ERNESTO FRANCISCO, JR. vs.
OMBUDSMAN and not administrative in nature, however, the conclusion in
ANIANO A. DESIERTO
G.R. No. 154117 October 2,
2009
FACTS:
The petitioner (Ernesto Francisco Jr.) filed
criminal cases (graft and plunder) against the respondents
former President Estrada and others with the Office of the
Ombudsman. The Office of the Ombudsman dismissed the
case for lack of evidence. The petitioner then filed a motion
for reconsideration which was likewise denied. The case
was raised to the Supreme Court for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure base on
the ground that the Office of the Ombudsman committed
serious errors of law amounting to lack or excess of
jurisdiction in not finding respondents as guilty of
committing plunder or/are graft, and in denying the motion
for reconsideration filed by the petitioner with the
respondent.
ISSUES:
1. Whether or not public respondent Office of the
Ombudsman committed serious errors of law as
well as grave abuse of discretion amounting to
excess or lack of jurisdiction in issuing the
questioned Resolution and Order
2. Whether or not the petition should be dismissed
for using the wrong mode of appeal
Ruling:
1. No
Grave abuse of discretion has been defined as "such
capricious and whimsical exercise of judgment tantamount
to lack of jurisdiction." The abuse of discretion must be "so
patent and gross as to amount to an evasion of a positive
duty or a virtual refusal to perform a duty enjoined by law,
or to act at all in contemplation of law, as where the power
is exercised in an arbitrary and despotic manner by reason
of passion or hostility." We do not find this situation to be
present in the instant case so as to merit a reversal of the
questioned Resolution and Order issued by respondent
Office of the Ombudsman.
2. No
Although we agree with private respondents Velarde that a
petition for review on certiorari under Rule 45 is not the
proper remedy for parties seeking relief from final
judgments, orders, or resolutions of quasi-judicial bodies or
agencies like the Office of the Ombudsman, as has been
repeatedly held by this Court, we find that the remedy of
appeal under Rule 43 posited by private respondents
Velarde is not proper either. This Court subsequently held
that under the ruling in Fabian, "all appeals from decisions
of the Ombudsman in administrative disciplinary cases may
be taken to the Court of Appeals under Rule 43 of the 1997
Rules of Civil Procedure." Said remedy, therefore, is not
applicable to cases involving criminal or non-
administrative charges filed before the Office of the
Ombudsman, which is the situation in the case before us
now. As we further stated in Tirol v. Del Rosario:
[An] aggrieved party is not without recourse where the
finding of the Ombudsman as to the existence of probable
cause is tainted with grave abuse of discretion, amounting
to lack or excess of jurisdiction. An aggrieved party may
file a petition for certiorari under Rule 65 of the 1997 Rules
of Civil Procedure.
In Fabian v. Desierto, the case was dismissed and
remanded to the Court of Appeals. This case being criminal
Fabian is not applicable.
Thus, due to the nature of this case and the allegations
involving grave abuse of discretion committed by the
Office of the Ombudsman, it should have been filed
under Rule 65, and not Rule 45, of the 1997 Rules of
Civil Procedure.
This Court had already provided this remedy in Nava v.
Commission on Audit, wherein we held:
The remedy availed of by petitioner is erroneous. Instead of
a petition for certiorari under Rule 65 of the Rules of Court,
petitioner filed with this Court the present petition for
review on certiorari under Rule 45 of the Rules of Court
pursuant to the provisions of Section 27 of Republic Act
No. 6770.
Rule 45 of the Rules of Court provides that only judgments
or final orders or resolutions of the Court of Appeals,
Sandiganbayan, the Regional Trial Court and other courts,
whenever authorized by law, may be the subject of an
appeal by certiorari to this Court. It does not include
resolutions of the Ombudsman on preliminary
investigations in criminal cases. Petitioner's reliance on
Section 27 of R.A. No. 6770 is misplaced. Section 27 is
involved only whenever an appeal by certiorari under Rule
45 is taken from a decision in an administrative disciplinary
action. It cannot be taken into account where an original
action for certiorari under Rule 65 is resorted to as a
remedy for judicial review, such as from an incident in a
criminal action. In other words, the right to appeal is not
granted to parties aggrieved by orders and decisions of the
Ombudsman in criminal cases, like the case at bar. Such
right is granted only from orders or decisions of the
Ombudsman in administrative cases.
An aggrieved party is not left without any recourse. Where
the findings of the Ombudsman as to the existence of
probable cause is tainted with grave abuse of discretion
amounting to lack or excess of jurisdiction, the aggrieved
party may file a petition for certiorari under Rule 65 of the
Rules of Court.
CONTRACT OF ADHESION
2. SERRA vs. COURT OF APPEALS
G.R. No. 103338, January 4, 1994, J.
FACTS: Petitioner Federico Serra, owner of a lot, and
private respondent Rizal Commercial Banking Corporation
(RCBC) entered into a "Contract of Lease with Option to
Buy" in May 25, 1975 which provided that Serra will lease
the subject land to RCBC for a period of 25 years from
June 1, 1975 to June 1, 2000, that the RCBC has the option
to purchase the same at P210.00 per square meter within a
period of 10 years from May 25, 1975, the date of the
signing of the Contract, and that Serra will have to register
said land under the Torrens System to the Register of
Deeds of Province of Masbate within the same 10- year
option period.
Pursuant to said contract, RCBC constructed improvements
on the subject land to house its branch office, while the
petitioner had the property, within 3 years from 1975, duly
registered with OCT No. 0-232 under the Torrens System.
RCBC informed petitioner of its intention to buy the
property but petitioner replied that he is no longer selling
the property. RCBC then filed an action for specific
performance and damages against Serra in March 1985
alleging that during the negotiations it made clear to
petitioner that it intends to stay permanently on property
once its branch office is opened unless the exigencies of the
business requires otherwise. Although finding that the
contract was valid, the lower court ruled that the option to
buy is unenforceable because it lacked a consideration
distinct from the price (lower than P210/sqm) and RCBC
did not exercise its option within the reasonable time. Upon
motion for reconsideration, however, the lower court
reversed itself on the 2nd issue, declared the contract as
valid, and ordered Serra to deliver the proper deed of sale
to RCBC.

The Court of Appeals likewise affirmed said
decision. The Supreme Court affirmed the appellate
courts decision.
ISSUE: Whether or not there was a valid contract of lease
with option to buy between the parties.
Was there a consideration distinct from the price to support
the option given to RCBC?
HELD: Yes. The contract of "LEASE
WITH OPTION TO BUY" between petitioner and
respondent bank is valid, effective and enforceable; the
price being certain and that there was consideration distinct
from the price to support the option given to the lessee.
Accordingly, a contract of adhesion is one wherein a party,
usually a corporation, prepares the stipulations in the
contract, while the other party merely affixes his signature
or his "adhesion" thereto. These types of contracts are as
binding as ordinary contracts because in reality, the party
who adheres to the contract is free to reject
it entirely.
In the case at bar, the Supreme Court did not find the
situation to be inequitable because petitioner is a
highly educated man, who, at the time of the trial was
already a CPA-Lawyer. It is evident that a man of his
stature should have been more cautious in transactions he
enters into, particularly where it concerns valuable
properties. Also, in the present case, the consideration is
even more heavy on the
part of the lessee since it entails transferring of the
building and/or improvements on the property to petitioner,
should respondent bank fail to exercise its option within the
period stipulated.
SPS BUENAVENTURA vs. COURT OF
APPEALS
G.R. No. 126376, May 20, 2003, J. Carpio
FACTS: Petitioners, seek the declaration of nullity of
certain deeds of sale and certificates of titles executed by
their parents on behalf of their co-defendant children based
on the allegations that
a. no actual valid consideration;
b. under pricing of property;
c. sale do not reflect true intention of party and;
d. deprivation of petitioners legitime.
The case was dismissed by the RTC holding that
under Article 777 of the NCC, 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. There is no legitime to speak
of because the parents (defendant) are still alive. On
appeal, the CA affirmed the decision.
ISSUE: Whether or not appellants has cause of action
against the appellees.
HELD: No. Under the law, any person
is free to dispose their properties, provided that such
dispositions are not made in fraud of creditors. In the
case at bench, as held by the SC in Velarde, et al.
vs. Paez: The plaintiffs are not parties to the alleged
deed of sale and are not principally or subsidiarily
bound thereby; hence, they
National Grains Authority v. IAC [G.R. No. 74470.
March 8, 1989.]
Third Division, Medialdea (J): 4 concur
Facts: National Grains Authority (now National Food
Authority, NFA) is a government agency created under PD
4. One of its incidental functions is the buying of palay
grains from qualified farmers. On 23 August 1979, Leon
Soriano offered to sell palay grains to the NFA, through the
Provincial Manager (William Cabal) of NFA in
Tuguegarao, Cagayan. He submitted the documents
required by the NFA for pre-qualifying as a seller, which
were processed and accordingly, he was given a quota of
2,640 cavans of palay. The quota noted in the Farmers
Information Sheet represented the maximum number of
cavans of palay that Soriano may sell to the NFA. On 23
and 24 August 1979, Soriano delivered 630 cavans of
palay. The palay delivered were not rebagged, classified
and weighed. When Soriano demanded payment of the 630
cavans of palay, he was informed that its payment will be
held in abeyance since Mr. Cabal was still investigating on
an information he received that Soriano was not a bona fide
farmer and the palay delivered by him was not produced
from his farmland but was taken from the warehouse of a
rice trader, Ben de Guzman. On 28 August 1979, Cabal
wrote Soriano advising him to withdraw from the NFA
warehouse the 630 cavans stating that NFA cannot legally
accept the said delivery on the basis of the subsequent
certification of the BAEX technician (Napoleon Callangan)
that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, Soriano
insisted that the palay grains delivered be paid. He then
filed a complaint for specific performance and/or collection
of money with damages on 2 November 1979, against the
NFA and William Cabal (Civil Case 2754). Meanwhile, by
agreement of the parties and upon order of the trial court,
the 630 cavans of palay in question were withdrawn from
the warehouse of NFA. On 30 September 1982, the trial
court found Soriano a bona fide farmer and rendered
judgment ordering the NFA, its officers and agents to pay
Soriano the amount of P47,250.00 representing the unpaid
price of the 630 cavans of palay plus legal interest thereof
(12% per annum, from the filing of complaint on 20
November 1979 until fully paid). NFA and Cabal filed a
motion for reconsideration, which was denied by the court
on 6 December 1982.
Appeal was filed with the Intermediate Appellate Court. On
23 December 1986, the then IACupheld the findings of the
trial court and affirmed the decision ordering NFA and its
officers to pay Soriano the price of the 630 cavans of rice
plus interest. The motion for reconsideration of the
appellate courts decision was denied in a resolution dated
17 April 1986. Hence, the present petition for review with
the sole issue of whether or not there was a contract of sale
in the present case.
The Supreme Court dismissed the instant petition for
review, and affirmed the assailed decision of the then IAC
(now Court of Appeals) is affirmed; without costs.
1. Sale defined
Article 1458 of the Civil Code of the Philippines defines
sale as a contract whereby one of the contracting parties
obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other party to pay therefore a
price certain in money or its equivalent.
2. Contract defined; requisites
A contract, on the other hand, is a meeting of minds
between two (2) persons whereby one binds himself, with
respect to the other, to give something or to render some
service (Art. 1305, Civil Code of the Philippines). The
essential requisites of contracts are: (1) consent of the
contracting parties, (2) object certain which is the subject
matter of the contract, and (3) cause of the obligation which
is established (Art. 1318, Civil Code of the Philippines.)
3. Present case involves a perfected contract of sale
In the present case, Soriano initially offered to sell palay
grains produced in his farmland to NFA. When the latter
accepted the offer by noting in Sorianos Farmers
Information Sheet a quota of 2,640 cavans, there was
already a meeting of the minds between the parties. The
object of the contract, being the palay grains produced in
Sorianos farmland and the NFA was to pay the same
depending upon its quality. The contention that since the
delivery were not rebagged, classified and weighed in
accordance with the palay procurement program of NFA,
there was no acceptance of the offer thus this is a clear
case of policitation or an unaccepted offer to sell, is
untenable.
4. Quantity being indeterminate does not affect
perfection of contract; No need to create new contract
The fact that the exact number of cavans of palay to be
delivered has not been determined does not affect the
perfection of the contract. Article 1349 of the New Civil
Code provides that the fact that the quantity is not
determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same,
without the need of a new contract between the parties. In
the present case, there was no need for NFA and Soriano to
enter into a new contract to determine the exact number of
cavans of palay to be sold. Soriano can deliver so much of
his produce as long as it does not exceed 2,640 cavans.
5. Sale a consensual contract; Acceptance is on the
offer and not the goods delivered
Sale is a consensual contract, there is perfection when
there is consent upon the subject matter and price, even if
neither is delivered. (Obana vs. C.A., L-36249, March 29,
1985, 135 SCRA 557, 560) Article 1475 of the Civil Code
provides that 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. The
acceptance referred to which determines consent is the
acceptance of the offer of one party by the other and not of
the goods delivered.
6. Compliance of mutual obligations once a contract of
sale is perfected
From the moment the contract of sale is perfected, it is
incumbent upon the parties to comply with their mutual
obligations or the parties may reciprocally demand
performance thereof. (Article 1475, Civil Code, 2nd par.)
Philippine Free Press , Inc. vs Court of Appeals
G.R. No. 132864 | October 24, 2005 | J. Garcia
Background Information:
Petitioner is a domestic corporation engaged in
the publication of Philippine Free Press
Magazine, one of the . . . widely circulated
political magazines in the Philippines during the
60s.
In 1963, Phil Free Press purchased a parcel of
land and constructed a building therein which
later on became the companys main office.
In the 1965 Presidential Elections, Phil Free Press
supported the late President Diosdado Macapagal
against then Senate President Ferdinand Marcos.
Upon the election of Marcos, Phil Free Press
printed numerous articles exposing corruption
and abuses of the Marcos Regime and the plan of
the Marcoses to impose a dictatorship in the guise
of Martial Law.
In September 20, 1972, the soldiers of Marcos
seized control over the main office of Phil Free
Press and padlocked the establishment after
forcing out its employees at gunpoint. Teodoro
Locsin Sr., the President of the company, was
informed that Martial Law had been declared and
that Marcos instructed the soldiers to close the
printing press.
After the printing press was forcibly closed,
Locsin was arrested and was locked up in a
maximum security block at Fort Bonifacio. He
was later on released subject to certain
conditions; the one related to the printing press is
that he was not to publish the Philippine Free
Press.
Since the publication of the Philippine Free Press
ceased, the property remained locked up and
under heavy military guard. The cessation of
publication led to the financial ruin of the
company. The situation was further aggravated
when the employees demanded for the payment
of their separation pays as a result of the closure
of the company. Also, the minority stockholders
demanded that Locsin buy out their shares.
Facts:
1. In early 1973, Locsin was approached several
times by Marcos representatives with offers to
buy the Philippine Free Press, Inc. However,
Locsin declined the offer stating that it was not
for sale.
2. In mid 1973, Locsin was again contacted but this
time, by Brig. General Hans Menzi, concerning
the sale of the PFP, Inc. They held a meeting at
the building of the company and there, Menzi
reiterated the offer to buy the property once
again, asserting that Marcos cannot be denied.
Locsin then made a counteroffer that he will sell
everything but that he will be allowed to keep the
name of PFP, Inc.
3. Menzi contacted Locsin thereafter informing the
latter that Marcos was amenable to the
counteroffer and is offering the purchase price of
P5,750,000.
4. In August 1973, Menzi tendered a check for
P1,000,000 to Locsin for the downpayment of the
sale and the latter accepted the same.
5. In October 1973, Menzi paid the balance of the
purchase price and the parties executed 2
notarized deeds of sale of the property in dispute.
6. Locsin used the proceeds of the sale to pay the
separation pays of the employees and to buy out
the shares of the minority stockholders of the
company.
7. In February 1987, PFP filed a complaint for
Annulment of Sale on the grounds of vitiated
consent and gross inadequacy of the purchase
price.
Issue:
1. Does the gross inadequacy of the purchase price
indicate vitiation of consent to the contract of sale
which would make the sale voidable?
2. Does the utilization of the proceeds
of the sale constitute as implied ratification of the
sale?
Held:
On both counts, no. The Supreme Court dismissed the
petition.
Ratio:
1. Gross inadequacy of the purchase price
does not, as a matter of civil law, per
se affect a contract of sale. Article 1470 of
the Civil Code says so. It reads:
Article 1470. Gross inadequacy
of price does not affect a contract of
sale, except as it may indicate a defect
in the consent, or that the parties really
intended a donation or some other act
or contract.
Following the codal provision, petitioner must first
prove a defect in the consent, failing which its case
for annulment contract of sale on ground gross
inadequacy of price must fall. The categorical conclusion
of the Court of Appeals, confirmatory of that of the trial
court, is that the price paid for the Free Press office
building, and other physical assets is not unreasonable to
justify the nullification of the sale. This factual
determination, predicated as it were on
offered evidence, notably petitioners Balance Sheet as of
November 30, 1972 (Exh. 13), must be accorded great
weight if not finality. (Balance Sheet indicates that the net
book value of the Properties was actually
only P994,723.66.)
2. The Supreme Court reiterated the ruling of the Court
of Appeals:
In the case at bench, Free
Presss own witnesses admitted that the
proceeds of the 1973 sale were used to
settle the claims of its employees,
redeem the shares of its stockholders
and finance the companys entry into
money-market shareholdings and
fishpond business activities (TSN, 2
May 1988, pp. 16, 42-45). It need not
 be overemphasized that by using the
proceeds in this manner, Free Press
only too clearly confirmed the
voluntaries of its consent and ratified
the sale. Needless to state, such
ratification cleanses the assailed
contract from any alleged defects from
the moment it was constituted (Art.
1396, Civil Code).
Ting Ho vs Teng Gui
GR No. 130115 July 16, 2008
Facts:
Felix Ting Ho, Jr., Merla Ting Ho Braden, Juana Ting Ho
and Lydia Ting Ho Belenzo against their brother,
respondent Vicente Teng Gui. The controversy revolves
around a parcel of land, and the improvements which
should form part of the estate of their deceased father, Felix
Ting Ho, and should be partitioned equally among each of
the siblings. Petitioners alleged that their father Felix Ting
Ho died intestate on June 26, 1970, and left upon his death
an estate. According to petitioners, the said lot and
properties were titled and tax declared under trust in the
name of respondent Vicente Teng Gui for the benefit of the
deceased Felix Ting Ho who, being a Chinese citizen, was
then disqualified to own public lands in thePhilippines; and
that upon the death of Felix Ting Ho, the respondent took
possession of the same for his own exclusive use and
benefit to their exclusion and prejudice.
Issue:
Whether or not the sale was void
Ruling:
No, the sale was not void. Article 1471 of the Civil Code
has provided that if the price is simulated, the sale is void,
but the act may be shown to have been in reality a donatin,
or some other act or contract. The sale in this case, was
however valid because the sale was in fact a donation. The
law requires positive proof of the simulation of the price of
the sale. But since the finding was based on a mere
assumption, the price has not been proven to be a
simulation.
G.R. No. 83851. March 3, 1993.
VISAYAN SAWMILL COMPANY, INC., and ANG
TAY, petitioners, vs. THE HONORABLE COURT OF
APPEALS and RJH TRADING, represented by RAMON
J. HIBIONADA, proprietor, respondents.
Saleto J. Erames and Edilberto V. Logronio for petitioners.
Eugenio O. Original for private respondent.
SYLLABUS
1. CIVIL LAW; CONTRACT TO SELL; EFFECT OF
VENDEE'S FAILURE TO COMPLY WITH POSITIVE
SUSPENSIVE CONDITION; CASE AT BAR. The
petitioner corporation's obligation to sell is unequivocally
subject to a positive suspensive condition, i.e., the private
respondent's opening, making or indorsing of an
irrevocable and unconditional letter of credit. The former
agreed to deliver the scrap iron only upon payment of the
purchase price by means of an irrevocable and
unconditional letter of credit. Otherwise stated, the contract
is not one of sale where the buyer acquired ownership over
the property subject to the resolutory condition that the
purchase price would be paid after delivery. Thus, there
was to be no actual sale until the opening, making or
indorsing of the irrevocable and unconditional letter of
credit. Since what obtains in the case at bar is a mere
promise to sell, the failure of the private respondent to
comply with the positive suspensive condition cannot even
be considered a breach casual or serious but simply
an event that prevented the obligation of petitioner
corporation to convey title from acquiring binding force. In
Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc.,
this Court stated: ". . . The upshot of all these stipulations is
that in seeking the ouster of Maritime for failure to pay the
price as agreed upon, Myers was not rescinding (or more
properly, resolving) the contract, but precisely enforcing it
according to its express terms. In its suit Myers was not
seeking restitution to it of the ownership of the thing sold
(since it was never disposed of), such restoration being the
logical consequence of the fulfillment of a resolutory
condition, express or implied (Article 1190); neither was it
seeking a declaration that its obligation to sell was
extinguished. What it sought was a judicial declaration that
because the suspensive condition (full and punctual
payment) had not been fulfilled, its obligation to sell to
Maritime never arose or never became effective and,
therefore, it (Myers) was entitled to repossess the property
object of the contract, possession being a mere incident to
its right of ownership. It is elementary that, as stated by
Castan, -- 'b) Si la condicion suspensiva llega a faltar, la
obligacion se tiene por no existente, y el acreedor pierde
todo derecho, incluso el de utilizar las medidas
conservativas.'(3 Castan, Derecho Civil, 7a Ed., p. 107).
(Also Puig Pea, Der. Civ., T. IV (1), p. 113).'"
2. ID.; ID.; ID.; RESCISSION. The obligation of the
petitioner corporation to sell did not arise; it therefore
cannot be compelled by specific performance to comply
with its prestation. In short, Article 1191 of the Civil Code
does not apply; on the contrary, pursuant to Article 1597 of
the Civil Code, the petitioner corporation may totally
rescind, as it did in this case, the contract. Said Article
provides: "ART. 1597. Where the goods have not been
delivered to the buyer, and the buyer has repudiated the
contract of sale, or has manifested his inability to perform
his obligations, thereunder, or has committed a breach
thereof, the seller may totally rescind the contract of sale by
giving notice of his election so to do to the buyer."
3. ID.; ID.; IN CASE AT BAR, VENDOR'S CONSENT
TO DIGGING UP AND GATHERING OF SCRAP IRON
NOT CONSTRUED AS DELIVERY THEREOF;
REASONS THEREFOR. Paragraph 6 of the Complaint
reads: "6. That on May 17, 1983 Plaintiff with the consent
of defendant Ang Tay sent his men to the stockyard of
Visayan Sawmill Co., Inc. at Cawitan, Sta. Catalina,
Negros Oriental to dig and gather the scrap iron and stock
the same for weighing." This permission or consent can, by
no stretch of the imagination, be construed as delivery of
the scrap iron in the sense that, as held by the public
respondent, citing Article 1497 of the Civil Code,
petitioners placed the private respondent in control and
possession thereof. In the first place, said Article 1497 falls
under the Chapter Obligations of the Vendor, which is
found in Title VI (Sales), Book IV of the Civil Code. As
such, therefore, the obligation imposed therein is premised
on an existing obligation to deliver the subject of the
contract. In the instant case, in view of the private
respondent's failure to comply with the positive suspensive
condition earlier discussed, such an obligation had not yet
arisen. In the second place, it was a mere accommodation
to expedite the weighing and hauling of the iron in the
event that the sale would materialize. The private
respondent was not thereby placed in possession of and
control over the scrap iron. Thirdly, We cannot even
assume the conversion of the initial contract or promise to
sell into a contract of sale by the petitioner corporation's
alleged implied delivery of the scrap iron because its action
and conduct in the premises do not support this conclusion.
Indeed, petitioners demanded the fulfillment of the
suspensive condition and eventually cancelled the contract.
4. ID.; CONTRACTS; DAMAGES; MORAL DAMAGES;
PURPOSE OF AWARD THEREOF; EXEMPLARY
DAMAGES. In contracts, such as in the instant case,
moral damages may be recovered if defendants acted
fraudulently and in bad faith, while exemplary damages
may only be awarded if defendants acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. In
the instant case, the refusal of the petitioners to deliver the
scrap iron was founded on the non-fulfillment by the
private respondent of a suspensive condition. It cannot,
therefore, be said that the herein petitioners had acted
fraudulently and in bad faith or in a wanton, reckless,
oppressive or malevolent manner. What this Court stated in
Inhelder Corp. vs. Court of Appeals needs to be stressed
anew: "At this juncture, it may not be amiss to remind Trial
Courts to guard against the award of exhorbitant (sic)
damages that are way out of proportion to the
environmental circumstances of a case and which, time and
again, this Court has reduced or eliminated. Judicial
discretion granted to the Courts in the assessment of
damages must always be exercised with balanced restraint
and measured objectivity." For, indeed, moral damages are
emphatically not intended to enrich a complainant at the
expense of the defendant. They are awarded only to enable
the injured party to obtain means, diversion or amusements
that will serve to obviate the moral suffering he has
undergone, by reason of the defendant's culpable action. Its
award is aimed at the restoration, within the limits of the
possible, of the spiritual status quo ante, and it must be
proportional to the suffering inflicted.
ROMERO, J., dissenting:
1. CIVIL LAW; CONTRACT OF SALE; DEFINED;
WHEN PERFECTED; CASE AT BAR. Article 1458 of
the Civil Code has this definition: "By a 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." Article 1475 gives the significance of this
mutual undertaking of the parties, thus: "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, when the parties
entered into the contract entitled "Purchase and Sale of
Scrap Iron" on May 1, 1983, the contract reached the stage
of perfection, there being a meeting of the' minds upon the
object which is the subject matter of the contract and the
price which is the consideration. Applying Article 1475 of
the Civil Code, from that moment, the parties may
reciprocally demand performance of the obligations
incumbent upon them, i.e., delivery by the vendor and
payment by the vendee.
2. ID.; ID.; DELIVERY; HOW ACCOMPLISHED; CASE
AT BAR. From the time the seller gave access to the
buyer to enter his premises, manifesting no objection
thereto but even sending 18 or 20 people to start the
operation, he has placed the goods in the control and
possession of the vendee and delivery is effected. For
according to Article 1497, "The thing sold shall be
understood as delivered when it is placed in the control and
possession of the vendee." Such action or real delivery
(traditio) is the act that transfers ownership. Under Article
1496 of the Civil Code, "The ownership of the thing sold is
acquired by the vendee from the moment it is delivered to
him in any of the ways specified in Articles 1497 to 1501,
or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee."
3. ID.; ID.; PROVISION IN CONTRACT REGARDING
MODE OF PAYMENT NOT ESSENTIAL REQUISITE
THEREOF; WHEN PROVISION CONSIDERED A
SUSPENSIVE CONDITION. a provision in the contract
regarding the mode of payment, like the requirement for the
opening of the Letter of Credit in this case, is not among
the essential requirements of a contract of sale enumerated
in Articles 1305 and 1474, the absence of any of which will
prevent the perfection of the contract from happening.
Likewise, it must be emphasized that not every provision
regarding payment should automatically be classified as a
suspensive condition. To do so would change the nature of
most contracts of sale into contracts to sell. For a provision
in the contract regarding the payment of the price to be
considered a suspensive condition, the parties must have
made this clear in certain and unambiguous terms, such as
for instance, by reserving or withholding title to the goods
until full payment by the buyer. This was a pivotal
circumstance in the Luzon Brokerage case where the
contract in question was replete with very explicit
provisions such as the following: "Title to the properties
subject of this contract remains with the Vendor and shall
pass to, and be transferred in the name of the Vendee only
upon complete payment of the full price . . .;" 10 the
Vendor (Myers) will execute and deliver to the Vendee a
definite and absolute Deed of Sale upon full payment of the
Vendee . . .; and "should the Vendee fail to pay any of the
monthly installments, when due, or otherwise fail to
comply with any of the terms and conditions herein
stipulated, then this Deed of Conditional Sale shall
automatically and without any further formality, become
null and void." It is apparent from a careful reading of
Luzon Brokerage, as well as the cases which preceded it
and the subsequent ones applying its doctrines, that the
mere insertion of the price and the mode of payment among
the terms and conditions of the agreement will not
necessarily make it a contract to sell. The phrase in the
contract "on the following terms and conditions" is
standard form which is not to be construed as imposing a
condition, whether suspensive or resolutory, in the sense of
the happening of a future and uncertain event upon which
an obligation is made to depend. There must be a manifest
understanding that the agreement is in what may be
referred to as "suspended animation" pending compliance
with provisions regarding payment. The reservation of title
to the object of the contract in the seller is one such
manifestation. Hence, it has been decided in the case of
Dignos v. Court of Appeals that, absent a proviso in the
contract that the title to the property is reserved in the
vendor until full payment of the purchase price or a
stipulation giving the vendor the right to unilaterally
rescind the contract the moment the vendee fails to pay
within the fixed period, the transaction is an absolute
contract of sale and not a contract to sell.
4. ID.; ID.; CONTRACT OF SALE DISTINGUISHED
FROM CONTRACT TO SELL; EFFECT OF NON-
PAYMENT OF PURCHASE PRICE; EFFECT OF
DELIVERY ON OWNERSHIP OF OBJECT OF
CONTRACT. In a contract of sale, the non-payment of
the price is a resolutory condition which extinguishes the
transaction that, for a time, existed and discharges the
obligations created thereunder. On the other hand, "the
parties may stipulate that ownership in the thing shall not
pass to the purchaser until he has fully paid the price." In
such a contract to sell, the full payment of the price is a
positive suspensive condition, such that in the event of non-
payment, the obligation of the seller to deliver and transfer
ownership never arises. Stated differently, in a contract to
sell, ownership is not transferred upon delivery of property
but upon full payment of the purchase price. Consequently,
in a contract of sale, after delivery of the object of the
contract has been made, the seller loses ownership and
cannot recover the same unless the contract is rescinded.
But in the contract to sell, the seller retains ownership and
the buyer's failure to pay cannot even be considered a
breach, whether casual or substantial, but an event that
prevented the seller's duty to transfer title to the object of
the contract.
5. ID.; ID.; CASE OF SYCIP V. NATIONAL COCONUT
CORPORATION, ET AL., G.R. NO. L-6618, APRIL 28,
1956, DISTINGUISHED FROM CASE AT BAR.
Worthy of mention before concluding is Sycip v. National
Coconut Corporation, et al. since, like this case, it involves
a failure to open on time the Letter of Credit required by
the seller. In Sycip, after the buyer offered to buy 2,000
tons of copra, the seller sent a telegram dated December 19,
1946 to the buyer accepting the offer but on condition that
the latter opens a Letter of Credit within 48 hours. It was
not until December 26, 1946, however, that the Letter of
Credit was opened. The Court, speaking through Justice
Bengzon, held that because of the delay in the opening of
the Letter of Credit; the seller was not obliged to deliver the
goods. Two factors distinguish Sycip from the case at bar.
First, while there has already been a perfected contract of
sale in the instant case, the parties in Sycip were still
undergoing the negotiation process. The seller's qualified
acceptance in Sycip served as a counter offer which
prevented the contract from being perfected. Only an
absolute and unqualified acceptance of a definite offer
manifests the consent necessary to perfect a contract.
Second, the Court found in Sycip that time was of the
essence for the seller who was anxious to sell to other
buyers should the offeror fail to open the Letter of Credit
within the stipulated time. In contrast, there are no indicia
in this case that can lead one to conclude that time was of
the essence for petitioner as would make the eleven-day
delay a fundamental breach of the contract.
6. ID.; OBLIGATIONS AND CONTRACTS;
RESCISSION UNDER ARTICLE 1191 OF THE CIVIL
CODE; WHEN PROPER; DELAY IN PAYMENT FOR
TWENTY DAYS NOT CONSIDERED A
SUBSTANTIAL BREACH OF CONTRACT; CASE AT
BAR. The right to rescind pursuant to Article 1191 is
not absolute. Rescission will not be permitted for slight or
casual breach of the contract. Here, petitioners claim that
the breach is so substantial as to justify rescission . . . I am
not convinced that the circumstances may be characterized
as so substantial and fundamental as to defeat the object of
the parties in making the agreement. None of the alleged
defects in the Letter of Credit would serve to defeat the
object of the parties. It is to be stressed that the purpose of
the opening of a Letter of Credit is to effect payment. The
above-mentioned factors could not have prevented such
payment. It is also significant to note that petitioners sent a
telegram to private respondents on May 23, 1983
cancelling the contract. This was before they had even
received on May 26, 1983 the notice from the bank about
the opening of the Letter of Credit. How could they have
made a judgment on the materiality of the provisions of the
Letter of Credit for purposes of rescinding the contract
even before setting eyes on said document? To be sure, in
the contract, the private respondents were supposed to open
the Letter of Credit on May 15, 1983 but, it was not until
May 26, 1983 or eleven (11) days later that they did so. Is
the eleven-day delay a substantial breach of the contract as
could justify the rescission of the contract? In Song Fo and
Co. v. Hawaiian-Philippine Co., it was held that a delay in
payment for twenty (20) days was not a violation of an
essential condition of the contract which would warrant
rescission for non-performance. In the instant case, the
contract is bereft of any suggestion that time was of the
essence. On the contrary, it is noted that petitioners allowed
private respondents' men to dig and remove the scrap iron
located in petitioners' premises between May 17, 1983 until
May 30, 1983 or beyond the May 15, 1983 deadline for the
opening of the Letter of Credit. Hence, in the absence of
any indication that the time was of the essence, the eleven-
day delay must be deemed a casual breach which cannot
justify a rescission.
DECISION
DAVIDE, JR., J p:
By this petition for review under Rule 45 of the Rules of
Court, petitioners urge this Court to set aside the decision
of public respondent Court of Appeals in C.A.-G.R. CV
No. 08807, 1 promulgated on 16 March 1988, which
affirmed with modification, in respect to the moral
damages, the decision of the Regional Trial Court (RTC) of
Iloilo in Civil Case No. 15128, an action for specific
performance and damages, filed by the herein private
respondent against the petitioners. The dispositive portion
of the trial court's decision reads as follows:
"IN VIEW OF THE ABOVE FINDINGS, judgment is
hereby rendered in favor of plaintiff and against the
defendants ordering the latter to pay jointly and severally
plaintiff, to wit:
1) The sum of Thirty-Four Thousand Five Hundred Eighty
Three and 16/100 (P34,583.16), as actual damages;
2) The sum of One Hundred Thousand (P100,000.00)
Pesos, as moral damages;
3) The sum of Ten Thousand (P10,000.00) Pesos, as
exemplary damages;
4) The sum of TWENTY Five Thousand (P25,000.00)
Pesos, as attorney's fees; and
5) The sum of Five Thousand (P5,000.00) Pesos as actual
litis expenses." 2
The public respondent reduced the amount of moral
damages to P25,000.00.
The antecedent facts, summarized by the public respondent,
are as follows:
"On May 1, 1983, herein plaintiff-appellee and defendants-
appellants entered into a sale involving scrap iron located at
the stockyard of defendant-appellant corporation at
Cawitan, Sta. Catalina, Negros Oriental, subject to the
condition that plaintiff-appellee will open a letter of credit
in the amount of P250,000.00 in favor of defendant-
appellant corporation on or before May 15, 1983. This is
evidenced by a contract entitled `Purchase and Sale of
Scrap Iron' duly signed by both parties.
On May 17, 1983, plaintiff-appellee through his man (sic),
started to dig and gather and (sic) scrap iron at the
defendant-appellant's (sic) premises, proceeding with such
endeavor until May 30 when defendants-appellants
allegedly directed plaintiff-appellee's men to desist from
pursuing the work in view of an alleged case filed against
plaintiff-appellee by a certain Alberto Pursuelo. This,
however, is denied by defendants-appellants who allege
that on May 23, 1983, they sent a telegram to plaintiff-
appellee cancelling the contract of sale because of failure of
the latter to comply with the conditions thereof.
On May 24, 1983, plaintiff-appellee informed defendants-
appellants by telegram that the letter of credit was opened
May 12, 1983 at the Bank of the Philippine Islands main
office in Ayala, but then (sic) the transmittal was delayed.
On May 26, 1983, defendants-appellants received a letter
advice from the Dumaguete City Branch of the Bank of the
Philippine Islands dated May 26, 1983, the content of
which is quited (sic) as follows:
'Please be advised that we have received today cable advise
from our Head Office which reads as follows:
'Open today our irrevocable Domestic Letter of Credit No.
01456-d fot (sic) P250,000.00 favor ANG TAY c/o
Visayan Sawmill Co., Inc. Dumaguete City, Negros
Oriental Account of ARMACO-MARSTEEL ALLOY
CORPORATION 2nd Floor Alpap 1 Bldg., 140 Alfaro stp
(sic) Salcedo Village, Makati, Metro Manila Shipments of
about 500 MT of assorted steel scrap marine/heavy
equipment expiring on July 24, 1983 without recourse at
sight draft drawn on Armaco Marsteel Alloy Corporation
accompanied by the following documents: Certificate of
Acceptance by Armaco-Marsteel Alloy Corporation
shipment from Dumaguete City to buyer's warehouse
partial shipment allowed/transhipment (sic) not allowed'.
For your information'.
On July 19, 1983, plaintiff-appellee sent a series of
telegrams stating that the case filed against him by Pursuelo
had been dismissed and demanding that defendants-
appellants comply with the deed of sale, otherwise a case
will be filed against them.
In reply to those telegrams, defendants-appellants' lawyer,
on July 20, 1983 informed plaintiff-appellee's lawyer that
defendant-appellant corporation is unwilling to continue
with the sale due to plaintiff-appellee's failure to comply
with essential pre-conditions of the contract.
On July 29, 1983, plaintiff-appellee filed the complaint
below with a petition for preliminary attachment. The writ
of attachment was returned unserved because the
defendant-appellant corporation was no longer in operation
and also because the scrap iron as well as other pieces of
machinery can no longer be found on the premises of the
corporation." 3
In his complaint, private respondent prayed for judgment
ordering the petitioner corporation to comply with the
contract by delivering to him the scrap iron subject thereof;
he further sought an award of actual, moral and exemplary
damages, attorney's fees and the costs of the suit. 4
In their Answer with Counterclaim, 5 petitioners insisted
that the cancellation of the contract was justified because of
private respondent's non-compliance with essential pre-
conditions, among which is the opening of an irrevocable
and unconditional letter of credit not later than 15 May
1983.
During the pre-trial of the case on 30 April 1984, the
parties defined the issues to be resolved; these issues were
subsequently embodied in the pre-trial order, to wit:
"1. Was the contract entitled Purchase and Sale of Scrap
Iron, dated May 1, 1983 executed by the parties cancelled
and terminated before the Complaint was filed by anyone
of the parties; if so, what are the grounds and reasons relied
upon by the cancelling parties; and were the reasons or
grounds for cancelling valid and justified?
2. Are the parties entitled to damages they respectively
claim under the pleadings?" 6
On 29 November 1985, the trial court rendered its
judgment, the dispositive portion of which was quoted
earlier.
Petitioners appealed from said decision to the Court of
Appeals which docketed the same as C.A.-G.R. CV No.
08807. In their Brief, petitioners, by way of assigned errors,
alleged that the trial court erred:
"1. In finding that there was delivery of the scrap iron
subject of the sale;
2. In not finding that plaintiff had not complied with the
conditions in the contract of sale;
3. In finding that defendants-appellants were not justified in
cancelling the sale;
4. In awarding damages to the plaintiff as against the
defendants-appellants;
5. In not awarding damages to defendants-appellants." 7
Public respondent disposed of these assigned errors in this
wise:
"On the first error assigned, defendants-appellants argue
that there was no delivery because the purchase document
states that the seller agreed to sell and the buyer agreed to
buy 'an undetermined quantity of scrap iron and junk which
the seller will identify and designate.' Thus, it is contended,
since no identification and designation was made, there
could be no delivery. In addition, defendants-appellants
maintain that their obligation to deliver cannot be
completed until they furnish the cargo trucks to haul the
weighed materials to the wharf.
The arguments are untenable. Article 1497 of the Civil
Code states:
'The thing sold shall be understood as delivered when it is
placed in the control and possession of the vendee.'
In the case at bar, control and possession over the subject
matter of the contract was given to plaintiff-appellee, the
buyer, when the defendants-appellants as the sellers
allowed the buyer and his men to enter the corporation's
premises and to dig-up the scrap iron. The pieces of scrap
iron then (sic) placed at the disposal of the buyer. Delivery
was therefore complete. The identification and designation
by the seller does not complete delivery.
On the second and third assignments of error, defendants-
appellants argue that under Articles 1593 and 1597 of the
Civil Code, automatic rescission may take place by a mere
notice to the buyer if the latter committed a breach of the
contract of sale.
Even if one were to grant that there was a breach of the
contract by the buyer, automatic rescission cannot take
place because, as already (sic) stated, delivery had already
been made. And, in cases where there has already been
delivery, the intervention of the court is necessary to annul
the contract.
As the lower court aptly stated:
'Respecting these allegations of the contending parties,
while it is true that Article 1593 of the New Civil Code
provides that with respect to movable property, the
rescission of the sale shall of right take place in the interest
of the vendor, if the vendee fails to tender the price at the
time or period fixed or agreed, however, automatic
rescission is not allowed if the object sold has been
delivered to the buyer (Guevarra vs. Pascual, 13 Phil. 311;
Escueta vs. Pando, 76 Phil 256), the action being one to
rescind judicially and where (sic) Article 1191, supra,
thereby applies. There being already an implied delivery of
the items, subject matter of the contract between the parties
in this case, the defendant having surrendered the premises
where the scraps (sic) were found for plaintiff's men to dig
and gather, as in fact they had dug and gathered, this Court
finds the mere notice of resolution by the defendants
untenable and not conclusive on the rights of the plaintiff
(Ocejo Perez vs. Int. Bank, 37 Phi. 631). Likewise, as early
as in the case of Song Fo vs. Hawaiian Philippine
Company, it has been ruled that rescission cannot be
sanctioned for a slight or casual breach (47 Phil. 821).'
In the case of Angeles vs. Calasanz (135 (1935) SCRA
323), the Supreme Court ruled:
'Article 1191 is explicit. In reciprocal obligations, either
party has the right to rescind the contract upon failure of
the other to perform the obligation assumed thereunder.
Of course, it must be understood that the right of a party in
treating a contract as cancelled or resolved on account of
infractions by the other contracting party must be made
known to the other and is always provisional, being ever
subject to scrutiny and review by the proper court.'
Thus, rescission in cases falling under Article 1191 of the
Civil Code is always subject to review by the courts and
cannot be considered final.
In the case at bar, the trial court ruled that rescission is
improper because the breach was very slight and the delay
in opening the letter of credit was only 11 days.
'Where time is not of the essence of the agreement, a slight
delay by one party in the performance of his obligation is
not a sufficient ground for rescission of the agreement.
Equity and justice mandates (sic) that the vendor be given
additional (sic) period to complete payment of the purchase
price.' (Taguda vs. Vda. de Leon, 132 SCRA (1984), 722).'
There is no need to discuss the fourth and fifth assigned
errors since these are merely corollary to the first three
assigned errors." 8
Their motion to reconsider the said decision having been
denied by public respondent in its Resolution of 4 May
1988, 9 petitioners filed this petition reiterating the
abovementioned assignment of errors.
There is merit in the instant petition.
Both the trial court and the public respondent erred in the
appreciation of the nature of the transaction between the
petitioner corporation and the private respondent. To this
Court's mind, what obtains in the case at bar is a mere
contract to sell or promise to sell, and not a contract of sale.
The trial court assumed that the transaction is a contract of
sale and, influenced by its view that there was an "implied
delivery" of the object of the agreement, concluded that
Article 1593 of the Civil Code was inapplicable; citing
Guevarra vs. Pascual 10 and Escueta vs. Pando, 11 it ruled
that rescission under Article 1191 of the Civil Code could
only be done judicially. The trial court further classified the
breach committed by the private respondent as slight or
casual, foreclosing, thereby, petitioners' right to rescind the
agreement.
Article 1593 of the Civil Code provides:
"ARTICLE 1593. With respect to movable property, the
rescission of the sale shall of right take place in the interest
of the vendor, if the vendee, upon the expiration of the
period fixed for the delivery of the thing, should not have
appeared to receive it, or, having appeared, he should not
have tendered the price at the same time, unless a longer
period has been stipulated for its payment."
Article 1191 provides:
"ARTICLE 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even
after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there
be just cause authorizing the fixing of a period."
xxx xxx xxx
Sustaining the trial court on the issue of delivery, public
respondent cites Article 1497 of the Civil Code which
provides:
"ARTICLE 1497. The thing sold shall be understood as
delivered, when it is placed in the control and possession of
the vendee."
In the agreement in question, entitled PURCHASE AND
SALE OF SCRAP IRON, 12 the seller bound and promised
itself to sell the scrap iron upon the fulfillment by the
private respondent of his obligation to make or indorse an
irrevocable and unconditional letter of credit in payment of
the purchase price. Its principal stipulation reads, to wit:
xxx xxx xxx
"Witnesseth:
That the SELLER agrees to sell, and the BUYER agrees to
buy, an undetermined quantity of scrap iron and junk which
the SELLER will identify and designate now at Cawitan,
Sta. Catalina, Negros Oriental, at the price of FIFTY
CENTAVOS (P0.50) per kilo on the following terms and
conditions:
1. Weighing shall be done in the premises of the SELLER
at Cawitan, Sta. Catalina, Neg. Oriental.
2. To cover payment of the purchase price, BUYER will
open, make or indorse an irrevocable and unconditional
letter of credit not later than May 15, 1983 at the
Consolidated Bank and Trust Company, Dumaguete City,
Branch, in favor of the SELLER in the sum of TWO
HUNDRED AND FIFTY THOUSAND PESOS
(P250,000.00), Philippine Currency.
3. The SELLER will furnish the BUYER free of charge at
least three (3) cargo trucks with drivers, to haul the
weighed materials from Cawitan to the TSMC wharf at Sta.
Catalina for loading on BUYER's barge. All expenses for
labor, loading and unloading shall be for the account of the
BUYER.
4. SELLER shall be entitled to a deduction of three percent
(3%) per ton as rust allowance." (Emphasis supplied).
The petitioner corporation's obligation to sell is
unequivocally subject to a positive suspensive condition,
i.e., the private respondent's opening, making or indorsing
of an irrevocable and unconditional letter of credit. The
former agreed to deliver the scrap iron only upon payment
of the purchase price by means of an irrevocable and
unconditional letter of credit. Otherwise stated, the contract
is not one of sale where the buyer acquired ownership over
the property subject to the resolutory condition that the
purchase price would be paid after delivery. Thus, there
was to be no actual sale until the opening, making or
indorsing of the irrevocable and unconditional letter of
credit. Since what obtains in the case at bar is a mere
promise to sell, the failure of the private respondent to
comply with the positive suspensive condition cannot even
be considered a breach casual or serious but simply
an event that prevented the obligation of petitioner
corporation to convey title from acquiring binding force. In
Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc.,
13 this Court stated:
" . . . The upshot of all these stipulations is that in seeking
the ouster of Maritime for failure to pay the price as agreed
upon, Myers was not rescinding (or more properly,
resolving) the contract, but precisely enforcing it according
to its express terms. In its suit Myers was not seeking
restitution to it of the ownership of the thing sold (since it
was never disposed of), such restoration being the logical
consequence of the fulfillment of a resolutory condition,
express or implied (article 1190); neither was it seeking a
declaration that its obligation to sell was extinguished.
What it sought was a judicial declaration that because the
suspensive condition (full and punctual payment) had not
been fulfilled, its obligation to sell to Maritime never arose
or never became effective and, therefore, it (Myers) was
entitled to repossess the property object of the contract,
possession being a mere incident to its right of ownership.
It is elementary that, as stated by Castan,
'b) Si la condicion suspensiva llega a faltar, la obligacion se
tiene por no existente, y el acreedor pierde todo derecho,
incluso el de utilizar las medidas conservativas.' (3 Cast n,
Derecho Civil, 7a Ed., p. 107). (Also Puig Pea, Der. Civ.,
T. IV (1), p. 113)'."
In the instant case, not only did the private respondent fail
to open, make or indorse an irrevocable and unconditional
letter of credit on or before 15 May 1983 despite his earlier
representation in his 24 May 1983 telegram that he had
opened one on 12 May 1983, the letter of advice received
by the petitioner corporation on 26 May 1983 from the
Bank of the Philippine Islands Dumaguete City branch
explicitly makes reference to the opening on that date of a
letter of credit in favor of petitioner Ang Tay c/o Visayan
Sawmill Co. Inc., drawn without recourse on ARMACO-
MARSTEEL ALLOY CORPORATION and set to expire
on 24 July 1983, which is indisputably not in accordance
with the stipulation in the contract signed by the parties on
at least three (3) counts: (1) it was not opened, made or
indorsed by the private respondent, but by a corporation
which is not a party to the contract; (2) it was not opened
with the bank agreed upon; and (3) it is not irrevocable and
unconditional, for it is without recourse, it is set to expire
on a specific date and it stipulates certain conditions with
respect to shipment. In all probability, private respondent
may have sold the subject scrap iron to ARMACO-
MARSTEEL ALLOY CORPORATION, or otherwise
assigned to it the contract with the petitioners. Private
respondent's complaint fails to disclose the sudden entry
into the picture of this corporation.
Consequently, the obligation of the petitioner corporation
to sell did not arise; it therefore cannot be compelled by
specific performance to comply with its prestation. In short,
Article 1191 of the Civil Code does not apply; on the
contrary, pursuant to Article 1597 of the Civil Code, the
petitioner corporation may totally rescind, as it did in this
case, the contract. Said Article provides:
"ARTICLE 1597. Where the goods have not been delivered
to the buyer, and the buyer has repudiated the contract of
sale, or has manifested his inability to perform his
obligations, thereunder, or has committed a breach thereof,
the seller may totally rescind the contract of sale by giving
notice of his election so to do to the buyer."
The trial court ruled, however, and the public respondent
was in agreement, that there had been an implied delivery
in this case of the subject scrap iron because on 17 May
1983, private respondent's men started digging up and
gathering scrap iron within the petitioner's premises. The
entry of these men was upon the private respondent's
request. Paragraph 6 of the Complaint reads:
"6. That on May 17, 1983 Plaintiff with the consent of
defendant Ang Tay sent his men to the stockyard of
Visayan Sawmill Co., Inc. at Cawitan, Sta. Catalina,
Negros Oriental to dig and gather the scrap iron and stock
the same for weighing." 14
This permission or consent can, by no stretch of the
imagination, be construed as delivery of the scrap iron in
the sense that, as held by the public respondent, citing
Article 1497 of the Civil Code, petitioners placed the
private respondent in control and possession thereof. In the
first place, said Article 1497 falls under the Chapter 15
Obligations of the Vendor, which is found in Title VI
(Sales), Book IV of the Civil Code. As such, therefore, the
obligation imposed therein is premised on an existing
obligation to deliver the subject of the contract. In the
instant case, in view of the private respondent's failure to
comply with the positive suspensive condition earlier
discussed, such an obligation had not yet arisen. In the
second place, it was a mere accommodation to expedite the
weighing and hauling of the iron in the event that the sale
would materialize. The private respondent was not thereby
placed in possession of and control over the scrap iron.
Thirdly, We cannot even assume the conversion of the
initial contract or promise to sell into a contract of sale by
the petitioner corporation's alleged implied delivery of the
scrap iron because its action and conduct in the premises do
not support this conclusion. Indeed, petitioners demanded
the fulfillment of the suspensive condition and eventually
cancelled the contract.
All told, Civil Case No. 15128 filed before the trial court
was nothing more than the private respondent's preemptive
action to beat the petitioners to the draw.
One last point. This Court notes the palpably excessive and
unconscionable moral and exemplary damages awarded by
the trial court to the private respondent despite a clear
absence of any legal and factual basis therefor. In contracts,
such as in the instant case, moral damages may be
recovered if defendants acted fraudulently and in bad faith,
16 while exemplary damages may only be awarded if
defendants acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. 17 In the instant case, the
refusal of the petitioners to deliver the scrap iron was
founded on the non-fulfillment by the private respondent of
a suspensive condition. It cannot, therefore, be said that the
herein petitioners had acted fraudulently and in bad faith or
in a wanton, reckless, oppressive or malevolent manner.
What this Court stated in Inhelder Corp. vs. Court of
Appeals 18 needs to be stressed anew:
"At this juncture, it may not be amiss to remind Trial
Courts to guard against the award of exhorbitant (sic)
damages that are way out of proportion to the
environmental circumstances of a case and which, time and
again, this Court has reduced or eliminated. Judicial
discretion granted to the Courts in the assessment of
damages must always be exercised with balanced restraint
and measured objectivity."
For, indeed, moral damages are emphatically not intended
to enrich a complainant at the expense of the defendant.
They are awarded only to enable the injured party to obtain
means, diversion or amusements that will serve to obviate
the moral suffering he has undergone, by reason of the
defendant's culpable action. Its award is aimed at the
restoration, within the limits of the possible, of the spiritual
status quo ante, and it must be proportional to the suffering
inflicted. 19
WHEREFORE, the instant petition is GRANTED. The
decision of public respondent Court of Appeals in C.A.-
G.R. CV No. 08807 is REVERSED and Civil Case No.
15128 of the Regional Trial Court of Iloilo is ordered
DISMISSED.
Costs against the private respondent.
SO ORDERED.
Narvasa, C .J ., Cruz, Feliciano, Padilla, Bidin and
Bellosillo, JJ ., concur.
Gutierrez, Jr., J ., On terminal leave.
Melo and Quiason, JJ ., No part.
Separate Opinions
ROMERO, J., dissenting:
I vote to dismiss the petition.
Petitioner corporation, Visayan Sawmill Co., Inc., entered
into a contract on May 1, 1983 with private respondent
RJH Trading Co. represented by private respondent Ramon
J. Hibionada. The contract, entitled "PURCHASE AND
SALE OF SCRAP IRON," stated:
This contract for the Purchase and Sale of Scrap Iron, made
and executed at Dumaguete City, Phil., this 1st day of May,
1983 by and between:
VISAYAN SAWMILL CO., INC., . . . hereinafter called
the SELLER, and
RAMON J. HIBIONADA, . . . hereinafter called the
BUYER,
witnesseth:
That the SELLER agrees to sell, and the BUYER agrees to
buy, an undetermined quantity of scrap iron and junk which
the SELLER will identify and designate now at Cawitan,
Sta. Catalina, Negros Oriental, at the price of FIFTY
CENTAVOS (P.50) per kilo on the following terms and
conditions:
1. Weighing shall be done in the premises of the SELLER
at Cawitan, Sta. Catalina, Negros Oriental.
2. To cover payment of the purchase price BUYER will
open, make or indorse an irrevocable and unconditional
letter of credit not later than May 15, 1983 at the
Consolidated Bank and Trust Company, Dumaguete City
Branch, in favor of the SELLER in the sum of TWO
HUNDRED AND FIFTY THOUSAND PESOS
(P250,000.00), Philippine currency.
3. The SELLER will furnish the BUYER free of charge at
least three (3) cargo trucks with drivers, to haul the
weighed materials from Cawitan to the TSMC wharf at Sta.
Catalina for loading on BUYER'S barge. All expenses for
labor, loading and unloading shall be for the account of the
BUYER.
4. SELLER shall be entitled to a deduction of three percent
(3%) per ton as rust allowance.
xxx xxx xxx
On May 17, 1983, the workers of private respondents were
allowed inside petitioner company's premises in order to
gather the scrap iron. However, on May 23, 1983,
petitioner company sent a telegram which stated:
"RAMON HIBIONADA
RJH TRADING
286 QUEZON STREET
ILOILO CITY
DUE YOUR FAILURE TO COMPLY WITH
CONDITIONS BEFORE DEADLINE OUR CONTRACT
FOR PURCHASE SCRAP IRON CANCELLED
VISAYAN SAWMILL CO., INC."
Hibionada wired back on May 24, 1983 the following:
"ANG TAY VISAYAN SAWMILL
DUMAGUETE CITY
LETTER OF CREDIT AMOUNTING P250,000.00
OPENED MAY 12, 1983 BANK OF PI MAIN OFFICE
AYALA AVENUE MAKATI METRO MANILA BUT
TRANSMITTAL IS DELAYED PLEASE CONSIDER
REASON WILL PERSONALLY FOLLOW-UP IN
MANILA THANKS REGARDS.
RAMON HIBIONADA"
On May 26, 1983, petitioner company received the
following advice from the Dumaguete City Branch of The
Bank of Philippine Islands: cdll
"Opened today our Irrevocable Domestic Letter of Credit
2-01456-4 for P250,000.00 in favor ANG TAY c/o Visayan
Sawmill Co., Inc. Dumaguete City Negros Oriental
Account of ARMACO-MARSTEEL ALLOW (sic)
CORPORATION 2nd Floor Alpap 1 Bldg., 140 Alfaro st.
Salcedo Village Makati Metro Manila Shipments of about
500 MT of assorted steel scrap marine/heavy equipment
expiring on July 23, 1983 without recourse at slight draft
drawn on Armaco-Marsteel Alloy Corporation
accompanied by the following documents: Certificate of
acceptance by Armaco-Marsteel Allow (sic) Corporation
shipment from Dumaguete City to buyer's warehouse
partial shipment allowed/transhipment not allowed."
Subsequently, petitioners' counsel sent another telegram to
private respondents stating that:
"VISAYAN SAWMILL COMPANY UNWILLING TO
CONTINUE SALE OF SCRAP IRON TO HIBIONADA
DUE TO NON COMPLIANCE WITH ESSENTIAL PRE
CONDITIONS"
Consequently, private respondents filed a complaint for
specific performance and damages with the Regional Trial
Court (RTC) of Iloilo (Branch XXXV) which decided in
favor of private respondents. The RTC decision having
been affirmed by the Court of Appeals, the present petition
was filed.
Finding the petition meritorious, the ponencia reversed the
decision of the Court of Appeals. Based on its appreciation
of the contract in question, it has arrived at the conclusion
that herein contract is not a contract of sale but a contract to
sell which is subject to a positive suspensive condition, i.e.,
the opening of a letter of credit by private respondents.
Since the condition was not fulfilled, the obligation of
petitioners to convey title did not arise. The lengthy
decision of Luzon Brokerage Co., Inc. v. Maritime Co. Inc.
1 penned by Justice J.B.L. Reyes, was cited as authority on
the assumption that subject contract is indeed a contract to
sell but which will be shown herein as not quite accurate.
Evidently, the distinction between a contract to sell and a
contract of sale is crucial in this case. Article 1458 of the
Civil Code has this definition: "By a 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."
Article 1475 gives the significance of this mutual
undertaking of the parties, thus: "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, when the parties entered into the contract entitled
"Purchase and Sale of Scrap Iron" on May 1, 1983, the
contract reached the stage of perfection, there being a
meeting of the' minds upon the object which is the subject
matter of the contract and the price which is the
consideration. Applying Article 1475 of the Civil Code,
from that moment, the parties may reciprocally demand
performance of the obligations incumbent upon them, i.e.,
delivery by the vendor and payment by the vendee.
Petitioner, in its petition, admits that "[b]efore the opening
of the letter of credit, buyer Ramon Hibionada went to Mr.
Ang Tay and informed him that the letter of credit was
forthcoming and if it was possible for him (buyer) to start
cutting and digging the scrap iron before the letter of credit
arrives and the former (seller) manifested no objection, and
he immediately sent 18 or 20 people to start the operation."
2
From the time the seller gave access to the buyer to enter
his premises, manifesting no objection thereto but even
sending 18 or 20 people to start the operation, he has placed
the goods in the control and possession of the vendee and
delivery is effected. For according to Article 1497, "The
thing sold shall be understood as delivered when it is
placed in the control and possession of the vendee." 3
Such action or real delivery (traditio) is the act that
transfers ownership. Under Article 1496 of the Civil Code,
"The ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred
from the vendor to the vendee."
That payment of the price in any form was not yet effected
is immaterial to the transfer of the right of ownership. In a
contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction
that, for a time, existed and discharges the obligations
created thereunder. 4
On the other hand, "the parties may stipulate that
ownership in the thing shall not pass to the purchaser until
he has fully paid the price." 5 In such a contract to sell, the
full payment of the price is a positive suspensive condition,
such that in the event of non-payment, the obligation of the
seller to deliver and transfer ownership never arises. Stated
differently, in a contract to sell, ownership is not
transferred upon delivery of property but upon full payment
of the purchase price. 6
Consequently, in a contract of sale, after delivery of the
object of the contract has been made, the seller loses
ownership and cannot recover the same unless the contract
is rescinded. But in the contract to sell, the seller retains
ownership and the buyer's failure to pay cannot even be
considered a breach, whether casual or substantial, but an
event that prevented the seller's duty to transfer title to the
object of the contract.
At the outset, it must be borne in mind that a provision in
the contract regarding the mode of payment, like the
requirement for the opening of the Letter of Credit in this
case, is not among the essential requirements of a contract
of sale enumerated in Articles 1305 7 and 1474, 8 the
absence of any of which will prevent the perfection of the
contract from happening. Likewise, it must be emphasized
that not every provision regarding payment should
automatically be classified as a suspensive condition. To do
so would change the nature of most contracts of sale into
contracts to sell. For a provision in the contract regarding
the payment of the price to be considered a suspensive
condition, the parties must have made this clear in certain
and unambiguous terms, such as for instance, by reserving
or withholding title to the goods until full payment by the
buyer. 9 This was a pivotal circumstance in the Luzon
Brokerage case where the contract in question was replete
with very explicit provisions such as the following: "Title
to the properties subject of this contract remains with the
Vendor and shall pass to, and be transferred in the name of
the Vendee only upon complete payment of the full price . .
.;" 10 the Vendor (Myers) will execute and deliver to the
Vendee a definite and absolute Deed of Sale upon full
payment of the Vendee . . .; 11 and "should the Vendee fail
to pay any of the monthly installments, when due, or
otherwise fail to comply with any of the terms and
conditions herein stipulated, then this Deed of Conditional
Sale shall automatically and without any further formality,
become null and void." 12
It is apparent from a careful reading of Luzon Brokerage,
as well as the cases which preceded it 13 and the
subsequent ones applying its doctrines, 14 that the mere
insertion of the price and the mode of payment among the
terms and conditions of the agreement will not necessarily
make it a contract to sell. The phrase in the contract "on the
following terms and conditions" is standard form which is
not to be construed as imposing a condition, whether
suspensive or resolutory, in the sense of the happening of a
future and uncertain event upon which an obligation is
made to depend. There must be a manifest understanding
that the agreement is in what may be referred to as
"suspended animation" pending compliance with
provisions regarding payment. The reservation of title to
the object of the contract in the seller is one such
manifestation. Hence, it has been decided in the case of
Dignos v. Court of Appeals 15 that, absent a proviso in the
contract that the title to the property is reserved in the
vendor until full payment of the purchase price or a
stipulation giving the vendor the right to unilaterally
rescind the contract the moment the vendee fails to pay
within the fixed period, the transaction is an absolute
contract of sale and not a contract to sell. 16
In the instant case, nowhere in the contract did it state that
the petitioners reserve title to the goods until private
respondents have opened a letter of credit. Nor is there any
provision declaring the contract as without effect until after
the fulfillment of the condition regarding the opening of the
letter of credit.
Examining the contemporaneous and subsequent conduct
of the parties, which may be relevant in the determination
of the nature and meaning of the contract, 17 it is
significant that in the telegram sent by petitioners to
Hibionada on May 23, 1983, it stated that "DUE [TO]
YOUR FAILURE TO COMPLY WITH CONDITIONS
BEFORE DEADLINE OUR CONTRACT FOR
PURCHASE SCRAP IRON CANCELLED." And in some
of the pleadings in the course of this litigation, petitioners
referred to the transaction as a contract of sale. 18
In light of the provisions of the contract, contemporaneous
and subsequent acts of the parties and the other relevant
circumstances surrounding the case, it is evident that the
stipulation for the buyer to open a Letter of Credit in order
to cover the payment of the purchase price does not bear
the marks of a suspensive condition. The agreement
between the parties was a contract of sale and the "terms
and conditions" embodied therein which are standard form,
are clearly resolutory in nature, the breach of which may
give either party the option to bring an action to rescind
and/or seek damages. Contrary to the conclusions arrived at
in the ponencia, the transaction is not a contract to sell but a
contract of sale.
However, the determination of the nature of the contract
does not settle the controversy. A breach of the contract
was committed and the rights and liabilities of the parties
must be established. The ponencia, notwithstanding its
conclusion that no contract of sale existed, proceeded to
state that petitioner company may rescind the contract
based on Article 1597 of the Civil Code which expressly
applies only to a contract of sale. It provides:
"ARTICLE 1597. Where the goods have not been delivered
to the buyer, and the buyer has repudiated the contract of
sale, or has manifested his inability to perform his
obligations, thereunder, or has committed a breach thereof,
the seller may totally rescind the contract of sale by giving
notice of his election so to do to the buyer." (Emhasis
supplied).
The ponencia was then confronted with the issue of
delivery since Article 1597 applies only "[w]here the goods
have not yet been delivered." In this case, as aforestated,
the workers of private respondents were actually allowed to
enter the petitioners' premises, thus, giving them control
and possession of the goods. At this juncture, it is even
unnecessary to discuss the issue of delivery in relation to
the right of rescission nor to rely on Article 1597. In every
contract which contains reciprocal obligations, the right to
rescind is always implied under Article 1191 of the Civil
Code in case one of the parties fails to comply with his
obligations. 19
The right to rescind pursuant to Article 1191 is not
absolute. Rescission will not be permitted for slight or
casual breach of the contract. 20 Here, petitioners claim
that the breach is so substantial as to justify rescission, not
only because the Letter of Credit was not opened on May
15, 1983 as stipulated in the contract but also because of
the following factors: (1) the Letter of Credit, although
opened in favor of petitioners was made against the account
of a certain Marsteel Alloy Corporation, instead of private
respondent's account; (2) the Letter of Credit referred to
"assorted steel scrap" instead of "scrap iron and junk" as
provided in the contract; (3) the Letter of Credit placed the
quantity of the goods at "500 MT" while the contract
mentioned "an undetermined quantity of scrap iron and
junk"; (4) no amount from the Letter of Credit will be
released unless accompanied by a Certificate of
Acceptance; and (5) the Letter of Credit had an expiry date.
I am not convinced that the above circumstances may be
characterized as so substantial and fundamental as to defeat
the object of the parties in making the agreement. 21 None
of the alleged defects in the Letter of Credit would serve to
defeat the object of the parties. It is to be stressed that the
purpose of the opening of a Letter of Credit is to effect
payment. The above-mentioned factors could not have
prevented such payment. It is also significant to note that
petitioners sent a telegram to private respondents on May
23, 1983 cancelling the contract. This was before they had
even received on May 26, 1983 the notice from the bank
about the opening of the Letter of Credit. How could they
have made a judgment on the materiality of the provisions
of the Letter of Credit for purposes of rescinding the
contract even before setting eyes on said document?
To be sure, in the contract, the private respondents were
supposed to open the Letter of Credit on May 15, 1983 but,
it was not until May 26, 1983 or eleven (11) days later that
they did so. Is the eleven-day delay a substantial breach of
the contract as could justify the rescission of the contract?
In Song Fo and Co. v. Hawaiian-Philippine Co. 22 it was
held that a delay in payment for twenty (20) days was not a
violation of an essential condition of the contract which
would warrant rescission for non-performance. In the
instant case, the contract is bereft of any suggestion that
time was of the essence. On the contrary, it is noted that
petitioners allowed private respondents' men to dig and
remove the scrap iron located in petitioners' premises
between May 17, 1983 until May 30, 1983 or beyond the
May 15, 1983 deadline for the opening of the Letter of
Credit. Hence, in the absence of any indication that the time
was of the essence, the eleven-day delay must be deemed a
casual breach which cannot justify a rescission.
Worthy of mention before concluding is Sycip v. National
Coconut Corporation, et al. 23 since, like this case, it
involves a failure to open on time the Letter of Credit
required by the seller. In Sycip, after the buyer offered to
buy 2,000 tons of copra, the seller sent a telegram dated
December 19, 1946 to the buyer accepting the offer but on
condition that the latter opens a Letter of Credit within 48
hours. It was not until December 26, 1946, however, that
the Letter of Credit was opened. The Court, speaking
through Justice Bengzon, held that because of the delay in
the opening of the Letter of Credit; the seller was not
obliged to deliver the goods.
Two factors distinguish Sycip from the case at bar. First,
while there has already been a perfected contract of sale in
the instant case, the parties in Sycip were still undergoing
the negotiation process. The seller's qualified acceptance in
Sycip served as a counter offer which prevented the
contract from being perfected. Only an absolute and
unqualified acceptance of a definite offer manifests the
consent necessary to perfect a contract. 24 Second, the
Court found in Sycip that time was of the essence for the
seller who was anxious to sell to other buyers should the
offeror fail to open the Letter of Credit within the stipulated
time. In contrast, there are no indicia in this case that can
lead one to conclude that time was of the essence for
petitioner as would make the eleven-day delay a
fundamental breach of the contract.
In sum, to my mind, both the trial court and the respondent
Court of Appeals committed no reversible error in their
appreciation of the agreement in question as a contract of
sale and not a contract to sell, as well as holding that the
breach of the contract was not substantial and, therefore,
petitioners were not justified in law in rescinding the
agreement.
PREMISES CONSIDERED, the Petition must be
DISMISSED and the decision of the Court of Appeals
AFFIRMED.
Grio-Aquino,
[ G.R. No. 131679, February 01, 2000 ]
CAVITE DEVELOPMENT BANK AND FAR EAST
BANK AND TRUST COMPANY, PETITIONERS, VS.
SPOUSES CYRUS LIM AND LOLITA CHAN LIM
AND COURT OF APPEALS, RESPONDENTS.
Facts:
Rodolfo Guansing obtained a loan from Cavite
Development Bank(CDB) and offered as security his real
estate property. For failing to pay his loan the property was
foreclosed and title was issued in the name of CDB.
Now here comes Lolita Chan Lim, the respondent on this
case who offered to buy the property from CDB. Mrs. Lim
paid P30,000.00 as option money and was issued receipt by
CDB. However , Mrs. Lim later discovered that the title of
the property is being disputed by Perfecto Guansing, the
father of the mortgagee Rodolfo Guansing. In fact, in a
separate case it was declared that Rodolfo fraudulently
secured title to the said mortgaged property and title to it
was restored to Perfecto . The decision has since become
final and executory.
Aggrieved by what she considered a serious
misrepresentation by CDB and its mother company
FEBTC, on their ability to sell the subject property, filed an
action for specific performance and damage against
petitioners.
Issues: Was the sale between CDB and Mrs. Lim
perfected?
Is CDB liable for damges?
Is the sale valid?
Decision: Contracts are not defined by the parties thereto
but by the principles of law. In determining the nature of a
contract, the courts are not bound by the name or title given
to it by the contracting parties. In the case at bar, the sum of
P30,000.00, although denominated in the offer to purchase
as option money is actually in the nature of earnest
money or down payment when considered with the other
terms of the offer.
It is because when Mrs. Lim offered to buy the property the
10% so called option money forms part of the purchase
price as contemplated under Art. 1482 of the Civil Code. It
is clear then that the parties in this case actually entered
into a contract of sale, partially consummated as to the
payment of the price.
CDB cannot invoke the defense that it is a mortgagee in
good faith. It only applies to private individuals and not to
banking institutions. They cannot be excused from the duty
of exercising the due diligence required of banking
institutions. It is standard practice for banks, before
approving a loan, to investigate who are the real owners
thereof. Banking is affected with public interest that is why
they are expected to exercise more care and prudence than
private individuals.
Considering CDBs negligence it is therefore liable for
damages.
As to its validity, the doctrine of Nemo dat quod non
habet applies. One cannot give what one does not have.
The seller not being the owner the sale is void.
Balatbat v. CA
Facts:
A parcel of land was acquired by plaintiff Aurelio Roque
and Maria Mesina during their conjugal union. Maria died
on August 28, 1966. On June 15, 1977, Aurelio filed a case
for partition. The trial court held that Aurelio is entitled to
the portion at his share in the conjugal property, and 1/5
of the other half which formed part of Marias estate,
divided equally among him at his 4 children. The decision
having become final and executory, the Register of Deeds
of Manila issued a transfer certificate of title on October 5,
1979 according to the ruling of the court. On April 1, 1980,
Aurelio sold his 6/10 share to spouses Aurora Tuazon-
Repuyan and Jose Repuyan, as evidenced by a deed of
absolute sale. On June 21, 1980, Aurora caused the
annotation of her affidavit of adverse claim. On August 20,
1980, Aurelio filed a complaint for rescission of contract
grounded on the buyers failure to pay the balance of the
purchase price. On February 4, 1982, another deed of
absolute sale was executed between Aurelio and his
children, and herein petitioner Clara Balatbat, involving the
entire lot. Balatbat filed a motion for the issuance of writ of
possession, which was granted by the court on September
20, 1982, subject to valid rights and interests of third
persons. Balatbat filed a motion to intervene in the
rescission case, but did not file her complaint in
intervention. The court ruled that the sale between Aurelio
and Aurora is valid.
Issues:(1) Whether the alleged sale to private respondents
was merely executory(2) Whether there was double sale(3)
Whether petitioner is a buyer in good faith and for value
Held:(1) Contrary to petitioner's contention that the sale
dated April 1, 1980 in favor of private respondents
Repuyan was merely executory for the reason that there
was no delivery of the subject property and that
consideration/price was not fully paid, we find the sale as
consummated, hence, valid and enforceable. The Court
dismissed vendor's Aurelio Roque complaint for rescission
of the deed of sale and declared that the Sale dated April 1,
1980, as valid and enforceable. No appeal having been
made, the decision became final and executory.The
execution of the public instrument, without actual delivery
of the thing, transfers the ownership from the vendor to the
vendee, who may thereafter exercise the rights of an owner
over the same. In the instant case, vendor Roque delivered
the owner's certificate of title to herein private respondent.
The provision of Article 1358 on the necessity of a public
document is only for convenience, not for validity or
enforceability. It is not a requirement for the validity of a
contract of sale of a parcel of land that this be embodied in
a public instrument. A contract of sale being consensual, it
is perfected by the mere consent of the parties. Delivery of
the thing bought or payment of the price is not necessary
for the perfection of the contract; and failure of the vendee
to pay the price after the execution of the contract does not
make the sale null and void for lack of consideration but
results at most in default on the part of the vendee, for
which the vendor may exercise his legal remedies.
(2) Article 1544 of the Civil Code provides that in case of
double sale of an immovable property, ownership shall be
transferred (1) to the person acquiring it who in good faith
first recorded it in the Registry of Property; (2) in default
thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who
presents the oldest title, provided there is good faith. In the
case at bar, vendor Aurelio Roque sold 6/10 portion of his
share to private respondents Repuyan on April 1, 1980.
Subsequently, the same lot was sold again by vendor
Aurelio Roque (6/10) and his children (4/10), represented
by the Clerk of Court pursuant to Section 10, Rule 39 of the
Rules of Court, on February 4, 1982. Undoubtedly, this is a
case of double sale contemplated under Article 1544 of the
New Civil Code. Evidently, private respondents Repuyan's
caused the annotation of an adverse claim on the title of the
subject property on July 21, 1980. The annotation of the
adverse claim in the Registry of Property is sufficient
compliance as mandated by law and serves notice to the
whole world. On the other hand, petitioner filed a notice
of lis pendens only on February 2, 1982. Accordingly,
private respondents who first caused the annotation of the
adverse claim in good faith shall have a better right over
herein petitioner. As between two purchasers, the one who
has registered 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. Further, even in default of the first registrant or
first in possession, private respondents have presented the
oldest title. Thus, private respondents who acquired the
subject property in good faith and for valuable
consideration established a superior right as against the
petitioner.
(3) Petitioner cannot be considered as a buyer in good faith.
If petitioner did investigate before buying the land on
February 4, 1982, she should have known that there was a
pending case and an annotation of adverse claim was made
in the title of the property before the Register of Deeds and
she could have discovered that the subject property was
already sold to the private respondents. It is incumbent
upon the vendee of the property to ask for the delivery of
the owner's duplicate copy of the title from the vendor. One
who purchases real estate with knowledge of a defect or
lack of title in his vendor cannot claim that he has acquired
title thereto in good faith as against the true owner of the
land or of an interest therein; and the same rule must be
applied to one who has knowledge of facts which should
have put him upon such inquiry and investigation as might
be necessary to acquaint him with the defects in the title of
his vendor. Good faith, or the want of it is not a visible,
tangible fact that can be seen or touched, but rather a state
or condition of mind which can only be judged of by actual
or fancied tokens or signs.
SERRANO VS CAGUIAT
517 SCRA 57
FACTS:
Spouses Serrano agreed to sell in favor of
respondent Caguiat aparcel of land at 1,500.00 per square
meter. Caguiat partiallypaid petitioners 100, 000.00 as
evidenced by a receipt issuedby petitioners indicating
therein respondents promise to pay theremaining balance.
Respondent, after making known hisreadiness to pay the
balance, requested from petitioners thepreparation of the
necessary Deed of Sale. When petitionerscancelled the
transaction and intended to return to Caguiat hispartial
payment, respondent filed a complaint for
specificperformance and damages. The trial court relying
on Article 1482of the Civil Code ruled that the payment of
100, 000.00 beingan earnest money signified the
perfection of the contract of sale. The Court of Appeals
denied petitioners motion forreconsideration in affirmation
of the lower courts decision.
ISSUE:
Whether or not the partial payment constitutes an
earnestmoney as manifested in Article 1482 of the Civil
Code
HELD:
No. Article 1482 applies only to earnest money
given in acontract of sale. It was apparent that the earnest
money in thecase at bar was given in lieu of a contract to
sell. Unlike in acontract of sale, the ownership of the parcel
of land was retainedby the Spouses Serrano and shall only
be passed to Caguiat uponfull payment of the purchase
price as evidenced by the receipt.Relatively, no Deed of
Sale has been executed as proof of theintention of the
parties to immediately transfer the ownership of the parcel
of land. Spouses Serrano also retained ownership of the
certificate of title of the lot, thereby indicating no actual
orconstructive delivery of the ownership of the property.
Finally,should the transaction pushed through, Caguiats
payment of theremaining balance would have been a
suspensive condition sincethe transfer of ownership was
subordinated to the happening of afuture and uncertain
event.
Spouses Santiago Vs. Villamor (2012)
Facts:
Spouses Villamor are the parents of respondents
Mancer, Carlos and Domingo Jr. (respondents) and
the grandparents of respondent John Villamor.
In January 1982: Spouses Villamor mortgaged their
4.5-hectare coconut land in Masbate to the San
Jacinto Bank as security for a P10,000.00 loan.
For failure to pay the loan, the property was extra-
judicially foreclosed by the bank. Spouses Villamor
failed to redeem the property so San Jacinto Bank
obtained a final deed of sale in its favor in 1991.
The San Jacinto Bank then offered the land for sale
to any interested buyer.
The children of spouses Villamor agreed to buy the
property.
The San Jacinto Bank agreed with the respondents
and Catalina (one of the sisters of the respondents)
to a P65,000.00 sale, payable in installments.
Upon full payment of the children of spouses
Catalina, San Jacinto bank refused to issue the deed
of conveyance. Hence, they filed an action for
specific performance
Specific performance case (RTC and CA):
o RTC ruled that the issuance of the deed of registration of
San Jacinto Bank in favor of spouses Villamor was done in
good faith.
o CA reversed RTC ruling saying that the children of
Spouses Villamor did not act as representatives of their
parents.
In 1994 (Before the action for specific performance
was filed), spouses Villamor sold the land to
petitioner-spouses Santiago for P150k.
When the children of spouses VIllamor refused to
vacate the land after spouses Santiagos demand,
the latter also filed an action for quieting of title.
Quieting of Title case (RTC and CA):
o RTC ruled that spouses Villamor were purchasers in good
faith, hence they are the legal owners. RTC also said that
the notarized deed of sale in their favor resulted in
constructive delivery of the land.
o CA ruled that spouses Villamors action for quieting of
title cannot prosper for they have no legal or equitable title
over the land.
Spouses Villamor that the deed of sale executed in
their favor was equivalent to delivery of the land
under Article 1498 of the CC and that they are
purchasers in good faith since they had no
knowledge of the supposed transaction between the
San Jacinto Bank and the respondents and Catalina.
The children of Spouses Villamor (respondents)
hold that they have a legal title to the land since
they perfected the sale with the San Jacinto Bank as
early as November 4, 1991, the first installment
payment, and are in actual possession of the land;
and that petitioners-spouses Santiago are not
purchasers in good faith because they failed to
show why they are not in possession of the
property.
Issue: WON Spouses Santiago has a legal title over the
property. NO
Relevance: If they have legal title, they can file for action
for quieting of title and for reconveyance.
Held:
The Court said that spouses Santiago failed to prove that
they have any legal or equitable title over the disputed land.
Execution of the deed of sale only a prima facie
presumption of delivery
Article 1477 of the Civil Code recognizes that the
"ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof."
Related to this article is Article 1497 which provides that
"the thing sold shall be understood as delivered, when it is
placed in the control and possession of the vendee."
"A person who does not have actual possession of the
thing sold cannot transfer constructive possession by
the execution and delivery of a public instrument."
With respect to incorporeal property, Article 1498 of the
Civil Code lays down the general rule: the execution of a
public instrument "shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed
the contrary does not appear or cannot clearly be inferred."
However, the execution of a public instrument gives rise
only to a prima facie presumption of delivery, which is
negated by the failure of the vendee to take actual
possession of the land sold.
No constructive delivery of the land in favor of spouses
Santiago
In this case, no constructive delivery of the land transpired
upon the execution of the deed of sale since it was not the
spouses Villamor, Sr. but the respondents who had actual
possession of the land. The presumption of constructive
delivery is inapplicable and must yield to the reality that the
petitioners were not placed in possession and control of the
land.
Spouses Santiago were not purchasers in good faith
In this case, the spouses Villamor, Sr. were not in
possession of the land. The petitioners, as prospective
vendees, carried the burden of investigating the rights of
the respondents who were then in actual possession of the
land. The petitioners cannot take refuge behind the
allegation that, by custom and tradition in San Jacinto,
Masbate, the children use their parents' property, since they
offered no proof supporting their bare allegation.
The burden of proving the status of a purchaser in good
faith lies upon the party asserting that status and cannot be
discharged by reliance on the legal presumption of good
faith. The petitioners failed to discharge this burden.
Pan Pacific Industrial Sales Co., Inc. vs. Court of
Appeals and Nicolas Capistrano
G.R. No. 125283 February 10, 2006
Facts:
On September 10, 1982, Capistrano executed a Special
Power of Attorney authorizing Cruz to mortgage the
subject lot in favor of Associated Bank (the Bank) as
security for the latters loan accommodation. Cruz obtained
a loan in the amount of P500,000.00 from the Bank. Thus,
he executed a Real Estate Mortgage over the subject lot in
favor of the Bank.
Capistrano and Cruz then executed a letter-agreement dated
September 23, 1982 whereby Cruz agreed to buy the
subject lot for the price of P350,000.00, of which
P200,000.00 would be paid out of the loan secured by
Cruz, and the balance of P150,000.00 in eight (8) quarterly
payments of P18,750.00 within two (2) years from October
30, 1982, without need of demand and with interest at 18%
in case of default. Capistrano the executed the Deed of
Absolute Sale over the subject lot in favor of Cruz which
was notarized by Notary Public Vicente J. Benedicto.
Capistranos wife, Josefa Borromeo Capistrano, signed in
advance the Marital Consent evidencing her conformity in
advance to the sale. The Marital Consent was also sworn to
before Benedicto.
Cruz continued payments to Capistrano for the subject lot.
Sometime in October 1985, Capistrano delivered to Cruz a
Statement of Account signed by Capistrano, showing that
as of October 30, 1985, Cruzs balance stood at P19,561.00
as principal, and P3,520.98 as interest, or a total of
P23,081.98. Cruz filed a case with the RTC of Manila to
enjoin the foreclosure due to the danger of foreclosure by
the bank of the mortgage on the subject lot. Cruz also
impleaded Capistrano and his spouse Josefa Borromeo
Capistrano as defendants, the title to the subject lot not
having been transferred yet to his name.
Cruz also devised a way to save the subject lot from
foreclosure by seeking a buyer for it and eventually
arranging for the buyer to pay the mortgage debt to which
Pan Pacific was the buyer. Pan Pacific paid off Cruzs debt
in the amount of P1,180,000.00. Consequently, the Bank
executed a Cancellation of Real Estate Mortgage. Cruz then
executed a Deed of Absolute Sale over the subject lot in
favor of Pan Pacific, attaching thereto the previous Deed of
Absolute Sale executed by Capistrano in favor of Cruz.
Unknowingly to Cruz, Capistrano filed a Revocation of
Special Power of Attorney with the Register of Deeds of
Manila and even requested that the transaction between
Cruz and Pan Pacific shall be withheld. Capistrano filed the
precursory complaint. Pan Pacific was allowed to intervene
in the proceedings and joined Cruz in resisting the
complaint insofar as the first cause of action on the subject
lot is concerned. The trial court rendered a decision in favor
of Capistrano declaring: (1) the letter-ageement as resolved
and/or rescinded; (2) both the Deed of Absolute Sale and
the document entitled, "Marital Consent", null and void;
and (3) the Deed of Absolute Sale executed by the spouses
Severo C. Cruz, III and Lourdes Miranda Cruz in favor of
the intervenor, Pan Pacific Industrial Sales, Co., Inc., null
and void.
Pan Pacific and the Cruz spouses contended that
Capistrano failed to present clear and convincing evidence
to overturn the presumption of regularity of public
documents like the documents in question. Pan Pacific,
however, filed the instant Petition solely concerning the
first cause of action in the Amended Complaint. Pan Pacific
contends that the genuineness and due execution of the
Deed of Absolute Sale and Marital Consent cannot be
overridden by the self-serving testimony of Capistrano. It
points out that Capistrano cannot contest the sale of the
subject lot to Cruz, as the sale had already been
consummated. Capistrano posits in his Memorandum that
Pan Pacific is not an innocent purchaser for value and in
good faith as Cruz was never the registered owner of the
subject lot. Pan Pacific was bound at its peril to investigate
the right of Cruz to transfer the property to it.
Issue:
Whether or not Pan Pacific is entitled fully on the
subject lot despite the balance remaining due by Cruz to
Capistrano.
Held:
Since Cruz had a balance of P132,061.00 owing to
Capistrano as of the date of the deed of sale, the latter could
not have possibly executed the deed. This From the
existence of Cruzs outstanding balance, the non-existence
of the deed of sale does not necessarily follow.
Indeed, a vendor may agree to a deed of absolute sale even
before full payment of the purchase price. Article 1478 of
the Civil Code states that "the parties may stipulate that
ownership in the thing shall not pass to the purchaser until
he has fully paid the price." A sensu contrario, the parties
may likewise stipulate that the ownership of the property
may pass even if the purchaser has not fully paid the price.
The courts below also assigned an adverse connotation to
Cruzs impleading of the Capistrano spouses as party-
defendants in the action against the Bank to enjoin the
foreclosure of the mortgage on the subject lot. Cruzs move
is congruent with both his strong desire to protect his
interest in the subject lot and the reality that there was an
existing deed of sale in his favor. Precisely, his interest in
the lot is borne out and had arisen from the deed of sale. As
purchaser of the lot, he had to avert the foreclosure of the
mortgage thereon. And to ensure against the dismissal of
the action for failure to join a real party-in-interest, he had
to implead Capistrano in whose name the title to the subject
lot was registered still.
With respect to whatever balance Cruz may still owe to
Capistrano, the Court believes that this is not a concern of
Pan Pacific as the latter is not a party to the Deed of
Absolute Sale between Capistrano and Cruz. But of course,
Pan Pacific should enjoy full entitlement to the subject lot
as it was sold to him by Cruz who earlier had acquired title
thereto absolutely and unconditionally by virtue of the
Deed of Absolute Sale. Cruz had the right to sell the subject
lot to Pan Pacific in 1988, as he in fact did.
ADELFA PROPERTIES, INC vs. CA et al
G.R. No. 111238
January 25, 1995
FACTS: Private respondents and their brothers Jose and
Dominador were the registered CO-OWNERS of a parcel
of land in Las Pinas, covered by a TCT.
Jose and Dominador sold their share (eastern portion of the
land) to Adelfa. Thereafter, Adelfa expressed interest in
buying the western portion of the property from private
respondents herein. Accordingly, an exclusive Option to
Purchase was executed between Adelfa and Private
respondents and an option money of 50,000 was given to
the latter.
A new owners copy of the certificate of title was issued (as
the copy with respondent Salud was lost) was issued but
was kept by Adelfas counsel, Atty. Bernardo.
Before Adelfa could make payments, it received summons
as a case was filed (RTC Makati) against Jose and
Dominador and Adelfa, because of a complaint in a civil
case by the nephews and nieces of private respondents
herein. As a consequence, Adelfa, through a letter,
informed the private respondents that it would hold
payment of the full purchase price and suggested that they
settle the case with their said nephews and nieces. Salud
did not heed the suggestion; respondents informed Atty.
Bernardo that they are canceling the transaction. Atty
Bernardo made offers but they were all rejected.
RTC Makati dismissed the civil case. A few days after,
private respondents executed a Deed of Conditional Sale in
favor of Chua, over the same parcel of land.
Atty Bernardo wrote private respondents informing them
that in view of the dismissal of the case, Adelfa is willing
to pay the purchase price, and requested that the
corresponding deed of Absolute Sale be executed. This was
ignored by private respondents.
Private respondents sent a letter to Adelfa enclosing therein
a check representing the refund of half the option money
paid under the exclusive option to purchase, and requested
Adelfa to return the owners duplicate copy of Salud.
Adelfa failed to surrender the certificate of title, hence the
private respondents filed a civil case before the RTC Pasay,
for annulment of contract with damages. The trial court
directed the cancellation of the exclusive option to
purchase. On appeal, respondent CA affirmed in toto the
decision of the RTC hence this petition.
ISSUE:
1. WON the agreement between Adelfa and Private
respondents was strictly an option contract
2. WON Article 1590 applies in this case, thereby
justifiying the refusal by Adelfa to pay the
balance of the purchase price
3. WON Private respondents could unilaterraly and
prematurely terminate the option period, if indeed
it is a option contract, as the option period has not
lapsed yet.
HELD: The judgement of the CA is AFFIRMED
1. NO. The agreement between the parties is a contract
to sell, and not an option contract or a contract of sale.
Contract to SELL
by agreement the ownership is reserved in the vendor
and is not to pass until the full payment of the price
title is retained by the vendor until the full payment of
the price, such payment being a positive
Contract of SALE
the title passes to the vendee upon the delivery of the
thing sold
the vendor has lost and cannot recover ownership until
and unless the contract is resolved or rescinded
There are two features which convince us that the parties
never intended to transfer ownership to petitioner except
upon the full payment of the purchase price.
(1) the exclusive option to purchase, although it
provided for automatic rescission of the contract and partial
forfeiture of the amount already paid in case of default,
does not mention that petitioner is obliged to return
possession or ownership of the property as a consequence
of non-payment. There is no stipulation anent reversion or
reconveyance of the property to herein private respondents
in the event that petitioner does not comply with its
obligation. With the absence of such a stipulation, although
there is a provision on the remedies available to the parties
in case of breach, it may legally be inferred that the parties
never intended to transfer ownership to the petitioner to
completion of payment of the purchase price.
(2) Secondly, it has not been shown there was delivery
of the property, actual or constructive, made to herein
petitioner. The exclusive option to purchase is not
contained in a public instrument the execution of which
would have been considered equivalent to delivery.
Neither did petitioner take actual, physical possession of
the property at any given time. It is true that after the
reconstitution of private respondents certificate of title, it
remained in the possession of petitioners counsel, Atty.
Bayani L. Bernardo, who thereafter delivered the same to
herein petitioner. Normally, under the law, such possession
by the vendee is to be understood as a delivery. 18However,
private respondents explained that there was really no
intention on their part to deliver the title to herein petitioner
with the purpose of transferring ownership to it. They claim
that Atty. Bernardo had possession of the title only because
he was their counsel in the petition for reconstitution.
In effect, there was an implied agreement that ownership
shall not pass to the purchaser until he had fully paid the
price in this case. Article 1478 of the civil code does not
require that such a stipulation be expressly made.
Consequently, an implied stipulation to that effect is
considered valid and, therefore, binding and enforceable
between the parties. It should be noted that under the law
and jurisprudence, a contract which contains this kind of
stipulation is considered a contract to sell.
The important task in contract interpretation is always the
ascertainment of the intention (parties never intended to
transfer ownership to petitionerexcept upon the full
payment of the purchase price) of the contracting parties
and that task is, of course, to be discharged by looking to
the words they used to project that intention in their
contract. The title of a contract does not necessarily
determine its true nature. Hence, the fact that the document
under discussion is entitled Exclusive Option to Purchase
is not controlling where the text thereof shows that it is a
contract to sell.
The obligation of petitioner consisted of an obligation to
give something, that is, the payment of the purchase price.
The contract did not simply give petitioner the discretion to
pay for the property. It will be noted that there is nothing
in the said contract to show that petitioner was merely
given a certain period within which to exercise its privilege
to buy. The agreed period was intended to give time to
herein petitioner within which to fulfill and comply with its
obligation, that is, to pay the balance of the purchase price.
No evidence was presented by private respondents to prove
otherwise.
The test in determining whether a contract is a contract of
sale or purchase or a mere option is whether or not the
agreement could be specifically enforced. There is no
doubt that the obligation of petitioner to pay the purchase
price is specific, definite and certain, and consequently
binding and enforceable. Had private respondents chosen to
enforce the contract, they could have specifically
compelled petitioner to pay the balance. This is distinctly
made manifest in the contract itself as an integral
stipulation, compliance with which could legally and
definitely be demanded from petitioner as a consequence.
While there is jurisprudence to the effect that a contract
which provides that the initial payment shall be totally
forfeited in case of default in payment is to be considered
as an option contract, still we are not inclined to conform
with the findings of respondent court and the court a
quo that the contract executed between the parties is an
option contract, for the reason that the parties were already
contemplating the payment of the balance of the purchase
price, and were not merely quoting an agreed value for the
property. The term balance, connotes a remainder or
something remaining from the original total sum already
agreed upon.
In other words, the alleged option money was
actually earnest money which was intended to form part of
the purchase price. The amount was not distinct from the
cause or consideration for the sale of the property, but was
itself a part thereof. It is a statutory rule that 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. It constitutes an advance
payment and must, therefore, be deducted from the total
price. Also, earnest money is given by the buyer to the
seller to bind the bargain.
There are clear distinctions between earnest money and
option money, viz.:
(a) earnest money is part of the purchase price, while
option money ids the money given as a distinct
consideration for an option contract;
(b) earnest money is given only where there is already a
sale, while option money applies to a sale not yet perfected;
and
(c) when earnest money is given, the buyer is bound to pay
the balance, while when the would-be buyer gives option
money, he is not required to buy.
The aforequoted characteristics of earnest money are
apparent in the so-called option contract under review, even
though it was called option money by the parties. In
addition, private respondents failed to show that the
payment of the balance of the purchase price was only a
condition precedent to the acceptance of the offer or to the
exercise of the right to buy. On the contrary, it has been
sufficiently established that such payment was but an
element of the performance of petitioners obligation under
the contract to sell.
2. Its failure to pay the purchase price within the agreed
period, petitioner invokes Article 1590 of the civil Code
which provides:
Art. 1590. Should the vendee be disturbed in the possession
or ownership of the thing acquired, or should he have
reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has
caused the disturbance or danger to cease, unless the latter
gives security for the return of the price in a proper case, or
it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize the
suspension of the payment of the price.
Respondent court refused to apply the aforequoted
provision of law on the erroneous assumption that the true
agreement between the parties was a contract of option. As
we have hereinbefore discussed, it was not an option
contract but a perfected contract to sell. Verily, therefore,
Article 1590 would properly apply.
Both lower courts, are in accord that since the Civil Case in
Makati involved only the eastern half of the land subject of
the deed of sale between Adelfa and the Jimenez brothers,
it did not, therefore, have any adverse effect on private
respondents title and ownership over the western half of
the land which is covered by the contract subject of the
present case. But at a glance, it is easily discernible that,
although the complaint prayed for the annulment only of
the contract of sale executed between petitioner and the
Jimenez brothers, the plaintiffs therein were claiming to be
co-owners of the entireparcel of land, and not only of a
portion thereof nor, as incorrectly interpreted by the lower
courts, not pertaining exclusively to the eastern half
adjudicated to the Jimenez brothers.
Such being the case, petitioner was justified in suspending
payment of the balance of the purchase price by reason of
the aforesaid vindicatory action filed against it. The
assurance made by private respondents that petitioner did
not have to worry about the case because it was pure and
simple harassment is not the kind of guaranty
contemplated under the exceptive clause in Article 1590
wherein the vendor is bound to make payment even with
the existence of a vindicatory action if the vendee should
give a security for the return of the price.
3. YES. The private respondents may no longer be
compelled to sell and deliver the subject property to
petitioner for two reasons, that is, petitioners failure to
duly effect the consignation of the purchase price after the
disturbance had ceased; and, secondarily, the fact that the
contract to sell had been validly rescinded by private
respondents.
The 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. Besides, a mere
tender of payment is not sufficient to compel private
respondents to deliver the property and execute the deed of
absolute sale. It is consignation which is essential in order
to extinguish petitioners obligation to pay the balance of
the purchase price.
The rule is different in case of an option contract or in legal
redemption or in a sale with right to repurchase, wherein
consignation is not necessary because these cases involve
an exercise of a right or privilege (to buy, redeem or
repurchase) rather than the discharge of an obligation,
hence tender of payment would be sufficient to preserve the
right or privilege. This is because the provisions on
consignation are not applicable when there is no
obligation to pay. A contract to sell, as in the case before
us, involves the performance of an obligation, not merely
the exercise of a privilege of a right. Consequently,
performance or payment may be effected not by tender of
payment alone but by both tender and consignation.
Furthermore, petitioner no longer had the right to suspend
payment after the disturbance ceased with the dismissal of
the civil case filed against it. Necessarily, therefore, its
obligation to pay the balance again arose and resumed after
it received notice of such dismissal. Unfortunately,
petitioner failed to seasonably make payment. By reason of
petitioners failure to comply with its obligation, private
respondents elected to resort to and did announce the
rescission of the contract through its letter to petitioner.
That written notice of rescission is deemed sufficient under
the circumstances. Article 1592 of the Civil Code which
requires rescission either by judicial action or notarial act is
not applicable to a contract to sell. Furthermore, judicial
action for rescission of a contract is not necessary where
the contract provides for automatic rescission in case of
breach, as in the contract involved in the present
controversy.
In the case at bar, it has been shown that although petitioner
was duly furnished and did receive a written notice of
rescission which specified the grounds therefore, it failed to
reply thereto or protest against it. By such cavalier
disregard, it has been effectively estopped from seeking the
affirmative relief it now desires but which it had theretofore
disdained.
SANTOS vs. SANTOS Case Digest
SANTOS vs. SANTOS
366 SCRA 395
FACTS: Petitioner Zenaida M. Santos is the widow of
Salvador Santos, a brother of private respondents Calixto,
Alberto, Antonio, all surnamed Santos and Rosa Santos-
Carreon.
The spouses Jesus and Rosalia were the parents of the
respondents and the husband of the petitioner. The spouses
owned a parcel of registered land with a four-door
apartment administered by Rosalia who rented them out.
On January 19, 1959, the spouses executed a deed of sale
of the properties in favor of their children Salvador and
Rosa. Rosa in turn sold her share to Salvador on November
20, 1973, which resulted in the issuance of new TCT.
Despite the transfer of the property to Salvador, Rosalia
continued to lease and receive rentals from the apartment
units.
On January 9, 1985, Salvador died, followed by Rosalia
who died the following month. Shortly after, petitioner
Zenaida, claiming to be Salvadors heir, demanded the rent
from Antonio Hombrebueno, a tenant of Rosalia. When the
latter refused to pay, Zenaida filed an ejectment suit against
him with the Metropolitan Trial Court of Manila, which
eventually decided in Zenaidas favor.
On January 5, 1989, private respondent instituted an action
for reconveyance of property with preliminary injunction
against petitioner in the Regional Trial Court of Manila,
where they alleged that the two deeds of sale were
simulated for lack of consideration. The petitioner on the
other hand denied the material allegations in the complaint
and that she further alleged that the respondents right to
reconveyance was already barred by prescription and
laches considering the fact that from the date of sale from
Rosa to Salvador up to his death, more or less twelve (12)
years had lapsed, and from his death up to the filing of the
case for reconveyance, four (4) years has elapsed. In other
words, it took respondents about sixteen (16) years to file
the case. Moreover, petitioner argues that an action to annul
a contract for lack of consideration prescribes in ten (10)
years and even assuming that the cause of action has not
prescribed, respondents are guilty of laches for their
inaction for a long period of time.
The trial court decided in favor of private respondents in as
much as the deeds of sale were fictitious, the action to
assail the same does not prescribe.
Upon appeal, the Court of Appeals affirmed the trial courts
decision. It held that the subject deeds of sale did not confer
upon Salvador the ownership over the subject property,
because even after the sale, the original vendors remained
in dominion, control, and possession thereof.
ISSUE: Whether or not the cause of action of the
respondents had prescribed and/or barred by laches.
RULING: No, the cause of action by the respondents had
not prescribed nor is it barred by laches.
First, the right to file an action for the reconveyance of the
subject property to the estate of Rosalia has not prescribed
since deeds of sale were simulated and fictitious. The
complaint amounts to a declaration of nullity of a void
contract, which is imprescriptible. Hence, respondents
cause of action has not prescribed.
Second, neither is their action barred by laches. The
elements of laches are: 1) conduct on the part of the
defendant, or of one under whom he claims, giving rise to
the situation of which the complainant seeks a remedy; 2)
delay in asserting the complainants rights, the complainant
having knowledge or notice of the defendants conduct as
having been afforded an opportunity to institute a suit; 3)
lack of knowledge or notice on the part of the defendant
that the complainant would assert the right in which he
bases his suit; and 4) injury or prejudice to the defendant in
the event relief is accorded to the complainant, or the suit is
not held barred. These elements must all be proved
positively. The lapse of four (4) years is not an
unreasonable delay sufficient to bar respondents action.
Moreover, the fourth (4th) element is lacking in this case.
The concept of laches is not concerned with the lapse of
time but only with the effect of unreasonable lapse. The
alleged sixteen (16) years of respondents inaction has no
adverse effect on the petitioner to make respondents guilty
of laches.
Dizon vs Dizon
GR No. 156539, 5 September 2007
FACTS
Petitioner Domingo Dizon purchased from his
nephew, herein respondent Elpidio Dizon a house and lot
located in Tondo, Manila. Respondent failed to deliver the
house and lot to petitioner. Co-owner of the lot,
respondents brother Ricardo, did not give said respondent
a written authority to sell his share. Petitioner then filed
with the RTC a complaint for specific performance and
sum of money with damages against respondent. RTC
rendered a decision rescinding the contract between the
parties.
The trial court issued a writ of execution
implemented by sheriff Cesar Cabildo, who then scheduled
the auction sale of respondents properties. Petitioners
attorney-in-fact as well as respondent and counsel
participated. Petitioner was the highest bidder having
offered P180,000.00. In the afternoon of said auction date,
the sheriff went to respondents house and showed
Supplemental Minutes on Sheriffs Sale offering a new
bid at P1,690,074.41 in lieu of the earlier bid. Respondent
refused to sign contending that it would be difficult for
himto redeem the property and besides, the auction sale had
already been perfected and the subsequent sale is a new or
second sale. He moved to quash the minutes but the trial
court denied the motion. His MR was also denied.
On petition for certiorari and prohibition before
the CA, it granted the petition and set aside the questioned
orders.
ISSUE
Has petitioner the option to amend his bid being
the highest bidder to conform to the amounts awarded in
his favor by the trial court?
HELD
No. Article 1476 (2) of the Civil Code provides:
xxx (2) A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or in
other customary manner. Until such announcement is
made, any bidder may retract his bid; and the auctioneer
may withdraw the goods from the sale unless the auction
has been announced to be without reserve.
During the public auction conducted, which
began at 10:25 AM and ended at 10:45 AM, the sheriff
declared petitioner as the highest bidder. Considering that
the auction sale had already been perfected, a supplemental
sale with the higher consideration at the instance of only
one partycould no longer be validly executed.
CA affirmed; petition denied
Dignos vs. Court of Appeals, and Jabil
158 SCRA 378
February 1988
FACTS:
In July 1965, herein petitioners Silvestre T. Dignos and
Isabela Lumungsod de Dignos (spouses Dignos) sold their
parcel of land in Opon, LapuLapu to herein private
respondent Antonio Jabil for the sum of P28,000 payable
for two installments, with an assumption of indebtedness
with the First Insular Bank of Cebu in the sum of P12,000
and the next installment of P4,000 to be paid in September
1965. In November 1965, the spouses Dignos sold the same
parcel of land for P35,000 to defendants Luciano Cabigas
and Jovita L. de Cabigas (spouses Cabigas) who were then
US citizens, and executed in their favor an Absolute Deed
of Sale duly registered in the Office of the Register of
Deeds.
Upon discovery of the 2nd sale of the subject land, Jabil
filed the case at bar in the CFI of Cebu which rendered its
Decision in August 1975 declaring the 2nd sale to the
spouses Cabigas null and void ab initio and the 1st sale to
Jabil not rescinded. The CFI of Cebu also ordered Jabil to
pay the remaining P16,000 to the spouses Dignos and to
reimburse the spouses Cabigas a reasonable amount
corresponding the expenses in the construction of hollow
block fences in the said parcel of land. The spouses Dignos
were also ordered to return the P35,000 to the spouses
Cabigas.
Both Jabil and the spouses Dignos appealed to the Court of
Appeals, which affirmed in July 1981 the CFI of Cebus
Decision except for the part of Jabil paying the expenses of
the spouses Cabigas for building a fence. The spouses
Dignos contested that the contract between them and Jabil
was merely a contract to sell and not a deed of sale.
ISSUE:
Is the contract between the parties a contract of sale or a
contract to sell?
COURT RULING:
The Supreme Court affirmed the Decision of the Court of
Appeals saying stated that all the elements of a valid
contract of sale are present in the document and that the
spouses Dignos had no right to sell the land in question
because an actual delivery of its possession has already
been made in favor of Jabil as early as March 1965. It was
also found that the spouses Dignos never notified Jabil by
notarial act that they were rescinding the contract, and
neither did they file a suit in court to rescind the sale. There
is no showing that Jabil properly authorized a certain
Cipriano Amistad to tell petitioners that he was already
waiving his rights to the land in question.

Kilosbayan Inc vs Teofisto Guingona, Jr.
In 1993, the Philippine Charity Sweepstakes Office decided
to put up an on-line lottery system which will establish a
national network system that will in turn expand PCSOs
source of income.
A bidding was made. Philippine Gaming Management
Corporation (PGMC) won it. A contract of lease was
awarded in favor of PGMC.
Kilosbayan opposed the said agreement between PCSO and
PGMC as it alleged that:
1. PGMC does not meet the nationality requirement because it
is 75% foreign owned (owned by a Malaysian firm Berjaya
Group Berhad);
2. PCSO, under Section 1 of its charter (RA 1169), is
prohibited from holding and conducting lotteries in
collaboration, association or joint venture with any person,
association, company or entity;
3. The network system sought to be built by PGMC for PCSO
is a telecommunications network. Under the law (Act No.
3846), a franchise is needed to be granted by the Congress
before any person may be allowed to set up such;
4. PGMCs articles of incorporation, as well as the Foreign
Investments Act (R.A. No. 7042) does not allow it to
install, establish and operate the on-line lotto and
telecommunications systems.
PGMC and PCSO, through Teofisto Guingona, Jr. and
Renato Corona, Executive Secretary and Asst. Executive
Secretary respectively, alleged that PGMC is not a
collaborator but merely a contractor for a piece of work,
i.e., the building of the network; that PGMC is a mere
lessor of the network it will build as evidenced by the
nature of the contract agreed upon, i.e., Contract of Lease.
ISSUE: Whether or not Kilosbayan is correct.
HELD: Yes, but only on issues 2, 3, and 4.
1. On the issue of nationality, it seems that PGMCs foreign
ownership was reduced to 40% though.
2. On issues 2, 3, and 4, Section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42, prohibits the PCSO from holding
and conducting lotteries in collaboration, association or
joint venture with any person, association, company or
entity, whether domestic or foreign. There is undoubtedly
a collaboration between PCSO and PGMC and not merely
a contract of lease. The relations between PCSO and
PGMC cannot be defined simply by the designation they
used, i.e., a contract of lease. Pursuant to the wordings of
their agreement, PGMC at its own expense shall build,
operate, and manage the network system including its
facilities needed to operate a nationwide online lottery
system. PCSO bears no risk and all it does is to provide its
franchise in violation of its charter. Necessarily, the use
of such franchise by PGMC is a violation of Act No. 3846.
6.) DINO V. SIO (2001)
[ G.R. NO. 113564, JUNE 20, 2001 ]
As this Court ruled in Engineering & Machinery
Corporation v. Court of Appeals, et al.,"a contract for a
piece of work, labor and materials may be distinguished
from a contract of sale by the inquiry as to whether the
thing transferred is one not in existence and which would
never have existed but for the order of the person desiring
it. In such case, the contract is one for a piece of work, not
a sale. On the other hand, if the thing subject of the
contract would have existed and been the subject of a sale
to some other person even if the order had not been given
then the contract is one of sale." The contract between the
petitioners and respondent stipulated that respondent would
manufacture upon order of the petitioners 20,000 pieces of
vinyl frogs and 20,000 pieces of vinyl mooseheads
according to the samples specified and approved by the
petitioners. Respondent Sio did not ordinarily manufacture
these products, but only upon order of the petitioners and at
the price agreed upon.[14] Clearly, the contract executed by
and between the petitioners and the respondent was a
contract for a piece of work. At any rate, whether the
agreement between the parties was one of a contract of sale
or a piece of work, the provisions on warranty of title
against hidden defects in a contract of sale apply to the case
at bar, viz:
"Art. 1714. If the contractor agrees to produce the work
from material furnished by him, he shall deliver the thing
produced to the employer and transfer dominion over the
thing. This contract shall be governed by the following
articles as well as by the pertinent provisions on warranty
of title and against hidden defects and the payment of price
in a contract of sale."
"Art. 1561. The vendor shall be responsible for warranty
against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is
intended, or should they diminish its fitness for such use to
such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower
price for it; but said vendor shall not be answerable for
patent defects or those which may be visible, or for those
which are not visible if the vendee is an expert who, by
reason of his trade or profession, should have known
them."
Petitioners aver that they discovered the defects in
respondent's products when customers in their (petitioners')
shirt business came back to them complaining that the frog
and moosehead figures attached to the shirts they bought
were torn. Petitioners allege that they did not readily see
these hidden defects upon their acceptance. A hidden
defect is one which is unknown or could not have been
known to the vendee. Petitioners then returned to the
respondent 29,772 defective pieces of vinyl products and
demanded a refund of their purchase price in the amount of
P208,404.00. Having failed to collect this amount, they
filed an action for collection of a sum of money.
Article 1567 provides for the remedies available to the
vendee in case of hidden defects, viz:
"Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565
and 1566, the vendee may elect between withdrawing from
the contract and demanding a proportionate reduction of the
price, with damages in either case."
By returning the 29,772 pieces of vinyl products to
respondent and asking for a return of their purchase price,
petitioners were in effect "withdrawing from the contract"
as provided in Art. 1567. The prescriptive period for this
kind of action is provided in Art. 1571 of the New Civil
Code, viz:
"Art. 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after six months from
the delivery of the thing sold." (Emphasis supplied)
Petitioners fault the ruling on the ground that it was too late
in the day for respondent to raise the defense of
prescription. The law then applicable to the case at bar,
Rule 9, Sec. 2 of the Rules of Court, provides:
"Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived; except the
failure to state a cause of action . . . "
Thus, they claim that since the respondent failed to raise
the defense of prescription in a motion to dismiss or in its
answer, it is deemed waived and cannot be raised for the
first time on appeal in a motion for reconsideration of the
appellate court's decision.
As a rule, the defense of prescription cannot be raised for
the first time on appeal.
Even if the defense of prescription was raised for the first
time on appeal in respondent's Supplemental Motion for
Reconsideration of the appellate court's decision, this does
not militate against the due process right of the petitioners.
On appeal, there was no new issue of fact that arose in
connection with the question of prescription, thus it cannot
be said that petitioners were not given the opportunity to
present evidence in the trial court to meet a factual issue.
Equally important, petitioners had the opportunity to
oppose the defense of prescription in their Opposition to
the Supplemental Motion for Reconsideration filed in the
appellate court and in their Petition for Review in this
Court.
This Court's application of the Osorio and Gicano doctrines
to the case at bar is confirmed and now enshrined in Rule
9, Sec. 1 of the 1997 Rules of Civil Procedure, viz:
"Section 1. Defense and objections not pleaded. - Defenses
and objections not pleaded whether in a motion to dismiss
or in the answer are deemed waived. However, when it
appears from the pleadings that the court has no jurisdiction
over the subject matter, that there is another action pending
between the same parties for the same cause, or that the
action is barred by a prior judgment or by statute of
limitations, the court shall dismiss the claim."
The SC ruled denyingthe petition and the impugned
decision of the Court of Appeals dated January 24, 1994
was AFFIRMED.
Concrete Aggregates vs. CTA and CIR
185 SCRA 416
May 1990
FACTS:
Petitioner, a domestic corporation duly existing under the
laws of the Philippines, has an aggregate plant at
Montalban, Rizal which processes rock aggregates mined
by it from private lands, and maintains and operates a plant
at Longos, Quezon City for the production of ready-mixed
concrete and plant-mixed hot asphalt. Sometime in 1968,
the agents of respondent Commission on Internal Revenue
(CIR) conducted an investigation of petitioner's tax
liabilities, and assessed and demanded payment from
petitioner the amount of P244,002.76 as sales and ad
valorem taxes for the first semester of 1968, inclusive of
surcharges.
Instead of paying, the petitioner appealed to respondent
CTA. The said Court concluded that petitioner is a
manufacturer subject to the 7% sales tax under the Section
Section 186 of the 1968 National Internal Revenue Code,
and ordered it to pay what the respondent CIR demands,
plus interest at the rate of 14% per centum from January 1,
1973 up to the date of full payment thereof pursuant to
Section 183 (now 193) of the same Code. Petitioner
contends, however, that it is a contractor within the
meaning of Section 191 under the same Code, that its
business falls under "other construction work contractors"
or "other independent contractors", and that it produced
asphalt and concrete mix only upon previous orders.
ISSUE:
Is the petitioner a contractor subject to the 3% contractor's
tax under Section 191 or a manufacturer subject to the 7%
sales tax under Section 186?
COURT RULING:
The Supreme Court affirmed respondent CTAs decision
and declared that petitioner is a manufacturer as defined by
Section 194(x), now Section 187(x), of the Tax Code. It
reiterated the respondent CTAs finding that petitioner was
formed and organized primarily as a manufacturer; that it
has an aggregate plant at Montalban, Rizal, which
processes rock aggregates mined by it from private lands; it
operates a concrete batching plant at Longos, Quezon City
where the specified aggregates from its plant at Montalban
are mixed with sand and cement, after which water is added
and the concrete mixture is sold and delivered to
customers; and at its plant site at Longos, Quezon City,
petitioner has also an asphalt mixing machinery where
bituminous asphalt mix is manufactured.
Fule v. CA
Facts:
Gregorio Fule, a banker and a jeweller, offered to sell his
parcel of land to Dr. Cruz in exchange for P40,000 and a
diamond earring owned by the latter. A deed of absolute
sale was prepared by Atty. Belarmino, and on the same day
Fule went to the bank with Dichoso and Mendoza, and Dr.
Cruz arrived shortly thereafter. Dr. Cruz got the earrings
from her safety deposit box and handed it to Fule who,
when asked if those were alright, nodded and took the
earrings. Two hours after, Fule complained that the earrings
were fake. He files a complaint to declare the sale null and
void on the ground of fraud and deceit.
Issue:
Whether the sale should be nullified on the ground of fraud
Held:
A contract of sale is perfected at the moment there is a
meeting of the minds upon the thing which is the object of
the contract and upon the price. Being consensual, a
contract of sale has the force of law between the
contracting parties and they are expected to abide in good
faith by their respective contractual commitments. It is
evident from the facts of the case that there was a meeting
of the minds between petitioner and Dr. Cruz. As such,
they are bound by the contract unless there are reasons or
circumstances that warrant its nullification.
Contracts that are voidable or annullable, even though there
may have been no damage to the contracting parties are: (1)
those where one of the parties is incapable of giving
consent to a contract; and (2) those where the consent is
vitiated by mistake, violence, intimidation, undue influence
or fraud. The records, however, are bare of any evidence
manifesting that private respondents employed such
insidious words or machinations to entice petitioner into
entering the contract of barter. It was in fact petitioner who
resorted to machinations to convince Dr. Cruz to exchange
her jewelry for the Tanay property.
Furthermore, petitioner was afforded the reasonable
opportunity required in Article 1584 of the Civil Code
within which to examine the jewelry as he in fact accepted
them when asked by Dr. Cruz if he was satisfied with the
same. By taking the jewelry outside the bank, petitioner
executed an act which was more consistent with his
exercise of ownership over it. This gains credence when it
is borne in mind that he himself had earlier delivered the
Tanay property to Dr. Cruz by affixing his signature to the
contract of sale. That after two hours he later claimed that
the jewelry was not the one he intended in exchange for his
Tanay property, could not sever the juridical tie that now
bound him and Dr. Cruz. The nature and value of the thing
he had taken preclude its return after that supervening
period within which anything could have happened, not
excluding the alteration of the jewelry or its being switched
with an inferior kind.
Ownership over the parcel of land and the pair of emerald-
cut diamond earrings had been transferred to Dr. Cruz and
petitioner, respectively, upon the actual and constructive
delivery thereof. Said contract of sale being absolute in
nature, title passed to the vendee upon delivery of the thing
sold since there was no stipulation in the contract that title
to the property sold has been reserved in the seller until full
payment of the price or that the vendor has the right to
unilaterally resolve the contract the moment the buyer fails
to pay within a fixed period.
While it is true that the amount of P40,000.00 forming part
of the consideration was still payable to petitioner, its
nonpayment by Dr. Cruz is not a sufficient cause to
invalidate the contract or bar the transfer of ownership and
possession of the things exchanged considering the fact that
their contract is silent as to when it becomes due and
demandable.