Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 103577 October 7, 1996
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE
A. CORONEL, ANNABELLE C. GONZALES (for herself and
on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO
A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA
BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ,
and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F.
NOEL as attorney-in-fact, respondents.
MELO, J.:p
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last
named, Catalina Balais Mabanag) to consummate the sale of a
parcel of land with its improvements located along Roosevelt
Avenue in Quezon City entered into by the parties sometime in
January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by
respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et
al. (hereinafter referred to as Coronels) executed a document
entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff
Ramona Patricia Alcaraz (hereinafter referred to as Ramona)
which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 Total amount
50,000 Down payment
P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 119627 of
the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
We bind ourselves to effect the transfer in our names from our
deceased father, Constancio P. Coronel, the transfer certificate
of title immediately upon receipt of the down payment above-
stated.
On our presentation of the TCT already in or name, We will
immediately execute the deed of absolute sale of said property
and Miss Ramona Patricia Alcaraz shall immediately pay the
balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand
(P50,000.00) Pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title
of the property registered in the name of their deceased father
upon receipt of the Fifty Thousand (P50,000.00) Pesos down
payment;
3. Upon the transfer in their names of the subject property, the
Coronels will execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the whole balance of
One Million One Hundred Ninety Thousand (P1,190,000.00)
Pesos.
On the same date (January 15, 1985), plaintiff-appellee
Concepcion D. Alcaraz (hereinafter referred to as Concepcion),
mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. "B", Exh. "2").
On February 6, 1985, the property originally registered in the
name of the Coronels' father was transferred in their names
under TCT
No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the property covered
by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag
(hereinafter referred to as Catalina) for One Million Five
Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter
has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs.
"F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract
(Exh. "A") with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for
specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No.
327403 (Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of
adverse claim covering the same property with the Registry of
Deeds of Quezon City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute
Sale over the subject property in favor of Catalina (Exh. "G";
Exh. "7").
On June 5, 1985, a new title over the subject property was
issued in the name of Catalina under TCT No. 351582 (Exh. "H";
Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch
83, RTC, Quezon City) the parties agreed to submit the case for
decision solely on the basis of documentary exhibits. Thus,
plaintiffs therein (now private respondents) proffered their
documentary evidence accordingly marked as Exhibits "A"
through "J", inclusive of their corresponding submarkings.
Adopting these same exhibits as their own, then defendants
(now petitioners) accordingly offered and marked them as
Exhibits "1" through "10", likewise inclusive of their
corresponding submarkings. Upon motion of the parties, the trial
court gave them thirty (30) days within which to simultaneously
submit their respective memoranda, and an additional 15 days
within which to submit their corresponding comment or reply
thereof, after which, the case would be deemed submitted for
resolution.
On April 14, 1988, the case was submitted for resolution before
Judge Reynaldo Roura, who was then temporarily detailed to
preside over Branch 82 of the RTC of Quezon City. On March 1,
1989, judgment was handed down by Judge Roura from his
regular bench at Macabebe, Pampanga for the Quezon City
branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby
rendered ordering defendant to execute in favor of plaintiffs a
deed of absolute sale covering that parcel of land embraced in
and covered by Transfer Certificate of Title No. 327403 (now
TCT No. 331582) of the Registry of Deeds for Quezon City,
together with all the improvements existing thereon free from all
liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and
upon receipt thereof, the said document of sale to plaintiffs and
upon receipt thereof, the plaintiffs are ordered to pay defendants
the whole balance of the purchase price amounting to
P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of
the Registry of Deeds for Quezon City in the name of intervenor
is hereby canceled and declared to be without force and effect.
Defendants and intervenor and all other persons claiming under
them are hereby ordered to vacate the subject property and
deliver possession thereof to plaintiffs. Plaintiffs' claim for
damages and attorney's fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the
new presiding judge of the Quezon City RTC but the same was
denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the
decision and to render anew decision by the undersigned
Presiding Judge should be denied for the following reasons: (1)
The instant case became submitted for decision as of April 14,
1988 when the parties terminated the presentation of their
respective documentary evidence and when the Presiding
Judge at that time was Judge Reynaldo Roura. The fact that
they were allowed to file memoranda at some future date did not
change the fact that the hearing of the case was terminated
before Judge Roura and therefore the same should be
submitted to him for decision; (2) When the defendants and
intervenor did not object to the authority of Judge Reynaldo
Roura to decide the case prior to the rendition of the decision,
when they met for the first time before the undersigned
Presiding Judge at the hearing of a pending incident in Civil
Case No. Q-46145 on November 11, 1988, they were deemed to
have acquiesced thereto and they are now estopped from
questioning said authority of Judge Roura after they received
the decision in question which happens to be adverse to them;
(3) While it is true that Judge Reynaldo Roura was merely a
Judge-on-detail at this Branch of the Court, he was in all
respects the Presiding Judge with full authority to act on any
pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide or
resolve such cases submitted to him for decision or resolution
because he continued as Judge of the Regional Trial Court and
is of co-equal rank with the undersigned Presiding Judge. The
standing rule and supported by jurisprudence is that a Judge to
whom a case is submitted for decision has the authority to
decide the case notwithstanding his transfer to another branch
or region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the
Decision dated March 1, 1989 rendered in the instant case,
resolution of which now pertains to the undersigned Presiding
Judge, after a meticulous examination of the documentary
evidence presented by the parties, she is convinced that the
Decision of March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for
Reconsideration and/or to Annul Decision and Render Anew
Decision by the Incumbent Presiding Judge" dated March 20,
1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December
16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad
Santos (P), JJ.) rendered its decision fully agreeing with the trial
court.
Hence, the instant petition which was filed on March 5, 1992.
The last pleading, private respondents' Reply Memorandum,
was filed on September 15, 1993. The case was, however, re-
raffled to undersigned ponente only on August 28, 1996, due to
the voluntary inhibition of the Justice to whom the case was last
assigned.
While we deem it necessary to introduce certain refinements in
the disquisition of respondent court in the affirmance of the trial
court's decision, we definitely find the instant petition bereft of
merit.
The heart of the controversy which is the ultimate key in the
resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled
"Receipt of Down Payment" which was offered in evidence by
both parties. There is no dispute as to the fact that said
document embodied the binding contract between Ramona
Patricia Alcaraz on the one hand, and the heirs of Constancio P.
Coronel on the other, pertaining to a particular house and lot
covered by TCT No. 119627, as defined in Article 1305 of the
Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give
something or to render some service.
While, it is the position of private respondents that the "Receipt
of Down Payment" embodied a perfected contract of sale, which
perforce, they seek to enforce by means of an action for specific
performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell,
subject to certain suspensive conditions, and because of the
absence of Ramona P. Alcaraz, who left for the United States of
America, said contract could not possibly ripen into a contract
absolute sale.
Plainly, such variance in the contending parties' contentions is
brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on
whatever relevant and admissible evidence may be available on
record, this, Court, as were the courts below, is now called upon
to adjudge what the real intent of the parties was at the time the
said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract
of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicity
reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we
shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill is promise to sell
the subject property when the entire amount of the purchase
price is delivered to him. In other words the full payment of the
purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising
and thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer. In Roque
vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the
respondent was a contract to sell where the ownership or title is
retained by the seller and is not to pass until the full payment of
the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective seller's obligation to sell the subject property by
entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil
Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase
price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale until
the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and housing Corp. vs. Court of
Appeals, 133 SCRA 777 [1984]). However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the
property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without
any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench. In
a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase
price, for instance, cannot be deemed a buyer in bad faith and
the prospective buyer cannot seek the relief of reconveyance of
the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because
there is no defect in the owner-seller's title per se, but the latter,
of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of
the suspensive condition, the sale becomes absolute and this
will definitely affect the seller's title thereto. In fact, if there had
been previous delivery of the subject property, the seller's
ownership or title to the property is automatically transferred to
the buyer such that, the seller will no longer have any title to
transfer to any third person. Applying Article 1544 of the Civil
Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the seller's
title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer
cannot defeat the first buyer's title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the
property subject of the sale.
With the above postulates as guidelines, we now proceed to the
task of deciphering the real nature of the contract entered into
by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words
used therein should be given their natural and ordinary meaning
unless a technical meaning was intended (Tan vs. Court of
Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared
in the said "Receipt of Down Payment" that they
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 1199627 of
the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
without any reservation of title until full payment of the entire
purchase price, the natural and ordinary idea conveyed is that
they sold their property.
When the "Receipt of Down Payment" is considered in its
entirety, it becomes more manifest that there was a clear intent
on the part of petitioners to transfer title to the buyer, but since
the transfer certificate of title was still in the name of petitioner's
father, they could not fully effect such transfer although the
buyer was then willing and able to immediately pay the
purchase price. Therefore, petitioners-sellers undertook upon
receipt of the down payment from private respondent Ramona P.
Alcaraz, to cause the issuance of a new certificate of title in their
names from that of their father, after which, they promised to
present said title, now in their names, to the latter and to
execute the deed of absolute sale whereupon, the latter shall, in
turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because
the sellers herein made no express reservation of ownership or
title to the subject parcel of land. Furthermore, the circumstance
which prevented the parties from entering into an absolute
contract of sale pertained to the sellers themselves (the
certificate of title was not in their names) and not the full
payment of the purchase price. Under the established facts and
circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-
sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and
consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at
bar did not merely promise to sell the properly to private
respondent upon the fulfillment of the suspensive condition. On
the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title changed to their
names and immediately thereafter, to execute the written deed
of absolute sale.
Thus, the parties did not merely enter into a contract to sell
where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the latter.
What may be perceived from the respective undertakings of the
parties to the contract is that petitioners had already agreed to
sell the house and lot they inherited from their father, completely
willing to transfer full ownership of the subject house and lot to
the buyer if the documents were then in order. It just happened,
however, that the transfer certificate of title was then still in the
name of their father. It was more expedient to first effect the
change in the certificate of title so as to bear their names. That
is why they undertook to cause the issuance of a new transfer of
the certificate of title in their names upon receipt of the down
payment in the amount of P50,000.00. As soon as the new
certificate of title is issued in their names, petitioners were
committed to immediately execute the deed of absolute sale.
Only then will the obligation of the buyer to pay the remainder of
the purchase price arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installment by
withholding ownership over the property until the buyer effects
full payment therefor, in the contract entered into in the case at
bar, the sellers were the one who were unable to enter into a
contract of absolute sale by reason of the fact that the certificate
of title to the property was still in the name of their father. It was
the sellers in this case who, as it were, had the impediment
which prevented, so to speak, the execution of an contract of
absolute sale.
What is clearly established by the plain language of the subject
document is that when the said "Receipt of Down Payment" was
prepared and signed by petitioners Romeo A. Coronel, et al.,
the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer
of the certificate of title from the name of petitioners' father,
Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in
fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on
said date, the conditional contract of sale between petitioners
and private respondent Ramona P. Alcaraz became obligatory,
the only act required for the consummation thereof being the
delivery of the property by means of the execution of the deed
of absolute sale in a public instrument, which petitioners
unequivocally committed themselves to do as evidenced by the
"Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil
Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there
is a meeting of minds upon the thing which is the object of the
contract and upon the price.
From the moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as
well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which constitutes
the condition.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioners' names was fulfilled
on February 6, 1985, the respective obligations of the parties
under the contract of sale became mutually demandable, that is,
petitioners, as sellers, were obliged to present the transfer
certificate of title already in their names to private respondent
Ramona P. Alcaraz, the buyer, and to immediately execute the
deed of absolute sale, while the buyer on her part, was obliged
to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.
It is also significant to note that in the first paragraph in page 9
of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect
the transfer in our names from our deceased father Constancio
P. Coronel, the transfer certificate of title immediately upon
receipt of the downpayment above-stated". The sale was still
subject to this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a
contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of
first transferring the title to the property under their names, there
could be no perfected contract of sale. (Emphasis supplied.)
 (Ibid.)
not aware that they set their own trap for themselves, for Article
1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is
more controlling than these mere hypothetical arguments is the
fact that the condition herein referred to was actually and
indisputably fulfilled on February 6, 1985, when a new title was
issued in the names of petitioners as evidenced by TCT No.
327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as
evidenced by the document denominated as "Receipt of Down
Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract
of sale subject only to the suspensive condition that the sellers
shall effect the issuance of new certificate title from that of their
father's name to their names and that, on February 6, 1985, this
condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides
Art. 1187. The effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligation to do or not to do, the courts shall determine, in
each case, the retroactive effect of the condition that has been
complied with.
the rights and obligations of the parties with respect to the
perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on
January 19, 1985 because they were then not yet the absolute
owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which
the property, rights and obligations to be extent and value of the
inheritance of a person are transmitted through his death to
another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and
daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation of
law. Thus, at the point their father drew his last breath,
petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon them.
It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article
777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not
be declared unless the creditors have been paid is rendered
moot by the fact that they were able to effect the transfer of the
title to the property from the decedent's name to their names on
February 6, 1985.
Aside from this, petitioners are precluded from raising their
supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture contrary
to that which they took when they entered into the agreement
with private respondent Ramona P. Alcaraz. The Civil Code
expressly states that:
Art. 1431. Through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the
subject property at the time of sale, petitioners cannot claim now
that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a
perfected contract of sale between them and Ramona P.
Alcaraz, the latter breached her reciprocal obligation when she
rendered impossible the consummation thereof by going to the
United States of America, without leaving her address,
telephone number, and Special Power of Attorney (Paragraphs
14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so
petitioners conclude, they were correct in unilaterally rescinding
rescinding the contract of sale.
We do not agree with petitioners that there was a valid
rescission of the contract of sale in the instant case. We note
that these supposed grounds for petitioners' rescission, are
mere allegations found only in their responsive pleadings, which
by express provision of the rules, are deemed controverted
even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised
Rules of Court). The records are absolutely bereft of any
supporting evidence to substantiate petitioners' allegations. We
have stressed time and again that allegations must be proven
by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882
[1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation
is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the
United States of America on February 6, 1985, we cannot justify
petitioner-sellers' act of unilaterally and extradicially rescinding
the contract of sale, there being no express stipulation
authorizing the sellers to extarjudicially rescind the contract of
sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda.
de Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged
absence of Ramona P. Alcaraz because although the evidence
on record shows that the sale was in the name of Ramona P.
Alcaraz as the buyer, the sellers had been dealing with
Concepcion D. Alcaraz, Ramona's mother, who had acted for
and in behalf of her daughter, if not also in her own behalf.
Indeed, the down payment was made by Concepcion D. Alcaraz
with her own personal check (Exh. "B"; Exh. "2") for and in
behalf of Ramona P. Alcaraz. There is no evidence showing that
petitioners ever questioned Concepcion's authority to represent
Ramona P. Alcaraz when they accepted her personal check.
Neither did they raise any objection as regards payment being
effected by a third person. Accordingly, as far as petitioners are
concerned, the physical absence of Ramona P. Alcaraz is not a
ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in
default, insofar as her obligation to pay the full purchase price is
concerned. Petitioners who are precluded from setting up the
defense of the physical absence of Ramona P. Alcaraz as
above-explained offered no proof whatsoever to show that they
actually presented the new transfer certificate of title in their
names and signified their willingness and readiness to execute
the deed of absolute sale in accordance with their agreement.
Ramona's corresponding obligation to pay the balance of the
purchase price in the amount of P1,190,000.00 (as buyer) never
became due and demandable and, therefore, she cannot be
deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract
involving reciprocal obligations may be considered in default, to
wit:
Art. 1169. Those obliged to deliver or to do something, incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner
with what is incumbent upon him . From the moment one of the
parties fulfill his obligation, delay by the other begins. (Emphasis
supplied.)
There is thus neither factual nor legal basis to rescind the
contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner,
Catalina B. Mabanag, gave rise to a case of double sale where
Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should
be movable property.
Should if be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in
Registry of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof to the person who presents the oldest title,
provided there is good faith.
The record of the case shows that the Deed of Absolute Sale
dated April 25, 1985 as proof of the second contract of sale was
registered with the Registry of Deeds of Quezon City giving rise
to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second
paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or
ownership to pass to the first buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale ahead
of the first buyer, and (b) should there be no inscription by either
of the two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first buyer.
Unless, the second buyer satisfies these requirements, title or
ownership will not transfer to him to the prejudice of the first
buyer.
In his commentaries on the Civil Code, an accepted authority on
the subject, now a distinguished member of the Court, Justice
Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second
sale cannot defeat the first buyer's rights except when the
second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his
registration with bad faith (see also Astorga vs. Court of Appeals,
G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R.
No. 56232, 22 June 1984, 129 SCRA 656), it has held that it is
essential, to merit the protection of Art. 1544, second paragraph,
that the second realty buyer must act in good faith in registering
his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA
99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993
Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at
bar was annoted on the title of the subject property only on
February 22, 1985, whereas, the second sale between
petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was unaware
of any adverse claim or previous sale, for which reason she is
buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is
not whether or not the second buyer was a buyer in good faith
but whether or not said second buyer registers such second
sale in good faith, that is, without knowledge of any defect in the
title of the property sold.
concerned, the issue of whether or not Concepcion was also
acting in her own behalf as a co-buyer is not squarely raised in
the instant petition, nor in such assumption disputed between
mother and daughter. Thus, We will not touch this issue and no
longer disturb the lower courts' ruling on this point.

As clearly borne out by the evidence in this case, petitioner WHEREFORE, premises considered, the instant petition is
Mabanag could not have in good faith, registered the sale hereby DISMISSED and the appealed judgment AFFIRMED.
entered into on February 18, 1985 because as early as February
22, 1985, a notice of lis pendens had been annotated on the SO ORDERED.
transfer certificate of title in the names of petitioners, whereas
petitioner Mabanag registered the said sale sometime in April, Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.
1985. At the time of registration, therefore, petitioner Mabanag
knew that the same property had already been previously sold Panganiban, J., took no part.
to private respondents, or, at least, she was charged with
knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the
defect in petitioners' title to the property at the time of the
registration of the property.
Republic of the Philippines
This Court had occasions to rule that: SUPREME COURT
Baguio
If a vendee in a double sale registers that sale after he has
acquired knowledge that there was a previous sale of the same SECOND DIVISION
property to a third party or that another person claims said
property in a pervious sale, the registration will constitute a G.R. No. 188661 April 11, 2012
registration in bad faith and will not confer upon him any right.
(Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. ESTELITA VILLAMAR, Petitioner,
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. vs.
554; Fernandez vs. Mercader, 43 Phil. 581.) BALBINO MANGAOIL, Respondent.

Thus, the sale of the subject parcel of land between petitioners DECISION
and Ramona P. Alcaraz, perfected on February 6, 1985, prior to
that between petitioners and Catalina B. Mabanag on February REYES, J.:
18, 1985, was correctly upheld by both the courts below.
The Case
Although there may be ample indications that there was in fact
an agency between Ramona as principal and Concepcion, her
mother, as agent insofar as the subject contract of sale is
Before us is a petition for review on certiorari1 under Rule 45 of
the Rules of Court filed by Estelita Villamar (Villamar) to assail
the Decision 2 rendered by the Court of Appeals (CA) on
February 20, 2009 in CA-G.R. CV No. 86286, the dispositive
portion of which reads:
WHEREFORE, the instant appeal is DISMISSED. The assailed
decision is AFFIRMED in toto .
SO ORDERED .3
The resolution4 issued by the CA on July 8, 2009 denied the
petitioner's motion for reconsideration to the foregoing.
The ruling 5 of Branch 23, Regional Trial Court (RTC) of Roxas,
Isabela, which was affirmed by the CA in the herein assailed
decision and resolution, ordered the (1) rescission of the
contract of sale of real property entered into by Villamar and
Balbino Mangaoil (Mangaoil); and (2) return of the down
payment made relative to the said contract.
Antecedents Facts
The CA aptly summarized as follows the facts of the case prior
to the filing by Mangaoil of the complaint 6 for rescission of
contract before the RTC:
Villamar is the registered owner of a 3.6080 hectares parcel of
land [hereinafter referred as the subject property] in San
Francisco, Manuel, Isabela covered by Transfer Certificate of
Title (TCT) No. T-92958-A. On March 30, 1998, she entered into
an Agreement with Mangaoil for the purchase and sale of said
parcel of land, under the following terms and conditions:
"1. The price of the land is ONE HUNDRED AND EIGHTY
THOUSAND (180,000.00) PESOS per hectare but only the
3.5000 hec. shall be paid and the rest shall be given free, so that
the total purchase or selling price shall be []630,000.00 only;
2. ONE HUNDRED EIGHTY FIVE THOUSAND (185,000.00)
PESOS of the total price was already received on March 27,
1998 for payment of the loan secured by the certificate of
title covering the land in favor of the Rural Bank of Cauayan,
San Manuel Branch, San Manuel, Isabela [Rural Bank of
Cauayan], in order that the certificate of title thereof be
withdrawn and released from the said bank, and the rest shall
be for the payment of the mortgag[e]s in favor of Romeo
Lacaden and Florante Parangan;
3. After the release of the certificate of title covering the land
subject-matter of this agreement, the necessary deed of
absolute sale in favor of the PARTY OF THE SECOND PART
shall be executed and the transfer be immediately effected so
that the latter can apply for a loan from any lending institution
using the corresponding certificate of title as collateral therefor,
and the proceeds of the loan, whatever be the amount, be given
to the PARTY OF THE FIRST PART;
4. Whatever balance left from the agreed purchase price of the
land subject matter hereof after deducting the proceed of the
loan and the []185,000.00 already received as above-
mentioned, the PARTY OF THE SECOND PART shall pay unto
the PARTY OF THE FIRST PART not later than June 30,
1998 and thereafter the parties shall be released of any
obligations for and against each other; xxx"
On April 1, 1998, the parties executed a Deed of
Absolute Sale whereby Villamar (then Estelita
Bernabe) transferred the subject parcel of land to
Mangaoil for and in consideration of []150,000.00.
In a letter dated September 18, 1998, Mangaoil
informed Villamar that he was backing out from
the sale agreed upon giving as one of the reasons
therefor:
"3. That the area is not yet fully cleared by
incumbrances as there are tenants who are not
 willing to vacate the land without giving them back
the amount that they mortgaged the land."
Mangaoil demanded refund of his []185,000.00
down payment. Reiterating said demand in
another letter dated April 29, 1999, the same,
however, was unheeded. 7 x x x (Citations omitted)
On January 28, 2002, the respondent filed before
the RTC a complaint8 for rescission of contract
against the petitioner. In the said complaint, the
respondent sought the return of 185,000.00 which
he paid to the petitioner, payment of interests
thereon to be computed from March 27, 1998 until
the suit's termination, and the award of damages,
costs and 20,000.00 attorney's fees. The
respondent's factual allegations were as follows:
5. That as could be gleaned the "Agreement" (Annex "A"), the
plaintiff [Mangaoil] handed to the defendant [Villamar] the sum
of []185,000.00 to be applied as follows; []80,000 was for the
redemption of the land which was mortgaged to the Rural Bank
of Cauayan, San Manuel Branch, San Manuel, Isabela, to
enable the plaintiff to get hold of the title and register the sale x
x x and []105,000.00 was for the redemption of the said land
from private mortgages to enable plaintiff to posses[s] and
cultivate the same;
6. That although the defendant had already long redeemed the
said land from the said bank and withdrawn TCT No. T-92958-A,
she has failed and refused, despite repeated demands, to hand
over the said title to the plaintiff and still refuses and fails to do
so;
7. That, also, the plaintiff could not physically, actually and
materially posses[s] and cultivate the said land because the
private mortgage[e]s and/or present possessors refuse to
vacate the same;
xxxx
11. That on September 18, 1998, the plaintiff sent a letter to the
defendant demanding a return of the amount so advanced by
him, but the latter ignored the same, x x x;
12. That, again, on April 29, 1999, the plaintiff sent to the
defendant another demand letter but the latter likewise ignored
the same, x x x;
13. That, finally, the plaintiff notified the defendant by a notarial
act of his desire and intention to rescind the said contract of sale,
xxx;
x x x x.9 (Citations omitted)
In the respondents answer to the complaint, she averred that
she had complied with her obligations to the respondent.
Specifically, she claimed having caused the release of TCT No.
T-92958-A by the Rural Bank of Cauayan and its delivery to a
certain "Atty. Pedro C. Antonio" (Atty. Antonio). The petitioner
alleged that Atty. Antonio was commissioned to facilitate the
transfer of the said title in the respondent's name. The petitioner
likewise insisted that it was the respondent who
unceremoniously withdrew from their agreement for reasons
only the latter knew.
The Ruling of the RTC
On September 9, 2005, the RTC ordered the rescission of the
agreement and the deed of absolute sale executed between the
respondent and the petitioner. The petitioner was, thus directed
to return to the respondent the sum of 185,000.00 which the
latter tendered as initial payment for the purchase of the subject
property. The RTC ratiocinated that:
There is no dispute that the defendant sold the LAND to the
plaintiff for []630,000.00 with down payment of []185,000.00.
There is no evidence presented if there were any other partial
payments made after the perfection of the contract of sale.
Article 1458 of the Civil Code provides:
"Art. 1458. By the contract of sale[,] one of the contracting
parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay
therefore a price certain in money or its equivalent."
As such, in a contract of sale, the obligation of the vendee to
pay the price is correlative of the obligation of the vendor to
deliver the thing sold. It created or established at the same time,
out of the same course, and which result in mutual relations of
creditor and debtor between the parties.
The claim of the plaintiff that the LAND has not been delivered
to him was not refuted by the defendant. Considering that
defendant failed to deliver to him the certificate of title and of the
possession over the LAND to the plaintiff, the contract must be
rescinded pursuant to Article 1191 of the Civil Code which, in
part, provides:
"Art. 1191. The power of rescind obligations is implied in
reciprocal ones in case one of the obligors should not
comply with what is incumbent upon him." 10
The petitioner filed before the CA an appeal to challenge the
foregoing. She ascribed error on the part of the RTC when the
latter ruled that the agreement and deed of sale executed by
and between the parties can be rescinded as she failed to
deliver to the respondent both the subject property and the
certificate of title covering the same.
The Ruling of the CA
On February 20, 2009, the CA rendered the now assailed
decision dismissing the petitioner s appeal based on the
following grounds:
Burden of proof is the duty of a party to prove the truth of his
claim or defense, or any fact in issue necessary to establish his
claim or defense by the amount of evidence required by law. In
civil cases, the burden of proof is on the defendant if he
alleges, in his answer, an affirmative defense, which is not a
denial of an essential ingredient in the plaintiff's cause of action,
but is one which, if established, will be a good defense i.e., an
"avoidance" of the claim, which prima facie, the plaintiff already
has because of the defendant's own admissions in the
pleadings.
Defendant-appellant Villamar's defense in this case was
an affirmative defense. She did not deny plaintiff-appellees
allegation that she had an agreement with plaintiff-appellee for
the sale of the subject parcel of land. Neither did she deny that
she was obliged under the contract to deliver the certificate of
title to plaintiff-appellee immediately after said title/property was
redeemed from the bank. What she rather claims is that she
already complied with her obligation to deliver the title to
plaintiff-appellee when she delivered the same to Atty.
Antonio as it was plaintiff-appellee himself who engaged the
services of said lawyer to precisely work for the immediate
transfer of said title in his name. Since, however, this affirmative
defense as alleged in defendant-appellant's answer was not
admitted by plaintiff-appellee, it then follows that it behooved
thedefendant-appellant to prove her averments by
preponderance of evidence.
Yet, a careful perusal of the record shows that the defendant-
appellant failed to sufficiently prove said affirmative
defense. She failed to prove that in the first place, "Atty.
Antonio" existed to receive the title for and in behalf of
plaintiff-appellee. Worse, the defendant-appellant failed to
prove that Atty. Antonio received said title "as allegedly agreed
upon."
We likewise sustain the RTC's finding that defendant-appellant
V[i]llamar failed to deliver possession of the subject property
to plaintiff-appellee Mangaoil. As correctly observed by the RTC
- "[t]he claim of the plaintiff that the land has not been delivered
to him was not refuted by the defendant." Not only that. On
cross-examination, the defendant-appellant gave Us insight
on why no such delivery could be made, viz.:
"x x x x
Q: So, you were not able to deliver this property to Mr.
Mangaoil just after you redeem the property because of the
presence of these two (2) persons, is it not?
xxx
A: Yes, sir.
Q: Forcing you to file the case against them and which
according to you, you have won, is it not?
A: Yes, sir.
Q: And now at present[,] you are in actual possession of
the land?
A: Yes, sir. x x x"
With the foregoing judicial admission, the RTC could not have
erred in finding that defendant-[appellant] failed to deliver the
possession of the property sold, to plaintiff-appellee.
Neither can We agree with defendant-appellant in her argument
that the execution of the Deed of Absolute Sale by the parties is
already equivalent to a valid and constructive delivery of the
property to plaintiff-appellee. Not only is it doctrinally settled that
in a contract of sale, the vendor is bound to transfer the
ownership of, and to deliver the thing that is the object of
the sale, the way Article 1547 of the Civil Code is worded, viz.:
"Art. 1547. In a contract of sale, unless a contrary intention
appears, there is:
(1) An implied warranty on the part of the seller that he has a
right to sell the thing at the time when the ownership is to pass,
and that the buyer shall from that time have and enjoy the
legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any
hidden defaults or defects, or any change or encumbrance not
declared or known to the buyer.
x x x."
shows that actual, and not mere constructive delivery is
warrantied by the seller to the buyer. "(P)eaceful possession
of the thing" sold can hardly be enjoyed in a mere
constructive delivery.
The obligation of defendant-appellant Villamar to transfer
ownership and deliver possession of the subject parcel of land
was her correlative obligation to plaintiff-appellee in exchange
for the latter's purchase price thereof. Thus, if she fails to
comply with what is incumbent upon her, a correlative right to
rescind such contract from plaintiff-appellee arises, pursuant to
Article 1191 of the Civil Code. 11 x x x (Citations omitted)
The Issues
Aggrieved, the petitioner filed before us the instant petition and
submits the following issues for resolution:
I.
WHETHER THE FAILURE OF PETITIONER-
SELLER TO DELIVER THE CERTIFICATE OF
TITLE OVER THE PROPERTY TO
RESPONDENT-BUYER IS A BREACH OF
OBLIGATION IN A CONTRACT OF SALE OF
REAL PROPERTY THAT WOULD WARRANT
RESCISSION OF THE CONTRACT;
II.
WHETHER PETITIONER IS LIABLE FOR
BREACH OF OBLIGATION IN A CONTRACT OF
SALE FOR FAILURE OF RESPONDENT[-
]BUYER TO IMMEDIATELY TAKE ACTUAL
POSSESSION OF THE PROPERTY
NOTWITHSTANDING THE ABSENCE OF ANY
STIPULATION IN THE CONTRACT PROVIDING
FOR THE SAME;
III.
WHETHER THE EXECUTION OF A DEED OF
SALE OF REAL PROPERTY IN THE PRESENT
CASE IS ALREADY EQUIVALENT TO A VALID
AND CONSTRUCTIVE DELIVERY OF THE
PROPERTY TO THE BUYER;
IV.
WHETHER OR NOT THE CONTRACT OF SALE
SUBJECT MATTER OF THIS CASE SHOULD BE
RESCINDED ON SLIGHT OR CASUAL BREACH;
V.
WHETHER OR NOT THE COURT OF APPEALS
ERRED IN AFFIRMING THE DECISION OF THE
RTC ORDERING THE RESCISSION OF THE
CONTRACT OF SALE[.] 12
The Petitioner's Arguments
The petitioner avers that the CA, in ordering the rescission of
the agreement and deed of sale, which she entered into with the
respondent, on the basis of her alleged failure to deliver the
certificate of title, effectively imposed upon her an extra duty
which was neither stipulated in the contract nor required by law.
She argues that under Articles 149513 and 149614 of the New Civil
Code (NCC), the obligation to deliver the thing sold is complied
with by a seller who executes in favor of a buyer an instrument
of sale in a public document. CitingChua v. Court of
Appeals,15 she claims that there is a distinction between
transferring a certificate of title in the buyer's name, on one hand,
and transferring ownership over the property sold, on the other.
The latter can be accomplished by the seller's execution of an
instrument of sale in a public document. The recording of the
sale with the Registry of Deeds and the transfer of the certificate
of title in the buyer's name are necessary only to bind third
parties to the transfer of ownership. 16
The petitioner contends that in her case, she had already
complied with her obligations under the agreement and the law
when she had caused the release of TCT No. T-92958-A from
the Rural Bank of Cauayan, paid individual mortgagees Romeo
Lacaden (Lacaden) and Florante Parangan (Paranga), and
executed an absolute deed of sale in the respondent's favor.
She adds that before T-92958-A can be cancelled and a new
one be issued in the respondent's favor, the latter decided to
withdraw from their agreement. She also points out that in the
letters seeking for an outright rescission of their agreement sent
to her by the respondent, not once did he demand for the
delivery of TCT.
The petitioner insists that the respondent's change of heart was
due to (1) the latter's realization of the difficulty in determining
the subject property's perimeter boundary; (2) his doubt that the
property he purchased would yield harvests in the amount he
expected; and (3) the presence of mortgagees who were not
willing to give up possession without first being paid the
amounts due to them. The petitioner contends that the actual
reasons for the respondent's intent to rescind their agreement
did not at all constitute a substantial breach of her obligations.
The petitioner stresses that under Article 1498 of the NCC, when
a sale is made through a public instrument, its execution is
equivalent to the delivery of the thing which is the contract's
object, unless in the deed, the contrary appears or can be
inferred. Further, in Power Commercial and Industrial
Corporation v. CA,17 it was ruled that the failure of a seller to
eject lessees from the property he sold and to deliver actual and
physical possession, cannot be considered a substantial breach,
when such failure was not stipulated as a resolutory or
suspensive condition in the contract and when the effects and
consequences of the said failure were not specified as well. The
execution of a deed of sale operates as a formal or symbolic
delivery of the property sold and it already authorizes the buyer
to use the instrument as proof of ownership. 18
The petitioner argues that in the case at bar, the agreement and
the absolute deed of sale contains no stipulation that she was
obliged to actually and physically deliver the subject property to
the respondent. The respondent fully knew Lacaden's and
Parangan's possession of the subject property. When they
agreed on the sale of the property, the respondent consciously
assumed the risk of not being able to take immediate physical
possession on account of Lacaden's and Parangan's presence
therein.
The petitioner likewise laments that the CA allegedly
misappreciated the evidence offered before it when it declared
that she failed to prove the existence of Atty. Antonio. For the
record, she emphasizes that the said lawyer prepared and
notarized the agreement and deed of absolute sale which were
executed between the parties. He was also the petitioners
counsel in the proceedings before the RTC. Atty. Antonio was
also the one asked by the respondent to cease the transfer of
the title over the subject property in the latter's name and to
return the money he paid in advance.
The Respondent's Contentions
In the respondent's comment, 19 he seeks the dismissal of the
instant petition. He invokes Articles 1191 and 1458 to argue that
when a seller fails to transfer the ownership and possession of a
property sold, the buyer is entitled to rescind the contract of sale.
Further, he contends that the execution of a deed of absolute
sale does not necessarily amount to a valid and constructive
delivery. In Masallo v. Cesar,20 it was ruled that a person who
does not have actual possession of real property cannot transfer
constructive possession by the execution and delivery of a
public document by which the title to the land is transferred.
In Addison v. Felix and Tioco,21 the Court was emphatic that
symbolic delivery by the execution of a public instrument is
equivalent to actual delivery only when the thing sold is subject
to the control of the vendor.
Our Ruling
The instant petition is bereft of merit.
There is only a single issue for resolution in the instant petition,
to wit, whether or not the failure of the petitioner to deliver to the
respondent both the physical possession of the subject property
and the certificate of title covering the same amount to a
substantial breach of the former's obligations to the latter
constituting a valid cause to rescind the agreement and deed of
sale entered into by the parties.
We rule in the affirmative.
The RTC and the CA both found that the petitioner failed to
comply with her obligations to deliver to the respondent both the
possession of the subject property and the certificate of title
covering the same.
Although Articles 1458, 1495 and 1498 of the NCC and case
law do not generally require the seller to deliver to the
buyer the physical possession of the property subject of a
contract of sale and the certificate of title covering the
same, the agreement entered into by the petitioner and the
respondent provides otherwise. However, the terms of the
agreement cannot be considered as violative of law, morals,
good customs, public order, or public policy, hence, valid.
Article 1458 of the NCC obliges the seller to transfer the
ownership of and to deliver a determinate thing to the buyer,
who shall in turn pay therefor a price certain in money or its
equivalent. In addition thereto, Article 1495 of the NCC binds the
seller to warrant the thing which is the object of the sale. On the
other hand, Article 1498 of the same code provides that when
the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed, the contrary does not
appear or cannot clearly be inferred.
In the case of Chua v. Court of Appeals,22 which was cited by
the petitioner, it was ruled that "when the deed of absolute sale
is signed by the parties and notarized, then delivery of the real
property is deemed made by the seller to the buyer." 23 The
transfer of the certificate of title in the name of the buyer is not
necessary to confer ownership upon him.
In the case now under our consideration, item nos. 2 and 3 of
the agreement entered into by the petitioner and the respondent
explicitly provide:
2. ONE HUNDRED EIGHTY FIVE THOUSAND (185,000.00)
PESOS of the total price was already received on March 27,
1998 for payment of the loan secured by the certificate of title
covering the land in favor of the Rural Bank of Cauayan, San
Manuel Branch, San Manuel, Isabela, in order that the
certificate of title thereof be withdrawn and released from the
said bank, and the rest shall be for the payment of the
mortgages in favor of Romeo Lacaden and Florante Parangan;
3. After the release of the certificate of title covering the land
subject-matter of this agreement, the necessary deed of
absolute sale in favor of the PARTY OF THE SECOND PART
shall be executed and the transfer be immediately effected so
that the latter can apply for a loan from any lending institution
using the corresponding certificate of title as collateral therefor,
and the proceeds of the loan, whatever be the amount, be given
to the PARTY OF THE FIRST PART;24 (underlining supplied)
As can be gleaned from the agreement of the contending
parties, the respondent initially paid the petitioner 185,000.00
for the latter to pay the loan obtained from the Rural Bank of
Cauayan and to cause the release from the said bank of the
certificate of title covering the subject property. The rest of the
amount shall be used to pay the mortgages over the subject
property which was executed in favor of Lacaden and Parangan.
After the release of the TCT, a deed of sale shall be executed
and transfer shall be immediately effected so that the title
covering the subject property can be used as a collateral for a
loan the respondent will apply for, the proceeds of which shall
be given to the petitioner.
Under Article 1306 of the NCC, the contracting parties may
establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.
While Articles 1458 and 1495 of the NCC and the doctrine
enunciated in the case of Chua do not impose upon the
petitioner the obligation to physically deliver to the respondent
the certificate of title covering the subject property or cause the
transfer in the latter's name of the said title, a stipulation
requiring otherwise is not prohibited by law and cannot be
regarded as violative of morals, good customs, public order or
public policy. Item no. 3 of the agreement executed by the
parties expressly states that "transfer [shall] be immediately
effected so that the latter can apply for a loan from any lending
institution using the corresponding certificate of title as collateral
therefore." Item no. 3 is literal enough to mean that there should
be physical delivery of the TCT for how else can the respondent
use it as a collateral to obtain a loan if the title remains in the
petitioners possession. We agree with the RTC and the CA that
the petitioner failed to prove that she delivered the TCT covering
the subject property to the respondent. What the petitioner
attempted to establish was that she gave the TCT to Atty.
Antonio whom she alleged was commissioned to effect the
transfer of the title in the respondent's name. Although Atty.
Antonio's existence is certain as he was the petitioners counsel
in the proceedings before the RTC, there was no proof that the
former indeed received the TCT or that he was commissioned to
process the transfer of the title in the respondent's name.
It is likewise the petitioner s contention that pursuant to Article
1498 of the NCC, she had already complied with her obligation
to deliver the subject property upon her execution of an absolute
deed of sale in the respondents favor. The petitioner avers that
she did not undertake to eject the mortgagors Parangan and
Lacaden, whose presence in the premises of the subject
property was known to the respondent.
We are not persuaded.
In the case of Power Commercial and Industrial
Corporation25 cited by the petitioner, the Court ruled that the
failure of the seller to eject the squatters from the property sold
cannot be made a ground for rescission if the said ejectment
was not stipulated as a condition in the contract of sale, and
when in the negotiation stage, the buyer's counsel himself
undertook to eject the illegal settlers.
The circumstances surrounding the case now under our
consideration are different. In item no. 2 of the agreement, it is
stated that part of the 185,000.00 initially paid to the petitioner
shall be used to pay the mortgagors, Parangan and Lacaden.
While the provision does not expressly impose upon the
petitioner the obligation to eject the said mortgagors, the
undertaking is necessarily implied. Cessation of occupancy of
the subject property is logically expected from the mortgagors
upon payment by the petitioner of the amounts due to them.
We note that in the demand letter 26 dated September 18, 1998,
which was sent by the respondent to the petitioner, the former
lamented that "the area is not yet fully cleared of incumbrances
as there are tenants who are not willing to vacate the land
without giving them back the amount that they mortgaged the
land." Further, in the proceedings before the RTC conducted
after the complaint for rescission was filed, the petitioner herself
testified that she won the ejectment suit against the mortgagors
"only last year". 27 The complaint was filed on September 8, 2002
or more than four years from the execution of the parties'
agreement. This means that after the lapse of a considerable
period of time from the agreement's execution, the mortgagors
remained in possession of the subject property.
Notwithstanding the absence of stipulations in the
agreement and absolute deed of sale entered into by
Villamar and Mangaoil expressly indicating the
consequences of the former's failure to deliver the physical
possession of the subject property and the certificate of
title covering the same, the latter is entitled to demand for
the rescission of their contract pursuant to Article 1191 of
the NCC.
We note that the agreement entered into by the petitioner and
the respondent only contains three items specifying the parties'
undertakings. In item no. 5, the parties consented "to abide with
all the terms and conditions set forth in this agreement and
never violate the same." 28
Article 1191 of the NCC is clear that "the power to rescind
obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him."
The respondent cannot be deprived of his right to demand for
rescission in view of the petitioners failure to abide with item
nos. 2 and 3 of the agreement. This remains true
notwithstanding the absence of express stipulations in the
agreement indicating the consequences of breaches which the
parties may commit. To hold otherwise would render Article
1191 of the NCC as useless.
Article 1498 of the NCC generally considers the execution of
a public instrument as constructive delivery by the seller to
the buyer of the property subject of a contract of sale. The
case at bar, however, falls among the exceptions to the
foregoing rule since a mere presumptive and not
conclusive delivery is created as the respondent failed to
take material possession of the subject property.
Further, even if we were to assume for argument's sake that the
agreement entered into by the contending parties does not
require the delivery of the physical possession of the subject
property from the mortgagors to the respondent, still, the
petitioner's claim that her execution of an absolute deed of sale
was already sufficient as it already amounted to a constructive
delivery of the thing sold which Article 1498 of the NCC allows,
cannot stand.
In Philippine Suburban Development Corporation v. The Auditor
General,29 we held:
When the sale of real property is made in a public instrument,
the execution thereof is equivalent to the delivery of the thing
object of the contract, if from the deed the contrary does not
appear or cannot clearly be inferred.1wphi1
In other words, there is symbolic delivery of the property subject
of the sale by the execution of the public instrument, unless
from the express terms of the instrument, or by clear inference
therefrom, this was not the intention of the parties. Such would
be the case, for instance, x x x where the vendor has no control
over the thing sold at the moment of the sale, and, therefore, its
material delivery could not have been made .30 (Underlining
supplied and citations omitted)
Stated differently, as a general rule, the execution of a public
instrument amounts to a constructive delivery of the thing
subject of a contract of sale. However, exceptions exist, among
which is when mere presumptive and not conclusive delivery is
created in cases where the buyer fails to take material
possession of the subject of sale. A person who does not have
actual possession of the thing sold cannot transfer constructive
possession by the execution and delivery of a public instrument.
In the case at bar, the RTC and the CA found that the petitioner
failed to deliver to the respondent the possession of the subject
property due to the continued presence and occupation of
Parangan and Lacaden. We find no ample reason to reverse the
said findings. Considered in the light of either the agreement
entered into by the parties or the pertinent provisions of law, the
petitioner failed in her undertaking to deliver the subject property
to the respondent.
IN VIEW OF THE FOREGOING, the instant petition
is DENIED. The February 20, 2009 Decision and July 8, 2009
Resolution of the Court of Appeals, directing the rescission of
the agreement and absolute deed of sale entered into by
Estelita Villamar and Balbino Mangaoil and the return of the
down payment made for the purchase of the subject property,
are AFFIRMED. However, pursuant to our ruling in Eastern
Shipping Lines, Inc. v. CA,31 an interest of 12% per annum is
imposed on the sum of 185,000.00 to be returned to Mangaoil
to be computed from the date of finality of this Decision until full
satisfaction thereof.
SO ORDERED.
FIRST DIVISION
G. R. No. 158149 February 9, 2006
BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF
COMMERCE), Petitioner,
vs.
PERLA P. MANALO and CARLOS MANALO,
JR., Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the
Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 47458
affirming, on appeal, the Decision2 of the Regional Trial Court
(RTC) of Quezon City, Branch 98, in Civil Case No. Q-89-3905.
The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of
land in Quezon City, known as the Xavierville Estate
Subdivision, with an area of 42 hectares. XEI caused the
subdivision of the property into residential lots, which was then
offered for sale to individual lot buyers.3
On September 8, 1967, XEI, through its General Manager,
Antonio Ramos, as vendor, and The Overseas Bank of Manila
(OBM), as vendee, executed a "Deed of Sale of Real Estate"
over some residential lots in the subdivision, including Lot 1,
Block 2, with an area of 907.5 square meters, and Lot 2, Block 2,
with an area of 832.80 square meters. The transaction was
subject to the approval of the Board of Directors of OBM, and
was covered by real estate mortgages in favor of the Philippine
National Bank as security for its account amounting to
5,187,000.00, and the Central Bank of the Philippines as
security for advances amounting to
22,185,193.74. Nevertheless, XEI continued selling the
4
residential lots in the subdivision as agent of OBM. 5
Sometime in 1972, then XEI president Emerito Ramos, Jr.
contracted the services of Engr. Carlos Manalo, Jr. who was in
business of drilling deep water wells and installing pumps under
the business name Hurricane Commercial, Inc. For 34,887.66,
Manalo, Jr. installed a water pump at Ramos residence at the
corner of Aurora Boulevard and Katipunan Avenue, Quezon City.
Manalo, Jr. then proposed to XEI, through Ramos, to purchase
a lot in the Xavierville subdivision, and offered as part of the
downpayment the 34,887.66 Ramos owed him. XEI, through
Ramos, agreed. In a letter dated February 8, 1972, Ramos
requested Manalo, Jr. to choose which lots he wanted to buy so
that the price of the lots and the terms of payment could be fixed
and incorporated in the conditional sale.6 Manalo, Jr. met with
Ramos and informed him that he and his wife Perla had chosen
Lots 1 and 2 of Block 2 with a total area of 1,740.3 square meters.
In a letter dated August 22, 1972 to Perla Manalo, Ramos
confirmed the reservation of the lots. He also pegged the price
of the lots at 200.00 per square meter, or a total of 348,060.00,
with a 20% down payment of the purchase price amounting to
69,612.00 less the 34,887.66 owing from Ramos, payable on
or before December 31, 1972; the corresponding Contract of
Conditional Sale would then be signed on or before the same
date, but if the selling operations of XEI resumed after
December 31, 1972, the balance of the downpayment would fall
due then, and the spouses would sign the aforesaid contract
within five (5) days from receipt of the notice of resumption of
such selling operations. It was also stated in the letter that, in
the meantime, the spouses may introduce improvements
thereon subject to the rules and regulations imposed by XEI in
the subdivision. Perla Manalo conformed to the letter
agreement. 7
The spouses Manalo took possession of the property on
September 2, 1972, constructed a house thereon, and installed a
fence around the perimeter of the lots.
In the meantime, many of the lot buyers refused to pay their
monthly installments until they were assured that they would be
issued Torrens titles over the lots they had purchased.8 The
spouses Manalo were notified of the resumption of the selling
operations of XEI. 9 However, they did not pay the balance of the
downpayment on the lots because Ramos failed to prepare a
contract of conditional sale and transmit the same to Manalo for
their signature. On August 14, 1973, Perla Manalo went to the
XEI office and requested that the payment of the amount
representing the balance of the downpayment be deferred,
which, however, XEI rejected. On August 10, 1973, XEI
furnished her with a statement of their account as of July 31,
1973, showing that they had a balance of 34,724.34 on the
downpayment of the two lots after deducting the account of
Ramos, plus 3,819.6810 interest thereon from September 1,
1972 to July 31, 1973, and that the interests on the unpaid
balance of the purchase price of 278,448.00 from September 1,
1972 to July 31, 1973 amounted to 30,629.28. 11 The spouses
were informed that they were being billed for said unpaid
interests.12
On January 25, 1974, the spouses Manalo received another
statement of account from XEI, inclusive of interests on the
purchase price of the lots. 13 In a letter dated April 6, 1974 to XEI,
Manalo, Jr. stated they had not yet received the notice of
resumption of Leis selling operations, and that there had been
no arrangement on the payment of interests; hence, they should
not be charged with interest on the balance of the downpayment
on the property. 14 Further, they demanded that a deed of
conditional sale over the two lots be transmitted to them for their
signatures. However, XEI ignored the demands. Consequently,
the spouses refused to pay the balance of the downpayment of
the purchase price. 15
Sometime in June 1976, Manalo, Jr. constructed a business sign
in the sidewalk near his house. In a letter dated June 17, 1976,
XEI informed Manalo, Jr. that business signs were not allowed
along the sidewalk. It demanded that he remove the same, on
the ground, among others, that the sidewalk was not part of the
land which he had purchased on installment basis from
XEI.16 Manalo, Jr. did not respond. XEI reiterated its demand on
September 15, 1977.17
Subsequently, XEI turned over its selling operations to OBM,
including the receivables for lots already contracted and those
yet to be sold. 18On December 8, 1977, OBM warned Manalo, Jr.,
that "putting up of a business sign is specifically prohibited by
their contract of conditional sale" and that his failure to comply
with its demand would impel it to avail of the remedies as
provided in their contract of conditional sale. 19
Meanwhile, on December 5, 1979, the Register of Deeds issued
Transfer Certificate of Title (TCT) No. T-265822 over Lot 1, Block
2, and TCT No. T-265823 over Lot 2, Block 2, in favor of the
OBM.20 The lien in favor of the Central Bank of the Philippines
was annotated at the dorsal portion of said title, which was later
cancelled on August 4, 1980.21
Subsequently, the Commercial Bank of Manila (CBM) acquired
the Xavierville Estate from OBM. CBM wrote Edilberto Ng, the
president of Xavierville Homeowners Association that, as of
January 31, 1983, Manalo, Jr. was one of the lot buyers in the
subdivision. 22 CBM reiterated in its letter to Ng that, as of
January 24, 1984, Manalo was a homeowner in the subdivision. 23
In a letter dated August 5, 1986, the CBM requested Perla
Manalo to stop any on-going construction on the property since
it (CBM) was the owner of the lot and she had no permission for
such construction. 24She agreed to have a conference meeting
with CBM officers where she informed them that her husband
had a contract with OBM, through XEI, to purchase the property.
When asked to prove her claim, she promised to send the
documents to CBM. However, she failed to do so. 25 On
September 5, 1986, CBM reiterated its demand that it be
furnished with the documents promised, 26 but Perla Manalo did
not respond.
On July 27, 1987, CBM filed a complaint27 for unlawful detainer
against the spouses with the Metropolitan Trial Court of Quezon
City. The case was docketed as Civil Case No. 51618. CBM
claimed that the spouses had been unlawfully occupying the
property without its consent and that despite its demands, they
refused to vacate the property. The latter alleged that they, as
vendors, and XEI, as vendee, had a contract of sale over the
lots which had not yet been rescinded. 28
While the case was pending, the spouses Manalo wrote CBM to
offer an amicable settlement, promising to abide by the
purchase price of the property (313,172.34), per agreement
with XEI, through Ramos. However, on July 28, 1988, CBM
wrote the spouses, through counsel, proposing that the price of
1,500.00 per square meter of the property was a reasonable
starting point for negotiation of the settlement. 29The spouses
rejected the counter proposal,30 emphasizing that they would
abide by their original agreement with XEI. CBM moved to
withdraw its complaint31 because of the issues raised. 32
In the meantime, the CBM was renamed the Boston Bank of the
Philippines. After CBM filed its complaint against the spouses
Manalo, the latter filed a complaint for specific performance and
damages against the bank before the Regional Trial Court (RTC)
of Quezon City on October 31, 1989.
The plaintiffs alleged therein that they had always been ready,
able and willing to pay the installments on the lots sold to them
by the defendants remote predecessor-in-interest, as might be
or stipulated in the contract of sale, but no contract was
forthcoming; they constructed their house worth 2,000,000.00
on the property in good faith; Manalo, Jr., informed the
defendant, through its counsel, on October 15, 1988 that he
would abide by the terms and conditions of his original
agreement with the defendants predecessor-in-interest; during
the hearing of the ejectment case on October 16, 1988, they
offered to pay 313,172.34 representing the balance on the
purchase price of said lots; such tender of payment was
rejected, so that the subject lots could be sold at considerably
higher prices to third parties.
Plaintiffs further alleged that upon payment of the 313,172.34,
they were entitled to the execution and delivery of a Deed of
Absolute Sale covering the subject lots, sufficient in form and
substance to transfer title thereto free and clear of any and all
liens and encumbrances of whatever kind and nature.33 The
plaintiffs prayed that, after due hearing, judgment be rendered in
their favor, to wit:
WHEREFORE, it is respectfully prayed that after due hearing:
(a) The defendant should be ordered to execute and deliver a
Deed of Absolute Sale over subject lots in favor of the plaintiffs
after payment of the sum of 313,172.34, sufficient in form and
substance to transfer to them titles thereto free and clear of any
and all liens and encumbrances of whatever kind or nature;
(b) The defendant should be held liable for moral and exemplary
damages in the amounts of 300,000.00 and 30,000.00,
respectively, for not promptly executing and delivering to plaintiff
the necessary Contract of Sale, notwithstanding repeated
demands therefor and for having been constrained to engage
the services of undersigned counsel for which they agreed to
pay attorneys fees in the sum of 50,000.00 to enforce their
rights in the premises and appearance fee of 500.00;
(c) And for such other and further relief as may be just and
equitable in the premises. 34
In its Answer to the complaint, the defendant interposed the
following affirmative defenses: (a) plaintiffs had no cause of
action against it because the August 22, 1972 letter agreement
between XEI and the plaintiffs was not binding on it; and (b) "it
had no record of any contract to sell executed by it or its
predecessor, or of any statement of accounts from its
predecessors, or records of payments of the plaintiffs or of any
documents which entitled them to the possession of the
lots."35 The defendant, likewise, interposed counterclaims for
damages and attorneys fees and prayed for the eviction of the
plaintiffs from the property. 36
Meanwhile, in a letter dated January 25, 1993, plaintiffs, through
counsel, proposed an amicable settlement of the case by paying
942,648.70, representing the balance of the purchase price of
the two lots based on the current market value. 37 However, the
defendant rejected the same and insisted that for the smaller lot,
they pay 4,500,000.00, the current market value of the
property.38 The defendant insisted that it owned the property
since there was no contract or agreement between it and the
plaintiffs relative thereto.
During the trial, the plaintiffs adduced in evidence the separate
Contracts of Conditional Sale executed between XEI and
Alberto Soller; 39 Alfredo Aguila, 40 and Dra. Elena Santos-
Roque 41 to prove that XEI continued selling residential lots in the
subdivision as agent of OBM after the latter had acquired the
said lots.
For its part, defendant presented in evidence the letter dated
August 22, 1972, where XEI proposed to sell the two lots subject
to two suspensive conditions: the payment of the balance of the
downpayment of the property, and the execution of the
corresponding contract of conditional sale. Since plaintiffs failed
to pay, OBM consequently refused to execute the
corresponding contract of conditional sale and forfeited the
34,877.66 downpayment for the two lots, but did not notify them
of said forfeiture. 42 It alleged that OBM considered the lots
unsold because the titles thereto bore no annotation that they
had been sold under a contract of conditional sale, and the
plaintiffs were not notified of XEIs resumption of its selling
operations.
On May 2, 1994, the RTC rendered judgment in favor of the
plaintiffs and against the defendant. The fallo of the decision
reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendant
(a) Ordering the latter to execute and deliver a Deed of Absolute
Sale over Lot 1 and 2, Block 2 of the Xavierville Estate
Subdivision after payment of the sum of 942,978.70 sufficient in
form and substance to transfer to them titles thereto free from
any and all liens and encumbrances of whatever kind and
nature.
(b) Ordering the defendant to pay moral and exemplary
damages in the amount of 150,000.00; and
(c) To pay attorneys fees in the sum of 50,000.00 and to pay
the costs.
SO ORDERED. 43
The trial court ruled that under the August 22, 1972 letter
agreement of XEI and the plaintiffs, the parties had a "complete
contract to sell" over the lots, and that they had already partially
consummated the same. It declared that the failure of the
defendant to notify the plaintiffs of the resumption of its selling
operations and to execute a deed of conditional sale did not
prevent the defendants obligation to convey titles to the lots
from acquiring binding effect. Consequently, the plaintiffs had a
cause of action to compel the defendant to execute a deed of
sale over the lots in their favor.
Boston Bank appealed the decision to the CA, alleging that the
lower court erred in (a) not concluding that the letter of XEI to
the spouses Manalo, was at most a mere contract to sell subject
to suspensive conditions, i.e., the payment of the balance of the
downpayment on the property and the execution of a deed of
conditional sale (which were not complied with); and (b) in
awarding moral and exemplary damages to the spouses Manalo
despite the absence of testimony providing facts to justify such
awards. 44
On September 30, 2002, the CA rendered a decision affirming
that of the RTC with modification. The fallo reads:
WHEREFORE, the appealed decision is AFFIRMED with
MODIFICATIONS that (a) the figure "942,978.70" appearing [in]
par. (a) of the dispositive portion thereof is changed to
"313,172.34 plus interest thereon at the rate of 12% per annum
from September 1, 1972 until fully paid" and (b) the award of
moral and exemplary damages and attorneys fees in favor of
plaintiffs-appellees is DELETED.
SO ORDERED. 45
The appellate court sustained the ruling of the RTC that the
appellant and the appellees had executed a Contract to Sell
over the two lots but declared that the balance of the purchase
price of the property amounting to 278,448.00 was payable in
fixed amounts, inclusive of pre-computed interests, from
delivery of the possession of the property to the appellees on a
monthly basis for 120 months, based on the deeds of conditional
sale executed by XEI in favor of other lot buyers.46 The CA also
declared that, while XEI must have resumed its selling
operations before the end of 1972 and the downpayment on the
property remained unpaid as of December 31, 1972, absent a
written notice of cancellation of the contract to sell from the bank
or notarial demand therefor as required by Republic Act No.
6552, the spouses had, at the very least, a 60-day grace period
from January 1, 1973 within which to pay the same.
Boston Bank filed a motion for the reconsideration of the
decision alleging that there was no perfected contract to sell the
two lots, as there was no agreement between XEI and the
respondents on the manner of payment as well as the other
terms and conditions of the sale. It further averred that its claim
for recovery of possession of the aforesaid lots in its
Memorandum dated February 28, 1994 filed before the trial court
constituted a judicial demand for rescission that satisfied the
requirements of the New Civil Code. However, the appellate
court denied the motion.
Boston Bank, now petitioner, filed the instant petition for review
on certiorari assailing the CA rulings. It maintains that, as held
by the CA, the records do not reflect any schedule of payment
of the 80% balance of the purchase price, or 278,448.00.
Petitioner insists that unless the parties had agreed on the
manner of payment of the principal amount, including the other
terms and conditions of the contract, there would be no existing
contract of sale or contract to sell.47 Petitioner avers that the
letter agreement to respondent spouses dated August 22, 1972
merely confirmed their reservation for the purchase of Lot Nos.
1 and 2, consisting of 1,740.3 square meters, more or less, at the
price of 200.00 per square meter (or 348,060.00), the amount
of the downpayment thereon and the application of the
34,887.00 due from Ramos as part of such downpayment.
Petitioner asserts that there is no factual basis for the CA ruling
that the terms and conditions relating to the payment of the
balance of the purchase price of the property (as agreed upon
by XEI and other lot buyers in the same subdivision) were also
applicable to the contract entered into between the petitioner
and the Respondents. It insists that such a ruling is contrary to
law, as it is tantamount to compelling the parties to agree to
something that was not even discussed, thus, violating their
freedom to contract. Besides, the situation of the respondents
cannot be equated with those of the other lot buyers, as, for one
thing, the respondents made a partial payment on the
downpayment for the two lots even before the execution of any
contract of conditional sale.
Petitioner posits that, even on the assumption that there was a
perfected contract to sell between the parties, nevertheless, it
cannot be compelled to convey the property to the respondents
because the latter failed to pay the balance of the downpayment
of the property, as well as the balance of 80% of the purchase
price, thus resulting in the extinction of its obligation to convey
title to the lots to the Respondents.
Another egregious error of the CA, petitioner avers, is the
application of Republic Act No. 6552. It insists that such law
applies only to a perfected agreement or perfected contract to
sell, not in this case where the downpayment on the purchase
price of the property was not completely paid, and no
installment payments were made by the buyers.
Petitioner also faults the CA for declaring that petitioner failed to
serve a notice on the respondents of cancellation or rescission
of the contract to sell, or notarial demand therefor. Petitioner
insists that its August 5, 1986 letter requiring respondents to
vacate the property and its complaint for ejectment in Civil Case
No. 51618 filed in the Metropolitan Trial Court amounted to the
requisite demand for a rescission of the contract to sell.
Moreover, the action of the respondents below was barred by
laches because despite demands, they failed to pay the balance
of the purchase price of the lots (let alone the downpayment) for
a considerable number of years.
For their part, respondents assert that as long as there is a
meeting of the minds of the parties to a contract of sale as to the
price, the contract is valid despite the parties failure to agree on
the manner of payment. In such a situation, the balance of the
purchase price would be payable on demand, conformably to
Article 1169 of the New Civil Code. They insist that the law does
not require a party to agree on the manner of payment of the
purchase price as a prerequisite to a valid contract to sell. The
respondents cite the ruling of this Court in Buenaventura v.
Court of Appeals48 to support their submission.
They argue that even if the manner and timeline for the payment
of the balance of the purchase price of the property is an
essential requisite of a contract to sell, nevertheless, as shown
by their letter agreement of August 22, 1972 with the OBM,
through XEI and the other letters to them, an agreement was
reached as to the manner of payment of the balance of the
purchase price. They point out that such letters referred to the
terms of the terms of the deeds of conditional sale executed by
XEI in favor of the other lot buyers in the subdivision, which
contained uniform terms of 120 equal monthly installments
(excluding the downpayment, but inclusive of pre-computed
interests). The respondents assert that XEI was a real estate
broker and knew that the contracts involving residential lots in
the subdivision contained uniform terms as to the manner and
timeline of the payment of the purchase price of said lots.
Respondents further posit that the terms and conditions to be
incorporated in the "corresponding contract of conditional sale"
to be executed by the parties would be the same as those
contained in the contracts of conditional sale executed by lot
buyers in the subdivision. After all, they maintain, the contents
of the corresponding contract of conditional sale referred to in
the August 22, 1972 letter agreement envisaged those contained
in the contracts of conditional sale that XEI and other lot buyers
executed. Respondents cite the ruling of this Court in Mitsui
Bussan Kaisha v. Manila E.R.R. & L. Co. 49
The respondents aver that the issues raised by the petitioner
are factual, inappropriate in a petition for review on certiorari
under Rule 45 of the Rules of Court. They assert that petitioner
adopted a theory in litigating the case in the trial court, but
changed the same on appeal before the CA, and again in this
Court. They argue that the petitioner is estopped from adopting
a new theory contrary to those it had adopted in the trial and
appellate courts. Moreover, the existence of a contract of
conditional sale was admitted in the letters of XEI and OBM.
They aver that they became owners of the lots upon delivery to
them by XEI.
The issues for resolution are the following: (1) whether the
factual issues raised by the petitioner are proper; (2) whether
petitioner or its predecessors-in-interest, the XEI or the OBM, as
seller, and the respondents, as buyers, forged a perfect contract
to sell over the property; (3) whether petitioner is estopped from
contending that no such contract was forged by the parties; and
(4) whether respondents has a cause of action against the
petitioner for specific performance.
The rule is that before this Court, only legal issues may be
raised in a petition for review on certiorari. The reason is that
this Court is not a trier of facts, and is not to review and calibrate
the evidence on record. Moreover, the findings of facts of the
trial court, as affirmed on appeal by the Court of Appeals, are
conclusive on this Court unless the case falls under any of the
following exceptions:
(1) when the conclusion is a finding grounded entirely on
speculations, surmises and conjectures; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) where
there is a grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when the Court of Appeals, in making its
findings went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (7)
when the findings are contrary to those of the trial court; (8)
when the findings of fact are conclusions without citation of
specific evidence on which they are based; (9) when the facts
set forth in the petition as well as in the petitioners main and
reply briefs are not disputed by the respondents; and (10) when
the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the
evidence on record.50
We have reviewed the records and we find that, indeed, the
ruling of the appellate court dismissing petitioners appeal is
contrary to law and is not supported by evidence. A careful
examination of the factual backdrop of the case, as well as the
antecedental proceedings constrains us to hold that petitioner is
not barred from asserting that XEI or OBM, on one hand, and
the respondents, on the other, failed to forge a perfected
contract to sell the subject lots.
It must be stressed that the Court may consider an issue not
raised during the trial when there is plain error. 51 Although a
factual issue was not raised in the trial court, such issue may
still be considered and resolved by the Court in the interest of
substantial justice, if it finds that to do so is necessary to arrive
at a just decision,52 or when an issue is closely related to an
issue raised in the trial court and the Court of Appeals and is
necessary for a just and complete resolution of the
case.53 When the trial court decides a case in favor of a party on
certain grounds, the Court may base its decision upon some
other points, which the trial court or appellate court ignored or
erroneously decided in favor of a party. 54
In this case, the issue of whether XEI had agreed to allow the
respondents to pay the purchase price of the property was
raised by the parties. The trial court ruled that the parties had
perfected a contract to sell, as against petitioner s claim that no
such contract existed. However, in resolving the issue of
whether the petitioner was obliged to sell the property to the
respondents, while the CA declared that XEI or OBM and the
respondents failed to agree on the schedule of payment of the
balance of the purchase price of the property, it ruled that XEI
and the respondents had forged a contract to sell; hence,
petitioner is entitled to ventilate the issue before this Court.
We agree with petitioners contention that, for a perfected
contract of sale or contract to sell to exist in law, there must be
an agreement of the parties, not only on the price of the
property sold, but also on the manner the price is to be paid by
the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale,
whether absolute or conditional, one of the contracting parties
obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain
in money or its equivalent. A contract of sale is perfected at the
moment there is a meeting of the minds upon the thing which is
the object of the contract and the price. From the averment of
perfection, the parties are bound, not only to the fulfillment of
what has been expressly stipulated, but also to all the
consequences which, according to their nature, may be in
keeping with good faith, usage and law.55 On the other hand,
when the contract of sale or to sell is not perfected, it cannot, as
an independent source of obligation, serve as a binding juridical
relation between the parties.56
A definite agreement as to the price is an essential element of a
binding agreement to sell personal or real property because it
seriously affects the rights and obligations of the parties. Price is
an essential element in the formation of a binding and
enforceable contract of sale. The fixing of the price can never be
left to the decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by the other,
gives rise to a perfected sale. 57
It is not enough for the parties to agree on the price of the
property. The parties must also agree on the manner of
payment of the price of the property to give rise to a binding and
enforceable contract of sale or contract to sell. This is so
because the agreement as to the manner of payment goes into
the price, such that a disagreement on the manner of payment
is tantamount to a failure to agree on the price. 58
In a contract to sell property by installments, it is not enough
that the parties agree on the price as well as the amount of
downpayment. The parties must, likewise, agree on the manner
of payment of the balance of the purchase price and on the
other terms and conditions relative to the sale. Even if the buyer
makes a downpayment or portion thereof, such payment cannot
be considered as sufficient proof of the perfection of any
purchase and sale between the parties. Indeed, this Court ruled
in Velasco v. Court of Appeals 59 that:
It is not difficult to glean from the aforequoted averments that
the petitioners themselves admit that they and the respondent
still had to meet and agree on how and when the down-payment
and the installment payments were to be paid. Such being the
situation, it cannot, therefore, be said that a definite and firm
sales agreement between the parties had been perfected over
the lot in question. Indeed, this Court has already ruled before
that a definite agreement on the manner of payment of the
purchase price is an essential element in the formation of a
binding and enforceable contract of sale. The fact, therefore,
that the petitioners delivered to the respondent the sum of
10,000.00 as part of the downpayment that they had to pay
cannot be considered as sufficient proof of the perfection of any
purchase and sale agreement between the parties herein under
article 1482 of the New Civil Code, as the petitioners themselves
admit that some essential matter the terms of payment still
had to be mutually covenanted.60
We agree with the contention of the petitioner that, as held by
the CA, there is no showing, in the records, of the schedule of
payment of the balance of the purchase price on the property
amounting to 278,448.00. We have meticulously reviewed the
records, including Ramos February 8, 1972 and August 22, 1972
letters to respondents,61 and find that said parties confined
themselves to agreeing on the price of the property
(348,060.00), the 20% downpayment of the purchase price
(69,612.00), and credited respondents for the 34,887.00 owing
from Ramos as part of the 20% downpayment. The timeline for
the payment of the balance of the downpayment (34,724.34)
was also agreed upon, that is, on or before XEI resumed its
selling operations, on or before December 31, 1972, or within
five (5) days from written notice of such resumption of selling
operations. The parties had also agreed to incorporate all the
terms and conditions relating to the sale, inclusive of the terms
of payment of the balance of the purchase price and the other
substantial terms and conditions in the "corresponding contract
of conditional sale," to be later signed by the parties,
simultaneously with respondents settlement of the balance of
the downpayment.
The February 8, 1972 letter of XEI reads:
Mr. Carlos T. Manalo, Jr.
Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City
Dear Mr. Manalo:
We agree with your verbal offer to exchange the
proceeds of your contract with us to form as a
down payment for a lot in our Xavierville Estate
Subdivision.
Please let us know your choice lot so that we can
fix the price and terms of payment in
our conditional sale.
 Sincerely yours, In the meanwhile, you may introduce such
improvements on the said lots as you may desire,
XAVIERVILLE ESTATE, INC. subject to the rules and regulations of the
subdivision.
(Signed)
EMERITO B. RAMOS, JR. If the above terms and conditions are acceptable
President to you, please signify your conformity by signing
on the space herein below provided.
CONFORME:
Thank you.
(Signed)
CARLOS T. MANALO, JR. Very truly yours,
Hurricane Rotary Well Drilling 62
XAVIERVILLE ESTATE, INC. CONFORME:
The August 22, 1972 letter agreement of XEI and the
respondents reads: By:

Mrs. Perla P. Manalo (Signed)

1548 Rizal Avenue Extensionbr>Caloocan City (Signed)
EMERITO B. RAMOS,
PERLA P. MANALO
JR.
Dear Mrs. Manalo:

This is to confirm your reservation of Lot Nos. 1

President Buyer63
and 2; Block 2 of our consolidation-subdivision
plan as amended, consisting of 1,740.3 square
Based on these two letters, the determination of the terms of
meters more or less, at the price of 200.00 per
payment of the 278,448.00 had yet to be agreed upon on or
square meter or a total price of 348,060.00.
before December 31, 1972, or even afterwards, when the parties
sign the corresponding contract of conditional sale.
It is agreed that as soon as we resume selling
operations, you must pay a down payment of 20%
Jurisprudence is that if a material element of a contemplated
of the purchase price of the said lots and sign the
contract is left for future negotiations, the same is too indefinite
corresponding Contract of Conditional Sale, on or
to be enforceable. 64 And when an essential element of a
before December 31, 1972, provided, however,
contract is reserved for future agreement of the parties, no legal
that if we resume selling after December 31, 1972,
obligation arises until such future agreement is concluded. 65
then you must pay the aforementioned down
payment and sign the aforesaid contract within five
So long as an essential element entering into the proposed
(5) days from your receipt of our notice of
obligation of either of the parties remains to be determined by
resumption of selling operations.
an agreement which they are to make, the contract is
incomplete and unenforceable.66 The reason is that such a
contract is lacking in the necessary qualities of definiteness,
certainty and mutuality.67
There is no evidence on record to prove that XEI or OBM and
the respondents had agreed, after December 31, 1972, on the
terms of payment of the balance of the purchase price of the
property and the other substantial terms and conditions relative
to the sale. Indeed, the parties are in agreement that there had
been no contract of conditional sale ever executed by XEI, OBM
or petitioner, as vendor, and the respondents, as vendees. 68
The ruling of this Court in Buenaventura v. Court of Appeals has
no bearing in this case because the issue of the manner of
payment of the purchase price of the property was not raised
therein.
We reject the submission of respondents that they and Ramos
had intended to incorporate the terms of payment contained in
the three contracts of conditional sale executed by XEI and
other lot buyers in the "corresponding contract of conditional
sale," which would later be signed by them. 69 We have
meticulously reviewed the respondents complaint and find no
such allegation therein. 70 Indeed, respondents merely alleged in
their complaint that they were bound to pay the balance of the
purchase price of the property "in installments." When
respondent Manalo, Jr. testified, he was never asked, on direct
examination or even on cross-examination, whether the terms of
payment of the balance of the purchase price of the lots under
the contracts of conditional sale executed by XEI and other lot
buyers would form part of the "corresponding contract of
conditional sale" to be signed by them simultaneously with the
payment of the balance of the downpayment on the purchase
price.
We note that, in its letter to the respondents dated June 17, 1976,
or almost three years from the execution by the parties of their
August 22, 1972 letter agreement, XEI stated, in part, that
respondents had purchased the property "on installment
basis."71 However, in the said letter, XEI failed to state a specific
amount for each installment, and whether such payments were
to be made monthly, semi-annually, or annually. Also,
respondents, as plaintiffs below, failed to adduce a shred of
evidence to prove that they were obliged to pay the 278,448.00
monthly, semi-annually or annually. The allegation that the
payment of the 278,448.00 was to be paid in installments is,
thus, vague and indefinite. Case law is that, for a contract to be
enforceable, its terms must be certain and explicit, not vague or
indefinite.72
There is no factual and legal basis for the CA ruling that, based
on the terms of payment of the balance of the purchase price of
the lots under the contracts of conditional sale executed by XEI
and the other lot buyers, respondents were obliged to pay the
278,448.00 with pre-computed interest of 12% per annum in
120-month installments. As gleaned from the ruling of the
appellate court, it failed to justify its use of the terms of payment
under the three "contracts of conditional sale" as basis for such
ruling, to wit:
On the other hand, the records do not disclose the schedule of
payment of the purchase price, net of the downpayment.
Considering, however, the Contracts of Conditional Sale (Exhs.
"N," "O" and "P") entered into by XEI with other lot buyers, it
would appear that the subdivision lots sold by XEI, under
contracts to sell, were payable in 120 equal monthly installments
(exclusive of the downpayment but including pre-computed
interests) commencing on delivery of the lot to the buyer.73
By its ruling, the CA unilaterally supplied an essential element to
the letter agreement of XEI and the Respondents. Courts should
not undertake to make a contract for the parties, nor can it
enforce one, the terms of which are in doubt.74 Indeed, the Court
emphasized in Chua v. Court of Appeals 75 that it is not the
province of a court to alter a contract by construction or to make
a new contract for the parties; its duty is confined to the
interpretation of the one which they have made for themselves,
without regard to its wisdom or folly, as the court cannot supply
material stipulations or read into contract words which it does
not contain.
Respondents, as plaintiffs below, failed to allege in their
complaint that the terms of payment of the 278,448.00 to be
incorporated in the "corresponding contract of conditional sale"
were those contained in the contracts of conditional sale
executed by XEI and Soller, Aguila and Roque. 76 They likewise
failed to prove such allegation in this Court.
The bare fact that other lot buyers were allowed to pay the
balance of the purchase price of lots purchased by them in 120
or 180 monthly installments does not constitute evidence that
XEI also agreed to give the respondents the same mode and
timeline of payment of the 278,448.00.
Under Section 34, Rule 130 of the Revised Rules of Court,
evidence that one did a certain thing at one time is not
admissible to prove that he did the same or similar thing at
another time, although such evidence may be received to prove
habit, usage, pattern of conduct or the intent of the parties.
Similar acts as evidence. Evidence that one did or did not do a
certain thing at one time is not admissible to prove that he did or
did not do the same or a similar thing at another time; but it may
be received to prove a specific intent or knowledge, identity,
plan, system, scheme, habit, custom or usage, and the like.
However, respondents failed to allege and prove, in the trial
court, that, as a matter of business usage, habit or pattern of
conduct, XEI granted all lot buyers the right to pay the balance
of the purchase price in installments of 120 months of fixed
amounts with pre-computed interests, and that XEI and the
respondents had intended to adopt such terms of payment
relative to the sale of the two lots in question. Indeed,
respondents adduced in evidence the three contracts of
conditional sale executed by XEI and other lot buyers merely to
prove that XEI continued to sell lots in the subdivision as sales
agent of OBM after it acquired said lots, not to prove usage,
habit or pattern of conduct on the part of XEI to require all lot
buyers in the subdivision to pay the balance of the purchase
price of said lots in 120 months. It further failed to prive that the
trial court admitted the said deeds 77 as part of the testimony of
respondent Manalo, Jr. 78
Habit, custom, usage or pattern of conduct must be proved like
any other facts. Courts must contend with the caveat that,
before they admit evidence of usage, of habit or pattern of
conduct, the offering party must establish the degree of
specificity and frequency of uniform response that ensures more
than a mere tendency to act in a given manner but rather,
conduct that is semi-automatic in nature. The offering party
must allege and prove specific, repetitive conduct that might
constitute evidence of habit. The examples offered in evidence
to prove habit, or pattern of evidence must be numerous enough
to base on inference of systematic conduct. Mere similarity of
contracts does not present the kind of sufficiently similar
circumstances to outweigh the danger of prejudice and
confusion.
In determining whether the examples are numerous enough,
and sufficiently regular, the key criteria are adequacy of
sampling and uniformity of response. After all, habit means a
course of behavior of a person regularly represented in like
circumstances. 79 It is only when examples offered to establish
pattern of conduct or habit are numerous enough to lose an
inference of systematic conduct that examples are admissible.
The key criteria are adequacy of sampling and uniformity of
response or ratio of reaction to situations. 80
There are cases where the course of dealings to be followed is
defined by the usage of a particular trade or market or
profession. As expostulated by Justice Benjamin Cardozo of the
United States Supreme Court: "Life casts the moulds of conduct,
which will someday become fixed as law. Law preserves the
moulds which have taken form and shape from life." 81 Usage
furnishes a standard for the measurement of many of the rights
and acts of men. 82 It is also well-settled that parties who contract
on a subject matter concerning which known usage prevail,
incorporate such usage by implication into their agreement, if
nothing is said to be contrary. 83
However, the respondents inexplicably failed to adduce
sufficient competent evidence to prove usage, habit or pattern of
conduct of XEI to justify the use of the terms of payment in the
contracts of the other lot buyers, and thus grant respondents the
right to pay the 278,448.00 in 120 months, presumably because
of respondents belief that the manner of payment of the said
amount is not an essential element of a contract to sell. There is
no evidence that XEI or OBM and all the lot buyers in the
subdivision, including lot buyers who pay part of the
downpayment of the property purchased by them in the form of
service, had executed contracts of conditional sale containing
uniform terms and conditions. Moreover, under the terms of the
contracts of conditional sale executed by XEI and three lot
buyers in the subdivision, XEI agreed to grant 120 months within
which to pay the balance of the purchase price to two of them,
but granted one 180 months to do so. 84 There is no evidence on
record that XEI granted the same right to buyers of two or more
lots.
Irrefragably, under Article 1469 of the New Civil Code, the price
of the property sold may be considered certain if it be so with
reference to another thing certain. It is sufficient if it can be
determined by the stipulations of the contract made by the
parties thereto 85 or by reference to an agreement incorporated in
the contract of sale or contract to sell or if it is capable of being
ascertained with certainty in said contract; 86 or if the contract
contains express or implied provisions by which it may be
rendered certain; 87 or if it provides some method or criterion by
which it can be definitely ascertained.88As this Court held in
Villaraza v. Court of Appeals, 89 the price is considered certain if,
by its terms, the contract furnishes a basis or measure for
ascertaining the amount agreed upon.
We have carefully reviewed the August 22, 1972 letter
agreement of the parties and find no direct or implied reference
to the manner and schedule of payment of the balance of the
purchase price of the lots covered by the deeds of conditional
sale executed by XEI and that of the other lot buyers90 as basis
for or mode of determination of the schedule of the payment by
the respondents of the 278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila
Electric Railroad and Light Company91 is not applicable in this
case because the basic price fixed in the contract was 9.45 per
long ton, but it was stipulated that the price was subject to
modification "in proportion to variations in calories and ash
content, and not otherwise." In this case, the parties did not fix
in their letters-agreement, any method or mode of determining
the terms of payment of the balance of the purchase price of the
property amounting to 278,448.00.
It bears stressing that the respondents failed and refused to pay
the balance of the downpayment and of the purchase price of
the property amounting to 278,448.00 despite notice to them of
the resumption by XEI of its selling operations. The respondents
enjoyed possession of the property without paying a centavo.
On the other hand, XEI and OBM failed and refused to transmit
a contract of conditional sale to the Respondents. The
respondents could have at least consigned the balance of the
downpayment after notice of the resumption of the selling
operations of XEI and filed an action to compel XEI or OBM to
transmit to them the said contract; however, they failed to do so.
As a consequence, respondents and XEI (or OBM for that
matter) failed to forge a perfected contract to sell the two lots;
hence, respondents have no cause of action for specific
performance against petitioner. Republic Act No. 6552 applies
only to a perfected contract to sell and not to a contract with no
binding and enforceable effect.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED.
The Decision of the Court of Appeals in CA-G.R. CV No. 47458
is REVERSED and SET ASIDE. The Regional Trial Court of
Quezon City, Branch 98 is ordered to dismiss the complaint.
Costs against the Respondents.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-11827 July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP
MINES & SMELTING CO., INC., SEGUNDINA VIVAS,
FRNACISCO DANTE, PACIFICO ESCANDOR and
FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or
holder, either by himself or in a representative capacity, of 11
iron lode mineral claims, known as the Dawahan Group,
situated in the municipality of Jose Panganiban, province of
Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit
"3"), Fonacier constituted and appointed plaintiff-appellee
Fernando A. Gaite as his true and lawful attorney-in-fact to enter
into a contract with any individual or juridical person for the
exploration and development of the mining claims
aforementioned on a royalty basis of not less than P0.50 per ton
of ore that might be extracted therefrom. On March 19, 1954,
Gaite in turn executed a general assignment (Record on Appeal,
pp. 17-19) conveying the development and exploitation of said
mining claims into the Larap Iron Mines, a single proprietorship
owned solely by and belonging to him, on the same royalty
basis provided for in Exhibit "3". Thereafter, Gaite embarked
upon the development and exploitation of the mining claims in
question, opening and paving roads within and outside their
boundaries, making other improvements and installing facilities
therein for use in the development of the mines, and in time
extracted therefrom what he claim and estimated to be
approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to
revoke the authority granted by him to Gaite to exploit and
develop the mining claims in question, and Gaite assented
thereto subject to certain conditions. As a result, a document
entitled "Revocation of Power of Attorney and Contract" was
executed on December 8, 1954 (Exhibit "A"),wherein Gaite
transferred to Fonacier, for the consideration of P20,000.00, plus
10% of the royalties that Fonacier would receive from the mining
claims, all his rights and interests on all the roads,
improvements, and facilities in or outside said claims, the right
to use the business name "Larap Iron Mines" and its goodwill,
and all the records and documents relative to the mines. In the
same document, Gaite transferred to Fonacier all his rights and
interests over the "24,000 tons of iron ore, more or less" that the
former had already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,000.00 of which was
paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)
will be paid from and out of the first letter of credit covering the
first shipment of iron ores and of the first amount derived from
the local sale of iron ore made by the Larap Mines & Smelting
Co. Inc., its assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00,
Fonacier promised to execute in favor of Gaite a surety bond,
and pursuant to the promise, Fonacier delivered to Gaite a
surety bond dated December 8, 1954 with himself (Fonacier) as
principal and the Larap Mines and Smelting Co. and its
stockholders George Krakower, Segundina Vivas, Pacifico
Escandor, Francisco Dante, and Fernando Ty as sureties
(Exhibit "A-1"). Gaite testified, however, that when this bond was
presented to him by Fonacier together with the "Revocation of
Power of Attorney and Contract", Exhibit "A", on December 8,
1954, he refused to sign said Exhibit "A" unless another bond
under written by a bonding company was put up by defendants
to secure the payment of the P65,000.00 balance of their price of
the iron ore in the stockpiles in the mining claims. Hence, a
second bond, also dated December 8, 1954 (Exhibit "B"),was
executed by the same parties to the first bond Exhibit "A-1", with
the Far Eastern Surety and Insurance Co. as additional surety,
but it provided that the liability of the surety company would
attach only when there had been an actual sale of iron ore by
the Larap Mines & Smelting Co. for an amount of not less then
P65,000.00, and that, furthermore, the liability of said surety
company would automatically expire on December 8, 1955. Both
bonds were attached to the "Revocation of Power of Attorney
and Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney
he gave to Gaite and the two executed and signed the
"Revocation of Power of Attorney and Contract", Exhibit "A",
Fonacier entered into a "Contract of Mining Operation", ceding,
transferring, and conveying unto the Larap Mines and Smelting
Co., Inc. the right to develop, exploit, and explore the mining
claims in question, together with the improvements therein and
the use of the name "Larap Iron Mines" and its good will, in
consideration of certain royalties. Fonacier likewise transferred,
in the same document, the complete title to the approximately
24,000 tons of iron ore which he acquired from Gaite, to the
Larap & Smelting Co., in consideration for the signing by the
company and its stockholders of the surety bonds delivered by
Fonacier to Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with
respect to the Far Eastern Surety and Insurance Company, no
sale of the approximately 24,000 tons of iron ore had been made
by the Larap Mines & Smelting Co., Inc., nor had the P65,000.00
balance of the price of said ore been paid to Gaite by Fonacier
and his sureties payment of said amount, on the theory that they
had lost right to make use of the period given them when their
bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24").
And when Fonacier and his sureties failed to pay as demanded
by Gaite, the latter filed the present complaint against them in
the Court of First Instance of Manila (Civil Case No. 29310) for
the payment of the P65,000.00 balance of the price of the ore,
consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject to a
condition that the amount of P65,000.00 would be payable out of
the first letter of credit covering the first shipment of iron ore
and/or the first amount derived from the local sale of the iron ore
by the Larap Mines & Smelting Co., Inc.; that up to the time of
the filing of the complaint, no sale of the iron ore had been
made, hence the condition had not yet been fulfilled; and that
consequently, the obligation was not yet due and demandable.
Defendant Fonacier also contended that only 7,573 tons of the
estimated 24,000 tons of iron ore sold to him by Gaite was
actually delivered, and counterclaimed for more than
P200,000.00 damages.
At the trial of the case, the parties agreed to limit the
presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to
pay Gaite P65,000.00 become due and demandable when the
defendants failed to renew the surety bond underwritten by the
Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which
expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff
Gaite to defendant Fonacier were actually in existence in the
mining claims when these parties executed the "Revocation of
Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of
the defendants to pay plaintiff the P65,000.00 balance of the
price of the approximately 24,000 tons of iron ore was one with a
term: i.e., that it would be paid upon the sale of sufficient iron
ore by defendants, such sale to be effected within one year or
before December 8, 1955; that the giving of security was a
condition precedent to Gait's giving of credit to defendants; and
that as the latter failed to put up a good and sufficient security in
lieu of the Far Eastern Surety bond (Exhibit "B") which expired
on December 8, 1955, the obligation became due and
demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff
Gaite did have approximately 24,000 tons of iron ore at the
mining claims in question at the time of the execution of the
contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and severally, P65,000.00
with interest at 6% per annum from December 9, 1955 until
payment, plus costs. From this judgment, defendants jointly
appealed to this Court.
During the pendency of this appeal, several incidental motions
were presented for resolution: a motion to declare the
appellants Larap Mines & Smelting Co., Inc. and George
Krakower in contempt, filed by appellant Fonacier, and two
motions to dismiss the appeal as having become academic and
a motion for new trial and/or to take judicial notice of certain
documents, filed by appellee Gaite. The motion for contempt is
unmeritorious because the main allegation therein that the
appellants Larap Mines & Smelting Co., Inc. and Krakower had
sold the iron ore here in question, which allegedly is "property in
litigation", has not been substantiated; and even if true, does not
make these appellants guilty of contempt, because what is
under litigation in this appeal is appellee Gaite's right to the
payment of the balance of the price of the ore, and not the iron
ore itself. As for the several motions presented by appellee
Gaite, it is unnecessary to resolve these motions in view of the
results that we have reached in this case, which we shall
hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of
appellant Fonacier to pay appellee Gaite the P65,000.00
(balance of the price of the iron ore in question)is one with a
period or term and not one with a suspensive condition, and that
the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only
10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite
to appellant Fonacier.
The first issue involves an interpretation of the following
provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to
Isabelo F. Fonacier all his rights and interests over the 24,000
tons of iron ore, more or less, above-referred to together with all
his rights and interests to operate the mine in consideration of
the sum of SEVENTY-FIVE THOUSAND PESOS (P75,000.00)
which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the
signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first letter of credit
covering the first shipment of iron ore made by the Larap Mines
& Smelting Co., Inc., its assigns, administrators, or successors
in interest.
We find the court below to be legally correct in holding that the
shipment or local sale of the iron ore is not a condition
precedent (or suspensive) to the payment of the balance of
P65,000.00, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its efficacy
or obligatory force (as distinguished from its demandability) is
subordinated to the happening of a future and uncertain event;
so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never
existed. That the parties to the contract Exhibit "A" did not
intend any such state of things to prevail is supported by several
circumstances:
1) The words of the contract express no contingency in the
buyer's obligation to pay: "The balance of Sixty-Five Thousand
Pesos (P65,000.00) will be paid out of the first letter of credit
covering the first shipment of iron ores . . ." etc. There is no
uncertainty that the payment will have to be made sooner or
later; what is undetermined is merely the exact date at which it
will be made. By the very terms of the contract, therefore, the
existence of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not
only does each one of the parties assume a correlative
obligation (the seller to deliver and transfer ownership of the
thing sold and the buyer to pay the price),but each party
anticipates performance by the other from the very start. While
in a sale the obligation of one party can be lawfully subordinated
to an uncertain event, so that the other understands that he
assumes the risk of receiving nothing for what he gives (as in
the case of a sale of hopes or expectations, emptio spei), it is
not in the usual course of business to do so; hence, the
contingent character of the obligation must clearly appear.
Nothing is found in the record to evidence that Gaite desired or
assumed to run the risk of losing his right over the ore without
getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite
insisted on a bond a to guarantee payment of the P65,000.00, an
not only upon a bond by Fonacier, the Larap Mines & Smelting
Co., and the company's stockholders, but also on one by a
surety company; and the fact that appellants did put up such
bonds indicates that they admitted the definite existence of their
obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00
to the sale or shipment of the ore as a condition precedent,
would be tantamount to leaving the payment at the discretion of
the debtor, for the sale or shipment could not be made unless
the appellants took steps to sell the ore. Appellants would thus
be able to postpone payment indefinitely. The desireability of
avoiding such a construction of the contract Exhibit "A" needs
no stressing.
4) Assuming that there could be doubt whether by the wording
of the contract the parties indented a suspensive condition or a
suspensive period (dies ad quem) for the payment of the
P65,000.00, the rules of interpretation would incline the scales in
favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article
1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of
the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if
the buyer' obligation is deemed to be actually existing, with only
its maturity (due date) postponed or deferred, that if such
obligation were viewed as non-existent or not binding until the
ore was sold.
The only rational view that can be taken is that the sale of the
ore to Fonacier was a sale on credit, and not an aleatory
contract where the transferor, Gaite, would assume the risk of
not being paid at all; and that the previous sale or shipment of
the ore was not a suspensive condition for the payment of the
balance of the agreed price, but was intended merely to fix the
future date of the payment.
This issue settled, the next point of inquiry is whether appellants,
Fonacier and his sureties, still have the right to insist that Gaite
should wait for the sale or shipment of the ore before receiving
payment; or, in other words, whether or not they are entitled to
take full advantage of the period granted them for making the
payment.
We agree with the court below that the appellant have forfeited
the right court below that the appellants have forfeited the right
to compel Gaite to wait for the sale of the ore before receiving
payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else
replace it with an equivalent guarantee. The expiration of the
bonding company's undertaking on December 8, 1955
substantially reduced the security of the vendor's rights as
creditor for the unpaid P65,000.00, a security that Gaite
considered essential and upon which he had insisted when he
executed the deed of sale of the ore to Fonacier (Exhibit "A").
The case squarely comes under paragraphs 2 and 3 of Article
1198 of the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the
period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised.
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through fortuitous
event they disappear, unless he immediately gives new ones
equally satisfactory.
Appellants' failure to renew or extend the surety company's
bond upon its expiration plainly impaired the securities given to
the creditor (appellee Gaite), unless immediately renewed or
replaced.
There is no merit in appellants' argument that Gaite's
acceptance of the surety company's bond with full knowledge
that on its face it would automatically expire within one year was
a waiver of its renewal after the expiration date. No such waiver
could have been intended, for Gaite stood to lose and had
nothing to gain barely; and if there was any, it could be rationally
explained only if the appellants had agreed to sell the ore and
pay Gaite before the surety company's bond expired on
December 8, 1955. But in the latter case the defendants-
appellants' obligation to pay became absolute after one year
from the transfer of the ore to Fonacier by virtue of the deed
Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite
acted within his rights in demanding payment and instituting this
action one year from and after the contract (Exhibit "A") was
executed, either because the appellant debtors had impaired
the securities originally given and thereby forfeited any further
time within which to pay; or because the term of payment was
originally of no more than one year, and the balance of
P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is
whether there were really 24,000 tons of iron ore in the
stockpiles sold by appellee Gaite to appellant Fonacier, and
whether, if there had been a short-delivery as claimed by
appellants, they are entitled to the payment of damages, we
must, at the outset, stress two things: first, that this is a case of
a sale of a specific mass of fungible goods for a single price or a
lump sum, the quantity of "24,000 tons of iron ore, more or less,"
stated in the contract Exhibit "A," being a mere estimate by the
parties of the total tonnage weight of the mass; and second, that
the evidence shows that neither of the parties had actually
measured of weighed the mass, so that they both tried to arrive
at the total quantity by making an estimate of the volume thereof
in cubic meters and then multiplying it by the estimated weight
per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron
ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or
perfect the sale, nor was the price of P75,000,00 agreed upon by
the parties based upon any such measurement.(see Art. 1480,
second par., New Civil Code). The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual
number of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to his
buyer all of the ore found in the mass, notwithstanding that the
quantity delivered is less than the amount estimated by them
(Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage
Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil
Code). There is no charge in this case that Gaite did not deliver
to appellants all the ore found in the stockpiles in the mining
claims in questions; Gaite had, therefore, complied with his
promise to deliver, and appellants in turn are bound to pay the
lump price.
But assuming that plaintiff Gaite undertook to sell and
appellants undertook to buy, not a definite mass, but
approximately 24,000 tons of ore, so that any substantial
difference in this quantity delivered would entitle the buyers to
recover damages for the short-delivery, was there really a short-
delivery in this case?
We think not. As already stated, neither of the parties had
actually measured or weighed the whole mass of ore cubic
meter by cubic meter, or ton by ton. Both parties predicate their
respective claims only upon an estimated number of cubic
meters of ore multiplied by the average tonnage factor per cubic
meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic
meters in the stockpiles of ore that he sold to Fonacier, while
appellants contend that by actual measurement, their witness
Cirpriano Manlagit found the total volume of ore in the
stockpiles to be only 6.609 cubic meters. As to the average
weight in tons per cubic meter, the parties are again in
disagreement, with appellants claiming the correct tonnage
factor to be 2.18 tons to a cubic meter, while appellee Gaite
claims that the correct tonnage factor is about 3.7.
In the face of the conflict of evidence, we take as the most
reliable estimate of the tonnage factor of iron ore in this case to
be that made by Leopoldo F. Abad, chief of the Mines and
Metallurgical Division of the Bureau of Mines, a government
pensionado to the States and a mining engineering graduate of
the Universities of Nevada and California, with almost 22 years
of experience in the Bureau of Mines. This witness placed the
tonnage factor of every cubic meter of iron ore at between 3
metric tons as minimum to 5 metric tons as maximum. This
estimate, in turn, closely corresponds to the average tonnage
factor of 3.3 adopted in his corrected report (Exhibits "FF" and
FF-1") by engineer Nemesio Gamatero, who was sent by the
Bureau of Mines to the mining claims involved at the request of
appellant Krakower, precisely to make an official estimate of the
amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of
ore in the stockpiles made by appellant's witness Cipriano
Manlagit is correct, if we multiply it by the average tonnage
factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons,
which is not very far from the estimate of 24,000 tons made by
appellee Gaite, considering that actual weighing of each unit of
the mass was practically impossible, so that a reasonable
percentage of error should be allowed anyone making an
estimate of the exact quantity in tons found in the mass. It must
not be forgotten that the contract Exhibit "A" expressly stated
the amount to be 24,000 tons, more or less. (ch. Pine River
Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as
would entitle appellants to the payment of damages, nor could
Gaite have been guilty of any fraud in making any
misrepresentation to appellants as to the total quantity of ore in
the stockpiles of the mining claims in question, as charged by
appellants, since Gaite's estimate appears to be substantially
correct.
WHEREFORE, finding no error in the decision appealed from,
we hereby affirm the same, with costs against appellants.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes,
Dizon, De Leon and Natividad, JJ., concur.
Th
Republic of the Philippines
SUPREME COURT
FIRST DIVISION
G.R. No. 152658. July 29, 2005
LILY ELIZABETH BRAVO-GUERRERO, BEN MAURICIO P.
BRAVO,1 ROLAND P. BRAVO, JR., OFELIA BRAVO-
QUIESTAS, HEIRS OF CORPUSINIA BRAVO-NIOR namely:
GERSON U. NIOR, MARK GERRY B. NIOR, CLIFF RICHARD
B. NIOR, BRYAN B. NIOR, WIDMARK B. NIOR, SHERRY
ANNE B. NIOR, represented by LILY ELIZABETH BRAVO-
GUERRERO as their attorney-in-fact, and HONORABLE
FLORENTINO A. TUASON, JR., Presiding Judge, Regional
Trial Court, Branch 139, Makati City, Petitioners,
vs.
EDWARD P. BRAVO, represented by his attorney-in-fact
FATIMA C. BRAVO, respondent, and DAVID B. DIAZ,
JR., intervenor-respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review2 assailing the
Decision3 of 21 December 2001 of the Court of Appeals in CA-
G.R. CV No. 67794. The Court of Appeals reversed the
Decision4 of 11 May 2000 of the Regional Trial Court of Makati,
Branch No. 139, in Civil Case No. 97-1379 denying respondents
prayer to partition the subject properties.
Antecedent Facts
Spouses Mauricio Bravo ("Mauricio") and Simona5 Andaya
Bravo ("Simona") owned two parcels of land ("Properties")
measuring 287 and 291 square meters and located along
Evangelista Street, Makati City, Metro Manila. The Properties
are registered under TCT Nos. 58999 and 59000 issued by the
Register of Deeds of Rizal on 23 May 1958. The Properties
contain a large residential dwelling, a smaller house and other
improvements.
Mauricio and Simona had three children - Roland, Cesar and
Lily, all surnamed Bravo. Cesar died without issue. Lily Bravo
married David Diaz, and had a son, David B. Diaz, Jr. ("David
Jr."). Roland had six children, namely, Lily Elizabeth Bravo-
Guerrero ("Elizabeth"), Edward Bravo ("Edward"), Roland Bravo,
Jr. ("Roland Jr."), Senia Bravo, Benjamin Mauricio Bravo, and
their half-sister, Ofelia Bravo ("Ofelia").
Simona executed a General Power of Attorney ("GPA") on 17
June 1966 appointing Mauricio as her attorney-in-fact. In the
GPA, Simona authorized Mauricio to "mortgage or otherwise
hypothecate, sell, assign and dispose of any and all of my
property, real, personal or mixed, of any kind whatsoever and
wheresoever situated, or any interest therein xxx."6 Mauricio
subsequently mortgaged the Properties to the Philippine
National Bank (PNB) and Development Bank of the Philippines
(DBP) for 10,000 and 5,000, respectively. 7
On 25 October 1970, Mauricio executed a Deed of Sale with
Assumption of Real Estate Mortgage ("Deed of Sale")
conveying the Properties to "Roland A. Bravo, Ofelia A. Bravo
and Elizabeth Bravo"8("vendees"). The sale was conditioned on
the payment of 1,000 and on the assumption by the vendees of
the PNB and DBP mortgages over the Properties.
As certified by the Clerk of Court of the Regional Trial Court of
Manila, the Deed of Sale was notarized by Atty. Victorio Q.
Guzman on 28 October 1970 and entered in his Notarial
Register. 9 However, the Deed of Sale was not annotated on
TCT Nos. 58999 and 59000. Neither was it presented to PNB
and DBP. The mortage loans and the receipts for loan
payments issued by PNB and DBP continued to be in Mauricios
name even after his death on 20 November 1973. Simona died
in 1977.
On 23 June 1997, Edward, represented by his wife, Fatima
Bravo, filed an action for the judicial partition of the Properties.
Edward claimed that he and the other grandchildren of Mauricio
and Simona are co-owners of the Properties by succession.
Despite this, petitioners refused to share with him the
possession and rental income of the Properties. Edward later
amended his complaint to include a prayer to annul the Deed of
Sale, which he claimed was merely simulated to prejudice the
other heirs.
In 1999, David Jr., whose parents died in 1944 and who was
subsequently raised by Simona, moved to intervene in the case.
David Jr. filed a complaint-in-intervention impugning the validity
of the Deed of Sale and praying for the partition of the
Properties among the surviving heirs of Mauricio and Simona.
The trial court allowed the intervention in its Order dated 5 May
1999.10
The Ruling of the Trial Court
The trial court upheld Mauricios sale of the Properties to the
vendees. The trial court ruled that the sale did not prejudice the
compulsory heirs, as the Properties were conveyed for valuable
consideration. The trial court also noted that the Deed of Sale
was duly notarized and was in existence for many years without
question about its validity.
The dispositive portion of the trial courts Decision of 11 May
2000 reads:
WHEREFORE, premises considered, the Court hereby DENIES
the JUDICIAL PARTITION of the properties covered by TCT
Nos. 58999 and 59000 registered with the Office of the Register
of Deeds of Rizal.
SO ORDERED. 11
Dissatisfied, Edward and David Jr. ("respondents") filed a joint
appeal to the Court of Appeals.
The Ruling of the Court of Appeals
Citing Article 166 of the Civil Code ("Article 166"), the Court of
Appeals declared the Deed of Sale void for lack of Simonas
consent. The appellate court held that the GPA executed by
Simona in 1966 was not sufficient to authorize Mauricio to sell
the Properties because Article 1878 of the Civil Code ("Article
1878") requires a special power of attorney for such transactions.
The appellate court reasoned that the GPA was executed
merely to enable Mauricio to mortgage the Properties, not to sell
them.
The Court of Appeals also found that there was insufficient proof
that the vendees made the mortgage payments on the
Properties, since the PNB and DBP receipts were issued in
Mauricios name. The appellate court opined that the rental
income of the Properties, which the vendees never shared with
respondents, was sufficient to cover the mortgage payments to
PNB and DBP.
The Court of Appeals declared the Deed of Sale void and
ordered the partition of the Properties in its Decision of 21
December 2001 ("CA Decision"), as follows:
WHEREFORE, the decision of the Regional Trial Court of
Makati City, Metro-Manila, Branch 13[9] dated 11 May 2000[,]
review of which is sought in these proceedings[,] is REVERSED.
1. The Deed of Sale with Assumption of Real Estate Mortgage
(Exh. 4) dated 28 October 1970 is hereby declared null and void;
2. Judicial Partition on the questioned properties is hereby
GRANTED in the following manner:
A. In representation of his deceased mother, LILY BRAVO-DIAZ,
intervenor DAVID DIAZ, JR., is entitled to one-half (1/2) interest
of the subject properties;
B. Plaintiff-appellant EDWARD BRAVO and the rest of the five
siblings, namely: LILY ELIZABETH, EDWARD, ROLAND, JR.,
SENIA, BENJAMIN and OFELIA are entitled to one-sixth (1/6)
representing the other half portion of the subject properties;
C. Plaintiff-appellant Edward Bravo, intervenor DAVID DIAZ, JR.,
SENIA and BENJAMIN shall reimburse the defendant-appellees
LILY ELIZABETH, OFELIA and ROLAND the sum of One
Thousand (P1,000.00) PESOS representing the consideration
paid on the questioned deed of sale with assumption of
mortgage with interest of six (6) percent per annum effective 28
October 1970 until fully paid.
SO ORDERED. 12
The Issues
Petitioners seek a reversal of the Decision of the Court of
Appeals, raising these issues:
1. WHETHER THE COURT OF APPEALS ERRED IN NOT
UPHOLDING THE VALIDITY AND ENFORCEMENT OF THE
DEED OF SALE WITH ASSUMPTION OF MORTGAGE.
2. WHETHER THE COURT OF APPEALS ERRED IN
ORDERING THE PARTITION OF THE PROPERTY IN
QUESTION. 13
At the least, petitioners argue that the subject sale is valid as to
Mauricios share in the Properties.
On the other hand, respondents maintain that they are co-
owners of the Properties by succession. Respondents argue
that the sale of the conjugal Properties is void because: (1)
Mauricio executed the Deed of Sale without Simonas consent;
and (2) the sale was merely simulated, as shown by the grossly
inadequate consideration Mauricio received for the Properties.
While this case was pending, Leonida Andaya Lolong
("Leonida"), David Jr.s aunt, and Atty. Cendaa, respondents
counsel, informed the Court that David Jr. died on 14 September
2004. Afterwards, Leonida and Elizabeth wrote separate letters
asking for the resolution of this case. Atty. Cendaa later filed
an urgent motion to annotate attorneys lien on TCT Nos. 58999
and 59000. In its Resolution dated 10 November 2004,14 the
Court noted the notice of David Jr.s death, the letters written by
Leonida and Elizabeth, and granted the motion to annotate
attorneys lien on TCT Nos. 58999 and 59000.
The Ruling of the Court
The petition is partly meritorious.
The questions of whether Simona consented to the Deed of
Sale and whether the subject sale was simulated are factual in
nature. The rule is factual findings of the Court of Appeals are
binding on this Court. However, there are exceptions, such as
when the factual findings of the Court of Appeals and the trial
court are contradictory, or when the evidence on record does
not support the factual findings. 15 Because these exceptions
obtain in the present case, the Court will consider these issues.
On the Requirement of the Wifes Consent
We hold that the Court of Appeals erred when it declared the
Deed of Sale void based on Article 166, which states:
Art. 166. Unless the wife has been declared a non compos
mentis or a spendthrift, or is under civil interdiction or is confined
in a leprosarium, the husband cannot alienate or encumber any
real property of the conjugal partnership without the wifes
consent. If she refuses unreasonably to give her consent, the
court may compel her to grant the same.
This article shall not apply to property acquired by the conjugal
partnerships before the effective date of this Code.
Article 166 expressly applies only to properties acquired by the
conjugal partnership after the effectivity of the Civil Code of the
Philippines ("Civil Code"). The Civil Code came into force on 30
August 1950.16 Although there is no dispute that the Properties
were conjugal properties of Mauricio and Simona, the records
do not show, and the parties did not stipulate, when the
Properties were acquired.17Under Article 1413 of the old Spanish
Civil Code, the husband could alienate conjugal partnership
property for valuable consideration without the wifes consent.18
Even under the present Civil Code, however, the Deed of Sale
is not void. It is well-settled that contracts alienating conjugal
real property without the wifes consent are merely voidable
under the Civil Code that is, binding on the parties unless
annulled by a competent court and not void ab initio.19
Article 166 must be read in conjunction with Article 173 of the
Civil Code ("Article 173"). The latter prescribes certain conditions
before a sale of conjugal property can be annulled for lack of the
wifes consent, as follows:
Art. 173. The wife may, during the marriage and within ten
years from the transaction questioned, ask the courts for the
annulment of any contract of the husband entered into without
her consent, when such consent is required, or any act or
contract of the husband which tends to defraud her or impair her
interest in the conjugal partnership property. Should the wife
fail to exercise this right, she or her heirs after the
dissolution of the marriage, may demand the value of
property fraudulently alienated by the husband. (Emphasis
supplied)
Under the Civil Code, only the wife can ask to annul a contract
that disposes of conjugal real property without her consent. The
wife must file the action for annulment during the marriage and
within ten years from the questioned transaction. Article 173 is
explicit on the remedies available if the wife fails to exercise this
right within the specified period. In such case, the wife or her
heirs can only demand the value of the property provided they
prove that the husband fraudulently alienated the property.
Fraud is never presumed, but must be established by clear and
convincing evidence.20
Respondents action to annul the Deed of Sale based on Article
166 must fail for having been filed out of time. The marriage of
Mauricio and Simona was dissolved when Mauricio died in 1973.
More than ten years have passed since the execution of the
Deed of Sale.
Further, respondents, who are Simonas heirs, are not the
parties who can invoke Article 166. Article 173 reserves that
remedy to the wife alone. Only Simona had the right to have the
sale of the Properties annulled on the ground that Mauricio sold
the Properties without her consent.
Simona, however, did not assail the Deed of Sale during her
marriage or even after Mauricios death. The records are bereft
of any indication that Simona questioned the sale of the
Properties at any time. Simona did not even attempt to take
possession of or reside on the Properties after Mauricios death.
David Jr., who was raised by Simona, testified that he and
Simona continued to live in Pasay City after Mauricios death,
while her children and other grandchildren resided on the
Properties. 21
We also agree with the trial court that Simona authorized
Mauricio to dispose of the Properties when she executed the
GPA. True, Article 1878 requires a special power of attorney for
an agent to execute a contract that transfers the ownership of
an immovable. However, the Court has clarified that Article 1878
refers to the nature of the authorization, not to its form.22 Even if
a document is titled as a general power of attorney, the
requirement of a special power of attorney is met if there is a
clear mandate from the principal specifically authorizing the
performance of the act.23
In Veloso v. Court of Appeals,24 the Court explained that a
general power of attorney could contain a special power to sell
that satisfies the requirement of Article 1878, thus:
An examination of the records showed that the assailed power
of attorney was valid and regular on its face. It was notarized
and as such, it carries the evidentiary weight conferred upon it
with respect to its due execution. While it is true that it was
denominated as a general power of attorney, a perusal thereof
revealed that it stated an authority to sell, to wit:
"2. To buy or sell, hire or lease, mortgage or otherwise
hypothecate lands, tenements and hereditaments or other forms
of real property, more specifically TCT No. 49138, upon such
terms and conditions and under such covenants as my said
attorney shall deem fit and proper."
Thus, there was no need to execute a separate and special
power of attorney since the general power of attorney had
expressly authorized the agent or attorney in fact the power to
sell the subject property. The special power of attorney can
be included in the general power when it is specified
therein the act or transaction for which the special power is
required. (Emphasis supplied)
In this case, Simona expressly authorized Mauricio in the GPA
to "sell, assign and dispose of any and all of my property,
real, personal or mixed, of any kind whatsoever and
wheresoever situated, or any interest therein xxx" as well as to
"act as my general representative and agent, with full authority
to buy, sell, negotiate and contract for me and in my
behalf."25 Taken together, these provisions constitute a clear
and specific mandate to Mauricio to sell the Properties. Even if it
is called a "general power of attorney," the specific provisions in
the GPA are sufficient for the purposes of Article 1878. These
provisions in the GPA likewise indicate that Simona consented
to the sale of the Properties.
Whether the Sale of the Properties was Simulated
or is Void for Gross Inadequacy of Price
We point out that the law on legitime does not bar the
disposition of property for valuable consideration to
descendants or compulsory heirs. In a sale, cash of equivalent
value replaces the property taken from the estate. 26 There is no
diminution of the estate but merely a substitution in values.
Donations and other dispositions by gratuitous title, on the other
hand, must be included in the computation of legitimes.27
Respondents, however, contend that the sale of the Properties
was merely simulated. As proof, respondents point to the
consideration of 1,000 in the Deed of Sale, which respondents
claim is grossly inadequate compared to the actual value of the
Properties.
Simulation of contract and gross inadequacy of price are distinct
legal concepts, with different effects. When the parties to an
alleged contract do not really intend to be bound by it, the
contract is simulated and void.28 A simulated or fictitious contract
has no legal effect whatsoever29 because there is no real
agreement between the parties.
In contrast, a contract with inadequate consideration may
nevertheless embody a true agreement between the parties. A
contract of sale is a consensual contract, which becomes valid
and binding upon the meeting of minds of the parties on the
price and the object of the sale.30 The concept of a simulated
sale is thus incompatible with inadequacy of price. When the
parties agree on a price as the actual consideration, the sale is
not simulated despite the inadequacy of the price. 31
Gross inadequacy of price by itself will not result in a void
contract. Gross inadequacy of price does not even affect the
validity of a contract of sale, unless it signifies a defect in the
consent or that the parties actually intended a donation or some
other contract. 32Inadequacy of cause will not invalidate a
contract unless there has been fraud, mistake or undue
influence.33 In this case, respondents have not proved any of the
instances that would invalidate the Deed of Sale.
Respondents even failed to establish that the consideration paid
by the vendees for the Properties was grossly inadequate. As
the trial court pointed out, the Deed of Sale stipulates that, in
addition to the payment of 1,000, the vendees should assume
the mortgage loans from PNB and DBP. The consideration for
the sale of the Properties was thus 1,000 in cash and the
assumption of the 15,000 mortgage.
Respondents argue that 16,000 is still far below the actual
value of the Properties. To bolster their claim, respondents
presented the following: (1) Tax Declarations No. A-001-
0090534 and A-001-0090635for the year 1979, which placed the
assessed value of the Properties at 70,020 and their
approximate market value at 244,290; and (2) a certified copy
of the Department of Finances Department Order No. 62-
9736 dated 6 June 1997 and attached guidelines37 which
established the zonal value of the properties along Evangelista
Street at 15,000 per square meter.
The subject Deed of Sale, however, was executed in 1970. The
valuation of the Properties in 1979 or 1997 is of little relevance to
the issue of whether 16,000 was a grossly inadequate price to
pay for the Properties in 1970. Certainly, there is nothing
surprising in the sharp increase in the value of the Properties
nine or twenty-seven years after the sale, particularly when we
consider that the Properties are located in the City of Makati.
More pertinent are Tax Declarations No. 1581238 and No.
15813,39both issued in 1967, presented by petitioners. These tax
declarations placed the assessed value of both Properties at
16,160. Compared to this, the price of 16,000 cannot be
considered grossly inadequate, much less so shocking to the
conscience40 as to justify the setting aside of the Deed of Sale.
Respondents next contend that the vendees did not make the
mortgage payments on the Properties. Respondents allege that
the rents paid by the tenants leasing portions of the Properties
were sufficient to cover the mortgage payments to DBP and
PNB.
Again, this argument does not help respondents cause.
Assuming that the vendees failed to pay the full price stated in
the Deed of Sale, such partial failure would not render the sale
void. In Buenaventura v. Court of Appeals,41 the Court held:
xxx If there is a meeting of the minds of the parties as to the
price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. xxx
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 of the contract. Failure to pay the consideration is
different from lack of consideration. The former results 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. (Emphasis supplied.)
Neither was it shown that the rentals from tenants were
sufficient to cover the mortgage payments. The parties to this
case stipulated to only one tenant, a certain Federico M. Puno,
who supposedly leased a room on the Properties for 300 per
month from 1992 to 1994.42 This is hardly significant, when we
consider that the mortgage was fully paid by 1974. Indeed, the
fact that the Properties were mortgaged to DBP and PNB
indicates that the conjugal partnership, or at least Mauricio, was
short of funds.
Petitioners point out that they were duly employed and had the
financial capacity to buy the Properties in 1970. Respondents
did not refute this. Petitioners presented 72 receipts 43 showing
the mortgage payments made to PNB and DBP, and the
Release of the Real Estate Mortgage44 ("Mortgage Release")
dated 5 April 1974. True, these documents all bear Mauricios
name. However, this tends to support, rather than detract from,
petitioner-vendees explanation that they initially gave the
mortgage payments directly to Mauricio, and then later directly
to the banks, without formally advising the bank of the sale. The
last 3 mortgage receipts and the Mortgage Release were all
issued in Mauricios name even after his death in 1970.
Obviously, Mauricio could not have secured the Mortgage
Release and made these last payments.
Presumption of Regularity and Burden of Proof
The Deed of Sale was notarized and, as certified by the
Regional Trial Court of Manila, entered in the notarial books
submitted to that court. As a document acknowledged before a
notary public, the Deed of Sale enjoys the presumption of
regularity45 and due execution. 46 Absent evidence that is clear,
convincing and more than merely preponderant, the
presumption must be upheld.47
Respondents evidence in this case is not even preponderant.
Respondents allegations, testimony and bare denials cannot
prevail over the documentary evidence presented by petitioners.
These documents the Deed of Sale and the GPA which are
both notarized, the receipts, the Mortgage Release and the 1967
tax declarations over the Properties support petitioners
account of the sale.
As the parties challenging the regularity of the Deed of Sale and
alleging its simulation, respondents had the burden of proving
these charges. 48 Respondents failed to discharge this burden.
Consequentially, the Deed of Sale stands.
On the Partition of the Property
Nevertheless, this Court finds it proper to grant the partition of
the Properties, subject to modification.
Petitioners have consistently claimed that their father is one of
the vendees who bought the Properties. Vendees Elizabeth and
Ofelia both testified that the "Roland A. Bravo" in the Deed of
Sale is their father, 49 although their brother, Roland Bravo, Jr.,
made some of the mortgage payments. Petitioners counsel,
Atty. Paggao, made the same clarification before the trial
court. 50
As Roland Bravo, Sr. is also the father of respondent Edward
Bravo, Edward is thus a compulsory heir of Roland Bravo, and
entitled to a share, along with his brothers and sisters, in his
fathers portion of the Properties. In short, Edward and
petitioners are co-owners of the Properties.
As such, Edward can rightfully ask for the partition of the
Properties. Any co-owner may demand at any time the partition
of the common property unless a co-owner has repudiated the
co-ownership. 51 This action for partition does not prescribe and
is not subject to laches. 52
WHEREFORE, we REVERSE the Decision of 21 December
2001 of the Court of Appeals in CA-G.R. CV No. 67794. We
REINSTATE the Decision of 11 May 2000 of the Regional Trial
Court of Makati, Branch No. 139, in Civil Case No. 97-137,
declaring VALID the Deed of Sale with Assumption of Mortgage
dated 28 October 1970, with the following MODIFICATIONS:
1. We GRANT judicial partition of the subject Properties in the
following manner:
a. Petitioner LILY ELIZABETH BRAVO-GUERRERO is entitled
to one-third (1/3) of the Properties;
b. Petitioner OFELIA BRAVO-QUIESTAS is entitled to one-third
(1/3) of the Properties; and
c. The remaining one-third (1/3) portion of the Properties should
be divided equally between the children of ROLAND BRAVO.
2. The other heirs of ROLAND BRAVO must reimburse
ROLAND BRAVO, JR. for whatever expenses the latter incurred
in paying for and securing the release of the mortgage on the
Properties.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago,
and Azcuna, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11491 August 23, 1918
ANDRES QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for
appellant.
Crossfield & O'Brien for appellee.
AVANCEA, J.:
On January 24, 1911, in this city of manila, a contract in the
following tenor was entered into by and between the plaintiff, as
party of the first part, and J. Parsons (to whose rights and
obligations the present defendant later subrogated itself), as
party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES
QUIROGA AND J. PARSONS, BOTH MERCHANTS
ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF
"QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to
sell his beds in the Visayan Islands to J. Parsons under the
following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr.
Parsons for the latter's establishment in Iloilo, and shall invoice
them at the same price he has fixed for sales, in Manila, and, in
the invoices, shall make and allowance of a discount of 25 per
cent of the invoiced prices, as commission on the sale; and Mr.
Parsons shall order the beds by the dozen, whether of the same
or of different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds
received, within a period of sixty days from the date of their
shipment.
(C) The expenses for transportation and shipment shall be
borne by M. Quiroga, and the freight, insurance, and cost of
unloading from the vessel at the point where the beds are
received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its
payment, said payment when made shall be considered as a
prompt payment, and as such a deduction of 2 per cent shall be
made from the amount of the invoice.
The same discount shall be made on the amount of any invoice
which Mr. Parsons may deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days
before hand of any alteration in price which he may plan to
make in respect to his beds, and agrees that if on the date when
such alteration takes effect he should have any order pending to
be served to Mr. Parsons, such order shall enjoy the advantage
of the alteration if the price thereby be lowered, but shall not be
affected by said alteration if the price thereby be increased, for,
in this latter case, Mr. Quiroga assumed the obligation to invoice
the beds at the price at which the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except
the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement
which, for the benefit of both contracting parties, Mr. Parsons
may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in
case anyone should apply for the exclusive agency for any
island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his
agency for the sale of "Quiroga" beds in all the towns of the
Archipelago where there are no exclusive agents, and shall
immediately report such action to Mr. Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may
be terminated by either of the contracting parties on a previous
notice of ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his
complaint, only two of them constitute the subject matter of this
appeal and both substantially amount to the averment that the
defendant violated the following obligations: not to sell the beds
at higher prices than those of the invoices; to have an open
establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement
expenses for the same; and to order the beds by the dozen and
in no other manner. As may be seen, with the exception of the
obligation on the part of the defendant to order the beds by the
dozen and in no other manner, none of the obligations imputed
to the defendant in the two causes of action are expressly set
forth in the contract. But the plaintiff alleged that the defendant
was his agent for the sale of his beds in Iloilo, and that said
obligations are implied in a contract of commercial agency. The
whole question, therefore, reduced itself to a determination as to
whether the defendant, by reason of the contract hereinbefore
transcribed, was a purchaser or an agent of the plaintiff for the
sale of his beds.
In order to classify a contract, due regard must be given to its
essential clauses. In the contract in question, what was
essential, as constituting its cause and subject matter, is that
the plaintiff was to furnish the defendant with the beds which the
latter might order, at the price stipulated, and that the defendant
was to pay the price in the manner stipulated. The price agreed
upon was the one determined by the plaintiff for the sale of
these beds in Manila, with a discount of from 20 to 25 per cent,
according to their class. Payment was to be made at the end of
sixty days, or before, at the plaintiff's request, or in cash, if the
defendant so preferred, and in these last two cases an
additional discount was to be allowed for prompt payment.
These are precisely the essential features of a contract of
purchase and sale. There was the obligation on the part of the
plaintiff to supply the beds, and, on the part of the defendant, to
pay their price. These features exclude the legal conception of
an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but
delivers to the principal the price he obtains from the sale of the
thing to a third person, and if he does not succeed in selling it,
he returns it. By virtue of the contract between the plaintiff and
the defendant, the latter, on receiving the beds, was necessarily
obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not
sold the beds.
It would be enough to hold, as we do, that the contract by and
between the defendant and the plaintiff is one of purchase and
sale, in order to show that it was not one made on the basis of a
commission on sales, as the plaintiff claims it was, for these
contracts are incompatible with each other. But, besides,
examining the clauses of this contract, none of them is found
that substantially supports the plaintiff's contention. Not a single
one of these clauses necessarily conveys the idea of an agency.
The words commission on sales used in clause (A) of article 1
mean nothing else, as stated in the contract itself, than a mere
discount on the invoice price. The word agency, also used in
articles 2 and 3, only expresses that the defendant was the only
one that could sell the plaintiff's beds in the Visayan Islands.
With regard to the remaining clauses, the least that can be said
is that they are not incompatible with the contract of purchase
and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a
former vice-president of the defendant corporation and who
established and managed the latter's business in Iloilo. It
appears that this witness, prior to the time of his testimony, had
serious trouble with the defendant, had maintained a civil suit
against it, and had even accused one of its partners, Guillermo
Parsons, of falsification. He testified that it was he who drafted
the contract Exhibit A, and, when questioned as to what was his
purpose in contracting with the plaintiff, replied that it was to be
an agent for his beds and to collect a commission on sales.
However, according to the defendant's evidence, it was Mariano
Lopez Santos, a director of the corporation, who prepared
Exhibit A. But, even supposing that Ernesto Vidal has stated the
truth, his statement as to what was his idea in contracting with
the plaintiff is of no importance, inasmuch as the agreements
contained in Exhibit A which he claims to have drafted,
constitute, as we have said, a contract of purchase and sale,
and not one of commercial agency. This only means that
Ernesto Vidal was mistaken in his classification of the contract.
But it must be understood that a contract is what the law defines
it to be, and not what it is called by the contracting parties.
The plaintiff also endeavored to prove that the defendant had
returned beds that it could not sell; that, without previous notice,
it forwarded to the defendant the beds that it wanted; and that
the defendant received its commission for the beds sold by the
plaintiff directly to persons in Iloilo. But all this, at the most only
shows that, on the part of both of them, there was mutual
tolerance in the performance of the contract in disregard of its
terms; and it gives no right to have the contract considered, not
as the parties stipulated it, but as they performed it. Only the
acts of the contracting parties, subsequent to, and in connection
with, the execution of the contract, must be considered for the
purpose of interpreting the contract, when such interpretation is
necessary, but not when, as in the instant case, its essential
agreements are clearly set forth and plainly show that the
contract belongs to a certain kind and not to another.
Furthermore, the return made was of certain brass beds, and
was not effected in exchange for the price paid for them, but
was for other beds of another kind; and for the letter Exhibit L-1,
requested the plaintiff's prior consent with respect to said beds,
which shows that it was not considered that the defendant had a
right, by virtue of the contract, to make this return. As regards
the shipment of beds without previous notice, it is insinuated in
the record that these brass beds were precisely the ones so
shipped, and that, for this very reason, the plaintiff agreed to
their return. And with respect to the so-called commissions, we
have said that they merely constituted a discount on the invoice
price, and the reason for applying this benefit to the beds sold
directly by the plaintiff to persons in Iloilo was because, as the
defendant obligated itself in the contract to incur the expenses
of advertisement of the plaintiff's beds, such sales were to be
considered as a result of that advertisement.
In respect to the defendant's obligation to order by the dozen,
the only one expressly imposed by the contract, the effect of its
breach would only entitle the plaintiff to disregard the orders
which the defendant might place under other conditions; but if
the plaintiff consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by
and between the plaintiff and the defendant was one of
purchase and sale, and that the obligations the breach of which
is alleged as a cause of action are not imposed upon the
defendant, either by agreement or by law.
The judgment appealed from is affirmed, with costs against the
appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 188064 June 1, 2011
MILA A. REYES, Petitioner,
vs.
VICTORIA T. TUPARAN, Respondent.
DECISION
MENDOZA, J.:
Subject of this petition for review is the February 13, 2009
Decision1 of the Court of Appeals (CA) which affirmed with
modification the February 22, 2006 Decision 2 of the Regional
Trial Court, Branch 172, Valenzuela City (RTC), in Civil Case No.
3945-V-92, an action for Rescission of Contract with Damages.
On September 10, 1992, Mila A. Reyes (petitioner) filed a
complaint for Rescission of Contract with Damages against
Victoria T. Tuparan (respondent) before the RTC. In her
Complaint, petitioner alleged, among others, that she was the
registered owner of a 1,274 square meter residential and
commercial lot located in Karuhatan, Valenzuela City, and
covered by TCT No. V-4130; that on that property, she put up a
three-storey commercial building known as RBJ Building and a
residential apartment building; that since 1990, she had been
operating a drugstore and cosmetics store on the ground floor of
RBJ Building where she also had been residing while the other
areas of the buildings including the sidewalks were being leased
and occupied by tenants and street vendors.
In December 1989, respondent leased from petitioner a space
on the ground floor of the RBJ Building for her pawnshop
business for a monthly rental of 4,000.00. A close friendship
developed between the two which led to the respondent
investing thousands of pesos in petitioners financing/lending
business from February 7, 1990 to May 27, 1990, with interest at
the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real
properties to the Farmers Savings Bank and Loan Bank, Inc.
(FSL Bank) to secure a loan of 2,000,000.00 payable in
installments. On November 15, 1990, petitioners outstanding
account on the mortgage reached 2,278,078.13. Petitioner then
decided to sell her real properties for at least 6,500,000.00 so
she could liquidate her bank loan and finance her businesses.
As a gesture of friendship, respondent verbally offered to
conditionally buy petitioners real properties for 4,200,000.00
payable on installment basis without interest and to assume the
bank loan. To induce the petitioner to accept her offer,
respondent offered the following conditions/concessions:
1. That the conditional sale will be cancelled if the plaintiff
(petitioner) can find a buyer of said properties for the amount of
6,500,000.00 within the next three (3) months provided all
amounts received by the plaintiff from the defendant
(respondent) including payments actually made by defendant to
Farmers Savings and Loan Bank would be refunded to the
defendant with additional interest of six (6%) monthly;
2. That the plaintiff would continue using the space occupied by
her and drugstore and cosmetics store without any rentals for
the duration of the installment payments;
3. That there will be a lease for fifteen (15) years in favor of the
plaintiff over the space for drugstore and cosmetics store at a
monthly rental of only 8,000.00 after full payment of the
stipulated installment payments are made by the defendant;
4. That the defendant will undertake the renewal and payment of
the fire insurance policies on the two (2) subject buildings
following the expiration of the then existing fire insurance policy
of the plaintiff up to the time that plaintiff is fully paid of the total
purchase price of 4,200,000.00.3
After petitioner s verbal acceptance of all the
conditions/concessions, both parties worked together to obtain
FSL Banks approval for respondent to assume her (petitioner s)
outstanding bank account. The assumption would be part of
respondents purchase price for petitioners mortgaged real
properties. FSL Bank approved their proposal on the condition
that petitioner would sign or remain as co-maker for the
mortgage obligation assumed by respondent.
On November 26, 1990, the parties and FSL Bank executed the
corresponding Deed of Conditional Sale of Real Properties with
Assumption of Mortgage. Due to their close personal friendship
and business relationship, both parties chose not to reduce into
writing the other terms of their agreement mentioned in
paragraph 11 of the complaint. Besides, FSL Bank did not want
to incorporate in the Deed of Conditional Sale of Real Properties
with Assumption of Mortgage any other side agreement
between petitioner and respondent.
Under the Deed of Conditional Sale of Real Properties with
Assumption of Mortgage, respondent was bound to pay the
petitioner a lump sum of 1.2 million pesos without interest as
part of the purchase price in three (3) fixed installments as
follows:
a) 200,000.00 due January 31, 1991
b) 200,000.00 due June 30, 1991
c) 800,000.00 due December 31, 1991
Respondent, however, defaulted in the payment of her
obligations on their due dates. Instead of paying the amounts
due in lump sum on their respective maturity dates, respondent
paid petitioner in small amounts from time to time. To
compensate for her delayed payments, respondent agreed to
pay petitioner an interest of 6% a month. As of August 31, 1992,
respondent had only paid 395,000.00, leaving a balance of
805,000.00 as principal on the unpaid installments and
466,893.25 as unpaid accumulated interest.
Petitioner further averred that despite her success in finding a
prospective buyer for the subject real properties within the 3-
month period agreed upon, respondent reneged on her promise
to allow the cancellation of their deed of conditional sale.
Instead, respondent became interested in owning the subject
real properties and even wanted to convert the entire property
into a modern commercial complex. Nonetheless, she
consented because respondent repeatedly professed friendship
and assured her that all their verbal side agreement would be
honored as shown by the fact that since December 1990, she
(respondent) had not collected any rentals from the petitioner for
the space occupied by her drugstore and cosmetics store.
On March 19, 1992, the residential building was gutted by fire
which caused the petitioner to lose rental income in the amount
of 8,000.00 a month since April 1992. Respondent neglected to
renew the fire insurance policy on the subject buildings.
Since December 1990, respondent had taken possession of the
subject real properties and had been continuously collecting and
receiving monthly rental income from the tenants of the
buildings and vendors of the sidewalk fronting the RBJ building
without sharing it with petitioner.
On September 2, 1992, respondent offered the amount of
751,000.00 only payable on September 7, 1992, as full payment
of the purchase price of the subject real properties and
demanded the simultaneous execution of the corresponding
deed of absolute sale.
Respondents Answer
Respondent countered, among others, that the tripartite
agreement erroneously designated by the petitioner as a Deed
of Conditional Sale of Real Property with Assumption of
Mortgage was actually a pure and absolute contract of sale with
a term period. It could not be considered a conditional sale
because the acquisition of contractual rights and the
performance of the obligation therein did not depend upon a
future and uncertain event. Moreover, the capital gains and
documentary stamps and other miscellaneous expenses and
real estate taxes up to 1990 were supposed to be paid by
petitioner but she failed to do so.
Respondent further averred that she successfully rescued the
properties from a definite foreclosure by paying the assumed
mortgage in the amount of 2,278,078.13 plus interest and other
finance charges. Because of her payment, she was able to
obtain a deed of cancellation of mortgage and secure a release
of mortgage on the subject real properties including petitioner s
ancestral residential property in Sta. Maria, Bulacan.
Petitioners claim for the balance of the purchase price of the
subject real properties was baseless and unwarranted because
the full amount of the purchase price had already been paid, as
she did pay more than 4,200,000.00, the agreed purchase price
of the subject real properties, and she had even introduced
improvements thereon worth more than 4,800,000.00. As the
parties could no longer be restored to their original positions,
rescission could not be resorted to.
Respondent added that as a result of their business relationship,
petitioner was able to obtain from her a loan in the amount of
400,000.00 with interest and took several pieces of jewelry
worth 120,000.00. Petitioner also failed and refused to pay the
monthly rental of 20,000.00 since November 16, 1990 up to the
present for the use and occupancy of the ground floor of the
building on the subject real property, thus, accumulating
arrearages in the amount of 470,000.00 as of October 1992.
Ruling of the RTC
On February 22, 2006, the RTC handed down its decision finding
that respondent failed to pay in full the 4.2 million total
purchase price of the subject real properties leaving a balance
of 805,000.00. It stated that the checks and receipts presented
by respondent refer to her payments of the mortgage obligation
with FSL Bank and not the payment of the balance of
1,200,000.00. The RTC also considered the Deed of
Conditional Sale of Real Property with Assumption of Mortgage
executed by and among the two parties and FSL Bank a
contract to sell, and not a contract of sale. It was of the opinion
that although the petitioner was entitled to a rescission of the
contract, it could not be permitted because her non-payment in
full of the purchase price "may not be considered as substantial
and fundamental breach of the contract as to defeat the object
of the parties in entering into the contract."4 The RTC believed
that the respondents offer stated in her counsels letter dated
September 2, 1992 to settle what she thought was her unpaid
balance of 751,000.00 showed her sincerity and willingness to
settle her obligation. Hence, it would be more equitable to give
respondent a chance to pay the balance plus interest within a
given period of time.
Finally, the RTC stated that there was no factual or legal basis
to award damages and attorneys fees because there was no
proof that either party acted fraudulently or in bad faith.
Thus, the dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Allowing the defendant to pay the plaintiff within thirty (30)
days from the finality hereof the amount of 805,000.00,
representing the unpaid purchase price of the subject property,
with interest thereon at 2% a month from January 1, 1992 until
fully paid. Failure of the defendant to pay said amount within the
said period shall cause the automatic rescission of the contract
(Deed of Conditional Sale of Real Property with Assumption of
Mortgage) and the plaintiff and the defendant shall be restored
to their former positions relative to the subject property with
each returning to the other whatever benefits each derived from
the transaction;
2. Directing the defendant to allow the plaintiff to continue using
the space occupied by her for drugstore and cosmetic store
without any rental pending payment of the aforesaid balance of
the purchase price.
3. Ordering the defendant, upon her full payment of the
purchase price together with interest, to execute a contract of
lease for fifteen (15) years in favor of the plaintiff over the space
for the drugstore and cosmetic store at a fixed monthly rental of
8,000.00; and
4. Directing the plaintiff, upon full payment to her by the
defendant of the purchase price together with interest, to
execute the necessary deed of sale, as well as to pay the
Capital Gains Tax, documentary stamps and other
miscellaneous expenses necessary for securing the BIR
Clearance, and to pay the real estate taxes due on the subject
property up to 1990, all necessary to transfer ownership of the
subject property to the defendant.
No pronouncement as to damages, attorneys fees and costs.
SO ORDERED. 5
Ruling of the CA
On February 13, 2009, the CA rendered its decision affirming
with modification the RTC Decision. The CA agreed with the
RTC that the contract entered into by the parties is a contract to
sell but ruled that the remedy of rescission could not apply
because the respondents failure to pay the petitioner the
balance of the purchase price in the total amount of 805,000.00
was not a breach of contract, but merely an event that
prevented the seller (petitioner) from conveying title to the
purchaser (respondent). It reasoned that out of the total
purchase price of the subject property in the amount of
4,200,000.00, respondents remaining unpaid balance was only
805,000.00. Since respondent had already paid a substantial
amount of the purchase price, it was but right and just to allow
her to pay the unpaid balance of the purchase price plus interest.
Thus, the decretal portion of the CA Decision reads:
WHEREFORE, premises considered, the Decision dated 22
February 2006 and Order dated 22 December 2006 of the
Regional Trial Court of Valenzuela City, Branch 172 in Civil
Case No. 3945-V-92 are AFFIRMED with MODIFICATION in
that defendant-appellant Victoria T. Tuparan is hereby
ORDERED to pay plaintiff-appellee/appellant Mila A. Reyes,
within 30 days from finality of this Decision, the amount of
805,000.00 representing the unpaid balance of the purchase
price of the subject property, plus interest thereon at the rate of
6% per annum from 11 September 1992 up to finality of this
Decision and, thereafter, at the rate of 12% per annum until full RESPONDENTS NON-PAYMENT OF THE
payment. The ruling of the trial court on the automatic rescission 805,000.00 IS ONLY A SLIGHT OR CASUAL
of the Deed of Conditional Sale with Assumption of Mortgage is BREACH OF CONTRACT.
hereby DELETED. Subject to the foregoing, the dispositive
portion of the trial courts decision is AFFIRMED in all other B. THE COURT OF APPEALS SERIOUSLY
respects. ERRED AND ABUSED ITS DISCRETION IN
DISREGARDING AS GROUND FOR THE
SO ORDERED. 6 RESCISSION OF THE SUBJECT CONTRACT
THE OTHER FRAUDULENT AND MALICIOUS
After the denial of petitioners motion for reconsideration and ACTS COMMITTED BY THE RESPONDENT
respondents motion for partial reconsideration, petitioner filed AGAINST THE PETITIONER WHICH BY
the subject petition for review praying for the reversal and THEMSELVES SUFFICIENTLY JUSTIFY A
setting aside of the CA Decision anchored on the following DENIAL OF A GRACE PERIOD OF THIRTY (30)
DAYS TO THE RESPONDENT WITHIN WHICH
ASSIGNMENT OF ERRORS TO PAY TO THE PETITIONER THE 805,000.00
PLUS INTEREST THEREON.
A. THE COURT OF APPEALS SERIOUSLY
ERRED AND ABUSED ITS DISCRETION IN C. EVEN ASSUMING ARGUENDO THAT
DISALLOWING THE OUTRIGHT RESCISSION PETITIONER IS NOT ENTITLED TO THE
OF THE SUBJECT DEED OF CONDITIONAL RESCISSION OF THE SUBJECT CONTRACT,
SALE OF REAL PROPERTIES WITH THE COURT OF APPEALS STILL SERIOUSLY
ASSUMPTION OF MORTGAGE ON THE ERRED AND ABUSED ITS DISCRETION IN
GROUND THAT RESPONDENT TUPARANS REDUCING THE INTEREST ON THE 805,000.00
FAILURE TO PAY PETITIONER REYES THE TO ONLY "6% PER ANNUM STARTING FROM
BALANCE OF THE PURCHASE PRICE OF THE DATE OF FILING OF THE COMPLAINT ON
805,000.00 IS NOT A BREACH OF CONTRACT SEPTEMBER 11, 1992" DESPITE THE
DESPITE ITS OWN FINDINGS THAT PERSONAL COMMITMENT OF THE
PETITIONER STILL RETAINS OWNERSHIP AND RESPONDENT AND AGREEMENT BETWEEN
TITLE OVER THE SUBJECT REAL THE PARTIES THAT RESPONDENT WILL PAY
PROPERTIES DUE TO RESPONDENTS INTEREST ON THE 805,000.00 AT THE RATE
REFUSAL TO PAY THE BALANCE OF THE OF 6% MONTHLY STARTING THE DATE OF
TOTAL PURCHASE PRICE OF 805,000.00 DELINQUENCY ON DECEMBER 31, 1991.
WHICH IS EQUAL TO 20% OF THE TOTAL
PURCHASE PRICE OF 4,200,000.00 OR 66% OF D. THE COURT OF APPEALS SERIOUSLY
THE STIPULATED LAST INSTALLMENT OF ERRED AND ABUSED ITS DISCRETION IN THE
1,200,000.00 PLUS THE INTEREST THEREON. APPRECIATION AND/OR MISAPPRECIATION
IN EFFECT, THE COURT OF APPEALS OF FACTS RESULTING INTO THE DENIAL OF
AFFIRMED AND ADOPTED THE TRIAL THE CLAIM OF PETITIONER REYES FOR
COURTS CONCLUSION THAT THE ACTUAL DAMAGES WHICH CORRESPOND TO
THE MILLIONS OF PESOS OF CONTINUOUSLY COLLECTING ALL THE
RENTALS/FRUITS OF THE SUBJECT REAL RENTALS/FRUITS OF THE SUBJECT REAL
PROPERTIES WHICH RESPONDENT TUPARAN PROPERTIES WITHOUT ANY ACCOUNTING
COLLECTED CONTINUOUSLY SINCE AND COURT DEPOSIT OF THE COLLECTED
DECEMBER 1990, EVEN WITH THE UNPAID RENTALS/FRUITS AND THE PETITIONERS
BALANCE OF 805,000.00 AND DESPITE THE "URGENT MOTION TO DIRECT DEFENDANT
FACT THAT RESPONDENT DID NOT VICTORIA TUPARAN TO PAY THE
CONTROVERT SUCH CLAIM OF THE ACCUMULATED UNPAID REAL ESTATE TAXES
PETITIONER AS CONTAINED IN HER AND SEF TAXES ON THE SUBJECT REAL
AMENDED COMPLAINT DATED APRIL 22, 2006. PROPERTIES" DATED JANUARY 13, 2007
THEREBY EXPOSING THE SUBJECT REAL
E. THE COURT OF APPEALS SERIOUSLY PROPERTIES TO IMMINENT AUCTION SALE
ERRED AND ABUSED ITS DISCRETION IN THE BY THE CITY TREASURER OF VALENZUELA
APPRECIATION OF FACTS RESULTING INTO CITY.
THE DENIAL OF THE CLAIM OF PETITIONER
REYES FOR THE 29,609.00 BACK RENTALS G. THE COURT OF APPEALS SERIOUSLY
THAT WERE COLLECTED BY RESPONDENT ERRED AND ABUSED ITS DISCRETION IN
TUPARAN FROM THE OLD TENANTS OF THE DENYING THE PETITIONERS CLAIM FOR
PETITIONER. MORAL AND EXEMPLARY DAMAGES AND
ATTORNEYS FEES AGAINST THE
F. THE COURT OF APPEALS SERIOUSLY RESPONDENT.
ERRED AND ABUSED ITS DISCRETION IN
DENYING THE PETITIONERS EARLIER In sum, the crucial issue that needs to be resolved is whether or
"URGENT MOTION FOR ISSUANCE OF A not the CA was correct in ruling that there was no legal basis for
PRELIMINARY MANDATORY AND the rescission of the Deed of Conditional Sale with Assumption
PROHIBITORY INJUNCTION" DATED JULY 7, of Mortgage.
2008 AND THE "SUPPLEMENT" THERETO
DATED AUGUST 4, 2008 THEREBY Position of the Petitioner
CONDONING THE UNJUSTIFIABLE
FAILURE/REFUSAL OF JUDGE FLORO ALEJO The petitioner basically argues that the CA should have granted
TO RESOLVE WITHIN ELEVEN (11) YEARS THE the rescission of the subject Deed of Conditional Sale of Real
PETITIONERS THREE (3) SEPARATE Properties with Assumption of Mortgage for the following
"MOTIONS FOR PRELIMINARY INJUNCTION/ reasons:
TEMPORARY RESTRAINING ORDER,
ACCOUNTING AND DEPOSIT OF RENTAL 1. The subject deed of conditional sale is a reciprocal obligation
INCOME" DATED MARCH 17, 1995, AUGUST 19, whose outstanding characteristic is reciprocity arising from
1996 AND JANUARY 7, 2006 THEREBY identity of cause by virtue of which one obligation is correlative
PERMITTING THE RESPONDENT TO of the other.
UNJUSTLY ENRICH HERSELF BY
2. The petitioner was rescinding not enforcing the subject
Deed of Conditional Sale pursuant to Article 1191 of the Civil
Code because of the respondents failure/refusal to pay the
805,000.00 balance of the total purchase price of the
petitioners properties within the stipulated period ending
December 31, 1991.
3. There was no slight or casual breach on the part of the
respondent because she (respondent) deliberately failed to
comply with her contractual obligations with the petitioner by
violating the terms or manner of payment of the 1,200,000.00
balance and unjustly enriched herself at the expense of the
petitioner by collecting all rental payments for her personal
benefit and enjoyment.
Furthermore, the petitioner claims that the respondent is liable
to pay interest at the rate of 6% per month on her unpaid
installment of 805,000.00 from the date of the delinquency,
December 31, 1991, because she obligated herself to do so.
Finally, the petitioner asserts that her claim for damages or lost
income as well as for the back rentals in the amount of
29,609.00 has been fully substantiated and, therefore, should
have been granted by the CA. Her claim for moral and
exemplary damages and attorney s fees has been likewise
substantiated.
Position of the Respondent
The respondent counters that the subject Deed of Conditional
Sale with Assumption of Mortgage entered into between the
parties is a contract to sell and not a contract of sale because
the title of the subject properties still remains with the petitioner
as she failed to pay the installment payments in accordance
with their agreement.
Respondent echoes the RTC position that her inability to pay
the full balance on the purchase price may not be considered as
a substantial and fundamental breach of the subject contract
and it would be more equitable if she would be allowed to pay
the balance including interest within a certain period of time.
She claims that as early as 1992, she has shown her sincerity by
offering to pay a certain amount which was, however, rejected
by the petitioner.
Finally, respondent states that the subject deed of conditional
sale explicitly provides that the installment payments shall not
bear any interest. Moreover, petitioner failed to prove that she
was entitled to back rentals.
The Courts Ruling
The petition lacks merit.
The Court agrees with the ruling of the courts below that the
subject Deed of Conditional Sale with Assumption of Mortgage
entered into by and among the two parties and FSL Bank on
November 26, 1990 is a contract to sell and not a contract of
sale. The subject contract was correctly classified as a contract
to sell based on the following pertinent stipulations:
8. That the title and ownership of the subject real properties
shall remain with the First Party until the full payment of the
Second Party of the balance of the purchase price and
liquidation of the mortgage obligation of 2,000,000.00. Pending
payment of the balance of the purchase price and liquidation of
the mortgage obligation that was assumed by the Second Party,
the Second Party shall not sell, transfer and convey and
otherwise encumber the subject real properties without the
written consent of the First and Third Party.
9. That upon full payment by the Second Party of the full
balance of the purchase price and the assumed mortgage
obligation herein mentioned the Third Party shall issue the
corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in
favor of the Second Party.7
Based on the above provisions, the title and ownership of the
subject properties remains with the petitioner until the
respondent fully pays the balance of the purchase price and the
assumed mortgage obligation. Thereafter, FSL Bank shall then
issue the corresponding deed of cancellation of mortgage and
the petitioner shall execute the corresponding deed of absolute
sale in favor of the respondent.
Accordingly, the petitioners obligation to sell the subject
properties becomes demandable only upon the happening of
the positive suspensive condition, which is the respondents full
payment of the purchase price. Without respondents full
payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title.
Respondents failure to pay in full the purchase price is not the
breach of contract contemplated under Article 1191 of the New
Civil Code but rather just an event that prevents the petitioner
from being bound to convey title to the respondent. The 2009
case of Nabus v. Joaquin & Julia Pacson 8 is enlightening:
The Court holds that the contract entered into by the Spouses
Nabus and respondents was a contract to sell, not a contract of
sale.
A contract of sale is defined in Article 1458 of the Civil Code,
thus:
Art. 1458. By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
xxx
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract
of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly
reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we
shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to
sell the subject property when the entire amount of the purchase
price is delivered to him. In other words, the full payment of the
purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising
and, thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.
xxx xxx xxx
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by
entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil
Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase
price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale until
the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is
completely abated. However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if
there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically
transfers to the buyer by operation of law without any further act
having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.
Further, Chua v. Court of Appeals, cited this distinction between
a contract of sale and a contract to sell:
In a contract of sale, the title to the property passes to the
vendee upon the delivery of the thing sold; in a contract to sell,
ownership is, by agreement, reserved in the vendor and is not to
pass to the vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses
ownership over the property and cannot recover it until and
unless the contract is resolved or rescinded; whereas, in a
contract to sell, title is retained by the vendor until full payment
of the price. In the latter contract, payment of the price is a
positive suspensive condition, failure of which is not a breach
but an event that prevents the obligation of the vendor to convey
title from becoming effective.
It is not the title of the contract, but its express terms or
stipulations that determine the kind of contract entered into by
the parties. In this case, the contract entitled "Deed of
Conditional Sale" is actually a contract to sell. The contract
stipulated that "as soon as the full consideration of the sale has
been paid by the vendee, the corresponding transfer documents
shall be executed by the vendor to the vendee for the portion
sold." Where the vendor promises to execute a deed of absolute
sale upon the completion by the vendee of the payment of the
price, the contract is only a contract to sell." The aforecited
stipulation shows that the vendors reserved title to the subject
property until full payment of the purchase price.
xxx
Unfortunately for the Spouses Pacson, since the Deed of
Conditional Sale executed in their favor was merely a contract
to sell, the obligation of the seller to sell becomes demandable
only upon the happening of the suspensive condition. The full
payment of the purchase price is the positive suspensive
condition, the failure of which is not a breach of contract, but
simply an event that prevented the obligation of the vendor
to convey title from acquiring binding force. Thus, for its
non-fulfilment, there is no contract to speak of, the obligor
having failed to perform the suspensive condition which
enforces a juridical relation. With this circumstance, there can
be no rescission or fulfillment of an obligation that is still non-
existent, the suspensive condition not having occurred as yet.
Emphasis should be made that the breach contemplated in
Article 1191 of the New Civil Code is the obligors failure to
comply with an obligation already extant, not a failure of a
condition to render binding that obligation. [Emphases and
underscoring supplied]
Consistently, the Court handed down a similar ruling in the 2010
case of Heirs of Atienza v. Espidol, 9 where it was written:
Regarding the right to cancel the contract for non-payment of an
installment, there is need to initially determine if what the parties
had was a contract of sale or a contract to sell. In a contract of
sale, the title to the property passes to the buyer upon the
delivery of the thing sold. In a contract to sell, on the other hand,
the ownership is, by agreement, retained by the seller and is not
to pass to the vendee until full payment of the purchase price. In
the contract of sale, the buyers non-payment of the price is a
negative resolutory condition; in the contract to sell, the buyers
full payment of the price is a positive suspensive condition to the
coming into effect of the agreement. In the first case, the seller
has lost and cannot recover the ownership of the property
unless he takes action to set aside the contract of sale. In the
second case, the title simply remains in the seller if the buyer
does not comply with the condition precedent of making
payment at the time specified in the contract. Here, it is quite
evident that the contract involved was one of a contract to sell
since the Atienzas, as sellers, were to retain title of ownership to
the land until respondent Espidol, the buyer, has paid the
agreed price. Indeed, there seems no question that the parties
understood this to be the case.
Admittedly, Espidol was unable to pay the second installment of
1,750,000.00 that fell due in December 2002. That payment,
said both the RTC and the CA, was a positive suspensive
condition failure of which was not regarded a breach in the
sense that there can be no rescission of an obligation (to
turn over title) that did not yet exist since the suspensive
condition had not taken place. x x x. [Emphases and
underscoring supplied]
Thus, the Court fully agrees with the CA when it resolved:
"Considering, however, that the Deed of Conditional Sale was
not cancelled by Vendor Reyes (petitioner) and that out of the
total purchase price of the subject property in the amount of
4,200,000.00, the remaining unpaid balance of Tuparan
(respondent) is only 805,000.00, a substantial amount of the
purchase price has already been paid. It is only right and just to
allow Tuparan to pay the said unpaid balance of the purchase
price to Reyes." 10
Granting that a rescission can be permitted under Article 1191,
the Court still cannot allow it for the reason that, considering the
circumstances, there was only a slight or casual breach in the
fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when
the breach of the contract is substantial and fundamental to the
fulfillment of the obligation. Whether the breach is slight or
substantial is largely determined by the attendant
circumstances. 11 In the case at bench, the subject contract
stipulated the following important provisions:
2. That the purchase price of 4,200,000.00 shall be paid as
follows:
a) 278,078.13 received in cash by the First Party but directly
paid to the Third Party as partial payment of the mortgage
obligation of the First Party in order to reduce the amount to
2,000,000.00 only as of November 15, 1990;
b) 721,921.87 received in cash by the First Party as additional
payment of the Second Party;
c) 1,200,000.00 to be paid in installments as follows:
1. 200,000.00 payable on or before January 31, 1991;
2. 200,000.00 payable on or before June 30, 1991;
3. 800,000.00 payable on or before December 31, 1991;
Note: All the installments shall not bear any interest.
d) 2,000,000.00 outstanding balance of the mortgage obligation
as of November 15, 1990 which is hereby assumed by the
Second Party.
xxx
3. That the Third Party hereby acknowledges receipts from the
Second Party 278,078.13 as partial payment of the loan
obligation of First Party in order to reduce the account to only
2,000,000.00 as of November 15, 1990 to be assumed by the
Second Party effective November 15, 1990.12
From the records, it cannot be denied that respondent paid to
FSL Bank petitioners mortgage obligation in the amount of
2,278,078.13, which formed part of the purchase price of the
subject property. Likewise, it is not disputed that respondent
paid directly to petitioner the amount of 721,921.87
representing the additional payment for the purchase of the
subject property. Clearly, out of the total price of 4,200,000.00,
respondent was able to pay the total amount of 3,000,000.00,
leaving a balance of 1,200,000.00 payable in three (3)
installments.
Out of the 1,200,000.00 remaining balance, respondent paid on
several dates the first and second installments of 200,000.00
each. She, however, failed to pay the third and last installment
of 800,000.00 due on December 31, 1991. Nevertheless, on
August 31, 1992, respondent, through counsel, offered to pay
the amount of 751,000.00, which was rejected by petitioner for
the reason that the actual balance was 805,000.00 excluding
the interest charges.
Considering that out of the total purchase price of 4,200,000.00,
respondent has already paid the substantial amount of
3,400,000.00, more or less, leaving an unpaid balance of only
805,000.00, it is right and just to allow her to settle, within a
reasonable period of time, the balance of the unpaid purchase
price. The Court agrees with the courts below that the
respondent showed her sincerity and willingness to comply with
her obligation when she offered to pay the petitioner the amount
of 751,000.00.
On the issue of interest, petitioner failed to substantiate her
claim that respondent made a personal commitment to pay a
6% monthly interest on the 805,000.00 from the date of
delinquency, December 31, 1991. As can be gleaned from the
contract, there was a stipulation stating that: "All the installments
shall not bear interest." The CA was, however, correct in
imposing interest at the rate of 6% per annum starting from the
filing of the complaint on September 11, 1992.1avvphi1
Finally, the Court upholds the ruling of the courts below
regarding the non-imposition of damages and attorneys fees.
Aside from petitioners self-serving statements, there is not
enough evidence on record to prove that respondent acted
fraudulently and maliciously against the petitioner. In the case of
Heirs of Atienza v. Espidol,13 it was stated:
Respondents are not entitled to moral damages because
contracts are not referred to in Article 2219 of the Civil Code,
which enumerates the cases when moral damages may be
recovered. Article 2220 of the Civil Code allows the recovery of
moral damages in breaches of contract where the defendant
acted fraudulently or in bad faith. However, this case involves a
contract to sell, wherein full payment of the purchase price is a
positive suspensive condition, the non-fulfillment of which is not
a breach of contract, but merely an event that prevents the
seller from conveying title to the purchaser. Since there is no
breach of contract in this case, respondents are not entitled to
moral damages.
In the absence of moral, temperate, liquidated or compensatory
damages, exemplary damages cannot be granted for they are
allowed only in addition to any of the four kinds of damages
mentioned.
WHEREFORE, the petition is DENIED. estate together with the buildings and other improvements
existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal
SO ORDERED. under the following terms and conditions:

1. That upon full payment of [respondent] of the amount of

FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED
Republic of the Philippines (415,000), [petitioner] shall execute and sign a deed of
SUPREME COURT assumption of mortgage in favor of [respondent] without any
Manila further cost whatsoever;

THIRD DIVISION 2. That [respondent] shall assume payment of the outstanding

loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE
G.R. No. 170405 February 2, 2010 HUNDRED PESOS (684,500) with REAL SAVINGS AND
LOAN, 4 Cainta, Rizal (emphasis supplied)
RAYMUNDO S. DE LEON, Petitioner,
vs. xxx xxx xxx
BENITA T. ONG. 1 Respondent.
Pursuant to this deed, respondent gave petitioner 415,500 as
DECISION partial payment. Petitioner, on the other hand, handed the keys
to the properties and wrote a letter informing RSLAI of the sale
CORONA, J.: and authorizing it to accept payment from respondent and
release the certificates of title.
On March 10, 1993, petitioner Raymundo S. de Leon sold three
parcels of land 2 with improvements situated in Antipolo, Rizal to Thereafter, respondent undertook repairs and made
respondent Benita T. Ong. As these properties were mortgaged improvements on the properties. 5 Respondent likewise informed
to Real Savings and Loan Association, Incorporated (RSLAI), RSLAI of her agreement with petitioner for her to assume
petitioner and respondent executed a notarized deed of petitioners outstanding loan. RSLAI required her to undergo
absolute sale with assumption of mortgage 3 stating: credit investigation.

xxx xxx xxx Subsequently, respondent learned that petitioner again sold the
same properties to one Leona Viloria after March 10, 1993 and
That for and in consideration of the sum of ONE MILLION ONE changed the locks, rendering the keys he gave her useless.
HUNDRED THOUSAND PESOS (1.1 million), Philippine Respondent thus proceeded to RSLAI to inquire about the credit
currency, the receipt whereof is hereby acknowledged from investigation. However, she was informed that petitioner had
[RESPONDENT] to the entire satisfaction of already paid the amount due and had taken back the certificates
[PETITIONER], said [PETITIONER] does hereby sell, transfer of title.
and convey in a manner absolute and irrevocable, unto
said [RESPONDENT], his heirs and assigns that certain real Respondent persistently contacted petitioner but her efforts
proved futile.
On June 18, 1993, respondent filed a complaint for specific
performance, declaration of nullity of the second sale and
damages6against petitioner and Viloria in the Regional Trial
Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that
since petitioner had previously sold the properties to her on
March 10, 1993, he no longer had the right to sell the same to
Viloria. Thus, petitioner fraudulently deprived her of the
properties.
Petitioner, on the other hand, insisted that respondent did not
have a cause of action against him and consequently prayed for
the dismissal of the complaint. He claimed that since the
transaction was subject to a condition (i.e., that RSLAI approve
the assumption of mortgage), they only entered into a contract
to sell. Inasmuch as respondent did apply for a loan from RSLAI,
the condition did not arise. Consequently, the sale was not
perfected and he could freely dispose of the properties.
Furthermore, he made a counter-claim for damages as
respondent filed the complaint allegedly with gross and evident
bad faith.
Because respondent was a licensed real estate broker, the RTC
concluded that she knew that the validity of the sale was subject
to a condition. The perfection of a contract of sale depended on
RSLAIs approval of the assumption of mortgage. Since RSLAI
did not allow respondent to assume petitioner s obligation, the
RTC held that the sale was never perfected.
In a decision dated August 27, 1999,7 the RTC dismissed the
complaint for lack of cause of action and ordered respondent to
pay petitioner 100,000 moral damages, 20,000 attorney s fees
and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals
(CA), 8asserting that the court a quo erred in dismissing the
complaint.
The CA found that the March 10, 2003 contract executed by the
parties did not impose any condition on the sale and held that
the parties entered into a contract of sale. Consequently,
because petitioner no longer owned the properties when he sold
them to Viloria, it declared the second sale void. Moreover, it
found petitioner liable for moral and exemplary damages for
fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to
respondent and nullified the sale to Viloria. It likewise ordered
respondent to reimburse petitioner 715,250 (or the amount he
paid to RSLAI). Petitioner, on the other hand, was ordered to
deliver the certificates of titles to respondent and pay her
50,000 moral damages and 15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a
resolution dated November 11, 2005.10 Hence, this petition, 11 with
the sole issue being whether the parties entered into a contract
of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the
validity of the transaction was subject to a suspensive condition,
that is, the approval by RSLAI of respondents assumption of
mortgage. Because RSLAI did not allow respondent to assume
his (petitioners) obligation, the condition never materialized.
Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a
contract of sale as petitioner already conveyed full ownership of
the subject properties upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March
10, 1993 deed. The RTC ruled that it was a contract to sell while
the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the
property to the buyer upon the perfection of the contract. Should
the buyer default in the payment of the purchase price, the
seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of
the price is therefore a negative resolutory condition.12
On the other hand, a contract to sell is subject to a positive
suspensive condition. The buyer does not acquire ownership of
the property until he fully pays the purchase price. For this
reason, if the buyer defaults in the payment thereof, the seller
can only sue for damages. 13
The deed executed by the parties (as previously quoted) stated
that petitioner sold the properties to respondent "in a manner
absolute and irrevocable" for a sum of 1.1 million.14 With regard
to the manner of payment, it required respondent to pay
415,500 in cash to petitioner upon the execution of the deed,
with the balance 15 payable directly to RSLAI (on behalf of
petitioner) within a reasonable time. 16 Nothing in said instrument
implied that petitioner reserved ownership of the properties until
the full payment of the purchase price.17 On the contrary, the
terms and conditions of the deed only affected the manner of
payment, not the immediate transfer of ownership (upon the
execution of the notarized contract) from petitioner as seller to
respondent as buyer. Otherwise stated, the said terms and
conditions pertained to the performance of the contract, not the
perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over
the properties and deliver the same to the buyer. 18 In this regard,
Article 1498 of the Civil Code 19 provides that, as a rule, the
execution of a notarized deed of sale is equivalent to the
delivery of a thing sold.
In this instance, petitioner executed a notarized deed of
absolute sale in favor of respondent. Moreover, not only did
petitioner turn over the keys to the properties to respondent, he
also authorized RSLAI to receive payment from respondent and
release his certificates of title to her. The totality of petitioners
acts clearly indicates that he had unqualifiedly delivered and
transferred ownership of the properties to respondent. Clearly, it
was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of
the parties was subject to the condition that RSLAI had to
approve the assumption of mortgage, the said condition was
considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the
certificates of title without even notifying respondent. In this
connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to
respondent and then to Viloria on two separate
occasions.20 However, the second sale was not void for the sole
reason that petitioner had previously sold the same properties to
respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties
were sold validly on two separate occasions by the same seller
to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. (emphasis supplied)
This provision clearly states that the rules on double or multiple
sales apply only to purchasers in good faith. Needless to say, it
disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of
another without notice that some other person has a right to, or
an interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of
some other persons claim or interest in the property. 21 The law
requires, on the part of the buyer, lack of notice of a defect in
the title of the seller and payment in full of the fair price at the
time of the sale or prior to having notice of any defect in the
sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were
encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to
assume the balance of petitioners outstanding obligation to
RSLAI. Consequently, respondent informed RSLAI of the sale
and of her assumption of petitioner s obligation. However,
because petitioner surreptitiously paid his outstanding obligation
and took back her certificates of title, petitioner himself rendered
respondents obligation to assume petitioners indebtedness to
RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released
when the prestation become legally or physically impossible
without the fault of the obligor.
Since respondents obligation to assume petitioners
outstanding balance with RSLAI became impossible without her
fault, she was released from the said obligation. Moreover,
because petitioner himself willfully prevented the condition vis--
vis the payment of the remainder of the purchase price, the said
condition is considered fulfilled pursuant to Article 1186 of the
Civil Code. For purposes, therefore, of determining whether
respondent was a purchaser in good faith, she is deemed to
have fully complied with the condition of the payment of the
remainder of the purchase price.
Respondent was not aware of any interest in or a claim on the
properties other than the mortgage to RSLAI which
she undertook to assume. Moreover, Viloria bought the
properties from petitioner after the latter sold them to
respondent. Respondent was therefore a purchaser in good
faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer
registered the sale of the properties with the registrar of deeds,
the one who took prior possession of the properties shall be the
lawful owner thereof.
In this instance, petitioner delivered the properties to respondent
when he executed the notarized deed 22 and handed over to
respondent the keys to the properties. For this reason,
respondent took actual possession and exercised control
thereof by making repairs and improvements thereon. Clearly,
the sale was perfected and consummated on March 10, 1993.
Thus, respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the
balance of the purchase price was deemed fulfilled,
respondents obligation to pay it subsisted. Otherwise, she
would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner 684,500, the amount
stated in the deed. This is because the provisions, terms and
conditions of the contract constitute the law between the parties.
Moreover, the deed itself provided that the assumption of
mortgage "was without any further cost whatsoever." Petitioner,
on the other hand, must deliver the certificates of title to Decision1 of the Court of Appeals dated January 29, 1999 and its
respondent. We likewise affirm the award of damages. Resolution dated July 14, 1999 in CA-G.R. CV No. 48824.

WHEREFORE, the July 22, 2005 decision and November 11,
2005 resolution of the Court of Appeals in CA-G.R. CV No.
59748 are hereby AFFIRMED with MODIFICATION insofar as
respondent Benita T. Ong is ordered to pay petitioner
Raymundo de Leon 684,500 representing the balance of the
purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.
Spouses Onnie and Amparo Herrera, petitioners, are the
registered owners of a lot located in Las Pias, Metro Manila
covered by Transfer Certificate of Title No. T-9905.
Sometime in March 1990, Godofredo Caguiat, respondent,
offered to buy the lot. Petitioners agreed to sell it at 1,500.00
per square meter. Respondent then gave petitioners
100,000.00 as partial payment. In turn, petitioners gave
respondent the corresponding receipt stating that respondent
promised to pay the balance of the purchase price on or before
March 23, 1990, thus:

Las Pias, Metro Manila

March 19, 1990

Republic of the Philippines
SUPREME COURT RECEIPT FOR PARTIAL PAYMENT OF LOT NO.
Manila 23 COVERED BY TCT NO. T-9905, LAS PIAS,
METRO MANILA
FIRST DIVISION
RECEIVED FROM MR. GODOFREDO CAGUIAT
G.R. No. 139173 February 28, 2007 THE AMOUNT OF ONE HUNDRED THOUSAND
PESOS (100,000.00) AS PARTIAL
SPOUSES ONNIE SERRANO AND AMPARO PAYMENT OF OUR LOT SITUATED IN LAS
HERRERA, Petitioners PIAS, M.M. COVERED BY TCT NO. T-9905
vs. AND WITH AN AREA OF 439 SQUARE METERS.
GODOFREDO CAGUIAT, Respondent.
MR. CAGUIAT PROMISED TO PAY THE
DECISION BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL
SANDOVAL-GUTIERREZ, J.: EXECUTE AND SIGN THE FINAL DEED OF
SALE ON THIS DATE.
Before us is a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, assailing the SIGNED THIS 19th DAY OF MARCH, 1990 AT
LAS PIAS, M.M.
 (SGD) AMPARO HERRERA (SGD)
ONNIE SERRANO"2
On March 28, 1990, respondent, through his counsel Atty.
Ponciano Espiritu, wrote petitioners informing them of his
readiness to pay the balance of the contract price and
requesting them to prepare the final deed of sale.3
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent
a letter 4 to respondent stating that petitioner Amparo Herrera is
leaving for abroad on or before April 15, 1990 and that they are
canceling the transaction. Petitioners also informed respondent
that he can recover the earnest money of 100,000.00 anytime.
Again, on April 6, 1990, petitioners wrote respondent stating that
5
they delivered to his counsel Philippine National Bank
Managers Check No. 790537 dated April 6, 1990 in the amount
of 100,000.00 payable to him.
In view of the cancellation of the contract by petitioners,
respondent filed with the Regional Trial Court, Branch 63,
Makati City a complaint against them for specific performance
and damages, docketed as Civil Case No. 90-1067. 6
On June 27, 1994, after hearing, the trial court rendered its
Decision7finding there was a perfected contract of sale between
the parties and ordering petitioners to execute a final deed of
sale in favor of respondent. The trial court held:
xxx
In the evaluation of the evidence presented by the parties as to
the issue as to who was ready to comply with his obligation on
the verbal agreement to sell on March 23, 1990, shows that
plaintiffs position deserves more weight and credibility. First,
the 100,000.00 that plaintiff paid whether as downpayment or
earnest money showed that there was already a perfected
contract. Art. 1482 of the Civil Code of the Philippines, reads as
follows, to wit:
Art. 1482. Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of
the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to
push through 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, plaintiff
had the balance of the purchase price ready for payment (Exh.
C). Defendants mere allegation that it was plaintiff who did not
appear on March 23, 1990 is unavailing. Defendants letters
(Exhs. 2 and 5) appear to be mere afterthought.
On appeal, the Court of Appeals, in its assailed Decision of
January 29, 1999, affirmed the trial courts judgment.
Forthwith, petitioners filed their motion for reconsideration but it
was denied by the appellate court in its Resolution8 dated July
14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled
"Receipt for Partial Payment" signed by both parties earlier
mentioned is a contract to sell or a contract of sale.
Petitioners contend that the Receipt is not a perfected contract
of sale as provided for in Article 14589 in relation to Article
147510 of the Civil Code. The delivery to them of 100,000.00 as
down payment cannot be considered as proof of the perfection
of a contract of sale under Article 148211 of the same Code
since there was no clear agreement between the parties as
to the amount of consideration.
Generally, the findings of fact of the lower courts are entitled to
great weight and should not be 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.1awphi1.net 12 In the present
case, we find that both the trial court and the Court of Appeals
interpreted some significant facts resulting in an erroneous
resolution of the issue involved.
In holding that there is a perfected contract of sale, both courts
mainly relied on the earnest 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 proof of
the perfection of the contract."
We are not convinced.
In San Miguel Properties Philippines, Inc. v. Spouses
Huang,13 we held that the stages of a contract of sale are:
(1) negotiation, covering the period from the time the
prospective contracting parties 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 the
object of the contract and upon the price; and (3) consummation,
which begins when the parties perform their respective
undertakings under the contract of sale, culminating in the
extinguishment thereof.
With the above postulates as guidelines, we now proceed to
determine the real nature of the contract entered into by the
parties.
It is a canon in the interpretation of contracts that the words
used therein should be given their natural and ordinary meaning
unless a technical meaning was intended.14 Thus, when
petitioners declared in the said "Receipt for Partial Payment"
that they
RECEIVED FROM MR. GODOFREDO CAGUIAT
THE AMOUNT OF ONE HUNDRED THOUSAND
PESOS (100,000.00) AS PARTIAL
PAYMENT OF OUR LOT SITUATED IN LAS
PIAS, M.M. COVERED BY TCT NO. T-9905
AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE
BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL
EXECUTE AND SIGN THE FINAL DEED OF
SALE ON THIS DATE.
there can be no other interpretation than that they agreed to a
conditional contract of sale, consummation of which is subject
only to the full payment of the purchase price.
A contract to sell is akin to a conditional sale where the efficacy
or obligatory force of the vendor's obligation to transfer title is
subordinated to the happening of a future and uncertain event,
so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never
existed. The suspensive condition is commonly full
payment of the purchase price.15
The differences between a contract to sell and a contract of sale
are well-settled in jurisprudence. As early as 1951, in Sing Yee v.
Santos,16 we held that:
x x x [a] distinction must be made between a contract of sale in
which title passes to 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 payment, of
the purchase price is made. In the first case, non-payment of
the price is a negative resolutory condition; in the second case,
full payment is a positive suspensive condition. Being contraries,
their effect in law cannot be identical. In the first case, the
vendor has lost and cannot recover the ownership of the land
sold until and unless the contract of sale is itself resolved and
set aside. In the second case, however, the title remains in the
vendor if the vendee does not comply with the condition
precedent of making payment at the time specified in the As previously discussed, the suspensive condition (payment of
contract. the balance by respondent) did not take place. Clearly,
respondent cannot compel petitioners to transfer ownership of
In other words, in a contract to sell, ownership is retained by the the property to him.
seller and is not to pass to the buyer until full payment of the
price.17 WHEREFORE, we GRANT the instant Petition for Review. The
challenged Decision of the Court of Appeals is REVERSED and
In this case, the "Receipt for Partial Payment" shows that the respondents complaint is DISMISSED.
true agreement between the parties is a contract to sell.
SO ORDERED.
First, ownership over the property was retained by petitioners
and was not to pass to respondent until full payment of the
purchase price. Thus, petitioners need not push through with
the sale should respondent fail to remit the balance of the
purchase price before the deadline on March 23, 1990. In effect,
petitioners have the right to rescind unilaterally the contract the Republic of the Philippines
moment respondent fails to pay within the fixed period. 18 SUPREME COURT
Manila
Second, the agreement between the parties was not embodied
in a deed of sale. The absence of a formal deed of conveyance THIRD DIVISION
is a strong indication that the parties did not intend immediate
transfer of ownership, but only a transfer after full payment of G.R. No. 104482 January 22, 1996
the purchase price. 19
BELINDA TAEDO, for herself and in representation of her
Third, petitioners retained possession of the certificate of title of brothers and sisters, and TEOFILA CORPUZ TAEDO,
the lot. This is an additional indication that the agreement did representing her minor daughter VERNA
not transfer to respondent, either by actual or constructive TAEDO, petitioners,
delivery, ownership of the property.20 vs.
THE COURT OF APPEALS, SPOUSES RICARDO M.
It is true that Article 1482 of the Civil Code provides that TAEDO AND TERESITA BARERA TAEDO, respondents.
"Whenever earnest money is given in a contract of sale, it shall
be considered as part of the price and proof of the perfection of DECISION
the contract." However, this article speaks of earnest
money given in a contract of sale. In this case, the earnest PANGANIBAN, J.:
money was given in a contract to sell. The earnest money
forms part of the consideration only if the sale is consummated Is a sale of future inheritance valid? In multiple sales of the
upon full payment of the purchase price.21 Now, since the same real property, who has preference in ownership? What is
earnest money was given in a contract to sell, Article 1482, the probative value of the lower court's finding of good faith in
which speaks of a contract of sale, does not apply.
registration of such sales in the registry of property? These are
the main questions raised in this Petition for review
on certiorari under Rule 45 of the Rules of Court to set aside
and reverse the Decision 1 of the Court of Appeals2 in CA-G.R.
CV NO. 24987 promulgated on September 26, 1991 affirming the
decision of the Regional Trial Court, Branch 63, Third Judicial
Region, Tarlac, Tarlac in Civil Case No. 6328, and its Resolution
denying reconsideration thereof, promulgated on May 27, 1992.
By the Court's Resolution on October 25, 1995, this case (along
with several others) was transferred from the First to the Third
Division and after due deliberation, the Court assigned it to the
undersignedponente for the writing of this Decision.
The Facts
On October 20, 1962, Lazardo Taedo executed a notarized
deed of absolute sale in favor of his eldest brother, Ricardo
Taedo, and the latter's wife, Teresita Barera, private
respondents herein, whereby he conveyed to the latter in
consideration of P1,500.00, "one hectare of whatever share I
shall have over Lot No. 191 of the cadastral survey of Gerona,
Province of Tarlac and covered by Title T-13829 of the Register
of Deeds of Tarlac", the said property being his "future
inheritance" from his parents (Exh. 1). Upon the death of his
father Matias, Lazaro executed an "Affidavit of Conformity"
dated February 28, 1980 (Exh. 3) to "re-affirm, respect,
acknowledge and validate the sale I made in 1962." On January
13, 1981, Lazaro executed another notarized deed of sale in
favor of private respondents covering his "undivided ONE
TWELVE (1/12) of a parcel of land known as Lot 191 . . . " (Exh.
4). He acknowledged therein his receipt of P10,000.00 as
consideration therefor. In February 1981, Ricardo learned that
Lazaro sold the same property to his children, petitioners herein,
through a deed of sale dated December 29, 1980 (Exh. E). On
June 7, 1982, private respondents recorded the Deed of Sale
(Exh. 4) in their favor in the Registry of Deeds and the
corresponding entry was made in Transfer Certificate of Title No.
166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus
damages) of the deeds of sale executed by Lazaro in favor of
private respondents covering the property inherited by Lazaro
from his father.
Petitioners claimed that their father, Lazaro, executed an
"Absolute Deed of Sale" dated December 29, 1980 (Exit. E).
Conveying to his ten children his allotted portion tinder the
extrajudicial partition executed by the heirs of Matias, which
deed included the land in litigation (Lot 191).
Petitioners also presented in evidence: (1) a private writing
purportedly prepared and signed by Matias dated December 28,
1978, stating that it was his desire that whatever inheritance
Lazaro would receive from him should be given to his (Lazaro's)
children (Exh. A); (2) a typewritten document dated March 10,
1979 signed by Lazaro in the presence of two witnesses,
wherein he confirmed that he would voluntarily abide by the
wishes of his father, Matias, to give to his (Lazaro's) children all
the property he would inherit from the latter (Exh. B); and (3) a
letter dated January 1, 1980 of Lazaro to his daughter, Carmela,
stating that his share in the extrajudicial settlement of the estate
of his father was intended for his children, petitioners herein
(Exh. C).
Private respondents, however presented in evidence a "Deed of
Revocation of a Deed of Sale" dated March 12, 1981 (Exh. 6),
wherein Lazaro revoked the sale in favor of petitioners for the
reason that it was "simulated or fictitious without any
consideration whatsoever".
Shortly after the case a quo was filed, Lazaro executed a sworn
statement (Exh. G) which virtually repudiated the contents of the
Deed of Revocation of a Deed of Sale (Exh. 6) and the Deed of
Sale (Exh. 4) in favor of private respondents. However, Lazaro
testified that he sold the property to Ricardo, and that it was a
lawyer who induced him to execute a deed of sale in favor of his
children after giving him five pesos (P5.00) to buy a "drink" (TSN
September 18, 1985, pp. 204-205).
The trial court decided in favor of private respondents, holding
that petitioners failed "to adduce a proponderance of evidence
to support (their) claim." On appeal, the Court of Appeals
affirmed the decision of the trial court, ruling that the Deed of
Sale dated January 13, 1981 (Exh. 9) was valid and that its
registration in good faith vested title in said respondents.
The Issues
Petitioners raised the following "errors" in the respondent Court,
which they also now allege in the instant Petition:
I. The trial court erred in concluding that the Contract of Sale of
October 20, 1962 (Exhibit 7, Answer) is merely voidable or
annulable and not void ab initio pursuant to paragraph 2 of
Article 1347 of the New Civil Code involving as it does a "future
inheritance".
II. The trial court erred in holding that defendants-appellees
acted in good faith in registering the deed of sale of January 13,
1981 (Exhibit 9) with the Register of Deeds of Tarlac and
therefore ownership of the land in question passed on to
defendants-appellees.
III. The trial court erred in ignoring and failing to consider the
testimonial and documentary evidence of plaintiffs-appellants
which clearly established by preponderance of evidence that
they are indeed the legitimate and lawful owners of the property
in question.
IV. The decision is contrary to law and the facts of the case and
the conclusions drawn from the established facts are illogical
and off-tangent.
From the foregoing, the issues may be restated as follows:
1. Is the sale of a future inheritance valid?
2. Was the subsequent execution on January 13, 1981 (and
registration with the Registry of Property) of a deed of sale
covering the same property to the same buyers valid?
3. May this Court review the findings of the respondent Court (a)
holding that the buyers acted in good faith in registering the said
subsequent deed of sale and (b) in "failing to consider
petitioners' evidence"? Are the conclusions of the respondent
Court "illogical and off-tangent"?
The Court's Ruling
At the outset, let it be clear that the "errors" which are
reviewable by this Court in this petition for review
on certiorari are only those allegedly committed by the
respondent Court of Appeals and not directly those of the trial
court, which is not a party here. The "assignment of errors" in
the petition quoted above are therefore totally misplaced, and
for that reason, the petition should be dismissed. But in order to
give the parties substantial justice we have decided to delve into
the issues as above re-stated. The errors attributed by
petitioners to the latter (trial) court will be discussed only insofar
as they are relevant to the appellate court's assailed Decision
and Resolution.
The sale made in 1962 involving future inheritance is not really
at issue here. In context, the assailed Decision conceded "it
may be legally correct that a contract of sale of anticipated
future inheritance is null and void."3
But to remove all doubts, we hereby categorically rule that,
pursuant to Article 1347 of the Civil Code, "(n)o contract may be
entered into upon a future inheritance except in cases expressly
authorized by law."
Consequently, said contract made in 1962 is not valid and
cannot be the source of any right nor the creator of any
obligation between the parties.
Hence, the "affidavit of conformity" dated February 28, 1980,
insofar as it sought to validate or ratify the 1962 sale, is also
useless and, in the words of the respondent Court, "suffers from
the same infirmity." Even private respondents in their
memorandum4 concede this.
However, the documents that are critical to the resolution of this
case are: (a) the deed of sale of January 13, 1981 in favor of
private respondents covering Lazaro's undivided inheritance of
one-twelfth (1/12) share in Lot No. 191, which was subsequently
registered on June 7, 1982; and (b) the deed of sale dated
December 29, 1980 in favor of petitioners covering the same
property. These two documents were executed after the death
of Matias (and his spouse) and after a deed of extra-judicial
settlement of his (Matias') estate was executed, thus vesting in
Lazaro actual title over said property. In other words, these
dispositions, though conflicting, were no longer infected with the
infirmities of the 1962 sale.
Petitioners contend that what was sold on January 13, 1981 was
only one-half hectare out of Lot No. 191, citing as authority the
trial court's decision. As earlier pointed out, what is on review in
these proceedings by this Court is the Court of Appeals'
decision which correctly identified the subject matter of the
January 13, 1981 sale to be the entire undivided 1/12 share of
Lazaro in Lot No. 191 and which is the same property disposed
of on December 29, 1980 in favor of petitioners.
Critical in determining which of these two deeds should be given
effect is the registration of the sale in favor of private
respondents with the register of deeds on June 7, 1982.
Article 1544 of the Civil Code governs the preferential rights of
vendees in cases of multiple sales, as follows:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title,
provided there is good faith.
The property in question is land, an immovable, and following
the above-quoted law, ownership shall belong to the buyer who
in good faith registers it first in the registry of property. Thus,
although the deed of sale in favor of private respondents was
later than the one in favor of petitioners, ownership would vest
in the former because of the undisputed fact of registration. On
the other hand, petitioners have not registered the sale to them
at all.
Petitioners contend that they were in possession of the property
and that private respondents never took possession thereof. As
between two purchasers, the one who registered the sale in his
favor has a preferred right over the other who has not registered
his title, even if the latter is in actual possession of the
immovable property.5
As to third issue, while petitioners conceded the fact of
registration, they nevertheless contended that it was done in
bad faith. On this issue, the respondent Court ruled;
Under the second assignment of error, plaintiffs-appellants
contend that defendants-appellees acted in bad faith when they
registered the Deed of Sale in their favor as appellee Ricardo
already knew of the execution of the deed of sale in favor of the
plaintiffs; appellants cite the testimony of plaintiff Belinda
Taedo to the effect that defendant Ricardo Taedo called her
up on January 4 or 5, 1981 to tell her that he was already the
owner of the land in question "but the contract of sale between
our father and us were (sic) already consumated" (pp. 9-10, tsn,
January 6, 1984). This testimony is obviously self-serving, and
because it was a telephone conversation, the deed of sale
dated December 29, 1980 was not shown; Belinda merely told
her uncle that there was already a document showing that
plaintiffs are the owners (p. 80). Ricardo Taedo controverted
this and testified that he learned for the first time of the deed of
sale executed by Lazaro in favor of his children "about a month
or sometime in February 1981" (p. 111, tsn, Nov. 28, 1984). . . .6
The respondent Court, reviewing the trial court's findings,
refused to overturn the latter's assessment of the testimonial
evidence, as follows;
We are not prepared to set aside the finding of the lower court
upholding Ricardo Taedo's testimony, as it involves a matter of
credibility of witnesses which the trial judge, who presided at the
hearing, was in a better position to resolve. (Court of Appeals'
Decision, p. 6.)
In this connection, we note the tenacious allegations made by
petitioners, both in their basic petition and in their memorandum,
as follows:
1. The respondent Court allegedly ignored the claimed fact that
respondent Ricardo "by fraud and deceit and with
foreknowledge" that the property in question had already been
sold to petitioners, made Lazaro execute the deed of January 13,
1981;
2. There is allegedly adequate evidence to show that only 1/2 of
the purchase price of P10,000.00 was paid at the time of the
execution of the deed of sale, contrary to the written
acknowledgment, thus showing bad faith;
3. There is allegedly sufficient evidence showing that the deed
of revocation of the sale in favor of petitioners "was tainted with
fraud or deceit."
4. There is allegedly enough evidence to show that private
respondents "took undue advantage over the weakness and
unschooled and pitiful situation of Lazaro Taedo . . ." and that
respondent Ricardo Taedo "exercised moral ascendancy over
his younger brother he being the eldest brother and who
reached fourth year college of law and at one time a former
Vice-Governor of Tarlac, while his younger brother only attained
first year high school . . . ;
5. The respondent Court erred in not giving credence to
petitioners' evidence, especially Lazaro Taedo's Sinumpaang
Salaysay dated July 27, 1982 stating that Ricardo Taedo
deceived the former in executing the deed of sale in favor of
private respondents.
To be sure, there are indeed many conflicting documents and
testimonies as well as arguments over their probative value and
significance. Suffice it to say, however, that all the above
contentions involve questions of fact, appreciation of evidence
and credibility of witnesses, which are not proper in this review.
It is well-settled that the Supreme Court is not a trier of facts. In
petitions for review under Rule 45 of the Revised Rules of Court,
only questions of law may be raised and passed upon. Absent
any whimsical or capricious exercise of judgment, and unless
the lack of any basis for the conclusions made by the lower
courts be amply demonstrated, the Supreme Court will not
disturb their findings. At most, it appears that petitioners have
shown that their evidence was not believed by both the trial and
the appellate courts, and that the said courts tended to give
more credence to the evidence presented by private
respondents. But this in itself is not a reason for setting aside
such findings. We are far from convinced that both courts
gravely abused their respective authorities and judicial
prerogatives.
As held in the recent case of Chua Tiong Tay vs. Court of
Appeals and Goldrock Construction and Development Corp .7
The Court has consistently held that the factual findings of the
trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the
exceptional circumstances where a reassessment of facts found Petitioner, Present:
by the lower courts is allowed are when the conclusion is a VELASCO, JR., J., Chairperson,
finding grounded entirely on speculation, surmises or - versus - PERALTA,
conjectures; when the inference made is manifestly absurd,
ABAD,
mistaken or impossible; when there is grave abuse of discretion
in the appreciation of facts; when the judgment is premised on a MENDOZA, and
misapprehension of facts; when the findings went beyond the PERLAS-
issues of the case and the same are contrary to the admissions BERNABE, JJ.
of both appellant and appellee. After a careful study of the case PHILIPPINE REALTY CORPORATION,
at bench, we find none of the above grounds present to justify MSGR. DOMINGO A. CIRILOS,
the re-evaluation of the findings of fact made by the courts TROPICANA PROPERTIES AND
below.
DEVELOPMENT CORPORATION
In the same vein, the ruling in the recent case of South Sea and STANDARD REALTY Promulgated:
Surety and Insurance Company, Inc. vs. Hon. Court of Appeals, CORPORATION,
et al.8 is equally applicable to the present case: Respondents. January 18, 2012

We see no valid reason to discard the factual conclusions of the x -----------------------------------------------------------------------------------

appellate court. . . . (I)t is not the function of this Court to assess ---- x
and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties, particularly where, such
as here, the findings of both the trial court and the appellate DECISION
court on the matter coincide. (emphasis supplied)
ABAD, J.:
WHEREFORE, the petition is DENIED and the assailed
Decision of the Court of Appeals is AFFIRMED. No Costs.

SO ORDERED. The present case involves a determination of the

perfection of contract of sale.

The Facts and the Case

THIRD DIVISION

On April 17, 1988 Ramon Licup wrote Msgr. Domingo A.

STARBRIGHT SALES G.R. No. 177936 Cirilos, offering to buy three contiguous parcels of land in
ENTERPRISES, INC., Paraaque that The Holy See and Philippine Realty Corporation
(PRC) owned for P1,240.00 per square meter. Licup accepted
the responsibility for removing the illegal settlers on the land and
enclosed a check for P100,000.00 to close the transaction. [1] He
undertook to pay the balance of the purchase price upon
presentation of the title for transfer and once the property has
been cleared of its occupants.
Msgr. Cirilos, representing The Holy See and PRC,
signed his name on the conforme portion of the letter and
accepted the check. But the check could not be encashed due
to Licups stop-order payment. Licup wrote Msgr. Cirilos on April
26, 1988, requesting that the titles to the land be instead
transferred to petitioner Starbright Sales Enterprises, Inc.
(SSE). He enclosed a new check for the same amount. SSEs
representatives, Mr. and Mrs. Cu, did not sign the letter.
On November 29, 1988 Msgr. Cirilos wrote SSE,
requesting it to remove the occupants on the property and,
should it decide not to do this, Msgr. Cirilos would return to it
the P100,000.00 that he received. On January 24, 1989 SSE
replied with an updated proposal.[2] It would be willing to comply
with Msgr. Cirilos condition provided the purchase price is
lowered to P1,150.00 per square meter.
On January 26, 1989 Msgr. Cirilos wrote back, rejecting
the updated proposal. He said that other buyers were willing to
acquire the property on an as is, where is basis at P1,400.00 per
square meter. He gave SSE seven days within which to buy the
property at P1,400.00 per square meter, otherwise, Msgr. Cirilos
would take it that SSE has lost interest in the same. He
enclosed a check for P100,000.00 in his letter as refund of what
he earlier received.
On February 4, 1989 SSE wrote Msgr. Cirilos that they
already had a perfected contract of sale in the April 17, 1988
letter which he signed and that, consequently, he could no
longer impose amendments such as the removal of the informal
settlers at the buyers expense and the increase in the purchase
price.
SSE claimed that it got no reply from Msgr. Cirilos and
that the next thing they knew, the land had been sold to
Tropicana Properties on March 30, 1989. On May 15, 1989 SSE
demanded rescission of that sale. Meanwhile, on August 4, 1989
Tropicana Properties sold the three parcels of land to Standard
Realty.
Its demand for rescission unheeded, SSE filed a
complaint for annulment of sale and reconveyance with
damages before the Regional Trial Court (RTC) of Makati,
Branch 61, against The Holy See, PRC, Msgr. Cirilos, and
Tropicana Properties in Civil Case 90-183. SSE amended its
complaint on February 24, 1992, impleading Standard Realty as
additional defendant.
The Holy See sought dismissal of the case against it,
claiming that as a foreign government, it cannot be sued without
its consent. The RTC held otherwise but, on December 1,
1994,[3] the Court reversed the ruling of the RTC and ordered the
case against The Holy See dismissed. By Order of January 26,
1996 the case was transferred to the Paraaque RTC, Branch
258.
SSE alleged that Licups original letter of April 17, 1988 to
Msgr. Cirilos constituted a perfected contract. Licup even gave
an earnest money of P100,000.00 to close the transaction. His
offer to rid the land of its occupants was a mere gesture of
accommodation if only to expedite the transfer of
title. [4] Further, SSE claimed that, in representing The Holy See
and PRC, Msgr. Cirilos acted in bad faith when he set the price
of the property at P1,400.00 per square meter when in truth, the
property was sold to Tropicana Properties for only P760.68 per
square meter.
Msgr. Cirilos maintained, on the other hand, that based
on their exchange of letters, no contract of sale was perfected
between SSE and the parties he represented.And, only after the
negotiations between them fell through did he sell the land to
Tropicana Properties.
In its Decision of February 14, 2000, the Paraaque RTC
treated the April 17, 1988 letter between Licum and Msgr. Cirilos
as a perfected contract of sale between the parties. Msgr.
Cirilos attempted to change the terms of contract and return
SSEs initial deposit but the parties reached no agreement
regarding such change. Since such agreement was wanting, the
original terms provided in the April 17, 1988 letter continued to
bind the parties.
On appeal to the Court of Appeals (CA), the latter
rendered judgment on November 10, 2006,[5] reversing the
Paraaque RTC decision. The CA held that no perfected contract
its can be gleaned from the April 17, 1988 letter that SSE had relied
on. Indeed, the subsequent exchange of letters between SSE
and Msgr. Cirilos show that the parties were grappling with the
terms of the sale. Msgr. Cirilos made no unconditional
acceptance that would give rise to a perfected contract.
 As to the P100,000.00 given to Msgr. Cirilos, the CA
considered it an option money that secured for SSE only the
privilege to buy the property even if Licup called it a
deposit. The CA denied SSEs motion for reconsideration on
May 2, 2007.
The Issue Presented
The only issue in this case is whether or not the CA erred
in holding that no perfected contract of sale existed between
SSE and the land owners, represented by Msgr. Cirilos.
The Courts Ruling
Three elements are needed to create a perfected
contract: 1) the consent of the contracting parties; (2) an object
certain which is the subject matter of the contract; and (3) the
cause of the obligation which is established. [6] Under the law on
sales, a contract of sale is perfected when the seller, obligates
himself, for a price certain, to deliver and to transfer ownership
of a thing or right to the buyer, over which the latter
agrees. [7] From that moment, the parties may demand reciprocal
performance.
The Court believes that the April 17, 1988 letter between
Licup and Msgr. Cirilos, the representative of the propertys
owners, constituted a perfected contract. When Msgr. Cirilos
affixed his signature on that letter, he expressed his conformity
to the terms of Licups offer appearing on it. There was meeting
of the minds as to the object and consideration of the contract.
But when Licup ordered a stop-payment on his deposit
and proposed in his April 26, 1988 letter to Msgr. Cirilos that the
property be instead transferred to SSE, a subjective novation
took place.
A subjective novation results through substitution of the
person of the debtor or through subrogation of a third person to
the rights of the creditor. To accomplish a subjective novation
through change in the person of the debtor, the old debtor
needs to be expressly released from the obligation and the third
person or new debtor needs to assume his place in the
relation.[8]
Novation serves two functions one is to extinguish an
existing obligation, the other to substitute a new one in its place
requiring concurrence of four requisites: 1) a previous valid
obligation; 2) an agreement of all parties concerned to a new
contract; 3) the extinguishment of the old obligation; and 4) the
birth of a valid new obligation. [9]
Notably, Licup and Msgr. Cirilos affixed their signatures
on the original agreement embodied in Licups letter of April 26,
1988. No similar letter agreement can be found between SSE
and Msgr. Cirilos.
The proposed substitution of Licup by SSE opened the
negotiation stage for a new contract of sale as between SSE
and the owners. The succeeding exchange of letters between
Mr. Stephen Cu, SSEs representative, and Msgr. Cirilos attests
to an unfinished negotiation. Msgr. Cirilos referred to his
discussion with SSE regarding the purchase as a pending
transaction. [10]
Cu, on the other hand, regarded SSEs first letter to Msgr.
Cirilos as an updated proposal. [11] This proposal took up two
issues: which party would undertake to evict the occupants on
the property and how much must the consideration be for the
property. These are clear indications that there was no meeting
of the minds between the parties. As it turned out, the parties
reached no consensus regarding these issues, thus producing
no perfected sale between them.
Parenthetically, Msgr. Cirilos did not act in bad faith when
he sold the property to Tropicana even if it was for a lesser
consideration. More than a month had passed since the last
communication between the parties on February 4, 1989. It is
not improbable for prospective buyers to offer to buy the
property during that time.
The P100,000.00 that was given to Msgr. Cirilos as
deposit cannot be considered as earnest money. Where the
parties merely exchanged offers and counter-offers, no contract
is perfected since they did not yet give their consent to such
offers.[12]Earnest money applies to a perfected sale.
SSE cannot revert to the original terms stated in Licups
letter to Msgr. Cirilos dated April 17, 1988 since it was not privy
to such contract. The parties to it were Licup and Msgr.
Cirilos. Under the principle of relativity of contracts, contracts
can only bind the parties who entered into it. It cannot favor or
prejudice a third person. [13] Petitioner SSE cannot, therefore,
impose the terms Licup stated in his April 17, 1988 letter upon
the owners.
WHEREFORE, the Court DISMISSES the petition
and AFFIRMS the Court of Appeals Decision dated November
10, 2006 in CA-G.R. CV 67366.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 199648 January 28, 2015
FIRST OPTIMA REALTY CORPORATION, Petitioner,
vs.
SECURITRON SECURITY SERVICES, INC., Respondent.
DECISION
DEL CASTILLO, J.:
In a potential sale transaction, the prior payment of earnest
money even before the property owner can agree to sell his
property is irregular, and cannot be used to bind the owner to
the obligations of a seller under an otherwise perfected contract
of sale; to cite a well-worn cliche, the carriage cannot be placed
before the horse. The property owner-prospective seller may not
be legally obliged to enter into a sale with a prospective buyer
through the latter's employment of questionable practices which
prevent the owner from freely giving his consent to the
transaction; this constitutes a palpable transgression of the
prospective seller's rights of ownership over his property, an
anomaly which the Court will certainly not condone.
This Petition for Review on Certiorari 1 seeks to set aside: 1) the
September 30, 2011 Decision2 of the Court of Appeals (CA) in
CA-G.R. CV No. 93715 affirming the February 16, 2009 Decision'
of the Regional Trial Court (RTC) of Pasay City, Branch 115 in
Civil Case No. 06-0492 CFM; and 2) the CAs December 9, 2011
Resolution4 denying the herein petitioner s Motion for
Reconsideration5 of the assailed judgment.
Factual Antecedents
Petitioner First Optima Realty Corporation is a domestic
corporation engaged in the real estate business. It is the
registered owner of a 256-square meter parcel of land with
improvements located in Pasay City, covered by Transfer
Certificate of Title No. 125318 (the subject
property).6 Respondent Securitron Security Services, Inc., on
the other hand, is a domestic corporation with offices located
beside the subject property.
Looking to expand its business and add toits existing offices,
respondent through its General Manager, Antonio Eleazar
(Eleazar) sent a December 9, 2004 Letter 7 addressed to
petitioner through its Executive Vice-President, Carolina T.
Young (Young) offering to purchase the subject property at
6,000.00 per square meter. A series of telephone calls ensued,
but only between Eleazar and Youngs secretary; 8 Eleazar
likewise personally negotiated with a certain Maria Remoso
(Remoso), who was an employee of petitioner. 9 At this point,
Eleazar was unable to personally negotiate with Young or the
petitioners board of directors.
Sometime thereafter, Eleazar personally went to petitioner s
office offering to pay for the subject property in cash, which he
already brought with him. However, Young declined to accept
payment, saying that she still needed to secure her sisters
advice on the matter. 10 She likewise informed Eleazar that prior
approval of petitioners Board of Directors was required for the
transaction, to which remark Eleazar replied that respondent
shall instead await such approval.11
On February 4, 2005, respondent sent a Letter 12 of even date to
petitioner. It was accompanied by Philippine National Bank
Check No. 24677 (the subject check), issued for 100,000.00 and
made payable to petitioner. The letter states thus:
Gentlemen:
As agreed upon, we are making a deposit of ONE
HUNDRED THOUSAND PESOS (Php 100,000.00)
as earnest money for your property at the corner
of Layug St., & Lim-An St., Pasay City as per TCT
No. 125318 with an area of 256 sq. m. at 6,000.00/
sq. m. for a total of ONE MILLION FIVE
HUNDRED THIRTY SIX THOUSAND PESOS
(Php 1,536,000.00).
Full payment upon clearing of the tenants at said
property and signing of the Deed of Sale.
(signed)
ANTONIO S. ELEAZAR 13
Despite the delicate nature of the matter and large amount
involved, respondent did not deliver the letter and check directly
to Young or her office; instead, they were coursed through an
ordinary receiving clerk/receptionist of the petitioner, who thus
received the same and therefor issued and signed Provisional
Receipt No. 33430.14 The said receipt reads:
Received from x x x Antonio Eleazar x x x the sum of Pesos
One Hundred Thousand x x x
IN PAYMENT OF THE FOLLOWING x x x
Earnest money or Partial payment of
Pasay Property Layug & Lim-an St. x x x.
Note: This is issued to transactions not
yet cleared but subsequently an OfficialReceipt will be issued. x
x x15
The check was eventually deposited with and credited to
petitioners bank account.
Thereafter, respondent through counsel demanded in writing
that petitioner proceed with the sale of the property.16 In a March
3, 2006 Letter 17 addressed to respondents counsel, petitioner
wrote back:
Dear Atty. De Jesus:
Anent your letter dated January 16, 2006 received
on February 20, 2006, please be informed of the
following:
1. It was your client SECURITRON SECURITY
SERVICES, INC. represented by Mr. Antonio
Eleazar who offered to buy our property located at
corner Layug and Lim-An St., Pasay City;
2. It tendered an earnest money despite the fact
that we are still undecided to sell the said property;
3. Our Board of Directors failed to pass a
resolution to date whether it agrees to sell the
property;
4. We have no Contract for the earnest money nor
Contract to Sell the said property with your client;
Considering therefore the above as well as due to
haste and demands which we feel [are forms] of
intimidation and harassment, we regret to inform
you that we are now incline (sic) not to accept your
offer to buy our property. Please inform your client
 to coordinate with us for the refund of this (sic)
money.
Very truly yours,
(signed)
CAROLINA T. YOUNG
Executive Vice[-]President 18
Ruling of the Regional Trial Court of Pasay City
On April 18, 2006, respondent filed with the Pasay RTC a civil
case against petitioner for specific performance with damages
to compel the latter to consummate the supposed sale of the
subject property. Docketed as Civil Case No. 06-0492 CFM and
assigned to Branch 115 of the Pasay RTC, the Complaint 19 is
predicated on the claim that since a perfected contract of sale
arose between the parties after negotiations were conducted
and respondent paid the 100,000.00 supposed earnest
money which petitioner accepted, the latter should be
compelled to sell the subject property to the former. Thus,
respondent prayed that petitioner be ordered to comply with its
obligation as seller, accept the balance of the purchase price,
and execute the corresponding deed of sale in respondents
favor; and that petitioner be made to pay 200,000.00 damages
for its breach and delay in the performance of its obligations,
200,000.00 by way of attorney's fees, and costs of suit.
In its Answer with Compulsory Counterclaim, 20 petitioner argued
that it never agreed to sell the subject property; that its board of
directors did not authorize the sale thereof to respondent, as no
corresponding board resolution to such effect was issued; that
the respondents 100,000.00 check payment cannot be
considered as earnest money for the subject property, since
said payment was merely coursed through petitioners receiving
clerk, who was forced to accept the same; and that respondent
was simply motivated by a desire to acquire the subject property
at any cost. Thus, petitioner prayed for the dismissal of the case
and, by way of counterclaim, it sought the payment of moral
damages in the amount of 200,000.00; exemplary damages in
the amount of 100,000.00; and attorneys fees and costs of suit.
In a Reply, 21 respondent countered that authorization by
petitioners Board of Directors was not necessary since it is a
real estate corporation principally engaged in the buying and
selling of real property; that respondent did not force nor
intimidate petitioners receiving clerk into accepting the February
4, 2005 letter and check for 100,000.00; that petitioners
acceptance of the check and its failure for more than a year
to return respondents payment amounts to estoppel and a
ratification of the sale; and that petitioner is not entitled to its
counterclaim.
After due proceedings were taken, the Pasay RTC issued its
Decision dated February 16, 2009, decreeing as follows:
WHEREFORE, defendant First Optima Realty Corporation is
directed to comply with its obligation by accepting the remaining
balance of One Million Five Hundred Thirty-Six Thousand Pesos
and Ninety-Nine Centavos (1,536,000.99), and executing the
corresponding deed of sale in favor of the plaintiff Securitron
Security Services, Inc. over the subject parcel of land.
No costs.
SO ORDERED. 22
In ruling for the respondent, the trial court held that petitioners
acceptance of 100,000.00 earnest money indicated the
existence of a perfected contract of sale between the parties;
that there is no showing that when respondent gave the
February 4, 2005 letter and check to petitioners receiving clerk,
the latter was harassed or forced to accept the same; and that
for the sale of the subject property, no resolution of petitioners
board of directors was required since Young was "free to
represent" the corporation in negotiating with respondent for the
sale thereof. Ruling of the Court of Appeals
Petitioner filed an appeal with the CA. Docketed as CA-G.R. CV
No. 93715, the appeal made out a case that no earnest money
can be considered to have been paid to petitioner as the
supposed payment was received by a mere receiving clerk, who
was not authorized to accept the same; that the required board
of directors resolution authorizing the sale of corporate assets
cannot be dispensed with in the case of petitioner; that whatever
negotiations were held between the parties only concerned the
possible sale, not the sale itself, of the subject property; that
without the written authority of petitioners board of directors,
Young cannot enter into a sale of its corporate property; and
finally, that there was no meeting of the minds between the
parties in the first place.
On September 30, 2011, the CA issued the assailed Decision
affirming the trial court s February 16, 2009Decision,
pronouncing thus:
Article 1318 of the Civil Code declares that no contract exists
unless the following requisites concur: (1) consent of the
contracting parties; (2) object certain which is the subject matter
of the contract; and (3) cause of the obligation established.
A careful perusal of the records of the case show[s] that there
was indeed a negotiation between the parties as regards the
sale of the subject property, their disagreement lies on whether
they have arrived on an agreement regarding said sale. Plaintiff-
appellee avers that the parties have already agreed on the sale
and the price for it and the payment of earnest money and the
remaining balance upon clearing of the property of unwanted
tenants. Defendant-appellant on the other hand disputes the
same and insists that there was no concrete agreement
between the parties.
Upon a careful consideration of the arguments of the parties
and the records of the case, we are more inclined to sustain the
arguments of the plaintiff-appellee and affirm the findings of the
trial court that there was indeed a perfected contract of sale
between the parties. The following instances militate against the
claim of the defendant-appellant: First. The letter of the plaintiff-
appellee dated February 4, 2005 reiterating their agreement as
to the sale of the realty for the consideration of Php 1,536,000.00
was not disputed nor replied to by the defendant-appellant, the
said letter also provides for the payment of the earnest money
of Php 100,000.00 and the full payment upon the clearing of the
property of unwanted tenants, if the defendant-appellant did not
really agree on the sale of the property it could have easily
replied to the said letter informing the plaintiff-appellee that it is
not selling the property or that the matter will be decided first by
the board of directors, defendant-appellants silence or inaction
on said letter shows its conformity or consent thereto; Second.
In addition to the aforementioned letter, defendant-appellants
acceptance of the earnest money and the issuance of a
provisional receipt clearly shows that there was indeed an
agreement between the parties and we do not subscribe to the
argument of the defendant-appellant that the check was merely
forced upon its employee and the contents of the receipt was
just dictated by the plaintiff-appellees employee because
common sense dictates that a person would not issue a receipt
for a check with a huge amount if she does not know what that
is for and similarly would not issue [a] receipt which would bind
her employer if she does not have prior instructions to do [so]
from her superiors; Third. The said check for earnest money
was deposited in the bank by defendant-appellant and not until
after one year did it offer to return the same. Defendant-
appellant cannot claim lack of knowledge of the payment of the
check since there was a letter for it, and it is just incredible that
a big amount of money was deposited in [its] account [without
knowing] about it [or] investigat[ing] what [it was] for. We are
more inclined to believe that their inaction for more than one
year on the earnest money paid was due to the fact that after
the payment of earnest money the place should be cleared of
unwanted tenants before the full amount of the purchase price
will be paid as agreed upon as shown in the letter sent by the
plaintiff-appellee.
As stated above the presence of defendant-appellants consent
and, corollarily, the existence of a perfected contract between
the parties are evidenced by the payment and receipt of Php
100,000.00 as earnest money by the contracting parties x x x.
Under the law on sales, specifically Article 1482 of the Civil
Code, it provides that whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and
proof of the perfection of the contract. Although the presumption
is not conclusive, as the parties may treat the earnest money
differently, there is nothing alleged in the present case that
would give rise to a contrary presumption.
We also do not find merit in the contention of the defendant-
appellant that there is a need for a board resolution for them to
sell the subject property since it is a corporation, a juridical
entity which acts only thru the board of directors. While we
agree that said rule is correct, we must also point out that said
rule is the general rule for all corporations [but] a corporation
[whose main business is buying and selling real estate] like
herein defendant-appellant, is not required to have a board
resolution for the sale of the realty in the ordinary course of
business, thus defendant-appellants claim deserves scant
consideration.
Furthermore, the High Court has held that "a corporate officer or
agent may represent and bind the corporation in transactions
with third persons to the extent that the authority to do so has
been conferred upon him, and this includes powers which have
been intentionally conferred, and also such powers as, in the
usual course of the particular business, are incidental to, or may
be implied from, the powers intentionally conferred, powers
added by custom and usage, as usually pertaining to the
particular officer or agent, and such apparent powers as the
corporation has caused persons dealing with the officer or agent
to believe that it was conferred."
In the case at bench, it is not disputed and in fact was admitted
by the defendant-appellant that Ms. Young, the Executive Vice-
President was authorized to negotiate for the possible sale of
the subject parcel of land. Therefore, Ms. Young can represent
and bind defendant-appellant in the transaction.
Moreover, plaintiff-appellee can assume that Ms. Young, by
virtue of her position, was authorized to sell the property of the
corporation. Selling of realty is not foreign to [an] executive
vice[-]presidents function, and the real estate sale was shown
to be a normal business activity of defendant-appellant since its
primary business is the buy and sell of real estate. Unmistakably,
its Executive Vice-President is cloaked with actual or apparent
authority to buy or sell real property, an activity which falls within
the scope of her general authority.
Furthermore, assuming arguendo that a board resolution was
indeed needed for the sale of the subject property, the
defendant-appellant is estopped from raising it now since, [it] did
not inform the plaintiff-appellee of the same, and the latter deal
(sic) with them in good faith. Also it must be stressed that the
plaintiff-appellee negotiated with one of the top officer (sic) of
the company thus, any requirement on the said sale must have
been known to Ms. Young and she should have informed the
plaintiff-appellee of the same.
In view of the foregoing we do not find any reason to deviate
from the findings of the trial court, the parties entered into the
contract freely, thus they must perform their obligation faithfully.
Defendant-appellants unjustified refusal to perform its part of
the agreement constitutes bad faith and the court will not
tolerate the same.
WHEREFORE, premises considered, the Decision of the
Regional Trial Court of Pasay City Branch 115, in Civil Case No.
06-0492 CFM is hereby AFFIRMED.
SO ORDERED. 23
Petitioner moved for reconsideration, 24 but in a December 9,
2011 Resolution, the CA held its ground. Hence, the present
Petition.
Issues
In an October 9,2013 Resolution, 25 this Court resolved to give
due course to the Petition, which raises the following issues:
I less the payment of earnest money therefor; that during trial,
THE HONORABLE COURT OF APPEALS ERRED ON A
QUESTION OF LAW WHEN IT RULED THAT THE MONEY
RESPONDENT DELIVERED TO PETITIONER WAS EARNEST
MONEY THEREBY PROVIDING A PERFECTED CONTRACT
OF SALE.
II
THE HONORABLE COURT OF APPEALS ERRED ON A
QUESTION OF LAW WHEN IT RULED THAT THE TIME THAT
LAPSED IN RETURNING THE MONEY AND IN REPLYING TO
THE LETTER IS PROOF OF ACCEPTANCE OF EARNEST
MONEY.
III
THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS AND GRAVE ERROR WHEN IT IGNOREDTHE
RESERVATION IN THE PROVISIONAL RECEIPT "Note: This
is issued to transactions not yet cleared but subsequently an
Official Receipt will be issued." 26
Petitioners Arguments
In its Petition and Reply 27 seeking to reverse and set aside the
assailed CA dispositions and in effect to dismiss Civil Case No.
06-0492 CFM, petitioner argues that respondent failed to prove
its case that a contract of sale was perfected between the
parties. It particularly notes that, contrary to the CAs ruling,
respondents delivery of the February 4, 2005 letter and check;
petitioners failure to respond to said letter; petitioner s
supposed acceptance of the check by depositing the same in its
account; and its failure to return the same after more than one
year from its tender these circumstances do not at all prove
that a contract of sale was perfected between the parties. It
claims that there was never an agreement in the first place
between them concerning the sale of the subject property, much
Eleazar himself admitted that the check was merely a
"deposit";28 that the February 4, 2005 letter and check were
delivered not to Young, but to a mere receiving clerk of
petitioner who knew nothing about the supposed transaction
and was simply obliged to accept the same without the
prerogative to reject them; that the acceptance of respondents
supposed payment was not cleared and was subject to approval
and issuance of the corresponding official receipt as noted in
Provisional Receipt No. 33430; that respondent intentionally
delivered the letter and check in the manner that it did in order
to bind petitioner to the supposed sale with or without the latters
consent; that petitioner could not be faulted for receiving the
check and for depositing the same as a matter of operational
procedure with respect to checks received in the course of its
day-to-day business.
Petitioner argues that ultimately, it cannot be said that it gave its
consent to any transaction with respondent or to the payment
made by the latter. Respondents letter and check constitute
merely an offer which required petitioners acceptance in order
to give rise to a perfected sale; "[o]therwise, a buyer can easily
bind any unsuspecting seller to a contract of sale by merely
devising a way that prevents the latter from acting on the
communicated offer."29
Petitioner thus theorizes that since it had no perfected
agreement with the respondent, the latters check should be
treated not as earnest money, but as mere guarantee, deposit
or option money to prevent the prospective seller from backing
out from the sale,30 since the payment of any consideration
acquires the character of earnest money only after a perfected
sale between the parties has been arrived at.31
Respondents Arguments
In its Comment,32 respondent counters that petitioners case
typifies a situation where the seller has had an undue change of
mind and desires to escape the legal consequences attendant
to a perfected contract of sale. It reiterates the appellate courts
pronouncements that petitioner s failure to reply to respondents
February 4, 2005 letter indicates its consent to the sale; that its
acceptance of the check as earnest money and the issuance of
the provisional receipt prove that there is a prior agreement
between the parties; that the deposit of the check in petitioner s
account and failure to timely return the money to respondent
militates against petitioners claim of lack of knowledge and
consent. Rather they indicate petitioners decision to sell subject
property as agreed. Respondent adds that contrary to
petitioners claim, negotiations were in fact held between the
parties after it sent its December 9, 2004 letter-offer, which
negotiations precisely culminated in the preparation and
issuance of the February4, 2005 letter; that petitioner s failure to
reply to its February 4, 2005 letter meant that it was amenable to
respondents terms; that the issuance of a provisional receipt
does not prevent the perfection of the agreement between the
parties, since earnest money was already paid; and that
petitioner cannot pretend to be ignorant of respondents check
payment, as it involved a large sum of money that was
deposited in the formers bank account.
Our Ruling
The Court grants the Petition. The trial and appellate courts
erred materially in deciding the case; they overlooked important
facts that should change the complexion and outcome of the
case.
It cannot be denied that there were negotiations between the
parties conducted after the respondents December 9, 2004
letter-offer and prior to the February 4, 2005 letter. These
negotiations culminated in a meeting between Eleazar and
Young whereby the latter declined to enter into an agreement
and accept cash payment then being tendered by the former.
Instead, Young informed Eleazar during said meeting that she
still had to confer with her sister and petitioners board of
directors; in turn, Eleazar told Young that respondent shall await
the necessary approval.
Thus, the trial and appellate courts failed to appreciate that
respondents offer to purchase the subject property was never
accepted by the petitioner at any instance, even after
negotiations were held between them. Thus, as between them,
there is no sale to speak of. "When there is merely an offer by
one party without acceptance of the other, there is no
contract."33 To borrow a pronouncement in a previously decided
case,
The stages of a contract of sale are: (1) negotiation, starting
from the time the prospective contracting parties 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; and (3) consummation, which
commences when the parties perform their respective
undertakings under the contract of sale, culminating in the
extinguishment of the contract.
In the present case, the parties never got past the negotiation
stage. Nothing shows that the parties had agreed on any final
arrangement containing the essential elements of a contract of
sale, namely, (1) consent or the meeting of the minds of the
parties; (2) object or subject matter of the contract; and (3) price
or consideration of the sale.34
Respondents subsequent sending of the February 4, 2005 letter
and check to petitioner without awaiting the approval of
petitioners board of directors and Youngs decision, or without
making a new offer constitutes a mere reiteration of its original
offer which was already rejected previously; thus, petitioner was
under no obligation to reply to the February 4, 2005 letter. It
would be absurd to require a party to reject the very same offer
each and every time it is made; otherwise, a perfected contract
of sale could simply arise from the failure to reject the same
offer made for the hundredth time.1wphi1 Thus, said letter
cannot be considered as evidence of a perfected sale, which
does not exist in the first place; no binding obligation on the part
of the petitioner to sell its property arose as a consequence. The
letter made no new offer replacing the first which was rejected.
Since there is no perfected sale between the parties,
respondent had no obligation to make payment through the
check; nor did it possess the right to deliver earnest money to
petitioner in order to bind the latter to a sale. As contemplated
under Art. 1482 of the Civil Code, "there must first be a perfected
contract of sale before we can speak of earnest
money."35 "Where the parties merely exchanged offers and
counter-offers, no contract is perfected since they did not yet
give their consent to such offers. Earnest money applies to a
perfected sale."36
This Court is inclined to accept petitioners explanation that
since the check was mixed up with all other checks and
correspondence sent to and received by the corporation during
the course of its daily operations, Young could not have timely
discovered respondents check payment; petitioners failure to
return the purported earnest money cannot mean that it agreed
to respondents offer.
Besides, respondents payment of supposed earnest money
was made under dubious circumstances and in disregard of
sound business practice and common sense. Indeed,
respondent must be faulted for taking such a course of action
that is irregular and extraordinary: common sense and logic
dictate that if any payment is made under the supposed sale
transaction, it should have been made directly to Young or
coursed directly through her office, since she is the officer
directly responsible for negotiating the sale, as far as
respondent is concerned and considering the amount of money
involved; no other ranking officer of petitioner can be expected
to know of the ongoing talks covering the subject property.
Respondent already knew, from Eleazars previous meeting with
Young, that it could only effectively deal with her; more than that,
it should know that corporations work only through the proper
channels. By acting the way it did coursing the February 4,
2005 letter and check through petitioners mere receiving clerk
or receptionist instead of directly with Youngs office,
respondent placed itself under grave suspicion of putting into
effect a premeditated plan to unduly bind petitioner to its
rejected offer, in a manner which it could not achieve through
negotiation and employing normal business practices. It
impresses the Court that respondent attempted to secure the
consent needed for the sale by depositing part of the purchase
price and under the false pretense that an agreement was
already arrived at, even though there was none. Respondent
achieved the desired effect up to this point, but the Court will not
be fooled.
Thus, as between respondents irregular and improper actions
and petitioners failure to timely return the 100,000.00 purported
earnest money, this Court sides with petitioner. In a manner of
speaking, respondent cannot fault petitioner for not making a
refund since it is equally to blame for making such payment
under false pretenses and irregular circumstances, and with
improper motives. Parties must come to court with clean hands,
as it were.
In a potential sale transaction, the prior payment of earnest
money even before the property owner can agree to sell his
property is irregular, and cannot be used to bind the owner to
the obligations of a seller under an otherwise perfected contract
of sale; to cite a well-worn clich, the carriage cannot be placed
before the horse. The property owner-prospective seller may not
be legally obliged to enter into a sale with a prospective buyer
through the latters employment of questionable practices which
prevent the owner from freely giving his consent to the
transaction; this constitutes a palpable transgression of the
prospective sellers rights of ownership over his property, an
anomaly which the Court will certainly not condone. An
agreement where the prior free consent of one party thereto is
withheld or suppressed will be struck down, and the Court shall
always endeavor to protect a property owners rights against
devious practices that put his property in danger of being lost or
unduly disposed without his prior knowledge or consent. As this
ponente has held before, "[t]his Court cannot presume the
existence of a sale of land, absent any direct proof of it."37
Nor will respondent's supposed payment be 'treated as a
deposit or guarantee; its actions will not be dignified and must
be called for what they are: they were done irregularly and with
a view to acquiring the subject property against petitioner's
consent.
Finally, since there is nothing in legal contemplation which
petitioner must perform particularly for the respondent, it should
follow that Civil Case No. 06-0492 CFM for specific performance
with damages is left with no leg. to stand on; it must be
dismissed.
With the foregoing view, there is no need to resolve the other
specific issues and arguments raised by the petitioner, as they
do not materially affect the rights and obligations of the parties -
the Court having declared that no agreement exists between
them; nor do they have the effect of altering the outcome of the
case.
WHEREFORE, the Petition is GRANTED. The September 30,
2011 Decision and December 9, 2011 Resolution of the Court of
Appeals in CA-G.R. CV No. 93715, as well as the February 16,
2009 Decision of the Regional Trial Court of Pasay City, Branch
115 in Civil Case No. 06-0492 CFM are REVERSED and SET
ASIDE. Civil Case No. 06-0492 CFM is ordered DISMISSED. ,
Petitioner First Optima Realty Corporation is ordered to
REFUND the amount of 100,000.00 to respondent Securitron
Security Services, Inc. without interest, unless petitioner has
done so during the course of the proceedings.
SO ORDERED.
THIRD DIVISION
G.R. No. 165879 November 10, 2006
MARIA B. CHING, Petitioner,
vs.
JOSEPH C. GOYANKO, JR., EVELYN GOYANKO, JERRY
GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO, MARY
ELLEN GOYANKO AND JESS GOYANKO, Respondents.
DECISION
CARPIO MORALES, J.:
On December 30, 1947, Joseph Goyanko (Goyanko) and
Epifania dela Cruz (Epifania) were married. 1 Out of the union
were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius,
Mary Ellen and Jess, all surnamed Goyanko.
Respondents claim that in 1961, their parents acquired a 661
square meter property located at 29 F. Cabahug St., Cebu City
but that as they (the parents) were Chinese citizens at the time,
the property was registered in the name of their aunt, Sulpicia
Ventura (Sulpicia).
On May 1, 1993, Sulpicia executed a deed of sale2 over the
property in favor of respondents father Goyanko. In turn,
Goyanko executed on October 12, 1993 a deed of sale3 over the
property in favor of his common-law-wife-herein petitioner Maria
B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus
issued in petitioners name.
After Goyankos death on March 11, 1996, respondents
discovered that ownership of the property had already been
transferred in the name of petitioner. Respondents thereupon
had the purported signature of their father in the deed of sale
verified by the Philippine National Police Crime Laboratory
which found the same to be a forgery.4
Respondents thus filed with the Regional Trial Court of Cebu
City a complaint for recovery of property and damages against
petitioner, praying for the nullification of the deed of sale and of
TCT No. 138405 and the issuance of a new one in favor of their
father Goyanko.
In defense, petitioner claimed that she is the actual owner of the
property as it was she who provided its purchase price. To
disprove that Goyankos signature in the questioned deed of
sale is a forgery, she presented as witness the notary public
who testified that Goyanko appeared and signed the document
in his presence.
By Decision of October 16, 1998,5 the trial court dismissed the
complaint against petitioner, the pertinent portions of which
decision read:
There is no valid and sufficient ground to declare the sale as
null and void, fictitious and simulated. The signature on the
questioned Deed of Sale is genuine. The testimony of Atty.
Salvador Barrameda who declared in court that Joseph
Goyanko, Sr. and Maria Ching together with their witnesses
appeared before him for notarization of Deed of Sale in question
is more reliable than the conflicting testimonies of the two
document examiners. Defendant Maria Ching asserted that the
Deed of Sale executed by Joseph Goyanko, Sr. in her favor is
valid and genuine. The signature of Joseph Goyanko, Sr. in the
questioned Deed of Absolute Sale is genuine as it was duly
executed and signed by Joseph Goyanko, Sr. himself.
The parcel of lands known as Lot No. 6 which is sought to be
recovered in this case could never be considered as the
conjugal property of the original Spouses Joseph C. Goyanko
and Epifania dela Cruz or the exclusive capital property of the
husband. The acquisition of the said property by defendant
Maria Ching is well-elicited from the aforementioned testimonial
and documentary evidence presented by the defendant.
Although for a time being the property passed through Joseph
Goyanko, Sr. as a buyer yet his ownership was only temporary
and transitory for the reason that it was subsequently sold to
herein defendant Maria Ching. Maria Ching claimed that it was
even her money which was used by Joseph Goyanko, Sr. in the
purchase of the land and so it was eventually sold to her. In her
testimony, defendant Ching justified her financial capability to
buy the land for herself. The transaction undertaken was from
the original owner Sulpicia Ventura to Joseph Goyanko, Sr. and
then from Joesph Goyanko, Sr. to herein defendant Maria Ching.
The land subject of the litigation is already registered in the
name of defendant Maria Ching under TCT No. 138405. By
virtue of the Deed of Sale executed in favor of Maria Ching,
Transfer Certificate of Title No. 138405 was issued in her favor.
In recognition of the proverbial virtuality of a Torrens title, it has
been repeatedly held that, unless bad faith can be established
on the part of the person appearing as owner on the certificate
of title, there is no other owner than that in whose favor it has
been issued. A Torrens title is not subject to collateral attack. It
is a well-known doctrine that a Torrens title, as a rule, is
irrevocable and indefeasible, and the duty of the court is to see
to it that this title is maintained and respected unless challenged
in a direct proceedings [sic].6 (Citations omitted; underscoring
supplied)
Before the Court of Appeals where respondents appealed, they
argued that the trial court erred:
1. . . . when it dismissed the complaint a quo . . . , in effect,
sustaining the sale of the subject property between Joseph, Sr.
and the defendant-appellee, despite the proliferation in the
records and admissions by both parties that defendant-appellee
was the "mistress" or "common-law wife" of Joseph, Sr..
2. . . . when it dismissed the complaint a quo . . . , in effect,
sustaining the sale of the subject property between Joseph, Sr.
and the defendant-appellee, despite the fact that the marriage of
Joseph, Sr. and Epifania was then still subsisting thereby
rendering the subject property as conjugal property of Joseph,
Sr. and Epifania.
3. . . . in dismissing the complaint a quo . . . , in effect,
sustaining the validity of the sale of the subject property
between Joseph, Sr. and the defendant-appellee, despite the
clear findings of forgery and the non-credible testimony of
notary public. 7
By Decision dated October 21, 2003,8 the appellate court
reversed that of the trial court and declared null and void the
questioned deed of sale and TCT No. 138405. Held the
appellate court:
. . . The subject property having been acquired during the
existence of a valid marriage between Joseph Sr. and Epifania
dela Cruz-Goyanko, is presumed to belong to the conjugal
partnership. Moreover, while this presumption in favor of
conjugality is rebuttable with clear and convincing proof to the
contrary, we find no evidence on record to conclude otherwise.
The record shows that while Joseph Sr. and his wife Epifania
have been estranged for years and that he and defendant-
appellant Maria Ching, have in fact been living together as
common-law husband and wife, there has never been a judicial
decree declaring the dissolution of his marriage to Epifania nor
their conjugal partnership. It is therefore undeniable that the
661-square meter property located at No. 29 F. Cabahug Street,
Cebu City belongs to the conjugal partnership.
Even if we were to assume that the subject property was not
conjugal, still we cannot sustain the validity of the sale of the
property by Joseph, Sr. to defendant-appellant Maria Ching,
there being overwhelming evidence on records that they have
been living together as common-law husband and wife. On this
score, Art. 1352 of the Civil Code provides:
"Art. 1352. Contracts without cause, or with unlawful cause,
produce no effect whatsoever. The cause is unlawful if it is
contrary to law, morals, good customs, public order or public
policy."
We therefore find that the contract of sale in favor of the
defendant-appellant Maria Ching was null and void for being
contrary to morals and public policy. The purported sale, having
been made by Joseph Sr. in favor of his concubine, undermines
the stability of the family, a basic social institution which public
policy vigilantly protects. Furthermore, the law emphatically
prohibits spouses from selling property to each other, subject to
certain exceptions. And this is so because transfers or
conveyances between spouses, if allowed during the marriage
would destroy the system of conjugal partnership, a basic policy
in civil law. The prohibition was designed to prevent the exercise
of undue influence by one spouse over the other and is likewise
applicable even to common-law relationships otherwise, "the
condition of those who incurred guilt would turn out to be better
than those in legal union. 9 (Underscoring supplied)
Hence, the present petition, petitioners arguing that the
appellate court gravely erred in:
I.
. . . APPLYING THE STATE POLICY ON PROHIBITION
AGAINST CONVEYANCES AND TRANSFERS OF
PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW
SPOUSES ON THE SUBJECT PROPERTY, THE SAME
BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE
PROPERTY OF PETITIONER, AND THAT THE SAME WAS
NEVER PART OF THE CONJUGAL PROPERTY OF THE
MARRIAGE BETWEEN RESPONDENTS MOTHER EPIFANIA
GOYANKO AND PETITIONERS COMMON LAW HUSBAND,
JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR
CAPITAL PROPERTY OF THE LATTER AT ANYTIME
BEFORE THE SAME WAS VALIDLY ACQUIRED BY
PETITIONER.
 II.
. . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST
AS PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF
THE NEW CIVIL CODE CAN VALIDLY EXIST BETWEEN
COMMON LAW SPOUSES.
III.
. . . NOT FINDING THAT A CONVEYANCE OVER A
PROPERTY MADE BY A TRUSTEE, WHO BECAME AS SUCH
IN CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE
A COMMON LAW HUSBAND OF THE BENEFICIARY, IS NOT
A VIOLATION OF A STATE POLICY ON PROHIBITION
AGAINST CONVEYANCES AND TRANSFERS OF
PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW
SPOUSES.
IV.
. . . ALLOWING RESPONDENTS TO ABANDON THEIR
ORIGINAL THEORY OF THEIR CASE DURING APPEAL. 10
The pertinent provisions of the Civil Code which apply to the
present case read:
ART. 1352. Contracts without cause, or with unlawful cause,
produce no effect whatever. The cause is unlawful if it is
contrary to law, morals, good customs, public order or public
policy.
ART. 1409. The following contracts are inexistent and void from
the beginning:
(1) Those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the
transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set
up the defense of illegality be waived.
ARTICLE 1490. The husband and wife cannot sell property to
each other, except:
(1) When a separation of property was agreed upon in the
marriage settlements; or
(2) When there has been a judicial separation of property under
Article 191. (Underscoring supplied)
The proscription against sale of property between spouses
applies even to common law relationships. So this Court ruled
in Calimlim-Canullas v. Hon. Fortun, etc., et al.:11
Anent the second issue, we find that the contract of sale was
null and void for being contrary to morals and public policy. The
sale was made by a husband in favor of a concubine after
he had abandoned his family and left the conjugal home
where his wife and children lived and from whence they
derived their support. The sale was subversive of the
stability of the family, a basic social institution which public
policy cherishes and protects.
Article 1409 of the Civil Code states inter alia that: contracts
whose cause, object, or purposes is contrary to law, morals,
good customs, public order, or public policy
are void and inexistent from the very beginning.
Article 1352 also provides that: "Contracts without cause, or
with unlawful cause, produce no effect whatsoever. The cause
is unlawful if it is contrary to law, morals, good customs, public
order, or public policy."
Additionally, the law emphatically prohibits the spouses
from selling property to each other subject to certain
exceptions.1wphi1Similarly, donations between spouses
during marriage are prohibited. And this is so because if
transfers or conveyances between spouses were allowed during
marriage, that would destroy the system of conjugal partnership,
a basic policy in civil law. It was also designed to prevent the
exercise of undue influence by one spouse over the other, as
well as to protect the institution of marriage, which is the
cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage,
otherwise, "the condition of those who incurred guilt would
turn out to be better than those in legal union." Those
provisions are dictated by public interest and their criterion must
be imposed upon the will of the parties. . . .12 (Italics in the
original; emphasis and underscoring supplied)
As the conveyance in question was made by Goyangko in favor
of his common- law-wife-herein petitioner, it was null and void.
Petitioners argument that a trust relationship was created
between Goyanko as trustee and her as beneficiary as provided
in Articles 1448 and 1450 of the Civil Code which read:
ARTICLE 1448. There is an implied trust when property is sold,
and the legal estate is granted to one party but the price is paid
by another for the purpose of having the beneficial interest of
the property. The former is the trustee, while the latter is the
beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying
the price of the sale, no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.
ARTICLE 1450. If the price of a sale of property is loaned or paid
by one person for the benefit of another and the conveyance is
made to the lender or payor to secure the payment of the debt,
a trust arises by operation of law in favor of the person to whom
the money is loaned or for whom it is paid. The latter may
redeem the property and compel a conveyance thereof to him.
does not persuade.
For petitioners testimony that it was she who provided the
purchase price is uncorroborated. That she may have been
considered the breadwinner of the family and that there was
proof that she earned a living do not conclusively clinch her
claim.
As to the change of theory by respondents from forgery of their
fathers signature in the deed of sale to sale contrary to public
policy, it too does not persuade. Generally, a party in a litigation
is not permitted to freely and substantially change the theory of
his case so as not to put the other party to undue disadvantage
by not accurately and timely apprising him of what he is up
against, 13 and to ensure that the latter is given the opportunity
during trial to refute all allegations against him by presenting
evidence to the contrary. In the present case, petitioner cannot
be said to have been put to undue disadvantage and to have
been denied the chance to refute all the allegations against her.
For the nullification of the sale is anchored on its illegality per se,
it being violative of the above-cited Articles 1352, 1409 and 1490
of the Civil Code.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioner.
SO ORDERED