G.R. No.

L-29139 November 15, 1974 (a) Will the payment of twelve per cent interest of
P12,500.00 commence to run from August 6, 1964 when
CONSUELO P. PICZON, RUBEN O. PICZON and AIDA P. plaintiffs made the first demand or from August 29, 1956
ALCANTARA, plaintiffs-appellants, when the obligation becomes due and demandable?
vs.
ESTEBAN PICZON and SOSING-LOBOS & CO., INC., defendants- (b) Is defendant Esteban Piczon liable as a guarantor or a
appellees. surety?

Vicente C. Santos for plaintiffs-appellants. That the parties are hereby required to file their respective
memorandum if they so desire on or before September 15,
Jacinto R. Bohol for defendant-appellee Sosing-Lobos & Co., Inc. 1967 to discuss the legal issues and therewith the case will
be considered submitted for decision.
Vicente M. Macabidang for defendant-appellee Esteban Piczon.
WHEREFORE, the instant case is hereby considered
submitted based on the aforesaid facts agreed upon and
upon submission of the parties of their respective
BARREDO, J.:p memorandum on or before September 15, 1967.

Appeal from the decision of the Court of First Instance of Samar in its Civil Case No. 5156, entitled Consuelo SO ORDERED.1 (Record on Appeal pp. 28-30.)
P. Piczon, et al. vs. Esteban Piczon, et al., sentencing defendants-appellees, Sosing Lobos and Co., Inc., as
principal, and Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the sum of P12,500.00 with 12%
interest from August 6, 1964 until said principal amount of P12,500.00 shall have been duly paid, and the Annex "A", the actionable document of appellants reads thus:
costs."

AGREEMENT OF LOAN
After issues were joined and at the end of the pre-trial held on August 22,
1967, the trial court issued the following order:
"When this case was called for pre-trial, plaintiffs and
defendants through their lawyers, appeared and entered into
the following agreement:
1. That defendants admit the due execution of Annexes "A"
and "B" of the complaint;
2. That consequently defendant Sosing-Lobos and Co., Inc.
binds itself to the plaintiffs for P12,500.00, the same to be
paid on or before October 31, 1967 together with the interest
that this court may determine.
That the issues in this case are legal ones namely:
KNOW YE ALL MEN BY THESE PRESENTS:
That I, ESTEBAN PICZON, of legal age, married, Filipino,
and resident of and with postal address in the municipality of
Catbalogan, Province of Samar, Philippines, in my capacity
as the President of the corporation known as the "SOSING-
LOBOS and CO., INC.," as controlling stockholder, and at
the same time as guarantor for the same, do by these
presents contract a loan of Twelve Thousand Five Hundred
Pesos (P12,500.00), Philippine Currency, the receipt of
which is hereby acknowledged, from the "Piczon and Co.,
Inc." another corporation, the main offices of the two
corporations being in Catbalogan, Samar, for which I
undertake, bind and agree to use the loan as surety cash
deposit for registration with the Securities and Exchange
Commission of the incorporation papers relative to the
 "Sosing-Lobos and Co., Inc.," and to return or pay the same
amount with Twelve Per Cent (12%) interest per annum,
commencing from the date of execution hereof, to the
"Piczon and Co., Inc., as soon as the said incorporation
papers are duly registered and the Certificate of
Incorporation issued by the aforesaid Commission.
IN WITNESS WHEREOF, I hereunto signed my name in
Catbalogan, Samar, Philippines, this 28th day of September,
1956.
(Record on Appeal, pp. 6-7.)
The trial court having rendered judgment in the tenor aforequoted,
appellants assign the following alleged errors:
I from the time the obligee judicially or extrajudicially
THE TRIAL COURT ERRED IN ORDERING THE
PAYMENT OF 12% INTEREST ON THE PRINCIPAL OF
P12,500.00 FROM AUGUST 6, 1964, ONLY, INSTEAD OF
FROM SEPTEMBER 28, 1956, WHEN ANNEX "A" WAS
DULY EXECUTED.
II
THE TRIAL COURT ERRED IN CONSIDERING
DEFENDANT ESTEBAN PICZON AS GUARANTOR ONLY
AND NOT AS SURETY.
III
THE TRIAL COURT ERRED IN NOT ADJUDICATING
DAMAGES IN FAVOR OF THE PLAINTIFFS-
APPELLANTS. (Appellants' Brief, pp. a to b.)
Appellants' first assignment of error is well taken. Instead of requiring
appellees to pay interest at 12% only from August 6, 1964, the trial court
should have adhered to the terms of the agreement which plainly provides
that Esteban Piczon had obligated Sosing-Lobos and Co., Inc. and himself
to "return or pay (to Piczon and Co., Inc.) the same amount (P12,500.00)
with Twelve Per Cent (12%) interest per annum commencing from the date
of the execution hereof", Annex A, which was on September 28, 1956.
Under Article 2209 of the Civil Code "(i)f the obligation consists in the
payment of a sum of money, and the debtor incurs in delay, the indemnity
for damages, there being no stipulation to the contrary, shall be the
payment of the interest agreed upon, and in the absence of stipulation, the
legal interest, which is six per cent per annum." In the case at bar, the
"interest agreed upon" by the parties in Annex A was to commence from
the execution of said document.
Appellees' contention that the reference in Article 2209 to delay incurred by
the debtor which can serve as the basis for liability for interest is to that
defined in Article 1169 of the Civil Code reading thus:
Those obliged to deliver or to do something incur in delay
demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary
in order that delay may exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time when
the thing is to be delivered or the service is to be rendered
was a controlling motive for the establishment of the
contract; or
(3) When demand would be useless, as when the obligor
has rendered it beyond his power to perform.
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 fulfills his obligation, delay by the other
begins.
is untenable. In Quiroz vs. Tan Guinlay, 5 Phil. 675, it was held that the PREMISES CONSIDERED, the judgment of the trial court is modified so as
article cited by appellees (which was Article 1100 of the Old Civil Code to make appellees liable for the stipulated interest of 12% per annum from
read in relation to Art. 1101) is applicable only when the obligation is to do September 28, 1956, instead of August 6, 1964. In all other respects, said
something other than the payment of money. And in Firestone Tire & judgment is affirmed. Costs against appellees.
Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the Court squarely ruled that
if the contract stipulates from what time interest will be counted, said
stipulated time controls, and, therefore interest is payable from such time,
and not from the date of the filing of the complaint (at p. 925). Were that not
the law, there would be no basis for the provision of Article 2212 of the Civil
Code providing that "(I)nterest due shall earn legal interest from the time it
is judicially demanded, although the obligation may be silent upon this
point." Incidentally, appellants would have been entitled to the benefit of
this article, had they not failed to plead the same in their complaint. Their
prayer for it in their brief is much too late. Appellees had no opportunity to
meet the issue squarely at the pre-trial.

As regards the other two assignments of error, appellants' pose cannot be

sustained. Under the terms of the contract, Annex A, Esteban Piczon
expressly bound himself only as guarantor, and there are no circumstances
in the record from which it can be deduced that his liability could be that of
a surety. A guaranty must be express, (Article 2055, Civil Code) and it
would be violative of the law to consider a party to be bound as a surety
when the very word used in the agreement is "guarantor."

Moreover, as well pointed out in appellees' brief, under the terms of the
pre-trial order, appellants accepted the express assumption of liability by
Sosing-Lobos & Co., Inc. for the payment of the obligation in question,
thereby modifying their original posture that inasmuch as that corporation
did not exist yet at the time of the agreement, Piczon necessarily must
have bound himself as insurer.

As already explained earlier, appellants' prayer for payment of legal interest

upon interest due from the filing of the complaint can no longer be
entertained, the same not having been made an issue in the pleadings in
the court below. We do not believe that such a substantial matter can be
deemed included in a general prayer for "any other relief just and equitable
in the premises", especially when, as in this case, the pre-trial order does
not mention it in the enumeration of the issues to be resolved by the court.

G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and
PACITA ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents
Miguel Lu and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2)
parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022
and TCT No. T-39023 both measuring 15,808 square meters or a total of
3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of
land to respondent Pablo Babasanta, (hereinafter, Babasanta) for the price
of fifteen pesos (15.00) per square meter. Babasanta made a
downpayment of fifty thousand pesos (50,000.00) as evidenced by a
memorandum receipt issued by Pacita Lu of the same date. Several other
payments totaling two hundred thousand pesos (200,000.00) were made
by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand
the execution of a final deed of sale in his favor so that he could effect full
payment of the purchase price. In the same letter, Babasanta notified the
spouses about having received information that the spouses sold the same
property to another without his knowledge and consent. He demanded that
the second sale be cancelled and that a final deed of sale be issued in his
favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she
acknowledged having agreed to sell the property to him at fifteen pesos
(15.00) per square meter. She, however, reminded Babasanta that when
the balance of the purchase price became due, he requested for a
reduction of the price and when she refused, Babasanta backed out of the
sale. Pacita added that she returned the sum of fifty thousand pesos
(50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the
Regional Trial Court (RTC), Branch 31, of San Pedro, Laguna, a Complaint
for Specific Performance and Damages1 against his co-respondents herein,
the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T-
39022 and T-39023 had been sold to him by the spouses at fifteen pesos
(15.00) per square meter. Despite his repeated demands for the
execution of a final deed of sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans
from Babasanta and when the total advances of Pacita reached fifty
thousand pesos (50,000.00), the latter and Babasanta, without the
knowledge and consent of Miguel Lu, had verbally agreed to transform the
transaction into a contract to sell the two parcels of land to Babasanta with
the fifty thousand pesos (50,000.00) to be considered as the
downpayment for the property and the balance to be paid on or before 31
December 1987. Respondents Lu added that as of November 1987, total
payments made by Babasanta amounted to only two hundred thousand
pesos (200,000.00) and the latter allegedly failed to pay the balance of
two hundred sixty thousand pesos (260,000.00) despite repeated
demands. Babasanta had purportedly asked Pacita for a reduction of the
price from fifteen pesos (15.00) to twelve pesos (12.00) per square
meter and when the Spouses Lu refused to grant Babasantas request, the
latter rescinded the contract to sell and declared that the original loan
transaction just be carried out in that the spouses would be indebted to him
in the amount of two hundred thousand pesos (200,000.00). Accordingly,
on 6 July 1989, they purchased Interbank Managers Check No. 05020269
in the amount of two hundred thousand pesos (200,000.00) in the name
of Babasanta to show that she was able and willing to pay the balance of
her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January
19903 wherein he prayed for the issuance of a writ of preliminary injunction
with temporary restraining order and the inclusion of the Register of Deeds
of Calamba, Laguna as party defendant. He contended that the issuance of
a preliminary injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint
contending that it raised new matters which seriously affect their
substantive rights under the original complaint. However, the trial court in
its Order dated 17 January 19905 admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development
Corporation (SLDC) filed a Motion for Intervention6 before the trial court.
SLDC alleged that it had legal interest in the subject matter under litigation
because on 3 May 1989, the two parcels of land involved, namely Lot
1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with
Mortgage.7 It alleged that it was a buyer in good faith and for value and
therefore it had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention,8 respondent Babasanta
demurred and argued that the latter had no legal interest in the case
because the two parcels of land involved herein had already been
conveyed to him by the Spouses Lu and hence, the vendors were without
legal capacity to transfer or dispose of the two parcels of land to the
intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC
to intervene. SLDC filed its Complaint-in-Intervention on 19 April
1990.9 Respondent Babasantas motion for the issuance of a preliminary
injunction was likewise granted by the trial court in its Order dated 11
January 199110 conditioned upon his filing of a bond in the amount of fifty
thousand pesos (50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989,
the Spouses Lu executed in its favor an Option to Buy the lots subject of
the complaint. Accordingly, it paid an option money in the amount of three
hundred sixteen thousand one hundred sixty pesos (316,160.00) out of
the total consideration for the purchase of the two lots of one million two
hundred sixty-four thousand six hundred forty pesos (1,264,640.00). After
the Spouses Lu received a total amount of six hundred thirty-two thousand
three hundred twenty pesos (632,320.00) they executed on 3 May 1989
a Deed of Absolute Sale with Mortgage in its favor. SLDC added that the
certificates of title over the property were delivered to it by the spouses
clean and free from any adverse claims and/or notice of lis pendens. SLDC
further alleged that it only learned of the filing of the complaint sometime in
the early part of January 1990 which prompted it to file the motion to
intervene without delay. Claiming that it was a buyer in good faith, SLDC
argued that it had no obligation to look beyond the titles submitted to it by
the Spouses Lu particularly because Babasantas claims were not
annotated on the certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993
upholding the sale of the property to SLDC. It ordered the Spouses Lu to
pay Babasanta the sum of two hundred thousand pesos (200,000.00)
with legal interest plus the further sum of fifty thousand pesos (50,000.00)
as and for attorneys fees. On the complaint-in-intervention, the trial court
ordered the Register of Deeds of Laguna, Calamba Branch to cancel the
notice of lis pendens annotated on the original of the TCT No. T-39022 (T-
7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both
Babasanta and SLDC did not register the respective sales in their favor,
ownership of the property should pertain to the buyer who first acquired
possession of the property. The trial court equated the execution of a public
instrument in favor of SLDC as sufficient delivery of the property to the
latter. It concluded that symbolic possession could be considered to have
been first transferred to SLDC and consequently ownership of the property
pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of
Appeals alleging in the main that the trial court erred in concluding that
SLDC is a purchaser in good faith and in upholding the validity of the sale
made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They
contended that the trial court erred in failing to consider that the contract to
sell between them and Babasanta had been novated when the latter
abandoned the verbal contract of sale and declared that the original loan
transaction just be carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta null and
void ab initio for lack of knowledge and consent of Miguel Lu. They further
averred that the trial court erred in not dismissing the complaint filed by
Babasanta; in awarding damages in his favor and in refusing to grant the
reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision11 which set
aside the judgment of the trial court. It declared that the sale between
Babasanta and the Spouses Lu was valid and subsisting and ordered the
spouses to execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase price in the
amount of two hundred sixty thousand pesos (260,000.00). The appellate
court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC
was null and void on the ground that SLDC was a purchaser in bad faith.
The Spouses Lu were further ordered to return all payments made by
SLDC with legal interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with
the appellate court.12 However, in a Manifestation dated 20 December
1995,13 the Spouses Lu informed the appellate court that they are no longer
contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as
withdrawn the motion for reconsideration filed by the Spouses Lu in view of
their manifestation of 20 December 1995. The appellate court denied
SLDCs motion for reconsideration on the ground that no new or substantial
arguments were raised therein which would warrant modification or
reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate
court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO
WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER
PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF
200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE
DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK
POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE
TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
FACT THAT RESPONDENT BABASANTA HAS SUBMITTED NO
EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS
RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT
NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF
FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE
DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN
LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that it had
prior notice of Babasantas claim over the property merely on the basis of
its having advanced the amount of two hundred thousand pesos
(200,000.00) to Pacita Lu upon the latters representation that she
needed the money to pay her obligation to Babasanta. It argued that it had
no reason to suspect that Pacita was not telling the truth that the money
would be used to pay her indebtedness to Babasanta. At any rate, SLDC
averred that the amount of two hundred thousand pesos (200,000.00)
which it advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as notice of the
prior sale of the land to Babasanta. It added that at no instance did Pacita
Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it
immediately took possession of the property and asserted its rights as new
owner as opposed to Babasanta who has never exercised acts of
ownership. Since the titles bore no adverse claim, encumbrance, or lien at
the time it was sold to it, SLDC argued that it had every reason to rely on
the correctness of the certificate of title and it was not obliged to go beyond
the certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on Babasanta to
prove that it was aware of the prior sale to him but the latter failed to do so.
SLDC pointed out that the notice of lis pendens was annotated only on 2
June 1989 long after the sale of the property to it was consummated on 3
May 1989. 1aw phi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the
Spouses Lu informed the Court that due to financial constraints they have
no more interest to pursue their rights in the instant case and submit
themselves to the decision of the Court of Appeals.16
On the other hand, respondent Babasanta argued that SLDC could not
have acquired ownership of the property because it failed to comply with
the requirement of registration of the sale in good faith. He emphasized
that at the time SLDC registered the sale in its favor on 30 June 1990,
there was already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioners registration of
the sale did not confer upon it any right. Babasanta further asserted that
petitioners bad faith in the acquisition of the property is evident from the
fact that it failed to make necessary inquiry regarding the purpose of the
issuance of the two hundred thousand pesos (200,000.00) managers
check in his favor.
The core issue presented for resolution in the instant petition is who
between SLDC and Babasanta has a better right over the two parcels of
land subject of the instant case in view of the successive transactions
executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta
presented a document signed by Pacita Lu acknowledging receipt of the
sum of fifty thousand pesos (50,000.00) as partial payment for 3.6
hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna.17 While the receipt signed by Pacita did not mention the price for
which the property was being sold, this deficiency was supplied by Pacita
Lus letter dated 29 May 198918 wherein she admitted that she agreed to
sell the 3.6 hectares of land to Babasanta for fifteen pesos (15.00) per
square meter.
An analysis of the facts obtaining in this case, as well as the evidence
presented by the parties, irresistibly leads to the conclusion that the
agreement between Babasanta and the Spouses Lu is a contract to sell
and not a contract of sale.
Contracts, in general, are perfected by mere consent,19 which is manifested
by the meeting of the offer and the acceptance upon the thing which are to
constitute the contract. The offer must be certain and the acceptance
absolute.20 Moreover, contracts shall be obligatory in whatever form they
may have been entered into, provided all the essential requisites for their
validity are present.21
The receipt signed by Pacita Lu merely states that she accepted the sum of
fifty thousand pesos (50,000.00) from Babasanta as partial payment of
3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no
stipulation that the seller reserves the ownership of the property until full
payment of the price which is a distinguishing feature of a contract to sell,
the subsequent acts of the parties convince us that the Spouses Lu never
intended to transfer ownership to Babasanta except upon full payment of
the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein
that despite his repeated requests for the execution of the final deed of sale
in his favor so that he could effect full payment of the price, Pacita Lu
allegedly refused to do so. In effect, Babasanta himself recognized that
ownership of the property would not be transferred to him until such time as
he shall have effected full payment of the price. Moreover, had the sellers
intended to transfer title, they could have easily executed the document of
sale in its required form simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu
should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite
germane. In a contract of sale, title passes to the vendee upon the delivery
of the thing sold; whereas in a contract to sell, by agreement the ownership
is reserved in the vendor and is not to pass until the full payment of the
price.22 In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas
in a contract to sell, title is retained by the vendor until the full payment of
the price, such payment being a positive suspensive condition and failure
of which is not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective.23
The perfected contract to sell imposed upon Babasanta the obligation to
pay the balance of the purchase price. There being an obligation to pay the
price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Mere sending of a
letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of
payment.24 Consignation of the amounts due in court is essential in order to
extinguish Babasantas obligation to pay the balance of the purchase price.
Glaringly absent from the records is any indication that Babasanta even
attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory
force.
On the assumption that the transaction between the parties is a contract of
sale and not a contract to sell, Babasantas claim of ownership should
nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent and from
25
that moment, the parties may reciprocally demand performance.26 The
essential elements of a contract of sale, to wit: (1) consent or meeting of
the minds, that is, to transfer ownership in exchange for the price; (2)
object certain which is the subject matter of the contract; (3) cause of the
obligation which is established.27
The perfection of a contract of sale should not, however, be confused with
its consummation. In relation to the acquisition and transfer of ownership, it
should be noted that sale is not a mode, but merely a title. A mode is the
legal means by which dominion or ownership is created, transferred or
destroyed, but title is only the legal basis by which to affect dominion or
ownership.28 Under Article 712 of the Civil Code, "ownership and other real
rights over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain contracts,
by tradition." Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same.29 Therefore, sale by itself does not transfer or
affect ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale, that
actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired
by the vendee from the moment it is delivered to him in any of the ways
specified in Article 1497 to 1501.30 The word "delivered" should not be
taken restrictively to mean transfer of actual physical possession of the
property. The law recognizes two principal modes of delivery, to wit: (1)
actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and
possession of the vendee.31 Legal or constructive delivery, on the other
hand, may be had through any of the following ways: the execution of a
public instrument evidencing the sale;32 symbolical tradition such as the
delivery of the keys of the place where the movable sold is being
kept;33 traditio longa manu or by mere consent or agreement if the movable
sold cannot yet be transferred to the possession of the buyer at the time of
the sale;34 traditio brevi manu if the buyer already had possession of the
object even before the sale;35 and traditio constitutum possessorium, where
the seller remains in possession of the property in a different capacity.36
Following the above disquisition, respondent Babasanta did not acquire
ownership by the mere execution of the receipt by Pacita Lu
acknowledging receipt of partial payment for the property. For one, the
agreement between Babasanta and the Spouses Lu, though valid, was not
embodied in a public instrument. Hence, no constructive delivery of the
lands could have been effected. For another, Babasanta had not taken
possession of the property at any time after the perfection of the sale in his
favor or exercised acts of dominion over it despite his assertions that he
was the rightful owner of the lands. Simply stated, there was no delivery to
Babasanta, whether actual or constructive, which is essential to transfer
ownership of the property. Thus, even on the assumption that the perfected
contract between the parties was a sale, ownership could not have passed
to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing
sold.37
However, it must be stressed that the juridical relationship between the
parties in a double sale is primarily governed by Article 1544 which lays
down the rules of preference between the two purchasers of the same
property. It provides:
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 principle of primus tempore, potior jure (first in time, stronger in right)
gains greater significance in case of double sale of immovable property.
When the thing sold twice is an immovable, the one who acquires it and
first records it in the Registry of Property, both made in good faith, shall be
deemed the owner.38 Verily, the act of registration must be coupled with
good faith that is, the registrant must have no knowledge of the defect or
lack of title of his vendor or must not have been aware of facts which
should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had
acquired knowledge of Babasantas claim. Babasanta, however, strongly
argues that the registration of the sale by SLDC was not sufficient to confer
upon the latter any title to the property since the registration was attended
by bad faith. Specifically, he points out that at the time SLDC registered the
sale on 30 June 1990, there was already a notice of lis pendens on the file
with the Register of Deeds, the same having been filed one year before on
2 June 1989.
Did the registration of the sale after the annotation of the notice of lis
pendens obliterate the effects of delivery and possession in good faith
which admittedly had occurred prior to SLDCs knowledge of the
transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu
executed the Option to Buy in favor of SLDC upon receiving 316,160.00
as option money from SLDC. After SLDC had paid more than one half of
the agreed purchase price of 1,264,640.00, the Spouses Lu subsequently
executed on 3 May 1989 a Deed of Absolute Salein favor or SLDC. At the
time both deeds were executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta. Simply stated, from the time
of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the
consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of
another without notice that some other person has a right to, or 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 the claim or interest of some other
person in the property.40 Following the foregoing definition, we rule that
SLDC qualifies as a buyer in good faith since there is no evidence extant in
the records that it had knowledge of the prior transaction in favor of
Babasanta. At the time of the sale of the property to SLDC, the vendors
were still the registered owners of the property and were in fact in
possession of the lands. Time and again, this Court has ruled that a
l^vvphi1.net
person dealing with the owner of registered land is not bound to go beyond
the certificate of title as he is charged with notice of burdens on the
property which are noted on the face of the register or on the certificate of
title.41 In assailing knowledge of the transaction between him and the
Spouses Lu, Babasanta apparently relies on the principle of constructive
notice incorporated in Section 52 of the Property Registration Decree (P.D.
No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance,
mortgage, lease, lien, attachment, order, judgment, instrument or entry
affecting registered land shall, if registered, filed, or entered in the office of
the Register of Deeds for the province or city where the land to which it
relates lies, be constructive notice to all persons from the time of such
registering, filing, or entering.
However, the constructive notice operates as suchby the express
wording of Section 52from the time of the registration of the notice of lis
pendens which in this case was effected only on 2 June 1989, at which
time the sale in favor of SLDC had long been consummated insofar as the
obligation of the Spouses Lu to transfer ownership over the property to
SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim
of Babasanta the annotation of the notice of lis pendens cannot help
Babasantas position a bit and it is irrelevant to the good or bad faith
characterization of SLDC as a purchaser. A notice of lis pendens, as the
Court held in Natao v. Esteban,42 serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and
that he should keep his hands off the same, unless he intends to gamble
on the results of the litigation." Precisely, in this case SLDC has intervened
in the pending litigation to protect its rights. Obviously, SLDCs faith in the
merit of its cause has been vindicated with the Courts present decision
which is the ultimate denouement on the controversy.
The Court of Appeals has made capital43 of SLDCs averment in
its Complaint-in-Intervention44 that at the instance of Pacita Lu it issued a
check for 200,000.00 payable to Babasanta and the confirmatory
testimony of Pacita Lu herself on cross-examination.45 However, there is
nothing in the said pleading and the testimony which explicitly relates the
amount to the transaction between the Spouses Lu and Babasanta for
what they attest to is that the amount was supposed to pay off the
advances made by Babasanta to Pacita Lu. In any event, the incident took
place after the Spouses Lu had already executed the Deed of Absolute
Sale with Mortgage in favor of SLDC and therefore, as previously
explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had
been tainted by the prior notice of lis pendensand assuming further for the
same nonce that this is a case of double sale, still Babasantas claim could
not prevail over that of SLDCs. In Abarquez v. Court of Appeals,46 this
Court had the occasion to rule that if a vendee in a double sale registers
the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon
him any right. If the registration is done in bad faith, it is as if there is no
registration at all, and the buyer who has taken possession first of the
property in good faith shall be preferred.
The law speaks not only of one criterion. The first criterion is priority of
entry in the registry of property; there being no priority of such entry, the
second is priority of possession; and, in the absence of the two priorities,
the third priority is of the date of title, with good faith as the common critical
element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property
at any time, SLDCs right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be
purely academic for as earlier stated in this decision, the contract between
Babasanta and the Spouses Lu is not a contract of sale but merely a
contract to sell. In Dichoso v. Roxas,47 we had the occasion to rule that
Article 1544 does not apply to a case where there was a sale to one party
of the land itself while the other contract was a mere promise to sell the
land or at most an actual assignment of the right to repurchase the same
land. Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of
the Court of Appeals appealed from is REVERSED and SET ASIDE and
the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna
is REINSTATED. No costs.
SO ORDERED.

In Abarquez, the first sale to the spouses Israel was notarized and
registered only after the second vendee, Abarquez, registered their deed of
sale with the Registry of Deeds, but the Israels were first in possession.
This Court awarded the property to the Israels because registration of the
property by Abarquez lacked the element of good faith. While the facts in
the instant case substantially differ from that in Abarquez, we would not
hesitate to rule in favor of SLDC on the basis of its prior possession of the
property in good faith. Be it noted that delivery of the property to SLDC was
immediately effected after the execution of the deed in its favor, at which
time SLDC had no knowledge at all of the prior transaction by the Spouses
Lu in favor of Babasanta. 1a\^/phi 1.net
G.R. No. 77365 April 7, 1992
RITA CALEON, petitioner,
vs.
AGUS DEVELOPMENT CORPORATION and COURT OF
APPEALS, respondents.
BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the January
28, 1987 decision of the Court of Appeals in CA-G.R. SP No. 10990
entitled "Rita Caleon V. Hon. Samilo Barlongay, et al." dismissing the
petition for review of the decision of the Regional Trial Court of Manila,
Branch 34, which affirmed the decision of the Metropolitan Trial Court of
Manila, Branch XII, ejecting the petitioner.
The undisputed facts of the case are as follows:
Private respondent Agus Development Corporation is the owner of a parcel
of land denominated as Lot 39, Block 28, situated at 1611-1619 Lealtad,
Sampaloc, Manila, which it leased to petitioner Rita Caleon for a monthly
rental of P180.00. Petitioner constructed on the lot leased a 4-door
apartment building.
Without the consent of the private respondent, the petitioner sub-leased
two of the four doors of the apartment to Rolando Guevarra and Felicisima
Estrada for a monthly rental of P350.00 each. Upon learning of the sub-
lease, private respondent through counsel demanded in writing that the
petitioner vacate the leased premises (Rollo, Annex "A", p. 20).
For failure of petitioner to comply with the demand, private respondent filed
a complaint for ejectment (Civil Case No. 048908) with the Metropolitan
Trial Court of Manila, Branch XII against the petitioner citing as ground
therefor the provisions of Batas Pambansa Blg. 25, Section 5, which is the
unauthorized sub-leasing of part of the leased premises to third persons
without securing the consent of the lessor within the required sixty (60)-day
period from the promulgation of the new law (B.P. 25). (Rollo, Petition, p.
8).
After trial, the court a quo rendered its decision ordering petitioner and all
persons claiming possession under her (a) to vacate the premises alluded
to in the complaint; (b) to remove whatever improvement she introduced on
the property; (c) to pay private respondent the amount of P2,000.00 as
attorney's fees; and (d) to pay the costs (Rollo, Annex "A", p. 19).
Petitioner appealed the decision to the Regional Trial Court and on
November 24, 1980, presiding judge of the RTC, the Hon. Samilo
Barlongay, affirmed in toto the decision of the Metropolitan Trial Court
(Rollo, Annex "A", p. 19).
The decision of the Regional Trial Court was appealed to the Court of
Appeals for review. The respondent Court of Appeals rendered its decision
dated January 28, 1987, the dispositive portion of which reads as follows:
PREMISES CONSIDERED, the petition not being prima
facie meritorious, the same is outright dismissed.
SO ORDERED. (Rollo, Annex "A", p. 21)
Hence, the petition for review on certiorari.
The principal issue in this case is whether or not the lease of an apartment
includes a sublease of the lot on which it is constructed, as would
constitute a ground for ejectment under Batas Pambansa BLg. 25.
Petitioner is of the view that Batas Pambansa Blg. 25 is not applicable
because what she leased was her own apartment house which does not
include a sublease of the lot she leased from private respondent on which
the apartment is constructed.
Petitioner's contention is untenable.
This issue has already been laid to rest in the case of Duellome v.
Gotico (7 SCRA 841 [1963]) where this Court ruled that the lease of a
building naturally includes the lease of the lot, and the rentals of the
building includes those of the lot. Thus:
 . . . the lease of a building would naturally include the lease
of the lot and that the rentals of the building include the
rentals of the lot.
xxx xxx xxx
Furthermore, under our Civil Code, the occupancy of a
building or house not only suggests but implies the tenancy
or possession in fact of the land on which they are
constructed. This is not a new pronouncement. An extensive
elaboration of this rule was discussed by this Court in the
case of Baquiran, et al., v. Baquiran, et al., 53 O.G. p. 1130.
. . . the Court of Appeals should have found
the herein appellees lessees of the house,
and for all legal purposes, of the lot on which
it was built as well.
But petitioner insists that the ruling in the aforecited case is not applicable
to the case at bar because the former is a damage suit while the latter is an
ejectment case.
Be that as it may, this Court has categorically answered in the affirmative,
the principal question, common to both cases and on which rests the
resolution of the issues involved therein. Under the above ruling it is
beyond dispute that petitioner in leasing her apartment has also subleased
the lot on which it is constructed which lot belongs to private respondent.
Consequently, she has violated the provisions of Section 5, Batas
Pambansa Blg. 25 which is a ground for Ejectment.
Section 5 of Batas Pambansa Blg. 25 enumerates the grounds for judicial
ejectment, among which is the subleasing of residential units without the
written consent of the owner/lessor, to wit:
Se. 5 Grounds for judicial ejectment. Ejectment shall be
allowed on the following grounds:
a) Subleasing or assignment of lease of residential units in
whole or in part, with the written consent of the
owner/lessor: Provided that in the case of subleases or
assignments executed prior to the approval of this Act, the
sublessor/assignor shall have sixty days from the effectivity
of this Act within which to obtain the written approval of the
owner/lessor or terminate the sublease or assignment.
Section 2(b) of Batas Pambansa Blg. 25 defines the term residential unit as
follows:
Sec. 2. Definition of Terms Unless otherwise indicated
wherever in this Act, the following shall have the following
meaning:
xxx xxx xxx
b. A residential unit refers to an apartment, house and/or
land on which another's dwelling is located used for
residential purposes and shall include not only buildings,
parts or units thereof used solely as dwelling places, except
motels, motel rooms, hotels, hotel rooms, boarding houses,
dormitories, rooms and bedspaces for rent, but also those
used for home industries, retail stores, or other business
purposes if the owner thereof and his family actually live
therein and use it principally for dwelling purposes: . . .
Petitioner argued further that Batas Pambansa Blg. 25 cannot be applied in
this case because there is a perfected contract of lease without any
express prohibition on subleasing which had been in effect between
petitioner and private respondent long before the enactment of Batas
Pambansa Blg. 25. Therefore, the application of said law to the case at bar
is unconstitutional as an impairment of the obligation of contracts.
It is well settled that all presumptions are indulged in favor of
constitutionality; one who attacks a statute, alleging unconstitutionality
must prove its invalidity beyond a reasonable doubt (Victoriano v. Elizalde
Rope Workers' Union, 59 SCRA 54 [1974]). In fact, this Court does not
decide questions of a constitutional nature unless that question is properly
raised and presented in appropriate cases and is necessary to a
determination of the case, i.e., the issue of constitutionality must be the
very lis mota presented (Tropical Homes, Inc. v. National Housing
Authority, 152 SCRA 540 [1987]).
In any event, it is now beyond question that the constitutional guaranty of them to another who is not entitled thereto (Salonga v. Farrales, 105 SCRA
non-impairment of obligations of contract is limited by and subject to the 360 [1981]).
exercise of police power of the state in the interest of public health, safety,
morals and general welfare (Kabiling, et al. v. National Housing Authority, WHEREFORE, the Petition is Denied for lack of merit and the assailed
156 SCRA 623 [1987]). In spite of the constitutional prohibition, the State decision of the Court of Appeals is Affirmed.
continues to possess authority to safeguard the vital interests of its people.
Legislation appropriate to safeguarding said interest may modify or SO ORDERED.
abrogate contracts already in effect (Victoriano v. Elizalde Rope Workers'
Union, et al., supra). In fact, every contract affecting public interest suffers
a congenital infirmity in that it contains an implied reservation of the police
power as a postulate of the existing legal order. This power can be
activated at anytime to change the provisions of the contract, or even
abrogate it entirely, for the promotion or protection of the general welfare.
Such an act will not militate against the impairment clause, which is subject
to and limited by the paramount police power (Villanueva v. Castaeda,
154 SCRA 142 [1987]).

Batas Pambansa Blg. 25, "An Act Regulating Rentals of Dwelling Units or
of Land On Which Another's Dwelling is Located and For Other Purposes"
shows that the subject matter of the law is the regulation of rentals and is
intended only for dwelling units with specified monthly rentals constructed
before the law became effective (Baens v. Court of Appeals, 125 SCRA
634 [1983]).

Batas Pambansa Blg. 25 is derived from P.D. No. 20 which has been
declared by this Court as a police power legislation, applicable to leases
entered into prior to July 14, 1971 (effectivity date of RA 6539), so that the
applicability thereof to existing contracts cannot be denied (Gutierrez v.
Cantada, 90 SCRA 1 [1979]).

Finally, petitioner invokes, among others, the promotion of social justice

policy of the New Constitution. Like P.D. No. 20, the objective of Batas
Pambansa Blg. 25 is to remedy the plight of lessees, but such objective is
not subject to exploitation by the lessees for whose benefit the law was
enacted. Thus, the prohibition provided for in the law against the sublease
of the premises without the consent of the owner. As enunciated by this
Court, it must be remembered that social justice cannot be invoked to
trample on the rights of property owners, who under our Constitution and
laws are also entitled to protection. The social justice consecrated in our
Constitution was not intended to take away rights from a person and give
 [G.R. No. L-27454. April 30, 1970.]
ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO
GONZALES, Defendant-Appellee.
Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.
Sulpicio E. Platon, for Defendant-Appellee.
SYLLABUS
1. CIVIL LAW; CONTRACTS; BREACH OF CONTRACT FOR NON-
PERFORMANCE; FIXING OF PERIOD BEFORE FILING OF COMPLAINT
FOR NON-PERFORMANCE, ACADEMIC. Where the time for
compliance had expired and there was breach of contract by non-
performance, it was academic for the plaintiff to have first petitioned the
court to fix a period for the performance of the contract before filing his
complaint.
2. ID.; ID.; ID.; DEFENDANT CANNOT INVOKE ARTICLE 1197 OF THE
CIVIL CODE OF THE PHILIPPINES. Where the defendant virtually
admitted non-performance of the contract by returning the typewriter that
he was obliged to repair in a non-working condition, with essential parts
missing, Article 1197 of the Civil Code of the Philippines cannot be
invoked. The fixing of a period would thus be a mere formality and would
serve no purpose than to delay.
3. ID.; ID.; ID.; DAMAGES RECOVERABLE; CASE AT BAR. Where the
defendant-appellee contravened the tenor of his obligation because he not
only did not repair the typewriter but returned it "in shambles, he is liable
for the cost of the labor or service expended in the repair of the typewriter,
which is in the amount of P58.75, because the obligation or contract was to
repair it. In addition, he is likewise liable under Art. 1170 of the Code, for
the cost of the missing parts, in the amount of P31.10, for in his obligation
to repair the typewriter he was bound, but failed or neglected, to return it in
the same condition it was when he received it.
4. ID.; ID.; ID.; CLAIMS FOR DAMAGES OR ATTORNEYS FEES NOT
RECOVERABLE; NOT ALLEGED OR PROVED IN INSTANT CASE.
Claims for damages and attorneys fees must be pleaded, and the
existence of the actual basis thereof must be proved. As no findings of fact
were made on the claims for damages and attorneys fees, there is no
factual basis upon which to make an award therefor.
5. REMEDIAL LAW; APPEALS; APPEAL FROM COURT OF FIRST
INSTANCE TO SUPREME COURT; ONLY QUESTIONS OF LAW
REVIEWABLE. Where the appellant directly appeals from the decision of
the trial court to the Supreme Court on questions of law, he is bound by the
judgment of the court a quo on its findings of fact.
DECISION
REYES, J.B.L., J.:
This is a direct appeal by the party who prevailed in a suit for breach of oral
contract and recovery of damages but was unsatisfied with the decision
rendered by the Court of First Instance of Manila, in its Civil Case No.
65138, because it awarded him only P31.10 out of his total claim of P690
00 for actual, temperate and moral damages and attorneys fees.
The appealed judgment, which is brief, is hereunder quoted in
full:jgc:chanrobles.com.ph
"In the early part of July, 1963, the plaintiff delivered to the defendant, who
is a typewriter repairer, a portable typewriter for routine cleaning and
servicing. The defendant was not able to finish the job after some time
despite repeated reminders made by the plaintiff. The defendant merely
gave assurances, but failed to comply with the same. In October, 1963, the
defendant asked from the plaintiff the sum of P6.00 for the purchase of
spare parts, which amount the plaintiff gave to the defendant. On October
26, 1963, after getting exasperated with the delay of the repair of the
typewriter, the plaintiff went to the house of the defendant and asked for
the return of the typewriter. The defendant delivered the typewriter in a
wrapped package. On reaching home, the plaintiff examined the typewriter
returned to him by the defendant and found out that the same was in
shambles, with the interior cover and some parts and screws missing. On
October 29, 1963. the plaintiff sent a letter to the defendant formally
demanding the return of the missing parts, the interior cover and the sum of
P6.00 (Exhibit D). The following day, the defendant returned to the plaintiff
some of the missing parts, the interior cover and the P6.00.
"On August 29, 1964, the plaintiff had his typewriter repaired by Freixas
Business Machines, and the repair job cost him a total of P89.85, including
labor and materials (Exhibit C).
"On August 23, 1965, the plaintiff commenced this action before the City
Court of Manila, demanding from the defendant the payment of P90.00 as
actual and compensatory damages, P100.00 for temperate damages,
P500.00 for moral damages, and P500.00 as attorneys fees.
"In his answer as well as in his testimony given before this court, the
defendant made no denials of the facts narrated above, except the claim of
the plaintiff that the typewriter was delivered to the defendant through a
certain Julio Bocalin, which the defendant denied allegedly because the
typewriter was delivered to him personally by the plaintiff.
"The repair done on the typewriter by Freixas Business Machines with the
total cost of P89.85 should not, however, be fully chargeable against the
defendant. The repair invoice, Exhibit C, shows that the missing parts had
a total value of only P31.10.
"WHEREFORE, judgment is hereby rendered ordering the defendant to
pay the plaintiff the sum of P31.10, and the costs of suit.
"SO ORDERED."cralaw virtua1aw library
The error of the court a quo, according to the plaintiff-appellant, Rosendo
O. Chaves, is that it awarded only the value of the missing parts of the
typewriter, instead of the whole cost of labor and materials that went into
the repair of the machine, as provided for in Article 1167 of the Civil Code,
reading as follows:jgc:chanrobles.com.ph
"ART. 1167. If a person obliged to do something fails to do it, the same
shall be executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor
of the obligation. Furthermore it may be decreed that what has been poorly
done he undone."cralaw virtua1aw library
On the other hand, the position of the defendant-appellee, Fructuoso
Gonzales, is that he is not liable at all, not even for the sum of P31.10,
because his contract with plaintiff-appellant did not contain a period, so that
plaintiff-appellant should have first filed a petition for the court to fix the
period, under Article 1197 of the Civil Code, within which the defendant
appellee was to comply with the contract before said defendant-appellee
could be held liable for breach of contract.
Because the plaintiff appealed directly to the Supreme Court and the
appellee did not interpose any appeal, the facts, as found by the trial court,
are now conclusive and non-reviewable. 1
The appealed judgment states that the "plaintiff delivered to the defendant .
. . a portable typewriter for routine cleaning and servicing" ; that the
defendant was not able to finish the job after some time despite repeated
reminders made by the plaintiff" ; that the "defendant merely gave
assurances, but failed to comply with the same" ; and that "after getting
exasperated with the delay of the repair of the typewriter", the plaintiff went
to the house of the defendant and asked for its return, which was done.
The inferences derivable from these findings of fact are that the appellant
and the appellee had a perfected contract for cleaning and servicing a
typewriter; that they intended that the defendant was to finish it at some
future time although such time was not specified; and that such time had
passed without the work having been accomplished, far the defendant
returned the typewriter cannibalized and unrepaired, which in itself is a
breach of his obligation, without demanding that he should be given more
time to finish the job, or compensation for the work he had already done.
The time for compliance having evidently expired, and there being a breach
of contract by non-performance, it was academic for the plaintiff to have
first petitioned the court to fix a period for the performance of the contract
before filing his complaint in this case. Defendant cannot invoke Article
1197 of the Civil Code for he virtually admitted non-performance by
returning the typewriter that he was obliged to repair in a non-working
condition, with essential parts missing. The fixing of a period would thus be
a mere formality and would serve no purpose than to delay (cf. Tiglao. Et.
Al. V. Manila Railroad Co. 98 Phil. 18l).
It is clear that the defendant-appellee contravened the tenor of his
obligation because he not only did not repair the typewriter but returned it
"in shambles", according to the appealed decision. For such contravention,
as appellant contends, he is liable under Article 1167 of the Civil Code. jam
quot, for the cost of executing the obligation in a proper manner. The cost
of the execution of the obligation in this case should be the cost of the labor
or service expended in the repair of the typewriter, which is in the amount
of P58.75. because the obligation or contract was to repair it.

In addition, the defendant-appellee is likewise liable, under Article 1170 of

the Code, for the cost of the missing parts, in the amount of P31.10, for in
his obligation to repair the typewriter he was bound, but failed or neglected,
to return it in the same condition it was when he received it.

Appellants claims for moral and temperate damages and attorneys fees
were, however, correctly rejected by the trial court, for these were not
alleged in his complaint (Record on Appeal, pages 1-5). Claims for
damages and attorneys fees must be pleaded, and the existence of the
actual basis thereof must be proved. 2 The appealed judgment thus made
no findings on these claims, nor on the fraud or malice charged to the
appellee. As no findings of fact were made on the claims for damages and
attorneys fees, there is no factual basis upon which to make an award
therefor. Appellant is bound by such judgment of the court, a quo, by
reason of his having resorted directly to the Supreme Court on questions of
law.

IN VIEW OF THE FOREGOING REASONS, the appealed judgment is

hereby modified, by ordering the defendant-appellee to pay, as he is
hereby ordered to pay, the plaintiff-appellant the sum of P89.85, with
interest at the legal rate from the filing of the complaint.
G.R. No. 117190 January 2, 1997
JACINTO TANGUILIG doing business under the name and style J.M.T.
ENGINEERING AND GENERAL MERCHANDISING, petitioner,
vs.
COURT OF APPEALS and VICENTE HERCE JR., respondents.
BELLOSILLO, J.:
This case involves the proper interpretation of the contract entered into
between the parties.
Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business
under the name and style J.M.T. Engineering and General Merchandising
proposed to respondent Vicente Herce Jr. to construct a windmill system
for him. After some negotiations they agreed on the construction of the
windmill for a consideration of P60,000.00 with a one-year guaranty from
the date of completion and acceptance by respondent Herce Jr. of the
project. Pursuant to the agreement respondent paid petitioner a down
payment of P30,000.00 and an installment payment of P15,000.00, leaving
a balance of P15,000.00.
On 14 March 1988, due to the refusal and failure of respondent to pay the
balance, petitioner filed a complaint to collect the amount. In
his Answer before the trial court respondent denied the claim saying that
he had already paid this amount to the San Pedro General Merchandising
Inc. (SPGMI) which constructed the deep well to which the windmill system
was to be connected. According to respondent, since the deep well formed
part of the system the payment he tendered to SPGMI should be credited
to his account by petitioner. Moreover, assuming that he owed petitioner a
balance of P15,000.00, this should be offset by the defects in the windmill
system which caused the structure to collapse after a strong wind hit their
place.1
Petitioner denied that the construction of a deep well was included in the
agreement to build the windmill system, for the contract price of
P60,000.00 was solely for the windmill assembly and its installation,
exclusive of other incidental materials needed for the project. He also
disowned any obligation to repair or reconstruct the system and insisted
that he delivered it in good and working condition to respondent who
accepted the same without protest. Besides, its collapse was attributable to
a typhoon, a force majeure, which relieved him of any liability.
In finding for plaintiff, the trial court held that the construction of the deep
well was not part of the windmill project as evidenced clearly by the letter
proposals submitted by petitioner to respondent.2 It noted that "[i]f the
intention of the parties is to include the construction of the deep well in the
project, the same should be stated in the proposals. In the absence of such
an agreement, it could be safely concluded that the construction of the
deep well is not a part of the project undertaken by the plaintiff."3 With
respect to the repair of the windmill, the trial court found that "there is no
clear and convincing proof that the windmill system fell down due to the
defect of the construction."4
The Court of Appeals reversed the trial court. It ruled that the construction
of the deep well was included in the agreement of the parties because the
term "deep well" was mentioned in both proposals. It also gave credence to
the testimony of respondent's witness Guillermo Pili, the proprietor of
SPGMI which installed the deep well, that petitioner Tanguilig told him that
the cost of constructing the deep well would be deducted from the contract
price of P60,000.00. Upon these premises the appellate court concluded
that respondent's payment of P15,000.00 to SPGMI should be applied to
his remaining balance with petitioner thus effectively extinguishing his
contractual obligation. However, it rejected petitioner's claim of force
majeure and ordered the latter to reconstruct the windmill in accordance
with the stipulated one-year guaranty.
His motion for reconsideration having been denied by the Court of Appeals,
petitioner now seeks relief from this Court. He raises two issues: firstly,
whether the agreement to construct the windmill system included the
installation of a deep well and, secondly, whether petitioner is under
obligation to reconstruct the windmill after it collapsed.
We reverse the appellate court on the first issue but sustain it on the
second.
The preponderance of evidence supports the finding of the trial court that
the installation of a deep well was not included in the proposals of
petitioner to construct a windmill system for respondent. There were in fact
two (2) proposals: one dated 19 May 1987 which pegged the contract price
at P87,000.00 (Exh. "1"). This was rejected by respondent. The other was
submitted three days later, i.e., on 22 May 1987 which contained more
specifications but proposed a lower contract price of P60,000.00 (Exh. "A").
The latter proposal was accepted by respondent and the construction
immediately followed. The pertinent portions of the first letter-proposal
(Exh. "1") are reproduced hereunder
In connection with your Windmill System and Installation, we would
like to quote to you as follows:
One (1) Set Windmill suitable for 2 inches
diameter deepwell, 2 HP, capacity, 14 feet in
diameter, with 20 pieces blade, Tower 40 feet high,
including mechanism which is not advisable to
operate during extra-intensity wind. Excluding
cylinder pump.
UNIT
CONTR
ACT
PRICE
P87,000
.00
The second letter-proposal (Exh. "A") provides as follows:
In connection with your Windmill system, Supply of Labor Materials
and Installation, operated water pump, we would like to quote to
you as
follows
One (1) set Windmill assembly for 2 inches or 3
inches deep-well pump, 6 Stroke, 14 feet diameter,
1-lot blade materials, 40 feet Tower complete with
standard appurtenances up to Cylinder pump,
shafting U.S. adjustable International Metal.
One (1) lot Angle bar, G.I. pipe, Reducer
Coupling, Elbow Gate valve, cross Tee coupling.
One (1) lot Float valve.
One (1) lot Concreting materials foundation.
F. O. B.
Laguna
Contract
Price
P60,000
.00
Notably, nowhere in either proposal is the installation of a deep well
mentioned, even remotely. Neither is there an itemization or description of
the materials to be used in constructing the deep well. There is absolutely
no mention in the two (2) documents that a deep well pump is a component
of the proposed windmill system. The contract prices fixed in both
proposals cover only the features specifically described therein and no
other. While the words "deep well" and "deep well pump" are mentioned in
both, these do not indicate that a deep well is part of the windmill system.
They merely describe the type of deep well pump for which the proposed
windmill would be suitable. As correctly pointed out by petitioner, the words
"deep well" preceded by the prepositions "for" and "suitable for" were
meant only to convey the idea that the proposed windmill would be
appropriate for a deep well pump with a diameter of 2 to 3 inches. For if the
real intent of petitioner was to include a deep well in the agreement to
construct a windmill, he would have used instead the conjunctions "and" or
"with." Since the terms of the instruments are clear and leave no doubt as
to their meaning they should not be disturbed.
Moreover, it is a cardinal rule in the interpretation of contracts that the
intention of the parties shall be accorded primordial consideration5 and, in
case
of doubt, their contemporaneous and subsequent acts shall be principally
considered.6 An examination of such contemporaneous and subsequent
acts of respondent as well as the attendant circumstances does not
persuade us to uphold him.
Respondent insists that petitioner verbally agreed that the contract price of
P60,000.00 covered the installation of a deep well pump. He contends that
since petitioner did not have the capacity to install the pump the latter
agreed to have a third party do the work the cost of which was to be
deducted from the contract price. To prove his point, he presented
Guillermo Pili of SPGMI who declared that petitioner Tanguilig approached
him with a letter from respondent Herce Jr. asking him to build a deep well
pump as "part of the price/contract which Engineer (Herce) had with Mr.
Tanguilig."7
We are disinclined to accept the version of respondent. The claim of Pili
that Herce Jr. wrote him a letter is unsubstantiated. The alleged letter was
never presented in court by private respondent for reasons known only to
him. But granting that this written communication existed, it could not have
simply contained a request for Pili to install a deep well; it would have also
mentioned the party who would pay for the undertaking. It strains credulity
that respondent would keep silent on this matter and leave it all to
petitioner Tanguilig to verbally convey to Pili that the deep well was part of
the windmill construction and that its payment would come from the
contract price of P60,000.00.
We find it also unusual that Pili would readily consent to build a deep well
the payment for which would come supposedly from the windmill contract
price on the mere representation of petitioner, whom he had never met
before, without a written commitment at least from the former. For if indeed
the deep well were part of the windmill project, the contract for its
installation would have been strictly a matter between petitioner and Pili
himself with the former assuming the obligation to pay the price. That it was
respondent Herce Jr. himself who paid for the deep well by handing over to
Pili the amount of P15,000.00 clearly indicates that the contract for the
deep well was not part of the windmill project but a separate agreement
between respondent and Pili. Besides, if the price of P60,000.00 included
the deep well, the obligation of respondent was to pay the entire amount to
petitioner without prejudice to any action that Guillermo Pili or SPGMI may
take, if any, against the latter. Significantly, when asked why he tendered
payment directly to Pili and not to petitioner, respondent explained, rather
lamely, that he did it "because he has (sic) the money, so (he) just paid the
money in his possession."8
Can respondent claim that Pili accepted his payment on behalf of
petitioner? No. While the law is clear that "payment shall be made to the
person in whose favor the obligation has been constituted, or his successor
in interest, or any person authorized to receive it,"9 it does not appear from
the record that Pili and/or SPGMI was so authorized.
Respondent cannot claim the benefit of the law concerning "payments
made by a third person."10 The Civil Code provisions do not apply in the
instant case because no creditor-debtor relationship between petitioner and
Guillermo Pili and/or SPGMI has been established regarding the
construction of the deep well. Specifically, witness Pili did not testify that he
entered into a contract with petitioner for the construction of respondent's
deep well. If SPGMI was really commissioned by petitioner to construct the
deep well, an agreement particularly to this effect should have been
entered into.
The contemporaneous and subsequent acts of the parties
concerned effectively belie respondent's assertions. These
circumstances only show that the construction of the well by SPGMI
was for the sole account of respondent and that petitioner merely
supervised the installation of the well because the windmill was to
be connected to it. There is no legal nor factual basis by which this
Court can impose upon petitioner an obligation he did not expressly
assume nor ratify.
The second issue is not a novel one. In a long line of cases 11 this
Court has consistently held that in order for a party to claim
exemption from liability by reason of fortuitous event under Art.
1174 of the Civil Code the event should be the sole and proximate
cause of the loss or destruction of the object of the contract.
In Nakpil vs. Court of Appeals,12 four (4) requisites must concur: (a)
the cause of the breach of the obligation must be independent of
the will of the debtor; (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner; and, (d) the
debtor must be free from any participation in or aggravation of the
injury to the creditor.
Petitioner failed to show that the collapse of the windmill was due
solely to a fortuitous event. Interestingly, the evidence does not
disclose that there was actually a typhoon on the day the windmill
collapsed. Petitioner merely stated that there was a "strong wind."
But a strong wind in this case cannot be fortuitous unforeseeable
nor unavoidable. On the contrary, a strong wind should be present
in places where windmills are constructed, otherwise the windmills
will not turn.

The appellate court correctly observed that "given the newly-

constructed windmill system, the same would not have collapsed
had there been no inherent defect in it which could only be
attributable to the appellee."13 It emphasized that respondent had in
his favor the presumption that "things have happened according to
the ordinary course of nature and the ordinary habits of life."14 This
presumption has not been rebutted by petitioner.

Finally, petitioner's argument that private respondent was already in

default in the payment of his outstanding balance of P15,000.00
and hence should bear his own loss, is untenable. 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.15 When the windmill failed to function properly
it became incumbent upon petitioner to institute the proper repairs
in accordance with the guaranty stated in the contract. Thus,
respondent cannot be said to have incurred in delay; instead, it is
petitioner who should bear the expenses for the reconstruction of
the windmill. Article 1167 of the Civil Code is explicit on this point
that if a person obliged to do something fails to do it, the same shall
be executed at his cost.

WHEREFORE, the appealed decision is MODIFIED. Respondent

VICENTE HERCE JR. is directed to pay petitioner JACINTO M.
TANGUILIG the balance of P15,000.00 with interest at the legal
rate from the date of the filing of the complaint. In return, petitioner
is ordered to "reconstruct subject defective windmill system, in
accordance with the one-year guaranty"16 and to complete the same
within three (3) months from the finality of this decision.

SO ORDERED.

Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.