G.R. No.

125283

February 10, 2006

PAN PACIFIC INDUSTRIAL SALES CO., INC., Petitioner, vs. COURT OF APPEALS and NICOLAS CAPISTRANO, Respondents.
TINGA, J.: Petitioner Pan Pacific Industrial Sales Co., Inc. (Pan Pacific) filed the instant Petition for Review on Certiorari1assailing the Decision2 dated 4 June 1996 of the Court of Appeals Fourteenth Division in C.A. G.R. No. CV-41112. The challenged Decision affirmed in toto the Decision3 dated 24 April 1992 of the Regional Trial Court (RTC) of Manila, Branch 18 in Civil Case No. 8846720. The case arose when on 22 December 1988, private respondent Nicolas Capistrano (Capistrano) filed an Amended Complaint 4 before the RTC of Manila against Severo C. Cruz III (Cruz), his spouse Lourdes Yap Miranda, and Atty. Alicia Guanzon, 5 pleading two causes of action.6 The first cause of action is for the nullification, or alternatively, for the "rescission," of a Deed of Absolute Sale 7covering a parcel of land that Capistrano owned, located at 1821 (Int.), Otis Street (now Paz Guanzon Street), Paco, Manila, and covered by Transfer Certificate of Title (TCT) No. 143599 to Cruz.8 This is the subject lot. Capistrano denied having executed the deed. The second cause of action is for the rescission of another agreement with an alternative prayer for specific performance. Capistrano alleged that he agreed to sell another parcel of land in the same vicinity to Cruz. According to Capistrano, Cruz only paid P100,000.00 of the stipulated purchase price, thereby leavingP250,000.00 still unpaid.9 The operative facts follow. On 10 September 1982, Capistrano executed a Special Power of Attorney 10 authorizing Cruz to mortgage the subject lot in favor of Associated Bank (the Bank) as security for the latters loan accommodation. 11 Shortly, by virtue of the Special Power of Attorney, Cruz obtained a loan in the amount of P500,000.00 from the Bank. Thus, he executed a Real Estate Mortgage12 over the subject lot in favor of the Bank.13 Capistrano and Cruz then executed a letter-agreement dated 23 September 1982 whereby Cruz agreed to buy the subject lot for the price of P350,000.00, of which P200,000.00 would be paid out of the loan secured by Cruz, and the balance of P150,000.00 in eight (8) quarterly payments of P18,750.00 within two (2) years from 30 October 1982, without need of demand and with interest at 18% in case of default.14 On 15 March 1983, Capistrano executed the Deed of Absolute Sale 15 over the subject lot in favor of Cruz. Two (2) days later, on 17 March 1983, Notary Public Vicente J. Benedicto (Benedicto) notarized the deed. However, it was earlier or on 9 March 1983 that Capistranos wife, Josefa Borromeo Capistrano, signed the Marital Consent 16evidencing her conformity in advance to the sale. The Marital Consent was also sworn to before Benedicto. Following the execution of the deed of sale, Cruz continued payments to Capistrano for the subject lot. Sometime in October 1985, Capistrano delivered to Cruz a Statement of Account 17 signed by Capistrano, showing that as of 30 October 1985, Cruzs balance stood at P19,561.00 as principal, and P3,520.98 as interest, or a total ofP23,081.98. Thus, in May 1987, with the mortgage on the subject lot then being in danger of foreclosure by the Bank, Cruz filed a case with the RTC of Manila, Branch 11, docketed as Civil Case No. 87-40647, to enjoin the foreclosure. Cruz impleaded Capistrano and his spouse Josefa Borromeo Capistrano as defendants, the title to the subject lot not having been transferred yet to his name. 18 Cruz also devised a way to save the subject lot from foreclosure by seeking a buyer for it and eventually arranging for the buyer to pay the mortgage debt. Towards this end, Cruz succeeded in engaging Pan Pacific. Thus, on 22 September 1988, Pan Pacific paid off Cruzs debt in the amount of P1,180,000.00.19 Consequently, on 23 September 1988, the Bank executed a Cancellation of Real Estate Mortgage. 20 On even date, Cruz executed a Deed of Absolute Sale21 over the subject lot in favor of Pan Pacific, attaching thereto the previous Deed of Absolute Saleexecuted by Capistrano in favor of Cruz.

Surprisingly, on 20 October 1988, Capistrano filed a Revocation of Special Power of Attorney 22 with the Register of Deeds of Manila. Less than a week later, Capistrano sent the Register of Deeds another letter informing said officer of his having come to know of the sale of the subject lot by Cruz to Pan Pacific and requesting the officer to withhold any action on the transaction.23 Before long, in November 1988, Capistrano filed the precursory complaint before the Manila RTC in Civil Case No. 88-46720. Pan Pacific, which bought the subject lot from the Cruz spouses, was allowed to intervene in the proceedings and joined Cruz, et al. in resisting the complaint insofar as the first cause of action on the subject lot is concerned. 24 Then on 24 April 1992, a Decision was rendered by the trial court in favor of Capistrano on both causes of action, the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, Severo E. (sic) Cruz III, his spouse, Lourdes Miranda Cruz, and the intervenor, Pan Pacific Industrial Sales Co., Inc., as follows: 1. Declaring the Letter-Agreement, dated September 23, 1982, Exhibit "C", as resolved and/or rescinded; 2. Declaring both the Deed of Absolute Sale, Exhibit "H", and the document entitled, "Marital Consent", Exhibit "K", null and void; 3. Declaring the Deed of Absolute Sale executed by the spouses Severo C. Cruz, III and Lourdes Miranda Cruz in favor of the intervenor, Pan Pacific Industrial Sales, Co., Inc., Exhibit "8", null and void; 4. Making the writ of preliminary injunction issued by this Court on November 23, 1988, permanent; 5. Ordering the intervenor, thru its legal counsel and corporate secretary, Atty. Senen S. Burgos, who has possession of the owners copy of TCT No. 143599 of the Register of Deeds of Manila, in the name of the plaintiff, to surrender the same to this Court within ten days from finality of the decision for turn over to the plaintiff; 6. Ordering Defendant Register of Deeds of Manila to reject and not give due course to the documents submitted to it, which have for their purpose the transfer of the real estate property covered by TCT No. 143599 from the name of the plaintiff to Defendant Cruz and/or to the intervenor; and 7. Ordering the spouses Severo C. Cruz, III and Lourdes Miranda Cruz to pay the plaintiff the sum ofP69,561.00 as net amount due to the latter as per the computation in the end-part of this decision. The counterclaims of both Severo C. Cruz, III and spouse, and of the intervenor, Pan Pacific Industrial Sales Co., Inc., are both dismissed, for lack of merit. Double costs against the defendants-Cruz spouses. SO ORDERED.25 To arrive at the conclusion that the first Deed of Absolute Sale and the Marital Consent are spurious, the trial court mainly relied on Capistranos disavowal of his signature and that of his wifes, together with extrinsic factors which in its opinion evinced the spuriousness. Pan Pacific and the Cruz spouses interposed separate appeals to the Court of Appeals, their common concern being the trial courts finding that the Deed of Absolute Sale and the Marital Consent were spurious.26 In assailing this finding, Pan Pacific and the Cruz spouses contended that Capistrano failed to present clear and convincing evidence to overturn the presumption of regularity of public documents like the documents in question. 27 The Court of Appeals affirmed the RTC Decision. Concerning the subject lot, it held that while a notarial document cannot be disproved by the mere denial of the signer, the denial in this case should be taken together with the other circumstances of the case which in sum constitute clear and convincing evidence sufficient to overcome the presumption of regularity of the documents. 28 The Cruz spouses did not elevate the Court of Appeals Decision to this Court. Thus, the RTC Decision became final as to them.

Pan Pacific, however, filed the instant Petition solely concerning the first cause of action in the Amended Complaint . Pan Pacific contends that the genuineness and due execution of the Deed of Absolute Sale and Marital Consent cannot be overridden by the selfserving testimony of Capistrano. It stresses that the trial court cannot rely on irrelevant extrinsic factors to rule against the genuineness of the deed.29 Finally, it points out that Capistrano cannot contest the sale of the subject lot to Cruz, as the sale had already been consummated.30 For his part, Capistrano posits in his Memorandum31 that Pan Pacific is not an innocent purchaser for value and in good faith as Cruz was never the registered owner of the subject lot. Pan Pacific was bound at its peril to investigate the right of Cruz to transfer the property to it. Moreover, Capistrano asserts that the legal presumption of regularity of public documents does not obtain in this case as the documents in question were not properly notarized. He adds that the parties never appeared before the notary public as in fact the deed had only been delivered by Capistrano to the house of Cruzs mother. Furthermore, Capistrano maintains that his spouses signature on the Marital Consent is a forgery as it was virtually impossible for her to have signed the same. Lastly, Capistrano disputes Cruzs assertion that the sale had been consummated, pointing out that the Amended Complaint consisted of two (2) causes of action pertaining to two (2) separate lots, and Cruz had only paid P100,000.00 of the total price of the lot subject of the second cause of action. 1avvphil.net The petition is imbued with merit. Pan Pacific disputes the common conclusion reached by the courts below that the presumption of regularity of the Deed of Absolute Sale and the Marital Consent, which in its estimation are both public document s, has been rebutted by Capistranos countervailing evidence. The correctness of the conclusions on the alleged spuriousness of the documents in question drawn by the courts below from the facts on record is before this Court. The issue is a question of law cognizable by the Court.32 Deeply embedded in our jurisprudence is the rule that notarial documents celebrated with all the legal requisites under the safeguard of a notarial certificate is evidence of a high character and to overcome its recitals, it is incumbent upon the party challenging it to prove his claim with clear, convincing and more than merely preponderant evidence. 33 A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and it has in its favor the presumption of regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy as to the falsity of the certificate. Absent such, the presumption must be upheld. The burden of proof to overcome the presumption of due execution of a notarial document lies on the one contesting the same. Furthermore, an allegation of forgery must be proved by clear and convincing evidence, and whoever alleges it has the burden of proving the same. 34 Evidently, as he impugns the genuineness of the documents, Capistrano has the burden of making out a clear-cut case that the documents are bogus. The courts below both concluded that Capistrano had discharged this burden. However, this Court does not share the conclusion. Indeed, Capistrano failed to present evidence of the forgery that is enough to overcome the presumption of authenticity. To support the allegation of the spuriousness of his signature on the Deed of Absolute Sale and that of his wife on the Marital Consent, Capistrano relied heavily on his bare denial, at the same time taking sanctuary behind other circumstances which supposedly cast doubt on the authenticity of the documents. Capistrano did not bother to present corroborating witnesses much less an independent expert witness who could declare with authority and objectivity that the challenged signatures are forged. It befuddles the Court why both the courts below did not find this irregular considering that the Court has previously declared in Sy Tiangco v. Pablo and Apao,,35 "that the execution of a document that has been ratified before a notary public cannot be disproved by the mere denial of the alleged signer." The case of Chilianchin v. Coquinco36 also finds application in this regard wherein we stated that: As the lower court correctly said, the plaintiff did not even present a sample of his authentic signature to support his contention that it is not his the (sic) signature appearing in said document. He did not call a handwriting expert to prove his assertion. His attorney, at the beginning of the trial, made it of record that if the defendant present an expert in hand-writing to show that the signature in question is genuine, the plaintiff will also present an expert to the contrary, as if it were incumbent upon the defendant to show that the signature of the plaintiff in Exhibit A is genuine . . . . 37 Corollarily, he who disavows the authenticity of his signature on a public document bears the responsibility to present evidence to that effect. Mere disclaimer is not sufficient. At the very least, he should present corroborating witnesses to prove his assertion. At best, he should present an expert witness.

On the other hand, the Court cannot understand why an unfavorable inference arose not from Capistranos but from Cruzs failure to have the documents examined by an expert witness of the National Bureau Investigation (NBI) and to present the notary public as witness. Specifically, the courts below took Cruzs inability to obtain the NBI examination of the documents as he had somehow undertaken as an indication that the documents are counterfeit. 38 The courts below may have forgotten that on Capistrano lies the burden to prove with clear and convincing evidence that the notarized documents are spurious. Nothing in law or jurisprudence reposes on Cruz the obligation to prove that the documents are genuine and duly executed. Hence it is not incumbent upon Cruz to call the notary public or an expert witness. In contrast, Capistrano should have called the expert witness, the notary public himself or the witnesses to the document to prove his contention that he never signed the deed of sale, that its subscribing witnesses never saw him sign the same, and that he never appeared before the notary public before whom the acknowledgment was made. In fact, there is no evidence that the notarization of the documents did not take place. All that Capistrano could say on this matter was that he had not seen Benedicto, the notary public.39 The assertion that the parties to the deednever appeared before the notary public is not supported by evidence either. The courts below drew an inference to that effect from Cruzs testimony that the deed of sa le was dropped or delivered to his mothers house. 40 That is not a reasonable deduction to make as it is plainly conjectural. No conclusion can be derived therefrom which could destroy the genuineness of the deed. The testimony means what it declares: that the copy of the deed was dropped at the house of Cruzs mother. That is all. Nor can the Court lend credence to the thinking of the courts below that since Cruz had a balance of P132,061.00 owing to Capistrano as of the date of the deed of sale, the latter could not have possibly executed the deed. This is plain guesswork. From the existence of Cruzs outstanding balance, the non-existence of the deed of sale does not necessarily follow. Indeed, a vendor may agree to a deed of absolute sale even before full payment of the purchase price. Article 1478 of the Civil Code states that "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price." A sensu contrario, the parties may likewise stipulate that the ownership of the property may pass even if the purchaser has not fully paid the price. The courts below also assigned an adverse connotation to Cruzs impleading of the Capistrano spouses as party -defendants in the action against the Bank to enjoin the foreclosure of the mortgage on the subject lot. Cruzs move is congruent with both his strong desire to protect his interest in the subject lot and the reality that there was an existing deed of sale in his favor. Precisely, his interest in the lot is borne out and had arisen from the deed of sale. As purchaser of the lot, he had to avert the foreclosure of the mortgage thereon. And to ensure against the dismissal of the action for failure to join a real party-in-interest, he had to implead Capistrano in whose name the title to the subject lot was registered still. Apart from Capistranos abject failure to overcome the presumption of regularity and genuineness with which the Deed of Absol ute Sale is impressed as a public document, Capistranos cause is eviscerated by his own acts in writing before and after the execution of the deed. Said written acts constitute indelible recognition of the existence and genuineness of the Deed of Absolute Sale. First is the letter-agreement41 dated 23 September 1982 made and signed by Capistrano in favor of Cruz, which the latter also signed subsequently, stating that Cruz will, as he did, purchase the subject lot for P350,000.00 to be paid according to the terms provided therein. Second is the Statement of Account42 signed by Capistrano, which he delivered to Cruz, showing that as of 30 October 1985, Cruzs balance of the stipulated purchase price consisted of P19,561.00 as principal andP3,520.98 as interest, or a total of P23,081.98. Third is Capistranos Amended Complaint itself which illustrates his own manifest uncertainty as to the relief he was seeking in court. He demanded that the Deed of Absolute Sale be nullified yet he prayed in the same breath for the "rescission" of the same 43 evidently, a self-defeating recognition of the contract. In asking for "rescission," Capistrano obviously was invoking Article 1191 of the Civil Code which provides that the "power to rescind," which really means to resolve or cancel, is implied in reciprocal obligations "in case one of the obligors should not comply with what is incumbent upon him." When a party asks for the resolution or cancellation of a contract it is implied that he recognizes its existence. A non-existent contract need not be cancelled. These are unmistakable written admissions of Capistrano that he really intended to sell the subject lot to Cruz and that he received payments for it from the latter as late as the year 1985. It is thus a little baffling why in 1988, he decided to disown the Deed of Absolute Sale. The most plausible explanation for his sudden change of mind would be his belated realization that he parted with the subject lot for too small an amount (P350,000.00), compared to the price pegged by Cruz (P1,800,000.00) in the sale to Pan Pacific.

Now, to the Marital Consent. The fact that the document contains a jurat, not an acknowledgment, should not affect its genuineness or that of the related document of conveyance itself, the Deed of Absolute Sale. In this instance, a jurat suffices as the document only embodies the manifestation of the spouses consent,44 a mere appendage to the main document. The use of a jurat, instead of an acknowledgement does not elevate the Marital Consent to the level of a public document but instead consigns it to the status of a private writing.45 The lack of acknowledgment, however, does not render a deed invalid. The necessity of a public document for contracts which transmit or extinguish real rights over immovable property, as mandated by Article 1358 of the Civil Code, is only for convenience; it is not essential for validity or enforceability. 46 From the perspective of the law on evidence, however, the presumption of regularity does not hold true with respect to the Marital Consent which is a private writing. It is subject to the requirement of proof under Section 20, Rule 132 of the Rules of Court which states: Section 20. Proof of private document.- Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either: (a) By anyone who saw the document executed or written; or (b) By evidence of the genuineness of the signature or handwriting of the maker. Any other private document need only be identified as that which is claimed to be. The requirement of proof of the authenticity of the Marital Consent was adequately met, in this case, through the testimony of Cruz to the effect that, together with the other witnesses to the document, he was present when Capistranos wife affixed her signature thereon before notary public Benedicto.47 Viewed against this positive declaration, Capistranos negative and self-serving assertions that his wifes signature on the document was forged because "(i)t is too beautiful" and that his wife could not have executed the Mar ital Consent because it was executed on her natal day and she was somewhere else, crumble and become unworthy of belief. That the Marital Consent was executed prior to the Deed of Absolute Sale also does not indicate that it is phoney. A fair assumption is that it was executed in anticipation of the Deed of Absolute Sale which was accomplished a scant six (6) days later. With respect to whatever balance Cruz may still owe to Capistrano, the Court believes that this is not a concern of Pan Pacific as the latter is not a party to the Deed of Absolute Sale between Capistrano and Cruz. But of course, Pan Pacific should enjoy full entitlement to the subject lot as it was sold to him by Cruz who earlier had acquired title thereto absolutely and unconditionally by virtue of the Deed of Absolute Sale. Otherwise laid down, Cruz had the right to sell the subject lot to Pan Pacific in 1988, as he in fact did. Thus, the question of whether or not Pan Pacific is a purchaser in good faith should be deemed irrelevant. 1avvphil.net WHEREFORE, the Petition is GRANTED. The Decision dated 4 June 1996 of the Court of Appeals in CA-G.R. CV No. 41112 is REVERSED and SET ASIDE. Respondent Nicolas Capistrano is ordered to surrender the owners duplicate certificate of Transfer o f Certificate of Title No. 143599 to the Register of Deeds of Manila to enable the issuance of a new title over the subject lot in the name of petitioner Pan Pacific Industrial Sales, Inc. Costs against respondent Nicolas Capistrano. SO ORDERED. G.R. No. 165881 April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner, vs. COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents CALLEJO, SR., J.: Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the Decision 1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the Resolution3of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision4of the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante. Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped assembling jeepneys and

retained only nine, four of which he operated by employing drivers on a "boundary basis." One of those drivers was respondent Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings as compensation for driving the vehicle. In August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where Bustamante would remit to Villarama P550.00 a day for a period of four years; Bustamante would then become the owner of the vehicle and continue to drive the same under Villamarias franch ise. It was also agreed that Bustamante would make a downpayment of P10,000.00. On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng BoundaryHulog"5 over the passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay the boundary-hulog for three days, Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears, including a penalty of P50.00 a day; in case Bustamante failed to remit the daily boundary-hulog for a period of one week, the Kasunduan would cease to have legal effect and Bustamante would have to return the vehicle to Villamaria Motors. Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from Villamaria Motors. Thus, Bustamante was authorized to operate the vehicle to transport passengers only and not for other purposes. He was also required to display an identification card in front of the windshield of the vehicle; in case of failure to do so, any fine that may be imposed by government authorities would be charged against his account. Bustamante further obliged himself to pay for the cost of replacing any parts of the vehicle that would be lost or damaged due to his negligence. In case the vehicle sustained serious damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs. Bustamante was not allowed to wear slippers, short pants or undershirts while driving. He was required to be polite and respectful towards the passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased for two or more days and was required to attend any meetings which may be called from time to time. Aside from the boundary-hulog, Bustamante was also obliged to pay for the annual registration fees of the vehicle and the premium for the vehicles comprehensive insurance. Bustamante promised to strictly comply with the rules and regulations imposed by Villamaria for the upkeep and maintenance of the jeepney. Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed upon, he made daily remittances of P550.00 in payment of the purchase price of the vehicle. Bustamante failed to pay for the annual registration fees of the vehicle, but Villamaria allowed him to continue driving the jeepney. In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed to pay their respective boundary-hulog. This prompted Villamaria to serve a "Paalala," 6 reminding them that under the Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their respective jeepneys would be returned to him without any complaints. He warned the drivers that the Kasunduan would henceforth be strictly enforced and urged them to comply with their obligation to avoid litigation. On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from driving the vehicle. On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife Teresita. In his Position Paper,8 Bustamante alleged that he was employed by Villamaria in July 1996 under the boundary system, where he was required to remit P450.00 a day. After one year of continuously working for them, the spouses Villamaria presented the Kasunduan for his signature, with the assurance that he (Bustamante) would own the jeepney by March 2001 after paying P550.00 in daily installments and that he would thereafter continue driving the vehicle along the same route under the same franchise. He further narrated that in July 2000, he informed the Villamaria spouses that the surplus engine of the jeepney needed to be replaced, and was assured that it would be done. However, he was later arrested and his drivers license was confiscated because apparently, the replacement en gine that was installed was taken from a stolen vehicle. Due to negotiations with the apprehending authorities, the jeepney was not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and he was no longer allowed to drive the vehicle since then unless he paid them P70,000.00. Bustamante prayed that judgment be rendered in his favor, thus: WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered ordering the respondents, jointly and severally, the following: 1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed of Sale in favor of the complainant relative to the PUJ with Plate No. PVU-660; 2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits computed from July 24, 2000 up to the time of his actual reinstatement;

3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses incurred by the complainant in the repair and maintenance of the subject jeep; 4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day counted from August 7, 1997 up to June 2000 or a total of P91,200.00; 5. To pay moral and exemplary damages of not less than P200,000.00; 6. Attorneys fee[s] of not less than 10% o f the monetary award. Other just and equitable reliefs under the premises are also being prayed for. 9 In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but alleged that Bustamante failed to pay the P10,000.00 downpayment and the vehicles annual r egistration fees. They further alleged that Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a day, which prompted them to issue the Paalaala. Instead of complying with his obligations, Bustamante stopped making his remittances despite his daily trips and even brought the jeepney to the province without permission. Worse, the jeepney figured in an accident and its license plate was confiscated; Bustamante even abandoned the vehicle in a gasoline station in Sucat, Paraaque City for two weeks. When the security guard at the gasoline station requested that the vehicle be retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante told her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were worn, the alternator was gone, and the battery was no longer working. Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency Corporation v. NLRC,12 the spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan executed on August 7, 1997 transformed the employer-employee relationship into that of vendor-vendee. Hence, the spouses concluded, there was no legal basis to hold them liable for illegal dismissal. They prayed that the case be dismissed for lack of jurisdiction and patent lack of merit. In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the conduct of his employment. He maintained that the rulings of the Court in National Labor Union v. Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free Workers v. Abbas16 are germane to the issue as they define the nature of the owner/operator-driver relationship under the boundary system. He further reiterated that it was the Villamaria spouses who presented the Kasunduan to him and that he conformed thereto only upon their representation that he would own the vehicle after four years. Moreover, it appeared that the Paalala was duly received by him, as he, together with other drivers, was made to affix his signature on a blank piece of paper purporting to be an "attendance sheet." On March 15, 2002, the Labor Arbiter rendered judgment 17 in favor of the spouses Villamaria and ordered the complaint dismissed on the following ratiocination: Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim that complainant violated the terms of their contract and afterwards abandoned the vehicle assigned to him. As against the foregoing, [the] complaints (si c) mere allegations to the contrary cannot prevail. Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees.18 Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the employer-employee relationship between him and Villamaria. While he did not receive fixed wages, he kept only the excess of the boundary-hulog which he was required to remit daily to Villamaria under the agreement. Bustamante maintained that he remained an employee because he was engaged to perform activities which were necessary or desirable to Villamarias trade or business. The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus: WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not stated in the Labor Arbiter's decision but mainly on a jurisdictional issue, there being none over the subject matter of the controversy. 21 The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for Reconsideration, which the NLRC resolved to deny on May 30, 2003. 22 Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred

I IN DISMISSING PETITIONERS APPEAL "FOR REASON NOT STATED IN THE LABOR ARBITERS DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;" II IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23 Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued to be that of employeremployee and as such, the Labor Arbiter had jurisdiction over his complaint. He further alleged that it is common knowledge that operators of passenger jeepneys (including taxis) pay their drivers not on a regular monthly basis but on commission or boundary basis, or even the boundary-hulog system. Bustamante asserted that he was dismissed from employment without any lawful or just cause and without due notice. For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee relationship. He further pointed out that the Dinglasan case pertains to the boundary system and not the boundary-hulog system, hence inapplicable in the instant case. He argued that upon the execution of the Kasunduan, the juridical tie between him and Bustamante was transformed into a vendorvendee relationship. Noting that he was engaged in the manufacture and sale of jeepneys and not in the business of transporting passengers for consideration, Villamaria contended that the daily fees which Bustmante paid were actually periodic installments for the the vehicle and were not the same fees as understood in the boundary system. He added that the boundary-hulog plan was basically a scheme to help the driver-buyer earn money and eventually pay for the unit in full, and for the owner to profit not from the daily earnings of the driver-buyer but from the purchase price of the unit sold. Villamaria further asserted that the apparently restrictive conditions in the Kasunduan did not mean that the means and method of driver-buyers conduct was controlled, but were mere ways to preserve the vehicle for the benefit of both parties: Villamaria would be able to collect the agreed purchase price, while Bustamante would be assured that the vehicle would still be in good running condition even after four years. Moreover, the right of vendor to impose certain conditions on the buyer should be respected until full ownership of the property is vested on the latter. Villamaria insisted that the parallel circumstances obtaining in Singer Sewing Machine Company v. Drilon24 has analogous application to the instant issue. In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of the decision reads: UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE, and judgment entered in favor of petitioner: 1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation pay computed from the time of his employment up to the time of termination based on the prevailing minimum wage at the time of termination; and, 2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back wages computed from the time of his dismissal up to March 2001 based on the prevailing minimum wage at the time of his dismissal. Without Costs. SO ORDERED.26 The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamantes complaint. Under t he Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and employer-employee. The CA ratiocinated that Villamarias exercise of control over Bustamantes conduct in operating the jeepney is inconsistent with the formers claim that he was not engaged in the transportation business. There was no evidence that petitioner was allowed to let some other person drive the jeepney. The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean that Villamaria could not exercise it. It explained that the existence of an employment relationship did not depend on how the worker was paid but on the presence or absence of control over the means and method of the employees work. In this case, Villamarias directives (to drive carefully, wear an identification card, don decent attire, park the vehicle in his garage, and to inform him about provincial trips, etc.) was a means to control the way in which Bustamante was to go about his work. In view of Villamarias supervision and control as employer, the fact that the "boundary" represented installment payments of the purchase price on the jeepney did not remove the parties employer-employee relationship.

While the appellate court recognized that a weeks default in paying the boundary-hulog constituted an additional cause for terminating Bustamantes employment, it held that the latter was illegally dismissed. According to the CA, assuming that Bust amante failed to make the required payments as claimed by Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for Bustamante to abandon it. It also pointed out that Villamaria neither submitted any police report to support his claim that the vehicle figured in a mishap nor presented the affidavit of the gas station guard to substantiate the claim that Bustamante abandoned the unit. Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a motion for reconsideration thereof. The CA denied the motion in a Resolution27 dated November 2, 2004, and Villamaria received a copy thereof on November 8, 2004. Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of the Rules of Court, alleging that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling that the juridical relationship between him and respondent under the Kasunduan was a combination of employer-employee and vendor-vendee relationships. The terms and conditions of the Kasunduan clearly state that he and respondent Bustamante had entered into a conditional deed of sale over the jeepney; as such, their employer-employee relationship had been transformed into that of vendor-vendee. Petitioner insists that he had the right to reserve his title on the jeepney until after the purchase price thereof had been paid in full. In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal via a petition for review on certiorari under Rule 45 of the Rules of Court and not a special civil action of certiorari under Rule 65. He argues that petitioner failed to establish that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in its decision, as the said ruling is in accord with law and the evidence on record. Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a boundary-hulog scheme was a devious circumvention of the Labor Code of the Philippines. Respondent insists that his juridical relationship with petitioner is that of employer-employee because he was engaged to perform activities which were necessary or desirable in the usual business of petitioner, his employer. In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence, it behooves the Court to resolve the merits of his petition. We agree with respondents contention that the remedy of petitioner from the CA decision was to file a petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his motion for the reconsideration within which to file the petition under Rule 45. 28 But instead of doing so, he filed a petition for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend the running of the 15-day reglementary period; consequently, the CA decision became final and executory upon the lapse of the reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed. 29 It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is proscribed by the remedy of appeal under Rule 45. As the Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals: 30 We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or issues of law within fifteen days from notice of the said resolution. Otherwise, the decision of the CA shall become final and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal to this Court from the decision of the CA. It is a continuation of the appellate process over the original case. A review is not a matter of right but is a matter of judicial discretion. The aggrieved party may, however, assail the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty days from notice of the decision of the CA or its resolution denying the motion for reconsideration of the same. This is based on the premise that in issuing the assailed decision and resolution, the CA acted with grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy and adequate remedy in the ordinary course of law. A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower court. The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. The aggrieved party is, likewise, barred from filing a petition for certiorari if the remedy of appeal is lost through his negligence. A petition for certiorari is an original action and does not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding. A petition for certiorari must be based on jurisdictional grounds because, as long as the respondent court acted within its jurisdiction, any error committed by it will amount to nothing more than an error of judgment which may be corrected or reviewed only by appeal.31

However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under Rule 45, conformably with the principle that rules of procedure are to be construed liberally, provided that the petition is filed within the reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid and compelling circumstances warrant that the petition be resolved on its merits.32 In this case, the petition was filed within the reglementary period and petitioner has raised an issue of substance: whether the existence of a boundary-hulog agreement negates the employer-employee relationship between the vendor and vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such case. We resolve these issues in the affirmative. The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency of the government has jurisdiction over the same, are determined by the material allegations of the complaint in relation to the law involved and the character of the reliefs prayed for, whether or not the complainant/plaintiff is entitled to any or all of such reliefs.33 A prayer or demand for relief is not part of the petition of the cause of action; nor does it enlarge the cause of action stated or change the legal effect of what is alleged.34 In determining which body has jurisdiction over a case, the better policy is to consider not only the status or relationship of the parties but also the nature of the action that is the subject of their controversy. 35 Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only over the following: x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work, and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relationship, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (c) Cases arising from the interpretation or implementation of collective bargaining agreements, and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite.36 The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes or their collective bargaining agreement. 37 Not every dispute between an employer and employee involves matters that only the Labor Arbiter and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees where the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the regular courts. 38 When the principal relief is to be granted under labor legislation or a collective bargaining agreement, the case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might be asserted as an incident to such claim. 39 We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-employee relationship of the parties extant before the execution of said deed. As early as 1956, the Court ruled in National Labor Union v. Dinglasan 40 that the jeepney owner/operator-driver relationship under the boundary system is that of employer-employee and not lessor-lessee. This doctrine was affirmed, under similar factual settings, in

Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was analogously applied to govern the relationships between auto-calesa owner/operator and driver,43 bus owner/operator and conductor,44 and taxi owner/operator and driver.45 The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common carrier to primarily govern the compensation of the driver, that is, the latters daily earnings are remitted to the owner/operator less the excess of th e boundary which represents the drivers compensation. Und er this system, the owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels where the lessor loses complete control over the chattel leased but the lessee is still ultimately responsible for the consequences of its use. The management of the business is still in the hands of the owner/operator, who, being the holder of the certificate of public convenience, must see to it that the driver follows the route prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the business operations. The fact that the driver does not receive fixed wages but only the excess of the "boundary" given to the owner/operator is not sufficient to change the relationship between them. Indubitably, the driver performs activities which are usually necessary or desirable in the usual business or trade of the owner/operator. 46 Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which represented the boundary of petitioner as well as respondents partial payment (hulog) of the purchase price of the jeepney. Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily remittances also had a dual purpose: that of petitioners boundary and respondents partial payment (hulog) for the vehicle. This dual purpose was expres sly stated in the Kasunduan. The well-settled rule is that an obligation is not novated by an instrument that expressly recognizes the old one, changes only the terms of payment, and adds other obligations not incompatible with the old provisions or where the new contract merely supplements the previous one. 47 The two obligations of the respondent to remit to petitioner the boundary-hulog can stand together. In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind that when the terms of the agreement are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations shall prevail.48 The intention of the contracting parties should be ascertained by looking at the words used to project their intention, that is, all the words, not just a particular word or two or more words standing alone. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. 49 The parts and clauses must be interpreted in relation to one another to give effect to the whole. The legal effect of a contract is to be determined from the whole read together.50 Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as driver of the jeepney, thus: Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga sumusunod: 1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG. 2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o pangangalakal sa malinis at maayos na pamamaraan. 3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga bagay na makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG. 4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG. 5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa harap ng windshield upang sa pamamagitan nito ay madaliang malaman kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi. 6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID card sa wastong lugar o anuman kasalanan o kapabayaan. 7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan. 8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan.

9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng VILLAMARIA MOTORS. 10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang kasuotan upang igalang ng mga pasahero. 11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng magandang asal sa mga pasaheros at hindi dapat magsasalita ng masama kung sakali man may pasaherong pilosopo upang maiwasan ang anumang kaguluhan na maaaring kasangkutan. 12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng responsibilidad. Ang halagang dapat bayaran sa opisina ay may karagdagang multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA MOTORS. 13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG. 14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive insurance taon-taon at kahit anong uri ng aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG. 15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa ikasusulong ng samahan. 16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na magkakaroon ng pagbabago o karagdagan sa mga darating na panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan. 17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi kainisan ng kapwa driver at maiwasan ang pagkakasangkot sa anumang gulo. 18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito. 19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw sa lalawigan ay dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin. 20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang aksidente. 21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang maiwasan ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA MOTORS. 22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa.51 The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a contract to sell the jeepney on a daily installment basis of P550.00 payable in four years and that petitioner would thereafter become its owner. A contract is one of conditional sale, oftentimes referred to as contract to sell, if the ownership or title over the property sold is retained by the vendor, and is not passed to the vendee unless and until there is full payment of the purchase price and/or upon faithful compliance with the other terms and conditions that may lawfully be stipulated. 52 Such payment or satisfaction of other preconditions, as the case may be, is a positive suspensive condition, the failure of which is not a breach of contract, casual or

serious, but simply an event that would prevent the obligation of the vendor to convey title from acquiring binding force. 53 Stated differently, the efficacy or obligatory force of the vendor's obligation to transfer title 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.54 The vendor may extrajudicially terminate the operation of the contract, refuse conveyance, and retain the sums or installments already received, where such rights are expressly provided for. 55 Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material possession was vested in respondent as its driver. In case respondent failed to make his P550.00 daily installment payment for a week, the agreement would be of no force and effect and respondent would have to return the jeepney to petitioner; the employer-employee relationship would likewise be terminated unless petitioner would allow respondent to continue driving the jeepney on a boundary basis of P550.00 daily despite the termination of their vendor-vendee relationship. The juridical relationship of employer-employee between petitioner and respondent was not negated by the foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondents conduct as driver of the vehicle. As correctly ruled by the CA: The exercise of control by private respondent over petitioners conduct in operating the jeepney he was driving is inconsiste nt with private respondents claim that he is, or was, not engaged in the transportation business; that, even if petitioner was allowed to let some other person drive the unit, it was not shown that he did so; that the existence of an employment relation is not dependent on how the worker is paid but on the presence or absence of control over the means and method of the work; that the amount earned in excess of the "boundary hulog" is equivalent to wages; and that the fact that the power of dismissal was not mentioned in the Kasunduan did not mean that private respondent never exercised such power, or could not exercise such power. Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors about the fact that the unit would be going out to the province for two days of more, or to drive the unit carefully, etc. necessarily related to control over the means by which the petitioner was to go about his work; that the ruling applicable here is not Singer Sewing Machine but National Labor Union since the latter case involved jeepney owners/operators and jeepney drivers, and that the fact that the "boundary" here represented installment payment of the purchase price on the jeepney did not withdraw the relationship from that of employer-employee, in view of the overt presence of supervision and control by the employer.56 Neither is such juridical relationship negated by petitioners claim that the terms and conditions in the Kasunduan relative to respondents behavior and deportment as driver was for his and respondents benefit: to insure that respondent would be able to pay the requisite daily installment of P550.00, and that the vehicle would still be in good condition despite the lapse of four years. What is primordial is that petitioner retained control over the conduct of the respondent as driver of the jeepney. Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise supervision and control over the respondent, by seeing to it that the route provided in his franchise, and the rules and regulations of the Land Transportation Regulatory Board are duly complied with. Moreover, in a business establishment, an identification card is usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide employee of the firm who issues it.57 As respondents employer, it was the burden of petitioner to prove that respondents termination from employment was for a la wful or just cause, or, at the very least, that respondent failed to make his daily remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled by the appellate court: It is basic of course that termination of employment must be effected in accordance with law. The just and authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor Code. Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the boundary hulog for one week or longer may be considered an additional cause for termination of employment. The reason is because the Kasunduan would be of no force and effect in the event that the purchaser failed to remit the boundary hulog for one week. The Kasunduan in this case pertinently stipulates: 13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol pa. Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an employee is for a just cause. The failure of the employer to discharge this burden means that the dismissal is not justified and that the employee is entitled to reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that petitioner failed to pay the miscellaneous fee of P10,000.00 and the yearly registration of the unit; that petitioner also stopped remitting the "boundary hulog," prompting him (private respondent) to issue a "Paalala," which petitioner however ignored; that petitioner even brought the unit to his (petitioners) province without informing him (private respondent) about it; and that petitioner eventually abandoned the veh icle at a gasoline station after figuring in an accident. But private respondent failed to substantiate these allegations with solid, sufficient proof. Notably, private respondents allegation viz, that he retrieved the vehicle from the gas station, where petitioner abandoned it, contradicted his statement in the Paalala that he would enforce the provision (in the Kasunduan) to the effect that default in the remittance of the boundary hulog for one week would result in the forfeiture of the unit. The Paalala reads as follows: "Sa lahat ng mga kumukuha ng sasakyan "Sa pamamagitan ng BOUNDARY HULOG "Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa. "Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing Kasunduan kayat aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito. "Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso. "Sumasainyo "Attendance: 8/27/99 "(The Signatures appearing herein include (sic) that of petitioners) (Sgd.) OSCAR VILLAMARIA, JR." If it were true that petitioner did not remit the boundary hulog for one week or more, why did private respondent not forthwith take steps to recover the unit, and why did he have to wait for petitioner to abandon it? 1avvphil.net On another point, private respondent did not submit any police report to support his claim that petitioner really figured in a vehicular mishap. Neither did he present the affidavit of the guard from the gas station to substantiate his claim that petitioner abandoned the unit there.58 Petitioners claim that he opted not to terminate the employment of respondent because of magnanimity is negated by his (petitioners) own evidence that he took the jeepney from the respondent only on July 24, 2000. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner. SO ORDERED.

PLATINUM PLANS PHILS INC V. CUCUECO 488 SCRA 156 (2006)

FACTS: Respondent Cucueco filed a case for specific performance with damages against petitioner Platinum Plans pursuant to an alleged contract of sale executed by them for the purchase of a condominium unit. According to the respondent: sometime in July 1993, he offered to buy from petitioner Platinum Plans Phils a condominium unit he was leasing from the latter for P 4 million payable in 2 installments of P2 million with the following terms and conditions: a. Cucueco will issue a check for P100,00 as earnest money

b. He will issue a post-dated check for P1.9 million to be encashed on September 30, 1993 on the condition that he will stop paying rentals for the said unit after September 30 c. In case Platinum Plans has an outstanding loan of less than P2 million with the bank as of December 1993, Cucueco shall assume the same and pay the difference from the remaining P2 million Cucueco likewise claimed that Platinum Plans accepted his offer by encashing the checks he issued. However, he was surprised to learn that Platinum Plans had changed the due date of the installment payment to September 30, 1993. Respondent argued that there was a perfected sale between him and Platinum plans and as such, he may validly demand from the petitioner to execute the necessary deed of sale transferring ownership and title over the property in his favor Platinum Plans denied Cucuecos allegations and asserted that Cucuecos initial down payment was forfeited based on the follo wing terms and conditions: a. The terms of payment only includes two installments (August 1993 and September 1993)

b. In case of non-compliance on the part of the vendee, all installments made shall be forfeited in favor of the vendor Platinum Plans c. Ownership over the property shall not pass until payment of the full purchase price

Petitioners anchor their argument on the claim that there was no meeting of the minds between the two parties, as evidenced by their letter of non-acceptance. The trial court ruled in favor of Platinum, citing that since the element of consent was absent there was no perfected contract. The trial court ordered Platinum Plans to return the P2 million they had received from Cucueco, and for Cucueco to pay Platinum Plans rentals in arrears for the use of the unit. Upon appeal, CA held that there was a perfected contract despite the fact that both parties never agreed on the date of payment of the remaining balance. CA ordered Cucueco to pay the remaining balance of the purchase price and for Platinum Plans, to execute a deed of sale over the property ISSUE: WON the contract there is a perfected contract of sale HELD: No, it is a contract to sell. In a contract of sale, the vendor cannot recover ownership of the thing sold until and unless the contract itself is resolved and set aside. Art 1592 provides: In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon, the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. Based on the above provision, a party who fails to invoke judicially or by notarial act would be prevented from blocking the consummation of the same in light of the precept that mere failure to fulfill the contract does not by itself have the effect of rescission. On the other hand, a contract to sell is bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite its delivery to the prospective buyer, commits to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e., full payment of the purchase price. Full payment here is considered as a positive suspensive condition.

As a result if the party contracting to sell, because of non-compliance with the suspensive condition, seeks to eject the prospective buyer from, the land, the seller is enforcing the contract and is not resolving it. The failure to pay is not a breach of contract but an event which prevent the obligation to convey title from materializing. In the present case, neither side was able to produce any written evidence documenting the actual terms of their agreement. The trial court was correct in finding that there was no meeting of minds in this case considering that the acceptance of the offer was not absolute and uncondition. In earlier cases, the SC held that before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established.

Furthermore, the reservation of the title in the name of Platinum Plans clearly indicates an intention of the parties to enter into a contract of sell. Where the seller promises to execute a deed of absolute sale upon completion of the payment of purchase price, the agreement is a contract to sell. The court cannot, in this case, step in to cure the deficiency by fixing the period pursuant to: The relief sought by Cucueco was for specific performance to compel Platinum Plans to receive the balance of the purchase price. The relief provide in Art 1592 only applies to contracts of sale Because of the differing dates set by both parties, the court would have no basis for granting Cucueco an extension of time within which to pay the outstanding balance SELLER CANNOT TREAT THE CONTRACT AS CANCELLED WITHOUT SERVING NOTICE The act of a party in treating the contract as cancelled should be made known to the other party because this act is subject to scrutiny and review by the courts in cased the alleged defaulter brings the matter for judicial determination as explained in UP v. De los Angeles. In the case at bar, there were repeated written notices sent by Platinum Plans to Cucueco that failure to pay the balance would result in the cancellation of the contract and forfeiture of the down payment already made. Under these circumstance, the cancellation made by Platinum Plans is valid and reasonable (except for the forfeiture of the down payment because Cucueco never agreed to the same) EFFECTS OF CONTRACT TO SELL A contract to sell would be rendered ineffective and without force and effect by the non-fulfillment of the buyers obligation to pay since this is a suspensive condition to the obligation of the seller to sell and deliver the title of the property. As an effect, the parties stand as if the conditional obligation had never existed. There can be no rescission of an obligation that is still non-existent as the suspensive condition has not yet occurred. CAS RELIANCE ON LEVY HERMANOS V. GERVACIO IS MISPLACED It was unnecessary for CA to distinguish whether the transaction between the parties was an installment sale or a straight sale. In the first place, there is no valid and enforceable contract to speak of.

G.R. No. 163562

July 21, 2006

PILIPINAS SHELL PETROLEUM CORPORATION, petitioner, vs. CARLOS ANG GOBONSENG, JR., respondent.
GARCIA, J.: In this petition for review under Rule 45 of the Rules of Court, petitioner Pilipinas Shell Petroleum Corporation (Pilipinas Shell, hereafter) seeks the reversal and setting aside of the Decision 1 dated October 10, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 63777, as reiterated in its Resolution2 of April 13, 2004, reversing an earlier decision of the Regional Trial Court (RTC) of Negros Oriental, Dumaguete City, Branch 40, in a suit for collection of rentals with damages thereat commenced by the herein respondent Carlos Ang Gobonseng against, among others, the herein petitioner. The rentals sought to be collected pertain to a gasoline station at Lot No. 853-A, located at corner Real Urdaneta streets, Dumaguete City. The factual backdrop: Sometime on January 5, 1982, one Julio Tan Pastor, original owner of Lot No. 853-A, sold it to the respondent forP1.3 million, albeit in the covering Deed of Absolute Sale executed by the parties, the amount indicated was onlyP13,000.00, evidently to avoid payment of the correct legal fees in the registration and transfer of title to the vendee. On the same date, however, the parties, in order to reflect their real intentions, executed a Memorandum of Agreement thereunder spelling out the true terms and conditions of their transaction, to wit: "1. Purchase price is P1,300,000.00 (P1.3 million);

2. P500,000.00 shall be paid upon the execution of the Deed of Sale. Out of this amount part shall be paid to whatever mortgage obligation there is with the Philippines National Bank and/or any other bank involving lot no. 853-A; and its improvements; 3. Balance of P800,000.00 will be paid in five (5) years at a yearly payment of P160,000.00 the first payment to be paid one year from date hereof and succeeding four installments every year thereafter; 4. All obligations or liabilities on or involving lot no. 853-A or its improvements such as electric bills, water bills, telephone bills, etc., shall be for the account of the VENDOR which if not paid will be automatically deductible from the first payment of the remaining balance; 5. Real property taxes full for 1981 over lot no. 853-A and its improvements, capital gains tax, documentary stamp tax, sales tax shall be shouldered by the VENDOR; Registration expenses shall be shouldered by the VENDEE; 6. Upon the execution of the Deed of Sale, ownership and possession shall automatically pass to the VENDEE; The VENDOR agrees to pay a penalty of P500.00 for every day of delay in vacating the property;" Respondent, armed with the inaccurate Deed of Absolute Sale earlier executed by Julio Tan Pastor, and notwithstanding the Memorandum of Agreement aforementioned, succeeded in registering the conveying instrument with the Registry of Deeds and was then issued Transfer Certificate of Title (TCT) No. 13607 over Lot No. 853-A in his own name. In the meantime, vendor Tan Pastor presented for encashment the postdated checks issued to him by respondent as payment for the subject lot. Unfortunately, the drawee bank dishonored those checks for a variety of reasons, namely, drawn against insufficient funds, stop payment order or closed account. This prompted vendor Tan Pastor to file against respondent a criminal action for violation of Batas Pambansa (BP) 22, otherwise known as the Bouncing Checks Law, docketed as Criminal Case No. 7071, entitled People of the Philippines v. Carlos Ang Gobonseng, Jr., of the xxx. It appears that prior to the sale of Lot No. 853-A to respondent, Tan Pastor had been operating thereon a gasoline station, first with Flying A, subsequently with Getty Oil, and later with Basic Land Oil and Energy Corporation ( BLECOR). In 1982, Pilipinas Shell acquired BLECOR, including all the latter's assets, liabilities and contracts. Thereafter, Tan Pastor remained as the distributor of Pilipinas Shell products and continued to operate the gas station on Lot No. 853-A until 1991. Sometime in 1991, respondent sent demand letters to Pilipinas Shell for payment by the latter of rentals for its occupancy and use of his property. Responding to said letters, Pilipinas Shell disowned liability for the rentals, explaining that the gas station on Lot No. 853-A was a dealer-owned filling station, hence the demands for rental payment must be directed to Tan Pastor. In any event, Pilipinas Shell, hoping for an amicable settlement of the controversy between respondent and Tan Pastor relative to Lot No. 853-A, facilitated a meeting between the two. True enough, on January 30, 1992, thru the efforts of Pilipinas Shell, Tan Pastor and respondent executed an Agreement 3 embodying the following terms and conditions: "The parties herein have agreed, as follows: 1. For humanitarian, peace, and other considerations, Carlos A. Gobonseng, Jr., the OWNER, hereby allows Julio Tan Pastor the use of Lot No. 853-A at Corner Real-Urdaneta Streets, Dumaguete City, covered by TCT No. 13607, as a gas/ fuel/ gasoline/ oil/ filling, selling and servicing, station, and for such other use appropriate, or related, to the same, without any rental for a period of THREE (3) YEARS from January 1st 1992, or up to December 31st 1994, NON-EXTENDIBLE; 2. Consistent with the foregoing, Julio Tan Pastor is authorized to enter into any business contract with a third person for the use of said property for a period of THREE (3) YEARS from JANUARY 1st 1992 or up to DECEMBER 31st 1994, the DEADLINE; 3. No construction, renovation or repair, shall be done by Julio Tan Pastor, without the PRIOR written consent of the owner, Carlos A. Gobonseng, Jr.; 4. All improvements, including old and new constructions, repairs, replacements, and other removable items, shall automatically belong in ownership to the owner, Carlos A. Gobonseng, Jr., upon and at the time of completion of construction of work, installation or repair or replacement, excluding those owned or constructed by Shell Petroleum Corp.,

or Francisco "Baludoy" Salva, which shall automatically belong to Carlos Ang Gobonseng, Jr. upon the expiration of the lease contract which the latter executed in favor of Francisco C. Salva; 5. Subject to the terms and conditions stipulated in the contract of lease between Carlos Ang Gobonseng, Jr. and Francisco C. Salva, Julio Tan Pastor and children or heirs, or Lessee, or third person, obligate and undertake to VACATE Lot No. 853-A NOT later than December 31, 1994. On December 31, 1994, PEACEFUL POSSESSION of the property and premises shall be TURNED OVER to the owner, Carlos A. Gobonseng, Jr., otherwise, a penalty of P5,000.00 for every day of delay in vacating the premises is imposed; 6. All the parties herein have no more further claimes against each other, and waived, abandoned, relinquished, any such claim or claims; Thereafter, Tan Pastor executed and filed in Criminal Case No. 7071 an Affidavit of Desistance thereunder making known his lack of interest in further pursuing the case, which was eventually dismissed. The controversy could have ended there were it not for the fact that on November 13, 1992, in the RTC of Negros Oriental, respondent filed a civil suit for collection of rentals and damages against Tan Pastor and Pilipinas Shell. In his complaint, docketed as Civil Case No. 10389, respondent, as plaintiff, alleged ownership of Lot No. 853-A on the basis of TCT No. 13607. He further averred that since 1982, he had been paying the realty taxes due thereon and that Tan Pastor and Pilipinas Shell continued occupying said lot and using the same as a gasoline and service station without paying rentals therefor. He thus prayed that judgment be rendered ordering Tan Pastor and petitioner to pay him rentals and damages for their use and occupation of his lot from 1982 to 1991. In its Answer, Pilipinas Shell countered that plaintiff's claim for unpaid rentals had no basis because the gasoline station on his property is a dealer-owned filling station, as evidenced by a certification4 issued by the president of the Shell Dealers Association of the Philippines. Pilipinas Shell likewise emphasized that Lot No. 853-A was initially the subject of controversy between respondent and Tan Pastor until 1992 when, thru its efforts, the warring parties executed an Agreement whereunder both (Tan Pastor and respondent) made it expressly clear that they "have no more further claims against each other, and waived, abandoned, relinquished, any such claim or claims." On this premise, Pilipinas Shell argued that respondent's demand for rentals is devoid of any legal or factual basis. In the meantime, Tan Pastor died, leaving his heirs who were accordingly substituted as Pilipinas Shell's co-defendant in the case. On March 15, 1999, the trial court came out with its decision5 rendering judgment for Pilipinas Shell and its co-defendants, to wit: WHEREFORE, premises considered, plaintiff's complaint for collection of rental and damages against Pilipinas Shell and the heirs of Julio Tan Pastor is hereby dismissed for lack of cause of action against them. Further, plaintiff (Gobonseng) is hereby ordered to pay defendant Pilipinas Shell the amount of P150,000.00 for the other defendants, the heirs of Julio Tan Pastor. The cross-claim filed by defendant Pilipinas Shell Petroleum Corporation against its co-defendants, the heirs of Julio Tan Pastor is hereby denied for lack of legal basis. SO ORDERED. Therefrom, respondent went to the CA. As stated at the threshold hereof, the CA, in its Decision6 of October 10, 2003, reversed that of the trial court, thus: "WHEREFORE, in view of the foregoing considerations, the decision appealed from is hereby REVERSED and SET ASIDE and a new one is entered, ordering appellee Pilipinas Shell Petroleum Corporation to pay unto appellant: P8,000 per month as reasonable compensation for the use and occupation of Lot No. 853-A as a Shell refilling station starting from 1982 until 1991 plus interest at 12% per annum until fully paid and attorney's fees of 20% of the total amount due the appellant, without prejudice to its cross-claim against its co-defendants, which is hereby reinstated and prompt resolution of which by the court a quo is hereby directed. SO ORDERED."

With its motion for reconsideration having been denied by the CA in its equally challenged Resolution7 of April 13, 2004, Pilipinas Shell is now with this Court raising the following issues: 1) Whether or not the decision of the Honorable Court of Appeals in upholding the ownership by Respondent of Lot 853-A is in accordance with the provision of Article 1496 of the Civil Code of the Philippines considering that there was no delivery yet to the Respondent of the property which was the subject of a contract of sale between him and Julio Tan Pastor; 2) Whether or not the decision of the Honorable Court of Appeals making the Petitioner liable for the payment of rentals for the use of Lot 853-A by Julio Tan Pastor as an operator of a dealer-owned filling station is consistent with Article 1157 of the Civil Code of the Philippines which provides for the legal sources of obligation; 3) Whether or not the decision of the Honorable Court of Appeals in reversing the findings of facts of the trial court on the ground that the judge who penned the decision is not the one who heard the testimonies of all the witnesses, is in accordance with the general rule that the trial court's decision is to be given credence and accorded due preference by the appellate court. Then, as now, respondent insists that he had sufficiently established his ownership of Lot No. 853-A thru the Deed of Absolute Sale, the Memorandum of Agreement between him and Tan Pastor, TCT No. 13607 and his faithful and religious payments of the real estate taxes due on the property. To him, the existence of a gasoline station in his property since 1982 entitles him to the payment of rentals by Pilipinas Shell. Pilipinas Shell, on the other hand, contends that respondent is without cause of action against it. It asserts non-liability for rentals because the gasoline station on Lot 853-A was operated by Tan Pastor as a dealer-owned station. Expounding on this concept, Pilipinas Shell explained that in a dealer-owned filling station, the owner of the lot is at the same time the operator of the station, with Pilipinas Shell merely providing the dealer-owner with certain equipment and facilities for the operation of his gas station. Pilipinas Shell further alleged that it was made aware of the change in the ownership of Lot No. 853-A only in the latter part of 1991 when it received a letter from respondent demanding payment of rentals therefor. Apparently, Tan Pastor did not see the need to inform Pilipinas Shell of the change in ownership of the subject lot primarily because according to him, ownership of the lot remained with him until full payment of the agreed price shall have been effected. As it appears, Pilipinas Shell totally believed Tan Pastor's representation since there was indeed a pending criminal case for violation of BP 22 against respondent, coupled by the fact that Tan Pastor continued to be in possession and use of Lot No. 853-A as a filling and service station for Pilipinas Shell's petroleum products until 1992. We grant the petition. Anent the issue of ownership of Lot No. 853-A, we hold that this particular question has already been rendered moot by subsequent events and acts of respondent and Tan Pastor. Significantly, respondent and Tan Pastor both admit and agree that said lot was the subject of the Deed of Absolute Sale between them. Despite contrasting allegations on the payment of the contract price, both agreed on the object and consideration of the sale. It must be stressed that a contract of sale is not a real, but a consensual contract. In Buenaventura v. Court of Appeals,8 this Court made it clear that a contract of sale, being consensual in nature, becomes valid and binding upon the meeting of the minds of the parties as to the object and the price. If there is a meeting of the minds, the contract is valid despite the manner of payment, or even if the manner of payment was breached. In fine, it is not the act of payment of the contract price that determines the validity of a contract of sale. The manner of payment and the payment itself of the agreed price have nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure of a party to effect payment of the contract price results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract. 9 Here, the controversy between Tan Pastor and respondent with respect to the manner of payment or the breach thereof does not vitiate the validity and binding effect of their contract of sale. In this light, respondent cannot thus be faulted for registering the document of sale and successfully securing TCT No. 13607 covering Lot No. 853-A in his name. However, coming to the more basic issue herein of whether or not respondent is entitled to the payment of rentals by Pilipinas Shell for the use and occupancy of Lot No. 853-A, the Court finds and so holds that respondent's claim has no basis in fact and in law. To the mind of the Court, respondent's entitlement to rentals turns on the nature of the gasoline station being operated by Tan Pastor on the subject lot. To resolve this, we must necessarily venture into determining whether the gasoline station thereat was dealer-

owned or company-owned. Undoubtedly, this exercise involves an examination of facts which is normally beyond the ambit of this Court. For, well-settled is the rule that this Court, not being a trier of facts, does not normally embark in the evaluation of evidence adduced during trial. The rule, however, admits of exceptions. So it is that in Sampayan v. Court of Appeals,10 the Court held: "[i]t is a settled rule that in the exercise of the Supreme Court's power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties' during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion." To the Court, exceptions (5), (7) and (11), above, find application in the instant case. And after a careful evaluation of the evidence, the Court finds for the petitioner. To begin with, the trial court's conclusion that Tan Pastor operated the gasoline station in his capacity as dealer-owner is wellsupported by the evidence on record. Pilipinas Shell has shown clear and convincing proof that the outlet at Lot No. 853-A was dealer-owned gas station as per the Certification of the president of the Shell Dealers Association of the Philippines. It may be that such a certification, coming as it does from the president of petitioner's dealers association, does not warrant the probative value it otherwise deserves. It bears emphasis, however, that respondent himself does not dispute the fact that he never demanded rental payments from Tan Pastor from 1982 to 1991. It was only after the criminal case for bouncing checks was dismissed that he claimed entitlement to rentals. Prior thereto, he never demanded for any rental payment, much less instituted any action to enforce the same. Besides, and as correctly observed by the trial court, there was an admission by the respondent himself that, since 1982 up to 1991, he had been in the possession of Lot No. 853-A and nobody else. Coming as it does from the respondent no less, that statement commands great weight and respect. The lower court succinctly summarizes: "There was no legal basis for plaintiff Carlos Gobonseng, Jr. to demand payment from Pilipinas Shell as he himself admitted that he was in possession of the property from 1982 to 1991. As his testimony is against his interest, it became more believable the lack of legal anchorage to base his demand for rental payment from 1982 to 1992. No less than the Court who asked him the questions and hereunder is his answer: "Court: Q -- Who was in possession of the property since 1982 up to 1991? A -- I am the actual possessor from 1982 to 1991. Q -- Is it not a fact that it was Julio Tan Pastor's who was in possession of that property since 1982 and up to 1991? A -- No, it is not, Your Honor. xxxxxx Q -- You mean to tell the Court that prior to 1992 Julio Tan Pastor was not in possession of the property in question? A -- Not in possession, Your Honor. As an operator, Your Honor, selling the shell products, Your Honor. Q -- Who was in possession of that property? A -- Me, myself, Your Honor." (TSN, p. 5, 5-29-96) What is more, respondent and Tan Pastor had already executed an Agreement11 whereunder they declared that they had "no more further claims against each other, and waived, abandoned, relinquished, any such claim or claims." If anything else, such declaration

evidenced respondent's stance in not collecting rentals for the use of the subject property as he even in fact allowed Tan Pastor the "use of Lot No. 853-A at Corner Real-Urdaneta Streets, Dumaguete City, covered by TCT No. 13607, as a gas/ fuel/ gasoline/ oil/ filling, selling and servicing, station, and for such other use appropriate, or related, to the same, without any rental for a period of THREE (3) YEARS from January 1st 1992, or up to December 31st 1994, NON-EXTENDIBLE." (Emphasis supplied.) Thus, respondent is now estopped from demanding payment of rentals from Tan Pastor or Pilipinas Shell. In Bank of the Philippine Islands v. Casa Montessori International,12 we ruled: "Estoppel precludes individuals from denying or asserting, by their own deed or representation, anything contrary to that established as the truth, in legal contemplation. Our rules on evidence even make a juris et de jure presumption that whenever one has, by one's own act or omission, intentionally and deliberately led another to believe a particular thing to be true and to act upon that belief, one cannot in any litigation arising from such act or omission be permitted to falsify that supposed truth." Lastly, respondent insists that Pilipinas Shell had recognized his ownership of Lot No. 853-A and his right to collect rentals when the latter, through a letter,13 sought his permission to refurbish the gasoline station located thereat. We are not persuaded. A careful scrutiny of the letter referred to would reveal that it was made and sent to respondent on February 7, 1992, a few days after Tan Pastor and respondent had made amends and executed an Agreement to waive any and all further claims against each other. Clearly, Pilipinas Shell was made aware of this development and the change in the ownership of Lot No. 853-A. To reiterate, Pilipinas Shell was even instrumental in this amicable settlement of the controversy between respondent and Tan Pastor. Hence, it is but proper for Pilipinas Shell to address respondent in seeking permission to make any improvements on the lot. We note that in the decision under review, the CA made a finding that there is not enough evidence for it to competently pass upon and make a ruling on the nature of the gasoline station situated on Lot No. 853-A. We rule and so hold that such a finding all the more strengthens the trial court's decision as more in accord with the evidence adduced in the course of the proceedings thereat. As it is, the trial court's decision reflects and shows its distinct advantage of having heard the witnesses themselves, observed their deportment and their manner of testifying and behavior during trial. Finally, respondent submits that the CA correctly set aside the trial court's decision on the ground that the judge who heard most of the witnesses was other than the judge who ultimately penned the decision in the case. On this score, respondent argues that the findings of fact of the trial court cannot be given credence and accorded due deference. The Court does not agree. The circumstance that the judge who wrote the decision had not heard the testimonies of the witnesses does not automatically taint his decision. Here, the decision of the trial court made reference to several transcripts of stenographic notes taken in the course of trial. Likewise, several exhibits were referred to and used as evidence to substantiate the trial court's conclusions. The validity of a decision is not necessarily impaired by the fact that its ponente only took over from a colleague who had earlier presided at the trial. This circumstance alone cannot be the basis for the reversal of the trial court's decision unless there is a clear showing of grave abuse of discretion in the appreciation or a misapprehension of the facts, 14 of which we find none. WHEREFORE, the instant petition is GRANTED and the assailed Decision and Resolution of the CA areREVERSED and SET ASIDE. The decision dated March 15, 1999 of the RTC in Civil Case No. 10389 isREINSTATED. No pronouncement as to costs. SO ORDERED.

G.R. No. 154156

August 31, 2006

JMA HOUSE INCORPORATED, Petitioner, vs. STA. MONICA INDUSTRIAL and DEVELOPMENT CORPORATION and A. GUERRERO DEVELOPMENT CORPORATION, Respondents.
CALLEJO, SR., J.: Before the Court is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 60085 affirming on appeal the Decision2 of the Regional Trial Court (RTC), Quezon City, Branch 105, in Civil Case No. Q-91-10576.

JMA House Incorporated (JMA) applied for a P1,500,000.00 loan from the Pioneer Savings and Loan Association, Inc. (Pioneer). To secure payment thereof, JMA executed a real estate mortgage over a parcel of land identified as Lot No. 4, Block No. 13, Subdivision Plan No. Psd-35337 covered by Transfer Certificate of Title (TCT) No. 268126. The lot, which was located in Quezon City across Gate 1 of the Maryknoll College, had an area of 1,611.6 square meters. 3 There was likewise a three-storey commercial and residential building which was occupied by tenants.4 Upon the failure of JMA to pay its loan, the real estate mortgage was foreclosed extrajudicially. Pioneer was the winning bidder at P2,000,000.00 during the sale at public auction held on August 26, 1985. The Sheriff executed a Certificate of Sale over the property in favor of Pioneer which was annotated at the dorsal portion of TCT No. 268126 on October 11, 1985.5 JMA had one year or until October 11, 1986 to redeem the property. JMA decided to redeem the property from Pioneer sometime in June 1986. It offered to borrow from Sta. Monica Industrial and Development Corporation (Sta. Monica) the amount of P2,300,000.00. During the negotiations between Rosita Alberto, the General Manager of JMA, and Sta. Monicas president Eugenio Trinidad, the parties agreed that the latter would purchase the property for P3,021,000.00.6 Trinidad insisted that JMA execute a deed of absolute sale over the property for the price of P4,100,000.00. Rosita Alberto suggested that instead of a deed of absolute sale, a real estate mortgage be executed considering that the property was worth much more thanP4,100,000.00. Trinidad refused. By way of a compromise, Alberto suggested that a supplement deed giving JMA the option to repurchase the property within a period of two years be executed. 7 Trinidad agreed to this proposal. Thus, the lawyers of JMA and Sta. Monica prepared two deeds.8 From the P3,021,000.00 it received from Sta. Monica, JMA remitted P2,300,000.00 to Pioneer. On June 23, 1986, Pioneer and JMA executed a Deed of Legal Redemption and Absolute Sale in which Pioneer, for and consideration of P2,300,000.00, transferred to JMA all the rights over the property, including the improvements thereon, which Pioneer acquired under the Certificate of Sale.9 The parties, likewise, declared therein that it was their intention that, with the execution of said deed, the loan of JMA amounting toP1,250,000.00, including all interests, penalties and charges thereon, were considered fully paid and legally extinguished.10 On June 30, 1986 JMA, represented by its General Manager Rosita Alberto, executed a Deed of Absolute Sale over the lot, including the buildings thereon, in favor of Sta. Monica, represented by Eugenio Trinidad. The receipt for P4,100,000.00 as purchase price was acknowledged by JMA from Sta. Monica.11 As agreed upon by the parties, the parties likewise executed a contract denominated as Option to Buy, in which Sta. Monica gave JMA the option to buy the property for P4,100,000.00 within one (1) year from the execution of the Deed Of Absolute Sale on or before July 1, 1987, with a "grace period" of one year immediately upon the expiration thereof (until July 1, 1988). The parties agreed that, in case JMA availed of such extension, JMA would be obligated to pay an additional amount equivalent to 3.5% a month as liquidated damages, until the whole amount is fully paid and/or the option is finally exercised.12 Alberto turned over to Trinidad the owners duplicate of TCT No. 26812.6 The Register of Deeds thereafter issued TCT No. 3476 38 in the name of Sta. Monica;13 however, the Option to Buy was not annotated at the dorsal portion of the title. As agreed upon between JMA and Sta. Monica, the latter thenceforth paid the realty taxes on the property. 14 JMA continued collecting the rentals from the tenants of the buildings with the knowledge and conformity of Sta. Monica. On November 17, 1986, Sta. Monica mortgaged the property to the PCI Capital Corporation as security for a P3,600,000.00 loan.15 In a letter dated January 26, 1988, Sta. Monica, through Eugenio Trinidad, informed Rosita Alberto and the tenants of the buildings in the property that due to the failure of JMA to "repurchase" the property, it had been sold to A. Guerrero Development Corporation (AGCOR) effective February 1, 1988, and, as the new owner, AGCOR would be collecting the rentals.16 Rosita Alberto protested to Trinidad, insisting that the period given to JMA to buy back the property had not yet elapsed. Nevertheless, on February 2, 1988, Sta. Monica and AGCOR executed a Deed of Absolute Sale over the property for P5,700,000.00, receipt of which was acknowledged by Sta. Monica.17Part of the amount was used by Sta. Monica to redeem the property from PCI Capital Corporation which executed a Release of Real Estate Mortgage on February 16, 1988. 18 On February 17, 1988, the Register of Deeds issued TCT No. 376746 in the name of AGCOR.19 It paid the realty taxes on the property starting 1988.20 Despite the sale of the property to AGCOR, Trinidad received, on June 30, 1988, five checks from Rosita Alberto drawn against the account of JMA in the total amount of P3,000,000.00. He likewise received P57,000.00 from Atty. Rosalie Alberto, Rositas sister and a member of the JMA Board of Directors "as partial payment of the account of JMA for the property located at No. 335, Katipunan Street, Quezon City."21 However, the checks were dishonored by the drawee Bank. 22 Trinidad failed to return the cash amount of P57,000.00 to JMA. On October 30, 1989, AGCOR mortgaged the property to Planters Development Bank as security for a P7,000,000.00 loan.23 Almost two years thereafter, or on November 11, 1991, JMA filed a complaint against Sta. Monica and AGCOR, as defendants, in the RTC of Quezon City for specific performance, reconveyance and damages. It alleged that it mortgaged its property to Sta. Monica as

security for a P3,021,000.00 loan and P1,079,000.00 as interest; however, upon the insistence of Trinidad, in lieu of a real estate mortgage, a deed of absolute sale was executed over the property for the price of P4,100,000.00; an Option to Buy was also executed in its favor, giving it the option to buy the property for P4,100,000.00 within a period of one (1) year from execution thereof, and in the meantime, it retained dominion over the property; on January 26, 1988, it received notice that beginning February 1, 1988, the tenants will pay their rentals to the new owner of the property, defendant AGCOR, to which it protested; defendant Sta. Monica assured the plaintiff that defendant AGCOR was aware of its option to buy the property. JMA further alleged that it informed defendant Sta. Monica on June 30, 1988 that it was ready to repurchase the property for P5,822,000.00 with an initial payment of P3,057,000.00 to be immediately tendered on said date, and the remaining balance of P2,765,000.00 after one month. Sta. Monica assured JMA that th e property would be delivered to it with AGCORs conformity. JMA paid P3,057,000.00 on June 30, 1988, per redemption receipt issued by Trinidad, who however refused to receive the balance. Despite representations to defendant AGCOR to abide by the Option to Buy, AGCOR maintained its right to possess and own the property and even filed ejectment cases against it; worse, Sta. Monica never returned the downpayment given on June 30, 1988 and continues to benefit therefrom. JMA averred that it had a right to repurchase the property under the terms of the Option to Buy Agreement dated June 30, 1986, considering that the transaction actually entered into is one of equitable mortgage and not a deed of sale with option to buy. Defendant Sta. Monica is mandated by law to abide by the said agreement and could not have sold the questioned property to defendant AGCOR, taking into account that it has accepted the amount of P3,057,000.00 as downpayment for the purchase price. Having sold the property to AGCOR, defendant Sta. Monica must be made to pay the plaintiff the amount of P15,000,000.00 which is the actual market value of the property, as well as the rental payments which it failed to collect. 24 The plaintiff prayed that judgment be rendered in its favor, thus: WHEREFORE, it is most respectfully prayed of this Honorable Court that judgment be rendered in favor of the plaintiff ordering: 1) Defendants Sta. Monica and AGCOR to respect and acknowledge the right of JMA to repurchase and consequently own and possess the property free from liens and all encumbrances; 2) Defendants to solidarily pay the plaintiff the accrued rentals of P2,362,500.00 as of October 1991, with an additional P52,500.00 every month thereafter until defendant AGCOR ceases to collect the mentioned rentals from the tenants of the premises; 3) Ordering defendants to pay exemplary damages in the amount of P100,000.00, nominal damages in the amount of P100,000.00, attorneys fees in the sum of P200,000.00 and the costs of suit; Just and equitable reliefs are, likewise, prayed for under the premises. 25 For its part, Sta. Monica alleged in its Answer to the complaint the following special and affirmative defenses: (1) JMA has no cause of action against it; (2) the complaint is unfounded and malicious; (3) it acted in good faith; (4) the supposed "Option to Buy" is not supported by valuable consideration and, therefore, is unenforceable; (5) assuming arguendo that there was an extension to exercise the said "Option to Buy," it was not in writing, without consideration and, therefore, unenforceable; (6) the amount/s which JMA had given to it had been offset by the value of the property and the resulting damages sustained by it (Sta. Monica). Defendant claimed P1,000,000.00,P500,000.00, P200,000.00 and P100,000.00 compulsory counterclaim representing actual, moral and exemplary damages, including attorneys fees and the litigation expenses, respectively. Defendant AGCOR alleged in its Answer with Cross-claim and Counterclaims that the physical possession of the subject property was voluntarily surrendered by Sta. Monica to it upon execution of the Deed of Absolute Sale. It came to know of the alleged "Option to Buy" only on September 30, 1988 when Trinidad made an offer to repurchase the subject property with an initial downpayment of P3,000,000.00, the balance to be paid on the following day. However, Trinidad never showed up or called as promised. As special and affirmative defenses, it claimed that there was no cause of action against it, since even assuming that an option to buy was duly executed, it was not a party thereto. It pointed out that the option was not registered nor annotated in the title with the Register of Deeds for the purpose of giving notice to the whole world; JMA was estopped from claiming that its contract 26 with Sta. Monica was a sale with right to repurchase, considering that there was no pre-existing condition or limitation whatsoever to serve as notice to third persons dealing with the said property; it was a purchaser in good faith without knowledge of any agreement between JMA and Sta. Monica or any fact that would vitiate consent in the acquisition of the property; it acquired legal title thru sale and in fact, TCT No. 376746 was issued in its name; and JMA is guilty of laches and it had not completely exercised its option to repurchase by paying the total amount and there is no proof that the option was extended by Sta. Monica for another year.

By way of cross-claim, AGCOR alleged that JMA and Sta. Monica should be the only parties in this case, since they executed the "Option to Buy," to its exclusion. Because of its inclusion as defendant, its goodwill was damaged and it was deprived of its right of full ownership; thus, cross-defendant Sta. Monica should be held liable for actual or compensatory damages in the amount of P1,000,000.00. It likewise asserted compulsory counterclaims in the amount of P500,000.00 as moral damages, P300,000.00 as exemplary damages, andP200,000.00 as attorneys fees.27 On January 10, 1992, Eugenio Trinidad died. 28 Victor Trinidad became the President of Sta. Monica. During trial, JMA presented Rosita Alberto and her sister, Atty. Rosalie Alberto as witnesses. Rosita testified that she graduated from the University of the Philippines with a Bachelor of Arts degree in Economics. 29 It was Eugenio Trinidad who insisted that JMA execute a deed of absolute sale instead of a real estate mortgage to secure theP4,100,000.00 loan.30 She, in turn, requested that an option to buy be executed by the plaintiff to supplement the deed of absolute sale to which Trinidad agreed. 31 JMA retained possession of the property and continued collecting rentals from the tenants since the transaction between the parties was precisely a contract of mortgage.32 When she protested to Trinidads letter dated January 26, 1988 informing her and the tenants that the property had not been repurchased by JMA, Trinidad verbally assured her that JMA could repurchase the property and pay the price thereof within a reasonable time. Trinidad agreed to the repurchasing of the property for P5,822,000.00 payable in two installments, to wit: (a) P3,057,000.00 on June 30, 1988; and (b) the balance ofP2,768,000.00 within a reasonable time. On June 30, 1988, P3,000,000.00 in checks and P57,000.00 cash was paid by JMA, through Atty. Rosalie Alberto and Atty. Rellosa to Trinidad, and for which the latter issued a redemption receipt. JMA was ready to pay the balance of the repurchase price (P2,768,000.00) but Trinidad could not be located, and worse, failed to return the initial amount paid. 33 On cross-examination, Rosita Alberto admitted that her agreement with Trinidad, that JMA can repurchase the property by paying the price within a reasonable time, was merely verbal because she trusted Trinidad. 34 JMA did not file any complaint for consignation of the amount for its repurchase of the property.35 She admitted that the checks delivered to Trinidad had been dishonored. 36 The respective lawyers of Sta. Monica and JMA typed the deed of absolute sale and option to buy. 37 Atty. Rosalie Alberto testified that JMA is a family corporation. She learned of the deed of absolute sale and option to buy only in February 1988.38 She represented JMA in the negotiations with Trinidad for the repurchase of the property. Trinidad informed her that he had already informed defendant AGCOR of plaintif fs tender ofP3,057,000.00. He, however, suggested that she personally inform AGCOR of said tender. When she did so, Guerrero informed her that AGCOR could no longer accept the offer. 39 She wanted to tell Trinidad about what Guerrero had said, but she could no longer locate him. 40 Franco Marquez, President of the Philippine Appraisal Co., Inc., testified that the property was appraised on May 15, 1986, and its value was pegged at P11,080,000.00.41 Defendant Sta. Monica presented its president, Victor Trinidad, who testified on the damages sustained by it. On cross-examination, he admitted that, despite the deed of absolute sale, it never took possession of the property. 42Neither did defendant collect rentals from the tenants of the building because of the option to buy. 43 Alberto Guerrero, a doctor of medicine and a lawyer, testified that he was the president of AGCOR, also a family corporation. When the property was offered for sale by Sta. Monica, he examined the title in the Register of Deeds and discovered that it was mortgaged to PCI Capital Corporation.44 He agreed to buy the property and paid Sta. Monicas loan on February 3 and 16, 1988, upon which a Release of Real Estate Mortgage was issued.45 In due course, defendants AGCOR and Sta. Monica executed a Deed of Absolute Sale covering the property.46 He further declared that AGCOR secured a P2,500,000.00 loan from Planters Bank and used the money to pay Sta. Monica. On October 30, 1989, Sta. Monica executed a real estate mortgage over the property in favor of Planters Bank as security for a P7,000,000.00 loan. The deed was annotated at the dorsal portion of TCT No. 376746 on November 15, 1980. 47 The property was declared for taxation purposes after the property had been purchased. 48 On January 26, 1996, JMA filed an Omnibus Motion to Admit Newly-Discovered Evidence, which included the Appraisal Report of the Philippine Appraisal Co., Inc.49 to prove the fair market value of the property as of February 1, 1988. The RTC granted the motion and allowed Franco M. Marquez to testify on the Appraisal Report. 50 The plaintiff offered the Report as part of the motion and to prove that the appraisal value of the property in May 1986 was P11,080,000.00. The report was admitted as part of the testimony of Marquez.51 On December 8, 1997, the trial court rendered judgment in favor of the defendants. It ordered the dismissal of the complaint and ordered the plaintiff to pay P50,000.00 to each of the defendants. The fallo of the decision reads: WHEREFORE, in light of the foregoing, the Court renders judgment as follows:

1. Plaintiffs complaint is dismissed and it is ordered on the counterclaim, to pay the amount of P50,000.00 each to defendant Sta. Monica Industrial & Development Corporation and defendant A. Guerrero Development Corporation as at torneys fees; and to pay the costs of suit; 2. The cross-claim of A. Guerrero Development Corporation against Sta. Monica Industrial and Development Corporation is dismissed. SO ORDERED.52 The trial court disbelieved the testimony of Atty. Alberto, holding that to declare the transaction between the plaintiff and defendant Sta. Monica as an equitable mortgage would be unjust to the latter. 53 The trial court noted that the plaintiff agreed to the execution of the deed of absolute sale and the option to buy; Rosita Alberto was an Economics graduate and was assisted by a lawyer. When the deed of absolute sale over the property was executed, JMA even offered to repurchase/buy the property instead of redeeming it, and waited up to June 30, 1988 to tender the repurchase price. The RTC concluded that the true intention of the parties was the property to be sold to Sta. Monica for profit, with JMA retaining the option to buy it back for P4,100,000.00 within a specific period of time. Moreover, considering that JMA failed to file an action for reformation of deed, it was estopped from claiming that the deed of absolute sale and option to buy failed to reflect the true intention of the parties. The RTC ruled that the Appraisal Report had no probative weight because the property subject thereof was covered by TCT No. 20416, not the property covered by TCT No. 268216 which was the subject of the contract between the plaintiff and defendant Sta. Monica. Further, the remittances made to Trinidad by way of checks did not buttress the case for JMA because they were so remitted after the stipulated one-year period and was short of the agreed amount of P4,100,000.00. It was further pointed out that the checks bounced. The RTC also declared that before AGCOR bought the property, it had no knowledge of the option to buy executed by JMA and Sta. Monica; and even if it had, JMA had failed to exercise its option and pay the purchase price of the property within the stipulated period. It was further stated that there is no evidence to prove the supposed obligation of Sta. Monica to return the amount of P57,000.00 received by Trinidad on June 30, 1988; there is no evidence that he was authorized by Sta. Monica to do so and that he received the amount for and in its behalf.54 JMA appealed the decision to the CA. On January 28, 2002, the appellate court dismissed the appeal and affirmed the decision of the RTC, holding that the contracts entered into by the parties are what they purport to be: a Deed of Absolute Sale and Option to Buy; the deeds were notarized, hence, are public documents, and have the presumption of regularity. Furthermore, there were no ambiguities in the deeds. It was further held that JMA was barred by laches to enforce its claim that the deed of absolute sale was in fact an equitable mortgage. It pointed out that the property was not repurchased within the timeline fixed in the Option to Buy. 55 JMA filed a motion for the reconsideration of the decision which the CA denied on July 1, 2002. 56 JMA, now petitioner, filed the instant petition for review on certiorari, seeking to reverse the ruling of the CA on the following grounds: I THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT APPLYING ARTICLE 1602 OF THE CIVIL CODE AND NOT HOLDING THAT THE CONTRACT SUBJECT MATTER OF THE INSTANT PETITION IS THAT OF AN EQUITABLE MORTGAGE. II THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER IS GUILTY OF LACHES IN ASSERTING ITS RIGHT OVER ITS PROPERTY. III THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE FINDING OF THE LOWER COURT THAT RESPONDENT AGCOR HAS NO KNOWLEDGE OF THE OPTION TO BUY. 57 It maintains that the trial court and the CA failed to consider the testimony of its General Manager Rosita Alberto, to prove that the contract entered into between it and respondent Sta. Monica is, in reality, a real estate mortgage. Petitioner maintains that the trial

court and the appellate court ignored the facts based on the following evidence: (1) petitioner was in dire need of money when it executed the Deed of Absolute Sale and Option to Buy on June 30, 1985; (2) it continued to possess the property after the execution of the Deed of Sale and Option to Buy, and even collected the rentals from the tenants of the commercial and residential buildings; (3) the purchase price ofP4,100,000.00 is grossly inadequate as purchase price of the property compared to its market value (P11,080,000.00) as found by the Philippine Appraisal Company. On the other hand, respondents aver that the issues raised by the petitioner are factual, which the Court is proscribed from reviewing. Moreover, the findings of facts of the trial court were affirmed by the CA; hence, such findings are conclusive on this Court. They insist that the CA decision is in accord with the law and the evidence on record. Article 1602 of the New Civil Code does not apply in this case because petitioner failed to exercise its option and pay the agreed upon repurchase price; hence, the CA correctly ruled that it was barred by laches when it filed its complaint below only on November 11, 1991. The threshold issues are the following: (1) whether the Court is proscribed from reviewing the factual issues raised by petitioner; (2) whether the transaction between the parties is an equitable mortgage; (3) whether the petitioner is barred by laches from filing the action against the respondent; and (4) whether respondent AGCOR was in good faith when it purchased the property from respondent Sta. Monica for P5,700,000.00. The petition is denied for lack of merit. Section 1, Rule 45 of the Rules of Court provides that only questions of law may be raised in this Court. Th e rationale for the rule is that the Court is not a trier of facts; it is not to re-examine and calibrate the evidence on record, as such task is assigned to the trial court. The trial courts findings, as affirmed by the CA, are conclusive on this Court unless there is preponderant evidence that the lower court ignored, misconstrued or misinterpreted cogent and substantial facts and circumstances which, if considered, would modify or reverse the outcome of the case. 58 The Court may look into and resolve factual issues in exceptional cases such as when the findings and conclusions of the trial court are contrary to evidence on record or tainted with grave abuse of discretion amounting to excess of jurisdiction. On the second issue, the law is that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.59 When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the courts may not read into it any other intention that would contradict its plain import. 60 The clear terms of the contract should never be the subject matter of interpretation. Neither abstract justice nor the rule of liberal interpretation justifies the creation of a contract for the parties which they did not make themselves or the imposition upon one party to a contract or obligation not assumed simply or merely to avoid seeming hardships. 61 Their true meaning must be enforced, as it is to be presumed that the contracting parties know their scope and effects.62 If the parties execute two or more separate writings covering a common transaction and subject matter, the writings should be read and interpreted together to render the parties intention effective. 63 On the other hand, if the contract is ambiguous or the contracting parties offer conflicting claims on their intent, the trial court, at the first instance, has to ascertain the true intent of the parties, taking into account the contemporaneous and subsequent conduct, actions and words of the parties material to the case,64 and pertinent facts having a tendency to fix and determine the real intent of the parties and undertaking shall be considered. It is the parties intention which shall be accorded primordial consideration. The reasonableness of the result obtained, after analysis and construction of the contract/contracts, must also be carefully considered. 65 The ascertained intention of the parties is deemed an integral part of the contract, as though it had been originally expressed in unequivocal terms. The Court will enforce the true agreement of the parties even if the property in question has already been registered and a new transfer certificate of title is issued in the name of the transferee.66 The rule is that he who alleges that a contract does not reflect the true intention of the parties thereto may prove the same by documentary or parol evidence.67 In this case, petitioner alleges that the Deed of Absolute Sale and Option to Buy do not reflect the true intention of the parties, which according to it is a loan with mortgage or an equitable mortgage. The petitioner is burdened to prove, by clear and convincing evidence, the terms of the writings. 68 In the language of State Supreme Court of North Carolina in Obriant v. Lee,69 "the intention must be established, not by simple declarations of the parties, but by proof of facts and circumstances, inconsistent with the rule of absolute purchase, otherwise, the solemnity of deeds would always be exposed to the slippery memory of witnesses." The presumption is that the contract is what it purports to be; and, to establish its character as a mortgage, the evidence must be clear, unequivocal and convincing which reasons tending to show that the transaction was intended as a security for debt; and thus to be a mortgage must be sufficient to satisfy every reasonable mind without hesitation. 70 A less rigorous rule would mean that no man is safe in taking a deed of property. It would be only necessary for the grantor to bring witnesses to an agreement that the deed was regarded as an equitable mortgage, to enable him, on payment of the purchase price and interest, to redeem, particularly if the value of the property had doubled or trebled in ratio. 71 Unless the testimony is entirely plain and convincing beyond reasonable controversy, the writing will be held to express correctly the intention of the parties. 72 If there is a doubt as to the fact whether the transaction is in the nature of a mortgage, the presumption, in order to avoid a forfeiture is always in favor of a position to redeem, to subserve abstract justice and avert injurious consequences.73

An equitable mortgage is one which, although lacking in some formality, or form or words or other requisites deemed required by statutes nevertheless reveals the intention of the parties to charge a real property as security for a debt and contains nothing impossible or contrary to law. An equitable mortgage may be constituted by any writing from which the intention to create such a lien may be patterned. Under Article 1602 of the New Civil Code, a contract shall be presumed to be an equitable mortgage in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. For the presumptions under the article to apply, two requisites must concur: (1) that the parties entered into a contract denominated as a sale; and (2) that their intention was to secure an existing debt by way of mortgage. 74In order for a deed to be declared a mortgage, the relation of debtor and creditor must exist between the grantor in such a deed and one who seeks to have it declared a mortgage.75 There must be a continuing binding debt; a debt in its fullest sense. Where there is no debt, there can be no mortgage; for if there is nothing to secure, there can be no security. 76 If there is an indebtedness or liability between the parties, either a debt existing prior to the conveyance, or a debt arising from a loan made at the time of the conveyance, or from any other cause, and this debt is still left subsistent, not being discharged or satisfied by the conveyance, but the grantor is regarded as still owing and bound to pay at some future time, so that the payment stipulated for in the agreement to re-convey is in reality the payment of this existing debt, then the whole transaction amounts to a mortgage, whatever stipulation they may have inserted in the instruments. If there is no relation of debtor-creditor, but by the terms of the contract one is merely given an option to buy real property for a fixed amount and for a fixed price, there is no equitable mortgage; the optionee is not bound to buy and to pay for said real property. 77 In the present case, the trial and appellate courts declared that based on the evidence on record, petitioner sold the property to respondent Sta. Monica for P3,021,000.00; as stated in the Option to Buy, petitioner may opt to repurchase the property for P4,100,000.00. Respondent Sta. Monica agrees with the findings of the trial court and the appellate court. 78 The trial court failed to make any finding why petitioner sold the property to respondent Sta. Monica forP3,021,000.00, which is contrary to what appears on the face of the deed of absolute sale - P4,100,000.00-which amount petitioner acknowledged to have received from said respondent. Although petitioner claimed in its complaint that the true purchase price of the property was P3,021,000.00 and that it borrowed from respondent Sta. Monica P1,079,000.00 as mortgage for one year (from June 30, 1986 to June 30, 1987), no testimonial and documentary evidence was adduced to prove the same. Petitioner was burdened to prove its claim in its complaint that it borrowed P3,021,000.00 from respondent Sta. Monica, 79 failing which its claim will be defeated even if respondents failed to present any evidence to prove their side. 80 To reiterate, there is no evidence on record that petitioner borrowed P3,021,000.00 from respondent Sta. Monica in 1986 as alleged in its complaint. The only evidence on record is that petitioner decided in June 1986 to redeem the property from Pioneer much earlier than the one-year-period therefor and needed P2,300,000.00 for the purpose. Petitioner received the amount from respondent Sta. Monica and was able to redeem the property from Pioneer. The only evidence of petitioner that it received money from respondent Sta. Monica is the Deed of Absolute Sale, in which the petitioner acknowledged to have received P4,100,000.00. The "Redemption Receipt" signed by Trinidad on June 30, 1988 for P3,000,000.00 in the form of checks andP57,000.00 in cash "as partial payment of the account of JMA for the property x x x" does not constitute evidence that petitioner secured a loan of P3,021,000.00 from respondent Sta. Monica in June 1986. The said amount was part of the P5,822,000.00 which petitioner was obliged to pay to respondent Sta. Monica, in case it opted to buy the property under the Option to Buy, representing the repurchase price, inclusive of liquidated damages. In fact, Rosita Alberto testified that petitioner expected respondent Sta. Monica to execute a deed of sale over the property upon its payment of P4,100,000.00. This is gleaned from the testimony of Atty. Alberto: Atty. Balbastro:

Q Let me put it this way, under these documents, Exhibits B and C, more particularly Exhibit C, the Option to Buy, JMA House Incorporated was given up to June 30, 1988 within which to exercise her option to buy, is that correct? A Yes, Sir. Q And as of June 30, 1988, how much money did you tender to Sta. Monica Industrial Corporation? A I tendered a total amount of three million fifty-seven thousand pesos, Sir. Q And how much is the redemption price, if you know? If you know the repurchase price? A Based on the papers that can be found on the deed of absolute sale, if JMA House Incorporated was to redeem the property during the first year, we were supposed to repurchase on time. COURT: Q You are a lawyer, right? A Yes, Your Honor. WITNESS: A To repurchase the property within the first year, a total amount of four million one hundred thousand pesos, inclusive of interest, was supposed to be paid. If the repurchase was to be made on the second year, interests of 3.5 per cent per month was to be added on the face value which is one million one hundred thousand pesos. xxxx Atty. Balbastro: Q Aside from Exhibit G, you do not have any other document concerning the payment you made to Sta. Monica Industrial Corporation? A No other. Q Now, subsequent to the payments (sic) of Exhibits B and C, no other written document was executed between JMA House Incorporated and Sta. Monica Industrial and Development Corporation, is that correct? A No other because we were expecting that the next document to be executed was a deed of absolute sale of Sta. Monica Industrial Corporation back to JMA House Incorporated covering the property. 81 If, as claimed by petitioner, the transaction between it and respondent Sta. Monica was an equitable mortgage, the latter would be obliged to execute a Cancellation of Real Estate Mortgage or Release of Mortgage over the property in favor of the petitioner. But, as admitted by Rosita Alberto, petitioner did not expect respondent Sta. Monica to execute any of these; petitioner expected that a deed of sale would be executed in its favor. It bears stressing that petitioner and respondent Sta. Monica were assisted by their respective lawyers during the negotiations held between Rosita Alberto and Trinidad. While Trinidad insisted on a deed of absolute sale, Rosita Alberto suggested that a real estate mortgage be executed by the parties instead. Trinidad rejected this, upon which Rosita proposed that an option to buy be executed as a supplement to the deed of absolute sale, to which Trinidad readily agreed. Obviously, the parties had arrived at a compromise to execute two deeds: a deed of absolute sale for P4,100,000.00, and a deed of option to enable petitioner to buy the property for the same price. Rosita Alberto testified, thus: Q Now, you also made mention that you had mortgaged the property to Sta. Monica Industrial Corporation. Did you execute any document to prove that mortgage?

A Yes. Through the negotiation we were talking about a real estate mortgage but Mr. Trinidad insisted on a deed of sale in their favor. However, I requested for another document an option to buy/option to repurchase which is supplement to the deed of sale which would give us two years from the date of signing, to repurchase the property. ATTY. LAZARO: Q Madam Witness, do you still recall the exact date when this deed of absolute sale was executed? A It was June 30th 1986. Q And how about the option to buy agreement that you are mentioning? When was it executed? A It was executed [simultaneously] on the same day, June 30, 1986. Q I am going to show you now a deed of absolute sale between JMA House Incorporated and Sta. Monica Industrial and Development Corporation which has been previously marked as Exhibit B and Exhibit B-1. What is the relation of this deed of absolute sale to the one that you are referring to? A This is the same deed of absolute sale that we signed. Q And I am calling your attention to Exhibit B-1 wherein the signature over and above the name Rosita Alberto [appears], whose signature is that? A My signature, Sir. Q And I am also calling your attention to the signature over and above the name Eugenio E. Trinidad, President and General Manager. Whose signature is that? A Mr. Trinidad[s].82 The respective lawyers of petitioner and respondent Sta. Monica thereafter prepared the deeds which were executed on June 30, 1986 before the same Notary Public, Atilano H. Lim. According to Rosita Alberto, the Option to Buy supplemented the Deed of Absolute Sale. The testimony of Rosita Alberto on the matter follows: Q Alright, I will read to you your Exh. "C," under the second WHEREAS, and I quote: Whereas, the parties in the aforementioned Deed mutually agreed that the VENDOR JMA HOUSE INCORPORATED is given an option to buy back the properties subject thereto" Do you recall this provision? A Yes. This is the document. Q And, in this second WHEREAS, the aforementioned Deed referred to here is the Deed referred to in the first WHEREAS, that is the Deed of Absolute Sale, marked as Exhibit "B", is that correct? A Yes. Q I am going back to my first question. In other words, the basis of the option to buy is the supposed mutual agreement between JMA House Incorporated and Sta. Monica Industrial and Development Corporation to give JMA House Incorporated the [option] to buy back the property as provided in the Deed of Absolute Sale marked here as Exhibit "B," is that correct? A They were supplementing each other, the option to buy and the deed of absolute sale. 83 The fact that petitioner sold the property to respondent Sta. Monica is evidenced by Rosita Albertos admission that she deli vered to respondent Sta. Monica the owners duplicate of TCT No. 268126, after which the latter had the property registered in its name, conformably with their "pre-arrangement." This can be gleaned from her testimony, in answer to the questions of counsel of respondent AGCOR: ATTY. LUCAS:

Q After June 30, 1986, Your Honor. WITNESS: A After June 30, 1986, the taxes were paid by STA. MONICA. That was the pre-arrangement, Your Honor, with STA. MONICA. And it would be absurd for JMA to pay the taxes when the title was with STA. MONICA. And we believe that they would be using it for their purposes, the title; for STA. MONICAs purposes. So, they are more than willing to take up the taxes. 84 Although Rosita Alberto did not specify the particulars of her "pre-arrangement" with Trinidad outside of the Deed of Absolute Sale and Option to Buy, it can safely be presumed that they agreed that petitioner would continue collecting rentals from the tenants, and respondent may mortgage the property as security for its P3,600,000.00 loan from the PCI Capital Corporation. Petitioner would then be able to generate funds for the purchase of the property on or before June 30, 1987 or 1988, partly from the rentals. On the other hand, respondent Sta. Monica was able to generate funds from its loan, with the property as collateral, for its business. Both parties benefited under the arrangement. While it is true that per Appraisal Report of the Philippine Appraisal Corporation, the property of the petitioner had a value, as of 1986, of P11,080,000.00, despite which, Alberto agreed to sell the property for P4,100,000.00 under the Deed of Absolute Sale, nevertheless, Alberto cannot be faulted. After all, under the Option to Buy, petitioner was obliged to pay only P4,100,000.00. It must be stressed that an option is a continuing offer or contract by which an owner stipulates with another that the latter shall have the right to buy the property at a fixed price with a certain time, or under, or in compliance with, certain terms and conditions; or which gives to the owner of the property the right to sell or demand a sale. 85It is, in fine, an unaccepted offer, governed by the second paragraph of Article 1479 of the New Civil Code which states that "a promise to buy and sell a determinate thing for a price certain is reciprocally demandable." An option is not of itself a purchase, but merely secures the privilege to buy. An option is a privilege given by the owner of the property to another to buy the property at his election, and the owner does not sell the property but gives another the right to buy at his election.86 It imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Without acceptance, it is not, properly speaking, treated as a contract, and does not vest, transfer or agree to transfer, any title to, or any interest or right in the subject property, but is merely a contract by which the owner of the property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms. 87 Thus, an option contract involves two distinct elements, that is: (1) the offer to sell, which does not become a contract until accepted; (2) the completed contract to lease the offer for a specified time.88 It is a separate and distinct contract from that which the parties may enter into, upon the consummation of the option. It bears stressing that an option must be supported by a consideration distinct and separate from the price. 1wphi1 A consideration for an optional contract is just as important as the consideration for any other kind of contract. 89 If there is no consideration for the optional contract, then it cannot be enforced anymore than any other contract where no consideration exists. 90 However, case law is that although an option is not binding as a contract for want of consideration, yet if the offer contained therein is not withdrawn, its acceptance within the time limited gives rise to a contract of sale, binding on the vendor, which cannot be affected by any subsequent attempt to withdraw the offer.91 The optionee or promisee is burdened to prove such consideration for the option. The consideration for the option is not presumed. In Villamor v. Court of Appeals,92 the Court ruled that consideration is "the why of the contract, the essential reason which moves the contracting parties to enter into the contract." 93 The consideration for a contract, including an option, need not be money or anything of monetary value but may consist of either a benefit or a detriment to the promisor. 94 There is sufficient consideration for a promise if there is any benefit to the promisee or any detriment to the promisor. A benefit should not necessarily accrue to the promisee if a detriment to the promisor is present; and there is consideration if the promisee does anything legal which he is not bound to do or refrain from doing anything which he has a right to do, whether or not there is any actual loan or detriment to him or actual benefit to the promisor.95 It is sufficient that something valuable flows from the person to whom it is made, or that he suffers some prejudice or inconvenience, and that the promise is the inducement to the transaction. Indeed, there is a consideration if the promisee, in return for the promise, does anything legal which he is not bound to do, or refrains from doing anything which he has a right to do, whether there is any actual loss or detriment to him or actual benefit to the promisor or not. 96 We agree with the rulings of the trial court and the CA that the option granted to the petitioner has a consideration distinct from the purchase price of the property for P4,100,000.00. As gleaned from the Option to Buy itself, the agreement was executed by the parties because of the Deed of Absolute Sale they had executed on the same occasion. Instead of the parties executing a Real Estate Mortgage as suggested by petitioner, the parties, by way of compromise, agreed to execute a Deed of Absolute Sale, on the condition that they execute an Option to Buy, giving petitioner the privilege to repurchase the property within a period of one year, with a grace period of one year immediately upon the expiration of

the original one year period. As admitted by Rosita Alberto, the two deeds complemented each other, the Option to Buy being a supplement to the Deed of Absolute Sale. In fine, petitioner would not have agreed to sell the property to respondent Sta. Monica unless petitioner was given the option to repurchase the property for the same amount. However, we agree with the ruling of the CA that petitioner failed to exercise its option and notify respondent Sta. Monica of its acceptance of the latters offer within the timeline under the Option to Buy. Under the said deed, petitioner had one year fr om June 30, 1986 or up to June 30, 1987 to exercise its option, and in case of failure to do so, it had a one year grace period (from July 1, 1987 to June 30, 1988), provided that, in the latter case, it would pay equitable damages of 3.5% a month from July 1, 1987 to June 30, 1988 until full payment of the purchase price or until the option is finally exercised. The pertinent portion of the contract reads: NOW, THEREFORE, for and in consideration of the foregoing premises, stipulations and conditions, the JMA HOUSE INCORPORATED is hereby given an option to buy back the subject properties mentioned in the aforesaid Deed of Absolute Sale, and in like manner the STA. MONICA INDUSTRIAL AND DEVELOPMENT CORPORATION hereby undertakes and binds itself to resell the same unto the said JMA HOUSE INCORPORATED within a period of One (1) year from and after date of execution of the said Deed for a fixed consideration of FOUR MILLION ONE HUNDRED THOUSAND PESOS (P4,100,000.00) Philippine Currency; PROVIDED, HOWEVER, should the said JMA HOUSE INCORPORATED failed (sic) to exercise the herein option to buy back within the above-stated period, the JMA HOUSE INCORPORATED be (sic) given a grace period of another One (1) year immediately thereafter. In case of such extension the JMA HOUSE INCORPORATED hereby undertakes and binds itself to pay an amount equivalent to Three and one-half percent (sic) month for and as liquidated damages until the whole amount is fully paid and/or the option is finally exercised. It is clear that petitioner failed to exercise its option on or before June 30, 1987. Neither did petitioner exercise its option and pay the liquidated damages to respondent Sta. Monica from July 1, 1987 up to June 1988. This impelled respondent Sta. Monica to inform petitioner that because of its failure to exercise its option to purchase the property, it had to discontinue collecting the rentals from the tenants of the buildings. On February 2, 1988, respondent Sta. Monica sold the property to respondent AGCOR, which secured TCT No. 376746 on February 17, 1988. The Option to Buy provides that acceptance must be accompanied by payment of liquidated damages; such payment is a condition precedent to the exercise of the right to buy, and the money must be tendered or offered. A mere notice of an intention to accept, or of an acceptance without such payment or tender, does not constitute a valid compliance.97 Respondent Sta. Monicas acceptance of the five checks in the total amount of P3,000,000.00 and the cash amount of P57,000.00 on June 30, 1988, as partial payment of petitioners account did not resuscitate the right which petitioner had by then already lost, particularly since the property had already been sold and titled to AGCOR. The said partial payment was an exercise in futility, made worse by the fact that the five checks were dishonored by the drawee bank. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. Costs against the petitioner. SO ORDERED.

G.R. No. 160805

November 24, 2006

SPOUSES ADIEL DE LA CENA and CARIDAD AREVALO DE LA CENA, Petitioners, vs. SPOUSES JOSE BRIONES and HERMINIA LLEDO BRIONES, Respondents.
QUISUMBING, J.: For review on certiorari are the Decision1 dated November 25, 2002 of the Court of Appeals in CA-G.R. CV No. 43335, and its Resolution dated October 16, 2003, denying the motion for reconsideration. The appellate court reversed the decision dated July 27, 1993 of the Regional Trial Court of Legazpi City, Branch 6, in Civil Case No. 8248 for quieting of title, recovery of possession and damages. The facts are as follows: Involved in this case is a six-meter by nine-meter portion of a 1,011-square meter lot located at Bagumbayan, Daraga, Albay. The whole lot is now registered under Transfer Certificate of Title (TCT) No. T-54600 in the name of petitioners, spouses Adiel de la Cena

and Caridad Arevalo de la Cena (the de la Cenas).2 It was previously owned by the spouses Antonio and Josefa Arevalo (the Arevalos), parents of petitioner Caridad Arevalo de la Cena. Sometime in 1969, the respondents, spouses Jose and Herminia Briones (the Brioneses), rented from the Arevalos, a house constructed on the contested portion of the aforementioned lot. Five months later, respondents bought the house. Then on January 31, 1977, respondents also bought the contested portion of said lot from the Arevalos. They paid P1,260 as downpayment.3 Unknown to the Brioneses, the whole lot had been mortgaged by the Arevalos to Albay Development Bank. On April 24, 1979, TCT No. T-54600 was issued to petitioners, who paid an unspecified amount to the Arevalos for the whole lot and P9,000 to the bank representing the balance of the loan obtained by the Arevalos. 4 Thereafter, petitioners de la Cenas demanded that respondents Brioneses vacate the contested portion. When respondents refused and after a barangay conciliation failed, petitioners filed before the Regional Trial Court of Legazpi City a complaint for quieting of title, recovery of possession, and damages against respondents. The trial court decided in favor of petitioners de la Cenas, disposing of the case as follows: WHEREFORE, premises considered, decision is hereby rendered: 1) Declaring the claim of ownership of defendants [respondents herein] upon the property in question based upon exhibit "1" as invalid and ineffec[t]ive and is prejudicial to the title of the plaintiffs [petitioners herein] and casting a cloud upon said title which cloud is hereby ordered removed and the plaintiffs title hereby ordered quieted. 2) The plaintiffs are hereby ordered to pay the defendants P35,952.93 as reimbursement for the value of the expenses incurred by the defendants in renovating or repairs inuring to plaintiffs benefits. 3) Within thirty (30) days from the payment of the aforesaid P35,952.93 by the plaintiffs to the defendants, the defendants shall vacate the property in question leaving the house behind. 4) Costs against both plaintiffs and defendants. SO ORDERED.5 While the trial court found that there was a perfected contract of sale of the contested portion between respondents Brioneses and the Arevalos, it said that the sale did not bind petitioners de la Cenas because, (1) the acknowledgment receipt 6 issued by the Arevalos of the downpayment of respondents was not a public document under Article 1358 (1)7 of the Civil Code; and (2) the sale was unregistered. The trial court further noted that petitioners de la Cenas were unaware of the previous sale of the contested portion to the Brioneses. Nonetheless, it faulted petitioners de la Cenas for not ascertaining the nature of respondents Brioneses possessi on of the contested portion, since the former were aware that the Brioneses had purchased the house that stood thereon. Upon respondents appeal, the Court of Appeals reversed the trial courts decision. Thus, WHEREFORE, the appeal is GRANTED. The assailed decision is REVERSED and SET ASIDE. The parties shall, at their expense share and share alike, cause a SURVEY to determine their respective portions of Lot No. 2 consistent with this decision. Thereafter, in accordance with the said survey, the Register of Deeds of Albay shall ISSUE a new transfer certificate of title to defendants-appellants [respondents herein] for the portion pertaining to them, while the remaining portion of Lot No. 2 shall continue to pertain to plaintiffs-appellees [petitioners herein] under their TCT No. T-54600. SO ORDERED.8 The appellate court similarly held that there was a perfected contract of sale of the contested portion based on the receipt acknowledging the downpayment.9 The appellate court found that the sale had been consummated and it took note of respondents full payment of the purchase price of P6,000 on installment basis, as testified to by respondent Herminia Briones. 10 The appellate court also concluded that petitioner Caridad Arevalo de la Cena had known of the sale of the house and the contested portion to respondents. Thus, the appellate court ruled that even if petitioners were first to register the sale, their registration was tainted with bad faith. The appellate court denied petitioners motion for reconsideration.

Hence, the instant petition raising the following issues: 1. Whether or not there existed a perfected contract of sale between petitioners predecessors -in-interest, the Arevalo spouses and the respondents; and 2. Assuming that there was such a perfected contract of sale, whether or not the petitioners had knowledge thereof prior to the registration of the property in their names.11 We will resolve the issues in the order presented. Petitioners contend that the Court of Appeals erred in ruling that there was a perfected contract of sale based on the receipt acknowledging the downpayment. Petitioners also contend that the receipt neither stated the portion sold, nor the price, nor the buyer. They aver that there had yet been no meeting of the minds upon the object of the contract and the price. Respondents counter that a contract of sale is perfected by mere agreement of the parties; even without the receipt acknowledging the downpayment, there could still be a perfected contract of sale. At this juncture, we note that petitioners did not appeal the trial courts finding that there was a perfected contract of sa le of the contested portion to respondents. By not appealing, petitioners are deemed to have accepted the tr ial courts factual findings and conclusions of law on this matter.12 In addition, a contract of sale is perfected by mere consent, upon a meeting of the minds on the object of the contract and the price.13 When the Arevalos accepted the P1,260 as downpayment, they had agreed to the sale of the contested portion to respondents. In fact, the contract of sale had already been consummated. Hence, its enforcement cannot be barred by the Statute of Frauds, which applies only to an executory agreement.14 We note that the Arevalos delivered the contested portion to respondents; the respondents had paid the P1,260 as downpayment; the downpayment was received; the respondents had paid on installment the balance of the full purchase price of P6,000;15 some installments were paid weekly as demanded by the Arevalos who did not issue receipts; 16 P400 owed by the Arevalos to respondent Herminia Brioness mother, was also used to offset the price; 17 respondents paid the last installment in 1980;18 and respondents continued their actual possession. Moreover, ownership of the thing sold was transferred to the buyer upon actual or constructive delivery.19 Petitioners also contend that the Court of Appeals erred in concluding that they knew of the sale between the Arevalos and respondents.1wphi1 They insist that they had no knowledge of the sale of the contested portion to respondents. Hence, they claim they were buyers in good faith who had also in good faith first registered the sale. In a double sale of immovable property, as in this case, ownership belongs to the person who in good faith first recorded it in the registry of property.20 The requirement is two-fold: acquisition in good faith and registration in good faith. But here, petitioners failed to show that they were in good faith because as second buyers they were not ignorant of the first sale to respondents from the time petitioners acquired the whole lot until the title was transferred to them.211wphi1 The records reveal that petitioner Caridad Arevalo de la Cena had testified on direct examination that at the time they acquired the whole lot from her parents, respondents were already staying on the contested portion, thus: q Now, at the time you acquired the property way back in 1979 were the [respondents] already staying in the property in question? a Yes, sir, they were already staying in the property.22 (Emphasis supplied.) Further, Caridad knew of respondents claim that they bought the house from the formers parents. She also kne w that respondents renovated the house after they bought it, as revealed by the testimony of Caridad on additional direct examination: q [Do] you have any knowledge when the [respondents] started renovating the house? a It was long time but the renovation was gradual. They have started the renovation when they allegedly purchased it .23 (Emphasis supplied.)

The records also reveal that Caridad testified on cross-examination that she talked to respondents only after herein petitioners had bought the whole lot, to wit: q I am asking you whether you talked to [respondents] when you bought the property? a I talked to them after we purchased the property .24 (Emphasis supplied.) Thus, Caridads testimony belie petitioners contention that their "knowledge of respondents claims over the [contested] por tion arose only after, not before, the lot had been titled or registered in their name" or "only after the demand to vacate was received by"25 respondents. On direct examination, Caridad testified: q Did [respondents] comply with your demands? a They did not. q Why? Do you know the reason why they refused? a I have been hearing stories because they have been telling people that they have already purchased the property . q When was that[?] When did you learn of such allegation of the [respondents]? a Even before we asked them to vacate we have been hearing stories already .26 (Emphasis supplied.) Patently, petitioners made no efforts to clarify the true nature of respondents possession, despite knowing of the latters c laim of ownership and actual, visible and public possession of the contested portion. One who buys real property in actual possession of another should at least inquire as to the right of the ones in possession. Absent such inquiry, petitioners cannot be regarded as bona fide buyers as against respondents, the ones in possession of the contested portion. 27 The rule is that if a buyer in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer on him any right.28 WHEREFORE, the petition is DENIED for lack of merit. Petitioners are ORDERED to reconvey to respondents the six-meter by nine-meter contested portion of the lot covered by Transfer Certificate of Title No. T-54600. Thereafter, the Register of Deeds of Albay shall issue the corresponding transfer certificate of title of the reconveyed portion. All expenses for the purpose shall be shared equally by the parties. The remaining area covered by TCT No. T-54600 shall remain with petitioners. Costs against petitioners. SO ORDERED.

7th case: 508 SCRA 12 (di ko mahanap)

G.R. No. 166862 December 20, 2006

MANILA METAL CONTAINER CORPORATION, petitioner, REYNALDO C. TOLENTINO, intervenor, vs. PHILIPPINE NATIONAL BANK, respondent, DMCI-PROJECT DEVELOPERS, INC., intervenor.

CALLEJO, SR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. No. 46153 which affirmed the decision2 of the Regional Trial Court (RTC), Branch 71, Pasig City, in Civil Case No. 58551, and its Resolution 3 denying the motion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC). The Antecedents

Petitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City), Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from respondent Philippine National Bank (PNB), petitioner executed a real estate mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation of P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment4 of Real Estate Mortgage over its property. On March 31, 1981, petitioner secured another loan of P653,000.00 from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and other charges.5 On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction for P911,532.21, petitioner's outstanding obligation to respondent PNB as of June 30, 1982, 6 plus interests and attorney's fees. After due notice and publication, the property was sold at public auction on September 28, 1982 where respondent PNB was declared the winning bidder for P1,000,000.00. The Certificate of Sale7 issued in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated at the dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984. Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an extension of time to redeem/repurchase the property.8 In its reply dated August 30, 1983, respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action and recommendation. 9 In a letter10 dated February 10, 1984, petitioner reiterated its request for a one year extension from February 17, 1984 within which to redeem/repurchase the property on installment basis. It reiterated its request to repurchase the property on installment. 11 Meanwhile, some PNB Pasay City Branch personnel informed petitioner that as a matter of policy, the bank does not accept "partial redemption."12 Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a new title in favor of respondent PNB.13 Petitioner's offers had not yet been acted upon by respondent PNB. Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47. This included the bid price of P1,056,924.50, interest, advances of insurance premiums, advances on realty taxes, registration expenses, miscellaneous expenses and publication cost. 14 When apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNB as "deposit to repurchase," and Official Receipt No. 978191 was issued to it.15 In the meantime, the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property for P1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. It was suggested that petitioner purchase the property for P2,660,000.00, its minimum market value. Respondent PNB gave petitioner until December 15, 1984 to act on the proposal; otherwise, its P725,000.00 deposit would be returned and the property would be sold to other interested buyers. 16 Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another letter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in a letter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property for P2,660,000.00. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the property. 17 On February 25, 1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984. Petitioner declared that it had already agreed to the SAMD's offer to purchase the property forP1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse should PNB insist on the position.18 On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner's offer to purchase the property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it.19 On page two of the letter was a space above the typewritten name of petitioner's President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated therein that he had received it. 20 Petitioner did not respond, so PNB requested petitioner in a letter dated June 30, 1988 to submit an amended offer to repurchase. Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB had agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price of the property. 21 Petitioner averred that it had a net balance payable in the amount of P643,452.34. Respondent PNB, however, rejected petitioner's offer to pay the balance of P643,452.34 in a letter dated August 1, 1989.22

On August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages." To support its cause of action for specific performance, it alleged the following: 34. As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the substantial amount of P725,000.00 for the redemption/repurchase price of P1,574,560.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed, the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD. The Bank cannot take advantage of a condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal. 35. PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from Manila Metal. PNB cannot take advantage of its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal. Petitioner later filed an amended complaint and supported its claim for damages with the following arguments: 36. That in order to protect itself against the wrongful and malicious acts of the defendant Bank, plaintiff is constrained to engage the services of counsel at an agreed fee of P50,000.00 and to incur litigation expenses of at least P30,000.00, which the defendant PNB should be condemned to pay the plaintiff Manila Metal. 37. That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal suffered besmirched reputation for which defendant PNB is liable for moral damages of at least P50,000.00. 38. That for the wrongful and malicious act of defendant PNB which are highly reprehensible, exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the public good of at least P30,000.00.23 Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus: a) Declaring the Amended Real Estate Mortgage (Annex "A") null and void and without any legal force and effect. b) Declaring defendant's acts of extra-judicially foreclosing the mortgage over plaintiff's property and setting it for auction sale null and void. c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. 43792) covering the property described in paragraph 4 of the Complaint, to reinstate TCT No. 37025 in the name of Manila Metal and to cancel the annotation of the mortgage in question at the back of the TCT No.37025 described in paragraph 4 of this Complaint. d) Ordering the defendant PNB to return and/or deliver physical possession of the TCT No. 37025described in paragraph 4 of this Complaint to the plaintiff Manila Metal. e) Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages, moral and exemplary damages in the aggregate amount of not less than P80,000.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion, and attorney's fees of P50,000.00 and litigation expenses of at least P30,000.00 as may be proved during the trial, and costs of suit. Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises. 24 In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts. 25 The parties agreed to limit the issues to the following: 1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiff's offer to purchase the property is still valid and legally enforceable.

2. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the defendant in its letter dated June 4, 1985. 3. Whether or not there is a perfected contract of sale between the parties. 26 While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner vacate the property within 15 days from notice,27 but petitioners refused to do so. On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00.28 The offer was however rejected by respondent PNB, in a letter dated April 13, 1993. According to it, the prevailing market value of the property was approximately P30,000,000.00, and as a matter of policy, it could not sell the property for less than its market value. 29 On June 21, 1993, petitioner offered to purchase the property for P4,250,000.00 in cash.30The offer was again rejected by respondent PNB on September 13, 1993. 31 On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and respondent PNB's counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit petitioner had made.32 The trial court ruled that there was no perfected contract of sale between the parties; hence, petitioner had no cause of action for specific performance against respondent. The trial court declared that respondent had rejected petitioner's offer to repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner had offered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which respondent PNB had demanded. It further declared that the P725,000.00 remitted by petitioner to respondent PNB on June 4, 1985 was a "deposit," and not a downpayment or earnest money. On appeal to the CA, petitioner made the following allegations: I THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE. II THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE. III THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANTAPPELLEE IN ITS LETTER DATED 4 JUNE 1985. IV THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE. V THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE. VI THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER. VII

THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFF-APPELLANT. VIII THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND LITIGATION EXPENSES. 33 Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over the property covered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors.34 Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting the motion,35 and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiffappellant, and his motion to withdraw as intervenor. 36 The CA rendered judgment on May 11, 2000 affirming the decision of the RTC. 37 It declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale. The CA ratiocinated that petitioner's original offer to purchase the subject property had not been accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985 letter specifically on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not prosper. Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4, 1985 letter of respondent PNB. Consequently, there was no perfected contract of sale, and as such, there was no contract to rescind. According to the appellate court, the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented to support it. Respondent PNB's letter dated June 30, 1988 cannot revive the failed negotiations between the parties. Respondent PNB merely asked petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower selling price and that the balance of the repurchase be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989. Petitioner filed a motion for reconsideration, which the CA likewise denied. Thus, petitioner filed the instant petition for review on certiorari, alleging that: I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT. II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY. III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONERAPPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONERAPPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE. 38 The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from respondent.

Petitioner maintains that it had accepted respondent's offer made through the SAMD, to sell the property forP1,574,560.00. When the acceptance was made in its letter dated June 25, 1984; it then deposited P725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which respondent had issued. Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. Moreover, as gleaned from the letter of SAMD dated June 4, 1985, the PNB Board of Directors had approved petitioner's offer to purchase the property. It claims that this was the suspensive condition, the fulfillment of which gave rise to the contract. Respondent could no longer unilaterally withdraw its offer to sell the property for P1,574,560.47, since the acceptance of the offer resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of the original purchase price of P1,574,560.47, while respondent was obliged to transfer ownership and deliver the property to petitioner, conformably with Article 1159 of the New Civil Code. Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondent's offer to sell the property for P1,574,560.00. Consequently, respondent could no longer validly make a counter-offer of P1,931,789.88 for the purchase of the property. It likewise maintains that, although theP725,000.00 was considered as "deposit for the repurchase of the property" in the receipt issued by the SAMD, the amount constitutes earnest money as contemplated in Article 1482 of the New Civil Code. Petitioner cites the rulings of this Court in Villonco v. Bormaheco39 and Topacio v. Court of Appeals.40 Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent and its failure to pay the balance of the price as fixed by respondent within the 60-day period from notice was to protest respondent's breach of its obligation to petitioner. It did not amount to a rejection of respondent's offer to sell the property since respondent was merely seeking to enforce its right to pay the balance of P1,570,564.47. In any event, respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract. Petitioner's letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency of the case in the RTC were merely to compromise the pending lawsuit, they did not constitute separate offers to repurchase the property. Such offer to compromise should not be taken against it, in accordance with Section 27, Rule 130 of the Revised Rules of Court. For its part, respondent contends that the parties never graduated from the "negotiation stage" as they could not agree on the amount of the repurchase price of the property. All that transpired was an exchange of proposals and counter-proposals, nothing more. It insists that a definite agreement on the amount and manner of payment of the price are essential elements in the formation of a binding and enforceable contract of sale. There was no such agreement in this case. Primarily, the concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. It clearly presupposes the existence of a valid and binding agreement, the effectivity of which is subordinated to its fulfillment. Since there is no perfected contract in the first place, there is no basis for the application of the principles governing "suspensive conditions." According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984 cannot be classified as a counter-offer; it is simply a recital of its total monetary claims against petitioner. Moreover, the amount stated therein could not likewise be considered as the counter-offer since as admitted by petitioner, it was only recommendation which was subject to approval of the PNB Board of Directors. Neither can the receipt by the SAMD of P725,000.00 be regarded as evidence of a perfected sale contract. As gleaned from the parties' Stipulation of Facts during the proceedings in the court a quo, the amount is merely an acknowledgment of the receipt of P725,000.00 as deposit to repurchase the property. The deposit of P725,000.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of Directors. Respondent maintains that its acceptance of the amount was qualified by that condition, thus not absolute. Pending such approval, it cannot be legally claimed that respondent is already bound by any contract of sale with petitioner. According to respondent, petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering, managing and preserving the properties and other special assets of PNB. The SAMD does not have the power to sell, encumber, dispose of, or otherwise alienate the assets, since the power to do so must emanate from its Board of Directors. The SAMD was not authorized by respondent's Board to enter into contracts of sale with third persons involving corporate assets. There is absolutely nothing on record that respondent authorized the SAMD, or made it appear to petitioner that it represented itself as having such authority. Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition, among others, "that the selling price shall be the total bank's claim as of documentation date x x x payable in cash (P725,000.00 already deposited) within 60 days from notice of approval." A new Statement of Account was attached therein indicating the total bank's claim to be P1,931,389.53 less deposit of P725,000.00, or P1,206,389.00. Furthermore, while respondent's Board of Directors accepted petitioner's offer to repurchase the property, the acceptance was qualified, in that it required a higher sale price and subject to specified

terms and conditions enumerated therein. This qualified acceptance was in effect a counter-offer, necessitating petitioner's acceptance in return. The Ruling of the Court The ruling of the appellate court that there was no perfected contract of sale between the parties on June 4, 1985 is correct. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.41 Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. Contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.42 Once perfected, they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law.43 By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. 44 The absence of any of the essential elements will negate the existence of a perfected contract of sale. As the Court ruled in Boston Bank of the Philippines v. Manalo :45 A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.46 A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract.47 When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.48 In San Miguel Properties Philippines, Inc. v. Huang ,49 the Court ruled that the stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. A negotiation is formally initiated by an offer, which, however, must be certain. 50 At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. In Adelfa Properties, Inc. v. Court of Appeals,51 the Court ruled that: x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale. 52 A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counteroffer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis.53 Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer.54 The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.

In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since it lacked the resources, it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties. 55 The request, which was made through a letter dated August 25, 1983, was referred to the respondent's main branch for appropriate action. 56 Before respondent could act on the request, petitioner again wrote respondent as follows: 1. Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150,000.00); 2. Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00); and 3. The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one year grave period requested for. 57 When the petitioner was told that respondent did not allow " partial redemption,"58 it sent a letter to respondent's President reiterating its offer to purchase the property.59 There was no response to petitioner's letters dated February 10 and 15, 1984. The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984 wasP1,574,560.47 cannot be considered an unqualified acceptance to petitioner's offer to purchase the property. The statement is but a computation of the amount which petitioner was obliged to pay in case respondent would later agree to sell the property, including interests, advances on insurance premium, advances on realty taxes, publication cost, registration expenses and miscellaneous expenses. There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept petitioner's offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioner's offer would not bind respondent. As this Court ruled in AF Realty Development, Inc. vs. Diesehuan Freight Services, Inc .:60 Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of authorized duties of such director, are held not binding on the corporation. Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when authorized by a board resolution or its by-laws.61 It appears that the SAMD had prepared a recommendation for respondent to accept petitioner's offer to repurchase the property even beyond the one-year period; it recommended that petitioner be allowed to redeem the property and pay P1,574,560.00 as the purchase price. Respondent later approved the recommendation that the property be sold to petitioner. But instead of the P1,574,560.47 recommended by the SAMD and to which petitioner had previously conformed, respondent set the purchase price at P2,660,000.00. In fine, respondent's acceptance of petitioner's offer was qualified, hence can be at most considered as a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of sale would have arisen; as it turns out, however, petitioner merely sought to have the counter-offer reconsidered. This request for reconsideration would later be rejected by respondent. We do not agree with petitioner's contention that the P725,000.00 it had remitted to respondent was "earnest money" which could be considered as proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. The provision reads: ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court: 8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCC's total liability to PNB as of June 25, 1984 to be P1,574,560.47 and recommended this amount as the repurchase price of the subject property. 9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property. The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board .62

Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price of the property, in the event that respondent would approve the recommendation of SAMD for respondent to accept petitioner's offer to purchase the property for P1,574,560.47. Unless and until the respondent accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.63 It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to accept the offer to purchase the property for P1,931,389.53. However, this amounted to an amendment of respondent's qualified acceptance, or an amended counter-offer, because while the respondent lowered the purchase price, it still declared that its acceptance was subject to the following terms and conditions: 1. That the selling price shall be the total Bank's claim as of documentation date (pls. see attached statement of account as of 5-31-85), payable in cash (P725,000.00 already deposited) within sixty (60) days from notice of approval; 2. The Bank sells only whatever rights, interests and participation it may have in the property and you are charged with full knowledge of the nature and extent of said rights, interests and participation and waive your right to warranty against eviction. 3. All taxes and other government imposts due or to become due on the property, as well as expenses including costs of documents and science stamps, transfer fees, etc., to be incurred in connection with the execution and registration of all covering documents shall be borne by you; 4. That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale, if there are any; 5. That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer, your deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties. 6. That the sale shall be subject to such other terms and conditions that the Legal Department may impose to protect the interest of the Bank.64 It appears that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested respondent to reconsider its amended counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund its P725,000.00 deposit. In sum, then, there was no perfected contract of sale between petitioner and respondent over the subject property. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed decision is AFFIRMED. Costs against petitioner Manila Metal Container Corporation. SO ORDERED [G.R. No. 149750. June 16, 2003]

AURORA ALCANTARA-DAUS, petitioner, vs. Spouses HERMOSO and SOCORRO DE LEON, respondents. DECISION PANGANIBAN, J.: While a contract of sale is perfected by mere consent, ownership of the thing sold is acquired only upon its delivery to the buyer. Upon the perfection of the sale, the seller assumes the obligation to transfer ownership and to deliver the thing sold, but the real right of ownership is transferred only by tradition or delivery thereof to the buyer. The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the February 9, 2001 Decision and the August 31, 2001 Resolution of the Court of Appeals[2](CA) in CA-GR CV No. 47587. The dispositive portion of the assailed Decision reads as follows: WHEREFORE, premises considered, the decision of the trial court is hereby REVERSED, and judgment rendered: 1. Declaring null and void and of no effect, the [D]eed of [A]bsolute [S]ale dated December 6, 1975, the [D]eed of [E]xtrajudicial [P]artition and [Q]uitclaim dated July 1, 1985, and T.C.T. No. T-31262; 2. Declaring T.C.T. No. 42238 as valid and binding; 3. Eliminating the award of P5,000.00 each to be paid to defendants-appellees.[3] The assailed Resolution[4] denied petitioners Motion for Reconsideration. The Facts The antecedents of the case were summarized by the Regional Trial Court (RTC) and adopted by the CA as follows: This is a [C]omplaint for annulment of documents and title, ownership, possession, injunction, preliminary injunction, restr aining order and damages. [Respondents] alleged in their [C]omplaint that they are the owners of a parcel of land hereunder described as follows, to w it: A parcel of land (Lot No. 4786 of the Cadastral Survey of San Manuel) situated in the Municipality of San Manuel, Bounded on the NW., by Lot No. 4785; and on the SE., by Lot Nos. 11094 & 11096; containing an area of Four Thousand Two Hundred Twelve (4,212) sq. m., more or less. Covered by Original Certificate of Title No. 22134 of the Land Records of Pangasina n. which [Respondent] Hermoso de Leon inherited from his father Marcelino de Leon by virtue of a [D]eed of [E]xtra-judicial [P]artition. Sometime in the early 1960s, [respondents] engaged the services of the late Atty. Florencio Juan to take care of the documents of the properties of his parents. Atty. Juan let them sign voluminous documents. After the death of Atty. Juan, some documents surfaced and most revealed that their properties had been conveyed by sale or quitclaim to [Respondent] Hermosos brothers and sisters, to Atty. Juan and his sisters, when in truth and in fact, no such conveyances were ever intended by them. His signature in the [D]eed of [E]xtra-judicial [P]artition with [Q]uitclaim made in favor of x x x Rodolfo de Leon was forged. They discovered that the land in question was sold by x x x Rodolfo de Leon to [Petitioner] Aurora Alcantara. They demanded annulment of the document and reconveyance but defendants refused x x x. xxx xxx xxx

[Petitioner] Aurora Alcantara-Daus [averred] that she bought the land in question in good faith and for value on December 6, 1975. [She] has been in continuous, public, peaceful, open possession over the same and has been appropriating the produce thereof without objection from anyone.[5] On August 23, 1994, the RTC (Branch 48) of Urdaneta, Pangasinan [6] rendered its Decision[7] in favor of herein petitioner. It ruled that respondents claim was barred by laches, because more than 18 years had passed since the land was sold. It further ruled that since it was a notarial document, the Deed of Extrajudicial Partition in favor of Rodolfo de Leon was presumptively authentic. Ruling of the Court of Appeals In reversing the RTC, the CA held that laches did not bar respondents from pursuing their claim. Notwithstanding the delay, laches is a doctrine in equity and may not be invoked to resist the enforcement of a legal right. The appellate court also held that since Rodolfo de Leon was not the owner of the land at the time of the sale, he could not transfer any land rights to petitioner. It further declared that the signature of Hermoso de Leon on the Deed of Extrajudicial Partition and Quitclaim -- upon which petitioner bases her claim -- was a forgery. It added that under the above circumstances, petitioner could not be said to be a buyer in good faith. Hence, this Petition.[8] The Issues Petitioner raises the following issues for our consideration:

1. Whether or not the Deed of Absolute Sale dated December 6, 1975 executed by Rodolfo de Leon (deceased) over the land in question in favor of petitioner was perfected and binding upon the parties therein? 2. Whether or not the evidentiary weight of the Deed of Extrajudicial Partition with Quitclaim, executed by [R]espondent Hermoso de Leon, Perlita de Leon and Carlota de Leon in favor of Rodolfo de Leon was overcome by more than [a] preponderance of evidence of respondents? 3. Whether or not the possession of petitioner including her predecessor-in-interest Rodolfo de Leon over the land in question was in good faith? 4. And whether or not the instant case initiated and filed by respondents on February 24, 1993 before the trial court has pr escribed and respondents are guilty of laches?[9] The Courts Ruling The Petition has no merit. First Issue: Validity of the Deed of Absolute Sale Petitioner argues that, having been perfected, the Contract of Sale executed on December 6, 1975 was thus binding upon the parties thereto. A contract of sale is consensual. It is perfected by mere consent,[10] upon a meeting of the minds[11] on the offer and the acceptance thereof based on subject matter, price and terms of payment.[12] At this stage, the sellers ownership of the thing sold is not an element in the perfection of the contract of sale. The contract, however, creates an obligation on the part of the seller to transfer ownership and to deliver the subject matter of the contract.[13] It is during the delivery that the law requires the seller to have the right to transfer ownership of the thing sold. [14] In general, a perfected contract of sale cannot be challenged on the ground of the sellers non-ownership of the thing sold at the time of the perfection of the contract.[15] Further, even after the contract of sale has been perfected between the parties, its consummation by delivery is yet another matter. It is through tradition or delivery that the buyer acquires the real right of ownership over the thing sold. [16] Undisputed is the fact that at the time of the sale, Rodolfo de Leon was not the owner of the land he delivered to petitioner. Thus, the consummation of the contract and the consequent transfer of ownership would depend on whether he subsequently acquired ownership of the land in accordance with Article 1434 of the Civil Code. [17] Therefore, we need to resolve the issue of the authenticity and the due execution of the Extrajudicial Partition and Quitclaim in his favor. Second Issue: Authenticity of the Extrajudicial Partition Petitioner contends that the Extrajudicial Partition and Quitclaim is authentic, because it was notarized and executed in accordance with law. She claims that there is no clear and convincing evidence to set aside the presumption of regularity in the issuance of such public document. We disagree. As a general rule, the due execution and authenticity of a document must be reasonably established before it may be admitted in evidence.[18] Notarial documents, however, may be presented in evidence without further proof of their authenticity, since the certificate of acknowledgment is prima facie evidence of the execution of the instrument or document involved. [19] To contradict facts in a notarial document and the presumption of regularity in its favor, the evidence must be clear, convincing and more than merely preponderant.[20] The CA ruled that the signature of Hermoso de Leon on the Extrajudicial Partition and Quitclaim was forged. However, this factual finding is in conflict with that of the RTC. While normally this Court does not review factual issues,[21] this rule does not apply when there is a conflict between the holdings of the CA and those of the trial court, [22] as in the present case. After poring over the records, we find no reason to reverse the factual finding of the appellate court. A comparison of the genuine signatures of Hermoso de Leon[23] with his purported signature on the Deed of Extrajudicial Partition with Quitclaim[24] will readily reveal that the latter is a forgery. As aptly held by the CA, such variance cannot be attributed to the age or the mechanical acts of the person signing.[25]

Without the corroborative testimony of the attesting witnesses, the lone account of the notary regarding the due execution of the Deed is insufficient to sustain the authenticity of this document. He can hardly be expected to dispute the authenticity of the very Deed he notarized.[26] For this reason, his testimony was -- as it should be --minutely scrutinized by the appellate court, and was found wanting. Third Issue: Possession in Good Faith Petitioner claims that her possession of the land is in good faith and that, consequently, she has acquired ownership thereof by virtue of prescription. We are not persuaded. It is well-settled that no title to registered land in derogation of that of the registered owner shall be acquired by prescription or adverse possession.[27] Neither can prescription be allowed against the hereditary successors of the registered owner, because they merely step into the shoes of the decedent and are merely the continuation of the personality of their predecessor in interest.[28] Consequently, since a certificate of registration[29] covers it, the disputed land cannot be acquired by prescription regardless of petitioners good faith. Fourth Issue: Prescription of Action and Laches Petitioner also argues that the right to recover ownership has prescribed, and that respondents are guilty of laches. Again, we disagree. Article 1141 of the New Civil Code provides that real actions over immovable properties prescribe after thirty years. This period for filing an action is interrupted when a complaint is filed in court. [30] Rodolfo de Leon alleged that the land had been allocated to him by his brother Hermoso de Leon in March 1963, [31] but that the Deed of Extrajudicial Partition assigning the contested land to the latter was executed only on September 16, 1963.[32] In any case, the Complaint to recover the land from petitioner was filed on February 24, 1993,[33] which was within the 30-year prescriptive period. On the claim of laches, we find no reason to reverse the ruling of the CA. Laches is based upon equity and the public policy of discouraging stale claims.[34] Since laches is an equitable doctrine, its application is controlled by equitable considerations. [35] It cannot be used to defeat justice or to perpetuate fraud and injustice.[36] Thus, the assertion of laches to thwart the claim of respondents is foreclosed, because the Deed upon which petitioner bases her claim is a forgery. WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. 119255

April 9, 2003

TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents.
CARPIO, J.: The Case This is a petition for review on certiorari seeking to reverse the decision1 of the Court of Appeals in an action for specific performance2 filed in the Regional Trial Court3 by petitioner Tomas K. Chua ("Chua") against respondent Encarnacion Valdes-Choy ("Valdes-Choy"). Chua sought to compel Valdes-Choy to consummate the sale of her paraphernal house and lot in Makati City. The Court of Appeals reversed the decision4 rendered by the trial court in favor of Chua. The Facts Valdes-Choy advertised for sale her paraphernal house and lot ("Property") with an area of 718 square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village, Makati City. The Property is covered by Transfer Certificate of Title

No. 162955 ("TCT") issued by the Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to the advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price of P10,800,000.00 payable in cash. On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt ("Receipt") evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer, reads: 30 June 1989 RECEIPT RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the sale of the property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila (Area : 718 sq. meters). The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable on or before 15 5July 1989. Capital Gains Tax for the account of the seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest money. This provided that all papers are in proper order.6 CONFORME: ENCARNACION Seller TOMAS x x x.7 In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce ("PBCom") a manager's check for P480,000.00. Strangely, after securing the manager's check, Chua immediately gave PBCom a verbal stop payment order claiming that this manager's check for P480,000.00 "was lost and/or misplaced." 8 On the same day, after receipt of Chua's verbal order, PBCom Assistant VicePresident Julie C. Pe notified in writing9 the PBCom Operations Group of Chua's stop payment order. In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels to execute the necessary documents and arrange the payments.10 Valdes-Choy as vendor and Chua as vendee signed two Deeds of Absolute Sale ("Deeds of Sale"). The first Deed of Sale covered the house and lot for the purchase price of P8,000,000.00. 11 The second Deed of Sale covered the furnishings, fixtures and movable properties contained in the house for the purchase price of P2,800,000.00.12 The parties also computed the capital gains tax to amount to P485,000.00. On 14 July 1989, the parties met again at the office of Valdes-Choy's counsel. Chua handed to Valdes-Choy the PBCom manager's check for P485,000.00 so Valdes-Choy could pay the capital gains tax as she did not have sufficient funds to pay the tax. Valdes-Choy issued a receipt showing that Chua had a remaining balance of P10,215,000.00 after deducting the advances made by Chua. This receipt reads: July 14, 1989 Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of FOUR HUNDRED EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as Partial Payment for the sale of the property located at 40 Tampingco Cor. Hidalgo St., San Lorenzo Village, Makati, Metro Manila (Area 718 sq. meters), covered by TCT No. 162955 of the Registry of Deeds of Makati, Metro Manila. The total purchase price of the above-mentioned property is TEN MILLION EIGHT HUNDRED THOUSAND PESOS only, broken down as follows: SELLING PRICE EARNEST MONEY P100,000.00 P10,800,000.00 K. Buyer CHUA VALDES

PARTIAL PAYMENT

485,000.00 585,000.00

BALANCE DUE ENCARNACION VALDEZ-CHOY

TO P10,215,000.00 80,000.00 P10,295,000.00

PLUS P80,000.00 for documentary stamps paid in advance by seller

x x x.

13

On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the P485,000.00 manager's check to her account with Traders Royal Bank. She then purchased a Traders Royal Bank manager's check for P480,000.00 payable to the Commissioner of Internal Revenue for the capital gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choy's counsel and handed the Traders Royal Bank check to the counsel who undertook to pay the capital gains tax. It was then also that Chua showed to ValdesChoy a PBCom manager's check for P10,215,000.00 representing the balance of the purchase price. Chua, however, did not give this PBCom manager's check to Valdes-Choy because the TCT was still registered in the name of Valdes-Choy. Chua required that the Property be registered first in his name before he would turn over the check to Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of Sale, claiming that what Chua required was not part of their agreement. 14 On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to PBCom an affidavit of loss 15 of the PBCom Manager's Check for P480,000.00. PBCom Assistant Vice-President Pe, however, testified that the manager's check was nevertheless honored because Chua subsequently verbally advised the bank that he was lifting the stop-payment order due to his "special arrangement" with the bank.16 On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-Choy suggested to her counsel that to break the impasse Chua should deposit in escrow the P10,215,000.00 balance. 17 Upon such deposit, Valdes-Choy was willing to cause the issuance of a new TCT in the name of Chua even without receiving the balance of the purchase price. Valdes-Choy believed this was the only way she could protect herself if the certificate of title is transferred in the name of the buyer before she is fully paid. Valdes-Choy's counsel promised to relay her suggestion to Chua and his counsel, but nothing came out of it. On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which the trial court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his complaint for specific performance with damages. After trial in due course, the trial court rendered judgment in favor of Chua, the dispositive portion of which reads: Applying the provisions of Article 1191 of the new Civil Code, since this is an action for specific performance where the plaintiff, as vendee, wants to pursue the sale, and in order that the fears of the defendant may be allayed and still have the sale materialize, judgment is hereby rendered: I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from finality of this decision: a. the owner's duplicate copy of TCT No. 162955 registered in her name; b. the covering tax declaration and the latest tax receipt evidencing payment of real estate taxes; c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly executed by defendant in favor of the plaintiff, whether notarized or not; and 2. Within five (5) days from compliance by the defendant of the above, ordering the plaintiff to deliver to the Branch Clerk of Court of this Court the sum of P10,295,000.00 representing the balance of the consideration (with the sum of P80,000.00 for stamps already included); 3. Ordering the Branch Clerk of this Court or her duly authorized representative: a. to make representations with the BIR for the payment of capital gains tax for the sale of the house and lot (not to include the fixtures) and to pay the same from the funds deposited with her;

b. to present the deed of sale executed in favor of the plaintiff, together with the owner's duplicate copy of TCT No. 162955, real estate tax receipt and proof of payment of capital gains tax, to the Makati Register of Deeds; c. to pay the required registration fees and stamps (if not yet advanced by the defendant) and if needed update the real estate taxes all to be taken from the funds deposited with her; and d. surrender to the plaintiff the new Torrens title over the property; 4. Should the defendant fail or refuse to surrender the two deeds of sale over the property and the fixtures that were prepared by Atty. Mark Bocobo and executed by the parties, the Branch Clerk of Court of this Court is hereby authorized and empowered to prepare, sign and execute the said deeds of sale for and in behalf of the defendant; 5. Ordering the defendant to pay to the plaintiff; a. the sum of P100,000.00 representing moral and compensatory damages for the plaintiff; and b. the sum of P50,000.00 as reimbursement for plaintiff's attorney's fees and cost of litigation. 6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be taken from the funds said plaintiff has deposited with the Court, the amounts covered at paragraph 5 above; 7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom the following amounts: a. the capital gains tax paid to the BIR; b. the expenses incurred in the registration of the sale, updating of real estate taxes, and transfer of title; and c. the amounts paid under this judgment to the plaintiff. 8. Ordering the defendant to surrender to the plaintiff or his representatives the premises with the furnishings intact within seventy-two (72) hours from receipt of the proceeds of the sale; 9. No interest is imposed on the payment to be made by the plaintiff because he had always been ready to pay the balance and the premises had been used or occupied by the defendant for the duration of this case. II. In the event that specific performance cannot be done for reasons or causes not attributable to the plaintiff, judgment is hereby rendered ordering the defendant: 1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at the legal rate from June 30, 1989 until fully paid; 2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from July 14, 1989 until fully paid; 3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the additional sum of P300,000.00 in the concept of exemplary damages; and 4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorney's fees and cost of litigation. SO ORDERED.18 Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. The Court of Appeals handed down a new judgment, disposing as follows: WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is rendered: (1) Dismissing Civil Case No. 89-5772;

(2) Declaring the amount of P100,000.00, representing earnest money as forfeited in favor of defendant-appellant; (3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to plaintiff-appellee without interest; (4) Dismissing defendant-appellant's compulsory counter-claim; and (5) Ordering the plaintiff-appellee to pay the costs.19 Hence, the instant petition. The Trial Court's Ruling The trial court found that the transaction reached an impasse when Valdes-Choy wanted to be first paid the full consideration before a new TCT covering the Property is issued in the name of Chua. On the other hand, Chua did not want to pay the consideration in full unless a new TCT is first issued in his name. The trial court faulted Valdes-Choy for this impasse. The trial court held that the parties entered into a contract to sell on 30 June 1989, as evidenced by the Receipt for the P100,000.00 earnest money. The trial court pointed out that the contract to sell was subject to the following conditions: (1) the balance of P10,700,000.00 was payable not later than 15 July 1989; (2) Valdes-Choy may stay in the Property until 13 August 1989; and (3) all papers must be "in proper order" before full payment is made. The trial court held that Chua complied with the terms of the contract to sell. Chua showed that he was prepared to pay Valdes-Choy the consideration in full on 13 July 1989, two days before the deadline of 15 July 1989. Chua even added P80,000.00 for the documentary stamp tax. He purchased from PBCom two manager's checks both payable to Valdes-Choy. The first check for P485,000.00 was to pay the capital gains tax. The second check for P10,215,000.00 was to pay the balance of the purchase price. The trial court was convinced that Chua demonstrated his capacity and readiness to pay the balance on 13 July 1989 with the production of the PBCom manager's check for P10,215,000.00. On the other hand, the trial court found that Valdes-Choy did not perform her correlative obligation under the contract to sell to put all the papers in order. The trial court noted that as of 14 July 1989, the capital gains tax had not been paid because Valdes-Choy's counsel who was suppose to pay the tax did not do so. The trial court declared that Valdes-Choy was in a position to deliver only the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. The trial court concluded that these documents were all useless without the Bureau of Internal Revenue receipt evidencing full payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate of title in Chua's name. The trial court held that Chua's non-payment of the balance of P10,215,000.00 on the agreed date was due to Valdes-Choy's fault. The Court of Appeals' Ruling In reversing the trial court, the Court of Appeals ruled that Chua's stance to pay the full consideration only after the Property is registered in his name was not the agreement of the parties. The Court of Appeals noted that there is a whale of difference between the phrases "all papers are in proper order" as written on the Receipt, and "transfer of title" as demanded by Chua. Contrary to the findings of the trial court, the Court of Appeals found that all the papers were in order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a position to deliver the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. The Property was also free from all liens and encumbrances. The Court of Appeals declared that the trial court erred in considering Chua's showing to Valdes-Choy of the PBCom manager's check for P10,215,000.00 as compliance with Chua's obligation to pay on or before 15 July 1989. The Court of Appeals pointed out that Chua did not want to give up the check unless "the property was already in his name." 20 Although Chua demonstrated his capacity to pay, this could not be equated with actual payment which he refused to do. The Court of Appeals did not consider the non-payment of the capital gains tax as failure by Valdes-Choy to put the papers "in proper order." The Court of Appeals explained that the payment of the capital gains tax has no bearing on the validity of the Deeds of Sale. It is only after the deeds are signed and notarized can the final computation and payment of the capital gains tax be made. The Issues

In his Memorandum, Chua raises the following issues: 1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE PROPERTY; 2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY WITHOUT OBSERVING THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL CODE; 3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY THE CIRCUMSTANCES OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE AUTOMATIC RESCISSION OF THE CONTRACT OF SALE; 4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS TO DECLARE THE "EARNEST MONEY" IN THE AMOUNT OF P100,000.00 AS FORFEITED IN FAVOR OF VALDES-CHOY; 5. WHETHER THE TRIAL COURT'S JUDGMENT IS IN ACCORD WITH LAW, REASON AND EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED.21 The issues for our resolution are: (a) whether the transaction between Chua and Valdes-Choy is a perfected contract of sale or a mere contract to sell, and (b) whether Chua can compel Valdes-Choy to cause the issuance of a new TCT in Chua's name even before payment of the full purchase price. The Court's Ruling The petition is bereft of merit. There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in her name under TCT No.162955, free from all liens and encumbrances. She was ready, able and willing to deliver to Chua the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There is also no dispute that on 13 July 1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as earnest money from Chua. Likewise, there is no controversy that the Receipt for the P100,000.00 earnest money embodied the terms of the binding contract between Valdes-Choy and Chua. Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay the balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit the earnest money, provided that "all papers are in proper order." On 13 July 1989, Chua gave Valdes-Choy the PBCom manager's check for P485,000.00 to pay the capital gains tax. Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the PBCom manager's check for P10,215,000.00, with Valdes-Choy as payee. However, Chua refused to give this check to Valdes-Choy until a new TCT covering the Property is registered in Chua's name. Or, as the trial court put it, until there is proof of payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate of title. First and Second Issues: Contract of Sale or Contract to Sell? Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the Receipt, as a contract to sell and not a contract of sale. This has been Chua's persistent contention in his pleadings before the trial and appellate courts. Chua now pleads for the first time that there is a perfected contract of sale rather than a contract to sell. He contends that there was no reservation in the contract of sale that Valdes-Choy shall retain title to the Property until after the sale. There was no agreement for an automatic rescission of the contract in case of Chua's default. He argues for the first time that his payment of earnest money and its acceptance by Valdes-Choy precludes the latter from rejecting the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract of sale without following Article 1592 22 of the Civil Code which requires demand, either judicially or by notarial act, before rescission may take place. Chua's new theory is not well taken in light of well-settled jurisprudence. An issue not raised in the court below cannot be raised for the first time on appeal, as this is offensive to the basic rules of fair play, justice and due process.23 In addition, when a party deliberately adopts a certain theory, and the case is tried and decided on that theory in the court below, the party will not be permitted to change his theory on appeal. To permit him to change his theory will be unfair to the adverse party.24

Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale. The distinction between a contract of sale and contract to sell is wellsettled: In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.25 A perusal of the Receipt shows that the true agreement between the parties was a contract to sell. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price. First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to pay the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy can sell the Property to other interested parties. There is in effect a right reserved in favor of Valdes-Choy not to push through with the sale upon Chua's failure to remit the balance of the purchase price before the deadline. This is in the nature of a stipulation reserving ownership in the seller until full payment of the purchase price. This is also similar to giving the seller the right to rescind unilaterally the contract the moment the buyer fails to pay within a fixed period.26 Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather than in a deed of sale, ownership not having passed between them. The signing of the Deeds of Sale came later when Valdes-Choy was under the impression that Chua was about to pay the balance of the purchase price. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price. 27 Third, Valdes-Choy retained possession of the certificate of title and all other documents relative to the sale. When Chua refused to pay Valdes-Choy the balance of the purchase price, Valdes-Choy also refused to turn-over to Chua these documents.28 These are additional proof that the agreement did not transfer to Chua, either by actual or constructive delivery, ownership of the Property.29 It is true that Article 1482 of the Civil Code provides that "[W]henever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The Receipt evidencing the contract to sell stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not consummated should Chua fail to pay the balance of the purchase price. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua to pay the balance of the purchase price. Chua, however, has the right to walk away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus Article 1482, which speaks of a contract of sale, is not applicable. Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition prevents the obligation to sell from arising and ownership is retained by the seller without further remedies by the buyer.30 Article 1592 of the Civil Code permits the buyer to pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until full payment of the price.31 Third and Fourth Issues: Withholding Balance of the Purchase Price and Forfeiture of the Earnest Money of Payment of the

Chua insists that he was ready to pay the balance of the purchase price but withheld payment because Valdes-Choy did not fulfill her contractual obligation to put all the papers in "proper order." Specifically, Chua claims that Valdes-Choy failed to show that the capital gains tax had been paid after he had advanced the money for its payment. For the same reason, he contends that Valdes-Choy may not forfeit the earnest money even if he did not pay on time. There is a variance of interpretation on the phrase "all papers are in proper order" as written in the Receipt. There is no dispute though, that as long as the papers are "in proper order," Valdes-Choy has the right to forfeit the earnest money if Chua fails to pay the balance before the deadline. The trial court interpreted the phrase to include payment of the capital gains tax, with the Bureau of Internal Revenue receipt as proof of payment. The Court of Appeals held otherwise. We quote verbatim the ruling of the Court of Appeals on this matter:

The trial court made much fuss in connection with the payment of the capital gains tax, of which Section 33 of the National Internal Revenue Code of 1977, is the governing provision insofar as its computation is concerned. The trial court failed to consider Section 34-(a) of the said Code, the last sentence of which provides, that "[t]he amount realized from the sale or other disposition of property shall be the sum of money received plus the fair market value of the property (other than money) received;" and that the computation of the capital gains tax can only be finally assessed by the Commission on Internal Revenue upon the presentation of the Deeds of Absolute Sale themselves, without which any premature computation of the capital gains tax becomes of no moment. At any rate, the computation and payment of the capital gains tax has no bearing insofar as the validity and effectiveness of the deeds of sale in question are concerned, because it is only after the contracts of sale are finally executed in due form and have been duly notarized that the final computation of the capital gains tax can follow as a matter of course. Indeed, exhibit D, the PBC Check No. 325851, dated July 13, 1989, in the amount of P485,000.00, which is considered as part of the consideration of the sale, was deposited in the name of appellant, from which she in turn, purchased the corresponding check in the amount representing the sum to be paid for capital gains tax and drawn in the name of the Commissioner of Internal Revenue, which then allayed any fear or doubt that that amount would not be paid to the Government after all.32 We see no reason to disturb the ruling of the Court of Appeals. In a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. In this case, the suspensive condition is the full payment of the purchase price by Chua. Such full payment gives rise to Chua's right to demand the execution of the contract of sale. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a contract of sale as follows: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownershipof and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. x x x. (Emphasis supplied) Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to the buyer, even if there is a contract to sell between them. It is also upon the existence of the contract of sale that the buyer is obligated to pay the purchase price to the seller. Since the transfer of ownership is in exchange for the purchase price, these obligations must be simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of a contrary stipulation. In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code, as follows: Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. (Emphasis supplied) The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of real property, the seller is not obligated to transfer in the name of the buyer a new certificate of title, but rather to transfer ownership of the real property. There is a difference between transfer of the certificate of title in the name of the buyer, and transfer of ownership to the buyer. The buyer may become the owner of the real property even if the certificate of title is still registered in the name of the seller. As between the seller and buyer, ownership is transferred not by the issuance of a new certificate of title in the name of the buyer but by the execution of the instrument of sale in a public document. In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted civil law commentator Arturo M. Tolentino explains it, Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of acquiring dominion and determines the transmission of ownership, the birth of the real right. The delivery, therefore, made in any of the forms provided in articles 1497 to 1505 signifies that the transmission of ownership from vendor to vendee has taken place . The delivery of the thing constitutes an indispensable requisite for the purpose of acquiring ownership. Our law does not admit the doctrine of transfer of property by mere consent; the ownership, the property right, is derived only from delivery of the thing. x x x.33 (Emphasis supplied) In a contract of sale of real property, delivery is effected when the instrument of sale is executed in a public document. When the deed of absolute sale is signed by the parties and notarized, then delivery of the real property is deemed made by the seller to the buyer. Article 1498 of the Civil Code provides that

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. x x x. Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign the deed of absolute sale before a notary public, the seller is in a position to transfer ownership of the real property to the buyer. At this point, the seller complies with his undertaking to sell the real property in accordance with the contract to sell, and to assume all the obligations of a vendor under a contract of sale pursuant to the relevant articles of the Civil Code. In a contract to sell, the seller is not obligated to transfer ownership to the buyer. Neither is the seller obligated to cause the issuance of a new certificate of title in the name of the buyer. However, the seller must put all his papers in proper order to the point that he is in a position to transfer ownership of the real property to the buyer upon the signing of the contract of sale. In the instant case, Valdes-Choy was in a position to comply with all her obligations as a seller under the contract to sell. First, she already signed the Deeds of Sale in the office of her counsel in the presence of the buyer. Second, she was prepared to turn-over the owner's duplicate of the TCT to the buyer, along with the tax declarations and latest realty tax receipt. Clearly, at this point ValdesChoy was ready, able and willing to transfer ownership of the Property to the buyer as required by the contract to sell, and by Articles 1458 and 1495 of the Civil Code to consummate the contract of sale. Chua, however, refused to give to Valdes-Choy the PBCom manager's check for the balance of the purchase price. Chua imposed the condition that a new TCT should first be issued in his name, a condition that is found neither in the law nor in the contract to sell as evidenced by the Receipt. Thus, at this point Chua was not ready, able and willing to pay the full purchase price which is his obligation under the contract to sell. Chua was also not in a position to assume the principal obligation of a vendee in a contract of sale, which is also to pay the full purchase price at the agreed time. Article 1582 of the Civil Code provides that Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract. x x x. (Emphasis supplied) In this case, the contract to sell stipulated that Chua should pay the balance of the purchase price "on or before 15 July 1989." The signed Deeds of Sale also stipulated that the buyer shall pay the balance of the purchase price upon signing of the deeds. Thus, the Deeds of Sale, both signed by Chua, state as follows: Deed of Absolute Sale covering the lot: xxx For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE , the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said parcel of land, together with the improvements existing thereon, free from all liens and encumbrances.34 (Emphasis supplied) Deed of Absolute Sale covering the furnishings: xxx For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND PESOS (P2,800,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE , the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said furnitures, fixtures and other movable properties thereon, free from all liens and encumbrances.35 (Emphasis supplied) However, on the agreed date, Chua refused to pay the balance of the purchase price as required by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil Code. Chua was therefore in default and has only himself to blame for the rescission by Valdes-Choy of the contract to sell. Even if measured under existing usage or custom, Valdes-Choy had all her papers "in proper order." Article 1376 of the Civil Code provides that:

Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established. Customarily, in the absence of a contrary agreement, the submission by an individual seller to the buyer of the following papers would complete a sale of real estate: (1) owner's duplicate copy of the Torrens title; 36 (2) signed deed of absolute sale; (3) tax declaration; and (3) latest realty tax receipt. The buyer can retain the amount for the capital gains tax and pay it upon authority of the seller, or the seller can pay the tax, depending on the agreement of the parties. The buyer has more interest in having the capital gains tax paid immediately since this is a pre-requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the government is concerned, the capital gains tax remains a liability of the seller since it is a tax on the seller's gain from the sale of the real estate. Payment of the capital gains tax, however, is not a pre-requisite to the transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing and notarization of the deed of absolute sale. The recording of the sale with the proper Registry of Deeds 37 and the transfer of the certificate of title in the name of the buyer are necessary only to bind third parties to the transfer of ownership. 38 As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument conveying the real estate.39 Registration of the sale with the Registry of Deeds, or the issuance of a new certificate of title, does not confer ownership on the buyer. Such registration or issuance of a new certificate of title is not one of the modes of acquiring ownership.40 In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that customarily would complete the sale, and to pay as well the capital gains tax. On the other hand, Chua's condition that a new TCT be first issued in his name before he pays the balance of P10,215,000.00, representing 94.58% of the purchase price, is not customary in a sale of real estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt, cannot be considered part of the "omissions of stipulations which are ordinarily established" by usage or custom.41 What is increasingly becoming customary is to deposit in escrow the balance of the purchase price pending the issuance of a new certificate of title in the name of the buyer. Valdes-Choy suggested this solution but unfortunately, it drew no response from Chua. Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There was no hindrance to paying the capital gains tax as Chua himself had advanced the money to pay the same and Valdes-Choy had procured a manager's check payable to the Bureau of Internal Revenue covering the amount. It was only a matter of time before the capital gains tax would be paid. Chua acted precipitately in filing the action for specific performance a mere two days after the deadline of 15 July 1989 when there was an impasse. While this case was dismissed on 22 November 1989, he did not waste any time in re-filing the same on 29 November 1989. Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the Property. Article 1181 of the Civil Code provides that ART. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired shall depend upon the happening of the event which constitutes the condition. Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him because the suspensive condition - the full payment of the purchase price - did not happen. There is no correlative obligation on the part of Valdes-Choy to transfer ownership of the Property to Chua. There is also no obligation on the part of Valdes-Choy to cause the issuance of a new TCT in the name of Chua since unless expressly stipulated, this is not one of the obligations of a vendor. WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23 February 1995 is AFFIRMED in toto. SO ORDERED.