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 revise.[13]
 Second. The other question is whether the contract between petitioner and private
respondent is valid and binding. Petitioner invokes the ruling in Ibay v. Intermediate
Appellate Court.[14] In that case the transfer of rights to petitioner was disapproved by the
PHHC in view of Resolution No. 82 providing that the sale of more than one lot per person
shall not be permitted.Petitioner was already the holder of a land by reason of a previous
award made to him by the PHHC. Accordingly, the right of the awardee to recover the
possession of the lot from him was upheld. In this case, however, there is no evidence
that the sale to private respondent of the lot was made in 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 there was a meeting of the minds
of the parties, and whether there could be a sale of future property. The question whether
the sale was void because it was made within the one-year period of prohibition to
petitioner as awardee was never briefed or in any way argued below. For all intents and
purposes, therefore, petitioner waived this ground and cannot now urge it as ground for
reversing the decision of the Court of Appeals.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

.R. Nos. L-5048 and L-5049 October 31, 1953

In re Testate Estate of the late HILARION MARTIR. ANGELA MARTIR DE GUANZON, ETC.,
plaintiffs-appellees,
vs.
The Spouses AMADO P. JALANDONI and PAZ RAMOS, co-administrators-appellants.

Enrique F. Mariño for appellants.

REYES, J.:

This is an appeal from an order of the Court of First Instance of Occidental Negros approving the
inventory and accounts submitted by a co-administratrix in the testate proceedings of the deceased
spouses Hilarion Martir and Ligoria Martir.

It appears that in said proceedings Hermogenes Martir and Angela Martir, the only legitimate
children of the deceased spouses, were appointed co-administrators of both estates. Hermogenes,
however, died in 1943, and he was succeeded by Amado P. Jalandoni.

On July 5, 1947, the co-administratrix Angela Martir submitted for the approval of the court an
inventory of the two estates, the accounts of her administration for 1945 and 1946, and a project of
partition. The inventory was objected to by the co-administrator, Amado P. Jalandoni, in so far as it
included certain parcels of land claimed to have been bought by his wife, Paz Ramos, from
Hermogenes Martir; while the accounts were objected to, not only by Amado P. Jalandoni, but also
by the Financing Corporation of the Philippines, judgment creditor of Hermogenes Martir in a certain
civil case and purchaser, at the execution sale, of the latter's entire interests in the estates of his
deceased parents.

Overruling the objections, the court, in its order of October 14, 1948, approved the inventory and
accounts submitted by the co-administratrix but postponed hearing on the project of partition, at the
same time directing both co-administrators to render a final accounting of their joint administration
within thirty days.

The Financing Corporation asked for a reconsideration of the order in so far as it referred to the
accounts, while Jalandoni and his wife asked for a reconsideration in so far as the order overruled
their objection to the inventory, albeit, they later joined the corporation in its prayer to have the
approval of the accounts set aside and to have certain corrections made herein.

Both motions having been denied by the court, Jalandoni and his wife announced their intention to
appeal to the Court of Appeals and in due time presented their record on appeal, which was
approved by the court. The Financing Corporation, on its part, filed a second motion for
reconsideration. But the court postponed consideration of this motion together with the project of
partition, stating that it was doing so in view of the appeal from the order invalidating the sale to Paz
Ramos of certain lots belonging to the estates.

Though the case was elevated to the Court of Appeals, that court has certified the case here
because in its opinion the value in controversy is more than P50,000.

Appellants, in their brief, assail the approval of both the inventory and the accounts. But we think that
questions referring to the latter should wait for the appeal of the Financing Corporation when and if
its second motion for reconsideration is denied. For we note that appellants have joined hands with
the Financing Corporation in opposing those accounts so that their objections are identical. As the
corporation is not a party to this appeal, it may not be fair to have a final ruling on those objections
without giving it a hearing. The present appeal, therefore, should be deemed limited to the
consideration of the order below in so far as it overrules appellants' objections to the inventory and
declares the sale made to them by Hermogenes Martir null and void.

The record shows that on September 4, 1940, Hermogenes Martir executed a deed, Exhibit G,
selling all his rights and interests in ten cadastral lots registered in the name of his deceased parents
Hilarion Martir and Ligoria Martir to Paz Ramos, wife of Amado P. Jalandoni, subject to repurchase
within three years. As the repurchase was not made within the stipulated period, the vendee and her
husband executed an affidavit consolidating title in themselves and succeeded in having the
Register of Deeds of Occidental Negros issue to them transfer certificates of title for some of the
lots.

The authenticity of the deed of sale, Exhibit "G" is not disputed. But lacking judicial approval, the sale
was declared void by the court below as an unauthorized disposal of property in custodia legis.

This ruling is assailed by appellants on the theory that the court below, in the exercise of its probate
jurisdiction, had no authority to pass on questions of ownership and declare the sale in question null
and void. But the jurisdictional question thus raised is, in our opinion, of no importance since the lots
covered by the sale were already included in previous inventories filed by the co-administrators and,
at the time of the sale, still stood in the name of the deceased spouses Hilarion Martir and Ligoria
Martir as appears in the transfer certificates of title mentioned in the deed of sale. Moreover, as
stated by the court in its order, and as borne out by the transcript of stenographic notes taken at the
hearing, the said lots were admitted by counsel for appellants to be part of the estates in course of
administration. In any event, though questions on title to real property cannot be deter-mined in a
testate or intestate proceedings, it is now established that, for the purpose of determining whether or
not a given property should be included in the inventory, the probate court may pass upon the title
thereto, though such determination is not conclusive and is subject to the final decision in a separate
action to be instituted between the parties. (Moran on the Rules on Court, Vol. 11, 1952 ed., pp. 408-
409.) In so far, therefore, as the order appealed from denies the exclusion of the lots claimed by
appellants from the inventory filed by the administratrix, we find no reason why the said order should
not be allowed to stand.

But we note, on examination of the deed of sale Exhibit "G", that what the vendor, Hermogenes
Martir, did convey to Paz Ramos by means of said document was merely his rights and interests in
the lots in question, that is, his rights and interests as an heir in a portion of the hereditary estate,
and there is no law that prohibits an heir from selling his interests in an inheritance, except that any
such sale must be deemed subject to the result of the administration proceedings. Thus, in the case
of Cea et al. vs. Court of Appeals et al., (84 Phil., 798) we upheld the opinion of the Court of Appeals
that the sale by a devisee of a half interest bequeathed to him in specific property, pending
settlement of the estate in course of administration, was void as a conveyance of property in the
custody of the law but valid as an assignment of his interest therein as a devisee. Considered,
therefore, as a sale of Hermogenes Martir's interest in certain properties left by his diseased parents,
which were still in course of ad-ministration, that sale is not necessarily void, although it should be
held subject to the result of the administration proceedings. The inclusion of the lots in question in
the inventories was, however, proper.

In view of the foregoing, the order appealed from is affirmed is so far as it approves the inventory
submitted by the co-administratrix but with the understanding that the sale made by Hermogenes
Martir in favor of appellants shall be deemed a mere assignment of the vendor's interest in the lots
covered by the deed of sale, subject to the result of the administration proceedings, and without
prejudice to the result of any action already brought or still to be brought contesting the title of the
estates of Hilarion Martir and Ligoria Martir to the said lots or any portion thereof. Consideration of
the order below with respect to the accounts must await the final resolution of the Financing
Corporation's motion for reconsideration. Without special pronouncement as to costs.

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S.

TRIA, petitioners, vs. VICENTE RODRIGUEZ, respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of

Appeals reversing the decision of the Regional Trial Court, Naga City, Branch
[1]

19, in Civil Case No. 87-1335, as well as the appellate courts resolution
denying reconsideration. Slxsc

The antecedent facts are as follows:

Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in
Liboton, Naga City. On September 28, 1964, he sold a portion thereof,
consisting of 345 square meters, to respondent Vicente S. Rodriguez for
P2,415.00. The sale is evidenced by a Deed of Sale. [2]

Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was
appointed judicial administrator of the decedents estate in Special
Proceedings No. R-21, RTC, Branch 19, Naga City. Ramon San Andres
engaged the services of a geodetic engineer, Jose Peero, to prepare a
consolidated plan (Exh. A) of the estate. Engineer Peero also prepared a
sketch plan of the 345-square meter lot sold to respondent. From the result of
the survey, it was found that respondent had enlarged the area which he
purchased from the late Juan San Andres by 509 square meters. [3]

Accordingly, the judicial administrator sent a letter, dated July 27, 1987, to
[4]

respondent demanding that the latter vacate the portion allegedly encroached
by him. However, respondent refused to do so, claiming he had purchased the
same from the late Juan San Andres. Thereafter, on November 24, 1987, the
judicial administrator brought an action, in behalf of the estate of Juan San
Andres, for recovery of possession of the 509-square meter lot. Slxmis

In his Re-amended Answer filed on February 6, 1989, respondent alleged that

apart from the 345-square meter lot which had been sold to him by Juan San
Andres on September 28, 1964, the latter likewise sold to him the following
day the remaining portion of the lot consisting of 509 square meters, with both
parties treating the two lots as one whole parcel with a total area of 854
square meters. Respondent alleged that the full payment of the 509-square
meter lot would be effected within five (5) years from the execution of a formal
deed of sale after a survey is conducted over said property. He further alleged
that with the consent of the former owner, Juan San Andres, he took
possession of the same and introduced improvements thereon as early as
1964.

As proof of the sale to him of 509 square meters, respondent attached to his
answer a receipt (Exh. 2) signed by the late Juan San Andres, which reads in
[5]

full as follows: Missdaa

Received from Vicente Rodriguez the sum of Five Hundred

(P500.00) Pesos representing an advance payment for a
residential lot adjoining his previously paid lot on three sides
excepting on the frontage with the agreed price of Fifteen (15.00)
Pesos per square meter and the payment of the full consideration
 based on a survey shall be due and payable in five (5) years
period from the execution of the formal deed of sale; and it is
agreed that the expenses of survey and its approval by the
Bureau of Lands shall be borne by Mr. Rodriguez.

Naga City, September 29, 1964.

(Sgd.
)

JUAN
R.
SAN
AND
RES

Vend
or

Noted:

(Sgd.)

VICENTE RODRIGUEZ

Vendee

Respondent also attached to his answer a letter of judicial administrator

Ramon San Andres (Exh. 3), asking payment of the balance of the purchase
[6]

price. The letter reads:

Dear Inting,

Please accommodate my request for Three Hundred (P300.00)

Pesos as I am in need of funds as I intimated to you the other
day.

We will just adjust it with whatever balance you have payable to

the subdivision.

Thanks.
 Since
rely,

(Sgd.
)

RAM
ON
SAN
AND
RES

Vicente Rodriguez

Penafrancia Subdivision, Naga City

P.S.

You can let bearer Enrique del Castillo sign for the amount.

Received One Hundred Only

(Sgd.
)

RAM
ON
SAN
AND
RES

3/30/
66

Respondent deposited in court the balance of the purchase price amounting

to P7,035.00 for the aforesaid 509-square meter lot. Sdaadsc

While the proceedings were pending, judicial administrator Ramon San

Andres died and was substituted by his son Ricardo San Andres. On the other
hand, respondent Vicente Rodriguez died on August 15, 1989 and was
substituted by his heirs.
[7]
Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose
Peero, testified that based on his survey conducted sometime between 1982
[8]

and 1985, respondent had enlarged the area which he purchased from the
late Juan San Andres by 509 square meters belonging to the latters estate.
According to Peero, the titled property (Exh. A-5) of respondent was enclosed
with a fence with metal holes and barbed wire, while the expanded area was
fenced with barbed wire and bamboo and light materials. Rtcspped

The second witness, Ricardo San Andres, administrator of the estate,

[9]

testified that respondent had not filed any claim before Special Proceedings
No. R-21 and denied knowledge of Exhibits 2 and 3. However, he recognized
the signature in Exhibit 3 as similar to that of the former administrator, Ramon
San Andres. Finally, he declared that the expanded portion occupied by the
family of respondent is now enclosed with barbed wire fence unlike before
where it was found without fence.

On the other hand, Bibiana B. Rodriguez, widow of respondent Vicente

[10]

Rodriguez, testified that they had purchased the subject lot from Juan San
Andres, who was their compadre, on September 29, 1964, at P15.00 per
square meter. According to her, they gave P500.00 to the late Juan San
Andres who later affixed his signature to Exhibit 2. She added that on March
30, 1966, Ramon San Andres wrote them a letter asking for P300.00 as
partial payment for the subject lot, but they were able to give him only
P100.00. She added that they had paid the total purchase price of P7,035.00
on November 21, 1988 by depositing it in court. Bibiana B. Rodriquez stated
that they had been in possession of the 509-square meter lot since 1964
when the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she
testified that they did not know at that time the exact area sold to them
because they were told that the same would be known after the survey of the
subject lot. Korte

On September 20, 1994, the trial court rendered judgment in favor of

[11]

petitioner. It ruled that there was no contract of sale to speak of for lack of a
valid object because there was no sufficient indication in Exhibit 2 to identify
the property subject of the sale, hence, the need to execute a new contract.

Respondent appealed to the Court of Appeals, which on April 21, 1998

rendered a decision reversing the decision of the trial court. The appellate
court held that the object of the contract was determinable, and that there was
a conditional sale with the balance of the purchase price payable within five
years from the execution of the deed of sale. The dispositive portion of its
decisions reads:
 IN VIEW OF ALL THE FOREGOING, the judgment appealed from
is hereby REVERSED and SET ASIDE and a new one entered
DISMISSING the complaint and rendering judgment against the
plaintiff-appellee:

1. to accept the P7,035.00 representing the balance of the

purchase price of the portion and which is deposited in court
under Official Receipt No. 105754 (page 122, Records);

2. to execute the formal deed of sale over the said 509 square
meter portion of Lot 1914-B-2 in favor of appellant Vicente
Rodriguez;

3. to pay the defendant-appellant the amount of P50,000.00 as

damages and P10,000.00 attorneys fees as stipulated by them
during the trial of this case; and

4. to pay the costs of the suit.

SO ORDERED.

Hence, this petition. Petitioner assigns the following errors as having been
allegedly committed by the trial court: Sclaw

I.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT

THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO SELL
DESPITE ITS LACKING ONE OF THE ESSENTIAL ELEMENTS
OF A CONTRACT, NAMELY, OBJECT CERTAIN AND
SUFFICIENTLY DESCRIBED.

II.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT

PETITIONER IS OBLIGED TO HONOR THE PURPORTED
CONTRACT TO SELL DESPITE NON-FULFILLMENT BY
RESPONDENT OF THE CONDITION THEREIN OF PAYMENT
OF THE BALANCE OF THE PURCHASE PRICE.

III.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT

CONSIGNATION WAS VALID DESPITE NON-COMPLIANCE
WITH THE MANDATORY REQUIREMENTS THEREOF.

IV.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT

LACHES AND PRESCRIPTION DO NOT APPLY TO
 RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE
THE PURPORTED CONTRACT AFTER THE LAPSE OF 24
YEARS.

The petition has no merit.

First. Art. 1458 of the Civil Code provides:

By the contract of sale one of the contracting parties obligates

himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer

ownership in exchange for the price;

b) Determinate subject matter; and,

c) Price certain in money or its equivalent. [12]

As shown in the receipt, dated September 29, 1964, the late Juan San Andres
received P500.00 from respondent as "advance payment for the residential lot
adjoining his previously paid lot on three sides excepting on the frontage;" the
agreed purchase price was P15.00 per square meter; and the full amount of
the purchase price was to be based on the results of a survey and would be
due and payable in five (5) years from the execution of a deed of sale.

Petitioner contends, however, that the "property subject of the sale was not
described with sufficient certainty such that there is a necessity of another
agreement between the parties to finally ascertain the identity, size and
purchase price of the property which is the object of the alleged sale." He
[13]

argues that the "quantity of the object is not determinate as in fact a survey is
needed to determine its exact size and the full purchase price therefor." In [14]

support of his contention, petitioner cites the following provisions of the Civil
Code: Sclex

Art. 1349. The object of every contract must be determinate as to

its kind. The fact that the quantity is not determinable shall not be
 an obstacle to the existence of a contract, provided it is possible
to determine the same without the need of a new contract
between the parties.

Art. 1460 . . . The requisite that a thing be determinate is satisfied

if at the time the contract is entered into, the thing is capable of
being made determinate without the necessity of a new and
further agreement between the parties.

Petitioners contention is without merit. There is no dispute that respondent

purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This
portion is located in the middle of Lot 1914-B-2, which has a total area of 854
square meters, and is clearly what was referred to in the receipt as the
"previously paid lot." Since the lot subsequently sold to respondent is said to
adjoin the "previously paid lot" on three sides thereof, the subject lot is
capable of being determined without the need of any new contract. The fact
that the exact area of these adjoining residential lots is subject to the result of
a survey does not detract from the fact that they are determinate or
determinable. As the Court of Appeals explained: [15]

Concomitantly, the object of the sale is certain and determinate.

Under Article 1460 of the New Civil Code, a thing sold is
determinate if at the time the contract is entered into, the thing is
capable of being determinate without necessity of a new or further
agreement between the parties. Here, this definition finds
realization.

Appellees Exhibit "A" (page 4, Records) affirmingly shows that the

original 345 sq. m. portion earlier sold lies at the middle of Lot
1914-B-2 surrounded by the remaining portion of the said Lot
1914-B-2 on three (3) sides, in the east, in the west and in the
north. The northern boundary is a 12 meter road. Conclusively,
therefore, this is the only remaining 509 sq. m. portion of Lot
1914-B-2 surrounding the 345 sq. m. lot initially purchased by
Rodriguez. It is quite defined, determinate and certain. Withal, this
is the same portion adjunctively occupied and possessed by
Rodriguez since September 29, 1964, unperturbed by anyone for
over twenty (20) years until appellee instituted this suit.

Thus, all of the essential elements of a contract of sale are present, i.e., that
there was a meeting of the minds between the parties, by virtue of which the
late Juan San Andres undertook to transfer ownership of and to deliver a
determinate thing for a price certain in money. As Art. 1475 of the Civil Code
provides: Xlaw

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. . . .

That the contract of sale is perfected was confirmed by the former

administrator of the estates, Ramon San Andres, who wrote a letter to
respondent on March 30, 1966 asking for P300.00 as partial payment for the
subject lot. As the Court of Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting of

the mind between San Andres and Rodriguez for the sale of the
property adjoining the 345 square meter portion previously sold to
Rodriguez on its three (3) sides excepting the frontage. The price
is certain, which is P15.00 per square meter. Evidently, this is a
perfected contract of sale on a deferred payment of the purchase
price. All the pre-requisite elements for a valid purchase
transaction are present. Sale does not require any formal
document for its existence and validity. And delivery of
possession of land sold is a consummation of the sale (Galar vs.
Husain, 20 SCRA 186 [1967]). A private deed of sale is a valid
contract between the parties (Carbonell v. CA, 69 SCRA 99
[1976]). Xsc

In the same vein, after the late Juan R. San Andres received the
P500.00 downpayment on March 30, 1966, Ramon R. San
Andres wrote a letter to Rodriguez and received from Rodriguez
the amount of P100.00 (although P300.00 was being requested)
deductible from the purchase price of the subject portion. Enrique
del Castillo, Ramons authorized agent, correspondingly signed
the receipt for the P100.00. Surely, this is explicitly a veritable
proof of the sale over the remaining portion of Lot 1914-B-2 and a
confirmation by Ramon San Andres of the existence thereof. [16]

There is a need, however, to clarify what the Court of Appeals said is a

conditional contract of sale. Apparently, the appellate court considered as a
"condition" the stipulation of the parties that the full consideration, based on a
survey of the lot, would be due and payable within five (5) years from the
execution of a formal deed of sale. It is evident from the stipulations in the
receipt that the vendor Juan San Andres sold the residential lot in question to
respondent and undertook to transfer the ownership thereof to respondent
without any qualification, reservation or condition. In Ang Yu Asuncion v.
Court of Appeals, we held: Sc
[17]

In Dignos v. Court of Appeals (158 SCRA 375), we have said that,

although denominated a "Deed of Conditional Sale," a sale is still
absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g., until
or unless the price is paid. Ownership will then be transferred to
the buyer upon actual or constructive delivery (e.g., by the
execution of a public document) of the property sold. Where the
condition is imposed upon the perfection of the contract itself, the
failure of the condition would prevent such perfection. If the
condition is imposed on the obligation of a party which is not
fulfilled, the other party may either waive the condition or refuse to
proceed with the sale. (Art. 1545, Civil Code)

Thus, in one case, when the sellers declared in a "Receipt of Down Payment"
that they received an amount as purchase price for a house and lot without
any reservation of title until full payment of the entire purchase price, the
implication was that they sold their property. In Peoples Industrial and
[18]

Commercial Corporation v. Court of Appeals, it was stated:

[19]

A deed of sale is considered absolute in nature where there is neither a

stipulation in the deed that title to the property sold is reserved in the seller
until full payment of the price, nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed
period. Scmis

Applying these principles to this case, it cannot be gainsaid that the contract
of sale between the parties is absolute, not conditional. There is no
reservation of ownership nor a stipulation providing for a unilateral rescission
by either party. In fact, the sale was consummated upon the delivery of the lot
to respondent. Thus, Art. 1477 provides that the ownership of the thing sold
[20]

shall be transferred to the vendee upon the actual or constructive delivery

thereof.

The stipulation that the "payment of the full consideration based on a survey
shall be due and payable in five (5) years from the execution of a formal deed
of sale" is not a condition which affects the efficacy of the contract of sale. It
merely provides the manner by which the full consideration is to be computed
and the time within which the same is to be paid. But it does not affect in any
manner the effectivity of the contract. Consequently, the contention that the
absence of a formal deed of sale stipulated in the receipt prevents the
happening of a sale has no merit. Missc

Second. With respect to the contention that the Court of Appeals erred in
upholding the validity of a consignation of P7,035.00 representing the balance
of the purchase price of the lot, nowhere in the decision of the appellate court
is there any mention of consignation. Under Art. 1257 of this Civil Code,
consignation is proper only in cases where an existing obligation is due. In this
case, however, the contracting parties agreed that full payment of purchase
price shall be due and payable within five (5) years from the execution of a
formal deed of sale. At the time respondent deposited the amount of
P7,035.00 in the court, no formal deed of sale had yet been executed by the
parties, and, therefore, the five-year period during which the purchase price
should be paid had not commenced. In short, the purchase price was not yet
due and payable.

This is not to say, however, that the deposit of the purchase price in the court
is erroneous. The Court of Appeals correctly ordered the execution of a deed
of sale and petitioners to accept the amount deposited by respondent.

Third. The claim of petitioners that the price of P7,035.00 is iniquitous is

untenable. The amount is based on the agreement of the parties as evidenced
by the receipt (Exh. 2). Time and again, we have stressed the rule that a
contract is the law between the parties, and courts have no choice but to
enforce such contract so long as they are not contrary to law, morals, good
customs or public policy. Otherwise, courts would be interfering with the
freedom of contract of the parties. Simply put, courts cannot stipulate for the
parties nor amend the latters agreement, for to do so would be to alter the real
intentions of the contracting parties when the contrary function of courts is to
give force and effect to the intentions of the parties. Misspped

Fourth. Finally, petitioners argue that respondent is barred by prescription

and laches from enforcing the contract. This contention is likewise untenable.
The contract of sale in this case is perfected, and the delivery of the subject
lot to respondent effectively transferred ownership to him. For this reason,
respondent seeks to comply with his obligation to pay the full purchase price,
but because the deed of sale is yet to be executed, he deemed it appropriate
to deposit the balance of the purchase price in court. Accordingly, Art. 1144 of
the Civil Code has no application to the instant case. Considering that a
[21]

survey of the lot has already been conducted and approved by the Bureau of
Lands, respondents heirs, assigns or successors-in-interest should reimburse
the expenses incurred by herein petitioners, pursuant to the provisions of the
contract. Spped

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the

modification that respondent is ORDERED to reimburse petitioners for the
expenses of the survey. Jospped

G.R. No. L-31271 April 29, 1974

ROMEO MARTINEZ and LEONOR SUAREZ, spouses, petitioners-appellants,

vs.
HON. COURT OF APPEALS, SECRETARY and UNDERSECRETARY OF PUBLIC WORKS &
COMMUNICATIONS, respondents-appellees.

Flores Macapagal, Ocampo and Balbastro for petitioners-appellants.

Office of the Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General Dominador L.
Quiroz and Solicitor Concepcion T. Agapinan for respondents-appellees.

ESGUERRA, J.:p

Petition for review by certiorari of the judgment of the Court of Appeals dated November 17, 1969 in its CA-G.R. 27655-R which reverses the
judgment of the Court of First Instance of Pampanga in favor of petitioners-appellants against the Secretary and Undersecretary of Public
Works & Communications in the case instituted to annul the order of November 25, 1958 of respondent Secretary of Public Works &
Communications directing the removal by the petitioners of the dikes they had constructed on Lot No. 15856 of the Register of Deeds of
Pampanga, which order was issued pursuant to the provisions of Republic Act No. 2056. The dispositive portion of the judgment of reversal
of the Court of Appeals reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed from is

hereby reversed, and another entered: [1] upholding the validity of the decision
reached by the respondent officials in the administrative case; [2] dissolving the
injunction issued by the Court below; and [3] cancelling the registration of Lot No. 2,
the disputed area, and ordering its reconveyance to the public domain. No costs in
this instance.

The background facts are stated by the Court of Appeals as follows:

The spouses Romeo Martinez and Leonor Suarez, now petitioners-appellees, are the
registered owners of two (2) parcels of land located in Lubao, Pampanga, covered by
transfer certificate of title No. 15856 of the Register of Deeds of the said province.
Both parcels of land are fishponds. The property involved in the instant case is the
second parcel mentioned in the above-named transfer certificate of title.

The disputed property was originally owned by one Paulino Montemayor, who
secured a "titulo real" over it way back in 1883. After the death of Paulino
Montemayor the said property passed to his successors-in-interest, Maria
Montemayor and Donata Montemayor, who in turn, sold it, as well as the first parcel,
to a certain Potenciano Garcia.
Because Potenciano Garcia was prevented by the then municipal president of
Lubao, Pedro Beltran, from restoring the dikes constructed on the contested
property, the former, on June 22, 1914, filed Civil Case No. 1407 with the Court of
First Instance against the said Pedro Beltran to restrain the latter in his official
capacity from molesting him in the possession of said second parcel, and on even
date, applied for a writ of preliminary injunction, which was issued against said
municipal president. The Court, by decision promulgated June 12, 1916, declared
permanent the preliminary injunction, which, decision, on appeal, was affirmed by the
Supreme Court on August 21, 1918. From June 22, 1914, the dikes around the
property in question remained closed until a portion thereof was again opened just
before the outbreak of the Pacific War.

On April 17, 1925. Potenciano Garcia applied for the registration of both parcels of
land in his name, and the Court of First Instance of Pampanga, sitting as land
registration court, granted the registration over and against the opposition of the
Attorney-General and the Director of Forestry. Pursuant to the Court's decision,
original certificate of title No. 14318, covering said parcels 1 and 2 was issued to the
spouses Potenciano Garcia and Lorenza Sioson.

These parcels of land were subsequently bought by Emilio Cruz de Dios in whose
name transfer certificate of title No. 1421 was first issued on November 9, 1925.

Thereafter, the ownership of these properties changed hands until eventually they
were acquired by the herein appellee spouses who hold them by virtue of transfer
certificate of title No. 15856.

To avoid any untoward incident, the disputants agreed to refer the matter to the
Committee on Rivers and Streams, by then composed of the Honorable Pedro
Tuason, at that time Secretary of Justice, as chairman, and the Honorable Salvador
Araneta and Vicente Orosa, Secretary of Agriculture and National Resources and
Secretary of Public Works and Communications, respectively, as members. This
committee thereafter appointed a Sub-Committee to investigate the case and to
conduct an ocular inspection of the contested property, and on March 11, 1954, said
Sub-Committee submitted its report to the Committee on Rivers and Streams to the
effect that Parcel No. 2 of transfer certificate of title No. 15856 was not a public river
but a private fishpond owned by the herein spouses.

On July 7, 1954, the Committee on Rivers and Streams rendered its decision the
dispositive part of which reads:

"In view of the foregoing considerations, the spouses Romeo

Martinez and Leonor Suarez should be restored to the exclusive
possession, use and enjoyment of the creek in question which forms
part of their registered property and the decision of the courts on the
matter be given full force and effect."

The municipal officials of Lubao, led by Acting Mayor Mariano Zagad, apparently
refused to recognize the above decision, because on September 1, 1954, the
spouses Romeo Martinez and Leonor Suarez instituted Civil Case No. 751 before
the Court of First Instance of Pampanga against said Mayor Zagad, praying that the
latter be enjoined from molesting them in their possession of their property and in the
construction of the dikes therein. The writ of preliminary injunction applied for was
issued against the respondent municipal Mayor, who immediately elevated the
injunction suit for review to the Supreme Court, which dismissed Mayor Zagad's
petition on September 7, 1953. With this dismissal order herein appellee spouses
proceeded to construct the dikes in the disputed parcel of land.

Some four (4) years later, and while Civil Case No. 751 was still pending the
Honorable Florencio Moreno, then Secretary of Public Works and Communications,
ordered another investigation of the said parcel of land, directing the appellees
herein to remove the dikes they had constructed, on the strength of the authority
vested in him by Republic Act No. 2056, approved on June 13, 1958, entitled "An Act
To Prohibit, Remove and/or Demolish the Construction of Dams. Dikes, Or Any
Other Walls In Public Navigable Waters, Or Waterways and In Communal Fishing
Grounds, To Regulate Works in Such Waters or Waterways And In Communal
Fishing Grounds, And To Provide Penalties For Its Violation, And For Other
Purposes. 1 The said order which gave rise to the instant proceedings, embodied a
threat that the dikes would be demolished should the herein appellees fail to comply
therewith within thirty (30) days.

The spouses Martinez replied to the order by commencing on January 2, 1959 the
present case, which was decided in their favor by the lower Court in a decision dated
August 10, 1959, the dispositive part of which reads:

"WHEREFORE, in view of the foregoing considerations, the Court

hereby declares the decision, Exhibit S, rendered by the
Undersecretary of Public Works and Communications null and void;
declares the preliminary injunction, hereto for issued, permanent, and
forever enjoining both respondents from molesting the spouses
Romeo Martinez and Leonor Suarez in their possession, use and
enjoyment of their property described in Plan Psu-9992 and referred
to in their petition."

"Without pronouncement as to costs."

"SO ORDERED."

As against this judgment respondent officials of the Department of Public Works and
Communications took the instant appeal, contending that the lower Court erred:

1. In holding that then Senator Rogelio de la Rosa, complainant in the administrative

case, is not an interested party and his letter-complaint dated August 15, 1958 did
not confer jurisdiction upon the respondent Undersecretary of Public Works and
Communications to investigate the said administrative case;

2. In holding that the duty to investigate encroachments upon public rivers conferred
upon the respondent Secretary under Republic Act No. 7056 cannot be lawfully
delegated by him to his subordinates;

3. In holding that the investigation ordered by the respondent Secretary in this case
is illegal on the ground that the said respondent Secretary has arrogated unto himself
the power, which he does not possess, of reversing, making nugatory, and setting
aside the two lawful decisions of the Court Exhibits K and I, and even annulling
thereby, the one rendered by the highest Tribunal of the land;
 4. In not sustaining respondent's claim that petitioners have no cause of action
because the property in dispute is a public river and in holding that the said claim has
no basis in fact and in law;

5. In not passing upon and disposing of respondent's counterclaim;

6. In not sustaining respondent's claim that the petition should not have been
entertained on the ground that the petitioners have not exhausted administrative
remedies; and

7. In holding that the decision of the respondents is illegal on the ground that it
violates the principles that laws shall have no retroactive effect unless the contrary is
provided and in holding that the said Republic Act No. 2056 is unconstitutional on the
ground that respondents' threat of prosecuting petitioners under Section 3 thereof for
acts done four years before its enactment renders the said law ex post facto.

The Court of Appeals sustained the above-mentioned assignment of errors committed by the Court
of First Instance of Pampanga and, as previously stated, reversed the judgment of the latter court.
From this reversal this appeal by certiorari was taken, and before this Court, petitioners-appellants
assigned the following errors allegedly committed by the Court of Appeals:

1. THE COURT OF APPEALS ERRED IN DECLARING IN THE INSTANT CASE

THAT PARCEL NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO. 15856 IS A
PUBLIC RIVER AND ORDERING THE CANCELLATION OF ITS REGISTRATION
BECAUSE THIS CONSTITUTES A COLLATERAL ATTACK ON A TORRENS TITLE
IN VIOLATION OF THE LAW AND THE WELL-SETTLED JURISPRUDENCE ON
THE MATTER.

2. THE COURT OF APPEALS ERRED IN REOPENING AND RE-LITIGATING THE

ISSUE AS TO WHETHER OR NOT LOT NO. 2 OF TRANSFER CERTIFICATE OF
TITLE NO. 15856 REGISTER OF DEEDS OF PAMPANGA, IS A PUBLIC RIVER
NOTWITHSTANDING THE FACT THAT THIS ISSUE HAS BEEN LONG
RESOLVED AND SETTLED BY THE LAND REGISTRATION COURT OF
PAMPANGA IN LAND REGISTRATION PROCEEDING NO. 692 AND IS NOW RES
JUDICATA.

3. THE COURT OF APPEALS ERRED IN ORDERING THE CANCELLATION OF

THE REGISTRATION OF LOT NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO.
15856 NOTWITHSTANDING THE FACT THAT THE TORRENS TITLE COVERING
IT HAS BEEN VESTED IN THE PETITIONERS WHO ARE THE SEVENTH OF THE
SUCCESSIVE INNOCENT PURCHASERS THEREOF AND WHO IN PURCHASING
THE SAME RELIED ON THE PRINCIPLE THAT THE PERSONS DEALING WITH
REGISTERED LAND NEED NOT GO BEHIND THE REGISTER TO DETERMINE
THE CONDITION OF THE PROPERTY.

The 1st and 2nd assignment of errors, being closely related, will be taken up together.

The ruling of the Court of Appeals that Lot No. 2 covered by Transfer Certificate of Title No. 15856 of
the petitioners-appellants is a public stream and that said title should be cancelled and the river
covered reverted to public domain, is assailed by the petitioners-appellants as being a collateral
attack on the indefeasibility of the torrens title originally issued in 1925 in favor of the petitioners-
appellants' predecessor-in-interest, Potenciano Garcia, which is violative of the rule of res judicata. It
is argued that as the decree of registration issued by the Land Registration Court was not re-opened
through a petition for review filed within one (1) year from the entry of the decree of title, the
certificate of title issued pursuant thereto in favor of the appellants for the land covered thereby is no
longer open to attack under Section 38 of the Land Registration Act (Act 496) and the jurisprudence
on the matter established by this Tribunal. Section 38 of the Land Registration Act cited by
appellants expressly makes a decree of registration, which ordinarily makes the title absolute and
indefeasible, subject to the exemption stated in Section 39 of the said Act among which are: "liens,
claims or rights arising or existing under the laws or Constitution of the United States or of the
Philippine Islands which the statute of the Philippine Islands cannot require to appear of record in the
registry."

At the time of the enactment of Section 496, one right recognized or existing under the law is that
provided for in Article 339 of the old Civil Code which reads as follows:

Property of public ownership is:

1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and
bridges constructed by the State, and banks shores, roadsteads, and that of a similar
character. (Par. 1)

The above-mentioned properties are parts of the public domain intended for public use, are outside
the commerce of men and, therefore, not subject to private appropriation. ( 3 Manresa, 6th ed. 101-
104.)

In Ledesma v. Municipality of Iloilo, 49 Phil. 769, this Court held:

A simple possession of a certificate of title under the Torrens system does not
necessarily make the possessor a true owner of all the property described therein. If
a person obtains title under the Torrens system which includes by mistake or
oversight, lands which cannot be registered under the Torrens system, he does not
by virtue of said certificate alone become the owner of the land illegally included.

In Mercado v. Municipal President of Macabebe, 59 Phil. 592, it was also said:

It is useless for the appellant now to allege that she has obtained certificate of title
No. 329 in her favor because the said certificate does not confer upon her any right
to the creek in question, inasmuch as the said creek, being of the public domain, is
included among the various exceptions enumerated in Section 39 of Act 496 to which
the said certificate is subject by express provision of the law.

The same ruling was laid down in Director of Lands v. Roman Catholic Bishop of Zamboanga, 61
Phil. 644, as regards public plaza.

In Dizon, et al. v. Rodriguez, et al., G.R. No. L-20300-01 and G.R. No. L-20355-56, April 30, 1965,
20 SCRA 704, it was held that the incontestable and indefeasible character of a Torrens certificate of
title does not operate when the land covered thereby is not capable of registration.

It is, therefore, clear that the authorities cited by the appellants as to the conclusiveness and
incontestability of a Torrens certificate of title do not apply here. The Land Registration Court has no
jurisdiction over non-registerable properties, such as public navigable rivers which are parts of the
public domain, and cannot validly adjudge the registration of title in favor of a private applicant.
Hence, the judgment of the Court of First Instance of Pampanga as regards the Lot No. 2 of
Certificate of Title No. 15856 in the name of petitioners-appellants may be attacked at any time,
either directly or collaterally, by the State which is not bound by any prescriptive period provided for
by the Statute of Limitations (Article 1108, par. 4, new Civil Code). The right of reversion or
reconveyance to the State of the public properties fraudulently registered and which are not capable
of private appropriation or private acquisition does not prescribe. (Republic v. Ramona Ruiz, et al.,
G.R. No. L-23712, April 29, 1968, 23 SCRA 348; Republic v. Ramos, G.R. No.
L-15484, January 31, 1963, 7 SCRA 47.)

When it comes to registered properties, the jurisdiction of the Secretary of Public Works &
Communications under Republic Act 2056 to order the removal or obstruction to navigation along a
public and navigable creek or river included therein, has been definitely settled and is no longer
open to question (Lovina v. Moreno, G.R. No L-17821, November 29, 1963, 9 SCRA 557; Taleon v.
Secretary of Public Works & Communications G.R. No. L-24281, May 16, 1961, 20 SCRA 69, 74).

The evidence submitted before the trial court which was passed upon by the respondent Court of
Appeals shows that Lot No. 2 (Plan Psu 992) of Transfer Certificate of Title No. 15856, is a river of
the public domain. The technical description of both Lots Nos. 1 and 2 appearing in Original
Certificate of Title No. 14318 of the Register of Deeds of Pampanga, from which the present
Transfer Certificate of Title No. 15856 was derived, confirms the fact that Lot No. 2 embraced in said
title is bounded practically on all sides by rivers. As held by the Court of First Instance of Pampanga
in Civil Case No. 1247 for injunction filed by the petitioners' predecessors-in-interest against the
Municipal Mayor of Lubao and decided in 1916 (Exh. "L"), Lot No. 2 is a branch of the main river that
has been covered with water since time immemorial and, therefore, part of the public domain. This
finding having been affirmed by the Supreme Court, there is no longer any doubt that Lot No. 2 of
Transfer Certificate of Title No. 15856 of petitioners is a river which is not capable of private
appropriation or acquisition by prescription. (Palanca v. Com. of the Philippines, 69 Phil. 449;
Meneses v. Com. of the Philippines, 69 Phil. 647). Consequently, appellants' title does not include
said river.

II

As regards the 3rd assignment of error, there is no weight in the appellants' argument that, being a
purchaser for value and in good faith of Lot No. 2, the nullification of its registration would be
contrary to the law and to the applicable decisions of the Supreme Court as it would destroy the
stability of the title which is the core of the system of registration. Appellants cannot be deemed
purchasers for value and in good faith as in the deed of absolute conveyance executed in their favor,
the following appears:

6. Que la segunda parcela arriba descrita y mencionada esta actualmente abierta,

sin malecones y excluida de la primera parcela en virtud de la Orden Administrative
No. 103, tal como fue enmendada, del pasado regimen o Gobierno.

7. Que los citados compradores Romeo Martinez y Leonor Suarez se encargan de

gestionar de las autoridades correspondientes para que la citada segunda parcela
pueda ser convertida de nuevo en pesqueria, corriendo a cuenta y cargo de los
mismos todos los gastos.

8. Que en el caso de que dichos compradores no pudiesen conseguir sus propositos

de convertir de nuevo en pesquera la citada segunda parcela, los aqui vendedores
no devolveran ninguna cantidad de dinero a los referidos compradores; este es, no
 se disminuiriat el precio de esta venta. (Exh. 13-a, p. 52, respondents record of
exhibits)

These stipulations were accepted by the petitioners-appellants in the same conveyance in the
following terms:

Romeo Martinez y Leonor Suarez, mayores de edad, filipinos y residentes en al

Barrio de Julo Municipio de Malabon, Provincia de Rizal, por la presente, declaran
que estan enterados del contenido de este documento y lo aceptan en los precisos
terminos en que arriba uedan consignados. (Exh. 13-a, ibid)

Before purchasing a parcel of land, it cannot be contended that the appellants who were the
vendees did not know exactly the condition of the land that they were buying and the obstacles or
restrictions thereon that may be put up by the government in connection with their project of
converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily assumed
the risks attendant to the sale of said lot. One who buys something with knowledge of defect or lack
of title in his vendor cannot claim that he acquired it in good faith (Leung Lee v. Strong Machinery
Co., et al., 37 Phil. 664).

The ruling that a purchaser of a registered property cannot go beyond the record to make inquiries
as to the legality of the title of the registered owner, but may rely on the registry to determine if there
is no lien or encumbrances over the same, cannot be availed of as against the law and the accepted
principle that rivers are parts of the public domain for public use and not capable of private
appropriation or acquisition by prescription.

FOR ALL THE FOREGOING, the judgment of the Court of Appeals appealed from is in accordance
with law, and the same is hereby affirmed with costs against the petitioners-appellants.

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, petitioner, vs.

COURT OF APPEALS and FIRESTONE CERAMICS,
INC., respondents.

[G.R. No. 143590. November 14, 2001]

NATIONAL DEVELOPMENT CORPORATION, petitioner, vs. FIRESTONE

CERAMICS, INC., respondents.

DECISION
BELLOSILLO, J.:

A litigation is not simply a contest of litigants before the bar of public opinion; more than that,
it is a pursuit of justice through legal and equitable means. To prevent the search for justice from
evolving into a competition for public approval, society invests the judiciary with complete
independence thereby insulating it from demands expressed through any medium, the press not
excluded. Thus, if the court would merely reflect, and worse, succumb to the great pressures of the
day, the end result, it is feared, would be a travesty of justice.
In the early sixties, petitioner National Development Corporation (NDC), a government
owned and controlled corporation created under CA 182 as amended by CA 311 and PD No. 668,
had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila. The
estate was popularly known as the NDC compound and covered by Transfer Certificates of Title
Nos. 92885, 110301 and 145470.
Sometime in May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested
its desire to lease a portion of the property for its ceramic manufacturing business. On 24 August
1965 NDC and FIRESTONE entered into a contract of lease denominated as Contract No. C-30-
65 covering a portion of the property measured at 2.90118 hectares for use as a manufacturing
plant for a term of ten (10) years, renewable for another ten (10) years under the same terms and
conditions.[1] In consequence of the agreement, FIRESTONE constructed on the leased premises
several warehouses and other improvements needed for the fabrication of ceramic products.
Three and a half (3-1/2) years later, or on 8 January 1969, FIRESTONE entered into a second
contract of lease with NDC over the latter's four (4)-unit pre-fabricated reparation steel warehouse
stored in Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual
assembly within the NDC compound. The second contract, denominated as Contract No. C-26-68,
was for similar use as a ceramic manufacturing plant and was agreed expressly to be "co-extensive
with the lease of LESSEE with LESSOR on the 2.60 hectare-lot."[2]
On 31 July 1974 the parties signed a similar contract concerning a six (6)-unit pre-fabricated
steel warehouse which, as agreed upon by the parties, would expire on 2 December 1978. [3] Prior
to the expiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an
extension of their lease agreement. Consequently on 29 November 1978 the Board of Directors of
NDC adopted Resolution No. 11-78-117 extending the term of the lease, subject to several
conditions among which was that in the event NDC "with the approval of higher authorities, decide
to dispose and sell these properties including the lot, priority should be given to the
LESSEE"[4] (underscoring supplied). On 22 December 1978, in pursuance of the resolution, the
parties entered into a new agreement for a ten-year lease of the property, renewable for another ten
(10) years, expressly granting FIRESTONE the first option to purchase the leased premises in the
event that it decided "to dispose and sell these properties including the lot . . . . "[5]
The contracts of lease conspicuously contain an identically worded provision requiring
FIRESTONE to construct buildings and other improvements within the leased premises worth
several hundred thousands of pesos.[6]
The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,
cognizant of the impending expiration of their lease agreement with NDC, informed the latter
through several letters and telephone calls that it was renewing its lease over the property. While
its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who
promised immediate action on the matter, the rest of its communications remained
unacknowledged.[7] FIRESTONE's predicament worsened when rumors of NDC's supposed plans
to dispose of the subject property in favor of petitioner Polytechnic University of the Philippines
(PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire
to purchase the property in the exercise of its contractual right of first refusal.
 Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted
an action for specific performance to compel NDC to sell the leased property in its
favor. FIRESTONE averred that it was pre-empting the impending sale of the NDC compound to
petitioner PUP in violation of its leasehold rights over the 2.60-hectare[8] property and the
warehouses thereon which would expire in 1999. FIRESTONE likewise prayed for the issuance
of a writ of preliminary injunction to enjoin NDC from disposing of the property pending the
settlement of the controversy.[9]
In support of its complaint, FIRESTONE adduced in evidence a letter of Antonio A. Henson
dated 15 July 1988 addressed to Mr. Jake C. Lagonera, Director and Special Assistant to Executive
Secretary Catalino Macaraeg, reviewing a proposed memorandum order submitted to then
President Corazon C. Aquino transferring the whole NDC compound, including the leased
property, in favor of petitioner PUP.Attached to the letter was a draft of the proposed memorandum
order as well as a summary of existing leases on the subject property. The survey listed
FIRESTONE as lessee of a portion of the property, placed at 29,000[10] square meters, whose
contract with NDC was set to expire on 31 December 1989[11] renewable for another ten (10) years
at the option of the lessee. The report expressly recognized FIRESTONE's right of first refusal to
purchase the leased property "should the lessor decide to sell the same."[12]
Meanwhile, on 21 February 1989 PUP moved to intervene and asserted its interest in the
subject property, arguing that a "purchaser pendente lite of property which is subject of a litigation
is entitled to intervene in the proceedings."[13] PUP referred to Memorandum Order No. 214 issued
by then President Aquino ordering the transfer of the whole NDC compound to the National
Government, which in turn would convey the aforementioned property in favor of PUP at
acquisition cost. The issuance was supposedly made in recognition of PUP's status as the "Poor
Man's University" as well as its serious need to extend its campus in order to accommodate the
growing student population. The order of conveyance of the 10.31-hectare property would
automatically result in the cancellation of NDC's total obligation in favor of the National
Government in the amount of P57,193,201.64.
Convinced that PUP was a necessary party to the controversy that ought to be joined as party
defendant in order to avoid multiplicity of suits, the trial court granted PUP's motion to
intervene.FIRESTONE moved for reconsideration but was denied. On certiorari, the Court of
Appeals affirmed the order of the trial court. FIRESTONE came to us on review but in a Resolution
dated 11 July 1990 we upheld PUP's inclusion as party-defendant in the present controversy.
Following the denial of its petition, FIRESTONE amended its complaint to include PUP and
Executive Secretary Catalino Macaraeg, Jr., as party-defendants, and sought the annulment
of Memorandum Order No. 214. FIRESTONE alleged that although Memorandum Order No.
214 was issued "subject to such liens/leases existing [on the subject property]," PUP disregarded
and violated its existing lease by increasing the rental rate at P200,000.00 a month while
demanding that it vacated the premises immediately.[14] FIRESTONE prayed that in the
event Memorandum Order No. 214 was not declared unconstitutional, the property should be sold
in its favor at the price for which it was sold to PUP - P554.74 per square meter or for a total
purchase price of P14,423,240.00.[15]
Petitioner PUP, in its answer to the amended complaint, argued in essence that the lease
contract covering the property had expired long before the institution of the complaint, and that
further, the right of first refusal invoked by FIRESTONE applied solely to the six-unit pre-
fabricated warehouse and not the lot upon which it stood.
After trial on the merits, judgment was rendered declaring the contracts of lease executed
between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses
constructed thereon valid and existing until 2 June 1999. PUP was ordered and directed to sell to
FIRESTONE the "2.6 hectare leased premises or as may be determined by actual verification and
survey of the actual size of the leased properties where plaintiff's fire brick factory is located"
at P1,500.00 per square meter considering that, as admitted by FIRESTONE, such was the
prevailing market price thereof.
The trial court ruled that the contracts of lease executed between FIRESTONE and NDC were
interrelated and inseparable because "each of them forms part of the integral system of plaintiff's
brick manufacturing plant x x x if one of the leased premises will be taken apart or otherwise
detached from the two others, the purpose of the lease as well as plaintiff's business operations
would be rendered useless and inoperative."[16] It thus decreed that FIRESTONE could exercise its
option to purchase the property until 2 June 1999 inasmuch as the 22 December 1978
contract embodied a covenant to renew the lease for another ten (10) years at the option of the
lessee as well as an agreement giving the lessee the right of first refusal.
The trial court also sustained the constitutionality of Memorandum Order No. 214 which was
not per se hostile to FIRESTONE's property rights, but deplored as prejudicial thereto the "very
manner with which defendants NDC and PUP interpreted and applied the same, ignoring in the
process that plaintiff has existing contracts of lease protectable by express provisions in the
Memorandum No. 214 itself."[17]It further explained that the questioned memorandum was issued
"subject to such liens/leases existing thereon"[18] and petitioner PUP was under express instructions
"to enter, occupy and take possession of the transferred property subject to such leases or liens and
encumbrances that may be existing thereon"[19] (underscoring supplied).
Petitioners PUP, NDC and the Executive Secretary separately filed their Notice of Appeal, but
a few days thereafter, or on 3 September 1996, perhaps realizing the groundlessness and the futility
of it all, the Executive Secretary withdrew his appeal.[20]
Subsequently, the Court of Appeals affirmed the decision of the trial court ordering the sale
of the property in favor of FIRESTONE but deleted the award of attorney's fees in the amount of
Three Hundred Thousand Pesos (P300,000.00). Accordingly, FIRESTONE was given a grace
period of six (6) months from finality of the court's judgment within which to purchase the property
in questioned in the exercise of its right of first refusal. The Court of Appeals observed that as
there was a sale of the subject property, NDC could not excuse itself from its obligation TO OFFER
THE PROPERTY FOR SALE FIRST TO FIRESTONE BEFORE IT COULD TO OTHER
PARTIES. The Court of Appeals held: "NDC cannot look to Memorandum Order No. 214 to
excuse or shield it from its contractual obligations to FIRESTONE. There is nothing therein that
allows NDC to disavow or repudiate the solemn engagement that it freely and voluntarily
undertook, or agreed to undertake."[21]
PUP moved for reconsideration asserting that in ordering the sale of the property in favor of
FIRESTONE the courts a quo unfairly created a contract to sell between the parties. It argued that
the "court cannot substitute or decree its mind or consent for that of the parties in determining
whether or not a contract (has been) perfected between PUP and NDC."[22] PUP further contended
that since "a real property located in Sta. Mesa can readily command a sum of P10,000.00 per
square (meter)," the lower court gravely erred in ordering the sale of the property at only P1,500.00
per square meter. PUP also advanced the theory that the enactment of Memorandum Order No.
214 amounted to a withdrawal of the option to purchase the property granted to
FIRESTONE. NDC, for its part, vigorously contended that the contracts of lease executed between
the parties had expired without being renewed by FIRESTONE; consequently, FIRESTONE was
no longer entitled to any preferential right in the sale or disposition of the leased property.
We do not see it the way PUP and NDC did. It is elementary that a party to a contract cannot
unilaterally withdraw a right of first refusal that stands upon valuable consideration. That principle
was clearly upheld by the Court of Appeals when it denied on 6 June 2000 the twin motions for
reconsideration filed by PUP and NDC on the ground that the appellants failed to advance new
arguments substantial enough to warrant a reversal of the Decision sought to be reconsidered.[23] On
28 June 2000 PUP filed an urgent motion for an additional period of fifteen (15) days from 29 June
2000 or until 14 July 2000 within which to file a Petition for Review on Certiorari of
the Decision of the Court of Appeals.
On the last day of the extended period PUP filed its Petition for Review on Certiorari assailing
the Decision of the Court of Appeals of 6 December 1999 as well as the Resolution of 6 June 2000
denying reconsideration thereof. PUP raised two issues: (a) whether the courts a quo erred when
they "conjectured" that the transfer of the leased property from NDC to PUP amounted to a sale;
and, (b) whether FIRESTONE can rightfully invoke its right of first refusal. Petitioner posited that
if we were to place our imprimatur on the decisions of the courts a quo, "public welfare or
specifically the constitutional priority accorded to education" would greatly be prejudiced.[24]
Paradoxically, our paramount interest in education does not license us, or any party for that
matter, to destroy the sanctity of binding obligations. Education may be prioritized for legislative
or budgetary purposes, but we doubt if such importance can be used to confiscate private property
such as FIRESTONE's right of first refusal.
On 17 July 2000 we denied PUP's motion for extension of fifteen (15) days within which to
appeal inasmuch as the aforesaid pleading lacked an affidavit of service of copies thereof on the
Court of Appeals and the adverse party, as well as written explanation for not filing and serving
the pleading personally.[25]
Accordingly, on 26 July 2000 we issued a Resolution dismissing PUP's Petition for
Review for having been filed out of time. PUP moved for reconsideration imploring a resolution
or decision on the merits of its petition. Strangely, about the same time, several articles came out
in the newspapers assailing the denial of the petition. The daily papers reported that we
unreasonably dismissed PUP's petition on technical grounds, affirming in the process the decision
of the trial court to sell the disputed property to the prejudice of the government in the amount
of P1,000,000,000.00.[26] Counsel for petitioner PUP, alleged that the trial court and the Court of
Appeals "have decided a question of substance in a way definitely not in accord with law or
jurisprudence."[27]
At the outset, let it be noted that the amount of P1,000,000,000.00 as reported in the papers
was way too exaggerated, if not fantastic. We stress that NDC itself sold the whole 10.31-hectare
property to PUP at only P57,193,201.64 which represents NDC's obligation to the national
government that was, in exchange, written off. The price offered per square meter of the property
was pegged at P554.74.FIRESTONE's leased premises would therefore be worth
only P14,423,240.00. From any angle, this amount is certainly far below the ballyhooed price
of P1,000,000,000.00.
On 4 October 2000 we granted PUP's Motion for Reconsideration to give it a chance to
ventilate its right, if any it still had in the leased premises, thereby paving the way for a
reinstatement of its Petition for Review.[28] In its appeal, PUP took to task the courts a quo for
supposedly "substituting or decreeing its mind or consent for that of the parties (referring to NDC
and PUP) in determining whether or not a contract of sale was perfected." PUP also argued that
inasmuch as "it is the parties alone whose minds must meet in reference to the subject matter and
cause," it concluded that it was error for the lower courts to have decreed the existence of a sale of
the NDC compound thus allowing FIRESTONE to exercise its right of first refusal.
On the other hand, NDC separately filed its own Petition for Review and advanced arguments
which, in fine, centered on whether or not the transaction between petitioners NDC and PUP
amounted to a sale considering that ownership of the property remained with the
government.[29] Petitioner NDC introduced the novel proposition that if the parties involved are
both government entities the transaction cannot be legally called a sale.
In due course both petitions were consolidated.[30]
We believe that the courts a quo did not hypothesize, much less conjure, the sale of the
disputed property by NDC in favor of petitioner PUP. Aside from the fact that the intention of
NDC and PUP to enter into a contract of sale was clearly expressed in the Memorandum Order
No. 214,[31] a close perusal of the circumstances of this case strengthens the theory that the
conveyance of the property from NDC to PUP was one of absolute sale, for a valuable
consideration, and not a mere paper transfer as argued by petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates
himself to transfer the ownership of and to deliver a determinate thing to the other or others who
shall pay therefore a sum certain in money or its equivalent.[32] It is therefore a general requisite
for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there
should be a concurrence of the promise of the vendor to sell a determinate thing and the promise
of the vendee to receive and pay for the property so delivered and transferred. The Civil Code
provision is, in effect, a "catch-all" provision which effectively brings within its grasp a whole
gamut of transfers whereby ownership of a thing is ceded for a consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the
questioned transaction. Petitioners NDC and PUP have their respective charters and therefore each
possesses a separate and distinct individual personality.[33] The inherent weakness of NDCs
proposition that there was no sale as it was only the government which was involved in the
transaction thus reveals itself.Tersely put, it is not necessary to write an extended dissertation on
government owned and controlled corporations and their legal personalities. Beyond cavil, a
government owned and controlled corporation has a personality of its own, distinct and separate
from that of the government.[34] The intervention in the transaction of the Office of the President
through the Executive Secretary did not change the independent existence of these entities. The
involvement of the Office of the President was limited to brokering the consequent relationship
between NDC and PUP. But the withdrawal of the appeal by the Executive Secretary is considered
significant as he knew, after a review of the records, that the transaction was subject to existing
liens and encumbrances, particularly the priority to purchase the leased premises in favor of
FIRESTONE.
True that there may be instances when a particular deed does not disclose the real intentions
of the parties, but their action may nevertheless indicate that a binding obligation has been
undertaken. Since the conduct of the parties to a contract may be sufficient to establish the
existence of an agreement and the terms thereof, it becomes necessary for the courts to examine
the contemporaneous behavior of the parties in establishing the existence of their contract.
The preponderance of evidence shows that NDC sold to PUP the whole NDC compound,
including the leased premises, without the knowledge much less consent of private respondent
FIRESTONE which had a valid and existing right of first refusal.
All three (3) essential elements of a valid sale, without which there can be no sale, were
attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of the
parties, determinate subject matter, and consideration therefor.
Consent to the sale is obvious from the prefatory clauses of Memorandum Order No.
214 which explicitly states the acquiescence of the parties to the sale of the property -

WHEREAS, PUP has expressed its willingness to acquire said NDC properties
and NDC has expressed its willingness to sell the properties to PUP (underscoring
supplied).[35]

Furthermore, the cancellation of NDC's liabilities in favor of the National Government in the
amount of P57,193,201.64 constituted the "consideration" for the sale. As correctly observed by
the Court of Appeals-

The defendants-appellants' interpretation that there was a mere transfer, and not a sale,
apart from being specious sophistry and a mere play of words, is too strained and
hairsplitting. For it is axiomatic that every sale imposes upon the vendor the
obligation to transfer ownership as an essential element of the contract. Transfer of
title or an agreement to transfer title for a price paid, or promised to be paid, is the
very essence of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid & Oberly, Inc., v.
RJL Martinez Fishing Corp., 166 SCRA 493). At whatever legal angle we view it,
therefore, the inescapable fact remains that all the requisites of a valid sale were
attendant in the transaction between co-defendants-appellants NDC and PUP
concerning the realities subject of the present suit.[36]

What is more, the conduct of petitioner PUP immediately after the transaction is in itself an
admission that there was a sale of the NDC compound in its favor. Thus, after the issuance
of Memorandum Order No. 214 petitioner PUP asserted its ownership over the property by posting
notices within the compound advising residents and occupants to vacate the premises.[37] In
its Motion for Intervention petitioner PUP also admitted that its interest as a "purchaser pendente
lite" would be better protected if it was joined as party-defendant in the controversy thereby
confessing that it indeed purchased the property.
 In light of the foregoing disquisition, we now proceed to determine whether FIRESTONE
should be allowed to exercise its right of first refusal over the property. Such right was expressly
stated by NDC and FIRESTONE in par. XV of their third contract denominated as A-10-78
executed on 22 December 1978 which, as found by the courts a quo, was interrelated to and
inseparable from their first contract denominated as C-30-65 executed on 24 August 1965 and their
second contract denominated as C-26-68 executed on 8 January 1969. Thus -

Should the LESSOR desire to sell the leased premises during the term of this
Agreement, or any extension thereof, the LESSOR shall first give to the LESSEE,
which shall have the right of first option to purchase the leased premises subject to
mutual agreement of both parties.[38]

In the instant case, the right of first refusal is an integral and indivisible part of the contract of
lease and is inseparable from the whole contract. The consideration for the right is built into the
reciprocal obligations of the parties. Thus, it is not correct for petitioners to insist that there was
no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the
stipulation is part and parcel of the contract of lease making the consideration for the lease the
same as that for the option.
It is a settled principle in civil law that when a lease contract contains a right of first refusal,
the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has
made an offer to sell to the latter at a certain price and the lessee has failed to accept it. [39] The
lessee has a right that the lessor's first offer shall be in his favor.
The option in this case was incorporated in the contracts of lease by NDC for the benefit of
FIRESTONE which, in view of the total amount of its investments in the property, wanted to be
assured that it would be given the first opportunity to buy the property at a price for which it would
be offered. Consistent with their agreement, it was then implicit for NDC to have first offered the
leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if
FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to
petitioner PUP.
It now becomes apropos to ask whether the courts a quo were correct in fixing the proper
consideration of the sale at P1,500.00 per square meter. In contracts of sale, the basis of the right
of first refusal must be the current offer of the seller to sell or the offer to purchase of the
prospective buyer. Only after the lessee-grantee fails to exercise its right under the same terms and
within the period contemplated can the owner validly offer to sell the property to a third person,
again, under the same terms as offered to the grantee.[40] It appearing that the whole NDC
compound was sold to PUP for P554.74 per square meter, it would have been more proper for the
courts below to have ordered the sale of the property also at the same price. However, since
FIRESTONE never raised this as an issue, while on the other hand it admitted that the value of the
property stood at P1,500.00 per square meter, then we see no compelling reason to modify the
holdings of the courts a quo that the leased premises be sold at that price.
Our attention is invited by petitioners to Ang Yu Asuncion v. CA[41] in concluding that if our
holding in Ang Yu would be applied to the facts of this case then FIRESTONE's "option, if still
subsisting, is not enforceable," the option being merely a preparatory contract which cannot be
enforced.
 The contention has no merit. At the heels of Ang Yu came Equatorial Realty Development,
Inc., v. Mayfair Theater, Inc.,[42] where after much deliberation we declared, and so we hold, that
a right of first refusal is neither "amorphous nor merely preparatory" and can be enforced and
executed according to its terms. Thus, in Equatorial we ordered the rescission of the sale which
was made in violation of the lessee's right of first refusal and further ordered the sale of the leased
property in favor of Mayfair Theater, as grantee of the right. Emphatically, we held that "(a right
of first priority) should be enforced according to the law on contracts instead of the panoramic and
indefinite rule on human relations." We then concluded that the execution of the right of first
refusal consists in directing the grantor to comply with his obligation according to the terms at
which he should have offered the property in favor of the grantee and at that price when the offer
should have been made.
One final word. Petitioner PUP should be cautioned against bidding for public sympathy by
bewailing the dismissal of its petition before the press. Such advocacy is not likely to elicit the
compassion of this Court or of any court for that matter. An entreaty for a favorable disposition of
a case not made directly through pleadings and oral arguments before the courts do not persuade
us, for as judges, we are ruled only by our forsworn duty to give justice where justice is due.
WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590 are
DENIED. Inasmuch as the first contract of lease fixed the area of the leased premises at 2.90118
hectares while the second contract placed it at 2.60 hectares, let a ground survey of the leased
premises be immediately conducted by a duly licensed, registered surveyor at the expense of
private respondent FIRESTONE CERAMICS, INC., within two (2) months from finality of the
judgment in this case. Thereafter, private respondent FIRESTONE CERAMICS, INC., shall have
six (6) months from receipt of the approved survey within which to exercise its right to purchase
the leased property at P1,500.00 per square meter, and petitioner Polytechnic University of the
Philippines is ordered to reconvey the property to FIRESTONE CERAMICS, INC., in the exercise
of its right of first refusal upon payment of the purchase price thereof.
SO ORDERED.

G.R. No. L-22487 May 21, 1969

ASUNCION ATILANO, CRISTINA ATILANO, ROSARIO ATILANO, assisted by their respective

husbands, HILARIO ROMANO, FELIPE BERNARDO, and MAXIMO LACANDALO, ISABEL
ATILANO and GREGORIO ATILANO, plaintiffs-appellees,
vs.
LADISLAO ATILANO and GREGORIO M. ATILANO, defendants-appellants.

Climaco and Azcarraga for plaintiff-appellee.

T. de los Santos for defendants-appellants.

MAKALINTAL, J.:

In 1916 Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, lot No. 535 of the then
municipality of Zamboanga cadastre. The vendee thereafter obtained transfer certificate of title No.
1134 in his name. In 1920 he had the land subdivided into five parts, identified as lots Nos. 535-A,
535-B, 535-C, 535-D and 535-E, respectively. On May 18 of the same year, after the subdivision had
been effected, Eulogio Atilano I, for the sum of P150.00, executed a deed of sale covering lot No.
535-E in favor of his brother Eulogio Atilano II, who thereupon obtained transfer certificate of title No.
3129 in his name. Three other portions, namely lots Nos. 535-B, 535-C and 535-D, were likewise
sold to other persons, the original owner, Eulogio Atilano I, retaining for himself only the remaining
portion of the land, presumably covered by the title to lot No. 535-A. Upon his death the title to this
lot passed to Ladislao Atilano, defendant in this case, in whose name the corresponding certificate
(No. T-5056) was issued.

On December 6, 1952, Eulogio Atilano II having become a widower upon the death of his wife Luisa
Bautista, he and his children obtained transfer certificate of title No. 4889 over lot No. 535-E in their
names as co-owners. Then, on July 16, 1959, desiring to put an end to the co-ownership, they had
the land resurveyed so that it could properly be subdivided; and it was then discovered that the land
they were actually occupying on the strength of the deed of sale executed in 1920 was lot No. 535-A
and not lot 535-E, as referred to in the deed, while the land which remained in the possession of the
vendor, Eulogio Atilano I, and which passed to his successor, defendant Ladislao Atilano, was lot
No. 535-E and not lot No. 535-A.

On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also deceased, filed the
present action in the Court of First Instance of Zamboanga, alleging, inter alia, that they had offered
to surrender to the defendants the possession of lot No. 535-A and demanded in return the
possession of lot No. 535-E, but that the defendants had refused to accept the exchange. The
plaintiffs' insistence is quite understandable, since lot No. 535-E has an area of 2,612 square
meters, as compared to the 1,808 square-meter area of lot No. 535-A.

In their answer to the complaint the defendants alleged that the reference to lot No. 535-E in the
deed of sale of May 18, 1920 was an involuntary error; that the intention of the parties to that sale
was to convey the lot correctly identified as lot No. 535-A; that since 1916, when he acquired the
entirety of lot No. 535, and up to the time of his death, Eulogio Atilano I had been possessing and
had his house on the portion designated as lot No. 535-E, after which he was succeeded in such
possession by the defendants herein; and that as a matter of fact Eulogio Atilano I even increased
the area under his possession when on June 11, 1920 he bought a portion of an adjoining lot, No.
536, from its owner Fruto del Carpio. On the basis of the foregoing allegations the defendants
interposed a counterclaim, praying that the plaintiffs be ordered to execute in their favor the
corresponding deed of transfer with respect to lot No. 535-E.

The trial court rendered judgment for the plaintiffs on the sole ground that since the property was
registered under the Land Registration Act the defendants could not acquire it through prescription.
There can be, of course, no dispute as to the correctness of this legal proposition; but the
defendants, aside from alleging adverse possession in their answer and counterclaim, also alleged
error in the deed of sale of May 18, 1920, thus: "Eulogio Atilano 1.o, por equivocacion o error
involuntario, cedio y traspaso a su hermano Eulogio Atilano 2.do el lote No. 535-E en vez del Lote
No. 535-A." lawphi 1.ñet

The logic and common sense of the situation lean heavily in favor of the defendants' contention.
When one sells or buys real property — a piece of land, for example — one sells or buys the
property as he sees it, in its actual setting and by its physical metes and bounds, and not by the
mere lot number assigned to it in the certificate of title. In the particular case before us, the portion
correctly referred to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II,
who had constructed his residence therein, even before the sale in his favor even before the
subdivision of the entire lot No. 535 at the instance of its owner, Eulogio Atillano I. In like manner the
latter had his house on the portion correctly identified, after the subdivision, as lot No. 535-E, even
adding to the area thereof by purchasing a portion of an adjoining property belonging to a different
owner. The two brothers continued in possession of the respective portions the rest of their lives,
obviously ignorant of the initial mistake in the designation of the lot subject of the 1920 until 1959,
when the mistake was discovered for the first time.

The real issue here is not adverse possession, but the real intention of the parties to that sale. From
all the facts and circumstances we are convinced that the object thereof, as intended and
understood by the parties, was that specific portion where the vendee was then already residing,
where he reconstructed his house at the end of the war, and where his heirs, the plaintiffs herein,
continued to reside thereafter: namely, lot No. 535-A; and that its designation as lot No. 535-E in the
deed of sale was simple mistake in the drafting of the document. The mistake did not vitiate the
1âwphi1.ñet

consent of the parties, or affect the validity and binding effect of the contract between them. The new
Civil Code provides a remedy for such a situation by means of reformation of the instrument. This
remedy is available when, there having been a meeting of the funds of the parties to a contract, their
true intention is not expressed in the instrument purporting to embody the agreement by reason of
mistake, fraud, inequitable conduct on accident (Art. 1359, et seq.) In this case, the deed of sale
executed in 1920 need no longer reformed. The parties have retained possession of their respective
properties conformably to the real intention of the parties to that sale, and all they should do is to
execute mutual deeds of conveyance.

WHEREFORE, the judgment appealed from is reversed. The plaintiffs are ordered to execute a
deed of conveyance of lot No. 535-E in favor of the defendants, and the latter in turn, are ordered to
execute a similar document, covering lot No. 595-A, in favor of the plaintiffs. Costs against the latter.

G.R. No. L-24732 April 30, 1968

PIO SIAN MELLIZA, petitioner,

vs.
CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS, respondents.

Cornelio P. Ravena for petitioner.

Office of the Solicitor General for respondents.

BENGZON, J.P., J.:

Juliana Melliza during her lifetime owned, among other properties, three parcels of residential land in
Iloilo City registered in her name under Original Certificate of Title No. 3462. Said parcels of land
were known as Lots Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square meters.

On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square meters of Lot
1214, to serve as site for the municipal hall. 1 The donation was however revoked by the parties for
the reason that the area donated was found inadequate to meet the requirements of the
development plan of the municipality, the so-called "Arellano Plan". 2

Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-
B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3.
As approved by the Bureau of Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot
1214-B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C; and Lot 1214-B-13,
with 4,135 square meters, became Lot 1214-D.

On November 15, 1932 Juliana Melliza executed an instrument without any caption containing the
following:
 Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS VEINTIDOS PESOS
(P6,422.00), moneda filipina que por la presente declaro haber recibido a mi entera
satisfaccion del Gobierno Municipal de Iloilo, cedo y traspaso en venta real y difinitiva a
dicho Gobierno Municipal de Iloilo los lotes y porciones de los mismos que a continuacion se
especifican a saber: el lote No. 5 en toda su extension; una porcion de 7669 metros
cuadrados del lote No. 2, cuya porcion esta designada como sub-lotes Nos. 2-B y 2-C del
piano de subdivision de dichos lotes preparado por la Certeza Surveying Co., Inc., y una
porcion de 10,788 metros cuadrados del lote No. 1214 — cuya porcion esta designada como
sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo plano de subdivision.

Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de venta
difinitiva, y que para la mejor identificacion de los lotes y porciones de los mismos que son
objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el
Gobierno Municipal de Iloilo para la construccion de avenidas, parques y City Hall site del
Municipal Government Center de iloilo, segun el plano Arellano.

On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios Sian
Villanueva who thereafter obtained her own registered title thereto, under Transfer Certificate of Title
No. 18178. Remedios in turn on November 4, 1946 transferred her rights to said portion of land to
Pio Sian Melliza, who obtained Transfer Certificate of Title No. 2492 thereover in his name.
Annotated at the back of Pio Sian Melliza's title certificate was the following:

... (a) that a portion of 10,788 square meters of Lot 1214 now designated as Lots Nos. 1214-
B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per
instrument dated November 15, 1932....

On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city
hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site
donated consisted of Lots Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square
meters, more or less.

Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio
Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of
the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff, the City
did not have funds (p. 9, Appellant's Brief.)

The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering
the three lots, Nos. 1214-B, 1214-C and 1214-D.

On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against
Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value.

The defendants answered, contending that Lot 1214-B was included in the public instrument
executed by Juliana Melliza in favor of Iloilo municipality in 1932. After stipulation of facts and trial,
the Court of First Instance rendered its decision on August 15, 1957, dismissing the complaint. Said
court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in
the conveyance Lot 1214-B. In support of this conclusion, it referred to the portion of the instrument
stating:

Asimismo hago constar que la cesion y traspaso que arriba se mencionan es de venta
difinitiva, y que para la major identificacion de los lotes y porciones de los mismos que son
objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el
 Gobierno municipal de Iloilo para la construccion de avenidas, parques y City Hall site del
Municipal Government Center de Iloilo, segun el plano Arellano.

and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but also such
other portions of lots as were necessary for the municipal hall site, such as Lot 1214-B. And thus it
held that Iloilo City had the right to donate Lot 1214-B to the U.P.

Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the Court of
Appeals affirmed the interpretation of the Court of First Instance, that the portion of Lot 1214 sold by
Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included
whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it
ordered the remand of the case for reception of evidence to determine the area actually taken by
Iloilo City for the construction of avenues, parks and for city hall site.

The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant maintains that the
public instrument is clear that only Lots Nos. 1214-C and 1214-D with a total area of 10,788 square
meters were the portions of Lot 1214 included in the sale; that the purpose of the second paragraph,
relied upon for a contrary interpretation, was only to better identify the lots sold and none other; and
that to follow the interpretation accorded the deed of sale by the Court of Appeals and the Court of
First Instance would render the contract invalid because the law requires as an essential element of
sale, a "determinate" object (Art. 1445, now 1448, Civil Code).

Appellees, on the other hand, contend that the present appeal improperly raises only questions of
fact. And, further, they argue that the parties to the document in question really intended to include
Lot 1214-B therein, as shown by the silence of the vendor after Iloilo City exercised ownership
thereover; that not to include it would have been absurd, because said lot is contiguous to the others
admittedly included in the conveyance, lying directly in front of the city hall, separating that building
from Lots 1214-C and 1214-D, which were included therein. And, finally, appellees argue that the
sale's object was determinate, because it could be ascertained, at the time of the execution of the
contract, what lots were needed by Iloilo municipality for avenues, parks and city hall site "according
to the Arellano Plan", since the Arellano plan was then already in existence.

The appeal before Us calls for the interpretation of the public instrument dated November 15, 1932.
And interpretation of such contract involves a question of law, since the contract is in the nature of
law as between the parties and their successors-in-interest.

At the outset, it is well to mark that the issue is whether or not the conveyance by Juliana Melliza to
Iloilo municipality included that portion of Lot 1214 known as Lot 1214-B. If not, then the same was
included, in the instrument subsequently executed by Juliana Melliza of her remaining interest in Lot
1214 to Remedios Sian Villanueva, who in turn sold what she thereunder had acquired, to Pio Sian
Melliza. It should be stressed, also, that the sale to Remedios Sian Villanueva — from which Pio
Sian Melliza derived title — did not specifically designate Lot 1214-B, but only such portions of Lot
1214 as were not included in the previous sale to Iloilo municipality (Stipulation of Facts, par. 5,
Record on Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior conveyance to
Iloilo municipality, then it was excluded from the sale to Remedios Sian Villanueva and, later, to Pio
Sian Melliza.

The point at issue here is then the true intention of the parties as to the object of the public
instrument Exhibit "D". Said issue revolves on the paragraph of the public instrument aforequoted
and its purpose, i.e., whether it was intended merely to further describe the lots already specifically
mentioned, or whether it was intended to cover other lots not yet specifically mentioned.
First of all, there is no question that the paramount intention of the parties was to provide Iloilo
municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with
its avenues and parks. For this matter, a previous donation for this purpose between the same
parties was revoked by them, because of inadequacy of the area of the lot donated.

Secondly, reading the public instrument in toto, with special reference to the paragraphs describing
the lots included in the sale, shows that said instrument describes four parcels of land by their lot
numbers and area; and then it goes on to further describe, not only those lots already mentioned,
but the lots object of the sale, by stating that said lots are the ones needed for the construction of the
city hall site, avenues and parks according to the Arellano plan. If the parties intended merely to
cover the specified lots — Lots 2, 5, 1214-C and 1214-D, there would scarcely have been any need
for the next paragraph, since these lots are already plainly and very clearly described by their
respective lot number and area. Said next paragraph does not really add to the clear description that
was already given to them in the previous one.

It is therefore the more reasonable interpretation, to view it as describing those other portions of land
contiguous to the lots aforementioned that, by reference to the Arellano plan, will be found needed
for the purpose at hand, the construction of the city hall site.

Appellant however challenges this view on the ground that the description of said other lots in the
aforequoted second paragraph of the public instrument would thereby be legally insufficient,
because the object would allegedly not be determinate as required by law.

Such contention fails on several counts. The requirement of the law that a sale must have for its
object a determinate thing, is fulfilled 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 (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of
some of the lots plus the statement that the lots object of the sale are the ones needed for city hall
site, avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time
of the execution of the contract, for rendering determinate said lots without the need of a new and
further agreement of the parties.

The Arellano plan was in existence as early as 1928. As stated, the previous donation of land for city
hall site on November 27, 1931 was revoked on March 6, 1932 for being inadequate in area under
said Arellano plan. Appellant claims that although said plan existed, its metes and bounds were not
fixed until 1935, and thus it could not be a basis for determining the lots sold on November 15, 1932.
Appellant however fails to consider that the area needed under that plan for city hall site was then
already known; that the specific mention of some of the lots covered by the sale in effect fixed the
corresponding location of the city hall site under the plan; that, therefore, considering the said lots
specifically mentioned in the public instrument Exhibit "D", and the projected city hall site, with its
area, as then shown in the Arellano plan (Exhibit 2), it could be determined which, and how much of
the portions of land contiguous to those specifically named, were needed for the construction of the
city hall site.

And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C and 1214-D,
admittedly covered by the public instrument. It is stipulated that, after execution of the contract
Exhibit "D", the Municipality of Iloilo possessed it together with the other lots sold. It sits practically in
the heart of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts, was the
notary public of the public instrument. As such, he was aware of its terms. Said instrument was also
registered with the Register of Deeds and such registration was annotated at the back of the
corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be inferred that
Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable with knowledge of
them; that knowing so, he should have examined the Arellano plan in relation to the public
instrument Exhibit "D"; that, furthermore, he should have taken notice of the possession first by the
Municipality of Iloilo, then by the City of Iloilo and later by the University of the Philippines of Lot
1214-B as part of the city hall site conveyed under that public instrument, and raised proper
objections thereto if it was his position that the same was not included in the same. The fact remains
that, instead, for twenty long years, Pio Sian Melliza and his predecessors-in-interest, did not object
to said possession, nor exercise any act of possession over Lot 1214-B. Applying, therefore,
principles of civil law, as well as laches, estoppel, and equity, said lot must necessarily be deemed
included in the conveyance in favor of Iloilo municipality, now Iloilo City.

WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the Court of First
Instance, and the complaint in this case is dismissed. No costs. So ordered.

G.R. No. L-9935 February 1, 1915

YU TEK and CO., plaintiff-appellant,

vs.
BASILIO GONZALES, defendant-appellant.

Beaumont, Tenney and Ferrier for plaintiff.

Buencamino and Lontok for defendant.

TRENT, J.:

The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of which follow:

1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine
currency from Messrs. Yu Tek and Co., and that in consideration of said sum be obligates
himself to deliver to the said Yu Tek and Co., 600 piculs of sugar of the first and second
grade, according to the result of the polarization, within the period of three months, beginning
on the 1st day of January, 1912, and ending on the 31st day of March of the same year,
1912.

2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said Messrs. Yu Tek
and Co., of this city the said 600 piculs of sugar at any place within the said municipality of
Santa Rosa which the said Messrs. Yu Tek and Co., or a representative of the same may
designate.

3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek and Co. the
600 piculs of sugar within the period of three months, referred to in the second paragraph of
this document, this contract will be rescinded and the said Mr. Basilio Gonzales will then be
obligated to return to Messrs. Yu Tek and Co. the P3,000 received and also the sum of
P1,200 by way of indemnity for loss and damages.

Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to
recover the P3,000. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200 under
paragraph 4, supra. Judgment was rendered for P3,000 only, and from this judgment both parties
appealed.

The points raised by the defendant will be considered first. He alleges that the court erred in refusing
to permit parol evidence showing that the parties intended that the sugar was to be secured from the
crop which the defendant raised on his plantation, and that he was unable to fulfill the contract by
reason of the almost total failure of his crop. This case appears to be one to which the rule which
excludes parol evidence to add to or vary the terms of a written contract is decidedly applicable.
There is not the slightest intimation in the contract that the sugar was to be raised by the defendant.
Parties are presumed to have reduced to writing all the essential conditions of their contract. While
parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it
cannot serve the purpose of incorporating into the contract additional contemporaneous conditions
which are not mentioned at all in the writing, unless there has been fraud or mistake. In an early
case this court declined to allow parol evidence showing that a party to a written contract was to
become a partner in a firm instead of a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.)
Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of employment provided
that the plaintiff should receive from the defendant a stipulated salary and expenses. The defendant
sought to interpose as a defense to recovery that the payment of the salary was contingent upon the
plaintiff's employment redounding to the benefit of the defendant company. The contract contained
no such condition and the court declined to receive parol evidence thereof.

In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop
raised by the defendant. There is no clause in the written contract which even remotely suggests
such a condition. The defendant undertook to deliver a specified quantity of sugar within a specified
time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He
was equally at liberty to purchase it on the market or raise it himself. It may be true that defendant
owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his
own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the
contract by parol evidence cannot be considered. The rights of the parties must be determined by
the writing itself.

The second contention of the defendant arises from the first. He assumes that the contract was
limited to the sugar he might raise upon his own plantation; that the contract represented a perfected
sale; and that by failure of his crop he was relieved from complying with his undertaking by loss of
the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that
there was a perfected sale. Article 1450 defines a perfected sale as follows:

The sale shall be perfected between vendor and vendee and shall be binding on both of
them, if they have agreed upon the thing which is the object of the contract and upon the
price, even when neither has been delivered.

Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been
perfected, be governed by the provisions of articles 1096 and 1182."

This court has consistently held that there is a perfected sale with regard to the "thing" whenever the
article of sale has been physically segregated from all other articles Thus, a particular tobacco
factory with its contents was held sold under a contract which did not provide for either delivery of
the price or of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite
similar was the recent case of Barretto vs. Santa Marina (26 Phil. Rep., 200) where specified shares
of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price
and the stock until the latter had been appraised by an inventory of the entire assets of the company.
In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was held perfected between the
vendor and vendee, although the delivery of the price was withheld until the necessary documents of
ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff
had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of
exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus
delivered. Prior to the presentation of the bill for payment, the hemp was destroyed. Whereupon, the
defendant suspended payment of the bill. It was held that the hemp having been already delivered,
the title had passed and the loss was the vendee's. It is our purpose to distinguish the case at bar
from all these cases.

In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of
the first and second classes. Was this an agreement upon the "thing" which was the object of the
contract within the meaning of article 1450, supra? Sugar is one of the staple commodities of this
country. For the purpose of sale its bulk is weighed, the customary unit of weight being denominated
a "picul." There was no delivery under the contract. Now, if called upon to designate the article sold,
it is clear that the defendant could only say that it was "sugar." He could only use this generic name
for the thing sold. There was no "appropriation" of any particular lot of sugar. Neither party could
point to any specific quantity of sugar and say: "This is the article which was the subject of our
contract." How different is this from the contracts discussed in the cases referred to above! In the
McCullough case, for instance, the tobacco factory which the parties dealt with was specifically
pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular
shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco
case, where a quantity of hemp was the subject of the contract, it was shown that that quantity had
been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp.

A number of cases have been decided in the State of Louisiana, where the civil law prevails, which
confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47
Sou., 444). In this case a contract was entered into by a traveling salesman for a quantity of shoes,
the sales having been made by sample. The court said of this contract:

But it is wholly immaterial, for the purpose of the main question, whether Mitchell was
authorized to make a definite contract of sale or not, since the only contract that he was in a
position to make was an agreement to sell or an executory contract of sale. He says that
plaintiff sends out 375 samples of shoes, and as he was offering to sell by sample shoes,
part of which had not been manufactured and the rest of which were incorporated in
plaintiff's stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should at
that time have agreed upon the specific objects, the title to which was to pass, and hence
there could have been no sale. He and Seegars and Co. might have agreed, and did (in
effect ) agree, that the identification of the objects and their appropriation to the contract
necessary to make a sale should thereafter be made by the plaintiff, acting for itself and for
Seegars and Co., and the legend printed in red ink on plaintiff's billheads ("Our responsibility
ceases when we take transportation Co's. receipt `In good order'" indicates plaintiff's idea of
the moment at which such identification and appropriation would become effective. The
question presented was carefully considered in the case of State vs. Shields, et al. (110 La.,
547, 34 Sou., 673) (in which it was absolutely necessary that it should be decided), and it
was there held that in receiving an order for a quantity of goods, of a kind and at a price
agreed on, to be supplied from a general stock, warehoused at another place, the agent
receiving the order merely enters into an executory contract for the sale of the goods, which
does not divest or transfer the title of any determinate object, and which becomes effective
for that purpose only when specific goods are thereafter appropriated to the contract; and, in
the absence of a more specific agreement on the subject, that such appropriated takes place
only when the goods as ordered are delivered to the public carriers at the place from which
they are to be shipped, consigned to the person by whom the order is given, at which time
and place, therefore, the sale is perfected and the title passes.

This case and State vs. Shields, referred to in the above quotation are amply illustrative of the
position taken by the Louisiana court on the question before us. But we cannot refrain from referring
to the case of Larue and Prevost vs.Rugely, Blair and Co. (10 La. Ann., 242) which is summarized
by the court itself in the Shields case as follows:
 . . . It appears that the defendants had made a contract for the sale, by weight, of a lot of
cotton, had received $3,000 on account of the price, and had given an order for its delivery,
which had been presented to the purchaser, and recognized by the press in which the cotton
was stored, but that the cotton had been destroyed by fire before it was weighed. It was held
that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000
paid on account of the price.

We conclude that the contract in the case at bar was merely an executory agreement; a promise of
sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are
not applicable. The defendant having defaulted in his engagement, the plaintiff is entitled to recover
the P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must
therefore be affirmed.

The plaintiff has appealed from the judgment of the trial court on the ground that it is entitled to
recover the additional sum of P1,200 under paragraph 4 of the contract. The court below held that
this paragraph was simply a limitation upon the amount of damages which could be recovered and
not liquidated damages as contemplated by the law. "It also appears," said the lower court, "that in
any event the defendant was prevented from fulfilling the contract by the delivery of the sugar by
condition over which he had no control, but these conditions were not sufficient to absolve him from
the obligation of returning the money which he received."

The above quoted portion of the trial court's opinion appears to be based upon the proposition that
the sugar which was to be delivered by the defendant was that which he expected to obtain from his
own hacienda and, as the dry weather destroyed his growing cane, he could not comply with his part
of the contract. As we have indicated, this view is erroneous, as, under the contract, the defendant
was not limited to his growth crop in order to make the delivery. He agreed to deliver the sugar and
nothing is said in the contract about where he was to get it.

We think is a clear case of liquidated damages. The contract plainly states that if the defendant fails
to deliver the 600 piculs of sugar within the time agreed on, the contract will be rescinded and he will
be obliged to return the P3,000 and pay the sum of P1,200 by way of indemnity for loss and
damages. There cannot be the slightest doubt about the meaning of this language or the intention of
the parties. There is no room for either interpretation or construction. Under the provisions of article
1255 of the Civil Code contracting parties are free to execute the contracts that they may consider
suitable, provided they are not in contravention of law, morals, or public order. In our opinion there is
nothing in the contract under consideration which is opposed to any of these principles.

For the foregoing reasons the judgment appealed from is modified by allowing the recovery of
P1,200 under paragraph 4 of the contract. As thus modified, the judgment appealed from is affirmed,
without costs in this instance.

-------------------------------------

G.R. No. 105387 November 11, 1993

JOHANNES SCHUBACK & SONS PHILIPPINE TRADING CORPORATION, petitioner,

vs.
THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing business under the name
and style "PHILIPPINE SJ INDUSTRIAL TRADING," respondents.

Hernandez, Velicaria, Vibar & Santiago for petitioner.

Ernesto M. Tomaneng for private respondent.

ROMERO, J.:

In this petition for review on certiorari, petitioner questions the reversal by the Court of Appeals 1 of
the trial court's ruling that a contract of sale had been perfected between petitioner and private
respondent over bus spare parts.

The facts as quoted from the decision of the Court of Appeals are as follows:

Sometime in 1981, defendant 2 established contact with plaintiff 3 through the

Philippine Consulate General in Hamburg, West Germany, because he wanted to
purchase MAN bus spare parts from Germany. Plaintiff communicated with its
trading partner. Johannes Schuback and Sohne Handelsgesellschaft m.b.n. & Co.
(Schuback Hamburg) regarding the spare parts defendant wanted to order.

On October 16, 1981, defendant submitted to plaintiff a list of the parts (Exhibit B) he
wanted to purchase with specific part numbers and description. Plaintiff referred the
list to Schuback Hamburg for quotations. Upon receipt of the quotations, plaintiff sent
to defendant a letter dated 25 November, 1981 (Exh. C) enclosing its offer on the
items listed by defendant.

On December 4, 1981, defendant informed plaintiff that he preferred genuine to

replacement parts, and requested that he be given 15% on all items (Exh. D).

On December 17, 1981, plaintiff submitted its formal offer (Exh. E) containing the
item number, quantity, part number, description, unit price and total to defendant. On
December, 24, 1981, defendant informed plaintiff of his desire to avail of the prices of
the parts at that time and enclosed Purchase Order No. 0101 dated 14 December
1981 (Exh. F to F-4). Said Purchase Order contained the item number, part number
and description. Defendant promised to submit the quantity per unit he wanted to
order on December 28 or 29 (Exh. F).

On December 29, 1981, defendant personally submitted the quantities he wanted to

Mr. Dieter Reichert, General Manager of plaintiff, at the latter's residence (t.s.n., 13
December, 1984, p. 36). The quantities were written in ink by defendant in the same
Purchase Order previously submitted. At the bottom of said Purchase Order,
defendant wrote in ink above his signature: "NOTE: Above P.O. will include a 3%
discount. The above will serve as our initial P.O." (Exhs. G to G-3-a).

Plaintiff immediately ordered the items needed by defendant from Schuback

Hamburg to enable defendant to avail of the old prices. Schuback Hamburg in turn
ordered (Order No. 12204) the items from NDK, a supplier of MAN spare parts in
West Germany. On January 4, 1982, Schuback Hamburg sent plaintiff a proforma
invoice (Exhs. N-1 to N-3) to be used by defendant in applying for a letter of credit.
Said invoice required that the letter of credit be opened in favor of Schuback
Hamburg. Defendant acknowledged receipt of the invoice (t.s.n., 19 December 1984,
p. 40).
 An order confirmation (Exhs. I, I-1) was later sent by Schuback Hamburg to plaintiff
which was forwarded to and received by defendant on February 3, 1981 (t.s.n., 13
Dec. 1984, p. 42).

On February 16, 1982, plaintiff reminded defendant to open the letter of credit to
avoid delay in shipment and payment of interest (Exh. J). Defendant replied,
mentioning, among others, the difficulty he was encountering in securing: the
required dollar allocations and applying for the letter of credit, procuring a loan and
looking for a partner-financier, and of finding ways 'to proceed with our orders" (Exh.
K).

In the meantime, Schuback Hamburg received invoices from, NDK for partial
deliveries on Order No.12204 (Direct Interrogatories., 07 Oct, 1985, p. 3). Schuback
Hamburg paid NDK. The latter confirmed receipt of payments made on February 16,
1984 (Exh.C-Deposition).

On October 18, 1982, Plaintiff again reminded defendant of his order and advised
that the case may be endorsed to its lawyers (Exh. L). Defendant replied that he did
not make any valid Purchase Order and that there was no definite contract between
him and plaintiff (Exh. M). Plaintiff sent a rejoinder explaining that there is a valid
Purchase Order and suggesting that defendant either proceed with the order and
open a letter of credit or cancel the order and pay the cancellation fee of 30% of
F.O.B. value, or plaintiff will endorse the case to its lawyers (Exh. N).

Schuback Hamburg issued a Statement of Account (Exh. P) to plaintiff enclosing

therewith Debit Note (Exh. O) charging plaintiff 30% cancellation fee, storage and
interest charges in the total amount of DM 51,917.81. Said amount was deducted
from plaintiff's account with Schuback Hamburg (Direct Interrogatories, 07 October,
1985).

Demand letters sent to defendant by plaintiff's counsel dated March 22, 1983 and
June 9, 1983 were to no avail (Exhs R and S).

Consequently, petitioner filed a complaint for recovery of actual or compensatory damages,

unearned profits, interest, attorney's fees and costs against private respondent.

In its decision dated June 13, 1988, the trial court4 ruled in favor of petitioner by ordering private
respondent to pay petitioner, among others, actual compensatory damages in the amount of DM
51,917.81, unearned profits in the amount of DM 14,061.07, or their peso equivalent.

Thereafter, private respondent elevated his case before the Court of Appeals. On February 18,
1992, the appellate court reversed the decision of the trial court and dismissed the complaint of
petitioner. It ruled that there was no perfection of contract since there was no meeting of the minds
as to the price between the last week of December 1981 and the first week of January 1982.

The issue posed for resolution is whether or not a contract of sale has been perfected between the
parties.

We reverse the decision of the Court of Appeals and reinstate the decision of the trial court. It bears
emphasizing that a "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. . . . " 5
Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and
acceptance upon the thing and the cause which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified acceptance constitutes a counter offer." The facts
presented to us indicate that consent on both sides has been manifested.

The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal
containing the item number, quantity, part number, description, the unit price and total to private
respondent. On December 24, 1981, private respondent informed petitioner of his desire to avail of
the prices of the parts at that time and simultaneously enclosed its Purchase Order No. 0l01 dated
December 14, 1981. At this stage, a meeting of the minds between vendor and vendee has
occurred, the object of the contract: being the spare parts and the consideration, the price stated in
petitioner's offer dated December 17, 1981 and accepted by the respondent on December 24,1981.

Although said purchase order did not contain the quantity he wanted to order, private respondent
made good, his promise to communicate the same on December 29, 1981. At this juncture, it should
be pointed out that private respondent was already in the process of executing the agreement
previously reached between the parties.

Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement made by private
respondent: "Note. above P.O. will include a 3% discount. The above will serve as our initial P.O."
This notation on the purchase order was another indication of acceptance on the part of the vendee,
for by requesting a 3% discount, he implicitly accepted the price as first offered by the vendor. The
immediate acceptance by the vendee of the offer was impelled by the fact that on January 1, 1982,
prices would go up, as in fact, the petitioner informed him that there would be a 7% increase,
effective January 1982. On the other hand, concurrence by the vendor with the said discount
requested by the vendee was manifested when petitioner immediately ordered the items needed by
private respondent from Schuback Hamburg which in turn ordered from NDK, a supplier of MAN
spare parts in West Germany.

When petitioner forwarded its purchase order to NDK, the price was still pegged at the old one.
Thus, the pronouncement of the Court Appeals that there as no confirmed price on or about the last
week of December 1981 and/or the first week of January 1982 was erroneous.

While we agree with the trial court's conclusion that indeed a perfection of contract was reached
between the parties, we differ as to the exact date when it occurred, for perfection took place, not on
December 29, 1981. Although the quantity to be ordered was made determinate only on December
29, 1981, quantity is immaterial in the perfection of a sales contract. What is of importance is the
meeting of the minds as to the object and cause, which from the facts disclosed, show that as of
December 24, 1981, these essential elements had already occurred.

On the part of the buyer, the situation reveals that private respondent failed to open an irrevocable
letter of credit without recourse in favor of Johannes Schuback of Hamburg, Germany. This
omission, however. does not prevent the perfection of the contract between the parties, for the
opening of the letter of credit is not to be deemed a suspensive condition. The facts herein do not
show that petitioner reserved title to the goods until private respondent had opened a letter of credit.
Petitioner, in the course of its dealings with private respondent, did not incorporate any provision
declaring their contract of sale without effect until after the fulfillment of the act of opening a letter of
credit.

The opening of a etter of credit in favor of a vendor is only a mode of payment. It is not among the
essential requirements of a contract of sale enumerated in Article 1305 and 1474 of the Civil Code,
the absence of any of which will prevent the perfection of the contract from taking place.
To adopt the Court of Appeals' ruling that the contract of sale was dependent on the opening of a
letter of credit would be untenable from a pragmatic point of view because private respondent would
not be able to avail of the old prices which were open to him only for a limited period of time. This
explains why private respondent immediately placed the order with petitioner which, in turn promptly
contacted its trading partner in Germany. As succinctly stated by petitioner, "it would have been
impossible for respondent to avail of the said old prices since the perfection of the contract would
arise much later, or after the end of the year 1981, or when he finally opens the letter of credit." 6

WHEREFORE, the petition is GRANTED and the decision of the trial court dated June 13, 1988 is
REINSTATED with modification.

.R. No. L-57499 June 22, 1984

MERCEDES CALIMLIM- CANULLAS, petitioner,

vs.
HON. WILLELMO FORTUN, Judge, Court of First instance of Pangasinan, Branch I, and
CORAZON DAGUINES, respondents.

Fernandez Law Offices for petitioner.

Francisco Pulido for respondents.

MELENCIO-HERRERA, J.:

Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution
on the Motion for Reconsideration, dated November 27, 1980, of the then Court of First Instance of
Pangasinan, Branch I, in Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES
Calimlim-Canullas," upholding the sale of a parcel of land in favor of DAGUINES but not of the
conjugal house thereon'

The background facts may be summarized as follows: Petitioner MERCEDES Calimlim-Canullas

and FERNANDO Canullas were married on December 19, 1962. They begot five children. They
lived in a small house on the residential land in question with an area of approximately 891 square
meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965,
FERNANDO inherited the land.

In 1978, FERNANDO abandoned his family and was living with private respondent Corazon
DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a judgment
rendered on October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which
judgment has become final.

On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for
the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited
by me from my deceased parents."

Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980
for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house
in dispute where she and her children were residing, including the coconut trees on the land, were
built and planted with conjugal funds and through her industry; that the sale of the land together with
the house and improvements to DAGUINES was null and void because they are conjugal properties
and she had not given her consent to the sale,

In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of
the land in question as well as the one-half () of the house erected on said land." Upon
reconsideration prayed for by MERCEDES, however, respondent Court resolved:

WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on

October 6, 1980, is hereby amended to read as follows:

(1) Declaring plaintiff as the true and lawful owner of the land in question and the 10
coconut trees;

(2) Declaring as null and void the sale of the conjugal house to plaintiff on April 15,
1980 (Exhibit A) including the 3 coconut trees and other crops planted during the
conjugal relation between Fernando Canullas (vendor) and his legitimate wife, herein
defendant Mercedes Calimlim- Canullas;

xxx xxx xxx

The issues posed for resolution are (1) whether or not the construction of a conjugal house on the
exclusive property of the husband ipso facto gave the land the character of conjugal property; and
(2) whether or not the sale of the lot together with the house and improvements thereon was valid
under the circumstances surrounding the transaction.

The determination of the first issue revolves around the interpretation to be given to the second
paragraph of Article 158 of the Civil Code, which reads:

xxx xxx xxx

Buildings constructed at the expense of the partnership during the marriage on land
belonging to one of the spouses also pertain to the partnership, but the value of the
land shall be reimbursed to the spouse who owns the same.

We hold that pursuant to the foregoing provision both the land and the building belong to the
conjugal partnership but the conjugal partnership is indebted to the husband for the value of the
land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the
lot, 1 which value would be reimbursed at the liquidation of the conjugal partnership. 2

In his commentary on the corresponding provision in the Spanish Civil Code (Art. 1404), Manresa
stated:

El articulo cambia la doctrine; los edificios construidos durante el matrimonio en

suelo propio de uno de los conjuges son gananciales, abonandose el valor del suelo
al conj uge a quien pertenezca.

It is true that in the case of Maramba vs. Lozano, 3 relied upon by respondent Judge, it was held that
the land belonging to one of the spouses, upon which the spouses have built a house, becomes
conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of
the land. We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs.
Paterno, 3 SCRA 678, 691 (1961), where the following was explained:
 As to the above properties, their conversion from paraphernal to conjugal assets
should be deemed to retroact to the time the conjugal buildings were first constructed
thereon or at the very latest, to the time immediately before the death of Narciso A.
Padilla that ended the conjugal partnership. They can not be considered to have
become conjugal property only as of the time their values were paid to the estate of
the widow Concepcion Paterno because by that time the conjugal partnership no
longer existed and it could not acquire the ownership of said properties. The
acquisition by the partnership of these properties was, under the 1943 decision,
subject to the suspensive condition that their values would be reimbursed to the
widow at the liquidation of the conjugal partnership; once paid, the effects of the
fulfillment of the condition should be deemed to retroact to the date the obligation
was constituted (Art. 1187, New Civil Code) ...

The foregoing premises considered, it follows that FERNANDO could not have alienated the house
and lot to DAGUINES since MERCEDES had not given her consent to said sale. 4

Anent the second issue, we find that the contract of sale was null and void for being contrary to
morals and public policy. The sale was made by a husband in favor of a concubine after he had
abandoned his family and left the conjugal home where his wife and children lived and from whence
they derived their support. That sale was subversive of the stability of the family, a basic social
institution which public policy cherishes and protects. 5

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is
contrary to law, morals, good customs, public order, or public policy are void and inexistent from the
very beginning.

Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or
public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to
certain exceptions.6 Similarly, donations between spouses during marriage are prohibited. 7 And this
is so because if transfers or con conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to
prevent the exercise of undue influence by one spouse over the other,8 as well as to protect the
institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage, otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by
public interest and their criterion must be imposed upon the wig of the parties. That was the ruling
in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited
in Matabuena vs. Cervantes. 9 We quote hereunder the pertinent dissertation on this point:

We reach a different conclusion. While Art. 133 of the Civil Code considers as void a
donation between the spouses during the marriage, policy considerations of the most
exigent character as wen as the dictates of morality require that the same prohibition
should apply to a common-law relationship.

As announced in the outset of this opinion, a 1954 Court of Appeals decision,

Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old
Civil Code speaks unequivocally. If the policy of the law is, in the language of the
opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor
of the other consort and his descendants because of fear of undue influence
 and improper pressure upon the donor, a prejudice deeply rooted in our ancient law,
..., then there is every reason to apply the same prohibitive policy to persons living
together as husband and wife without benefit of nuptials. For it is not to be doubted
that assent to such irregular connection for thirty years bespeaks greater influence of
one party over the other, so that the danger that the law seeks to avoid is
correspondingly increased'. Moreover, as pointed out by Ulpian (in his lib 32 ad
Sabinum, fr. 1), "It would not be just that such donations — should subsist, lest the
conditions of those who incurred guilt should turn out to be better." So long as
marriage remains the cornerstone of our family law, reason and morality alike
demand that the disabilities attached to marriage should likewise attach
to concubinage (Emphasis supplied),

WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of
November 27, 1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale of
the lot, house and improvements in question, is hereby declared null and void. No costs.

G.R. No. 61584 November 25, 1992

DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO FANESA, petitioners,

vs.
COURT OF APPEALS, ALICIO PAULMITAN, ELENA PAULMITAN, ABELINO PAULMITAN,
ANITA PAULMITAN, BAKING PAULMITAN, ADELINA PAULMITAN and ANITO
PAULMITAN, respondents.

ROMERO, J.:

This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court of
Appeals, dated July 14, 1982 in CA-G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v. Donato
Sagario Paulmitan, et al." which affirmed the decision 2 of the then Court of First Instance (now RTC)
of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in Civil Case No. 11770.

The antecedent facts are as follows:

Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels of land
located in the Province of Negros Occidental: (1) Lot No. 757 with an area of 1,946 square meters
covered by Original Certificate of Title (OCT) No. RO-8376; and (2) Lot No. 1091 with an area of
69,080 square meters and covered by OCT No. RO-11653. From her marriage with Ciriaco
Paulmitan, who is also now deceased, Agatona begot two legitimate children, namely: Pascual
Paulmitan, who also died in 1953, 4 apparently shortly after his mother passed away, and Donato
Paulmitan, who is one of the petitioners. Petitioner Juliana P. Fanesa is Donato's daughter while the
third petitioner, Rodolfo Fanes, is Juliana's husband. Pascual Paulmitan, the other son of Agatona
Sagario, is survived by the respondents, who are his children, name: Alicio, Elena, Abelino, Adelina,
Anita, Baking and Anito, all surnamed Paulmitan.

Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to the two lots
mentioned above remained in the name of Agatona. However, on August 11, 1963, petitioner
Donato Paulmitan executed an Affidavit of Declaration of Heirship, extrajudicially adjudicating unto
himself Lot No. 757 based on the claim that he is the only surviving heir of Agatona Sagario. The
affidavit was filed with the Register of Deeds of Negros Occidental on August 20, 1963, cancelled
OCT No. RO-8376 in the name of Agatona Sagario and issued Transfer Certificate of Title (TCT) No.
35979 in Donato's name.

As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the same in favor
of petitioner Juliana P. Fanesa, his daughter. 5

In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited and sold
at a public auction, with the Provincial Government of Negros Occidental being the buyer. A
Certificate of Sale over the land was executed by the Provincial Treasurer in favor of the Provincial
Board of Negros Occidental. 6

On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial Government of
Negros Occidental for the amount of P2,959.09. 7

On learning of these transactions, respondents children of the late Pascual Paulmitan filed on
January 18, 1975 with the Court of First Instance of Negros Occidental a Complaint against
petitioners to partition the properties plus damages.

Petitioners set up the defense of prescription with respect to Lot No. 757 as an affirmative defense,
contending that the Complaint was filed more than eleven years after the issuance of a transfer
certificate of title to Donato Paulmitan over the land as consequence of the registration with the
Register of Deeds, of Donato's affidavit extrajudicially adjudicating unto himself Lot No. 757. As
regards Lot No. 1091, petitioner Juliana P. Fanesa claimed in her Answer to the Complaint that she
acquired exclusive ownership thereof not only by means of a deed of sale executed in her favor by
her father, petitioner Donato Paulmitan, but also by way of redemption from the Provincial
Government of Negros Occidental.

Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757, the trial
court issued an order dated April 22, 1976 dismissing the complaint as to the said property upon
finding merit in petitioners' affirmative defense. This order, which is not the object of the present
petition, has become final after respondents' failure to appeal therefrom.

Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial court
decided in favor of respondents as to Lot No. 1091. According to the trial court, the respondents, as
descendants of Agatona Sagario Paulmitan were entitled to one-half (1/2) of Lot No. 1091, pro
indiviso. The sale by petitioner Donato Paulmitan to his daughter, petitioner Juliana P. Fanesa, did
not prejudice their rights. And the repurchase by Juliana P. Fanesa of the land from the Provincial
Government of Negros Occidental did not vest in Juliana exclusive ownership over the entire land
but only gave her the right to be reimbursed for the amount paid to redeem the property. The trial
court ordered the partition of the land and directed petitioners Donato Paulmitan and Juliana P.
Fanesa to pay private respondents certain amounts representing the latter's share in the fruits of the
land. On the other hand, respondents were directed to pay P1,479.55 to Juliana P. Fanesa as their
share in the redemption price paid by Fanesa to the Provincial Government of Negros Occidental.
The dispositive portion of the trial court's decision reads:

WHEREFORE, judgment is hereby rendered on the second cause of action pleaded

in the complain as follows:

1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one-half
undivided portion of Lot 1091 is concerned as to vest ownership over said half
portion in favor of defendant Juliana Fanesa and her husband Rodolfo Fanesa, while
the remaining half shall belong to plaintiffs, pro-indiviso;
 2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, now
covered by TCT No. RO-11653 (N.A.), is ordered partitioned. The parties must
proceed to an actual partition by property instrument of partition, submitting the
corresponding subdivision within sixty (60) days from finality of this decision, and
should they fail to agree, commissioners of partition may be appointed by the Court;

3. Pending the physical partition, the Register of Deeds of Negros Occidental is

ordered to cancel Original Certificate of Title No. RO-11653 (N.A.) covering Lot 1091,
Pontevedra Cadastre, and to issue in lieu thereof a new certificate of title in the name
of plaintiffs and defendants, one-half portion each,pro-indiviso, as indicated in
paragraph 1 above;

4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana Fanesa the
amount of P1,479.55 with interest at the legal rate from May 28, 1974 until paid;

5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are ordered
to account to plaintiffs and to pay them, jointly and severally, the value of the produce
from Lot 1091 representing plaintiffs' share in the amount of P5,000.00 per year from
1966 up to the time of actual partition of the property, and to pay them the sum of
P2,000.00 as attorney's fees as well as the costs of the suit.

xxx xxx xxx

On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.

To determine the rights and obligations of the parties to the land in question, it is well to review,
initially, the relatives who survived the decedent Agatona Sagario Paulmitan. When Agatona died in
1953, she was survived by two (2) sons, Donato and Pascual. A few months later in the same year,
Pascual died, leaving seven children, the private respondents. On the other had, Donato's sole
offspring was petitioner Juliana P. Fanesa.

At the time of the relevant transactions over the properties of decedent Agatona Sagario Paulmitan,
her son Pascual had died, survived by respondents, his children. It is, thus, tempting to apply the
principles pertaining to the right of representation as regards respondents. It must, however, be
borne in mind that Pascual did no predecease his mother, 8 thus precluding the operation of the provisions in the Civil
Code on the right of representation 9 with respect to his children, the respondents. When Agatona Sagario Paulmitan died intestate in 1952,
her two (2) sons Donato and Pascual were still alive. Since it is well-settled by virtue of Article 777 of the Civil Code that "[t]he rights to the
succession are transmitted from the moment of the death of the decedent," 10 the right of ownership, not only of Donato but also of Pascual,
over their respective shares in the inheritance was automatically and by operation of law vested in them in 1953 when their mother died
intestate. At that stage, the children of Donato and Pascual did not yet have any right over the inheritance since "[i]n every inheritance, the
relative nearest in degree excludes the more distant
ones." 11 Donato and Pascual excluded their children as to the right to inherit from Agatona Sagario Paulmitan, their mother.

From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away of her
son Pascual in 1953, the estate remained unpartitioned. Article 1078 of the Civil Code provides:
"Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned
in common by such heirs, subject to the payment of debts of the deceased." 12 Donato and Pascual
Paulmitan were, therefore, co-owners of the estate left by their mother as no partition was ever
made.

When Pascual Paulmitan died intestate in 1953, his children, the respondents, succeeded him in the
co-ownership of the disputed property. Pascual Paulmitan's right of ownership over an undivided
portion of the property passed on to his children, who, from the time of Pascual's death, became co-
owners with their uncle Donato over the disputed decedent estate.
Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two transactions,
namely: (a) the sale made in her favor by her father Donato Paulmitan; and (b) her redemption of the
land from the Provincial of Negros Occidental after it was forfeited for non-payment of taxes.

When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P. Fanesa, he
was only a co-owner with respondents and as such, he could only sell that portion which may be
allotted to him upon termination of the co-ownership. 13 The sale did not prejudice the rights of
respondents to one half (1/2) undivided share of the land which they inherited from their father. It did
not vest ownership in the entire land with the buyer but transferred only the seller's pro-
indiviso share in the property 14 and consequently made the buyer a co-owner of the land until it is
partitioned. In Bailon-Casilao v. Court of Appeals, 15 the Court, through Justice Irene R. Cortes,
outlined the effects of a sale by one co-owner without the consent of all the co-owners, thus:

The rights of a co-owner of a certain property are clearly specified in Article 493 of
the Civil Code, Thus:

Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it and
even substitute another person its enjoyment, except when personal rights are
involved. But the effect of the alienation or mortgage, with respect to the co-owners,
shall be limited to the portion which may be allotted to him in the division upon the
termination of the co-ownership. [Emphasis supplied.]

As early as 1923, this Court has ruled that even if a co-owner sells the whole
property as his, the sale will affect only his own share but not those of the other co-
owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)].
This is because under the aforementioned codal provision, the sale or other
disposition affects only his undivided share and the transferee gets only what would
correspond to his grantor in the partition of the thing owned in common [Ramirez v.
Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia
and Gaudencio Bailon which are valid with respect to their proportionate shares, and
the subsequent transfers which culminated in the sale to private respondent
Celestino Afable, the said Afable thereby became a co-owner of the disputed parcel
of land as correctly held by the lower court since the sales produced the effect of
substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730
(1910)].

From the foregoing, it may be deduced that since a co-owner is entitled to sell his
undivided share, a sale of the entire property by one co-owner without the consent of
the other co-owners is not null and void. However, only the rights of the co-owner-
seller are transferred, thereby making the buyer a co-owner of the property.

Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the land to his
daughter, petitioner Juliana P. Fanesa, did not give to the latter ownership over the entire land but
merely transferred to her the one half (1/2) undivided share of her father, thus making her the co-
owner of the land in question with the respondents, her first cousins.

Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the fact that
when the Provincial Government of Negros Occidental bought the land after it was forfeited for non-
payment of taxes, she redeemed it.

The contention is without merit.

The redemption of the land made by Fanesa did not terminate the co-ownership nor give her title to
the entire land subject of the co-ownership. Speaking on the same issue raised by petitioners, the
Court, in Adille v. Court of Appeals, 16 resolved the same with the following pronouncements:

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership
over the property held in common?

Essentially, it is the petitioners' contention that the property subject of dispute

devolved upon him upon the failure of his co-heirs to join him in its redemption within
the period required by law. He relies on the provisions of Article 1515 of the old Civil
Code, Article 1613 of the present Code, giving the vendee a retro the right to
demand redemption of the entire property.

There is no merit in this petition.

The right of repurchase may be exercised by co-owner with respect to his share
alone (CIVIL CODE, art. 1612, CIVIL CODE (1889), art. (1514.). While the records
show that petitioner redeemed the property in its entirety, shouldering the expenses
therefor, that did not make him the owner of all of it. In other words, it did not put to
end the existing state of co-ownership (Supra, Art. 489). There is no doubt that
redemption of property entails a necessary expense. Under the Civil Code:

Art. 488. Each co-owner shall have a right to compel the other co-owners to
contribute to the expenses of preservation of the thing or right owned in common and
to the taxes. Any one of the latter may exempt himself from this obligation by
renouncing so much of his undivided interest as may be equivalent to his share of
the expenses and taxes. No such waiver shall be made if it is prejudicial to the co-
ownership.

The result is that the property remains to be in a condition of co-ownership. While a

vendee a retro, under Article 1613 of the Code, "may not be compelled to consent to
a partial redemption," the redemption by one co-heir or co-owner of the property in its
totality does not vest in him ownership over it. Failure on the part of all the co-owners
to redeem it entitles the vendee a retro to retain the property and consolidate title
thereto in his name (Supra, art. 1607). But the provision does not give to the
redeeming co-owner the right to the entire property. It does not provide for a mode of
terminating a co-ownership.

Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the redemption
she made, nevertheless, she did acquire the right to reimbursed for half of the redemption price she
paid to the Provincial Government of Negros Occidental on behalf of her co-owners. Until
reimbursed, Fanesa hold a lien upon the subject property for the amount due her. 17

Finally, petitioners dispute the order of the trial court, which the Court of Appeals affirmed, for them
to pay private respondents P5,000.00 per year from 1966 until the partition of the estate which
represents the share of private respondents in the fruits of the land. According to petitioners, the
land is being leased for P2,000.00 per year only. This assigned error, however raises a factual
question. The settled rule is that only questions of law may be raised in a petition for review. As a
general rule, findings of fact made by the trial court and the Court of Appeals are final and conclusive
and cannot be reviewed on appeal. 18

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals AFFIRMED.
ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA,
DEMETRIO QUIJADA, ELIUTERIA QUIJADA, EULALIO
QUIJADA, and WARLITO QUIJADA, petitioners, vs. COURT OF
APPEALS, REGALADO MONDEJAR, RODULFO GOLORAN,
ALBERTO ASIS, SEGUNDINO RAS, ERNESTO GOLORAN, CELSO
ABISO, FERNANDO BAUTISTA, ANTONIO MACASERO, and
NESTOR MAGUINSAY, respondents.

DECISION
MARTINEZ, J.:

Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private respondents
for quieting of title, recovery of possession and ownership of parcels of land with claim for
attorney's fees and damages. The suit was premised on the following facts found by the Court of
Appeals, which is materially the same as that found by the trial court:

"Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda. de
Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from
the latter the two-hectare parcel of land subject of the case, situated in the barrio of
San Agustin, Talacogon, Agusan del Sur. On April 5, 1956, Trinidad Quijada together
with her sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and brother
Epapiadito Corvera executed a conditional deed of donation (Exh. C) of the two-
hectare parcel of land subject of the case in favor of the Municipality of Talacogon,
the condition being that the parcel of land shall be used solely and exclusively as part
of the campus of the proposed provincial high school in Talacogon. Apparently,
Trinidad remained in possession of the parcel of land despite the donation. On July
29, 1962, Trinidad sold one (1) hectare of the subject parcel of land to defendant-
appellant Regalado Mondejar (Exh. 1). Subsequently, Trinidad verbally sold the
remaining one (1) hectare to defendant-appellant (respondent) Regalado Mondejar
without the benefit of a written deed of sale and evidenced solely by receipts of
payment. In 1980, the heirs of Trinidad, who at that time was already dead, filed a
complaint for forcible entry (Exh. E) against defendant-appellant (respondent)
Regalado Mondejar, which complaint was, however, dismissed for failure to
prosecute (Exh. F). In 1987, the proposed provincial high school having failed to
materialize, the Sangguniang Bayan of the municipality of Talacogon enacted a
resolution reverting the two (2) hectares of land donated back to the donors (Exh.
D). In the meantime, defendant-appellant (respondent) Regalado Mondejar sold
portions of the land to defendants-appellants (respondents) Fernando Bautista (Exh.
5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7) and Ernesto Goloran (Exh. 8).

"On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against defendants-
appellants (respondents). In the complaint, plaintiffs-appellees (petitioners) alleged
that their deceased mother never sold, conveyed, transferred or disposed of the
property in question to any person or entity much less to Regalado Mondejar save the
donation made to the Municipality of Talacogon in 1956; that at the time of the
alleged sale to Regalado Mondejar by Trinidad Quijada, the land still belongs to the
Municipality of Talacogon, hence, the supposed sale is null and void.

"Defendants-appellants (respondents), on the other hand, in their answer claimed that

the land in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29,
1962, and the remaining one (1) hectare on installment basis until fully paid. As
affirmative and/or special defense, defendants-appellants (respondents) alleged that
plaintiffs' action is barred by laches or has prescribed.

"The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly because
'Trinidad Quijada had no legal title or right to sell the land to defendant Mondejar in 1962, 1966,
1967 and 1968, the same not being hers to dispose of because ownership belongs to the
Municipality of Talacogon' (Decision, p. 4; Rollo, p. 39) and, secondly, that the deed of sale
executed by Trinidad Quijada in favor of Mondejar did not carry with it the conformity and
acquiescence of her children, more so that she was already 63 years old at the time, and a widow
(Decision, p. 6; Rollo, p. 41)."[1]

The dispositive portion of the trial court's decision reads:

"WHEREFORE, viewed from the above perceptions, the scale of justice having
tilted in favor of the plaintiffs, judgment is, as it is hereby rendered:

1) ordering the Defendants to return and vacate the two (2) hectares of land to Plaintiffs as
described in Tax Declaration No. 1209 in the name of Trinidad Quijada;
2) ordering any person acting in Defendants' behalf to vacate and restore the peaceful possession
of the land in question to Plaintiffs;
3) ordering the cancellation of the Deed of Sale executed by the late Trinidad Quijada in favor of
Defendant Regalado Mondejar as well as the Deeds of Sale/Relinquishments executed by
Mondejar in favor of the other Defendants;
4) ordering Defendants to remove their improvements constructed on the questioned lot;
5) ordering the Defendants to pay Plaintiffs, jointly and severally, the amount of P10,000.00
representing attorney's fees;
6) ordering Defendants to pays the amount of P8,000.00 as expenses of litigation; and
7) ordering Defendants to pay the sum of P30,000.00 representing moral damages.

SO ORDERED."[2]

On appeal, the Court of Appeals reversed and set aside the judgment a quo[3] ruling that the
sale made by Trinidad Quijada to respondent Mondejar was valid as the4 former retained an
inchoate interest on the lots by virtue of the automatic reversion clause in the deed of
donation.[4] Thereafter, petitioners filed a motion for reconsideration. When the CA denied their
motion,[5] petitioners instituted a petition for review to this Court arguing principally that the sale
of the subject property made by Trinidad Quijada to respondent Mondejar is void, considering that
at that time, ownership was already transferred to the Municipality of Talacogon. On the contrary,
private respondents contend that the sale was valid, that they are buyers in good faith, and that
petitioners' case is barred by laches.[6]
We affirm the decision of the respondent court.
The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters[7] was
subject to the condition that the donated property shall be "used solely and exclusively as a part of
the campus of the proposed Provincial High School in Talacogon."[8] The donation further provides
that should "the proposed Provincial High School be discontinued or if the same shall be opened
but for some reason or another, the same may in the future be closed" the donated property shall
automatically revert to the donor.[9] Such condition, not being contrary to law, morals, good
customs, public order or public policy was validly imposed in the donation.[10]
When the Municipality's acceptance of the donation was made known to the donor, the former
became the new owner of the donated property -- donation being a mode of acquiring and
transmitting ownership[11] - notwithstanding the condition imposed by the donee. The donation is
perfected once the acceptance by the donee is made known to the donor.[12] Accordingly, ownership
is immediately transferred to the latter and that ownership will only revert to the donor if the
resolutory condition is not fulfilled.
In this case, that resolutory condition is the construction of the school. It has been ruled that
when a person donates land to another on the condition that the latter would build upon the land a
school, the condition imposed is not a condition precedent or a suspensive condition but a
resolutory one.[13] Thus, at the time of the sales made in 1962 towards 1968, the alleged seller
(Trinidad) could not have sold the lots since she had earlier transferred ownership thereof by virtue
of the deed of donation. So long as the resolutory condition subsists and is capable of fulfillment,
the donation remains effective and the donee continues to be the owner subject only to the rights
of the donor or his successors-in-interest under the deed of donation. Since no period was imposed
by the donor on when must the donee comply with the condition, the latter remains the owner so
long as he has tried to comply with the condition within a reasonable period. Such period, however,
became irrelevant herein when the donee-Municipality manifested through a resolution that it
cannot comply with the condition of building a school and the same was made known to the
donor. Only then - when the non-fulfillment of the resolutory condition was brought to the donor's
knowledge - that ownership of the donated property reverted to the donor as provided in the
automatic reversion clause of the deed of donation.
The donor may have an inchoate interest in the donated property during the time that
ownership of the land has not reverted to her. Such inchoate interest may be the subject of contracts
including a contract of sale. In this case, however, what the donor sold was the land itself which
she no longer owns. It would have been different if the donor-seller sold her interests over the
property under the deed of donation which is subject to the possibility of reversion of ownership
arising from the non-fulfillment of the resolutory condition.
As to laches, petitioners' action is not yet barred thereby. Laches presupposes failure or neglect
for an unreasonable and unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier;[14] "it is negligence or omission to assert a right within a
reasonable time, thus, giving rise to a presumption that the party entitled to assert it either has
abandoned or declined to assert it."[15] Its essential elements of:
a) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation complained of;
b) Delay in asserting complainant's right after he had knowledge of the defendant's conduct and
after he has an opportunity to sue;
c) Lack of knowledge or notice on the part of the defendant that the complainant would assert the
right on which he bases his suit; and,
d) Injury or prejudice to the defendant in the event relief is accorded to the complainant."[16]
are absent in this case. Petitioners' cause of action to quiet title commenced only when the property
reverted to the donor and/or his successors-in-interest in 1987. Certainly, when the suit was
initiated the following year, it cannot be said that petitioners had slept on their rights for a long
time. The 1960's sales made by Trinidad Quijada cannot be the reckoning point as to when
petitioners' cause of action arose.They had no interest over the property at that time except under
the deed of donation to which private respondents were not privy. Moreover, petitioners had
previously filed an ejectment suit against private respondents only that it did not prosper on a
technicality.
Be that at it may, there is one thing which militates against the claim of petitioners. Sale, being
a consensual contract, is perfected by mere consent, which is manifested the moment there is a
meeting of the minds[17] as to the offer and acceptance thereof on three (3) elements: subject matter,
price and terms of payment of the price.[18] ownership by the seller on the thing sold at the time of
the perfection of the contract of sale is not an element for its perfection. What the law requires is
that the seller has the right to transfer ownership at the time the thing sold is
delivered.[19] Perfection per se does not transfer ownership which occurs upon the actual or
constructive delivery of the thing sold.[20] A perfected contract of sale cannot be challenged on the
ground of non-ownership on the part of the seller at the time of its perfection; hence, the sale is
still valid.
The consummation, however, of the perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer when the seller or her successors-
in-interest subsequently acquires ownership thereof. Such circumstance happened in this case
when petitioners -- who are Trinidad Quijada's heirs and successors-in-interest -- became the
owners of the subject property upon the reversion of the ownership of the land to
them. Consequently, ownership is transferred to respondent Mondejar ands those who claim their
right from him. Article 1434 of the New Civil Code supports the ruling that the seller's "title passes
by operation of law to the buyer."[21] This rule applies not only when the subject matter of the
contract of sale is goods,[22] but also to other kinds of property, including real property.[23]
There is also no merit in petitioners' contention that since the lots were owned by the
municipality at the time of the sale, they were outside the commerce of men under Article 1409
(4) of the NCC;[24]thus, the contract involving the same is inexistent and void from the
beginning. However, nowhere in Article 1409 (4) is it provided that the properties of a
municipality, whether it be those for public use or its patrimonial property[25] are outside the
commerce of men. Besides, the lots in this case were conditionally owned by the municipality. To
rule that the donated properties are outside the commerce of men would render nugatory the
unchallenged reasonableness and justness of the condition which the donor has the right to impose
as owner thereof. Moreover, the objects referred to as outsides the commerce of man are those
which cannot be appropriated, such as the open seas and the heavenly bodies.
With respect to the trial courts award of attorneys fees, litigation expenses and moral damages,
there is neither factual nor legal basis thereof. Attorneys fees and expenses of litigation cannot,
following the general rule in Article 2208 of the New Civil Code, be recovered in this case, there
being no stipulation to that effect and the case does not fall under any of the exceptions.[26] It cannot
be said that private respondents had compelled petitioners to litigate with third persons. Neither
can it be ruled that the former acted in gross and evident bad faith in refusing to satisfy the latters
claims considering that private respondents were under an honest belief that they have a legal right
over the property by virtue of the deed of sale. Moral damages cannot likewise be justified as none
of the circumstances enumerated under Articles 2219[27] and 2220[28] of the New Civil Code concur
in this case.
WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of Appeals is
AFFIRMED.

G.R. No. L-36359 January 31, 1974

FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners,

vs.
ZOSIMO GABAR, JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF
APPEALS, respondents.

Rizalindo V. Diaz for petitioners.

Alfredo Ber. Pallarca for respondents.

ANTONIO, J.: 1äwphï1.ñët

Appeal from the decision of the Court of Appeals in CA-G.R. No. 49091-R, dated January 10,
1973, reversing the judgment of the trial court and dismissing the complaint filed by herein
petitioners, and from said appellate court's resolution, dated February 5, 1973, denying
petitioners' motion for reconsideration.

The facts of the case, as found by the trial court, which have not been disturbed by
respondent Court of Appeals, are as follows:

Plaintiff Nicanora Gabar Bucton (wife of her co-plaintiff Felix Bucton) is the
sister of defendant Zosimo Gabar, husband of his co-defendant Josefina
Llamoso Gabar.

This action for specific performance prays, inter-alia, that defendants-spouses

be ordered to execute in favor of plaintiffs a deed of sale of the western half of
a parcel of land having an area of 728 sq. m. covered by TCT No. II (from OCT
No. 6337) of the office of the Register of Deeds of Misamis Oriental.
Plaintiffs' evidence tends to show that sometime in 1946 defendant Josefina
Llamoso Gabar bought the above-mentioned land from the spouses Villarin on
installment basis, to wit, P500 down, the balance payable in installments.
Josefina entered into a verbal agreement with her sister-in-law, plaintiff
Nicanora Gabar Bucton, that the latter would pay one-half of the price (P3,000)
and would then own one-half of the land. Pursuant to this understanding
Nicanora on January 19, 1946 gave her sister-in-law Josefina the initial amount
of P1,000, for which the latter signed a receipt marked as Exhibit A.

Subsequently, on May 2, 1948 Nicanora gave Josefina P400. She later signed a
receipt marked as Exhibit B.

On July 30, 1951 plaintiffs gave defendants P1,000 in concept of loan, for
which defendant Zosimo Gabar signed a receipt marked as Exhibit E.

Meanwhile, after Josefina had received in January, 1946 the initial amount of
P1,000 as above stated, plaintiffs took possession of the portion of the land
indicated to them by defendants and built a modest nipa house therein. About
two years later plaintiffs built behind the nipa house another house for rent.
And, subsequently, plaintiffs demolished the nipa house and in its place
constructed a house of strong materials, with three apartments in the lower
portion for rental purposes. Plaintiffs occupied the upper portion of this house
as their residence, until July, 1969 when they moved to another house,
converting and leasing the upper portion as a dormitory.

In January, 1947 the spouses Villarin executed the deed of sale of the land
abovementioned in favor of defendant Josefina Llamoso Gabar, Exhibit I, to
whom was issued on June 20, 1947 TCT No. II, cancelling OCT No. 6337.
Exhibit D.

Plaintiffs then sought to obtain a separate title for their portion of the land in
question. Defendants repeatedly declined to accommodate plaintiffs. Their
excuse: the entire land was still mortgaged with the Philippine National Bank
as guarantee for defendants' loan of P3,500 contracted on June 16, 1947:
Exhibit D-1.

Plaintiffs continued enjoying their portion of the land, planting fruit trees and
receiving the rentals of their buildings. In 1953, with the consent of defendants
(who were living on their portion), plaintiffs had the entire land surveyed and
subdivided preparatory to obtaining their separate title to their portion. After
the survey and the planting of the concrete monuments defendants erected a
fence from point 2 to point 4 of the plan, Exhibit I, which is the dividing line
between the portion pertaining to defendants, Exhibit I-1, and that pertaining to
plaintiffs, Exhibit I-2.

In the meantime, plaintiffs continued to insist on obtaining their separate title.

Defendants remained unmoved, giving the same excuse. Frustrated, plaintiffs
were compelled to employ Atty. Bonifacio Regalado to intercede; counsel tried
but failed. Plaintiffs persevered, this time employing Atty. Aquilino Pimentel,
Jr. to persuade defendants to comply with their obligation to plaintiffs; this,
too, failed. Hence, this case, which has cost plaintiffs P1,500 in attorney's fees.
 Defendants' evidence — based only on the testimony of defendant Josefina
Llamoso Gabar — denies agreement to sell to plaintiffs one-half of the land in
litigation. She declared that the amounts she had received from plaintiff
Nicanora Gabar Bucton — first, P1,000, then P400 — were loans, not payment
of one-half of the price of the land (which was P3,000). This defense is devoid
of merit.

When Josefina received the first amount of P1,000 the receipt she signed,
Exhibit A, reads:

Received from Mrs. Nicanora Gabar the sum of one thousand (P1,000) pesos,
victory currency, as part payment of the one thousand five hundred (P1,500.00)
pesos, which sum is one-half of the purchase value of Lot No. 337, under
Torrens Certificate of Title No. 6337, sold to me by Mrs. Carmen Roa Villarin.

"(Sgd.) Josefina Ll. Gabar".

On the basis of the facts quoted above the trial court on February 14, 1970, rendered
judgment the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered for plaintiffs:

 1) Ordering defendants within thirty days from receipt hereof to execute a deed
of conveyance in favor of plaintiffs of the portion of the land covered by OCT
No. II, indicated as Lot 337-B in the Subdivision Plan, Exhibit I, and described
in the Technical Description, Exhibit 1-2; should defendants for any reason fail
to do so, the deed shall be executed in their behalf by the Provincial Sheriff of
Misamis Oriental or his Deputy;

2) Ordering the Register of Deeds of Cagayan de Oro, upon presentation to him

of the above-mentioned deed of conveyance, to cancel TCT No. II and in its
stead to issue Transfer Certificates of Title, to wit, one to plaintiffs and another
to defendants, based on the subdivision Plan and Technical Description
above-mentioned; and ordering defendants to present and surrender to the
Register of Deeds their TCT No. II so that the same may be cancelled; and

3) Ordering defendants to pay unto plaintiffs attorney's fees in the amount of

P1,500 and to pay the costs.

SO ORDERED.

Appeal was interposed by private respondents with the Court of Appeals, which reversed the
judgment of the trial court and ordered petitioners' complaint dismissed, on the following
legal disquisition:

Appellees' alleged right of action was based on the receipt (Exh. A) which was
executed way back on January 19, 1946. An action arising from a written
contract does not prescribe until after the lapse of ten (10) years from the date
of action accrued. This period of ten (10) years is expressly provided for in
Article 1144 of the Civil Code.

From January 19, 1946 to February 15, 1968, when the complaint was filed in
this case, twenty-two (22) years and twenty-six (26) days had elapsed.
Therefore, the plaintiffs' action to enforce the alleged written contract (Exh. A)
was not brought within the prescriptive period of ten (10) years from the time
the cause of action accrued.

The land in question is admittedly covered by a torrens title in the name of

Josefina Llamoso Gabar so that the alleged possession of the land by the
plaintiffs since 1947 is immaterial because ownership over registered realty
may not be acquired by prescription or adverse possession (Section 40 of Act
496).

It is not without reluctance that in this case we are constrained to sustain the
defense of prescription, for we think that plaintiffs really paid for a portion of
the lot in question pursuant to their agreement with the defendants that they
would then own one-half of the land. But we cannot apply ethical principles in
lieu of express statutory provisions. It is by law provided that:

"ART. 1144. The following actions must be brought within ten

years from the time the right of action accrues:

1. Upon a written contract;

 2. Upon an obligation created by law;

3. Upon a judgment."

If eternal vigilance is the price of safety, one cannot sleep on one's right and
expect it to be preserved in its pristine purity.

Petitioners' appeal is predicated on the proposition that owners of the property by purchase
from private respondents, and being in actual, continuous and physical possession thereof
since the date of its purchase, their action to compel the vendors to execute a formal deed of
conveyance so that the fact of their ownership may be inscribed in the corresponding
certificate of title, had not yet prescribed when they filed the present action.

We hold that the present appeal is meritorious.

1. There is no question that petitioner Nicanora Gabar Bucton paid P1,500.00 to respondent
Josefina Gabar as purchase price of one-half of the lot now covered by TCT No. II, for
respondent Court of Appeals found as a fact "that plaintiffs really paid for a portion of the lot
in question pursuant to their agreement with the defendants that they would own one-half
(1/2) of the land." That sale, although not consigned in a public instrument or formal writing,
is nevertheless valid and binding between petitioners and private respondents, for the time-
honored rule is that even a verbal contract of sale or real estate produces legal effects
between the parties.1 Although at the time said petitioner paid P1,000.00 as part payment of
the purchase price on January 19, 1946, private respondents were not yet the owners of the
lot, they became such owners on January 24, 1947, when a deed of sale was executed in their
favor by the Villarin spouses. In the premises, Article 1434 of the Civil Code, which provides
that "[w]hen a person who is not the owner of a thing sells or alienates and delivers it, and
later the seller or grantor acquires title thereto, such title passes by operation of law to the
buyer or grantee," is applicable.2 Thus, the payment by petitioner by Nicanora Gabar Bucton
of P1,000.00 on January 19, 1946, her second payment of P400.00 on May 2, 1948, and the
compensation, up to the amount of P100.00 (out of the P1,000.00-loan obtained by private
respondents from petitioners on July 30, 1951), resulted in the full payment of the purchase
price and the consequential acquisition by petitioners of ownership over one-half of the lot.
Petitioners therefore became owners of the one-half portion of the lot in question by virtue of
a sale which, though not evidenced by a formal deed, was nevertheless proved by both
documentary and parole evidence.

2. The error of respondent Court of Appeals in holding that petitioners' right of action had
already prescribed stems from its belief that the action of petitioners is based on the receipt
Exh. "A" which was executed way back on January 19, 1946, and, therefore, in the view of
said appellate court, since petitioners' action was filed on February 15, 1968, or after the
lapse of twenty-two (22) years and twenty-six (26) days from, the date of said document, the
same is already barred according to the provisions of Article 1144 of the New Civil Code. The
aforecited document (Exh. "A"), as well as the other documents of similar import (Exh. "B"
and Exh. "E"), are the receipts issued by private respondents to petitioners, evidencing
payments by the latter of the purchase price of one-half of the lot.

The real and ultimate basis of petitioners' action is their ownership of one-half of the lot
coupled with their possession thereof, which entitles them to a conveyance of the property.
In Sapto, et al. v. Fabiana,3 this Court, speaking thru Mr. Justice J.B.L. Reyes, explained that, under
the circumstances no enforcement of the contract is needed, since the delivery of possession of the
land sold had consummated the sale and transferred title to the purchaser, and that, actually, the
action for conveyance is one to quiet title, i.e., to remove the cloud upon the appellee's ownership by
the refusal of the appellants to recognize the sale made by their predecessors. We held therein that
"... it is an established rule of American jurisprudence (made applicable in this jurisdiction by Art. 480
of the New Civil Code) that actions to quiet title to property in the possession of the plaintiff are
imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 20 L.R.A. 930; Inland Empire Land Co. vs.
Grant County, 138 Wash. 439, 245 Pac. 14).

The prevailing rule is that the right of a plaintiff to have his title to land quieted, as
against one who is asserting some adverse claim or lien thereon, is not barred while
the plaintiff or his grantors remain in actual possession of the land, claiming to be
owners thereof, the reason for this rule being that while the owner in fee continues
liable to an action, proceeding, or suit upon the adverse claim, he has a continuing
right to the aid of a court of equity to ascertain and determine the nature of such
claim and its effect on his title, or to assert any superior equity in his favor. He may
wait until his possession is disturbed or his title in attacked before taking steps to
vindicate his right. But the rule that the statute of limitations is not available as a
defense to an action to remove a cloud from title can only be invoked by a
complainant when he is in possession. One who claims property which is in the
possession of another must, it seems, invoke remedy within the statutory period. (44
Am. Jur., p. 47)

The doctrine was reiterated recently in Gallar v. Husain, et al.,4 where We ruled that by the delivery
of the possession of the land, the sale was consummated and title was transferred to the appellee,
that the action is actually not for specific performance, since all it seeks is to quiet title, to remove the
cloud cast upon appellee's ownership as a result of appellant's refusal to recognize the sale made by
his predecessor, and that as plaintiff-appellee is in possession of the land, the action is
imprescriptible. Considering that the foregoing circumstances obtain in the present case, We hold
that petitioners' action has not prescribed.

WHEREFORE, the decision and resolution of respondent Court of Appeals appealed from are
hereby reversed, and the judgment of the Court of First Instance of Misamis Oriental, Branch IV, in
its Civil Case No. 3004, is revived. Costs against private respondents.

G.R. No. L-34655 March 5, 1932

SIY CONG BIENG & CO., INC., plaintiff-appellee,

vs.
HONGKONG & SHANGHAI BANKING CORPORATION, defendant-appellant.

DeWitt, Perkins & Brandy for appellant.

Feria & La O for appellee.

OSTRAND, J.:

This action was brought in the Court of First Instance of Manila to recover the sum of P31,645, the
value of 464 bales of hemp deposited in certain bonded warehouses as evidenced by
the quedans (warehouse receipts) described in the complaint, said quedans having been delivered
as pledge by one Otto Ranft to the herein defendant, the Hongkong and Shanghai Banking
Corporation, for the guarantee of a preexisting debt of the former to the latter. The record shows that
both parties, through their respective counsel, subscriber and submitted to the court below the
following agreement of facts:
 STIPULATION OF FACTS

(Translated into English)

Come now the parties, both the plaintiff and the defendant Hongkong & Shanghai
Banking Corporation, through their respective counsel in the above entitled case, and
respectfully submit to the court the following agreed statements of facts:

1. That both the plaintiff and the defendant Hongkong & Shanghai Banking
Corporation are corporations domicile in the City of Manila and duly authorized to
transact business in accordance with the laws of the Philippine Islands.

2. That the plaintiff is a corporation engaged in business generally, and that the
defendant Hongkong & Shanghai Banking Corporation is a foreign bank authorized
to engage in the banking business in the Philippines.

3. That on June 25, 1926, certain negotiable warehouse receipts described below
were pledge by Otto Ranft to the defendant Hongkong & Shanghai Banking
Corporation to secure the payment of his preexisting debts to the latter:

No. Warehouseman Depositor Bales

1707 Public Warehouse Co Siy Cong Bieng & Co., Inc. 27

133 W.F. Stevenson Co do 67
1722 Public Warehouse Co do 60

1723 do do 4
1634 The Philippine Warehouse Company do 99
1918 Public Warehouse Co O. Ranft 166

2 Siy Cong Bieng & Co., Inc do 2

1702 The Philippine Warehouse Company Siy Cong Bieng & Co., Inc. 39

And that the baled hemp covered by these warehouse receipts was worth P31,635; receipts
number 1707,133,1722, 1723, 1634, and 1702 being endorsed in blank by the plaintiff and
Otto Ranft, and numbers 1918 and 2, by Otto Ranft alone.

4. That in the night of June 25, 1926, said Otto Ranft died suddenly at his house in
the City of Manila.

5. That both parties submit this agreed statement of facts, but reserve their right to
have in evidence upon other points not included herein, and upon which they cannot
come to an agreement.

Manila, August 7, 1929.

The evidence shows that on June 25, 1926, Ranft called at the office of the herein plaintiff to
purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans above
mentioned. The parties agreed to the aforesaid price, and on the same date the quedans, together
with the covering invoice, were sent to Ranft by the plaintiff, without having been paid for the hemp,
but the plaintiff's understanding was that the payment would be made against the same quedans,
and it appear that in previous transaction of the same kind between the bank and the plaintiff,
quedans were paid one or two days after their delivery to them.

In the evening of the day upon which the quedans in question were delivered to the herein
defendant, Ranft died, and when the plaintiff found that such was the case, it immediately demanded
the return of the quedans, or the payment of the value, but was told that the quedans had been sent
to the herein defendant as soon as they were received by Ranft.

Shortly thereafter the plaintiff filed a claim for the aforesaid sum of P31,645 in the intestate
proceedings of the estate of the deceased Otto Ranft, which on an appeal form the decision of the
committee on claims, was allowed by the Court of First Instance in case No. 31372 (City of Manila).
In the meantime, demand had been made by the plaintiff on the defendant bank for the return of the
quedans, or their value, which demand was refused by the bank on the ground that it was a holder of
the quedans in due course. Thereupon the plaintiff filed its first complaint against the defendant,
wherein it alleged that it has "sold" the quedans in question to the deceased O. Ranft for cash, but
that the said O. Ranft had not fulfilled the conditions of the sale. Later on, plaintiff filed an amended
complaint, wherein they changed the word "sold" referred to in the first complaint to the words
"attempted to sell".

Upon trial the judge of the court below rendered judgment in favor of the plaintiff principally on the
ground that in the opinion of the court the defendant bank "could not have acted in good faith for the
reason that according to the statements of its own witness, Thiele, the quedans were delivered to
the bank in order to secure the debts of Ranft for the payment of their value and from which it might
be deduced that the said bank knew that the value of the said quedans was not as yet paid when the
same were endorsed to it, and its alleged belief that Ranft was the owner of the said quedans was
not in accordance with the facts proved at the time"; and that, moreover, the circumstances were
such that "the bank knew, or should have known, that Ranft had not yet acquired the ownership of
the said quedans and that it therefore could not invoke the presumption that it was acting in good
faith and without negligence on its part".

In our opinion the judgment of the court below is not tenable. It may be noted, first, that
the quedans in question were negotiable in form; second, that they were pledge by Otto Ranft to the
defendant bank to secure the payment of his preexisting debts to said bank (paragraph 3 of the
Stipulation of Facts); third, that such of the quedans as were issued in the name of the plaintiff were
duly endorsed in blank by the plaintiff and by Otto Ranft; and fourth, that the two
remaining quedans which were duly endorsed in blank by him.

When these quedans were thus negotiated, Otto Ranft was indebted to the Hongkong & Shanghai
Banking Corporation in the sum of P622,753.22, which indebtedness was partly covered
by quedans. He was also being pressed to deposit additional payments as a further security to the
bank, and there is no doubt that the quedans here in question were received by the bank to secure
the payment of Ranft's preexisting debts; it is so stated in paragraph 3 of the stipulation of the facts
agreed on by the parties and hereinbefore quoted.

It further appears that it has been the practice of the bank in its transactions with Ranft that the value
of the quedans has been entered in the current accounts between Ranft and the bank, but there is
no evidence to the effect that the bank was at any time bound to pay back to Ranft the amount of
any of the quedans, and there is nothing in the record to show that the bank has promised to pay the
values of the quedans neither to Ranft nor to the herein plaintiff; on the contrary, as stated in the
stipulation of facts, the "negotiable warehouse receipts — were pledged by Otto Ranft to the
defendant Hongkong & Shanghai Banking Corporation secure the payment of his preexisting debts
to the latter", and taking into consideration that the quedans were negotiable in form and duly
endorsed in blank by the plaintiff and by Otto Ranft, it follows that on the delivery of the qeudans to
the bank they were no longer the property of the indorser unless he liquidated his debt with the bank.

In his brief the plaintiff insists that the defendant, before the delivery of the quedans, should have
ascertained whether Ranft had any authority to negotiate the quedans.

We are unable to find anything in the record which in any manner would have compelled the bank to
investigate the indorser. The bank had a perfect right to act as it did, and its action is in accordance
with sections 47, 38, and 40 of the Warehouse Receipts Act (Act No. 2137), which read as follows:

SEC. 47. When negotiation not impaired by fraud, mistake, or duress. — The validity of the
negotiation of a receipt is not impaired by the fact that such negotiation was a breach of duty
on the part of the person making the negotiation, or by the fact that the owner of the receipt
was induced by fraud, mistake, or duress to intrust the possession or custody of the receipt
was negotiated, or a person to whom the receipt was subsequent negotiated, paid value
therefor, without notice of the breach of duty, or fraud, mistake, or duress.

SEC. 38. Negotiation of negotiable receipts by indorsement. — A negotiable receipt may be

negotiated by the indorsement of the person to whose order the goods are, by the terms of
the receipt, deliverable. Such indorsement may be in blank, to bearer or to a specified
person. . . . Subsequent negotiation may be made in like manner.

SEC. 40. Who may negotiate a receipt. — A negotiable receipt may be negotiated:

(a) By the owner thereof, or

(b) By any person to whom the possession or custody of the receipt has been entrusted by
the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the goods
to the order of the person to whom the possession or custody of the receipt has been
entrusted, or if at the time of such entrusting the receipt is in such form that it may be
negotiated by delivery.

The question as to the rights the defendant bank acquired over the aforesaid quedans after
indorsement and delivery to it by Ranft, we find in section 41 of the Warehouse Receipts Act (Act
No. 2137):

SEC. 41. Rights of person to whom a receipt has been negotiated. — A person to whom a
negotiable receipt has been duly negotiated acquires thereby:

(a) Such title to the goods as the person negotiating the receipt to him had or had ability to
convey to a purchaser in good faith for value, and also such title to the goods as the
depositor of person to whose order the goods were to be delivered by the terms of the
receipt had or had ability to convey to a purchaser in good faith for value, and. . . .

In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana Bank & Trust Co.
(239 U.S., 520), Chief Justice Hughes said in regard to negotiation of receipts:
 It will be observed that "one who takes by trespass or a finder is not included within the
description of those who may negotiate." (Report of Commissioner on Uniform States Laws,
January 1, 1910, p. 204.) Aside from this, the intention is plain to facilitate the use of
warehouse receipts as documents of title. Under sec. 40, the person who may negotiate the
receipt is either the "owner thereof", or a "person to whom the possession or custody of the
receipt has been intrusted by the owner" if the receipt is in the form described. The
warehouse receipt represents the goods, but the intrustion of the receipt, as stated, is more
than the mere delivery of the goods; it is a representation that the one to whom the
possession of the receipt has been so intrusted has the title to the goods. By sec. 47, the
negotiation of the receipt to a purchaser for value without notice is not impaired by the fact
that it is a breach of duty, or that the owner of the receipt was induced "by fraud, mistake, or
duree" to intrust the receipt to the person who negotiated it. And, under sec. 41, one to
whom the negotiable receipt has been duly negotiated acquires such title to the goods as the
person negotiating the receipt to him, or the depositor or person whose order the goods were
delivered by the terms of the receipt, either had or "had ability to convey to a purchaser in
good faith for value." The clear import of these provisions is that if the owner of the goods
permit another to have the possession or custody of negotiable warehouse receipts running
to the order of the latter, or to bearer, it is a representation of title upon which bona
fide purchasers for value are entitled to rely, despite breaches of trust or violations of
agreement on the part of the apparent owner.

In its second assignment of error, the defendant-appellant maintains that the plaintiff-appellee is
estopped to deny that the bank had a valid title to the quedans for the reason that the plaintiff had
voluntarily clothed Ranft with all the attributes of ownership and upon which the defendant bank
relied. In our opinion, the appellant's view is correct. In the National Safe Deposit vs. Hibbs (229
U.S., 391), certain certificates of stock were pledged as collateral by the defendant in error to the
plaintiff bank, which certificates were converted by one of the trusted employees of the bank to his
own use and sold by him. The stock certificates were unqualified endorsed in blank by the defendant
when delivered to the bank. The Supreme Court of the United States through Justice Day applied
the familiar rule of equitable estoppel that where one of two innocent persons must suffer a loss he
who by his conduct made the loss possible must bear it, using the following language:

We think this case correctly states the principle, and, applied to the case in hand, is decisive
of it. Here one of two innocent person must suffer and the question at last is, Where shall the
loss fall? It is undeniable that the broker obtained the stock certificates, containing all the
indicia of ownership and possible of ready transfer, from one who had possession with the
bank's consent, and who brought the certificates to him, apparently clothed with the full
ownership thereof by all the tests usually applied by business men to gain knowledge upon
the subject before making a purchase of such property. On the other hand, the bank, for a
legitimate purpose, with confidence in one of its own employees, instrusted the certificates to
him, with every evidence of title and transferability upon them. The bank's trusted agent, in
gross breach of his duty, whether with technical criminality or not is unimportant, took such
certificates, thus authenticated with evidence of title, to one who, in the ordinary course of
business, sold them to parties who paid full value for them. In such case we think the
principles which underlie equitable estoppel place the loss upon him whose misplaced
confidence has made the wrong possible. . . .

We regret that the plaintiff in this case has suffered the loss of the quedans, but as far as we can
see, there is now no remedy available to the plaintiff. The bank is not responsible for the loss; the
negotiable quedans were duly negotiated to the bank and as far as the record shows, there has
been no fraud on the part of the defendant.
The appealed judgment is reversed and the appellant is absolved from the plaintiff's complaint.
Without costs. So ordered

.R. No. L-8255 July 11, 1957

CITY OF MANILA, plaintiff-appellee,

vs.
BUGSUK LUMBER CO., defendant-appellant.

City Fiscal Eugenio Angeles and Assistant Fiscal Artemio H. Cusi for appellee.
M. Almario and J. L. Misa for appellant.

FELIX, J.:

Bugsuk Lumber Company, Inc., a domestic corporation with field office at Balabak, Palawan, and
principal office at 703 San Fernando, Binondo, Manila, was organized to:

(a) Comprar y vender maderas y para dedicarse, en general a toda clase de negocios sobre
maderas;

(T buy and sell lumber and to engage in general, in any kind of business concerning lumber);

(b) Solicitor del Gobiern o adquirir, en la forma permitia por la ley, concessiones madereras
si el negocio asi lo exige;

(To apply from the Government or to acquire in any manner permitted by law, lumber
concessions if the business would so require);

(c) Aserrar maderas y comprar trozos de madera, en caso de que el negocio de la

corporacion lo exija; y

(To saw lumber and to buy logs, in case the business of the corporation would so demand;
and)

(d) Hacer toda clase de negocios relacionados directa o indirectamente con los fines para
los cuales se ha creado esta corporacion (Exhibit "A").

(To make all kinds of business that may be directly or indirectly in line with the purposes for
which this corporation has been created).

In 1951 and during the 1st, 2nd and 3rd quarters of 1952, the Bugsuk Lumber Company made sales
of lumber to several firms including Pio Barreto & Sons, Inc., Gotamco & Sons, Co., Basilan Lumber
Co., Dy Pac & So, Inc., Central Sawmill, Woodart Inc., Felipe Yupangco & Sons, Inc., Jacinto Music
Store and P. E. Domingo & Co., Inc. (Exhibits B to B-23).

On October 10, 1952, the Office of the Treasurer of the City of Manila sent a demand to the
Company for the payment of the amount of P544.50 for license fees corresponding to the years
1951 and 1952, and P40.00 for the necessary mayor's permit, on the ground that said business firm
was found to be engaged in the sales of timber products without first securing the required licenses
and permits pursuant to City Ordinances Nos. 3420, 3364 and 3000. (Exhibit C). The Company must
have refused or failed to pay said imposts because on June 11, 1953, the City Fiscal of Manila filed
a complaint against the Bugsuk Lumber Co., Inc., with the Municipal Court of Manila alleging, among
others, that defendant Company sold at wholesale to different lumber dealers in Manila during the
1st, 2nd, 3rd and 4th quarters of 1951 and the 1st, 2nd and 3rd quarters of 1952 different kinds of
lumber for which it should have paid a quarterly license tax of P40.000 or a total of P280.00 as
provided by Ordinance No. 3000, as amended; that during the 2nd, 3rd and 4th quarters of 1951 and
the 1st, 2nd, 3rd and 4th quarters of 1952, defendant Company sold at retail to different firms lumber
for which it should have paid a total amount of P215.00 for license fees and the mayor's permit of
P20.00; that despite repeated demands, defendant Company refused and failed to pay the same
and, therefore, prayed that judgment be rendered ordering the defendant Company to pay the City of
Manila the amount of P584.50 representing license fees and mayor's permit fees, with legal interests
thereon and surcharges and for such other relief as may be deemed just and equitable in the
premises.

Defendant Bugsuk Lumber Co., Inc., filed an answer on October 12, 1953, contesting plaintiff's
allegation that it sold lumber at wholesale transactions because what it actually sold were
unprocessed logs; neither did it sell at retail because the timbers were delivered directly from the
vessel to the lumber dealers, and set up the affirmative defenses that the Bugsuk Lumber Company
was essentially a producer, having no lumber yard of any kind in Manila or elsewhere, nor kept a
store where lumber or logs could be sold, and that its products (logs) were sold directly from the
lumber concession to the dealers in Manila; that as such producer, it had paid the taxes required by
law such as the ordinary Timber License fee, Privilege tax (producer), sales tax, forestry charges,
reforestation fees, residence taxes, and the municipal licenses in Bugsuk, Palawan; that the taxes in
the form of license and permit fees sought to be collected by the City would constitute double
taxation, and prayed for the dismissal of the complaint.

The record shows that the Municipal Court of Manila rendered judgment in favor of plaintiff and
defendant Company appealed the case to the Court of First Instance of Manila based practically in
the same arguments. On July 18, 1954, the Court of First Instance rendered decision holding that
the Company sold logs to various firms in wholesale and retail transactions and although defendant
had no store or lumber yard in the City, this fact alone cannot destroy the findings of the inspector of
the City Treasurer's Office that it sold logs to different buyers in Manila; that the imposition of the
taxes in question did not constitute double taxation and that the municipal taxes sought to be
collected by the City authorities were not excessive and, consequently, ordered the defendant
Company to pay the sum of P584.50 plus legal interests and costs.

From this decision, therein defendant took the matter to this Court and in this instance alleged that
the lower Court erred:

1. In holding that appellant is a wholesale dealer and not a producer within the meaning of
the tax ordinance;

2. In holding that appellant is a retail dealer and not a producer within the meaning of the tax
ordinance; and

3. In holding that appellant is liable under the municipal ordinances imposing taxes in
wholesale and retail dealers because defendant is not a dealer but a producer.

We could see from the foregoing set of facts that the only question at issue in this case is whether or
not appellant, maintaining a principal office in Manila, receiving orders for its products and accepting
in said office payments thereto, can be considered a dealer in this City and is, therefore, subject to
the payment of the license tax and permit fees in question.
Appellant does not dispute the power of the Municipal Board of the City of Manila to enact Ordinance
No. 3000 requiring wholesale and retail dealers to secure and pay the mayor's permit annually,
neither does it contest the validity of Ordinance No. 3364 which contains the following provision:

Group 2. Retail dealers in new (not yet used) merchandise, which dealers are not yet subject
to the payment of any municipal tax, such as; (1) Retail dealers in General Merchandise and
(2) retail dealers exclusively engaged in the sale of electrical supplies; sporting goods; office
equipment and materials; rice; textile including knitted wares; hardwares, including
glasswares; cooking utensils and construction materials; papers; books including stationery;
(Ordinance No. 3364);

nor of Ordinance No. 3420 which provides:

SEC. 1. Municipal Tax on wholesalers in General Merchandise. — There shall be paid by

every person, firm or corporation engaging in business as wholesale dealer in general
merchandise, a municipal tax based on wholesales, or on the receipts of exchange value of
goods sold, exchanged or transferred, in accordance with the following: (Ordinance No.
3420.)

A dealer has been defined as:

A dealer, in the common acceptation and, therefore, in the legal meaning of the word, is not
one who buys to keep or makes to sell, but one who buys to sell again; the middleman
between the producer and the consumer of the commodity (In re Hemming, 51 F. 2d 850).

It has been said that a dealer stands immediately between the producer and the consumer,
and depends for his profit, not upon the labor he bestows on his commodities, but upon the
skill and foresight with which he watches the markets (State vs. J. Watts Kearny & Sons, 160
So. 77).

In the light of the above definitions, appellant certainly does not fall within the common and ordinary
acceptation of the word "dealer" for there is no controversy as to the fact that what appellant sold
was the produce of its concession in Palawan. Even conceding, therefore, that the lumber which
appellant disposed of comes within the connotation of 'construction materials' (Group 2, Ordinance
No. 3364) and of the term "general merchandise" (used in Ordinances Nos. 3364 and 3420), which
was defined as:

All articles subject to the payment of percentage taxes or graduated fixed taxes, but not
articles subject to the payment of specific taxes under the provisions of the Internal Revenue
Code. It shall also include poultry, livestock, fish and other allied products (Ordinance No.
3420).

We see no reason why a producer or manufacturer selling its own produce or manufactured goods
would be considered a dealer just to make it liable for the corresponding dealer's tax, as is the case
in the instant appeal.

Appellee, however, in asserting that appellant Company is a dealer relied on the case of Atlantic
Refining Co. vs.Van Valkenburg, 265 Pa. 456; 109 A. 208, wherein it was held that the term dealer
includes "one who carries on the business of selling goods, wares and merchandise manufactured
by him at a store or warehouse apart from his own manufactory", and it was the contention of the
City Fiscal that the office at 703 San Fernando, Binondo, Manila, where appellant received orders
and receipted payment for such orders is actually a store.
Appellant admittedly maintained said principal office but averred that it was used merely to facilitate
the payment of the tax obligations of said Company, to receive orders of its timber produce and
accept payments therefor, and not for any purpose connected with the business of buying and
selling. Did the fact that appellant received orders of its goods and accepted payments thereto in
said office make such office a store? .

Lexicographers defined a store as:

Any place where goods are kept for sale, whether by wholesale or retail; a shop (Webster's
New International Dictionary, 2nd ed., p. 2486).

Any place where goods are deposited and sold by one engaged in buying and selling them
(Black's Law Dictionary, 4th ed., p. 1589).

It was also said that:

A store is any place where goods are kept for sale or sold, whether by wholesale or retail
(Standard Oil Co. vs. Green, 34 F. Supp. 30). It also applies to a building or room in which
goods of any kind or in which goods, wares and merchandise are kept for sale, or to any
building used for the sale of goods of any kind (Jackson vs. Lane, 59 A. 2d 662; 142 N. J.
Eq. 193).

It could be seen that the placing of an order for goods and the making of payment thereto at a
principal office does not transform said office into a store, for it is a necessary element that there
must also be goods or wares stored therein or on display, and provided also that the firm or person
maintaining that office is actually engaged in the business of buying and selling. These elements are
wanting in the case at bar for it needs no further clarification that the principal office alluded to as a
store only serves to facilitate the transactions relative to the sale of its produce, but does not act as a
dealer or intermediary between its field office and its customers.

We may further add that this matter was already passed upon by this Court when, through Mr.
Justice Alejo Labrador, it held that:

It may be admitted that the manufacturer becomes a dealer if he carries on the business of
selling goods or the products manufactured by him at a store or warehouse apart from his
own shop or manufactory. But plaintiff-appellee did not carry on the business of selling sugar
at stores or at its warehouses. It entered into the contracts of sale at its central office in
Manila and made deliveries of the sugar sold from its warehouses. It does not appear that
the plaintiff keeps stores at its warehouses and engages in selling sugar in said stores.
Neither does it appear that any one who desires to purchase sugar from it may go to the
warehouses and there purchase sugar. All that it does was to sell the sugar it manufactured;
it does not open stores for the sale of such sugar. Plaintiff-appellee did not, therefore,
engage in the business of selling sugar. (Central Azucarera de Don Pedro vs. City of Manila
et al., 97 Phil., 627).

Wherefore, the decision appealed from is hereby reversed and appellant declared exempt from the
liabilities sought to be charged against it under the provisions of the aforementioned ordinances,
without pronouncement as to costs. It is so ordered.

Sun Brothers vs. Velasco (54 O.G. 5143)

Sun Brothers vs. Jose Velasco (54 OG 5143)

L-17085-R, January 13, 1958

Angeles, J.:

Facts:

Sun Brothers & company delivered to Lopez an Admiral refrigerator under a “Conditional Sale
Agreement”. Out of the P1,700 purchase price, only P500 was paid as downpayment.

Inter alia, they stipulated that Lopez shall not remove the refrigerator from his address nor part
possession therewith without the express written consent of Sun brothers. In violation thereof,
Sun Brothers may rescind the sale, recover possession and the amounts paid shall be forfeited.
The refrigerator shall remain the absolute property of Sun Brothers until Lopez has fully paid
the purchase price.

Lopez sold the refrigerator to JV Trading (owned by Jose Velasco) without knowledge of Sun
brothers for P850, misrepresented himself as Jose Lim and executed a document stating that he
is the absolute owner. Thereafter, Velasco displayed the refrigerator in his store abd Co Kang
Chui bought it for P985.

Issue:

Whether Co Kang Chiu, an innocent buyer from a store, has a better right as owner than Sun
Brothers, a conditional vendor

Held:

Co Kang Chiu has a better right than Sun Brothers.

Article 1505 of the Civil Code provides:

“Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not
the owner thereof, and who does not sell them under authority or with the consent of the
owner, the buyer acquires no better title to the goods than the seller had, unless the owner if the
goods is by his conduct precluded from denying the seller’s authority to sell.

“Nothing in this Title, however, shall affect:

(1) The provisions of any factors’ acts, recording laws, or any other provision of law enabling
the apparent owner of goods to dispose of them as if he were the true owner thereof;
…

(3) Purchases made in a merchant’s store, or in fairs, or markets, …”

The lower court committed error when it applied the 1st paragraph of Article 1505. It is true
that Francisco Lopez, the conditional vendee, never had any title to the refrigerator in question,
because the stipulation between him and the conditional vendor, Sun Brothers, is that title shall
vest in the vendee upon payment in full of the purchase price, and Lopez has not fully paid
such price. When Lopez, who has not tile to the refrigerator, sold it to Jose Velasco, the latter
did not acquire any better right than what Lopez had --- which is practically nothing. We do not
agree with the court a quo that Velasco was a purchaser in good faith and for value for the
reason that Lopez, being a private person who is not engaged in the business of selling
refrigerators, Velasco must be reasonably expected to have inquired from Lopez whether or not
the refrigerator he was selling has been paid in full. In this, Velasco has been negligent.

Also, since Co Kang Chui purchased the refrigerator from JV Trading, a merchant store
and displayed thereat, the 3rd paragraph of Art. 1505 applies, from which Co Kang Chui should
be declared as having acquired a valid title to the refrigerator, although his predecessors in
interest did not have any right of ownership over it. This is a case of imperfect or void title
ripening into a valid one, as a result of some intervening causes. The policy of the law which we
do not feel justified to deviate, has always been that where the rights and interests of a vendor
comes into clash with that of an innocent buyer for value, the latter must be protected.

The rule embodied in Article 1505 (3) protecting innocent third parties who have made
purchases at merchants’ stores in good faith and for value appears to us to be a wise and
necessary rule not only to facilitate commercial sales on movables but to give stability to
business transactions. This rule is necessary in a country such as ours where free enterprise
prevails, for buyers cannot be reasonably expected to look behind the title of every article when
he buys at a store. The doctrine of caveat emptor [the buyer alone is responsible for checking the
quality and suitability of goods before a purchase is made] is now rarely applied, and if it is
ever mentioned, it is more of an exception rather than the general rule.

Upon the whole, we are persuaded to believe that Co Kang Chui who is now is possession of
the refrigerator should be adjudged the owner thereof, because he bought it at a merchant’s
store in good faith and for value.

CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner, vs. COURT

OF APPEALS, ANACLETO NOOL and EMILIA
NEBRE, respondents.

DECISION
PANGANIBAN, J.:

A contract of repurchase arising out of a contract of sale where the seller

did not have any title to the property sold is not valid. Since nothing was sold,
then there is also nothing to repurchase.

Statement of the Case

This postulate is explained by this Court as it resolves this petition for review
on certiorari assailing the January 20, 1993 Decision of Respondent Court of
[1]

Appeals in CA-G.R. CV No. 36473, affirming the decision of the trial

[2] [3]

court which disposed as follows:

[4] [5]

WHEREFORE, judgment is hereby rendered dismissing the complaint for no

cause of action, and hereby:
1. Declaring the private writing, Exhibit C, to be an option to sell,
not binding and considered validly withdrawn by the defendants
for want of consideration;
2. Ordering the plaintiffs to return to the defendants the sum
of P30,000.00 plus interest thereon at the legal rate, from the
time of filing of defendants counterclaim until the same is fully
paid;
3. Ordering the plaintiffs to deliver peaceful possession of the two
hectares mentioned in paragraph 7 of the complaint and in
paragraph 31 of defendants answer (counterclaim);
4. Ordering the plaintiffs to pay reasonable rents on said two
hectares at P5,000.00 per annum or at P2,500.00 per cropping
from the time of judicial demand mentioned in paragraph 2 of
the dispositive portion of this decision, until the said two
hectares shall have been delivered to the defendants; and
5. To pay the costs.
SO ORDERED.

The Antecedent Facts

The facts, which appear undisputed by the parties, are narrated by the Court
of Appeals as follows:
 Two (2) parcels of land are in dispute and litigated upon here. The first has an
area of 1 hectare . It was formerly owned by Victorino Nool and covered by
Transfer Certificate of Title No. T-74950.With an area of 3.0880 hectares, the
other parcel was previously owned by Francisco Nool under Transfer
Certificate of Title No. T-100945. Both parcels are situated in San Manuel,
Isabela. The plaintiff spouses, Conchita Nool and Gaudencio Almojera, now
the appellants, seek recovery of the aforementioned parcels of land from the
defendants, Anacleto Nool, a younger brother of Conchita, and Emilia Nebre,
now the appellees.

In their complaint, plaintiff-appellants alleged inter alia that they are the owners of
subject parcels of land, and they bought the same from Conchitas other brothers,
Victorino Nool and Francisco Nool; that as plaintiffs were in dire need of money, they
obtained a loan from the Iligan Branch of the Development Bank of the Philippines, in
Ilagan, Isabela, secured by a real estate mortgage on said parcels of land, which were
still registered in the names of Victorino Nool and Francisco Nool, at the time, and for
the failure of plaintiffs to pay the said loan, including interest and surcharges,
totaling P56,000.00, the mortgage was foreclosed; that within the period of
redemption, plaintiffs contacted defendant Anacleto Nool for the latter to redeem the
foreclosed properties from DBP, which the latter did; and as a result, the titles of the
two (2) parcels of land in question were transferred to Anacleto Nool; that as part of
their arrangement or understanding, Anacleto Nool agreed to buy from the plaintiff
Conchita Nool the two (2) parcels of land under controversy, for a total price
of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon payment
of the balance of P14,000.00, plaintiffs were to regain possession of the two (2)
hectares of land, which amounts defendants failed to pay, and the same day the said
arrangement was made; another covenant was entered into by the parties, whereby
[6] [7]

defendants agreed to return to plaintiffs the lands in question, at anytime the latter
have the necessary amount; that plaintiffs asked the defendants to return the same but
despite the intervention of the Barangay Captain of their place, defendants refused to
return the said parcels of land to plaintiffs; thereby impelling them (plaintiffs) to come
to court for relief.

In their answer defendants-appellees theorized that they acquired the lands in

question from the Development Bank of the Philippines, through negotiated
sale, and were misled by plaintiffs when defendant Anacleto Nool signed the
private writing agreeing to return subject lands when plaintiffs have the money
to redeem the same; defendant Anacleto having been made to believe, then,
that his sister, Conchita, still had the right to redeem the said properties.
The pivot of inquiry here, as aptly observed below, is the nature and
significance of the private document, marked Exhibit D for plaintiffs, which
 document has not been denied by the defendants, as defendants even averred
in their Answer that they gave an advance payment of P30,000.00 therefor,
and acknowledged that they had a balance of P14,000.00 to complete their
payment. On this crucial issue, the lower court adjudged the said private
writing (Exhibit D) as an option to sell not binding upon and considered the
same validly withdrawn by defendants for want of consideration; and decided
the case in the manner abovementioned.

There is no quibble over the fact that the two (2) parcels of land in dispute were
mortgaged to the Development Bank of the Philippines, to secure a loan obtained by
plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For the non-payment of said
loan, the mortgage was foreclosed and in the process, ownership of the mortgaged
lands was consolidated in DBP (Exhibits 3 and 4 for defendants). After DBP became
the absolute owner of the two parcels of land, defendants negotiated with DBP and
succeeded in buying the same. By virtue of such sale by DBP in favor of defendants,
the titles of DBP were cancelled and corresponding Transfer Certificates of Title
(Annexes C and D to the complaint) issued to the dependants. [8]

It should be stressed that Manuel S. Mallorca, authorized officer of DBP,

certified that the one-year redemption period was from March 16, 1982 up to
March 15, 1983 and that the Mortgagors right of redemption was not exercised
within this period. Hence, DBP became the absolute owner of said parcels of
[9]

land for which it was issued new certificates of title, both entered on May 23,
1983 by the Registry of Deeds for the Province of Isabela. About two years
[10]

thereafter, on April 1, 1985, DBP entered into a Deed of Conditional

Sale involving the same parcels of land with Private Respondent Anacleto
[11]

Nool as vendee. Subsequently, the latter was issued new certificates of title on
February 8, 1988. [12]

The Court of Appeals ruled: [13]

WHEREFORE, finding no reversible error infirming it, the appealed

Judgment is hereby AFFIRMED in toto. No pronouncement as to costs.

The Issues

Petitioners impute to Respondent Court the following alleged errors:

1. The Honorable Court of Appeals, Second Division has misapplied the
legal import or meaning of Exhibit C in a way contrary to law and existing
jurisprudence in stating that it has no binding effect between the parties
 and considered validly withdrawn by defendants-appellees for want of
consideration.
2. The Honorable Court of Appeals, Second Division has miserably failed
to give legal significance to the actual possession and cultivation and
appropriating exclusively the palay harvest of the two (2) hectares land
pending the payment of the remaining balance of fourteen thousand pesos
(P14,000.00) by defendants-appellees as indicated in Exhibit C.

3. The Honorable Court of Appeals has seriously erred in affirming the

decision of the lower court by awarding the payment of rents per annum and
the return of P30,000.00 and not allowing the plaintiffs-appellants to re-
acquire the four (4) hectares, more or less upon payment of one hundred
thousand pesos (P100,000.00) as shown in Exhibit D. [14]

The Courts Ruling

The petition is bereft of merit.

First Issue: Are Exhibits C and D Valid and Enforceable?

The petitioner-spouses plead for the enforcement of their agreement with

private respondents as contained in Exhibits C and D, and seek damages for
the latters alleged breach thereof. In Exhibit C, which was a private handwritten
document labeled by the parties as Resibo ti Katulagan or Receipt of
Agreement, the petitioners appear to have sold to private respondents the
parcels of land in controversy covered by TCT No. T-74950 and TCT No. T-
100945. On the other hand, Exhibit D, which was also a private handwritten
document in Ilocano and labeled as Kasuratan, private respondents agreed that
Conchita Nool can acquire back or repurchase later on said land when she has
the money. [15]

In seeking to enforce her alleged right to repurchase the parcels of land,

Conchita (joined by her co-petitioner-husband) invokes Article 1370 of the Civil
Code which mandates that (i)f the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall control. Hence, petitioners contend that the Court of Appeals
erred in affirming the trial courts finding and conclusion that said Exhibits C and
D were not merely voidable but utterly void and inexistent.
 We cannot sustain petitioners view. Article 1370 of the Civil Code is
applicable only to valid and enforceable contracts. The Regional Trial Court and
the Court of Appeals ruled that the principal contract of sale contained in Exhibit
C and the auxilliary contract of repurchase in Exhibit D are both void. This
conclusion of the two lower courts appears to find support in Dignos vs. Court
of Appeals, where the Court held:
[16]

Be that as it may, it is evident that when petitioners sold said land to the
Cabigas spouses, they were no longer owners of the same and the sale is null
and void.
In the present case, it is clear that the sellers no longer had any title to the
parcels of land at the time of sale. Since Exhibit D, the alleged contract of
repurchase, was dependent on the validity of Exhibit C, it is itself void. A void
contract cannot give rise to a valid one. Verily, Article 1422 of the Civil Code
[17]

provides that (a) contract which is the direct result of a previous illegal contract,
is also void and inexistent.
We should however add that Dignos did not cite its basis for ruling that a
sale is null and void where the sellers were no longer the owners of the
property. Such a situation (where the sellers were no longer owners) does not
appear to be one of the void contracts enumerated in Article 1409 of the Civil
Code. Moreover, the Civil Code itself recognizes a sale where the goods are
[18] [19]

to be acquired x x x by the seller after the perfection of the contract of sale,

clearly implying that a sale is possible even if the seller was not the owner at
the time of sale, provided he acquires title to the property later on.
In the present case however, it is likewise clear that the sellers can no longer
deliver the object of the sale to the buyers, as the buyers themselves have
already acquired title and delivery thereof from the rightful owner, the
DBP. Thus, such contract may be deemed to be inoperative and may thus fall,
[20]

by analogy, under item no. 5 of Article 1409 of the Civil Code:Those which
contemplate an impossible service. Article 1459 of the Civil Code provides that
the vendor must have a right to transfer the ownership thereof [object of the
sale] at the time it is delivered. Here, delivery of ownership is no longer
possible. It has become impossible.
Furthermore, Article 1505 of the Civil Code provides that where goods are
sold by a person who is not the owner thereof, and who does not sell them
under authority or with consent of the owner, the buyer acquires no better title
to the goods than the seller had, unless the owner of the goods is by his conduct
precluded from denying the sellers authority to sell. Here, there is no allegation
at all that petitioners were authorized by DBP to sell the property to the private
respondents. Jurisprudence, on the other hand, teaches us that a person can
sell only what he owns or is authorized to sell; the buyer can as a consequence
acquire no more than what the seller can legally transfer. No one can give
[21]

what he does not have neno dat quod non habet. On the other hand, Exhibit D
presupposes that petitioners could repurchase the property that they sold to
private respondents. As petitioners sold nothing, it follows that they can also
repurchase nothing. Nothing sold, nothing to repurchase. In this light, the
contract of repurchase is also inoperative and by the same analogy, void.

Contract of Repurchase
Dependent on Validity of Sale

As borne out by the evidence on record, the private respondents bought the
two parcels of land directly from DBP on April 1, 1985 after discovering that
petitioners did not own said property, the subject of Exhibits C and D executed
on November 30, 1984. Petitioners, however, claim that they can exercise their
alleged right to repurchase the property, after private respondents had acquired
the same from DBP. We cannot accede to this, for it clearly contravenes the
[22]

intention of the parties and the nature of their agreement. Exhibit D reads:

WRITING

Nov. 30, 1984

That I, Anacleto Nool have bought from my sister Conchita Nool a land an
area of four hectares (4 has.) in the value of One Hundred Thousand
(100,000.00) Pesos. It is our agreement as brother and sister that she
can acquire back or repurchase later on said land when she has the money.
[Underscoring supplied]
As proof of this agreement we sign as brother and sister this written document
this day of Nov. 30, 1984, at District 4, San Manuel, Isabela.
Sgd ANACLETO NOOL
Anacleto Nool
Sgd Emilio Paron
Witness

Sgd Conchita Nool

Conchita Nool[23]
 One repurchases only what one has previously sold. In other words, the
right to repurchase presupposes a valid contract of sale between
the same parties. Undisputedly, private respondents acquired title to the
property from DBP, and not from the petitioners.
Assuming arguendo that Exhibit D is separate and distinct from Exhibit C
and is not affected by the nullity of the latter, still petitioners do not thereby
acquire a right to repurchase the property. In that scenario, Exhibit D ceases to
be a right to repurchase ancillary and incidental to the contract of sale; rather,
it becomes an accepted unilateral promise to sell. Article 1479 of the Civil Code,
however, provides that an accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promissor if the promise
is supported by a consideration distinct from the price. In the present case, the
alleged written contract of repurchase contained in Exhibit D is bereft of any
consideration distinct from the price. Accordingly, as an independent contract,
it cannot bind private respondents. The ruling in Diamante vs. CA supports [24]

this. In that case, the Court through Mr. Justice Hilario G. Davide, Jr. explained:

Article 1601 of the Civil Code provides:

Conventional redemption shall take place when the vendor reserves the
right to repurchase the thing sold, with the obligation to comply with
the provisions of article 1616 and other stipulations which may have
been agreed upon.
In Villarica, et al. Vs. Court of Appeals, et al., decided on 29
November 1968, or barely seven (7) days before the respondent Court
promulgated its decisions in this case, this Court, interpreting the
above Article, held:
The right of repurchase is not a right granted the vendor by the vendee
in a subsequent instrument, but is a right reserved by the vendor in the
same instrument of sale as one of the stipulations of the contract. Once
the instrument of absolute sale is executed, the vendor can not longer
reserve the right to repurchase, and any right thereafter granted the
vendor by the vendee in a separate instrument cannot be a right of
repurchase but some other right like the option to buy in the instant
case. x x x.
In the earlier case of Ramos, et al. vs. Icasiano, et al., decided in 1927,
this Court had already ruled that an agreement to repurchase becomes a
promise to sell when made after the sale, because when the sale is
made without such an agreement, the purchaser acquires the thing sold
absolutely, and if he afterwards grants the vendor the right to
 repurchase, it is a new contract entered into by the purchaser, as
absolute owner already of the object. In that case the vendor has nor
reserved to himself the right to repurchase.
In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found another
occasion to apply the foregoing principle.
Hence, the Option to Repurchase executed by private respondent in the present
case, was merely a promise to sell, which must be governed by Article 1479 of
the Civil Code which reads as follows:
Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price.

Right to Repurchase Based on

Homestead or Trust Non-Existent

Petitioners also base their alleged right to repurchase on (1) Sec. 119 of the
Public Land Act and (2) an implied trust relation as brother and sister.
[25] [26]

The Court notes that Victorino Nool and Francisco Nool mortgaged the land
to DBP. The brothers, together with Conchita Nool and Anacleto Nool, were all
siblings and heirs qualified to repurchase the two parcels of land under Sec.
119 of the Public Land Act which provides that (e)very conveyance of land
acquired under the free patent or homestead provisions, when proper, shall be
subject to repurchase by the applicant, his widow or legal heirs, within a period
of five years from the date of conveyance. Assuming the applicability of this
statutory provision to the case at bar, it is indisputable that Private Respondent
Anacleto Nool already repurchased from DBP the contested properties. Hence,
there was no more right of repurchase that his sister Conchita or brothers
Victorino and Francisco could exercise. The properties were already owned by
an heir of the homestead grantee and the rationale of the of the provision to
keep homestead lands within the family of the grantee was thus fulfilled. [27]

The claim of a trust relation is likewise without merit. The records show that
private respondents did not purchase the contested properties from DBP in trust
for petitioners. The former, as previously mentioned, in fact bought the land
from DBP upon realization that the latter could not validly sell the
same. Obviously, petitioners bought it for themselves. There is no evidence at
all in the records that they bought the land in trust for private respondents. The
fact that Anacleto Nool was the younger brother of Conchita Nool and that they
signed a contract of repurchase, which as discussed earlier was void, does not
prove the existence of an implied trust in favor of petitioners.

Second Issue: No Estoppel in Impugning the

Validity of Void Contracts

Petitioners argue that when Anacleto Nool took the possession of the two
hectares, more or less, and let the other two hectares to be occupied and
cultivated by plaintiffs-appellants, Anacleto Nool cannot later on disclaim the
terms or contions (sic) agreed upon and his actuation is within the ambit of
estoppel x x x. We disagree. The private respondents cannot be estopped
[28]

from raising the defense of nullity of contract, specially in this case where they
acted in good faith, believing that indeed petitioners could sell the two parcels
of land in question.Article 1410 of the Civil Code mandates that (t)he action or
defense for the declaration of the inexistence of a contract does not prescribe. It
is well-settled doctrine that as between parties to a contract, validity cannot be
given to it by estoppel if it is prohibited by law or it is against public policy (19
Am. Jur. 802). It is not within the competence of any citizen to barter away what
public policy by law seeks to preserve. Thus, it is immaterial that private
[29]

respondents initially acted to implement the contract of sale, believing in good

faith that the same was valid.We stress that a contract void at inception cannot
be validated by ratification or prescription and certainly cannot be binding on or
enforceable against private respondents. [30]

Third Issue: Return of P30,000.00 with Interest

and Payment of Rent

Petitioners further argue that it would be a miscarriage of justice to order

them (1) to return the sum of P30,000.00 to private respondents when allegedly
it was Private Respondent Anacleto Nool who owed the former a balance of
P14,000.00 and (2) to order petitioners to pay rent when they were allowed to
cultivate the said two hectares. [31]

We are not persuaded. Based on the previous discussion, the balance

of P14,000.00 under the void contract of sale may not be enforced. Petitioners
are the ones who have an obligation to return what they unduly and improperly
received by reason of the invalid contract of sale. Since they cannot legally give
title to what they sold, they cannot keep the money paid for the object of the
sale. It is basic that (e)very person who through an act of performance by
another, or any other means, acquires or comes into possession of something
at the expense of the latter without just or legal ground, shall return the
same. Thus, if a void contract has already been performed, the restoration of
[32]

what has been given is in order. Corollarily and as aptly ordered by respondent
[33]

appellate court, interest thereon will run only from the time of private
respondents demand for the return of this amount in their counterclaim. In the
[34]

same vein, petitioners possession and cultivation of the two hectares are
anchored on private respondents tolerance. Clearly, the latters tolerance
ceased upon their counterclaim and demand on the former to vacate. Hence,
their right to possess and cultivate the land ipso facto ceased.
WHEREFORE, the petition is DENIED and the assailed Decision of the
Court of Appeals affirming that of the trial court is hereby AFFIRMED.
SO ORDERED.