(Illegible) [4]

SECOND DIVISION

[G.R. No. 133638. April 15, 2005]

PERPETUA VDA. DE APE, petitioner, vs. THE HONORABLE COURT OF APPEALS and GENOROSA
CAWIT VDA. DE LUMAYNO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G.R.
CV No. 45886 entitled, Generosa Cawit de Lumayno, accompanied by her husband Braulio Lumayno v.
Fortunato Ape, including his wife Perpetua de Ape.
The pertinent facts are as follows:
Cleopas Ape was the registered owner of a parcel of land particularly known as Lot No. 2319 of the
Escalante Cadastre of Negros Occidental and covered by Original Certificate of Title (OCT) No. RP 1379
(RP-154 [300]).[2] Upon Cleopas Apes death sometime in 1950, the property passed on to his wife, Maria
Ondoy, and their eleven (11) children, namely: Fortunato, Cornelio, Bernalda, Bienvenido, Encarnacion,
Loreta, Lourdes, Felicidad, Adela, Dominador, and Angelina, all surnamed Ape.
On 15 March 1973, Generosa Cawit de Lumayno (private respondent herein), joined by her
husband, Braulio,[3] instituted a case for Specific Performance of a Deed of Sale with Damages against
Fortunato and his wife Perpetua (petitioner herein) before the then Court of First Instance of Negros
Occidental. It was alleged in the complaint that on 11 April 1971, private respondent and Fortunato entered
into a contract of sale of land under which for a consideration of P5,000.00, Fortunato agreed to sell his
share in Lot No. 2319 to private respondent. The agreement was contained in a receipt prepared by
private respondents son-in-law, Andres Flores, at her behest. Said receipt was attached to the complaint
as Annex A thereof and later marked as Exhibit G for private respondent. The receipt states:
April 11, 1971
TO WHOM IT MAY CONCERN:
This date received from Mrs. Generosa Cawit de Lumayno the sum of THIRTY PESOS ONLY as Advance Payment
of my share in Land Purchased, for FIVE THOUSAND PESOS LOT #2319.
(Signed)
FORTUNATO APE
P30.00 WITNESS:

As private respondent wanted to register the claimed sale transaction, she supposedly demanded
that Fortunato execute the corresponding deed of sale and to receive the balance of the consideration.
However, Fortunato unjustifiably refused to heed her demands. Private respondent, therefore, prayed that
Fortunato be ordered to execute and deliver to her a sufficient and registrable deed of sale involving his
one-eleventh (1/11) share or participation in Lot No. 2319 of the Escalante Cadastre; to pay P5,000.00 in
damages; P500.00 reimbursement for litigation expenses as well as additional P500.00 for every appeal
made; P2,000.00 for attorneys fees; and to pay the costs.[5]
Fortunato and petitioner denied the material allegations of the complaint and claimed that Fortunato
never sold his share in Lot No. 2319 to private respondent and that his signature appearing on the
purported receipt was forged. By way of counterclaim, the defendants below maintained having entered
into a contract of lease with respondent involving Fortunatos portion of Lot No. 2319. This purported lease
contract commenced in 1960 and was supposed to last until 1965 with an option for another five (5) years.
The annual lease rental was P100.00 which private respondent and her husband allegedly paid on
installment basis. Fortunato and petitioner also assailed private respondent and her husbands continued
possession of the rest of Lot No. 2319 alleging that in the event they had acquired the shares of
Fortunatos co-owners by way of sale, he was invoking his right to redeem the same. Finally, Fortunato and
petitioner prayed that the lease contract between them and respondent be ordered annulled; and that
respondent be ordered to pay them attorneys fees; moral damages; and exemplary damages. [6]
In their reply,[7] the private respondent and her husband alleged that they had purchased from
Fortunatos co-owners, as evidenced by various written instruments, [8] their respective portions of Lot No.
2319. By virtue of these sales, they insisted that Fortunato was no longer a co-owner of Lot No. 2319 thus,
his right of redemption no longer existed.
Prior to the resolution of this case at the trial court level, Fortunato died and was substituted in this
action by his children named Salodada, Clarita, Narciso, Romeo, Rodrigo, Marieta, Fortunato, Jr., and
Salvador, all surnamed Ape.[9]
During the trial, private respondent testified that she and her husband acquired the various portions
of Lot No. 2319 belonging to Fortunatos co-owners. Thereafter, her husband caused the annotation of an
adverse claim on the certificate of title of Lot No. 2319.[10] The annotation states:
Entry No. 123539 Adverse claim filed by Braulio Lumayno. Notice of adverse claim filed by Braulio Lumayno
affecting the lot described in this title to the extent of 77511.93 square meters, more or less, the aggregate area of
shares sold to him on the basis of (alleged) sales in his possession. Doc. No. 157, Page No. 33, Book No. XI, Series
of 1967 of Alexander Cawit of Escalante, Neg. Occ. Date of instrument. June 22, 1967 at 8:30 a.m. (SGD)
FEDENCIORRAZ, Actg. Register of Deeds.[11]
In addition, private respondent claimed that after the acquisition of those shares, she and her
husband had the whole Lot No. 2319 surveyed by a certain Oscar Mascada who came up with a technical
description of said piece of land.[12] Significantly, private respondent alleged that Fortunato was present
when the survey was conducted.[13]
Also presented as evidence for private respondent were pictures taken of some parts of Lot No.
2319 purportedly showing the land belonging to Fortunato being bounded by a row of banana plants
thereby separating it from the rest of Lot No. 2319.[14]

As regards the circumstances surrounding the sale of Fortunatos portion of the land, private
respondent testified that Fortunato went to her store at the time when their lease contract was about to
expire. He allegedly demanded the rental payment for his land but as she was no longer interested in
renewing their lease agreement, they agreed instead to enter into a contract of sale which Fortunato
acceded to provided private respondent bought his portion of Lot No. 2319 for P5,000.00. Thereafter, she
asked her son-in-law Flores to prepare the aforementioned receipt. Flores read the document to Fortunato
and asked the latter whether he had any objection thereto. Fortunato then went on to affix his signature on
the receipt.
For her part, petitioner insisted that the entire Lot No. 2319 had not yet been formally subdivided;
[15]
that on 11 April 1971 she and her husband went to private respondents house to collect past rentals for
their land then leased by the former, however, they managed to collect only thirty pesos; [16] that private
respondent made her (petitioners) husband sign a receipt acknowledging the receipt of said amount of
money;[17] and that the contents of said receipt were never explained to them. [18] She also stated in her
testimony that her husband was an illiterate and only learned how to write his name in order to be
employed in a sugar central.[19] As for private respondents purchase of the shares owned by Fortunatos coowners, petitioner maintained that neither she nor her husband received any notice regarding those sales
transactions.[20] The testimony of petitioner was later on corroborated by her daughter-in-law, Marietta Ape
Dino.[21]
After due trial, the court a quo rendered a decision [22] dismissing both the complaint and the
counterclaim. The trial court likewise ordered that deeds or documents representing the sales of the
shares previously owned by Fortunatos co-owners be registered and annotated on the existing certificate
of title of Lot No. 2319. According to the trial court, private respondent failed to prove that she had actually
paid the purchase price of P5,000.00 to Fortunato and petitioner. Applying, therefore, the provision of
Article 1350 of the Civil Code,[23] the trial court concluded that private respondent did not have the right to
demand the delivery to her of the registrable deed of sale over Fortunatos portion of the Lot No. 2319.
The trial court also rejected Fortunato and petitioners claim that they had the right of redemption
over the shares previously sold to private respondent and the latters husband, reasoning as follows:
Defendants in their counterclaim invoke their right of legal redemption under Article 1623 of the New Civil Code in
view of the alleged sale of the undivided portions of the lot in question by their co-heirs and co-owners as claimed by
the plaintiffs in their complaint. They have been informed by the plaintiff about said sales upon the filing of the
complaint in the instant case as far back as March 14, 1973. Defendant themselves presented as their very own
exhibits copies of the respective deeds of sale or conveyance by their said co-heirs and co-owners in favor of the
plaintiffs or their predecessors-in-interest way back on January 2, 1992 when they formally offered their exhibits in
the instant case; meaning, they themselves acquired possession of said documentary exhibits even before they
formally offered them in evidence. Under Art. 1623 of the New Civil Code, defendants have only THIRTY (30)
DAYS counted from their actual knowledge of the exact terms and conditions of the deeds of sale or conveyance of
their co-heirs and co-owners share within which to exercise their right of legal redemption.[24]
Within the reglementary period, both parties filed their respective notices of appeal before the trial
court with petitioner and her children taking exception to the finding of the trial court that the period within
which they could invoke their right of redemption had already lapsed. [25] For her part, private respondent
raised as errors the trial courts ruling that there was no contract of sale between herself and Fortunato and
the dismissal of their complaint for specific performance.[26]

The Court of Appeals, in the decision now assailed before us, reversed and set aside the trial courts
dismissal of the private respondents complaint but upheld the portion of the court a quos decision ordering
the dismissal of petitioner and her childrens counterclaim. The dispositive portion of the appellate courts
decision reads:
WHEREFORE, the decision dated March 11, 1994, is hereby REVERSED and SET ASIDE insofar as the dismissal
of plaintiffs-appellants complaint is concerned, and another one is entered ordering the defendant-appellant Fortunato
Ape and/or his wife Perpetua de Ape and successors-in-interest to execute in favor of plaintiff-appellant Generosa
Cawit de Lumayno a Deed of Absolute Sale involving the one-eleventh (1/11) share or participation of Fortunato Ape
in Lot No. 2319, Escalante Cadastre, containing an area of 12,527.19 square meters, more or less, within (30) days
from finality of this decision, and in case of non-compliance with this Order, that the Clerk of Court of said court is
ordered to execute the deed on behalf of the vendor. The decision is AFFIRMED insofar as the dismissal of
defendants-appellants counterclaim is concerned.
Without pronouncement as to costs.[27]
The Court of Appeals upheld private respondents position that Exhibit G had all the earmarks of a
valid contract of sale, thus:
Exhibit G is the best proof that the P5,000.00 representing the purchase price of the 1/11th share of Fortunato Ape was
not paid by the vendee on April 11, 1971, and/or up to the present, but that does not affect the binding force and effect
of the document. The vendee having paid the vendor an advance payment of the agreed purchase price of the
property, what the vendor can exact from the vendee is full payment upon his execution of the final deed of sale. As is
shown, the vendee precisely instituted this action to compel the vendor Fortunato Ape to execute the final document,
after she was informed that he would execute the same upon arrival of his daughter Bala from Mindanao, but
afterwards failed to live up to his contractual obligation (TSN, pp. 11-13, June 10, 1992).
It is not right for the trial court to expect plaintiff-appellant to pay the balance of the purchase price before the final
deed is executed, or for her to deposit the equivalent amount in court in the form of consignation. Consignation
comes into fore in the case of a creditor to whom tender of payment has been made and refuses without just cause to
accept it (Arts. 1256 and 1252, N.C.C.; Querino vs. Pelarca, 29 SCRA 1). As vendee, plaintiff-appellant Generosa
Cawit de Lumayno does not fall within the purview of a debtor.
We, therefore, find and so hold that the trial court should have found that exhibit G bears all the earmarks of a private
deed of sale which is valid, binding and enforceable between the parties, and that as a consequence of the failure and
refusal on the part of the vendor Fortunato Ape to live up to his contractual obligation, he and/or his heirs and
successors-in-interest can be compelled to execute in favor of, and to deliver to the vendee, plaintiff-appellant
Generosa Cawit de Lumayno a registerable deed of absolute sale involving his one-eleventh (1/11th) share or
participation in Lot No. 2319, Escalante Cadastre, containing an area of 12,527.19 square meters, more or less, within
30 days from finality of this decision, and, in case of non-compliance within said period, this Court appoints the
Clerk of Court of the trial court to execute on behalf of the vendor the said document. [28]
The Court of Appeals, however, affirmed the trial courts ruling on the issue of petitioner and her
childrens right of redemption. It ruled that Fortunatos receipt of the Second Owners Duplicate of OCT (RP)
1379 (RP-154 ([300]), containing the adverse claim of private respondent and her husband, constituted a

sufficient compliance with the written notice requirement of Article 1623 of the Civil Code and the period of
redemption under this provision had long lapsed.
Aggrieved by the decision of the appellate court, petitioner is now before us raising, essentially, the
following issues: whether Fortunato was furnished with a written notice of sale of the shares of his coowners as required by Article 1623 of the Civil Code; and whether the receipt signed by Fortunato proves
the existence of a contract of sale between him and private respondent.
In her memorandum, petitioner claimed that the Court of Appeals erred in sustaining the court a
quos pronouncement that she could no longer redeem the portion of Lot No. 2319 already acquired by
private respondent for no written notice of said sales was furnished them. According to her, the Court of
Appeals unduly expanded the scope of the law by equating Fortunatos receipt of Second Owners
Duplicate of OCT (RP) 1379 (RP-154 ([300]) with the written notice requirement of Article 1623. In addition,
she argued that Exhibit G could not possibly be a contract of sale of Fortunatos share in Lot No. 2319 as
said document does not contain (a) definite agreement on the manner of payment of the price. [29] Even
assuming that Exhibit G is, indeed, a contract of sale between private respondent and Fortunato, the latter
did not have the obligation to deliver to private respondent a registrable deed of sale in view of private
respondents own failure to pay the full purchase price of Fortunatos portion of Lot No. 2319. Petitioner is
also of the view that, at most, Exhibit G merely contained a unilateral promise to sell which private
respondent could not enforce in the absence of a consideration distinct from the purchase price of the
land. Further, petitioner reiterated her claim that due to the illiteracy of her husband, it was incumbent upon
private respondent to show that the contents of Exhibit G were fully explained to him. Finally, petitioner
pointed out that the Court of Appeals erred when it took into consideration the same exhibit despite the fact
that only its photocopy was presented before the court.
On the other hand, private respondent argued that the annotation on the second owners certificate
over Lot No. 2319 constituted constructive notice to the whole world of private respondents claim over the
majority of said parcel of land. Relying on our decision in the case of Cabrera v. Villanueva,[30] private
respondent insisted that when Fortunato received a copy of the second owners certificate, he became fully
aware of the contracts of sale entered into between his co-owners on one hand and private respondent
and her deceased husband on the other.
Private respondent also averred that although (Lot No. 2319) was not actually partitioned in a survey
after the death of Cleopas Ape, the land was partitioned in a hantal-hantal manner by the heirs. Each took
and possessed specific portion or premises as his/her share in land, farmed their respective portion or
premises, and improved them, each heir limiting his/her improvement within the portion or premises which
were his/her respective share.[31] Thus, when private respondent and her husband purchased the other
parts of Lot No. 2319, it was no longer undivided as petitioner claims.
The petition is partly meritorious.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners.

Despite the plain language of the law, this Court has, over the years, been tasked to interpret the
written notice requirement of the above-quoted provision. In the case Butte v. Manuel Uy & Sons, Inc.,
[32]
we declared that
In considering whether or not the offer to redeem was timely, we think that the notice given by the vendee (buyer)
should not be taken into account. The text of Article 1623 clearly and expressly prescribes that the thirty days for
making the redemption are to be counted from notice in writing by the vendor. Under the old law (Civ. Code of 1889,
Art. 1524), it was immaterial who gave the notice; so long as the redeeming co-owner learned of the alienation in
favor of the stranger, the redemption period began to run. It is thus apparent that the Philippine legislature in Article
1623 deliberately selected a particular method of giving notice, and that method must be deemed exclusive. (39 Am.
Jur., 237; Payne vs. State, 12 S.W. 2(d) 528). As ruled in Wampler vs. Lecompte, 150 Atl. 458 (affd. in 75 Law Ed.
[U.S.] 275)
why these provisions were inserted in the statute we are not informed, but we may assume until the contrary is
shown, that a state of facts in respect thereto existed, which warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the seller, and not by the buyer, are easily divined. The
seller of an undivided interest is in the best position to know who are his co-owners that under the law must be
notified of the sale. Also, the notice by the seller removes all doubts as to fact of the sale, its perfection; and its
validity, the notice being a reaffirmation thereof, so that the party notified need not entertain doubt that the seller may
still contest the alienation. This assurance would not exist if the notice should be given by the buyer.[33]
The interpretation was somehow modified in the case of De Conejero, et al. v. Court of Appeals, et
al.[34] wherein it was pointed out that Article 1623 does not prescribe a particular form of notice, nor any
distinctive method for notifying the redemptioner thus, as long as the redemptioner was notified in writing
of the sale and the particulars thereof, the redemption period starts to run. This view was reiterated
in Etcuban v. The Honorable Court of Appeals, et al.,[35] Cabrera v. Villanueva,[36] Garcia, et al. v.
Calaliman, et al.,[37] Distrito, et al. v. The Honorable Court of Appeals, et al., [38] and Mariano, et al. v. Hon.
Court of Appeals, et al.[39]
However, in the case of Salatandol v. Retes,[40] wherein the plaintiffs were not furnished any written
notice of sale or a copy thereof by the vendor, this Court again referred to the principle enunciated in the
case of Butte. As observed by Justice Vicente Mendoza, such reversion is only sound, thus:
Art. 1623 of the Civil Code is clear in requiring that the written notification should come from the vendor or
prospective vendor, not from any other person. There is, therefore, no room for construction. Indeed, the principal
difference between Art. 1524 of the former Civil Code and Art. 1623 of the present one is that the former did not
specify who must give the notice, whereas the present one expressly says the notice must be given by the vendor.
Effect must be given to this change in statutory language. [41]
In this case, the records are bereft of any indication that Fortunato was given any written notice of
prospective or consummated sale of the portions of Lot No. 2319 by the vendors or would-be vendors. The
thirty (30)-day redemption period under the law, therefore, has not commenced to run.

Despite this, however, we still rule that petitioner could no longer invoke her right to redeem from
private respondent for the exercise of this right presupposes the existence of a co-ownership at the time
the conveyance is made by a co-owner and when it is demanded by the other co-owner or co-owners.
[42]
The regime of co-ownership exists when ownership of an undivided thing or right belongs to different
persons.[43] By the nature of a co-ownership, a co-owner cannot point to specific portion of the property
owned in common as his own because his share therein remains intangible. [44] As legal redemption is
intended to minimize co-ownership,[45] once the property is subdivided and distributed among the coowners, the community ceases to exist and there is no more reason to sustain any right of legal
redemption.[46]
In this case, records reveal that although Lot No. 2319 has not yet been formally subdivided, still, the
particular portions belonging to the heirs of Cleopas Ape had already been ascertained and they in fact
took possession of their respective parts. This can be deduced from the testimony of petitioner herself,
thus:
Q When the plaintiffs leased the share of your husband, were there any metes and bounds?
A It was not formally subdivided. We have only a definite portion. (hantal-hantal)
Q This hantal-hantal of your husband, was it also separate and distinct from the hantal-hantal or the
share of the brothers and sisters of your husband?
A Well, this property in question is a common property.
Q To the north, whose share was that which is adjacent to your husbands assumed partition?
A I do not know what [does] this north [mean].
COURT
(To Witness)
Q To the place from where the sun rises, whose share was that?
A The shares of Cornelia, Loreta, Encarnacion and Adela.
Q How could you determine their own shares?
A They were residing in their respective assumed portions.
Q How about determining their respective boundaries?
A It could be determined by stakes and partly a row of banana plantations planted by my son-in-law.
Q Who is this son-in-law you mentioned?
A Narciso Ape.
ATTY. CAWIT
(Continuing)
Q You said that there were stakes to determine the hantal-hantal of your husband and the hantal-hantal
of the other heirs, did I get you right?
ATTY. TAN
Admitted, Your Honor.
ATTY. CAWIT
Q Mrs. Ape, in 1960, Cleopas Ape was already dead, is that correct?
A Certainly, since he died in 1950.
Q By the manifestation of your counsel that the entire land (13 hectares) of your father-in-law, Cleopas
Ape, was leased to Generosa Lumayno, is this correct?
A No, it is only the assumed portion of my husband [which] was leased to Generosa Lumayno.

Q For clarification, it was only the share of your husband [which] was leased to Generosa Cawit
Lumayno?
A Yes.[47]
ATTY. CAWIT
Q My question: is that portion which you said was leased by your husband to the Lumayno[s] and
which was included to the lease by your mother-in-law to the Lumayno[s], when the
Lumayno[s] returned your husband[s] share, was that the same premises that your husband
leased to the Lumayno[s]?
A The same.
Q In re-possessing this portion of the land corresponding to the share of your husband, did your husband
demand that they should re-possess the land from the Lumayno[s] or did the Lumayno[s]
return them to your husband voluntarily?
A They just returned to us without paying the rentals.
COURT
Q Was the return the result of your husbands request or just voluntarily they returned it to your
husband?
A No, sir, it was just returned voluntarily, and they abandoned the area but my husband continued
farming.[48]
Similarly telling of the partition is the stipulation of the parties during the pre-trial wherein it was
admitted that Lot No. 2319 had not been subdivided nevertheless, Fortunato Ape had possessed a specific
portion of the land ostensibly corresponding to his share.[49]
From the foregoing, it is evident that the partition of Lot No. 2319 had already been effected by the
heirs of Cleopas Ape. Although the partition might have been informal is of no moment for even an oral
agreement of partition is valid and binding upon the parties. [50] Likewise, the fact that the respective shares
of Cleopas Apes heirs are still embraced in one and the same certificate of title and have not been
technically apportioned does not make said portions less determinable and identifiable from one another
nor does it, in any way, diminish the dominion of their respective owners.[51]
Turning now to the second issue of the existence of a contract of sale, we rule that the records of
this case betray the stance of private respondent that Fortunato Ape entered into such an agreement with
her.
A contract of sale is a consensual contract, thus, it is perfected by mere consent of the parties. It is
born from the moment there is a meeting of minds upon the thing which is the object of the sale and upon
the price.[52] Upon its perfection, the parties may reciprocally demand performance, that is, the vendee may
compel the transfer of the ownership and to deliver the object of the sale while the vendor may demand
the vendee to pay the thing sold.[53] For there to be a perfected contract of sale, however, the following
elements must be present: consent, object, and price in money or its equivalent. In the case of Leonardo v.
Court of Appeals, et al.,[54] we explained the element of consent, to wit:
The essence of consent is the agreement of the parties on the terms of the contract, the acceptance by one of the offer
made by the other. It is the concurrence of the minds of the parties on the object and the cause which constitutes the
contract. The area of agreement must extend to all points that the parties deem material or there is no consent at all.
To be valid, consent must meet the following requisites: (a) it should be intelligent, or with an exact notion of the
matter to which it refers; (b) it should be free and (c) it should be spontaneous. Intelligence in consent is vitiated by
error; freedom by violence, intimidation or undue influence; spontaneity by fraud.[55]

In this jurisdiction, the general rule is that he who alleges fraud or mistake in a transaction must
substantiate his allegation as the presumption is that a person takes ordinary care for his concerns and
that private dealings have been entered into fairly and regularly. [56] The exception to this rule is provided for
under Article 1332 of the Civil Code which provides that [w]hen one of the parties is unable to read, or if
the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained to the former.
In this case, as private respondent is the one seeking to enforce the claimed contract of sale, she
bears the burden of proving that the terms of the agreement were fully explained to Fortunato Ape who
was an illiterate. This she failed to do. While she claimed in her testimony that the contents of the receipt
were made clear to Fortunato, such allegation was debunked by Andres Flores himself when the latter
took the witness stand. According to Flores:
ATTY. TAN
Q Mr. Witness, that receipt is in English, is it not?
A Yes, sir.
Q When you prepared that receipt, were you aware that Fortunato Ape doesnt know how to read and
write English?
A Yes, sir, I know.
Q Mr. Witness, you said you were present at the time of the signing of that alleged receipt of P30.00,
correct?
A Yes, sir.
Q Where, in what place was this receipt signed?
A At the store.
Q At the time of the signing of this receipt, were there other person[s] present aside from you, your
mother-in-law and Fortunato Ape?
A In the store, yes, sir.
Q When you signed that document of course you acted as witness upon request of your mother-in-law?
A No, this portion, I was the one who prepared that document.
Q Without asking of (sic) your mother-in-law, you prepared that document or it was your mother-in-law
who requested you to prepare that document and acted as witness?
A She requested me to prepare but does not instructed (sic) me to act as witness. It was our opinion that
whenever I prepared the document, I signed it as a witness.
Q Did it not occur to you to ask other witness to act on the side of Fortunato Ape who did not know how
to read and write English?
A It occurred to me.
Q But you did not bother to request a person who is not related to your mother-in-law, considering that
Fortunato Ape did not know how to read and write English?
A The one who represented Fortunato Ape doesnt know also how to read and write English. One a maid.
Q You mentioned that there [was another] person inside the store, under your previous statement, when
the document was signed, there [was another] person in the store aside from you, your motherin-law and Fortunato Ape, is not true?
A That is true, there is one person, but that person doesnt know how to read also.
Q Of course, Mr. Witness, since it occurred to you that there was need for other witness to sign that
document for Fortunato Ape, is it not a fact that the Municipal Building is very near your
house?
A Quite (near).

Q But you could readily proceed to the Municipal Building and request one who is knowledgeable in
English to act as witness?
A I think there is no need for that small receipt. So I dont bother myself to go.
Q You did not consider that receipt very important because you said that small receipt?
A Yes, I know.[57]
As can be gleaned from Floress testimony, while he was very much aware of Fortunatos inability to
read and write in the English language, he did not bother to fully explain to the latter the substance of the
receipt (Exhibit G). He even dismissed the idea of asking somebody else to assist Fortunato considering
that a measly sum of thirty pesos was involved. Evidently, it did not occur to Flores that the document he
himself prepared pertains to the transfer altogether of Fortunatos property to his mother-in-law. It is
precisely in situations such as this when the wisdom of Article 1332 of the Civil Code readily becomes
apparent which is to protect a party to a contract disadvantaged by illiteracy, ignorance, mental weakness
or some other handicap.[58]
In sum, we hold that petitioner is no longer entitled to the right of redemption under Article 1632 of
the Civil Code as Lot No. 2319 had long been partitioned among its co-owners. This Court likewise annuls
the contract of sale between Fortunato and private respondent on the ground of vitiated consent.
WHEREFORE, premises considered, the decision dated 25 March 1998 of the Court of Appeals is
hereby REVERSED and SET ASIDE and the decision dated 11 March 1994 of the Regional Trial Court,
Branch 58, San Carlos City, Negros Occidental, dismissing both the complaint and the counterclaim, is
hereby REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
VDA DE APE VS. COURT OF APPEALS
456 SCRA 193 Civil Law Law on Sales Elements of a Contract of Sale Consent Vitiated
Cleopas Ape died in 1950 and left a parcel of land (Lot 2319) to his 11 children. The children
never formally divided the property amongst themselves except throughhantal-hantal whereby each just
occupied a certain portion and developed each.
On the other hand, the spouses Lumayno were interested in the land so they started buying the portion of
land that each of the heirs occupied. On 11 Apr 1973, one of the children, Fortunato, entered into a
contract of sale with Lumayno. In exchange of his lot, Lumayno agreed to pay P5,000.00. She paid in
advance P30.00. Fortunato was given a receipt prepared by Lumaynos son in law (Andres Flores). Flores
also acted as witness. Lumayno also executed sales transactions with Fortunatos siblings separately.
In 1973, Lumayno compelled Fortunato to make the the delivery to her of the registrable deed of
sale over Fortunatos portion of the Lot No. 2319. Fortunato assailed the validity of the contract of sale. He
also invoked his right to redeem (as a co-owner) the portions of land sold by his siblings to Lumayno.
Fortunato died during the pendency of the case.
ISSUE: Whether or not there was a valid contract of sale?
HELD: No. Fortunato was a no read no write person. It was incumbent for the the other party to prove
that details of the contract was fully explained to Fortunato before Fortunato signed the receipt.

A contract of sale is a consensual contract, thus, it is perfected by mere consent of the parties.
It is born from the moment there is a meeting of minds upon the thing which is the object of the sale and
upon the price. Upon its perfection, the parties may reciprocally demand performance, that is, the vendee
may compel the transfer of the ownership and to deliver the object of the sale while the vendor may
demand the vendee to pay the thing sold. For there to be a perfected contract of sale, however, the
following elements must be present: consent, object, and price in money or its equivalent.
For consent to be valid, it must meet the following requisites:
(a) it should be intelligent, or with an exact notion of the matter to which it refers;
(b) it should be free and
(c) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation
or undue influence; spontaneity by fraud.
Lumayno claimed that she explained fully the receipt to Fortunato, but Flores testimony belies it.
Flores said there was another witness but the other was a maid who also lacked education. Further, Flores
himself was not aware that the receipt was to transfer the ownership of Fortunatos land to her mom-inlaw. It merely occurred to him to explain the details of the receipt but he never did

SECOND DIVISION
[G.R. No. 134219. June 08, 2005]
SPOUSES MARIO AND ELIZABETH TORCUATOR, petitioners, vs. SPOUSES REMEGIO AND
GLORIA BERNABE and SPOUSES DIOSDADO and LOURDES SALVADOR, respondents.
DECISION
TINGA, J.:
In the instant Petition,[1] spouses Mario and Elizabeth Torcuator assail the Decision[2] of the Court of
Appeals in C.A.-G.R. CV No. 36427, which affirmed the trial courts dismissal of their complaint for specific
performance,[3] and its Resolution[4] which denied their motion for reconsideration.
The facts as summarized by the Court of Appeals are as follows:
The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa, Metro-Manila, with an area of
569 square meters and covered by TCT No. S-79773. The lower court found that the above parcel of land was
purchased by the spouses Diosdado and Lourdes Salvador (Salvadors, for short) from the developers of Ayala
Alabang subject, among others, to the following conditions:-It is part of the condition of buying a lot in Ayala Alabang Village (a) that the lot buyer shall deposit with Ayala
Corporation a cash bond (about P17,000.00 for the Salvadors) which shall be refunded to him if he builds a residence
thereon within two (2) years of purchase, otherwise the deposit shall be forfeited, (b) architectural plans for any
improvement shall be approved by Ayala Corporation, and (c) no lot may be resold by the buyer unless a residential
house has been constructed thereon (Ayala Corporation keeps the Torrens Title in their [sic] possession).
(p. 5, RTC Decision)
Evidences on record further reveal that on December 18, 1980, the Salvadors sold the parcel of land to the spouses
Remigio and Gloria Bernabe (Bernabes, for expediency). Given the above restrictions, the Salvadors concomitantly
executed a special power of attorney authorizing the Bernabes to construct a residential house on the lot and to
transfer the title of the property in their names.
The Bernabes, on the other hand, without making any improvement, contracted to sell the parcel of land to the
spouses Mario and Elizabeth Torcuator (Torcuators, for brevity) sometime in September of 1986. Then again,
confronted by the Ayala Alabang restrictions, the parties agreed to cause the sale between the Salvadors and the
Bernabes cancelled (Exhibit D), in favor of (a) a new deed of sale from the Salvadors directly to the Torcuators; (b) a
new Irrevocable Special Power of Attorney (Exhibit F) executed by the Salvadors to the Torcuators in order for the
latter to build a house on the land in question; and (c) an Irrevocable Special Power of Attorney (Exhibit E) from the

Salvadors to the Bernabes authorizing the latter to sell, transfer and convey, with power of substitution, the subject
lot.
The Torcuators thereafter had the plans of their house prepared and offered to pay the Bernabes for the land upon
delivery of the sale contract. For one reason or another, the deed of sale was never consummated nor was payment on
the said sale ever effected. Subseuqently, the Bernabes sold the subject land to Leonardo Angeles, a brother-in-law
(Exh. 7). The document however is not notarized. As a result, the Torcuators commenced the instant action against
the Bernabes and Salvadors for Specific Performance or Rescission with Damages.
After trial, the court a quo rendered its decision, the decretal portion reads:-From all the foregoing disquisition, especially since the plaintiffs did not suffer any real damage (by January, 1987
they could have purchased another lot in Ayala Alabang, and the architectural plans they commissioned Arch. Selga
to prepare could then be used by the plaintiffs), the complaint filed by the plaintiff spouses is dismissed. Since the
plaintiff acted with sincerity and without delay in asserting what they believed to be their prerogatives, i.e., without
any malice or desire to take advantage of another, the counter-claim interposed by the Bernabes against the Torcuator
spouses is similarly dismissed.
Makati, Metro-Manila, August 20, 1991.[5]
The Court of Appeals dismissed the appeal, ruling that the sale between the Bernabes and the
Torcuators was tainted with serious irregularities and bad faith. The appellate court agreed with the trial
courts conclusion that the parties entered into the contract with the intention of reneging on the stipulation
disallowing the sale or transfer of vacant lots in Ayala Alabang Village.
It also ruled that the parties deprived the government of taxes when they made it appear that the
property was sold directly by the Salvadors to the Torcuators. Since there were actually two sales, i.e., the
first sale between the Salvadors and the Bernabes and the second between the Bernabes and Torcuators,
taxes should have been paid for both transfers.[6]
The Court of Appeals denied petitioners motion for reconsideration in its Resolution[7] dated June 15,
1998.
Petitioners then filed the instant petition, averring that the appellate court erred in dismissing their
appeal on the strength of issues which were neither pleaded nor proved. The conditions allegedly imposed
by Ayala Corporation on the sale of lots in Ayala Alabang Village were: (a) that the lot-buyer shall deposit
with Ayala Corporation a cash bond (aboutP17,000.00 for the Salvadors) which shall be refunded to him if
he builds a residence thereon within two (2) years of purchase, otherwise the deposit shall be forfeited; (b)
architectural plans for any improvement shall be approved by Ayala Corporation; and (c) no lot may be
resold by the buyer unless a residential house has been constructed thereon (Ayala Corporation keeps the
Torrens title in their (sic) possession.)[8]
According to petitioners, the stipulation prohibiting the sale of vacant lots in Ayala Alabang Village,
adverted to by the appellate court in its decision as evidence that the sale between the Bernabes and the
Torcuators was tainted with serious irregularities, was never presented or offered in evidence by any of the
parties. Without such stipulation having been presented, marked and offered in evidence, the trial court
and the appellate court should not have considered the same.
The appellate court allegedly also erred in declaring that the contract of sale subject of the case is
void, as it was intended to deprive the government of revenue since the matter of taxes was not even
mentioned in the appealed decision of the trial court.
Further, petitioners assert that the contract was a perfected contract of sale not a mere contract to
sell. The trial court thus erred in declaring that the contract was void due only to petitioners failure to
deliver the agreed consideration. Likewise, the fact that the contract calls for the payment of the agreed
purchase price in United States Dollars does not result in the contract being void. The most that could be
demanded, in accordance with jurisprudence, is to pay the obligation in Philippine currency.
Petitioners also dispute the trial courts finding that they did not suffer any real damage as a result of
the transaction. On the contrary, they claim that respondents refusal to transfer the property caused them
actual and moral damages.

Respondents filed their Comment/Opposition (To the Petition for Certiorari)[9] dated November 4,
1998 countering that petitioners knew of the condition prohibiting the sale of vacant lots in Ayala Alabang
Village as the same was annotated on the title of the property which was submitted and adopted by both
parties as their evidence. The fact that the agreement required petitioners to construct a house in the
name of the Salvadors shows that petitioners themselves knew of the condition and acknowledged its
validity.
As regards petitioners contention that the Court of Appeals should not have ruled on the matter of
taxes due the government, respondents assert that the appellate court has the power to review the entire
case to determine the validity of the judgment of the lower court. Thus, it may review even matters which
were not raised on appeal.
Respondents refer to the circumstances surrounding the transaction as proof that the parties entered
into a mere contract to sell and not a contract of sale. Allegedly, the memorandum containing the
agreement of the parties merely used the term offer. The payment of the purchase price was ostensibly a
condition sine qua non to the execution of the deed of sale in favor of petitioners, especially since the
Bernabes came to the Philippines with the express purpose of selling the property and were leaving for the
United States as soon as they were paid. Moreover, petitioners were required to construct a residential
house on the property before it could be sold to them in accordance with the condition imposed by Ayala
Corporation.
Further, respondents maintain that the transaction was not consummated due to the fault of
petitioners who failed not only to prepare the necessary documentation but also to pay the purchase price
for the property. They also argue that the special power of attorney executed by the Salvadors in favor of
petitioners merely granted the latter the right to construct a residential house on the property in the name
of the Salvadors. The original document was not even given to the Torcuators precisely because they have
not paid the purchase price.
Petitioners filed a Reply[10] dated January 20, 1999 in reiteration of their arguments.
In the Resolution[11] dated February 10, 1999, the parties were required to file their respective
memoranda. Accordingly, petitioners filed their Memorandum[12] on April 19, 1999. On the other hand, in
view of respondents disappearance without notice, the Court resolved to dispense with their
memorandum.[13]
The trial court denied petitioners complaint on three (3) grounds, namely: (1) the alleged nullity of the
contract between the parties as it violated Ayala Corporations condition that the construction of a house is
a prerequisite to any sale of lots in Ayala Alabang Village; (2) non-payment of the purchase price; and (3)
the nullity of the contract as it called for payment in United States Dollars. To these reasons, the Court of
Appeals added a fourth basis for denying petitioners appeal and that is the alleged nullity of the agreement
because it deprived the government of taxes.
An analysis of the facts obtaining in this case leads us to affirm the assailed decisions although from
a slightly different but related thrust.
Let us begin by characterizing the agreement entered into by the parties, i.e., whether the
agreement is a contract to sell as the trial court ruled, or a contract of sale as petitioners insist.
The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As
early as 1951, we held that in a contract of sale, title passes to the buyer upon delivery of the thing sold,
while in a contract to sell, ownership is reserved in the seller and is not to pass until the full payment of the
purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the
second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be
identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and
unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in
the vendor if the vendee does not comply with the condition precedent of making payment at the time
specified in the contract.[14]
In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the
buyer until full payment of the price or the fulfillment of some other conditions either of which is a future

and uncertain event the non-happening of which is not a breach, casual or serious, but simply an event
that prevents the obligation of the vendor to convey title from acquiring binding force.[15]
We have carefully examined the agreement between the parties and are far from persuaded that it
was a contract of sale.
Firstly, the agreement imposed upon petitioners the obligation to fully pay the agreed purchase price
for the property. That ownership shall not pass to petitioners until they have fully paid the price is implicit in
the agreement. Notably, respondent Remigio Bernabe testified, without objection on the part of petitioners,
that he specifically informed petitioners that the transaction should be completed, i.e., that he should
receive the full payment for the property, before he left for the United States on October 14, 1986.[16]
Moreover, the deed of sale would have been issued only upon full payment of the purchase price,
among other things. Petitioner Mario Torcuator acknowledged this fact when he testified that the deed of
sale and original special power of attorney were only to be delivered upon full payment of the purchase
price.[17]
As correctly observed by the trial court, the Salvadors did not execute a deed of sale in favor of
petitioners, and instead executed a special power of attorney authorizing the Bernabes to sell the property
on their behalf, in order to afford the latter a measure of protection that would guarantee full payment of
the purchase price before any deed of sale in favor of petitioners was executed.
Remarkably, the records are bereft of any indication that petitioners ever attempted to tender
payment or consign the purchase price as required by law. The Complaint[18] filed by petitioners makes no
mention at all of a tender of payment or consignation having been made, much less that petitioners are
willing and ready to pay the purchase price. Petitioners averments to the effect that they have sufficient
funds to pay for the property and have even applied for a telegraphic transfer from their bank account to
the Bernabes bank account, uncoupled with actual tender and consignation, are utterly self- serving.
The trial court correctly noted that petitioners should have consigned the amount due in court
instead of merely sending respondents a letter expressing interest to push through with the transaction.
Mere sending of a letter by the vendee expressing the intention to pay without the accompanying payment
is not considered a valid tender of payment. Consignation of the amount due in court is essential in order
to extinguish the obligation to pay and oblige the vendor to convey title.[19]
On this score, even assuming that the agreement was a contract of sale, respondents may not be
compelled to deliver the property and execute the deed of absolute sale. In cases such as the one before
us, which involve the performance of an obligation and not merely the exercise of a privilege or right,
payment may be effected not by mere tender alone but by both tender and consignation. The rule is
different in cases which involve an exercise of a right or privilege, such as in an option contract, legal
redemption or sale with right to repurchase, wherein mere tender of payment would be sufficient to
preserve the right or privilege.[20] Hence, absent a valid tender of payment and consignation, petitioners are
deemed to have failed to discharge their obligation to pay.
Secondly, the parties clearly intended the construction of a residential house on the property as
another suspensive condition which had to be fulfilled. Ayala Corporation retained title to the property and
the Salvador spouses were precluded from selling it unless a residence had been constructed thereon.
The Ayala stipulation was a pervasive, albeit unwritten, condition in light of which the transaction in this
case was negotiated. The parties undoubtedly understood that they had to contend with the Ayala
stipulation which is why they resorted to the execution of a special power of attorney authorizing
petitioners to construct a residential building on the property in the name of the Salvadors. Had the
agreement been a contract of sale as petitioners would impress upon the Court, the special power of
attorney would have been entirely unnecessary as petitioners would have had the right to compel the
Salvadors to transfer ownership to them.[21]
Thirdly, there was neither actual nor constructive delivery of the property to petitioners. Apart from
the fact that no public document evidencing the sale was executed, which would have been considered
equivalent to delivery, petitioners did not take actual, physical possession of the property. The special
power of attorney, which petitioners count on as evidence that they took possession of the property, can by

no means be interpreted as delivery or conveyance of ownership over the property. Taken by itself, in fact,
the special power of attorney can be interpreted as tied up with any number of property arrangements,
such as a contract of lease or a joint venture. That is why respondents, especially the Salvadors, never
intended to deliver the title to petitioners and conformably with that they executed only a special power of
attorney. Indeed, continuously looming large as an essentiality in their judgment to dispose of their
valuable property is the prior or contemporaneous receipt of the commensurate price therefor.
This brings us to the application of the Statute of Frauds. Article 1403 of the Civil Code provides:
Art. 1403. The following contracts are unenforceable unless they are ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof,
be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its contents:
(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or an interest
therein;
....
The term Statute of Frauds is descriptive of statutes which require certain classes of contracts, such
as agreements for the sale of real property, to be in writing. It does not deprive the parties the right to
contract with respect to the matters therein involved, but merely regulates the formalities of the contract
necessary to render it enforceable. The purpose of the statute is to prevent fraud and perjury in the
enforcement of obligations depending for their evidence on the unassisted memory of witnesses by
requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party
to be charged.[22] The written note or memorandum, as contemplated by Article 1403 of the Civil Code,
should embody the essentials of the contract.[23]
In the instant case, petitioners present as written evidence of the agreement the special power of
attorney executed in their favor by the Salvadors and the summary of agreement [24]allegedly initialed by
respondent Remigio Bernabe. These documents do not suffice as notes or memoranda as contemplated
by Article 1403 of the Civil Code.
The special power of attorney does not contain the essential elements of the purported contract and,
more tellingly, does not even refer to any agreement for the sale of the property. In any case, it was
rendered virtually inoperable as a consequence of the Salvadors adamant refusal to part with their title to
the property.
The summary of agreement, on the other hand, is fatally deficient in the fundamentals and
ambiguous in the rest of its terms. For one, it does not mention when the alleged consideration should be
paid and transfer of ownership effected. The document does not even refer to a particular property as the
object thereof. For another, it is unclear whether the supposed purchase price is P600.00, P590.00
or P570.00/square meter. The other conditions, such as payment of documentary stamp taxes, capital
gains tax and other registration expenses, are likewise uncertain.
Conformably with Article 1405[25] of the Civil Code, however, respondents acceptance of the
agreement foisted by petitioners on them is deemed to have arisen from their failure to object to the
testimony of petitioner Mario Torcuator on the matter [26] and their cross-examination of said petitioner
thereon.[27]
Be that as it may, considering our ruling that the agreement was a contract to sell, respondents were
not obliged to convey title to the property before the happening of two (2) suspensive conditions, namely:
full payment of the purchase price and construction of a residence on the property. They were acting
perfectly within their right when they considered the agreement cancelled after unsuccessfully demanding
payment from petitioners.
That said, the question of whether the transaction violated the Uniform Currency Act, Republic Act
No. 529, is already moot. The contract having been cancelled, any resolution regarding the validity of the
stipulation requiring payment of the purchase price in foreign currency would not serve any further
purpose.

Petitioners next insist that the condition requiring the construction of a house on any residential lot
located in Ayala Alabang Village before it can be sold was never submitted in evidence and was never
testified to by any of the witnesses presented during the trial. Hence, the trial court and the Court of
Appeals should not have used this as basis for its denial of petitioners cause.
This assertion, however, is completely untrue. While the Formal Offer of Evidence[28] of petitioners,
respondents Offer of Exhibits,[29] and the Formal Offer of Evidence (On Rebuttal) [30]of petitioners make no
mention of any stipulation prohibiting the sale of vacant lots in Ayala Alabang Village, respondents maintain
that petitioners are fully aware of the prohibition as the conditions imposed by Ayala Corporation on the
sale of Ayala Alabang lots are inscribed on the title of the property which was submitted in evidence by
both parties.
Despite petitioners remonstration that the inscriptions on the title are hardly legible, [31] we are
inclined to give credence to respondents account. It is quite implausible that a lawyer such as petitioner
Mario Torcuator would not take the precaution of checking the original title of the property with the Registry
of Deeds to ascertain whether there are annotations therein that would prejudice his position.
More importantly, petitioner Mario Torcuator himself testified on the existence of the condition
prohibiting the sale of vacant lots in Ayala Alabang Village, viz:
ATTY. J. DE DIOS, JR.
Q -Mr. witness aside from this summary of agreement which has been marked as Exhibit J do
you still have a document relating to his transaction between you and the defendant?
A -Yes, sir, as I indicated in my earlier testimony there was supposed to be a letter addressed
to Ayala Corporation which defendant Salvador should sign in order to request Ayala to
deliver to me the TCT covering the lot subject of the transaction.
Q -This letter that you are referring to do you still have a copy of that letter?
A -Yes, sir.
Q -I am showing to you a xerox copy of a letter addressed to Ayala Corporation and signed by
Diosdado and Lourdes Salvador, can you please explain to this Court what is the
relation of this document with what you are referring to executed by the defendant
Diosdado Salvador and Lourdes Salvador addressed to Ayala Corporation?
A -This is the letter of Mr. Salvador, sir, signed in my presence.
Q -Can you tell the Court where is the original of this document?
A -All of the original copies of that letter are with the defendant Bernabe, sir.
Q -Can you tell the Court how did you come to have a xerox copy of this document?
A -Yes, because as soon as the copies of the documents for the transaction were signed by
Mrs. Salvador who was then in New York, they were sent by the spouses to the
daughter of Mr. Salvador who in turn told me that all the originals are supposed to be
delivered to Mr. Bernabe and I was given a xerox copy of the same.
ATTY. J. DE DIOS, JR.
- And which for purpose of identification, your Honor, may we request that this letter addressed
to Ayala Corporation and signed by Diosdado Salvador and Lourdes Salvador be
marked as Exhibit K for the plaintiff, your Honor.
COURT
- Mark it.
...
ATTY. J. DE DIOS, JR.
- Mr. Witness, this letter appears to be, does it contain any date? Can you tell this Court why
this document does not contain the date?
ATTY. A. MAGNO
- Incompetent, your Honor, because he was not the one who made that document.
COURT
- Let him explain.

ATTY. MAGNO
- Yes, your Honor.
ATTY. J. DE DIOS, JR.
- Because, your Honor, there is a requirement by Ayala Corporation that no lot or
property may be transferred until there is a complete building or structure
built on the lot and so what I was supposed to get only from Mr. Salvador,
aside from the deed of absolute sale, is merely a special power of attorney
to authorize me to construct my house in the lot and upon completion of
the house that is the time that I would be allowed by Ayala Corporation to
transfer the property in my name. Therefore, the letter requesting Ayala
Corporation to release the title in the name of Mr. Salvador to was deliberately
undated because it would be only dated when I completed the house.
[32]
[Emphasis supplied]
The fact that petitioners agreed to construct a residential house on the property in the name of the
Salvadors further proves that they knew that a direct sale to them of a vacant lot would contravene the
condition imposed by Ayala Corporation on the original buyers of lots in Ayala Alabang Village. Hence, they
agreed on the elaborate plan whereby the Salvador spouses, in whose names the property was registered,
would execute a special power of attorney in favor of petitioners authorizing the latter to construct a
residential house on the property in the name of the Salvadors. The records even indicate that the
documents to effectuate this plan were prepared by petitioner Mario Torcuator himself.
In his testimony, for instance, petitioner Mario Torcuator stated that: [B]ased on our discussion, your
Honor, from the P600 per square meter price, we agreed upon, they agreed to give me a rebate of 5% in
the form of discount because there was a problem in the documentation which I tried to solve which are
the papers in favor of Bernabe missing. I suggested to Mr. Bernabe that we prepare a new set of
document which will be signed by Mr. Salvador as the previous owner and because of that I will be getting
in effect a 5% discount as my commission.[33]
This was confirmed by respondent Remigio Bernabe:
Q - Now, where there any documents presented to you during that
occasion?
A - Yes, sir.
Q - By whom?
A - Mr. Torcuator prepared some documents for me to sign.
Q - And do you recall what was that documents?
A - Yes, sir. Mr. Torcuator prepared a documents for cancellation
of the deed of sale of Mr. Salvador to Remigio Bernabe, and cancellation also of
the irrevocable power of attorney of Salvador to Bernabe, and power of attorney
of Salvador authorizing Remigio Bernabe to sell the property and power of
attorney of Salvador given to Mr. Torcuator.[34]
Petitioners therefore cannot feign ignorance of the condition imposed by Ayala Corporation.
We do not agree, however, with the trial court and appellate courts ruling that the transaction
between the parties was void for being contrary to good customs and morals.[35]
In order to declare the agreement void for being contrary to good customs and morals, it must first
be shown that the object, cause or purpose thereof contravenes the generally accepted principles of
morality which have received some kind of social and practical confirmation. [36]
We are not inclined to rule that the transaction in this case offended good customs and morals. It
should be emphasized that the proscription imposed by Ayala Corporation was on the resale of the
property without a residential house having been constructed thereon. The condition did not require that
the original lot buyer should himself construct a residential house on the property, only that the original
buyer may not resell a vacant lot. In view of our finding that the agreement between the parties was a
mere contract to sell, no violation of the condition may be inferred from the transaction as no transfer of

ownership was made. In fact, the agreement in this case that petitioners will construct a residential house
on the property in the name of the Salvadors (who retained ownership of the property until the fulfillment of
the twin conditions of payment and construction of a residence) was actually in compliance with or
obeisance to the condition.
Finally, the issue of whether the agreement violated the law as it deprived the government of capital
gains tax is wholly irrelevant. Capital gains taxes, after all, are only imposed on gains presumed to have
been realized from sales, exchanges or dispositions of property. Having declared that the contract to sell in
this case was aborted by petitioners failure to comply with the twin suspensive conditions of full payment
and construction of a residence, the obligation to pay taxes never arose. Hence, any error the appellate
court may have committed when it passed upon the issue of taxes despite the fact that no evidence on the
matter was pleaded, adduced or proved is rather innocuous and does not warrant reversal of the decisions
under review.
WHEREFORE, the instant petition is DENIED. Costs against petitioners.
SO ORDERED.
Austria-Martinez, (Acting Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.
Puno, (Chairman), on official leave.

[G.R. No. 103577. October 7, 1996]

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.
GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO
A.
CORONEL,
FLORAIDA
A.
ALMONTE,
and
CATALINA
BALAIS
MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and
RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-infact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel herein
petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land
with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties
sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a
document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter
referred to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment

-----------------------------------------P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase
price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total
amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer
certificate of title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said
property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of theP1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document
aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their
deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in
favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand
(P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as
Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels father was transferred in their
names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina
B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00)
Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down payment
paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and
caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the
Registry of Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina
(Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582
(Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties
agreed to submit the case for decision solely on the basis of documentary exhibits.Thus, plaintiffs therein
(now private respondents) proffered their documentary evidence accordingly marked as Exhibits A through
J, inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise
inclusive of their corresponding submarkings.Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective memoranda, and an additional 15 days

within which to submit their corresponding comment or reply thereto, after which, the case would be
deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was
then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. OnMarch 1, 1989,
judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for
the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of
plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title
No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements
existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said
document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance
of the purchase price amounting toP1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of
Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and
effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject
property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the
counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon
City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned
Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of
April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the
Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some
future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the
same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority
of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time
before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November
11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of
Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that
Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding
Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he
returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases
submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of coequal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to
whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another
branch or region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case,
resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the

documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by
evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew
Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals
(Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents
Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the
case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court
in the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the case
at bar is the precise determination of the legal significance of the document entitled Receipt of Down
Payment which was offered in evidence by both parties. There is no dispute as to the fact that the said
document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs
of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627,
as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. 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.
While, it is the position of private respondents that the Receipt of Down Payment embodied a
perfected contract of sale, which perforce, they seek to enforce by means of an action for specific
performance, petitioners on their part insist that what the document signified was a mere executory
contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P.
Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of
absolute sale.
Plainly, such variance in the contending parties contention is brought about by the way each
interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever
relevant and admissible evidence may be available on record, this Court, as were the courts below, is now
called upon to adjudge what the real intent of the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the
first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer
of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase price. What the seller agrees or
obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership
or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of
sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which
states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor
of the promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated
(cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous
delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller contracted with, but to a
third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to
the property will transfer to the buyer after registration because there is no defect in the owner-sellers
title per se, but the latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous
delivery of the subject property, the sellers ownership or title to the property is automatically transferred to
the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article
1544 of the Civil Code, such second buyer of the property who may have had actual or constructive
knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case
a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the
sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature
of the contract entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their
natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212
SCRA 586 [1992]). Thus, when petitioners declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of
Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea
conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there
was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of
title was still in the name of petitioners father, they could not fully effect such transfer although the buyer
was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook
upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a
new certificate of title in their names from that of their father, after which, they promised to present said
title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall,
in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no express
reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which
prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves

(the certificate of title was not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely presume that, had the certificate of
title been in the names of petitioners-sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the
property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having
already agreed to sell the subject property, they undertook to have the certificate of title change to their
names and immediately thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by
the buyer with certain terms and conditions, promised to sell the property to the latter.What may be
perceived from the respective undertakings of the parties to the contract is that petitioners had already
agreed to sell the house and lot they inherited from their father, completely willing to transfer ownership of
the subject house and lot to the buyer if the documents were then in order. It just so happened, however,
that the transfer certificate of title was then still in the name of their father. It was more expedient to first
effect the change in the certificate of title so as to bear their names. That is why they undertook to cause
the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in
the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were
committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to
pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to
protect the seller against a buyer who intends to buy the property in installment by withholding ownership
over the property until the buyer effects full payment therefor, in the contract entered into in the case at bar,
the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact
that the certificate of title to the property was still in the name of their father. It was the sellers in this case
who, as it were, had the impediment which prevented, so to speak, the execution of an contract of
absolute sale.
What is clearly established by the plain language of the subject document is that when the said
Receipt of Down Payment was prepared and signed by petitioners Romulo A. Coronel,et. al., the parties
had agreed to a conditional contract of sale, consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985
(Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof
being the delivery of the property by means of the execution of the deed of absolute sale in a public
instrument, which petitioners unequivocally committed themselves to do as evidenced by the Receipt of
Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at
bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts.
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.

Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the
transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and
to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay
the balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from
our deceased father Constancio P. Coronel, the transfer certificate of title immediately
upon receipt of the downpayment above-stated". The sale was still subject to this
suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive
condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their
names, there could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly
provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere
hypothetical arguments is the fact that the condition herein referred to was actually and indisputably
fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by
TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated
as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the
suspensive condition that the sellers shall effect the issuance of new certificate title from that of their
fathers name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day
of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that
has been complied with.

the rights and obligations of the parties with respect to the perfected contract of sale became mutually due
and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6,
1985. As of that point in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they
were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and
value of the inheritance of a person are transmitted through his death to another or others by his will or by operation
of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P.
Coronel are compulsory heirs who were called to succession by operation of law.Thus, at the point their
father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned,
such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is
expressly provided that rights to the succession are transmitted from the moment of death of the decedent
(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be declared unless the creditors have
been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property
from the decedents name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into
an agreement at that time and they cannot be allowed to now take a posture contrary to that which they
took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code
expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale, petitioners
cannot claim now that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between them
and Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without leaving her address, telephone
number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to
the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in
unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the
instant case. We note that these supposed grounds for petitioners rescission, are mere allegations found
only in their responsive pleadings, which by express provision of the rules, are deemed controverted even
if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely
bereft of any supporting evidence to substantiate petitioners allegations. We have stressed time and again
that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961];

Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79
Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February
6, 1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of
sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of
sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because
although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer,
the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in
behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion
D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is
no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P.
Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment
being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of
Ramona P. Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to
pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the
physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they
actually presented the new transfer certificate of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance with their agreement. Ramonas
corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may
be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay
by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a
case of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession;
and, in the absence thereof to the person who presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the
second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and
(b) should there be no inscription by either of the two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished
member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of
the second sale cannot defeat the first buyers rights except when the second buyer first registers in good faith the
second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register, since knowledge taints his registration with bad faith (see
also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22
June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that
the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals,
69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the
subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and
petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is
that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was
unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer
in good faith but whether or not said second buyer registers such second sale in good faith, that is, without
knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice
of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas
petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been previously sold to private respondents,
or, at least, she was charged with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the
time of the registration of the property.
This Court had occasions to rule that:

If a vendee 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 upon him any right. (Salvoro vs. Tanega, 87 SCRA 349
[1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs.
Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on
February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was
correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as
principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the
issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised
in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not
touch this issue and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
judgment AFFIRMED.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., and Francisco, JJ., concur.
Panganiban, J., no part.
Romulo Coronel vs Court of Appeals , Conception Alcaraz
FACTS:
This case is about a sale of land in Roosevelt Avenue, Quezon City by the vendor Romulo Coronel to the
vendees Conception Alcaraz and her daughter Ramona Patricia Alcaraz with the following conditions:

The Coronels will immediately transfer the certificate of title in their name upon receipt of the
downpayment which is 50,000.

Upon the transfer in their names of the subject property, the Coronels will execute the deed of
absolute sale in favor of Ramona and then Ramona shall immediately pay the Coronels the
whole balance of 1,190,000.
On January 15, 1985, Conception paid the downpayment of 50,000 and then on February 6,
1985, the property was now registered under the name of Coronels. By Feb. 18, 1985, the Coronels sold
the property to Catalina B. Mabanag for 1,580,000 after she made a 300,000 downpayment. This is the
reason why the Coronels cancelled and rescind the contract with the Alcaraz by depositing back the
50,000 to Ramonas bank account.
On Feb. 22, Conception filed a complaint for specific performance against the Coronels. On
April, the Coronels executed a deed of absolute sale over the subject property to Catalina after which on
June Catalina was issued a new title over the subject property.
ISSUE:
Whether or not the Receipt of Down payment embodied a perfected contract of sale or just a
mere contract to sell?
HELD:

CONTRACT OF SALE- contracting parties obligates himself to transfer the ownership and to
deliver a determinate thing and the other to pay a price certain in money or its equivalent.

CONTRACT TO SELL- the prospective seller explicitly reserves the transfer of the title to the
prospective buyer, meaning the seller does not yet agree or consent to transfer the ownership of
the property until the happening of a contingent event like full payment of price.
SUPREME COURT RULING:
When the Receipt of Down Payment document was prepared and signed by Romulo Coronel,
the parties had agreed to a conditional contract of sale the consummation of the contract is subject only to
the successful transfer of the certificate of Title.
According to Supreme Court, the receipt of down payment document manifests a clear intent of the
Coronels to transfer the title to the buyer, but since the title is still in the name effect the transfer even
though the buyers are able and willing to immediately pay the purchase price. The agreement as well
could not have been a contract to sell because the seller or the Coronels made no express reservation of
ownership or the title of the land.
On Feb. 6, 1985, the Contract of Sale between the Coronels and the Alcaraz became obligatory.
\
DIZON VS COURT OF APPEALS

SYNOPSIS
In 1974, Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with
herein petitioners involving a land in Quezon City. The term of the lease was for one (1) year, during which
period, the lessee was granted an option to purchase the lot for P3,000.00 per square meter. Thereafter,
the lease shall be on a per month basis with a monthly rental of P3,000.00. Later, for failure to pay the
increased rental of P8,000.00 per month effective June 1976, herein petitioners filed an action for
ejectment to which the Corporation was ordered to vacate the leased premises. The Corporation,
however, questioned the jurisdiction of the City Court over the ejectment case. Subsequently, the
Corporation filed its own action for specific performance and fixing the period for obligation. It sought to
compel the execution of a deed of sale pursuant to the option to purchase, and the receipt of the partial
payment it made and to fix the period to pay the balance thereof.
Petitioners have established a right to evict private respondent from the subject premises for nonpayment of rentals. In this regard, the then City Court had exclusive jurisdiction over the ejectment suit.
The filing by the Corporation of a suit with the RTC for specific performance did not divest the City Court of
its jurisidiction over the ejectment case The decision of the City Court was affirmed by the Intermediate
Appellate Court and the Supreme Court. Having failed to exercise the option to purchase within the
stipulated one-year period, private respondent Corporation cannot now enforce its option. An implied new
lease on a monthly basis does not ipso facto carry with it an implied revival of the option to purchase the
leased premises. The right to exercise the option to purchase expired with the termination of the original
contract of lease for one year. The private respondent delivered a check of P300,000.00 to Alice Dizon
who allegedly acted as agent of petitioners pursuant to the supposed authority given by petitioner as
payee thereof does not amount to a perfected contract of sale pursuant to the contract of lease with option
to buy. There was no valid consent by the petitioners on the supposed sale entered into by Alice Dizon, as
petitioners alleged agent, and private respondent.
SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; LEASE; NON-PAYMENT OF RENTALS GIVES RIGHT TO

EVICT, REGARDLESS OF THE ACTION FOR SPECIFIC PERFORMANCE TO ENFORCE
OPTION TO PURCHASE WHICH WAS ALSO INSTITUTED. Petitioners have established a right to
evict private respondent from the subject premises for non-payment of rentals. Since the rent was
paid on a monthly basis, the period of lease is considered to be from month to month in accordance
with Article 1687 of the New Civil Code. Where the rentals are paid monthly, the lease, even if
verbal may be deemed to be on a monthly basis, expiring at the end of every month pursuant to
Article 1687, in relation to Article 1673 of the Civil Code. In such case, a demand to vacate is not
even necessary for judicial action after the expiration of every month. When private respondent
failed to pay the increased rental, the petitioners had a cause of action to institute an ejectment suit
against the former with the then City Court. In this regard, the City Court (now MTC) had exclusive
jurisdiction over the ejectment suit. The filing by private respondent of a suit with the Regional Trial
Court for specific performance to enforce the option to purchase did not divest the then City Court of
its jurisdiction to take cognizance over the ejectment case. Of note is the fact that the decision of the
City Court was affirmed by both the Intermediate Appellate Court and this Court.
2. ID.; ID.; ID.; FAILURE TO EXERCISE OPTION TO PURCHASE WITHIN THE STIPULATED PERIOD;
EFFECT; CASE AT BAR. Having failed to exercise the option to purchase within the stipulated one
year period, private respondent cannot enforce its option to purchase anymore. Moreover, even
assuming arguendo that the right to exercise the option still subsists at the time private respondent
tendered the amount, the suit for specific performance to enforce the option to purchase was filed
more than ten (10) years after accrual of the cause of action as provided under Article 1144 of the
New Civil Code. In this case, there was a contract of lease for one (1) year with option to purchase.
The contract of lease expired without the private respondent, as lessee, purchasing the property but
remained in possession thereof. Hence, there was an implicit renewal of the contract of lease on a
monthly basis. The other terms of the original contract of lease which are revived in the implied new
lease under Article 1670 of the New Civil Code are only those terms which are germane to the
lessees right of continued enjoyment of the property leased. Therefore, an implied new lease does
not ipso facto carry with it any implied revival of private respondents option to purchase (as lessee
thereof) the leased premises. The provision entitling the lessee the option to purchase the leased
premises is not deemed incorporated in the impliedly renewed contract because it is alien to the
possession of the lessee. Private respondents right to exercise the option to purchase expired with
the termination of the original contract of lease for one year.
3. ID.; ID.; CONTRACT OF SALE; WHEN PERFECTED. Under Article 1475 of the New Civil Code, the
contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts. Thus, the
elements of a contract of sale are consent, object, and price in money or its equivalent. It bears
stressing that the absence of any of these essential elements negates the existence of a perfected
contract of sale. Sale is a consensual contract and he who alleges it must show its existence by
competent proof.
4. ID.; ID.; CONTRACT OF AGENCY; NOT APPRECIATED. There was no valid consent by the
petitioners (as co-owners of the leased premises) on the supposed sale entered into by Dizon, as
petitioners alleged agent, and private respondent. The basis for agency is representation and a
person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the

agent. As provided in Article 1868 of the New Civil Code, there was no showing that petitioners
consented to the act of Dizon nor authorized her to act on their behalf with regard to her transaction
with private respondent. The most prudent thing private respondent should have done was to
ascertain the extent of the authority of Dizon. Being negligent in this regard, private respondent
cannot seek relief on the basis of a supposed agency.

FIRST DIVISION
MANILA METAL CONTAINER G.R. No. 166862
CORPORATION,
Petitioner,
Present:
REYNALDO C. TOLENTINO,
Intervenor, PANGANIBAN, C.J., Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR., and
CHICO-NAZARIO, JJ.
PHILIPPINE NATIONAL BANK,
Respondent,
DMCI-PROJECT DEVELOPERS, Promulgated:
INC.,
Intervenor. December 20, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R.
No. 46153 which affirmed the decision [2] 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 Amendment[4] 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 forP911,532.21, petitioners outstanding obligation to
respondent PNB as of June 30, 1982,[6] plus interests and attorneys fees.

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.

After due notice and publication, the property was sold at public auction on September 28, 1982 where
respondent PNB was declared the winning bidder forP1,000,000.00. The Certificate of Sale[7] 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
onFebruary 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984.

Petitioner rejected respondents 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 petitioners offer to pay the
balance of P643,452.34 in a letter dated August 1, 1989.[22]

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]

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:

In a letter[10] 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]

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.

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]Petitioners 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 petitioners 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 datedNovember 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]

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.

Petitioner, however, did not agree to respondent PNBs 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 SAMDs offer to purchase the property for P1,574,560.47,
and that was why it had paidP725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse
should PNB insist on the position.[18]

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.

On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted
petitioners 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 petitioners President, Pablo Gabriel, where
he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated therein that

Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus:

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]

a) Declaring the Amended Real Estate Mortgage (Annex A) null and void and without any
legal force and effect.

b)

Declaring defendants acts of extra-judicially foreclosing the mortgage over plaintiffs

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. 37025 described in paragraph 4 of this Complaint to the plaintiff Manila Metal.

e)

Ordering the defendant PNB to pay the plaintiff Manila Metals 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 attorneys 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.
[25]

During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts.
The parties agreed to limit the issues to the following:
1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiffs 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.

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-APPELLEES LETTER
DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANTS 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 DEFENDANTAPPELLEE.
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 DEFENDANT-APPELLEE 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.

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.[30] The
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 PNBs counterclaim. It ordered respondent PNB to refund theP725,000.00 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 petitioners

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, ATTOTRNEYS FEES AND LITIGATION
EXPENSES.[33]
Meanwhile, on June 17, 1993, petitioners 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 plaintiff-appellant, 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 petitioners original offer to purchase the subject property had not been accepted
by respondent PNB. In fact, it made a counter-offer through itsJune 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 PNBs 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.

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 respondents offer made through the SAMD, to sell the property
for P1,574,560.00. 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 theSAMDs 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 petitioners 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
respondents 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 the P725,000.00
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. Bormaheco[39] and Topacio v. Court of Appeals.[40]

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 PNBS 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 NONPAYMENT OF THE PETITIONER-APPELLANT 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
PETITIONER-APPELLANT
DATED MARCH
18,
1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT

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 respondents
breach of its obligation to petitioner. It did not amount to a rejection of respondents 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.
Petitioners 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, theeffectivity 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 governingsuspensive 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 respondents 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 banks 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 banks
claim to be P1,931,389.53 less deposit of P725,000.00, orP1,206,389.00. Furthermore, while respondents Board of
Directors accepted petitioners 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 petitioners 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 counter-offer 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 respondents 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

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.

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]

This contention is likewise negated by the stipulation of facts which the parties entered into in the trial
[58]

When the petitioner was told that respondent did not allow partial redemption, it sent a letter to respondents
President reiterating its offer to purchase the property. [59]There was no response to petitioners 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 was P1,574,560.47 cannot be considered an unqualified acceptance to petitioners 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 respondents Board of Directors to accept
petitioners offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioners 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.

court:
8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB
prepared an updated Statement of Account showing MMCCs 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 petitioners 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 respondents 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 Banks 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;

It appears that the SAMD had prepared a recommendation for respondent to accept petitioners 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 atP2,660,000.00. In fine, respondents acceptance of
petitioners 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.

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;

We do not agree with petitioners 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:

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;

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]

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. Petitioners 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. 95771 March 19, 1993
LAWRENCE
BOWE
and
CIRILO
ARBOLARIO, petitioners,
vs.
HONORABLE COURT OF APPEALS, and TEODORO R. GARCIA, represented by his son, SERAFIN
M. GARCIA, respondents.
Mario O. Leyco for petitioners.
Ricardo J.M. Rivera Law Office for private respondent.
CAMPOS, JR., J.:
This is a petition for review on certiorari seeking the reversal of the Decision * of December 18, 1989 and
the Resolution ** of October 23, 1990 of the respondent Court of Appeals in CA-G.R. CV No. 17201,
entitled "TEODORO R. GARCIA, represented by his son, SERAFIN GARCIA v. LAWRENCE BOWE, ET
AL." affirming the decision" of the Regional Trial Court of Olongapo City dated December 17, 1987 in Civil
Case No. 451-0-84 for termination of a lease contract with damages and reimbursement of rents.
As gathered from the records, the facts of the case are as follows:
On June 27, 1979, private respondent (plaintiff below) Teodoro Garcia's wife Luz Garcia, now deceased,
as owner and lessor of a two (2) storey, 6-door apartment building located at No. 2-B Leo St., Lower
Kalaklan, Olongapo City entered into a contract of lease 1 covering the same property with Laura Arbolario
(now deceased, substituted by her son by previous marriage Lawrence Bowe), 2 for a period of five (5)
years starting September 1, 1979 to terminate on September 1, 1984. 3 It was stipulated, among others,
that herein petitioners can sublease the premises and collect rentals therefrom and shall start to pay
private respondent the amount of P30,000.00 as yearly rental after the indebtedness of private respondent
to petitioners in the amount of P75,000.00 is fully and completely paid by private respondent to the
petitioners out of the rental received by the latter on said property. 4
Sometime in October of 1982, during the efficacy of the contract of lease, Teodoro Garcia and his son,
Serafin Garcia, verbally agreed to sell the disputed house and lot to the spouses Cirilo and Laura Arbolario
for a consideration of P220,000.00. 5
Pursuant to said agreement, the first of the downpayments was made on August 18, 1982 6 for P2,600.00.
Said receipt was signed by Serafin Garcia in the presence of the petitioners. 7 Succeeding payments were
also made in installment and private respondents admittedly received the total amount of P66,000.00 8 and

it was agreed that the balance will be paid by the petitioners to private respondent upon the latter's
(Teodoro Garcia) return to the Philippines when he could execute the deed of absolute sale. 9 After the
petitioners' last payment on December 22, 1983 private respondent wrote them a letter informing them that
the deal is off 10 and after the expiration of the lease contract on September 1, 1984, private respondent's
son Serafin went to petitioners and offered an accounting of the amounts of money they have paid (to
compute them as rentals) but the petitioners refused, claiming that they already own the property. 11
Hence, Teodoro Garcia, represented by his son, Serafin Garcia filed a complaint against Laura Arbolario,
joined by her husband Cirilo (Carlos) Arbolario before the RTC of Olongapo docketed as Civil Case No.
451-0-84, alleging that the conditions on said contract of lease have been fully satisfied; that petitioner's
unjust refusal to vacate the premises after September 1, 1984 has caused actual damages by way of
rental from September 2, 1984 up to the time petitioners shall have relinquished the premises; and that
defendant's violation of their contractual obligation caused exemplary and moral damages, attorney's fees
plus incidental expenses for litigation; and thus prayed for: the termination of the contract of lease as of
September 1, 1984; petitioners to reimburse private respondent of all rents received from said 6-door
apartment from September 2, 1984 up to the time she shall vacate the premises by virtue of judgment; and
petitioners to pay attorney's fee of P10,000.00, miscellaneous expenses of P2,000.00 and moral and
exemplary damages. 12
Petitioners' admit the existence of the contract of lease and assert in defense that in 1982 private
respondent agreed to sell to them the house and lot subject of the contract of lease for P220,000.00; that
pursuant to said agreement, private respondent or through his children received from petitioners down
payments in the total amount of P66,600.00 and it was agreed that the balance will be paid by petitioners
to private respondent as soon as the latter returned to the Philippines when he could execute the deed of
absolute sale; that petitioners collected rental from tenants thereon and made considerable improvements
and repairs on the apartment; that they have a perfect right not to vacate the premises being owners
thereof by virtue of the sale; and as counterclaim, petitioners allege that despite the agreement to sell,
private respondent refused to accept petitioners' offer and tender of the payment of the additional amount
of P153,400.00 which petitioners are willing and able to pay at any time or upon order of the court; and
thus praying that the case be dismissed.
After hearing the lower court rendered its decision dated December 17, 1987, the dispositive portion of
which reads:
WHEREFORE, from the FOREGOING considerations, this Court hereby renders
judgment as follows:
1) Pronouncing the termination of the written and implied Contract
of Lease between plaintiff and the defendants;
2) Directing the defendants to vacate the apartment building and
land located at No. 2-B Leo Street, (formerly Indiana Street)
Lower Kalaklan, Olongapo City, and surrender the same to the
plaintiff-owner;
3) Directing the defendants to pay the amount of P6,900.00
representing the balance of the unpaid rentals from September
1979 to September 1984;
4) Directing the defendants to pay plaintiff annual rentals from
September 1, 1984 to September 1, 1987, which this Court holds
as an implied renewal of their written Contract of Lease at the
same yearly rental of P30,000.00 or a total of P90,000.00 and

thereafter to pay the amount of P2,500.00 every month from

October 1, 1987 up to the time that defendants shall vacate the
premises;
5) Directing the defendants to pay the plaintiff the amount of
P8,000.00 by way of attorney's fees and costs; and
6) All other contending claims of the parties are hereby
DISMISSED. 13
Petitioners appealed the decision of the lower court to the respondent Court of Appeals which affirmed in
full 14the said decision.
Hence, this petition.
Petitioners assign the following errors:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING AND IN FINDING NO
REVERSIBLE ERROR IN THE APPEALED DECISION OF THE TRIAL COURT A QUO BECAUSE:
A. IT ERRED IN FINDING THAT THE CONTRACT OF SALE WAS NEVER
CONSUMMATED.
B. IT ERRED IN FINDING THAT THE CONTRACT OF SALE WAS RESCINDED.
C. IT ERRED IN PLACING UNDUE EMPHASIS ON NOVATION OF THE CONTRACT
OF LEASE WHEN THE SAME HAS BEEN SUPPLANTED AND/OR ABANDONED.
D. IT ERRED IN NOT DISMISSING THE CASE AS AN EJECTMENT CASE
EXCLUSIVELY COGNIZABLE BY THE INFERIOR COURT, HENCE, THIS
HONORABLE COURT OF APPEALS HAS NO APPELLATE JURISDICTION OVER
THE PRESENT CASE.
The main issue to be resolved is whether or not the contract of lease has been supplanted and/or
abandoned.
Petitioners contend that the contract of lease between them and private respondent was already
supplanted and/or abandoned in 1982 when their contract of sale, although admittedly verbal, was
perfected and partially performed. Consequently, their relationship as lessor and lessee was terminated
effectively and ipso facto upon such perfection of their contract of sale. To bolster their contention,
petitioners introduced several receipts, Exhibits 1-6, as evidence of their payment in installments.
Private respondent, on the other hand, counters that the contract was not one "of sale" but a mere
"contract to sell", or at most, a conditional contract of sale.
The petition is devoid of merit.
Indeed a contract of sale is perfected by mere consent. 15 It is not enough to state, however, that the
contract of sale, being consensual, became effective between petitioners and private respondent as of
1982. Such fact is beyond dispute. What is crucial at this point is to ascertain those undertakings which the
parties have consented in order to determine the nature of their agreement.
According to Lim vs. Court Appeals: 16
. . . A distinction must be made between a contract of sale in which title passes to the
buyer upon delivery of the thing sold and a contract to sell . . . where by agreement
the ownership is reserved in the seller and is not to pass until the full payment of the
purchase price is made. In the first case, non-payment of the price is a negative
resolutory condition; in the second case, full payment is a positive suspensive
condition. Being contraries, their effect in law cannot be identical. In the first case, the
vendor has lost and cannot recover the ownership of the land sold until and unless the
contract of sale is itself resolved and set aside. In the second case, however, the title

remains in the vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract.
Inevitably, the foregoing distinctions lead to a finding that the verbal agreement between petitioners and
private respondent was only a contract to sell, not a contract of sale.
A careful examination of the receipts, 17 presented by the petitioners shows that only Exhibits "2", "4" and
"5" have direct bearing on the agreement of the petitioners and private respondent regarding the disputed
properties. Those exhibits reveal that the amounts contained therein are either "downpayments",
"deductible from apartment sale" or "an advanced payment of unconsummated sale". Those are the only
terms contained in the said exhibits. Nothing more.
Prescinding therefrom, there was no immediate transfer of title to petitioners to speak of as would have
happened if there had been a sale at the outset. 18 Clearly the absence of formal deed of conveyance
strongly indicates that the parties did not intend immediate transfer of title, but only a transfer after full
payment of the price. 19
It is unlikely that if the contract were an absolute sale, the petitioners would not have insisted that the
same be reduced to writing despite several opportunities to do so. Another thing is that at the time
petitioners were delivering the unpaid balance which was allegedly rejected by private respondent, they
simply asked private respondent (Teodoro Garcia) to give back the amounts that had been given as
advance payment. 20 This simply goes against the grain of their argument that they are already the owners
of the disputed properties. Hence, as payment of the consideration was a positive suspensive condition,
title to the subject property never passed to the petitioners.
This Court's ruling in Lim v. Court of Appeals, 21 is worth quoting:
It is true that the contract to sell imposes reciprocal obligations and so cannot be
terminated unilaterally by either party. Judicial rescission is required under Article 1191
of the Civil Code. However, this rule is not absolute. We have held that in proper
cases, a party may take it upon itself to consider the contract rescinded and act
accordingly albeit subject to judicial confirmation, which may or may not be given. It is
true that the rescinding party takes a risk that its action may not be approved by the
court. But as we said in University of the Philippines v. De los Angeles [35 SCRA 102
(1970)]:
xxx xxx xxx
. . . But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a
judgment before taking extrajudicial steps to protect its interest.
Other-wise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the
pendency of the suit until final judgment of rescission is rendered
when the law itself requires that he should exercise due diligence
to minimize its own damages.
It is also contended by petitioners that the suit initiated by herein private respondent denominated, as
termination of lease with damages and reimbursement of rents, was actually a suit for unlawful detainer.
Hence, the Regional Trial Court has no jurisdiction to entertain the same.
This contention is also bereft of merit.
There is no question that the original lease contract between the parties was only for five (5) years
nonetheless petitioners continued occupying the leased premises beyond that date and it was only
sometime in October 1984, that Serafin Garcia went to see petitioners for accounting purposes regarding

the advance payment made by the latter and informing them at the same that a case will be filed against
them. 22 There is no evidence on record that petitioners were served with notice to vacate. This Court will
have to determine whether such continued occupancy was with or without the implied acquiescence of
private respondent.
An implied new lease or tacita reconduccion will set in if it is shown that: (a) the term of the original
contract of lease has expired; (b) the lessor has not given the lessee a notice to vacate; and (c) the lessee
continued enjoying the thing leased for fifteen days with the acquiescence of the lessor. This acquiescence
may be inferred from this failure to serve a notice to quit. 23
In the instant case, there is an implied renewal of the lease contract. As aforementioned, no talks have
been held between the lessor and the lessees concerning the renewal of the lease. By the inaction of the
lessor, there can be no inference that he intends to discontinue it. In such a case, no less than an express
notice to vacate must be made within the statutory 15-day period. Not only was there an absence of notice
to vacate but there were also no communications that transpired between the parties regarding the lease.
The earliest communication that has been shown was in October, 1984, definitely way beyond the 15-day
statutory period required by law.
Considering that there was an implied renewal of lease, there is no unlawful detainer to speak of. The filing
of the termination of contract was, therefore, appropriate and clearly the Regional Trial Court has
jurisdiction over the case since it is an action involving the title to or possession of real property or any
interest therein. 24
WHEREFORE, the petition is DENIED. The decision and resolution of the respondent Court of Appeals
dated December 18, 1989 and October 23, 1990 respectively, are AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. 107207 November 23, 1995

VIRGILIO R. ROMERO, petitioner,
vs.
HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG, respondents.
VITUG, J.:
The parties pose this question: May the vendor demand the rescission of a contract for the sale of a parcel
of land for a cause traceable to his own failure to have the squatters on the subject property evicted within
the contractually-stipulated period?
Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture
and exportation of perlite filter aids, permalite insulation and processed perlite ore. In 1988, petitioner and
his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately
2,000 square meters. The project was made known to several freelance real estate brokers.
A day or so after the announcement, Alfonso Flores and his wife, accompanied by a broker, offered a
parcel of land measuring 1,952 square meters. Located in Barangay San Dionisio, Paraaque, Metro
Manila, the lot was covered by TCT No. 361402 in the name of private respondent Enriqueta Chua vda. de
Ongsiong. Petitioner visited the property and, except for the presence of squatters in the area, he found
the place suitable for a central warehouse.
Later, the Flores spouses called on petitioner with a proposal that should he advance the amount of
P50,000.00 which could be used in taking up an ejectment case against the squatters, private respondent

would agree to sell the property for only P800.00 per square meter. Petitioner expressed his concurrence.
On 09 June 1988, a contract, denominated "Deed of Conditional Sale," was executed between petitioner
and private respondent. The simply-drawn contract read:
DEED OF CONDITIONAL SALE
KNOW ALL MEN BY THESE PRESENTS:
This Contract, made and executed in the Municipality of Makati, Philippines this 9th
day of June, 1988 by and between:
ENRIQUETA CHUA VDA. DE ONGSIONG, of legal age, widow,
Filipino and residing at 105 Simoun St., Quezon City, Metro
Manila, hereinafter referred to as the VENDOR;
-andVIRGILIO R. ROMERO, married to Severina L. Lat, of Legal age,
Filipino, and residing at 110 San Miguel St., Plainview Subd.,
Mandaluyong Metro Manila, hereinafter referred to as the
VENDEE:
W I T N E S S E T H : That
WHEREAS, the VENDOR is the owner of One (1) parcel of land with a total area of
ONE THOUSAND NINE HUNDRED FIFTY TWO (1,952) SQUARE METERS, more or
less, located in Barrio San Dionisio, Municipality of Paraaque, Province of Rizal,
covered by TCT No. 361402 issued by the Registry of Deeds of Pasig and more
particularly described as follows:
xxx xxx xxx
WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land and the
VENDOR has accepted the offer, subject to the terms and conditions hereinafter
stipulated:
NOW, THEREFORE, for and in consideration of the sum of ONE MILLION FIVE
HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS (P1,561,600.00) ONLY,
Philippine Currency, payable by VENDEE to in to (sic) manner set forth, the VENDOR
agrees to sell to the VENDEE, their heirs, successors, administrators, executors,
assign, all her rights, titles and interest in and to the property mentioned in the FIRST
WHEREAS CLAUSE, subject to the following terms and conditions:
1. That the sum of FIFTY THOUSAND PESOS (P50,000.00)
ONLY Philippine Currency, is to be paid upon signing and
execution of this instrument.
2. The balance of the purchase price in the amount of ONE
MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED
PESOS (P1,511,600.00) ONLY shall be paid 45 days after the
removal of all squatters from the above described property.
3. Upon full payment of the overall purchase price as aforesaid,
VENDOR without necessity of demand shall immediately sign,
execute, acknowledged (sic) and deliver the corresponding deed
of absolute sale in favor of the VENDEE free from all liens and
encumbrances and all Real Estate taxes are all paid and updated.
It is hereby agreed, covenanted and stipulated by and between the parties hereto that
if after 60 days from the date of the signing of this contract the VENDOR shall not be

able to remove the squatters from the property being purchased, the downpayment
made by the buyer shall be returned/reimbursed by the VENDOR to the VENDEE.
That in the event that the VENDEE shall not be able to pay the VENDOR the balance
of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX
HUNDRED PESOS (P1,511,600.00) ONLY after 45 days from written notification to
the VENDEE of the removal of the squatters from the property being purchased, the
FIFTY THOUSAND PESOS (P50,000.00) previously paid as downpayment shall be
forfeited in favor of the VENDOR.
Expenses for the registration such as registration fees, documentary stamp, transfer
fee, assurances and such other fees and expenses as may be necessary to transfer
the title to the name of the VENDEE shall be for the account of the VENDEE while
capital gains tax shall be paid by the VENDOR.
IN WITNESS WHEREOF, the parties hereunto signed those (sic) presents in the City
of Makati MM, Philippines on this 9th day of June, 1988.
(Sgd.) (Sgd.)
VIRGILIO R. ROMERO ENRIQUETA CHUA VDA.
DE ONGSIONG
Vendee Vendor
SIGNED IN THE PRESENCE OF:
(Sgd.) (Sgd.)
Rowena C. Ongsiong Jack M. Cruz 1
Alfonso Flores, in behalf of private respondent, forthwith received and acknowledged a check for
P50,000.00 2 from petitioner. 3
Pursuant to the agreement, private respondent filed a complaint for ejectment (Civil Case No. 7579)
against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Paraaque. A few
months later, or on 21 February 1989, judgment was rendered ordering the defendants to vacate the
premises. The decision was handed down beyond the 60-day period (expiring 09 August 1988) stipulated
in the contract. The writ of execution of the judgment was issued, still later, on 30 March 1989.
In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received from
petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol,
counsel for petitioner, in his reply of 17 April 1989, refused the tender and stated:.
Our client believes that with the exercise of reasonable diligence considering the
favorable decision rendered by the Court and the writ of execution issued pursuant
thereto, it is now possible to eject the squatters from the premises of the subject
property, for which reason, he proposes that he shall take it upon himself to eject the
squatters, provided, that expenses which shall be incurred by reason thereof shall be
chargeable to the purchase price of the land. 4
Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its Regional Director for
Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of Paraaque for a grace period of 45 days
from 21 April 1989 within which to relocate and transfer the squatter families. Acting favorably on the
request, the court suspended the enforcement of the writ of execution accordingly.
On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day grace period and
his client's willingness to "underwrite the expenses for the execution of the judgment and ejectment of the
occupants." 5
In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent, advised Atty.
Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his client's failure to

evict the squatters from the premises within the agreed 60-day period. He added that private respondent
had "decided to retain the property." 6
On 23 June 1989, Atty. Apostol wrote back to explain:
The contract of sale between the parties was perfected from the very moment that
there was a meeting of the minds of the parties upon the subject lot and the price in
the amount of P1,561,600.00. Moreover, the contract had already been partially
fulfilled and executed upon receipt of the downpayment of your client. Ms. Ongsiong is
precluded from rejecting its binding effects relying upon her inability to eject the
squatters from the premises of subject property during the agreed period. Suffice it to
state that, the provision of the Deed of Conditional Sale do not grant her the option or
prerogative to rescind the contract and to retain the property should she fail to comply
with the obligation she has assumed under the contract. In fact, a perusal of the terms
and conditions of the contract clearly shows that the right to rescind the contract and
to demand the return/reimbursement of the downpayment is granted to our client for
his protection.
Instead, however, of availing himself of the power to rescind the contract and demand
the return, reimbursement of the downpayment, our client had opted to take it upon
himself to eject the squatters from the premises. Precisely, we refer you to our letters
addressed to your client dated April 17, 1989 and June 8, 1989.
Moreover, it is basic under the law on contracts that the power to rescind is given to
the injured party. Undoubtedly, under the circumstances, our client is the injured party.
Furthermore, your client has not complied with her obligation under their contract in
good faith. It is undeniable that Ms. Ongsiong deliberately refused to exert efforts to
eject the squatters from the premises of the subject property and her decision to retain
the property was brought about by the sudden increase in the value of realties in the
surrounding areas.
Please consider this letter as a tender of payment to your client and a demand to
execute the absolute Deed of Sale. 7
A few days later (or on 27 June 1989), private respondent, prompted by petitioner's continued refusal to
accept the return of the P50,000.00 advance payment, filed with the Regional Trial Court of Makati, Branch
133, Civil Case No. 89-4394 for rescission of the deed of "conditional" sale, plus damages, and for the
consignation of P50,000.00 cash.
Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of execution in Civil Case
No. 7579 on motion of private respondent but the squatters apparently still stayed on.
Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of Makati 8 rendered decision
holding that private respondent had no right to rescind the contract since it was she who "violated her
obligation to eject the squatters from the subject property" and that petitioner, being the injured party, was
the party who could, under Article 1191 of the Civil Code, rescind the agreement. The court ruled that the
provisions in the contract relating to (a) the return/reimbursement of the P50,000.00 if the vendor were to
fail in her obligation to free the property from squatters within the stipulated period or (b), upon the other
hand, the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price,
amounted to "penalty clauses". The court added:
This Court is not convinced of the ground relied upon by the plaintiff in seeking the
rescission, namely: (1) he (sic) is afraid of the squatters; and (2) she has spent so
much to eject them from the premises (p. 6, tsn, ses. Jan. 3, 1990). Militating against

her profession of good faith is plaintiffs conduct which is not in accord with the rules of
fair play and justice. Notably, she caused the issuance of an alias writ of execution on
August 25, 1989 (Exh. 6) in the ejectment suit which was almost two months after she
filed the complaint before this Court on June 27, 1989. If she were really afraid of the
squatters, then she should not have pursued the issuance of an alias writ of
execution. Besides, she did not even report to the police the alleged phone threats
from the squatters. To the mind of the Court, the so-called squatter factor is simply
factuitous (sic). 9
The lower court, accordingly, dismissed the complaint and ordered, instead, private respondent
to eject or cause the ejectment of the squatters from the property and to execute the absolute
deed of conveyance upon payment of the full purchase price by petitioner.
Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate court rendered its
decision.10 It opined that the contract entered into by the parties was subject to a resolutory condition, i.e.,
the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the
object of the contract; that private respondent substantially complied with her obligation to evict the
squatters; that it was petitioner who was not ready to pay the purchase price and fulfill his part of the
contract, and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in case
private respondent would fail to eject the squatters within the 60-day period was not a penal clause. Thus,
it concluded.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE, and a
new one entered declaring the contract of conditional sale dated June 9, 1988
cancelled and ordering the defendant-appellee to accept the return of the
downpayment in the amount of P50,000.00 which was deposited in the court below.
No pronouncement as to costs. 11
Failing to obtain a reconsideration, petitioner filed this petition for review on certiorari raising issues that, in
fine, center on the nature of the contract adverted to and the P50,000.00 remittance made by petitioner.
A perfected contract of sale may either be absolute or conditional 12 depending on whether the agreement
is devoid of, or subject to, any condition imposed on the passing of title of the thing to be conveyed or on
the obligation of a party thereto. When ownership is retained until the fulfillment of a positive condition the
breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force. If the
condition is imposed on an obligation of a party which is not complied with, the other party may either
refuse to proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is
imposed upon the perfection of the contract itself, the failure of such condition would prevent the juridical
relation itself from coming into existence. 13
In determining the real character of the contract, the title given to it by the parties is not as much significant
as its substance. For example, a deed of sale, although denominated as a deed of conditional sale, may
be treated as absolute in nature, if title to the property sold is not reserved in the vendor or if the vendor is
not granted the right to unilaterally rescind the contract predicated
on the fulfillment or non-fulfillment, as the case may be, of the prescribed condition. 14
The term "condition" in the context of a perfected contract of sale pertains, in reality, to the compliance by
one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the
reciprocal prestation of the other party. The reciprocal obligations referred to would normally be, in the
case of vendee, the payment of the agreed purchase price and, in the case of the vendor, the fulfillment of
certain express warranties (which, in the case at bench is the timely eviction of the squatters on the
property).

It would be futile to challenge the agreement here in question as not being a duly perfected contract. A sale
is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to
transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. 15
The object of the sale, in the case before us, was specifically identified to be a 1,952-square meter lot in
San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title No. 361402 of the Registry of
Deeds for Pasig and therein technically described. The purchase price was fixed at P1,561,600.00, of
which P50,000.00 was to be paid upon the execution of the document of sale and the balance of
P1,511,600.00 payable "45 days after the removal of all squatters from the above described property."
From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. Under the agreement, private respondent is obligated to evict the
squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into
motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase
price. Private respondent's failure "to remove the squatters from the property" within the stipulated period
gives petitioner the right to either refuse to proceed with the agreement or waive that condition in
consonance with Article 1545 of the Civil Code. 16This option clearly belongs to petitioner and not to private
respondent.
We share the opinion of the appellate court that the undertaking required of private respondent does not
constitute a "potestative condition dependent solely on his will" that might, otherwise, be void in
accordance with Article 1182 of the Civil Code 17 but a "mixed" condition "dependent not on the will of the
vendor alone but also of third persons like the squatters and government agencies and personnel
concerned." 18 We must hasten to add, however, that where the so-called "potestative condition" is
imposed not on the birth of the obligation but on its fulfillment, only the obligation is avoided, leaving
unaffected the obligation itself. 19
In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the obligee to
choose between proceeding with the agreement or waiving the performance of the condition. It is this
provision which is the pertinent rule in the case at bench. Here, evidently, petitioner has waived the
performance of the condition imposed on private respondent to free the property from squatters. 20
In any case, private respondent's action for rescission is not warranted. She is not the injured party. 21 The
right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach
of faith by the other party that violates the reciprocity between them. 22 It is private respondent who has
failed in her obligation under the contract. Petitioner did not breach the agreement. He has agreed, in fact,
to shoulder the expenses of the execution of the judgment in the ejectment case and to make
arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner
has tendered payment and demanded forthwith the execution of the deed of absolute sale. Parenthetically,
this offer to pay, having been made prior to the demand for rescission, assuming for the sake of argument
that such a demand is proper under Article 1592 23 of the Civil Code, would likewise suffice to defeat
private respondent's prerogative to rescind thereunder.
There is no need to still belabor the question of whether the P50,000.00 advance payment is reimbursable
to petitioner or forfeitable by private respondent, since, on the basis of our foregoing conclusions, the
matter has ceased to be an issue. Suffice it to say that petitioner having opted to proceed with the sale,
neither may petitioner demand its reimbursement from private respondent nor may private respondent
subject it to forfeiture.

WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED AND SET ASIDE,
and another is entered ordering petitioner to pay private respondent the balance of the purchase price and
the latter to execute the deed of absolute sale in favor of petitioner. No costs.
SO ORDERED.
[G.R. No. 115307. July 8, 1997]
MANUEL LAO, petitioner, vs. COURT OF APPEALS and BETTER HOMES REALTY & HOUSING
CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
As a general rule, the main issue in an ejectment suit is possession de facto, not possession de
jure. In the event the issue of ownership is raised in the pleadings, such issue shall be taken up only for
the limited purpose of determining who between the contending parties has the better right to
possession. However, where neither of the parties objects to the allegation of the question of ownership -which may be initially improvident or improper -- in an ejectment suit and, instead, both present evidence
thereon, argue the question in their various submissions and participate in all aspects of the trial without
objecting to the Metropolitan (or Municipal) Trial Courts jurisdiction to decide the question of ownership,
the Regional Trial Court -- in the exercise of its original jurisdiction as authorized by Section 11, Rule 40 of
the Rules of Court -- may rule on the issue and the corollary question of whether the subject deed is one of
sale or of equitable mortgage.
These postulates are discussed by the Court as it resolves this petition under Rule 45 seeking a
reversal of the December 21, 1993 Decision[1] and April 28, 1994 Resolution[2] of the Court of Appeals in
CA-G.R. SP No. 92-14293.
The Antecedent Facts
The facts of this case are narrated by Respondent Court of Appeals as follows: [3]
On June 24, 1992, (herein Private Respondent Better Homes Realty and Housing Corporation) filed with the
Metropolitan Trial Court of Quezon City, a complaint for unlawful detainer, on the ground that (said private
respondent) is the owner of the premises situated at Unit I, No. 21 N. Domingo Street, Quezon City, evidenced by
Transfer Certificate of Title No. 22184 of the Registry of Deeds of Quezon City; that (herein Petitioner Manuel Lao)
occupied the property without rent, but on (private respondents) pure liberality with the understanding that he would
vacate the property upon demand, but despite demand to vacate made by letter received by (herein petitioner) on
February 5, 1992, the (herein petitioner) refused to vacate the premises.
In his answer to the complaint, (herein petitioner) claimed that he is the true owner of the house and lot located at
Unit I, No. 21 N. Domingo Street, Quezon City; that the (herein private respondent) purchased the same from N.

Domingo Realty and Development Corporation but the agreement was actually a loan secured by mortgage; and that
plaintiffs cause of action is for accion publiciana, outside the jurisdiction of an inferior court.
On October 9, 1992, the Metropolitan Trial Court of Quezon City rendered judgment ordering the (petitioner) to
vacate the premises located at Unit I, No. 21 N. Domingo Street, Quezon City; to pay (private respondent) the sum
of P300.00 a day starting on January 31, 1992, as reasonable rent for the use and occupation of the premises; to pay
plaintiff P5,000.00, as attorneys fees, and costs.
On appeal to the Regional Trial Court of Quezon City,[4] on March 30, 1993, the latter court rendered a decision
reversing that of the Metropolitan Trial Court, and ordering the dismissal of the (private respondents) complaint for
lack of merit, with costs taxed against (private respondent).
In its decision, the Regional Trial Court held that the subject property was acquired by (private respondent) from N.
Domingo Realty and Development Corporation, by a deed of sale, and (private respondent) is now the registered
owner under Transfer Certificate of Title No. 316634 of the Registry of Deeds of Quezon City, but in truth the
(petitioner) is the beneficial owner of the property because the real transaction over the subject property was not a
sale but a loan secured by a mortgage thereon.
The dispositive portion of the Regional Trial Courts decision is quoted below: [5]
WHEREFORE, judgment is hereby rendered reversing the appealed decision and ordering the dismissal of plaintiffs
complaint for lack of merit, with the costs taxed against it.
IT IS SO ORDERED.
On April 28, 1993, private respondent filed an appeal with the Court of Appeals which reversed the
decision of the Regional Trial Court. The Respondent Court ruled:
The Metropolitan Trial Court has no jurisdiction to resolve the issue of ownership in an action for unlawful detainer
(B.P. 129, Sec. 33 [2]; Cf. Alvir vs. Vera, 130 SCRA 357). The jurisdiction of a court is determined by the nature of
the action alleged in the complaint (Ching vs. Malaya, 153 SCRA 412). In its complaint in the inferior court, the
plaintiff alleged that it is the owner of the premises located at Unit I, No. 21 N. Domingo Street, Quezon City, and
that defendants occupation is rent free and based on plaintiffs pure liberality coupled with defendants undertaking to
vacate the premises upon demand, but despite demands, defendant has refused to vacate. The foregoing allegations
suffice to constitute a cause of action for ejectment (Banco de Oro vs. Court of Appeals, 182 SCRA 464).
The Metropolitan Trial Court is not ousted of jurisdiction simply because the defendant raised the question of
ownership (Bolus vs. Court of Appeals, 218 SCRA 798). The inferior court shall resolve the issue of ownership only
to determine who is entitled to the possession of the premises (B.P. 129, Sec. 33[2]; Bolus vs. Court of
Appeals, supra).
Here, the Metropolitan Trial Court ruled that as owner, plaintiff (herein private respondent Better Homes Realty and
Housing Corporation) is entitled to the possession of the premises because the defendants stay is by mere tolerance of
the plaintiff (herein private respondent).
On the other hand, the Regional Trial Court ruled that the subject property is owned by the defendant, (herein
petitioner Manuel Lao) and, consequently, dismissed the complaint for unlawful detainer. Thus, the Regional Trial
Court resolved the issue of ownership, as if the case were originally before it as an action for recovery of possession,
or accion publiciana, within its original jurisdiction. In an appeal from a decision of the Municipal Trial Court, or
Metropolitan Trial Court, in an unlawful detainer case, the Regional Trial Court is simply to determine whether the
inferior court correctly resolved the issue of possession; it shall not delve into the issue of ownership (Manuel vs.

Court of Appeals, 199 SCRA 603). What the Regional Trial Court did was to rule that the real agreement between the
plaintiff and the previous owner of the property was not a sale, but an equitable mortgage. Defendant was only a
director of the seller corporation, and his claim of ownership could not be true. This question could not be determined
summarily. It was not properly in issue before the inferior court because, as aforesaid, the only issue was
possession de facto (Manlapaz vs. Court of Appeals, 191 SCRA 795), or who has a better right to physical possession
(Dalida vs. Court of Appeals, 117 SCRA 480). Consequently, the Regional Trial Court erred in reversing the decision
of the Metropolitan Trial Court.
WHEREFORE, the Court hereby REVERSES the decision of the Regional Trial Court. In lieu thereof, We affirm the
decision of the Metropolitan Trial Court of Quezon City sentencing the defendant and all persons claiming right
under him to vacate the premises situated at Unit I, No. 21 N. Domingo Street, Quezon City, and to surrender
possession to the plaintiff; to pay plaintiff the sum of P300.00, a day starting on January 31, 1992, until defendant
shall have vacated the premises; to pay plaintiff P5,000.00 as attorneys fees, and costs.
SO ORDERED.[6]
Manuel Laos motion for reconsideration dated January 24, 1994 was denied by the Court of Appeals
in its Resolution promulgated on April 28, 1994. Hence, this petition for review before this Court.[7]
The Issues
Petitioner Manuel Lao raises three issues:
3.1 Whether or not the lower court can decide on the issue of ownership in the present ejectment case
3.2 Whether or not private respondent had acquired ownership over the property in question
3.3 Whether or not petitioner should be ejected from the premises in question[8]
The Courts Ruling

Respondent Court cites Alvir vs. Vera to support its Decision. On the contrary, we believe such case
buttresses instead the Regional Trial Courts decision. The cited case involves an unlawful detainer suit
where the issue of possession was inseparable from the issue of transfer of ownership, and the latter was
determinable only after an examination of a contract of sale involving the property in question. The Court
ruled that where a case was tried and heard by the lower court in the exercise of its original jurisdiction by
common assent of the parties by virtue of the issues raised x x x and the proofs presented by them, any
dismissal on the ground of lack of jurisdiction would only lead to needless delays and multiplicity of
suits. The Court held:
In actions of forcible entry and detainer, the main issue is possession de facto, independently of any claim of
ownership or possession de jure that either party may set forth in his pleading. x x x Defendants claim of ownership
of the property from which plaintiff seeks to eject him is not sufficient to divest the inferior court of its jurisdiction
over the action of forcible entry and detainer. However, if it appears during the trial that the principal issue relates to
the ownership of the property in dispute and any question of possession which may be involved necessarily depends
upon the result of the inquiry into the title, previous rulings of this Court are that the jurisdiction of the municipal or
city court is lost and the action should be dismissed.
We have at bar a case where, in effect, the question of physical possession could not properly be determined without
settling that of lawful or de jure possession and of ownership and hence, following early doctrine, the jurisdiction of
the municipal court over the ejectment case was lost and the action should have been dismissed. As a consequence,
respondent court would have no jurisdiction over the case on appeal and it should have dismissed the case on appeal
from the municipal trial court. However, in line with Section 11, Rule 40 of the Revised Rules of Court, which reads
-SEC. 11. Lack of Jurisdiction. -- A case tried by an inferior court without jurisdiction over the subject matter shall be
dismissed on appeal by the Court of First Instance. But instead of dismissing the case, the Court of First Instance in
the exercise of its original jurisdiction, may try the case on the merits if the parties therein file their pleadings and go
to trial without objection to such jurisdiction.

The petition for review is meritorious.

First Issue: Jurisdiction to Decide the Issue of Ownership
The Court of Appeals held that as a general rule, the issue in an ejectment suit is possession de
facto, not possession de jure, and that in the event the issue of ownership is raised as a defense, the issue
is taken up for the limited purpose of determining who between the contending parties has the better right
to possession. Beyond this, the MTC acts in excess of its jurisdiction. However, we hold that this is not a
hard and fast rule that can be applied automatically to all unlawful detainer cases.
Section 11, Rule 40 of the Rules of Court provides that [a] case tried by an inferior court without
jurisdiction over the subject matter shall be dismissed on appeal by the Court of First Instance. But instead
of dismissing the case, the Court of First Instance, in the exercise of its original jurisdiction, may try the
case on the merits if the parties therein file their pleadings and go to the trial without any objection to such
jurisdiction. After a thorough review of the records of this case, the Court finds that the respondent
appellate court failed to apply this Rule and erroneously reversed the RTC Decision.

this Court held in Saliwan vs. Amores, 51 SCRA 329, 337, that dismissal on the said ground of lack of appellate
jurisdiction on the part of the lower court flowing from the municipal courts loss of jurisdiction would lead only to
needless delay and multiplicity of suits in the attainment of the same result and ignores, as above stated, that the case
was tried and heard by the lower court in the exercise of its original jurisdiction by common assent of the parties by
virtue of the issues raised by the parties and the proof presented by them thereon. [9]
This pronouncement was reiterated by this Court through Mr. Justice Teodoro R. Padilla
in Consignado vs. Court of Appeals[10] as follows:
As the MTC of Laguna had no jurisdiction over the unlawful detainer case in view of the raised question of title or
ownership over the property in dispute, the RTC of Laguna also had no appellatejurisdiction to decide the case on the
merits. It should have dismissed the appeal. However, it had original jurisdiction to pass upon the controversy. It is to
be noted, in this connection, that in their respective memoranda filed with the RTC of Laguna, the petitioners and

private respondents did not object to the said court exercising its original jurisdiction pursuant to the aforequoted
provisions of Section 11, Rule 40 of the Rules of Court.
xxxxxxxxx
Petitioners now contend, among others, that the Court of Appeals erred in resolving the question of ownership as if
actual title, not mere possession of subject premises, is involved in the instant case.
The petitioners contention is untenable. Since the MTC and RTC of Laguna decided the question of ownership over
the property in dispute, on appeal the Court of Appeals had to review and resolve also the issue of ownership. x x x
It is clear, therefore, that although an action for unlawful detainer is inadequate for the ventilation of
issues involving title or ownership of controverted real property, [i]t is more in keeping with procedural due
process that where issues of title or ownership are raised in the summary proceedings for unlawful
detainer, said proceeding should be dismissed for lack of jurisdiction, unless, in the case of an appeal from
the inferior court to the Court of First Instance, the parties agree to the latter Court hearing the case in its
original jurisdiction in accordance with Section 11, Rule 40 x x x.[11]
In the case at bar, a determination of the issue of ownership is indispensable to resolving the rights
of both parties over the property in controversy, and is inseparable from a determination of who between
them has the right to possess the same. Indeed, the very complaint for unlawful detainer filed in the
Metropolitan Trial Court of Quezon City is anchored on the alleged ownership of private respondent over
the subject premises.[12] The parties did not object to the incongruity of a question of ownership being
brought in an ejectment suit. Instead they both submitted evidence on such question, and the Metropolitan
Trial Court decided on the issue. These facts are evident in the Metropolitan Trial Courts decision:
From the records of the case, the evidence presented and the various arguments advanced by the parties, the Court
finds that the property subject matter of this case is in the name of (herein private respondent) Better Homes and
Realty Housing Corporation; that the Deed of Absolute Sale which was the basis for the issuance of said TCT No.
22184 is between N. Domingo Realty and Development Corporation and Better Homes Realty and Housing
Corporation which was signed by Artemio S. Lao representing the seller N. Domingo and Realty Development
Corporation; that a Board Resolution of N. Domingo and Realty and Development Corporation (Exhibit D position
paper) shows that the Directors of the Board of the N. Domingo Realty and Development Corporation passed a
resolution selling apartment units I and F located at No. 21 N. Domingo St., Quezon City and designating the (herein
petitioner) with his brother Artemio S. Lao as signatories to the Deed of Sale. The claim therefore of the (herein
petitioner) that he owns the property is not true. x x x[13]
When the MTC decision was appealed to the Regional Trial Court, not one of the parties questioned
the Metropolitan Trial Courts jurisdiction to decide the issue of ownership. In fact, the records show that
both petitioner and private respondent discussed the issue in their respective pleadings before the
Regional Trial Court.[14] They participated in all aspects of the trial without objection to its jurisdiction to
decide the issue of ownership. Consequently, the Regional Trial Court aptly decided the issue based on
the exercise of its original jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court.

This Court further notes that in both of the contending parties pleadings filed on appeal before the
Court of Appeals, the issue of ownership was likewise amply discussed. [15] The totality of evidence
presented was sufficient to decide categorically the issue of ownership.
These considerations, taken together with the fact that both the Metropolitan Trial Court and the
Regional Trial Court decided the issue of ownership, justify the review of the lower courts findings of fact
and decision on the issue of ownership. This we now do, as we dispose of the second issue and decide
the case with finality to spare the parties the time, trouble and expense of undergoing the rigors of another
suit where they will have to present the same evidence all over again and where, in all probability, the
same ultimate issue of ownership will be brought up on appeal.
Second Issue: Absolute Sale or Equitable Mortgage?
Private Respondent Better Homes Realty and Housing Corporation anchored its right in the
ejectment suit on a contract of sale in which petitioner (through their family corporation) transferred the title
of the property in question. Petitioner contends, however, that their transaction was not an absolute sale,
but an equitable mortgage.
In determining the nature of a contract, the Court looks at the intent of the parties and not at the
nomenclature used to describe it. Pivotal to deciding this issue is the true aim and purpose of the
contracting parties as shown by the terminology used in the covenant, as well as by their conduct, words,
actions and deeds prior to, during and immediately after executing the agreement. [16] In this regard, parol
evidence becomes admissible to prove the true intent and agreement of the parties which the Court will
enforce even if the title of the property in question has already been registered and a new transfer
certificate of title issued in the name of the transferee. In Macapinlac vs. Gutierrez Repide, which involved
an identical question, the Court succintly stated:
x x x This conclusion is fully supported by the decision in Cuyugan vs. Santos (34 Phil., 100), where this court held
that a conveyance in the form of a contract of sale with pacto de retro will be treated as a mere mortgage, if really
executed as security for a debt, and that this fact can be shown by oral evidence apart from the instrument of
conveyance, a doctrine which has been followed in the later cases of Villa vs. Santiago (38 Phil., 157), and Cuyugan
vs. Santos (39 Phil., 970).
xxxxxxxxx
In the first place, it must be borne in mind that the equitable doctrine which has been so fully stated above, to the
effect that any conveyance intended as security for a debt will be held in effect to be a mortgage, whether so actually
expressed in the instrument or not, operates regardless of the form of the agreement chosen by the contracting parties
as the repository of their will. Equity looks through the form and considers the substance; and no kind of engagement
can be adopted which will enable the parties to escape from the equitable doctrine to which reference is made. In
other words, a conveyance of land, accompanied by registration in the name of the transferee and the issuance of a
new certificate, is no more secured from the operation of this equitable doctrine than the most informal conveyance
that could be devised.[17]

The law enumerates when a contract may be presumed to be an equitable mortgage:

(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.
x x x x x x x x x[18]
The foregoing presumption applies also to a contract purporting to be an absolute sale.[19]
Applying the preceding principles to the factual milieu of this case, we find the agreement between
the private respondent and N. Domingo Realty & Housing Corporation, as represented by petitioner,
manifestly one of equitable mortgage. First, possession of the property in the controversy remained with
Petitioner Manuel Lao who was the beneficial owner of the property, before, during and after the alleged
sale.[20] It is settled that a pacto de retro sale should be treated as a mortgage where the (property) sold
never left the possession of the vendors. [21] Second, the option given to Manuel Lao to purchase the
property in controversy had been extended twice [22] through documents executed by Mr. Tan Bun Uy,
President and Chairman of the Board of Better Homes Realty & Housing Corporation. The wording of the
first extension is a refreshing revelation that indeed the parties really intended to be bound by a loan with
mortgage, not by a pacto de retro. It reads, On June 10, 88, this option is extended for another sixty days
to expired (sic) on Aug. 11, 1988. The purchase price is increased toP137,000.00. Since Mr. Lao borrow
(sic) P20,000.00 from me.[23] These extensions clearly represent the extension of time to pay the loan
given to Manuel Lao upon his failure to pay said loan on its maturity. Mr. Lao was even granted an
additional loan of P20,000.00 as evidenced by the above-quoted document. Third, unquestionably, Manuel
Lao and his brother were in such dire need of money that they mortgaged their townhouse units registered
under the name of N. Domingo Realty Corporation, the family corporation put up by their parents, to
Private Respondent Better Homes Realty & Housing Corporation. In retrospect, it is easy to blame
Petitioner Manuel Lao for not demanding a reformation of the contract to reflect the true intent of the
parties. But this seeming inaction is sufficiently explained by the Lao brothers desperate need for money,
compelling them to sign the document purporting to be a sale after they were told that the same was just
for formality.[24] In fact, this Court, in various cases involving the same situation, had occasion to state:
x x x In Jayme, et al. v. Salvador, et al., this Court upheld a judgment of the Court of First Instance of Iloilo which
found the transaction between the parties to be a loan instead of a sale of real propertynotwithstanding the
terminology used in the document, after taking into account the surrounding circumstances of the transaction. The
Court through Justice Norberto Romualdez stated that while it was true that plaintiffs were aware of the contents of
the contracts, the preponderance of the evidence showed however that they signed knowing that said contracts did not
express their real intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining

funds. Necessitous men are not, truly speaking, free men; but to answer a present emergency, will submit to any terms
that the crafty may impose upon them.[25]
Moreover, since the borrowers urgent need for money places the latter at a disadvantage vis-avis the lender who can thus dictate the terms of their contract, the Court, in case of an ambiguity, deems
the contract to be one which involves the lesser transmission of rights and interest over the property in
controversy.[26]
As aptly found and concluded by the regional trial court:
The evidence of record indicates that while as of April 4, 1988 (the date of execution of the Deed of Absolute Sale
whereby the N. Domingo and Realty & Development Corporation purportedly sold the townhouse and lot subject of
this suit to [herein private respondent Better Homes Realty & Housing Corporation] for P100,000.00) said N.
Domingo Realty & Development Corporation (NDRDC, for short) was the registered owner of the subject property
under Transfer Certificate of Title (TCT) No. 316634 of the Registry of Deeds for Quezon City, (herein petitioner
Manuel Lao) in fact was and has been since 1975 the beneficial owner of the subject property and, thus, the same was
assigned to him by the NDRDC, the family corporation set up by his parents and of which (herein petitioner) and his
siblings are directors. That the parties real transaction or contract over the subject property was not one of sale but,
rather, one of loan secured by a mortgage thereon is unavoidably inferrable from the following facts of record, to
(herein petitioners) possession of the subject property, which started in 1975 yet, continued and remained even after
the alleged sale of April 4, 1988; (herein private respondent) executed an option to purchase in favor (herein
petitioner) as early as April 2, 1988 or two days before (herein private respondent) supposedly acquired ownership of
the property; the said option was renewed several times and the price was increased with each renewal (thus, the
original period for the exercise of the option was up to June 11, 1988 and the price was P109,000.00; then, on June
10, 1988, the option was extended for 60 days or until August 11, 1988 and the price was increased to P137,000.00;
and then on August 11, 1988, the option was again extended until November 11, 1988 and the price was increased
to P158, 840.00); and, the Deed of Absolute Sale of April 4, 1988 was registered and the property transferred in the
name of (private respondent) only on May 10, 1989, per TCT No. 22184 of the Registry of Deeds for Quezon City
(Arts. 1602, nos. 2, 3, & 6, & 1604, Civil Code). Indeed, if it were true, as it would have the Court believe, that
(private respondent) was so appreciative of (petitioners) alleged facilitation of the subject propertys sale to it, it is
quite strange why (private respondent) some two days before such supposed sale would have been minded and
inclined to execute an option to purchase allowing (petitioner) to acquire the property -- the very same property it was
still hoping to acquire at the time. Certainly, what is more likely and thus credible is that, if (private respondent) was
indeed thankful that it was able to purchase the property, it would not given (petitioner) any option to purchase at all
x x x.[27]
Based on the conduct of the petitioner and private respondent and even the terminology of the
second option to purchase, we rule that the intent and agreement between them was undoubtedly one of
equitable mortgage and not of sale.
Third Issue: Should Petitioner Be Ejected?

We answer in the negative. An action for unlawful detainer is grounded on Section 1, Rule 70 of the
Rules of Court which provides that:

SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ

and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.
DECISION

x x x a landlord, vendor, vendee, or other person against whom the possession of any land or building is unlawfully
withheld after the expiration or termination of the right to hold possession, by virtue of any contract, express or
implied, or the legal representatives or assigns of any such landlord, vendor, vendee, or other person, may, at any time
within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper
inferior court against the person or persons unlawfully withholding or depriving of possession, or any person or
persons claiming under them, for the restitution of such possession, together with damages and costs. x x x.

CARPIO, J.:

Based on the previous discussion, there was no sale of the disputed property. Hence, it still belongs
to petitioners family corporation, N. Domingo Realty & Development Corporation.Private respondent, being
a mere mortgagee, has no right to eject petitioner. Private respondent, as a creditor and mortgagee, x x x
cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to
the contrary is null and void.[28]

This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of
Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3]dated 18 February
1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 895174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid
consideration and that the plaintiffs did not have a cause of action against the defendants.

Other Matters

The Facts

Private respondent in his memorandum also contends that (1) petitioner is not the real party in
interest and (2) the petition should be dismissed for raising/stating facts not so found by the Court of
Appeals. These deserve scant consideration. Petitioner was impleaded as party defendant in the
ejectment suit by private respondent itself. Thus, private respondent cannot question his standing as a
party. As such party, petitioner should be allowed to raise defenses which negate private respondents right
to the property in question. The second point is really academic. This ponencia relies on the factual
narration of the Court of Appeals and not on the facts supplied by petitioner.
WHEREFORE, the petition is hereby GRANTED. The challenged Decision of the Court of Appeals
is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Quezon City ordering the
dismissal of the complaint for ejectment is REINSTATED and AFFIRMED. No pronouncement as to costs.
SO ORDERED.

[G.R. No. 126376. November 20, 2003]

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA
and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD
JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and
FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO,
SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN
and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN,

The Case

The Court of Appeals summarized the facts of the case as follows:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma
and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed
JOAQUIN. The married Joaquin children are joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents
Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of
title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395
executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration
of P6,000.00 (Exh. C), pursuant to which TCT No. [36113/T-172] was issued in her name
(Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed
on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration
of P1[2],000.00 (Exh. D), pursuant to which TCT No. S-109772 was issued in her name
(Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed
on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for
a consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued
to them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed
on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for
a consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued
to them (Exh. F-1); and

5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395
executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration
of P20,000.00 (Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh.
G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395
executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration
of P25,000.00 (Exh. K), pursuant to which TCT No. 157779 was issued in his name (Exh.
K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their
complaint, aver:
- XXThe deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND VOID AB
INITIO because
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis;
b) Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the
properties are more than three-fold times more valuable than the measly sums appearing
therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and
vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their
legitime.
- XXI Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772, 155329,
155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties in litisxxx are NULL AND
VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as the
requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were with sufficient
considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the
consequences of their deeds of sale; and (3) that the certificates of title were issued with sufficient factual and legal
basis.[4] (Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino
Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis
filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted

that compulsory heirs have the right to a legitime but such right is contingent since said right commences
only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines.
[7]

After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court
stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the Deeds of Sale
were all executed for valuable consideration. This assertion must prevail over the negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against defendants since there can be
no legitime to speak of prior to the death of their parents. The court finds this contention tenable. In determining the
legitime, the value of the property left at the death of the testator shall be considered (Art. 908 of the New Civil
Code). Hence, the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs
therefore cannot claim an impairment of their legitime while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the counterclaim is likewise
DISMISSED.
No costs.
SO ORDERED.[8]
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether xxx they
have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are
compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their parents. However,
their right to the properties of their defendant parents, as compulsory heirs, is merely inchoate and vests only upon
the latters death. While still alive, defendant parents are free to dispose of their properties, provided that such
dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be creditors of
their defendant parents. Consequently, they cannot be considered as real parties in interest to assail the validity of said
deeds either for gross inadequacy or lack of consideration or for failure to express the true intent of the parties. In
point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence,
they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions made by
their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by the court a quo, the
legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot
claim an impairment of their legitime while their parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is inconsequential.

WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.
SO ORDERED.[9]
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN
QUESTION HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT
THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO
NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS
PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST
OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA
LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A
GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE
RESPONDENTS.[10]
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the
Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted
that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners strategy was
to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their
respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will
then co-own their parents estate by hereditary succession.[11]
It is evident from the records that petitioners are interested in the properties subject of the Deeds of
Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should

have dismissed the action for this reason alone. An action must be prosecuted in the name of the real
party-in-interest.[12]
[T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured by the
judgment, or the party entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the real parties are those who are parties to the
agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the
contracting parties and can show the detriment which would positively result to them from the contract even though
they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.
These are parties with a present substantial interest, as distinguished from a mere expectancy or future, contingent,
subordinate, or consequential interest. The phrase present substantial interest more concretely is meant such interest
of a party in the subject matter of the action as will entitle him, under the substantive law, to recover if the evidence is
sufficient, or that he has the legal title to demand and the defendant will be protected in a payment to or recovery by
him.[13]
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the
appellate court stated, petitioners right to their parents properties is merely inchoate and vests only upon
their parents death. While still living, the parents of petitioners are free to dispose of their properties. In
their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the
lots to their siblings does not affect the value of their parents estate. While the sale of the lots reduced the
estate, cash of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of
Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is
a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then
the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as
to the price, because the price stipulated in the contract is simulated, then the contract is void. [14] Article
1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract. Payment of the price goes into the performance
of the contract. Failure to pay the consideration is different from lack of consideration. The former results in
a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the
latter prevents the existence of a valid contract.[15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove
simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent
Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her
payment of the purchase price.[16] The trial court did not find the allegation of absolute simulation of price

credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of
their respondent siblings financial capacity to buy the questioned lots.[17] On the other hand, the Deeds of
Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of
Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent
father.[18]

paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price
by the buyer to the seller is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
[G.R. No. 111743. October 8, 1999]

Whether the Deeds of Sale are void

for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:

VISITACION GABELO, ERLINDA ABELLA, PETRA PEREZ, ERLINDA TRAQUENA, BEN CARDINAL,
EDUARDO TRAQUENA, LEOPOLDO TRAQUENA, MARIFE TUBALAS, ULYSIS MATEO,
JOCELYN FERNANDEZ, ALFONSO PLACIDO, LEONARDO TRAQUENA, SUSAN RENDON
AND MATEO TRINIDAD, petitioners, vs. COURT OF APPEALS, URSULA MAGLENTE,
CONSOLACION BERJA, MERCEDITA FERRER, THELMA ABELLA, ANTONIO NGO, and
PHILIPPINE REALTY CORPORATION, respondents.

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless
there has been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the
consent, or that the parties really intended a donation or some other act or contract. (Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code
which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be
equal to the exact value of the subject matter of sale. All the respondents believed that they received the
commutative value of what they gave. As we stated inVales v. Villa:[19]
Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise
investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute
themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been
defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things,
make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they have in the world; but
not for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the commission
of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and
remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater
weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence
all over again unless there has been a showing that the findings of the lower court are totally devoid of
support or are clearly erroneous so as to constitute serious abuse of discretion. [20] In the instant case, the
trial court found that the lots were sold for a valid consideration, and that the defendant children actually

DECISION
PURISIMA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, of the decision of the
Court of Appeals, dated April 29, 1993, in CA-G.R. CV No. 33178, affirming the decision of the Regional Trial Court
of Manila, Branch 38, in Civil Case No. 89-48057, entitled Philippine Realty Corporation vs. Ursula Maglente, et al.,
declaring the defendants (herein respondents) as the rightful party to purchase the land under controversy, and
ordering the plaintiff, Philippine Realty Corporation (PRC, for brevity), to execute the corresponding Contract of
Sale/Contract to Sell in favor of the defendants aforenamed.
The antecedent facts culminating in the filing of the present petition are as follows:
On January 15, 1986, Philippine Realty Corporation, owner of a parcel of land at 400 Solana Street,
Intramuros, Manila, with an area of 675.80 square meters, and covered by Transfer Certificate of Title No. 43989,
entered into a Contract of Lease thereover with the herein private respondent, Ursula Maglente. The lease was for a
period of three (3) years at a monthly rental of P3,000.00 during the first year,P3,189.78 per month in the second year
and P3,374.00 monthly for the third year. The lease contract stipulated:
12. That the LESSOR shall have the right to sell any part of the entire leased land for any amount or consideration it
deems convenient, subject to the condition, however, that the LESSEE shall be notified about it sixty (60) days in
advance; that the LESSEE shall be given the first priority to buy it; and in the event that the LESSEE cannot afford to
buy, the final buyer shall respect this lease for the duration of the same, except in cases of exproriation.
It also prohibited the lessee to cede, transfer, mortgage, sublease or in any manner encumber the whole or part of the
leased land and its improvements or its rights as LESSEE of the leased land, without the previous consent in writing
of the LESSOR contained in a public instrument.
However, after the execution of the lease agreement, respondent Maglente started leasing portions of the leased
area to the herein petitioners, Visitacion Gabelo, Erlinda Abella, Petra Perez, Erlinda Traquena, Ben Cardinal,

Eduardo Traquena, Leopoldo Traquena, Marife Tubalas, Ulysis Mateo, Jocelyn Fernandez, Alfonso Placido,
Leonardo Traquena, Susan Rendon and Mateo Trinidad, who erected their respective houses thereon.
On March 9, 1987, when the lease contract was about to expire, the Philippine Realty Corporation, through its
Junior Trust and Property Officers, Mr. Leandro Buguis and Mr. Florentino B. Rosario, sent a written offer to sell
subject properties to respondent Ursula Maglente. The said letter stated:
We wish to inform you that the Archdiocese of Manila has now decided to open for sale the properties it own (sic) in
the District of Intramuros, Manila. However, before we acccept offers from other parties we are of course giving the
first priority to our tenants or lessees of Intramuros lots.
Responding to such written offer, Maglente wrote a letter, dated February 2, 1988, to the Roman Catholic
Archbishop of Manila manifesting an intention to exercise her right of first priority to purchase the property as
stipulated in the lease contract.
On February 15, 1988, a Memorandum on the offer of Maglente to purchase the property was prepared and
presented to Msgr. Domingo Cirilos, president of Philippine Realty Corporation, at the offered price of P1,800.00 per
square meter or for a total amount of P1,216,440.00, with a downpayment of P100,000.00; the balance of the
purchase price payable within ten (10) years with interest at the rate of eighteen (18%) percent per annum. Msgr.
Cirilos found the offer acceptable and approved the same.
On May 11, 1988, Maglente gave a partial downpayment of P25,000.00 and additional P25,000.00 on May 20,
1988. In a letter, dated January 28, 1989, Maglente informed the said corporation that there were other persons who
were her co-buyers, actually occupying the premises, namely: Consolacion Berja, Mercedita Ferrer, Thelma Abella
and Antonio Ngo within their respective areas of 100, 50, 60 and 400 square meters.
On January 30, 1989 Maglente paid her back rentals of P60,642.16 and P50,000.00 more, to complete her
downpayment of P100,000.00.
On February 1989, Philippine Realty Corporation (PRC) received copy of a letter sent by the herein petitioners
to the Archbishop of Manila, Jaime Cardinal Sin, expressing their desire to purchase the portions of subject property
on which they have been staying for a long time. And so, PRC met with the petitioners who apprised the corporation
of their being actual occupants of the leased premises and of the impending demolition of their houses which
Maglente threatened to cause. Petitioners then asked PRC to prevent the demolition of their houses which might
result in trouble and violence.
On February 23, 1989, in order to resolve which group has the right to purchase subject property as between
the petitioners/sublessees of Maglente, and respondent Maglente, and her co-buyers, PRC brought a Complaint in
Interpleader against the herein petitioners and private respondents, docketed as Civil Case No. 89-48057 before
Branch 38 of the Regional Trial Court of Manila.
On March 11, 1991, after trial on the merits, the lower court of origin rendered judgment in favor of
respondent Maglente and her group, disposing thus:

Dissatisfied with the aforesaid decision below, the Gabelo group (petitioners here) appealed to the Court of
Appeals, which affirmed the disposition of the trial court appealed from.
Undaunted, petitioners found their way to this Court via the present petition, assigning as sole error the ruling
of the Court of Appeals upholding the right of the private respondents, Consolacion Berja and Antonio Ngo, to
purchase subject property.
Petitioners theorize that they are tenants of Ursula Maglente on the land in dispute, which they are occupying,
and as such actual occupants they have the preferential right to purchase the portions of land respectively occupied by
them; that the private respondents, Thelma Abella and Antonio Ngo, have never been occupants of the contested lot,
and that, as defined in the Pre-trial Order [1] issued below, the issue for resolution should have been limited to whether
or not Berja and Ngo actually occupied the premises in question because occupation thereon is the basis of the right
to purchase subject area.
Petitioners contention is untenable. There is no legal basis for the assertion by petitioners that as actual
occupants of the said property, they have the right of first priority to purchase the same.
As regards the freedom of contract, it signifies or implies the right to choose with whom to contract. PRC is
thus free to offer its subject property for sale to any interested person. It is not duty bound to sell the same to the
petitioners simply because the latter were in actual occupation of the property absent any prior agreement vesting in
them as occupants the right of first priority to buy, as in the case of respondent Maglente. As a matter of fact, because
it (PRC) contracted only with respondent Maglente, it could even evict the petitioners from the premises occupied by
them considering that the sublease contract between petitioners and Maglente was inked without the prior consent in
writing of PRC, as required under the lease contract. Thus, although the other private respondents were not parties to
the lease contract between PRC and Maglente, the former could freely enter into a contract with them.
So also, the contract of sale having been perfected, the parties thereto are already bound thereby and
petitioners can no longer assert their right to buy. It is well-settled that a contract of sale is perfected the moment
there is a meeting of the minds of the contracting parties upon the thing which is the object of the contract and upon
the price.[2] From the time a party accepts the other partys offer to sell within the stipulated period without
qualification, a contract of sale is deemed perfected.[3]
In the case under consideration, the contract of sale was already perfected - PRC offered the subject lot for sale
to respondent Maglente and her group through its Junior Trust and Property Officers.Respondent Maglente and her
group accepted such offer through a letter addressed to the Roman Catholic Archbishop of Manila, dated February 2,
1988, manifesting their intention to purchase the property as provided for under the lease contract. Thus, there was
already an offer and acceptance giving rise to a valid contract. As a matter of fact, respondents have already
completed payment of their downpayment of P100,000.00. Therefore, as borne by evidence on record, the requisites
under Article 1318 of the Civil Code[4] for a perfected contract have been met.
Anent petitioners submission that the sale has not been perfected because the parties have not affixed their
signatures thereto, suffice it to state that under the law, the meeting of the minds between the parties gives rise to a
binding contract although they have not affixed their signatures to its written form. [5]
WHEREFORE, the petition is hereby DENIED for lack of merit and the decision of the Court of Appeals in
CA-G.R. CV No. 33178 AFFIRMED. No pronouncement as to costs.

WHEREFORE, premises considered, judgment is hereby rendered as follows:

SO ORDERED.
1. Declaring the defendants Ursula Maglente, Consolacion Berja, Mercedita Ferrer, Thelma Abella and
Antonio Ngo as the rightful party to purchase the land in controversy; and
2. Ordering plaintiff Philippine Realty Corporation to execute the corresponding contract of
sale/contract to sell in favor of the defendants aforementioned in accordance with this Decision
within thirty (30) days from notice thereof.

ALCANTARA-DAUS v. SPOUSES DE LEON

G.R. No. 149750 June 16, 2003

FACTS:
Spouses De Leon are the owners of a parcel of land situated in the Municipality of San Manuel,
Pangasinan with an area of Four Thousand Two Hundred Twelve square meters more or less. Respondent
Hermoso De Leon inherited the said lot from his father Marcelino De Leon by virtue of a Deed of ExtraJudicial Partition. Said lot is covered by Original Certificate of Title No. 22134 of the Land Records of
Pangasinan.
Sometime 1960s, Spouses De Leon engaged the services of the late Atty. Florencio Juan to take care of
the documents of their properties. They were asked to sign voluminous documents by the latter. After the
death of Atty. Juan, some documents surfaced and most revealed that their properties had been conveyed
by sale or quitclaim to Hermosos brothers and sisters, to Atty. Juan and his sisters, when in truth and in
fact, no such conveyances were ever intended by them. Furthermore, respondent found out that his
signature in the Deed of Extra-judicial Partition with Quitclaim made in favor of Rodolfo de Leon was
forged. They discovered that the land in question was sold by Rodolfo de Leon to Aurora Alcantara
Spouses De Leon demanded the annulment of the document and re-conveyance but defendants refused.
Petitioner, Aurora Alcantara-Daus averred that she bought the land in question in good faith and for value
on December 1975 and that she has been in continuous, public, peaceful, open possession over the same
and has been appropriating the produce thereof without objection from anyone.
The RTC of Urdaneta, Pangasinan rendered its Decision 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.
ISSUES:
Whether or not the Deed of Absolute executed by Rodolfo De Leon over the land in question in favor of
petitioner was perfected and binding upon the parties therein?
Whether or not the evidentiary weight of the Deed of Extrajudicial Partition with Quitclaim, executed by
respondent 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?
HELD:
First Issue:
NO. It is during the delivery that the law requires the seller to have the right to transfer ownership of the
thing sold. In general, a perfected contract of sale cannot be challenged on the ground of the sellers nonownership of the thing sold at the time of the perfection of the contract.
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.
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. 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:
NO. As a general rule, the due execution and authenticity of a document must be reasonably established
before it may be admitted in evidence. 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. 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.
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, this rule does not apply when there is a conflict between the holdings of the CA and
those of the trial court, as in the present case.
After poring over the records, the SC finds no reason to reverse the factual finding of the appellate
court. A comparison of the genuine signatures of Hermoso De Leon with his purported signature on the
Deed of Extrajudicial Partition with Quitclaim 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.
[G.R. No. 142013. October 15, 2002]
BIAN STEEL CORPORATION, petitioner, vs. HON. COURT OF APPEALS, MYLENE C. GARCIA and
MYLA C. GARCIA, respondents.
[G.R. No. 148430. October 15, 2002]
MYLENE C. GARCIA and MYLA C. GARCIA, petitioners, vs. HON. ENRICO A. LANZANAS, Presiding
Judge, RTC, Branch 7, Manila and RUFO J. BERNARDO, Sheriff-In-Charge, for the ExOfficio Sheriff of Manila, respondents.
DECISION
CORONA, J.:
Before us are two consolidated petitions: (1) G.R. No. 142013, a special civil action for certiorari and
mandamus seeking to annul and set aside the Resolutions [1] of the Court of Appeals dated October 21,
1999 and January 31, 2000, denying petitioner Bian Steel Corporations motion for intervention and motion
for reconsideration, and (2) G.R. No. 148430, seeking to set aside the decision [2] and resolution of the
Court of Appeals dated February 10, 2000 and May 31, 2001, respectively, dismissing the petition of
petitioners Mylene C. Garcia and Myla C. Garcia for violating the rules on forum-shopping.
Stripped of the non-essentials, the facts of the case are as follows:
On July 22, 1998, Bian Steel Corporation (BSC) filed with the Regional Trial Court of Manila a
complaint against Joenas Metal Corporation and spouses Ng Ley Huat and Leticia Dy Ng (the spouses
Ng) for collection of a sum of money with damages, docketed as Civil Case No. 98-89831.
On July 24, 1998, the trial court [3] issued a Writ of Preliminary Attachment after BSC filed an
attachment bond. Pursuant thereto, on July 27, 1998, the sheriff of Branch 7 of the RTC of Manila,
Manuelito P. Viloria, levied on the property registered in the names of the spouses Ng and covered by TCT
No. 11387 of the Registry of Deeds of Quezon City. This property under preliminary attachment was in fact
mortgaged to the Far East Bank and Trust Company (FEBTC), now Bank of the Philippine Islands (BPI),
and consisted of a 268-square-meter lot located at 14 Tulip Road, Gardenville Town and Country Homes,
Congressional Avenue, Project 8, Quezon City.
On August 5, 1998, a sheriffs return was filed by Viloria, stating that, as of that date, summons was
not served upon the defendant spouses Ng because they could not be located. BSC caused the filing of a
motion to serve the summons by publication which was granted. Summons by publication thereafter
ensued.

In the meantime, defendant-spouses Ng sold the property to petitioners (in G.R. No. 148430) Mylene
and Myla Garcia by means of a deed of sale dated June 29, 1998. Said transaction was registered only
about a month-and-a-half later, on August 12, 1998, after the mortgagee FEBTC gave its approval to the
sale. On August 19, 1998, TCT No. 11387 in the name of the spouses Ng was cancelled and, in lieu
thereof, TCT No. 194226 in the names of Mylene and Myla Garcia was issued. The annotation of the
preliminary attachment made earlier on July 27, 1998 by sheriff Viloria on the old title, TCT No. 11387, was
transferred to TCT No. 194226.
On August 28, 1998, the Garcias filed a complaint-in-intervention in Civil Case No. 98-89831
pending at Branch 7 of the Manila RTC, alleging that they were the registered owners of the property
covered by TCT No. 194226 which was the subject of BSCs writ of preliminary attachment. Said
complaint-in-intervention was denied by the trial court for lack of merit.
On April 14, 1999, the trial court rendered judgment by default in favor of BSC, the dispositive
portion of which was:
WHEREFORE, decision is hereby rendered in favor of plaintiff Bian Steel Corporation, and against defendants
Joenas Metal Corporation, Ng Ley Huat and Leticia Dy Ng, ordering the latter to jointly and severally:
1. pay the plaintiff the amount of FIVE MILLION EIGHT HUNDRED FIFTY SIX THOUSAND PESOS
(P5,856,000.00) as actual damages;
2. pay the plaintiff the amount of ONE MILLION PESOS (P1,000,000.00) as and for consequential damages;
3. pay the plaintiff the amount equivalent to 25% of the total amount due the plaintiff from the defendant as and for
attorneys fees; and
4. to pay the costs of suit.
SO ORDERED.[4]
On June 14, 1999, a Notice of Sale of Execution on Real Property was issued by respondent sheriff
Rufo J. Bernardo. It scheduled the public auction of the property on July 7, 1999.
Meanwhile, on February 18, 1999, in view of the dismissal of their complaint-in-intervention, the
Garcias filed an action against BSC, sheriff Manuelito P. Viloria, the Register of Deeds of Quezon City and
FEBTC (now BPI) for cancellation of the notice of levy annotated on TCT No. 194226 before Branch 98 of
the Regional Trial Court of Quezon City,[5] docketed as Civil Case No. 99-36804. The Garcias claimed that
they were the registered owners of the property in dispute, having acquired the same on June 29, 1998 by
means of a deed of sale with assumption of mortgage from spouses Ng Ley Huat and Leticia Dy Ng.
In said case in the Quezon City RTC, the Garcias were able to secure a temporary restraining order
enjoining sheriff Rufo J. Bernardo or any person acting in his behalf from continuing with the public auction
sale of the subject property initially scheduled on July 7, 1999. This TRO was disregarded by the Manila
RTC.
Acting on the ex-parte manifestation with motion to proceed with the execution sale filed by BSC,
Judge Enrico Lanzanas of Branch 7, RTC, Manila affirmed, on July 8, 1999, his previous order and
directed the public auction of the attached property, unless otherwise enjoined by the Court of Appeals or
this Court. Thereafter, the public auction was rescheduled from July 7, 1999 to August 6, 1999.
On August 4, 1999, the Garcias filed another case with the Court of Appeals for the issuance of a
writ of preliminary injunction with prayer for temporary restraining order which sought to perpetually enjoin
Judge Lanzanas and sheriff Bernardo from proceeding with the public auction on August 6, 1999. Their
petition did not implead BSC as private respondent.
In a resolution dated August 5, 1999, the Third Division of the Court of Appeals [6] temporarily
restrained public respondents Judge Lanzanas and Bernardo from proceeding with the public auction of
the subject property. Hence, the scheduled public sale on August 6, 1999 did not transpire. This prompted
petitioner BSC to file a motion for intervention on August 16, 1999, praying that it be allowed to intervene
and be heard in the case as private respondent, and to comment and oppose the petition filed by the
Garcias. Likewise, said motion sought to oppose the prayer for preliminary injunction with urgent request
for the issuance of the temporary restraining order.

On October 21, 1999, the First Division of the Court of Appeals, in its resolution, [7] denied BSCs
motion for intervention on the ground that its rights could be protected in a separate proceeding,
particularly in the cancellation case filed by the Garcias. BSC's motion for reconsideration was likewise
denied on January 31, 2000. Thus, on March 13, 2000, BSC filed with this Court a special civil action for
certiorari and mandamus, docketed as G.R. No. 142013, seeking to annul and set aside the Resolutions of
the Court of Appeals dated October 21, 1999 and January 31, 2000. BSC is invoking the following issues:
I
THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION IN DENYING PETITIONERS MOTION FOR
INTERVENTION FOR BEING IMPROPER AS INTERVENORS RIGHTS MAY BE PROTECTED IN A
SEPARATE PROCEEDING IN CIVIL CASE NO. 99-36804 OF THE RTC, BRANCH 98, QUEZON CITY, FOR
CANCELLATION OF THE NOTICE OF LEVY ANNOTATED ON TCT NO. 194226.
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT
TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT TO ENTERTAIN PETITIONERS
INTERVENTION WOULD NECESSARY (SIC) PRE-EMPT THE ADJUDICATION OF ISSUES IN CIVIL CASE
NO. 99-36804 BECAUSE EVIDENCE AND COUNTER-EVIDENCE WILL BE PRODUCED BY THE PARTIES
IN THE INJUNCTION SUIT, AND THIS WILL UNDULY DELAY OR PREJUDICE THE ADJUDICATION OF
THE RIGHTS OF THE PRINCIPAL PARTIES.
III
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT
TO LACK OR EXCESS OF JURISDICTION IN RULING THAT THE ALLOWANCE OR DISALLOWANCE OF
A MOTION TO INTERVENE IS ADDRESSED TO THE SOUND DISCRETION OF THE COURT,
OVERLOOKING THE FACT THAT IN THE INSTANT CASE, THE APPELLATE COURT DID NOT EXERCISE
WISELY ITS SOUND DISCRETION WHEN IT DENIED PETITIONERS MOTION FOR INTERVENTION.
Similarly, the Fifteenth Division of the Court of Appeals, in its decision [8] dated February 10, 2000,
dismissed the petition of the Garcias for violating the rules on forum-shopping. It denied their motion for
reconsideration on May 31, 2001.
The Garcias thus filed with this Court a petition for review on certiorari, docketed as G.R. No.
148430, seeking to set aside the February 10, 2000 decision of the Court of Appeals as well as its
resolution dated May 31, 2001 denying their motion for reconsideration, raising the following errors:
I
WHETHER OR NOT PETITIONERS WERE GUILTY OF VIOLATING THE RULES ON FORUM-SHOPPING.
II
WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT OF INJUNCTION.
Subsequently, G.R. No. 142013 and G.R. No. 148430 were consolidated pursuant to this Court's
Resolution dated February 27, 2002.
In the meantime, on August 4, 2001, the Garcias were again served by the sheriff of the Manila RTC
with a notice of sale of execution of the disputed property scheduled for August 7, 2001. Because no TRO
was issued by this Court, the public auction ordered by the Manila RTC was held as scheduled and the
property was awarded to BSC as the highest bidder.
On August 15, 2001, a little too late, this Court[9] issued the TRO sought by the Garcias in a
resolution which partially stated that:
Acting on the Petitioners Urgent Motion for the Issuance of a temporary restraining order and/or writ of preliminary
injunction dated August 6, 2001, praying that public respondents be enjoined from proceeding with the conduct of the
public auction sale involving Petitioners property, registered under TCT No. 194226 of the Registry of Deeds of
Quezon City, the Court Resolved to ISSUE the TEMPORARY RESTRAINING ORDER prayed for, effective
immediately until further orders from this Court.[10]
A year after the public auction, on August 6, 2002, the Garcias, fearful of the impending
consolidation of title in favor of BSC, filed before this Court an urgent ex-parte motion for the issuance of

an order maintaining the status quo ante. They wanted to prevent the consolidation of the title and
possession by BSC until such time as the rights and interests of both sets of petitioners in the two cases
before us shall have been determined and finally resolved.
Acting on the said motion, on August 9, 2002, the Court [11] resolved to grant the motion and directed
the parties to maintain the status quo as of August 6, 2002.
Going over the merits of the petitions, the Court deems it essential to resolve two pivotal issues: (1)
who, between BSC and the Garcias, has a better right to the disputed property, and (2) whether the
Garcias violated the rule against forum- shopping.
It should be noted that, at the time of the attachment of the property on July 27, 1998, the spouses
Ng were still the registered owners of said property. It should also be observed that the preliminary
attachment in favor of petitioner BSC was annotated and recorded in the Registry of Deeds of Quezon City
on July 27, 1998 in accordance with the provisions of the Property Registration Decree (PD 1529). This
annotation produced all the effects which the law gives to its registration or inscription.[12]
This Court has always held that attachment is a proceeding in rem. It is against the particular
property, enforceable against the whole world. The attaching creditor acquires a specific lien on the
attached property which ripens into a judgment against the res when the order of sale is made. Such a
proceeding in effect means that the property attached is an indebted thing and a virtual condemnation of it
to pay the owners debt.[13] This doctrine was validated by this Court in the more recent case of Republic
vs. Saludares[14]:
xxx.
The law does not provide the length of time an attachment lien shall continue after the rendition of the judgment, and
it must therefore necessarily continue until the debt is paid, or sale is had under execution issued on the judgment, or
until the judgment is satisfied, or the attachment discharged or vacated in some manner provided by law. Thus, if the
property attached is subsequently sold, the purchaser of the attached property acquires it subject to an
attachment legally and validly levied thereon.
xxx.
In the instant case, the records reveal that the levy on attachment covering the subject property was
annotated on TCT No. 11387 on July 27, 1998. The deed of sale executed on June 29, 1998 in favor of
the Garcias was approved by FEBTC only on August 12, 1998 which was also the date when the sale
was registered. From the foregoing, it can be seen that, when the Garcias purchased the property in
question, it was already under a duly registered preliminary attachment. In other words, there was already
notice to said purchasers (and the whole world) of the impending acquisition by BSC, as the judgment
creditor, of a legal lien on the title of the Ng spouses as judgment debtors in case BSC won its case in the
Manila RTC.
The Garcias claim they acquired the subject property by means of a deed of sale with assumption of
mortgage dated June 29, 1998, meaning, they purchased the property ahead of the inscription of the levy
on attachment thereon on July 27, 1998. But, even if consensual, not all contracts of sale became
automatically and immediately effective.[15] In Ramos vs. Court of Appeals[16] we held:
In sales with assumption of mortgage, the assumption of mortgage is a condition precedent to the sellers consent
and therefore, without approval of the mortgagee, the sale is not perfected.
Apart therefrom, notwithstanding the approval of the sale by mortgagee FEBTC (BPI), there was yet
another step the Garcias had to take and it was the registration of the sale from the Ngs to them. Insofar
as third persons are concerned, what validly transfers or conveys a person's interest in real property is the
registration of the deed.[17]
Thus, when the Garcias bought the property on June 29, 1998, it was, at that point, no more than a
private transaction between them and the Ngs. It needed to be registered before it could become
binding on all third parties, including BSC. It turned out that the Garcias registered it only on August 12,
1998, after FEBTC (now BPI) approved the sale. It was too late by then because, on July 27, 1998, the
levy in favor of BSC, pursuant to the preliminary attachment ordered by the Manila RTC, had already been
annotated on the original title on file with the Registry of Deeds. This registration of levy (or notice, in

laymans language) now became binding on the whole world, including the Garcias. The rights which had
already accrued in favor of BSC by virtue of the levy on attachment over the property were never
adversely affected by the unregistered transfer from the spouses Ng to the Garcias.
We sympathize with the Garcias but, had they only bothered to check first with the Register of
Deeds of Quezon City before buying the property as a prudent buyer would have done they would have
seen the warning about BSCs superior rights over it. This alone should have been sufficient reason for
them to back out of the deal.
It is doctrinal that a levy on attachment, duly registered, has preference over a prior unregistered
sale and, even if the prior unregistered sale is subsequently registered before the sale on execution but
after the levy is made, the validity of the execution sale should be upheld because it retroacts to the date
of levy. The priority enjoyed by the levy on attachment extends, with full force and effect, to the buyer at
the auction sale conducted by virtue of such levy.[18] The sale between the spouses Ng and the Garcias
was undoubtedly a valid transaction between them. However, in view of the prior levy on attachment on
the same property, the Garcias took the property subject to the attachment. The Garcias, in buying
registered land, stood exactly in the shoes of their vendors, the Ngs, and their title ipso facto became
subject to the incidents or results of the pending litigation[19] between the Ngs and BSC.
Even the alleged lack of actual and personal knowledge of the existence of the levy on attachment
over the subject property by the Garcias cannot be sustained by this Court on the ground that one who
deals with registered land is charged with notice of the burdens on the property which are duly noted on
the certificate of title. On this specific point, we are concerned not with actual or personal knowledge but
constructive notice through registration in the Registry of Deeds. Otherwise stated, what we should follow
is the annotation (or lack thereof) on the original title on file with the Registry of Deeds, not on the duplicate
title in the hands of the private parties.
When a conveyance has been properly recorded, such record is constructive notice of its contents
and all interests, legal and equitable, included therein. Under the rule on notice, it is presumed that the
purchaser has examined every instrument on record affecting the title. Such presumption is irrefutable and
cannot be overcome by any claim of innocence or good faith.Therefore, such presumption cannot be
defeated by proof of lack of knowledge of what the public record contains any more than one may be
permitted to show that he was ignorant of the provisions of the law. The rule that all persons must take
notice of the facts which the public record contains is a rule of law. The rule must be absolute. Any
variation would lead to endless confusion and useless litigation. [20] Otherwise, the very purpose and object
of the law requiring public registration would be for naught.
Pertinent to the matter at hand is Article 1544 of the New Civil Code which provides:
If the same thing should have been sold to different vendees, x x x should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. x x x
Because of the principle of constructive notice to the whole world, one who deals with registered
property which is the subject of an annotated levy on attachment cannot invoke the rights of a purchaser in
good faith. As between two purchasers, the one who registers the sale in his favor has a preferred right
over the other who has not registered his title even if the latter is in actual possession of the immovable
property.[21] And, as between two purchasers who both registered the respective sales in their favor, the
one who registered his sale ahead of the other would have better rights than the other who registered later.
Applying said provision of the law and settled jurisprudence to the instant case, when the disputed
property was consequently sold on execution to BSC, this auction sale retroacted to the date of inscription
of BSC's notice of attachment on July 27, 1998. The earlier registration thus gave BSC superior and
preferential rights over the attached property as against the Garcias [22] who registered their purchase of the
property at a later date. Notably, the Garcias were not purchasers for value in view of the fact that they
acquired the property in payment of the loan earlier obtained from them by the Spouses Ng.[23]
All told, the purchaser of a property subject to an attachment legally and validly levied thereon is
merely subrogated to the rights of the vendor and acquires the property subject to the rights of the
attachment creditor. An attaching creditor who registers the order of attachment and the sale by public

auction of the property to him as the highest bidder acquires a superior title to the property as against a
vendee who previously bought the same property from the registered owner but who failed to register his
deed of sale.[24]
Petitioners Garcias failed to show that BSC acted in bad faith which would have impelled this Court
to rule otherwise.
The foregoing considerations show that the Garcias are not entitled to the issuance of a writ of
preliminary injunction from this Court. For the issuance of the writ to be proper, it must be shown that the
invasion of the right sought to be protected is material and substantial, that the right of the Garcias is clear
and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious
damage.[25] Such requirements are all wanting in the case at bar. Thus, in view of the clear and
unmistakable absence of any legal basis for the issuance thereof, the same must be denied.
On the second question whether the Garcias violated the rule against forum-shopping we answer in
the affirmative.
The Court of Appeals, in dismissing the Garcias' petition on the ground of forum-shopping,
explained:
A party is guilty of forum-shopping where he repetitively availed of several judicial remedies in different courts,
simultaneously or successively, all substantially founded on the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by some
other court (Gatmaytan vs. Court of Appeals, 267 SCRA 487).
The test to determine whether a party violated the rule against forum-shopping is where the elements of litis
pendentia are present or where a final judgment in one case will amount to res judicata in another (Solid Homes, Inc.
vs. Court of Appeals, 271 SCRA 157).
What is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the
courts and parties-litigants by a party who asks different courts and/or administrative agencies to rule on the same or
related causes and/or grant the same or substantially the same reliefs, in the process creating possibility of conflicting
decisions being rendered by the different fora upon the same issues (Golangco vs. Court of Appeals, 283 SCRA 493).
The above jurisprudence instructs us the various indicia of forum-shopping. The more important of these are: when
the final judgment in one case will amount to res judicata in another, or where the cases filed are substantially
founded on the same transactions and the same essential facts and circumstances, or raising substantially the same
issues, or more importantly, where there exists the possibility of conflicting decisions being rendered by different fora
upon the same issues.
If we take a look closely on the instant Petition for Injunction, forum-shopping is evident. In Civil Case No. 99-36804
raffled to Branch 98 of RTC- Quezon City, petitioners therein prayed for the cancellation of the notice of levy in their
title. They are claiming that the controverted property is owned by them such that the respondent therein has no right
to levy on their property, petitioners not being the respondents debtor. In the present petition, petitioners seek that the
scheduled auction sale of the same property be perpetually enjoined, claiming that the property is owned by them and
that the same is erroneously made to answer for liability not owing by them. Ultimately, the two actions involve the
same essential facts and circumstances, and are raising the same issues.
x x x The propriety of the issuance of injunction would depend on the finding that the petitioners have a clear legal
right over the property - a right in esse or the existence of a right to be protected. Thus, this court must make a
categorical finding of fact. This very same issue of fact who as between the two contending parties have a better right
to the property is the very issue presented before the RTC of Quezon City. Clearly therefore, this Court and that of
RTC Quezon City are called upon to decide on the same issues based on the same essential facts and
circumstances. Hence, the possibility of these two courts rendering or coming up with different or conflicting
decisions is very much real. Needless to say, the decision in one case would constitute res judicata in the other. The
instant petition for injunction obviously violates the rule on forum-shopping.
We agree with the Court of Appeals.
As clearly demonstrated, the willful attempt by the Garcias to obtain a preliminary injunction in
another court (the Court of Appeals) after they filed a case seeking the same relief from the original court
(the Quezon City RTC) constitutes grave abuse of the judicial process. Such contemptuous act is

penalized by the summary dismissal of both actions as mandated by paragraph 17 of the Interim Rules
and Guidelines issued by this Court on January 11, 1983 and Supreme Court Circular No. 28-91, to wit:
xxx
SUBJECT: ADDITIONAL REQUISITES FOR PETITIONS FILED WITH THE SUPREME COURT AND THE
COURT OF APPEALS TO PREVENT FORUM-SHOPPING OR MULTIPLE FILING OF PETITIONS AND
COMPLAINTS.
The attention of the Court has been called to the filing of multiple petitions and complaints involving the same issues
in the Supreme Court, the Court of Appeals or different Divisions thereof, or any other tribunal or agency, with the
result that said tribunals or agency have to resolve the same issues.
x x x.
3. Penalties.
(a) Any violation of this Circular shall be a cause for the summary dismissal of the multiple petition or complaint;
x x x.
In Bugnay Construction & Development Corporation vs. Laron,[26] we declared:
Forum-shopping, an act of malpractice, is proscribed and condemned as trifling with the courts and abusing their
processes. It is improper conduct that degrades the administration of justice. The rule has been formalized in
Paragraph 17 of the Interim Rules and Guidelines issued by this Court of January 11, 1983, in connection with the
implementation of the Judiciary Reorganization Act x x x. The Rule ordains that (a) violation of the rule shall
constitute a contempt of court and shall be a cause for the summary dismissal of both petitions, without prejudice to
the taking of appropriate action against the counsel or party concerned.
The rule against forum-shopping has been further strengthened by the issuance of Supreme Court
Administrative Circular No. 04-94. Said circular formally established the rule that the deliberate filing of
multiple complaints to obtain favorable action constitutes forum-shopping and shall be a ground for
summary dismissal thereof.
Accordingly, the Garcias cannot pursue simultaneous remedies in two different fora. This is a
practice which degrades the judicial process, messes up the orderly rules of procedure and is vexatious
and unfair to the other party in the case.
We rule therefore that the execution sale in favor of BSC was superior to the sale of the same
property by the Ngs to the Garcias on August 12, 1998. The right of petitioner BSC to the ownership and
possession of the property, the surrender of the owner's duplicate copy of TCT No. 194226 covering the
subject property for inscription of the certificate of sale, the cancellation of TCT No. 194226 and the
issuance of a new title in favor of BSC, is affirmed without prejudice to the right of the Garcias to seek
reimbursement from the spouses Ng.
In view of our disposition of the first issue resulting in the denial of the Garcias petition, the petition of
BSC praying that it be allowed to intervene therein has been rendered moot. The Court thus finds it
unnecessary to discuss it.
WHEREFORE, the petitions are DENIED. The Resolution dated August 9, 2002 issued by this Court
directing the parties to maintain the status quo as of August 6, 2002 is hereby lifted and set aside. The
Registry of Deeds of Quezon City is hereby ordered to cancel TCT No. 194226 in the names of Myla and
Mylene Garcia and issue a new title in favor of BSC without further delay.
SO ORDERED.
G.R. No. 156437
March 1, 2004
NATIONAL HOUSING AUTHORITY, petitioner,
vs.
GRACE BAPTIST CHURCH and the COURT OF APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court, seeking to reverse the Decision of the
Court of Appeals dated February 26, 2001,1 and its Resolution dated November 8, 2002,2 which modified
the decision of the Regional Trial Court of Quezon City, Branch 90, dated February 25, 1997.3
On June 13, 1986, respondent Grace Baptist Church (hereinafter, the Church) wrote a letter to petitioner
National Housing Authority (NHA), manifesting its interest in acquiring Lots 4 and 17 of the General
Mariano Alvarez Resettlement Project in Cavite.4 In its letter-reply dated July 9, 1986, petitioner informed
respondent:
In reference to your request letter dated 13 June 1986, regarding your application for Lots 4 and
17, Block C-3-CL, we are glad to inform you that your request was granted and you may now
visit our Project Office at General Mariano Alvarez for processing of your application to purchase
said lots.
We hereby advise you also that prior to approval of such application and in accordance with our existing
policies and guidelines, your other accounts with us shall be maintained in good standing.5
Respondent entered into possession of the lots and introduced improvements thereon.6
On February 22, 1991, the NHAs Board of Directors passed Resolution No. 2126, approving the sale of
the subject lots to respondent Church at the price of P700.00 per square meter, or a total price of
P430,500.00.7 The Church was duly informed of this Resolution through a letter sent by the NHA.8
On April 8, 1991, the Church tendered to the NHA a managers check in the amount of P55,350.00,
purportedly in full payment of the subject properties.9 The Church insisted that this was the price quoted to
them by the NHA Field Office, as shown by an unsigned piece of paper with a handwritten computation
scribbled thereon.10Petitioner NHA returned the check, stating that the amount was insufficient considering
that the price of the properties have changed. The Church made several demands on the NHA to accept
their tender of payment, but the latter refused. Thus, the Church instituted a complaint for specific
performance and damages against the NHA with the Regional Trial Court of Quezon City,11 where it was
docketed as Civil Case No. Q-91-9148.
On February 25, 1997, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to reimburse to the plaintiff the amount of P4,290.00
representing the overpayment made for Lots 1, 2, 3, 18, 19 and 20;
2. Declaring that there was no perfected contract of sale with respect to Lots 4 and 17
and ordering the plaintiff to return possession of the property to the defendant and to
pay the latter reasonable rental for the use of the property at P200.00 per month
computed from the time it took possession thereof until finally vacated. Costs against
defendant.
SO ORDERED.12
On appeal, the Court of Appeals, affirmed the trial courts finding that there was indeed no contract of sale
between the parties. However, petitioner was ordered to execute the sale of the lots to Grace Baptist
Church at the price of P700.00 per square meter, with 6% interest per annum from March 1991. The
dispositive portion of the Court of Appeals decision, dated February 26, 2001, reads:
WHEREFORE, the appealed Decision is hereby AFFIRMED with the MODIFICATION that
defendant-appellee NHA is hereby ordered to sell to plaintiff-appellant Grace Baptist Church
Lots 4 and 17 at the price of P700.00 per square meter, or a total cost P430,000.00 with 6%
interest per annum from March, 1991 until full payment in cash.
SO ORDERED.13
The appellate court ruled that the NHAs Resolution No. 2126, which earlier approved the sale of the
subject lots to Grace Baptist Church at the price of P700.00 per square meter, has not been revoked at

any time and was therefore still in effect. As a result, the NHA was estopped from fixing a different price for
the subject properties. Considering further that the Church had been occupying the subject lots and even
introduced improvements thereon, the Court of Appeals ruled that, in the interest of equity, it should be
allowed to purchase the subject properties.14
Petitioner NHA filed a Motion for Reconsideration which was denied in a Resolution dated November 8,
2002. Hence, the instant petition for review on the sole issue of: Can the NHA be compelled to sell the
subject lots to Grace Baptist Church in the absence of any perfected contract of sale between the parties?
Petitioner submits that the Court cannot compel it to sell the subject property to Grace Baptist Church
without violating its freedom to contract.15 Moreover, it contends that equity should be applied only in the
absence of any law governing the relationship between the parties, and that the law on sales and the law
on contracts in general apply to the present case.16
We find merit in petitioners submission.
Petitioner NHA is not estopped from selling the subject lots at a price equal to their fair market value, even
if it failed to expressly revoke Resolution No. 2126. It is, after all, hornbook law that the principle of
estoppel does not operate against the Government for the act of its agents,17 or, as in this case, their
inaction.
On the application of equity, it appears that the crux of the controversy involves the characterization of
equity in the context of contract law. Preliminarily, we reiterate that this Court, while aware of its equity
jurisdiction, is first and foremost, a court of law. While equity might tilt on the side of one party, the same
cannot be enforced so as to overrule positive provisions of law in favor of the other.18 Thus, before we can
pass upon the propriety of an application of equitable principles in the case at bar, we must first determine
whether or not positive provisions of law govern.
It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising
therefrom have the force of law between the parties and should be complied with in good faith. 19 However,
it must be understood that contracts are not the only source of law that govern the rights and obligations
between the parties. More specifically, no contractual stipulation may contradict law, morals, good
customs, public order or public policy.20 Verily, the mere inexistence of a contract, which would ordinarily
serve as the law between the parties, does not automatically authorize disposing of a controversy based
on equitable principles alone. Notwithstanding the absence of a perfected contract between the parties,
their relationship may be governed byother existing laws which provide for their reciprocal rights and
obligations.
It must be remembered that contracts in which the Government is a party are subject to the same rules of
contract law which govern the validity and sufficiency of contract between individuals. All the essential
elements and characteristics of a contract in general must be present in order to create a binding and
enforceable Government contract.21
It appearing that there is no dispute that this case involves an unperfected contract, the Civil Law
principles governing contracts should apply. In Vda. de Urbano v. Government Service Insurance
System,22 it was ruled that a qualified acceptance constitutes a counter-offer as expressly stated by Article
1319 of the Civil Code. In said case, petitioners offered to redeem mortgaged property and requested for
an extension of the period of redemption. However, the offer was not accepted by the GSIS. Instead, it
made a counter-offer, which petitioners did not accept. Petitioners again offer to pay the redemption price
on staggered basis. In deciding said case, it was held that when there is absolutely no acceptance of an
offer or if the offer is expressly rejected, there is no meeting of the minds. Since petitioners offer was
denied twice by GSIS, it was held that there was clearly no meeting of the minds and, thus, no perfected
contract. All that is established was a counter-offer.23

In the case at bar, the offer of the NHA to sell the subject property, as embodied in Resolution No. 2126,
was similarly not accepted by the respondent.24 Thus, the alleged contract involved in this case should be
more accurately denominated as inexistent. There being no concurrence of the offer and acceptance, it did
not pass the stage of generation to the point of perfection.25 As such, it is without force and effect from the
very beginning or from its incipiency, as if it had never been entered into, and hence, cannot be validated
either by lapse of time or ratification.26 Equity can not give validity to a void contract,27 and this rule should
apply with equal force to inexistent contracts.
We note from the records, however, that the Church, despite knowledge that its intended contract of sale
with the NHA had not been perfected, proceeded to introduce improvements on the disputed land. On the
other hand, the NHA knowingly granted the Church temporary use of the subject properties and did not
prevent the Church from making improvements thereon. Thus, the Church and the NHA, who both acted in
bad faith, shall be treated as if they were both in good faith. 28 In this connection, Article 448 of the Civil
Code provides:
The owner of the land on which anything has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay
the price of the land, and the one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land and if its value is considerably more than that of the building or
trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon the terms
of the lease and in case of disagreement, the court shall fix the terms thereof.
Pursuant to our ruling in Depra v. Dumlao,29 there is a need to remand this case to the trial court, which
shall conduct the appropriate proceedings to assess the respective values of the improvements and of the
land, as well as the amounts of reasonable rentals and indemnity, fix the terms of the lease if the parties so
agree, and to determine other matters necessary for the proper application of Article 448, in relation to
Articles 546 and 548, of the Civil Code.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The Court of Appeals Decision dated
February 26, 2001 and Resolution dated November 8, 2002 are REVERSED and SET ASIDE. The
Decision of the Regional Trial Court of Quezon City-Branch 90, dated February 25, 1997, is REINSTATED.
This case is REMANDED to the Regional Trial Court of Quezon City, Branch 90, for further proceedings
consistent with Articles 448 and 546 of the Civil Code.
No costs.
SO ORDERED.

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. MARIO MYRNO TAN, accusedappellant.

DECISION
QUISUMBING, J.:
On appeal is the decision rendered on January 26, 1995, by the Regional Trial Court of
Antipolo, Rizal, Branch 74, in Criminal Case No. 91-6398, finding appellant Mario Myrno Tan

guilty of estafa under paragraph 2 (d) of Article 315 of the Revised Penal Code and sentencing
him to reclusion perpetua.
In an Information dated January 11, 1991, Prosecutor Eduardo Fabian charged
appellant with the crime of estafa allegedly committed as follows:
That in or about and during the month of July 1990 up to September 1990, in the Municipality of Antipolo,
Province of Rizal, Philippines, within the jurisdiction of this Honorable Court, the above-named accused,
with intent to defraud New Durawood Company Inc., herein represented by one, Wilson M. Gaw and by
means of deceit and false representation, did then and there wilfully, unlawfully and feloniously make out
and issue Security Bank and Trust Company Check No. 293232 postdated October 1, 1990 in the amount
of P254,037.00, to apply on account, well-knowing at the time of issue he did not have sufficient funds in or
credit with the drawee bank for the payment in full of the face amount of such check upon its presentment,
which check when presented for payment within ninety (90) days from the date thereof was subsequently
dishonored by the drawee bank for the reason of Drawn Against Insufficient Funds and, despite receipt of
notice of such dishonor the accused failed to pay said payee the face amount of said check or make
arrangement for full payment thereof within three (3) days after receiving notice, to the damage and
prejudice of the said New Durawood Company, Inc. in the aforementioned amount of P254,037.00.
CONTRARY TO LAW.[1]
Upon arraignment, appellant, assisted by counsel, entered a plea of not guilty to the
charge.[2] Thereafter, trial on the merits ensued. Subsequently, the trial court rendered its
verdict finding appellant guilty as charged. The dispositive portion of its decision reads:
WHEREFORE, in view of the foregoing, and computing the penalty corresponding to the P254,037.00
amount defrauded in accordance with the foregoing provision, the Court hereby sentences accused Mario
Myrno Tan to suffer the penalty of Reclusion Perpetua (the Indeterminate Sentence Law not being
applicable to persons convicted of offenses punished with death or life imprisonment (Section 2, Act. No.
4105 as amended by Act. No. 4225), the Court cannot therefore impose a minimum penalty that is one
degree lower than Reclusion Perpetua). In addition accused is likewise sentenced to indemnify
complainant New Durawood Company the amount of P254,037.00 by way of actual damages plus legal
interest and to pay the Costs.
SO ORDERED.[3]
In view of the penalty imposed, the case is now before us on appeal.
The facts of this case on record are as follows:
Private complainant New Durawood Company is engaged in the buy and sell of
construction materials, with Wilson Gaw (Gaw) serving as manager of its branch in Mayamot,
Antipolo, Rizal. Appellant Mario Myrno Tan, owner of Hocson Trading, was among the regular
customers of the company.
As a matter of practice between the parties, appellant would first place his orders for
construction materials with private complainant. Then private complainant would compute the
total amount involved and then show it to appellant. Thereafter, the company would prepare
the invoice and appellant would issue post-dated checks in payment for the ordered

supplies. The materials would then be delivered later either to appellants warehouse in
Caloocan City or the construction site. It was appellants caretaker who received the materials
and signed the delivery receipts.
Complainants branch manager, Wilson Gaw, testified that:
Sometime in July or August 1990, appellant came to his store to procure construction
supplies. After computing the total amount of the ordered materials, appellant issued a
check. Appellant told Gaw about his (appellants) big construction project and assured Gaw
that the check appellant would issue as payment for the materials was as good as
cash.Because of appellants representation, Gaw accepted appellants Security Bank and Trust
Company (SBTC) Check No. 293232 post-dated October 1, 1990, in the amount of
P254,037.00 corresponding to the amount of materials that appellant ordered. Thereafter,
deliveries were made as evidenced by the following invoices[4] issued by private complainant:
INVOICE NO. & DATE........AMOUNT........RECEIVED BY
17442....9-8-90............P76,000.00........Ernie Conwi
15117....9-8-90.... ........15,800.00........Nards A. Gabatin
15307....9-14-90 ........ 7,643.00........N. A. Gabatin
15308....9-14-90............151,554.00........unidentified person
15309....9-14-90 ........ 3,040.00........Nards A. Gabatin
....................P254,037.00
The SBTC check paid by appellant was deposited by private complainant at the Rizal
Commercial and Banking Corporation. But the check was dishonored as it was drawn against
insufficient funds.
Another witness for the prosecution, Sylvia Gaerlan, testified that she was the current
account bookkeeper of SBTC at Salcedo Village, Makati. She said that she called up appellant
to inform him of the dishonor of said check, but it was only appellants secretary who
answered. The secretary in turn informed appellant of the checks dishonor.
Gaw said he made several verbal demands upon appellant to make good his check.
Gaw claimed that when he went to see appellant and demanded payment from the latter,
appellant said that he had no money. Next, the company sent a letter to appellant demanding
payment of all his checks that bounced which amounted already to P1,657,483.61, including
SBTC Check No. 293232. Even after the written demand, appellant still failed to redeem the
bouncing checks.
Finally, the company filed several criminal cases against appellant because of the
several bouncing checks he had issued. These criminal cases were filed in the different
branches of the Regional Trial Court in Antipolo, Rizal. The present case involves only the
abovecited SBTC check.
Appellant was arrested on February 7, 1991 pursuant to the order of arrest issued by the
trial court. Upon application, appellant was allowed to post bail for his provisional
liberty. Thereafter, on motion of the prosecution, the trial court directed the Commissioner of
Immigration and Deportation to include appellant in its hold order list to prevent appellant from
leaving the country.[5]
On the scheduled date of arraignment on March 13, 1991, appellant failed to appear
and so the trial court ordered his immediate arrest. But in view of the valid reason manifested

by appellant, the trial court recalled the warrant for appellants arrest. Nonetheless, appellant
failed to appear for his arraignment on July 10, 1991. Accordingly, the trial court issued an
alias warrant for appellants arrest and cancelled his bail bond in favor of the government. In
the meantime, the case was archived until the appellant could be apprehended. On August 22,
1992, private complainant informed the trial court that appellant was being detained at the
PNP Criminal Investigation Service field office in Cainta, Rizal in connection with other criminal
cases filed against appellant. Based on said information, the trial court ordered the jail warden
in PNP CIS in Cainta, Rizal to bring the appellant for the arraignment on October 21,
1992. Just the same, appellant failed to appear during said hearing. [6]
Later on, the police reported that appellant escaped from their detention center. On
January 24, 1993, appellant was rearrested and then detained at the Rizal Provincial
Jail.When he was finally arraigned on May 10, 1993, appellant pleaded not guilty to the
charge.[7]
Testifying in his defense, appellant admitted issuing the check in question but
vehemently denied having received the materials he ordered. Thus, he claimed he did not
deposit the corresponding amount to fund the check. He declared that the persons who signed
in the delivery receipts were not his authorized representatives. He also pointed out that all the
invoices for the materials had a stamp marking them as paid for by MBTC (Metropolitan Bank
and Trust Company) checks which were not his. He stated that Ernie Conwi, to whom the
materials were delivered, had his own construction firm not in any way connected with his
business.
Unfortunately, the trial court did not lend credence to the defense put up by appellant
and on the basis of the evidence adduced by the prosecution, held appellant guilty as charged
and sentenced him, as stated, to reclusion perpetua. Appellant seasonably filed his notice of
appeal.[8]
Appellant now asserts before us that the trial court erred:
I
IN FINDING THAT THE POST-DATED CHECK [EXH. F] WAS ISSUED IN PAYMENT OF AN
OBLIGATION OR FOR A CONSIDERATION THAT WAS ACTUALLY DELIVERED TO THE
ACCUSED
II
IN NOT FINDING THAT THE GOODS COVERED BY SALES INVOICES HAD BEEN PAID FOR BY
CHECKS BELONGING TO ANOTHER PERSON AND NOT TO THE ACCUSED-APPELLANT
III
IN HOLDING THAT THE EVIDENCE ADDUCED ESTABLISHES BEYOND REASONABLE DOUBT
THE GUILT OF THE ACCUSED FOR THE CRIME CHARGED

IV
IN CONVICTING THE ACCUSED OF THE CRIME CHARGED. [9]
The main issue is whether or not there is sufficient evidence to support the conviction of
the appellant for estafa beyond reasonable doubt. In resolving this issue, we must inquire
whether all the elements of estafa have been proved. In particular, we must find out if there
was consideration for the issuance of the cited bouncing check.
Appellant contends that the prosecution failed to sufficiently prove that the merchandise
he ordered were delivered to and received by him or his authorized representatives.Thus,
appellant argues, he cannot be held liable for estafa since he was not able to obtain goods
from the private complainant by means of the check he issued.
After a close study of the evidence on record in this case, we are convinced that the trial
court erred in finding that appellants check was issued for consideration. Hence, it also erred
in convicting appellant. We shall now discuss these points in detail.
Article 315 (2)(d) of the Revised Penal Code penalizes any person who shall defraud
another by postdating a check or issuing a check in payment of an obligation when the
offender has no funds in the bank or his funds deposited therein are not sufficient to cover the
amount of check. The elements therefore of this form of estafa are (1) postdating or issuing a
check in payment of an obligation contracted at the time the check was issued; (2) lack or
insufficiency of funds to cover the check; and (3) damage to the payee thereof.Damage and
deceit are essential elements of the offense and must be established with satisfactory proof to
warrant conviction. The false pretense or fraudulent act must be committed prior to or
simultaneously with the issuance of the bad check.[10]
The transaction between the parties here is in the nature of contract of sale whereby
private complainant (seller) obligates itself to deliver construction materials to appellant
(buyer) who, in turn, binds himself to pay therefor a sum of money or its equivalent (price). The
contract of purchase and sale is reciprocal and from it arises not only the obligation to deliver
the thing but also that of paying the price. There is actual delivery when the thing sold is
placed in the control and possession of the buyer or his agent.[11]
In this case, there is no ample proof that appellant or his representatives ever received
the merchandise ordered. On the contrary, witness Gaw himself admitted that the construction
materials were received by Ernie Conwi, Nards Gabatin and an unidentified person, all of
whom were not authorized by appellant. Nor was it shown that these persons turned over the
merchandise to appellant. During his cross-examination, Gaw declared:
ATTY. BELLA RAMONA ANTONANO
Q: Mr. Witness, for how long has the accused been your customer?
A: I cannot recall, mam, for quite 6 months.
Q: So, when he orders from you, who usually receive the goods he orders from you?
A: It is only his caretaker, mam.
Q: Were you ever furnish (sic) the name of the caretaker of Mr. Tan to receive the goods?
A: No, mam.
Q: So, you do not know as to who are these persons that receive for and in behalf of Mr. Tan?
A: No, but Mr. Tan said at his given address he has a person right there to receive those goods.

Q: And that at any rate no name has given to you by Mr. Tan as to who is going to receive the goods to
be delivered?
A: Yes, mam.
Q: So, May I refer to your Exhibit A, your sales invoice marked as Exhibit A there appears to be a name
Ernie Conwi which was also marked as Exhibit A-1 for the prosecution. Now, do you know if this
person is an authorized representative of Mr. Tan?
ATTY. DIAZ III: You honor, I think the best evidence would be the document itself.
ATTY. ANTONANO: Yes, your honor.
ATTY. DIAZ III: What does the document say, counsel?
ATTY. ANTONANO: Received the above goods in good order and condition. My question is do you
know if this person is authorized representative of Mr. Tan to receive goods in his behalf?
COURT: Witness may answer.
A: No, but the address given here as per instruction of Mr. Tan he has the person who will receive
these goods.
Q: But only a person you do not know of who specifically the person who will going to receive this?
A: Yes, mam.
ATTY. ANTONANO:
Q: And also showing to you Exhibits B, C and E there appears also here the name Nards A. Gabatin
for these 3 exhibits, do you know if this person is an authorized representative of Mr. Tan to
receive?
A: No.
Q: And also on Exhibit D there also appears a signature which cannot be determine (sic) who is the
person signing for in this particular receipt. So, you do not know also who is this person who
receive (sic) the goods which you delivered to Mr. Tan?
A: Yes, mam.
Q: Now, Mr. witness, in that particular case is it not the policy of your office also to ascertain whether
the persons who received the items or the goods are authorized representative of your
customer?
A: No, mam.
Q: Despite the substantial amount involved in the receipt, Mr. Witness?
A: Yes, mam.[12]
Furthermore, the records indicate that the materials, although addressed to Hocson
Trading, were delivered to Conwis apartment in Karangalan Village, Cainta, Rizal. [13] This
contravenes the standing arrangement between the parties. As a matter of practice, the
merchandise should have been sent to appellants warehouse or the construction site
designated by appellant. This fact lends credence to appellants assertion that he did not
receive the materials he ordered.
Another factor which bolsters appellants defense is the fact that the invoices showed the
materials were paid for by checks not belonging to appellant. Note that appellant was charged
here of estafa for obtaining merchandise from the offended party by means of the SBTC
Check No. 293232 he issued. But, as appellant pointed out, Sales Invoices Nos. 17442 and
15117 bear the stamp PAID and the handwritten notation reading MB
TC 062382 9/19 while Sales Invoices Nos. 15307, 15308 and 15309 contain a similar
stamp PAID and a notation MBTC 062392 9/27. Appellant stated that he does not have an
account with MBTC, a claim not disputed by the prosecution. Hence, we can reasonably

conclude that the merchandise covered by the aforesaid invoices were paid by MBTC Check
Nos. 062382 and 062392 presumably drawn by another person, but not by appellant. Nor did
they involve SBTC Check No. 293232 that appellant earlier issued though postdated October
1, 1990.
Clearly, one element of estafa is missing in this case: no damage was sustained by
private complainant by reason of appellants issuance of his check. Based on the documentary
and testimonial evidence, it was not proved that appellant received something of value from
private complainant. Appellant had no obligation to pay him, or to make good the SBTC
check. The evidence consisting of the invoices, deliveries of materials and the bouncing
MBTC checks does not and could not incriminate appellant. Consequently, appellant cannot
be held guilty of estafa for lack of evidence against him.
WHEREFORE, appellant MARIO MYRNO TAN is hereby ACQUITTED of the charge
against him. He is ordered immediately RELEASED from confinement unless held for some
other legal cause. No costs.
SO ORDERED.
Polytechnic University of the Philippines vs Court of Appeals and Firestone Ceramics
National Development Corporation vs Firestone Ceramics Inc.
[GR No. 143513 and 143590. November 14, 2001]
Bellosilo, J.:
Facts:
Petitioner National Development Corp., a government owned and controlled corporation, had in its
disposal a 10 hectares property. Sometime in May 1965, private respondent Firestone Corporation
manifested its desire to lease a portion of it for ceramic manufacturing business. On August 24, 1965, both
parties entered into a contract of lease for a term of 10 years renewable for another 10 years. Prior to the
expiration of the aforementioned contract, Firestone wrote NDC requesting for an extension of their lease
agreement. It was renewed with an express grant to Firestone of the first option to purchase the leased
premise in the event that it was decided "to dispose and sell the properties including the lot..."
Cognizant of the impending expiration of the leased agreement, Firestone informed NDC through letters
and calls that it was renewing its lease. No answer was given. Firestone's predicament worsened when it
learned of NDC's supposed plans to dispose the subject property in favor of petitioner Polytechnic
University of the Philippines. PUP referred to Memorandum Order No. 214 issued by then President
Aquino ordering the transfer of the whole NDC compound to the National Government. The order of
conveyance would automatically result in the cancellation of NDC's total obligation in favor of the National
Government.
Firestone instituted an action for specific performance to compel NDC to sell the leased property in its
favor.
Issue:
1. Whether or not there is a valid sale between NDC and PUP.
Ruling
A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to
transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a
sum certain in money or its equivalent. It is therefore a general requisite for the existence of a valid and

enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the
promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the
property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which
effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a
consideration.
All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the
"disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject
matter, and consideration therefor.
Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which explicitly
states the acquiescence of the parties to the sale of the property. Furthermore, the cancellation of NDC's
liabilities in favor of the National Government constituted the "consideration" for the sale.
CARRASCOSO VS COURT OF APPEALS
In March 1972, El Dorado Plantation, Inc. (El Dorado), through its board member Lauro Leviste, executed
a Deed of Sale with Fernando Carrascoso, Jr. The subject of the sale was a 1,825 hectare of land. It was
agreed that Carrascoso was to pay P1.8M.; that P290K would be paid by Carrascoso to PNB to settle the
mortgage upon the said land. P210k would be paid directly to Leviste. The balance of P1.3M plus 10%
interest would be paid over the next 3 years at P519k every 25 th of March. Leviste also assured that there
were no tenants hence the land does not fall under the Land Reform Code. Leviste allowed Carrascoso to
mortgage the land which the latter did.
Carrascoso obtained a total of P1.07M as mortgage and he used the same to pay the down payment
agreed upon in the contract. Carrascoso defaulted from his obligation which was supposed to be settled
on March 25, 1975. Leviste then sent him letters to make good his end of the contract otherwise he will be
litigated.
In 1977, Carrascoso executed a Buy and Sell Contract with PLDT. The subject of the sale was the same
land sold to Carrascoso by Leviste but it was only the 1000 sq. m. portion thereof. The land is to be sold at
P3M. Part of the terms and conditions agreed upon was that Carrascoso is to remove all tenants from the
land within one year. He was also being given a 6-month extension in case hell need one. Thereafter,
PLDT will notify Carrascoso if whether or not PLDt will finalize the sale. Eventually, PLDT gained
possession of the land.
Meanwhile, El Dorado filed a civil case against Carrascoso. PLDT intervened averring that it was a buyer
in good faith. The Regional Trial Court (RTC) ruled in favor of Carrascoso. The Court of Appeals (CA)
reversed the RTC ruling.
ISSUE: What is the nature of each contract?
HELD: The contract executed between El Dorado and Carrascoso was a contract of sale. It was
perfected by their meeting of the minds and was consummated by the delivery of the property to
Carrascoso. However, El Dorado has the right to rescind the contract by reason of Carrascosos failure to
perform his obligation.
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of and
deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its
equivalent. The non-payment of the price by the buyer is a resolutory condition which extinguishes the
transaction that for a time existed, and discharges the obligations created thereunder. Such failure to pay
the price in the manner prescribed by the contract of sale entitles the unpaid seller to sue for collection or
to rescind the contract.

On the other hand, the contract between Carrascoso and PLDT is a contract to sell. This is evidenced by
the terms and conditions that they have agreed upon that after fulfillment of Carrascosos obligation PLDT
has to notify Carrascoso of its decision whether or not to finalize the sale.
Side Issue: Carrascoso also averred that there was a breach on El Dorados part when it comes to
warranty. Carrascoso claimed that there were tenants on the land and he spent about P2.9M relocating
them. The SC ruled that Carrascoso merely had a bare claim without additional proof to support it.
Requisites of Express warranty in a Contract of Sale
(1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject
matter of the sale;
(2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and
(3) the buyer purchases the thing relying on such affirmation or promise thereon.

G.R. No. L-11827

July 31, 1961

FERNANDO A. GAITE, plaintiff-appellee,

vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO., INC., SEGUNDINA
VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR and FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance because the claims involved aggregate
more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself or in a representative
capacity, of 11 iron lode mineral claims, known as the Dawahan Group, situated in the municipality of Jose
Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier constituted and appointed
plaintiff-appellee Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any
individual or juridical person for the exploration and development of the mining claims aforementioned on a
royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom. On March 19, 1954,
Gaite in turn executed a general assignment (Record on Appeal, pp. 17-19) conveying the development
and exploitation of said mining claims into the Larap Iron Mines, a single proprietorship owned solely by
and belonging to him, on the same royalty basis provided for in Exhibit "3". Thereafter, Gaite embarked
upon the development and exploitation of the mining claims in question, opening and paving roads within
and outside their boundaries, making other improvements and installing facilities therein for use in the

development of the mines, and in time extracted therefrom what he claim and estimated to be
approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to
exploit and develop the mining claims in question, and Gaite assented thereto subject to certain
conditions. As a result, a document entitled "Revocation of Power of Attorney and Contract" was executed
on December 8, 1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the consideration of
P20,000.00, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or outside said claims, the right to use the
business name "Larap Iron Mines" and its goodwill, and all the records and documents relative to the
mines. In the same document, Gaite transferred to Fonacier all his rights and interests over the "24,000
tons of iron ore, more or less" that the former had already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,000.00 of which was paid upon the signing of the agreement,
and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from and out of
the first letter of credit covering the first shipment of iron ores and of the first amount derived
from the local sale of iron ore made by the Larap Mines & Smelting Co. Inc., its assigns,
administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite a
surety bond, and pursuant to the promise, Fonacier delivered to Gaite a surety bond dated December 8,
1954 with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and its stockholders
George Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties
(Exhibit "A-1"). Gaite testified, however, that when this bond was presented to him by Fonacier together
with the "Revocation of Power of Attorney and Contract", Exhibit "A", on December 8, 1954, he refused to
sign said Exhibit "A" unless another bond under written by a bonding company was put up by defendants
to secure the payment of the P65,000.00 balance of their price of the iron ore in the stockpiles in the
mining claims. Hence, a second bond, also dated December 8, 1954 (Exhibit "B"),was executed by the
same parties to the first bond Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as additional
surety, but it provided that the liability of the surety company would attach only when there had been an
actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less then P65,000.00, and
that, furthermore, the liability of said surety company would automatically expire on December 8, 1955.
Both bonds were attached to the "Revocation of Power of Attorney and Contract", Exhibit "A", and made
integral parts thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two executed and
signed the "Revocation of Power of Attorney and Contract", Exhibit "A", Fonacier entered into a "Contract
of Mining Operation", ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the
right to develop, exploit, and explore the mining claims in question, together with the improvements therein
and the use of the name "Larap Iron Mines" and its good will, in consideration of certain royalties. Fonacier
likewise transferred, in the same document, the complete title to the approximately 24,000 tons of iron ore
which he acquired from Gaite, to the Larap & Smelting Co., in consideration for the signing by the

company and its stockholders of the surety bonds delivered by Fonacier to Gaite (Record on Appeal, pp.
82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far Eastern Surety and
Insurance Company, no sale of the approximately 24,000 tons of iron ore had been made by the Larap
Mines & Smelting Co., Inc., nor had the P65,000.00 balance of the price of said ore been paid to Gaite by
Fonacier and his sureties payment of said amount, on the theory that they had lost right to make use of the
period given them when their bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24"). And when
Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the present complaint against
them in the Court of First Instance of Manila (Civil Case No. 29310) for the payment of the P65,000.00
balance of the price of the ore, consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by
Gaite was subject to a condition that the amount of P65,000.00 would be payable out of the first letter of
credit covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron
ore by the Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the complaint, no sale of the
iron ore had been made, hence the condition had not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable. Defendant Fonacier also contended that only 7,573 tons of
the estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered, and counterclaimed for
more than P200,000.00 damages.

Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and
severally, P65,000.00 with interest at 6% per annum from December 9, 1955 until payment, plus costs.
From this judgment, defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were presented for resolution: a motion to
declare the appellants Larap Mines & Smelting Co., Inc. and George Krakower in contempt, filed by
appellant Fonacier, and two motions to dismiss the appeal as having become academic and a motion for
new trial and/or to take judicial notice of certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation therein that the appellants Larap Mines & Smelting
Co., Inc. and Krakower had sold the iron ore here in question, which allegedly is "property in litigation", has
not been substantiated; and even if true, does not make these appellants guilty of contempt, because what
is under litigation in this appeal is appellee Gaite's right to the payment of the balance of the price of the
ore, and not the iron ore itself. As for the several motions presented by appellee Gaite, it is unnecessary to
resolve these motions in view of the results that we have reached in this case, which we shall hereafter
discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite the
P65,000.00 (balance of the price of the iron ore in question)is one with a period or term and not one with a
suspensive condition, and that the term expired on December 8, 1955; and

At the trial of the case, the parties agreed to limit the presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00 become due and
demandable when the defendants failed to renew the surety bond underwritten by the Far Eastern Surety
and Insurance Co., Inc. (Exhibit "B"), which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were
actually in existence in the mining claims when these parties executed the "Revocation of Power of
Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to pay plaintiff the
P65,000.00 balance of the price of the approximately 24,000 tons of iron ore was one with a term: i.e., that
it would be paid upon the sale of sufficient iron ore by defendants, such sale to be effected within one year
or before December 8, 1955; that the giving of security was a condition precedent to Gait's giving of credit
to defendants; and that as the latter failed to put up a good and sufficient security in lieu of the Far Eastern
Surety bond (Exhibit "B") which expired on December 8, 1955, the obligation became due and
demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have approximately 24,000 tons of
iron ore at the mining claims in question at the time of the execution of the contract Exhibit "A."

(2) that the lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of iron ore
sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his rights
and interests over the 24,000 tons of iron ore, more or less, above-referred to together with all
his rights and interests to operate the mine in consideration of the sum of SEVENTY-FIVE
THOUSAND PESOS (P75,000.00) which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from and out of the
first letter of credit covering the first shipment of iron ore made by the Larap Mines & Smelting
Co., Inc., its assigns, administrators, or successors in interest.
We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is not
a condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or

obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and
uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed. That the parties to the contract Exhibit "A" did not intend any such
state of things to prevail is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of
Sixty-Five Thousand Pesos (P65,000.00) will be paid out of the first letter of credit covering the first
shipment of iron ores . . ." etc. There is no uncertainty that the payment will have to be made sooner or
later; what is undetermined is merely the exact date at which it will be made. By the very terms of the
contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is
deferred.
2) A contract of sale is normally commutative and onerous: not only does each one of the parties assume a
correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the
price),but each party anticipates performance by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands
that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent
character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite
desired or assumed to run the risk of losing his right over the ore without getting paid for it, or that Fonacier
understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to
guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines & Smelting
Co., and the company's stockholders, but also on one by a surety company; and the fact that appellants
did put up such bonds indicates that they admitted the definite existence of their obligation to pay the
balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or shipment of the ore as a
condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the
sale or shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus
be able to postpone payment indefinitely. The desireability of avoiding such a construction of the contract
Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the parties indented a
suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules
of interpretation would incline the scales in favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of
interests.

and there can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be
actually existing, with only its maturity (due date) postponed or deferred, that if such obligation were
viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not
an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that
the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of
the agreed price, but was intended merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his sureties, still have the
right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment; or, in
other words, whether or not they are entitled to take full advantage of the period granted them for making
the payment.
We agree with the court below that the appellant have forfeited the right court below that the appellants
have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the
balance of P65,000.00, because of their failure to renew the bond of the Far Eastern Surety Company or
else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking on
December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid
P65,000.00, a security that Gaite considered essential and upon which he had insisted when he executed
the deed of sale of the ore to Fonacier (Exhibit "A"). The case squarely comes under paragraphs 2 and 3
of Article 1198 of the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has promised.
(3) When by his own acts he has impaired said guaranties or securities after their establishment,
and when through fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the
securities given to the creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full
knowledge that on its face it would automatically expire within one year was a waiver of its renewal after
the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to
gain barely; and if there was any, it could be rationally explained only if the appellants had agreed to sell
the ore and pay Gaite before the surety company's bond expired on December 8, 1955. But in the latter

case the defendants-appellants' obligation to pay became absolute after one year from the transfer of the
ore to Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding
payment and instituting this action one year from and after the contract (Exhibit "A") was executed, either
because the appellant debtors had impaired the securities originally given and thereby forfeited any further
time within which to pay; or because the term of payment was originally of no more than one year, and the
balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really 24,000 tons of iron ore
in the stockpiles sold by appellee Gaite to appellant Fonacier, and whether, if there had been a shortdelivery as claimed by appellants, they are entitled to the payment of damages, we must, at the outset,
stress two things:first, that this is a case of a sale of a specific mass of fungible goods for a single price or
a lump sum, the quantity of "24,000 tons of iron ore, more or less," stated in the contract Exhibit "A," being
a mere estimate by the parties of the total tonnage weight of the mass; and second, that the evidence
shows that neither of the parties had actually measured of weighed the mass, so that they both tried to
arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then
multiplying it by the estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore because no provision was made in
their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor
was the price of P75,000,00 agreed upon by the parties based upon any such measurement.(see Art.
1480, second par., New Civil Code). The subject matter of the sale is, therefore, a determinate object, the
mass, and not the actual number of units or tons contained therein, so that all that was required of the
seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwithstanding that
the quantity delivered is less than the amount estimated by them (Mobile Machinery & Supply Co., Inc. vs.
York Oilfield Salvage Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil Code). There is no
charge in this case that Gaite did not deliver to appellants all the ore found in the stockpiles in the mining
claims in questions; Gaite had, therefore, complied with his promise to deliver, and appellants in turn are
bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy, not a definite mass, but
approximately 24,000 tons of ore, so that any substantial difference in this quantity delivered would entitle
the buyers to recover damages for the short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or weighed the whole mass
of ore cubic meter by cubic meter, or ton by ton. Both parties predicate their respective claims only upon
an estimated number of cubic meters of ore multiplied by the average tonnage factor per cubic meter.

Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the stockpiles of ore that he
sold to Fonacier, while appellants contend that by actual measurement, their witness Cirpriano Manlagit
found the total volume of ore in the stockpiles to be only 6.609 cubic meters. As to the average weight in
tons per cubic meter, the parties are again in disagreement, with appellants claiming the correct tonnage
factor to be 2.18 tons to a cubic meter, while appellee Gaite claims that the correct tonnage factor is about
3.7.
In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor of iron
ore in this case to be that made by Leopoldo F. Abad, chief of the Mines and Metallurgical Division of the
Bureau of Mines, a government pensionado to the States and a mining engineering graduate of the
Universities of Nevada and California, with almost 22 years of experience in the Bureau of Mines. This
witness placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to
5 metric tons as maximum. This estimate, in turn, closely corresponds to the average tonnage factor of 3.3
adopted in his corrected report (Exhibits "FF" and FF-1") by engineer Nemesio Gamatero, who was sent
by the Bureau of Mines to the mining claims involved at the request of appellant Krakower, precisely to
make an official estimate of the amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles made by appellant's
witness Cipriano Manlagit is correct, if we multiply it by the average tonnage factor of 3.3 tons to a cubic
meter, the product is 21,809.7 tons, which is not very far from the estimate of 24,000 tons made by
appellee Gaite, considering that actual weighing of each unit of the mass was practically impossible, so
that a reasonable percentage of error should be allowed anyone making an estimate of the exact quantity
in tons found in the mass. It must not be forgotten that the contract Exhibit "A" expressly stated the amount
to be 24,000 tons, more or less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would entitle appellants to the payment of
damages, nor could Gaite have been guilty of any fraud in making any misrepresentation to appellants as
to the total quantity of ore in the stockpiles of the mining claims in question, as charged by appellants,
since Gaite's estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we hereby affirm the same, with costs
against appellants.