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G.R. No.

L-116650 May 23, 1995

TOYOTA SHAW, INC., petitioner,


vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.

DAVIDE, JR., J.:

At the heart of the present controversy is the document marked Exhibit "A" 1 for the private
respondent, which was signed by a sales representative of Toyota Shaw, Inc. named Popong
Bernardo. The document reads as follows:

4 June 1989

AGREEMENTS BETWEEN MR. SOSA


& POPONG BERNARDO OF TOYOTA
SHAW, INC.

1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG


BERNARDO) a week after, upon arrival of Mr. Sosa from the Province
(Marinduque) where the unit will be used on the 19th of June.

2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.

3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released
by TOYOTA SHAW, INC. on the 17th of June at 10 a.m.

Very truly yours

(Sgd.)
POPO
NG
BERN
ARDO.

Was this document, executed and signed by the petitioner's sales representative, a perfected
contract of sale, binding upon the petitioner, breach of which would entitle the private
respondent to damages and attorney's fees? The trial court and the Court of Appeals took the
affirmative view. The petitioner disagrees. Hence, this petition for review on certiorari.

The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals,
as well as in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent
Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L. Sosa
wanted to purchase a Toyota Lite Ace. It was then a seller's market and Sosa had difficulty
finding a dealer with an available unit for sale. But upon contacting Toyota Shaw, Inc., he was
told that there was an available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the
Toyota office at Shaw Boulevard, Pasig, Metro Manila. There they met Popong Bernardo, a
sales representative of Toyota.

Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because
he, his family, and a balikbayan guest would use it on 18 June 1989 to go to Marinduque, his
home province, where he would celebrate his birthday on the 19th of June. He added that if he
does not arrive in his hometown with the new car, he would become a "laughing stock."
Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June 1989.
Bernardo then signed the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of
Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of the purchase price
would be paid by credit financing through B.A. Finance, and for this Gilbert, on behalf of his
father, signed the documents of Toyota and B.A. Finance pertaining to the application for
financing.

The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of
P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales Proposal
(VSP) No. 928,2 on which Gilbert signed under the subheading CONFORME. This document
shows that the customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo
Street, United Paraaque II; that the model series of the vehicle is a "Lite Ace 1500" described
as "4 Dr minibus"; that payment is by "installment," to be financed by "B.A.," 3 with the initial
cash outlay of P100,000.00 broken down as follows:

a) downpayment P 53,148.00

b) insurance P 13,970.00

c) BLT registration fee P 1,067.00

CHMO fee P 2,715.00

service fee P 500.00

accessories P 29,000.00

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for
"Delivery Terms" were not filled-up. It also contains the following pertinent provisions:

CONDITIONS OF SALES
1. This sale is subject to availability of unit.

2. Stated Price is subject to change without prior notice, Price prevailing and in
effect at time of selling will apply. . . .

Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.

On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle
would not be ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that
same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office. According to Sosa,
Bernardo informed them that the Lite Ace was being readied for delivery. After waiting for about
an hour, Bernardo told them that the car could not be delivered because "nasulot ang unit ng
ibang malakas."

Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the
disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged that a
particular unit had already been reserved and earmarked for Sosa but could not be released
due to the uncertainty of payment of the balance of the purchase price. Toyota then gave Sosa
the option to purchase the unit by paying the full purchase price in cash but Sosa refused.

After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his
downpayment be refunded. Toyota did so on the very same day by issuing a Far East Bank
check for the full amount of P100,000.00, 4 the receipt of which was shown by a check voucher
of Toyota,5 which Sosa signed with the reservation, "without prejudice to our future claims for
damages."

Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by
him, he demanded the refund, within five days from receipt, of the downpayment of
P100,000.00 plus interest from the time he paid it and the payment of damages with a warning
that in case of Toyota's failure to do so he would be constrained to take legal action. 6 The
second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded one
million pesos representing interest and damages, again, with a warning that legal action would
be taken if payment was not made within three days.7 Toyota's counsel answered through a
letter dated 27 November 1989 8 refusing to accede to the demands of Sosa. But even before
this answer was made and received by Sosa, the latter filed on 20 November 1989 with Branch
38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages
under Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00.9 He
alleges, inter alia, that:

9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff,


plaintiff suffered embarrassment, humiliation, ridicule, mental anguish and
sleepless nights because: (i) he and his family were constrained to take the
public transportation from Manila to Lucena City on their way to Marinduque; (ii)
his balikbayan-guest canceled his scheduled first visit to Marinduque in order to
avoid the inconvenience of taking public transportation; and (iii) his relatives,
friends, neighbors and other provincemates, continuously irked him about "his
Brand-New Toyota Lite Ace that never was." Under the circumstances,
defendant should be made liable to the plaintiff for moral damages in the amount
of One Million Pesos (P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was entered into between it and
Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that Bernardo
signed Exhibit "A" in his personal capacity. As special and affirmative defenses, it alleged that:
the VSP did not state date of delivery; Sosa had not completed the documents required by the
financing company, and as a matter of policy, the vehicle could not and would not be released
prior to full compliance with financing requirements, submission of all documents, and execution
of the sales agreement/invoice; the P100,000.00 was returned to and received by Sosa; the
venue was improperly laid; and Sosa did not have a sufficient cause of action against it. It also
interposed compulsory counterclaims.

After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered on 18
February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS
BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid perfected contract of sale
between Sosa and Toyota which bound Toyota to deliver the vehicle to Sosa, and further agreed
with Sosa that Toyota acted in bad faith in selling to another the unit already reserved for him.

As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial
court held that the extent of Bernardo's authority "was not made known to plaintiff," for as
testified to by Quirante, "they do not volunteer any information as to the company's sales policy
and guidelines because they are internal matters." 13 Moreover, "[f]rom the beginning of the
transaction up to its consummation when the downpayment was made by the plaintiff, the
defendants had made known to the plaintiff the impression that Popong Bernardo is an
authorized sales executive as it permitted the latter to do acts within the scope of an apparent
authority holding him out to the public as possessing power to do these acts." 14 Bernardo then
"was an agent of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15

The court further declared that "Luna Sosa proved his social standing in the community and
suffered besmirched reputation, wounded feelings and sleepless nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:

WHEREFORE, viewed from the above findings, judgment is hereby rendered in


favor of the plaintiff and against the defendant:

1. ordering the defendant to pay to the plaintiff the sum of


P75,000.00 for moral damages;

2. ordering the defendant to pay the plaintiff the sum of


P10,000.00 for exemplary damages;

3. ordering the defendant to pay the sum of P30,000.00 attorney's


fees plus P2,000.00 lawyer's transportation fare per trip in
attending to the hearing of this case;

4. ordering the defendant to pay the plaintiff the sum of P2,000.00


transportation fare per trip of the plaintiff in attending the hearing
of this case; and

5. ordering the defendant to pay the cost of suit.

SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case
was docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994,17 the
Court of Appeals affirmed in toto the appealed decision.

Toyota now comes before this Court via this petition and raises the core issue stated at the
beginning of the ponenciaand also the following related issues: (a) whether or not the standard
VSP was the true and documented understanding of the parties which would have led to the
ultimate contract of sale, (b) whether or not Sosa has any legal and demandable right to the
delivery of the vehicle despite the non-payment of the consideration and the non-approval of his
credit application by B.A. Finance, (c) whether or not Toyota acted in good faith when it did not
release the vehicle to Sosa, and (d) whether or not Toyota may be held liable for damages.

We find merit in the petition.

Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is
a perfected contract of sale.

Article 1458 of the Civil Code defines a contract of sale as follows:

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

A contract of sale may be absolute or conditional.

and Article 1475 specifically provides when it is deemed perfected:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts.

What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see.
It is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a
determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a
price certain appears therein. The provision on the downpayment of P100,000.00 made no
specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only
refer to a sale on installment basis, as the VSP executed the following day confirmed. But
nothing was mentioned about the full purchase price and the manner the installments were to
be paid.

This Court had already ruled that a definite agreement on the manner of payment of the price is
an essential element in the formation of a binding and enforceable contract of sale. 18 This is so
because the agreement as to the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree on the price.
Definiteness as to the price is an essential element of a binding agreement to sell personal
property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For
one thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in
bold letters, viz.,

AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO


OF TOYOTA SHAW, INC.

that he was not dealing with Toyota but with Popong Bernardo and that the latter did not
misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo was
only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent
upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of
Bernardo's authority as an
agent20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent.21

At the most, Exhibit "A" may be considered as part of the initial phase of the generation or
negotiation stage of a contract of sale. There are three stages in the contract of sale, namely:

(a) preparation, conception, or generation, which is the period of negotiation and


bargaining, ending at the moment of agreement of the parties;

(b) perfection or birth of the contract, which is the moment when the parties come
to agree on the terms of the contract; and

(c) consummation or death, which is the fulfillment or performance of the terms


agreed upon in the contract.22

The second phase of the generation or negotiation stage in this case was the execution of the
VSP. It must be emphasized that thereunder, the downpayment of the purchase price was
P53,148.00 while the balance to be paid on installment should be financed by B.A. Finance
Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota,
otherwise it should not have mentioned B.A. Finance in the VSP.

Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No.
1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by the Central
Bank of the Philippines, the Insurance Commission and the Cooperatives Administration Office,
which are primarily organized for the purpose of extending credit facilities to consumers and to
industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial
papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages,
or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and
industrial machinery, business and office machines and equipment, appliances and other
movable property." 23

Accordingly, in a sale on installment basis which is financed by a financing company, three


parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the
price of the thing purchased on installment, the seller who assigns the notes or discounts them
with a financing company, and the financing company which is subrogated in the place of the
seller, as the creditor of the installment buyer. 24 Since B.A. Finance did not approve Sosa's
application, there was then no meeting of minds on the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for
which reason it suggested to Sosa that he pay the full purchase price. When the latter refused,
Toyota cancelled the VSP and returned to him his P100,000.00. Sosa's version that the VSP
was cancelled because, according to Bernardo, the vehicle was delivered to another who was
"mas malakas" does not inspire belief and was obviously a delayed afterthought. It is claimed
that Bernardo said, "Pasensiya kayo, nasulot ang unit ng ibang malakas," while the Sosas had
already been waiting for an hour for the delivery of the vehicle in the afternoon of 17 June 1989.
However, in paragraph 7 of his complaint, Sosa solemnly states:

On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales
representative, Mr. Popong Bernardo, called plaintiff's house and informed the
plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m. of June
17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to
defendant's office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle
but the defendant for reasons known only to its representatives, refused and/or
failed to release the vehicle to the plaintiff. Plaintiff demanded for an explanation,
but nothing was given; . . . (Emphasis supplied). 25

The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that
the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him, and
its non-delivery did not cause any legally indemnifiable injury.

The award then of moral and exemplary damages and attorney's fees and costs of suit is
without legal basis. Besides, the only ground upon which Sosa claimed moral damages is that
since it was known to his friends, townmates, and relatives that he was buying a Toyota Lite Ace
which they expected to see on his birthday, he suffered humiliation, shame, and sleepless nights
when the van was not delivered. The van became the subject matter of talks during his
celebration that he may not have paid for it, and this created an impression against his business
standing and reputation. At the bottom of this claim is nothing but misplaced pride and ego. He
should not have announced his plan to buy a Toyota Lite Ace knowing that he might not be able
to pay the full purchase price. It was he who brought embarrassment upon himself by bragging
about a thing which he did not own yet.

Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated,
or compensatory damages, he is likewise not entitled to exemplary damages. Under Article
2229 of the Civil Code, exemplary or corrective damages are imposed by way of example or
correction for the public good, in addition to moral, temperate, liquidated, or compensatory
damages.

Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body
of the decision, and not only in the dispositive portion thereof, the legal reason for the award of
attorney's fees. 26 No such explicit determination thereon was made in the body of the decision
of the trial court. No reason thus exists for such an award.

WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of
Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint in Civil
Case No. 89-14 is DISMISSED. The counterclaim therein is likewise DISMISSED.

No pronouncement as to costs.
SO ORDERED.

Padilla, Bellosillo and Kapunan, JJ., concur.

Quiason, J., is on leave.

TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-


CHOY, respondents.

DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari seeking to reverse the decision [1] of the Court of
Appeals in an action for specific performance[2] filed in the Regional Trial Court[3] by petitioner
Tomas K. Chua (Chua) against respondent Encarnacion Valdes-Choy (Valdes-Choy). Chua
sought to compel Valdes-Choy to consummate the sale of her paraphernal house and lot in
Makati City. The Court of Appeals reversed the decision[4] rendered by the trial court in favor of
Chua.

The Facts

Valdes-Choy advertised for sale her paraphernal house and lot (Property) with an area of
718 square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo
Village, Makati City. The Property is covered by Transfer Certificate of Title No. 162955 (TCT)
issued by the Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to
the advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price
of P10,800,000.00 payable in cash.
On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt
(Receipt) evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer,
reads:

30 June 1989

RECEIPT

RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE
HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the sale of the
property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila (Area : 718
sq. meters).
The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable on or
before 15[5] July 1989. Capital Gains Tax for the account of the seller. Failure to pay balance on or before
15 July 1989 forfeits the earnest money. This provided that all papers are in proper order.[6]

CONFORME: ENCARNACION VALDES

Seller

TOMAS K. CHUA

Buyer

x x x.[7]

In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce (PBCom)
a managers check for P480,000.00. Strangely, after securing the managers check, Chua
immediately gave PBCom a verbal stop payment order claiming that this managers check
for P480,000.00 was lost and/or misplaced.[8] On the same day, after receipt of Chuas verbal
order, PBCom Assistant VicePresident Julie C. Pe notified in writing [9] the PBCom Operations
Group of Chuas stop payment order.
In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels
to execute the necessary documents and arrange the payments. [10] Valdes-Choy as vendor and
Chua as vendee signed two Deeds of Absolute Sale (Deeds of Sale). The first Deed of Sale
covered the house and lot for the purchase price of P8,000,000.00.[11] The second Deed of Sale
covered the furnishings, fixtures and movable properties contained in the house for the
purchase price of P2,800,000.00.[12] The parties also computed the capital gains tax to amount
to P485,000.00.
On 14 July 1989, the parties met again at the office of Valdes-Choys counsel. Chua handed
to Valdes-Choy the PBCom managers check for P485,000.00 so Valdes-Choy could pay the
capital gains tax as she did not have sufficient funds to pay the tax. Valdes-Choy issued a
receipt showing that Chua had a remaining balance of P10,215,000.00 after deducting the
advances made by Chua. This receipt reads:

July 14, 1989

Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of FOUR HUNDRED
EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as Partial Payment for the sale of the
property located at 40 Tampingco Cor. Hidalgo St., San Lorenzo Village, Makati, Metro Manila (Area
718 sq. meters), covered by TCT No. 162955 of the Registry of Deeds of Makati, Metro Manila.

The total purchase price of the above-mentioned property is TEN MILLION EIGHT HUNDRED
THOUSAND PESOS only, broken down as follows:

SELLING PRICE P10,800,000.00

EARNEST MONEY P100,000.00


PARTIAL PAYMENT 485,000.00
____________________585,000.00

BALANCE DUE TO
ENCARNACION VALDEZ-CHOY P10,215,000.00
VVVVVVVVVVVV
PLUS P80,000.00 for documentary
stamps paid in advance by seller ___80,000.00

P10,295,000.00

x x x.[13]

On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited


the P485,000.00 managers check to her account with Traders Royal Bank. She then purchased
a Traders Royal Bank managers check for P480,000.00 payable to the Commissioner of
Internal Revenue for the capital gains tax. Valdes-Choy and Chua returned to the office of
Valdes-Choys counsel and handed the Traders Royal Bank check to the counsel who undertook
to pay the capital gains tax. It was then also that Chua showed to Valdes-Choy a PBCom
managers check for P10,215,000.00 representing the balance of the purchase price. Chua,
however, did not give this PBCom managers check to Valdes-Choy because the TCT was still
registered in the name of Valdes-Choy. Chua required that the Property be registered first in his
name before he would turn over the check to Valdes-Choy. This angered Valdes-Choy who tore
up the Deeds of Sale, claiming that what Chua required was not part of their agreement.[14]
On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to
PBCom an affidavit of loss[15] of the PBCom Managers Check for P480,000.00. PBCom
Assistant Vice-President Pe, however, testified that the managers check was nevertheless
honored because Chua subsequently verbally advised the bank that he was lifting the stop-
payment order due to his special arrangement with the bank.[16]
On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-
Choy suggested to her counsel that to break the impasse Chua should deposit in escrow
the P10,215,000.00 balance.[17] Upon such deposit, Valdes-Choy was willing to cause the
issuance of a new TCT in the name of Chua even without receiving the balance of the purchase
price.Valdes-Choy believed this was the only way she could protect herself if the certificate of
title is transferred in the name of the buyer before she is fully paid. Valdes-Choys counsel
promised to relay her suggestion to Chua and his counsel, but nothing came out of it.
On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy
which the trial court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his
complaint for specific performance with damages. After trial in due course, the trial court
rendered judgment in favor of Chua, the dispositive portion of which reads:

Applying the provisions of Article 1191 of the new Civil Code, since this is an action for specific
performance where the plaintiff, as vendee, wants to pursue the sale, and in order that the fears of the
defendant may be allayed and still have the sale materialize, judgment is hereby rendered:

I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from finality of this
decision:

a. the owners duplicate copy of TCT No. 162955 registered in her name;
b. the covering tax declaration and the latest tax receipt evidencing payment of real estate taxes;

c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly executed by defendant in
favor of the plaintiff, whether notarized or not; and

2. Within five (5) days from compliance by the defendant of the above, ordering the plaintiff to deliver to
the Branch Clerk of Court of this Court the sum of P10,295,000.00 representing the balance of the
consideration (with the sum of P80,000.00 for stamps already included);

3. Ordering the Branch Clerk of this Court or her duly authorized representative:

a. to make representations with the BIR for the payment of capital gains tax for the sale of the house and
lot (not to include the fixtures) and to pay the same from the funds deposited with her;

b. to present the deed of sale executed in favor of the plaintiff, together with the owners duplicate copy of
TCT No. 162955, real estate tax receipt and proof of payment of capital gains tax, to the Makati Register
of Deeds;

c. to pay the required registration fees and stamps (if not yet advanced by the defendant) and if needed
update the real estate taxes all to be taken from the funds deposited with her; and

d. surrender to the plaintiff the new Torrens title over the property;

4. Should the defendant fail or refuse to surrender the two deeds of sale over the property and the fixtures
that were prepared by Atty. Mark Bocobo and executed by the parties, the Branch Clerk of Court of this
Court is hereby authorized and empowered to prepare, sign and execute the said deeds of sale for and in
behalf of the defendant;

5. Ordering the defendant to pay to the plaintiff;

a. the sum of P100,000.00 representing moral and compensatory damages for the plaintiff; and

b. the sum of P50,000.00 as reimbursement for plaintiffs attorneys fees and cost of litigation.

6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be taken from the
funds said plaintiff has deposited with the Court, the amounts covered at paragraph 5 above;

7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom the following
amounts:

a. the capital gains tax paid to the BIR;

b. the expenses incurred in the registration of the sale, updating of real estate taxes, and transfer of title;
and

c. the amounts paid under this judgment to the plaintiff.

8. Ordering the defendant to surrender to the plaintiff or his representatives the premises with the
furnishings intact within seventy-two (72) hours from receipt of the proceeds of the sale;
9. No interest is imposed on the payment to be made by the plaintiff because he had always been ready to
pay the balance and the premises had been used or occupied by the defendant for the duration of this case.

II. In the event that specific performance cannot be done for reasons or causes not attributable to the
plaintiff, judgment is hereby rendered ordering the defendant:

1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at the legal rate
from June 30, 1989 until fully paid;

2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from July 14, 1989 until
fully paid;

3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the additional sum
of P300,000.00 in the concept of exemplary damages; and

4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorneys fees and cost of litigation.

SO ORDERED.[18]

Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial
court. The Court of Appeals handed down a new judgment, disposing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is
rendered:

(1) Dismissing Civil Case No. 89-5772;

(2) Declaring the amount of P100,000.00, representing earnest money as forfeited in favor of defendant-
appellant;

(3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to plaintiff-appellee without


interest;

(4) Dismissing defendant-appellants compulsory counter-claim; and

(5) Ordering the plaintiff-appellee to pay the costs. [19]

Hence, the instant petition.

The Trial Courts Ruling

The trial court found that the transaction reached an impasse when Valdes-Choy wanted to
be first paid the full consideration before a new TCT covering the Property is issued in the name
of Chua. On the other hand, Chua did not want to pay the consideration in full unless a new TCT
is first issued in his name. The trial court faulted Valdes-Choy for this impasse.
The trial court held that the parties entered into a contract to sell on 30 June 1989, as
evidenced by the Receipt for the P100,000.00 earnest money. The trial court pointed out that
the contract to sell was subject to the following conditions: (1) the balance
of P10,700,000.00 was payable not later than 15 July 1989; (2) Valdes-Choy may stay in the
Property until 13 August 1989; and (3) all papers must be in proper order before full payment is
made.
The trial court held that Chua complied with the terms of the contract to sell. Chua showed
that he was prepared to pay Valdes-Choy the consideration in full on 13 July 1989, two days
before the deadline of 15 July 1989. Chua even added P80,000.00 for the documentary stamp
tax. He purchased from PBCom two managers checks both payable to Valdes-Choy. The first
check for P485,000.00 was to pay the capital gains tax. The second check for P10,215,000.00
was to pay the balance of the purchase price. The trial court was convinced that Chua
demonstrated his capacity and readiness to pay the balance on 13 July 1989 with the
production of the PBCom managers check for P10,215,000.00.
On the other hand, the trial court found that Valdes-Choy did not perform her correlative
obligation under the contract to sell to put all the papers in order. The trial court noted that as of
14 July 1989, the capital gains tax had not been paid because Valdes-Choys counsel who was
suppose to pay the tax did not do so. The trial court declared that Valdes-Choy was in a position
to deliver only the owners duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. The trial court concluded that these documents
were all useless without the Bureau of Internal Revenue receipt evidencing full payment of the
capital gains tax which is a pre-requisite to the issuance of a new certificate of title in Chuas
name.
The trial court held that Chuas non-payment of the balance of P10,215,000.00 on the
agreed date was due to Valdes-Choys fault.

The Court of Appeals Ruling

In reversing the trial court, the Court of Appeals ruled that Chuas stance to pay the full
consideration only after the Property is registered in his name was not the agreement of the
parties. The Court of Appeals noted that there is a whale of difference between the phrases all
papers are in proper order as written on the Receipt, and transfer of title as demanded by Chua.
Contrary to the findings of the trial court, the Court of Appeals found that all the papers were
in order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a
position to deliver the owners duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. The Property was also free from all liens and
encumbrances.
The Court of Appeals declared that the trial court erred in considering Chuas showing to
Valdes-Choy of the PBCom managers check for P10,215,000.00 as compliance with Chuas
obligation to pay on or before 15 July 1989. The Court of Appeals pointed out that Chua did not
want to give up the check unless the property was already in his name. [20] Although Chua
demonstrated his capacity to pay, this could not be equated with actual payment which he
refused to do.
The Court of Appeals did not consider the non-payment of the capital gains tax as failure by
Valdes-Choy to put the papers in proper order. The Court of Appeals explained that the payment
of the capital gains tax has no bearing on the validity of the Deeds of Sale. It is only after the
deeds are signed and notarized can the final computation and payment of the capital gains tax
be made.

The Issues

In his Memorandum, Chua raises the following issues:

1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE PROPERTY;

2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY WITHOUT


OBSERVING THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL CODE;

3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE PURCHASE


PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY THE CIRCUMSTANCES
OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE AUTOMATIC RESCISSION OF
THE CONTRACT OF SALE;

4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS TO
DECLARE THE EARNEST MONEY IN THE AMOUNT OF P100,000.00 AS FORFEITED IN FAVOR
OF VALDES-CHOY;

5. WHETHER THE TRIAL COURTS JUDGMENT IS IN ACCORD WITH LAW, REASON AND
EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED.[21]

The issues for our resolution are: (a) whether the transaction between Chua and Valdes-
Choy is a perfected contract of sale or a mere contract to sell, and (b) whether Chua can
compel Valdes-Choy to cause the issuance of a new TCT in Chuas name even before payment
of the full purchase price.

The Courts Ruling

The petition is bereft of merit.


There is no dispute that Valdes-Choy is the absolute owner of the Property which is
registered in her name under TCT No.162955, free from all liens and encumbrances. She was
ready, able and willing to deliver to Chua the owners duplicate copy of the TCT, the signed
Deeds of Sale, the tax declarations, and the latest realty tax receipt. There is also no dispute
that on 13 July 1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as
earnest money from Chua. Likewise, there is no controversy that the Receipt for
the P100,000.00 earnest money embodied the terms of the binding contract between Valdes-
Choy and Chua.
Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua
agreed on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15
July 1989; (2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay
the balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit
the earnest money, provided that all papers are in proper order. On 13 July 1989, Chua gave
Valdes-Choy the PBCom managers check for P485,000.00 to pay the capital gains tax.
Both the trial and appellate courts found that the balance of P10,215,000.00 was not
actually paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-
Choy the PBCom managers check for P10,215,000.00, with Valdes-Choy as payee. However,
Chua refused to give this check to Valdes-Choy until a new TCT covering the Property is
registered in Chuas name. Or, as the trial court put it, until there is proof of payment of the
capital gains tax which is a pre-requisite to the issuance of a new certificate of title.

First and Second Issues: Contract of Sale or Contract to Sell?

Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the
Receipt, as a contract to sell and not a contract of sale. This has been Chuas persistent
contention in his pleadings before the trial and appellate courts.
Chua now pleads for the first time that there is a perfected contract of sale rather than a
contract to sell. He contends that there was no reservation in the contract of sale that Valdes-
Choy shall retain title to the Property until after the sale. There was no agreement for an
automatic rescission of the contract in case of Chuas default. He argues for the first time that his
payment of earnest money and its acceptance by Valdes-Choy precludes the latter from
rejecting the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not
validly rescind the contract of sale without following Article 1592 [22] of the Civil Code which
requires demand, either judicially or by notarial act, before rescission may take place.
Chuas new theory is not well taken in light of well-settled jurisprudence. An issue not raised
in the court below cannot be raised for the first time on appeal, as this is offensive to the basic
rules of fair play, justice and due process. [23] In addition, when a party deliberately adopts a
certain theory, and the case is tried and decided on that theory in the court below, the party will
not be permitted to change his theory on appeal. To permit him to change his theory will be
unfair to the adverse party.[24]
Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement
between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a
contract of sale. The distinction between a contract of sale and contract to sell is well-settled:

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until
full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership
over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a
contract to sell, title is retained by the vendor until full payment of the price. In the latter contract,
payment of the price is a positive suspensive condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective. [25]

A perusal of the Receipt shows that the true agreement between the parties was a contract
to sell. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua
until full payment of the purchase price.
First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails
to pay the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy
can sell the Property to other interested parties. There is in effect a right reserved in favor of
Valdes-Choy not to push through with the sale upon Chuas failure to remit the balance of the
purchase price before the deadline. This is in the nature of a stipulation reserving ownership in
the seller until full payment of the purchase price. This is also similar to giving the seller the right
to rescind unilaterally the contract the moment the buyer fails to pay within a fixed period.[26]
Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather
than in a deed of sale, ownership not having passed between them. The signing of the Deeds of
Sale came later when Valdes-Choy was under the impression that Chua was about to pay the
balance of the purchase price. The absence of a formal deed of conveyance is a strong
indication that the parties did not intend immediate transfer of ownership, but only a transfer
after full payment of the purchase price.[27]
Third, Valdes-Choy retained possession of the certificate of title and all other documents
relative to the sale. When Chua refused to pay Valdes-Choy the balance of the purchase price,
Valdes-Choy also refused to turn-over to Chua these documents. [28] These are additional proof
that the agreement did not transfer to Chua, either by actual or constructive delivery, ownership
of the Property.[29]
It is true that Article 1482 of the Civil Code provides that [W]henever earnest money is given
in a contract of sale, it shall be considered as part of the price and proof of the perfection of the
contract. However, this article speaks of earnest money given in a contract of sale. In this
case, the earnest money was given in a contract to sell. The Receipt evidencing the contract to
sell stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not
consummated should Chua fail to pay the balance of the purchase price. The earnest money
forms part of the consideration only if the sale is consummated upon full payment of the
purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua
to pay the balance of the purchase price. Chua, however, has the right to walk away from the
transaction, with no obligation to pay the balance, although he will forfeit the earnest
money.Clearly, there is no contract of sale. The earnest money was given in a contract to sell,
and thus Article 1482, which speaks of a contract of sale, is not applicable.
Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full
payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the
condition prevents the obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer. [30] Article 1592 of the Civil Code permits the buyer to pay,
even after the expiration of the period, as long as no demand for rescission of the contract has
been made upon him either judicially or by notarial act. However, Article 1592 does not apply to
a contract to sell where the seller reserves the ownership until full payment of the price.[31]

Third and Fourth Issues: Withholding of Payment of the Balance


of the Purchase Price and Forfeiture of the Earnest Money

Chua insists that he was ready to pay the balance of the purchase price but withheld
payment because Valdes-Choy did not fulfill her contractual obligation to put all the papers in
proper order. Specifically, Chua claims that Valdes-Choy failed to show that the capital gains tax
had been paid after he had advanced the money for its payment. For the same reason, he
contends that Valdes-Choy may not forfeit the earnest money even if he did not pay on time.
There is a variance of interpretation on the phrase all papers are in proper order as written
in the Receipt. There is no dispute though, that as long as the papers are in proper order,
Valdes-Choy has the right to forfeit the earnest money if Chua fails to pay the balance before
the deadline.
The trial court interpreted the phrase to include payment of the capital gains tax, with the
Bureau of Internal Revenue receipt as proof of payment. The Court of Appeals held
otherwise.We quote verbatim the ruling of the Court of Appeals on this matter:

The trial court made much fuss in connection with the payment of the capital gains tax, of which Section
33 of the National Internal Revenue Code of 1977, is the governing provision insofar as its computation is
concerned. The trial court failed to consider Section 34-(a) of the said Code, the last sentence of which
provides, that [t]he amount realized from the sale or other disposition of property shall be the sum of
money received plus the fair market value of the property (other than money) received; and that the
computation of the capital gains tax can only be finally assessed by the Commission on Internal Revenue
upon the presentation of the Deeds of Absolute Sale themselves, without which any premature
computation of the capital gains tax becomes of no moment. At any rate, the computation and payment of
the capital gains tax has no bearing insofar as the validity and effectiveness of the deeds of sale in
question are concerned, because it is only after the contracts of sale are finally executed in due form and
have been duly notarized that the final computation of the capital gains tax can follow as a matter of
course. Indeed, exhibit D, the PBC Check No. 325851, dated July 13, 1989, in the amount
of P485,000.00, which is considered as part of the consideration of the sale, was deposited in the name of
appellant, from which she in turn, purchased the corresponding check in the amount representing the sum
to be paid for capital gains tax and drawn in the name of the Commissioner of Internal Revenue, which
then allayed any fear or doubt that that amount would not be paid to the Government after all. [32]

We see no reason to disturb the ruling of the Court of Appeals.


In a contract to sell, the obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. In this case, the suspensive condition is the full payment
of the purchase price by Chua. Such full payment gives rise to Chuas right to demand the
execution of the contract of sale.
It is only upon the existence of the contract of sale that the seller becomes obligated to
transfer the ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a
contract of sale as follows:

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

x x x. (Emphasis supplied)

Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership
to the buyer, even if there is a contract to sell between them. It is also upon the existence of the
contract of sale that the buyer is obligated to pay the purchase price to the seller. Since the
transfer of ownership is in exchange for the purchase price, these obligations must be
simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of a
contrary stipulation.
In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil
Code, as follows:
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing
which is the object of the sale. (Emphasis supplied)

The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of
real property, the seller is not obligated to transfer in the name of the buyer a new certificate of
title, but rather to transfer ownership of the real property. There is a difference between transfer
of the certificate of title in the name of the buyer, and transfer of ownership to the buyer.The
buyer may become the owner of the real property even if the certificate of title is still registered
in the name of the seller. As between the seller and buyer, ownership is transferred not by the
issuance of a new certificate of title in the name of the buyer but by the execution of the
instrument of sale in a public document.
In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted
civil law commentator Arturo M. Tolentino explains it, -

Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of acquiring
dominion and determines the transmission of ownership, the birth of the real right. The delivery,
therefore, made in any of the forms provided in articles 1497 to 1505 signifies that the transmission of
ownership from vendor to vendee has taken place. The delivery of the thing constitutes an indispensable
requisite for the purpose of acquiring ownership. Our law does not admit the doctrine of transfer of
property by mere consent; the ownership, the property right, is derived only from delivery of the thing. x
x x.[33] (Emphasis supplied)

In a contract of sale of real property, delivery is effected when the instrument of sale is
executed in a public document. When the deed of absolute sale is signed by the parties and
notarized, then delivery of the real property is deemed made by the seller to the buyer. Article
1498 of the Civil Code provides that

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to
the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear
or cannot clearly be inferred.

x x x.

Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign
the deed of absolute sale before a notary public, the seller is in a position to transfer ownership
of the real property to the buyer. At this point, the seller complies with his undertaking to sell the
real property in accordance with the contract to sell, and to assume all the obligations of a
vendor under a contract of sale pursuant to the relevant articles of the Civil Code. In a contract
to sell, the seller is not obligated to transfer ownership to the buyer. Neither is the seller
obligated to cause the issuance of a new certificate of title in the name of the buyer. However,
the seller must put all his papers in proper order to the point that he is in a position to transfer
ownership of the real property to the buyer upon the signing of the contract of sale.
In the instant case, Valdes-Choy was in a position to comply with all her obligations as a
seller under the contract to sell. First, she already signed the Deeds of Sale in the office of her
counsel in the presence of the buyer. Second, she was prepared to turn-over the owners
duplicate of the TCT to the buyer, along with the tax declarations and latest realty tax
receipt.Clearly, at this point Valdes-Choy was ready, able and willing to transfer ownership of the
Property to the buyer as required by the contract to sell, and by Articles 1458 and 1495 of the
Civil Code to consummate the contract of sale.
Chua, however, refused to give to Valdes-Choy the PBCom managers check for the
balance of the purchase price. Chua imposed the condition that a new TCT should first be
issued in his name, a condition that is found neither in the law nor in the contract to sell as
evidenced by the Receipt. Thus, at this point Chua was not ready, able and willing to pay the full
purchase price which is his obligation under the contract to sell. Chua was also not in a position
to assume the principal obligation of a vendee in a contract of sale, which is also to pay the full
purchase price at the agreed time. Article 1582 of the Civil Code provides that
Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and
place stipulated in the contract.
x x x. (Emphasis supplied)
In this case, the contract to sell stipulated that Chua should pay the balance of the
purchase price on or before 15 July 1989. The signed Deeds of Sale also stipulated that the
buyer shall pay the balance of the purchase price upon signing of the deeds. Thus, the Deeds of
Sale, both signed by Chua, state as follows:

Deed of Absolute Sale covering the lot:

xxx

For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine
Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE, the
VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said
parcel of land, together with the improvements existing thereon, free from all liens and encumbrances.
[34]
(Emphasis supplied)

Deed of Absolute Sale covering the furnishings:

xxx

For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND PESOS
(P2,800,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR
from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors
and assigns, the said furnitures, fixtures and other movable properties thereon, free from all liens and
encumbrances.[35] (Emphasis supplied)

However, on the agreed date, Chua refused to pay the balance of the purchase price as
required by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil
Code. Chua was therefore in default and has only himself to blame for the rescission by Valdes-
Choy of the contract to sell.
Even if measured under existing usage or custom, Valdes-Choy had all her papers in
proper order. Article 1376 of the Civil Code provides that:

Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities
of a contract, and shall fill the omission of stipulations which are ordinarily established.

Customarily, in the absence of a contrary agreement, the submission by an individual seller


to the buyer of the following papers would complete a sale of real estate: (1) owners duplicate
copy of the Torrens title;[36] (2) signed deed of absolute sale; (3) tax declaration; and (3) latest
realty tax receipt. The buyer can retain the amount for the capital gains tax and pay it upon
authority of the seller, or the seller can pay the tax, depending on the agreement of the parties.
The buyer has more interest in having the capital gains tax paid immediately since this is a
pre-requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the
government is concerned, the capital gains tax remains a liability of the seller since it is a tax on
the sellers gain from the sale of the real estate. Payment of the capital gains tax, however, is
not a pre-requisite to the transfer of ownership to the buyer. The transfer of ownership
takes effect upon the signing and notarization of the deed of absolute sale.
The recording of the sale with the proper Registry of Deeds[37] and the transfer of the
certificate of title in the name of the buyer are necessary only to bind third parties to the transfer
of ownership.[38] As between the seller and the buyer, the transfer of ownership takes effect upon
the execution of a public instrument conveying the real estate. [39] Registration of the sale with
the Registry of Deeds, or the issuance of a new certificate of title, does not confer ownership on
the buyer. Such registration or issuance of a new certificate of title is not one of the modes of
acquiring ownership.[40]
In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that
customarily would complete the sale, and to pay as well the capital gains tax. On the other
hand, Chuas condition that a new TCT be first issued in his name before he pays the balance
of P10,215,000.00, representing 94.58% of the purchase price, is not customary in a sale of real
estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt,
cannot be considered part of the omissions of stipulations which are ordinarily established by
usage or custom.[41] What is increasingly becoming customary is to deposit in escrow the
balance of the purchase price pending the issuance of a new certificate of title in the name of
the buyer. Valdes-Choy suggested this solution but unfortunately, it drew no response from
Chua.
Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him
the owners duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the
latest realty tax receipt. There was no hindrance to paying the capital gains tax as Chua himself
had advanced the money to pay the same and Valdes-Choy had procured a managers check
payable to the Bureau of Internal Revenue covering the amount. It was only a matter of time
before the capital gains tax would be paid. Chua acted precipitately in filing the action for
specific performance a mere two days after the deadline of 15 July 1989 when there was an
impasse. While this case was dismissed on 22 November 1989, he did not waste any time in re-
filing the same on 29 November 1989.
Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is
a suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the
Property. Article 1181 of the Civil Code provides that -

ART. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired shall depend upon the happening of the event which constitutes the condition.

Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him
because the suspensive condition - the full payment of the purchase price - did not
happen.There is no correlative obligation on the part of Valdes-Choy to transfer ownership of
the Property to Chua. There is also no obligation on the part of Valdes-Choy to cause the
issuance of a new TCT in the name of Chua since unless expressly stipulated, this is not one of
the obligations of a vendor.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23
February 1995 is AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.

XENTREX AUTOMOTIVE, INC., Petitioner vs. COURT OF APPEALS, MAC-ARTHUR


M. SAMSON AND GERTRUDES C. SAMSON, Respondents.

RESOLUTION
QUISUMBING, J.:

This petition for review on certiorari seeks to reserve respondent appellate court's decision
promulgated on July 31, 1995 affirming the judgment of the Regional Trial Court which ruled as
follows:

"WHEREFORE, jusgment is hereby rendered in favor of palintiffs and against the defendant
ordering the latter to pay the former, the following:

1. Moral Damages of P100,000.00 for besmirched reputation, wounded feelings, moral shock,
social humilation, and the like suffered by the plaintiffs;

2. Nominal damages of P50,000.00 in order that the rights of the plaintiffs which have been
violated may be vindicated;

3. Exempalry or corrective damages of P50,000.00 by way of example or correction for public


good;

4. Attorneys fees of P20,000.00 and litigation expenses of P6,00.00;

In addition, defendant is ordered to re-imburse (sic) palintiffs the amount of P250,000.00


reperesenting the advance payment of the car made by the plaintiffs to the defendant, and to
pay cost.

SO ORDERED."[1]

Petitioner is a dealer of motor vehicles. On October 25, 1991, private respondents went to
petitioner to purchase a brand new car, a 1991 Nissan Sentra Super Saloon A/T model, valued
at P494,000.00. Private respondents ,made an initial deposit of P50,000.00; petitioner issued
the corresponding official receipt (O.R. No. 6504). The balance was to be paid thru bank
financing. Pending the processing of their application for financing, private respondents paid an
additional P200,000.00. to petitioner which was covered by another receipt (O.R. NO. 6547).
Eventually, due to the slow pace in the processing of their application for financing, private
respondents decided to pay the remaining balance on November 6, 1991 by tendering a check
in the amount of P250,000.00. As it turned out however, to private respondent's shock and
disppointment, the car had already been sold to another buyer without their knowledge,
prompting them to send a demand letter to petitioner asking the latter to comply with its
obligation to deliver the car. Their demand inheeded, private respondents (plaintiffs below) filed
a suit for breach of contract and damages before the Regional Trial Court of Dagupan City,
Branch 42. Denying any liability, petitioner (defendant below) alleged that the complaint stated
no cause of action. After trial, judgment was rendered by the trial court in private respondents'
favor. On appeal by petitioner, theCourt of Appeals affirmed the decision of the trial court.[2]
It is petitioner's main contention that both the trial and the appellate courts erred in
adjusting it liable for breach of contract and damages. Petitioner argues that there was no
perfected contract of sale between the parties due to private respondents' failure to comply with
their obligation to pay the purchase price of the car in full. Thus, petitioner asserts that it has no
obligation to deliver the car to private respondents and therefore could not be held liable for
breach of contract of sales as confirmed by the findings of the trial court and in turn affirmed by
the court of Appeals; hence, petitioner should be held liable for breach of contract for failing to
deliver the car to them
We find that the instant petition lacks merit. The issues raised by petitioner are essentially
factual matters, the determination of which are best left to the court below. Well-settled is the
rule that factual findings of the lower courts are entitled to great weight and respect on appeal,
and in fact accorded finality when supported by substantial evidence on the record as in the
case.[3] Undoubtedly, there was a perfected contract of sale between the petitioner and private
respondents as confirmed by the trial court when it found that "[b] y accepting a deposit
of P50,000.00 and by pulling out a unit of Philippine Nissan 1.6 cc Sentra Automatic (Flamingo
red), defendant obliged itself to sell to the plaintiffs a determinate thing of a price certain in
money which was P494,000.00".[4] Resultingly, petitioner committed a breach of contract when it
allowed the unit in question to be sold to another buyer to the prejudice of private respondents.
The Court of Appeals gave complate accord to the aforementioned findings and affirmed the
same in its decision.[5] In this regard it must be emphasized that the prevailing rule is that
the findings of fact of the trial court, particularly when affirmed by the Court of Appeals, are
binding upon this Court.[6] We have scrutinized the record of this case and found no reason to
deviate from the findings of the court a quo as they are consistent with the law and the evidence
on record. Article 1475 of the New Civil Code is very explicit the "[t]he contract of sale is
perfected at the moment there is a meeting of the minds upon the thing which is the object of
the contract and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provision of the law governing the form of contracts." Contrary,
therefore, to petitioner's assertion, both the trial court and the Court of Appeals did not commit
reversible error in declaring that there was indeed a perfected contract of sale and that
petitioner breached the same when it failed to deliver the car to private respondents.
However, with respect to the damages awarded to private respondent, the Court cannot
sustain the same in its entirety.
The award for exemplary damages in this case is unwarranted because there is no showing
that petitioner acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. [7] In the
same vein, the grant of nominal damages must also be deleted because the factual basis for
such not has been established.
Nevertheless, We sustain the award of moral damages considering private respondent
Macarthur Samson's testimony that he suffered from shock and embarrassment as a result of
petitioner's failure to comply with its obligation.[8] This is consistent with our pronouncement in
Tan vs. Court of Appeals[9] and American Express International, Inc. vs. IAC[10] that "[w]hile
petitioner was not in bad faith, its negligence caused the private respondent to suffer mental
anguish, serious anxiety, embarrassment and humiliation, for which he is entitled to recover
reasonable moral damages (Art. 2217, Civil Code)." We however find the amount
of P100,000.00 as moral damages excessive and exorbitant in this case, bearing in mind that
these damages are not intended to enrich the complainant at the expense of the defendant.
[11]
The amount of P10,000.00 as moral damages is herein deemed reasonable. Anent the
amount of attorney's fees, We also find it proper to reduce the same P10,000.00.
WHEREFORE, the dispositive portion of the decision of the Court of Appeals dated July 31,
1995 is hereby MODIFIED and judgment is herein rendered ordering herein petitioner to pay
private respondents the following amounts:

1) Moral Damages of 10,000.00 for the shock and embarrassment suffered by private
respondent as a result of petitioner's failure to comply with its obligation.

2) Attorney's fees of P10,000.00 and litigation expenses in the sum of P6,000.00.

3) The amount of P250,000.00 representing the advance payment of the car made by private
respondent to petitioner plus legal interest computed from the time of the filinh of complaint.

Cost against petitioner.


SO ORDERED
Davide, Jr. (Chairman), Bellosillo, Vitug and Panganiban JJ., concur

FIRST DIVISION

G.R.NO. L-36249 March 29, 1985

ANIANO OBAA, petitioner,


vs.
THE COURT OF APPEALS AND ANICETO SANDOVAL, respondents.

MELENCIO-HERRERA, J.:

Petitioner seeks a review of the Decision of respondent Appellate Court (in CA-G.R. No. 44345-
R) ordering him in an action for Replevin to return to Aniceto SANDOVAL, private respondent
herein, 170 cavans of rice or to pay its value in the amount of P37.25 per cavan, with legal
interest from the filing of the Complaint until fully paid.

SANDOVAL is the owner and manager of the "Sandoval and Sons Rice Mill" located in Rosales,
Pangasinan. He is engaged in the buying and selling of palay.

On November 21, 1964, SANDOVAL was approached by a certain Chan Lin who offered to
purchase from him 170 cavans of clean rice (wagwag variety) at the price of P37.26 per cavan,
delivery to be made the following day at petitioner's store in San Fernando, La Union, with
payment to be made thereat by Chan Lin to SANDOVAL's representative. SANDOVAL accepted
the offer as he knew petitioner and had had previous transactions with him.
As agreed, the 170 cavans of rice were transported the following day on a truck belonging to
SANDOVAL to petitioner's store in San Fernando, La Union. Chan Lin accompanied the
shipment. Upon arrival thereat, the goods were unloaded but when the truck driver attempted to
collect the purchase price from Chan Lin, the latter was nowhere to be found. The driver tried to
collect from petitioner, but the latter refused stating that he had purchase the goods from Chan
Lin at P33.00 per cavan and that the price therefore had already been paid to Chan Lin.

Further demands having been met with refusal, SANDOVAL, as plaintiff, filed suit for replevin
against petitioner, then the defendant, before the Municipal Court of San Fernando, La Union,
which ordered petitioner-defendant to pay to SANDOVAL one-half () of the cost of the rice or
P2,805.00.

On appeal by petitioner-defendant to the then Court of First Instance of La Union, the parties
agreed to adopt SANDOVAL's testimony before the Municipal Court. After trial de novo,
judgment was rendered dismissing the complaint against petitioner-defendant.

On appeal to respondent Appellate Court, SANDOVAL obtained a reversal in his favor, as


follows:

WHEREFORE, the appealed decision is hereby set aside and another one
entered ordering defendant-appellee to return the one hundred and seventy
cavans of rice to plaintiff- appellant or to pay its value in the amount of P 37.25
per cavan, with legal interest from the filing of the complaint until fully paid and
with costs against the appellee. 1

Before us, petitioner-defendant takes issue with the following Appellate Court findings:

From the evidence presented by the parties, it is evident that this is a simple
case of swindling perpetuated by Chan Lin at the expense of the plaintiff and the
defendant. The act of Chan Lin in purchasing plaintiff's rice at the price of P 37.25
per cavan and thereafter offering the same goods to defendant at a much lower
price is an indication that it was never his intention to comply with his obligation
to plaintiff. It is clear that Chan Lin's only purpose in entering into said contract
with plaintiff was to acquire the physical possession of the goods and then to
pass them on to defendant on the pretext that he is the owner thereof. Premises
considered, therefore, Chan Lin cannot be considered as the owner of the goods
at the time the same was said to have been sold to the defendant-appellee.
Considering that defendant acquired the 170 cavans of rice from a person who is
not the owner thereof, it is therefore clear that he acquired no greater right than
his predecessor-in-interest.

Finally, on principle of equity, it is but proper that plaintiff-appellant be allowed to


recover the one-hundred and seventy cavans of rice or its value. Being the
undisputed owner of the above mentioned goods, the appellant cannot be
deprived of its ownership without the corresponding payment. 2

We agree with petitioner-defendant that there was a perfected sale. Article 1475 of the Civil
Code lays down the general rule that there is perfection when there is consent upon the subject
matter and price, even if neither is delivered.
The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.

xxx xxx xxx

Ownership of the rice, too, was transferred to the vendee, Chan Lin, upon its delivery to him at
San Fernando, La Union, the place stipulated 3 and pursuant to Articles 1477 and 1496 of the
same Code:

Art. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.

Art. 1496. The ownership of the thing sold is acquired by the vendee from the
moment it is delivered to him in any of the ways specified in Articles 1497 to
1501, or in any manner signifying an agreement that the possession is
transferred from the vendor to the vendee.

At the very least, Chan Lin had a rescissible title to the goods for the non-payment of the
purchase price, but which had not been rescinded at the time of the sale to petitioner.

However, from petitioner-defendant's own testimony before the Court of First


Instance, he admits that three days after the delivery, he was repaid the sum of
P5,600.00 by Chan Lin, who was then accompanied by SANDOVAL's driver, and
that he had delivered the rice back to them. On rebuttal, however, the driver
denied that the rice had ever been returned. 4 The driver's version is the more
credible, for, as SANDOVAL's counsel had manifested in open Court, if return of
the rice had been effected, they would have withdrawn the complaint. 5 Following
is the admission made by petitioner-defendant:

Q After the third day ... when that request for you to hold the rice
was already overdue, what happened?

A This is what happened. Chan Lin and the driver with the same
truck that they used to unload the rice, came to me.

Q What day was that?

A That was I think, Thursday, about 4:30 P.M.

Q Do you know the date?

A November 26, I think.

Q What did they do when this driver and Mr. Chan Lin came back?

A They told me that they wanted the rice back and give my money
back.

Q Did they give you your money back?


A Yes.

Q How much?

A They gave me P5.600.

COURT:

Q They gave you that amount?

A Yes, sir.

ATTY. GUALBERTO:

Q Did they tell you why they were getting back the rice and giving
you back your money?

A Yes. The complete rice, and Vallo (SANDOVAL's driver) told me,
he wanted to return the rice to the ricemill, that is what Vallo and
the Chinese agreed with Aniceto Sandoval.

Q Did the Chinese tell you that he made agreement with Sandoval
to get back the rice?

A Yes.

COURT:

Q Did you receive the money?

A Yes , sir6

Having been repaid the purchases price by Chan Lin , the sale, as between them, had been
voluntarily rescinded, and petitioner-defendant was thereby divested of any claim to the rice.
Technically, therefore, he should return the rice to Chan Lin, but since even the latter, again from
petitioner-defendant's own testimony above-quoted, was ready to return the rice to SANDOVAL,
and the latter's driver denies that the rice had been returned by petitioner-defendant cannot be
allowed to unjustly enrich himself at the expense of another by holding on to property no longer
belonging to him.7 In law and in equity, therefore, SANDOVAL is entitled to recover the rice, or
the value theref since hewas not paid the price therefor.

WHEREFORE, albeit on a different premise, the judgment under review is hereby AFFIRMED.
Costs against petitioner.

SO ORDERED.

Plana, Relova, Gutierrez, Jr., De la Fuente and Alampay, JJ., concur.

Teehankee, J., took no part.


ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA, DEMETRIO QUIJADA,
ELIUTERIA QUIJADA, EULALIO QUIJADA, and WARLITO
QUIJADA, petitioners, vs. COURT OF APPEALS, REGALADO MONDEJAR, RODULFO
GOLORAN, ALBERTO ASIS, SEGUNDINO RAS, ERNESTO GOLORAN, CELSO
ABISO, FERNANDO BAUTISTA, ANTONIO MACASERO, and NESTOR
MAGUINSAY, respondents.

DECISION
MARTINEZ, J.:

Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private respondents for
quieting of title, recovery of possession and ownership of parcels of land with claim for attorney's fees
and damages. The suit was premised on the following facts found by the Court of Appeals, which is
materially the same as that found by the trial court:

"Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda. de Quijada. Trinidad
was one of the heirs of the late Pedro Corvera and inherited from the latter the two-hectare parcel of land
subject of the case, situated in the barrio of San Agustin, Talacogon, Agusan del Sur. On April 5, 1956,
Trinidad Quijada together with her sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and
brother Epapiadito Corvera executed a conditional deed of donation (Exh. C) of the two-hectare parcel of
land subject of the case in favor of the Municipality of Talacogon, the condition being that the parcel of
land shall be used solely and exclusively as part of the campus of the proposed provincial high school in
Talacogon. Apparently, Trinidad remained in possession of the parcel of land despite the donation. On
July 29, 1962, Trinidad sold one (1) hectare of the subject parcel of land to defendant-appellant Regalado
Mondejar (Exh. 1). Subsequently, Trinidad verbally sold the remaining one (1) hectare to defendant-
appellant (respondent) Regalado Mondejar without the benefit of a written deed of sale and evidenced
solely by receipts of payment. In 1980, the heirs of Trinidad, who at that time was already dead, filed a
complaint for forcible entry (Exh. E) against defendant-appellant (respondent) Regalado Mondejar, which
complaint was, however, dismissed for failure to prosecute (Exh. F). In 1987, the proposed provincial
high school having failed to materialize, the Sangguniang Bayan of the municipality of Talacogon enacted
a resolution reverting the two (2) hectares of land donated back to the donors (Exh. D). In the meantime,
defendant-appellant (respondent) Regalado Mondejar sold portions of the land to defendants-appellants
(respondents) Fernando Bautista (Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7) and Ernesto
Goloran (Exh. 8).

"On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against defendants-appellants
(respondents). In the complaint, plaintiffs-appellees (petitioners) alleged that their deceased mother never
sold, conveyed, transferred or disposed of the property in question to any person or entity much less to
Regalado Mondejar save the donation made to the Municipality of Talacogon in 1956; that at the time of
the alleged sale to Regalado Mondejar by Trinidad Quijada, the land still belongs to the Municipality of
Talacogon, hence, the supposed sale is null and void.

"Defendants-appellants (respondents), on the other hand, in their answer claimed that the land in dispute
was sold to Regalado Mondejar, the one (1) hectare on July 29, 1962, and the remaining one (1) hectare
on installment basis until fully paid. As affirmative and/or special defense, defendants-appellants
(respondents) alleged that plaintiffs' action is barred by laches or has prescribed.

"The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly because 'Trinidad
Quijada had no legal title or right to sell the land to defendant Mondejar in 1962, 1966, 1967 and 1968,
the same not being hers to dispose of because ownership belongs to the Municipality of Talacogon'
(Decision, p. 4; Rollo, p. 39) and, secondly, that the deed of sale executed by Trinidad Quijada in favor of
Mondejar did not carry with it the conformity and acquiescence of her children, more so that she was
already 63 years old at the time, and a widow (Decision, p. 6; Rollo, p. 41)."[1]

The dispositive portion of the trial court's decision reads:

"WHEREFORE, viewed from the above perceptions, the scale of justice having tilted in favor of the
plaintiffs, judgment is, as it is hereby rendered:

1) ordering the Defendants to return and vacate the two (2) hectares of land to Plaintiffs as
described in Tax Declaration No. 1209 in the name of Trinidad Quijada;
2) ordering any person acting in Defendants' behalf to vacate and restore the peaceful
possession of the land in question to Plaintiffs;
3) ordering the cancellation of the Deed of Sale executed by the late Trinidad Quijada in favor
of Defendant Regalado Mondejar as well as the Deeds of Sale/Relinquishments executed by
Mondejar in favor of the other Defendants;
4) ordering Defendants to remove their improvements constructed on the questioned lot;
5) ordering the Defendants to pay Plaintiffs, jointly and severally, the amount of P10,000.00
representing attorney's fees;
6) ordering Defendants to pays the amount of P8,000.00 as expenses of litigation; and
7) ordering Defendants to pay the sum of P30,000.00 representing moral damages.

SO ORDERED."[2]

On appeal, the Court of Appeals reversed and set aside the judgment a quo[3] ruling that the sale
made by Trinidad Quijada to respondent Mondejar was valid as the4 former retained an inchoate interest
on the lots by virtue of the automatic reversion clause in the deed of donation. [4] Thereafter, petitioners
filed a motion for reconsideration. When the CA denied their motion, [5] petitioners instituted a petition for
review to this Court arguing principally that the sale of the subject property made by Trinidad Quijada to
respondent Mondejar is void, considering that at that time, ownership was already transferred to the
Municipality of Talacogon. On the contrary, private respondents contend that the sale was valid, that they
are buyers in good faith, and that petitioners' case is barred by laches. [6]
We affirm the decision of the respondent court.
The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters [7] was subject to
the condition that the donated property shall be "used solely and exclusively as a part of the campus of the
proposed Provincial High School in Talacogon." [8] The donation further provides that should "the
proposed Provincial High School be discontinued or if the same shall be opened but for some reason or
another, the same may in the future be closed" the donated property shall automatically revert to the
donor.[9] Such condition, not being contrary to law, morals, good customs, public order or public policy
was validly imposed in the donation.[10]
When the Municipality's acceptance of the donation was made known to the donor, the former
became the new owner of the donated property -- donation being a mode of acquiring and transmitting
ownership[11] - notwithstanding the condition imposed by the donee. The donation is perfected once the
acceptance by the donee is made known to the donor. [12] Accordingly, ownership is immediately
transferred to the latter and that ownership will only revert to the donor if the resolutory condition is not
fulfilled.
In this case, that resolutory condition is the construction of the school. It has been ruled that when a
person donates land to another on the condition that the latter would build upon the land a school, the
condition imposed is not a condition precedent or a suspensive condition but a resolutory one. [13] Thus, at
the time of the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not have sold the lots
since she had earlier transferred ownership thereof by virtue of the deed of donation. So long as the
resolutory condition subsists and is capable of fulfillment, the donation remains effective and the donee
continues to be the owner subject only to the rights of the donor or his successors-in-interest under the
deed of donation. Since no period was imposed by the donor on when must the donee comply with the
condition, the latter remains the owner so long as he has tried to comply with the condition within a
reasonable period. Such period, however, became irrelevant herein when the donee-Municipality
manifested through a resolution that it cannot comply with the condition of building a school and the
same was made known to the donor. Only then - when the non-fulfillment of the resolutory condition was
brought to the donor's knowledge - that ownership of the donated property reverted to the donor as
provided in the automatic reversion clause of the deed of donation.
The donor may have an inchoate interest in the donated property during the time that ownership of
the land has not reverted to her. Such inchoate interest may be the subject of contracts including a contract
of sale. In this case, however, what the donor sold was the land itself which she no longer owns. It would
have been different if the donor-seller sold her interests over the property under the deed of donation
which is subject to the possibility of reversion of ownership arising from the non-fulfillment of the
resolutory condition.
As to laches, petitioners' action is not yet barred thereby. Laches presupposes failure or neglect for an
unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or
should have been done earlier; [14] "it is negligence or omission to assert a right within a reasonable time,
thus, giving rise to a presumption that the party entitled to assert it either has abandoned or declined to
assert it."[15] Its essential elements of:
a) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation complained of;
b) Delay in asserting complainant's right after he had knowledge of the defendant's conduct and
after he has an opportunity to sue;
c) Lack of knowledge or notice on the part of the defendant that the complainant would assert
the right on which he bases his suit; and,
d) Injury or prejudice to the defendant in the event relief is accorded to the complainant." [16]
are absent in this case. Petitioners' cause of action to quiet title commenced only when the property
reverted to the donor and/or his successors-in-interest in 1987. Certainly, when the suit was initiated the
following year, it cannot be said that petitioners had slept on their rights for a long time. The 1960's sales
made by Trinidad Quijada cannot be the reckoning point as to when petitioners' cause of action
arose.They had no interest over the property at that time except under the deed of donation to which
private respondents were not privy. Moreover, petitioners had previously filed an ejectment suit against
private respondents only that it did not prosper on a technicality.
Be that at it may, there is one thing which militates against the claim of petitioners. Sale, being a
consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of
the minds[17] as to the offer and acceptance thereof on three (3) elements: subject matter, price and terms
of payment of the price.[18] ownership by the seller on the thing sold at the time of the perfection of the
contract of sale is not an element for its perfection. What the law requires is that the seller has the right to
transfer ownership at the time the thing sold is delivered. [19] Perfection per se does not transfer ownership
which occurs upon the actual or constructive delivery of the thing sold. [20] A perfected contract of sale
cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection;
hence, the sale is still valid.
The consummation, however, of the perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer when the seller or her successors-in-
interest subsequently acquires ownership thereof. Such circumstance happened in this case when
petitioners -- who are Trinidad Quijada's heirs and successors-in-interest -- became the owners of the
subject property upon the reversion of the ownership of the land to them. Consequently, ownership is
transferred to respondent Mondejar ands those who claim their right from him. Article 1434 of the New
Civil Code supports the ruling that the seller's "title passes by operation of law to the buyer." [21] This rule
applies not only when the subject matter of the contract of sale is goods, [22] but also to other kinds of
property, including real property.[23]
There is also no merit in petitioners' contention that since the lots were owned by the municipality at
the time of the sale, they were outside the commerce of men under Article 1409 (4) of the NCC; [24]thus,
the contract involving the same is inexistent and void from the beginning. However, nowhere in Article
1409 (4) is it provided that the properties of a municipality, whether it be those for public use or its
patrimonial property[25] are outside the commerce of men. Besides, the lots in this case were conditionally
owned by the municipality. To rule that the donated properties are outside the commerce of men would
render nugatory the unchallenged reasonableness and justness of the condition which the donor has the
right to impose as owner thereof. Moreover, the objects referred to as outsides the commerce of man are
those which cannot be appropriated, such as the open seas and the heavenly bodies.
With respect to the trial courts award of attorneys fees, litigation expenses and moral damages, there
is neither factual nor legal basis thereof. Attorneys fees and expenses of litigation cannot, following the
general rule in Article 2208 of the New Civil Code, be recovered in this case, there being no stipulation to
that effect and the case does not fall under any of the exceptions. [26] It cannot be said that private
respondents had compelled petitioners to litigate with third persons. Neither can it be ruled that the former
acted in gross and evident bad faith in refusing to satisfy the latters claims considering that private
respondents were under an honest belief that they have a legal right over the property by virtue of the
deed of sale. Moral damages cannot likewise be justified as none of the circumstances enumerated under
Articles 2219[27] and 2220[28] of the New Civil Code concur in this case.
WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.

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