Republic of the Philippines development and exploitation of said mining claims into the Larap
SUPREME COURT Iron Mines, a single proprietorship owned solely by and belonging
Manila
EN BANC
G.R. No. L-11827 July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES
& SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO
DANTE, PACIFICO ESCANDOR and FERNANDO
TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or
holder, either by himself or in a representative capacity, of 11 iron
lode mineral claims, known as the Dawahan Group, situated in the
municipality of Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"),
Fonacier constituted and appointed plaintiff-appellee Fernando A.
Gaite as his true and lawful attorney-in-fact to enter into a contract
with any individual or juridical person for the exploration and
development of the mining claims aforementioned on a royalty
basis of not less than P0.50 per ton of ore that might be extracted
therefrom. On March 19, 1954, Gaite in turn executed a general
assignment (Record on Appeal, pp. 17-19) conveying the
to him, on the same royalty basis provided for in Exhibit "3".
Thereafter, Gaite embarked upon the development and
exploitation of the mining claims in question, opening and paving
roads within and outside their boundaries, making other
improvements and installing facilities therein for use in the
development of the mines, and in time extracted therefrom what he
claim and estimated to be approximately 24,000 metric tons of iron
ore.
For some reason or another, Isabelo Fonacier decided to revoke
the authority granted by him to Gaite to exploit and develop the
mining claims in question, and Gaite assented thereto subject to
certain conditions. As a result, a document entitled "Revocation of
Power of Attorney and Contract" was executed on December 8,
1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
consideration of P20,000.00, plus 10% of the royalties that
Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or outside
said claims, the right to use the business name "Larap Iron Mines"
and its goodwill, and all the records and documents relative to the
mines. In the same document, Gaite transferred to Fonacier all his
rights and interests over the "24,000 tons of iron ore, more or less"
that the former had already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,000.00 of which was
paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of
credit covering the first shipment of iron ores and of the first
amount derived from the local sale of iron ore made by the
Larap Mines & Smelting Co. Inc., its assigns,
administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier
promised to execute in favor of Gaite a surety bond, and pursuant
to the promise, Fonacier delivered to Gaite a surety bond dated
December 8, 1954 with himself (Fonacier) as principal and the
Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante,
and Fernando Ty as sureties (Exhibit "A-1"). Gaite testified,
however, that when this bond was presented to him by Fonacier
together with the "Revocation of Power of Attorney and Contract",
Exhibit "A", on December 8, 1954, he refused to sign said Exhibit
"A" unless another bond under written by a bonding company was
put up by defendants to secure the payment of the P65,000.00
balance of their price of the iron ore in the stockpiles in the mining
claims. Hence, a second bond, also dated December 8, 1954
(Exhibit "B"),was executed by the same parties to the first bond
Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as
additional surety, but it provided that the liability of the surety
company would attach only when there had been an actual sale of
iron ore by the Larap Mines & Smelting Co. for an amount of not
less then P65,000.00, and that, furthermore, the liability of said
surety company would automatically expire on December 8, 1955.
Both bonds were attached to the "Revocation of Power of Attorney
and Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he
gave to Gaite and the two executed and signed the "Revocation of
Power of Attorney and Contract", Exhibit "A", Fonacier entered into
a "Contract of Mining Operation", ceding, transferring, and
conveying unto the Larap Mines and Smelting Co., Inc. the right to
develop, exploit, and explore the mining claims in question,
together with the improvements therein and the use of the name
"Larap Iron Mines" and its good will, in consideration of certain
royalties. Fonacier likewise transferred, in the same document, the
complete title to the approximately 24,000 tons of iron ore which
he acquired from Gaite, to the Larap & Smelting Co., in
consideration for the signing by the company and its stockholders
of the surety bonds delivered by Fonacier to Gaite (Record on
Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with
respect to the Far Eastern Surety and Insurance Company, no sale
of the approximately 24,000 tons of iron ore had been made by the
Larap Mines & Smelting Co., Inc., nor had the P65,000.00 balance
of the price of said ore been paid to Gaite by Fonacier and his
sureties payment of said amount, on the theory that they had lost
right to make use of the period given them when their bond, Exhibit
"B" automatically expired (Exhibits "C" to "C-24"). And when
Fonacier and his sureties failed to pay as demanded by Gaite, the
latter filed the present complaint against them in the Court of First
Instance of Manila (Civil Case No. 29310) for the payment of the
P65,000.00 balance of the price of the ore, consequential
damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject to a
condition that the amount of P65,000.00 would be payable out of
the first letter of credit covering the first shipment of iron ore and/or
the first amount derived from the local sale of the iron ore by the
Larap Mines & Smelting Co., Inc.; that up to the time of the filing of
the complaint, no sale of the iron ore had been made, hence the
condition had not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable. Defendant Fonacier
also contended that only 7,573 tons of the estimated 24,000 tons
of iron ore sold to him by Gaite was actually delivered, and
counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation
of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to
pay Gaite P65,000.00 become due and demandable when the
defendants failed to renew the surety bond underwritten by the Far
Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which expired
on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff
Gaite to defendant Fonacier were actually in existence in the
mining claims when these parties executed the "Revocation of
Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the
defendants to pay plaintiff the P65,000.00 balance of the price of
the approximately 24,000 tons of iron ore was one with a term: i.e.,
that it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or before
December 8, 1955; that the giving of security was a condition
precedent to Gait's giving of credit to defendants; and that as the
latter failed to put up a good and sufficient security in lieu of the Far
Eastern Surety bond (Exhibit "B") which expired on December 8,
1955, the obligation became due and demandable under Article
1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite
did have approximately 24,000 tons of iron ore at the mining claims
in question at the time of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and severally, P65,000.00
with interest at 6% per annum from December 9, 1955 until
payment, plus costs. From this judgment, defendants jointly
appealed to this Court.
During the pendency of this appeal, several incidental motions
were presented for resolution: a motion to declare the appellants
Larap Mines & Smelting Co., Inc. and George Krakower in
contempt, filed by appellant Fonacier, and two motions to dismiss
the appeal as having become academic and a motion for new trial
and/or to take judicial notice of certain documents, filed by appellee
Gaite. The motion for contempt is unmeritorious because the main
allegation therein that the appellants Larap Mines & Smelting Co.,
Inc. and Krakower had sold the iron ore here in question, which
allegedly is "property in litigation", has not been substantiated; and
even if true, does not make these appellants guilty of contempt,
because what is under litigation in this appeal is appellee Gaite's
right to the payment of the balance of the price of the ore, and not
the iron ore itself. As for the several motions presented by appellee
Gaite, it is unnecessary to resolve these motions in view of the
results that we have reached in this case, which we shall hereafter
discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of
appellant Fonacier to pay appellee Gaite the P65,000.00 (balance
of the price of the iron ore in question)is one with a period or term
and not one with a suspensive condition, and that the term expired
on December 8, 1955; and
(2) that the lower court erred in not holding that there were only
10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite to
appellant Fonacier.
The first issue involves an interpretation of the following provision
in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby
transfers to Isabelo F. Fonacier all his rights and interests
over the 24,000 tons of iron ore, more or less, above-
referred to together with all his rights and interests to
operate the mine in consideration of the sum of SEVENTY-
FIVE THOUSAND PESOS (P75,000.00) which the latter
binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid
upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first letter of
credit covering the first shipment of iron ore made by the
Larap Mines & Smelting Co., Inc., its assigns,
administrators, or successors in interest.
We find the court below to be legally correct in holding that the
shipment or local sale of the iron ore is not a condition precedent
(or suspensive) to the payment of the balance of P65,000.00, but
was only a suspensive period or term. What characterizes a
conditional obligation is the fact that its efficacy or obligatory force
(as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the suspensive
condition does not take place, the parties would stand as if the
conditional obligation had never existed. That the parties to the
contract Exhibit "A" did not intend any such state of things to prevail
is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's
obligation to pay: "The balance of Sixty-Five Thousand Pesos
(P65,000.00) will be paid out of the first letter of credit covering the
first shipment of iron ores . . ." etc. There is no uncertainty that the
payment will have to be made sooner or later; what is
undetermined is merely the exact date at which it will be made. By
the very terms of the contract, therefore, the existence of the
obligation to pay is recognized; only its maturity or demandability is
deferred.
2) A contract of sale is normally commutative and onerous: not only
does each one of the parties assume a correlative obligation (the
seller to deliver and transfer ownership of the thing sold and the
buyer to pay the price),but each party anticipates performance by
the other from the very start. While in a sale the obligation of one
party can be lawfully subordinated to an uncertain event, so that
the other understands that he assumes the risk of receiving nothing
for what he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course of business
to do so; hence, the contingent character of the obligation must
clearly appear. Nothing is found in the record to evidence that Gaite
desired or assumed to run the risk of losing his right over the ore
without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite
insisted on a bond a to guarantee payment of the P65,000.00, an
not only upon a bond by Fonacier, the Larap Mines & Smelting Co.,
and the company's stockholders, but also on one by a surety
company; and the fact that appellants did put up such bonds
indicates that they admitted the definite existence of their obligation
to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00
to the sale or shipment of the ore as a condition precedent, would
be tantamount to leaving the payment at the discretion of the
debtor, for the sale or shipment could not be made unless the
appellants took steps to sell the ore. Appellants would thus be able
to postpone payment indefinitely. The desireability of avoiding such
a construction of the contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of
the contract the parties indented a suspensive condition or a
suspensive period (dies ad quem) for the payment of the
P65,000.00, the rules of interpretation would incline the scales in
favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article 1378,
paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor
of the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if the
buyer' obligation is deemed to be actually existing, with only its
maturity (due date) postponed or deferred, that if such obligation
were viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore
to Fonacier was a sale on credit, and not an aleatory contract
where the transferor, Gaite, would assume the risk of not being
paid at all; and that the previous sale or shipment of the ore was
not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the
payment.
This issue settled, the next point of inquiry is whether appellants,
Fonacier and his sureties, still have the right to insist that Gaite
should wait for the sale or shipment of the ore before receiving
payment; or, in other words, whether or not they are entitled to take
full advantage of the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the
right court below that the appellants have forfeited the right to
compel Gaite to wait for the sale of the ore before receiving
payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace
it with an equivalent guarantee. The expiration of the bonding
company's undertaking on December 8, 1955 substantially
reduced the security of the vendor's rights as creditor for the unpaid
P65,000.00, a security that Gaite considered essential and upon
which he had insisted when he executed the deed of sale of the
ore to Fonacier (Exhibit "A"). The case squarely comes under
paragraphs 2 and 3 of Article 1198 of the Civil Code of the
Philippines:
"ART. 1198. The debtor shall lose every right to make use
of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties
or securities which he has promised.
(3) When by his own acts he has impaired said guaranties
or securities after their establishment, and when through
fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond
upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance
of the surety company's bond with full knowledge that on its face it
would automatically expire within one year was a waiver of its
renewal after the expiration date. No such waiver could have been
intended, for Gaite stood to lose and had nothing to gain barely;
and if there was any, it could be rationally explained only if the
appellants had agreed to sell the ore and pay Gaite before the
surety company's bond expired on December 8, 1955. But in the
latter case the defendants-appellants' obligation to pay became
absolute after one year from the transfer of the ore to Fonacier by
virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite
acted within his rights in demanding payment and instituting this
action one year from and after the contract (Exhibit "A") was
executed, either because the appellant debtors had impaired the
securities originally given and thereby forfeited any further time
within which to pay; or because the term of payment was originally
of no more than one year, and the balance of P65,000.00 became
due and payable thereafter.
Coming now to the second issue in this appeal, which is whether
there were really 24,000 tons of iron ore in the stockpiles sold by
appellee Gaite to appellant Fonacier, and whether, if there had
been a short-delivery as claimed by appellants, they are entitled to
the payment of damages, we must, at the outset, stress two
things: first, that this is a case of a sale of a specific mass of
fungible goods for a single price or a lump sum, the quantity of
"24,000 tons of iron ore, more or less," stated in the contract Exhibit
"A," being a mere estimate by the parties of the total tonnage
weight of the mass; and second, that the evidence shows that
neither of the parties had actually measured of weighed the mass,
so that they both tried to arrive at the total quantity by making an
estimate of the volume thereof in cubic meters and then multiplying
it by the estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron
ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or
perfect the sale, nor was the price of P75,000,00 agreed upon by
the parties based upon any such measurement.(see Art. 1480,
second par., New Civil Code). The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual
number of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to his buyer
all of the ore found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them (Mobile
Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc.
171 So. 872, applying art. 2459 of the Louisiana Civil Code). There
is no charge in this case that Gaite did not deliver to appellants all
the ore found in the stockpiles in the mining claims in questions;
Gaite had, therefore, complied with his promise to deliver, and
appellants in turn are bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants
undertook to buy, not a definite mass, but approximately 24,000
tons of ore, so that any substantial difference in this quantity
delivered would entitle the buyers to recover damages for the
short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually
measured or weighed the whole mass of ore cubic meter by cubic
meter, or ton by ton. Both parties predicate their respective claims
only upon an estimated number of cubic meters of ore multiplied
by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic
meters in the stockpiles of ore that he sold to Fonacier, while
appellants contend that by actual measurement, their witness
Cirpriano Manlañgit found the total volume of ore in the stockpiles
to be only 6.609 cubic meters. As to the average weight in tons per
cubic meter, the parties are again in disagreement, with appellants
claiming the correct tonnage factor to be 2.18 tons to a cubic meter,
while appellee Gaite claims that the correct tonnage factor is about
3.7.
In the face of the conflict of evidence, we take as the most reliable
estimate of the tonnage factor of iron ore in this case to be that
made by Leopoldo F. Abad, chief of the Mines and Metallurgical
Division of the Bureau of Mines, a government pensionado to the
States and a mining engineering graduate of the Universities of
Nevada and California, with almost 22 years of experience in the
Bureau of Mines. This witness placed the tonnage factor of every
cubic meter of iron ore at between 3 metric tons as minimum to 5
metric tons as maximum. This estimate, in turn, closely
corresponds to the average tonnage factor of 3.3 adopted in his
corrected report (Exhibits "FF" and FF-1") by engineer Nemesio
Gamatero, who was sent by the Bureau of Mines to the mining
claims involved at the request of appellant Krakower, precisely to
make an official estimate of the amount of iron ore in Gaite's
stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore
in the stockpiles made by appellant's witness Cipriano Manlañgit is
correct, if we multiply it by the average tonnage factor of 3.3 tons
to a cubic meter, the product is 21,809.7 tons, which is not very far
from the estimate of 24,000 tons made by appellee Gaite,
considering that actual weighing of each unit of the mass was
practically impossible, so that a reasonable percentage of error
should be allowed anyone making an estimate of the exact quantity
in tons found in the mass. It must not be forgotten that the contract
Exhibit "A" expressly stated the amount to be 24,000 tons, more or
less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46
L. Ed. 1164).
There was, consequently, no short-delivery in this case as would
entitle appellants to the payment of damages, nor could Gaite have
been guilty of any fraud in making any misrepresentation to
appellants as to the total quantity of ore in the stockpiles of the
mining claims in question, as charged by appellants, since Gaite's
estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we
hereby affirm the same, with costs against appellants. Bengzon,
C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, De
Leon and Natividad, JJ., concur.
 SECOND DIVISION
[G.R. No. 115101. March 2, 1998]
FIDELA MANANZALA, petitioner, vs. COURT OF
APPEALS, and CORAZON
ARAEZ, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the
decision[1] of the Court of Appeals in C.A.-G.R. CV No.
31546, reversing the decision of the Regional Trial Court,
Branch 106, Quezon City, dismissing the complaint for
specific performance brought by private respondent. The
appellate court instead ordered petitioner to convey the
property in question to private respondent.
The background of this case is as follows.
Petitioner Fidela Mananzala is the registered owner of
a parcel of land located at Bagong Pagasa, Quezon City,
under Transfer Certificate of Title No. 32314, issued on
January 15, 1985. Petitioner had been in actual
possession of the land since 1955 by virtue of a conditional
sale made in her favor by the Philippine Homesite and
Housing Corporation (PHHC), now the National Housing
Authority (NHA). In 1960, however, the PHHC awarded the
land to Nestor and Elisea Mercado who took possession
of the land in that year.
Petitioner contested the award in court. She claimed
precedence not only in actual occupation of the land but
also in application for its purchase. Her right to the land
was upheld by the Court of First Instance of Quezon City,
whose decision was later affirmed by the Intermediate
Appellate Court. Consequently, the PHHC cancelled the
award made to the Mercado spouses.
On December 14, 1984, petitioner paid in full the price
of the land under the deed of conditional sale. The NHA
therefore executed a deed of sale in her favor on January
14, 1985.[2] The next day a transfer certificate of title to the
lot was issued in the name of petitioner.[3]
On January 31, 1985, private respondent Corazon
Aranez brought this action below for specific performance
against petitioner to enforce a deed of sale covering the
same lot allegedly entered into between her and petitioner
on March 22, 1960. The contract[4] stipulated that title to
the land shall be transferred to private respondent within
30 days after full payment of the purchase price by
petitioner to the PHHC.[5] The deed was notarized by Atty.
Pio Lopez, who was petitioners counsel in her case
against the Mercado spouses.[6] Private respondent
alleged that petitioner refused, despite repeated demands
made by her, to comply with the stipulation in their
contract. She prayed that petitioner be ordered to transfer
ownership of the land to her.
Petitioner denied selling the land to private
respondent. She contended that the deed was a forgery
and that her signature was secured through fraud by
private respondent and by Atty. Pio Lopez. In the
alternative, she averred that the deed of sale was void
because it was made before the actual award of the land
to her and that it was made in violation of the prohibition in
the rules and regulations of the PHHC against the
subsequent disposition of the land within one year of the
issuance of the title.
The trial court dismissed the complaint. Although
finding petitioners signature on the deed to be genuine, it
nevertheless ruled that there was no perfected contract of
sale because petitioner never really intended to sell the
land. Furthermore, the trial court also found the alleged
contract to be null and void because, at the time of the
sale, petitioner was not yet the owner thereof.[7]
On appeal, the Court of Appeals reversed.[8] It held
that there was a meeting of the minds between the parties
as evidenced by the signature of the petitioner on the deed
of sale which the National Bureau of Investigation found to
be genuine. The notarization of the deed gave rise to the
presumption of its regularity.[9] The Court of Appeals
further held that petitioner could validly sell the land even
before the actual award to her pursuant to Art. 1461 of the
Civil Code, which provides that things having a potential
existence may be the object of a contract of
sale. Consequently, the court ordered petitioner to transfer
ownership of the land to private respondent. Hence this
petition.
Petitioner alleges two grounds for her petition, to wit:
I.
THE RESPONDENT COURT OF APPEALS
ERRED IN VALIDATING A CONTRACT
EXECUTED IN VIOLATION OF LAW AND
PUBLIC POLICY.
II.
THE CHALLENGED NOTARIAL DOCUMENT,
APART FROM BEING CONTRARY TO LAW
AND PUBLIC POLICY, DOES NOT SERVE
THE PRESUMPTION OF REGULARITY.
We shall deal with these questions in inverse order.
First. Petitioner avers that the appellate court erred in
relying on the presumption of regularity accorded to
notarial documents in holding the deed of sale between
her and private respondent to be valid.
This is not true. The decision of the appellate court
shows that the court also took into account the evidence
of the parties. It relied on the report of the National Bureau
of Investigation which found the signature of the petitioner
on the questioned document to be genuine.[10] The NBI
report was based on a comparison of the signature on the
deed and ten specimen signatures of petitioners. The trial
court itself arrived at the same conclusion as to the
genuiness and due execution of the deed.[11] Indeed,
petitioners claim that her signature on the deed had been
procured through fraud is contradicted by her allegation in
court that the signature on the deed was not hers. As she
claimed in her testimony, That is not my signature.[12] If the
signature on the deed was not her signature, then it could
not have been procured by fraud.
Anyway, that the signature of petitioner in the deed in
question is genuine is a factual finding of both the trial
court and the Court of Appeals which, in the absence of
very clear evidence to the contrary, this Court will not there was a meeting of the minds of the parties, and
revise.[13] whether there could be a sale of future property. The
question whether the sale was void because it was made
Second. The other question is whether the contract
within the one-year period of prohibition to petitioner as
between petitioner and private respondent is valid and
awardee was never briefed or in any way argued
binding. Petitioner invokes the ruling in Ibay v.
below. For all intents and purposes, therefore, petitioner
Intermediate Appellate Court.[14] In that case the transfer
waived this ground and cannot now urge it as ground for
of rights to petitioner was disapproved by the PHHC in
reversing the decision of the Court of Appeals.
view of Resolution No. 82 providing that the sale of more
than one lot per person shall not be permitted. Petitioner WHEREFORE, the decision of the Court of Appeals is
was already the holder of a land by reason of a previous AFFIRMED.
award made to him by the PHHC.Accordingly, the right of
SO ORDERED.
the awardee to recover the possession of the lot from him
was upheld. In this case, however, there is no evidence Regalado (Chairman), Melo, Puno and Martinez, JJ.,
that the sale to private respondent of the lot was made in concur.
violation of any rule of the PHHC. This issue was never
passed upon by either the trial court or the Court of
Appeals.
The above argument, as well as petitioners contention
that the sale to private respondent is void because it was
made within one year after the title to the property was
issued in the name of petitioner, while raised by petitioner
in her answer in the trial court, was not passed upon and
she did not urge it anymore except now. As already
noted, the trial court based its decision on its finding that
the sale was void on the ground that there was no meeting
of the minds of the parties.When its decision was
appealed, petitioner (as appellee) did not urge her original
defenses to uphold the decision in her favor. She merely
relied on the ruling of the trial court.[15] The appellate court,
in reversing the trial court, simply considered the issues

raised by the trial courts decision, namely, whether

petitioners signature on the deed was a forgery, whether


SECOND DIVISION
G.R. No. 216491, August 23, 2017
THE HEIRS OF PETER DONTON, THROUGH THEIR LEGAL
REPRESENTATIVE, FELIPE G. CAPULONG, Petitioners, v. DUANE
STIER AND EMILY MAGGAY, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated June 13, 2014 and the Resolution3 dated January
21, 2015 rendered by the Court of Appeals (CA) in CA-G.R. CV No.
97138, which affirmed the Decision4 dated December 14, 2009 and
the Order5 dated May 4, 2011 of the Regional Trial Court of Quezon
City, Branch 215 (RTC) dismissing the complaint for annulment of
title and reconveyance of property with damages originally filed by
now-deceased6 Peter Donton (Donton), the predecessor of herein
petitioners Heirs of Peter Donton (petitioners), for insufficiency of
evidence.
The Facts
The subject matter of this case is a parcel of land with improvements
located at No. 33, Don Jose Street, Murphy, Cubao, Quezon City,
consisting of 553.60 square meters,7 more or less (subject
property). It was previously covered by Transfer Certificate of Title
(TCT) No. N-1374808 of the Registry of Deeds of Quezon City under
the name of Donton until its registration in the names of
respondents Duane Stier (Stier) and Emily Maggay (Maggay;
collectively, respondents) under TCT No. N-225996.9
Sometime in June 2001, while Donton was in the United States, he
discovered that herein respondents took possession and control of
the subject property, as well as the management of his business
operating thereat.10 Donton's lawyers in the Philippines made
demands upon respondents to vacate the subject property and to
cease and desist from operating his business, but to no avail.11 Thus,
Donton was forced to return to the Philippines, where he learned
that respondents, through alleged fraudulent means, were able to
transfer the ownership of the subject property in their
names.12 Accordingly, his title, TCT No. N-137480, had been
cancelled and a new one, TCT No. N-225996, had been issued in
respondents' names.
Hence, he filed the instant complaint13 for annulment of title and
reconveyance of property with damages against respondents and
the Register of Deeds of Quezon City, alleging that the signature on
the Deed of Absolute Sale14 dated July 16, 2001, by virtue of which
he purportedly sold the subject property to respondents, was a
forgery.15 He denied signing or executing the document in favor of
respondents, especially considering that on the date of its purported
execution, i.e., July 16, 2001, he was allegedly still in the United
States, having departed from the Philippines on June 27, 2001 and
returned only on August 30, 2001.16 He averred that respondents
conspired with the employees of the Registry of Deeds of Quezon
City to defraud him, and that Stier is an American citizen and a non-
resident alien who is, therefore, not allowed by law to own any real
property in the Philippines.17 Accordingly, he prayed that TCT No. N-
225996 in respondents' names be annulled and cancelled; that a
new title be issued in his name as the rightful owner of the subject
property; and that respondents be ordered to pay him
P1,000,000.00 as moral damages, P200,000.00 as exemplary
damages, P200,000.00 as attorney's fees, and P200,000.00 as
litigation expenses.18
In their Answer with Counterclaim,19 respondents claimed that the
subject property had been lawfully transferred to them, asserting
that on September 11, 1995, Donton executed an Occupancy
Agreement20 whereby he acknowledged that Stier had been residing
thereat since January 5, 1995; that Stier had extended a loan to
him in the amount of P3,000,000.00 on July 5, 1997, secured by a
mortgage over the subject property and its improvements; and that
until full payment thereof, Donton allowed Stier to occupy the same.
Respondents likewise claimed that Donton executed a Special Power
of Attorney (SPA) dated September 11, 1995 in favor of Stier, giving
him full authority to sell, mortgage, or lease the subject
property.21 Unfortunately, Donton failed to pay his obligation to
Stier; thus, they initially executed a "unilateral contract of
sale"22 dated June 25, 2001 over the subject property. Eventually,
however, they executed the Deed of Absolute Sale dated July 16,
2001. As such, respondents argued that Donton cannot feign
ignorance of the sale of the subject property to them. By way of
counterclaim, respondents prayed for the awards of moral damages
in the amount of P1,000,000.00, exemplary damages in the amount
of P200,000.00, and P400,000.00 as attorney's fees, and litigation
expenses.23
During trial, Donton presented the findings of Rosario C. Perez
(Perez), Document Examiner II of the Philippine National Police
(PNP) Crime Laboratory in Camp Crame, who, after comparing the
alleged signature of Donton on the Deed of Absolute Sale to his
standard ones,24 found "significant divergences in the manner of
execution, line quality, stroke structure, and other individual
handwriting characteristics" between them, and concluded that they
were not written by one and the same person.25Perez herself
testified on the results of her examination.
In an Order26 dated February 9, 2004, the RTC allowed the
substitution of petitioners as plaintiffs after Donton passed away on
November 22, 2003.
On the other hand, respondents waived27 their right to present their
evidence.
The RTC Ruling
28
In a Decision dated December 14, 2009, the RTC dismissed the
complaint on the ground of insufficiency of evidence,29 finding that
the Deed of Absolute Sale, being a public and notarial document,
enjoys the presumption of regularity, and thus cannot be simply
defeated by Danton's bare allegation of forgery of his signature
thereon.30
Likewise, the RTC refused to give probative weight to the expert
testimony offered by Perez after the latter admitted that she
conducted the examination of the sample signatures not by virtue
of a court order, but at the instance of Donton and the Criminal
Investigation and Detection Group (CIDG).31 She also admitted that
she did not know the source of the documents procured by the CIDG
that she used in her examination. On this score, the RTC held that
the forensic examination and testimony of Perez were self-
serving,32 further explaining that it was not bound to accept the
findings of a handwriting expert.33Therefore, the same cannot be
used to invalidate the Deed of Absolute Sale and the title issued to
respondents.
Petitioners moved34 to set aside the RTC Decision, which the RTC
treated as a motion for reconsideration and which it subsequently
denied in an Order35 dated May 4, 2011. In denying petitioners'
motion, the RTC reiterated the disquisitions in its Decision and
added that petitioners failed to prove that Stier is an American
citizen.36 It explained that the only evidence that petitioners
presented was a Certification37from the Bureau of Immigration
(BOI) certifying that one Duane Otto Stier, an American citizen,
visited the Philippines on September 2, 2001 and left on October 6,
2001. As such, the RTC reasoned that the same was not sufficient
to prove Stier's citizenship; at most, it merely proved the alleged
travel of the latter.38 Similarly, petitioners failed to show that Stier
is married, as alleged in the complaint. With respect to petitioners'
contention that Maggay had no capacity to acquire real property,
the RTC found the same to be bereft of probative value, being
merely an opinion.39 Finally, the allegation that Donton was in the
United States from June 27, 2001 until August 30, 2001, and
therefore not in the Philippines on July 16, 2001 at the time of the
execution of the sale lost its credibility in the face of his admission
that he was in the Philippines in the last week of July 2001.40
Aggrieved, petitioners appealed41 to the CA.
The CA Ruling
In a Decision42 dated June 13, 2014, the CA denied the appeal and
affirmed the assailed RTC Decision and Order, finding that
petitioners failed to substantiate their allegation that Donton's
signature on the Deed of Absolute Sale was forged.43 It held that
the aforesaid document was notarized and therefore enjoys the
presumption of validity, which can only be overturned by clear and
convincing evidence.44Further, upon examination of Donton's
passport stamps, which petitioners offered in evidence to prove that
Donton could not have signed the Deed of Absolute Sale on July 16,
2001, the CA held that although he departed from the Philippines on
June 27, 2001, there was no entry stamp of his admittance to the
United States sometime between said date and August 30, 2001,
the date of his return to the Philippines.45
As regards the findings and testimony of Perez, the CA held that
"[n]otwithstanding Perez's expert testimony that the questioned
signature and the standard signatures [of Donton] were not signed
by the same person,"46 the RTC was correct in declaring her
testimony as self-serving. It considered that Perez did not know the
source of the documents, and that it was the CIDG that provided
her with Donton's standard signatures. She admitted that she had
no actual knowledge of whether the documents given to her for
examination came from Donton, and that she merely proceeded to
examine them without verifying the source.47 Thus, the source of
the documents being unverified, it cannot be concluded that the
signatures thereon are the genuine signatures of Donton.
Finally, the CA sustained the RTC in ruling that petitioners failed to
substantiate their allegation that Stier is an American citizen and
married, and that Maggay had no capacity to purchase real property.
On this score, the CA quoted with approval the RTC's findings that
the BOI-issued Certification procured and presented in evidence by
petitioners was insufficient to prove Stier's alleged American
citizenship, and that there was dearth of evidence to further prove
their allegation that he is married, or that Maggay had no capacity
to purchase real property.48
Petitioners' motion for reconsideration49 was denied in a The main thrust of petitioners' contention in this case is that
Resolution50 dated January 21, 2015; hence, this petition.
The Issue Before the Court
The issue for the Court's consideration is whether or not the CA
erred in ruling that petitioners failed to discharge the burden of proof
required to be entitled to the reliefs prayed for in this case, namely,
the annulment of title and reconveyance of property with damages.
The Court's Ruling
The petition is partly meritorious.
At the outset, the Court deems it necessary to underscore that a
re�examination of factual findings cannot be done acting on a
petition for review on certiorari because the Court is not a trier of
facts but reviews only questions of law.51 Thus, in petitions for
review on certiorari, only questions of law may generally be put into
issue.
This rule, however, admits of exceptions, such as when the
findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record and
when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion.52 Finding a
confluence of certain exceptions in this case, the general rule that
only legal issues may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court does not apply, and
the Court retains the authority to pass upon the evidence presented
and draw conclusions therefrom.53
In civil cases, basic is the rule that the party making allegations has
the burden of proving them by a preponderance of evidence.
Preponderance of evidence is the weight, credit, and value of the
aggregate evidence on either side and is usually considered to be
synonymous with the term "greater weight of the evidence" or
"greater weight of the credible evidence." It is a phrase which, in
the last analysis, means probability of the truth, or evidence which
is more convincing to the court as worthier of belief than that which
is offered in opposition thereto.54
Donton's signature on the Deed of Absolute Sale is a forgery. They
maintain that it was not possible for him to have signed the said
document considering that he was not in the Philippines on July 16,
2001, the date of execution and notarization thereof, he being in the
United States at the time. To bolster this argument, they offered in
evidence, among others, the immigration stamps on Donton's
passport,55 showing that the latter departed from the Philippines on
June 20, 2001 and returned on August 30, 2001.

However, as the courts a quo have aptly opined, the foregoing
immigration stamps are insufficient to prove that Donton was
physically absent from the country to have been able to appear
before the notary public on July 16, 2001, the date of the
acknowledgment of the Deed of Absolute Sale. It is well to point out,
as the RTC did, that petitioners failed to prove Donton's arrival or
entry in the United States, where he alleged to have gone, and his
departure therefrom to return to the Philippines on August 30, 2001.
Without evidence of such admittance to and departure from the
United States between June 27, 2001 and August 30, 2001, the
Court cannot discount the possibility that Donton may have returned
to the Philippines anytime between those dates to execute the Deed
of Absolute Sale. This is especially so in light of his own admission
in the complaint that he returned to the Philippines "sometime in
the last week of July 2001"56 allegedly to ascertain the truth and
veracity of the information he received that the subject property had
been transferred to respondents. These inconsistencies heavily
militate against him, effectively tainting his credibility as a witness
and rendering doubtful the veracity of his testimony.
Furthermore, forgery, as a rule, cannot be presumed and must be
proved by clear, positive and convincing evidence, and the burden
of proof lies on the party alleging forgery - in this case, petitioners.
The fact of forgery can only be established by a comparison between
the alleged forged signature and the authentic and genuine
signature of the person whose signature is theorized to have been
forged.57Pertinently, Section 22, Rule 132 of the Revised Rules of
Court provides: chanRoblesvirtualLawlibrary
Section. 22. How genuineness of handwriting proved. - The
handwriting of a person may be proved by any witness who believes
it to be the handwriting of such person because he has seen the
person write, or has seen writing purporting to be his upon which
the witness has acted or been charged, and has thus acquired
knowledge of the handwriting of such person. Evidence respecting
the handwriting may also be given by a comparison, made by the
witness or the court, with writings admitted or treated as
genuine by the party against whom the evidence is offered,
or proved to be genuine to the satisfaction of the judge.
(Emphasis supplied)
In Gepulle-Garbo v. Spouses Garabato,58 the Court explained the
factors involved in the examination and comparison of handwritings
in this wise:
chanRoblesvirtualLawlibrary
x x x [T]he authenticity of a questioned signature cannot be
determined solely upon its general characteristics, similarities or
dissimilarities with the genuine signature. Dissimilarities as regards
spontaneity, rhythm, pressure of the pen, loops in the strokes, signs
of stops, shades, etc., that may be found between the questioned
signature and the genuine one are not decisive on the question of
the former's authenticity. The result of examinations of questioned
handwriting, even with the benefit of aid of experts and scientific
instruments, is, at best, inconclusive. There are other factors that
must be taken into consideration. The position of the writer, the
condition of the surface on which the paper where the questioned
signature is written is placed, his state of mind, feelings and nerves,
and the kind of pen and/or paper used, play an important role on
the general appearance of the signature. Unless, therefore, there is,
in a given case, absolute absence, or manifest dearth, of direct or
circumstantial competent evidence on the character of a questioned
handwriting, much weight should not be given to characteristic
similarities, or dissimilarities, between that questioned handwriting
and an authentic one.59
To prove forgery, petitioners offered in evidence the findings and
testimony given by expert witness Perez, who declared that she
found "significant divergences in the manner of execution, line
quality, stroke structure and other individual handwriting
characteristics" between the signature that appears on the Deed of
Absolute Sale and the standard signatures of Donton, thereby
concluding that they were not written by one and the same
person.60 On cross-examination, however, Perez admitted that she
had no actual knowledge of the source of the specimen signatures
given to her for examination, as it was the CIDG personnel who
provided her with the same.61 Thus, as the CA correctly observed,
Perez's findings deserve little or no probative weight at all,
considering that the signatures which she used for comparison came
from an unverified source. Perforce, petitioners are left with no
conclusive evidence to prove their allegation that Donton's signature
on the Deed of Absolute Sale was forged.
It bears stressing that the opinion of handwriting experts are not
necessarily binding upon the court, the expert's function being to
place before the court data upon which the court can form its own
opinion. This principle holds true especially when the question
involved is mere handwriting similarity or dissimilarity, which can be
determined by a visual comparison of specimens of the questioned
signatures with those of the currently existing ones. A finding of
forgery does not depend entirely on the testimonies of handwriting
experts, because the judge must conduct an independent
examination of the questioned signature in order to arrive at a
reasonable conclusion as to its authenticity.62
In fine, the Court, therefore, upholds the findings of the courts a
quo in this respect.
Be that as it may, the Court, however, differs from the findings of
the courts a quo with respect to Stier's citizenship. More than the
Certification63 issued by the BOI, which clearly states that Stier is
an American citizen, the records contain other documents validating
the information. For instance, in paragraph 164 of respondents'
Answer with Counterclaim,65 they admitted paragraphs 1, 2, and 3
of the Complaint insofar as their personal circumstances are
concerned, and paragraph 2 of the Complaint states: chanRoblesvirtualLawlibrary
"2. Defendant DUANE STIER is of legal age, married, an American
citizen, a non-resident alien with postal address at Blk. 5, Lot 27,
A, B, Phase 1, St. Michael Home Subd., Binangonan, Rizal; x x
x"66 (Emphases supplied)
Similarly, one of the attachments to the Manifestation67 filed by
respondents before the RTC is an Affidavit68 executed by Stier
himself, stating:
"I, DUANE STIER, of legal age, married, American citizen x x
x"69 (Emphasis supplied)
The foregoing statements made by Stier are admissions against
interest and are therefore binding upon him. An admission against
interest is the best evidence which affords the greatest certainty of
the facts in dispute since no man would declare anything against
himself unless such declaration is true. Thus, an admission against
interest binds the person who makes the same, and absent any
showing that this was made through palpable mistake, no amount
of rationalization can offset it,70 especially so in this case where
respondents failed to present even one piece of evidence in their
defense.71
Hence, the courts a quo erred in ruling that Stier's American
citizenship was not established in this case, effectively rendering the
sale of the subject property as to him void ab initio, in light of the
clear proscription under Section 7, Article XII of the Constitution
against foreigners acquiring real property in the Philippines, to
wit:chanRoblesvirtualLawlibrary
Section 7. Save in cases of hereditary succession, no private lands
shall be transferred or conveyed except to individuals, corporations,
or associations qualified to acquire or hold lands of the public
domain.
Thus, lands of the public domain, which include private lands, may
be transferred or conveyed only to individuals or entities qualified
to acquire or hold private lands or lands of the public domain. Aliens,
whether individuals or corporations, have been disqualified from
acquiring lands of the public domain as well as private lands.72
In light of the foregoing, even if petitioners failed to prove that
Donton's signature on the Deed of Absolute Sale was a forgery, the
sale of the subject property to Stier is in violation of the
Constitution; hence, null and void ab initio. A contract that violates
the Constitution and the law is null and void and vests no rights and
creates no obligations. It produces no legal effect at
all.73 Furthermore, Stier is barred from recovering any amount that
he paid for the subject property, the action being proscribed by the
Constitution.74
Nevertheless, considering that petitioners failed to prove their
allegation that Maggay, the other vendee, had no capacity to
purchase the subject property, the sale to her remains valid but only
up to the extent of her undivided one-half share
therein.75 Meanwhile, the other undivided one-half share, which
pertained to Stier, shall revert to Donton, the original owner, for
being the subject of a transaction void ab initio. Consequently, the
Deed of Absolute Sale, together with TCT No. N-225996 issued in
respondents' favor, must be annulled only insofar as Stier is
concerned, without prejudice, however, to the rights of any
subsequent purchasers for value of the subject property.
WHEREFORE, the petition is PARTLY GRANTED. The Decision
dated June 13, 2014 and the Resolution dated January 21, 2015 of
the Court of Appeals in CA-G.R. CV No. 97138, which affirmed the
dismissal of the complaint filed by petitioners on the ground of
insufficiency of evidence, are hereby REVERSED and SET ASIDE,
and a NEW ONE is entered: (1) annulling the Deed of Absolute Sale
dated July 16, 2001 insofar as respondent Duane Stier is concerned;
(2) annulling Transfer Certificate of Title No. N-225996 insofar as
respondent Duane Stier is concerned; and (3) directing the Registry
of Deeds of Quezon City to issue a new title in the name of Peter
Donton and Emily Maggay, all without prejudice to the rights of any
subsequent purchasers for value of the subject property.

SO ORDERED.

Carpio,*Acting C. J., (Chairperson), Peralta, and Reyes, Jr., JJ.,

concur.
Caguioa, J., on leave.
 Republic of the Philippines On July 10, 1990, Domingo Carabeo (petitioner)
Supreme Court entered into a contract denominated as Kasunduan sa
Baguio City Bilihan ng Karapatan sa Lupa[1] (kasunduan) with
Spouses Norberto and Susan Dingco (respondents)
whereby petitioner agreed to sell his rights over a 648
THIRD DIVISION square meter parcel of unregistered land situated
in Purok III, Tugatog, Orani, Bataan to respondents
DOMINGO CARABEO, G.R. No. 190823 for P38,000.
Petitioner,
Present: Respondents tendered their initial payment of P10,000
upon signing of the contract, the remaining balance to
CARPIO,* J., be paid on September 1990.
- versus - CARPIO MORALES, J., Chairperson,
BRION,
BERSAMIN, and Respondents were later to claim that when they were
SERENO, JJ. about to hand in the balance of the purchase price,
SPOUSES NORBERTO and petitioner requested them to keep it first as he was yet
SUSAN DINGCO, Promulgated: to settle an on-going squabble over the land.
Respondents. April 4, 2011
Nevertheless, respondents gave petitioner small
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -sums
- - - -of- -money
- - - - -from
x time to time which totaled P9,100,
on petitioners request according to them;due to
DECISION respondents inability to pay the amount of the
remaining balance in full, according to petitioner.
CARPIO MORALES, J.:
By respondents claim, despite the alleged
problem over the land, they insisted on petitioners
acceptance of the remaining balance of P18,900
butpetitioner remained firm in his refusal, proffering as
reason therefor that he would register the land first.
Sometime in 1994, respondents learned that the
alleged problem over the land had been settled and that
petitioner had caused its registration in his name on
December 21, 1993 under Transfer Certificate of Title
No. 161806. They thereupon offered to pay the balance
but petitioner declined, drawing them to file a
complaint before the Katarungan
Pambarangay. No settlement was reached, however,
hence, respondent filed a complaint for specific
performance before the Regional Trial Court (RTC) of
Balanga, Bataan.
Petitioner countered in his Answer to the
Complaint that the sale was void for lack of object
certain, the kasunduan not having specified the metes
and bounds of the land. In any event, petitioner alleged
that if the validity of the kasunduan is upheld,
respondents failure to comply with their reciprocal
obligation to pay the balance of the purchase price
would render the action premature. For, contrary to
respondents claim, petitioner maintained that they
failed to pay the balance of P28,000 on September 1990
to thus constrain him to accept installment payments
totaling P9,100.
After the case was submitted for decision or on
January 31, 2001,[2] petitioner passed away. The
records do not show that petitioners counsel informed
Branch 1 of the Bataan RTC, where the complaint was
lodged, of his death and that proper substitution was
effected in accordance with Section 16, Rule 3, Rules
of Court.[3]
By Decision of February 25, 2001,[4] the trial
court ruled in favor of respondents, disposing as
follows:
WHEREFORE, premises
considered, judgment is hereby rendered
ordering:
1. The defendant to sell his right over 648
square meters of land pursuant to the
contract dated July 10, 1990 by
executing a Deed of Sale thereof after
the payment of P18,900 by the
plaintiffs;
 2. The defendant to pay the costs of the
suit.
SO ORDERED.[5]
Petitioners counsel filed a Notice of Appeal on
March 20, 2001.
By the herein challenged Decision dated July 20,
[6]
2009, the Court of Appeals affirmed that of the trial
court.
Petitioners motion for reconsideration having
been denied by Resolution of January 8, 2010, the
present petition for review was filed by Antonio
Carabeo, petitioners son,[7] faulting the appellate court:
(A)
in holding that the element of a
contract, i.e., an object certain is present in
this case.
(B)
in considering it unfair to expect
respondents who are not lawyers to make
judicial consignation after herein petitioner
allegedly refused to accept payment of the
balance of the purchase price.
(C)
in upholding the validity of the
contract, Kasunduan sa Bilihan ng
Karapatan sa Lupa, despite the lack of
spousal consent, (underscoring supplied)
and proffering that
(D)
[t]he death of herein petitioner causes the
dismissal of the action filed by
respondents; respondents cause of action
being an action in personam. (underscoring
supplied)
The petition fails.
The pertinent portion of the kasunduan reads:[8]
xxxx
 Na ako ay may isang partial na lupa
na matatagpuan sa Purok 111, Tugatog,
Orani Bataan, na may sukat na 27 x 24
metro kuwadrado, ang nasabing lupa ay
may sakop na dalawang punong santol at
isang punong mangga, kayat ako ay
nakipagkasundo sa mag-asawang Norby
Dingco at Susan Dingco na ipagbili sa
kanila ang karapatan ng nasabing lupa sa
halagang P38,000.00.
x x x x (underscoring supplied)
That the kasunduan did not specify the technical
boundaries of the property did not render the sale a
nullity. The requirement that a sale must have for its
object a determinate thing is satisfied as long as, at the
time the contract is entered into, the object of the sale
is capable of being made determinate without the
necessity of a new or further agreement between the
parties.[9] As the above-quoted portion of
the kasunduan shows, there is no doubt that the object
of the sale is determinate.
Clutching at straws, petitioner proffers lack of
spousal consent. This was raised only on appeal, hence,
will not be considered, in the present case, in the
interest of fair play, justice and due process.[10]
Respecting the argument that petitioners death
rendered respondents complaint against him
dismissible, Bonilla v. Barcena[11] enlightens:
The question as to whether an action
survives or not depends on the nature of the
action and the damage sued for. In
the causes of action which survive, the
wrong complained [of] affects primarily
and principally property and property
rights, the injuries to the person being
merely incidental, while in the causes of
action which do not survive, the injury
complained of is to the person, the property
and rights of property affected being
incidental. (emphasis and underscoring
supplied)
In the present case, respondents are pursuing a
property right arising from the kasunduan, whereas
petitioner is invoking nullity of the kasunduan to
protect his proprietary interest. Assuming arguendo,
however, that the kasunduan is deemed void, there is a
corollary obligation of petitioner to return the money
paid by respondents, and since the action involves CONCHITA CARPIO MORALES
property rights,[12] it survives. Associate Justice

It bears noting that trial on the merits was already

concluded before petitioner died. Since the trial court
was not informed of petitioners death, it may not be
faulted for proceeding to render judgment without
ordering his substitution. Its judgment is thus valid and
binding upon petitioners legal representatives or
successors-in-interest, insofar as his interest in the
property subject of the action is concerned.[13]

In another vein, the death of a client immediately

divests the counsel of authority.[14] Thus, in filing a
Notice of Appeal, petitioners counsel of record had no
personality to act on behalf of the already deceased
client who, it bears reiteration, had not been substituted
as a party after his death. The trial courts decision had
thereby become final and executory, no appeal having
been perfected.

WHEREFORE, the petition is DENIED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM
CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON
SORIANO, respondents.
Cordoba, Zapanta, Rola & Garcia for petitioner National Grains
Authority.
Plaridel Mar Israel for respondent Leon Soriano.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the
Intermediate Appellate Court (now Court of Appeals) dated
December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon
Soriano, Plaintiff- Appellee versus National Grains Authority and
William Cabal, Defendants Appellants", which affirmed the
decision of the Court of First Instance of Cagayan, in Civil Case
No. 2754 and its resolution (p. 28, Rollo) dated April 17, 1986 which
denied the Motion for Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority,
NFA for short) is a government agency created under Presidential
Decree No. 4. One of its incidental functions is the buying of palay
grains from qualified farmers.
On August 23, 1979, private respondent Leon Soriano offered to
sell palay grains to the NFA, through William Cabal, the Provincial
Manager of NFA stationed at Tuguegarao, Cagayan. He submitted
the documents required by the NFA for pre-qualifying as a seller,
namely: (1) Farmer's Information Sheet accomplished by Soriano
and certified by a Bureau of Agricultural Extension (BAEX)
technician, Napoleon Callangan, (2) Xerox copies of four (4) tax
declarations of the riceland leased to him and copies of the lease
contract between him and Judge Concepcion Salud, and (3) his
Residence Tax Certificate. Private respondent Soriano's
documents were processed and accordingly, he was given a quota
of 2,640 cavans of palay. The quota noted in the Farmer's
Information Sheet represented the maximum number of cavans of
palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day,
August 24, 1979, Soriano delivered 630 cavans of palay. The palay
delivered during these two days were not rebagged, classified and
weighed. when Soriano demanded payment of the 630 cavans of
palay, he was informed that its payment will be held in abeyance
since Mr. Cabal was still investigating on an information he
received that Soriano was not a bona tide farmer and the palay
delivered by him was not produced from his farmland but was taken
from the warehouse of a rice trader, Ben de Guzman. On August
28, 1979, Cabal wrote Soriano advising him to withdraw from the
NFA warehouse the 630 cavans Soriano delivered stating that NFA
cannot legally accept the said delivery on the basis of the
subsequent certification of the BAEX technician, Napoleon
Callangan that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, private respondent
Soriano insisted that the palay grains delivered be paid. He then
filed a complaint for specific performance and/or collection of
money with damages on November 2, 1979, against the National
Food Authority and Mr. William Cabal, Provincial Manager of NFA
with the Court of First Instance of Tuguegarao, and docketed as
Civil Case No. 2754.
Meanwhile, by agreement of the parties and upon order of the trial
court, the 630 cavans of palay in question were withdrawn from the
warehouse of NFA. An inventory was made by the sheriff as
representative of the Court, a representative of Soriano and a
representative of NFA (p. 13, Rollo).
On September 30, 1982, the trial court rendered judgment ordering
petitioner National Food Authority, its officers and agents to pay
respondent Soriano (as plaintiff in Civil Case No. 2754) the amount
of P 47,250.00 representing the unpaid price of the 630 cavans of
palay plus legal interest thereof (p. 1-2, CA Decision). The
dispositive portion reads as follows:
WHEREFORE, the Court renders judgment in
favor of the plaintiff and against the defendants
National Grains Authority, and William Cabal and
hereby orders:
1. The National Grains Authority, now the National
Food Authority, its officers and agents, and Mr.
William Cabal, the Provincial Manager of the
National Grains Authority at the time of the filing of
this case, assigned at Tuguegarao, Cagayan,
whomsoever is his successors, to pay to the
plaintiff Leon T. Soriano, the amount of
P47,250.00, representing the unpaid price of the
palay deliveries made by the plaintiff to the
defendants consisting of 630 cavans at the rate
Pl.50 per kilo of 50 kilos per cavan of palay;
2. That the defendants National Grains Authority,
now National Food Authority, its officer and/or
agents, and Mr. William Cabal, the Provincial
Manager of the National Grains Authority, at the
time of the filing of this case assigned at
Tuguegarao, Cagayan or whomsoever is his
successors, are likewise ordered to pay the plaintiff
Leon T. Soriano, the legal interest at the rate of
TWELVE (12%) percent per annum, of the amount
of P 47,250.00 from the filing of the complaint on
November 20, 1979, up to the final payment of the
price of P 47,250.00;
3. That the defendants National Grains Authority,
now National Food Authority, or their agents and
duly authorized representatives can now withdraw
the total number of bags (630 bags with an excess
of 13 bags) now on deposit in the bonded
warehouse of Eng. Ben de Guzman at
Tuguegarao, Cagayan pursuant to the order of this
court, and as appearing in the written inventory
dated October 10, 1980, (Exhibit F for the plaintiff
and Exhibit 20 for the defendants) upon payment
of the price of P 47,250.00 and TWELVE
PERCENT (12%) legal interest to the plaintiff,
4. That the counterclaim of the defendants is
hereby dismissed;
5. That there is no pronouncement as to the award
of moral and exemplary damages and attorney's
fees; and
6. That there is no pronouncement as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was denied
on December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate
Appellate Court. In a decision promulgated on December 23, 1986
(pp. 9-21, Rollo) the then Intermediate Appellate Court upheld the
findings of the trial court and affirmed the decision ordering NFA
and its officers to pay Soriano the price of the 630 cavans of rice
plus interest. Petitioners' motion for reconsideration of the
appellate court's decision was denied in a resolution dated April 17,
1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority
and Mr. William Cabal on May 15, 1986 assailing the decision of
the Intermediate Appellate Court on the sole issue of whether or
not there was a contract of sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by
Soriano on August 23, 1979 was made only for purposes of having
it offered for sale. Further, petitioners stated that the procedure
then prevailing in matters of palay procurement from qualified
farmers were: firstly, there is a rebagging wherein the palay is
transferred from a private sack of a farmer to the NFA sack;
secondly, after the rebagging has been undertaken, classification
of the palay is made to determine its variety; thirdly, after the
determination of its variety and convinced that it passed the quality
standard, the same will be weighed to determine the number of
kilos; and finally, it will be piled inside the warehouse after the
preparation of the Warehouse Stock Receipt (WSP) indicating
therein the number of kilos, the variety and the number of bags.
Under this procedure, rebagging is the initial operative act
signifying acceptance, and acceptance will be considered
complete only after the preparation of the Warehouse Stock
Receipt (WSR). When the 630 cavans of palay were brought by
Soriano to the Carig warehouse of NFA they were only offered for
sale. Since the same were not rebagged, classified and weighed
in accordance with the palay procurement program of NFA, there
was no acceptance of the offer which, to petitioners' mind is a clear
case of solicitation or an unaccepted offer to sell.
The petition is not impressed with merit.
Article 1458 of the Civil Code of the Philippines defines sale as a
contract whereby one of the contracting parties obligates himself
to transfer the ownership of and to deliver a determinate thing, and
the other party to pay therefore a price certain in money or its
equivalent. A contract, on the other hand, is a meeting of minds
between two (2) persons whereby one binds himself, with respect
to the other, to give something or to render some service (Art.
1305, Civil Code of the Philippines). The essential requisites of
contracts are: (1) consent of the contracting parties, (2) object
certain which is the subject matter of the contract, and (3) cause of
the obligation which is established (Art. 1318, Civil Code of the
Philippines.
In the case at bar, Soriano initially offered to sell palay grains
produced in his farmland to NFA. When the latter accepted the
offer by noting in Soriano's Farmer's Information Sheet a quota of
2,640 cavans, there was already a meeting of the minds between
the parties. The object of the contract, being the palay grains
produced in Soriano's farmland and the NFA was to pay the same
depending upon its quality. The fact that the exact number of
cavans of palay to be delivered has not been determined does not
affect the perfection of the contract. Article 1349 of the New Civil
Code provides: ". . .. The fact that the quantity is not determinate
shall not be an obstacle to the existence of the contract, provided
it is possible to determine the same, without the need of a new
contract between the parties." In this case, there was no need for
NFA and Soriano to enter into a new contract to determine the
exact number of cavans of palay to be sold. Soriano can deliver so
much of his produce as long as it does not exceed 2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986,
petitioners further contend that there was no contract of sale
because of the absence of an essential requisite in contracts,
namely, consent. It cited Section 1319 of the Civil Code which
states: "Consent is manifested by the meeting of the offer and the
acceptance of the thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contend that there was
no consent because there was no acceptance of the 630 cavans ACCORDINGLY, the instant petition for review is DISMISSED. The
of palay in question. assailed decision of the then Intermediate Appellate Court (now
Court of Appeals) is affirmed. No costs.
The above contention of petitioner is not correct Sale is a
consensual contract, " ... , there is perfection when there is consent SO ORDERED.
upon the subject matter and price, even if neither is delivered."
(Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560)
This is provided by Article 1475 of the Civil Code which states:

Art. 1475. The contract of sale is perfected at the

moment there is a meeting of minds upon the thing
which is the object of the contract and upon the
price.

xxx

The acceptance referred to which determines consent is the

acceptance of the offer of one party by the other and not of the
goods delivered as contended by petitioners.

From the moment the contract of sale is perfected, it is incumbent

upon the parties to comply with their mutual obligations or "the
parties may reciprocally demand performance" thereof. (Article
1475, Civil Code, 2nd par.).

The reason why NFA initially refused acceptance of the 630 cavans
of palay delivered by Soriano is that it (NFA) cannot legally accept
the said delivery because Soriano is allegedly not a bona fide
farmer. The trial court and the appellate court found that Soriano
was a bona fide farmer and therefore, he was qualified to sell palay
grains to NFA.

Both courts likewise agree that NFA's refusal to accept was without
just cause. The above factual findings which are supported by the
record should not be disturbed on appeal.
 REGISTER OF DEEDS OF LAS PINAS, METRO MANILA,
DISTRICT IV, Respondents.

DECISION

SERENO, J.:

Before us are consolidated Rule 45 Petitions1 seeking to nullify the

Court of Appeals (CA) Decision dated 2 November 20042 and
Resolution dated 10 May 20053 in CA-G.R. CV No. 47421. The CA
Decision reversed and set aside the Decision dated 6 July 1992
FIRST DIVISION issued by the Regional Trial Court (RTC), Branch 65 of Makati.4

January 13, 2016 FACTUAL ANTECEDENTS

G.R. No. 168078 Petitioner Dulos Realty was the registered owner of certain
residential lots covered by Transfer Certificate of Title (TCT) Nos.
S-39767, S-39775, S-28335, S-39778 and S-29776, located at
FABIO CAHAYAG and CONRADO RIVERA, Petitioners,
Airmen's Village Subdivision, Pulang Lupa II, Las Pinas, Metro
vs.
Manila.
COMMERCIAL CREDIT CORPORATION, represented by its
President, LEONARDO B. ALEJANDRO; TERESITA T. QUA,
assisted by her husband ALFONSO MA. QUA; and the On 20 December 1980, Dulos Realty obtained a loan from
REGISTER OF DEEDS OF LAS PINAS, METRO MANILA, respondent CCC in the amount of P300,000. To secure the loan,
DISTRICT IV, Respondents. the realty executed a Real Estate Mortgage over the subject
properties in favor of respondent. The mortgage was duly
annotated on the certificates of title on 3 February 1981.5
x-----------------------x
On 29 March 1981, Dulos Realty entered into a Contract to Sell
G.R. No. 168357
with petitioner Cahayag over the lot covered by TCT No. S-39775.6
DULOS REALTY & DEVELOPMENT CORPORATION,
On 12 August 1981, Dulos Realty entered into another Contract to
represented by its President, JUANITO C. DULOS; and
Sell, this time with petitioner Rivera over the lot covered by TCT
MILAGROS E. ESCALONA, and ILUMINADA D.
No. S-28335.7
BALDOZA, Petitioners,
vs.
COMMERCIAL CREDIT CORPORATION, represented by its Dulos Realty defaulted in the payment of the mortgage loan,
President, LEONARDO B. ALEJANDRO; TERESITA T. QUA, prompting respondent CCC to initiate extrajudicial foreclosure
assisted by her husband ALFONSO MA. QUA; and the
proceedings. On 17 November 1981, the auction sale was held,
with respondent CCC emerging as the highest bidder.8
On 23 November 1981, a Certificate of Sale covering the
properties, together with all the buildings and improvements
existing thereon, was issued in favor of CCC.9 The Certificate of
Sale was annotated on the corresponding titles to the properties
on 8 March 1982.10
Thereafter, or on 13 January 1983, Dulos Realty entered into a
Contract to Sell with petitioner Escalona over the house and lot
covered by TCT No. S-29776.11
On 10 November 1983, an Affidavit of Consolidation in favor of
respondent CCC dated 26 August 1983 was annotated on the
corresponding titles to the properties.12 By virtue of the affidavit,
TCT Nos. S-39775, S-28335, S-39778 and S-29776 - all in the
name of Dulos Realty - were cancelled and TCT Nos. 74531,
74532, 74533 and 74534 were issued in the name of respondent
CCC on the same day.13
On 10 December 1983, Dulos Realty entered into a Deed of
Absolute Sale with petitioner Baldoza over the property covered by
TCT No. S-39778, together with the improvements existing
thereon.14
On 21 December 1983, respondent CCC, through a Deed of
Absolute Sale, sold to respondent Qua the same subject
properties, now covered by TCT Nos. 74531, 74532, 74533 and
74534, which were in the name of respondent CCC. The sale was
duly annotated on the corresponding titles to the properties on 5
January 1984.15
Accordingly, TCT Nos. 74531, 74532, 74533 and 74534 were
cancelled; and TCT Nos. 77012, 77013, 77014 and 770015 were
issued to respondent Qua on 5 January 1984.16
Subsequently, respondent Qua filed ejectment suits individually
against petitioners Du1os Realty,17 Cahayag,18Esca1ona,19 and
Rivera20 before the Metropolitan Trial Court (MTC) of Las Piñas,
Metro Manila.
The MTC rendered Decisions in favor of respondent Qua. It
ordered Dulos Realty, Escalona, Cahayag, and Rivera to vacate
the properties.
On 8 March 1988, the MTC issued a Writ of Execution to enforce
its Decision dated 20 October 1986 in Civil Case No. 2257 against
Dulos Realty "and all persons claiming right under
defendant."21 The subject of the writ of execution was Lot 11 Block
II,22 which was the lot sold by Dulos Realty to petitioner Baldoza.
COMPLAINT FOR ANNULMENT
OF SHERIFF'S SALE AND OTHER DOCUMENTS
On 5 December 1988, petitioners filed a Complaint against
respondents for the "Annulment of Sherifffs] Sale and Other
Documents with Preliminary Injunction and/or Temporary
Restraining Order" before the RTC of Makati City, where it was
docketed as Civil Case No. 88-2599.23
The Complaint24 alleged that petitioners Cahayag, Rivera,
Escalona and Baldoza were owners of the properties in question
by virtue of Contracts of Sale individually executed in their favor,
and that the Real Estate Mortgage between Dulos Realty and
defendant-appellant CCC did not include the houses, but merely
referred to the lands themselves.25 Thus, the inclusion of the
housing units in the Deed of Sale executed by respondent CCC in
favor of respondent Qua was allegedly illegal.26
Respondents failed to file an answer within the reglementary
period. Subsequently, they were declared in default. They
appealed the order of default but their appeal was dismissed on 8
February 1990.27
On 6 July 1992, the RTC rendered a Decision,28 which ruled that
the houses were not included in the Real Estate Mortgage; and that
the foreclosure of the mortgage over the subject lots, as well as the
housing units, was not valid.29 The trial court held that this
conclusion was established by the plaintiffs' evidence, which went
unrefuted when defendants were declared in default.30
THE CA DECISION
Respondents proceeded to the CA, where they secured a
favorable ruling. In its Decision rendered on 2 November
2004,31 the appellate court held that the extrajudicial foreclosure
was valid, since the Real Estate Mortgage clearly included the
buildings and improvements on the lands, subject of the mortgage.
After establishing the inclusion of the housing units in the Real
Estate Mortgage, the CA determined the rights of the buyers in the
Contracts to Sell/Contract of Sale vis-a-vis those of the mortgagee
and its successor-in-interest.
In the cases of petitioners Cahayag, Rivera and Escalona, the CA
pointed to lack of evidence establishing full payment of the price.
As supporting reason, it stated that even if there were full payment
of the purchase price, the mortgagee and the latter's successor-in-
interest had a better right over the properties. The CA anchored
this conclusion on the fact that the Real Estate Mortgage was
annotated at the back of the titles to the subject properties before
the execution of the Contracts to Sell. It said that the annotation
constituted sufficient notice to third parties that the property was
subject to an encumbrance. With the notice, Cahayag, Rivera and
Escalona should have redeemed the properties within the one-year
redemption period, but they failed to do so. Consequently, the right
of respondent CCC over the properties became absolute, and the
transfer to respondent Qua was valid.
As regards Baldoza, though the case involved a Contract of Sale,
and not a mere Contract to Sell, the CA declared the transaction
null and void on the purported ground that Dulos was no longer the
owner at the time of the sale.
The CA accordingly reversed and set aside the RTC Decision,
dismissed the case for lack of merit, and ordered petitioners to
surrender possession of the properties to respondent Qua.
THE RULE 45 PETITIONS
On 30 May 2005, petitioners Cahayag and Rivera filed their Rule
45 Petition with this Court.32 For their part, petitioners Dulos Realty,
Baldoza and Escalona filed their Rule 45 Petition on 19 July 2005.33
In the Petition under G.R. No. 168357, it is argued, among others,
that the Deed of Absolute Sale in favor of petitioner Baldoza was
the culmination of a Contract to Sell between her and Dulos Realty.
She claims that the Contract to Sell, marked as Exhibit "L" during
the trial, was executed on 10 January 1979, which preceded the
execution of the Deed of Real Estate Mortgage and the registration
of the mortgage on 3 February 1981.34 After full payment of the
price under the Contract to Sell, Dulos Realty executed the Deed
of Absolute Sale. In other words, Baldoza is arguing that she has
a better title to the property than respondent Qua since the
unregistered contract to sell in her favor was executed before the
registration of the mortgage. But the CA ignored Exhibit "L" and
merely stated that there was only a Deed of Absolute Sale in favor
of Baldoza.
THE ARGUMENTS
The arguments of petitioners, as stated in their respective
Memoranda, are summarized as follows:
Coverage of the Mortgage
Initially, petitioners attempt to stave off the effects of the extra
judicial foreclosure by attacking the coverage of the Real Estate
Mortgage with respect to its subject-matter.35 They draw attention
to the fact that the List of Properties attached to the Deed of Real
Estate Mortgage refers merely to the lands themselves and does
not include the housing units found thereon.36 Petitioners also
contend that doubts should be resolved against the drafter
inasmuch as the agreement is a contract of adhesion, having been
prepared by the mortgagee.37
As backup argument for the theory that the houses are outside the
coverage of the mortgage agreement, petitioners argue that the
improvements were not owned by Dulos Realty, the mortgagor, but
by its buyers under the Contracts to Sell and Contracts of Sale;
hence, those improvements are excluded from the coverage of the
real estate mortgage.
Validity of the Mortgage
Petitioners next challenge the validity of the foreclosure sale on the
ground that the mortgage executed by the mortgagor (petitioner
Dulos Realty) and the mortgagee (respondent CCC) was null and
void.38 Petitioners claim that Dulos Realty was no longer the owner
of the properties it had mortgaged at the time of the execution of
the mortgage contract, as they were sold under existing Contracts
to Sell and Deed of Absolute Sale.39
Petitioners Cahayag, Rivera and Escalona lean on the
unregistered Contracts to Sell they had individually executed with
Dulos Realty as vendor. For his part, petitioner Baldoza points to
the Deed of Absolute Sale executed by Dulos Realty in his favor.
Better Right over the Properties
Petitioners claim that respondent CCC cannot claim to be a
mortgagee in good faith, since it is a financial institution.40 As such,
respondent CCC knew that it was dealing with a subdivision
developer, which was in the business of selling subdivision
lots.41 Dela Merced v. GSIS42 which states that the general rule that
a mortgagee need not look beyond the title cannot benefit banks
and other financial institutions, as a higher due diligence
requirement is imposed on them.
They also raise the contention that lack of full payment of the
purchase price under the Contracts to Sell on the part of Cahayag,
Rivera and Escalona was due to respondent Qua's "harassment
and unlawful actuations.43
Petitioners further state that respondent Qua is a mere transferee
of respondent CCC and that, like a stream, she cannot rise higher
than her source. They also argue that Qua is not an innocent
purchaser for value, since she is a former investor of respondent
CCC and one of its principal stockholders.44
No Prior Written HLURB Approval of
the Mortgage
Finally, petitioners allege that the mortgage contract in this case
was not approved by the BLURB, which violates Section 18 of P.D.
95745 and results in the nullity of the mortgage.46
Exhibit "L" as Evidence of a Prior
Contract to Sell
The matter of CA ignoring Exhibit "L" as evidence of a prior
unregistered Contract to Sell was not included in the Memoranda
of petitioners.
THE ISSUES
Based on the foregoing facts and arguments raised by petitioners,
the threshold issues to be resolved are the following:
1. Whether the real mortgage covers the lands only, as
enumerated in the Deed of Real Estate Mortgage or the
housing units as well;
 2. Whether Dulos Realty was the owner of the properties it
had mortgaged at the time of its execution in view of the
various Contracts to Sell and Deed of Absolute Sale
respectively executed in favor of petitioners Cahayag,
Rivera, Escalona and Cahayag;
3. Who, as between petitioners-buyers and respondent
Qua, has a better right over the properties?
4. Whether the Deed of Absolute Sale in favor of Baldoza
was not preceded by a Contract to Sell and full payment of
the purchase price; and
5. Whether the mortgage is void on the ground that it
lacked the prior written approval of the HLURB.
OUR RULING
We deny the Petition for reasons as follows.
1. Attack on the Subject-matter
the Real Estate Mortgage
It is true that the List of Properties attached to the Deed of Real
Estate Mortgage refers merely to the lands themselves and does
not include the housing units found thereon. A plain reading of the
Real Estate Mortgage, however, reveals that it covers the housing
units as well. We quote the pertinent provision of the agreement:
[T]he MORTGAGOR has transferred and conveyed and, by these
presents, do hereby transfer and convey by way of FIRST
MORTGAGE unto the MORTGAGEE, its successors and assigns
the real properties described in the list appearing at the back of this
document and/or in a supplemental document attached hereto as
Annex "A" and made and integral part hereof, together with all
the buildings and/or other improvements now existing or
which may hereafter be place[d] or constructed thereon, all of
which the MORTGAGOR hereby warrants that he is the absolute
owner and exclusive possessor thereof, free from all liens and
encumbrances of whatever kind and nature. xxx.47 (Emphasis
Ours)
Thus, the housing units would fall under the catch-all
phrase "together with all the buildings and/or other
improvements now existing or which may hereafter be placed
or constructed thereon."
The contra proferentem rule finds no application to this case. The
doctrine provides that in the interpretation of documents,
ambiguities are to be construed against the drafter.48 By its very
nature, the precept assumes the existence of an ambiguity in the
contract, which is why contra proferentem is also called the
ambiguity doctrine.49 In this case, the Deed of Real Estate
Mortgage clearly establishes that the improvements found on the
real properties listed therein are included as subject-matter of the
contract. It covers not only the real properties, but the buildings and
improvements thereon as well.
of
2. Challenge to the Foreclosure
Sale with Regard to the
Ownership of the Mortgaged
Properties
To begin with, the Contracts to Sell and Deed of Absolute Sale
could not have posed an impediment at all to the mortgage, given
that these contracts had yet to materialize when the mortgage was
constituted. They were all executed after the constitution of the
Real Estate Mortgage on 20 December 1980.
As regards Cahayag, the Contract to Sell in his favor was executed
on 29 March 1981, more than three months after the execution of
the mortgage contract.50 This is taken from the Contract to Sell
itself, which forms part of the records of this case.51
At this juncture, we note that the CA, for reasons unknown,
specified 29 September 1980,52 and not 29 March 1981, as the date
of the execution of the Contract to Sell in its Decision. Respondent
Qua has raised this point in her Memorandum filed with us. This
Court cannot be bound by the factual finding of the CA with regard
to the date of the Contract to Sell in favor of Cahayag. The general
rule that the Court is bound by the factual findings of the CA must
yield in this case, as it falls under one of the exceptions: when the
findings of the CA are contradicted by the evidence on record.53 In
this case, there is nothing in the records to support the CA's
conclusion that the Contract to Sell was executed on 29 September
1980. The evidence on record, however, reveals that the correct
date is 29 March 1981.
In the case of petitioner Rivera, the corresponding Contract to Sell
in his favor was executed only on 12 August 1981, or almost eight
months after the perfection of the mortgage contract on 20
December 1980.
Lastly, Dulos Realty executed the Deed of Absolute Sale in favor
of petitioner Baldoza on 10 December 1983, which was almost
three years from the time the mortgage contract was executed on
20 December 1980.
There was neither a contract to sell nor a deed of absolute sale to
speak of when the mortgage was executed.
Petitioners equate a contract to sell to a contract of sale, in which
the vendor loses ownership over the property upon its
delivery.54 But a contract to sell, standing alone, does not transfer
ownership.55 At the point of perfection, the seller under a contract
to sell does not even have the obligation to transfer ownership to
the buyer.56 The obligation arises only when the buyer fulfills the
condition: full payment of the purchase price.57 In other words, the
seller retains ownership at the time of the execution of the contract
to sell.58
There is no evidence to show that any of petitioners Cahayag,
Rivera and Escalona were able to effect full payment of the
purchase price, which could have at least given rise to the
obligation to transfer ownership. Petitioners Cahayag and Rivera
even admit that they defaulted on their obligations under their
respective Contracts to Sell, although they attribute the default to
respondent Qua's "harassment and unlawful actuations."59 The
statement, though, was a mere allegation that was left
unsubstantiated and, as such, could not qualify as proof of
anything.60
3. Who Has a Better Right over the Properties
Registration of the mortgage hound the buyers under the
Contracts to Sell
Registration of the mortgage establishes a real right or lien in favor
of the mortgagee, as provided by Articles 131261and 212662 of the
Civil Code.63 Corollary to the rule, the lien has been treated as
"inseparable from the property inasmuch as it is a right in rem."64 In
other words, it binds third persons to the mortgage.
The purpose of registration is to notify persons other than the
parties to the contract that a transaction concerning the property
was entered into.65 Ultimately, registration, because it provides
constructive notice to the whole world, makes the certificate of title
reliable, such that third persons dealing with registered land need
only look at the certificate to determine the status of the property.66
In this case, the Real Estate Mortgage over the property was
registered on 3 February 1981. On the other hand, the Contracts
to Sell were all executed after the registration of the mortgage. The
Contract to Sell in favor of petitioner Cahayag was executed on 29
March 1981, or almost two months after the registration of the
mortgage. The corresponding Contract to Sell in favor of Rivera
was executed only on 12 August 1981, roughly six months after the
registration of the mortgage contract. Lastly, the Contract to Sell in
favor of Escalona was executed on 13 January 1983, or nearly two
years after the registration of the mortgage on 3 February 1981.
Consequently, petitioners Cahayag, Rivera and Escalona, were
bound to the mortgage executed between mortgagor Dulos Realty
and mortgagee CCC, by virtue of its registration. Definitely, the
buyers each had constructive knowledge of the existence of the
mortgage contract when they individually executed the Contracts
to Sell.
Dela Merced v. GSIS not applicable
Petitioner invokes the above case. Dela Merced involved a clash
between an unrecorded contract to sell and a registered mortgage
contract. The contract to sell between the mortgagors (Spouses
Zulueta) and the buyer (Francisco Dela Merced) was
executed before the former's constitution of the mortgage in favor
of GSIS. Because the Zuluetas defaulted on their loans, the
mortgage was foreclosed; the properties were sold at public
auction to GSIS as the highest bidder; and the titles were
consolidated after the spouses' failure to redeem the properties
within the one-year redemption period. GSIS later sold the
contested lot to Elizabeth D. Manlongat and Ma. Therese D.
Manlongat. However, Dela Merced was able to fully pay the
purchase price to Spouses Zulueta, who executed a Deed of
Absolute Sale in his favor prior to the foreclosure sale.
This Court stated therein the general rule that the purchaser is not
required to go beyond the Torrens title if there is nothing therein to
indicate any cloud or vice in the ownership of the property or any
encumbrance thereon. The case nonetheless provided an
exception to the general rule. The exception arises when the
purchaser or mortgagee has knowledge of a defect in the vendor's
title or lack thereof, or is aware of sufficient facts to induce a
reasonably prudent person to inquire into the status of the property
under litigation. The Court applied the exception, taking into
consideration the fact that GSIS, the mortgagee, was a financing
institution.
But Dela Merced is not relevant here. Dela Merced involved a
Contract to Sell that was executed prior to the mortgage, while the
Contracts to Sell in this case were all executed after the
constitution and registration of the mortgage.
In Dela Merced, since GSIS had knowledge of the contract to sell,
this knowledge was equivalent to the registration of the Contract to
Sell. Effectively, this constitutes registration canceled out the
subsequent registration of the mortgage. In other words, the buyer
under the Contract to Sell became the- first to register. Following
the priority in time rule in civil law, the lot buyer was accorded
preference or priority in right in Dela Merced.
In this case, the registration of the mortgage, which predated the
Contracts to Sell, already bound the buyers to the mortgage.
Consequently, the determination of good faith does not come into
play.
Dela Merced materially differs from this case on another point. The
Contract to Sell in favor of Dela Merced was followed by full
payment of the price and execution of the Deed of Absolute
Sale. In this case, the Contract to Sell in favor of each of petitioners
Cahayag, Rivera and Escalona, is not coupled with full payment
and execution of a deed of absolute sale.
This case also needs to be distinguished from Luzon Development
Bank v. Enriquez.67 In that case, the unregistered Contract to Sell
was executed after the execution of the mortgage. Instead of
resorting to foreclosure, the owner/developer and the bank entered
into a dacion en pago. The Court declared that the bank was bound
by the Contract to Sell despite the non-registration of the contract.
It reasoned that the bank impliedly assumed the risk that some of
the units might have been covered by contracts to sell. On the other
hand, the Court pronounced the mortgage to be void, as it was
without the approval of the Housing and Land Use Regulatory
Board (HLURB). The Court consequently ordered the unit buyer in
that case to pay the balance to the bank, after which the buyer was
obliged to deliver a clean title to the property.
There are points of distinction between the case at bar and Luzon
Development Bank. First, there is a definite finding in Luzon
Development Bank that the mortgage was without prior HLURB
approval, rendering the mortgage void. In the present case, as will
be discussed later, there is no proof from the records on whether
the HLURB did or did not approve the mortgage. Second, Luzon
Development Bank did not even reach the foreclosure stage of the
mortgage. This case, however, not only reached the foreclosure
stage; it even went past the redemption period, consolidation of the
title in the owner, and sale of the property by the highest bidder to
a third person.
The first distinction deserves elaboration. The absence of prior
written approval of the mortgage by the HLURB rendered it void.
This effectively wiped out any discussion on whether registration
bound the installment buyer. In fact, Luzon Development Bank did
not even bother to state whether the mortgage was registered or
not. More important, the tables were turned when Luzon
Development Bank held that the bank was bound to the Contract
to Sell in view of the latter's constructive notice of the Contract to
Sell. Stated differently, the actually unregistered Contract to Sell
became fictionally registered, making it binding on the bank.
In this case, on account of its registration, and the fact that the
contracts were entered into after it, the mortgage is valid even as
to petitioners.
No Redemption within One Year from the Foreclosure Sale
When it comes to extrajudicial foreclosures, the law68 grants
mortgagors or their successors-in-interest an opportunity to
redeem the property within one year from the date of the sale. The
one-year period has been jurisprudentially held to be counted from
the registration of the foreclosure sale with the Register of
Deeds.69 An exception to this rule has been carved out by Congress
for juridical mortgagors. Section 47 of the General Banking Law of
2000 shortens the redemption period to within three months after
the foreclosure sale or until the registration of the certificate of sale,
whichever comes first.70 The General Banking Law of 2000 came
into law on 13 June 2000.
If the redemption period expires and the mortgagors or their
successors-in-interest fail to redeem the foreclosed property, the
title thereto is consolidated in the purchaser.71 The consolidation
confirms the purchaser as the owner of the property; concurrently,
the mortgagor-for failure to exercise the right of redemption within
the period-loses all interest in the property.72
We now apply the rules to this case.
As the foreclosure sale took place prior to the advent of the General
Banking Law of 2000, the applicable redemption period is one year.
In this case, because the Certificate of Sale in favor of respondent
CCC was registered on 8 March 1982, the redemption period was
until 8 March 1983. It lapsed without any right of redemption having
been exercised by Dulos Realty. Consequently, the right of
respondent CCC, as purchaser of the subject lots, became
absolute. As a matter of right, it was entitled to the consolidation of
the titles in its name and to the possession of those lots. Further,
the right of respondent CCC over the lots was transferred to
respondent Qua by virtue of the Deed of Sale executed between
them.
Given the foregoing considerations, respondent Qua, who now has
title to the properties subject of the various Contracts to Sell, is the
lawful owner thereof.
Foreclosure Sale vs. Contract of Sale
When Dulos Realty executed a Deed of Absolute Sale covering the
real property registered under TCT No. S-39778 in favor of
petitioner Baldoza on 10 December 1983, it was no longer the
owner of the property. Titles to the subject properties, including the
one sold to Baldoza, had already been consolidated in favor of
respondent CCC as early as 10 November 1983. In fact, on the
same date, the titles to the subject lots in the name of Dulos Realty
had already been cancelled and new ones issued to respondent
CCC.
The fact that Dulos Realty was no longer the owner of the real
property at the time of the sale led the CA to declare that the
Contract of Sale was null and void. On this premise, the appellate
court concluded that respondent Qua had a better title to the
property over petitioner Baldoza.
We find no error in the conclusion of the CA that respondent Qua
has a better right to the property. The problem lies with its
reasoning. We therefore take a different route to reach the same
conclusion.
Proper place of nemo dat quod non habet in the Law on Sales
Undeniably, there is an established rule under the law on sales that
one cannot give what one does not have (Nemo dat quad non ha
bet).73 The CA, however, confuses the application of this rule with
respect to time. It makes the nemo dat quad non habet rule a
requirement for the perfection of a contract of sale, such that a
violation thereof goes into the validity of the sale. But the Latin
precept has been jurisprudentially held to apply to a contract of sale
at its consummation stage, and not at the perfection stage.74
Cavite Development Bank v. Spouses Syrus Lim75 puts nemo dat
quad non habet in its proper place. Initially, the Court rules out
1âwphi1
ownership as a requirement for the perfection of a contract of sale.
For all that is required is a meeting of the minds upon the object of
the contract and the price. The case then proceeds to give
examples of the rule. It cites Article 1434 of the Civil Code, which
provides that in case the seller does not own the subject matter of
the contract at the time of the sale, but later acquires title to the
thing sold, ownership shall pass to the buyer. The Court also refers
to the rule as the rationale behind Article 1462, which deals with
sale of "future goods."
Cavite Development Bank thereafter turns to Article 1459, which
requires ownership by the seller of the thing sold at the time of
delivery or consummation stage of the sale. The Court explains
that if the rule were otherwise, the seller would not be able to
comply with the latter's obligation to transfer ownership to the buyer
under a perfected contract of sale. The Court ends the discourse
with the conclusion that "[i]t is at the consummation stage where
the principle of nemo dat quad non habet applies.76
Case law also provides that the fact th,at the seller is not the owner
of the subject matter of the sale at the time of perfection does not
make the sale void.77
Hence, the lesson: for title to pass to the buyer, the seller must be
the owner of the thing sold at the consummation stage or at the
time of delivery of the item sold. The seller need not be the owner
at the perfection stage of the contract, whether it is of a contract to
sell or a contract of sale. Ownership is not a requirement for a valid
contract of sale; it is a requirement for a valid transfer of ownership'.
Consequently, it was not correct for the CA to consider the contract
of sale void. The CA erroneously considered lack of ownership on
the part of the seller as having an effect on the validity of the sale.
The sale was very much valid when the Deed of Absolute Sale
between the parties was executed on 10 December 1983, even
though title to the property had earlier been consolidated in favor
of respondent CCC as early as 10 November 1983. The fact that
Dulos Realty was no longer the owner of the property in question
at the time of the sale did not affect the validity of the contract.
On the contrary, lack of title goes into the performance of a
contract of sale. It is therefore crucial to determine in this case if
the seller was the owner at the time of delivery of the object of the
sale. For this purpose, it should be noted that execution of a public
instrument evidencing a sale translates to delivery.78 It transfers
ownership of the item sold to the buyer.79
In this case, the delivery coincided with the perfection of the
contract -The Deed of Absolute Sale covering the real property in
favor of petitioner Baldoza was executed on 10 December 1983.
As already mentioned, Dulos Realty was no longer the owner of
the property on that date. Accordingly, it could not have validly
transferred ownership of the real property it had sold to petitioner.
Thus, the correct conclusion that should be made is that while there
was a valid sale, there was no valid transfer of title to Baldoza,
since Dulos Realty was no longer the owner at the time of the
execution of the Deed of Absolute Sale.
No Bad Faith on Qua
The contention that Qua is a stockholder and former member of
the Board of Directors of respondent CCC and therefore she is not
exactly a stranger to the affairs of CCC is not even relevant.
An innocent purchaser for value is one who "buys the property of
another without notice that some other person has a right to or
interest in it, and who pays a full and fair price at the time of the
purchase or before receiving any notice of another person's
claim."80 The concept thus presupposes that there must be an
adverse claim or defect in the title to the property to be purchased
by the innocent purchaser for value.
Respondent Qua traces her title to respondent CCC, whose
acquisition over the property proceeded from a foreclosure sale
that was valid. As there is no defect in the title of respondent CCC
to speak of in this case, there is no need to go into a discussion of
whether Qua is an innocent purchaser for value.
4. Dispute as to the Factual Finding of the CA that the Deed of
Absolute Sale in Favor of Baldoza was not Preceded by a
Contract to Sell and Full Payment of the Purchase Price
We absolutely discard the argument. We can think of at least four
reasons why. First, Exhibit "L" was not formally offered in
evidence. Second, it was not even incorporated into the
records. Third, the argument is irrelevant. Fourth, it was even
abandoned in the Memoranda filed by petitioners with us. Last, we
are not a trier of facts and thus we yield to the finding of the CA.
Exhibit "L" not formally offered
A perusal of the records shows that the Contract to Sell that
Baldoza referred to had in fact been marked as Exhibit "L" during
her direct examination in court.81 Even so, Exhibit "L" was never
formally offered as evidence. For this reason, we reject her
contention. Courts do not consider evidence that has not been
formally offered.82 This explains why the CA never mentioned the
alleged Contract to Sell in favor of Baldoza.
The rationale behind the rule rests on the need for judges to
confine their factual findings and ultimately their judgment solely
and strictly to the evidence offered by the parties to a suit.83 The
rule has a threefold purpose. It allows the trial judge to know the
purpose of the evidence presented; affords opposing parties the
opportunity to examine the evidence and object to its admissibility
when necessary; and facilitates review, given that an appellate
court does not have to review documents that have not been
subjected to scrutiny by the trial court.84
Exhibit "L" not incorporated into the records
The rule, of course, admits an exception. Evidence not formally
offered may be admitted and considered by the trial court so long
as the following requirements obtain: (1) the evidence is
duly identified by testimony duly recorded; and (2) the evidence
is incorporated into the records of the case.
The exception does not apply to the case of Baldoza. While she
duly identified the Contract to Sell during her direct examination,
which was duly recorded, Exhibit "L" was not incorporated into the
records.
Exhibit "L" not relevant
Be that as it may, the contention that a Contract to Sell in favor of
Baldoza preceded the sale in her favor is irrelevant. It must be
stressed that the sale to Baldoza made by Dulos Realty took
place after the lapse of the redemption period and after
consolidation of title in the name of respondent CCC on 10
November 1983, one month prior to the sale to Baldoza on 10
December 1983. Dulos Realty still would have lost all interest over
the property mortgaged.
The fact that Dulos Realty ceased to be the owner of the property
and therefore it could no longer effect delivery of the property at
the time the Deed of Absolute Sale in favor of Baldoza was
executed is the very reason why the case of Baldoza cannot be
compared with Dela Merced. In the case, the buyer in the Contract
to Sell was able to effect full payment of the purchase price and to
execute a Deed of Absolute Sale in his favor before the
foreclosure sale. In this case, the full payment of the purchase
price and the execution of a Deed of Absolute Sale in favor of
Baldoza was done after the foreclosure sale.
Issue over Exhibit "L" not included in the Memorandum
Equally important is the fact that petitioners failed to include the
issue over Exhibit "L" in any of the Memoranda they filed with us.
The omission is fatal. Issues raised in previous pleadings but
not included in the memorandum are deemed waived or
abandoned (A.M. No. 99-2-04-SC). As they are "a summation of
the parties' previous pleadings, the memoranda alone may be
considered by the Court in deciding or resolving the
petition."85 Thus, even as the issue was raised in the Petition, the
Court may not consider it in resolving the case on the ground of
failure of petitioners to include the issue in the Memorandum. They
have either waived or abandoned it.
5. Issue of HLURB's Non-Approval of the Mortgage
Petitioners allege before the Court that the mortgage contract in
this case was not approved by the HLURB. They claim that this
violates Section 18 of P.D. 95786 and results in the nullity of the
mortgage. Respondents have disputed the claim and counter-
argue that the allegation of the petitioners is not supported by
evidence. Respondents likewise aver that the argument was raised
for the first time on appeal.87
It is rather too late in the day for petitioners to raise this argument.
Parties are not permitted to change their theory of a case at the
appellate stage.88 Thus, theories and issues not raised at the trial
level will not be considered by a reviewing court on the ground that
they cannot be raised for the first time on appeal.89 Overriding
considerations of fair play, justice and due process dictate this
recognized rule.90 This Court cannot even receive evidence on this
matter.
Petitioners' original theory of the case is the nullity of the mortgage
on the grounds previously discussed. If petitioners are allowed to
introduce their new theory, respondents would have no more
opportunity to rebut the new claim with contrary evidence, as the
trial stage has already been terminated. In the interest of fair play
and justice, the introduction of the new argument must be barred.91
Exceptions Not Applicable
The Court is aware that the foregoing is merely a general rule.
Exceptions are written in case law: first, an issue of jurisdiction may
be raised at any time, even on appeal, for as long as the exercise
thereof will not result in a mockery of the demands of fair
play;92 second, in the interest of justice and at the sound discretion
of the appellate court, a party may be allowed to change its legal
theory on appeal, but only when the factual bases thereof would
not require further presentation of evidence by the adverse party
for the purpose of addressing the issue raised in the new
theory;93 and last, which is actually a bogus exception, is when the
question falls within the issues raised at the trial court.94

The exceptions do not apply to the instant case. The new argument
offered in this case concerns a factual matter - prior approval by
the HLURB. This prerequisite is not in any way related to
jurisdiction, and so the first exception is not applicable. There is
nothing in the record to allow us to make any conclusion with
respect to this new allegation.

Neither will the case fall under the second exception. Evidence
would be required of the respondents to disprove the new
allegation that the mortgage did not have the requisite prior HLURB
approval. Besides, to the mind of this court, to allow petitioners to
change their theory at this stage of the proceedings will be
exceedingly inappropriate.

Petitioners raised the issue only after obtaining an unfavorable

judgment from the CA. Undoubtedly, if we allow a change of theory
late in the game, so to speak, we will unjustifiably close our eyes
to the fundamental right of petitioners to procedural due process.
They will lose the opportunity to meet the challenge, because trial
has already ended. Ultimately, we will be throwing the
Constitutional rulebook out the window.

WHEREFORE, premises considered, the Petitions are DENIED,

and the Court of Appeals Decision dated 2 November 2004 and
Resolution dated 10 May 2005 in CA-G.R. CV No. 47421 are
hereby AFFIRMED.

SO ORDERED.

MARIA LOURDES P.A. SERENO

Chief Justice, Chairperson