Danguilan Vs.

IAC

Facts:
A parcel of lot owned by Domingo Melad was being claimed by petitioner Felix Danguilan and
respondent Apolonia Melad.
Apolonia Melad contends that she acquired the property when Dominggo Melad sold it to her
when she was just 3 years old in which her mother paid the consideration. (Evidence: Deed of
sale dated December 4, 1943 with a sum consideration of P80.00.)
Apolonia contended that she just moved out of the farm only in 1946 when Felix Danguilan
approached her and asked permission to cultivate the land and to stay therein.
Dangguilan, on the other hand, presented for his part 2 documents executed in September 14,
1941 and December 18, 1943, to prove his claim that the properties were given to him by
Dominggo Melad through an onerous donation. The onerous part of the donation includes the
taking care of the farm and the arrangement of the burial of Dominggo.
RTC ruled in favor of Danguilan. CA reversed RTCs ruling. It ruled that there was a donation,
which was void for failing to comply with the formalities.

Issues:
1. Who has the better right between parties? Petitioner Danguilan.
2. WON there was delivery in favor of respondent for the alleged sale? NO.

Held:

Domingo Melad intended to donate the property to petitioner Danguilan

It is our view, considering the language of the two instruments, that Domingo Melad did intend to
donate the properties to the petitioner Danguilan. We do not think, however, that the donee was
moved by pure liberality. While truly donations, the conveyances were onerous donations as the
properties were given to petitioner Danguilan in exchange for his obligation to take care of the donee
for the rest of his life and provide for his burial.

Hence, it was not covered by the rule in Article 749 of the Civil Code requiring donations of real
properties to be effected through a public instrument, and the 2 private documents remain valid.

Assuming there was a valid deed of sale, PR Melad failed to show that it was consummated
(no actual delivery + no possession)
At any rate, even assuming the validity of the deed of sale, the record shows that Apolonia Melad did
not take possession of the disputed properties and indeed waited until 1962 to file this action for
recovery of the lands from petitioner Danguilan. If she did have possession, she transferred the same
to Danguilan in 1946, by her own sworn admission, and moved out to another lot belonging to her
step-brother.

Her claim that the petitioner was her tenant (later changed to administrator) was disbelieved by the
trial court, and properly so, for its inconsistency. In short, she failed to show that she consummated
the contract of sale by actual delivery of the properties to her and her actual possession thereof in
concept of purchaser-owner.

No constructive delivery allowed if property is in actual and adverse possession of a third

person
In our jurisdiction, it is a fundamental and elementary principle that ownership does not pass be mere
stipulation but only by delivery and the execution of a public document does not constitute sufficient
delivery where the property involved is in the actual and adverse possession of third persons.

Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a well- known
doctrine of law that "non mudis pactis sed traditione dominia rerum transferuntur".

In conformity with said doctrine as established in paragraph 2 of article 609 of said code, that "the
ownership and other property rights are acquired and transmitted by law, by gift, by testate or
intestate succession, and, in consequence of certain contracts, by tradition".

In accordance with such disposition and provisions the delivery of a thing constitutes a necessary and
indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a
contract.

One who is in possession is presumed to be the owner

In this case, there no dispute that it is Danguilan and not Melad who is in actual possession of the
litigated properties. And even if the claim of petitioner and respondent are weak, judgment must be in
favor of the Danguilan for one who is in possession is presumed to be the owner, and cannot be
obliged to show or prove a better right.

FACTS:
Apolinia sought the recovery of a farm lot and house from Danguilan. She averred that she acquired the property
through sale. Danguilan on the other hand, contends that the property is his by virtue of a donation.

HELD:
The donation being of real property, it is void for not complying with the requirements given by law. Donation of real
property should be in a public instrument. In this case, it wasnt.

PASAGUI V. VILLABLANCA (November 10, 1975)

FACTS:

Plaintiffs Calixto Pasagui and Fausta Mosar bought a property in Leyte from Estaquia and Catalina Bocar for P2,800.
Before they could take possession of the property, defendant spouses Ester T. Villablanca and Zosimo Villablanca took
possession of it and harvested from the coconut plantation thereon. Plaintiffs demanded the return of the property but the
defendants refused.

Plaintiffs filed a case in the CFI but respondents contend that the case is a forcible entry and as such, CFI has no
jurisdiction.

ISSUE:

WON the case is of forcible entry.

HELD:

In order that an action may be considered as one for forcible entry, it is not only necessary that the plaintiff should allege
his prior physical possession of the property but also that he was deprived of his possession by any of the means
provided in section 1, Rule 70 of the Revised Rules of Court.

It is true that the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land subject
of the sale. This presumptive delivery only holds true when there is no impediment that may prevent the passing of the
property from the hands of the vendor into those of the vendee. It can be negated by the reality that the vendees actually
failed to obtain material possession of the land subject of the sale.

PERFECTO DY, JR. vs. COURT OF APPEALS, GELAC

TRADING INC., and ANTONIO V. GONZALES
Posted on September 21, 2013 by winnieclaire

Standard

G.R. No. 92989. July 8, 1991.

FACTS:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers.
Sometime in 1979, Wilfredo Dy purchased a truck and a farm tractor through financing extended by Libra Finance and Investment
Corporation (Libra). Both truck and tractor were mortgaged to Libra as security for the loan.
The petitioner wanted to buy the tractor from his brother so, he wrote a letter to Libra requesting that he be allowed to purchase from
Wilfredo Dy the said tractor and assume the mortgage debt of the latter.
Libra thru its manager, Cipriano Ares approved the petitioners request.
Wilfredo Dy executed a deed of absolute sale in favor of the petitioner over the tractor in question. At this time, the subject tractor was
in the possession of Libra Finance due to Wilfredo Dys failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate release could not be effected because Wilfredo
Dy had obtained financing not only for said tractor but also for a truck and Libra insisted on full payment for both.
Petitioner was able to convince his sister to purchase the truck so that full payment can be made for both
A PNB check was issued in the amount of P22,000.00 in favor of Libra, thus settling in full the indebtedness of Wilfredo Dy with the
financing firm. Libra insisted that it be cleared first before releasing the chattels
Meanwhile, Civil Case entitled Gelac Trading, Inc. v. Wilfredo Dy, a collection case to recover the sum of P12,269.80 was pending in
another court
On the strength of an alias writ of execution issued, the provincial sheriff was able to seize and levy on the tractor which was in the
premises of Libra in Carmen, Cebu. The tractor was subsequently sold at public auction where Gelac Trading was the alone bidder.
Later, Gelac sold the tractor to one of its stockholders, Antonio Gonzales.
It was only when the check was that the petitioner learned about GELAC having already taken custody of the subject tractor
petitioner filed an action to recover the subject tractor against GELAC Trading
the RTC rendered judgment in favor of the petitioner
Court of Appeals reversed the decision of the RTC (held that the tractor in question still belonged to Wilfredo Dy when it was seized
and levied by the sheriff)

ISSUE: WHETHER OR NOT OWNERSHIP OF THE FARM TRACTOR HAD ALREADY PASSED TO HEREIN PETITIONER WHEN
SAID TRACTOR WAS LEVIED ON BY THE SHERIFF PURSUANT TO AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER
CASE IN FAVOR OF RESPONDENT GELAC TRADING INC.

HELD: YES

SPECIAL CONTRACTS; CHATTEL MORTGAGE; RIGHT OF MORTGAGOR TO SELL THE PROPERTY MORTGAGED; RULE.
The mortgagor who gave the property as security under a chattel mortgage did not part with the ownership over the same. He had the
right to sell it although he was under the obligation to secure the written consent of the mortgagee or he lays himself open to criminal
prosecution under the provision of Article 319 par. 2 of the Revised Penal Code. And even if no consent was obtained from the
mortgagee, the validity of the sale would still not be affected.
APPLICABLE IN CASE AT BAR. We see no reason why Wifredo Dy, as the chattel mortgagor can not sell the subject tractor. There
is no dispute that the consent of Libra Finance was obtained in the instant case. Libra allowed the petitioner to purchase the tractor and
assume the mortgage debt of his brother. The sale between the brothers was therefore valid and binding as between them and to the
mortgagee, as well.

REMEDY OF MORTGAGEE IN CASE MORTGAGOR FAILED TO PAY THE DEBT. It was Libra Finance which was in possession
of the subject tractor due to Wilfredos failure to pay the amortization as a preliminary step to foreclosure. As mortgagee, he has the
right of foreclosure upon default by the mortgagor in the performance of the conditions mentioned in the contract of mortgage. The law
implies that the mortgagee is entitled to possess the mortgaged property because possession is necessary in order to enable him to
have the property sold. While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor, his right of
ownership was not divested from him upon his default. Neither could it be said that Libra was the owner of the subject tractor because
the mortgagee can not become the owner of or convert and appropriate to himself the property mortgaged (Article 2088, Civil Code).
Said property continues to belong to the mortgagor. The only remedy given to the mortgagee is to have said property sold at public
auction and the proceeds of the sale applied to the payment of the obligation secured by the mortgagee (See Martinez vs. PNB, 93
Phil. 765, 767 [1953]). There is no showing that Libra Finance has already foreclosed the mortgage and that it was the new owner of
the subject tractor. Undeniably, Libra gave its consent to the sale of the subject tractor to the petitioner. It was aware of the transfer of
rights to the petitioner.

PURCHASER OF MORTGAGED PROPERTY STEPS INTO THE SHOES OF THE MORTGAGOR. Where a third person purchases
the mortgaged property, he automatically steps into the shoes of the original mortgagor. His right of ownership shall be subject to the
mortgage of the thing sold to him. In the case at bar, the petitioner was fully aware of the existing mortgage of the subject tractor to
Libra. In fact, when he was obtaining Libras consent to the sale, he volunteered to assume the remaining balance of the mortgage debt
of Wilfredo Dy which Libra undeniably agreed to.
SALE; DELIVERY OF PROPERTY VESTS OWNERSHIP TO THE VENDEE. Article 1496 of the Civil Code states 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 Articles 1497 to 1501
or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. We agree with the
petitioner that Articles 1498 and 1499 are applicable in the case at bar.
RULE ON CONSTRUCTIVE DELIVERY. In the instant case, actual delivery of the subject tractor could not be made. However, there
was constructive delivery already upon the execution of the public instrument pursuant to Article 1498 and upon the consent or
agreement of the parties when the thing sold cannot be immediately transferred to the possession of the vendee (Article 1499).

CONSUMMATION OF SALE; NOT DEPENDENT ON THE ENCASHMENT OF CHECK. The payment of the check was actually
intended to extinguish the mortgage obligation so that the tractor could be released to the petitioner. It was never intended nor could it
be considered as payment of the purchase price because the relationship between Libra and the petitioner is not one of sale but still a
mortgage. The clearing or encashment of the check which produced the effect of payment determined the full payment of the money
obligation and the release of the chattel mortgage. It was not determinative of the consummation of the sale. The transaction between
the brothers is distinct and apart from the transaction between Libra and the petitioner. The contention, therefore, that the
consummation of the sale depended upon the encashment of the check is untenable.

EVIDENCE; FRAUD; MUST BE ESTABLISHED BY CLEAR CONVINCING EVIDENCE. There is no sufficient evidence to show that
the sale of the tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo and Perfecto are brothers, this fact alone does
not give rise to the presumption that the sale was fraudulent. Relationship is not a badge of fraud (Goquiolay vs. Sycip, 9 SCRA 663
[1963]). Moreover, fraud can not be presumed; it must be established by clear convincing evidence.

DY V. CA (July 08, 1991)

FACTS:

Wilfredo Dy bought a truck and tractor from Libra Finance Corporation. Both truck and tractor was also mortgage to Libra
as security for a loan and as such, they took possession of it. Brother of Wilfredo, Perfecto Dy and sister Carol Dy-Seno
requested Libra that they be allowed to buy the property and assume the mortgage debt. Libra agreed to the request.

Meanwhile, a collection suit was filed against Wilfredo Dy by Gelac Trading Inc. On the strength of a writ of execution, the
sheriff was able to obtain the tractor on the premises of Libra. It was sold in a public auction in which Gelac Trading was
the lone bidder. Gelac subsequently sold it to one of their stockholders.

The respondents claim that at the time of the execution of the deed of sale, no constructive delivery was effected since
the consummation of the sale depended upon the clearance and encashment of the check which was issued in payment
of the subject tractor
ISSUE:

WON the William Dy is still the owner of the tractor when it was obtained through the writ of execution.

HELD:

The tractor was not anymore in possession of William Dy when it was obtained by the sheriff because he already sold it to
his brother.

William Dy has the right to sell his property even though it was mortgage because in a mortgage, the mortgagor doesnt
part with the ownership over the property. He is allowed to sell the property as long as there is consent from the
mortgagee such as in this case. But even if there is no consent given, the sale would still be valid without prejudice to the
criminal action against the mortgagor.

When William Dy sold the tractor, he already transferred the ownership of it because NCC states that the ownership of
the thing sold is acquired by the vendee from the moment it is delivered to him or in any other manner signing an
agreement that the possession is transferred from the vendor to the vendee. In the instant case, actual delivery of the
subject tractor could not be made but there was constructive delivery already upon the execution of a public instrument
which in this case is a deed of sale.

The payment of the check was actually intended to extinguish the mortgage obligation.

POWER COMMERCIAL V. CA (June 20, 1997)

FACTS:

Petitioner asbestos manufacturer Power Commercial and industrial corporation bought the property of spouses Reynaldo
and Angelita Quiambao located in Makati City.

Since there are lessees occupying the subject land, part of the deed of sale is a warranty of respondents that will defend
its title and peaceful possession in favor of the petitioners.

The property is mortgage to PNP and as such, petitioners filed a request to assume responsibility of the mortgage.
Because of petitioners failure to produce the required papers, their petition was denied.

Petitioners allege that the contract should be rescinded because of failure of delivery.

ISSUE:

WON the contract is recissible due to breach of contract.

HELD:

There is no breach of contact in this case since there is no provision in the contract that imposes the obligation to the
respondents to eject the people occupying the property.

There was also a constructive delivery because the deed of sale was made in a public document. The contention of the
petitioners that there could be no constructive delivery because the respondents is not in possession of the property is of
no merit. What matters in a constructive delivery is control and not possession. Control was placed in the hands of the
petitioners that is why they were able to file an ejectment case. Prior physical delivery or possession is not legally required
and the execution of the deed of sale is deemed equivalent to delivery.

Philippine Suburban Dev Corp vs Auditor General

G.R. No. L-19545
Subject: Sales
Doctrine: Constructive or legal delivery
Facts:
On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the
Committee created to survey suitable lots for relocating squatters in Manila and suburbs, approved in principle
the acquisition by the Peoples Homesite and Housing Corporation of the unoccupied portion of the Sapang
Palay Estate in Sta. Maria, Bulacan and of another area either in Las Pias or Paraaque, Rizal, or Bacoor,
Cavite for those who desire to settle south of Manila. On June 10, 1960, the Board of Directors of the PHHC
passed Resolution No. 700 (Annex C) authorizing the purchase of the unoccupied portion of the Sapang Palay
Estate at P0.45 per square meter subject to the following conditions precedent:
3. That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the
purchase and development of this property from the proposed P4.5 million bond issue to be absorbed by the
GSIS.
4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated
February 3, 1959.

On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the
amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the
entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter.

On December 29,1960, Petitioner Philippine Suburban Development Corporation, as owner of the unoccupied
portion of the Sapang Palay Estate and the Peoples Homesite and Housing Corporation, entered into a contract
embodied in a public instrument entitled Deed of Absolute Sale whereby the former conveyed unto the latter
the two parcels of land abovementioned. This was not registered in the Office of the Register of Deeds until
March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money needed
for registration expenses.

In the meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in
conformity with Executive Order No. 290, expressed objections thereto and requested a re-examination of the
contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda was assessed at
P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased amount of P4,898,110.00.

It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC
acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed
immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims
in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying.
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of
P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said
amount represented the realty tax due on the property involved for the calendar year 1961. Petitioner, through
the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and
thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a
refund of the amount so paid. Upon recommendation of the Provincial Treasurer of Bulacan, said request was
denied by the Secretary of Finance in a letter-decision dated August 22, 1961.
**Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of
Absolute Sale on December 29, 1960. It is now claimed in this appeal that the Auditor General erred in
disallowing the refund of the real estate tax in the amount of P30,460.90 because aside from the presumptive
delivery of the property by the execution of the deed of sale on December 29, 1960, the possession of the
property was actually delivered to the vendee prior to the sale, and, therefore, by the transmission of ownership
to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently, under no
obligation to pay the real property tax for the year 1961.
**Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil
Code does not apply because of the requirement in the contract that the sale shall first be approved by the
Auditor General, pursuant to the Executive Order.

ISSUE: WON there was already a valid transfer of ownership between the parties.
HELD:
Considering the aforementioned approval and authorization by the President of the Philippines of the specific
transaction in question, the prior approval by the Auditor General envisioned by Administrative Order would
therefore, not be necessary.
Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or
constructive (constructive tradition). 2 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. 3
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, when a certain date is fixed for the purchaser to
take possession of the property subject of the conveyance, or where, in case of sale by installments, it is
stipulated that until the last installment is made, the title to the property should remain with the vendor, or when
the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, or 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.
In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control
over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed
of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase
price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary,
the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer,
but title passes by the delivery of the goods.
WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under protest to the
Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount of
P30,460,90, is hereby ordered refunded. Without any pronouncement as to costs.

110 Phil. 482

REYES, J.B.L., J.:

From the order of the Court of First Instance of Manila, dated August 10, 1955, denying
its petition to exclude certain pieces of steel matting from the assets of the insolvent M.
P. Malabanan; the Board of Liquidators appealed to the Court of Appeals. The latter
certified the case to this Court on the ground that only questions of law are involved.
The Board of Liquidators (hereinafter referred to as the Board) is an agency of the
Government created under Executive Order No. 372 (November 24, 1950), and,
pursuant to Executive Order No. 377 (December 1, 1950), took over the functions of the
defunct Surplus Property Liquidating Committee.
On June 14, 1952 Melecio Malabanan entered into an agreement with the Board for the
salvage of surplus properties sunk in territorial waters off the provinces of Mindoro, La
Union, and Batangas (Exhibit "A"). By its terms, Malabanan was to commence
operations within 30 days from execution of said contract, which was to be effective for
a period of one (1) year from the start of operations, extendible for a total period of not
more than six (6) months. On June 10, 1953, Malabanan requested for an extension of
one (1) year for the salvage in waters of Mindoro and Batangas; and the Board extended
the contract up to November 30, 1953. On November 18, 1953, Malabanan requested a
second extension of one (1) more year for the waters of Occidental Mindoro, and the
Board again extended the contract up to August 31, 1954. Malabanan submitted a
recovery report dated July 26, 1954, wherein it is stated that he had recovered a total of
13,107 pieces of steel mattings, as follows:
1. December, 1953-April 30, 1951
2,655
..........
2. May 1, 1954-June 30, 1954
10,552
...............
13,107 (pieces)
Four months previously, Malabanan had entered into an agreement with Exequiel
Floro, dated March 31, 1954 (Exhibit 1, Floro), in which, among other things, it was
agreed that Floro would advance to Malabanan certain sums of money, not to exceed
P25,000.00, repayment thereof being secured by quantities of steel mattings which
Malabanan would consign to Floro; that said advances were to be paid within a certain
period, and upon default at the expiration thereof, Floro was authorized to sell
whatever steel mattings were in his possession under said contract, in an amount
sufficient to satisfy the advances. Pursuant thereto, Floro claims to have made total
advances to the sum of P24,224.50.
It appears that as Malabanan was not able to repay Floro's advances, the latter, by a
document dated August 4, 1954, sold 11,047 pieces of steel mattings to Eulalio Legaspi
for the sum of P24,303.40.
Seventeen days later, on August 21, 1954, Malabanan filed in the Court of First Instance
of Manila a petition for voluntary insolvency, attaching thereto a Schedule of Accounts,
in which the Board was listed as one of the creditors for P10,874.46, and Exequiel Floro
for P24,220.50, the origin of the obligations being described as "Manila Royalty" and
"Salvaging Operations", respectively. Also attached was an Inventory of Properties,
listing certain items of personal property allegedly aggregating P33,707.00 in value. In
this list were included 11,167 pieces of steel mattings with an alleged estimated value of
P33,501.00.
Soon after, the Board, claiming to be the owner of the listed steel matting, filed a
petition to exclude them from the inventory; and to make the insolvent account for a
further 1,940 pieces of steel matting, the difference between the number stated in the
insolvent's recovery report of July 26, 1954 and that stated in the inventory. Exequiel
Floro opposed the Board's petition and claimed that the steel matting listed had
become the property of Eulalio Legaspi by virtue of a deed of sale in his favor, executed
by Floro pursuant to the latter's contract with Malabanan on March 31, 1954. The court
below, after reception of evidence as to the genuineness and due execution of the deed
of sale to Legaspi, as well as of the contract between Malabanan and Floro, denied the
Board's petition, declaring that Malabanan had acquired ownership over the steel
mattings under his contract with the Board; that Exequiel Floro was properly
authorized to dispose of the steel mattings under Floro's contract with Malabanan; and
that the sale to Eulalio Legaspi was valid and not contrary to the Insolvency Law.
In this appeal, the Board contends that Malabanan did not acquire ownership over the
steel mattings due to his failure to comply with the terms of the contract, allegedly
constituting conditions precedent for the transfer of title, namely: payment of the price;
audit and check as to the nature, quantity and value of properties salvaged; weighing of
the salvaged properties to be conducted jointly by representatives of the Board and of
Malabanan; determination of the site for storage; audit and verification of the recovery
reports by government auditors; and filing of a performance bond.
We are of the opinion, and so hold, that the contract (Exhibit "A") between Malabanan
and the Board had the effect of vesting Malabanan with title to, or ownership of, the
steel mattings in question as soon as they were brought up from the bottom of the sea.
This is shown by pertinent provisions of the contract as follows:
"10. For and in consideration of the assignment by the Board of Liquidators to the
Contractor (Malabanan) of all right, title and interest in and to all surplus properties
salvaged by the Contractor under this contract, the Contractor shall pay to the
Government Ninety Pesos (P90.00) per long ton (2,240 lbs.) of surplus properties
recovered.
"11. Payment of the agreed price shall be made monthly during the first ten (10) days of
every-month on the basis of recovery reports of sunken surplus properties salvaged
during, the preceding month, duly verified and audited by the authorized
representative of the Board of Liquidators."
That Malabanan was required under the contract to post a bond of P10,000.00 to
guarantee compliance with the terms and conditions of the contract; that the
operations for salvage were entirely at Malabanan's expense and risks; that gold, silver,
copper, coins, currency, jewelry, precious stones, etc. were excepted from the contract,
and were instead required to be turned over to the Board for disposition; that the
expenses for storage, including guard service, were for Malabanan's account all these
circumstances indicated that ownership of the goods passed to Malabanan as soon as
they were recovered or salvaged (i.e., as soon as the salvor had gained effective
possession of the goods), and not only after payment of the stipulated price.
While there can be reservation of title in the seller until full payment of the price
(Article 1478, N.C.C.), or, until fulfillment of a condition (Article .1605, N.C.C.); and
while execution of a public instrument amounts to delivery only when from the deed
the contrary does not appear or cannot clearly be inferred (Article 1498, supra), there
is nothing in the said contract which may be deemed a reservation of title, or from
which it, may clearly be inferred that delivery was not intended.
The contention that there was no delivery is incorrect; While there was no physical
tradition, there was one by agreement (traditio longa manu) in conformity with Article
1499 of the Civil Code, .
"Article 1499 The delivery of movable property may likewise be made by the mere
consent or agreement of the contracting parties, if the thing sold cannot be transferred
to the possession of the vendee at the time of the sale. * * *"
As observed earlier, there is nothing in the terms of the public instrument in question
from which an intent to withhold delivery or transfer of title may be inferred.
The Board also contends that as no renewal of the bond required was filed for the
extension of the contract, it ceased to have any force and effect; and, as the steel
mattings were recovered during the extended period of the contract, Malabanan did
not acquire any rights thereto. The pertinent portion of the contract provides:
"12. Jointly with the execution of this contract, the Contractor shall file a bond in the
amount of Ten Thousand (P10,000.00) Pesos to guarantee his faithful compliance with
the terms and conditions herein; Provided, that this contract shall not be considered to
have been executed notwithstanding the signing hereof by the parties until said bond"
shall have been properly filed."
Malabanan filed a bond dated June 10, 1952, effective for one (1) year, or up to June 10,
1953. The principal contract, executed on June 14, 1952, was first extended to
November 30, 1953, and finally, to August 31, 1954. As can be seen, there was no longer
any bond from June 11, 1953 to August 31, 1954.
The lapse of the bond did not extinguish the contract between Malabanan and the
Board. The requirement that a bond be posted was already complied with when
Malabanan filed the bond dated June 10, 1952. A bond merely stands as guaranty for a
principal obligation which may exist independently of said bond, the latter being
merely an accessory contract (Valencia vs. RFC & C.A., 103 Phil., 444). Significantly, its
purpose, as per the terms of the contract, was "to guarantee his (Malabanan's) faithful
compliance with the terms and conditions herein"; and, for violation of the contract,
the Board may declare "the bond forfeited" (par. 13). Being for its benefit, the Board
could legally waive the bond requirement (Valencia vs. RFC, et al., supra.), and it did
so when, the bond already having expired, it extended the contract not only once, but
twice. In none of the resolutions extending the contract (Annexes "C" & "E", pp. 108-
112, Record on Appeal) was there a requirement that the bond be renewed, in the face
of the first indorsement by the Executive Officer of the Board (Annex "F", pp. 112-113,
Record on Appeal) recommending that Malabanan's request for a second extension be
granted "provided the bond be originally posted should continue."
There is no merit to the suggestion that there being a novation, Article 1299 of the Civil
Code should govern. Novation is never presumed, it being required that the intent to
novate be expressed clearly and unequivocally, or that the terms of the new agreement
be incompatible with the old contract (Article 1292, N.C.C.; Martinez vs. Cavives, 25
Phil. 581; Tiu Siuce vs. Habana, 45 Phil. 707; Pablo vs. Sapungan, 71 Phil. 145;
Young vs. Villa, 93 Phil., 21; 49 Off. Gaz., [5] 1818.) Here there was neither express
novation nor incompatibility from which it could be implied. Moreover, a mere
extension of the term (period) for payment or performance is not novation
(Inchausti vs. Yulo, 34 Phil. 978; Zapanta vs. De Rotaeche, 21 Phil. 154; Pablo vs.
Sapungan, supra) ; and, while the extension covered only some of the areas originally
agreed upon, this change did not alter the essence of the contract (cf. Ramos vs.
Gibbon, 67 Phil., 371; Bank of P.I. vs. Herridge, 47 Phil., 57).
It is next contended that the sale by Floro to Legaspi on August 4, 1954 (within 30 days
prior to petition for insolvency) was void as a fraudulent transfer under Section 70 of
the Insolvency Law. The court below held that the sale to Legaspi was valid and not
violative of Section 70; but there having been no proceedings to determine whether the
sale was fraudulent, we think it was premature for the court below to decide this point,
especially because under section 36, No. 8, of the Insolvency Act, all proceedings to set
aside fraudulent transfers should be brought and prosecuted by the assignee, who can
legally represent all the creditors of the insolvent (Maceda, et al., vs. Hernandez, et al.,
70 Phil., 261). To allow a single creditor to bring such a proceeding would invite a
multiplicity of suits, since the resolution of his case would not bind the other creditors,
who may refile the same claim independently, with diverse proofs, and possibly give
rise to contradictory rulings by the courts.
The order appealed from is hereby affirmed in so far as it declares the disputed goods
to be the property of the insolvent; but without prejudice to the right of the assignee in
insolvency to take whatever action may be proper to attack the alleged fraudulent
transfer of the steel matting to Eulalio Legaspi, and to make the proper parties account
for the difference between the number of pieces of steel matting stated in the
insolvent's recovery report, Annex "B" (13,107), and that stated in his inventory
(11,167). Costs against appellant.

STA.ANA V. HERNANDEZ (January 17, 1966)

FACTS:

Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo sold a land in Bulacan to respondent Rosa Hernandez for
P11,000 lump sum. (there were two other previous sales to different vendees of other portions of the land)
The boundaries of the land were stated in the deed of sale and its approximate land area.

Petitioners-spouses caused the preparation of the subdivision plan but Hernandez didnt agree to the partition. As such,
petitioners-spouses filed a case alleging that Hernandez is occupying in excess of 17000 square meter of the land sold.
Hernandez claims that the excess area is part of the land she bought.

ISSUE:

WON the excess area occupied by Hernandez is part of the land sold.

HELD:

The sale involves a definite and identified tract, a corpus certum, that obligated the vendors to deliver to the buyer all the
land within the boundaries, irrespective of whether its real area should be greater or smaller than what is recited in the
deed.

To hold the buyer to no more than the area recited on the deed, it must be made clear therein that the sale was made by
unit of measure at a definite price for each unit. The sale in this case only involves the definite boundaries but only
approximate land areas. As such, Art 1542 concerning the sale for lump sum must be considered.

92 Phil. 145

PARAS, C.J.:
On November 9, 1946, the plaintiff-appellee (Visayan Distributors, Inc.), herein to be
referred to as appellee, and Mariano. R. Flores (doing business under the name of Rizal
Investment Corporation), herein to be referred to as Flores, and Teofilo Abeto (doing
business under the name of Philippine Investment Co., Ltd), herein to be referred to as
Abeto, entered into a contract whereby Abeto and Flores bound themselves to deliver
on November 18, 1946, to the appellee at the port of Romblon on board the vessel to be
supplied by the appellee 2,000 long tons of copra, to be paid by the appellee at $103.50
per ton f. o. b. appellee's vessel at Romblon. The contract provided that the appellee,
upon satisfactory inspection of the copra, would advance to Abeto and Flores the sum
of P10,000 for initial weighing and checking expenses, plus another P10,000 on the
first day of loading. The contract also provided that the appellee would furnish Abeto
and Flores with 15,000 empty sacks to facilitate the handling, weighing and loading of
copra. The purchase price was to be paid as follows:
"(a) 95 per cent of the total cost of copra to be paid upon presentation of the following:
Commercial Invoice. On-Board Bills of Lading. Weight Certificate and/or Survey
Eeport. 5 per cent upon acceptance of weight in American port.
"(e) The balance of invoice value payable by an irrevocable confirmed letter of credit
with the China Banking Corporation in favor of the sellers."
The appellee, after the execution of the contract, advanced to Abeto and Flores first the
sum of P10,000 and later the sum of P3,000.
Under date of November 12, 1946, a surety bond was executed by Abeto and Flores as
principals, and by Rizal Surety and Insurance Co., (herein to be referred to as Surety),
for the sum of P30,000, to secure the full and faithful performance of the contract of
Abeto and Flores with the appellee.
With due notice to Abeto and Flores, the SS. PANAMAN was sent by the appellee to,
and arrived at the port of Romblon on November 17, 1946, Abeto and Flores having
been advised by the appellee that said steamer would be ready to load the copra on
November 18, 1946. Abeto and Flores were, however, unable to deliver any amount of
copra on said steamer with the result that the SS. PANAMAN left Romblon without
cargo.
The appellee had previously sent to Abeto and Flores in Romblon 26,875 empty copra
sacks of which 2,908 were used by the appellee for transporting copra to Cebu on the
FS-156.
The appellee instituted in the Court of First Instance of Manila on December 14, 1946,
an action against Abeto and Flores and the Surety for breach of contract. In its first
amended complaint the appellee sought to recover (1) the sum of P13,000,
representing advances; (2) P55,500, representing the value of empty sacks; (3)
P150,000, as damages, and (4) the sum of P4,064, deposited by the appellee with the
Bureau of Customs in compliance with the rules and regulations in connection with the
sale and delivery of the copra in question.
The Surety filed a cross-claim against Abeto and Flores, and a third-party complaint
against Gregorio Gutierrez, in virtue of the indemnity agreement filed by the latter
three in favor of the Surety.
After trial, the Court of First Instance of Manila rendered a decision the dispositive
parts of which read as follows:
"In view of all the foregoing, judgment is hereby rendered sentencing defendant Teofilo
Abeto, Mariano R. Flores, and the Rizal Surety & Insurance Co., Inc., to pay plaintiff,
jointly and severally, the sum of P13,000 plus the further sum of P35,950 with interest
on both amounts at the legal rate from the date of the filing of the complaint, as well as
the further sum of P150,000 as damages, with costs of suit. The liability, however, of
defendant Rizal Surety & Insurance Co., Inc., shall be limited to P30,000 only.
"The court, likewise, sentences defendants Abeto and Flores and third-party defendant
Gregorio Gutierrez to reimburse, also jointly and severally, unto said defendant Rizal
Surety & Insurance Co., Inc., whatever amount the latter may pay to plaintiff, pursuant
to the foregoing judgment, with interest thereon at the rate of 12 percent per annum,
plus the further sum equivalent to 15 per cent of said amount as and for attorney's
fees."
From this decision Abeto and Flores as well as the Surety, have appealed, the first two
having filed their own brief, and the Surety having filed a separate brief.
Abeto and Flores contend that they had the copra called for in their contract with the
appellee on November 18, 1946, but that they refused to deliver the same on the ground
that the appellee was insolvent and failed to guarantee the payment of the purchase
price by a letter of credit called for in the contract, a contention also availed of by the
Surety. It is very significant, however, that Abeto and Flores had not made in their
answer even the slightest hint that they had copra in the port of Romblon on November
18, 1946. Upon the other hand, they merely invoked the defense that the contract of
November 9, 1946, was cancelled by another agreement made on November 22, 1946,
calling for the delivery of only 500 tons of copra,, and that, at any rate, their failure to
comply with the contract of November 9, 1946, was excused by force majeure (the
abrogation of the copra trade agreement between the United States and the
Philippines). Even in their letter to counsel for the appellee (Exhibit 1), Abeto and
Flores absolutely failed to mention the alleged fact that they had the necessary quantity
of copra on the date specified in their contract.
The conspicuous circumstance that the appellee's vessel SS. PANAMAN left the port of
Romblon with its hold empty, without any written notice or advice from Abeto and
Flores that they had the necessary copra which they would deliver only upon the
payment of its purchase price in accordance with the terms of their contract, militates
against the contention of Abeto and Flores and the Surety, that copra was available.
The evidence for Abeto and Flores tends to show that they, thru Ignacio Liso,
contracted with copra suppliers for the delivery of some 2,000 tons to the port of
Romblon upon the arrival of landing barges; that Lizo merely paid the necessary
deposit to the suppliers who thereupon signed the necessary contracts and the
corresponding receipts for the advance payment; that said copra bought from various
suppliers, which were not delivered to the appellee under their contract, were later sold
to Escudero & Co., and the Nacoco. The fact, however, that none of the alleged
contracts or receipts signed by the copra suppliers, and the invoices of Escudero & Co.
and the Nacoco was presented in evidence during the trial, is a strong indication
negativing the alleged existence of copra on or about November 18, 1946.
The Surety relies upon the provision in the contract between the appellee and Abeto
and Flores, to the effect that the bond "can be foreclosed if copra does not exist by the
time Buyer's vessel is ready to load." This is complemented by the proposition that
159,834 kilos of copra were delivered by Abeto and Flores to the appellee under their
contract of sale. The Surety's position is evidently erroneous, if we bear in mind the fact
that Abeto and Flores have not pretended that the said quantity of copra was a part of
the sale under the contract of November 9, 1946. Indeed, in the receipt signed by Abeto
and Flores for the partial payment of said 159,834 kilos of copra, it is expressly
admitted that the quantity was without prejudice to their contract for 2,000 tons of
copra, dated November 9, 1946. The Surety also supposes that the 159,834 kilos of
copra delivered to the appellee had been paid by the latter in the total amount of
P33,000, represented, first, by the sums of P10,000 and P3,000 advanced by the
appellee after the execution of the contract of November 9, 1946, and, secondly, by the
sum of P20,000 paid by the appellee upon loading said copra. This supposition is again
at war with the theory of Abeto and Flores, who specifically admitted that said copra
was in virtue of a separate deal and who, as a matter of fact, still hold the appellee liable
for the unpaid balance of P13,000. Indeed, the alleged failure of the appellee to pay the
balance of P13,000 is taken by Abeto and Flores as an evidence of appellee's insolvency
which justified Abeto and Flores in refusing to deliver the copra called for in the
contract of November 9, 1946.
The Surety maintains that the recital in the receipt signed by Abeto and Flores covering
the partial payment of 159,834 kilos of copra, to the effect that said quantity was
without prejudice to 'their obligation to deliver 2,000 tons of copra, should be
construed as meaning merely that Abeto and Flores did not waive the stipulation
requiring the appellee to obtain a letter of credit. Such construction is not borne out by
the terms of the receipt which protects expressly the rights of the appellee under the
contract of November 9, 1946, and would be tenable only if the receipt provided that
the delivery of 159,834 kilos of copra was without prejudice to the right of Abeto and
Flores regarding the letter of credit called for in their contract.
The alleged absence of a letter of credit to secure the payment of the purchase price is
invoked both by Abeto and Flores and by the Surety. In the first place, there is evidence
to the effect that a letter of credit was available, although it was not actually assigned to
Abeto and Flores, in the absence of copra ready for loading on the SS. PANAMAN. In
the second place, the alleged fact, constituting a defense, was not pleaded by Abeto and
Flores and the Surety, so much so that, when an attempt was made during the trial to
prove the absence1 of the letter of credit, counsel for the appellee objected, and the
objection was sustained by the trial court; and although the Surety was allowed to
amend its answer to plead the absence of the letter of credit as an excuse for the failure
of Abeto and Flores to comply with their contract, no amended answer was filed by the
Surety. The latter, however, contends that amendment was no longer necessary
because its answer already alleged violation on the part of the appellee of its contract,
and because counsel for the appellee admitted "that the letter of credit has not been
established for lack of compliance by defendants, Mr. Mariano Flores and Mr. Teofilo
Abeio and the companies they represent with the terms and conditions of the contract."
The alleged violation by the appellee of its contract, set up as a defense in the Surety's
answer, is a mere conclusion. As to the admission of counsel for the appellee, it may be
stated that the same must be taken in conjunction with the previous testimony of Peter
Cang Hocho, a witness for the appellee, that the letter of credit was available, though
not assigned to Abeto and Flores.
Moreover, it appears that under the terms of the contract of November 9, 1946, it is
only the balance of the invoice value which should be payable by an irrevocable letter of
credit, and the contract called for payment of 95 per cent of the total purchase price
upon presentation of the commercial invoice, on board bills of lading, wage certificate
and/or survey report, and 5 per cent upon acceptance of weight in American port. Said
balance of the invoice value appears to be merely 5 per cent of the contract price, and
the same could not of course be accurately determined before the quantity of copra to
be loaded on November 18, 1946, was known. At any rate, Abeto and Flores admit in
their brief (p. 14) that the contract did not obligate the appellee to secure the payment
of the purchase price.
Abeto and Flores, on the other hand, contend that they were excused from delivering
copra on November 18, 1946, because the appellee was insolvent, in that part of the
purchase price of the 159,834 kilos of copra delivered to the appellee remained unpaid,
reliance being placed on articles 1466 and 1467 of the old Civil Code. The contention is
untenable, it appearing that there is no conclusive proof showing that Abeto and Flores,
in definite terms, had warned the appellee that they would not deliver the copra called
for in their contract until they were sure of being paid in accordance with said contract.
Moreover, even assuming that the appellee still owed Abeto and Flores something upon
account of the 159,834 kilos of copra delivered before November 18, 1946, said fact is
not a positive evidence of insolvency,[1] not to mention the circumstance that the
contract is essentially a cash transaction, 95 per cent of the purchase price being
required to, be paid in cash and only 5 per cent by an irrevocable letter of credit. Of
course, the appellee was not to be expected to tender payment before the presentation
of the documents called for in the contract, namely, commercial invoice, on board bills
of lading, and wage certificate and/or survey report.
The Surety also claims that it "was released from liability under its bond because Abeto
ard Flores and the appellee novated their contract of November 9, 1946, without the
consent of the Surety. In the main, the Surety alleges that the appellee advanced
P10,000 to Abeto and Flores before the inspection of copra, and thereafter made
another advance payment of P3,000, in addition to the fact that the manner of
payment was changed from a letter of credit to cash, and that 26,875 empty copra sacks
were delivered to Abeto and Flores instead of only 15,000 as stipulated in the contract.
With reference to the payment of P10,000, it appears that the same was made with the
knowledge of the Surety, as shown by Exhibit A which contains a recital added in the
handwriting of Andres U. Cang, Treasurer and General Manager of the appellee,
worded as follows:
"N. B.
With due agreement of Rizal Investment Corp., it is agreed that upon delivery of thirty
thousand pesos (P30,000) BOND, the P10,000 cash will be delivered to Mr. M. Flores
of the Rizal Investment Corp.
(Sgd.) "A. U. C."
It is noteworthy that a duplicate copy of Exhibit A (Exhibit D-l), attached to the bond
Exhibit D and referred to therein as forming part thereof, contains said recital and
bears the dry seal of the Surety, initialed by one of its officials.
As to the advance payment of P3,000, suffice it to state that said payment could not
adversely affect the position of the Surety or render the obligation more onerous, and
therefore could not have the effect of releasing the bond (Bank of the Philippine Islands
vs. Albaladejo y Cia., 53 Phi]., 141; Bank of the Philippine Islands vs. Gooch and
Redfern, 45 Phil., 514).
In respect of the 26,875 empty sacks, it may be pointed out that although the contract
bound the appellee to furnish Abeto. and Flores with only 15,000 sacks, the excess
could likewise have no adverse effect insofar as the Surety was concerned, it appearing
that the Surety is not being charged with the value of such excess intended to be used
by the appellee for any proper purpose. Indeed, the liability of the Surety under the
bond is limited to P30,000, easily covered by the first advance payment of P10,000 and
the value of 15,000 empty copra sacks, at the proven price of P1.50 per sack.
The allegation that the manner of payment of the purchase price was altered, is
patently without merit, since, as already hereinbefore noted, the payment under the
contract of November 9, 1946, was essentially in cash, and the letter of credit could not
be assigned to Abeto and Flores without first determining the amount of copra to be
loaded on the appellee's vessel on November 18, 1946.
As to the amount of damages awarded by the lower court, there seems to be no room
for controversy. The sum of P150,000 has been positively established by the testimony
of Peter Gang Hocho, as profits which the appellee lost as a result of the breach of
contract on the part of Abeto and Flores. The evidence for the appellee to the effect that
there was already a contract of sale for the entire amount of copra which Abeto and
Flores covenanted to deliver to the appellee under the contract of November 9, 1946,
which would give the appellee such profits, remains uncontradicted in the record. On
the o'ther hand, the receipt by Abeto and Flores, thru their representatives Ignacio B.
Lizo and Isaias Ruiz, of the 23,957 empty copra sacks, is conclusively shown by Exhibts
I and E-2, in addition to the bills of lading covering the shipment of said sacks
(Exhibits L and M) admitted by Abeto and Flores.
It is contended for Abeto and Flores that their liability for damages, if any, is limited to
the sum of P30,000 fixed in the Surety bond. This contention is patently without merit,
because while the bond was intended to secure the full and faithful performance by
Abeto and Flores of their obligations under the contract of November 9, 1946, the
amount of P30,000 specified in the bond did not limit the extent of the damages to be
recovered by the appellee in case of breach on the part of Abeto and Flores. However,
the liability of the Surety is limited to said amount.
Wherefore, the appealed judgment is affirmed, and it is so ordered with costs against
the appellants.