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Chapter 1: GENERAL PRINCIPLES CELESTINO CO & CO. V COLLECTOR OF INTERNAL REVENUE

99 PHIL 841 BENGZON; August 31, 1956

NATURE Petition for review by certiorari of a decision of the Court of Tax Appeals FACTS - Celestino Co & Company is a duly registered general copartnership doing business under the trade name of "Oriental Sash Factory" - From 1946 to 1951 it paid percentage taxes of 7% on the gross receipts of its sash, door and window factory, in accordance with section 186 of the National Revenue Code imposing taxes on sale of manufactured articles - In 1952 it began to claim liability only to the contractor's 3% tax under section 191 of the same Code - Petitioner failed to convince the Bureau of Internal Revenue - It brought the matter to the Court of Tax Appeals, where it also failed ISSUE WON Celestino Co & Company is liable only for contractor's 3% tax under section 191 of the National Revenue Code HELD NO - The important thing to remember is that Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it "manufactures" the same is practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually to manufacture. - Petitioner contends that it manufacturers sash, windows and doors only for special customers and upon their special orders and in accordance with the desired specifications of the persons ordering the same and not for the general market: since the doors ordered by Don Toribio Teodoro & Sons, Inc., for instance, are not in existence and which never would have existed but for the order of the party desiring it; and since petitioner's contractual relation with his customers is that of a contract for a piece of work or since petitioner is engaged in the sale of services, it follows that the petitioner should be taxed under section 191 of the Tax Code and NOT under section 186 of the same Code - The argument rests on a false foundation. Any builder or homeowner, with sufficient money, may order windows or doors of the kind manufactured by this appellant. Therefore it is not true that it serves special customers only or confines its services to them alone. - The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its customers may desire. - Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filling orders for windows and doors according to specifications, it did not sell, but merely contracted for particular pieces of work or "merely sold its services". - Said article reads as follows: A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured

specially for the customer and upon his special order, and not for the general market, it is contract for a piece of work. - It is at once apparent that the Oriental Sash Factory did not merely sell its services to Don Toribio Teodoro & Co. (To take one instance) because it also sold the materials. The truth of the matter is that it sold materials ordinarily manufactured by it sash, panels, mouldings to Teodoro & Co., although in such form or combination as suited the fancy of the purchaser. Such new form does not divest the Oriental Sash Factory of its character as manufacturer. Neither does it take the transaction out of the category of sales under Article 1467 above quoted, because although the Factory does not, in the ordinary course of its business, manufacture and keep on stock doors of the kind sold to Teodoro, it could stock and/or probably had in stock the sash, mouldings and panels it used therefore - It is the opinion of the court that when this Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it-it thereby contracts for a piece of work filling special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work nothing is shown to call them special requiring extraordinary service of the factory. - If, as alleged-all the work of appellant is only to fill orders previously made, such orders should not be called special work, but regular work. - Supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a contractor. But as the doors and windows had been admittedly "manufactured" by the Oriental Sash Factory, such transactions could be, and should be taxed as "transfers" thereof under section 186 of the National Revenue Code. Disposition Appealed decision is affirmed.

CIR V ENGG EQUIPMENT & SUPPLY CO.

64 SCRA 590 ESGUERRA; June 30, 1975

FACTS - Engineering Equipment and Supply Co. (Engg) is a domestic corporation. As operator of an integrated engg shop, it is engaged in the design and installation of central type air conditioning system, pumping plants and steel fabrications. - Because Engg was denounced for tax evasion and alleged fraud, a raid and search was conducted by a joint team of Central Bank, NBI and BIR agents wherein company records were seized and confiscated. - Revenue examiners recommended that Engg be assessed for P480T as deficiency advance sales tax on the theory that it misdeclared its importation of air conditioning units and parts. This amount was later raised to P916T to include 25% and 50% surcharges. Engg contested the tax assessment of the CIR (Commissioner of Internal Revenue) and appealed the case to the Court of Tax Appeals (CTA). CTAs Ruling - Modifying the CIR decision, CTA declared Engg to be exempt from the deficiency manufacturers sales tax. This is because Engg is a contractor. However, Engg is ordered to pay CIR the sum of P174T as compensating tax of 30% on its importations and 25% surcharge for delinquency in payment of such tax. - Both parties were not satisfied with the decision. Engg claims that it should only be liable for 7% compensating tax. CIR contends that Engg is a manufacturer and seller of air conditioning units and, therefore, it is subject to the 30% advance sales tax prescribed by the Tax Code, as well as 50% fraud surcharge. - Engg claims that it is not a manufacturer and seller of airconditioning units BUT a contractor engaged in the design, supply and installation of the central type of air-conditioning system subject to the 3% tax, which is essentially a tax on the

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sale of services or labor of a contractor rather than on the sale of articles. ISSUES 1. WON Engg is a CONTRACTOR of air conditioning units (Otherwise, it is a manufacturer in relation to Sec 1941 of the Tax Code) 2. WON Engg should pay 50% surcharge as fraud penalty HELD 1. YES Ratio The true test of a contractor would seem to be that he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished. (Luzon Stevedoring Co v Trinidad) Impt! Distinction between a CONTRACT OF SALE and CONTRACT FOR SERVICES, LABOR and MATERIALS TEST: Whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given Art. 1467 of New Civil Code: A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order and not for the general market, it is a contract for a piece of work. Reasoning - Engg fabricates, assembles, supplies and installs in the buildings of its various customers the central type air conditioning system; prepares the plans and specifications which are distinct and different from each other; air conditioning units and spare parts or accessories thereof used by petitioner are not the window type of air conditioner which are manufactured, assembled and produced locally for sale to the general market; and the imported air conditioning units and spare parts or accessories thereof are supplied and installed by petitioner upon previous orders of its customers conformably with their needs and requirements. Thus, it falls within definition of contractor and is subject to contractors tax and not the advance sales tax imposed on manufacturers. This 30% compensating tax is not a tax on the importation of goods but a tax on the use of imported goods not subject to sales tax. * Other evidence and material facts considered were the ff: (a) Engineering Handbook Reference differentiating UNITARY and CENTRAL systems (b) Testimony of a licensed Mechanical and Electrical Engineer who was allegedly responsible for the preparation of the refrigeration and air conditioning code of Mla (c) Engg advertised itself as Engineering Equipment and Supply Company, Machinery Mechanical Supplies, Engineers, Contractors and NOT as manufacturers (d) Engg paid contractors tax on all the contracts for design and construction (e) Engg did not have ready-made air conditioning units for sale * Similar and applicable case is SM Lawrence Co v McFarland! 2. YES
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Ratio Whether it is subject to advance sales tax or compensating tax, it is required by law to truly declare its importation in the import entries and internal revenue declarations before the importations maybe released from customs custody. The said entries are the very documents where the nature, quantity and value of the imported goods declared and where the customs duties, internal revenue taxes, and other fees or charges incident to the importation are computed. Reasoning - Engg deliberately and purposely misdeclared its importations of air conditioning units and spare parts or accessories to evade payment of tax. Evidence consists of letters written by petitioner to its foreign suppliers, instructing them on how to invoice and describe the air conditioning units ordered by petitioner. Example: No mention of words air conditioning equipment should be made on any shipping documents... Disposition Decision appealed from is affirmed with the modification that Engg is hereby also made liable to pay the 50% fraud surcharge.

GONZALO PUYAT & SONS, INC. V ARCO AMUSEMENT CO.

72 PHIL 402 LAUREL; June 20, 1941

NATURE PETITION for review on certiorari. FACTS - Arco Amusement Co., which was engaged in the business of operating cinematographs, approached Gonzalo Puyat & Sons, Inc, which was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, USA, to equip its cinematographs with sound reproducing devices. After some negotiations, they agreed that Puyat, in behalf of Arco, would order sound reproducing equipment from Starr Piano Co. and that Arco would pay defendant, in addition to the price of the equipment, a 10% commission, plus all expenses (freight, insurance, banking charges, cables, etc.). At the expense of Arco, Puyat sent a cable to Starr Piano Co. inquiring about the equipment desired and making the said company to quote its price without discount. Starr Piano Company sent the list price of $1,700. - Puyat inforemed Arco the price of $1700 (without showing the cable of inquiry nor reply). Arco, by means of a letter, formally authorized the order. Upon delivery and presentation of necessary papers, Arco paid $1700 + 10% commission agreed upon + all expenses and charges. - Arco ordered for another sound reproducing equipment on the same terms as the first order, which was confirmed by a second letter. This time the supposed price quoted by the Starr Piano Company was $1600 so upon delivery of the second order, Arco paid $1600 + 10% commission + $160 all expenses incurred (not representing actual out-of-pocket expenses paid by the defendant but mere flat charge and rough estimate made by Puyat which was equivalent to 10% of the price of the equipment. - Arco found out (after 3 yrs) that the prices quoted to them by Puyat were not the net price but the list price, and that Puyat obtained a discount from Starr Piano Company. They were convinced that the prices charged them by Puyat were much too high including the charges for out-of-pocket expenses so they sought to obtain a reduction/reimbursement from Puyat, but failing to do so, they bought action against Puyat. - TC: the contract between the petitioner and the respondent was one of outright purchase and sale (PUYAT absolved) - CA: the relation between petitioner and respondent was that of agent and principal, the petitioner acting as agent of the respondent in the purchase of the equipment in question; even if the contract was of purchase and sale, Puyat was guilty of fraud in concealing the true price and hence would still be liable

Section 194. Words and Phrases Defined. (x) "Manufacturer" includes every person who by physical or chemical process alters the exterior texture or form or inner substance of any raw material or manufactured or partially manufactured products in such manner as to prepare it for a special use or uses to which it could not have been put in its original condition, or who by any such process alters the quality of any such material or manufactured or partially manufactured product so as to reduce it to marketable shape, or prepare it for any of the uses of industry, or who by any such process combines any such raw material or manufactured or partially manufactured products with other materials or products of the same or of different kinds and in such manner that the finished product of such process of manufacture can be put to special use or uses to which such raw material or manufactured or partially manufactured products in their original condition could not have been put, and who in addition alters such raw material or manufactured or partially manufactured products, or combines the same to produce such finished products for the purpose of their sale or distribution to others and not for his own use or consumption.

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to reimburse the respondent for the overpayments made by the latter ISSUES 1. WON the relation between the petitioner and respondent was that of agent and principal 2.If so, WON the Puyat was bound to reimburse Arco for any difference between the cost price and the sales price HELD 1. NO - Sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchase and sale, and not one of agency. Ratio. In agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil Code). Reasoning - First, the contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk", which can not bind either party. In the letters representing the agreement between them are clear in their terms and admit of no other interpretation than that Arco agreed to purchase from Puyat the equipment in question at the prices indicated ($1700 and $1600 respectively) which are fixed and determinate. Whatever unforseen events might have taken place unfavorable to the Puyat, such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, Arco would still pay them the prices fixed of $1,700 and $1,600. Even if Puyat was to receive 10% commission, this does not necessarily make them an agent of the respondent, as it was only an additional price which Arco bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. -Second, to hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. 2. NO - The petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middleman would not exist. Ratio. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers.xxx If the respondent later on discovers itself at the short end of a bad bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess price, on that ground alone. Reasoning - the twenty-five per cent (25% ) discount granted by the Starr Piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. The respondent could not have secured this discount from the Starr Piano Company and neither was the petitioner willing to waive that discount in favor of the respondent. As a matter of fact, no reason is advanced by the respondent why the petitioner should waive the 25 per cent discount granted it by the Starr Piano Company in exchange for the 10 per cent commission offered by the respondent.

- the petitioner was not duty bound to reveal the private arrangement it had with the Starr Piano Company relative to such discount to its prospective customers, and the respondent was not even aware of such an arrangement. - It was apparently to guard against an exhorbitant additional price that Arco sought to limit it to 10 per cent, so they are estopped from questioning that additional price (the 25% discount given to Puyat. - ON ALLEGED FRAUD: Not every concealment is fraud; and short of fraud, it were better that, within certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world. Disposition The writ of certiorari should be, as it is hereby, granted. The decision of the appellate court is accordingly reversed and the petitioner is absolved from the respondent's complaint in G. R. No. 1023, entitled "Arco Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat and Sons, Inc., defendant-appellee," without pronouncement regarding costs.

QUIROGA V PARSONS HARDWARE CO.

38 PHIL 501 AVANCEA; August 23, 1918

FACTS - On January 24, 1911, a contract was entered into by and between the plaintiff and J. for the exclusive sale of quiroga beds in the Visayan Island. The contract provides: - ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the following conditions: (A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles. (B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from the date of their shipment. (C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons. (D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice. The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash. (E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given. (F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds. - ART. 2. In compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprised with the Visayan group. - ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall

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immediately report such action to Mr. Quiroga for his approval. xxx Plaintiff, in his complaint, alleged that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses fo the same; and to order the beds by the dozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. ISSUE WON contract between the plaintiff and the defendant is a contract of purchase and sale HELD YES - In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. - It would be enough to hold that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. - Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. - The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another.

Furthermore, the return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement. - In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

FULE v CA (CRUZ/BELARMINO)
286 SCRA 698 ROMERO; Mar. 23, 1998

NATURE Petition for review on certiorari FACTS - Fule, a corporate secretary of the Rural Bank of Alaminos (the Bank) by profession and jeweler on the side, acquired a 10hectare property in Rizal. The former owner, Jacobe, had mortgaged it to the Bank for a loan of 10k but it was later foreclosed and offered for public auction upon his default. - Petitioner asked Dichoso and Mendoza (the Agents) to look for an interested buyer, and found one in private respondent Dr. Cruz. At the time, petitioner had shown interest in buying a pair of emerald-cut diamond earrings from Dr. Cruz but never came to an agreed price. Subsequently, negotiations for the barter of the jewelry and the property ensued; upon the request of Dr. Cruz, it was found by Atty. Belarmino that no barter was feasible because the 1-year period of redemption had not expired. To get over this legal impediment, petitioner executed a deed of redemption of behalf of Jacobe. - Petitioner arrived at Belarminos residence with the agents to execute a deed of absolute sale while Cruz held on to the earrings. Petitioner issued a certification stating the actual consideration of the sale was Php200k and not Php80k as indicated in the deed. Since the earrings were appraised at only Php160k, the remaining 40k was to be paid later in cash. This was done apparently to minimize the capital gains tax that petitioner would have to shoulder. Petitioner headed for the bank to meet up with Cruz and pick up the earrings. When asked if the jewelry was ok, petitioner nodded to express his satisfaction. Petitioner paid the agents $300 and some pieces of jewelry, but not half of the pair of earrings in question as previously promised. - Later that evening, petitioner arrived at Belarminos residence complaining the earrings were fake as confirmed by a tester. Petitioner accused the agents of deceiving him, which they denied. He nonetheless took back the $300 and jewelry given them. After another failed testing, the petitioner reported the matter to the police where the agents also executed their sworn statements. - Petitioner filed a complaint with the RTC to declare the contract of sale over the property null and void on the ground of fraud and deceit. The lower court denied the prayer for a writ of preliminary injunction over the deed as they found that the genuine pair of earrings had been delivered by Cruz. The 2 hours before petitioners complaint was considered unreasonable delay, placing petitioner in estoppel. The Court

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furthered that all elements of a valid contract were present, namely a meeting of the minds, determinate subject matter, and price certain. As the earrings had been delivered and the contract of absolute sale executed, the contract of barter or sale had been consummated. - The Court also finds that the plaintiff acted in bad faith in misrepresenting the price of the property. Damages and attys fees were in order for soiling Dr. Cruz and Belarminos good names. A petition with the CA yielded the same result, hence the instant petition ISSUE 1. WON the TC erred in holding that petitioner received a genuine pair of earrings 2. WON the CA erred in upholding the validity of the contract of barter or sale 3. WON the TC erred in awarding damages HELD 1. NO - As to questions of fact, the Court accords conclusiveness to the lower courts findings. Petitioner goes so far as to accuse the TC judge of handing in a ready-made 12 page decision due to the limited time afforded him to write it in a desperate effort to disparage the TCs findings of fact and convince the Court to review the same. Hence, this Court maintains the lower courts findings that Cruz had delivered the genuine pair of earrings. 2. NO - It is evident from the facts of the case that there was a meeting of the minds between petitioner and Cruz (Cruz asking if the earrings were ok and petitioners nodding in agreement) hence perfecting the contract. Petitioner contends that the contract was voidable because consent was vitiated by fraud. However, the facts show no evidence that insidious words or machinations were employed by Cruz to cajole petitioner to enter into the contract. It was in fact the petitioner who resorted to machinations to wheedle Cruz into the transaction by misrepresenting his propertys price. - Petitioner also failed to clearly allege mistake as a ground for nullification as he failed to prove the fact that prior to the delivery of the earrings, private respondents endeavored to substitute the earrings with a different or inferior item. On account of petitioners experience as a jeweler, he cannot be excused for the alleged mistake himself as he could have easily tested the earrings genuineness in the presence of Cruz. As stated in Art 27 CC, there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. Furthermore, having only complained 2 hours after the exchange, petitioner was afforded ample time within which to examine the earringsin fact, he accepted when asked if he was satisfied with the jewelry. - There being no legal bases for the nullification of the contract, ownership had been transferred to both parties respectively. While there remained a balance of 40k in cash to be paid to petitioner, this was not sufficient cause to invalidate the contract and will not incur interest on the part of Cruz. 3. NO - The malice with which petitioner filed the case is apparent. As an experienced jeweler who thoroughly examined the earrings himself and went so far as to sketch them earlier, it is illogical that he would fail to exert extra effort to check its genuineness at the precise moment of the exchange. As an experienced businessman, he was shrewd enough to bloat the propertys price only a few days after he had purchased it for a far lower value. Given this, it would appear that the cause of action of the instant case was contrived by the petitioner himself in hopes of obtaining a favorable outcome in his complaint to take the real jewelry, return a fake, and get back the property, all while dragging down private respondents. As his guilt in bringing about the supposed wrongdoing on which he anchored his cause of action is evident, he is answerable for all damages the defendant suffered from it.

DIsposition the decision of the CA is AFFIRMED. Dr. Cruz, however, is ordered to pay petitioner the balance of the purchase price of Php40k

Chapter 2: FORMATION OF THE CONTRACT MEDINA V COLLECTOR OF INTERNAL REVENUE

1 SCRA 303 REYES, J.B.L.; January 28, 1961

NATURE Petition to review a decision of the Court of Tax Appeals upholding a tax assessment of the Collector of Internal Revenue except with respect to the imposition of so-called compromise penalties, which were set aside. FACTS - That on or about May 20, 1944, petitioning taxpayer Antonio Medina married Antonia Rodriguez. Before 1946, the spouses had neither property nor business of their own. Later, however, petitioner, acquired forest concessions in the municipalities of San Mariano and Palanan in the Province of Isabela. From 1946 to 1948, the logs cut and removed by the petitioner from his concessions were sold to different persons in Manila through his agent, Mariano Osorio. - Some time in 1949, Antonia R. Medina, petitioner's wife, started to engage in business as a lumber dealer, and up to around 1952, petitioner sold to her almost all the logs produced in his San Mariano concession. Mrs. Medina, in turn, sold in Manila the logs bought from her husband through the same agent, Mariano Osorio. The proceeds were, upon instructions from petitioner, either received by Osorio for petitioner or deposited by said agent in petitioner's current account with the Philippine National Bank. - The Collector considered the sales made by Mrs. Medina as the petitioner's original sales taxable and NOT the sales made by the petitioner to his wife. Because of this, the petitioner protested the assessment, however, respondent Collector insisted on his demand. - According to Medina the sale was valid as he and his wife executed and recorded a pre-nuptial agreement for a regime of complete separation of property but all trace of the document was lost on account of the war. before their marriage. However, this claim was not sufficiently proven. ISSUES 1. WON the sales made by the petitioner to his wife could be considered as his original taxable sales under the provisions of Section 186 of the National Internal Revenue Code 2. WON the respondent Collector cannot assail the questioned sales, he being a stranger to said transactions HELD 1. NO Ratio Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca, 45 Phil. 43). Being void transactions, the sales made by the petitioner to his wife were correctly disregarded by the Collector in his tax assessments that considered as the taxable sales those made by the wife through the spouses' common agent, Mariano Osorio. 2. NO Ratio The government, as correctly pointed out by the Tax Court, is always an interested party to all matters involving taxable transactions and, needless to say, qualified to question their validity or legitimacy whenever necessary to block tax evasion. Disposition Decision appealed from is AFFIRMED

PHILIPPINE TRUST CO. V ROLDAN

99 Phil 393

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NATURE As guardian of the property of the minor Mariano L. Bernardo, the Philippine Trust Company filed in the Manila court of first instance a complaint to annul two contracts regarding 17 parcels of land: (a) sale thereof by Socorro Roldan, as guardian of said minor, to Fidel C. Ramos; and (b) sale thereof by Fidel C. Ramos to Socorro Roldan personally. The complaint likewise sought to annul a conveyance of four out of the said seventeen parcels by Socorro Roldan to Emilio Cruz. FACTS - Mariano Bernardo inherited from his father, Marcelo Bernardo, the parcels of land in question. In view of his minority, guardianship proceedings were instituted wherein Socorro Roldan was appointed guardian. She was the surviving spouse of Marcelo Bernardo - Socorro filed in a guardianship proceedings a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, to invest the money in a residential house, which the minor desired to have. The motion was granted. - Socorro, as guardian, executed the proper deed of sale in favor of her brother-in-law Dr. Fidel C. Ramos and obtained, judicial confirmation of the sale. A week later, Dr. Fidel C. Ramos executed in favor of Socorro, personally, a deed of conveyance covering the same seventeen parcels, for the sum of P15,000. And later the same year, Socorro sold four parcels out of the seventeen to Emilio Cruz for P3,000, reserving to herself the right to repurchase. - The Philippine Trust Company replaced Socorro as guardian. And this litigation, started two months later, seeks to undo what the previous guardian had done. The step-mother in effect, sold to herself, the properties of her ward, contends the plaintiff, and the sale should be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian from purchasing "either in person or through the mediation of another" the property of her ward. - The CFI, following Rodriguez vs. Mactal, held the article was not controlling, because there was no proof that Fidel C. Ramos was a mere intermediary or that the latter had previously agreed with Socorro Roldan to buy the parcels for her benefit. Even Socorro swore she had repurchased the lands from Dr. Fidel C. Ramos to preserve it and to give her protege opportunity to redeem - the court rendered judgment upholding the contracts but allowing the minor to repurchase all the parcels by paying P15,000, within one year. - CA affirmed judgment. ISSUE WON the contracts of sale was made were valid HELD Ratio No, the three sales should not be sustained: the first two for violation of article 1459 of the Civil Code; and the third because Socorro Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil Code) the obligation of Socorro Roldan to return the 17 parcels together with their fruits and the duty of the minor, through his guardian to repay P14,700 with legal interest. Reasoning - At first glance the resolutions of both courts accomplished substantial justice: the minor recovers his properties. But if the conveyances are annulled as prayed for, the minor will obtain a better deal: he receives all the fruits of the lands from the year 1947 (Article 1303 Civil Code) and will return P14,700, not P15,000. - When seeking approval of the sale, she represented the price to be the best obtainable in the market, Socorro was not entirely truthful. This is one phase to consider. Supposing she knew the parcels were actually worth P17,000; then she agreed to sell them to Dr. Ramos at P14,700; and knowing the realty's value she offered him the next day P15,000 or P15,500, and got it.

Will there be any doubt that she was recreant to her guardianship, and that her acquisition should be nullified? - The general doctrine that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his ward's interest and in line with the court's suspicion whenever the guardian acquires the ward's property we have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward's parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies. - She acted it may be without malice; there may have been no previous agreement between her and Dr. Ramos. But the fact remains that she acquired her protege's properties, through her brother-in-law. That she planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced from the very short time between the two sales (one week). The temptation which naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no actual collusion is proved (so hard to prove) between such guardian and the intermediate purchaser. This would uphold a sound principle of equity and justice. - Rodriguez vs. Mactal decision does not apply. It merely meant that the subsequent purchase by Mactal could not be annulled in that particular case because there was no proof of a previous agreement between Chioco and her. The court then considered such proof necessary to establish that the two sales were actually part of one scheme - guardian getting the ward's property through another person - because two years had elapsed between the sales. Such period of time was sufficient to dispel the natural suspicion of the guardian's motives or actions. In the case at bar, however, only one week had elapsed. And if we were technical, we could say, only one day had elapsed from the judicial approval of the sale (August 12), to the purchase by the guardian (Aug. 13). - Attempting to prove that the transaction was beneficial to the minor, appellee's attorney alleges that the money (P14,700) invested in the house on Tindalo Street produced for him rentals of P2,400 yearly; whereas the parcels of land yielded to his stepmother only an average of P1,522 per year. The argument would carry some weight if that house had been built out of the purchase price of P14,700 only. The calculation does not include the price of the lot on which the house was erected. Estimating such lot at P14,700 only, the result is that the price paid for the seventeen parcels gave the minor an income of only P1,200 a year, whereas the harvest from the seventeen parcels netted his step-mother a yearly profit of P1,522.00. The minor was thus on the losing end. Disposition Judgment is therefore rendered: a. Annulling the three contracts of sale in question; b. declaring the minor as the owner of the seventeen parcels of land, with the obligation to return to Socorro Roldan the price of P14,700 with legal interest from August 12, 1947; c. Ordering Socorro Roldan and Emilio Cruz to deliver said parcels of land to the minor; d. Requiring Socorro Roldan to pay him beginning with 1947 the fruits, which her attorney admits, amounted to P1,522 a year; e. Authorizing the minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the sum of P3,000; and f. charging appellees with the costs.

51 Phil 695 VILLAREAL; March 13, 1928

NATURE This is an appeal taken by Federico Valera from the judgment of the Court of First Instance of Manila dismissing his complaint against Miguel Velasco, on the ground that he has not satisfactorily proven his right of action.

VALERA V VELASCO

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- By virtue of the powers of attorney, Velasco was appointed attorney-in-fact of Valera with autority to manage his property in the Philippines, consisting of the usufruct of a real property located of Echague Street, City of Manila. Velasco accepted both powers of attorney, managed plaintiff's property. However, the 2 had a misunderstanding over the payment of the balance due to Attorney Velasco. Atty. Velasco filed suit and he won. - Judgment was rendered in his favor and after the writ of execution was issued, the sheriff levied upon the plaintiff's right of usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of his claim. He then sold his right of redemption to one Eduardo Hernandez. Hernandez then conveyed the same right of redemption to Valera. After Valera recovered his right if redemption, a Salvador Vallejo rendered a civil case against Valera on the ground that the said right of redemption was sold by the sheriff to him at a public auction. Later, he transferred said right of redemption to the defendant Velasco. ISSUES 1. WON Miguel Velasco was, and at present is, an authorized representative of the plaintiff Federico Valera 2. WON the sale at public auction of the right to repurchase the land in question to Salvador Vallejo and the sale by Salvador Vallejo to defendant Miguel Velasco are null and void HELD 1. NO - The fact that an agent institutes an action against his principal for the recovery of the balance in his favor and renders and final account of his operations, is equivalent to an express renunciation of the agency, and terminates the juridical relation between them. - If Miguel Velasco, in adopting a hostile attitude towards his principal, suing him for the collection of the balance in his favor, ceased ipso facto to be the agent of Valera, said agent's purchase of the aforesaid principal's right of usufruct at public auction held by virtue of an execution issued upon the judgment rendered in favor of the former and against the latter, is valid and legal. 2. NO - Next, it is deemed unnecessary to discuss the validity of the sale made by Federico Valera to Eduardo Hernandez of his right of redemption in the sale of his usufructuary right made by the sheriff by virtue of the execution of the judgment in favor of Miguel Velasco and against the said Federico Valera; and the same thing is true as to the validity of the resale of the same right of redemption made by Eduardo Hernandez to Federico Valera; inasmuch as Miguel Velasco's purchase at public auction held by virtue of an execution of Federico Valera's usufructuary right is valid and legal, and as neither the latter nor Eduardo Hernandez exercised his right of redemption within the legal period, the purchaser's title became absolute. - Moreover Miguel Velasco, having acquired Federico Valera's right of redemption from Salvador Vallejo, who had acquired it at public auction by virtue of a writ of execution issued upon the judgment obtained by the said Vallejo against the said Valera, the latter lost all right to said usufruct. - And even supposing that Eduardo Hernandez had been tricked by Miguel Velasco into selling Federico Valera's right of repurchase to the latter so that Salvador Vallejo might levy an execution on it, and even supposing that said resale was null for lack of consideration, yet, inasmuch as Eduardo Hernandez did not present a third party claim when the right was levied upon for the execution of the judgment obtained by Vallejo against Federico Vallera, nor did he file a complaint to recover said right before the period of redemption expired, said Eduardo Hernandez, and much less Federico Valera, cannot now contest the validity of said resale, for the reason that the one-year period of redemption has already elapsed. - Neither did the trial court err in not ordering Miguel Velasco to render a liquidation of accounts from March 31, 1923, inasmuch as he had acquired the rights of the plaintiff by purchase at the

execution sale, and as purchaser, he was entitled to receive the rents from the date of the sale until the date of the repurchase, considering them as part of the redemption price; but not having exercised the right repurchase during the legal period, and the title of the repurchaser having become absolute, the latter did not have to account for said rents. Disposition By virtue of the foregoing, and finding no error in the judgment appealed from, the same is hereby affirmed in all its parts, with costs against the appellant.

NAVAL V ENRIQUEZ
3 Phil 695 MAPA; April 12, 1904

FACTS - November 14, 1885, Don Jorge Enriquez, as heir of his deceased parents, Antonio Enriquez and Doa Ciriaca Villanueva, whose estates were at that time still undistributed, by public instrument sold to Don Victoriano Reyes his interest in both estates, equivalent to a tenth part thereof, for the sum of 7,000 pesos. - The deed was executed before Don Enrique Barrera, a notary public, who certified in the document that the vendor received the said consideration at the time of the execution of the instrument. - By another instrument executed April 15, 1886, before the same notary, Don Enrique Barrera y Caldes, Don Victoriano Reyes sold to Doa Carmen de la Cavada this interest which by the deed had acquired from Don Jorge Enriquez for the same consideration of 7,000 pesos. - The purchaser, Doa Carmen, was the wife of Don Francisco Enriquez, who was the executor and administrator of the testamentary estate of Don Antonio Enriquez at the dates of the execution of the two above mentioned. - The plaintiffs demand that these deeds be declared null and void, as well as the contracts evidenced thereby, apparently solely so far as they refer to the estate of Don Antonio Enriquez, no mention being made of the estate of Doa Ciriaca Villanueva in the complaint. This relief is prayed for upon the following grounds: (1) Because the said contracts were executed without consideration, it being alleged with respect to this matter that Don Jorge Enriquez did not receive any consideration for the sale made by him in favor of Don Victoriano Reyes, and that the latter did not receive any sum whatever as a consideration for the sale in turn executed by him in favor of Doa Carmen de la Cavada.. (2) Because Don Victoriano Reyes merely acted as an intermediary at the request and instance of Don Francisco Enriquez for the purpose of subsequently facilitating the acquisition by Doa Carmen de la Cavada of the hereditary share of Don Jorge Enriquez, the real acquirer being Don Francisco Enriquez, the executor and administrator of the estate of Don Antonio Enriquez. ISSUES 1. WON there was no consideration for the sales referred to in the complaint. 2. WON Article 1459 of the Civil Code applies incapacitates Don Francisco Enriquez as executor of the will of Don Antonio Enriquez, to acquire by purchase the hereditary right of Jorge Enriquez. HELD 1. NO - Victoriano Reyes testified that he paid nothing to Don Jorge Enriquez, and received nothing from Carmen de la Cavada as consideration for either of the sales. But against this statement is the testimony of the notary, Don Enrique Barrera y Caldes, before whom both contracts were executed, and that of the defendants Francisco Enriquez and Doa Carmen de la Cavada, who expressly affirm the contrary; and more especially the statement is contrary to the recitals of the deeds themselves, which confirm the statements of the witnesses last referred to.

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- These instruments having been executed with all the formalities prescribed by the law, they are admissible as evidence against the contracting parties and their successors with respect to recitals made therein by the former (Art. 1218, Civil Code.) Their evidentiary force can not be overcome except by other evidence of greater weight, sufficient to overcome the legal presumption of the regularity of acts and contracts celebrated with all the legal requisites under the safeguard of a notarial certificate. - It is beyond comprehension, and we can not believe that Jorge Enriquez, who according to the plaintiffs was absolutely without means of support for himself and his family, would convey to another his large interest in the estate without receiving any consideration therefor, and that to do this he would commit the grave crime of falsification. To justify this conclusion it would be necessary to suppose that Jorge Enriquez was absolutely devoid of intelligence or that he was the victim or error, violence, intimidation, or fraud. But these are circumstances which counsel for the plaintiffs have not demonstrated or even sought to demonstrate. - The contract of sale is consummated by the delivery of the purchase money and of the thing sold. "When the sale is made by public instrument the execution of the instrument is equivalent to the delivery of the thing which is the object of the contract, unless from the instrument itself the contrary intention clearly appears." (Art. 1462, par. 2, Civil Code.) And article 1464 provides that "With respect to incorporeal property [to which class the hereditary right which was the object of the contracts in question pertains], the provisions of paragraph 2 of article 1462 shall govern." - The delivery of the things sold was effected by the mere execution of the deed of sale; and it appearing from the deed itself that the consideration was delivered to the vendor at the time, and the contrary not having been sufficiently proven, the conclusion follows that the sale was consummated them and there, and that from that time the period of four years fixed by law for the prescription of the action of nullity must be counted in this case. 2. NO - The thing sold in the two contracts of sale mentioned in the complained was the hereditary right of Don Jorge Enriquez, which evidently was not in charge of the executor, Don Francisco Enriquez. - Executors, even in those cases in which they administer the property pertaining to the estate, do not administer the hereditary rights of any heir. This right is vested entirely in the heirs, who retain it or transmit it in whole or in part, as they may deem convenient, to some other person absolutely independent of the executor, whose authority, whatever powers the testator may have desired to confer upon him, do not and can not under any circumstances in the slightest degree limit the power of the heirs to dispose of the said right at will. That right does not form part of the property delivered to the executor for administration. - The prohibition which paragraph 3 of that article imposes upon executors refers to the property confided to their care, and does not extend, therefore, to property not falling within this class. Legal provisions of a prohibitive character must be strictly construed, and should not be extended to cases not expressly comprised within their text. - Even upon the supposition that the executor, Don Francisco Enriquez, was the person who really acquired the hereditary rights of Jorge Enriquez, the sale in question would not for that reason be invalid, the executor, Don Francisco Enriquez, not being legally incapable of acquiring the hereditary right in question as the plaintiffs erroneously suppose.

FACTS - Candida Acabo, on June 12, 1911, sold her six parcels of land to one Gan Tingco for Pesos 500.00. The buyer, however, could not take possession of the property since they were in possession of one Silvino Pabinquit who claimed that the property was sold to him by one Faustino Abad for Pesos 375. Abad, on the other hand, claimed that he bought the property from Henry Gardner who in turn claimed that he bought the property in a public auction held in the Barrio of Martelo on March 20, 1907. - As it turned out, the parcels of land of Acabo were in fact sold at a public auction allegedly by virtue of a writ of execution issued by the justice of the peace of Gujulngan based on a complaint filed by a Silvestre Basaltos. The justice of the peace who ordered the execution was none other than Henry Gardner. The writ, however, only mentioned that should Acabo fail to pay her obligation to Basaltos, the Sheriff should put a levy on her fixtures and other chattels. There was no mention of the real property of Acabo in the writ. - The trial court ruled in favor of Gan Tingco based on the fact that Henry Gardner, justice of the peace who issued the writ, was the buyer of the property during the auction. The judge in this case ruled that the purchase by Gardner was in violation of Article 1459 (5) of the civil code which prohibits judges from acquiring by purchase even at public or judicial sale, either in person or by an agent, any property or rights litigated in the court in the jurisdiction or territory within which they exercise their respective duties ISSUE WON the court erred in ruling that the purchase by Gardner was illegal HELD NO - The law prohibited participation of judges in any auction by judicial decree is rooted in the laws intention to avoid improper interference with and interest of a judge in a thing levied upon and sold by his order. Under the law, Gardner was prohibited from acquiring the ownership of Acabos land. Since said purchase was illegal, Gardner could not have passed on the title to Faustino Abad. The transfer by Abad to Pabinquit is also void.

MUNICIPAL COUNCIL OF ILOILO V EVANGELISTA

55 PHIL 290 VILLA-REAL; November 17, 1930

NATURE Appeal from a judgment of the CFI of Iloilo FACTS - March 20, 1924 Tan Ong Sze Vda. de Tan Toco sought to recover form the municipality of Iloilo the value of a strip of land belonging to her taken by the Municipality to widen a public street; the judgment entitled Vda to recover P42,966.40, the value of the strip of land, from the Municipality. - when the judgment, became final and executory, Atty. Jose Evangelista, in his own behalf and as counsel for the administratrix of Jose Ma. Arroyo's intestate estate, filed a claim in the same case for professional services rendered by him, which the court, acting with the consent of the appellant widow, fixed at 15 % of the amount of the judgment - claimants and PNB prayed that the amount of the judgment be turned over to it because the land taken over had been mortgaged to it. Antero Soriano also appeared claiming the amount of the judgment as it had been assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc. - March 29, 1928, the municipal treasurer of Iloilo, paid the late Antero Soriano the amount of P6,000 in part payment of the judgment mentioned above, assigned to him by Tan Boon Tiong, acting as attorney-in-fact of Tan Ong Sze Vda. de Tan Toco.

GAN TINGCO V PABINQUIT

35 Phil 81 (1916) ARELLANO; October 17, 1916

NATURE Appeal from a judgment of the Negros Oriental CFI

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- December 18, 1928, municipal treasurer deposited with the clerk the P6,000 on account of the judgment and recorded 15% attys lien in favor of Atty. Evangelista which also amounted to P6,000 - having a total of P12,000, the judgment for P42,966.44 against the municipality of Iloilo was reduced to P30,966.40 - Vda de Tan Toco contends: 1. the assignment was not made in consideration of professional services by Attorney Antero Soriano, for they had already been satisfied before the execution of said deed of assignment, but in order to facilitate the collection of the amount of said judgment in favor of the appellant, for the reason that, being Chinese, she had encountered many difficulties in trying to collect 2. payments admitted by the court in its judgment, as made by Tan Toco's widow to Attorney Antero Soriano for professional services rendered to her and to her coheirs, amounting to P2,900, must be added to the P700, 3. A glance at these receipts shows that those amounts were received by Attorney Antero Soriano for the firm of Soriano & Arroyo, which is borne out by the stamp on said receipts reading, "Bufete Soriano & Arroyo," and the manner in which said attorney receipted for them, "Soriano & Arroyo, by A. Soriano." ISSUE WON the assignment made by Tan Boon Tiong, as attorney-infact of the appellant Tan Ong Sze Viuda de Tan Toco, to Attorney Antero Soriano, of all the credits, rights and interests belonging to Tan Ong Sze Viuda de Tan Toco by virtue of the judgment of CFI Iloilo was valid HELD YES ** in short all this time, the Vda had two attorneys Tan Boon and Soriano; Vda did not want to pay Soriano anymore thinking she already paid Tan Boon and in turn Tan Boon assigned to Soriano the credits due him. Vda was even saying that Tan Boons assignment of the credits was not valid under A1459 because the credits that will come from the judgment cannot be the object of transfer since Soriano is her lawyer and it falls squarely in the prohibition. But, as mentioned in the case, Soriano has been handling her cases for a long period of time already and some of the cases were worth hundreds of thousands. And the approximately P10,000 she had already somehow paid is an inadequate amount to compensate Soriano. And besides, Vda has been continually using Soriano as her lawyer even after the said assignment controversy. - "ART. 1459. The following persons cannot take by purchase, even at a public or judicial auction, either in person or through the mediation of another: * * * * * * * "5. Justices, judges, members of the department of public prosecution, clerks of superior and inferior courts, and other officers of such courts, the property and rights in litigation before the court within whose jurisdiction or territory they perform their respective duties. This prohibition shall include the acquisition of such property by assignment. '"Actions between co-heirs concerning the hereditary property, assignments in payment of debts, or to secure the property of such persons, shall be excluded from this rule. "The Prohibition contained in this paragraph shall include lawyers and solicitors with respect to any property or rights involved in any litigation in which they may take part by virtue of their profession and office." - For the foregoing considerations, the court is of opinion and so holds: (1) That an agent or attorney-in-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy, them by an assignment of a judgment rendered in favor of said principal; (2) that when a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears

positively to have been the principal's intention; and (3). that the assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services, in other cases, does not contravene the prohibition of article 1459, case 5, of the Civil Code. Disposition Judgment affirmed

51 SCRA 120 TEEHANKEE; May 29, 1973

FACTS - On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot located in Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, who illegally entered said portions of the lot on two occasions in 1945 and in 1959. In his answer with counter-claim defendant claims that he and his predecessors-in-interest have always been in actual, open and continuous possession since time immemorial under claim of ownership of the portions of the lot in question. Unfortunately, his title - Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed on July 18-31, 1934 - Before WWII, Francisco Militante filed with the Court of First Instance of Iloilo an application for the registration of the title of the land but was opposed by the Director of Lands, the Director of Forestry and other oppositors. During WWII, the record of the case was lost. After the war, Francisco Militante petitioned this court to reconstitute the record of the case but in the end, the registration was denied. - He appealed but pending the decision (which was denied in the end), Francisco Militante sold to the plaintiff, Domingo Rubias the land, and was registered in the Registry of Deeds - Soon after, both Rubias and Militante were declaring the land for taxation purposes - On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo - During the trial of this case on the merit, the plaintiff will prove by competent evidence the following: > That the land he purchased from Francisco Militante under Exh. "A" was formerly owned and possessed by Liberato Demontao but that on September 6, 1919 the land was sold at public auction by virtue of a judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontao Francisco Balladeros and Gregorio Yulo, defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was registered in the Office of the Register of Deeds of Iloilo on August 4, 1920, under Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was executed by Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been registered in the Office of the Register of Deeds of Iloilo on February 10, 1934 (Exh. "1-1"). > On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced by a notarial deed (Exh. "J") which was registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1"). - Defendants, on the other hand will prove by competent evidence during the trial of this case the following facts: > That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio Batiller, in the ownership and possession of the land in the year 1930, and since then up to the present, the land remains in the possession of the defendant, his possession being actual, open, public, peaceful and continuous in the

RUBIAS V BATILLER

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concept of an owner, exclusive of any other rights and adverse to all other claimants. > That the alleged predecessors in interest of the plaintiff have never been in the actual possession of the land and that they never had any title thereto. > That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has been approved. - On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging that plaintiff does not have cause of action against him because the property in dispute which he (plaintiff) allegedly bought from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought on appeal to this Court and docketed as CA-G.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of his father-in-law, Francisco Militante. - Invoking Arts. 1409 and 1491 of the Civil Code which reads: > Art. 1409. The following contracts are inexistent and void from the beginning: (7) Those expressly prohibited by law. > ART. 1491. The following persons cannot acquire any purchase, even at a public auction, either in person of through the mediation of another: . + (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights of in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring an assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. - Defendant claims that plaintiff could not have acquired any interest in the property in dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-31, Record on Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of illegality of contracts is not available to third persons whose interests are not directly affected' (See pp. 32-35 Record on Appeal). - On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of dismissal the lower court practically agreed with defendant's contention that the contract (Exh. A) between plaintiff and Francism Militante was null and void. ISSUE WON the contract of sale between appellant and his father-inlaw, the late Francisco Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case involving the property in dispute HELD YES - The purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491 paragraph (5) of the Philippine Civil Code, reproduced supra; 6 and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that his client could sell the same since as already shown above, his client's claim to the property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived." - In a case, the Court ordered the issuance of a writ of possession for the return of the land by the lawyer to the adverse parties without reimbursement of the price paid by him

and other expenses, and ruled that counsel is a lawyer and is presumed to know the law. He must, therefore, from the beginning, have been well aware of the defect in his title and is, consequently, a possessor in bad faith." - Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law. - New Civil Code recognizes absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy" or which are "expressly prohibited or declared void by law" and declares such contracts "inexistent and void from the beginning." - nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. In his aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions it had been opined that they may be "ratified" by means of and in "the form of a new contact, in which cases its validity shall be determined only by the circumstances at the time the execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract." - As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's alleged cause of action founded thereon were being asserted against defendantappellant.

ZAYCO V SERRA
44 Phil 326
NATURE Appeal to the decision of the lower court holding the contract null and void for lack of consideration FACTS - On November 7, 1918, the plaintiff, Lorenzo Zayco, and the defendant, Salvador Serra, entered into a contract, the pertinent clauses of which are following: 1. That the party of the first part shall give the party of the second part an option to buy the Palma Central for the sum of one million pesos (P1,000,000). 4. That in the case the purchase of the Palma Central is made and the party of the second part cannot pay the whole price in cash, then he will be given a period not exceeding three years within which to make the full payment, computed from the day of the execution of the contract of sale, provided that the party of the second part gives a security or bond to the satisfaction of the party of the first part to guarantee the payment of the balance of the purchase price, with interest thereon at a reasonable rate. 6. That this option of the party of the second part to purchase the Palma Central, or to become a partner of, or join, the party of the first, expires on the 30th of June, 1919.

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7. That hereafter, in case of the sale of the Palma Central, or the formation of a partnership to operate the same, the party of the second part shall have preference to make such sale, or become a partner, over any other persons desiring to purchase the central or enter into partnership. - Under date of June 28, 1919, the plaintiff, Lorenzo Zayco, through his attorney, wrote a letter (Exhibit A) to the defendant, Salvador Serra, accepting the foregoing contract and placing at his disposal a cash order of the Bank of the Philippine Islands of Iloilo in the amount of P100,000, in part payment of the price of the Palma Central and Estate. Serra refused to accept such offer. - On the same day, June 30, 1919, Zayco brought suit against Serra to compel him to execute the deed of sale and conveyance of the Palma Central and Estate and to pay, in addition, P500,000 as damages. - The plaintiff also filed a supplemental complaint in which Philip Whitaker, Venancio Concepcion, and Eusebio R. de Luzuriaga were included as defendants, and it was alleged that, without the knowledge of the plaintiff Zayco, the defendant Serra sold the Palma Central and Estate to said Messrs. Philip Whitaker, Venancio Concepcion, and Eusebio R. de Luzuriaga on January 29, 1920, for the sum of P1,500,000 on the terms and conditions specified in said contract. - By the terms of the contract of November 7, 1918, Zayco was granted the right: (a) To purchase the Palma Central and Estate until June 30, 1919, and (b) have preference, after that date, over any other purchaser making the same terms. - The lower court held that this contract of November 7, 1918, has no consideration and is, for this reason, null and void. This conclusion, however, is not supported by the evidence ISSUES 1. WON there was valid consideration for the Contract 2. WON Serra has the obligation to accept the counter offer of Zayco HELD 1. YES - It is true that the contract does not state any consideration on the part of Serra, but it is presumed that there is a consideration in all contracts (art. 1277, Civ. Code). Besides, a consideration can be proved and, in this case, there is evidence showing its existence. - The Palma Central was in competition with the Bearin Central of Lizarraga Hermanos and both were doing their best to gain the greater number of supporters, which, as is well-known, constitutes the basis and measures of their development. Zayco owned an estate containing 350 hectares used for cultivating cane, situated between both centrals is such a way as to constitute an opening to them from the adjacent estates. Owing to this circumstance, Zayco has been the subject of solicitations of both centrals, each making the most favorable offers to win him. Lizarraga Hermanos went so far as to offer to remit his debt, amounting to P40,000, if he became a supporter of their central. Serra, in turn, offered to give him 60 per cent of the sugar of his cane milled in the Palma Central instead of 55 per cent, as allowed by the other centrals, and besides, they promised to assist him in acquiring this central. Zayco, at last, decided to become, as he in fact became, a supporter of the Palma Central. - All this, which preceded and led to the execution of the contract of November 7, 1918, is evidently a sufficient consideration to give life to the contract. It meant, on the part of Zayco, the waiver of positive benefits which he would have obtained from Lizarraga Hermanos. It meant at the same time, on the part of Serra, an expansion of his central and the consequent increase in his production and profit. Under such circumstance Zayco's support to the Palma Central was a prestation of thing or service which positively benefited Serra. 2. NO It is a counter offer, different from the original contract of Nov. 17, 1918. Zayco's acceptance, as his letter of June 28, 1919, indicates, could not, in itself, convert the offer of sale made by

Serra in the document of November 7, 1918, into a perfect contract. In order for the acceptance to have this effect, it must be plain and unconditional, and it will not be so if it involves any new proposal, for in that case it would not mean conformity with the offer, which is what gives rise to the generation of the contract. The letter of acceptance of Zayco lacks these requisites. When Zayco accepted the offer, tendering the sum of P100,000 as first payment, his acceptance involved a proposal, not contained in the offer, that this precisely, and not any other, should be the amount of the first payment. This proposal, in turn, required acceptance on the part of Serra. For this reason, Zayco's acceptance did not imply conformity with the offer of Serra, but only when the latter shall, in turn, have accepted his proposal that the amount to be paid in cash was P100,000. Not only was this not accepted by Serra, but Serra cancelled his offer on July 15, 1919. - Our conclusion is that the acceptance made by Zayco of Serra's offer was not sufficient to give life to a contract and is no ground for compelling Serra to execute the sale offered.

45 Phil 296 MALCOLM; October 23, 1923

FACTS - Luis Asiain is the owner of the hacienda known as "Maria" situated in the municipality of La Carlota, Province of Occidental Negros, containing about 106 hectares. Benjamin Jalandoni, the defendant-appellee, is the owner of another hacienda adjoining that of Asiain. Asiain said to Jalandoni that he was willing to sell a portion of his hacienda for the sum of P55,000. With a wave of his hand, Asiain indicated the tract of land in question, affirming that it contained between 25 and 30 hectares, and that the crop of sugar cane then planted would produce not less than 2,000 piculs of sugar. But as Jalandoni remained doubtful as to the extent of the land and as to the amount of the crop on it, Asiain wrote Jalandoni a letter assuring the latter of the accuracy of his assessment of the area and the amount of sugar it could produce and that in case it turned out to be inaccurate, he would be willing to compensate for it. - Sometime later, in July of the same year, Asiain and Jalandoni having met at Iloilo, they prepared and signed the memorandum-agreement where Asiain spouses promised to sell to Jalandoni parcels of land containing 25 hectares more or less and producing an estimated crop of 2000 piculs. During all of the period of negotiations, Jalandoni remained a doubting Thomas and was continually suggesting that, in his opinion, the amount of the land and of the crop was overestimated. Asiain on his part always gave assurances in conformity with the letter which he had written intended to convince Jalandoni that the latter was in error in his opinion. As a result, the parties executed the another agreement reaffirming their previous agreement and that in case the vendor should withdraw from the contract and desist from signing the document of final sale, the purchaser shall have the right to collect from said vendor all such amount as may have been advanced on account of this sale, with an indemnity of P15,000 as penalty. In case it is the purchaser who should withdraw from the contract of sale, then he will lose all such amount as may have been paid in advance on account of, this transaction. - Once in possession of the land, Jalandoni did two things. He had the sugar cane ground in La Carlota Sugar Central with the result that it gave an output of 800 piculs and 28 cates of centrifugal sugar. When opportunity offered, he secured the certificate of title of Asiain and procured a surveyor to survey the land. According to this survey, the parcel in question contained an area of 18 hectares, 54 ares, and 22 centiares. - Of the purchase price of P55,000, Jalandoni had paid P30,000, leaving a balance unpaid of P25,000. To recover the sum of P25,000 from Jalandoni or to obtain the certificate of title and the rent from him, action was begun by Asiain in the Court of First Instance of Occidental Negros. To the complaint, an answer and a counter-complaint were interposed by the defendant, by

ASIAIN V JALANDONI

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which it was asked that he be absolved from the complaint, that the contract be annulled, both parties to return whatever they had received, and that he recover from the plaintiff the sum of P3,600 annually as damages. In a well-reasoned decision, the Honorable Eduardo Gutierrez David, Judge of First Instance, declared null the document of purchase and its related memorandum; absolved Jalandoni from the payment of P25,000; ordered the Asiain to return to the defendant the sum of P30,000 with legal interest from July 12, 1920; ordered the Jalandoni to turn over to the plaintiff the tract of land and the certificate of title No. 468, and absolved the Asiain from the counter-complaint, without special finding as to the costs. It is from said judgment that the plaintiff has appealed. - The plaintiff contends that in the case of Irureta Goyena vs. Tambunting ([1902], 1 Phil., 490), the rule announced in the syllabus is: "An agreement to purchase a certain specified lot of land at a certain specified price is obligatory and enforceable regardless of the fact that its area is less than that mentioned in the contract." ISSUES 1. WON the lower court erred in nullifying the document of purchase and its related memorandum on the ground of mutual mistake under the Civil Code and thereafter restoring the parties to their original position 2. WON the stipulation more or less saves the contract from being declared null and void HELD 1. NO Ratio Mutual mistake of the contracting parties to a sale in regard to the subject-matter of the sale which is so material as to go to the essence of the contract, is a ground for relief and rescission. Reasoning - A comparative study of the American authorities throws considerable light on the situation. In volume 39 Cyc., page 1250, under the subject "Vendor and Purchaser," is found the following: "If, in a contract of sale the quantity of the realty to be conveyed is indicated by a unit of area, as by the acre, a marked excess or deficiency in the quantity stipulated for is a ground for avoiding the contract. Since it is very difficult, if not impossible, to ascertain the quantity of a tract with perfect accuracy, a slight excess or deficiency does not affect the validity of the contract. - "Where, however, the contract is not for the sale of a specific quantity of land, but for the sale of a particular tract, or designated lot or parcel, by name or description, fix a sum in gross, and the transaction is bona fide, a mutual mistake as to quantity, but not as to boundaries, will not generally entitle the purchaser to compensation, and is not ground for rescission. But it is well settled that a purchaser of land, when it is sold in gross, or with the description, 'more-or less,' or 'about,' does not thereby ipso-facto take all risk of quantity in the tract. If the difference between the real and the represented quantity is very great, both parties act obviously under a mistake which it is the duty of a court of equity to correct.' And relief will be granted when the mistake is so material that if the truth had been known to the parties the sale would not have been made." - A mutual mistake as to the quantity of the land sold may afford ground for equitable relief. As has been said, if, through gross and palpable mistake, more or less land should be conveyed than was in the contemplation of the seller to part with or the purchaser to receive, the injured party would be entitled to relief in like manner as he would be for an injury produced by a similar cause in a contract of any other species. And when it is evident that there has been a gross mistake as to quantity, and the complaining party has not been guilty of any fraud or culpable negligence, nor has he otherwise impaired the equity resulting from the mistake, he may be entitled to relief from the technical or legal effect of his contract, whether it be executed or only executory. It has also been held that where there is a very great difference between the actual and the estimated

quantity of acres of land sold in gross, relief may be granted on the ground of gross mistake. - EXCEPTION TO MUTUAL MISTAKE. Relief, however, will not be granted as a general rule where it appears that the parties intended a contract of hazard, as where the sale is a sale in gross and not by acreage or quantity as a basis for the price; and it has been held that a mistake on the part of the vendor of a town lot sold by description as to number on the plat, as to its area or dimensions, inducing a sale thereof at a smaller price than he would, have asked had he been cognizant of its size, not in any way occasioned or concealed by conduct of the purchaser, constitutes no ground for the rescission of the contract. The apparent conflict and discrepancies in the adjudicated eases involving mistakes as to quantity arise not from a denial of or a failure to recognize the general principle, but from the difficulty of its practical application in particular eases in determining the questions whether the contract was one of hazard as to quantity or not and whether the variance is unreasonable. The relative extent of the surplus or deficit -cannot furnish, per se, an infallible criterion in each caw for its determination, but each case must be considered with reference not only to that but its other peculiar circumstances. The conduct of the parties, the value, extent, and locality of the land, the date of the contract, the price, and other nameless circumstances, are always important, and generally decisive. In other words, each case must depend on its own peculiar circumstances and surroundings. - "The rule denying relief in ease of a deficit or an excess is frequently applied in equity as well as at law, but a court of equity will not interfere on account of either a surplus or a deficiency where it is clear that the parties intend a contract of hazard, and it is said that although this general rule may not carry into effect the real intention of the parties. It is calculated to prevent litigation. From an early date courts of equity under their general jurisdiction to grant relief on the ground of mistake have in case of a mistake in the estimation of the acreage in the tract sold and conveyed interposed their aid to grant relief to the vendor where there was a large surplus over the estimated acreage, and to the purchaser where there was, a large deficit. For the purpose of determining whether relief shall be granted the courts have divided the cases into two general classes: (1) Where the sale is of a specific quantity which is usually denominated a sale by the acre; (2) where the sale is of a specific tract by name or description, which is usually called a sale in gross. * * " "Sales in gross for the purpose of equitable relief may be divided into various subordinate classifications; (1) sales strictly and essentially by the tract, without reference in the negotiation or in the consideration to any designated or estimated quantity of acres; (2) sales of the like in which, though a supposed quantity by estimation is mentioned or referred to in the contract, the reference was made only for the purpose of description, and under such circumstances or in such a manner as to show that the parties intended to risk the contingency of quantity, whatever it might be, or how much it might exceed or fall short of that which was mentioned in the contract; (3) sales in which it is evident, from extraneous circumstances of locality, value, price, time, and the conduct and conversations of the parties, that they did not contemplate or intend to risk more than the usual rates of excess or deficit in similar cases, or than such as might reasonably be calculated on as within the range of ordinary contingency; (4) sales which, though technically deemed and denominated sales in gross, are in fact sales by the acre, and so understood by the parties. Contracts belonging to either of the two first mentioned classes, whether executed or executory, should not be modified by the chancellor when there has been no fraud. But in sales of either the third or fourth kind, an unreasonable surplus or deficit may entitle the injured party to equitable relief, unless he has, by his conduct, waived or forfeited his equity. * * * " - Coordinating more closely the law and the facts in the instant case, we reach the following conclusions: This was not a

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contract of hazard. It was a sale in gross in which there was a mutual mistake as to the quantity of land sold and as to the amount of the standing crop. The mistake of fact as disclosed not alone by the terms of the contract but by the attendant circumstances, which it is proper to consider in order to throw light upon the intention of the parties, is, as it is sometimes expressed, the efficient cause of the concoction. The mistake with reference to the subject-matter of the contract is such that, at the option of the purchaser, it is rescindable. Without such mistake the agreement would not have been made and since this is true, the agreement is inoperative and void. It is not exactly a case of over reaching on the plaintiff's part, or of misrepresentation and deception, or of fraud, but is more nearly akin to a bilateral mistake for which relief should be granted. Specific performance of the contract can therefore not be allowed at the instance of the vendor. 2. NO. Ratio The use of "more or less" or similar, words in designating quantity covers only a reasonable excess or deficiency and that when a vendee of land enters into a contract of sale with the vendor with the description "more or less," he does not thereby ipso facto take all risk of quantity in the land. Reasoning - The memorandum-agreement between Asiain and Jalandoni contains the phrase "more or less." It is the general view that this phrase or others of like import, added to a statement of quantity, can only be considered as covering inconsiderable or small differences one way or the other, and do not in themselves determine the character of the sale as one in gross or by the acre. The use of this phrase in designating quantity covers only a reasonable excess or deficiency. Such words may indeed relieve from exactness but not from gross deficiency. - The apparent conflict and discrepancies in the adjudicated cases arise not from a denial of or a failure Ito recognize the general principles. These principles, as commonly agreed to, may be summarized as follows: A vendee of land when it is sold in gross or with the description "more or less" does not thereby ipso facto take all risk of quantity in the land. The use of "more or less" or similar, words in designating quantity covers only a reasonable excess or deficiency. Disposition The ultimate result is to put the parties back in exactly their respective positions before they became involved in the negotiations and before accomplishment of the agreement. This was the decision of the trial judge and we think that decision conforms to the facts, the law, and the principles of equity. Judgment is affirmed, without prejudice to the right of the plaintiff to establish in this action in the lower court the amount of the rent of the land pursuant to the terms of the complaint during the time the land was in the possession of the defendant, and to obtain judgment against the defendant for that amount, with costs against the appellant.

Princesa, Pal.) to be there during the last week of the month, May. I will send you a telegram, as per your request, when I will reach Manila before taking the boat for Pto. Princesa. As it is now, there is no schedule yet of the boats plying between Manila and Pto. Princesa for next week." - CFI dismissed the case, on the ground that there was no cause of action. It said that since there was no written contract, although was valid in itself, it was unenforceable by virtue of the Statute of Frauds (Art. 1403, NCC). ISSUE WON the enforcement of the contract of sale was barred by the Statute of Frauds HELD NO Ratio The Statute of Frauds, embodied in Art. 1403 NCC, does not require that the contract itself be in writing. The plain text of Art. 1403, par(2) is clear that a written note or memorandum, embodying the essentials of the contract and signed by the party charged, or his agent, suffices to make the verbal agreement enforceable, taking it out of the operation of the statute. Reasoning - "ART. 1403.- The following contracts are unenforceable, unless they are ratified: (1) xxx (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing or a secondary evidence of its contents: xxx (e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein. xxx - The letter of Espino constitutes an adequate memorandum of the transaction. It was signed by Espino, refers to the property in question, giving its area, purchase price, and mode of payment. Thus, all the essential terms of the contract are present, and satisfies the requirements of the Statute of Frauds. - That the authenticity of the letter was not established is not relevant here; that is a question of evidence that should be determined during trial. Disposition Decision set aside, case REMANDED to court of origin for trial and decision.

BARRETTO V THE MANILA RAILROAD CO.

46 Phil 964 OSTRAND; March 29, 1924

PAREDES V ESPINO
22 SCRA 1000 REYES; March 13, 1968

NATURE Appeal from order of CFI Palawan (granting motion to dismiss) FACTS - Paredes filed an action for specific performance (to execute a deed of sale) and damages against Espino. It appears that Espino had agreed to sell to Paredes a piece of land in Puerto Princesa, upon his arrival in said city. There was no written contract, and Espino filed a motion to dismiss for lack of cause of action. Paredes, to oppose motion to dismiss, submitted as evidence Espinos letter, which said in part: So far I received two letters from you, xxx. In reply thereto, please be informed that after consulting with my wife, we both decided to accept your last offer of P4/sq.m of the lot which contains 1826 sq.m and on cash basis. - In order that we can facilitate the transaction of the sale in question, we (Mrs. Espino and I) are going there (Puerto

FACTS - On February 2, 1922, the general manager of the defendant company communicated with Mr. J. C. Miller, the right-of-way agent of the same company, regarding the companys desire to purchase the two houses of strong material situated on Calle Dagupan and inquiring if the purchase of the houses would be advantageous for the purposes of the company. To which Miller replied in the affirmative, thus prompting the general manager to give the go signal for the purchase. - On February 11, 1922, defendant The Manila Railroad Company offered to purchase from plaintiff Barretto a strong material house, No. 1210, Calle Dagupan, situated on the land of the defendant, for the sum of P3,700, the plaintiff accepted the offer and in purchase thereof executed a deed of sale of the house in favor of the defendant, but upon the presentation of the deed to the defendant the latter refused and returned the deed to the plaintiff, and still refuses to pay the purchase amount. The defendant's answer denies generally the allegations of the complaint and sets up as a special defense

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that the agreement referred to by the plaintiff was not in writing and is not enforceable under the Statute of Frauds. - The trial court held that there had been a sufficient part performance on the plaintiff's part to take the contract out of the Statute of Frauds and rendered judgment in favor of the plaintiff for the amount demanded in the complaint. From this judgment the defendant appeals. ISSUE WON the agreement at issue is not enforceable under the Statute of Frauds HELD YES Ratio It is well settled that the delivery of the deed to the agent of the vendee, with no intention to part with the title, does not take the case out of the Statute of Frauds. (Commins vs. Perry, 90 N. Y. Supp., 92; Nye vs. Taggart, 40 Vt., 295; Luzader vs. Richmond, 128 Ind., 344; Freeland vs. Charnley, 80 Ind., 132; Townsend vs. Hawkins, 45 Mo., 286.) Reasoning - In the present case it is very clear that there was no delivery of the deed with the intention to part with the title until the purchase price was paid, and it is equally clear that there was no final acceptance of the deed; the fact that the deed was returned to the plaintiff and by him retained, is practically conclusive upon this point. - It may be observed that in addition to pleading the Statute of Frauds as a defense, the defendant, during the trial of the case, also made timely objections to the introduction of parol evidence to prove the contract of sale and took due exceptions to the adverse rulings of the court and that, therefore, articles 1278 and 1279 of the Civil Code do not apply. (See Conlu vs. Araneta and Guanko, 15 Phil., 387; Gallemit vs. Tabiliran, 20 Phil., 241; Gomez vs. Salcedo, 26 Phil., 485; Gorospe and Gorospe vs. Ilayat, 29 Phil., 21; Santos vs. Rivera, 33 Phil., 1; Abrenica vs. Gonda and De Gracia, 34 Phil., 739.)

without success because Palma then was on the campaign trail as a candidate for councilor of lloilo City. - On October 20, 1963, Adriana died. Thereafter, the Torrens title to the property was transferred in the name of the nephews and niece of Adriana Maloto, after settlement of the latter's estate. Formal demand for the execution of a deed of sale was rejected by the nephews and niece of Adriana. - Hence, this suit to compel defendants to execute that deed. The Iloilo court declared as unenforceable Marges suit. ISSUES 1. WON the verbal contract is unenforceable 2. WON a prior decision on an ejectment case serves as a bar to a litigation as to the ownership of a disputed property. HELD 1. NO, it is enforceable Ratio The Statute of Frauds apply only to executory contracts and has no application to executed contracts. Reasoning - By Article 1403 (2) (e) of the Civil Code, a verbal contract for the sale of real property is unenforceable, unless ratified. For, such contract offends the Statute of Frauds. But long accepted and well settled is the rule that the Statute of Frauds is applicable only to executory contracts - not to contracts either totally or partially performed. The complaint here states that the deceased Adriana Maloto sold the disputed house and land to plaintiff; that consideration thereof was paid; that by reason of such sale, plaintiff performed acts of ownership thereon. The facts thus alleged are constitutive of a consummated contract. It matters not that neither the receipt for the consideration nor the sale itself was in writing. Because "oral evidence of the alleged consummated sale of the land" is not forbidden by the Statute of Frauds and may not be excluded in court. 2. NO Ratio An action for ejectment is no bar to another action contesting ownership. Reasoning - The record on appeal shows that defendants herein filed a suit for ejectment against plaintiff covering the same property, the subject of the suit herein. Inigo lost in said case and the decision became final. - We do not think that the decision in the ejectment case is an obstacle to the present suit. The simple reason is that an action of ejectment is no bar to another contesting ownership. - Another reason militates against the defendants. It would appear from the ejectment decision, Annex "A" of the supplementary memorandum, that the City Court of Iloilo declared that it is "of the opinion that the defendant Margarita Iigo is only a lessee of the properties described in the complaint." Implicit in this is that the question of ownership was in reality seriously presented before the city court. So that, possession, the problem before the city court, could not have been properly resolved there without first settling that of ownership. Since the issue of ownership became apparent in the course of the trial of the ejectment case aforesaid, the city court lost jurisdiction to proceed further with the trial thereof and the judgment thereon. - The decision in the ejectment case accordingly is not decisive of the question of ownership raised in the complaint before the Court of First Instance of Iloilo in the case now on appeal before this Court. Disposition For the reasons given, the order of the Court of First Instance of Iloilo of January 18, 1965 dismissing plaintiff's complaint is hereby set aside, and the case remanded to the court of origin for further proceedings. Costs against defendants.

INIGO V ESTATE OF MALOTO

21 SCRA 246 SANCHEZ; September 28, 2967

NATURE Appeal from an order dated January 18, 1965, sustaining defendants' motion to dismiss. The court below ruled that the claim on which plaintiff's suit is founded is unenforceable under the provisions of the Statute of Frauds. FACTS - On March 29, 1963, in pursuance of a previous verbal understanding, Margarita Inigo paid Adriana Maloto P10,000.00 as purchase price for the disputed house and lot of 453 square meters, located in lloilo City. The deed of sale was to be executed later on. - Margarita did not press Adriana Maloto for a receipt for the money paid considering the "almost filial relationship" between the two (Marge is a niece of Adriana's deceased husband), and because Marge was told by Adriana that the matter of the preparation of the said receipt and the deed of sale was to be referred to the latter's lawyer, Atty. Sulpicio Palma. - Marge "began to exercise ownership and dominion over the said property by improving the same and constructing a retail store in front thereof." On two occasions, in September and in October, 1963, on Adriana's instructions, plaintiff went to see Atty. Palma for the preparation of the deed of sale. She was

CITY-LITE REALTY CORPORATION V CA (BELLO,JR)

BELLOSILLO; February 10, 2000
NATURE

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Petition for review on certiorari (seeking to annul the Oct 20 1998 Decision of CA which reversed the decision of RTC of QC declaring that a contract of sale over the subject property was perfected and that Metro Drug Inc and Meldin Al G. Roy had the authority to sell the property FACTS - Respondent FP Holdings and Realty Corporation was the registered owner of a parcel of land located along E. Rodriguez Avenue Quezon City (also known as the Violago property or the San Lorenzo Ruiz Commercial Center). The property was offered to the general public through a circulation of a sales brochure containing these information (among others): total lot area : 71754 square meters 9192 sq m in front, 23332 sq m in the middle, and 39230 sq m at the back. This excludes the area covering the chapel and adjoining areas. Asking price was P6250/sq m with terms of payment negotiable. *(The front portion consisting of 9,192 sq m is the subject of this litigation). - On August 22 1991, respondent Meldin Roy sent a sales brochure together with the location plan and Transfer certificate to Atty Gelacio Mamaril, a real estate broker. Atty. Mamaril in turn passed on these documents to Antonio Teng, Executive VP and Atty. Victor Villanueva, Legal Counsel of City-Lite. - In a letter (dated Sept 19 1991) sent by City-Lite to Metro Drug (c/o Meldin Roy), after an initial meeting with Meldin Roy, CityLite expressed its interest to purchase of the front lot of the Violago Property. Roy then informed City-Lite that it would take time to subdivide the lot and respondent F.P. Holdings was not receptive to the purchase of only of the front lot. Atty. Mamaril wrote Metro Drug expressing City-Lites desire to buy the entire front lot provided the asking price of P6,250/sq m was reduced and that payment be in installment for a certain period. Roy made a counter offer stating: the purchase price shall be P6250/sq m or a total of P57,450,000.00; the above purchase price shall be paid to the owner as follows: a.) 15m downpayment, b.) balance payable within 6 mos from date of down payment without interest. - On Sept 26 1991, City-Lites officers and Atty. Mamaril met with Roy at the Manila Mandarin Hotel to consummate the transaction. They actually reached an agreement and Roy agreed to sell the property to City-Lite provided only that the latter submit its acceptance in writing to the terms and conditions of the sale (which they actually did later that afternoon). - However, for some reason or another and despite demand, FP Holdings refused to execute the corresponding deed ot sale in favor of City-Lite of the front lot of the property. Hence, to protect its interest, City-Lite registered an adverse claim to the title of the property (in the register of deeds of QC). - City-Lite demanded in writing that Metro Drug execute the deed of conveyance under pain of court action. FP Holdings, on the other hand, filed a petition for the cancellation of the adverse claim against City Lite. Edwin Fernandez of FP Holdings offered properties in Caloocan City and Quezon Boulevard to amicably settle with City-Lite. However, City-Lite declined the offer because it did not suit its business needs. - RTC of QC dismissed FP Holdings petition declaring that CityLites adverse claim had factual basis. City-Lite instituted a complaint against FP Holdings for specific performance and damages and caused the annotation for the 2nd notice of lis pendens. After the annotation of the second lis pendens, the property was transferred to Viewmaster Construction Corp.. Because of this, City-Lite amended its complaint to implead View Master as a necessary party and the Register of Deeds in QC as nominal defendant with the additional prayer for the cancellation of ViewMasters certificate of title. - On Oct 4, 1995, the court decided in favor of City-Lite ordering FP Holdings to execute a deed of sale in favor of City Lite and to the cancel certificate of title it had issued affecting the subject property and to issue a new one in the name of City-Lite. Viewmaster filed a motion for reconsideration of the decision of the lower court questioning the ruling that a perfected contract of sale existed between City-Lite and FP Holdings as there was no definite agreement over the manner of payment of the

purchase price. However, the motion for reconsideration was denied. On Oct 20 1998 CA reversed and set aside this judgment of RTC and subsequently, it denied City-Lites motion to reconsider its decision. ISSUE 1. WON a contract of sale was perfected between City_lite and FP Holdings 2. WON Metro Drug and Meldin Roy were authorized to sell the property to City LIte HELD 1. NO - The alleged sale of the land to City-Lite was not put in writing. Article 1874 of the Civil Code provides: When the sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Petitioner only anchors the authority of Metro Drug and Meldin Roy on a.) testimonies of petitioners 3 wtnesses and the admissions of Roy and the lawyer of Metro Drug b.) the sales brochure specifying Meldin Roy as a contact person, c.) the guard posted at the property saying that Metro Drug was the authorized agent and d.) the common knowledge among brokers that Metro Drug through Meldon Roy was the authorized agent to sell the property. However, these are insufficient to perfect the contract of sale. 2. NO - The absence of authority to sell can be determined from the written memorandum issued by FP Holdings President requesting MetroDrugs assistance in referring to them new buyers for the property. This obviously meant that Meldin Roy/ Metro Drug was only to assist FP Holdings in looking for buyers and referring to them possible prospects whom they were supposed to endorse to FP Holdings. But the final evaluation, appraisal and acceptance of the transaction could be made only by FP Holdings. Meldin Roy and/or Metro Drug was only a contact person with no authority to conclude the sale of the property. Infact, a witness for petitioner even admitted that Roy and/or Metro Drug was a mere broker. Disposition The appealed decision of the CA is affirmed

Chapter 3: SUBJECT MATTER OF SALE

56 SCRA 647 ESGUERRA; April 29, 1974
NATURE Petition for review by certiorari of the judgment of the CA which reversed the judgment of the CFI Pampanga 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, which order was issued pursuant to the provisions of RA No. 2056. FACTS - The spouses Romeo Martinez and Leonor Suarez are the registered owners of 2 parcels of land in Lubao, Pampanga. Both parcels of land are fishponds. The property involved in the instant case is the second parcel. - 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, filed a civil case with the CFI against the said Pedro Beltran to restrain the latter in his official capacity from molesting him in the

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possession of said second parcel. 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 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 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. Thereafter, the ownership of these properties changed hands until eventually they were acquired by the herein appellee spouses. - To avoid any untoward incident, the disputants agreed to refer the matter to the Committee on Rivers and Streams, by then composed of the Hon. 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. The Sub-Committee submitted its report to the Committee to the effect that Parcel No. 2 was not a public river but a private fishpond owned by the herein spouses. - the Committee on Rivers and Streams rendered its decision: "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." - The municipal officials of Lubao, led by Acting Mayor Mariano Zagad, apparently refused to recognize the above decision, because Romeo Martinez and Leonor Suarez instituted a civil case 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. With this dismissal order, the spouses proceeded to construct the dikes in the disputed parcel of land. - some 4 years later Hon. 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, 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. - The spouses Martinez replied to the order by commencing the present case, which was decided in their favor by the lower Court - As against this judgment respondent officials of the Department of Public Works and Communications took the instant appeal. The Court of Appeals reversed the judgment and entered another: [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. ISSUES 1. WON CA erred in declaring that parcel no.2 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 jurisprudence on the matter 2. WON the CA erred in reopening and re-litigating the issue as to WON lot no.2 is a public river despite the fact that this issue has long been resolved and settled by the land registration court and is now res judicata 3. WON the CA erred in ordering the cancellation of the registration of lot no.2 despite the fact that the Torrens Title covering it has been vested in the petitioners who are the 7th

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 HELD 1 and 2. NO Ratio The Land Registration Court has no jurisdiction over nonregisterable 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 CFI of Pampanga as regards the Lot No. 2 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. 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. Reasoning - 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 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)2 and the jurisprudence on the matter established by this Tribunal.3 At the time of the enactment of Act 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. --they are parts of the public domain intended for public use, are outside the commerce of men and, therefore, not subject to private appropriation. - the authorities cited by the appellants as to the conclusiveness and incontestability of a Torrens certificate of title do not apply here. - 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 3. NO Ratio 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. Reasoning - 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
2

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."

In Ledesma v. Municipality: 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: ... 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 - In Dizon, et al. v. Rodriguez, et al: the incontestable and indefeasible character of a Torrens certificate of title does not operate when the land covered thereby is not capable of registration.

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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. Disposition The judgment is hereby affirmed.

MELLIZA V CITY OF ILOILO

23 SCRA 477 BENGZON, J.P.; April 30, 1968

NATURE Petition for review by certiorari of decision of CA FACTS - Juliana Melliza (JM) owned 3 parcels of land in Iloilo known as Lot Nos. 2, 5, and 1214 respectively. Lot 1214 covered an area of 29,073 sq. m. - She later donated to the then Municipality of Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal hall but the same was revoked by the parties for being inadequate to meet the requirements of the municipality development plan dubbed as the Arellano Plan. - Subsequently, Lot 1214 was divided by a surveying co. into Lots 1214-A and 1214-B. And still later, 1214-B was further divided into Lots 1214-B1, 1214-B2 and 1214-B3. As approved by the Bureau of Lands, the Lots later became known as: 1214-B1----> 1214-B (4,562 sq. m.) 1214-B2----> 1214-C (6,653 sq. m.) 1214-B3----> 1214-D (4,135 sq. m.) - Nov. 15, 1932, JM executed an instrument stating: (it is in Spanish, di ko masyadong maintindihan but i think the 1st paragraph said: for the price of 6,422 pesos, she is transferring her rights to Lot Nos. 2 and 5 as well as 10,788 sq. m. of Lot 1214 covering sub lots 1214-B2 and 1214-B3 in favor of the Municipality of Iloilo... the 2nd paragraph said: the lots object of the sale are the ones needed for a city hall site; avenues and parks according the to Arellano plan). - Jan. 14, 1938: JM sold her remaining interest in Lot 1214 to Remedios San Villanueva. Remedios later transferred her rights to said portion of land to Pio Sian Melliza, herein petitioner. Annotated at the back of PSMs title certificate was that a portion of 10,788 sq. m. of Lot 1214 now designated as 1214-B2 and 1214-B3 belongs to the Municipality of Iloilo. - Aug.24, 1949: City of Iloilo (which succeeded Mun. of Iloilo), donated the city hall site together with the bldg. thereon, to U.P. (Iloilo). The site consisted of Lot Nos. 1214-B, 1214-C and 1214D. - 1952: U.P. enclosed the site with wire fence. Pio asked the city authorities for payment of the value of Lot 1214-B but no recovery was made. U.P. later obtained its Transfer Certificate Title covering the 3 lots. - Dec. 10, 1955: Pio filed an action in the CFI against Iloilo City and U.P. for recovery of Lot 1214-B or its value. Defendants answered that the said lot was included in the public instrument executed by JM in favor of Iloilo. - The CFI dismissed the complaint. Taking the 2nd paragraph of the instrument to mean that JM not only sold Lots 1214-C and 1214-D but also such other portions or lots as were necessary for the municipal hall site such as Lot 1214-B. - Pio appealed to the CA, which later affirmed the interpretation of the CFI. It said that the portion of Lot 1214 sold by JM was not limited to the 10,788 sq.m. specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. This decision prompted Pio to file this petition for certiorari. Petitioners claims > The public instrument is clear that only Lots 1214-C and 1214D (or 10,788 sq. m. of Lot 1214) were included in the sale. - The purpose of 2nd paragraph was only to better identify the lots sold and none other.

- To follow the interpretation of the CA and the CFI would render the contract invalid because the law requires as an essential element of sale, a determinate object. Respondents claims > Petitioners appeal raises only questions of fact (SC disposed of this by saying that since a contract is in the nature of law between the parties and their successors in interest, interpretation of such involves a question of law) - The document in question really intended to include Lot 1214B as shown by the silence of the vendor after Iloilo City exercised ownership - Not to include it would have been absurd because said lot is contiguous to the others admittedly included in the conveyance. - That the sales 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. ISSUE WON the conveyance by Juliana Melliza to Iloilo municipality included the portion of Lot 1214 known as Lot 1214-B and as a corollary: the issue of WON the description of said other lots in the 2nd paragraph of the public instrument was legally insufficient, the object not being determinate as required by law HELD 1. YES Ratio 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. Reasoning - 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. - Theres no question that the paramount intention of the parties was to provide Iloilo municipality with lots sufficient for the construction of the Iloilo City hall site, with its avenues and parks. A previous donation for this purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated. - Reading the public instrument in toto with special reference to the paragraphs describing the lots included in the sale, shows that said instrument describes 4 parcels of land by their lot nos. and area; and then it goes to further describe, not only those already mentioned, but the lots object of the sale, by stating that the 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 no. and areas. 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. - The Arellano plan was in existence as early as 1928, and the area needed under that plan for city hall site was then already known; 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 and the projected city hall site, with its area, as then shown in the Arellano plan, 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

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contract, the Municipality of Iloilo possessed it together with the other lots sold. It sits practically in the heart of the city hall site. - Furthermore, from the stipulation of facts, Pio was the notary public of the public instrument. As such, he was aware of its terms. Said instrument was also registered with the Reg. of Deeds and such registration was annotated at the back of the corresponding title certificate of JM. From these stipulated facts, it can be inferred that Pio 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; that furthermore, he should have taken notice of the possession first by the Mun. of Iloilo, then by the City of Iloilo and later by U.P. 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 conveyance. The fact remains that, instead, for 20 long years, Pio and his predecessors-ininterest, 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. Disposition Complaint is dismissed; decision appealed from is affirmed.

GAITE V FONACIER
2 SCRA 830 REYES; July 31, 1961

NATURE Appeal from CFI Manila FACTS - Isabelo Fonacier was the owner and/ or holder, either by himself or in a representative capacity, of 11 iron lode mineral claims, known as the Dawahan Group, situated in the municipality of Jose Panganiban, province of Camarines Norte - By a "Deed of Assignment" dated September 29, 1952, Fonacier constituted and appointed Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims on a royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom - On March 19, 1954, Gaite in turn executed a general assignment conveying the development and exploitation of said mining claims unto the Larap Iron Mines, a single proprietorship owned solely by and belonging to him, on the same royalty basis - Gaite embarked upon the development and exploitation of the mining claims in question, opening and paving roads within and outside their boundaries, making other improvements and installing facilities therein for use in the development of the mines, and extracted what he claimed and estimated to be approximately 24,000 metric tons of iron ore. - For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop the mining claims in question, and Gaite assented subject to certain conditions - on December 8, 1954, a document entitled "Revocation of Power of Attorney and Contract" was executed wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that Fonacier would receive from the mining claims

> all his rights and interests on all the roads, improvements, and facilities in or outside said claims > the right to use the business name "Larap Iron Mines" and its goodwill > all the records and documents relative to the mines - Gaite transferred to Fonacier all his rights and interests over the "24,000 tons of iron ore, more or less" that had been already extracted from the mineral claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing of the agreement, and the balance of P65,000 will be paid from and out of the first letter of credit covering the first shipment of iron ores and or the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co, Inc., its assigns, administrators, or successors in interests. - To secure the payment of the balance of P65,000.00, Fonacier executed a surety bond in favor of Gaite dated December 8, 1954 with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and its stockholders George Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties - Gaite testified when this bond was presented to him by Fonacier together with the "Revocation of Power of Attorney and Contract", he refused to sign unless another bond underwritten by a bonding company was put up by defendants to secure the payment of the P65,000 balance of the price of the iron ore in the stockpiles in the mining claims. Hence, a second bond, also dated December 8, 1954 was executed by the same parties to the first bond with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000, and that, furthermore, the liability of said surety company would automatically expire on December 8, 1955. - upon signing, Fonacier entered into a "Contract of Mining Operation", ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the right to develop, exploit, and explore the mining claims in question, together with the improvements therein and the use of the name "Larap Iron Mines" and its goodwill, in consideration of certain royalties and transferred the complete title to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co., in consideration for the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite - Up to December 8, 1955, when the bond expired WRT the Far Eastern Surety and Insurance Company, no sale of the approximately 24,000 tons of iron ore had been made by the Larap Mines & Smelting Co., Inc., nor had the P65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties - Gaite demanded from Fonacier and his sureties payment of said amount, on the theory that they had lost every right to make use of the period given them when their bond automatically expired and when Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the present complaint against them in the Court of First Instance of Manila for the payment of the P65,000 balance of the price of the ore, consequential damages, and attorney's fees. - All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by Gaite was subject to a condition that the amount would be payable out of the first letter of credit, covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc. and that up to the time of the filing of the complaint, no sale of the iron ore had been made, hence the condition had not yet been fulfilled and that consequently, the obligation was not yet due and demandable. - Fonacier also contended that only 7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered, and counterclaimed for more than P200,000 damages. - lower court held that the obligation of defendants to pay plaintiff the P65,000 balance of the price of the approximately

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24,000 tons of iron ore was one with a term: i.e., that it would be paid upon the sale of sufficient iron ore by defendants, such sale to be effected within one year or before December 8, 1955; that the giving of security was a condition precedent to Gaite's giving of credit to defendants; and that as the latter failed to put up a good and sufficient security in lieu of the Far Eastern Surety bond which expired on December 8, 1955, the obligation became due and demandable under Article 1198 of the New Civil Code - lower court found that plaintiff Gaite did have approximately 24,000 tons of the iron ore at the mining claims in question at the time of the execution of the contract - Judgment of LC was rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with interest at 6% per annum from December 9, 1955 until full payment, plus costs ISSUES 1. WON the obligation of Fonacier and his sureties to pay Gaite P65,000 is one with a period or term and not one with suspensive condition 2. if it is an obligation with a term, WON defendants have a right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment or WON they are entitled to take full advantage of the period granted them for making the payment 3. WON the estimated 24,006 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were actually in existence in the mining claims when these parties executed the "Revocation of Power of Attorney and Contract" HELD 1. YES Ratio The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000, but was only a suspensive period or term. Reasoning - What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed - That the parties to the contract did not intend any such state of things to prevail is supported by several circumstances: 1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of Sixty-Five Thousand Pesos (P65,000) will be paid out of the first letter of credit covering the first shipment of iron ore . . ." etc. There is no uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is deferred. 2) A contract of sale is normally commutative and onerous not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price), but each party anticipates performance by the other from the very start. While in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his rights over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond to guarantee payment of the P65,000, and not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one by a surety company; and the fact that appellants did put up such

bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000. 3) To subordinate the obligation to pay the remaining P65,000 to the sale or shipment of the ore as a condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the sale or shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus be able to postpone payment indefinitely. 4) Assuming that there could be doubt whether by the wording of the contract the parties intended a suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000, the rules of interpretation would incline the scales in favor of "the greatest reciprocity of interests", since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides: "if the contract is onerous, the doubt shall be settled in favor of the. greatest reciprocity of interests."; and there can be no question that greater reciprocity obtains if the buyer's obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, than if such obligation were viewed as non-existent or not binding until the ore was sold. - The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment. 2. NO Ratio Appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000 because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. Reasoning - The expiration of the bonding company's undertaking on December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid P65,000, a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier. - The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: "ART. 1198. The debtor shall lose every right to make use of the period: (1) * * * * * (2) When he does not furnish to the creditor the guaranties or securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory." - Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced. - no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date - No such waiver could have been intended, for Gaite stood to lose and had nothing to gain thereby; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8, 1955. But in the latter case the defendants-appellants' obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed 3. YES Ratio No short-delivery as would entitle Fonacier to the payment of damages, nor could Gaite have been guilty of any fraud in making any misrepresentation as to the total quantity of ore in the stockpiles of the mining claims in question since Gaite's estimate appears to be substantially correct.

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Reasoning Important things 1. that this is a case of a sale of a specific mass of fungible goods for a single price or a lump sum, the quantity of "24,000 tons of iron ore, more or less", stated in the contract being a mere estimate by the parties of the total tonnage weight of the mass 2. evidence shows that neither of the parties had actually measured or weighed the mass, so that they both tried to arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter. - The sale between the parties is a sale of a specific mass of iron ore because no provision was made in their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor was the price of P75,000 agreed upon by the parties based upon any such measurement (see Art. 1480, second par., New Civil Code). The subject-matter of the sale is, therefore, a determinate object, the mass, and not the actual number of units or tons contained therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwithstanding that the quantity delivered is less than the amount estimated by them - no charge in this case that Gaite did not deliver to appellants all the ore found in the stockpiles in the mining claims in question TF Gaite complied with his promise to deliver, and appellants in turn are bound to pay the lump price - Gaite asserts there was a total of 7,375 cubic meters in the stockpiles of ore that he sold to Fonacier, while appellants contend that by actual measurement, their witness Cipriano Manlagit found the total volume of ore in the stockpiles to be only 6,609 cubic meters - on the average weight in tons per cubic meter, the parties are in disagreement, with Fonacier claiming the correct tonnage factor to be 2.18 tons to a cubic meter, while Gaite claims that the correct tonnage factor is about 3.7. - In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor of iron ore in this case to be that made by Leopoldo F. Abad, chief of the Mines and Metallurgical Division of the Bureau of Mines, a government pensionado to the States and a mining engineering graduate of the Universities of Nevada and California, with almost 22 years of experience in the Bureau of Mines, who placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to 5 metric tons as maximum. This estimate, in turn, closely corresponds to the average tonnage factor of 3.3 adopted in his corrected report by engineer Nemesio Gamatero, of Bureau of Mines to the mining claim involved at the request of appellant Krakower, precisely to make an official estimate; of the amount of iron ore in Gaite's stockpiles after the dispute arose. - if we multiply it by the, average tonnage factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons, which is not very far from the estimate of 24,000 tons made by Gaite, considering that actual weighing of each unit of the mass was practically impossible - It must not be forgotten that the contract expressly stated the amount to be 24,000 tons, more or less. Disposition Judgment affirmed

sugar within the period of three months, the contract will be rescinded and Gonzalez will be obligated to return the P3000 received and also the sum of P1200 by way of indemnity for loss and damages. - Plaintiff proved that no sugar had been delivered to it nor had it been able to recover the P3000. Plaintiff prayed for judgment for the P3000 and in addition, for P1200. Judgment was rendered for P3000 only, and from this judgment both parties appealed. Defendants comments: - 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. - The contract was limited to 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. ISSUES 1. WON lower court erred in not admitting parol evidence 2. WON there was a perfected sale HELD 1. NO - 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. 2. NO - 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. - There is a perfected sale with regard to the thing whenever the article of sale has been physically segregated from all other articles - 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. There was no delivery under the contract. 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. - The contract in this case was merely an executory agreement; a promise of sale and not a sale. The defendant having defaulted in his engagement, the plaintiff is entitled to recover the P3000 which it advanced to the defendant. Disposition Judgment appealed from is modified by allowing the recovery of P1200 under paragraph 4 of the contract.

YU TEK & CO V GONZALEZ

29 Phil 384 TRENT; Feb 1, 1915 28 SCRA 231 MAKALINTAL; May 21, 1969
NATURE Appeal from the decision of the Court of First Instance FACTS - In 1916, Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, lot No. 535 of the then municipality of Zamboanga. The vendee thereafter obtained transfer certificate

ATILANO V ATILANO

NATURE Appeal from judgment of CFI Manila FACTS - The parties entered into a contract wherein Basilio Gonzalez received P3000 from Messrs. Yu Tek & Co., and that in consideration of said sum Gonzalez obligates himself to deliver to plaintiff 600 piculs of sugar of the first and secnd grade. It was also stipulated that in case Gonzalez does not deliver the

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of title No. 1134 in his name. In 1920 he had the land subdivided into five parts. 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. T5056) was issued. - On December 6, 1952, Eulogio Atilano II 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 CFI of Zamboanga, alleging, 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 sq m, 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 since the property was registered under the Land Registration Act the defendants could not acquire it through prescription. There can be 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 ISSUE WON the trial court rendered proper judgment for the plaintiffs since the property was registered under the Land Registration Act the defendants could not acquire it through prescription HELD NO. The court erred in granting the plaintiffs the lot. Reasoning - When one sells or buys real property, 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. 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: - 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. Disposition 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.

REP. V LICHAUCO
46 SCRA 305 (1972)

YTURRALDE V CA (JUDGE ERICTA AND REBOLLOS)

43 SCRA 313 MAKASIAR; February 28, 1972

NATURE Appeal by certiorari FACTS - Spouses Francisco Yturralde and Margarita de los Reyes, owned a parcel of agricultural land located in Guilinan, Tungawan, Zamboanga del Sur, containing an area of 14.1079 hectares, more or less. It was registered in their names under Original Certificate of Title No. 2356. - 1944 - Francisco Yturralde died intestate, survived by his wife and their 9 childen who are all petitioners in this case. - 1950 - Margarita contracted a second marriage with (yikes!) her brother-in-law Damaso Yturralde. - May 30, 1952 - Damaso Yturralde and Margarita de los Reyes executed a deed of sale with right of repurchase in favor of respondent Isabelo Rebollos, covering the above-mentioned property for a sum of P1,715.00. Damaso and Margarita failed to exercise the right to repurchase the property within the three-year period agreed upon, which expired on May 30, 1955. In 1961, Margarita de los Reyes died. - May 3, 1965 - Isabelo Rebollos, filed a petition for consolidation of ownership naming as respondents in the case the petitioners herein and Damaso Yturralde. - Summons was then issued, and received on June 17, 1965 by the respondent therein, Damaso, Ernesto, Fortunata, Montano, Guadalupe, Luis and Rosalia, all surnamed Yturralde. However, summons could not be served on three of the respondents therein, Josefina, Zosima and Ramon Yturralde, as they were no longer residing at their last known addresses. - Judge Buissan ordered that the summons be served on the remaining three children. The copies of the petition sent to said three respondents, but returned without service, were then delivered by Rebollos to the Clerk of Court of the Court of First

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Instance of Zamboanga del Sur to complete the delivery as required under Section 6 of Rule 13, Rules of Court. - On motion filed by Rebollos to declare the respondents in the case in default, the Court issued an order dated November 13, 1965, declaring all the respondents therein in default, after which Rebollos presented his evidence. - November 20, 1965 - The Court rendered a decision consolidating the ownership of the subject property in favor of Rebollos, and ordered the Register of Deeds of Zamboanga del Sur to cancel Original Certificate of Title No. 2356 covering said property and, in lieu of that, to issue a transfer certificate of title in the name of Rebollos. - A writ of execution was ordered and the petitioners filed a motion for reconsideration and another motion to quash the writ of execution. These were denied by respondent Judge Ericta. - On petition filed by Rebollos, the respondent Judge ordered the demolition of all buildings not belonging to Rebollos found on the premises in question. - The petitioners then filed a motion for reconsideration of the order of demolition, which was denied by the respondent Judge, who, however, on motion of said petitioners, directed the respondent Sheriff to defer the implementation of the writ of execution and the order of demolition until after June 23, 1969. - The petition was given due course by this Court, and on June 19, 1969, a writ of preliminary injunction was issued, restraining the respondents from enforcing the decision until further orders. - January 3, 1968 The land was sold by Rebollos to Pilar M. Vda. de Reyes and a TCT was issued in Reyess favor. - The case is a petition for prohibition. The Court of Appeals held that the action for prohibition before it seeking to restrain the enforcement of the decision and the implementing orders issued by the respondent Judge. Prohibition is a preventive remedy to restrain the exercise of a power or the performance of an act and not a remedy against acts already accomplished, which cannot be undone through a writ of prohibition. - In the instant case, the judgment of the lower trial court consolidates the ownership of the entire property involved in favor of respondent Isabelo Rebollos, orders the cancellation of the original certificate of title covering the same, and directs the issuance of a new certificate of title in the name of respondent Rebollos. - By virtue of an absolute deed of sale executed on January 3, 1968 by respondent Isabelo Rebollos, a new certificate of title was issued in the name of the vendee, Pilar M. Vda. de Reyes. The respondent Court of Appeals then concluded that "As the thing sought to be restrained had already been done, and since a certificate of title is conclusive evidence of the ownership of the land referred to therein, the same cannot be collaterally attacked, but can only be challenged in a direct proceeding. Prohibition is not the proper remedy. ISSUES WON the Court of Appeals erred in: 1. sustaining the actuation of the trial court in allowing service of summons upon appellants Josefina, Zosima and Ramon Yturralde by registered mail 2. sustaining the ruling of the trial court that it properly acquired jurisdiction over the aforesaid three appellants by virtue of such mode of service of summons 3. not declaring as null and void the decision of the trial court along with its implementing orders, at least insofar as the aforenamed three appellants are concerned on the ground that they were not given their day in court HELD 1. YES Ratio The writ of execution and the order of demolition, as heretofore stated, were never enforced by reason of which herein petitioners remain and are still in possession of the land. The general prayer for such other reliefs as herein petitioners may be entitled to under the law, includes a prayer for the nullification of the decision. Reasoning

- The respondent Court of Appeals erred in holding that the petition for prohibition before it will not prosper as the act sought to be prevented had already been performed because the implementation of the order of the trial court had been deferred. - The petitioners reiterated that they are still in possession of the property in question, which possession was recognized and protected by the respondent Court of Appeals itself. 2. YES Ratio When Article 1607 speaks of a judicial order after the vendor shall have been duly heard, it contemplates none other than a regular court proceeding under the governing Rules of Court, wherein the parties are given full opportunity to lay bare before the court the real covenant. Reasoning - The jurisdiction over the persons of herein petitioners Josefina, Zosima and Ramon all surnamed Yturralde, was not properly acquired by the court because they were not properly served with summons in the manner directed by Rule 14 of the Revised Rules of Court. - Article 1607 of the new Civil Code of 1950 provides that consolidation of ownership in the vendee a retro of real property by virtue of the failure of the vendor a retro "to comply with the provisions of Article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard." - Such consolidation shall be effected through an ordinary civil action, not by a mere motion, and that the vendor a retro should be made a party defendant, who should be served with summons in accordance with Rule 14 of the Revised Rules of Court; and that the failure on the part of the court to cause the service of summons as prescribed in Rule 14, is sufficient cause for attacking the validity of the judgment and subsequent orders on jurisdictional grounds. - The obvious intent of our Civil Code, in requiring a judicial confirmation of the consolidation in the vendee a retro of the ownership over the property sold, is not only to have all doubts over the true nature of the transaction speedily ascertained, and decided, but also to prevent the interposition of buyers in good faith while such determination is being made. - Rule 14 of the Revised Rules of Court on service of summons, which should govern, provides that "upon the filing of the complaint, the Clerk of Court shall forthwith issue the corresponding summons to the defendants" (Section 1, Rule 14), which summons shall be served by the sheriff or other proper court officer or for special reason by any person specially authorized by the court issuing the summons by personally handing a copy of the same to the defendants (Sections 5 & 7, Rule 14). > If the residence of the defendant is unknown or cannot be ascertained by diligent inquiry or if the defendant is residing abroad, service may be made by publication in a newspaper of general circulation. > The sheriff or private respondent Isabelo Rebollos himself should have made a diligent inquiry as to the whereabouts of the three petitioners aforementioned. The trial court could have directed such an inquiry, which would have disclosed that petitioners Josefina, Ramon and Zosima reside respectively at Sibugey in Zamboanga del Sur, Roxas Street in Basilan City, and Washington, D.C., U.S.A. There is no showing that such a diligent inquiry was made to justify a substituted service of summons by publication. 3. The action for consolidation should be brought against all the indispensable parties, without whom no final determination can be had of the action; and such indispensable parties who are joined as party defendants must be properly summoned pursuant to Rule 14 of the Revised Rules of Court. If anyone of the party defendants, who are all indispensable parties is not properly summoned, the court acquires no jurisdiction over the entire case and its decision and orders therein are null and void. Reasoning - The pacto de retro sale executed by Margarita de los Reyes expressly stipulates that she only sold all her rights, interests and participation in the lot covered by O.C.T. No. 2356.

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- Margarita therefore, could not, for she had no right to, sell the entire lot, which is registered under O.C.T. No. 2356 "in the name of Francisco Yturralde married to Margarita de los Reyes." Said lot is acknowledged by herein petitioners as the conjugal property of Francisco and Margarita. What she validly disposed of under the aforesaid pacto de retro sale of 1952 was only her conjugal share in the lot plus her successional right as heir in the conjugal share of her deceased husband Francisco. - Consequently, the vendee a retro, Isabelo Rebollos, cannot legally petition for the consolidation of his ownership over the entire lot. Rebollos prayed for the consolidation of his ownership over the entire lot covered by O.C.T. No. 2356, and not merely over the interest conveyed to him by Margarita. As the petition of private respondent Rebollos sought to divest all of them of their undivided interest in the entire agricultural land. - Because of such failure to comply with Rule 14 of the Revised Rules of Court on service of summons on indispensable parties, as heretofore stated, the trial court did not validly acquire jurisdiction over the case; because no complete and final determination of the action can be had without the aforesaid three petitioners Josefina, Zosima and Ramon. Disposition judgment is hereby rendered reversing the decision of respondent Court of Appeals and setting aside as null and void the decision of the respondent trial judge, the order for the issuance of the writ of execution, the writ of execution and the order of demolition.

Co. is the owner of three-fourths of lot No. 36, with the improvements thereon; of the whole of lot No. 38, with the improvements thereon; and of three-fourths of lot No. 55, excluding the improvements. - It appears that the defendant, Santiago Domingo, is now in possession of said property and has at all times been in possession since the plaintiff acquired its interest therein, and he has during the same period exclusively enjoyed the use of all the lots, with the income derived from the buildings thereon. - This circumstance, coupled with this refusal to admit the plaintiff's claim as coowner, resulted, in the institution of the present action by the plaintiff, for the purpose of recovering possession of lot No. 38 and to secure a partition of lots Nos. 36 and 55, with an accounting for the plaintiff's proper proportion of the profits. ISSUE WON the plaintiff has a cause of action HELD YES - In this connection it appears that the buildings referred to were erected in the latter months of the year 1912 and first half of 1913, and the defendant asserts that they were built by him with his own money and with the consent of his father. - But assuming, that his claims are true, it is clear that the defendant's right to the buildings in controversy has been lost, except in so far as he is owner of an undivided one-fourth interest by inheritance. This results from the fact that the plaintiff is a purchaser for value who has acquired the interests shown on the existing Torrens certificates upon the faith of the registered title, and the defendant is in no position to arrest the effect of these documents. - As will be seen, the filing of the lis pendens was intended to affect third persons with notice of the claim which the defendant had asserted. But it will be remembered that the efforts of the defendant to get his claim recognized in those proceedings completely failed of effect. For this reason the lis pendens must be considered to have lost its efficacy. The effect of notice by lis pendens is, of course, to charge the stranger with notice of the particular litigation referred to in the notice, and, if the notice is effective, the stranger who acquires the property affected by the lis pendens takes subject to the eventuality of the litigation. But when the adverse right fails in such litigation, the lis pendens becomes innocuous. - it should be noted that the defendant, supposing his claim to have been made in good faith, might have protected it, at any time before the property had passed into the hands of a third person, by a proceeding under section 112 of Act No. 496. Said section declares that any person may at any time apply by petition to the court, where "new interests have arisen or been created which do not appear upon the certificate," and procure such interests to be noted. Such a petition must be filed and entitled in the original case in which the decree of registration was entered - In Blass vs. De la Cruz and Melendres (37 Phil., 1), this court held that the registration of land in the name of a particular person vests in him not only the title to the land but also the title to the improvements thereon, unless special reservation is noted with respect to the improvements. In that case the improvements which became the subject of controversy had been placed on the land before it was registered and the decree of registration was res judicata as to the improvements. In the case before us the buildings which are the subject of controversy were placed on the land after the decree of registration. This circumstance made a proceeding under section 12 of Act No. 496 all the more necessary in order to protect the new interest thus created. So far as registered land is concerned, the right recognized in article 361 and related provisions of the Civil Code is subject to the contingency that it shall be noted in the registered title before the property passes into the hand of a purchaser for value.

ATKINS, KROLL & COMPANY, INC. V DOMINGO

46 PHIL 362 STREET; October 4, 1924

FACTS - Court of Land Registration, sitting in the Province of Zamboanga, adjudicated Lot Nos. 36, 38, and 55, to Buenaventura Domingo. No mention was made in the decision of the improvements on said lots, but when the corresponding decrees of registration were issued thereafter, the words "with all the improvements existing thereon" were inserted. - The same phrase appeared in the respective certificates of title covering the lots, with the result that according to the Torrens certificates Buenaventura Domingo was the owner not only of each of said lots but also of the improvements existing thereon. - Buenaventura Domingo died intestate leaving a widow and a number of children and grandchildren as heirs. One of his sons, namely, Santiago Domingo, the defendant in this case, qualified as administrator of his estate. - On August 8, 1918, the court duly approved the project of partition. No objection to this action appears to have been made by any person interested in the estate. - The share of Santiago Domingo in his father's estate, so far as affects lots Nos. 36 and 55, has remained undisturbed and said interest is still vested in him. - It is different with lot No. 38, for on February 17, 1922, Santiago Domingo sold his entire interest in lot No. 38, "with all the improvements existing thereon," by contract of sale with pacto de retro to one Ong Kong. The interest thus sold was subject to repurchase within the period of one year, but redemption was never effected; and on February 17, 1923, the property was duly consolidated in Ong Kong. On February 19, 1923, Ong Kong sold his entire interest in the lot and improvements thereon to the present plaintiff, Atkins, Kroll & Co. - The shares pertaining to the other heirs in lots Nos. 36, 38, and 55 suffered a number of mutations as to ownership; but in the end, through various transactions, all of said interests came to rest in the plaintiff, Atkins, Kroll & Co. - Each step in all of these mutations of title was accompanied by the corresponding proper changes in the Torrens certificates of title Nos. 3433, 3843, 3435, showing the present ownership of the lots and improvements. From these certificates it appears that the plaintiff, Atkins, Kroll &

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- The considerations so far adduced apply alike to the improvements on lots Nos. 36 and 38, but there is another circumstance, which is fatal to the defendant's claim to any of the improvements on lot No. 38. This is found in the fact that he sold his interest in said lot, including the improvements, to Ong Kong, the plaintiff's predecessor in interest. It is evident that the defendant is estopped by his own deed from claiming any interest in the buildings on this lot, whatever might have been the law governing his claim to the buildings on the other lot. Disposition Judgment reversed and the cause remanded for further proceedings in conformity with the opinion, without express pronouncement as to costs.

ARSENAL V IAC (& HEIRS OF TORCUATO SURALTA, ETC)

143 SCRA 40 GUTIERREZ, JR; July 14, 1986

NATURE Petition for certiorari FACTS - January 7, 1954: defendant Filomeno Palaos secured OCT No. P-290 from the Register of Deeds of Bukidnon for Lot 81, Pls-112 (87,829 sq. m. more or less) by virtue of Homestead Patent No. V-23602 granted to him. - September 10, 1957: Palaos and his wife Mahina Lagwas executed in favor of the plaintiff, Torcuato Suralta, sold four (4) hectares of the land embraced in his Torrens Certificate for the sum of P890.00 by means of a deed of acknowledged before a Notary. Plaintiff Suralta immediately took possession of the fourhectare portion of Lot 81, cultivated and worked the same openly, continuously and peacefully up to the present time in concept of owner thereof. He built a house and introduced permanent improvements thereon now valued at no less than P20,000.00. - Sometime in 1964, the defendant-spouses Francisca and Remedio Arsenal became tenants of an adjoining land owned by Eusebio Pabualan that is separated from the land in question only by a public road. They also came to know the plaintiff as their neighbor, and saw him very often working and cultivating the land in question. The plaintiff later came to know of their intention to buy the remaining land of Filomeno Palaos. - March 14, 1967: Filomeno Palaos and his wife executed a notarial Deed of Sale in consideration of the amount of P800.00 supposedly for the remaining three (3) hectares of their land without knowing that the document covered the entirety of Lot 81 including the four-hectare portion previously deeded by them to the plaintiff. The deed of sale was presented to the Office of the Commission on National Integration at Malaybalay for approval because Palaos and his wife belong to the cultural minorities and unlettered. The field representative and inspector of that office subsequently approved the same without inspecting the land to determine the actual occupants thereon. The defendants Arsenal took possession of the three-hectare portion of Lot 81 after their purchase and have cultivated the same up to the present time but they never disturbed the plaintiff's possession over the four-hectare portion that he had purchased in 1957. - March 28, 1967, Francisca Arsenal caused the tax declaration of the entire lot to be transferred in her name. The plaintiff learned of the transfer of the tax declaration to Francisca Arsenal and agreed with the latter to contribute in the payment of the land taxes and paid yearly from 1968 to 1973 the amount of P10.00 corresponding to his four-hectare portion to Arsenal. - July 11, 1973: plaintiff presented his Sales Contract in the Office of the Register of Deeds but it was refused registration for having been executed within the prohibitive period of 5yrs from the issuance of the patent. In order to cure the defect, he caused Filomeno Palaos to sign a new Sales Contract in his favor before Deputy Clerk of Court Florentina Villanueva covering the same four-hectare portion of Lot 81.

- August 1973: the plaintiff caused the segregation of his portion from the rest of the land by Geodetic Engr Benito P. Balbuena, who conducted the subdivision survey without protest from Francisca Arsenal who was notified thereof. The subdivision plan was approved by the Commissioner of Land Registration on April 18, 1974. - December 1973: the plaintiff saw for the first time the Deed of Sale embracing the whole Lot 81 signed by Filomeno Palaos in favor of Francisca Arsenal. Immediately he asked Palaos for explanation but the latter told him that he sold only three hectares to Arsenal. Plaintiff approached Francisca Arsenal for a satisfactory arrangement but she insisted on abiding by her contract. Because of their disagreement, Francisca Arsenal registered her Deed of Sale on December 6, 1973 and obtained TCT No. T-7879 for the entire Lot 81 w/o the knowledge of the plaintiff. - January 7, 1974: the plaintiff sent a telegram to the Secretary of Agriculture and Natural Resources requesting suspensions of the approval of the sale executed by Filomeno Palaos in favor of Francisca Arsenal, not knowing that the latter had already secured a TCT from the Register of Deeds. - mid January 1974: plaintiff learned of the cancellation of the OCT of Palaos and the issuance of the TCT to Arsenal so he sought the help of the municipal authorities to reach an amicable settlement with Francisca Arsenal who, on the other hand, refused to entertain all overture to that effect. This caused Torcuato Suralta to file a case against Filomeno Palaos, Mahina Lagwas, Francisca Arsenal, Remedio Arsenal and the Register of Deeds of Bukidnon for the annulment of TCT No. T7879 issued to the Arsenals insofar as it covers the four-hectare portion previously sold to him. Arsenal's Answer: Denial of previous knowledge of the sale to Suralta of the land in question; they assail the validity of the purchase by Suralta in 1957, pointing to the prohibition contained in the Public Land Law against its disposal within the period of five years from the issuance of the homestead patent. They also questioned the legality of the sale made to Suralta in 1957 by Filomeno Palaos and Mahina Lagwas for not having been approved by the Commission on National Integration despite the fact that Palaos and his wife belong to the cultural minorities, are illiterates, and do not understand the English language in which the deed of sale in favor of Suralta was written. Contention of the spouses Filomeno Palaos and Mahina Lagwas: sale made by them to Suralta is valid. They alleged that they verbally sold one hectare to one Tiburcio Tadena and sold the remaining 3.7829 hectares to the Arsenals. They stated that they informed the Arsenals about the previous sale of four hectares to Suralta. They also claimed that the Arsenals took undue advantage of their ignorance and illiteracy and caused them to sign the document of sale so as to include the entire 87,829 sq. m.covered by their original title. Lower Courts' Ruling: in favor of Suralta. The trial court imputed bad faith to the Arsenals and declared them disqualified to avail of the protection afforded by the provisions of the Civil Code to innocent purchasers although they registered their purchase ahead of Suralta. IAC affirmed in toto. Petitioner's argument: contract of sale executed in 1957 between the respondents Palaos and Suralta is invalid. Because the previous sale was void from the beginning, it cannot be ratified and "No amount of bad faith on the part of the petitioners could make it valid and enforceable in the courts of law." ISSUES 1. WON the contract of sale between respondents Palaos and Suralta in 1957 is valid 2. WON the execution by the respondents Palaos and Suralta of another instrument in 1973 cured the defects in their previous contract 3. Who among the two alleged purchasers of the four-hectare portion of land granted in homestead has acquired a valid title thereto

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HELD 1. NO - The 1957 contract of sale executed between Palaos and Suralta is void for ahving been entered into three years and eight months after the grant of the homestead patent to the respondent Palaos in 1954. The provisions of the Public Land Act (Commonwealth Act No. 141, as amended) are clear and explicit. A contract which purports of alienate, transfer, convey or encumber any homestead within the prohibitory period of five years from the date of the issuance of the patent is void from its execution. - Under the provisions of the Civil Code, a void contract is inexistent from the beginning. It cannot be ratified neither can the right to set up the defense of its illegality be waived. (Art. 1409, Civil Code). - Tolentino's commentaries: The right to set up the nullity of a void or non-existent contract is not limited to the parties as in the case of annullable or voidable contracts; it is extended to third persons who are directly affected by the contract. Any person may invoke the inexistence of the contract whenever juridical effects founded thereon are asserted against him. 2. NO - The execution of another instrument in 1973 cannot cure the defects in their previous contract. The terms of the second contract show clearly that no new consideration passed between them. The second contract of sale being merely confirmatory, it produces no effect and can not be binding. - An alienation or sale of a homestead executed within the fiveyear prohibitory period is void and cannot be confirmed or ratified. - Menil v. Court of Appeals: It cannot be claimed that there are two contracts: one which is undisputably null and void, and another, having been executed after the lapse of the 5-year prohibitory period, which is valid. The second contract of sale executed is admittedly a confirmatory deed of sale. Inasmuch as the contract of sale is void for it is expressly prohibited or declared void by law, it therefore cannot be confirmed nor ratified. - Manzano v. Ocampo: The execution of the formal deed after the expiration of the prohibitory period did not and could not legalize a contract that was void from its inception. - The law prohibiting any transfer or alienation of homestead land within five years from the issuance of the patent does not distinguish between executory and consummated sales; and it would hardly be in keeping with the primordial aim of this prohibition to preserve and keep in the family of the homesteader the piece of land that the State had gratuitously given to them. To hold valid a homestead sale actually perfected during the period of prohibition but with the execution of the formal deed of conveyance and the delivery of possession of the land sold to the buyer deferred until after the expiration of the prohibitory period, purposely to circumvent the law, would be to throw the door wide open to all possible fraudulent subterfuges and schemes that persons interested in land given to homesteaders may devise to circumvent and defeat the legal provision prohibiting their alienation within five years from the issuance of the homestead's patent. 3. Arsenal? NO! The issue of bad faith constitutes the fundamental barrier to the petitioner's claim of ownership. Clearly, the petitioners were in bad faith in including the entire area of the land in their deed of sale. They cannot be entitled to the four-hectare portion of the land for lack of consideration. To uphold their claim of ownership over that portion of land would be contrary to the well-entrenched principle against unjust enrichment consecrated in our Civil Code to the end that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the prejudice of another. - It is unusual for the petitioners who have been occupying the disputed land for four years with respondent Suralta to believe, without first verifying the fact, that the latter was a mere mortgagee of the portion of the land he occupies. Second, it is unlikely that the entire 8.7879 hectares of land was sold to them for only P800 in 1967 considering that in 1957, a four-hectare portion of the same was sold to the respondent Suralta for P819.

Third, contrary to the usual conduct of good faith purchasers for value, the petitioners actively encouraged the respondent Suralta to believe that they were co-owners of the land. The petitioners, without informing the respondent Suralta of their title to the land, kept the latter in peaceful possession of the land he occupies and received annual real estate tax contributions from him. It was only in 1973 when the respondent Suralta discovered the petitioners' title to the land and insisted on a settlement of the adverse claim that the petitioners registered their deed of sale and secured a transfer certificate of title in their favor. - Suralta? Since 1957, he has been in possession of the land which was almost acquired in an underhanded manner by the petitioners. BUT he was himself guilty of transgressing the law by entering, in 1957, into a transaction clearly prohibited by law. Equitable reasons will not control against any well-settled rule of law or public policy. Equity cannot give validity to a void contract. - the State? BUT the reversion of a public land grant to the government is effected only at the instance of the Government itself. The reversion contemplated in the Public Land Act is not automatic. The Government has to take action to cancel the patent and the certificate of title in order that the land involved may be reverted to it. Considering that this is an ordinary civil action in which the Government has not been included as a party, we rule against the automatic reversion of the land in question to the State. - the original owners? In cases where the homestead has been the subject of void conveyances, the law still regards the original owner as the rightful owner subject to escheat proceedings by the State. BUT the original owners in this case, the respondent Palaos and his wife, have never disaffirmed the contracts executed between them and the respondent Suralta. More than that, they expressly sustained the title of the latter in court and failed to show any interest in recovering the land. BUT THEN AGAIN, as in pari delicto may not be invoked to defeat the policy of the State neither may the doctrine of estoppel give a validating effect to a void contract. It is not within the competence of any citizen to barter away what public policy by law seeks to preserve. - The land in question therefore remains under the ownership of Palaso and his wife. Of course, this pronouncement covers only the previous transactions between the respondents. The Court cannot pass upon any new contract, between the same parties involving the same land if this is their clear intention. Any new transaction, however, would be subject to whatever steps the Government may take for the reversion of the property to it. Disposition IAC decision reversed and set aside. Sale of the four-hectare portion of the homestead to Suralta and his heirs: null and void. Sale of the same portion of land to the Arsenals also null and void. Filomeno Palaos and Mahina Lagwas ordered to reimburse the heirs of Torcuato Suralta the sum of P890, the price of the sale. The value of any improvements made on the land and the interests on the purchase price are compensated by the fruits the respondent Suralta and his heirs received from their long possession of the homestead. This judgment is without prejudice to any appropriate action the Government may take against the respondents Filomeno Palaos and Mahina Lagwas pursuant to Section 124 of Commonwealth Act No. 141, as amended.

AZNAR V YAPDIANGCO
13 SCRA 486 REGALA; March 31, 1965

NATURE An appeal from a decision of the Court of First Instance of Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the possession of the car in dispute. FACTS - May, 1959: Teodoro Santos advertised in two metropolitan papers the sale of his FORD FAIRLANE 500. L. De Dios, claiming

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to be a nephew of Vicente Marella, went to the Santos residence to answer the ad. - Teodoro Santos instructed his son Irineo to see Vicente Marella the following day at 1642 Crisostomo Street, Sampaloc, Manila. Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid only after the car had been registered in his name. - The registration of the car was effected in the name of Marella. Up to this stage of the transaction, the purchased price had not been paid. - Marella requested the registration papers and the deed of sale from Irineo Santos on the pretext that he would like to show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to the latter. At a place in Azcarraga, Marella left Irineo waiting and never returned, taking the deed of sale with him. - May 29, 1959: Vicente Marella was able to sell the car in question to the Jose B. Aznar, for P15,000.00. Aznar acquired the said car from Vicente Marella in good faith, for a valuable consideration and without notice of the defect appertaining to the vendor's title. - Members of the Philippine Constabulary seized and consfiscated the car. Aznar filed a complaint for replevin against Yapdiangco, head of the PC unit which seized the car. - Lower court rendered a decision awarding the car to Teodoro Santos. ISSUE Who between Santos and Aznar is the rightful owner of the car HELD - Teodoro Santos is the rightful owner of the car. Ratio If the owner has lost a thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from third persons who may have acquired it in good faith from such finder, thief or robber. Reasoning - ART. 559. The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. - If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefore. - Aznar contends that upon the facts of this case, the applicable provision of the Civil Code is Article 15064 and not Article 559 as was held by the decision under review. - It is essential that the seller should have a voidable title at least. It is very clearly inapplicable where, as in this case, the seller had no title at all. Vicente Marella did not have any title to the property under litigation because the same was never delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of the car to him. ART. 712. "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." - Ownership is not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same. Disposition Instant appeal is dismissed.

FACTS - On June 25, 1926, Otto Ranft called at the office of Siy Cong Bieng & Co, Inc., the herein plaintiff, to purchase hemp. On the same date the quedans (warehouse receipts), together with the covering invoice, were sent to Ranft by the plaintiff. In the evening of the day upon which the quedans in question were delivered to HSBC, the herein defendant, Ranft died. 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 sum of P31,645 in the intestate proceedings of the estate of the deceased Otto Ranft, which on an appeal from 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. ISSUES 1. WON HSBC acted in good faith in accepting the quedans from Ranft 2. WON Siy Cong Bieng is estopped from denying that the bank had a valid title to the quedans HELD 1. YES Ratio If the owner of the goods permits 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. 2. YES Ratio Applying 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, there is now no remedy available to the plaintiff. 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. Disposition The appealed judgment is reversed and the appellant is absolved from the plaintiff's complaint.

SEPARATE OPINION ROMUALDEZ [dissent]

- With due respect for the majority opinion, I dissent and vote for the confirmation of the appealed judgment.

JALBUENA V LIZARRAGA
33 PHIL 77 TRENT; December 24, 1915

NATURE Petition for review of the decision of the CFI FACTS - Salvador Lizarraga, as judgment creditor, caused the sheriff of the Province of Iloilo to levy upon an old sugar-mill as the property of Ildefonso Doronila, the judgment debtor and husband of the plaintiff. At the time of the levy Doronila stated to the sheriff that the mill belonged to him. The purchaser at this public sale sold the mill to Lopez. The present action was

SIY CONG BIENG V HSBC

56 Phil 598 OSTRAND; March 5, 1932

ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title.

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institutedby the plaintiff for the purpose of recovering the mill upon the ground that the same was her exclusive property.

HELD NO - The plaintiff knew that the mill was to be levied as property of her husband. Notwithstanding this knowledge, she stood by and permitted the sale to go forward without making the slightest protest or claim until the property had passed into the hands of Lopez. She is therefore estopped from asserting her claim of ownership against the defendants. Disposition Decision affirmed

SUN BROTHERS & COMPANY V VELASCO AND CO KANG CHIU

54 OG 5143 ANGELES; August 11, 1958

absolutely owned by Lopez, he is negligent on his part. Chiu however has a different case because when he bought the ref from Velasco, it was through the store of Velasco that displayed the ref and had it for sale. It was a place considered to be a merchants store. Paragraph three (3) now is applicable. Following the principle that where the rights and interests of a vendor comes into clash with that of an innocent buyer for value, the buyer must be protected. This rule is necessary because of free enterprise wherein buyers cannot be reasonably expected to look behind the title of every article when he buys at a store. - What Sun could do is to file a claim for indemnity against Lopez. Disposition Judgment modified. Chiu is declared to be the absolute owner of the refrigerator. Lopez is ordered to pay P. 1,700 to the plaintiff and 6% annual interest. Claim for damages is dismissed.

G.R. No. L-8420 (Unreported) PARAS; May 31, 1956

NATURE Appeal from CA Decision FACTS - Defendant-respondent Centeno owned 15 sacks of rice offered for sale at her store situated on a street near public market. In the morning of Jan. 21, 1951, a person approached defendant and offered her to purchase the rice in question. Defendant agreed to sell 15 sacks of rice in question at P26/ sack, which the buyer promised to pay as soon as he would receive the price of his adobe stones which were being then unloaded from a truck owned Francisco Tan, then parked at the opposite side of the street in front of the Union Grocery facing the defendants store. Relying on this promise and upon the request of said purchaser, the defendant ordered the rice in question loaded in the said truck, of which the plaintiff was the caretaker, expecting that as soon as the adobe stones would be paid, said purchaser would pay her the price of the rice. While the rice was being loaded on the truck and even thereafter, defendant kept an eye on it waiting for the purchaser to come to pay her. When the adobe stones were completely unloaded from the truck, the defendant looked for the purchaser, but the latter was not found. So defendant decided to unload the rice from the truck but to her surprise plaintiff-petitioner Masiclat objected on the ground that he has bought it at P26/sack from a person whom he did not know and whom he met only that morning for the first time. Defendant insisted in unloading the rice and the plaintiff objected. Hence, defendant called a policeman to investigate the matter and the latter brought the rice in question to the Municipal building where it was deposited pending investigation. Plaintiff then initiated this action for recovery of possession of the rice in question ISSUES 1. WON the contract of sale was consummated between respondent Centeno and unknown purchaser (alleged unknown seller to plaintiff) 2. WON petitioners have a better title to the rice in question HELD 1. NO Ratio Although a contract of sale is perfected upon the parties having agreed as to the thing which is the subject matter of the contract and the price, ownership is not considered transmitted until the property is actually delivered and the purchaser has taken possession and paid the price agreed upon. Reasoning - (1) The evidence does not clearly show the identity of the person who tried to buy the rice in question from the respondent, and neither does it show that the same person was the one who sold the commodity to Ramon Masiclat. (2) The sale

MASICLAT V CENTENO

NATURE Action for Recovery of Personal Property FACTS - Sun Brothers sold a refrigerator to Francisco Lopez. Lopez just paid down-payment and could not pay in full. In the Conditional Sale Agreement it was stipulated that the Admiral refrigerator would be the absolute property of Sun if the whole payment is not to be given to them and the agreement may be rescinded. Lopez sold the ref to J.V. Trading. Jose Velasco, the owner of J.V. Trading displayed the ref in his store and it was then bought by Co Kang Chiu. Sun filed a complaint for Replevin against Lopez and Chiu and asked for the recovery of the ref. Court granted it and a writ of recovery was given. Sheriff went to Chius residence but Chiu requested for it not to be taken that was granted to him Later, the Complaint was amended to include Velasco. CFI granted the case to the plaintiff ordering Chiu to return the ref to Sun while and Lopez would pay Sun. Velasco would pay Chiu. No damages were granted as petitioned by Chiu. - Velasco and Chiu appealed. Velasco asked that he be declared the lawful owner of the ref and that the transfer between Velasco and Chiu be valid and that Velasco be relieved from paying Chiu. Chiu on the other hand asks that he be declared the absolute owner and also asks for damages. ISSUE Who is the absolute owner HELD - Chiu is the owner. Applying Art. 1505 of the Civil Code: 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 of the goods is by his conduct precluded from denying the sellers authority to sell. Nothing in this Title, however, shall affect; 1. The provision of any factors acts, recording, laws, or any other provisions of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; 2. The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction; 3. Purchase made in a merchants store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. - The CFI was wrong when it applied this because following the facts, Velasco has no right because of the non-payment of the ref between Lopez and Sun. It also cant be said that it was in good faith because he should have asked about the ref being

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between the respondent Centeno and the unknown purchaser was not consummated because although the former allowed the rice in question to be loaded in the truck, she did not intend to transfer its ownership until she was paid the stipulated price; and this is very evident from the fact that respondent continually watched her rice and demanded its unloading as soon as the unknown purchaser was missing. Respondent thus has not lost ownership and legal possession thereof. 2. NO - The general principle of law as enunciated in A1505 CC that where one of 2 persons must suffer the fraud of a third, the loss should fall upon him who has enabled the third person to do the wrong, does not apply for the ff. reasons: (1) there was no definite finding that the unknown purchaser was same person who sold the rice to Masiclat, (2) Centeno could not have been so negligent as to allow the unknown purchaser to run away with said rice and enable him to sell it to Masiclat, it evident that in fact Centeno kept an eye on the rice in question. Disposition Decision of CA is affirmed.

TAGATAC V JIMENEZ
53 OG 3792

DE GARCIA V CA (SPOUSES GUEVARA)

37 SCRA 129 FERNANDO; January 30, 1971

NATURE Petition for review on certiorari of a decision of the Court of Appeals. FACTS - Presented in the lower court: "Plaintiff Angelina D. Guevara, assisted by her spouse, Juan B. Guevara, seeks recovery of `one (1) lady's diamond ring 18 cts. white gold mounting, with one (1) 2.05 cts. diamond-solitaire, and four (4) brills 0.10 cts. total weight' which she bought on October 27, 1947 from R. Rebullida, Inc." - Plaintiff's evidence tends to show that around October 11, 1953 plaintiff while talking to Consuelo S. de Garcia, recognized her ring in the finger of Mrs. Garcia and inquired where she bought it, which the defendant answered from her comadre. Plaintiff explained that that ring was stolen from her house in February 1952. Defendant handed the ring to plaintiff and it fitted her finger. - 2-3 days later, at the request of plaintiff, plaintiff, her husband Lt. Col. Juan Guevara, Lt. Cementina of Pasay PD, defendant and her attorney proceeded to the store of Mr. Rebullida to whom they showed the ring in question. Mr. Rebullida examined the ring with the aid of high power lens and after consulting the stock card thereon, concluded that it was the very ring that plaintiff bought from him in 1947. The ring was returned to defendant who despite a written request therefor failed to deliver the ring to plaintiff. - Later on when the sheriff tried to serve the writ of seizure (replevin), defendant refused to deliver the ring which had been examined by Mr. Rebullida, claiming it was lost. - On the other hand, defendant denied having made any admission before plaintiff or Mr. Rebullida or the sheriff. Her evidence tends to show that the ring was purchased by her from Mrs. Miranda who got it from Miss Angelita Hinahon who in turn got it from the owner, Aling Petring, who was boarding in her house; that the ring she bought could be similar to, but not the same ring plaintiff purchased from Mr. Rebullida which was stolen; that according to a pawn-shop owner the big diamond was before the trial never dismantled. When dismantled, defendant's diamond was found to weigh 2.57 cts. - Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with the judgment of the lower court being reversed. It is this decision now under review. - These are the facts as found by respondent Court of Appeals: " Before plaintiff lost the ring, she had been wearing it for six years and became familiar with it. Thus, when she saw the

missing ring in the finger of defendant, she readily and definitely identified it. Her identification was confirmed by Mr. Rafael Rebullida, whose candid testimony is entitled to great weight, with his 30 years experience behind him in the jewelry business and being a disinterested witness since both parties are his customers. Indeed, defendant made no comment when in her presence Rebullida after examining the ring and stock card told plaintiff that that was her ring, nor did she answer plaintiff's letter of demand, ... asserting ownership. Further confirmation may be found in the extra-judicial admissions, contained in defendant's original and first amended answers. - It is noteworthy that defendant gave a rather dubious source of her ring. Aling Petring from whom the ring supposedly came turned out to be a mysterious and ephemeral figure. Miss Hinahon did not even know her true and full name, nor her forwarding address. She appeared from nowhere, boarded three months in the house of Miss Hinahon long enough to sell her diamond ring, disappearing from the scene a week thereafter. Moreover, Mrs. Baldomera Miranda, third-party defendant, who tried to corroborate defendant on the latter's alleged attempt to exchange the ring defendant bought through her, is [belied] by her judicial admission in her Answer that appellee `suggested that she would make alterations to the mounting and structural design of the ring to hide the true identity and appearance of the original one'. Finally, defendant is refuted by her own extrajudicial admissions ... although made by defendant's counsel. Her proffered explanation that her counsel misunderstood her is puerile because the liability to error as to the identity of the vendor and the exchange of the ring with another ring of the same value, was rather remote." ISSUE WON respondent court is correct in granting the ring to Guevara HELD YES Ratio The title established by the first clause of Art. 559 is only a presumptive title sufficient to serve as a basis for acquisitive prescription, that the clause immediately following provides that `one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. Reasoning - The article reads thus: "The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor." - Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by the another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. - Actually, even under the first clause, possession in good faith does not really amount to title, for the reason that Art. 1132 of the Code provides for a period of acquisitive prescription for movables through `uninterrupted possession for four years in good faith, so that many Spanish writers, including Manresa, Sanchez Roman, Scaevola, De Buen, and Ramos, assert that under Art. 464 of the Spanish Code (Art. 559 of the New Civil Code), the title of the possessor is not that of ownership, but is merely a presumptive title sufficient to serve as a basis of acquisitive prescription. - AS TO OTHER ASSIGNED ERRORS: > Questions of fact, the court will not disturb (identity of ring and substitution)

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- As to the attorney's fees and exemplary damages, this is what respondent Court said in the decision under review: "Likewise, plaintiff is entitled to recover reasonable attorney's fees in the sum of P1,000, it being just and equitable under the circumstances, and another P1,000 as exemplary damages for the public good to discourage litigants from resorting to fraudulent devices to frustrate the ends of justice, as defendant herein tried to substitute the ring for plaintiff's ring." Considering the circumstances, the cursory discussion of the sixth assigned error on the matter by petitioner fails to demonstrate that respondent Court's actuation is blemished by legal defects. Disposition the decision of respondent Court of Appeals of August 6, 1962 is hereby affirmed.

- The petitioner argues that it was unlawfully deprived because the impostor acquired no title to the books that he could have validly transferred to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz. ISSUE WON the petitioner has been unlawfully deprived of the books because the check issued by the impostor in payment therefor was dishonored HELD NO Ratio The petitioner was not unlawfully deprived of the books because the sale between the petitioner and the imposter Tomas de la Pena Professor Cruz had already been perfected. Having acquired ownership, he could already validly transfer ownership to the private respondents. The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. Reasoning - Civil Code: Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. xxx xxx xxx Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid. - Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another. - Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books. Disposition While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents but against Tomas de la Pea, who has apparently caused all this trouble. The private respondents have themselves been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain. WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED.

EDCA PUBLISHING & DISTRIBUTING CORP. V CA (SPOUSES LEONOR AND GERARDO SANTOS, DOING BUSINESS UNDER THE NAME AND STYLE OF SANTOS BOOKSTORE)
184 SCRA 614 CRUZ; April 26, 1990

NATURE Petition to reverse the decision of the Court of Appeals FACTS - Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. - the movable property here consists of books. - a person identifying himself as Professor Jose Cruz placed an order by telephone with the petitioner company for 406 books, payable on delivery EDCA delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65. - Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's ownership from the invoice he showed her, paid him P1,700.00. - Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a dean and was informed that there was no such person in its employ. Also, Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check - EDCA then went to the police, which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Pea and his sale of 120 of the books he had ordered from EDCA to the private respondents. On the night of the same date, EDCA sought the assistance of the police, which forced their way into the store of the private respondents and threatened Leonor Santos with prosecution for buying stolen property. They seized the 120 books without warrant, loading them in a van belonging to EDCA, and thereafter turned them over to the petitioner - The private respondents sued for recovery of the books after demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and the petitioner, after initial refusal, finally surrendered the books to the private respondents. The petitioner was successively rebuffed in the three courts below and now hopes to secure relief from us. - Petitioner claims > the owner who has been unlawfully deprived of personal property is entitled to its recovery except only where the property was purchased at a public sale, in which event its return is subject to reimbursement of the purchase price.

Chapter 4: PRICE
17 SCRA 114 BENGZON; May 19, 1966
FACTS - Spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners, with Torrens of a 1,635square-meter residential land. Out of love and affection for

MAPALO V MAPALO

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Maximo Mapalo a brother of Miguel who was about to get married they decided to donate the eastern half of the land to him. O.C.T. No. 46503 was delivered. As a result, however, they were deceived into signing, on October 15, 1936, a deed of absolute sale over the entire land in his favor. Their signatures thereto were procured by fraud, that is, they were made to believe by Maximo Mapalo and by the attorney who acted as notary public who "translated" the document, that the same was a deed of donation in Maximo's favor covering one-half (the eastern half) of their land. Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses did not receive anything of value for the land. The attorney's misbehaviour was the subject of an investigation but its result does not appear on record. - Following the execution of the afore-stated document, the spouses Miguel Mapalo and Candida Quiba immediately built a fence of permanent structure in the middle of their land segregating the eastern portion from its western portion. Said fence still exists. The spouses have always been in continued possession over the western half of the land up to the present. - Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938, registered the deed of sale in his favor and obtained in his name TCT No. 12829 over the entire land. Thirteen years later, he sold for P2,500.00 said entire land in favor of Evaristo, Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos was in turn registered and TCT NO. 11350 was issued for the whole land in their names. - The Narcisos took possession only of the eastern portion of the land in 1951, after the sale in their favor was made. On February 7, 1952 they filed suit in the CFI to be declared owners of the entire land, for possession of its western portion; for damages; and for rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land with the consent of the spouses Mapalo and Quiba. - The Mapalo spouses filed their answer with a counterclaim on March 17, 1965, seeking cancellation of the TCT of the Narcisos as to the western half of the land, on the grounds that their (Mapalo spouses) signatures to the deed of sale of 1936 was procured by fraud and that the Narcisos were buyers in bad faith. They asked for reconveyance to them of the western portion of the land and issuance of a Transfer Certificate of Title in their names as to said portion. - In addition, the Mapalo spouses filed on December 16, 1957 their own complaint in the CFI of Pangasinan against the aforestated Narcisos and Maximo Mapalo. They asked that the deeds of sale of 1936 and of 1951 over the land in question be declared null and void as to the western half of said land. - Judge of CFI tried the two cases jointly. Said court rendered judgment on January 18, 1961, as follows: (a) dismissing the complaint of the Narcisos; (b) declaring as a donation only over the eastern half portion of the abovedescribed land, and as null and void with respect to the western half portion thereof; (c) declaring as null and void and without legal force and effect TCT issued in favor of Maximo Mapalo as regards the western half portion of the land covered therein; (d) declaring as null and void TCT in the names of the Narcisos insofar as the western half portion of the land covered therein is concerned; (e) ordering the spouses Mapalo and Quiba and the Narcisos to have the above-described land be subdivided by a competent land surveyor and that the expenses incident thereto be borne out by said parties pro rata; (f) ordering the Register of Deeds of Pangasinan to issue in lieu of Transfer Certificate of Title No. 11350 two new titles upon completion of the subdivision plan, one in favor of the spouses Miguel Mapalo and Candida Quiba covering the western half portion and another for the Narcisos covering the eastern half portion of the said land, upon payment of the legal fees; meanwhile the right of the spouses Mapalo and Quiba is hereby ordered to be annotated on the back of Transfer Certificate of Title No. 11350; and (g) sentencing Maximo Mapalo and the Narcisos to pay the costs. - The Narcisos appealed to the CA which reversed the judgment of the CFI, solely on the ground that the consent of the Mapalo

spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the same, within four years from notice of the fraud, had long prescribed. It reckoned said notice of the fraud from the date of registration of the sale on March 15, 1938. The Court of First Instance and the Court of Appeals are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on prescription that they lost in the Court of Appeals. From said decision of the Court of Appeals, the Mapalo spouses appealed to this Court. ISSUES 1. WON there was an onerous conveyance of ownership, that is, a sale, by virtue of said deed of October 15, 1936, with respect to said western portion. Specifically, was there a cause or consideration to support the existence of a contract of sale. (WON the conveyance of ownership is void or voidable) 2. WON the Narcisos were purchasers in good faith HELD 1. Ratio A contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. Reasoning - For a contract to exist at all, three essential requisites must concur: (1) consent, (2) object, and (3) cause or consideration. The Court of Appeals is right in that the element of consent is present as to the deed of sale of October 15, 1936. For consent was admittedly given, albeit obtained by fraud. Accordingly, said consent, although defective, did exist. In such case, the defect in the consent would provide a ground for annulment of a voidable contract, not a reason for nullity ab initio. - The parties are agreed that the second element of object is likewise present in the deed of October 15, 1936, namely, the parcel of land subject matter of the same. - Not so, however, as to the third element of cause or consideration. And on this point the decision of the Court of Appeals is silent. - As regards the eastern portion of the land, the Mapalo spouses are not claiming the same, it being their stand that they have donated and freely given said half of their land to Maximo Mapalo. And since they did not appeal from the decision of the trial court finding that there was a valid and effective donation of the eastern portion of their land in favor of Maximo Mapalo, the same pronouncement has become final as to them, rendering it no longer proper herein to examine the existence, validity efficacy of said donation as to said eastern portion. - As to the western portion, however, the fact not disputed herein is that no donation by the Mapalo spouses obtained as to said portion. Liberality as a cause or consideration does not exist as regards the western portion of the land in relation to the deed of 1936; that there was no donation with respect to the same. - The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or consideration produce no effect whatsoever. Nonetheless, under the Old Civil Code, the statement of a false consideration renders the contract voidable, unless it is proven that it is supported by another real and licit consideration. And it is further provided by the Old Civil Code that the action for annulment of a contract on the ground of falsity of consideration shall last four years, the term to run from the date of the consummation of the contract. - Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should be asked whether its case is one wherein there is no consideration, or one with a statement of a false consideration. If the former, it is void and inexistent; if the latter, only voidable, under the Old Civil Code. As observed earlier, the deed of sale of 1936 stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however, said consideration was totally absent. The problem, therefore, is whether a deed which states a consideration that in fact did not

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exist, is a contract without consideration, and therefore void ab initio, or a contract with a false consideration, and therefore, at least under the Old Civil Code, voidable. - Needless to add, the inexistence of a contract is permanent and incurable and cannot be the subject of prescription. 2. NO - Firstly, it has been positively shown by the undisputed testimony of Candida Quiba that Pacifico Narciso and Evaristo Narciso stayed for some days on the western side (the portion in question) of the above-described land until their house was removed in 1940 by the spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in his testimony in chief that when they bought the property, Miguel Mapalo was still in the premises in question (western part) which he is occupying and his house is still standing thereon; and thirdly, said Pacifico Narciso when presented as a rebuttal and sub-rebuttal witness categorically declared that before buying the land in question he went to the house of Miguel Mapalo and Candida Quiba and asked them if they will permit their elder brother Maximo to sell the property. - Aside from the fact that all the parties in these cases are neighbors, except Maximo Mapalo the foregoing facts are explicit enough and sufficiently reveal that the Narcisos were aware of the nature and extent of the interest of Maximo Mapalo their vendor, over the above-described land before and at the time the deed of sale in their favor was executed. - Upon the aforestated declaration of Pacifico Narciso the following question arises: What was the necessity, purpose and reason of Pacifico Narciso in still going to the spouses Mapalo and asked them to permit their brother Maximo to dispose of the above-described land? To this question it is safe to state that this act of Pacifico Narciso is a conclusive manifestation that they (the Narcisos) did not only have prior knowledge of the ownership of said spouses over the western half portion in question but that they also have recognized said ownership. It also conclusively shows their prior knowledge of the want of dominion on the part of their vendor Maximo Mapalo over the whole land and also of the flaw of his title thereto. Under this situation, the Narcisos may be considered purchasers in value but certainly not as purchasers in good faith. ... Disposition Decision of the CA is hereby reversed and set aside, and another one is hereby rendered affirming in toto the judgment of the CFIa quo, with attorney's fees on appeal in favor of appellants.

the same date. They went directly to the office of Gregorio Araneta Inc., and presented the letter to Benjamin Bautista. Since she had no money, Cronico requested Venturanza to issue a check for P33,572 to cover the down payment. However, Bautista did not accept the check. He advised Cronico that it is Gregorio Araneta II who would decide whose offer to buy may be accepted after the company receives the registry return cards attached to the registered letters sent to the offerors. - On March 22, 1962, between 10 and 11 a.m., Ramirez received the reply letter where it stated that the lot was being offered for sale on a first come, first served basis. Ramirez proceeded to the office of Bautista in the same morning stating that he accepted the conditions stated in the letter. On April 2, 1962, the J. M. Tuason & Co. Inc., and Claudio R. Ramirez executed a contract to sell the lot in question. - Meanwhile, on March 27, 1962, the company received a letter from Cronico requesting that the lot be sold to her. She tendered a check to cover the down payment which was, however, returned. On April 4, 1962, the company informed her that it had decided to sell the lot to Ramirez. Cronico lodged a complaint to annul and set aside the contract to sell. ISSUES 1. WON Cronico received the letter-offer by means of irregular and premature delivery 2. WON the defendant companys unilateral promise to sell was supported by a consideration other than the selling price 3. WON the CA erred in holding that plaintiff is not principally or subsidiarily obliged under the contract to sell and hence may not bring suit to annul the same HELD 1. YES Reasoning - The petitioner took delivery of the registered letter addressed to her at the entry section of the Manila post office - while this procedure may be tolerated by the postal authorities, the act of the petitioner in taking delivery of her letter at the entry section of the Manila post office without waiting for said letter to be delivered to her in due course of mail is a violation of the "first come first served" condition imposed by the respondent J. M. Tuason & Co. Inc., acting through Gregorio Araneta Inc. Viewing the case from the standpoint of regularity of notice, plaintiffappellee falls short of the yardstick. - The CA entertained serious doubts as to the financial capability of petitioner Cronico to purchase the property because she was receiving only P150 a month as her salary from her employment and there was no showing that she had sources of income other than her job. In fact, when petitioner tried to pay the down payment for the land, it was Mary Venturanza who drew the check which was rejected. In the trial court, Florencia Cronico was substituted by her assignee Lucille Venturanza, daughter of Mary Venturanza. It is apparent that petitioner did not have the capability to pay and that she acted only as a mere front of the Venturanzas. Realtors are given the right to choose their buyers so as to avoid delinquent payments of monthly installments which may result in costly court litigations. 2. NO. Ratio The promisee cannot compel the promisor to comply with the promise unless the former establishes the existence of a distinct consideration. The promisee has the burden of proving such consideration. Reasoning -In order that a unilateral promise may be binding upon the promisor, Article 1479, Civil Code of the Philippines, requires the concurrence of the condition that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. The promisee has the burden of proving such consideration. The petitioner has not established the existence of a consideration distinct from the price of the lot in question. 3. NO

CRONICO V J.M. TUASON & CO., INC.

78 SCRA 331 FERNANDEZ; August 26, 1977

FACTS - Appellant J. M. Tuason & Co. Inc. was the registered owner of Lot No. 22, Block 461, Sta. Mesa Heights Subdivision. In March, 1962, plaintiff Florencia Cronico offered to buy the lot from the appellant company with the help of Mary E. Venturanza. They personally talked to Benjamin F. Bautista, Manager of the Real Estate Department of Gregorio Araneta, Inc., the company's attorney-in-fact, proposing to buy Lot No. 22. She was required to present proofs to show her rights to the lot. On March 8, 1962, Florencia Cronico exhibited certain documents showing her priority rights to buy the lot. - In the first week of March, 1962, defendant-appellant Claudio Ramirez also learned that the lot was being sold. The occupants who also had priority rights to buy the land informed Ramirez, about the intended sale and expressed their willingness to waive their rights. In the same month Cronico and Ramirez sent separate letters to the company expressing their desire to purchase the land. The company sent separate reply letters to prospective buyers. They were dropped in the Manila Post Office at 11 in the morning of March 21, 1962 by registered mail. It so happened that Cronico went to the company's office on March 21, 1962, and she was informed that the reply letters had been mailed. Cronico and Mary Venturanza went to the post office and were able to get the letter at about 3:30 in the afternoon of

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Reasoning The petitioner cannot claim that she had accepted the promise before it was withdrawn because she had violated the condition of "first, come, first served" by taking delivery of the reply letter of the respondent company in the entry section of the Manila post office. Moreover, it was only on March 27, 1962 that the company received a letter from the petitioner requesting that the lot be sold to her. The respondent, Ramirez, had on March 23, 1962, confirmed in writing his verbal acceptance of the terms and conditions of the sale of the lot. - The petitioner maintains that the contract to sell contains a stipulation for her benefit, which reads: "that the buyer Claudio Ramirez has been fully informed by the company of all the circumstances relative to the offer of Florencia Cronico to buy said lot and that he agrees and binds himself to hold the company absolutely free and harmless from all claims and damages to said Florencia Cronico in connection with this sale of the lot to him." The foregoing clause cannot by any stretch of the imagination be considered as a clause "pour autrui" or for the benefit of the petitioner. The stipulation does not confer any right arising from the contract that may be enforced by the petitioner against any of the parties thereto. Neither does it impose any obligation arising from the contract that may be enforced by any of the parties thereto against the petitioner. The petitioner is not "obliged principally or subsidiarily" by the contract to sell. The said stipulation is for the benefit of the respondent company. Disposition Decision of the CA is hereby AFFIRMED.

relatives of the deceased vendor and were not bound, principally or subsidiarily, thereby. They filed a motion to dismiss. - TC granted motion to dismiss, holding (a) that on the authority of Armentia vs. Patriarca, the plaintiffs, as mere collateral relatives, not forced heirs, of Mateum, could not legally question the disposition made by said deceased during his lifetime, regardless of whether, as a matter of objective reality, said dispositions were valid or not; and (b) that the plaintiffs evidence of alleged fraud was insufficient, the fact that the deeds of sale each stated a consideration of only Pl.00 not being in itself evidence of fraud or simulation. - CA affirmed. The CA also declared that witnesses failed to establish fraud of any kind or that Mateum had continued paying taxes on the lands in question even after executing the deeds conveying them to the defendants, and that "since in duly notarized and registered deeds of sale consideration is presumed, we do not and it necessary to rule on the alternative allegations of the appellants that the said deed of sale was in reality donations. ISSUE WON deeds were void ab initio or merely voidable HELD Ratio Contracts with a false cause, or which are absolutely simulated or fictitious are void, unless it is shown that they are supported by another true and lawful cause or consideration. Reasoning - Consequences: If they were only voidable, then it is a correct proposition that since the vendor Mateum had no forced heirs whose legitimes may have been impaired, and the petitioners, his collateral relatives, not being bound either principally or subsidiarily to the terms of said deeds, the latter had and have no actionable right to question those transfers. If said deeds were void ab initio because to all intents and purposes without consideration, the property allegedly conveyed never really leaves the patrimony of the transferor, and upon the latter's death without a testament, such property would pass to the transferor's heirs intestate and be recoverable by them or by the Administrator of the transferor's estate. - The law as it is now no longer deems contracts with a false cause, or which are absolutely simulated or fictitious, merely voidable, but declares them void, unless it is shown that they are supported by another true and lawful cause or consideration. A logical consequence of that change is the juridical status of contracts without, or with a false, cause is that conveyances of property affected with such a vice cannot operate to divest and transfer ownership, even if unimpugned. If afterwards the transferor dies the property descends to his heirs, and without regard to the manner in which they are called to the succession, said heirs may bring an action to recover the property from the purported transferee. - Armentia only ruled that transfers made by a decedent in his lifetime, which are voidable for having been fraudulently made or obtained, cannot be posthumously impugned by collateral relatives succeeding to his estate who are not principally or subsidiarily bound by such transfers. For the reasons already stated, that ruling is not extendible to transfers which, though made under closely similar circumstances, are void ab initio for lack or falsity of consideration. - Upon the consideration alone that the apparent gross, not to say enormous, disproportion between the stipulated price of P l.00 plus unspecified and unquantified services and the undisputably valuable real estate allegedly sold worth at least P10,500.00 going only by assessments for tax purposes which are notoriously low indicators of actual value plainly and unquestionably demonstrates that they state a false and fictitious consideration, and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio. - Neither can the validity of said conveyances be defended on the theory that their true causa is the liberality of the transferor and they may be considered in reality donations because the

BAGNAS V CA (RETONIL)
176 SCRA 159 NARVASA; August 10, 1989

NATURE Appeal by certiorari FACTS - March 11, 1964: Hilario Mateum died single, without ascendants or descendants, and survived only by collateral relatives, of whom petitioners, his first cousins, were the nearest. He left no will, no debts, and an estate consisting of 29 parcels of land. April 3, 1964: the private respondents, also collateral relatives of Mateum though more remote in degree than petitioners, registered with the Registry of Deeds 2 deeds of sale purportedly executed by Mateum in their favor covering 10 parcels of land. Both deeds were in Tagalog, save for the English descriptions of the lands; and each recited the consideration of the sale to be "halagang ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod, ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO Pl.00), Philippine Currency, and services rendered, being rendered and to be rendered for my benefit"). - One deed was dated February 6, 1963 and covered five parcels of land, and the other was dated March 4, 1963, covering five other parcels, both antedating Mateum's death by more than a year. - May 22, 1964: petitioners commenced suit against the respondents seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as donations void for want of acceptance embodied in a public instrument. Claiming ownership pro indiviso of the lands subject of the deeds by virtue of being intestate heirs of Mateum, the petitioners prayed for recovery of ownership and possession of said lands, accounting of the fruits thereof and damages. - Respondents denied the alleged fictitious or fraudulent character of the sales in their favor, asserting that said sales were made for good and valuable consideration; that while they may have the effect of donations, yet the formalities and solemnities of donation are not required for their validity and effectivity, that they were collateral relatives of Mateum and had done many good things for him, nursing him in his last illness, which services constituted the bulk of the consideration of the sales; and that the plaintiffs could not question or seek annulment of the sales because they were mere collateral

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law also prescribes that donations of immovable property, to be valid, must be made and accepted in a public instrument, and it is not denied by the respondents that there has been no such acceptance which they claim is not required. - The transfers in question being void, it follows as a necessary consequence that the properties purportedly conveyed remained part of the estate of Hilario Mateum, said transfers notwithstanding, recoverable by his intestate heirs, the petitioners herein, whose status as such is not challenged. - Respondents not only failed to offer any proof whatsoever, opting to rely on a demurrer to the petitioner's evidence and upon the thesis, which they have maintained all the way to this Court, that petitioners, being mere collateral relatives of the deceased transferor, were without right to the conveyances in question. In effect, they gambled their right to adduce evidence on a dismissal in the TC and lost, it being the rule that when a dismissal thus obtained is reversed on appeal, the movant loses the right to present evidence in his behalf. Disposition Appealed Decision of the CA is reversed. The questioned transfers are declared void and of no force or effect. Such certificates of title as the private respondents may have obtained over the properties subject of said transfers are hereby annulled, and said respondents are ordered to return to the petitioners possession of an the properties involved in tills action, to account to the petitioners for the fruits thereof during the period of their possession, and to pay the costs. No damages, attorney's fees or litigation expenses are awarded, there being no evidence thereof before the Court.

HELD - The provision on downpayment made no reference to sale of a vehicle. Also nothing was mentioned about the full purchase price and the manner of paying the installments. A definite agreement on manner of payment of price is an essential element in a binding contract of sale. - Sosa didnt even sign Exhibit A. And the title indicates AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC. This shows he was dealing with Popong, not with Toyota. - Sosa didnt exercise diligence to know extent of Bernardos authority as agent. - At the most, Exhibit A may be part of the negotiation stage of contract of sale. There are 3 stages: preparation, perfection and consummation. - Accordingly, in a sale in installment financed by a financing company, there are 3 parties involved: the buyer, seller, financing company. Since the financing company did not approve, there was no meeting of the minds. - Damages cant also be awarded. Sosa caused his own humiliation. He should not have bragged about a thing which he still didnt own.

ROSENDO HERNAEZ V MATEO HERNAEZ ET AL.,

32 PHIL 214 TRENT; November 13, 1915

TOYOTA SHAW V CA (SOSA)

244 SCRA 320 DAVIDE JR; 1995
NATURE Appeal

NATURE Appeal from a judgment of CA FACTS - Sosa wanted to purchase a Toyota Lite Ace. Upon contracting Toyota Shaw, Inc., he was told that there was an available unit. Sosa and his son, Gilbert, went to Toyota Shaw. They met Popong Bernardo, a sales representative. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and a balikbayan guest would use it on 18 June 1989 to go to Marinduque, if he does not arrive in his hometown with the new car, he would become a "laughing stock. - The balance of the purchase price would be paid by credit financing through B.A. Finance. Sosa and Gilbert went to Toyota to deliver the downpayment. Bernardo accomplished Vehicle Sales Proposal (VSP). - On 17 June, Bernardo called to inform that vehicle wouldnt be ready for pick up at 10 a.m. but at 2:00 p.m. Sosa and Gilbert met Bernardo. Bernardo informed them that Lite Ace was being readied. After about an hour, Bernardo told them that the car couldnt be delivered because "nasulot ang unit ng ibang malakas." - Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit financing application of Sosa. Toyota gave option to purchase by paying full purchase price in cash but Sosa refused. Sosa asked that his downpayment be refunded. Toyota did so. - Toyota alleged that no sale was entered into between it and Sosa, that Bernardo had no authority to sign Exhibit "A", that Bernardo signed in personal capacity. Trial court rendered decision in favor of Sosa. Toyota appealed to CA. CA affirmed TCs decision. Toyota appealed to SC. ISSUES 1. WON the VSP is a contract of sale 2. WON Sosa has right to delivery despite nonpayment and nonapproval of his credit application 3. WON Toyota acted in good faith when it didnt release vehicle

FACTS - The spouses, Pedro Hernaez and Juana Espinosa, died, leaving several legitimate descendants. Neither of their estates had been divided up to the date of the institution of this action, but were both under administration. - Their son, Domingo Hernaez, sold all his interest in both his father's and mother's estate to his son, Vicente on November 6, 1901. - However, he then executed a document of sale in favor of Alejandro Montelibano on February 27, 1907, in which he purported to convey all his undivided interest in his mother's estate. - On the same date he executed another document of sale in which he purported to convey to Jose Montelibano foureighteenths of his interest in his mother's estate.(So 5/18 na lang remaining interest niya.) - Both of these sales were made with the connivance of his son, Vicente. Hence, although Vicente had actually purchased all of his father's interests in the estates of his grandparents and the undoubted owner thereof, he is effectually estopped from asserting his title as against either of the vendees - August 19, 1912 -Jose Montelibano sold his interest in the estate to Alejandro Montelibano. By this transfer, the latter stood as owner of all the interest of Domingo Hernaez as against Vicente. - It is admitted that Rosendo, Domingos brother, was notified of Montelibano's purchases on January 8, 1913, when he received notice of Montelibano's motion, entered in the administration proceedings, asking that he (Montelibano) be substituted as assignee of the interests of various heirs of the estate which he had acquired by purchase. - Notwithstanding this knowledge, Rosendo entered into a contract of sale with Vicente, whereby the latter purported to convey all the interest, which he had acquired from his father(D), in the estate of his grandparents. - Remember, Vicente is estopped from asserting title to any interest in his grandfather's estate and in five-eighteenths of his grandmother's estate. - Rosendo purchased with full knowledge of these facts. He, therefore, acquired thirteen-eighteenths of the interest of

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Domingo Hernaez y Espinosa in the estate of the latter's mother nothing more. - Alejandro is a holder of a prior equitable right has priority over the purchaser Rosendo) - Alejandro has acquired in his interest in the estate of the deceased spouses for a valuable consideration and in good faith, and there remains to Rosendo only the right of subrogation allowed him by A1067 of the Civil Code. - January 24, 1913- Rosendo instituted this action seeking to subrogate himself in the rights acquired by Montelibano in the estate. - TC- found for Rosendo but was ordered to pay Alejandro Php 10k for the privilege of exercising the right of subrogation. ISSUE 1. WON Rosendo can be charged with actual notice of conveyance prior to Jan 8, 1913 2. And if found so, WON Rosendo is entitled to exercise his right of subrogation as per A1067 of the CC (and at what price) HELD 1. NO - He was not chargeable with notice prior to January 8, 1913. 2. YES - It is clear that he has opportunely asserted his right of subrogation. Reasoning - A10675 of the CC provides that the co-heir may exercise this right of subrogation upon the payment to the purchaser of another heir's interest, "el precio de la compra" (the purchase price). - Obviously, if the interest had not been resold, Rosendo, would have had to pay only the price (P 4.5k) for which Jose acquired it. - The purpose of the article cannot be evaded by a reconveyance of the interest to a third person at a higher price. Subsequent purchasers of the interest acquire it burdened with the right of subrogation of co-heirs at the price for which the heir who sold it parted with it. Disposition - TCs judgment modified by substituting, as the price of subrogation of the interest the sum of P4,500(Jose Ms orig price),instead of P10,000.

HELD YES Ratio Art. 1458 of the NCC provides that a purchaser may pay a price certain in money or its equivalent, which means that payment of the price need not be in money. Reasoning - Should the RTC hold that the GI Sheets and other goods are sufficient payment as to credit Apostol with their value, certainly Phil Resources would be affected adversely, if its claim of ownership is true. Disposition judgment under review is affirmed.

198 SCRA 91 GANCAYCO; June 3, 1991

FACTS - On December 27, 1985, spouses Cifra, entered into an agreement with Chua denominated "Earnest Money' which provides as follows: Received from Dr. Manuel G. Yu Chua the cash sum of FIVE THOUSAND PESOS (P5,000.00) Philippine currency as earnest money for the house and lot owned by the spouses Leoncio G. Cifra, Jr. and Aurora R. Jongco-Cifra. The property is located at 665 Boni Avenue, Mandaluyong, Metro-Manila, Philippines and more particularly described in the Transfer Certificate of Title (TCT) No. 490040 (6093). The above property is presently mortgaged with the Social Security System (SSS) with an outstanding balance of more or less FORTY THOUSAND PESOS (P40,000.00) as of November, 1985. The agreed purchase price being ONE MILLION and ONE HUNDRED THOUSAND PESOS (P1.1M) shall be payable as follows: The sum equivalent to the above purchase price minus the outstanding mortgage balance with the SSS and the above earnest money shall be paid by the buyer to the seller upon the removal of the present tenant or occupant from the premises and upon the execution of the Deed of Absolute Sale. It is the understanding of the parties that the buyer shall assume the mortgage or obligation of the seller with the SSS as of November 1985. The monthly amortization was last paid by the seller on November 13, 1985 as evidenced by the Official Receipt (OR) No. 988474 K issued by Bank of the Philippine Islands (BPI), Ayala (Main). Further, the seller promises to secure at the shortest possible time the certification of balance or up to date statement of account from the SSS and deliver the same to the buyer. If and when the buyer purchases the property according to the terms and conditions above specified, the herein earnest money shall form a part of the purchase price otherwise the same shall be forfeited in favor of the seller. IN WITNESS, WHEREOF, the parties executed this instrument at the Municipality of Mandaluyong, Metro-Manila, Philippines, this 27th day of December 1985. xxx Addendum: In the event that the buyer shall fail to purchase the property after he is formally notified by the seller of the surrender of the premises by the present tenant or occupant, in addition to the forfeiture of the earnest money the buyer binds himself to pay the seller the sum of TWENTY THOUSAND PESOS (P20,000.00) Philippine currency plus the attorney's fees and other costs for any court case that may arise. On the other hand, if the seller shall not make good his promise to sell the above property even after the present tenant, William Lim Valencia, shall have surrendered the premises the seller binds himself to return the earnest money and in addition pay the buyer the sum of TWENTY THOUSAND PESOS (P20,000.00) Philippine currency plus the attorney's fees and other costs of any court case that may arise.

CIFRA V CA (CHUA)

REPUBLIC V PHIL RESOURCES DEV. CORP.

102 SCRA 961 (1958) PADILLA; January 31, 1958

NATURE Petition for review by certiorari of a decision of the CA FACTS - Macario Apostol, President of Phil Resources, bought logs from the Bureau of Prisons (in representation of the Republic of the Phils.) - Apostol, being in default, Republic instituted actions against him in the CFI - Pending the actions, Apostol paid part of this personal debt in GI Sheets and other goods from the warehouse of Phil Resources - Phil Resources filed motion to intervene with the CFI - CFI denied the motion. - CA set aside the order denying motion to intervene (Phil Resources entitled to intervene as per CA) - Republic filed this petition in the SC ISSUE WON Phil Resources has legal interest in the matter in litigation as to entitle it to intervene
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A1067 of the CC: If any of the heirs should sell his hereditary rights to a stranger before the division, all or any of the co-heirs may subrogate himself in the place of the purchaser, reimbursing him for the value of the purchase, provided they do so within the period of a month, to be counted from the time they were informed thereof.

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- On May 25, 1986, the Cifras sent a letter to Chua telling him of their desire to rescind the contract. They faulted neither themselves nor Chua, and stated that they had already missed the business opportunity they were going to use the proceeds of the sale for. They also said they were giving back the earnest money. - Chuas side > He wanted to push through with the sale. According to him, he had missed an opportunity to buy a cheaper property because of the anticipation of the sale of the Cifras property. He claims bad faith on the part of the couple when after the 90-day period (for the tenant to vacate the premises) from the date of the agreement, the tenant offered them a better price. - Cifras side > They wanted to rescind the contract because of the reason stated in their letter. They pointed out that the agreement stated that the balance was to be paid upon removal of the tenant. The couple gave the tenant a 90-day notice from the sale of the property; but the tenant is still occupying the property. That the tenant is still occupying the property is not the Cifras nor Chuas fault; rather, it is the tenant who refuses to comply with his contractual obligation. This delay caused them to miss the business opportunity and so they didnt need the money anymore. - Chua filed a case with the RTC. RTC ordered the execution of the deed of sale, awarded moral damages and attys fees. MFR in RTC, CA, and MFR in CA of Cifras were denied. ISSUES 1. WON Chua can demand for specific performance despite the addendum stipulation recognizing the right of the Cifras to cancel the sale for any reason 2. WON the award for attys fees is proper HELD 1. NO - The action for specific performance must fail. The provisions of Articles 1370 to 1375 of the Civil Code on the interpretation of contracts are squarely applicable to this case. - A reading of the contract shows the literal and clear agreement of the parties. From their contemporaneous and subsequent acts it also appears that the proceeds of the sale of the property by the Cifras were intended to apply to a proposed business venture of the Cifras abroad. As said proposed business did not prosper and the tenant of the premises have not yet vacated the premises, the couple decided to rescind the contract of sale in accordance with the agreement. - Under the addendum to the same agreement, both parties are given the freedom to back out of the transaction provided that, in the case of the seller, he must return the earnest money in addition to being liable to the buyer for P20,000.00, plus attorney's fees and other costs in case of litigation; and in case of the buyer, the earnest money is forfeited, and he is liable to pay the seller P20,000.00 in damages plus attorneys fees and other costs in case of litigation to the seller. This right which is afforded to both parties may be availed of by them, irrespective of whether or not the occupant of the premises had vacated the same. This stipulation is the law between the parties. 2. NO. - They are not liable for attorneys fees, for it was private respondent who brought the case to court as a result of which petitioners unnecessarily incurred expenses of litigation. Disposition The petition is GRANTED. The decision of the Court of Appeals dated December 20, 1989 and its resolution dated January 30, 1990 are hereby REVERSED and SET ASIDE. Another judgment is hereby rendered dismissing the complaint and rescinding the subject contract to sell dated December 27, 1985 upon the petitioners reimbursing to private respondent the P5,000.00 earnest money and paying them P20,000.00 as damages according to the same agreement.

NATURE This is a petition for certiorari and mandamus filed by Lorenzo Velasco and Socorro J. Velasco (hereinafter referred to as the petitioners) against the resolution of the Court of Appeals, which ordered the dismissal of the appeal interposed by the petitioners from a decision of the Court of First Instance of Quezon City on the ground that they had failed seasonably to file their printed record on appeal. FACTS - Under date of November 3, 1968, the Court of First Instance of Quezon City, after hearing on the merits, dismissing the complaint filed by the petitioners against the Magdalena Estate, Inc. (hereinafter referred to as the respondent) for the purpose of compelling specific performance by the respondent of an alleged deed of sale of a parcel of residential land in favor of the petitioners. The basis for the dismissal of the complaint was that the alleged purchase and sale agreement "was not perfected." - On November 18, 1968, after the perfection of their appeal to the Court of Appeals, the petitioners received a notice from the said court requiring them to file their printed record on appeal within sixty (60) days from receipt of said notice. This 60-day term was to expire on January 17, 1969. - Allegedly under date of January 15, 1969, the petitioners allegedly sent to the Court of Appeals and to counsel for the respondent, by registered mail allegedly deposited personally by its mailing clerk, one Juanito D. Quiachon, at the Makati Post Office, a "Motion For Extension of Time To File Printed Record on Appeal." The extension of time was sought on the ground "of mechanical failures of the printing machines, and the voluminous printing job now pending with the Vera Printing Press . . ." - On February 10, 1969, the petitioners filed their printed record on appeal in the Court of Appeals. Thereafter, the petitioners received from the respondent a motion filed on February 8, 1969 praying for the dismissal of the appeal on the ground that the petitioners had filed to file their printed record on appeal on time. Acting on the said motion to dismiss the appeal, the Court of Appeals, on February 25 1969, issued the following resolution: "Upon consideration of the motion of counsel for defendantappellee praying on the grounds therein stated that the appeal be dismissed in accordance with Rule 50, Rules of Court, and of the opposition thereto filed by counsel for plaintiffs-appellants, the Court RESOLVED to DENY the said motion to dismiss. "Upon consideration of the registry-mailed motion of counsel for plaintiffs appellants praying on the grounds therein stated for an extension of 30 days from January 15, 1969 within which to file the printed record on appeal, the Court RESOLVED to GRANT the said motion and the printed record on appeal which has already been filed is ADMITTED." - On March 11, 1969, the respondent prayed for a reconsideration of the above-mentioned resolution, averring that the Court of Appeals had been misled by the petitioners' "deceitful allegation that they filed the printed record on appeal within the reglementary period," because according to a certification issued by the postmaster of Makati, Rizal, the records of the said post office failed to reveal that on January 15, 1969 the date when their motion for extension of time to file the printed record on appeal was supposedly mailed by the petitioners there was any letter deposited there by the petitioners' counsel. The petitioners opposed the motion for reconsideration. They submitted to the appellate court the registry receipts (numbered 0215 and 0216), both stamped January 15, 1969, which were issued by the receiving clerk of the registry section of the Makati Post Office covering the mails for the disputed motion for extension of time to file their printed record on appeal and the affidavit of its mailing clerk Juanito D. Quiachon, to prove that their motion for extension was timely filed and served on the Court of Appeals and the respondent, respectively.

VELASCO V CA
51 SCRA 439

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- "The Acting Postmaster of the Commercial Center Post Office of Makati, Rizal, further certifies that 'Registry Receipts Nos. 0215 and 0216 addressed to Atty. Abraham F. Sarmiento of the Magdalena Estate, Quezon City and the Honorable Court of Appeals, respectively, does not appear in our Registry Record Book which was allegedly posted at this office on January 15, 1969.'"From the foregoing, it is immediately apparent that the motion for extension of time to file their printed Record on Appeal supposedly mailed to the plaintiffs on January 15, 1969 was not really mailed on that date but evidently on a date much later than January 15, 1969. This is further confirmed by the affidavit of Flaviano Malindog, a letter carrier of the Makati Post Office. In his said affidavit, Malindog swore among others: "'That on February 7, 1969, JUANITO D. QUIACHON approached me at the Makati Post Office and talked to me about certain letters which his employer had asked him to mail and that I should help him do something about the matter; but I asked him what they were all about, and he told me that they were letters for the Court of Appeals and for Atty. Abraham Sarmiento and that his purpose was to show that they were posted on January 15, 1969; that I inquired further, and he said that the letters were not so important and that his only concern was to have them postmarked January 15, 1969; "'That believing the word of JUANITO QUIACHON that the letters were not really important I agreed to his request; whereupon I got two (2) registry receipts from an old registry receipt booklet which is no longer being used and I numbered them 0215 for the letter addressed to Atty. Abraham Sarmiento in Quezon City and 0216 for the letter addressed to the Court of Appeals, Manila; that I placed the same numbering on the respective envelopes containing the letters; and that I also postmarked them January 15, 1969; "'That to the best of my recollection I wrote the correct date of posting, February 7, 1969 on the back of one or both of the registry receipts above mentions; "'That the correct date of posting, February 7, 1969 also appears in the Registry Bill Books for Quezon City and Manila where I entered the subject registered letters;' - On September 5, 1969, after the rendition of the foregoing resolution, the Court of Appeals promulgated another, denying the motion for reconsideration of the petitioners, but, at the same time, accepting as satisfactory the explanation of Atty. Patrocinio R. Corpuz why he should not be suspended from the practice of the legal profession. ISSUES 1. WON the appeal should be dismissed because the motion for extension wasnt mailed within the reglementary period 2. Assuming that it shouldnt, WON the contract of sale perfected between Lorenzo Velasco and Magdalena Estate, Inc. HELD 1. YES - The testimony of Flaviano Malindog, a letter carrier of the Makati Post Office, is worthy of belief. The Court of Appeals did not gravely abuse its discretion and did not act without or in excess of its jurisdiction. We share the view of the appellate court that the certifications issued by the two postmasters of Makati, Rizal and the sworn declaration of the mail carrier Malindog describing how the said registry receipts came to be issued, are worthy of belief. - This Court held in Bello vs. Fernando that the right to appeal is not a natural right nor a part of due process; it is merely a statutory privilege and may he exercised only in the manner provided by law. In this connection, the Rules of Court expressly makes it the duty of an appellant to file a printed record on appeal with the Court of Appeals within sixty (60) days from receipt of notice from the clerk of that court that the record on appeal approved by the trial court has already been received by the said court. 2. NO - A reading of the record, however, persuades the SC that the judgment a quo is substantially correct and morally just. The

appealed decision of the court a quo narrates both the alleged and proven facts of the dispute between the petitioners and the respondent, as follows: "This is a suit for specific performance filed by Lorenzo Velasco against the Magdalena Estate, Inc. on the allegation that on November 29, 1962 the plaintiff and the defendant had entered into a contract of sale by virtue of which the defendant offered to sell the plaintiff and the plaintiff in torn agreed to buy a parcel of land with an area of 2,059 square meters more particularly described as Lot 15, Block 7, Psd6129, located at No. 39 corner 6th Street and Pacific Avenue, New Manila, this City, for the total purchase price of P100,000.00. "It is alleged by the plaintiff that the agreement was that the plaintiff was to give a down payment of P10,000.00 to be followed by P20,000.00 and the balance of P70,000.00 would be paid in installments, the equal monthly amortization of which was to be determined as soon as the P30,000.00 down payment had been completed. It is further alleged that the plaintiff paid the down payment of P10,000.00 on November 29, 1962 as per receipt No. 207848 and that when on January 8, 1964 he tendered to the defendant the payment of the additional P20,000.00 to complete the P30,000.00 the defendant refused to accept and that eventually it likewise refused to execute a formal deed of sale obviously agreed upon. The plaintiff demands P25,000.00 exemplary damages, P2,000.00 actual damages and P7,000.00 attorney's fees. "The defendant, in its Answer, denies that it has had any direct-dealings, much less, contractual relations with the plaintiff regarding the property in question, and contends that the alleged contract is entirely unenforceable under the Statute of Frauds; that the truth of the matter is that a portion of the property in question was being leased by a certain Socorro Velasco who, on November 29, 1962, went to the office of the defendant indicated her desire to purchase the lot; that the defendant indicated its willingness to sell the property to her at the price of P100,000.00 under the condition that a down payment of P30,000.00 be made, P20,000.00 of which was to be paid on November 31, 1962, and that the balance of P70,000.00 including interest at 9% per annum was to be paid on installments for a period of ten years at the rate of P5,381.32 on June 30 and December of every year until the same shall have been fully paid; that on November 29, 1962 Socorro Velasco offered to pay P10,000.00 as initial payment instead of the agreed P20,000.00 but because the amount was short of the alleged P20,000.00 the same was accepted merely as deposit and upon request of Socorro Velasco the receipt was made in the name of her brother-in-law the plaintiff herein; that Socorro Velasco failed to complete the down payment of P30,000.00 and neither has she paid any installments on the balance of P70,000.00 up to the present time; that it was only on January 8, 1964 that Socorro Velasco tendered payment of P20,000.00, which offer the defendant refused to accept because it had considered the offer to sell rescinded on account of her failure to complete the down payment on or before December 31, 1962. "The lone witness for the plaintiff is Lorenzo Velasco, who exhibits the receipt, Exhibit A, issued in his favor by the Magdalena Estate, Inc., in the sum of P10,000.00 dated November 29, 1962. He also identifies a letter (Exh. B) of the Magdalena Estate, Inc. addressed to him and his reply thereto. He testifies that Socorro Velasco is his sister-in-law and that he had requested her to make the necessary contacts with the defendant referring to the purchase of the property in question. Because he does not understand English well, he had authorized her to negotiate with the defendant in her own name. But even so, he had always accompanied her whenever she went to the office of the defendant, and as a matter of fact, the receipt for the P10,000.00 down payment was issued in his favor. The plaintiff also depends on Exhibit A to prove that there was a perfected contract to sell calling attention to the annotations therein as follows: 'Earnest money for the purchase of Lot 15, Block 7, Psd-6129,

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Area 2,059 square meters including improvements thereon P10,000.00.' At the bottom of Exhibit A the following appears: 'Agreed price: P100,000.00, P30,000.00 down payment, bal. in 10 years.' "There does not seem to be any dispute regarding the fact that the Velasco family was leasing this property from the Magdalena Estate, Inc. since December 29, 1961; that the Velasco family sometime in 1962 offered to purchase the lot as a result of which Lorenzo Velasco thru Socorro Velasco made the P10,000.00 deposit or, in the language of the defendant 'earnest money or down payment' as evidenced by Exhibit A. The only matter that remains to be decided is whether the talks between the Magdalena Estate, Inc. and Lorenzo Velasco either directly or thru his sister-inlaw Socorro Velasco ever ripened into a consummated sale. It is the position of the defendant (1) that the sale was never consummated and (2) that the contract is unenforceable under the Statute of Frauds. - Lorenzo Velasco argues that the down payment was met because of the rental payments made by him to the defendant in behalf of Socorro Velasco. This is untenable. It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under article 1482 of the new Civil Code, as the petitioners themselves admit that some essential matter the terms of payment still had to be mutually covenanted. Disposition The petition is DENIED.