dementing illness
Feliciano.
similar in many aspects to Alzheimers disease. However, the
A study of the nature of schizophrenia will show that illness will wax and wane over many years, with only very
Feliciano could still be presumed capable of attending to his slow deterioration of intellect.[29]
property rights. Schizophrenia was brought to the attention
From these scientific studies it can be deduced that a
of the public when, in the late 1800s, Emil Kraepelin, a
person suffering from schizophrenia does not necessarily
German psychiatrist, combined hebrephrenia and catatonia
lose his competence to intelligently dispose his property. By
with certain paranoid states and called the condition
merely alleging the existence of schizophrenia, petitioners
dementia praecox. Eugene Bleuler, a Swiss psychiatrist,
failed to show substantial proof that at the date of the
modified Kraepelins conception in the early 1900s to
donation, June 16, 1951, Feliciano Catalan had lost total
include cases with a better outlook and in 1911 renamed the
control of his mental faculties. Thus, the lower courts
correctly held that Feliciano was of sound mind at that time property to Delia and Jesus Basa was legal and binding at
and that this condition continued to exist until proof to the the time of its execution. Thus, the property in question
contrary was adduced.[30] Sufficient proof of his infirmity to belongs to Delia and Jesus Basa.
give consent to contracts was only established when the
Finally, we note that the petitioners raised the issue of
Court of First Instance of Pangasinan declared him an
prescription and laches for the first time on appeal before
incompetent on December 22, 1953.[31]
this Court. It is sufficient for this Court to note that even if
It is interesting to note that the petitioners questioned the present appeal had prospered, the Deed of Donation was
Felicianos capacity at the time he donated the property, yet still a voidable, not a void, contract. As such, it remained
did not see fit to question his mental competence when he binding as it was not annulled in a proper action in court
entered into a contract of marriage with Corazon Cerezo or within four years.[34]
when he executed deeds of donation of his other properties
IN VIEW WHEREOF, there being no merit in the
in their favor. The presumption that Feliciano remained
arguments of the petitioners, the petition is DENIED. The
competent to execute contracts, despite his illness, is
decision of the Court of Appeals in CA-G.R. CV No. 66073
bolstered by the existence of these other contracts.
is affirmed in toto.
Competency and freedom from undue influence, shown to
have existed in the other acts done or contracts executed, are SO ORDERED.
presumed to continue until the contrary is shown.[32]
SECOND DIVISION

[G.R. No. 127540. October 17, 2001]

Needless to state, since the donation was valid, EUGENIO DOMINGO, CRISPIN MANGABAT and
Mercedes had the right to sell the property to whomever she SAMUEL CAPALUNGAN, petitioners, vs. HON.
chose.[33] Not a shred of evidence has been presented to COURT OF APPEALS, FELIPE C. RIGONAN
prove the claim that Mercedes sale of the property to her and CONCEPCION R. RIGONAN, respondents.
children was tainted with fraud or falsehood. It is of little EUGENIO DOMINGO, CRISPIN MANGABAT and
bearing that the Deed of Sale was registered only after the SAMUEL CAPALUNGAN, petitioners, vs. HON.
death of Mercedes. What is material is that the sale of the COURT OF APPEALS, THE DIRECTOR OF
LANDS, and FELIPE C. RIGONAN and Paulina Rigonan did not sell her properties to anyone. As her nearest
CONCEPCION R. RIGONAN, respondents. surviving kin within the fifth degree of consanguinity, they inherited
the three lots and the permanent improvements thereon when Paulina
died in 1966. They said they had been in possession of the contested
DECISION
properties for more than 10 years. Defendants asked for damages
QUISUMBING, J.:
against plaintiffs.

This petition seeks to annul the decision of the Court of Appeals


[1] During trial, Juan Franco, Notary Public Evaristo P. Tagatag and
[3]

dated August 29, 1996, which set aside the decision of the Regional plaintiff Felipe Rigonan testified for plaintiffs (private respondents
Trial Court of Batac, Ilocos Norte, Branch 17, in Civil Case No. 582- now).
17 for reinvindicacion consolidated with Cadastral Case No. 1. The [2]

petition likewise seeks to annul the resolution dated December 11, Franco testified that he was a witness to the execution of the
1996, denying petitioners motion for reconsideration. questioned deed of absolute sale. However, when cross-examined and
shown the deed he stated that the deed was not the document he signed
The facts of this case, culled from the records, are as follows: as a witness, but rather it was the will and testament made by Paulina
Rigonan.
Paulina Rigonan owned three (3) parcels of land, located at Batac
and Espiritu, Ilocos Norte, including the house and warehouse on one Atty. Tagatag testified that he personally prepared the deed, he
parcel. She allegedly sold them to private respondents, the spouses saw Paulina Rigonan affix her thumbprint on it and he signed it both
Felipe and Concepcion Rigonan, who claim to be her relatives. In as witness and notary public. He further testified that he also notarized
1966, herein petitioners Eugenio Domingo, Crispin Mangabat and Paulinas last will and testament dated February 19, 1965. The will
Samuel Capalungan, who claim to be her closest surviving relatives, mentioned the same lots sold to private respondents. When asked why
allegedly took possession of the properties by means of stealth, force the subject lots were still included in the last will and testament, he
and intimidation, and refused to vacate the same. Consequently, on could not explain. Atty. Tagatag also mentioned that he registered the
February 2, 1976, herein respondent Felipe Rigonan filed a complaint original deed of absolute sale with the Register of Deeds.
for reinvindicacion against petitioners in the Regional Trial Court of
Batac, Ilocos Norte. On July 3, 1977, he amended the complaint and Plaintiff Felipe Rigonan claimed that he was Paulinas close
included his wife as co-plaintiff. They alleged that they were the relative. Their fathers were first cousins. However, he could not recall
owners of the three parcels of land through the deed of sale executed the name of Paulinas grandfather. His claim was disputed by
by Paulina Rigonan on January 28, 1965; that since then, they had defendants, who lived with Paulina as their close kin. He admitted the
been in continuous possession of the subject properties and had discrepancies between the Register of Deeds copy of the deed and the
introduced permanent improvements thereon; and that defendants copy in his possession. But he attributed them to the representative
(now petitioners) entered the properties illegally, and they refused to from the Office of the Register of Deeds who went to plaintiffs house
leave them when asked to do so. after that Office received a subpoena duces tecum. According to him,
the representative showed him blanks in the deed and then the
Herein petitioners, as defendants below, contested plaintiffs representative filled in the blanks by copying from his (plaintiffs)
claims. According to defendants, the alleged deed of absolute sale was copy.
void for being spurious as well as lacking consideration. They said that
Counsel for defendants (petitioners herein) presented as witnesses and a Decree of Registration adjudicating the ownership of the
Jose Flores, the owner of the adjacent lot; Ruben Blanco, then acting said properties to defendants is hereby issued.
Registrar of Deeds in Ilocos Norte; and Zosima Domingo, wife of
defendant Eugenio Domingo. The alleged deed of sale (Exhs. A, A-1, 1 and 1-a) is hereby
declared null and void and fake and the prayer for the issuance
Jose Flores testified that he knew defendants, herein petitioners,
who had lived on the land with Paulina Rigonan since he could of a writ of preliminary injunction is hereby denied.
remember and continued to live there even after Paulinas death. He
said he did not receive any notice nor any offer to sell the lots from Plaintiffs are hereby ordered to pay defendants:
Paulina, contrary to what was indicated in the deed of sale that the
vendor had notified all the adjacent owners of the sale. He averred he a) P20,000.00 as moral damages;
had no knowledge of any sale between Paulina and private
respondents. b) P10,000.00 as exemplary damages;

Ruben Blanco, the acting Registrar of Deeds, testified that only c) P10,000.00 attorneys fees and other litigation expenses.
the carbon copy, also called a duplicate original, of the deed of sale
was filed in his office, but he could not explain why this was so. No pronouncement as to costs. [4]

Zosima Domingo testified that her husband, Eugenio Domingo, Private respondents herein appealed to the Court of Appeals.
was Paulinas nephew. Paulina was a first cousin of Eugenios
father. She also said that they lived with Paulina and her husband, Jose On August 29, 1996, the CA reversed the trial courts decision,
Guerson, since 1956. They took care of her, spent for her daily needs thus:
and medical expenses, especially when she was hospitalized prior to
her death. She stated that Paulina was never badly in need of money WHEREFORE, the decision dated March 23, 1994 is
during her lifetime.
hereby SET ASIDE. The plaintiffs-appellants Felipe Rigonan
On March 23, 1994, the trial court rendered judgment in favor of and Concepcion Rigonan are declared the owners of the
defendants (now the petitioners). It disposed: properties under litigation and the defendants-appellees are
hereby ordered to VACATE the subject properties and
WHEREFORE, premises considered, judgment is hereby SURRENDER the possession thereof to the heirs of the
rendered in favor of defendants and against the plaintiffs, and plaintiffs-appellants.
as prayed for, the Amended Complaint is
hereby DISMISSED. Costs against the defendants-appellees. [5]

Defendants are hereby declared, by virtue of intestate Hence, this petition assigning the following as errors:
succession, the lawful owners and possessors of the house I
including the bodega and the three (3) parcels of land in suit
THE RESPONDENT COURT OF APPEALS HAS DECIDED The basic issue for our consideration is, did private respondents
QUESTIONS OF LEGAL SUBSTANCE AND sufficiently establish the existence and due execution of the Deed of
SIGNIFICANCE NOT IN ACCORDANCE WITH THE Absolute and Irrevocable Sale of Real Property? Marked as Exhibits
EVIDENCE, LAW AND WITH THE APPLICABLE A, A-1, 1 and 1-a, this deed purportedly involved nine (9) parcels of
DECISIONS OF THIS HONORABLE COURT. land, inclusive of the three (3) parcels in dispute, sold at the price of
P850 by Paulina Rigonan to private respondents on January 28, 1965,
II
at Batac, Ilocos Norte. The trial court found the deed fake, being a
[7]

THAT THE FINDINGS OF RESPONDENT COURT OF carbon copy with no typewritten original presented; and the court
APPEALS ARE CONTRARY TO THOSE OF THE TRIAL concluded that the documents execution was tainted with alterations,
COURT AND CLEARLY VIOLATES THE RULE THAT THE defects, tamperings, and irregularities which render it null and void ab
FACTUAL FINDINGS OF TRIAL COURTS ARE ENTITLED initio.
[8]

TO GREAT WEIGHT AND RESPECT ON APPEAL,


ESPECIALLY WHEN SAID FINDINGS ARE ESTABLISHED Petitioners argue that the Court of Appeals erred in not applying
BY UNREBUTTED TESTIMONIAL AND DOCUMENTARY the doctrine that factual findings of trial courts are entitled to great
EVIDENCE. weight and respect on appeal, especially when said findings are
established by unrebutted testimonial and documentary evidence. They
III add that the Court of Appeals, in reaching a different conclusion, had
decided the case contrary to the evidence presented and the law
THAT THE FINDINGS AND CONCLUSIONS OF
applicable to the case. Petitioners maintain that the due execution of
RESPONDENT COURT OF APPEALS ARE GROUNDED
ENTIRELY ON SPECULATIONS, SURMISES, the deed of sale was not sufficiently established by private
CONJECTURES, OR ON INFERENCES MANIFESTLY respondents, who as plaintiffs had the burden of proving it. First, the
MISTAKEN. testimonies of the two alleged instrumental witnesses of the sale,
namely, Juan Franco and Efren Sibucao, were dispensed with and
IV discarded when Franco retracted his oral and written testimony that he
was a witness to the execution of the subject deed. As a consequence,
THAT THE RESPONDENT COURT OF APPEALS the appellate court merely relied on Atty. Tagatags (the notary public)
MANIFESTLY OVERLOOKED CERTAIN RELEVANT testimony, which was incredible because aside from taking the double
FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF role of a witness and notary public, he was a paid witness. Further his
PROPERLY CONSIDERED, WOULD JUSTIFY A testimony, that the subject deed was executed in the house of Paulina
DIFFERENT CONCLUSION. Rigonan, was rebutted by Zosima Domingo, Paulinas housekeeper,
who said that she did not see Atty. Tagatag, Juan Franco and Efren
V
Sibucao in Paulinas house on the alleged date of the deeds execution.
THAT THE FINDINGS OF FACT OF RESPONDENT COURT
OF APPEALS ARE PREMISED ON SUPPOSED ABSENCE Secondly, petitioners said that private respondents failed to
OF EVIDENCE BUT IS CONTRADICTED BY THE account for the typewritten original of the deed of sale and that the
EVIDENCE ON RECORD THUS CONSTITUTES GRAVE carbon copy filed with the Register of Deeds was only a duplicate
ABUSE OF DISCRETION.[6] which contained insertions and erasures. Further, the carbon copy was
without an affidavit of explanation, in violation of the Administrative
Code as amended, which requires that if the original deed of sale is not
presented or available upon registration of the deed, the carbon copy or of the Court of Appeals and the trial court are contradictory; when the
so-called duplicate original must be accompanied by an affidavit of findings are grounded entirely on speculations, surmises or
explanation, otherwise, registration must be denied.[9]
conjectures; and when the Court of Appeals overlooked certain
relevant facts not disputed by the parties which if properly considered
Thirdly, petitioners aver that the consideration of only P850 for would justify a different conclusion. All these, according to
the parcels of land sold, together with a house and a warehouse, was petitioners, are present in this case.
another indication that the sale was fictitious because no person who
was financially stable would sell said property at such a grossly Before proceeding to the main issue, we shall first settle
inadequate consideration. procedural issues raised by private respondents.

Lastly, petitioners assert that there was abundant evidence that at While the trial judge deciding the case presided over the hearings
the time of the execution of the deed of sale, Paulina Rigonan was of the case only once, this circumstance could not have an adverse
already senile. She could not have consented to the sale by merely effect on his decision. The continuity of a court and the efficacy of its
imprinting her thumbmark on the deed. proceedings are not affected by the death, resignation or cessation
from the service of the presiding judge. A judge may validly render a
In their comment, private respondents counter that at the outset decision although he has only partly heard the testimony of the
the petition must be dismissed for it lacks a certification against witnesses. After all, he could utilize and rely on the records of the
[10]

forum-shopping. Nonetheless, even disregarding this requirement, the case, including the transcripts of testimonies heard by the former
petition must still be denied in due course for it does not present any presiding judge.
substantial legal issue, but factual or evidentiary ones which were
already firmly resolved by the Court of Appeals based on records and On the matter of the certification against forum-shopping,
the evidence presented by the parties. Private respondents claim that petitioners aver that they attached one in the copy intended for this
the factual determination by the trial court lacks credibility for it was Court. This is substantial compliance. A deviation from a rigid
made by the trial judge who presided only in one hearing of the enforcement of the rules may be allowed to attain their prime objective
case. The trial judge could not validly say that the deed of absolute for, after all, the dispensation of justice is the core reason for the courts
sale was fake because no signature was forged, according to private existence.[11]

respondents; and indeed a thumbmark, said to be the sellers own,


appears thereon. While the issues raised in this petition might appear to be mainly
factual, this petition is properly given due course because of the
In their reply, petitioners said that the copy of the petition filed contradictory findings of the trial court and the Court of
with this Court was accompanied with a certification against forum Appeals. Further, the latter court apparently overlooked certain
shopping. If private respondents copy did not contain same relevant facts which justify a different conclusion. Moreover, a
[12]

certification, this was only due to inadvertence. Petitioners ask for the compelling sense to make sure that justice is done, and done rightly in
Courts indulgence for anyway there was substantial compliance with the light of the issues raised herein, constrains us from relying on
Revised Circular No. 28-91. technicalities alone to resolve this petition.

On the contention that here only factual issues had been raised, Now, on the main issue. Did private respondents establish the
hence not the proper subject for review by this Court, petitioners reply existence and due execution of the deed of sale? Our finding is in the
that this general rule admits of exceptions, as when the factual findings negative. First, note that private respondents as plaintiffs below
presented only a carbon copy of this deed. When the Register of Deeds IAC, 162 SCRA 823 (1988), the buyers immediate possession and
was subpoenaed to produce the deed, no original typewritten deed but occupation of the property was deemed corroborative of the
only a carbon copy was presented to the trial court. Although the Court truthfulness and authenticity of the deed of sale. The alleged vendors
of Appeals calls it a duplicate original, the deed contained filled in continued possession of the property in this case throws an inverse
blanks and alterations. None of the witnesses directly testified to prove implication, a serious doubt on the due execution of the deed of
positively and convincingly Paulinas execution of the original deed of sale. Noteworthy, the same parcels of land involved in the alleged sale
sale. The carbon copy did not bear her signature, but only her alleged were still included in the will subsequently executed by Paulina and
thumbprint. Juan Franco testified during the direct examination that he notarized by the same notary public, Atty. Tagatag. These [24]

was an instrumental witness to the deed. However, when cross- circumstances, taken together, militate against unguarded acceptance
examined and shown a copy of the subject deed, he retracted and said of the due execution and genuineness of the alleged deed of sale.
that said deed of sale was not the document he signed as witness. He [13]

declared categorically he knew nothing about it. [14]


Thirdly, we have to take into account the element of consideration
for the sale. The price allegedly paid by private respondents for nine
We note that another witness, Efren Sibucao, whose testimony (9) parcels, including the three parcels in dispute, a house and a
should have corroborated Atty. Tagatags, was not presented and his warehouse, raises further questions. Consideration is the why of a
affidavit was withdrawn from the court, leaving only Atty. Tagatags
[15]
contract, the essential reason which moves the contracting parties to
testimony, which aside from being uncorroborated, was self-serving. enter into the contract. On record, there is unrebutted testimony that
[25]

Paulina as landowner was financially well off. She loaned money to


Secondly, we agree with the trial court that irregularities abound several people. We see no apparent and compelling reason for her to
[26]

regarding the execution and registration of the alleged deed of sale. On sell the subject parcels of land with a house and warehouse at a meager
record, Atty. Tagatag testified that he himself registered the original price of P850 only.
deed with the Register of Deeds. Yet, the original was nowhere to be
[16]

found and none could be presented at the trial. Also, the carbon copy In Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents
on file, which is allegedly a duplicate original, shows intercalations were in their advanced years, and were not in dire need of money,
and discrepancies when compared to purported copies in except for a small amount of P2,000 which they said were loaned by
existence. The intercalations were allegedly due to blanks left unfilled petitioners for the repair of their houses roof. We ruled against
by Atty. Tagatag at the time of the deeds registration. The blanks were petitioners, and declared that there was no valid sale because of lack of
allegedly filled in much later by a representative of the Register of consideration.
Deeds. In addition, the alleged other copies of the document bore
different dates of entry: May 16, 1966, 10:20 A.M. and June 10,
[17]
In the present case, at the time of the execution of the alleged
1966, 3:16 P.M., and different entry numbers: 66246, 74389 and
[18] [19]
contract, Paulina Rigonan was already of advanced age and senile. She
64369. The deed was apparently registered long after its alleged date
[20]
died an octogenarian on March 20, 1966, barely over a year when the
of execution and after Paulinas death on March 20, 1966. deed was allegedly executed on January 28, 1965, but before copies of
Admittedly, the alleged vendor Paulina Rigonan was not given a
[21]
the deed were entered in the registry allegedly on May 16 and June 10,
copy. [22]
1966. The general rule is that a person is not incompetent to contract
merely because of advanced years or by reason of physical infirmities.
Furthermore, it appears that the alleged vendor was never asked to However, when such age or infirmities have impaired the mental
[27]

vacate the premises she had purportedly sold. Felipe testified that he faculties so as to prevent the person from properly, intelligently, and
had agreed to let Paulina stay in the house until her death. In Alcos v.
[23]
firmly protecting her property rights then she is undeniably
incapacitated. The unrebutted testimony of Zosima Domingo shows CORTES, VICTOR CORTES, MARICEL
that at the time of the alleged execution of the deed, Paulina was CORTES, ALELEI CORTES *
AND
already incapacitated physically and mentally. She narrated that
ANJEI CORTES, petitioners, vs. LEOPOLDO
**

Paulina played with her waste and urinated in bed. Given these
circumstances, there is in our view sufficient reason to seriously doubt SEVILLA, PETER SEVILLA, AND LUZVILLA
that she consented to the sale of and the price for her parcels of SEVILLA, respondents.
land. Moreover, there is no receipt to show that said price was paid to
and received by her. Thus, we are in agreement with the trial courts DECISION
finding and conclusion on the matter:
YNARES-SANTIAGO, J.:
The whole evidence on record does not show clearly that the
fictitious P850.00 consideration was ever delivered to the One who alleges defect or lack of valid consent to a
vendor. Undisputably, the P850.00 consideration for the nine contract by reason of fraud or undue influence must
(9) parcels of land including the house and bodega is grossly establish by full, clear and convincing evidence such
and shockingly inadequate, and the sale is null and void ab specific acts that vitiated a partys consent, otherwise, the
initio.
[28] latters presumed consent to the contract prevails. [1]

WHEREFORE, the petition is GRANTED. The decision and The instant petition for review seeks to set aside the
resolution of the Court of Appeals dated August 29, 1996 and September 26, 2000 Decision of the Court of Appeals in
[2]

December 11, 1996, respectively, are CA-G.R. CV No. 48956, affirming in toto the Decision of [3]

REVERSED and SET ASIDE. The decision of the Regional Trial the Regional Trial Court of Dipolog City, Branch 6, in Civil
Court of Batac, Ilocos Norte, Branch 17, dated March 23, 1994, is Case No. 4240 which declared, inter alia, the questioned
REINSTATED.
Deed of Donation Inter Vivos valid and binding on the
Costs against private respondents. parties.

SO ORDERED. The undisputed facts reveal that on December 10,


1973, Filomena Almirol de Sevilla died intestate leaving 8
FIRST DIVISION children, namely: William, Peter, Leopoldo, Felipe, Rosa,
Maria, Luzvilla, and Jimmy, all surnamed Sevilla. William,
[G.R. No. 150179. April 30, 2003] Jimmy and Maria are now deceased and are survived by
their respective spouses and children. Filomena Almirol
[4]

HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO de Sevilla left the following properties:
SEVILLA, WILSON SEVILLA, WILMA
SEVILLA, WILLINGTON SEVILLA, AND PARCEL I:
WILLIAM SEVILLA, JR., HEIRS OF MARIA
SEVILLA, NAMELY: AMADOR SEVILLA, JENO
A parcel of land known as Lot No. 653 situated at General Parcel I, Lot No. 653, is the paraphernal property of
Luna St., Dipolog City, with an area of about 804 square Filomena Almirol de Sevilla which she co-owned with her
meters, more or less, duly covered by Transfer Certificate of sisters, Honorata Almirol and Felisa Almirol, who were
[6]

Title No. (T-6671)-1448 [in the name of Filomena Almirol de both single and without issue. Parcels II, II and IV are
Sevilla, Honorata Almirol and Felisa Almirol] and assessed at conjugal properties of Filomena Almirol de Sevilla and
P31,360.00 according to Tax Dec. No. 018-947; her late husband Andres Sevilla. When Honorata died in
[7]

1982, her 1/3 undivided share in Lot No. 653 was


PARCEL II: transmitted to her heirs, Felisa Almirol and the heirs of
Filomena Almirol de Sevilla, who thereby acquired the
A parcel of land known as Lot No. 3805-B situated at Olingan, property in the proportion of one-half share each.
Dipolog City, with an area of about 18,934 square meters,
more or less, duly covered by Transfer Certificate of Title No. During the lifetime of Felisa and Honorata Almirol,
T-6672 and assessed at P5,890 according to Tax Dec. No. 009- they lived in the house of Filomena Almirol de Sevilla,
761; together with their nephew, respondent Leopoldo Sevilla
and his family. Leopoldo attended to the needs of his
PARCEL III: mother, Filomena, and his two aunts, Honorata and
Felisa.
[8]

A parcel of land known as Lot No. 837-1/4 situated at


Magsaysay Street, Dipolog City, with an area of about 880 Felisa died on July 6, 1988. Previous thereto, on
[9]

square meters more or less, duly covered by Original November 25, 1985, she executed a last will and
Certificate of Title No. 0-6064 and assessed at P12,870.00 testament devising her 1/2 share in Lot No. 653 to the
according to Tax Dec. No. 020-1078; spouses Leopoldo Sevilla and Belen Leyson. On [10]

August 8, 1986, Felisa executed another document


PARCEL IV: denominated as Donation Inter Vivos ceding to Leopoldo
Sevilla her 1/2 undivided share in Lot No. 653, which
A parcel of residential land known as Lot No. 1106-B-3
was accepted by Leopoldo in the same document. [11]

situated at Sta. Filomena, Dipolog City, with an area of 300


square meters, more or less, assessed at P3,150.00 according to On September 3, 1986, Felisa Almirol and Peter
Tax Dec. No. 006-317; Sevilla, in his own behalf and in behalf of the heirs of
Filomena Almirol de Sevilla, executed a Deed of Extra-
Commercial building erected on Parcel I above-described; and
judicial Partition, identifying and adjudicating the 1/3
residential building erected just at the back of the commercial
share of Honorata Almirol to the heirs of Filomena Almirol
building above-described and erected on Parcel I above-
de Sevilla and to Felisa Almirol.
[12]

described;[5]
Thereafter, respondents Leopoldo, Peter and Luzvilla Parcels II, III, and IV be partitioned among the heirs of
Sevilla obtained the cancellation of Transfer Certificate of Filomena Almirol de Sevilla in accordance with the law
Title No. (T-6671)-1448, over Lot No. 653, and the on intestate succession.
issuance of the corresponding titles to Felisa Almirol and
the heirs of Filomena Almirol de Sevilla. However, the On December 16, 1994, a decision was rendered by
requested titles for Lot Nos. 653-A and 653-B, were left the Regional Trial Court of Dipolog City, Zamboanga del
unsigned by the Register of Deeds of Dipolog City, Norte, Branch 6, upholding the validity of the Deed of
pending submission by Peter Sevilla of a Special Power Donation and declaring the Deed of Extra-judicial
of Attorney authorizing him to represent the other heirs of Partition unenforceable. The dispositive portion thereof,
Filomena Almirol de Sevilla. [13] reads:

On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and WHEREFORE, IN VIEW OF THE FOREGOING, summing
the heirs of William, Jimmy and Maria, all surnamed up the evidence for both the plaintiffs and the defendants, the
Sevilla, filed the instant case against respondents Court hereby renders judgment:
Leopoldo Sevilla, Peter Sevilla and Luzvilla Sevilla, for
annulment of the Deed of Donation and the Deed of 1) Declaring the questioned Deed of Donation Inter Vivos
Extrajudicial Partition, Accounting, Damages, with prayer valid and binding, and, therefore, has the full force and effect
for Receivership and for Partition of the properties of the of law;
late Filomena Almirol de Sevilla. They alleged that the
[14]

Deed of Donation is tainted with fraud because Felisa 2) Declaring the questioned Deed of Extra-Judicial Partition as
Almirol, who was then 81 years of age, was seriously ill unenforceable as yet as against the other heirs, as it lacks the
and of unsound mind at the time of the execution thereof; legal requisites of Special Power of Attorney or any other
and that the Deed of Extra-judicial Partition is void appropriate instrument to be executed by the other heirs who
because it was executed without their knowledge and were not made parties thereto;
consent.[15]

3) Finding the parties herein entitled to the partition of Parcel


In their answer, respondents denied that there was
[16] II, III, IV as designated in the Complaint, in equal shares, and,
fraud or undue pressure in the execution of the as to Lot No. 653 designated as Parcel I, it shall be divided
questioned documents. They alleged that Felisa was of equally into two, between defendant Leopoldo Sevilla on one
sound mind at the time of the execution of the assailed hand, and, collectively, the Heirs of William Sevilla, Heirs of
deeds and that she freely and voluntarily ceded her Jimmy Sevilla, Heirs of Maria Sevilla, Felipe Sevilla,
undivided share in Lot No. 653 in consideration of Leopoldo Sevilla, Peter Sevilla, Luzvilla Sevilla-Tan, on the
Leopoldos and his familys love, affection, and services other hand, as well as the two buildings thereon in
rendered in the past. Respondents further prayed that proportionate values;
4) Directing the parties, if they can agree, to submit herewith a Hence, the instant petition based on the following
project of partition, which shall designate the share which assignment of errors:
pertains to the heirs entitled thereto, that is, the particular and
specific portions of the properties subject of the partition; THAT THE HONORABLE COURT OF APPEALS ERRED
IN NOT HOLDING AS VOID AB INITIO THE DEED OF
5) Directing defendant Peter Sevilla to pay and/or collect from DONATION EXCUTED BY FELISA ALMIROL IN FAVOR
the parties the amounts corresponding to each one entitled or OF RESPONDENT LEOPOLDO SEVILLA CEDING TO
liable thereto, as recorded in the Statement of Accounts, except HIM ONE HALF PORTION OF LOT 653, DIPOLOG
for defendant Leopoldo Sevilla who is found by the Court to CADASTRE, IT HAVING BEEN EXECUTED WITH
have incurred only an overdraft of P5,742.98 and not FRAUD, UNDUE PRESSURE AND INFLUENCE;
P33,204.33 as earlier computed therein.
THAT THE APPELLATE COURT GREATLY ERRED IN
6) Dismissing the plaintiffs claim for damages, which is not NOT ORDERING THE PARTITION OF LOT 653,
proved with sufficient evidence, and defendants counterclaim, DIPOLOG CADASTRE EQUALLY AMONG THE EIGHT
on the same ground. (8) HEIRS OF FILOMENA, HONORATA AND FELISA,
ALL SURNAMED ALMIROL. [20]

7) With costs de oficio.


To resolve the issue raised in the instant petition for
IT IS SO ORDERED. [17]
review, the validity of the donation inter vivos executed
by Felisa Almirol in favor of Leopoldo Sevilla must first be
Both parties appealed to the Court of determined.
Appeals. Petitioners contended that the Deed of
Donation should be declared void and that Lot No. 653 Donation is an act of liberality whereby a person
should be divided equally among them. Respondents, on disposes gratuitously of a thing or right in favor of
the other hand, posited that the trial court erred in another who accepts it. Under Article 737 of the Civil
[21]

declaring the Deed of Extra-judicial Partition Code, the donors capacity shall be determined as of the
unenforceable against the other heirs of Filomena Almirol time of the making of the donation. Like any other
de Sevilla who were not parties to said Deed. contract, an agreement of the parties is essential, and
[22]

the attendance of a vice of consent renders the donation


On September 26, 2000, the Court of Appeals voidable.[23]

affirmed in toto the assailed decision of the trial court.


Petitioners filed a motion for reconsideration but the
[18]
In the case at bar, there is no question that at the
same was denied on August 30, 2001. [19]
time Felisa Almirol executed the deed of donation she
was already the owner of 1/2 undivided portion of Lot No.
653. Her 1/3 undivided share therein was increased by
1/2 when she and Filomena inherited the 1/3 share of E. That respondent Leopoldo Sevilla not contented with the
their sister Honorata after the latters death. Hence, the execution by Felisa Almirol of her last will and testament, had
1/2 undivided share of Felisa in Lot No. 653 is consulted a lawyer as to how he will be able to own the land
considered a present property which she can validly immediately;
dispose of at the time of the execution of the deed of
donation. [24] F. That upon the advice of Atty. Helen Angeles, Clerk of Court
of the Regional Trial Court of Zamboanga del Norte, Dipolog
Petitioners, however, insist that respondent Leopoldo City, Felisa Almirol executed a Deed of Donation, hence, the
Sevilla employed fraud and undue influence on the questioned Deed of Donation executed in his favor;
person of the donor. This argument involves appreciation
of the evidence. The settled rule is that factual findings
[25] G. That the subject matter of the Deed of Donation was the
of the trial court, if affirmed by the Court of Appeals, are one-half portion of Lot 653, Dipolog Cadastre, which was
entitled to great respect. There are exceptional
[26] willed by Felisa Almirol, in favor of respondent Leopoldo
circumstances when findings of fact of lower courts may Sevilla in her last will and testament;
be set aside but none is present in the case at
[27]

bar. Indeed, neither fraud nor undue influence can be H. That at the time of the execution of the Deed of Donation,
inferred from the following circumstance alleged by the Lot No. 653, Dipolog Cadastre, was not yet partitioned
petitioners, to wit between petitioners and respondents they being heirs of the
late Filomena and Honorata, all surnamed Almirol;
A. That Felisa Almirol lived with respondent Leopoldo Sevilla
in the residential house owned by petitioners and respondents; I. That after the execution of the Deed of Donation, respondent
Peter Sevilla and the late Felisa Almirol were the only ones
B. That the old woman Felisa Almirol was being supported out who executed the Deed of Extra-judicial Partition over Lot
of the rentals derived from the building constructed on the land 653, Dipolog Cadastre, the petitioners were not made parties in
which was a common fund. the said Deed of Extrajudicial Partition;

C. That when Felisa Almirol was already 82 years old, he J. That on the basis of the Deed of Extrajudicial Partition and
[Leopoldo Sevilla] accompanied her in the Office of Atty. Vic Deed of Donation, respondent Leopoldo Sevilla caused the
T. Lacaya, Sr., for the purpose of executing her last will and subdivision survey of Lot 653, Dipolog Cadastre, dividing the
testament same into two (2) lots, adjudicating one-half of the lot in his
favor and the other half in favor of respondents peter Sevilla
D. That in the last will and testament executed by Felisa and Luzvilla Sevilla, and to respondent Leopoldo Sevilla
Almirol, she had devised in favor of respondent Leopoldo himself;
Sevilla one-half of the land in question;
K. That only two persons knew the actual survey of the land, the consent of Felisa Almirol. Fraud and undue influence
petitioner Felipe Sevilla and respondent Leopoldo Sevilla that vitiated a partys consent must be established by full,
himself, the rest of the co-owners were not even notified; clear and convincing evidence, otherwise, the latters
presumed consent to the contract prevails. Neither[32]

L. That on the basis of the Extrajudicial Partition, Deed of does the fact that the donation preceded the partition
Donation, the approved subdivision plan, respondent Leopoldo constitute fraud. It is not necessary that partition should
Sevilla filed a petition for issuance of the corresponding titles first be had because what was donated to Leopoldo was
for the two lots, but the Register of Deeds of Dipolog City the 1/2 undivided share of Felisa in Lot No. 653.
refused to issue the corresponding titles for the two lots to
respondent Leopoldo Sevilla so that up to this moment the two Moreover, petitioners failed to show proof why Felisa
tiles were left unsigned by the Register of Deeds.[28]
should be held incapable of exercising sufficient
judgment in ceding her share to respondent Leopoldo.
There is fraud when, through the insidious words or As testified by the notary public who notarized the
[33]

machinations of one of the contracting parties, the other Deed of Donation, Felisa confirmed to him her intention
is induced to enter into a contract which, without them, to donate her share in Lot No. 653 to Leopoldo. He
he would not have agreed to. There is undue influence
[29]
stressed that though the donor was old, she was of
when a person takes improper advantage of his power sound mind and could talk sensibly.Significantly, there is
over the will of another, depriving the latter of a nothing in the record that discloses even an attempt by
reasonable freedom of choice. The following petitioners to rebut said declaration of the notary public.
circumstances shall be considered: the confidential,
family, spiritual and other relations between the parties, Clearly, therefore, the courts below did not err in
or the fact that the person alleged to have been unduly sustaining the validity of the deed of donation.
influenced was suffering from mental weakness, or was
ignorant or in financial distress. [30] Anent the Deed of Extra-judicial Partition, we find that
the same is void ab initio and not merely
Ei incumbit probatio qui dicit, non qui negat. He who unenforceable. In Delos Reyes v. Court of Appeals,
asserts, not he who denies, must prove. We have which is a case involving the sale of a lot by a person
[34]

consistently applied the ancient rule that if the plaintiff, who is neither the owner nor the legal representative, we
upon whom rests the burden of proving his cause of declared the contract void ab initio. It was held that one
action, fails to show in a satisfactory manner facts on of the requisites of a valid contract under Article 1318 of
which he bases his claim, the defendant is under no the Civil Code is the consent and the capacity to give
obligation to prove his exception or defense. In the [31]
consent of the parties to the contract. The legal capacity
instant case, the self-serving testimony of the petitioners of the parties is an essential element for the existence of
are vague on what acts of Leopoldo Sevilla constituted the contract because it is an indispensable condition for
fraud and undue influence and on how these acts vitiated the existence of consent. There is no effective consent in
law without the capacity to give such consent. In other Evidently, Felisa did not possess the capacity to give
words, legal consent presupposes capacity. Thus, there consent to or execute the deed of partition inasmuch as
is said to be no consent, and consequently, no she was neither the owner nor the authorized
contract when the agreement is entered into by one in representative of respondent Leopoldo to whom she
behalf of another who has never given him authorization previously transmitted ownership of her undivided share
therefor unless he has by law a right to represent the in Lot No. 653. Considering that she had no legal
latter.
[35]
capacity to give consent to the deed of partition, it follows
that there is no consent given to the execution of the
In the case at bar, at the time Felisa executed the deed, and therefore, there is no contract to speak of. As
deed of extra-judicial partition dividing the share of her such, the deed of partition is void ab initio, hence, not
deceased sister Honarata between her and the heirs of susceptible of ratification.
Filomena Almirol de Sevilla, she was no longer the
owner of the 1/2 undivided portion of Lot No. 653, having Nevertheless, the nullity of the deed of extra-judicial
previously donated the same to respondent Leopoldo partition will not affect the validity of the donation inter
Sevilla who accepted the donation in the same deed. A vivos ceding to respondent Leopoldo Sevilla the 1/2
donation inter vivos, as in the instant case, is undivided share of Felisa Almirol in Lot No. 653.Said lot
immediately operative and final. As a mode of acquiring
[36]
should therefore be divided as follows: 1/2 shall go to
ownership, it results in an effective transfer of title over respondent Leopoldo Sevilla by virtue of the deed of
the property from the donor to the donee and the donation, while the other half shall be divided equally
donation is perfected from the moment the donor knows among the heirs of Filomena Almirol de Sevilla including
of the acceptance by the donee. And once a donation is Leopoldo Sevilla, following the rules on intestate
accepted, the donee becomes the absolute owner of the succession.
property donated.
Finally, we note that the name of Rosa Sevilla,
daughter of Filomena Almirol de Sevilla, and one of the
plaintiffs herein, was omitted in the dispositive portion of
the trial courts decision. Her name should therefore be
[37]

included in the dispositive portion as one of the heirs


entitled to share in the properties of the late Filomena
Almirol de Sevilla.

WHEREFORE, in view of all the foregoing, the


Decision of the Court of Appeals in CA-G.R. CV No.
48956, affirming in toto the Decision of the Regional Trial
Court of Dipolog City, Branch 6, in Civil Case No. 4240,
is AFFIRMED with MODIFICATION. The Deed of Extra- Civil Case No. CEB-10766 is a suit for quieting of
judicial Partition dated September 3, 1986 is declared title. It was instituted on September 25, 1991 by
void, and the name of Rosa Sevilla is ordered included in petitioner spouses Mario
the dispositive portion of the trial courts judgment. J. Mendezona and Teresita M. Mendezona as initial
plaintiffs, and in the amended complaint filed on October
[4]

SO ORDERED. 7, 1991, herein co-petitioner spouses Luis


J. Mendezona and Maricar L. Mendezona and Teresita A
SECOND DIVISION dad Vda. de Mendezona joined as co-plaintiffs. [5]

[G.R. No. 143370. February 6, 2002] In their complaint, the petitioners, as plaintiffs therein,
alleged that petitioner spouses Mario
MARIO J. MENDEZONA and TERESITA M. J. Mendezona and Teresita M. Mendezona, petitioner
MENDEZONA, LUIS J. MENDEZONA and spouses Luis J. Mendezona and Maricar L. Mendezona,
MARICAR L. MENDEZONA and TERESITA and petitioner Teresita Adad Vda. de Mendezona own a
ADAD VDA. DE MENDEZONA, petitioners, parcel of land each in
vs. JULIO H. OZAMIZ, ROBERTO J. the Banilad Estate, Lahug, Cebu City with almost similar
MONTALVAN, JOSE MA. OZAMIZ, CARMEN H. areas of 3,462 square meters, 3,466 square meters and
OZAMIZ, PAZ O. MONTALVAN, MA. TERESA 3,468 square meters, covered and described in Transfer
O.F. ZARRAGA, CARLOS O. FORTICH, JOSE Certificate of Title (TCT) Nos. 116834, 116835, and
LUIS O. ROS, PAULITA O. RODRIGUEZ, and 116836 respectively, of the Registry of Deeds
LOURDES O. LON, respondents. of Cebu City. [6]

DECISION The petitioners ultimately traced their titles of


ownership over their respective properties from a
DE LEON, JR., J.: notarized Deed of Absolute Sale dated April 28, 1989
[7]

executed in their favor by Carmen Ozamiz for and in


Before us is a petition for review on certiorari of the consideration of the sum of One Million Forty Thousand
Decision and the Resolution of the Court of Appeals
[1] [2]
Pesos (P1,040,000.00).
dated July 27, 1998 and May 19, 2000, respectively, in
CA-G.R. CV No. 39752 which reversed and set aside the The petitioners initiated the suit to remove a cloud on
Decision dated September 23, 1992 rendered in favor of
[3]
their said respective titles caused by the inscription
the petitioners by the Regional Trial Court (RTC) thereon of a notice of lis pendens, which came about as
of Cebu City, Branch 6 in Civil Case No. CEB-10766. a result of an incident in Special Proceeding No. 1250 of
the RTC of Oroquieta City. Special Proceeding No. 1250
is a proceeding for guardianship over the person and
properties of Carmen Ozamiz initiated by the the Lahug property. Said Lahug property is the same
respondents Julio H. Ozamiz, Jose Ma. Ozamiz, Carmen property covered by the Deed of Absolute Sale
H. Ozamiz, Paz O. Montalvan, Ma. Teresa O.F. Zarraga,
[8]
dated April 28, 1989 executed by Carmen Ozamiz in
Carlos O. Fortich, Jose Luis O. Ros, Paulita O. favor of the petitioners. Respondents Roberto
Rodriguez and Lourdes O. Lon. [9]
J. Montalvan and Julio H. Ozamiz caused the inscription
on the titles of petitioners a notice of lis pendens,
It appears that on January 15, 1991, the respondents regarding Special Proceeding No. 1250, thus giving
[11]

instituted the petition for guardianship with the Regional rise to the suit for quieting of title, Civil Case No. CEB-
Trial Court of Oroquieta City, alleging therein that 10766, filed by herein petitioners.
Carmen Ozamiz, then 86 years old, after an illness in
July 1987, had become disoriented and could not In their Answer in Civil Case No. CEB-10766 the
[12]

recognize most of her friends; that she could no longer respondents opposed the petitioners claim of ownership
take care of herself nor manage her properties by reason of the Lahug property and alleged that the titles issued in
of her failing health, weak mind and absent-mindedness. the petitioners names are defective and illegal, and the
Mario Mendezona and Luis Mendezona, herein ownership of the said property was acquired in bad faith
petitioners who are nephews of Carmen Ozamiz, and without value inasmuch as the consideration for the
and Pilar Mendezona, a sister of Carmen Ozamiz, filed sale is grossly inadequate and unconscionable.
an opposition to the guardianship petition. Respondents further alleged that at the time of the sale
on April 28, 1989 Carmen Ozamiz was already ailing and
In the course of the guardianship proceeding, the not in full possession of her mental faculties; and that her
petitioners and the oppositors thereto agreed that properties having been placed in administration, she was
Carmen Ozamiz needed a guardian over her person and in effect incapacitated to contract with petitioners.
her properties, and thus respondent Paz
O. Montalvan was designated as guardian over the The issues for resolution were delimited in the pre-
person of Carmen Ozamiz while petitioner Mario trial to: (a) the propriety of recourse to quieting of title; (b)
J. Mendezona, respondents Roberto J. Montalvan and the validity or nullity of the Deed of Absolute Sale dated
Julio H. Ozamiz were designated as joint guardians over April 28, 1989 executed by Carmen Ozamiz in favor of
the properties of the said ward. herein petitioners; (c) whether the titles over the subject
parcel of land in plaintiffs names be maintained or should
As guardians, respondents Roberto J. Montalvan and they be cancelled and the subject parcels of
Julio H. Ozamiz filed on August 6, 1991 with the land reconveyed; and (d) damages and attorneys fees. [13]

guardianship court their inventories and Accounts,


listing therein Carmen Ozamizs properties, cash,
[10]
Trial on the merits ensued with the parties presenting
shares of stock, vehicles and fixed assets, including a evidence to prove their respective allegations. Petitioners
10,396 square meter property known as Mario Mendezona, Teresita Adad Vda.
de Mendezona and Luis Mendezona, as plaintiffs therein, (2) The three parcels of land were subsequently transferred to
testified on the circumstances surrounding the the names of the three vendees per TCTs Nos. 108729, 108730
sale. Carmencita Cedeno and Martin Yungco, and 108731 (Exhs. J, K & L, respectively). A partition
instrumental witnesses to the Deed of Absolute Sale agreement was entered into by the three vendees (Exh. 3) and
dated April 28, 1989, and, Atty. Asuncion Bernades, the the parcels of land are now titled in the names of the plaintiffs.
notary public who notarized the said document, testified
that on the day of execution of the said contract that Mario Mendezona TCT No. 116834 (Exh. A);
Carmen Ozamiz was of sound mind and that she
voluntarily and knowingly executed the said deed of sale. Luis Mendezona TCT No. 116835 (Exh. B);

For the defendants, the testimonies of respondent Antonio Mendezona TCT No. 116836 (Exh. C);
Paz O. Montalvan, a sister of
Carmen Ozamiz; Concepcion Agac-ac, an assistant of (3) The reservation of the usufructuary rights to the vendor
Carmen Ozamiz; respondent Julio Ozamiz; Carmen Ozamiz during her lifetime was confirmed by the
Carolina Lagura, a househelper of plaintiffs-spouses Mario Mendezona and Teresita Moraza and
Carmen Ozamiz; Joselito Gunio, an appraiser of plaintiffs spouses Luis Mendezona and MaricarLonga in a
land; Nelfa Perdido, a part-time bookkeeper of sworn statement (Exh. I) executed on October 15, 1990, which
Carmen Ozamiz, and the deposition of Dr. Faith Go, was duly annotated on the titles of the property;
physician of Carmen Ozamiz, were offered in evidence.
(4) The capital gains tax was paid (Exh. H) on May
The petitioners presented as rebuttal witnesses 5, 1989 and a certificate (Exh. H-1) was issued by the Bureau
petitioners Mario Mendezona and Luis Mendezona, to of Internal Revenue authorizing the Register of Deeds to
rebut the testimony of respondent Julio H. Ozamiz; and, transfer the property to the vendees;
Dr. William Buot, a doctor of neurology to rebut aspects
(5) A petition for guardianship over the person and properties
of the deposition of Dr. Faith Go on the mental capacity
of Carmen Ozamiz (Exh. E) was filed by all the defendants,
of Carmen Ozamiz at the time of the sale.
(except the defendant Roberto Montalvan) on January 15,
During the trial, the trial court found that the following 1991 with the Regional Trial Court of OroquietaCity,
facts have been duly established: [14]
denominated as Spec. Proc. No. 1250 and subsequently, an
Inventories and Accounts (Exh. F) was filed by court-
(1) On April 28, 1989, Carmen Ozamiz sold to her nephews, appointed guardians Roberto Montalvan and Julio Ozamiz, in
Mario, Antonio and Luis, all surnamed Mendezona, three (3) which the property was listed (Exh. F-1) and a Notice
parcels of residential land in Cebu City, per a Deed of Absolute of Lis Pendens was filed with the Register of Deeds
Sale (Exh. D) for a consideration of P1,040,000.00, in which of Cebu City on August 13, 1991 by said joint guardians.
deed the usufructuary rights were reserved during her lifetime. Plaintiff Mario Mendezona, as another joint guardian over
Carmen Ozamiz, filed his opposition (Exh. R) to the 2. That the one-third (1/3) share erroneously titled to
Inventories and Accounts, with the Oroquieta Court as to the Antonio Mendezona should be titled in the name
inclusion of the property (Exh.R-1). of Teresita Adad vda. de Mendezona as
her paraphernal property and the Register of Deeds
(6) Prior to his death, the deceased husband of of Cebu City is hereby ordered to do so;
plaintiff Teresita Adad Mendezona was granted a General
Power of Attorney (Exh. 1) by Carmen Ozamiz on March 23, 3. The Notice of Lis Pendens affecting the property should be
1988 and after his demise, Carmen Ozamiz granted eliminated from the record and the Register of Deeds
Mario Mendezona a General Power of Attorney (Exh. 2.) of Cebu City is ordered to expunge the same.
on August 11, 1990. Both powers of attorney relate to the
administration of the property, subject of this action, No pronouncement as to costs.
in Cebu City.
SO ORDERED.
On September 23, 1992 the trial court rendered its
decision in favor of the petitioners, the dispositive portion On appeal to the Court of Appeals, the appellate
of which reads, to wit: court reversed the factual findings of the trial court and
ruled that the Deed of Absolute Sale dated April 28, 1989
Wherefore, premises considered, the Court is of the opinion was a simulated contract since the petitioners failed to
and so declares that: prove that the consideration was actually paid, and,
furthermore, that at the time of the execution of the
1. The property described in the complaint was sold, with contract the mental faculties of Carmen Ozamiz were
reservation of usufructuary rights by Carmen Ozamiz to the already seriously impaired. Thus, the appellate court
plaintiffs under a valid contract, voluntarily and deliberately declared that the Deed of Absolute Sale of April 28,
entered into while she was of sound mind, for sufficient and 1989 is null and void. It ordered the cancellation of the
good consideration, and without fraud, force, undue influence certificates of title issued in the petitioners names and
or intimidation having been exercised upon her, and directed the issuance of new certificates of title in favor
consequently, the Court orders the defendants herein to of Carmen Ozamiz or her estate.
acknowledge and recognize the plaintiffs title to
the aforecited property and to refrain from further clouding the Petitioners filed a motion for reconsideration of the
same; decision of the appellate court. Subsequent thereto, the
petitioners filed a motion for a new trial and/or for
reception of evidence. They contended, among other
things, that the appellate court totally ignored the
testimony of Judge Teodorico Durias regarding the
mental condition of Carmen Ozamiz a month before the
execution of the Deed of Absolute Sale in question. The DEED OF ABSOLUTE SALE - WHO HAD FAILED TO
said testimony was taken in the Special Proceeding No. DISCHARGE THEIR BURDEN OF PROVING THAT
1250 in the Regional Trial Court of Oroquieta City. THERE WAS NO CONSIDERATION FOR THE
However, Judge Durias was not presented as a witness TRANSACTION.
in Civil Case No. CEB-10766 in
the Regional Trial Court of Cebu City. Petitioners alleged C.
that Judge Duriass testimony is a newly-discovered
evidence which could not have been discovered prior to THE COURT OF APPEALS GRAVELY ERRED IN
the trial in the court below by the exercise of due REFUSING TO RECEIVE IN EVIDENCE THE THREE (3)
diligence. CHECKS, WHICH PROVED BEYOND ANY DOUBT THAT
THE PURCHASE PRICE FOR THE LAHUG PROPERTY
The appellate court denied both motions in its HAD BEEN PAID TO CARMEN OZAMIZ, AFTER ASKING
Resolution dated May 19, 2000. Hence, the instant FOR THEM AND HAVING THEM PRESENTED TO IT IN
petition anchored on the following grounds: [15] OPEN COURT, THUS COOPERATING WITH
RESPONDENTS EFFORTS TO SUPPRESS THE CHECKS
I. (WHICH THE COURT ITSELF AND RESPONDENTS
CHALLENGED PETITIONERS TO PRODUCE).
THE COURT OF APPEALS GRAVELY ERRED IN RULING
THAT THE APRIL 28, 1989 DEED OF II.
ABSOLUTE SALE WAS A SIMULATED CONTRACT.
THE COURT OF APPEALS GRAVELY ERRED IN RULING
A. THAT CARMEN OZAMIZS MENTAL FACULTIES WERE
SERIOUSLY IMPAIRED WHEN SHE EXECUTED THE
THE COURT OF APPEALS GRAVELY ERRED IN DEED OF ABSOLUTE SALE ON APRIL 28, 1989.
IGNORING THE STATUTORY PRESUMPTIONS OF
ACTUAL AND SUFFICIENT CONSIDERATION FOR, A.
AND OF THE REGULARITY AND TRUTHFULNESS OF,
THE NOTARIZED DEED OF ABSOLUTE SALE. THE COURT OF APPEALS GRAVELY ERRED IN
IGNORING THE STATUTORY PRESUMPTION THAT
B. CARMEN OZAMIZ WAS OF SOUND MIND AND HAD
THE REQUISITE CAPACITY TO CONTRACT WHEN SHE
THE COURT OF APPEALS GRAVELY ERRED IN EXECUTED THE DEED OF ABSOLUTE SALE, AND IN
IMPOSING ON THE PETITIONERS THE BURDEN OF REFUSING TO RULE THAT IT WAS THE RESPONDENTS
PROVING PAYMENT, AND IN REFUSING TO - AS THE PARTIES ALLEGING MENTAL INCAPACITY-
RECOGNIZE AND RULE THAT IT WAS THE
RESPONDENTS - AS THE PARTIES ASSAILING THE
WHO HAD FAILED TO DISCHARGE THEIR BURDEN OF evidence. A motion for new trial upon the ground of
REBUTTING THAT PRESUMPTION. newly discovered evidence is properly granted only
where there is concurrence of the following requisites,
B. namely: (a) the evidence had been discovered after trial;
(b) the evidence could not have been discovered and
THE COURT OF APPEALS GRAVELY ERRED IN produced during trial even with the exercise of
REFUSING TO ACCEPT AND GIVE DUE AND reasonable diligence; and (c) the evidence is material
PREPONDERANT WEIGHT TO UNREFUTED EVIDENCE, and not merely corroborative, cumulative or impeaching
INCLUDING THE UNREFUTED TESTIMONIES OF THE and is of such weight that if admitted, would probably
INSTRUMENTAL WITNESSES AND OF THE NOTARY alter the result. All three (3) requisites must characterize
PUBLIC, THAT CARMEN OZAMIZ EXECUTED THE the evidence sought to be introduced at the new trial.
DEED OF ABSOLUTE SALE FREELY, VOLUNTARILY,
KNOWINGLY, AND INTELLIGENTLY. We find that the requirement of reasonable diligence
C.
has not been met by the petitioners. As early as the pre-
trial of the case at bar, the name of Judge Durias has
THE COURT OF APPEALS GRAVELY ERRED IN GIVING already cropped up as a possible witness for the
WEIGHT TO THE HEARSAY TESTIMONY OF DR. FAITH defendants, herein respondents. That the respondents
GO ON THE MENTAL CONDITION OF CARMEN chose not to present him is not an indicia per se of
OZAMIZ ON THE DATE SHE EXECUTED THE DEED OF suppression of evidence, since a party in a civil case is
ABSOLUTE SALE. free to choose who to present as his witness. Neither
can Judge Durias testimony in another case be
D. considered as newly discovered evidence since the facts
to be testified to by Judge Durias which were existing
THE COURT OF APPEALS GRAVELY ERRED IN before and during the trial, could have been presented
IGNORING, AND IN REFUSING TO RECEIVE IN by the petitioners at the trial below. The testimony of
[16]

EVIDENCE, JUDGE TEODORICO DURIASS TESTIMONY Judge Durias has been in existence waiting only to be
(THAT CARMEN OZAMIZ WAS OF SOUND MIND WHEN elicited from him by questioning.[17]

SHE EXECUTED ANOTHER CONTRACT BARELY A


MONTH BEFORE SHE EXECUTED THE DEED OF It has been held that a lack of diligence is exhibited
ABSOLUTE SALE) ON THE GROUND where the newly discovered evidence was necessary or
THAT THAT TESTIMONY WAS FORGOTTEN proper under the pleadings, and its existence must have
EVIDENCE. occurred to the party in the course of the preparation of
the case, but no effort was made to secure it; there is a
We shall first rule on the issue of whether to consider failure to make inquiry of persons who were likely to
the testimony of Judge Durias as newly discovered
know the facts in question, especially where information disputed Lahug property. They also alleged that no error
was not sought from co-parties; there is a failure to seek is ascribable to the appellate court for not considering
evidence available through public records; there is a the allegedly rehearsed testimonies of the instrumental
failure to discover evidence that is within the control of witnesses and the notary public.
the complaining party; there is a failure to follow leads
contained in other evidence; and, there is a failure to Factual findings of the appellate court are generally
utilize available discovery procedures. Thus, the
[18] conclusive on this Court which is not a trier of facts. It is
testimony of Judge Durias cannot be considered as not the function of the Supreme Court to analyze or
newly discovered evidence to warrant a new trial. weigh evidence all over again. However, this rule is not
without exception. If there is a showing that the appellate
In this petition at bench, herein petitioners essentially courts findings of facts complained of are totally devoid
take exception to two (2) main factual findings of the of support in the record or that they are so glaringly
appellate court, namely, (a) that the notarized Deed of erroneous as to constitute grave abuse of discretion, this
Absolute Sale dated April 28, 1989 was a simulated Court must discard such erroneous findings of facts.
contract, and (b) that Carmen Ozamizs mental faculties We find that the exception applies in the case at
[19]

were seriously impaired when she executed the said bench.


contract on April 28, 1989. The petitioners allege that
both conclusions are contrary or opposed to well- Simulation is defined as the declaration of a fictitious
recognized statutory presumptions of regularity enjoyed will, deliberately made by agreement of the parties, in
by a notarized document and that a contracting party to a order to produce, for the purposes of deception, the
notarized contract is of sound and disposing mind when appearances of a juridical act which does not exist or is
she executes the contract. different from what that which was really executed. The
[20]

requisites of simulation are: (a) an outward declaration of


The respondents posit a different view. They contend will different from the will of the parties; (b) the false
that clear and convincing evidence refuted the appearance must have been intended by mutual
presumptions on regularity of execution of the Deed of agreement; and (c) the purpose is to deceive third
Absolute Sale and existence of consideration persons. None of these were clearly shown to exist in
[21]

thereof. Relying upon the testimonies of Paz the case at bar.


O. Montalvan, Concepcion Agac-ac,
Carolina Lagura and Dr. Faith Go, they aver that they Contrary to the erroneous conclusions of the
were able to show that Carmen Ozamiz was already appellate court, a simulated contract cannot be inferred
physically and mentally incapacitated since the latter part from the mere non-production of the checks. It was not
of 1987 and could not have executed the said Deed of the burden of the petitioners to prove so. It is significant
Absolute Sale on April 28, 1989 covering the to note that the Deed of Absolute Sale dated April 28,
1989 is a notarized document duly acknowledged before
a notary public. As such, it has in its favor the also admitted that not all income of
presumption of regularity, and it carries the evidentiary Carmen Ozamiz passed through her since
weight conferred upon it with respect to its due Antonio Mendezona, as appointed administrator, directly
execution. It is admissible in evidence without further reported to Carmen Ozamiz. With
[24]
respect
proof of its authenticity and is entitled to full faith and to Nelfa Perdido, she testified that most of the
credit upon its face.
[22]
transactions that she recorded refer only to rental income
and expenses, and the amounts thereof were reported to
Payment is not merely presumed from the fact that her by Concepcion Agac-ac only, not by
the notarized Deed of Absolute Sale dated April 28, Carmen Ozamiz. She does not record deposits or
1989 has gone through the regular procedure as withdrawals in the bank accounts of Carmen Ozamiz.
evidenced by the transfer certificates of title issued in Their testimonies hardly deserve any credit and, hence,
[25]

petitioners names by the Register of Deeds. In other the appellate court misplaced reliance thereon.
words, whosoever alleges the fraud or invalidity of a
notarized document has the burden of proving the same Considering that Carmen Ozamiz acknowledged, on
by evidence that is clear, convincing, and more than the face of the notarized deed, that she received the
merely preponderant. Therefore, with this well-
[23]
consideration at One Million Forty Thousand Pesos
recognized statutory presumption, the burden fell upon (P1,040,000.00), the appellate court should not have
the respondents to prove their allegations attacking the placed too much emphasis on the checks, the
validity and due execution of the said Deed of Absolute presentation of which is not really necessary. Besides,
Sale. Respondents failed to discharge that burden; the burden to prove alleged non-payment of the
hence, the presumption in favor of the said deed stands. consideration of the sale was on the respondents, not on
But more importantly, that notarized deed shows on its the petitioners. Also, between its conclusion based on
face that the consideration of One Million Forty inconsistent oral testimonies and a duly notarized
Thousand Pesos (P1,040,000.00) was acknowledged to document that enjoys presumption of regularity, the
have been received by Carmen Ozamiz. appellate court should have given more weight to the
latter. Spoken words could be notoriously unreliable as
Simulation cannot be inferred from the alleged against a written document that speaks a uniform
absence of payment based on the testimonies language. [26]

of Concepcion Agac-ac, assistant of Carmen Ozamiz,


and Nelfa Perdido, part-time bookkeeper of Furthermore, the appellate court erred in ruling that at
Carmen Ozamiz. The testimonies of these two (2) the time of the execution of the Deed of Absolute Sale
witnesses are unreliable and inconsistent. on April 28, 1989 the mental faculties of
Carmen Ozamiz were already seriously impaired. It [27]

While Concepcion Agac-ac testified that she was placed too much reliance upon the testimonies of the
aware of all the transactions of Carmen Ozamiz, she
respondents witnesses. However, after a thorough 1987. The petitioners rebuttal witness, Dr. William Buot,
scrutiny of the transcripts of the testimonies of the a doctor of neurology, testified that no conclusion of
witnesses, we find that the respondents core witnesses mental incapacity at the time the said deed was
all made sweeping statements which failed to show the executed can be inferred from Dr. Faith Gos clinical
true state of mind of Carmen Ozamiz at the time of the notes nor can such fact be deduced from the mere
execution of the disputed document. The testimonies of prescription of a medication for episodic memory loss.
the respondents witnesses on the mental capacity of
Carmen Ozamiz are far from being clear and convincing, It has been held that a person is not incapacitated to
to say the least. contract merely because of advanced years or by reason
of physical infirmities. Only when such age or infirmities
Carolina Lagura, a househelper of Carmen Ozamiz, impair her mental faculties to such extent as to prevent
testified that when Carmen Ozamiz was confronted by her from properly, intelligently, and fairly protecting her
Paz O. Montalvan in January 1989 with the sale of property rights, is she considered incapacitated. The[30]

the Lahug property, Carmen Ozamiz denied the same. respondents utterly failed to show adequate proof that at
She testified that Carmen Ozamiz understood the the time of the sale on April 28, 1989
question then. However, this declaration is inconsistent
[28]
Carmen Ozamiz had allegedly lost control of her mental
with her (Carolinas) statement that since 1988 faculties.
Carmen Ozamiz could not fully understand the things
around her, that she was physically fit but mentally could We note that the respondents sought to impugn only
not carry a conversation or recognize persons who one document, namely, the Deed of Absolute Sale
visited her. Furthermore, the disputed sale occurred
[29] dated April 28, 1989, executed by Carmen Ozamiz.
on April 28, 1989 or three (3) months after this alleged However, there are nine (9) other important documents
confrontation in January 1989. This inconsistency was that were, signed by Carmen Ozamiz either before or
not explained by the respondents. after April 28, 1989 which were not assailed by the
respondents. Such is contrary to their assertion of
[31]

The revelation of Dr. Faith Go did not also shed light complete incapacity of Carmen Ozamizto handle her
on the mental capacity of Carmen Ozamiz on the affairs since 1987. We agree with the trial courts
relevant day - April 28, 1989 when the Deed of Absolute assessment that it is unfair for the [respondents] to claim
Sale was executed and notarized. At best, she merely soundness of mind of Carmen Ozamiz when it benefits
revealed that Carmen Ozamiz was suffering from certain them and otherwise when it disadvantages them. A [32]

infirmities in her body and at times, she was forgetful, but person is presumed to be of sound mind at any particular
there was no categorical statement that time and the condition is presumed to continue to exist,
Carmen Ozamiz succumbed to what the respondents in the absence of proof to the contrary. Competency
[33]

suggest as her alleged second childhood as early as and freedom from undue influence, shown to have
existed in the other acts done or contracts executed, are PUNO, J.:
presumed to continue until the contrary is shown. [34]

This is a petition for review of the Decision of the Court of Appeals in CA-
G.R. No. 51340-R entitled "Mariano T. Lim, et al., vs. Lorenzo O. Tan, et
All the foregoing considered, we find the instant al., dated July 28, 1908. 1
petition to be meritorious and the same should be
granted. The case involves the partition of the properties of the deceased spouse
Tan Quico and Josefa Oraa. The former died on May 11, 1932 and the
latter on August 6, 1932. Both died intestate. They left some ninety six
WHEREFORE, the instant petition is hereby (96) hectares of land located in the municipality of Guinobatan and
GRANTED and the assailed Decision and Resolution of Camalig Albay. 2
the Court of Appeals are hereby REVERSED and SET
ASIDE. The Decision dated September 23, 1992 of The late spouses were survived by four (4) children: Cresencia, Lorenzo,
Hermogenes and Elias. Elias died on May 2, 1935 without issue.
the Regional Trial Court of Cebu City, Branch 6, in Civil Cresencia died on December 20, 1967. 3 She was survived by her
Case No. CEB-10766 is REINSTATED. No husband, Lim Chay Sing, 4 and children, Mariano, Jaime, Jose
pronouncement as to costs. Jovita, Anacoreta, Antonietta, Ruben, Benjamin and Rogelio.
They are the petitioners in the case at bench.
SO ORDERED.
The sad spectacle of the heirs squalling over the properties of their
Republic of the Philippines deceased parents was again replayed in the case at bench. The
SUPREME COURT protagonists were the widower and children of Cresencia on one side,
Manila and Lorenzo and Hermogenes on the other side.

SECOND DIVISION The late Cresencia and Lorenzo had contrasting educational background.
Cresencia only reached the second grade of elementary school. She
could not read or write in English. On the other hand, Lorenzo is a lawyer
and a CPA.
G.R. No. L-55201 February 3, 1994
Petitioners, heirs of Cresencia, alleged that since the demise of the
spouses Tan Quico and Josefa Oraa, the subject properties had been
MARIANO T. LIM, JAIME T. LIM, JOSE T. LIM, JOVITA T. LIM,
administered by respondent Lorenzo. They claimed that before her death,
ANACORITA T. LIM, ANTONIETTA T. LIM, RUBEN T. LIM, BENJAMIN
T. LIM, ET AL., petitioners, Cresencia had demanded their partition from Lorenzo. 5 After
vs. Cresencia's death, they likewise clamored for their
COURT OF APPEALS, LORENZO O. TAN and HERMOGENES O. partition. 6 Their efforts proved fruitless. They failed Civil Case
TAN, respondents. No. 3676.

Eulogio E. Gatdula for petitioners. Respondent Lorenzo and Hermogenes adamant stance against partition
is based on various contentions. Principally, they urge: (1) that the
Miles L. Ludovice for private respondents. properties had already been partitioned, albeit, orally; and (2) during her
lifetime, the late Cresencia had sold and conveyed all her interests in
said properties to respondent Lorenzo. They cited as evidence the "Deed
of Confirmation of Extra Judicial Settlement of the Estate of Tan Quico BASED ON FACTS STATED IN THE QUESTIONED
and Josefa Oraa" 7 and a receipt of payment. 8 JUDGMENT IS CLEARLY INCORRECT, AS IT IS
CONTRARY TO THE PROVISION OF ART. 1337, CIVIL
The trial court decided in favor of the petitioners. It rejected the alleged CODE.
oral petition in light of the contrary testimony of respondent Hermogenes.
It voided the "Deed of Confirmation of Extra Judicial Settlement of the III. THE FINDING AND DECLARATION OF THE
Estate of Tan Quico and Josefa Oraa and Sale" 9 on the ground that it HONORABLE COURT OF APPEALS THAT LORENZO
was not understood by the late Cresencia when she signed it. O. TAN IS THE LAWFUL OWNER OF THE
PROPERTIES PERTAINING TO THE SHARE OF SAID
ILLITERATE OR PARTY AT A DISADVANTAGE,
On appeal, the respondent Court of Appeals, voting 4-1, reversed. It held CRESENCIA O. TAN BY VIRTUE OF SAID DOCUMENT
there was evidence to establish that the subject properties had been (EXH. "E"; ALSO EXH. "1") IS CONTRARY TO LAW, AS
previously partitioned. It ruled that respondent Lorenzo was not shown to THE LATTER'S CONSENT WAS GIVEN BY MISTAKE,
have exercised any undue influence over the late Crescencia when she UNDUE INFLUENCE AND/OR FRAUD.
signed the said Deed of Confirmation, etc.
IV. THE FINDING OF THE HONORABLE COURT OF
Dissatisfied, petitioners filed this petition for review by certiorari. They APPEALS THAT THERE WAS AN ORAL PARTITION BY
submit: AND AMONG CRESENCIA O. TAN AND HER TWO
BROTHERS LORENZO O. TAN AND HERMOGENES O.
I. THE FINDING OR CONCLUSION DRAWN BY THE TAN IS CONTRARY TO THE ORAL ADMISSION OF
HONORABLE COURT OF APPEALS THAT HERMOGENES O. TAN HIMSELF WHO TESTIFIED
THAT
THE EVIDENCE ON RECORD ALSO
SHOWS THAT THE TERMS OF EXH. "E" WE DID NOT HAVE EXACTLY A
(ALSO EXH. "1" IN ENGLISH) WERE PARTITION IN 1930.
READ TO CRESENCIANA O. TAN IN
THE BICOL DIALECT, EXPLAINED TO AS WELL AS SERIOUSLY CONTRADICTED BY CLEAR,
AND UNDERSTOOD BY HER, BEFORE COMPETENT AND CREDIBLE DOCUMENTARY
SHE SIGNED THE SAME. EVIDENCE AND THEREFORE SHOULD BE
DISREGARDED.
BASED ON THE FACTS STATED IN THE JUDGMENT
QUOTING "THE PERTINENT TESTIMONIES ON THIS We grant the petition.
POINT" OR BOTH DEFENDANTS IS MANIFESTLY
INCORRECT, AS THE SAME FALL FAR SHORT OF THE
MANDATORY REQUIREMENT OF ART. 1332, CIVIL The general rule is that factual findings of lower courts are accorded
CODE, THAT THE TERMS THEREOF SHOULD BE great respect by this court on review of their decisions. In the petition at
FULLY EXPLAINED TO THE ILLITERATE CRESENCIA bench, we are constrained to re-examine these findings considering the
O. TAN WHO DID NOT KNOW HOW TO READ AND contrarieties in the findings made by the appellate court and the trial
WRITE IN ENGLISH. court. Indeed, even the Decision of the appellate court is not a
unanimous but a mere majority decision.
II. THE CONCLUSION DRAWN BY THE HONORABLE
COURT OF APPEALS THAT THERE WAS NO UNDUE The first issue is whether or not the subject properties had already been
INFLUENCE EXERTED ON CRESENCIA O. TAN BY partitioned among the heirs of tan Quico and Josefa Oraa. The private
HER (LAWYER-CPA) BROTHER LORENZO O. TAN respondents alleged that the properties had been orally partitioned in
1930. 10 Their evidence on this score, however, leaves much to Witness: (SGD.) ANTONIETTA T. LIM
be desired. It is only respondent Lorenzo who stubbornly
insisted that the said properties had already been divided. Note: Amount of P8,970 includes P6,700 paid to acquire
However, brother Hermogenes, the other respondent, gave a Lot No. 202-54-41-T from Pedro L. Morada who
transferred his right to Jovita Lim.
different testimony. We quote his testimony:
The receipt speaks of the late Cresencia's pro-indiviso share of the
xxx xxx xxx
subject properties or her share before division. We also note that the
subject lots are still covered by tax declarations 12 in the name of their
Court:
parents. If these lots had already been partitioned to the
Q Never mind your sister, we are talking
different heirs and then occupied by them, it appears strange
about your parents. During their lifetime in that their tax declarations have not been adjusted to reflect their
1930 you said that the properties would be ownership considering the long time that has elapsed since
divided, so, in 1930, there was no actual 1930. Respondent Lorenzo testified that he took possession of
division because it would only be divided? the lot supposed to belong to the late Crescencia in 1966, 13 yet,
he himself did not cause any change in its tax declaration.
A We did not have exactly a partition in Similarly corrosive of the claim of private respondents is their
1930. own Exhibit "E" or "1", entitled "Deed of Confirmation of Extra
Judicial Settlement of the Estate of Tan Quico and Josefa Oraa."
Q You did not have a partition in 1930?
Nowhere in the text of this document prepared by no less than
respondent Lorenzo, is there any intimation that the subject why
A No, your Honor. 11
Exhibit was entitled Deed of Confirmation, respondent Lorenzo
The documentary evidence likewise support the conclusion that there explained; ". . . . we want to put it in black and white, the
was no such partition. Exhibit "2", the receipt dated April 20, 1966 separation of the properties which was in existence since 1930
thumbmarked by the late Crescencia and presented by the petitioners to 1932. . ." (TSN, March 2, 1970, p. 40). To say the least, the
themselves reads: omission buttresses the conclusion that the properties have not
been partitioned.
RECEIPT FOR P8,970.00
We now determine the next crucial issue of fact, i. e., whether or not the
Received from LORENZO O. TAN, on various dates, the total sum of EIGHT above mentioned Deed of Confirmation of Extra Judicial Settlement of
THOUSAND NINE HUNDRED SEVENTY (P8,970.00) PESOS as partial
payment for the sale of my pro-indiviso share on the properties inherited by me the estate of Tan Quico and Josefa Oraa (Exhibit "E" or "1") is valid. The
from my deceased parents. respondent court, reversing the trial court, held that the evidence failed to
establish that it was signed by the late Crescencia as a result of fraud,
As guarantee for the payment, I put up as security my mistake or undue influence. We hold this ruling erroneous. In calibrating
pro-indiviso one-third share on the properties inherited by the credibility of the witnesses on this issue, we take our mandate from
me from my deceased parents. Article 1332 of the Civil Code which provides: "When one of the parties is
unable to read, or if the contract is in language not understood by him,
Signed this 20th day of April, 1966 at Quezon City, and mistake or fraud is alleged, the person enforcing the contract must
Philippines. show that the terms thereof have been fully explained to the former." this
substantive law came into being due to the finding of the Code
(SGD.) CRESENCIA O. TAN Commission that there is still a fairly large number of illiterates in this
country, and documents are usually drawn up in English or Spanish. 14
It A I and my brother.
is also in accord with our state policy of promoting social
justice. 15 It also supplements Article 24 of the Civil Code which Q Who is that brother?
calls on court to be vigilant in the protection of the rights of
those who are disadvantaged in life. in the petition at bench, the A Hermogenes Tan.
questioned Deed is written in English, a language not
COURT:
understood by the late Crescencia, an illiterate. It was prepared
by the respondent Lorenzo, a lawyer and CPA. For reasons
Q Who read that document?
difficult to divine, respondent Lorenzo did not cause the
notarization of the deed. Petitioners alleged that the Deed was A I prepared it.
signed by the late Crescencia due to mistake, fraud or undue
influence. They postulated that respondent Lorenzo took Q You prepared it yourself?
advantage of the late Crescencia's trust and confidence.
Testifying on the trust of the late Crescencia on respondent A Yes, sir.
Lorenzo, petitioner Jose Lim declared: 16
Q Why do you have to prepare the
xxx xxx xxx document?

Q Now, will you tell the Court how the A Because I have all the details.
relation between your mother and your
uncle Lorenzo Tan before September COURT:
1967?
All right.
A My mother was so close to his brother,
Lorenzo Tan. My mother always asked ATTY. LUDOVICE:
him advice because he is considered by
my mother as God to her. . . .
Q In what language did you read this
document to Crescencia O. Tan?
Considering these circumstances, the burden was on private
respondents to prove that the content of the Deed was explained to the
A First it was in English then it was in Bicol
illiterate Crescencia before she signed it. 17 In this regard, the so as to clarify things, they were my sister
evidence adduced by the respondents failed to discharge their and my brother and to other persons who
burden. On one hand, respondent Lorenzo testified that he and is going to witness the document
his brother, respondent Hermogenes, explained in Bicolano, the
meaning of the deed to the late Crescencia, viz: 18 Q Did your sister understand the Bicol
dialect when the contents of this was
ATTY. LUDOVICE: read?

Q Who read the document to her? A Yes and before that, my sister knows
everything what is going on.
ATTY. GATDULA: This variance in testimony on a material matter works against the
credibility of private respondents. Nor are we prepared to give full faith
I moved to strike out the last portion of the and credit to the testimony that respondent Lorenzo alone explained the
answer. text of the deed to the late Crescencia. Respondent Lorenzo has too
much of a material stake on the dispute. His testimony on the issue is,
COURT: therefore, not free from bias and prejudice. Indeed, the preparation and
alleged signing of the said Deed leave a lot of questions unanswered. For
one, the Deed as important as it is, was not caused to be notarized by
Strike it out.
respondent Lorenzo. The need for notarization could not have escaped
respondent Lorenzo, a lawyer by profession. Article 1358 of the Civil
Respondent Hermogenes, however, gave a different testimony. He Code requires that the Deed should appear in a public document. For
declared it was respondent Lorenzo alone who read the text of the Deed another, respondent Lorenzo prepared the Deed in English language
in Bicolano to the late Crescencia. We quote his testimony, viz: 19 when he knew all along that the late Cresencia would not be able to
comprehend its meaning. For still another, none of the alleged witnesses
Q You presented this document, EXHIBIT to the Deed was presented to testify on whether it was signed by the late
1 for the defendants, to Crescencia Tan? Crescencia voluntarily and with clear comprehension of its content. Last
but not the least, it is strange that the Crescencia signed the said Deed
A It was presented by my brother Lorenzo with full freedom and complete understanding of its legal significance.
Tan.
Finally, we come to the issue of whether or not the late Crescencia sold
Q On what occasion was that on August her inheritance share in favor of the respondent Lorenzo. In taking the
15, 1967 was this presented? stance that there was indeed a sale, private respondents point to the
receipt, Exh. "2" dated April 20, 1966 as evidence. The significance of
A August 16 coincide with the fiesta in our this receipt, Exh. "2" was well analyzed by the trial court and we approve
town, Guinobatan. its ruling, viz:

Q Was this read to your sister by your Said defendant likewise presented in evidence a receipt
brother Lorenzo? (Exhibit 2) purports to show that on April 20, 1966,
Cresencia O. Tan had already received the aggregate
A Yes, sir, that was read. amount of P8,970.00 from defendant Lorenzo O. Tan as
"partial payment for the sale of my (Cresenciana O.
Q In what language was it read to her? Tan's) pro-indiviso share on the properties inherited by me
from my deceased parents.
A It was read in Bicol.
It is contended, by these exhibits, that Cresenciana O.
Tan wanted to buy Lot 202-5-41-T at No. 53 Bignay,
Q Did your sister understand the contents Project 2, Quezon City, with the proceeds of the sale to
of the document? defendant Lorenzo O. Tan of a portion of Lot 7671 located
in Singtan, Guinobatan, Albay, which is alleged to be the
A Yes, sir. share of said Cresenciana O. Tan.

Q Who read the document to her? However, the same receipt Exhibit 2 recites at the bottom
thereof that the amount of P8,970.00 includes the amount
A Lorenzo Tan read the document. of P6,700.00 paid to purchase the lot of certain Pedro L.
Morada who transferred his right to Jovita Lim. This Antecedent Facts
statement in Exhibit 2 belies defendant's contention that
Cresenciana O. Tan is the buyer of the lot in Quezon City.
On 3 February 1984, the spouses Lorenzo and
IN VIEW WHEREOF, the petition for review on certiorari is granted and Lorenza Francisco (petitioners) and Engineer Bienvenido
the Decision of the respondent appellate court in Ca-G.R. No. 51340-R C. Mercado (respondent) entered into a Contract of
dated July 28, 1980 is reversed and set aside. In its lieu, the Decision of Development (Contract) for the development into a
[4]

the then CFI of Albay, 10th Judicial District, Br. II in Civil Case No. 3676 is
reinstated. Costs against private respondents. subdivision of several parcels of land in Pampanga.

SO ORDERED. Under the Contract, respondent agreed to undertake


at his expense the development work for the Franda
FIRST DIVISION Village Subdivision. Respondent committed to complete
the construction within 27 months.Respondent also
[G. R. No. 118749. April 25, 2003] advanced P200,000.00 for the initial expenses of the
development work. In return, respondent would receive
SPOUSES LORENZO G. FRANCISCO and 50% of the total gross sales of the subdivision lots and
LORENZA D. FRANCISCO, petitioners, vs. other income of the subdivision. Respondent also
HONORABLE COURT OF APPEALS, and enjoyed the exclusive and irrevocable authority to
BIENVENIDO C. MERCADO, respondents. manage, control and supervise the sales of the lots
within the subdivision. The Contract required respondent
DECISION to submit to petitioners, within the first 15 days of every
month, a report on payments collected from lot buyers
CARPIO, J.:
with copies of all the contracts to sell. However,
The Case respondent failed to submit the monthly report.

Before this Court is a petition for review assailing the[1]


From 16 October 1985 to sometime in March 1986,
Decision of 21 November 1994 as well as the
[2]
within the 27-month period granted to respondent,
Resolution of 17 January 1995 of the Court of Appeals in petitioners also contracted a certain Nicasio Rosales, Sr.
CA-G.R. CV No. 34084. The Court of Appeals upheld the (Rosales) to undertake the partial development of the
Decision of 10 June 1991 of the Regional Trial Court of [3]
subdivision. On 16 July 1986, Rosales submitted his
San Fernando, Pampanga, in Civil Case No. 7909 accomplishment report. On the same day, petitioners
rescinding the subdivision development contract demanded that respondent submit within 15 days an
between the parties and awarding damages to accounting of his operation of the subdivision from the
respondent Bienvenido C. Mercado. beginning of the project up to 15 July 1986. Petitioners
also requested for copies of contracts to sell, receipts of
collections and receipts of disbursements for because he did not properly remit to petitioners the
development expenses. proceeds from the lot sales.

On 5 August 1986, respondent secured from the In a letter dated 25 November 1986, respondent
[7]

Human Settlements Regulatory Commission (HSRC) an requested petitioners to provide him with the format of
extension of time to finish the subdivision development the statement of collections they wanted or, alternatively,
until 30 July 1987. On 8 August 1986, petitioners to send an accountant to audit his records.He assured
instructed respondent to stop selling subdivision lots and them that he could account for all the proceeds from the
collecting payments from lot buyers. Petitioners also lot sales. He countered that he could have finished the
demanded the turnover to them of all official receipts in development of the subdivision on time had petitioners
the name of Franda Village Subdivision. Nonetheless,
[5]
not hampered him with their verbal demands to stop the
respondent continued to collect payments from lot development and fill up the lots first. Respondent
buyers until September 1986. suggested that he and petitioners settle their differences
either by mutually canceling the Contract and giving to
On 18 September 1986, petitioners wrote respondent each party its corresponding share, or by continuing with
that their accountant was not satisfied with respondents the arrangement. In the meantime, respondent informed
report which did not include the necessary supporting petitioners that he would continue the operation of the
documents. Petitioners required respondent to submit a subdivision in accordance with the Contract.
proper statement of collections with supporting receipts
and documents, and reiterated that respondent should On 20 January 1987, petitioners granted respondent
stop selling subdivision lots and collecting payments an authority to resume the sale of subdivision lots and
[8]

from lot buyers. For the first time, petitioners also alleged the collection of payments subject to the following
that respondent violated certain provisions of the conditions: (1) all collections shall be deposited in a joint
Contract. Petitioners mentioned the complaint of lot account with China Banking Corporation, San Fernando,
buyers that respondent was not developing the Pampanga branch; (2) withdrawals shall be limited to
subdivision within the agreed period. Another complaint 50% of the total collections or to respondent's share,
was that respondent issued two kinds of receipts, one in which can only be used for development expenses, and
the name of B. C. Mercado and the other in the name of any withdrawal shall be subject to the approval of
Franda Subdivision. [6]
petitioners; (3) only Franda Village Subdivision receipts,
duly countersigned by petitioners, shall be used; (4)
On 7 October 1986, petitioners informed the HSRC collections shall be subject to a weekly or monthly audit;
of the lot buyers complaints that respondent completed and (5) any violation of these conditions shall result in
only 5% of the development work and that he was the automatic cancellation of the authority.
issuing two kinds of receipts. Petitioners also claimed
that respondent was in serious violation of the Contract
On 28 January 1987, respondent informed HSRC development work on the subdivision within the 27-
that he had stopped development work on the month period exclusively granted to respondent; (2)
subdivision because the conditional authority issued by interfering with the latters development work; and (3)
petitioners violated the Contract. Specifically, respondent stopping respondent from managing the sale of lots and
referred to the following provisions of the Contract that collection of payments.
the conditional authority contravened: (1) his exclusive
and irrevocable right to manage, control, and supervise Because petitioners were the first to breach the
the sale of lots; (2) his authority to issue receipts as the Contract and even interfered with the development work,
developer without the participation of the landowners; the trial court declared that respondent did not incur
and (3) his right to withdraw his 50% share without the delay even if he completed only 28% of the development
approval of the landowners. Respondent attributed the
[9] work. Further, the HSRC extended the Contract up to
delay in the development of the subdivision to petitioners July 1987. Since the Contract had not expired at the time
who contracted the services of another person during the respondent filed the action for rescission, petitioners
effectivity of the Contract. Petitioners also stopped defense that respondent did not finish the development
respondent, without justification, from selling the lots and work on time was without basis.
collecting payments from lot buyers.
The trial court also found that respondent did not fail
On 27 February 1987, respondent filed with the trial to pay the 50% share of petitioners from the proceeds of
court an action to rescind the Contract with a prayer for the lot sales. The trial court viewed respondents failure to
damages. Petitioners countered that respondent submit the required report as only a slight infraction not
breached the Contract by failing to finish the subdivision warranting petitioners interference with respondent's
within the 27 months agreed upon, and therefore right to sell the lots and collect payments from sales
respondent was in delay. Petitioners also alleged that pursuant to Article X (3) of the Contract. The trial court
respondent sold one subdivision lot to two different noted that petitioners had tolerated the non-submission
buyers. of the monthly report until petitioners made the demand
for accounting on 16 July 1986, which respondent readily
Subsequently, petitioners obtained permission from complied. The trial court stressed that respondents right
the Housing and Land Use Regulatory Board to takeover under the Contract to sell lots and collect payments was
the development of the subdivision. exclusive and irrevocable.

The Ruling of the Trial Court The trial court found unproven the charge that
respondent sold one subdivision lot to two buyers. The
After trial on the merits, the trial court found for trial court considered the issue of a double sale
respondent. The trial court ruled that petitioners immaterial, as respondent did not violate any provision of
breached the Contract by: (1) hiring Rosales to do
the Contract and the aggrieved parties in such event The Court of Appeals adopted the findings of fact of
would be the buyers and not petitioners. the trial court. Declaring that there was no reversible
error, the appellate court in its Decision of 21 November
In its Decision of 10 June 1991, the trial court
[10]
1994 affirmed the ruling of the trial court in toto.
[11]

decreed the rescission of the Contract and awarded


damages to respondent, as follows: Petitioners filed a motion for reconsideration, which
the Court of Appeals denied in its Resolution of 17
Premises considered, judgement is hereby rendered in favor of January 1995. [12]

plaintiff granting the rescission of the Contract of


Development between him and defendants and ordering On 21 March 1995, petitioners filed with the Supreme
defendants to pay unto plaintiff the following: Court a petition for review assailing the appellate courts
decision and resolution. Petitioners prayed that the
1. Expenses of operation of the subdivision in the total amount Court: (1) reverse the decision of the Court of
of P1,808,756.01 and return of advance payment Appeals; (2) award to petitioners P4,403,895.00 as
of P200,000.00; additional cost of the development of the
subdivision, P57,864.00 as their unremitted
2. Attorneys fees of P25,000.00; share, P304,152.00 to reimburse them for the amounts
paid to Rosales, P50,000.00 as attorneys
3. P50,000.00 and P30,000.00 as temperate and exemplary fees, P10,000.00 as appearance fees, and moral and
damages; and exemplary damages; and (3) other equitable reliefs and
remedies. [13]

4. Cost of suit.
The Issues
SO ORDERED.
Petitioners assign the following errors:
The Ruling of the Court of Appeals
1. THE COURT OF APPEALS ERRED WHEN IT
On appeal to the Court of Appeals, petitioners HELD THAT DELAY IS NOT AN ISSUE IN
presented for the first time a supplemental Memorandum THIS CASE;
of Agreement dated 9 October 1985 allegedly entered
into by petitioners and Rosales with the conformity of 2. THE COURT OF APPEALS ERRED WHEN IT
respondent. However, the appellate court refused to take HELD THAT THE CONTRACT OF
cognizance of the Memorandum of Agreement, as DEVELOPMENT HAS NOT EXPIRED AND
petitioners did not formally offer it in evidence. WAS EXTENDED UP TO JULY 30, 1997 BY
PETITIONER;
3. THE COURT OF APPEALS ERRED WHEN IT SUBDIVISION SUBJECT OF THE
HELD THAT PRIVATE RESPONDENT WAS CONTRACT OF DEVELOPMENT IN FAVOR
ENTITLED TO THE RESCISSION OF THE OF TWO DIFFERENT PERSONS IS AT BEST
CONTRACT OF DEVELOPMENT AND A PERIPHERAL ISSUE TO THE MAIN ISSUE
DAMAGES BECAUSE OF INTERVENTION OF RESCISSION.
OF NICASIO ROSALES, SR. IN THE
DEVELOPMENT OF THE SUBDIVISION 6. THE COURT OF APPEALS ERRED WHEN IT
DURING THE EXISTENCE OF THE HELD THAT IT AFFIRMED THE DECISION
CONTRACT, AND THAT THE DATED JUNE 10, 1991 OF THE TRIAL
MEMORANDUM OF AGREEMENT OR COURT INSTEAD OF REVERSING THE
SUPPLEMENTAL AGREEMENT WHICH SAME AND AWARDING DAMAGES TO
BEARS THE CONFORMITY OF PLAINTIFF PETITIONERS. [14]

WAS NOT OFFERED OR PRODUCED IN THE


TRIAL COURT AND THEREFORE COULD The Ruling of the Court
NOT BE CONSIDERED ON APPEAL, WHEN
IN FACT IT WAS REFERENCED AND MADE It is evident from the assigned errors that petitioners
PART OF THE EVIDENCE OF THE PRIVATE are asking the Court to reexamine certain findings of fact
RESPONDENT; of the trial court. Petitioners submit that this case
constitutes an exception to Rule 45 of the Rules of Court
4. THE COURT OF APPEALS ERRED WHEN IT limiting to questions of law the issues that may be raised
HELD THAT PRIVATE RESPONDENT WAS in an appeal by certiorari to this Court.
ENTITLED TO THE RESCISSION OF THE
CONTRACT AND DAMAGES BECAUSE To bolster this argument, the petition for review,
PRIVATE RESPONDENTS NON- prepared by Atty. Pedro D. Diwa as counsel for
SUBMISSION OF THE MONTHLY petitioners, cited what is supposed to be the Courts
COLLECTION REPORT WAS NOT A ruling in Misa v. Court of Appeals. However, [15]

SERIOUS AND SUBSTANTIAL BREACH OF petitioners counsel misquoted the ruling in Misa. We
THE CONTRACT OF DEVELOPMENT; reproduce the erroneous excerpt - which petitioners
counsel even underscored as follows:
5. THE COURT OF APPEALS ERRED WHEN IT
HELD THAT PRIVATE RESPONDENT WAS And finally, Mr. Justice Medialdea of this COURT in the case
ENTITLED TO THE RESCISSION OF THE of Misa vs. Court of Appeals, G.R. No. 97291, August 5, 1992,
CONTRACT AND DAMAGES BECAUSE by way of exception to the settled rule that only questions of
PRIVATE RESPONDENTS EXECUTION OF law may be raised in a petition for review on certiorari under
DOUBLE SALE OF A LOT IN THE Rule 45 of the Rules of Court, held as follows:
It is firmly settled that only questions of law may be raised in a Villaseca, L-9590 Ap. 30, 1957; unrep.);** (6) When the Court
petition for review on certiorari under Rule 45 of the Rules of of Appeals, in making its findings, went beyond the issues of
Court. However, there are several instances when findings of the case and the same is contrary to the admissions of both
fact may be passed upon and reviewed by the Supreme Court, appellant and appellee (Evangelista v. Alto Surety and
to wit: xxx[16]
Insurance Co., 103 Phil. 401 [1958]; (7) The findings of the
Court of Appeals are contrary to those of the trial court (Garcia
Contrary to the quotation made in the petition for v. Court of Appeals, 33 SCRA 622 [1970]; Sacay v.
review, the Court in Misa refused to review the factual Sandiganbayan, 142 SCRA 593 [1986]) ** (8) When the
findings of the lower court. There the Court merely findings of fact are conclusions without citation of specific
acknowledged the exceptional circumstances which may evidence on which they are based (Ibid.,); (9) When the facts
warrant such a review, thus: set forth in the petition as well as in the petitioners main and
reply briefs are not disputed by the respondents (Ibid.,); and
It is readily discernible that petitioners are asking Us to re- (10) The finding of fact of the Court of Appeals is premised on
examine all the evidence already presented before the the supposed absence of evidence and is contradicted by the
respondent court and trial court and evaluated by them. These evidence on record (Salazar v. Gutierrez, 33 SCRA 242
evidence served as basis in arriving at their findings of [1970]). (Emphasis and underscoring supplied)
[17]

fact. We shall not analyze such evidence all over


again. Instead, We put finis to the factual findings in this We frown on the obvious carelessness of Atty.
case. It is firmly settled that only questions of law may be Diwa. Since only decisions of the Court establish
raised in a petition for review on certiorari under Rule 45 jurisprudence and doctrines in this jurisdiction, it is the
[18]

of the Rules of Court. Certainly, We recognize exceptions to duty of all officers of the court to cite the rulings and
this rule. The case of Medina, et. al. v. Asistio, etc., et al., G.R. decisions of the Supreme Court accurately, even word-
No. 75450, November 8, 1990, 191 SCRA 218, 223-224 for-word and punctuation mark-for-punctuation mark.
enumerates several instances when findings of fact may be Otherwise, if not faithfully and exactly quoted, the
[19]

passed upon and reviewed by this Court, none of which decisions and rulings of this Court may lose their proper
obtain herein: and correct meaning, to the detriment of other courts,
lawyers and the public who may thereby be misled. [20]

(1) When the conclusion is a finding grounded entirely on


speculation, surmises or conjecture (Joaquin v. Navarro, 93 In any event, the issues about the alleged extension
Phil. 257 [1953]; (2) When the inference made is manifestly of the Contract, the double sale, the interference with the
mistaken, absurd or impossible (Luna v. Linatok, 74 Phil. 14 development of the subdivision, are matters requiring the
[1942]; (3) Where there is a grave abuse of discretion (Buyco introduction and evaluation of evidence. They are
v. People, 95 Phil. 453 [1955]; (4) When judgment is based on questions of fact, which arise when doubt or difference
a misapprehension of facts (Cruz v. Sosing, L-4875, Nov. 27, exists about the truth or falsehood of alleged facts. [21]

1953); (5) When the findings of fact are conflicting (Casica v.


As a rule, only questions of law may be appealed to cannot prevail over the express grant to respondent of a
the Court by certiorari. The Court is not a trier of facts, its period within which to fulfill his obligation.
jurisdiction being limited to errors of law. Moreover, [22]

where as in this case the Court of Appeals affirms the Moreover, as the trial and appellate courts found,
factual findings of the trial court, such findings generally petitioners hampered and interfered with respondents
become conclusive and binding upon the Court. The [23] development work. Petitioners also stopped respondent
Court will not disturb the factual findings of the trial and from selling lots and collecting payments from lot buyers,
appellate courts unless there are compelling or which was the primary source of development funds. In
exceptional reasons, and there is none in the instant effect, petitioners rendered respondent incapable, or at
petition. least made it difficult for him, to develop the subdivision
within the allotted period. In reciprocal obligations,
The trial and appellate courts found that the HSRC neither party incurs in delay if the other does not comply
granted respondent an extension of up to 30 July 1987 to or is not ready to comply with what is incumbent upon
complete the development work under the him. It is only when one of the parties fulfills his
Contract. Petitioners did not contest HSRCs extension of obligation that delay by the other begins.
[27]

time to respondent. Thus, the Court finds no merit in


petitioners claim that respondent incurred delay in the Petitioners argue that the alleged Memorandum of
performance of his obligation under the Contract. At that Agreement may be treated as a judicial admission in
time, the law authorized HSRC to grant extensions of accordance with Geagonia v. Court of Appeals. We [28]

time for completion of subdivision projects. [24] do not agree. In Geagonia, the Court of Appeals
considered a letter written by Geagonia, although not
The law provides that delay may exist when the formally offered in evidence, because it was originally
obligor fails to fulfill his obligation within the time annexed to Geagonias initial complaint filed with the
expressly stipulated. In this case, the HSRC extended
[25]
Insurance Commissioner. The Court upheld the appellate
the period for respondent to finish the development work courts reversal of the Insurance Commissioners decision
until 30 July 1987. Respondent did not incur delay since on the ground that the letter constituted a judicial
the period granted him to fulfill his obligation had not admission by Geagonia. Findings of the Insurance
expired at the time respondent filed the action for Commissioner and the Court of Appeals were divergent
rescission on 27 February 1987. in Geagonia, an exceptional circumstance that allowed
the Court to reexamine the factual findings of the
Petitioners argue the Court of Appeals naively Insurance Commissioner.
assumed that respondent could complete the
development work in five months when he only finished In the instant case, petitioners never presented the
28.67% of the work in some 36 months. This argument
[26]
Memorandum of Agreement before the trial
is speculative and deserves scant consideration. It court. Petitioners merely annexed to their petition for
review before the Court of Appeals an unauthenticated sufficient basis for the cancellation of the Contract. The
photocopy of the alleged Memorandum of cancellation of a contract will not be permitted for a slight
Agreement. Petitioners argue that this agreement was or casual breach. Only a substantial and fundamental
"referenced and testified to" by respondent during his breach, which defeats the very object of the parties in
cross-examination on 1 August 1989 before the trial making the contract, will justify a cancellation. In the
[32]

court.However, in that testimony, respondent merely instant case, the development work continued for more
admitted to signing an amended or supplemental than two years despite the lack of a monthly report.
agreement, the contents of which he could not recall.
Respondents testimony does not identify or admit that
[29] Petitioners further contend that, considering
the Memorandum of Agreement presented by petitioners respondents non-submission of collection reports, they
was the agreement or contract respondent had were merely enforcing their rights under Article X (3) of
signed. Atty. Gorospe, then counsel for petitioners, even the Contract in demanding that respondent stop selling
[33]

manifested during the cross-examination of respondent the subdivision lots and collecting payments from lot
that no supplemental agreement or contract was buyers.
appended to the complaint. [30]

Whether petitioners could have justifiably invoked


Further, petitioners failed to explain adequately why Article X (3) of the Contract based on respondents failure
the alleged Memorandum of Agreement was never to submit the required reports is beside the point. It is
presented before the trial court. As succinctly explained clear from the records that petitioners did not seek to
by the Court of Appeals: stop respondents activities due to the latters failure to
submit the required reports. The non-submission of the
Appellants advertence to an alleged supplemental required reports was never mentioned in any of
Memorandum of Agreement (Annex A, Appellants brief) to petitioners letters. Indeed, petitioners letter of 8 August
prop up their cause deserves scant consideration. The said 1986, which first instructed respondent to stop selling the
document was neither produced nor offered in evidence in the lots and collecting payments, did not mention any
proceedings below, although it could have been easily violation at all, while the subsequent letters referred
[34]

produced in court by compulsory process. This lapse has only to the complaints of lot buyers. Article X (3) of the
not been satisfactorily explained by appellants. Contract required the innocent party to serve a written
xxx (Emphasis supplied)
[31]
notice of a violation of the terms and conditions of this
contract. Absent such written notice, this provision
[35]

On the fourth assigned error, we find no reversible cannot be invoked, much less enforced.
error in the ruling of the trial and appellate courts that
respondents non-submission of the monthly report was On the fifth assigned error, it is unnecessary for this
merely a slight infraction of the Contract.Respondents Court to rule on the materiality of the alleged double sale
failure to submit the monthly report cannot serve as
in the face of the trial and appellate courts' finding that no That petitioners required respondent to submit a
double sale took place. statement of collection on the same day that Rosales
submitted his accomplishment report does not sufficiently
On the award of damages, however, we find some show, by itself, gross and evident bad faith.The Contract
modification is in order. The trial court itself required the submission of a collection report.
awarded P50,000.00 in temperate damages to Although early on petitioners may have tolerated the
respondent for his besmirched reputation on his goodwill non-submission of the report, they should not be
and image as a good and able engineer and contractor. penalized for demanding later on that respondent comply
Under the law, however, moral and not temperate
[36]
with a condition of the Contract.
damages may be awarded for besmirched reputation
and similar injury. Temperate damages may be
[37]
WHEREFORE, the Decision of 21 November 1994 of
awarded only when pecuniary loss has been suffered but the Court of Appeals in CA-G.R. CV No. 34084
the amount cannot be proved with certainty from the upholding the Decision of 10 June 1991 of the Regional
nature of the case. Hence, the award of P50,000.00 in
[38]
Trial Court of San Fernando, Pampanga, Branch XLV, in
temperate damages should be deleted for lack of legal Civil Case No. 7909 is AFFIRMED, with the
basis. MODIFICATION that the award of attorneys fees,
temperate and exemplary damages is DELETED.
We likewise find without basis the trial courts award
of exemplary damages. In contracts, exemplary SO ORDERED.
damages may be awarded if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent FIRST DIVISION
manner. Nothing in the trial and appellate courts
[39]

decisions indicates that petitioners behaved in such [G.R. No. 163770. February 17, 2005]
manner as to warrant the grant of exemplary damages.
EPIFANIA DELA CRUZ, substituted by LAUREANA
On the award of attorneys fees, the general rule is V. ALBERTO, petitioner, vs. SPS. EDUARDO
that attorney's fees cannot be recovered as part of C. SISON and EUFEMIA S.
damages because no premium should be placed on the SISON, respondents.
right to litigate. Article 2208 of the Civil Code provides
[40]

that attorneys fees and expenses of litigation should not DECISION


be granted unless stipulated, except in certain cases
YNARES-SANTIAGO, J.:
where the defendant acted in gross and evident bad faith
in refusing to satisfy the plaintiffs plainly valid, just and
Before us is a petition for review on certiorari under
demandable claim. [41]

Rule 45 of the Rules of Court, assailing the Decision


dated April 20, 2004, of the Court of Appeals in CA-G.R.
[1]
for P20,000.00. They averred that Epifania could not
CV No. 55006, which reversed and set aside the have been deceived into signing the Deed of Absolute
Decision dated March 20, 1996, of the Regional Trial
[2]
Sale because it was duly notarized before Notary Public
Court of Lingayen, Pangasinan, Branch 38, declaring as Maximo V. Cuesta, Jr.; and they have complied with all
valid the Deed of Absolute Sale dated November 24, requisites for its registration, as evidenced by the
1989, executed by the deceased petitioner in favor of the Investigation Report by the Department of Agrarian
respondents. Reform (DAR), Affidavit of Seller/Transferor, Affidavit of
[3] [4]

Buyer/Transferee, Certification issued by the Provincial


[5]

Initially, the complainant in this case was Epifania S. Agrarian Reform Officer (PARO), Letter for the
[6]

Dela Cruz (Epifania), but she died on November 1, 1996, Secretary of Agrarian Reform, Certificate Authorizing
[7]

while the case was pending in the Court of Appeals. Payment of Capital Gains Tax, and the payment of the
[8]

Upon her demise, she was substituted by her niece, registration fees. Some of these documents even bore
Laureana V. Alberto. the signature of Epifania, proof that she agreed to the
transfer of the property.
Epifania claimed that sometime in 1992, she
discovered that her rice land in Salomague Sur, Respondents asserted that they have been in open,
Bugallon, Pangasinan, has been transferred and continuous, and peaceful possession of the land since
registered in the name of her nephew, Eduardo C. Sison, November 24, 1989; in fact, they have been receiving
without her knowledge and consent, purportedly on the the fruits and produce of the land since they purchased
strength of a Deed of Sale she executed on November the same, as corroborated by Manuel C. Rafon, the
24, 1989. caretaker of the property. [9]

Epifania thus filed a complaint before the Regional On March 20, 1996, the trial court rendered judgment
Trial Court of Lingayen, Pangasinan, to declare the deed in favor of Epifania, the dispositive portion of which
of sale null and void. She alleged that Eduardo tricked reads:
her into signing the Deed of Sale, by inserting the deed
among the documents she signed pertaining to the Wherefore, in view of the considerations discussed
transfer of her residential land, house and camarin, in above, the court hereby renders judgment in favor of the
favor of Demetrio, her foster child and the brother of plaintiff and against the defendants.
Eduardo.
1. Declaring the deed of sale marked exhibit A not valid
Respondents, spouses Eduardo and Eufemia Sison and without legal force and effect;
(Spouses Sison), denied that they employed fraud or
trickery in the execution of the Deed of Sale. They
claimed that they purchased the property from Epifania
2. Ordering and enjoining the defendants from disturbing In reversing the trial court, the Court of Appeals
the plaintiffs possession over the land covered by exhibit declared that Epifanias allegation of trickery and fraud in
A; the execution of the questioned deed of sale, was bare
and unsupported. Taken alone, it did not constitute the
3. Ordering the defendants to pay the plaintiff the sum of required convincing proof as would overcome the
Three Thousand (P3,000.00) Pesos as attys fee and Two presumption that a private document duly acknowledged
Thousand (P2,000.00) Pesos as litigation expenses and before a notary public, except a last will and testament,
to further pay the costs of the proceedings. is a public instrument which will also serve as evidence
of the fact which gave rise to its execution as well as its
All other claims are denied for lack of basis. date.[13]

SO ORDERED. [10]
Hence, this petition, raising the following errors:
The trial court found that Eduardo deceived Epifania I.
into signing the assailed deed by interspersing the same
with the documents executed by the latter in favor of her THE COURT OF APPEALS GRAVELY ERRED IN
foster son, Demetrio Sison. The trial court noted that
[11] SUSTAINING THE PRESUMPTION OF DUE
two sets of residence certificates were used by Epifania EXECUTION OF THE QUESTIONED DEED OF SALE.
for the year 1989, for which the respondents gave no
explanation. It also observed that there was no reason II.
for Epifania to sell her properties as she was not
THE COURT OF APPEALS GRAVELY ERRED IN
financially hard-up at the time of the sale.
HOLDING THAT THE QUESTIONED DEED OF SALE IS
Dissatisfied with the trial courts decision, the spouses VALID.
Sison appealed to the Court of Appeals, which disposed III.
of the appeal as follows:
THE COURT OF APPEALS GRAVELY ERRED IN NOT
WHEREFORE, premises considered, the appealed UPHOLDING THE CONCLUSIONS AND FINDINGS OF
judgment is REVERSED and SET ASIDE, and a new FACT BY THE TRIAL COURT. [14]

one entered DECLARING as valid the Deed of Absolute


Sale dated November 24, 1989 executed by the plaintiff- The sole issue for resolution is whether the deed of
appellee in favor of the defendants-appellants. absolute sale is valid.
SO ORDERED. [12]
The issue of whether fraud attended the execution of
a contract is factual in nature. Normally, this Court is
bound by the appellate courts findings, unless they are understand the English language. There being no
contrary to those of the trial court, in which case we may evidence adduced to support her bare allegations, thus,
wade into the factual dispute to settle it with finality. Epifania failed to satisfactorily establish her inability to
After a careful perusal of the records, we sustain the
[15]
read and understand the English language. It is well
Court of Appeals ruling that the Deed of Absolute Sale settled that a party who alleges a fact has the burden of
dated November 24, 1989 is valid. proving it. Consequently, the provisions of Art. 1332
[18]

does not apply.


Petitioner asserts that the presumption of due
execution of the questioned deed of sale does not apply Although Epifania was 79 years old at the time of the
in the instant case, Epifania being 79 years old at the execution of the assailed contract, her age did not impair
time she signed the questioned deed of sale and unable her mental faculties as to prevent her from properly and
to read and understand the English language used intelligently protecting her rights. Even at 83 years, she
therein. Petitioner cites Article 1332 of the Civil Code, exhibited mental astuteness when she testified in court.
which states: It is, therefore, inconceivable for her to sign the assailed
documents without ascertaining their contents, especially
ART. 1332. When one of the parties is unable to read, or if, as she alleges, she did not direct Eduardo to prepare
if the contract is in a language not understood by him, the same.
and mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been A comparison of the deed of sale in favor of Demetrio
fully explained to the former. and the deed of sale in favor Eduardo, draws out the
conclusion that there was no trickery employed. One can
During her testimony, Epifania insisted that she readily see that the first deed of sale is in all significant
cannot read, and yet, her avowal is inconsistent with
[16]
respects different from the second deed of sale. A casual
her own complaint where she alleged: perusal, even by someone as old as Epifania, would
enable one to easily spot the differences. Epifania could
7. She only read the document on top of the other not have failed to miss them. The Court of Appeals
several copies and found the same to be the deed in observed, thus:
favor of Demetrio C. Sison and being made to believe by
Eduardo C. Sison that the other copies are the same as Exhibit 14 was prepared using a different type writer with
the deed in favor of Demetrio C. Sison, she signed all the much bigger font, lending weight to the claim that it was
other copies which Eduardo made her sign; (Emphasis
[17]
executed on a later date, December 14, 1989. That it
supplied) bore a different residence certificate number, 14416455J,
may be said to have caused by an inadvertent error, but
To us, these contradictory statements do not which error was likely committed in the earlier deed in
establish the fact that Epifania was unable to read and favor of Eduardo itself, which shows the number
14416456J hand-printed along with the date of issue of necessity of preliminary proof as to their authenticity and
November 23, 1989. The error in the date of the due execution. They have in their favor the presumption
certificate, November 23, 1989 instead of January 23, of regularity, and to contradict the same, there must be
1989, may likely be because the deed of sale to Eduardo evidence that is clear, convincing and more than merely
was executed in November. Surely any deliberate preponderant. The burden of proof to overcome the
[21]

trickery by Eduardo could not have gone as far as presumption of due execution of a notarial document lies
creating these differences and errors, which could not on the one contesting the same. Petitioner failed to
conceivably have helped him conceal his alleged discharge this burden.
surreptitious insertion of copies of the deed in his favor
into the sheaves of documents he presented for signing It does not follow that since Epifania maintained bank
by appellee.[19] deposits, that she never intended to sell the rice land. As
respondents have pointed out, Epifania had stopped
Indeed, if the intention was to deceive, both deeds of making bagoong at the time of the execution of the deed
sale should have been mirror images as to mislead of sale. It is thus logical for a 79-year old woman with
[22]

Epifania into thinking that she was signing what no means of income to find other ways to support
appeared to be the same document. herself. Notably, petitioner herself pointed out that as of
August 16, 1990, her deposit decreased from
In addition, the questioned deed of sale was duly P1,005,857.66 to P346,760.58, which only shows that
notarized. It is a settled rule that one who denies the due she needed money between 1988-1990. The possibility
[23]

execution of a deed where ones signature appears has that she sold her property to acquire additional cash is
the burden of proving that, contrary to the recital in the therefore not remote, especially if we take into account
jurat, one never appeared before the notary public and that, twenty days after the sale to Eduardo, Epifania also
acknowledged the deed to be a voluntary act. Epifania
[20]
sold to Demetrio her residential land, house and
never claimed her signatures as forgeries. In fact, camarin.
Epifania never questioned the deed of sale in favor of
Demetrio, accepting it as a valid and binding document. We uphold the findings of the Court of Appeals that
It is only with respect to the deed of sale in favor of the series of official acts and processes leading to the
Eduardo that she denies knowledge of affixing her transfer of the tax declaration in the name of Eduardo
signature. Unfortunately, for both parties, the notary lend credence to the due execution of the questioned
public, Atty. Maximo V. Cuesta, Jr. before whom they deed of sale, thus:
appeared, died prior to the filing of the case.
Defendants then have every reason to maintain that they
Hence, we apply the rule that documents are now the absolute owners of the subject land. The
acknowledged before notaries public are public series of subsequent official acts and processes
documents which are admissible in evidence without pertinent to the transfer thereof to appellant can only
lend credence to the due execution of the questioned Significantly, it must also be mentioned that the appellee
deed of sale. By virtue of said deed, Tax Declaration No. also contemporaneously executed a notarized Affidavit of
57 in plaintiff-appellees name was cancelled and Tax Seller/Transferor (Exh. 5), acknowledging that she has
Declaration No. 4754 was issued in the names of sold 1.45 hectares of her OLT retention area to appellant
defendants-spouses (Exh. 2). As to whether defendants Eduardo Sison. Said instrument is also a public
are now the possessors of the land and have been document, to overcome which appellee failed also to
receiving their share of the produce since 1989 up to the adduce convincing evidence. Then there is the
present, there is the affidavit to that effect of Manuel certification or clearance issued by the Provincial
Rafon, a long-time tenant of the land in question (Exh. Agrarian Reform Office for purposes of registration of the
3), as well as an earlier affidavit by him also dated lot in the name of the defendants-appellants (Exh. 6).
November 24, 1989 that he continued to till the subject The Revenue District Officer Dante Canullas also
land as tenant (Exh.13). We also cannot ignore the approved the transfer to appellant when he issued a
investigation report of the DAR (Exh. 4) in regard to certificate authorizing registration (Exh. 7). There is even
appellants application for transfer of ownership, wherein the letter of the appellee to the Secreatry of Agrarian
the MARO, Erlinda R. Lomibao, found that the appellant Reform that the area from which she sold a portion to
was entitled to the necessary certification or clearance. Eduardo came from her retention limit under PD 27. The
obvious purpose of her letter was to facilitate the transfer
to Eduardo. [24]

The testimony of Municipal Agrarian Reform Officer


Erlinda Lomibao demonstrates the intent of Epifania to
sell her land to the former. According to Lomibao, both
Epifania and Eduardo appeared before her twice, to
facilitate the issuance of the clearance over the transfer
of the property. The DAR visitors logbook showed the
names and signatures of both parties written one after
the other.
[25]

These overwhelming documentary evidence


presented by the respondents prove that the spouses
Sison bought the property from Epifania. These
documents are too varied from each other to have been
accomplished through trickery and fraud. She could not
have signed all these documents, including that of
Demetrios and not inquire as to the contents thereof, if GONZAGA_REYES, J.:
as she alleged, the questioned deed of sale was
Before us are two consolidated[1] petitions for review
surreptitiously inserted with that intended for Demetrio. on certiorari under Rule 45 of the Revised Rules of Court. In G.R. No.
110672, petitioner Rural Bank of Sta. Maria, Pangasinan, assails
Incidentally, even Demetrio himself admitted that the portions of the Decision dated March 17, 1993, and the Resolution
subject property was sold by Epifania to Eduardo and dated January 25, 1993, of the Court of Appeals [2] in CA-G.R. CV No.
that the latter had been in open and continuous 21918, which affirmed with modification the Decision of the Regional
possession thereof since November 1989. Trial Court (Branch 6, Baguio City)[3] in Civil Case No. 890-R
entitled Rosario R. Rayandayan and Carmen R. Arceo versus Rural
WHEREFORE, in view of the foregoing, the petition Bank of Sta. Maria, Pangasinan and Halsema, Inc. In G.R. No.
is DENIED. The decision dated April 20, 2004 of the 111201, petitioners Rosario R. Rayandayan and Carmen R. Arceo
likewise assail portions of said Decision adverse to it.
Court of Appeals in CA-G.R. CV No. 55006, reversing
the March 20, 1996 decision of the Regional Trial Court, The facts as found by the trial court and adopted by the Court of
Branch 38 of Lingayen, Pangasinan, in Civil Case No. Appeals insofar as pertinent to the instant petitions are as follows:
17245, is AFFIRMED.
xxx, the Court Finds that a parcel of land of about 49,969
SO ORDERED. square meters, located in Residence Section J, Camp 7, Baguio
City, covered by TCT T-29817 (land for short) is registered in
THIRD DIVISION the name of Manuel Behis, married to Cristina Behis (Exhibit
B). Said land originally was part of a bigger tract of land
[G.R. No. 110672. September 14, 1999] owned by Behis (one name), father of Manuel Behis, covered
by OCT-0-33 (Exhibit 26, Halsema, for history of the
RURAL BANK OF STA. MARIA, PANGASINAN, petiti land). And upon the latters death on September 24, 1971, his
oner vs. THE HONORABLE COURT OF APPEA children, namely: Saro Behis, Marcelo Behis, Manuel Behis,
LS, ROSARIO R. RAYANDAYAN, CARMEN R. Lucia Behis, Clara Behis and Arana Behis, in an extrajudicial
ARCEO, respondents. settlement with Simultaneous Sale of Inheritance
dated September 28, 1978, agreed to sell the land to Manuel
[G.R. No. 111201. September 14, 1999] Behis, married to Cristina Behis (Exhibit `2, Halsema) but
which subsequently was explained as only an arrangement
ROSARIO R. RAYANDAYAN and CARMEN R. ARCE adopted by them to facilitate transactions over the land in a
O, petitioners vs. COURT OF APPEALS, HALSE Confirmation of Rights of Co-Ownership over real Property
MA INC. and RURAL BANK OF STA. MARIA, P dated September 26, 1983, showing that the Behis brothers and
ANGASINAN, INC.,respondents. sisters, including Manuel Behis, are still co-owners thereof
(Exhibit `30, Halsema, Exhibit `AA).
DECISION
Manuel Behis mortgaged said land in favor of the Bank in a Pursuant to their two contracts with Manuel Behis, plaintiffs
Real Estate Mortgage dated October 23, 1978 (Exhibit `Q-1) paid him during his lifetime the sum of P10,000.00 plus
as security for loans obtained, covered by six promissory notes P50,000.00 plus P145,800.00 (Exhibit `U as stipulated in the
and trust receipts under the Supervised Credit Program in the hearing), and the sum of P21,353.75 for the hospitalization,
total sum of P156,750.00 (Exhibit `Q-2 to `Q-7, Exhibits `4-A medical and burial expenses of Manuel Behis when he died on
to `4-F, Halsema) and annotated at the back of the title on June 21, 1985 (Exhibit `II, `JJ, `KK, `LL, `PP, `OO, and
February 13, 1979 as Entry No. 85538-10-231 (Exhibit 1-A-1, `RR). Obviously, from the above payments, the plaintiffs
Halsema). The mortgage, the promissory notes and trust were unable to complete their full payment to Manuel Behis of
receipts bear the signatures of both Manuel Behis and Cristina the sale of the land as it is nowhere near P2,400,000.00.
Behis.
Meantime, the loan in the name of Manuel Behis with the
Unfortunately thereafter, Manuel Behis was delinquent in Bank secured by the Real Estate Mortgage on the land
paying his debts. continued to accumulate being delinquent. By May 30, 1985,
in a Statement of Account (Exhibit `D) sent to Manuel Behis
On January 9, 1985, Manuel Behis sold the land to the by the Bank thru the Paredes Law Office for collection, the
plaintiffs[4] in a Deed of Absolute Sale with Assumption of Mortgage for the sum debt of P150,750.00 has ballooned into P316,368.13, with
of P250,000.00 (Exhibit `A) which bears the signature of his wife Cristina interest and other charges. In fact, the Bank, thru its President,
Behis. Manuel Behis took it upon himself to secure the signature of his wife and
came back with it. On the same date of January 9, 1985, plaintiffs and Manuel Vicente Natividad, initiated foreclosure proceedings. But after
Behis simultaneously executed another Agreement (Exhibit `15) whereby plaintiffs the usual publication, the same was discontinued since many
are indebted to Manuel Behis for the sum of P2,400,000.00 payable in installments
with P10,000.00 paid upon signing and in case of default in the installments, Manuel
parties were interested to buy the land outside the said
Behis shall have legal recourse to the portions of the land equivalent to the unpaid procedure but none materialized.
balance of the amounts in installments. Obviously, the real consideration of
the sale of the land of Manuel Behis to the plaintiffs is contained in this On June 19, 1985, Atty. William Arceo, in behalf of Manuel
Agreement (Exhibit `15).
Behis, wrote a letter asking for a more detailed Statement of
Plaintiffs did not present to the Register of Deeds of Baguio Account from the Bank broken down as to principal, interest
said two contracts and ask that the title, TCT T-29817 in the and other charges (Exhibit `E).
name of Manuel Behis be cancelled and a new one issued in
their name which normally a buyer does. Neither did plaintiffs Thereafter, plaintiffs finally presented the Deed of Absolute
annotate at the back of the title the aforesaid two Sale with Assumption of Mortgage (Exhibit `A) to the Bank
contracts. Nor did they immediately go to the Bank and when negotiating with its principal stockholder, Engr.
present said two contracts. Thus, the title to the land, TCT No. Edilberto Natividad, in Manila, but did not show to the latter
T-29817, remained in the name of Manuel Behis. the Agreement (Exhibit `15) with Manuel Behis providing for
the real consideration of P2,400,000.00. And thus, on August
1, 1985, a Memorandum of Agreement (Exhibit `F) was
entered into between plaintiffs, as assignees of Manuel Behis, Plaintiffs did not annotate the Memorandum of Agreement in the
and the Bank, the salient features of which are: title, TCT T-29817.

`x x x x x x x x x Pursuant to the Memorandum of Agreement, plaintiffs paid the


Bank the following:
`3. That during the lifetime of Manuel Behis he had executed a
(1) P35,000.00 on August 1, 1985 as initial deposit when the
Deed of Absolute Sale with Assumption of Mortgage in favor Agreement was signed (Exhibits `G and `H);
of Carmen Arceo and Rosario Rayandayan;
(2) P15,000.00 on September 16, 1985 (Exhibit `I) and P21,000.00
`4. That the total obligation of the late Manuel Behis to the on September 20, 1985 (Exhibit `J) to cover the obligation of
Bank amounts to P343,782.22; P36,000.00 on September 15, 1985;

(3) P20,000.00 on October 17, 1985 (Exhibit `K) and P16,000.00


`5. That the assignees hereby offer to redeem the aforesaid real on October 25, 1985 (Exhibit `L) to cover the obligation to pay
property and the Bank hereby agrees to release the mortgage P36,000.00 on October 15, 1985;
thereon under the following terms and conditions:
(4) P36,000.00 in the form of dollars remitted to Engr. Edilberto
(a). That the amount of P35,000.00 shall be paid by the Natividad on December 18, 1985 (Exhibit `N) to cover the
assignees to the Bank upon execution of this Agreement; obligation to pay P36,000.00 on November 15, 1985.

(b). That the amount of P108,000.00 shall be paid by the After the last payment of P36,000.00 on December 18, 1985,
assignees to the Bank at the rate of P36,000.00 a month received in dollars (Exhibit `N) which completed the
payable on September 15, 1985, October 15, 1985 and P143,000.00 under paragraphs 5 (a) and 5 (b) of the
November 15, 1985; Memorandum of Agreement Engr. Edilberto Natividad, wrote
a letter (Exhibit M) to Vicente Natividad, with instructions that
(c). That the balance of P200,000.00 shall be renewed for one payment be duly credited and Atty. Arceo will communicate
year and shall be secured by another mortgage over the same about the transfer of title to them and to consult the Banks
property which is renewable every year upon payment of counsel on the matter, and with instructions also to Ana Acosta
interests and at least 10 percent of the principal; of the Rural Bank of Tuba to debit said amount from the
savings of Edilberto Natividad. xxx.
(d). That the bank shall release the mortgage of Manuel Behis
and a new mortgage shall be executed by the assignees and the From the above payments made, the total amount of
bank shall give its consent for the transfer of the title under the P143,000.00 as required by paragraphs 5 (a) and 5 (b) of the
name of the assignees. Memorandum of Agreement was fully paid by plaintiffs
although they were not paid on time.
x x x.
Meanwhile, on September 5, 1985, Cristina Behis, widow of On February 15, 1986, as suggested by the Bank, Cristina
Manuel Behis, wrote a letter to the Bank (Exhibit `3, Halsema) Behis wrote another letter to the Bank claiming this time that
claiming the Real Estate mortgage was without her she was not a party to the Deed of Absolute Sale with
signature. And in another letter dated October 28, 1985 to the Assumption of Mortgage and her signature was forged
Bank (Exhibit 4, Halsema), Cristina Behis stressed she did not (Exhibit 5, Halsema) and requesting the Bank not to release
authorize anybody to redeem the property in her behalf as one the title with copy furnished to the plaintiffs (Exhibit `5-B,
of the mortgagors of the land. Halsema).

On January 7, 1986, plaintiffs demanded in a letter (Exhibit Then, months passed, and nothing was heard from the
`O) that the Bank comply with its obligation under the plaintiffs by the Bank. On the first week of July, 1986, Teodoro
Memorandum of Agreement to (1) release the mortgage of Verzosa, President of Halsema, Inc., heard about the land and
Manuel Behis, (2) give its consent for the transfer of title in the got interested and had preliminary talks with Vicente
name of the plaintiffs, and (3) execute a new mortgage with Natividad, President of the Bank, and with Edilberto
plaintiffs for the balance of P200,000.00 over the same land. Natividad, the principal stockholder of the bank.

Meanwhile on January 18, 1986, Cristina Behis went to the x x x.


Bank inquiring about her protest about her signature. The Bank
told her it did not receive her two letters and instead advised xxx, upon suggestion of the lawyer of Halsema,
her to write the Bank again as well as the plaintiffs about her an Assignment of Mortgage was entered into on July 28, 1986
objections. between Halsema and the Bank for the consideration of
P520,765.45 (Exhibit `1, Bank) which amount was the total
In a reply letter dated February 11, 1986, (Exhibit `B) to the indebtedness of Manuel Behis with the Bank at the time
demand of the plaintiffs, the Bank said it cannot comply (Exhibit `7-A, Halsema). Note however, that what was
because of supervening circumstances, enclosing the two assigned was the Mortgage made originally by Manuel Behis
letters of Cristina Behis dated September 5, 1985 and October and not the Mortgage as assumed by plaintiffs under a
28, 1985 which they said were both self explanatory, and restructured and liberalized terms.
suggested that plaintiffs take up the matter with Mrs. Cristina
Behis. As explained by Halsema lawyer, she suggested the
Assignment of Mortgage as the cheapest and fastest way for
Halsema to acquire the property of Manuel Behis as (1) they
assume the role of the Bank as Mortgagee with the assignment
of mortgage credit, (2) they acquire the property for the
amount only of the mortgage debt at the time, (3) after
execution thereof, the Bank is out of the picture, and (4) in
case of foreclosure, Halsema controls the foreclosure in settlement of the criminal case of Estafa against Edilberto
proceedings and is assured of its legality. Natividad and Vicente Natividad (Exhibit `14, Bank).

In turn, the Bank explained it entered into the Assignment of In the meantime, since the account of the late Manuel Behis
Mortgage because at the time it considered the Memorandum has been delinquent and his widow, Cristina Behis, and his
of Agreement cancelled as first, plaintiffs failed to settle the brothers and sisters could not pay as in fact they have already
objections of Cristina Behis aforesaid on her signature being assigned their rights to redeem, Halsema as Mortgage Creditor
forged in the Deed of Sale with Assumption of Mortgage in place of the Bank instituted foreclosure proceedings by
despite the lapse of time from February, 1986 to July, filing an Application for Foreclosure of Real Estate Mortgage
1986. Second, the terms of the Memorandum of Agreement in the Office of the Sheriff on July 31, 1986 (Exhibit `37,
have not been fully complied with as the payments were not Halsema) setting the public auction sale on September 2, 1986
made on time on the dates fixed therein; and third, their and was published and posted as required by law. A Notice of
consent to the Memorandum of Agreement was secured by the Foreclosure was sent directly to the mortgagor (Exhibit `38,
plaintiffs thru fraud as the Bank was not Halsema) and the public auction sale was held on September 2,
shown the Agreement containing the real consideration of 1986 at 10:00 a.m. at the City Hall, Baguio City, with Halsema
P2,400,000.00 of the sale of the land of Manuel Behis to as the only bidder to whom accordingly the Sheriffs Certificate
plaintiffs. of Sale was issued (Exhibit `8, Halsema).

On the same date of July 28, 1986, Vicente Natividad of the At the auction sale, the lawyer of Halsema was approached by
Bank sent notice of the Assignment of Mortgage to the debtor the plaintiff Rosario Rayandayan who told the former that the
mortgagor, Manuel Behis (already dead at the time) and land foreclosed was also sold to the plaintiffs. Since plaintiffs
Cristina Behis. Notice of the Assignment of Mortgage was not could not do anything anymore, they registered and annotated
sent to plaintiffs for as aforesaid what was assigned was the on the title, TCT T-29817, their adverse claim on September 3,
Mortgage originally made by Manuel Behis and not the 1986.[5]
Mortgage as assumed by plaintiffs under the restructured and
liberalized terms in the Memorandum of Agreement which was Since the Bank could not comply with the Memorandum of
considered by the Bank as cancelled. Agreement, petitioners Rayandayan and Arceo instituted Civil Case
No. 890-R before the Regional Trial Court of Baguio City (Branch 6)
xxx xxx xxx. against the Rural Bank of Sta. Maria, Pangasinan and Halsema, Inc.
for Specific Performance, Declaration of Nullity and/or Annulment of
Assignment of Mortgage and Damages on September 5, 1986, and
After the assignment of mortgage, the Bank returned the
caused a notice of lis pendens annotated at the back of the title, TCT T-
P143,000.00 to plaintiffs (Exhibit `13, Bank). But the latter 29817, on the same date. On March 6, 1989, judgment was rendered,
rejected the same maintaining the Memorandum of Agreement the dispositive portion of the decision pertinent to this case reads:
is valid until annulled by Court Action.Subsequently, however,
the Bank paid plaintiffs P143,000.00 and P90,000.00 interest
WHEREFORE, in view of All the Foregoing, Judgment is From the decision, plaintiffs Rayandayan and Arceo and
hereby rendered, as follows: defendant Halsema, Inc. appealed. Defendant Rural Bank of Sta.
Maria, Pangasinan did not appeal.[7] The Court of Appeals rendered
1. xxx xxx xxx; herein assailed decision, the dispositive portion insofar as pertinent to
this case reads:
2. Declaring the Deed of Sale with assumption of Mortgage
(Exhibit A) and the Agreement (Exhibit 15) taken together valid WHEREFORE, premises considered, decision is hereby
until annulled or cancelled; rendered:
3. Ordering the Bank to pay the plaintiffs the sum of P30,000.00 as 1. xxx xxx xxx;
Moral Damages, P10,000.00 as Exemplary Damages,
P20,000.00 as Attorneys fees and P5,000.00 as litigation
2. xxx xxx xxx;
expenses for their bad faith in violating the Memorandum of
Agreement which took place while the Memorandum of
3. xxx xxx xxx;
Agreement was still valid there being no court action first filed
to nullify it before entering into the Assignment of Mortgage;
4. Declaring the Deed of Absolute Sale with Assumption of
Mortgage, Exhibit A and the Memorandum of Agreement,
4. Ordering the plaintiffs to pay the Bank the sum of P30,000.00 as
Exhibit F, valid as between the parties thereto;
Moral Damages, P10,000.00 as Exemplary Damages,
P20,000.00 as Attorneys fees and P5,000.00 as litigation
expenses for plaintiffs bad faith in deceiving the Bank to enter 5. Ordering and sentencing defendant Rural Bank of Sta. Maria,
into the Memorandum of Agreement; Pangasinan to pay plaintiffs-appellant the sum of P229,135.00
as actual damages, the sum of P30,000.00 as moral damages,
P10,000.00 as exemplary damages, P20,000.00 as attorneys fees
5. Ordering the setting off in compensation the Damages awarded
and P5,000.00 as litigation expenses;
to plaintiffs and the Bank.
6. Affirming the dismissal of all other counterclaims for damages;
6. xxx xxx xxx;
7. Reversing and setting aside all other dispositions made by the
7. Declaring the Memorandum of Agreement as annulled due to the
trial court inconsistent with this decision;
fraud of plaintiffs;
8. There is no pronouncement as to costs.
8. xxx xxx xxx;

9. xxx xxx xxx; SO ORDERED.[8]

10. xxx xxx xxx, In sum, the Court of Appeals in its assailed decision: (1) affirmed
the validity of the Memorandum of Agreement between the parties
Without pronouncement as to costs. thereto; (2) reversed and set aside the finding of the trial court on the
bad faith of Rayandayan and Arceo in concealing the real purchase
SO ORDERED.[6] price of the land sold to them by Manuel Behis during negotiations
with the bank on the assumption of the mortgage debt; (3) modified DAMAGES; P20,000.00 AS ATTORNEYS FEES; AND
the trial courts finding as to the damages due Rayandayan and Arceo P5,000.00 AS LITIGATION EXPENSES.[12]
from the bank by adding P229,135.00 as actual damages; (4) dismissed
the counterclaim for damages by the bank and deleted the portion on The petition is devoid of merit.
the set-off of damages due between the bank on the one hand, and
Rayandayan and Arceo on the other. Briefly, the antecedents material to this appeal are as follows: A
Deed of Absolute Sale with Assumption of Mortgage was executed
Motions for reconsideration were filed by plaintiffs-appellants between Manuel Behis as vendor/assignor and Rayandayan and Arceo
Rayandanan and Arceo and defendant Rural Bank of Sta. Maria, as vendees/assignees for the sum of P250,000.00. On the same day,
Pangasinan which were denied for lack of merit.[9] Rayandayan and Arceo together with Manuel Behis executed another
Agreement embodying the real consideration of the sale of the land in
Hence, the instant consolidated petitions. the sum of P2,400,000.00. Thereafter, Rayandayan and Arceo
negotiated with the principal stockholder of the bank, Engr. Edilberto
In a Resolution dated August 25, 1993, this Court denied the Natividad in Manila, for the assumption of the indebtedness of Manuel
petition for review on certiorari (G.R. No. 111201) filed by Behis and the subsequent release of the mortgage on the property by
Rayandayan and Arceo for having been filed out of time and for late the bank. Rayandayan and Arceo did not show to the bank the
payment of docket fees.[10]Petitioners Rayandayan and Arceo moved to Agreement with Manuel Behis providing for the real consideration of
reconsider; this Court in a Resolution dated November 22, 1993, P2,400,000.00 for the sale of the property to the former. Subsequently,
resolved to deny the same with finality considering petitioners failed to the bank consented to the substitution of plaintiffs as mortgage debtors
show any compelling reason and to raise any substantial argument in place of Manuel Behis in a Memorandum of Agreement between
which would warrant a modification of the said resolution.[11] private respondents and the bank with restructured and liberalized
terms for the payment of the mortgage debt. Instead of the bank
What remains for resolution then is G.R. No. 110672, wherein foreclosing immediately for non-payment of the delinquent account,
petitioner Rural Bank of Sta. Maria, Pangasinan, contends that: petitioner bank agreed to receive only a partial payment of
P143,000.00 by installment on specified dates. After payment thereof,
I the bank agreed to release the mortgage of Manuel Behis; to give its
consent to the transfer of title to the private respondents; and to the
THE MEMORANDUM OF AGREEMENT (EXH. F) payment of the balance of P200,000.00 under new terms with a new
ENTERED INTO BETWEEN PRIVATE RESPONDENTS, mortgage to be executed by the private respondents over the same
AS ALLEGED ASSIGNEES OF MANUEL BEHIS, AND land.
PETITIONER BANK IS VOIDABLE AND MUST BE
ANNULLED. This brings us to the first issue raised by petitioner bank that the
Memorandum of Agreement is voidable on the ground that its consent
II to enter said agreement was vitiated by fraud because private
respondents withheld from petitioner bank the material information
PRIVATE RESPONDENTS ARE IN BAD FAITH, HENCE, that the real consideration for the sale with assumption of mortgage of
THEY ARE NOT ENTITLED TO THE SUMS OF P30,000.00 the property by Manuel Behis to Rayandayan and Arceo is
P2,400,000.00, and not P250,000.00 as represented to petitioner
AS MORAL DAMAGES; P10,000.00 AS EXEMPLARY
bank. According to petitioner bank, had it known of the real The bank received payments due under the Memorandum of
consideration for the sale, i.e. P2.4 million, it would not have Agreement, even if delayed. It initially claimed that the sale
consented into entering the Memorandum of Agreement with with assumption of mortgage was invalid not because of the
Rayandayan and Arceo as it was put in the dark as to the real capacity
concealment of the real consideration of P2,400,000.00 but
and financial standing of private respondents to assume the mortgage
from Manuel Behis. Petitioner bank pointed out that it would not have because of the information given by Cristina Behis, the widow
assented to the agreement, as it could not expect the private of the mortgagor Manuel Behis that her signature on the deed
respondents to pay the bank the approximately P343,000.00 mortgage of absolute sale with assumption of mortgage was
debt when private respondents have to pay at the same forged. Thus, the alleged nullity of the Memorandum of
time P2,400,000.00 to Manuel Behis on the sale of the land. Agreement, Exhibit F, is a clear aftertought. It was raised by
defendant bank, by way of counterclaim only after it was sued.
The kind of fraud that will vitiate a contract refers to those
insidious words or machinations resorted to by one of the contracting The deceit which avoids the contract exists where the party
parties to induce the other to enter into a contract which without them
who obtains the consent does so by means of concealing or
he would not have agreed to.[13] Simply stated, the fraud must be the
determining cause of the contract, or must have caused the consent to omitting to state material facts, with intent to deceive, by
be given. It is believed that the non-disclosure to the bank of the reason of which omission or concealment the other party was
purchase price of the sale of the land between private respondents and induced to give a consent which he would not otherwise have
Manuel Behis cannot be the fraud contemplated by Article 1338 of the given (Tolentino, Commentaries and Jurisprudence on the
Civil Code.[14] From the sole reason submitted by the petitioner bank Civil Code, Vol. IV, p. 480). In this case, the consideration for
that it was kept in the dark as to the financial capacity of private the sale with assumption of mortgage was not the inducement
respondent, we cannot see how the omission or concealment of the real to defendant bank to give a consent which it would not
purchase price could have induced the bank into giving its consent to
otherwise have given.
the agreement; or that the bank would not have otherwise given its
consent had it known of the real purchase price.
Indeed, whether the consideration of the sale with assumption
First of all, the consideration for the purchase of the land between of mortgage was P250,000.00 as stated in Exhibit A, or
Manuel Behis and herein private respondents Rayandayan and Arceo P2,400,000.00 as stated in the Agreement, Exhibit 15, should
could not have been the determining cause for the petitioner bank to not be of importance to the bank. Whether it was P250,000.00
enter into the memorandum of agreement. To all intents and purposes, or P2,400.000.00 the banks security remained unimpaired.
the bank entered into said agreement in order to effect payment on the
indebtedness of Manuel Behis. As correctly ruled by the Court of The stipulation in Exhibit 15, reading in case of default in all
Appeals: of the above, Manuel Behis shall have legal recourse to the
portion of the parcel of land under TCT No. T-29817
xxx. The real consideration for the sale with assumption of equivalent to the unpaid balance of the amount subject of this
mortgage, or the non-disclosure thereof, was not the Agreement, obviously even if revealed would not have
determining influence on the consent of the bank. induced defendant bank to withhold its consent. The legal
recourse to TCT No. T-29817 given to Manuel Behis, under
the Agreement, is subordinate and inferior to the mortgage to Consequently, not all elements of fraud vitiating consent for
the bank. purposes of annulling a contract concur, to wit: (a) It was employed by
a contracting party upon the other; (b) It induced the other party to
We are, therefore, constrained to uphold the validity of the enter into the contract; (c) It was serious; and; (d) It resulted in
damages and injury to the party seeking annulment. [18] Petitioner bank
Memorandum of Agreement, Exhibit F, and reverse and set
has not sufficiently shown that it was induced to enter into the
aside the ruling declaring the same annulled allegedly due to agreement by the non-disclosure of the purchase price, and that the
fraud of plaintiffs-appellants (paragraph 7, dispositive portion). same resulted in damages to the bank. Indeed, the general rule is that
whosoever alleges fraud or mistake in any transaction must
With the above conclusion reached, the award of moral and substantiate his allegation, since it is presumed that a person takes
exemplary damages, attorneys fees and expenses of litigation ordinary care for his concerns and that private transactions have been
in favor of defendant bank and against plaintiffs-appellants in fair and regular. Petitioner bank's allegation of fraud and deceit have
paragraph 4 of the dispositive portion of the decision of the not been established sufficiently and competently to rebut the
trial court must likewise be reversed and set aside; and presumption of regularity and due execution of the agreement.
similarly, paragraph 5. The basis for the award, which we
Based on the foregoing, the second issue raised by petitioner bank
quote for plaintiffs bad faith in deceiving the Bank to enter must likewise fail. Petitioner bank's imputation of bad faith to private
into the Memorandum of Agreement is not correct as we have respondents premised on the same non-disclosure of the real purchase
discussed.[15] price of the sale so as to preclude their entitlement to damages must
necessarily be resolved in the negative. Petitioner bank does not
Secondly, pursuant to Article 1339 0f the Civil Code,[16] silence or question the actual damages awarded to private respondents in the
concealment, by itself, does not constitute fraud, unless there is a amount of P229,135.00, but only the moral damages of P30,000.00,
special duty to disclose certain facts, or unless according to good faith exemplary damages of P10,000.00, attorney's fees of P20,000.00 and
and the usages of commerce the communication should be litigation expenses of P5,000.00. We may no longer examine the
made. Verily, private respondents Rayandayan and Arceo had no duty, amounts awarded by the trial court and affirmed by the appellate court
and therefore did not act in bad faith, in failing to disclose the real as petitioner bank did not appeal from the decision of the trial court. It
consideration of the sale between them and Manuel Behis. is well-settled that a party who does not appeal from the decision may
not obtain any affirmative relief from the appellate court other than
Thirdly, the bank had other means and opportunity of verifying what he has obtained from the lower court, if any, whose decision is
the financial capacity of private respondents and cannot avoid the brought up on appeal.[19]
contract on the ground that they were kept in the dark as to the
financial capacity by the non-disclosure of the purchase price. As WHEREFORE, the petition is hereby DENIED and the decision
correctly pointed out by respondent court, the bank security remained of the Court of Appeals, dated March 17, 1993 is AFFIRMED. No
unimpaired regardless of the consideration of the sale. Under the terms cost.
of the Memorandum of Agreement, the property remains as security
for the payment of the indebtedness, in case of default of SO ORDERED.
payment. Thus, petitioner bank does not and can not even allege that
the agreement was operating to its disadvantage. If fact, the bank
admits that no damages has been suffered by it. [17]