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DEVELOPMENT BANK OF THE PHILIPPINES C.

MOLL, 43 SCRA 82 (1972) As the proceeds of the foreclosure sales aforesaid were not sufficient to cover the loan indebtedness of
appellants, the appellee Bank then instituted the present case in the Court of First Instance of Manila on
January 23, 1964, for the purpose of recovering so the complaint alleges, the sums of P173,117.55, on
G.R. No. L-25802 January 31, 1972
account of the agricultural loans, and P1,475,473.90, on account of the industrial loans, which it claims to be
the outstanding balances or deficiencies under the two types of loans obtained by appellants.
DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee,
vs.
In their answer, appellants admit the existence of their indebtedness to the appellee Bank under the loan
LEONOR R. VDA. DE MOLL, SEBASTIAN MOLL, JR., BACILISO MOLL, ERIBERTO MOLL, ESTRELLA MOLL,
contracts mentioned in the latter's complaint; but they deny and dispute, among others, the deficiency
SALVADOR MOLL, SEGUNDO MOLL and AURORA MOLL, defendants-appellants.
claims of the appellee Bank, contending at the same time, by way of affirmative and special defenses, that
the extrajudicial foreclosure and public auction sales of the properties mortgaged had been carried out by
Jesus A. Avancena and Benedicto C. Legaspi for plaintiff-appellee. the sheriff irregularly and improperly in violation of the pertinent provisions of Rule 39 of the Rules of Court
and had thus resulted in the sale for unconscionable prices of their mortgaged properties which, according
Cesario A. Fabicante for defendant Eriberto Moll. to appellants' own estimate, have a total actual value of not less than P5,000,000.00.

Jose S. Sarte for defendants-appellants Leonor R. Vda. de Moll, et al. It appears, further, that the corresponding deeds and certificates of sale issued in favor of the appellee Bank
in consequence of the disputed foreclosure proceeding and public auction sales were registered with the
Register of Deeds concerned only on November 11, 1964 and December 7, 1964 some ten (10) months
BARREDO, J.:p later than the commencement of the present action for collection of the deficiency claim of the appellee
Bank. .
Appeal from the decision of the Court of First Instance of Manila in its Civil Case No. 56037 sentencing
appellants to jointly and severally pay to the appellee Development Bank of the Philippines the sum of After trial, the court below rendered the decision appealed from which, as stated earlier in the opening
P1,648,591.45, claimed by the said Bank to be the deficiency or unpaid balance of appellants' overdue paragraph hereof, sustains the above-mentioned deficiency claims of the appellee Development Bank of the
obligation under certain agricultural and industrial loans it had granted to appellants after applying to the Philippines. .
said loans the proceeds of the extrajudicial foreclosure and public auction sale of the properties mortgaged
to secure their payment, plus attorney's fees and costs.
In this appeal, appellants assail the said judgment thus: .

It appears that on April 12, 1947 and December 15, 1947, the appellee Development Bank of the Philippines
(then known as the Rehabilitation Finance Corporation) granted agricultural loans in the amounts of "I. THE HONORABLE COURT A QUO ERRED IN NOT SETTING ASIDE THE ALLEGED
P120,000.00 and P22,000.00, respectively, in favor of one Sebastian Moll, Sr. who, to secure the payment of AUCTION SALE ON JUNE 30,1962, OF THE MORTGAGED PROPERTIES BY THE
said loans, mortgaged in favor of the appellee Bank fourteen (14) parcels of land comprising the property DEFENDANTS-APPELLANTS TO THE PLAINTIFF-APPELLEE, ON THE GROUND THAT THE
known as "Hacienda Moll" covered by certificates of title and tax declarations issued by the land registry SELLING AUCTION PRICES OF SAID PROPERTIES WERE UNJUST, DISPROPORTIONATE
of the province of Camarines Sur. Said Sebastian Moll, Sr. having subsequently died, his heirs (appellants) AND UNCONSCIONABLE IN THE LIGHT OF THE FAIR AND CURRENT MARKET VALUE OF
executed on May 14, 1949 an extrajudicial partition of his estate, including the properties above-mentioned, THE SAME PROPERTIES AT THE TIME OF SAID AUCTION SALE. .
adjudicating the same to themselves, albeit binding themselves, jointly and severally, to assume payment of
the indebtedness of the deceased with the appellee Bank; and starting from the said date, appellants "II. THE HONORABLE COURT A QUO ERRED IN NOT DISMISSING THE COMPLAINT AT
themselves applied for and were granted by the appellee Bank new and additional loans, to wit: May 14, BAR FOR RECOVERY OF A DEFICIENCY CLAIM, ON THE GROUND THAT SAID
1949 an industrial loan of P150,000.00; May 28, 1951 an additional agricultural loan of P100,000.00; COMPLAINT WAS OR IS, PREMATURE, FOR THE REASON THAT IT HAD BEEN FILED
and May 31, 1951 another industrial loan of P580,000.00. The additional agricultural loan was granted by DURING THE PERIOD OF LEGAL REDEMPTION GRANTED BY LAW TO DEFENDANTS-
the appellee Bank on the security of the same properties already mortgaged to the appellee Bank by APPELLANTS AS MORTGAGE-DEBTORS." .
appellants' predecessor in interest, earlier stated; while the new industrial loans were secured by mortgages
on machineries, equipment and some other real estate.
The thrust of appellants' argument in respect of the first assignment of error is to the effect that if in 1947
and 1951 when the agricultural and industrial loans herein involved were obtained by appellants, the
Appellants thereafter failed to comply with the terms of the loan contracts as they fell due. Consequently, appellee Bank, after due inspection and appraisal of the securities they offered therefor, had granted them
the above-mentioned mortgages on their properties were extrajudicially foreclosed under the provisions of a total agricultural loan of P242,000.00 upon the security of the 14 parcels of land they mortgaged and a
Act 3135, as amended; and in the public auction sale thereof subsequently conducted by the Provincial total industrial loan of P770,000.00 upon the security of other lands and machineries and equipment they
Sheriff of Camarines Sur on June 30, 1962, the 14 parcels of land mortgaged to secure payment of the also mortgaged, hence, it is inconceivable that after the lapse of more than ten years and the fast and
agricultural loans and the machineries, equipment and other real estate mortgaged to secure payment of steadily increasing real estate values these past years, the same properties would command, in the
the industrial loans were awarded in favor of the appellee Bank as the sole and highest bidder for the extrajudicial foreclosure sales conducted by the provincial sheriff of Camarines Sur in 1962, only the measly
amounts of P176,174.50 and P19,750.00, respectively, which were accordingly applied to the payment of sums of P176,174.50 and P19,750.00, respectively, considering that pursuant to consistent banking practice,
the corresponding portions of the said loans. the aforesaid amounts of loans granted would represent only 60% of the actual and current market value of
the securities at the time of the grant of said loans. In short, it is the position of appellants that the
foreclosure sales aforesaid should be set aside because "the total auction selling price of P195,924.50 for
both the collateral securities to the agro-industrial loans, is so inadequate, disproportionate and shocking to ruled that redemption from execution sales under ordinary judgments pursuant to Section 30, Rule 39 of
conscience." . the Rules of Court should be made within twelve (12) months from the registration of the same and We
have uniformly applied the same rule to sales upon extrajudicial foreclosure of registered lands.".
It does appear that the purchase prices in question are considerably out of proportion to the possible actual
market value of appellants' securities. Considering, however, that the impugned sales were made subject to On the other hand, it may also be stressed that actions seeking to set aside auction sales do not toll the
appellants' right of redemption, the following ruling in Ponce de Leon vs. Rehabilitation Finance running of the period of redemption; and this We have to emphasize now, if only to forestall the possibility
Corporation, 1sufficiently disposes of their contention: . of the parties' coming up here in the future and praying for a definite ruling on the matter. This question
was resolved inSumerariz vs. Development Bank of the Philippines, L-23764, December 26, 1967, 21 SCRA
1374, thus: .
In support of their second assignment of error, the Sorianos maintain that the sum of
P10,000.00, for which the Paraaque property was sold to the RFC, is ridiculously
inadequate, considering that said property had been assessed at P59,647.05. This Under the second assignment of error, plaintiffs maintain that the period of one (1)
presense is devoid of merit, for said property was subject to redemption and: year to redeem the property in question was suspended by the institution of Case No.
29306 (commenced by Sumerariz and his wife against the DBP and the Sheriff of
Manila to set aside the foreclosure sale involved therein) on March 26, 1956, or three
... where there is the right to redeem ... inadequacy of price should not be material,
(3) days before the expiration of said period. We have not found, however, any
because the judgment debtor may re-acquire the property or else sell his right to
statute or decision in support of this pretense. Moreover, up to now plaintiffs have
redeem and thus recover any loss he claims to have suffered by reason of the price
not exercised the right of redemption. Indeed, although they have intimated their
obtained at the execution sale (Barrozo vs. Macaraig, 83 Phil. 378, 381, Emphasis
wish to redeem the property in question, they have not deposited the amount
Ours.)
necessary therefor. It may not be amiss to note that, unlike Section 30 of Rule 39 of
the Rules of Court, which permits the extension of the period of redemption of
Then, again, as the trial court had correctly observed: mortgaged properties, (Enage vs. Vda. e Hijas de F. Escano, 38 Phil. 657) Section 3 of
Commonwealth Act No. 459, in relation to Section 9 of Republic Act No. 85, which
But, mere inadequacy of the price obtained at the sheriff's sale unless shocking to the governs the redemption of property mortgaged to the Bank, does not contain a
conscience will not be sufficient to set aside the sale if there is no showing that, in the similar provision (Nepomuceno vs. Rehabilitation Finance Corporation, L-14897,
event of a regular sale, a better price can be obtained. The reason is that, generally, November 23, 1960). Again this question has been definitely settled by the decision in
and, in forced sales, low prices are usually offered (1 Moran's Rules of Court, 834- the previous case declaring that plaintiffs' right of redemption has already been
835). Considering that in Gov't. of P.I. vs. Soriano, G.R. No. 32196, wherein property extinguished in view of their failure to exercise it within the statutory period.
worth P120,000.00 was sold for only P15,000.00, in Philippine National Bank vs.
Gonzales, 45 Phil. 693, wherein property valued at P45,000.00 was sold for Perforce then We must hold that the foreclosure sales here involved cannot be set aside on the ground,
P15,000.00 and in Cu Unjieng & Sons v. Mabalacat Sugar Co., 58 Phil. 439, property vigorously alleged by appellants, that the prices obtained therein are grossly inadequate and
worth P300,000.00 to P400,000.00 was sold for P177,000.00, the Court cannot unconscionable. Corollarily, We do not deem it necessary to discuss further and rule upon appellants' claim
consider the sale of the Bacolod properties, the Taft Avenue house and lot and the that the foreclosure sales referred to were improperly and irregularly conducted by the provincial sheriff of
Paraaque property of the Sorianos null and void for having been sold at inadequate Camarines Sur because the latter sold the mortgaged properties here involved in mass and within a single
prices shocking to the conscience and there being no showing that in the event of a day, although the record appears to be bereft of any concrete showing, other than appellants' claim that
resale, better prices can be obtained.' better prices could had been obtained for the said mortgaged securities had the above-mentioned
provincial sheriff conducted the sales in question otherwise. 4
This ruling was reiterated in the more recent case of De Leon vs. Salvador, et al., 2
Anent appellants' second assignment of error to the effect that the present case was prematurely instituted
... (w)hile in ordinary sales for reasons of equity a transaction may be invalidated on on the ground that an action for recovery of an alleged deficiency claim cannot be legally entertained during
the ground of inadequacy of price, or when such inadequacy shocks one's conscience the period of redemption, appellants argue in their brief (pp. 16-18), as follows: .
as to justify the courts to interfere, such does not follow when the law gives to the
owner the right to redeem, as when a sale is made at public auction, upon the theory In the case at bar, the suit to recover deficiency claim was instituted on January 23,
that the lesser the price the easier it is for the owner to effect the redemption. And so 1964, (page 1 Record on Appeal), but, the Certificate of Sale by the Provincial Sheriff
it was aptly said: "When there is the right to redeem, inadequacy of price should not of Camarines Sur in connection with the auction sale of the collateral securities on the
be material, because the judgment debtor may reacquire the property or also sell his industrial loans was registered in the Office of the Register of Deeds of said province
right to redeem and thus recover the loss he claims to have suffered by reason of the on November 11, 1964, and, the Certificate of Sale of said provincial sheriff in
price obtained at the auction sale. connection with the auction sale of the collateral securities on the agricultural loans,
was registered in the same office on December 7, 1964. Therefore, the present action
At this juncture, it may not be amiss to make it clear that appellants' period to redeem the properties sold in for recovery of deficiency claim was filed even before the registration of both
the extrajudicial foreclosure sales in question is one year, "computed from the date of the registration of Certificates of Sale, as shown by Exhibit '2' for appellants (pp. 33-34, Record on
the certificates of sales of the mortgaged properties," since registered lands are involved in this case, and, as Appeal). As the running of the period of one year of the right of redemption
explained lately by this Court in Quimson, et al. vs. Philippine National Bank, 3 "this Court has uniformly commenced from the date and/or dates of registration of the Certificate of Sale, it is
too clear and unassailable that the filing of the case at bar on January 23, 1964, was
improper and premature. For indeed, the filing of a suit for recovery of a deficiency auctioned properties could not be a bar to the present action of appellee to recover the deficiencies which it
claim before the commencement or, during the period of the right of redemption, claims to have resulted after applying the proceeds of the foreclosure sales here involved in payment of
constitutes a clever anticipation that the auction sale arising from the effects of appellants' mortgage debt. .
extrajudicial foreclosure had been conducted with all the earmarks of validity, even if
it were not. Suppose an auction sale were declared illegal due to irregularities and
WHEREFORE, the decision appealed from is affirmed, with costs against appellants.
violation of the mandate of the law, what would be the effect of such pronouncement
in an action for deficiency claim when such action has no legal basis? If a suit for
recovery of a deficiency judgment or deficiency claim is a legal consequence of an
auction sale arising from judicial or extrajudicial foreclosure, then such suit should TOPACIO V. CA (1992)
await for the expiration period of the right of redemption within which period,
precisely, the redemptioner may ordinarily institute an action to assail the manner G.R. No. 102606 July 3, 1992
with which the auction sale was conducted. ... .

LINO R. TOPACIO, petitioner,


In the case of Philippine Bank of Commerce vs. De Vera, 5 We held: . vs.
HON. COURT OF APPEALS, BPI INVESTMENT CORP., respondents.
"A reading of the provisions of Act No. 3135, as amended (re extrajudicial foreclosure) discloses nothing, it is
true, as to the mortgagee's right to recover such deficiency. But neither do we find any provision thereunder PARAS, J.:
which expressly or impliedly prohibits such recovery. .

This is an appeal by way of certiorari from the decision 1 in CA G.R. CV 23258 which reversed the
Article 2131 of the new Civil Code, on the contrary, expressly provides that "The form, decision 2 of the Regional Trial Court, Branch 98, Quezon City in Civil Case No. 51954.
extent and consequences of a mortgage, both as to its constitution, modification and
extinguishment, and as to other matters not included in this Chapter, shall be
governed by the provisions of the Mortgage Law and of the Land Registration Law." On March 9, 1988, the parties submitted the following stipulation of facts:
Under the Mortgage Law, which is still in force, the mortgagee has the right to claim
for the deficiency resulting from the price obtained in the sale of the real property at 1. The parties admit the personal and corporate circumstances of each other as found
public auction and the outstanding obligation at the time of the foreclosure in the complaint.
proceedings. (See Soriano vs. Enriquez, 24 Phil. 584; Banco de Islas Filipinas v.
Concepcion e Hijos, 53 Phil. 86; Banco Nacional v. Barreto, 53 Phil. 101). Under the
Rules of Court (Sec. 6, Rule 70), "Upon the sale of any real property, under an order 2. The spouses Juan P. de Villa, Jr. and Rosalia de Villa, parents-in-law of the plaintiff,
for a sale to satisfy a mortgage or other incumbrance thereon, if there be a balance were the former owners of Lot No. 13, Block 21-A, covered by TCT No. 280808 of the
due to the plaintiff after applying the proceeds of the sale, the court, upon motion, Registry of Deeds of Quezon City. This property was previously mortgaged to the
should render a judgment against the defendant for any such balance for which, by Ayala Investment and Development Corporation to secure an obligation of
the record of the case, he may be personally liable to the plaintiff,... ." It is true that P500,000.00. For failure of the said mortgagors to pay upon maturity, the mortgage
this refers to a judicial foreclosure, but the underlying principle is the same, that the was foreclosed and consequently, defendant acquired the property as highest bidder
mortgage is but a security and not a satisfaction of indebtedness. ... . in the auction sale, following the foreclosure. No redemption having been exercised
by the mortgagors, the defendant was able to consolidate its title over the property.

Under the provisions of section 6 of Rule 70 now section 6 of Rule 68 of the revised Rules of Court
above-cited, it is expressly provided that "if there be a balance due to the plaintiff after applying the 3. Plaintiff, who lives with his in-laws, negotiated to purchase the property from
proceeds of the sale, the court, upon motion, shall render judgment against the defendant for any such defendant. He first made an offer on August 9, 1985 (Annex A, complaint) for
balance for which, by the record of the case, he may be personally liable to the plaintiff, upon which P900,000.00 but defendant asked plaintiff to improve his offer. Subsequently, the
execution may issue immediately if the balance is all due at the time of the rendition of the judgment." Said plaintiff and Mr. Manuel Ablan, then Manager of the Loans Adjustment and Special
provisions are equivalent to those of section 260 of the old Code of Civil Procedure, under which it was held Asset Department of the defendant arrived at P1,250,000.00 as the purchase price,
in a case, 6 "that in order that a decree for any balance for which the mortgagor may be personally liable to with 30% downpayment, and the balance, payable in cash, upon execution of the
the mortgagee may be issued, it is necessary that the sale of the mortgaged real property has been made Deed of Sale. Plaintiff confirmed his offer in his letter to the defendant dated
according to the decree for said sale to satisfy the judgment; that there has remained a balance due the November 27, 1985 (Annex B, complaint; Annex, 1, Answer), with his check payment
mortgagee after applying the proceeds of the sale to the debt; (and) that the mortgagee presents a motion of P375,000.00.
for the issuance of a decree for said balance", while in another case, 7 it was said that "Section 260 requires
the rendition and entry of a judgment for the deficiency against the defendant, who shall be personally 4. Defendant received plaintiff's initial payment of P375,000.00 on November 28,
liable to the plaintiff, and execution may issue on said judgment at once." We believe it is apparent from the 1985, for which a receipt was issued under defendant's Official Receipt No. 112375
provisions and decisions above-quoted that once the auction sale of the mortgaged property is effected and (Annex C, Complaint).
the resulting deficiency in the mortgage debt is ascertained, the mortgagee-creditor is then and there
entitled to secure a deficiency judgment which may immediately be executed, whether or not the
5. On December 4, 1985, defendant wrote to the plaintiff, informing him of the terms
mortgagor is still entitled to redeem the property sold. We hold then that appellants' right to redeem their
and conditions of the sale, as approved by the management of defendant, which,
among other things, gives plaintiff up to January 4, 1986 within which to pay the The dispositive portion of the trial court's decision is quoted hereunder:
balance of P875,000.00 (Annex D, Complaint, Annex 2, Answer).
Samakatwid, iginagawad ng hukumang ito ang pasiya para sa nagsasakdal at ipinag-
6. Plaintiff asked for extensions within which to pay the balance. The first was made uutos sa ipinagsakdal na BPI Investment Corporation na tanggapin mula sa
on January 8, 1986 (Annex 3, Answer), another on April 22, 1986 (Annex 4, Answer). nagsasakdal.
Defendant agreed to extend the payment up to June 30, 1986, in accordance with
defendant's letter dated May 5, 1986, requiring plaintiff, in addition, to pay interest at
Una Ang tsekeng P375,000.00 bilang paunang bayad na tatlumpung porsiento ng
24% per annum on the unpaid balance (Annex 5, Answer).
buong halaga.

7. Plaintiff, not having been able to meet defendant's deadline (June 30, 1986),
Pangalawa Ang hulihang P875,000.00 na may kalakip na interes na labindalawang
defendant wrote a letter to plaintiff dated September 6, 1986 (Annex 6, Answer)
(12%) porsiento simula sa ika-lima ng Oktubre, 1987 hanggang mabayaran ito;
declaring itself (defendant) free to sell the property to other buyers and informing
plaintiff that he could already claim his initial payment of P375,000.00
Pangatlo At isagawa ng nasasakdal na BPI Investment Corporation ang pagsasalin
ng ari-arian na nabanggit sa dakong itaas sa pamamagitan ng isang bilihan tuluyan sa
8. In response, plaintiff, in its letter dated October 22, 1986 (Annex 7, Answer), asked
kapakanan ng nasasakdal na si Lino Topacio at kanyang may-bahay.
for an extension of another six (6) months, within which to pay the balance of
P875,000.00. Defendant denied plaintiff's request and asked plaintiff to get back his
P375,000.00, in defendant's letter to plaintiff dated November 7, 1986 (Annex 8, Ang gastos ay dapat bayaran ng ipinagsasakdal.
Answer).
IPINAG-UUTOS. (Rollo, p. 24)
9. On January 5, 1987, defendant wrote plaintiff, reiterating its request that plaintiff
get back his P375,000.00 (Annex 9, Answer) and on February 12, 1987 (Annex E, The Court of Appeals, on appeal, reversed the trial court's decision stating that the letter dated December 4,
Complaint, Annex 10, Answer), defendant mailed to plaintiff a cashier's check for 1985, sent by BPI to the petitioner reveals that the contract entered into by them is a contract to sell, not a
P375,000.00, payable to him. Plaintiff replied in March 6, 1987 (Annex F, Complaint, contract of sale.
Annex 11, Answer), declining acceptance of the P375,000.00 and insisting therein the
defendant allow plaintiff to pay the balance of P875,000.00.
The letter of December 4, 1985 is hereby quoted as follows:

10. Subsequently, defendant informed plaintiff that the property is being sold for
P1,600.00, in its Answer. Plaintiff then wrote on April 1, 1987 to Mr. Xavier Loinaz of We are pleased to inform you that the managament has approved for the sale for the
defendant (Annex 13, Answer) asking that original price of P1,250,000.00 be above property to you under the following terms and conditions:
maintained. Defendant again wrote to plaintiff on May 29, 1987 (Annex 14, Answer)
reiterating its position that defendant was willing to sell at P1,600,000.00. 1. Selling price of P1,250,000.00 is on CASH basis;

11. Plaintiff, in its letter to defendant dated July 21, 1987, (Annex G, Complaint, Annex 2. Execution of a Deed of Absolute Sale;
15, Answer), returned the cashier's check earlier issued by defendant in favor of
plaintiff. Defendant acknowledged receipt of said letter but declined to take back the
said check as expressed in defendant's letter of the same date (Annex 16, Answer). 3. All expenses relative to the sale/transfer of title shall be for the account of the
buyer;

12. The cashier's check of P375,000.00 payable to plaintiff remains uncashed to date
and is still in the hands of the plaintiff, after defendant refused to accept its return. 4. Eviction of tenants, if any, shall be for the account of the buyer;

13. Plaintiff admits that Annexes 1 to 16 attached to the Answer are true and faithful 5. Sale of the property is on as-is where-is basis.
copies of the originals. Defendant likewise admits that Annexes A to G attached to the
complaint are true and faithful copies of the originals. Said Annexes are hereby If you are agreeable to the foregoing, kindly indicate your conformity by signing on
adopted by the parties as part of this Stipulation of Facts and may be received in the space provided below and return the copies to us together with your balance of
evidence without further authentication or identification. (Rollo, pp. 21-24) P875,000.00. The validity of the above approval is good up to January 4, 1986. (Rollo,
pp. 7-8)
On the basis of the foregoing stipulation, the trial court rendered judgment in favor of the petitioner, finding
that there is a perfected contract of sale which is still enforceable because the respondent failed to rescind The petition is impressed with merit.
either by judicial or notarial rescission.
The payment by petitioner of P375,000.00 on November 28, 1991 which respondent accepted, and for Respondent cannot just consider the sale cancelled by simply returning the downpayment which
which an official receipt was issued, the body of which hereby quoted: petitioner refused to accept.

Partial payment for the purchase of real property, formerly owned by Juan de Villa. WHEREFORE, the appealed decision of the Court of Appeals is hereby REVERSED and SET ASIDE and the
P375,000.00 was the operative act that gave rise to a perfected contract of sale decision of the Regional Trial Court of Quezon City, Branch 89, dated April 10, 1989 is AFFIRMED with costs
between the parties. Article 1482 of the Civil Code provides: against respondent.

Art. 1482. Whenever earnest money is given in a contract of sale, it shall be LABAGALA V CA (2001)
considered as part of the price and as proof of the perfection of the contract.
[G.R. No. 132305. December 4, 2001]
Earnest money is something of value to show that the buyer was really in earnest, and given to
the seller to bind the bargain. Under the Civil Code, earnest money is considered part of the IDA C. LABAGALA, petitioner, vs. NICOLASA T. SANTIAGO, AMANDA T. SANTIAGO and HON. COURT OF
purchase price and as proof of the perfection of the contract. The P375,000.00 given by the APPEALS, respondents.
petitioner representing 30% of the purchase price is earnest money.
DECISION
Furthermore, Article 1475 of the Civil Code states:
QUISUMBING, J.:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of the This petition for review on certiorari seeks to annul the decision dated March 4, 1997,[1] of the Court
minds upon the thing which is the object of the contract and upon the price. of Appeals in CA-G.R. CV No. 32817, which reversed and set aside the judgment dated October 17,
1990,[2] of the Regional Trial Court of Manila, Branch 54, in Civil Case No. 87-41515, finding herein petitioner
to be the owner of 1/3 pro indiviso share in a parcel of land.
From the moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts. The pertinent facts of the case, as borne by the records, are as follows:

Jose T. Santiago owned a parcel of land covered by TCT No. 64729, located in Rizal Avenue Extension,
Based on the aforecited article, the parties have agreed on the object of the contract which is the
Sta. Cruz, Manila. Alleging that Jose had fraudulently registered it in his name alone, his sisters Nicolasa and
house and lot located at No. 32 Whitefield St., White Plains, Quezon City and even before
Amanda (now respondents herein), sued Jose for recovery of 2/3 share of the property. [3] On April 20, 1981,
November 27, 1985, (the date petitioner sent his letter together with the 30% downpayment),
the trial court in that case decided in favor of the sisters, recognizing their right of ownership over portions
the parties have agreed on the price which is P1,250,000.00.
of the property covered by TCT No. 64729. The Register of Deeds of Manila was required to include the
names of Nicolasa and Amanda in the certificate of title to said property.[4]
Nowhere in the transaction indicates that BPI reserved its title property nor did it provide for any automatic
rescission in case of default. So when petitioner failed to pay the balance of P875,000.00 despite several Jose died intestate on February 6, 1984. On August 5, 1987, respondents filed a complaint for
extensions given by private respondent, the latter could not validly rescind the contract without complying recovery of title, ownership, and possession against herein petitioner, Ida C. Labagala, before the Regional
with the provision of Article 1592 or Article 1191 on notarial or judicial rescission respectively. The ruling Trial Court of Manila, to recover from her the 1/3 portion of said property pertaining to Jose but which came
in Taguba v. Vda. de Leon, 132 SCRA 722 applies in the case at bar, to wit: into petitioners sole possession upon Joses death.

Respondents alleged that Joses share in the property belongs to them by operation of law, because
Considering, therefore the nature of the transaction between petitioner Taguba and they are the only legal heirs of their brother, who died intestate and without issue. They claimed that the
private respondent, which We affirm and sustain to be a contract of sale, absolute in purported sale of the property made by their brother to petitioner sometime in March 1979 [5] was executed
nature the applicable provisions of Article 1592 of the New Civil Code which states: through petitioners machinations and with malicious intent, to enable her to secure the corresponding
transfer certificate of title (TCT No. 172334[6]) in petitioners name alone.[7]
Art. 1592. In the sale of immovable property, even though it Respondents insisted that the deed of sale was a forgery. The deed showed that Jose affixed his
may have been stipulated that upon failure to pay the price at thumbmark thereon but respondents averred that, having been able to graduate from college, Jose never
the time agreed upon the rescission of the contract shall of put his thumbmark on documents he executed but always signed his name in full. They claimed that Jose
right take place, the vendee may pay, even after the expiration could not have sold the property belonging to his poor and unschooled sisters who sacrificed for his
of the period, as long as no demand for rescission of the studies and personal welfare.[8] Respondents also pointed out that it is highly improbable for petitioner to
contract has been made upon him either judicially or by notarial have paid the supposed consideration of P150,000 for the sale of the subject property because petitioner
act. After the demand the court may not grant him a new term. was unemployed and without any visible means of livelihood at the time of the alleged sale. They also
stressed that it was quite unusual and questionable that petitioner registered the deed of sale only on
In the case at bar, it is undisputed that the petitioner Taguba never notified private January 26, 1987, or almost eight years after the execution of the sale.[9]
respondent by notarial act that he was rescinding the contract, and neither had he
filed suit in suit court to rescind the sale. On the other hand, petitioner claimed that her true name is not Ida C. Labagala as claimed by
respondent but Ida C. Santiago. She claimed not to know any person by the name of Ida C. Labagala. She
claimed to be the daughter of Jose and thus entitled to his share in the subject property. She maintained Apart from respondents testimonies, the appellate court noted that the birth certificate of Ida
that she had always stayed on the property, ever since she was a child. She argued that the purported sale Labagala presented by respondents showed that Ida was born of different parents, not Jose and his wife. It
of the property was in fact a donation to her, and that nothing could have precluded Jose from putting his also took into account the statement made by Jose in Civil Case No. 56226 that he did not have any child.
thumbmark on the deed of sale instead of his signature. She pointed out that during his lifetime, Jose never
acknowledged respondents claim over the property such that respondents had to sue to claim portions Hence, the present petition wherein the following issues are raised for consideration:
thereof. She lamented that respondents had to disclaim her in their desire to obtain ownership of the
1. Whether or not petitioner has adduced preponderant evidence to prove that she is the daughter of
whole property.
the late Jose T. Santiago, and
Petitioner revealed that respondents had in 1985 filed two ejectment cases against her and other
2. Whether or not respondents could still impugn the filiation of the petitioner as the daughter of the
occupants of the property. The first was decided in her and the other defendants favor, while the second
late Jose T. Santiago.
was dismissed. Yet respondents persisted and resorted to the present action.
Petitioner contends that the trial court was correct in ruling that she had adduced sufficient evidence
Petitioner recognized respondents ownership of 2/3 of the property as decreed by the RTC. But she
to prove her filiation by Jose Santiago, making her his sole heir and thus entitled to inherit his 1/3 portion.
averred that she caused the issuance of a title in her name alone, allegedly after respondents refused to
She points out that respondents had, before the filing of the instant case, previously considered[11] her as
take steps that would prevent the property from being sold by public auction for their failure to pay realty
the daughter of Jose who, during his lifetime, openly regarded her as his legitimate daughter. She asserts
taxes thereon. She added that with a title issued in her name she could avail of a realty tax amnesty.
that her identification as Joses daughter in his ITR outweighs the strange answers he gave when he
On October 17, 1990, the trial court ruled in favor of petitioner, decreeing thus: testified in Civil Case No. 56226.

Petitioner asserts further that respondents cannot impugn her filiation collaterally, citing the case
WHEREFORE, judgment is hereby rendered recognizing the plaintiffs [herein respondents] as being entitled of Sayson v. Court of Appeals[12] in which we held that (t)he legitimacy of (a) child can be impugned only in
to the ownership and possession each of one-third (1/3) pro indiviso share of the property originally a direct action brought for that purpose, by the proper parties and within the period limited by
covered by Transfer Certificate of Title No. 64729, in the name of Jose T. Santiago and presently covered by law.[13] Petitioner also cites Article 263 of the Civil Code in support of this contention.[14]
Transfer Certificate of Title No. 172334, in the name of herein defendant [herein petitioner] and which is
located at No. 3075-A Rizal Avenue Extension, Sta. Cruz, Manila, as per complaint, and the adjudication to For their part, respondents contend that petitioner is not the daughter of Jose, per her birth
plaintiffs per decision in Civil Case No. 56226 of this Court, Branch VI, and the remaining one-third (1/3) pro certificate that indicate her parents as Leo Labagala and Cornelia Cabrigas, instead of Jose Santiago and
indiviso share adjudicated in said decision to defendant Jose T. Santiago in said case, is hereby adjudged and Esperanza Cabrigas.[15] They argue that the provisions of Article 263 of the Civil Code do not apply to the
adjudicated to herein defendant as owner and entitled to possession of said share. The Court does not see present case since this is not an action impugning a childs legitimacy but one for recovery of title,
fit to adjudge damages, attorneys fees and costs. Upon finality of this judgment, Transfer Certificate of ownership, and possession of property.
Title No. 172334 is ordered cancelled and a new title issued in the names of the two (2) plaintiffs and the
The issues for resolution in this case, to our mind, are (1) whether or not respondents may impugn
defendant as owners in equal shares, and the Register of Deeds of Manila is so directed to effect the same
petitioners filiation in this action for recovery of title and possession; and (2) whether or not petitioner is
upon payment of the proper fees by the parties herein.
entitled to Joses 1/3 portion of the property he co-owned with respondents, through succession, sale, or
donation.
SO ORDERED.[10]
On the first issue, we find petitioners reliance on Article 263 of the Civil Code to be misplaced. Said
According to the trial court, while there was indeed no consideration for the deed of sale executed by article provides:
Jose in favor of petitioner, said deed constitutes a valid donation. Even if it were not, petitioner would still
be entitled to Joses 1/3 portion of the property as Joses daughter. The trial court ruled that the following
Art. 263. The action to impugn the legitimacy of the child shall be brought within one year from the
evidence shows petitioner to be the daughter of Jose: (1) the decisions in the two ejectment cases filed by
recording of the birth in the Civil Register, if the husband should be in the same place, or in a proper case,
respondents which stated that petitioner is Joses daughter, and (2) Joses income tax return which listed
any of his heirs.
petitioner as his daughter. It further said that respondents knew of petitioners existence and her being the
daughter of Jose, per records of the earlier ejectment cases they filed against petitioner. According to the
court, respondents were not candid with the court in refusing to recognize petitioner as Ida C. Santiago and If he or his heirs are absent, the period shall be eighteen months if they should reside in the Philippines; and
insisting that she was Ida C. Labagala, thus affecting their credibility. two years if abroad. If the birth of the child has been concealed, the term shall be counted from the
discovery of the fraud.
Respondents appealed to the Court of Appeals, which reversed the decision of the trial court.
This article should be read in conjunction with the other articles in the same chapter on paternity and
filiation in the Civil Code. A careful reading of said chapter would reveal that it contemplates situations
WHEREFORE, the appealed decision is REVERSED and one is entered declaring the appellants Nicolasa and
where a doubt exists that a child is indeed a mans child by his wife, and the husband (or, in proper cases,
Amanda Santiago the co-owners in equal shares of the one-third (1/3) pro indiviso share of the late Jose
his heirs) denies the childs filiation. It does not refer to situations where a child is alleged not to be the
Santiago in the land and building covered by TCT No. 172334. Accordingly, the Register of Deeds of Manila
child at all of a particular couple.[16]
is directed to cancel said title and issue in its place a new one reflecting this decision.
Article 263 refers to an action to impugn the legitimacy of a child, to assert and prove that a person is
SO ORDERED. not a mans child by his wife. However, the present case is not one impugning petitioners legitimacy.
Respondents are asserting not merely that petitioner is not a legitimate child of Jose, but that she is not a
child of Jose at all.[17] Moreover, the present action is one for recovery of title and possession, and thus
outside the scope of Article 263 on prescriptive periods.
Petitioners reliance on Sayson is likewise improper. The factual milieu present in Sayson does not Cabrigas. Her failure to show her birth certificate would raise the presumption that if such evidence were
obtain in the instant case. What was being challenged by petitioners in Sayson was (1) the validity of the presented, it would be adverse to her claim. Petitioners counsel argued that petitioner had been using
adoption of Delia and Edmundo by the deceased Teodoro and Isabel Sayson, and (2) the legitimate status of Santiago all her life. However, use of a family name certainly does not establish pedigree.
Doribel Sayson. While asserting that Delia and Edmundo could not have been validly adopted since Doribel
had already been born to the Sayson couple at the time, petitioners at the same time made the conflicting Further, we note that petitioner, who claims to be Ida Santiago, has the same birthdate as Ida
claim that Doribel was not the child of the couple. The Court ruled in that case that it was too late to Labagala.[26] The similarity is too uncanny to be a mere coincidence.
question the decree of adoption that became final years before. Besides, such a challenge to the validity of
During her testimony before the trial court, petitioner denied knowing Cornelia Cabrigas, who was
the adoption cannot be made collaterally but in a direct proceeding.[18]
listed as the mother in the birth certificate of Ida Labagala. In her petition before this Court, however, she
In this case, respondents are not assailing petitioners legitimate status but are, instead, asserting stated that Cornelia is the sister of her mother, Esperanza. It appears that petitioner made conflicting
that she is not at all their brothers child. The birth certificate presented by respondents support this statements that affect her credibility and could cast a long shadow of doubt on her claims of filiation.
allegation.
Thus, we are constrained to agree with the factual finding of the Court of Appeals that petitioner is in
We agree with the Court of Appeals that:: reality the child of Leon Labagala and Cornelia Cabrigas, and contrary to her averment, not of Jose Santiago
and Esperanza Cabrigas. Not being a child of Jose, it follows that petitioner can not inherit from him
through intestate succession. It now remains to be seen whether the property in dispute was validly
The Certificate of Record of Birth (Exhibit H)[19] plainly states that Ida was the child of the spouses Leon transferred to petitioner through sale or donation.
Labagala and [Cornelia] Cabrigas. This document states that it was Leon Labagala who made the report to
the Local Civil Registrar and therefore the supplier of the entries in said Certificate. Therefore, this On the validity of the purported deed of sale, however, we agree with the Court of Appeals that:
certificate is proof of the filiation of Ida. Appellee however denies that Exhibit H is her Birth Certificate. She
insists that she is not Ida Labagala but Ida Santiago. If Exhibit H is not her birth certificate, then where is
This deed is shot through and through with so many intrinsic defects that a reasonable mind is
hers? She did not present any though it would have been the easiest thing to do considering that according
inevitably led to the conclusion that it is fake. The intrinsic defects are extractable from the following
to her baptismal certificate she was born in Manila in 1969. This court rejects such denials and holds that
questions: a) If Jose Santiago intended to donate the properties in question to Ida, what was the big
Exhibit H is the certificate of the record of birth of appellee Ida
idea of hiding the nature of the contract in the faade of the sale? b) If the deed is a genuine
document, how could it have happened that Jose Santiago who was of course fully aware that he
Against such evidence, the appellee Ida could only present her testimony and a baptismal certificate (Exhibit owned only 1/3 pro indiviso of the properties covered by his title sold or donated the whole
12) stating that appellees parents were Jose Santiago and Esperanza Cabrigas. But then, a decisional rule in properties to Ida? c) Why in heavens name did Jose Santiago, a college graduate, who always signed
evidence states that a baptismal certificate is not a proof of the parentage of the baptized person. This his name in documents requiring his signature (citation omitted) [affix] his thumbmark on this deed
document can only prove the identity of the baptized, the date and place of her baptism, the identities of of sale? d) If Ida was [the] child of Jose Santiago, what was the sense of the latter donating his
the baptismal sponsors and the priest who administered the sacrament -- nothing more.[20] (Citations properties to her when she would inherit them anyway upon his death? e) Why did Jose Santiago
omitted.) affix his thumbmark to a deed which falsely stated that: he was single (for he was earlier married to
Esperanza Cabrigas); Ida was of legal age (for [s]he was then just 15 years old); and the subject
At the pre-trial conducted on August 11, 1988, petitioners counsel admitted that petitioner did not properties were free from liens and encumbrances (for Entry No. 27261, Notice of Adverse Claim and
have a birth certificate indicating that she is Ida Santiago, though she had been using this name all her Entry No. 6388, Notice of Lis Pendens were already annotated in the title of said properties). If the
life.[21] deed was executed in 1979, how come it surfaced only in 1984 after the death of Jose Santiago and
of all people, the one in possession was the baptismal sponsor of Ida?[27]
Petitioner opted not to present her birth certificate to prove her relationship with Jose and instead
offered in evidence her baptismal certificate.[22] However, as we held in Heirs of Pedro Cabais v. Court of Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the
Appeals: entire property to petitioner since 2/3 thereof belonged to his sisters.[28] Petitioner could not have given her
consent to the contract, being a minor at the time.[29] Consent of the contracting parties is among the
a baptismal certificate is evidence only to prove the administration of the sacrament on the dates essential requisites of a contract,[30] including one of sale, absent which there can be no valid
therein specified, but not the veracity of the declarations therein stated with respect to [a persons] contract. Moreover, petitioner admittedly did not pay any centavo for the property,[31] which makes the sale
kinsfolk. The same is conclusive only of the baptism administered, according to the rites of the void. Article 1471 of the Civil Code provides:
Catholic Church, by the priest who baptized subject child, but it does not prove the veracity of the
declarations and statements contained in the certificate concerning the relationship of the person Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a
baptized.[23] donation, or some other act or contract.
A baptismal certificate, a private document, is not conclusive proof of filiation.[24] More so are the Neither may the purported deed of sale be a valid deed of donation. Again, as explained by the Court
entries made in an income tax return, which only shows that income tax has been paid and the amount of Appeals:
thereof.[25]

We note that the trial court had asked petitioner to secure a copy of her birth certificate but Even assuming that the deed is genuine, it cannot be a valid donation. It lacks the acceptance of the
petitioner, without advancing any reason therefor, failed to do so. Neither did petitioner obtain a donee required by Art. 725 of the Civil Code. Being a minor in 1979, the acceptance of the donation should
certification that no record of her birth could be found in the civil registry, if such were the case. We find have been made by her father, Leon Labagala or [her] mother Cornelia Cabrigas or her legal representative
petitioners silence concerning the absence of her birth certificate telling. It raises doubt as to the existence pursuant to Art. 741 of the same Code. No one of those mentioned in the law - in fact no one at all -
of a birth certificate that would show petitioner to be the daughter of Jose Santiago and Esperanza accepted the donation for Ida.[32]
In sum, we find no reversible error attributable to the assailed decision of the Court of Appeals, hence 3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed
it must be upheld. on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a
consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R. CV No. them (Exh. E-1);
32817 is AFFIRMED.
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed
Costs against petitioner. on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for
a consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued
SO ORDERED.
to them (Exh. F-1); and

5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395
SPOUSES BUENAVENTURA V. CA executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration
ofP20,000.00 (Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh.
[G.R. No. 126376. November 20, 2003] G-1).

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA and NORA [6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed
JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh.
JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and FELICIANA K), pursuant to which TCT No. 157779 was issued in his name (Exh. K-1).]
LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN
and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their
ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS
complaint, aver:
JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and
LEA ASIS, respondents.
- XX-
DECISION
The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND
CARPIO, J.: VOID AB INITIO because
The Case
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the
This is a petition for review oncertiorari[1]to annul the Decision[2] dated 26 June 1996 of the Court of properties in litis;
Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3] dated 18 February
1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 89-
b) Secondly, assuming that there was consideration in the sums reflected in the questioned
5174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid
deeds, the properties are more than three-fold times more valuable than the measly
consideration and that the plaintiffs did not have a cause of action against the defendants.
sums appearing therein;
The Facts
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties
The Court of Appeals summarized the facts of the case as follows:
(vendors and vendees); and

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora,
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate
Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs
surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective spouses.
herein) of their legitime.

Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
- XXI -
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the
corresponding certificates of title issued in their names, to wit:
Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772,
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties inlitis xxx are
on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 NULL AND VOID AB INITIO.
(Exh. C), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. C-1);

2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as
on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were
of P1[2],000.00(Exh. D), pursuant to which TCT No. S-109772 was issued in her name with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full
(Exh. D-1);
knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were issued with Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be
sufficient factual and legal basis.[4] (Emphasis in the original) creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to
assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express
the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al.,
101 SCRA 376, thus:
The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound
Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis thereby; hence, they have no legal capacity to challenge their validity.
filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted
that compulsory heirs have the right to a legitime but such right is contingent since said right commences Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions
only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by
Philippines.[7] the court a quo, the legitime of a compulsory heir is computed as of the time of the death of the
decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial
court stated:
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is
inconsequential.
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the
Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the negative
allegation of plaintiffs. WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.

And then there is the argument that plaintiffs do not have a valid cause of action against defendants since SO ORDERED.[9]
there can be no legitime to speak of prior to the death of their parents. The court finds this contention
tenable. In determining the legitime, the value of the property left at the death of the testator shall be Hence, the instant petition.
considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the Issues
time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while
their parents live. Petitioners assign the following as errors of the Court of Appeals:

1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION
All the foregoing considered, this case is DISMISSED. HAD NO VALID CONSIDERATION.

In order to preserve whatever is left of the ties that should bind families together, the counterclaim is 2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS
likewise DISMISSED. A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.

3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT
No costs. EXPRESS THE TRUE INTENT OF THE PARTIES.

4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND
SO ORDERED.[8] PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN
OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST
The Ruling of the Court of Appeals OVER THE SUBJECT PROPERTIES.

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled: 5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD,
SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.[10]
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether The Ruling of the Court
xxx they have a cause of action against appellees.
We find the petition without merit.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the Deeds
parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely of Sale.
inchoate and vests only upon the latters death. While still alive, defendant parents are free to dispose of
their properties, provided that such dispositions are not made in fraud of creditors.
Whether Petitioners have a legal interest of the contract. Failure to pay the consideration is different from lack of consideration. The former results
over the properties subject of the Deeds of Sale in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while
the latter prevents the existence of a valid contract.[15]
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners
asserted that the purported sale of the properties in litis was the result of a deliberate conspiracy designed Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove
to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners strategy simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent
was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her
respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will payment of the purchase price.[16] The trial court did not find the allegation of absolute simulation of price
then co-own their parents estate by hereditary succession.[11] credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of
their respondent siblings financial capacity to buy the questioned lots.[17] On the other hand, the Deeds of
It is evident from the records that petitioners are interested in the properties subject of the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of
have dismissed the action for this reason alone. An action must be prosecuted in the name of the real Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent
party-in-interest.[12] father.[18]

Whether the Deeds of Sale are void


[T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured
for gross inadequacy of price
by the judgment, or the party entitled to the avails of the suit.
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
xxx invalidate the Deeds of Sale.

Articles 1355 of the Civil Code states:


In actions for the annulment of contracts, such as this action, the real parties are those who are parties to
the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to
one of the contracting parties and can show the detriment which would positively result to them from the Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract even though they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)
xxx. Article 1470 of the Civil Code further provides:

These are parties with a present substantial interest, as distinguished from a mere expectancy or future, Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in
contingent, subordinate, or consequential interest. The phrase present substantial interest more the consent, or that the parties really intended a donation or some other act or contract. (Emphasis
concretely is meant such interest of a party in the subject matter of the action as will entitle him, under the supplied)
substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and the
defendant will be protected in a payment to or recovery by him.[13] Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code
which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the equal to the exact value of the subject matter of sale. All the respondents believed that they received the
appellate court stated, petitioners right to their parents properties is merely inchoate and vests only upon commutative value of what they gave. As we stated in Vales v. Villa:[19]
their parents death. While still living, the parents of petitioners are free to dispose of their properties. In
their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the
lots to their siblings does not affect the value of their parents estate. While the sale of the lots reduced the Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from
estate, cash of equivalent value replaced the lots taken from the estate. unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts
cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not
Whether the Deeds of Sale are void because one person has been defeated or overcome by another, but because he has been defeated or
for lack of consideration overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose
money by them indeed, all they have in the world; but not for that alone can the law intervene and
Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of restore. There must be, in addition, a violation of the law, the commission of what the law knows as
Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void. an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it. (Emphasis
in the original)
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater
a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence
payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then all over again unless there has been a showing that the findings of the lower court are totally devoid of
the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as support or are clearly erroneous so as to constitute serious abuse of discretion.[20] In the instant case, the
to the price, because the price stipulated in the contract is simulated, then the contract is void.[14] Article trial court found that the lots were sold for a valid consideration, and that the defendant children actually
1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void. paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price
by the buyer to the seller is a factual finding that is now conclusive upon us.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract. Payment of the price goes into the performance WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto. SO ORDERED.
PHILIPPINE FREE PRESS, INC. V. CA (2005) In the evening of September 20, 1972, soldiers surrounded the Free Press
Building, forced out its employees at gunpoint and padlocked the said establishment.
PHILIPPINE FREE PRESS, INC., G.R. No. 132864 The soldier in charge of the military contingent then informed Teodoro Locsin, Jr., the
Petitioner, son of Teodoro Locsin, Sr., the President of [petitioner], that Martial Law had been
Present: declared and that they were instructed by the late President Marcos to take over the
building and to close the printing press. xxx.
PANGANIBAN, J., Chairman
SANDOVAL-GUTIERREZ, On September 21, 1972 . . ., Teodoro Locsin, Sr. was arrested [and] . . . . was
- versus - CORONA, brought to Camp Crame and was subsequently transferred to the maximum security
CARPIO-MORALES, and bloc at Fort Bonifacio.
GARCIA, JJ.
Sometime in December, 1972, Locsin, Sr. was informed . . . that no charges
Promulgated: were to be filed against him and that he was to be provisionally released subject to
COURT OF APPEALS (12th Division) and LIWAYWAY PUBLISHING, INC., the following conditions, to wit: (1) he remained (sic) under city arrest; xxx (5) he
Respondents. was not to publish the Philippine Free Press nor was he to do, say or write anything
October 24, 2005 critical of the Marcos administration . . . .

x---------------------------------------------------------------------------------x Consequently, the publication of the Philippine Free Press ceased. The
subject building remained padlocked and under heavy military guard (TSB, 27
DECISION May 1993, pp. 51-52; stipulated). The cessation of the publication of the ...
magazine led to the financial ruin of [petitioner] . . . . [Petitioners] situation was
GARCIA, J.: further aggravated when its employees demanded the payment of separation
pay as a result of the cessation of its operations. [Petitioners] minority
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Philippine Free stockholders, furthermore, made demands that Locsin, Sr. buy out their shares.
Press, Inc. seeks the reversal of the Decision[1] dated February 25, 1998 of the Court of Appeals (CA) xxx.
in CA-GR CV No. 52660, affirming, with modification, an earlier decision of the Regional Trial Court at
Makati, Branch 146, in an action for annulment of deeds of sale thereat instituted by petitioner On separate occasions in 1973, Locsin, Sr. was approached by the late Atty.
against the Presidential Commission for Good Crispin Baizas with offers from then President Marcos for the acquisition of the
Government (PCGG) and the herein private respondent, Liwayway Publishing, Inc. [petitioner]. However, Locsin, Sr. refused the offer stating that [petitioner] was not
for sale (TSN, 2 May 1988, pp. 8-9, 40; 27 May 1993, pp. 66-67).
As found by the appellate court in the decision under review, the facts are:
A few months later, the late Secretary Guillermo De Vega approached Locsin,
Sr. reiterating Marcoss offer to purchase the name and the assets of the
xxx [Petitioner] . . . is a domestic corporation engaged in the publication of [petitioner].xxx
Philippine Free Press Magazine, one of the . . . widely circulated political magazines in
the Philippines. Due to its wide circulation, the publication of the Free Press magazine Sometime during the middle of 1973, Locsin, Sr. was contacted by Brig. Gen.
enabled [petitioner] to attain considerable prestige prior to the declaration of Martial Hans Menzi, the former aide-de-camp of then President Marcos concerning the
Law as well as to achieve a high profit margin. . . . sale of the [petitioner]. Locsin, Sr. requested that the meeting be held inside the
[petitioner] Building and this was arranged by Menzi (TSN, 27 May 1993, pp. 69-70).
Sometime in . . . 1963, [petitioner] purchased a parcel of land situated at No. During the said meeting, Menzi once more reiterated Marcoss offer to purchase both
2249, Pasong Tamo Street, Makati which had an area of 5,000 square meters as the name and the assets of [petitioner] adding that Marcos cannot be denied (TSN,
evidenced by . . . (TCT) No. 109767 issued by the Register of Deeds of Makati (Exh. 27 May 1993, p. 71). Locsin, Sr. refused but Menzi insisted that he had no choice but
Z). Upon taking possession of the subject land, [petitioner] constructed an office to sell. Locsin, Sr. then made a counteroffer that he will sell the land, the building
building thereon to house its various machineries, equipment, office furniture and all the machineries and equipment therein but he will be allowed to keep the
and fixture. [Petitioner] thereafter made the subject building its main office . . . . name of the [petitioner]. Menzi promised to clear the matter with then President
Marcos (TSN, 27 May 1993, p. 72). Menzi thereafter contacted Locsin, Sr. and
During the 1965 presidential elections, [petitioner] supported the late informed him that President Marcos was amenable to his counteroffer and is offering
President Diosdado Macapagal against then Senate President Ferdinand Marcos. the purchase price of Five Million Seven Hundred Fifty Thousand (P5, 750,000.00)
Upon the election of the late President Ferdinand Marcos in 1965 and prior to the Pesos for the land, the building, the machineries, the office furnishing and the fixtures
imposition of Martial law on September 21, 1972, [petitioner] printed numerous of the [petitioner] on a take-it-or-leave-it basis (TSN, 2 May 1988, pp.42-43; 27 May
articles highly critical of the Marcos administration, exposing the corruption and 1993, p. 88).
abuses of the regime. The [petitioner] likewise ran a series of articles exposing
the plan of the Marcoses to impose a dictatorship in the guise of Martial Law . . . . On August 22, 1973, Menzi tendered to Locsin, Sr. a check for One Million (P1,
000,000.00) Pesos downpayment for the sale, . . . Locsin, Sr. accepted the check,
subject to the condition that he will refund the same in case the sale will not push I
through. (Exh. 7).
xxx IN ITS MISAPPLICATION OF THE DECISIONS OF THE HONORABLE COURT THAT
On August 23, 1973, the Board of Directors of [petitioner] held a meeting and RESULTED IN ITS ERRONEOUS CONCLUSION THAT PETITIONER'S CAUSE OF ACTION
reluctantly passed a resolution authorizing Locsin, Sr. to sell the assets of the HAD ALREADY PRESCRIBED.
[petitioner] to Menzi minus the name Philippine Free Press (Exhs. A-1 and 1; TSN, 27
May 1993, pp. 73-76). II

On October 23, 1973, the parties [petitioner, as vendor and private xxx IN CONCLUDING THAT THE UNDISPUTED FACTS AND CIRCUMSTANCES
respondent, represented by B/Gen. Menzi, as vendee] met . . . and executed two (2) PRECEDING THE EXECUTION OF THE CONTRACTS OF SALE FOR THE PETITIONER'S
notarized Deeds of Sale covering the land, building and the machineries of the PROPERTIES DID NOT ESTABLISH THE FORCE, INTIMIDATION, DURESS AND UNDUE
[petitioner]. Menzi paid the balance of the purchase price in the amount of . . . INFLUENCE WHICH VITIATED PETITIONER'S CONSENT.
(P4,750,000.00) Pesos (Exhs. A and (; B and 10;TSN, 27 May 1993, pp. 81-82; 3 June
1993, p. 89). A. xxx IN CONSIDERING AS HEARSAY THE TESTIMONIAL EVIDENCE WHICH
CLEARLY ESTABLISHED THE THREATS MADE UPON PETITIONER AND THAT
Locsin, Sr. thereafter used the proceeds of the sale to pay the separation pay of RESPONDENT LIWAYWAY WILL BE USED AS THE CORPORATE VEHICLE FOR
[petitioners] employees, buy out the shares of the minority stockholders as well as to THE FORCED ACQUISITION OF PETITIONER'S PROPERTIES.
settle all its obligations.
B. xxx IN CONCLUDING THAT THE ACTS OF THEN PRESIDENT MARCOS DURING
On February 26, 1987, [petitioner] filed a complaint for Annulment of MARTIAL LAW DID NOT CONSTITUTE THE FORCE, INTIMIDATION, DURESS
Sale against [respondent] Liwayway and the PCGG before the Regional Trail Court of AND UNDUE INFLUENCE WHICH VITIATED PETITIONER'S CONSENT.
Makati, Branch 146 on the grounds of vitiated consent and gross inadequacy of
purchase price. On motion of defendant PCGG, the complaint against it was dismissed C. xxx IN RESOLVING THE INSTANT CASE ON THE BASIS OF MERE SURMISES
on October 22, 1987. (Words in bracket and underscoring added) AND SPECULATIONS INSTEAD OF THE UNDISPUTED EVIDENCE ON RECORD.

In a decision dated October 31, 1995,[2] the trial court dismissed petitioners complaint and III
granted private respondents counterclaim, to wit:
xxx IN CONCLUDING THAT THE GROSSLY INADEQUATE PURCHASE PRICE FOR
WHEREFORE, in view of all the foregoing premises, the herein complaint for PETITIONER'S PROPERTIES DOES NOT INDICATE THE VITIATION OF PETITIONER'S
annulment of sales is hereby dismissed for lack of merit. CONSENT TO THE CONTRACTS OF SALE.

On [respondent] counterclaim, the court finds for [respondent] and against IV


[petitioner] for the recovery of attorneys fees already paid for at P1,945,395.98, plus
a further P316,405.00 remaining due and payable. xxx IN CONCLUDING THAT PETITIONER'S USE OF THE PROCEEDS OF THE SALE FOR ITS
SURVIVAL CONSTITUTE AN IMPLIED RATIFICATION [OF] THE CONTRACTS OF SALE.
SO ORDERED. (Words in bracket added)
V

In time, petitioner appealed to the Court of Appeals (CA) whereat its appellate recourse was xxx IN EXCLUDING PETITIONER'S EXHIBITS X-6 TO X-7 AND Y-3 (PROFFER)
docketed as CA-G.R. C.V. No. 52660. WHICH ARE ADMISSIBLE EVIDENCE WHICH COMPETENTLY PROVE THAT THEN
PRESIDENT MARCOS OWNED PRIVATE RESPONDENT LIWAYWAY, WHICH WAS USED
As stated at the outset hereof, the appellate court, in a decision dated February 25, 1998, affirmed AS THE CORPORATE VEHICLE FOR THE ACQUISITION OF PETITIONER'S PROPERTIES.
with modification the appealed decision of the trial court, the modification consisting of the deletion of the
award of attorneys fees to private respondent, thus:
The petition lacks merit.
WHEREFORE, with the sole modification that the award of attorneys fees in
favor of [respondent] be deleted, the Decision appealed from is hereby AFFIRMED in Petitioner starts off with its quest for the allowance of the instant recourse on the submission that the
all respects. martial law regime tolled the prescriptive period under Article 1391 of the Civil Code, which pertinently
reads:
SO ORDERED.
Article 391. The action for annulment shall be brought within four years.

Hence, petitioners present recourse, urging the setting aside of the decision under review This period shall begin:
which, to petitioner, decided questions of substance in a way not in accord with law and applicable
jurisprudence considering that the appellate court gravely erred:
In cases of intimidation, violence or undue influence, from the time the defect for said party to commence, continue or to even resist an action during the
of the consent ceases. dictatorial regime. (Emphasis and underscoring in the original)

xxx xxx xxx We are not persuaded.

It strains credulity to believe that petitioner found it impossible to commence and succeed in an
It may be recalled that the separate deeds of sale[3] sought to be annulled under petitioners basic annulment suit during the entire stretch of the dictatorial regime. The Court can grant that Mr. Locsin, Sr.
complaint were both executed on October 23, 1973. Per the appellate court, citing Development Bank of and petitioner were, in the context of DBP and Tan, true oppositionists during the period of material law.
the Philippines [DBP] vs. Pundogar[4], the 4-year prescriptive period for the annulment of the aforesaid Petitioner, however, has failed to convincingly prove that Mr. Locsin, Sr., as its then President, and/or its
deeds ended in late 1977, doubtless suggesting that petitioners right to seek such annulment governing board, were so circumstanced that it was well-nigh impossible for him/them to successfully
accrued four (4) years earlier, a starting time-point corresponding, more or less, to the date of the institute an action during the martial law years. Petitioner cannot plausibly feign ignorance of the fact that
conveying deed, i.e., October 23, 1973. Petitioner contends, however, that the 4-year prescriptive period shortly after his arrest in the evening of September 20, 1972, Mr. Locsin, Sr., together with several other
could not have commenced to run on October 23, 1973, martial law being then in full swing. Plodding on, journalists[10], dared to file suits against powerful figures of the dictatorial regime and veritably challenged
petitioner avers that the continuing threats on the life of Mr. Teodoro Locsin, Sr. and his family and the legality of the declaration of martial law. Docketed in this Court as GR No. L-35538, the case, after its
other menacing effects of martial law which should be considered as force majeure - ceased only after the consolidation with eight (8) other petitions against the martial law regime, is now memorialized in books of
February 25, 1986 People Power uprising. jurisprudence and cited in legal publications and case studies as Aquino vs. Enrile.[11]

Petitioner instituted its complaint for annulment of contracts on February 26, 1987. The Incidentally, Mr. Locsin Sr., as gathered from the ponencia of then Chief Justice Querube Makalintal
question that now comes to the fore is: Did the 4-year prescriptive period start to run in late October 1973, in Aquino, was released from detention notwithstanding his refusal to withdraw from his petition in said
as postulated in the decision subject of review, or on February 25, 1986, as petitioner argues, on the theory case. Judging from the actuations of Mr. Locsin, Sr. during the onset of martial law regime and immediately
that martial law has the effects of a force majeure[5], which, in turn, works to suspend the running of the thereafter, any suggestion that intimidation or duress forcibly stayed his hands during the dark days of
prescriptive period for the main case filed with the trial court. martial law to seek judicial assistance must be rejected.[12]

Petitioner presently faults the Court of Appeals for its misapplication of the doctrinal rule laid down Given the foregoing perspective, the Court is not prepared to disturb the ensuing ruling of the
in DBP vs. Pundogar[6] where this Court, citing and quoting excerpts from the ruling in Tan vs. Court of appellate court on the effects of martial law on petitioners right of action:
Appeals [7], as reiterated in National Development Company vs. Court of Appeals, [8] wrote
In their testimonies before the trial court, both Locsin, Sr. and Locsin, Jr.
We can not accept the petitioners contention that the period during which claimed that they had not filed suit to recover the properties until 1987 as they could
authoritarian rule was in force had interrupted prescription and that the same began not expect justice to be done because according to them, Marcos controlled every
to run only on February 25, 1986, when the Aquino government took power. It is true part of the government, including the courts, (TSN, 2 May 1988, pp. 23-24; 27 May
that under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of 1993, p. 121). While that situation may have obtained during the early years of the
tolling the period of prescription. However, we can not say, as a universal rule, that martial law administration, We could not agree with the proposition that it remained
the period from September 21, 1972 through February 25, 1986 involves a force consistently unchanged until 1986, a span of fourteen (14) years. The unfolding of
majeure. Plainly, we can not box in the "dictatorial" period within the term without subsequent events would show that while dissent was momentarily stifled, it was not
distinction, and without, by necessity, suspending all liabilities, however demandable, totally silenced. On the contrary, it steadily simmered and smoldered beneath the
incurred during that period, including perhaps those ordered by this Court to be paid. political surface and culminated in that groundswell of popular protest which swept
While this Court is cognizant of acts of the last regime, especially political acts, the dictatorship from power.[13]
that might have indeed precluded the enforcement of liability against that regime
and/or its minions, the Court is not inclined to make quite a sweeping The judiciary too, as an institution, was no ivory tower so detached from the
pronouncement, . . . . It is our opinion that claims should be taken on a case-to-case ever changing political climate. While it was not totally impervious to the influence
basis. This selective rule is compelled, among others, by the fact that not all of the dictatorships political power, it was not hamstrung as to render it inutile to
those imprisoned or detained by the past dictatorship were true political perform its functions normally. To say that the Judiciary was not able to render
oppositionists, or, for that matter, innocent of any crime or wrongdoing. Indeed, not justice to the persons who sought redress before it . . . during the Martial Law years is
a few of them were manipulators and scoundrels. [Italization in the original; a sweeping and unwarranted generalization as well as an unfounded indictment.
Underscoring and words in bracket added] The Judiciary, . . . did not lack in gallant jurists and magistrates who refused to be
cowed into silence by the Marcos administration. Be that as it may, the Locsins
mistrust of the courts and of judicial processes is no excuse for their non-observance
According to petitioner, the appellate court misappreciated and thus misapplied the correct thrust of of the prescriptive period set down by law.
the Tan case, as reiterated in DBP which, per petitioners own formulation, is the following:[9]

The prevailing rule, therefore, is that on a case-to-case basis, the Martial Law Corollary to the presented issue of prescription of action for annulment of contract voidable on
regime may be treated as force majeure that suspends the running of the applicable account of defect of consent[14] is the question of whether or not duress, intimidation or undue influence
prescriptive period provided that it is established that the party invoking the vitiated the petitioners consent to the subject contracts of sale. Petitioner delves at length on the vitiation
imposition of Martial Law as a force majeure are true oppositionists during the issue and, relative thereto, ascribes the following errors to the appellate court: first, in considering as
Martial Law regime and that said party was so circumstanced that is was impossible hearsay the testimonial evidence that may prove the element of "threat" against petitioner or Mr.
Locsin, Sr., and the dictatorial regime's use of private respondent as a corporate vehicle for forcibly in the declaration was at the time it was made so far contrary to the declarant's own
acquiring petitioners properties; second, in concluding that the acts of then President Marcos during the interest, that a reasonable man in his position would not have made the declaration
martial law years did not have a consent-vitiating effect on petitioner; and third, in resolving the case on unless he believed it to be true, may be received in evidence against himself or his
the basis of mere surmises and speculations. successors-in-interest and against third persons.

The evidence referred to as hearsay pertains mainly to the testimonies of Messrs. Locsin, Sr. and However, in assessing the probative value of Gen. Menzis supposed declaration against
Teodoro Locsin, Jr. (the Locsins, collectively), which, in gist, established the following facts: 1) the widely interest, i.e., that he was acting for the late President Marcos when he purportedly coerced Mr. Locsin, Sr.
circulated Free Press magazine, which, prior to the declaration of Martial Law, took the strongest critical to sell the Free Press property, we are loathed to give it the evidentiary weight petitioner endeavors to
stand against the Marcos administration, was closed down on the eve of such declaration, which closure impress upon us. For, the Locsins can hardly be considered as disinterested witnesses. They are likely to
eventually drove petitioner to financial ruin; 2) upon Marcos orders, Mr. Locsin, Sr. was arrested and gain the most from the annulment of the subject contracts. Moreover, allegations of duress or coercion
detained for over 2 months without charges and, together with his family, was threatened with execution; should, like fraud, be viewed with utmost caution. They should not be laid lightly at the door of men whose
3) Mr. Locsin, Sr. was provisionally released on the condition that he refrains from reopening Free Press and lips had been sealed by death.[16] Francisco explains why:
writing anything critical of the Marcos administration; and 4) Mr. Locsin, Sr. and his family remained fearful
of reprisals from Marcos until the 1986 EDSA Revolution. [I]t has been said that of all evidence, the narration of a witness of his conversation
with a dead person is esteemed in justice the weakest. One reason for its
Per the Locsins, it was amidst the foregoing circumstances that petitioners property in question unreliability is that the alleged declarant can not recall to the witness the
was sold to private respondent, represented by Gen. Menzi, who, before the sale, allegedly applied the circumstances under which his statement were made. The temptation and
squeeze on Mr. Locsin, Sr. thru the medium of the Marcos cannot be denied and [you] have no choice but opportunity for fraud in such cases also operate against the testimony. Testimony to
to sell line. statements of a deceased person, at least where proof of them will prejudice his
estate, is regarded as an unsafe foundation for judicial action except in so far as such
The appellate court, in rejecting petitioners above posture of vitiation of consent, observed: evidence is borne out by what is natural and probable under the circumstances taken
in connection with actual known facts. And a court should be very slow to act upon
It was under the above-enumerated circumstances that the late Hans Menzi, the statement of one of the parties to a supposed agreement after the death of the
allegedly acting on behalf of the late President Marcos, made his offer to purchase the other party; such corroborative evidence should be adduced as to satisfy the court of
Free Press. It must be noted, however, that the testimonies of Locsin, Sr. and Locsin, the truth of the story which is to benefit materially the person telling it. [17]
Jr. regarding Menzis alleged implied threat that Marcos cannot be denied and that
[respondent] was to be the corporate vehicle for Marcoss takeover of the Free Press Excepting, petitioner insists that the testimonies of its witnesses the Locsins - are not hearsay
is hearsay as Menzi already passed away and is no longer in a position to defend because:
himself; the same can be said of the offers to purchase made by Atty. Crispin Baizas
and Secretary Guillermo de Vega who are also both dead. It is clear from the In this regard, hearsay evidence has been defined as the evidence not of what
provisions of Section 36, Rule 130 of the 1989 Revised Rules on Evidence that any the witness knows himself but of what he has heard from others. xxx Thus, the mere
evidence, . . . is hearsay if its probative value is not based on the personal knowledge fact that the other parties to the conversations testified to by the witness are already
of the witness but on the knowledge of some other person not on the witness stand. deceased does [not] render such testimony inadmissible for being hearsay. [18]
Consequently, hearsay evidence, whether objected to or not, has no probative value
unless the proponent can show that the evidence falls within the exceptions to the xxx xxx xxx
hearsay evidence rule (Citations omitted)
The testimonies of Teodoro Locsin, Sr. and Teodoro Locsin, Jr. that the late
Atty. Baizas, Gen. Menzi and Secretary de Vega stated that they were representing
The appellate courts disposition on the vitiation-of-consent angle and the ratio therefor commends Marcos, that Marcos cannot be denied, and the fact that Gen. Menzi stated that
itself for concurrence. private respondent Liwayway was to be the corporate vehicle for the then President
Marcos' take-over of petitioner Free Press are not hearsay. Teodoro Locsin, Sr. and
Jurisprudence instructs that evidence of statement made or a testimony is hearsay if offered Teodoro Locsin, Jr. were in fact testifying to matters of their own personal
against a party who has no opportunity to cross-examine the witness. Hearsay evidence is excluded knowledge because they were either parties to the said conversation or were
precisely because the party against whom it is presented is deprived of or is bereft of opportunity to cross- present at the time the said statements were made. [19]
examine the persons to whom the statements or writings are attributed.[15] And there can be no quibbling
that because death has supervened, the late Gen Menzi, like the other purported Marcos subalterns,
Messrs. Baizas and De Vega, cannot cross-examine the Locsins for the threatening statements allegedly Again, we disagree.
made by them for the late President.

Like the Court of Appeals, we are not unmindful of the exception to the hearsay rule provided in Even if petitioner succeeds in halving its testimonial evidence, one-half purporting to quote
Section 38, Rule 130 of the Rules of Court, which reads: the words of a live witness and the other half purporting to quote what the live witness heard from one
already dead, the other pertaining to the dead shall nevertheless remain hearsay in character.
SEC. 38. Declaration against interest. The declaration made by a person
deceased or unable to testify, against the interest of the declarant, if the fact asserted
The all too familiar rule is that a witness can testify only to those facts which he knows of his own
knowledge. [20] There can be no quibbling that petitioners witnesses cannot testify respecting what
President Marcos said to Gen. Menzi about the acquisition of petitioners newspaper, if any there be, Petitioner laments that the scenario depicted in the immediately preceding quotation as a case of a
precisely because none of said witnesses ever had an opportunity to hear what the two talked about. court resorting to mere surmises and speculations, [24] oblivious that petitioner itself can only offer, as
counterpoint, also mere surmises and speculations, such as its claim about Eugenio Lopez Sr. and Imelda R.
Neither may petitioner circumvent the hearsay rule by invoking the exception under the declaration- Marcos offering enticing amounts to buy Free Press.[25]
against-interest rule. In context, the only declaration supposedly made by Gen. Menzi which
can conceivably be labeled as adverse to his interest could be that he was acting in behalf of Marcos in It bears stressing at this point that even after the imposition of martial law, petitioner, represented by
offering to acquire the physical assets of petitioner. Far from making a statement contrary to his own Mr. Locsin, Sr., appeared to have dared the ire of the powers-that-be. He did not succumb to, but in fact
interest, a declaration conveying the notion that the declarant possessed the authority to speak and to spurned offers to buy, lock-stock-and-barrel, the Free Press magazine, dispatching Marcos emissaries with
act for the President of the Republic can hardly be considered as a declaration against interest. what amounts to a curt Free Press is not for sale. This reality argues against petitioners thesis about
vitiation of its contracting mind, and, to be sure, belying the notion that Martial Law worked as a Sword of
Petitioner next assails the Court of Appeals on its conclusion that Martial Law is not per se a consent- Damocles that reduced petitioner or Mr. Locsin, Sr. into being a mere automaton. The following excerpt
vitiating phenomenon. Wrote the appellate court: [21] from the Court of Appeals decision is self-explanatory: [26]

In other words, the act of the ruling power, in this case the martial law Noteworthy is the fact that although the threat of arrest hung over his head
administration, was not an act of mere trespass but a trespass in law - not like the Sword of Damocles, Locsin Sr. was still able to reject the offers of Atty. Baizas
a perturbacion de mero hecho but apertubacion de derecho - justified as it is by an act and Secretary De Vega, both of whom were supposedly acting on behalf of the late
of government in legitimate self-defense (IFC Leasing & Acceptance President Marcos, without being subjected to reprisals. In fact, the Locsins testified
Corporation v. Sarmiento Distributors Corporation, , citingCaltex (Phils.) v. Reyes, 84 that the initial offer of Menzi was rejected even though it was supposedly
Phil. 654 [1949]. Consequently, the act of the Philippine Government in declaring accompanied by the threat that Marcos cannot be denied. Locsin, Sr. was,
martial law can not be considered as an act of intimidation of a third person who did moreover, even able to secure a compromise that only the assets of the Free Press
not take part in the contract (Article 1336, Civil Code). It is, therefore, incumbent on will be sold. It is, therefore, quite possible that plaintiff-appellants financial
[petitioner] to present clear and convincing evidence showing that the late President condition, albeit caused by the declaration of Martial Law, was a major factor in
Marcos, acting through the late Hans Menzi, abused his martial law powers by forcing influencing Locsin, Sr. to accept Menzis offer. It is not farfetched to consider that
plaintiff-appellant to sell its assets. In view of the largely hearsay nature of Locsin, Sr. would have eventually proceeded with the sale even in the absence of the
appellants evidence on this point, appellants cause must fall. alleged intimidation and undue influence because of the absence of other buyers.

According to petitioner, the reasoning of the appellate court is "flawed" because:[22] Petitioners third assigned error centers on the gross inadequacy of the purchase price, referring to the
amount of P5,775,000.00 private respondent paid for the property in question. To petitioner, the amount
It is implicit from the foregoing reasoning of the Court of Appeals that it treated thus paid does not even approximate the actual market value of the assets and properties, [27] and is very
the forced closure of the petitioner's printing press, the arrest and incarceration much less than the P18 Million offered by Eugenio Lopez.[28] Accordingly, petitioner urges the striking down,
without charges of Teodoro Locsin, Sr., the threats that he will be shot and the threats as erroneous, the ruling of the Court of Appeals on purchase price inadequacy, stating in this regard as
that other members of his family will be arrested as legal acts done by a dictator follows: [29]
under the Martial Law regime. The same flawed reasoning led the Court of Appeals to
the erroneous conclusion that such acts do not constitute force, intimidation, duress Furthermore, the Court of Appeals in determining the adequacy of the price for
and undue influence that vitiated petitioner's consent to the Contracts of Sale. the properties and assets of petitioner Free Press relied heavily on the claim that the
audited financial statements for the years 1971 and 1972 stated that the book
The contention is a rehash of petitioners bid to impute on private respondent acts of force and value of the land is set at Two Hundred Thirty-Seven Thousand Five Hundred Pesos
intimidation that were made to bear on petitioner or Mr. Locsin, Sr. during the early years of martial law. It (P237,500.00). However, the Court of Appeals' reliance on the book value of said
failed to take stock of a very plausible situation depicted in the appellate courts decision which supports its assets is clearly misplaced. It should be noted that the book value of fixed assets
case disposition on the issue respecting vitiation. Wrote that court: bears very little correlation with the actual market value of an asset. (Emphasis and
underscoring in the original).
Even assuming that the late president Marcos is indeed the owner of
[respondent], it does not necessarily follow that he, acting through the late Hans
Menzi, abused his power by resorting to intimidation and undue influence to coerce With the view we take of the matter, the book or actual market value of the property at the time of
the Locsins into selling the assets of Free Press to them (sic). sale is presently of little moment. For, petitioner is effectively precluded, by force of the principle
of estoppel ,[30] from cavalierly disregarding with impunity its own books of account in which the property
It is an equally plausible scenario that Menzi convinced the Locsins to sell the in question is assigned a value less than what was paid therefor. And, in line with the rule on
assets of the Free Press without resorting to threats or moral coercion by simply the quantum of evidence required in civil cases, neither can we cavalierly brush aside private respondents
pointing out to them the hard fact that the Free Press was in dire financial straits after evidence, cited with approval by the appellate court, that tends to prove that-[31]
the declaration of Martial Law and was being sued by its former employees, minority
stockholders and creditors. Given such a state of affairs, the Locsins had no choice xxx the net book value of the Properties was actually only P994,723.66 as
but to sell their assets.[23] appearing in Free Press's Balance Sheet as of November 30, 1972 (marked as Exh. 13
and Exh. V), which was duly audited by SyCip, Gorres, and Velayo, thus clearly
showing that Free Press actually realized a hefty profit of P4,755,276.34 from the sale SPOUSES SERRANO AND HERRERA V CA (2007)
to Liwayway.

SPOUSES ONNIE SERRANO AND AMPARO G.R. No. 139173


Lest it be overlooked, gross inadequacy of the purchase price does not, as a matter of civil law, per HERRERA,
se affect a contract of sale. Article 1470 of the Civil Code says so. It reads: Petitioners,
Present:
Article 1470. Gross inadequacy of price does not affect a contract of sale,
except as it may indicate a defect in the consent, or that the parties really intended a PUNO, C.J., Chairperson,
donation or some other act or contract. SANDOVAL-GUTIERREZ,
CORONA,
- versus - *AZCUNA, and

Following the aforequoted codal provision, it behooves petitioner to first prove a defect in the GARCIA, JJ.
consent, failing which its case for annulment contract of sale on ground gross inadequacy of price must
fall. The categorical conclusion of the Court of Appeals, confirmatory of that of the trial court, is that the
price paid for the Free Press office building, and other physical assets is not unreasonable to justify the GODOFREDO CAGUIAT, Promulgated:
nullification of the sale. This factual determination, predicated as it were on offered evidence, notably Respondent.
petitioners Balance Sheet as of November 30, 1972 (Exh. 13), must be accorded great weight if not February 28, 2007
finality.[32] x------------------------------------------------------------------------------------------------------x

In the light of the foregoing disquisition, the question of whether or not petitioners undisputed D E C I S I O N
utilization of the proceeds of the sale constitutes, within the purview of Article 1393 of the Civil
Code,[33] implied ratification of the contracts of sale need not detain us long. Suffice it to state in this regard
that the ruling of the Court of Appeals on the matter is well-taken. Wrote the appellate court: [34] SANDOVAL-GUTIERREZ, J.:

In the case at bench, Free Presss own witnesses admitted that the proceeds Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
of the 1973 sale were used to settle the claims of its employees, redeem the shares of amended, assailing the Decision[1] of the Court of Appeals dated January 29, 1999 and its Resolution
its stockholders and finance the companys entry into money-market shareholdings dated July 14, 1999 in CA-G.R. CV No. 48824.
and fishpond business activities (TSN, 2 May 1988, pp. 16, 42-45). It need not be
overemphasized that by using the proceeds in this manner, Free Press only too clearly Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las
confirmed the voluntaries of its consent and ratified the sale. Needless to state, such Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.
ratification cleanses the assailed contract from any alleged defects from the moment
it was constituted (Art. 1396, Civil Code). Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners
agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial
payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised
Petitioners posture that its use of the proceeds of the sale does not translate to tacit to pay the balance of the purchase price on or before March 23, 1990, thus:
ratification of what it viewed as voidable contracts of sale, such use being a matter of [its financial] Las Pias, Metro Manila
survival,[35] is untenable. As couched, Article 1393 of the Civil Code is concerned only with the act March 19, 1990
which passes for ratification of contract, not the reason which actuated the ratifying person to act RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY
the way he did. Ubi lex non distinguit nec nos distinguere debemus. When the law does not TCT NO. T-9905, LAS PIAS, METRO MANILA
distinguish, neither should we. [36] RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE
HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF
Finally, petitioner would fault the Court of Appeals for excluding Exhibits X-6 to X-7 and Y-3 OUR LOTSITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
(proffer). These excluded documents which were apparently found in the presidential palace or turned AREA OF 439 SQUARE METERS.
over by the US Government to the PCGG, consist of, among others, what appears to be private respondents MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON
Certificate of Stock for 24,502 shares in the name of Gen. Menzi, but endorsed in blank. The proffer was OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL
evidently intended to show that then President Marcos owned private respondent, Liwayway Publishing DEED OF SALE ON THIS DATE.
Inc. Said exhibits are of little relevance to the resolution of the main issue tendered in this case. Whether SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
or not the contracts of sale in question are voidable is the issue, not the ownership of Liwayway Publishing, (SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]
Inc.
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners
WHEREFORE, the petition is DENIED, and the challenged decision of the Court of informing them of his readiness to pay the balance of the contract price and requesting them to prepare the
Appeals AFFIRMED. final deed of sale.[3]
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter[4] to respondent stating that both the trial court and the Court of Appeals interpreted some significant facts resulting in an
that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling erroneous resolution of the issue involved.
the transaction. Petitioners also informed respondent that he can recover the earnest money In holding that there is a perfected contract of sale, both courts mainly relied on the earnest
of P100,000.00 anytime. money given by respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that
"Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as
Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his counsel proof of the perfection of the contract."
Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00
payable to him. We are not convinced.

In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial In San Miguel Properties Philippines, Inc. v. Spouses Huang,[13] we held that the stages of a
Court, Branch 63, Makati City a complaint against them for specific performance and damages, docketed as contract of sale are: (1) negotiation, covering the period from the time the prospective contracting parties
Civil Case No. 90-1067.[6]
indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon
the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to
On June 27, 1994, after hearing, the trial court rendered its Decision[7] finding there was a perfected the object of the contract and upon the price; and (3)consummation, which begins when the parties
contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.
respondent. The trial court held:
With the above postulates as guidelines, we now proceed to determine the real nature of the
xxx contract entered into by the parties.

It is a canon in the interpretation of contracts that the words used therein should be given their
In the evaluation of the evidence presented by the parties as to the issue natural and ordinary meaning unless a technical meaning was intended.[14] Thus, when petitioners declared
as to who was ready to comply with his obligation on the verbal agreement to sell on in the said Receipt for Partial Payment that they
March 23, 1990, shows that plaintiffs position deserves more weight and RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE
credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF
earnest money showed that there was already a perfected contract. Art. 1482 of the OUR LOTSITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
Civil Code of the Philippines, reads as follows, to wit: AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON
Art. 1482. Whenever earnest money is given in a contract of OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL
sale, it shall be considered as part of the price and as proof of the DEED OF SALE ON THIS DATE.
perfection of the contract.
there can be no other interpretation than that they agreed to a conditional contract of sale, consummation
Second, plaintiff was the first to react to show his eagerness to push through of which is subject only to the full payment of the purchase price.
with the sale by sending defendants the letter dated March 25, 1990. (Exh. D) and
reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third, A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
plaintiff had the balance of the purchase price ready for payment (Exh. vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so
C). Defendants mere allegation that it was plaintiff who did not appear on March that if the suspensive condition does not take place, the parties would stand as if the conditional obligation
23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere had never existed. The suspensive condition is commonly full payment of the purchase price.[15]
afterthought.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial The differences between a contract to sell and a contract of sale are well-settled in
courts judgment. jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that:
Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate
court in its Resolution[8] dated July 14, 1999. x x x [a] distinction must be made between a contract of sale in which title passes to
Hence, the present recourse. the buyer upon delivery of the thing sold and a contract to sell x x x where by
agreement the ownership is reserved in the seller and is not to pass until the full
The basic issue to be resolved is whether the document entitled Receipt for Partial Payment
payment, of the purchase price is made. In the first case, non-payment of the price is
signed by both parties earlier mentioned is a contract to sell or a contract of sale.
a negative resolutory condition; in the second case, full payment is a positive
Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article
suspensive condition. Being contraries, their effect in law cannot be identical. In the
1458[9] in relation to Article 1475[10] of the Civil Code. The delivery to them of P100,000.00 as down
first case, the vendor has lost and cannot recover the ownership of the land sold until
payment cannot be considered as proof of the perfection of a contract of sale under Article 1482[11]of the
and unless the contract of sale is itself resolved and set aside. In the second case,
same Code since there was no clear agreement between the parties as to the amount of consideration.
however, the title remains in the vendor if the vendee does not comply with the
Generally, the findings of fact of the lower courts are entitled to great weight and should not be
condition precedent of making payment at the time specified in the contract.
disturbed except for cogent reasons.14 Indeed, they should not be changed on appeal in the absence of a
clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight and
significance, which if considered would have altered the result of the case. [12] In the present case, we find
In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the This is a Petition for Review on Certiorari[1] assailing the Decision[2] of the Court of Appeals (CA) in
buyer until full payment of the price.[17] CA-G.R. CV No. 42993 which reversed and set aside the Decision of the Regional Trial Court (RTC) of
In this case, the Receipt for Partial Payment shows that the true agreement between the Olongapo City, Branch 74, in Civil Case No. 558-0-88.
parties is a contract to sell.
First, ownership over the property was retained by petitioners and was not to pass to The instant case traces its origin to an action for partition filed by petitioners Felix Ting Ho, Jr.,
respondent until full payment of the purchase price. Thus, petitioners need not push through with the sale Merla Ting Ho Braden, Juana Ting Ho and Lydia Ting Ho Belenzo against their brother, respondent Vicente
should respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In Teng Gui, before the RTC, Branch 74 of Olongapo City. The controversy revolves around a parcel of land,
effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay and the improvements established thereon, which, according to petitioners, should form part of the estate
within the fixed period.[18] of their deceased father, Felix Ting Ho, and should be partitioned equally among each of the siblings.
Second, the agreement between the parties was not embodied in a deed of sale. The absence
of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of In their complaint before the RTC, petitioners alleged that their father Felix Ting Ho died
ownership, but only a transfer after full payment of the purchase price.[19] intestate on June 26, 1970, and left upon his death an estate consisting of the following:
a) A commercial land consisting of 774 square meters, more or less, located at Nos. 16 and 18
Third, petitioners retained possession of the certificate of title of the lot. This is an additional Afable St., East Bajac-Bajac, Olongapo City, covered by Original Certificate of Title No. P-1064 and Tax
indication that the agreement did not transfer to respondent, either by actual or constructive delivery, Declaration No. 002-2451;
ownership of the property.[20] b) A two-storey residential house on the aforesaid lot;
It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a c) A two-storey commercial building, the first floor rented to different persons and the second
contract of sale, it shall be considered as part of the price and proof of the perfection of the floor, Bonanza Hotel, operated by the defendant also located on the above described lot; and
contract. However, this article speaks of earnest money given in a contract of sale. In this case, d) A sari-sari store (formerly a bakery) also located on the above described lot.[3]
the earnest money was given in a contract to sell. The earnest money forms part of the consideration only
if the sale is consummated upon full payment of the purchase price.[21] Now, since the earnest money was According to petitioners, the said lot and properties were titled and tax declared under trust in the name of
given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. respondent Vicente Teng Gui for the benefit of the deceased Felix Ting Ho who, being a Chinese citizen, was
then disqualified to own public lands in the Philippines; and that upon the death of Felix Ting Ho, the
As previously discussed, the suspensive condition (payment of the balance by respondent) did respondent took possession of the same for his own exclusive use and benefit to their exclusion and
not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to prejudice.[4]
him.
WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court In his answer, the respondent countered that on October 11, 1958, Felix Ting Ho sold the
of Appeals is REVERSED and respondents complaint is DISMISSED. commercial and residential buildings to his sister-in-law, Victoria Cabasal, and the bakery to his brother-in-
SO ORDERED. law, Gregorio Fontela.[5] He alleged that he acquired said properties from the respective buyers on October
28, 1961 and has since then been in possession of subject properties in the concept of an owner; and that
on January 24, 1978, Original Certificate of Title No. P-1064 covering the subject lot was issued to him
TING HO V. TENG GUI (2008) pursuant to a miscellaneous sales patent granted to him on January 3, 1978.[6]

The undisputed facts as found by the trial court (RTC), and affirmed by the appellate court (CA),
FELIX TING HO, JR., G.R. No. 130115 are as follows:
MERLA TING HO BRADEN,
JUANA TING HO & LYDIA [T]he plaintiffs and the defendant are all brothers and sisters, the
TING HO BELENZO, Present: defendant being the oldest. They are the only legitimate children of the deceased
Spouses Felix Ting Ho and Leonila Cabasal. Felix Ting Ho died on June 26, 1970 while
Petitioners, PUNO, C.J., Chairperson, the wife Leonila Cabasal died on December 7, 1978. The defendant Vicente Teng Gui
CARPIO, is the oldest among the children as he was born onApril 5, 1943. The father of the
CORONA, plaintiffs and the defendant was a Chinese citizen although their mother was
- versus - AZCUNA, and Filipino. That sometime in 1947, the father of the plaintiffs and defendant, Felix Ting
LEONARDO-DE CASTRO, JJ. Ho, who was already then married to their mother Leonila Cabasal, occupied a parcel
of land identified to (sic) as Lot No. 18 Brill which was thereafter identified as Lot No.
Promulgated: 16 situated at Afable Street, East Bajac-Bajac, Olongapo City, by virtue of the
VICENTE TENG GUI, permission granted him by the then U.S. Naval Reservation Office, Olongapo,
Respondent. July 16, 2008 Zambales. The couple thereafter introduced improvements on the land. They built a
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x house of strong material at 16 Afable Street which is a commercial and residential
house and another building of strong material at 18 Afable Streetwhich was a
DECISION residential house and a bakery. The couple, as well as their children, lived and resided
in the said properties until their death. The father, Felix Ting Ho had managed the
PUNO, C.J.: bakery while the mother managed the sari-sari store. Long before the death of Felix
Ting Ho, who died on June 26, 1970, he executed on October 11, 1958 a Deed of
Absolute Sale of a house of strong material located at 16 Afable Street, Olongapo, although from the face of the document it is stated in absolute terms that without
Zambales, specifically described in Tax Dec. No. 5432, in favor of Victoria Cabasal his any consideration Felix Ting Ho was transferring and renouncing his right in favor of
sister-in-law (Exh. C).This Deed of Sale cancelled the Tax Dec. of Felix Ting Ho over the his son, the defendant Vicente Teng Gui, still the Court believes that the transaction
said building (Exh. C-1) and the building was registered in the name of the buyer was one of implied trust executed by Felix Ting Ho for the benefit of his family[8]
Victoria Cabasal, as per Tax Dec. No. 7579 (Exh. C-2). On the same date, October 11,
1958 the said Felix Ting Ho also sold a building of strong material located at 18 Notwithstanding such findings, the RTC considered the Affidavit of Transfer, Relinquishment and
Afable Street, described in Tax Dec. No. 5982, in favor of Gregorio Fontela, of legal Renouncement of Rights and Interests over the land as a donation which was accepted by the donee, the
age, an American citizen, married (Exh. D). This Deed of Sale, in effect, cancelled Tax herein respondent. With respect to the properties in the lot, the trial court held that although the sales
Dec. No. 5982 and the same was registered in the name of the buyer Gregorio were simulated, pursuant to Article 1471 of the New Civil Code[9] it can be assumed that the intention of
Fontela, as per Tax Dec. No. 7580 (Exh. D-2). In turn Victoria Cabasal and her Felix Ting Ho in such transaction was to give and donate such properties to the respondent. As a result, it
husband Gregorio Fontela sold to Vicente Teng Gui on October 28, 1961 the awarded the entire conjugal share of Felix Ting Ho in the subject lot and properties to the respondent and
buildings which were bought by them from Felix Ting Ho and their tax declarations divided only the conjugal share of his wife among the siblings. The dispositive portion of the RTC decision
for the building they bought (Exhs. C-2 and D-2) were accordingly cancelled and the decreed:
said buildings were registered in the name of the defendant Vicente Teng Gui (Exhs.
C-3 and D-3). On October 25, 1966 the father of the parties Felix Ting Ho executed an WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest against the defendant as the Court orders the partition and the adjudication of the
including Improvements on Land in favor of his eldest son the defendant Vicente Teng subject properties, Lot 418, Ts-308, specifically described in original Certificate of Title
Gui. On the basis of the said document the defendant who then chose Filipino No. P-1064 and the residential and commercial houses standing on the lot specifically
citizenship filed a miscellaneous sales application with the Bureau of described in Tax Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the
Lands. Miscellaneous Sales Patent No. 7457 of the land which was then identified to following manner, to wit: To the defendant Vicente Teng Gui is adjudicated an
be Lot No. 418, Ts-308 consisting of 774 square meters was issued to the applicant undivided six-tenth (6/10) of the aforementioned properties and to each of the
Vicente Teng Gui and accordingly on the 24th of January, 1978 Original Certificate of plaintiffs Felix Ting Ho, Jr., Merla Ting-Ho Braden, Juana Ting and Lydia Ting Ho-
Title No. P-1064 covering the lot in question was issued to the defendant Vicente Belenzo each an undivided one-tenth (1/10) of the properties[10]
Teng Gui. Although the buildings and improvements on the land in question were
sold by Felix Ting Ho to Victoria Cabasal and Gregorio Fontela in 1958 and who in turn From this decision, both parties interposed their respective appeals. The petitioners claimed that
sold the buildings to the defendant in 1961 the said Felix Ting Ho and his wife the RTC erred in awarding respondent the entire conjugal share of their deceased father in the lot and
remained in possession of the properties as Felix Ting Ho continued to manage the properties in question contrary to its own finding that an implied trust existed between the parties. The
bakery while the wife Leonila Cabasal continued to manage the sari-sari store. During respondent, on the other hand, asserted that the RTC erred in not ruling that the lot and properties do not
all the time that the alleged buildings were sold to the spouses Victoria Cabasal and form part of the estate of Felix Ting Ho and are owned entirely by him.
Gregorio Fontela in 1958 and the subsequent sale of the same to the defendant
Vicente Teng Gui in October of 1961 the plaintiffs and the defendant continued to live On appeal, the CA reversed and set aside the decision of the RTC. The appellate court held that the
and were under the custody of their parents until their father Felix Ting Ho died in deceased Felix Ting Ho was never the owner and never claimed ownership of the subject lot since he is
1970 and their mother Leonila Cabasal died in 1978.[7] (Emphasis supplied) disqualified under Philippine laws from owning public lands, and that respondent Vicente Teng Gui was the
rightful owner over said lot by virtue of Miscellaneous Sales Patent No. 7457 issued in his favor, viz:
In light of these factual findings, the RTC found that Felix Ting Ho, being a Chinese citizen and the
father of the petitioners and respondent, resorted to a series of simulated transactions in order to preserve The deceased Felix Ting Ho, plaintiffs and defendants late father, was never the
the right to the lot and the properties thereon in the hands of the family. As stated by the trial court: owner of the subject lot, now identified as Lot No. 418, Ts-308 covered by OCT No.
P-1064 (Exh. A; Record, p. 104). As stated by Felix Ting Ho no less in the Affidavit of
After a serious consideration of the testimonies given by both one of the Transfer, Relinquishment and Renouncement of Rights and Interest etc. (Exh. B:
plaintiffs and the defendant as well as the documentary exhibits presented in the Record, p. 107), executed on October 25, 1966 he, the late Felix Ting Ho, was merely
case, the Court is inclined to believe that Felix Ting Ho, the father of the plaintiffs and a possessor or occupant of the subject lot by virtue of a permission granted by
the defendant, and the husband of Leonila Cabasal thought of preserving the the then U.S. Naval Reservation Office, Olongapo, Zambales. The late Felix Ting Ho
properties in question by transferring the said properties to his eldest son as he was never the owner and never claimed ownership of the land. (Emphasis supplied)
thought that he cannot acquire the properties as he was a Chinese citizen. To transfer
the improvements on the land to his eldest son the defendant Vicente Teng Gui, he The affidavit, Exhibit B, was subscribed and sworn to before a Land Investigator of
first executed simulated Deeds of Sales in favor of the sister and brother-in-law of his the Bureau of Lands and in the said affidavit, the late Felix Ting Ho expressly
wife in 1958 and after three (3) years it was made to appear that these vendees had acknowledged that because he is a Chinese citizen he is not qualified to purchase
sold the improvements to the defendant Vicente Teng Gui who was then 18 years public lands under Philippine laws for which reason he thereby transfers, relinquishes
old. The Court finds that these transaction (sic) were simulated and that no and renounces all his rights and interests in the subject land, including all the
consideration was ever paid by the vendees. improvements thereon to his son, the defendant Vicente Teng Gui, who is of legal
age, single, Filipino citizen and qualified under the public land law to acquire lands.
xxx xxx xxx
xxx xxx xxx
With regards (sic) to the transfer and relinquishment of Felix Ting Hos
right to the land in question in favor of the defendant, the Court believes, that
Defendant Vicente Teng Gui acquired the subject land by sales patent or
purchase from the government and not from his father, the late Felix Ting Ho. It The primary issue for consideration is whether both Lot No. 418, Ts-308 and the properties
cannot be said that he acquired or bought the land in trust for his father because on erected thereon should be included in the estate of the deceased Felix Ting Ho.
December 5, 1977 when the subject land was sold to him by the government and on
January 3, 1978 when Miscellaneous Sales Patent No. 7457 was issued, the late Felix We affirm the CA ruling.
Ting Ho was already dead, having died on June 6, 1970 (TSN, January 10, 1990, p.
4).[11] With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935 Constitution states:

Regarding the properties erected over the said lot, the CA held that the finding that the sales of the Section 1. All agricultural timber, and mineral lands of the public domain,
two-storey commercial and residential buildings and sari-sari store to Victoria Cabasal and Gregorio Fontela waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
and subsequently to respondent were without consideration and simulated is supported by evidence, which energy and other natural resources of the Philippines belong to the State, and their
clearly establishes that these properties should form part of the estate of the late spouses Felix Ting Ho and disposition, exploitation, development, or utilization shall be limited to citizens of
Leonila Cabasal. the Philippines or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, subject to any existing right, grant, lease,
Thus, while the appellate court dismissed the complaint for partition with respect to the lot in or concession at the time of the inauguration of the Government established under
question, it awarded the petitioners a four-fifths (4/5) share of the subject properties erected on the said this Constitution (Emphasis supplied)
lot. The dispositive portion of the CA ruling reads as follows:
Our fundamental law cannot be any clearer. The right to acquire lands of the public domain is
WHEREFORE, premises considered, the decision appealed from is REVERSED and reserved for Filipino citizens or corporations at least sixty percent of the capital of which is owned by
SET ASIDE and NEW JUDGMENT rendered: Filipinos. Thus, in Krivenko v. Register of Deeds,[14] the Court enunciated that:

1. DISMISSING plaintiff-appellants complaint with respect to the subject Perhaps the effect of our construction is to preclude aliens, admitted freely
parcel of land, identified as Lot No. 418, Ts-308, covered by OCT No. P-1064, in the into the Philippines from owning sites where they may build their homes. But if this
name of plaintiff-appellants [should be defendant-appellant]; is the solemn mandate of the Constitution, we will not attempt to compromise it
even in the name of amity or equity. We are satisfied, however, that aliens are not
2. DECLARING that the two-storey commercial building, the two-storey completely excluded by the Constitution from the use of lands for residential
residential building and sari-sari store (formerly a bakery), all erected on the subject purposes. Since their residence in the Philippines is temporary, they may be granted
lot No. 418, Ts-308, form part of the estate of the deceased spouses Felix Ting Ho and temporary rights such as a lease contract which is not forbidden by the Constitution.
Leonila Cabasal, and that plaintiff-appellants are entitled to four-fifths (4/5) thereof, Should they desire to remain here forever and share our fortunes and misfortunes,
the remaining one-fifth (1/5) being the share of the defendant-appellant; Filipino citizenship is not impossible to acquire.[15]

3. DIRECTING the court a quo to partition the said two-storey commercial In the present case, the father of petitioners and respondent was a Chinese citizen; therefore, he
building, two-storey residential building and sari-sari store (formerly a bakery) in was disqualified from acquiring and owning real property in thePhilippines. In fact, he was only occupying
accordance with Rule 69 of the Revised Rules of Court and pertinent provisions of the the subject lot by virtue of the permission granted him by the then U.S. Naval Reservation Office of
Civil Code; Olongapo, Zambales. As correctly found by the CA, the deceased Felix Ting Ho was never the owner of the
subject lot in light of the constitutional proscription and the respondent did not at any instance act as the
4. Let the records of this case be remanded to the court of origin for further dummy of his father.
proceedings;
On the other hand, the respondent became the owner of Lot No. 418, Ts-308 when he was
5. Let a copy of this decision be furnished the Office of the Solicitor General; granted Miscellaneous Sales Patent No. 7457 on January 3, 1978, by the Secretary of Natural Resources By
and Authority of the President of the Philippines, and when Original Certificate of Title No. P-1064 was
correspondingly issued in his name. The grant of the miscellaneous sales patent by the Secretary of Natural
6. There is no pronouncement as to costs. Resources, and the corresponding issuance of the original certificate of title in his name, show that the
respondent possesses all the qualifications and none of the disqualifications to acquire alienable and
SO ORDERED.[12] disposable lands of the public domain. These issuances bear the presumption of regularity in their
performance in the absence of evidence to the contrary.
Both petitioners and respondent filed their respective motions for reconsideration from this
ruling, which were summarily denied by the CA in its Resolution[13]dated August 5, 1997. Hence, this Registration of grants and patents involving public lands is governed by Section 122 of Act No. 496,
petition. which was subsequently amended by Section 103 of Presidential Decree No. 1529, viz:

According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-308 does not form Sec. 103. Certificate of title pursuant to patents.Whenever public land is by
part of the estate of the deceased Felix Ting Ho and is owned alone by respondent. Respondent, on the the Government alienated, granted or conveyed to any person, the same shall be
other hand, contends that he should be declared the sole owner not only of Lot No. 418, Ts-308 but also of brought forthwith under the operation of this Decree. It shall be the duty of the
the properties erected thereon and that the CA erred in not dismissing the complaint for partition with official issuing the instrument of alienation, grant, patent or conveyance in behalf of
respect to the said properties. the Government to cause such instrument to be filed with the Register of Deeds of
the province or city where the land lies, and to be there registered like other deeds family. The records show that during all the time that the properties were allegedly sold to the spouses
and conveyance, whereupon a certificate of title shall be entered as in other cases of Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of the same to respondent in 1961,
registered land, and an owners duplicate issued to the grantee. The deeds, grant, the petitioners and respondent, along with their parents, remained in possession and continued to live in
patent or instrument of conveyance from the Government to the grantee shall not said properties.
take effect as a conveyance or bind the land, but shall operate only as a contract
between the Government and the grantee and as evidence of authority to the However, the trial court concluded that:
Register of Deeds to make registration. It is the act of registration that shall be the
operative act to affect and convey the land, and in all cases under this Decree In fairness to the defendant, although the Deeds of Sale executed by Felix Ting
registration shall be made in the office of the Register of Deeds of the province or city Ho regarding the improvements in favor of Victoria Cabasal and Gregorio Fontela and
where the land lies. The fees for registration shall be paid by the grantee. After due the subsequent transfer of the same by Gregorio Fontela and Victoria Cabasal to the
registration and issuance of the certificate of title, such land shall be deemed to be defendant are all simulated, yet, pursuant to Article 1471 of the New Civil Code it can
registered land to all intents and purposes under this Decree.[16] (Emphasis supplied) be assumed that the intention of Felix Ting Ho in such transaction was to give and
donate the improvements to his eldest son the defendant Vicente Teng Gui [20]

Under the law, a certificate of title issued pursuant to any grant or patent involving public land is as Its finding was based on Article 1471 of the Civil Code, which provides that:
conclusive and indefeasible as any other certificate of title issued to private lands in the ordinary or
cadastral registration proceeding. The effect of the registration of a patent and the issuance of a certificate Art. 1471. If the price is simulated, the sale is void, but the act may be
of title to the patentee is to vest in him an incontestable title to the land, in the same manner as if shown to have been in reality a donation, or some other act or contract.[21]
ownership had been determined by final decree of the court, and the title so issued is absolutely conclusive
and indisputable, and is not subject to collateral attack.[17] The Court holds that the reliance of the trial court on the provisions of Article 1471 of the Civil
Code to conclude that the simulated sales were a valid donation to the respondent is misplaced because its
Nonetheless, petitioners invoke equity considerations and claim that the ruling of the RTC that an finding was based on a mere assumption when the law requires positive proof.
implied trust was created between respondent and their father with respect to the subject lot should be
upheld. The respondent was unable to show, and the records are bereft of any evidence, that the
simulated sales of the properties were intended by the deceased to be a donation to him. Thus, the Court
This contention must fail because the prohibition against an alien from owning lands of the public holds that the two-storey residential house, two-storey residential building and sari-sari store form part of
domain is absolute and not even an implied trust can be permitted to arise on equity considerations. the estate of the late spouses Felix Ting Ho and Leonila Cabasal, entitling the petitioners to a four-fifths (4/5)
share thereof.
In the case of Muller v. Muller,[18] wherein the respondent, a German national, was seeking
reimbursement of funds claimed by him to be given in trust to his petitioner wife, a Philippine citizen, for IN VIEW WHEREOF, the petition is DENIED. The assailed Decision dated December 27, 1996 of
the purchase of a property in Antipolo, the Court, in rejecting the claim, ruled that: the Court of Appeals in CA-G.R. CV No. 42993 is hereby AFFIRMED.

Respondent was aware of the constitutional prohibition and expressly SO ORDERED.


admitted his knowledge thereof to this Court. He declared that he had the Antipolo
property titled in the name of the petitioner because of the said prohibition. His
attempt at subsequently asserting or claiming a right on the said property cannot be
sustained.

The Court of Appeals erred in holding that an implied trust was created
and resulted by operation of law in view of petitioner's marriage to respondent.
Save for the exception provided in cases of hereditary succession, respondent's
disqualification from owning lands in the Philippines is absolute. Not even an
ownership in trust is allowed.Besides, where the purchase is made in violation of an
existing statute and in evasion of its express provision, no trust can result in favor of
the party who is guilty of the fraud. To hold otherwise would allow circumvention of
the constitutional prohibition.

Invoking the principle that a court is not only a court of law but also a court
of equity, is likewise misplaced. It has been held that equity as a rule will follow the
law and will not permit that to be done indirectly which, because of public policy,
cannot be done directly...[19]

Coming now to the issue of ownership of the properties erected on the subject lot, the Court
agrees with the finding of the trial court, as affirmed by the appellate court, that the series of transactions
resorted to by the deceased were simulated in order to preserve the properties in the hands of the