the latter told her not to worry as he would be the one to pay for the

SECOND DIVISION taxes and she would receive the net amount of P3,000,000.[6]

To conform with the consideration stated in the Deed of Absolute Sale,

SPOUSES CARMEN S. TONGSON G.R. No. 167874 the parties executed another Memorandum of Agreement, which
and JOSE C. TONGSON allegedly replaced the first Memorandum of Agreement,[7] showing that
substituted by his children namely: Present: the selling price of the land was only P400,000.[8]
JOSE TONGSON, JR.,
RAUL TONGSON, CARPIO, J., Chairperson, Upon signing the Deed of Absolute Sale, Napala paid P200,000 in
TITA TONGSON, BRION, cash to the Spouses Tongson and issued a postdated Philippine
GLORIA TONGSON DEL CASTILLO, National Bank (PNB) check in the amount
ALMA TONGSON, ABAD, and of P2,800,000,[9] representing the remaining balance of the purchase
Petitioners, PEREZ, JJ. price of the subject property. Thereafter, TCT No. 143020 was
cancelled and TCT No. T-186128 was issued in the name of EPBI.[10]
- versus -
When presented for payment, the PNB check was dishonored for the
reason Drawn Against Insufficient Funds. Despite the Spouses
EMERGENCY PAWNSHOP BULA, Promulgated: Tongson's repeated demands to either pay the full value of the check
INC. and DANILO R. NAPALA, or to return the subject parcel of land, Napala failed to do either. Left
Respondents. January 15, 2010 with no other recourse, the Spouses Tongson filed with the Regional
x-----------------------------------------------------------------------------------------x Trial Court, Branch 16, Davao City a Complaint for Annulment of
Contract and Damages with a Prayer for the Issuance of a Temporary
DECISION Restraining Order and a Writ of Preliminary Injunction.[11]

CARPIO, J.:
The Case
Before the Court is a petition for review[1] of the 31 August 2004
Decision[2] and 10 March 2005 Resolution[3] of the Court of Appeals in
CA-G.R. CV No. 58242. In the 31 August 2004 Decision, the Court of
Appeals partially granted the appeal filed by Emergency Pawnshop
Bula, Inc. (EPBI) and Danilo R. Napala (Napala) by modifying the
decision of the trial court. In the 10 March 2005 Resolution, the Court
In their Answer, respondents countered that Napala had already
delivered to the Spouses Tongson the amount of P2,800,000
representing the face value of the PNB check, as evidenced by a
receipt issued by the Spouses Tongson. Respondents pointed out that
the Spouses Tongson never returned the PNB check claiming that it
was misplaced.Respondents asserted that the payment they made
rendered the filing of the complaint baseless.[12]
At the pre-trial, Napala admitted, among others, issuing the postdated
PNB check in the sum of P2,800,000.[13] The Spouses Tongson, on
the other hand, admitted issuing a receipt which showed that they
received the PNB check from Napala. Thereafter, trial ensued.
The Ruling of the Trial Court

of Appeals denied the motion for partial reconsideration filed by the

Spouses Jose C. Tongson and Carmen S. Tongson (Spouses The trial court found that the purchase price of the subject property has
Tongson). not been fully paid and that Napalas assurance to the Spouses
Tongson that the PNB check would not bounce constituted fraud that
The Facts
induced the Spouses Tongson to enter into the sale. Without such

In May 1992, Napala offered to purchase from the Spouses Tongson assurance, the Spouses Tongson would not have agreed to the

their 364-square meter parcel of land, situated in Davao City and contract of sale. Accordingly, there was fraud within the ambit of Article

covered by Transfer Certificate of Title (TCT) No. 143020, 1338 of the Civil Code,[14] justifying the annulment of the contract of

for P3,000,000. Finding the offer acceptable, the Spouses Tongson sale, the award of damages and attorneys fees, and payment of costs.

executed with Napala a Memorandum of Agreement[4] dated 8 May

The dispositive portion of the 9 December 1996 Decision of the trial
1992.
court reads:
On 2 December 1992, respondents lawyer Atty. Petronilo A. Raganas,
Jr. prepared a Deed of Absolute Sale[5] indicating the consideration as WHEREFORE, judgment is hereby rendered
only P400,000. When Carmen Tongson noticed that the consideration
was very low, she [complained] and called the attention of Napala but I Annulling the contract entered into by the plaintiffs with
the defendants;
 II Declaring the writs of preliminary injunctions a) the sum of P2,800,000.00
issued permanent; representing the balance of
III Ordering defendants to: the purchase price of the
1) reconvey the property subject matter of the case to the plaintiffs; subject parcel of land, plus
2) pay plaintiffs:a) P100,000 as moral damages; b) P50,000 as interest at the legal rate of
exemplary damages; 6% per annum computed
c) P20,000 as attorneys fees; and from the date of filing of the
d) P35,602.50 cost of suit broken down as follows: complaint on 11 February
P70.00 bond fee 1993, until the finality of the
P60.00 lis pendens fee assailed decision; thereafter,
P902.00 docket fee the interest due shall be at
P390.00 docket fee the legal rate of 12% per
P8.00 summons fee annum until fully paid;
P12.00 SDF
P178.50 Xerox b) P50,000 as moral damages;
P9,000 Sidcor Insurance Bond fee c) P25,000 as exemplary damages;
P25,000 Sidcor Insurance Bond fee d) P20,000 as attorneys fees; and
e) The costs of suit in the total amount of P35,602.50.
or the total sum of P205,602.50.
It is understood, however, that plaintiffs entitlement to items a to d, is
It is further ordered that the monetary award be offsetted [sic] to subject to the condition that they have not received the same or
defendants downpayment of P200,000 thereby leaving a balance equivalent amounts in criminal case for Violation of Batas Pambansa
of P5,602.50.[15] Bilang 22, docketed as Criminal Case No. 30508-93, before the
Regional Trial Court of Davao City, Branch 12, instituted against the
defendant Danilo R. Napala by plaintiff Carmen S. Tongson.
Respondents appealed to the Court of Appeals.
SO ORDERED.[16]
The Ruling of the Court of Appeals
The Spouses Tongson filed a partial motion for reconsideration which
The Court of Appeals agreed with the trial courts finding that
Napala employed fraud when he misrepresented to the Spouses was denied by the Court of Appeals in its Resolution dated 10 March
Tongson that the PNB check in the amount of P2,800,000 would be
properly funded at its maturity. However, the Court of Appeals found 2005.
that the issuance and delivery of the PNB check and fraudulent
representation made by Napala could not be considered as the The Issues
determining cause for the sale of the subject parcel of land. Hence,
such fraud could not be made the basis for annulling the contract of
sale. Nevertheless, the fraud employed by Napala is a proper and The Spouses Tongson raise the following issues:
valid basis for the entitlement of the Spouses Tongson to the balance
of the purchase price in the amount of P2,800,000 plus interest at the
legal rate of 6% per annum computed from the date of filing of the 1. WHETHER THE CONTRACT OF SALE
CAN BE ANNULLED BASED ON THE
complaint on 11 February 1993.
FRAUD EMPLOYED BY NAPALA; and
Finding the trial courts award of damages unconscionable, the Court
of Appeals reduced the moral damages from P100,000 to P50,000
and the exemplary damages from P50,000to P25,000. 2. WHETHER THE COURT OF APPEALS
ERRED IN REDUCING THE AMOUNT OF
DAMAGES AWARDED BY THE TRIAL
The dispositive portion of the 31 August 2004 Decision of the Court of COURT.
Appeals reads:
The Ruling of the Court
WHEREFORE, the instant appeal is PARTIALLY The petition has merit.
GRANTED. The assailed decision of the Regional
Trial Court, 11th Judicial Region, Branch 16, On the existence of fraud
Davao City, in Civil Case No. 21,858-93, is hereby
MODIFIED, to read:

WHEREFORE, judgment is hereby A contract is a meeting of the minds between two persons, whereby
rendered ordering defendants to pay
plaintiffs: one is bound to give something or to render some service to the
other.[17] A valid contract requires the concurrence of the following

essential elements: (1) consent or meeting of the minds, that is,
consent to transfer ownership in exchange for the price; (2)
determinate subject matter; and (3) price certain in money or its
equivalent.[18]
In the present case, there is no question that the subject matter of the
sale is the 364-square meter Davao lot owned by the Spouses
Tongson and the selling price agreed upon by the parties
is P3,000,000. Thus, there is no dispute as regards the presence of
the two requisites for a valid sales contract, namely, (1) a determinate
subject matter and (2) a price certain in money.
The problem lies with the existence of the remaining element, which is
consent of the contracting parties, specifically, the consent of the
Spouses Tongson to sell the property to Napala. Claiming that their
consent was vitiated, the Spouses Tongson point out that Napalas
fraudulent representations of sufficient funds to pay for the property
induced them into signing the contract of sale. Such fraud, according
to the Spouses Tongson, renders the contract of sale void.
On the contrary, Napala insists that the Spouses Tongson willingly
consented to the sale of the subject property making the contract of
sale valid. Napala maintains that no fraud attended the execution of
the sales contract.
The trial and appellate courts had conflicting findings on the question
of whether the consent of the Spouses Tongson was vitiated by fraud.
While the Court of Appeals agreed with the trial courts finding that
Napala employed fraud when he assured the Spouses Tongson that
the postdated PNB check was fully funded when it fact it was not, the
Court of Appeals disagreed with the trial courts ruling that such fraud
could be the basis for the annulment of the contract of sale between
the parties.
Under Article 1338 of the Civil Code, there is fraud when, through
insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which, without them, he would
not have agreed to. In order that fraud may vitiate consent, it must be
the causal (dolo causante), not merely the incidental (dolo incidente),
inducement to the making of the contract.[19] Additionally, the fraud
must be serious.[20]
We find no causal fraud in this case to justify the annulment of the
contract of sale between the parties. It is clear from the records that
the Spouses Tongson agreed to sell their 364-square meter Davao
property to Napala who offered to pay P3,000,000 as purchase price
therefor. Contrary to the Spouses Tongsons belief that the fraud
employed by Napala was already operational at the time of the
perfection of the contract of sale, the misrepresentation by Napala that
the postdated PNB check would not bounce on its maturity hardly
equates to dolo causante. Napalas assurance that the check he
issued was fully funded was not the principal inducement for the
Spouses Tongson to sign the Deed of Absolute Sale. Even before
Napala issued the check, the parties had already consented and
agreed to the sale transaction. The Spouses Tongson were never
tricked into selling their property to Napala. On the contrary, they
willingly accepted Napalas offer to purchase the property
at P3,000,000. In short, there was a meeting of the minds as to the
object of the sale as well as the consideration therefor.
Some of the instances where this Court found the existence of causal
fraud include: (1) when the seller, who had no intention to part with her
property, was tricked into believing that what she signed were papers
pertinent to her application for the reconstitution of her burned
certificate of title, not a deed of sale;[21] (2) when the signature of the
authorized corporate officer was forged;[22] or (3) when the seller was
seriously ill, and died a week after signing the deed of sale raising
doubts on whether the seller could have read, or fully understood, the
contents of the documents he signed or of the consequences of his
act.[23] Suffice it to state that nothing analogous to these badges of
causal fraud exists in this case.
However, while no causal fraud attended the execution of the sales
contract, there is fraud in its general sense, which involves a false
representation of a fact,[24] when Napala inveigled the Spouses
Tongson to accept the postdated PNB check on the representation
that the check would be sufficiently funded at its maturity. In other
words, the fraud surfaced when Napala issued the worthless check to
the Spouses Tongson, which is definitely not during the negotiation
and perfection stages of the sale. Rather, the fraud existed in the
consummation stage of the sale when the parties are in the process of
performing their respective obligations under the perfected contract of
sale. In Swedish Match, AB v. Court of Appeals,[25] the Court explained
the three stages of a contract, thus:
I n general, contracts undergo three distinct
stages, to wit: negotiation; perfection or birth; and
consummation. Negotiation begins from the time
the prospective contracting parties manifest their
interest in the contract and ends at the moment of
agreement of the parties. Perfection or birth of the
contract takes place when the parties agree upon
the essential elements of the contract.
Consummation occurs when the parties fulfill or
perform the terms agreed upon in the contract,
culminating in the extinguishment thereof.
 is but proper and justified. Accordingly, respondents must reconvey
Indisputably, the Spouses Tongson as the sellers had already
the subject property to the Spouses Tongson, who in turn shall refund
performed their obligation of executing the Deed of Sale, which led to
the initial payment of P200,000 less the costs of suit.
the cancellation of their title in favor of EPBI. Respondents as the
buyers, on the other hand, failed to perform their correlative obligation
Napalas claims that rescission is not proper and that he should be
of paying the full amount of the contract price. While Napala
given more time to pay for the unpaid remaining balance
paid P200,000 cash to the Spouses Tongson as partial payment,
of P2,800,000 cannot be countenanced. Having acted fraudulently in
Napala issued an insufficiently funded PNB check to pay the remaining
performing his obligation, Napala is not entitled to more time to pay
balance of P2.8 million. Despite repeated demands and the filing of the
the remaining balance of P2,800,000, and thereby erase the default
complaint, Napala failed to pay the P2.8 million until the present.
or breach that he had deliberately incurred.[27] To do otherwise would
Clearly, respondents committed a substantial breach of their reciprocal
be to sanction a deliberate and reiterated infringement of the
obligation, entitling the Spouses Tongson to the rescission of the sales
contractual obligations incurred by Napala, an attitude repugnant to
contract. The law grants this relief to the aggrieved party, thus:
the stability and obligatory force of contracts.[28]
Article 1191 of the Civil Code provides:
The Court notes that the selling price indicated in the Deed of Absolute
Article 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the Sale was only P400,000, instead of the true purchase price
obligors should not comply with what is incumbent of P3,000,000. The undervaluation of the selling price operates to
upon him.
defraud the government of the taxes due on the basis of the correct
The injured party may choose between the fulfillment and the
rescission of the obligation, with payment of damages in either purchase price. Under the law,[29] the sellers have the obligation to pay
case. He may also seek rescission, even after he has chosen
the capital gains tax. In this case, Napala undertook to advance the
fulfillment, if the latter should become impossible.
capital gains tax, among other fees, under the Memorandum of
Agreement, thus:

ATTY. ALABASTRO:
Article 1385 of the Civil Code provides the effects of rescission, viz:
Q Is it not a fact that you were the one who paid for the capital
ART. 1385. Rescission creates the obligation to
gains tax?
return the things which were the object of the
A No, I only advanced the money.
contract, together with their fruits, and the price
with its interest; consequently, it can be carried out
Q To whom?
only when he who demands rescission can return
A To BIR.
whatever he may be obliged to restore.
Neither shall rescission take place when the things which are the
COURT:
object of the contract are legally in the possession of third persons who
did not act in bad faith.
Q You were the one who went to the BIR to pay the capital gains tax?
A It is embodied in the memorandum
agreement.[30]
While they did not file an action for the rescission of the sales contract,
the Spouses Tongson specifically prayed in their complaint for the
While Carmen Tongson protested against the very low consideration,
annulment of the sales contract, for the immediate execution of a deed
she eventually agreed to the reduced selling price indicated in the
of reconveyance, and for the return of the subject property to
Deed of Absolute since Napala assured her not to worry about the
them.[26] The Spouses Tongson likewise prayed for such other reliefs
taxes and expenses, as he had allegedly made arrangements with the
which may be deemed just and equitable in the premises. In view of
Bureau of Internal Revenue (BIR) regarding the payment of the taxes,
such prayer, and considering respondents substantial breach of their
thus:
obligation under the sales contract, the rescission of the sales contract
 Q What is the amount in the Deed of Absolute
Sale?
A It was only Four Hundred Thousand. And he told me not to worry
because x x x the BIR and not to worry because he will pay me what
was agreed the amount of Three Million and he will be paying all these
expenses so I was thinking, if that is the case, anyway he paid me the
Two Hundred Thousand cash and a subsequent Two Point Eight
Million downpayment check so I really thought that he was paying the
whole amount.
COURT:
Proceed.
ATTY. LIZA:
Q So you eventually agreed that this consideration be reduced to Four
Hundred Thousand Pesos and to be reflected in the Deed of Absolute
Sale?
A Yes, but when I was complaining to him why it is so because I was
worried why that was like that but Mr. Napala told me dont worry
because [he] can remedy this. And I asked him how can [he] remedy
this? And he told me we can make another Memorandum of
Agreement.
COURT:
Q Before you signed the Deed of Absolute Sale, you found out the
amount?
A Yes, sir.
Q And you complained?
A Yes.[31]
Considering that the undervaluation of the selling price of the subject
property, initiated by Napala, operates to defraud the government of
the correct amount of taxes due on the sale, the BIR must therefore
be informed of this Decision for its appropriate action.
On the award of damages
Citing Article 1338 of the Civil Code, the trial court awarded P100,000
moral damages and P50,000 exemplary damages to the Spouses
Tongson. While agreeing with the trial court on the Spouses Tongsons
entitlement to moral and exemplary damages, the Court of Appeals
reduced such awards for being unconscionable. Thus, the moral
damages was reduced from P100,000 to P50,000, and the exemplary
damages was reduced from P50,000 to P25,000.
As discussed above, Napala defrauded the Spouses Tongson in his
acts of issuing a worthless check and representing to the Spouses
Tongson that the check was funded, committing in the process a
substantial breach of his obligation as a buyer. For such fraudulent
acts, the law, specifically the Civil Code, awards moral damages to the
injured party, thus:
ART. 2220. Willful injury to property may be a
legal ground for awarding moral damages if the
court should find that, under the circumstances,
such damages are justly due. The same rule
applies to breaches of contract where the
defendant acted fraudulently or in bad
faith. (Emphasis supplied)
Considering that the Spouses Tongson are entitled to moral damages,
the Court may also award exemplary damages, thus:
ART. 2232. In contracts and quasi-contracts, the
court may award exemplary damages if the
defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.
Article 2234. When the amount of the exemplary
damages need not be proved, the plaintiff must
show that he is entitled to moral, temperate or
compensatory damages before the court may
consider the question of whether or not
exemplary damages would be awarded. In
case liquidated damages have been agreed upon,
although no proof of loss is necessary in order that
such liquidated damages may be recovered,
nevertheless, before the court may consider the
question of granting exemplary in addition to the
liquidated damages, the plaintiff must show that
he would be entitled to moral, temperate or
compensatory damages were it not for the
stipulation for liquidated damages. (Emphasis
supplied)
Accordingly, we affirm the Court of Appeals awards of moral and
exemplary damages, which we find equitable under the circumstances
in this case.
WHEREFORE, we PARTIALLY GRANT the petition. We SET
ASIDE the 31 August 2004 Decision and 10 March 2005 Resolution
of the Court of Appeals in CA-G.R. CV No. 58242, except as to the
award of moral and exemplary damages, and ORDER the rescission
of the contract of sale between the Spouses Tongson and Emergency
Pawnshop Bula, Inc.
Let a copy of this Decision be forwarded to the Bureau of Internal
Revenue for its appropriate action.
SO ORDERED.
THIRD DIVISION registration and the corresponding titles of the lots in favor of the
Caballeros.[4]

CARMEN DEL PRADO, G.R. No. 148225

Petitioner, On June 11, 1990, respondents sold to petitioner, Carmen del Prado,
Present:
Lot No. 11909 on the basis of the tax declaration covering the property.
The pertinent portion of the deed of sale reads as follows:
CORONA, J.,
versus - That we, Spouses ANTONIO L.
Chairperson, CABALLERO and LEONARDA B.
CABALLERO, Filipinos, both of legal
NACHURA, age and residents of Talamban, Cebu
DEL CASTILLO,* City, Philippines, for and in
SPOUSES ANTONIO L. CABALLERO consideration of the sum of FORTY
and LEONARDA CABALLERO, ABAD,* and THOUSAND PESOS (P40,000.00),
Philippine Currency, paid by CARMEN
Respondents. MENDOZA, JJ. DEL PRADO, Filipino, of legal age,
single and a resident of Sikatuna St.,
Cebu City, Philippines, the receipt of
Promulgated: which is full is hereby acknowledged, do
by these presents SELL, CEDE,
TRANSFER, ASSIGN & CONVEY unto
March 3, 2010 the said CARMEN DEL PRADO, her
heirs, assigns and/or successors-in-
interest, one (1) unregistered parcel of
land, situated at Guba, Cebu City,
x------------------------------------------------------------------------------------x
Philippines, and more particularly
described and bounded, as follows: A
parcel of land known as Cad. Lot No.
DECISION 11909, bounded as follows:
North : Lot 11903 East : Lot 11908
NACHURA, J.: West : Lot 11910 South : Lot 11858 & 11912 containing an
area of 4,000 square meters,more or less, covered by Tax
This is a petition for review on certiorari of the decision[1] of the Court Dec. No. 00787 of the Cebu City Assessors
of Appeals (CA) dated September 26, 2000 and its resolution denying Office, Cebu City. of which parcel of land we are the
absolute and lawful owners.
the motion for reconsideration thereof.
Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909,
The facts are as follows: was issued only on November 15, 1990, and entered in the Registration
Book of the City of Cebu on December 19, 1990.[5] Therein, the
In a judgment rendered on February 1, 1985 in Cadastral Case No. technical description of Lot No. 11909 states that said lot measures
about 14,457 square meters, more or less.[6]
N-6 (LRC Rec. No. N-611), Judge Juan Y. Reyes of the Regional Trial
Court (RTC) of Cebu City, Branch 14, adjudicated in favor of Spouses On March 20, 1991, petitioner filed in the same cadastral
Antonio L. Caballero and Leonarda B. Caballero several parcels of proceedings a Petition for Registration of Document Under
land situated in Guba, Cebu City, one of which was Cadastral Lot No. Presidential Decree (P.D.) 1529[7] in order that a certificate of title be
11909, the subject of this controversy.[2] On May 21, 1987, Antonio issued in her name, covering the whole Lot No. 11909. In the petition,
Caballero moved for the issuance of the final decree of registration for petitioner alleged that the tenor of the instrument of sale indicated that
their lots.[3] Consequently, on May 25, 1987, the same court, through the sale was for a lump sum or cuerpo cierto, in which case, the vendor
then Presiding Judge Renato C. Dacudao, ordered the National Land was bound to deliver all that was included within said boundaries even
Titles and Deeds Registration Administration to issue the decree of when it exceeded the area specified in the contract. Respondents
opposed, on the main ground that only 4,000 sq m of Lot No. 11909
was sold to petitioner. They claimed that the sale was not for a cuerpo
cierto. They moved for the outright dismissal of the petition on grounds
I.
of prescription and lack of jurisdiction.
After trial on the merits, the court found that petitioner had established
a clear and positive right to Lot No. 11909. The intended sale between
the parties was for a lump sum, since there was no evidence presented
that the property was sold for a price per unit. It was apparent that the
subject matter of the sale was the parcel of land, known as Cadastral
Lot No. 11909, and not only a portion thereof.[8] Thus, on August 2,
1993, the court a quo rendered its decision with the following
dispositive portion:
WHEREFORE, premises considered, the petition is hereby granted
and judgment is hereby rendered in favor of herein petitioner. The
Register of Deeds of the City of Cebu is hereby ordered and directed
to effect the registration in his office of the Deed of Absolute Sale
between Spouses Antonio Caballero and Leonarda Caballero and
Petitioner, Carmen del Prado dated June 11, 1990 covering Lot No.
11909 after payment of all fees prescribed by law. Additionally, the
Register of Deeds of the City of Cebu is hereby ordered to cancel
Original Certificate No. 1305 in the name of Antonio Caballero and
Leonarda Caballero and the Transfer Certificate of Title be issued in
the name of Petitioner Carmen del Prado covering the entire parcel
of land known as Cadastral Lot No. 11909.[9]
An appeal was duly filed. On September 26, 2000, the CA
promulgated the assailed decision, reversing and setting aside the
decision of the RTC.
The CA no longer touched on the character of the sale,
because it found that petitioner availed herself of an improper
remedy. The petition for registration of document is not one of the
remedies provided under P.D. No. 1529, after the original
registration has been effected. Thus, the CA ruled that the lower
court committed an error when it assumed jurisdiction over the
petition, which prayed for a remedy not sanctioned under
the Property Registration Decree. Accordingly, the CA disposed,
as follows:
IN VIEW OF ALL THE FOREGOING, the
appealed decision is REVERSED and SET ASIDE and a
new one entered dismissing the petition for lack of
jurisdiction. No pronouncement as to costs.[10]
Aggrieved, petitioner filed the instant petition, raising the following
issues:
WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE ERROR IN
MAKING FINDINGS OF FACT CONTRARY TO
THAT OF THE TRIAL COURT[;]
II. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE ERROR IN FAILING TO RULE THAT THE
SALE OF THE LOT IS FOR A LUMP SUM OR CUERPO CIERTO[;]
III. WHETHER OR NOT THE COURT A
QUO HAS JURISDICTION OVER THE PETITION FOR
REGISTRATION OF THE DEED OF ABSOLUTE SALE DATED 11
JUNE 1990 EXECUTED BETWEEN HEREIN PETITIONER AND
RESPONDENTS[.][11]
The core issue in this case is whether or not the sale of the
land was for a lump sum or not.
Petitioner asserts that the plain language of the Deed of Sale shows
that it is a sale of a real estate for a lump sum, governed under Article
1542 of the Civil Code.[12] In the contract, it was stated that the land
contains an area of 4,000 sq m more or less, bounded on the North by
Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos.
11858 & 11912, and on the West by Lot No. 11910. When the OCT
was issued, the area of Lot No. 11909 was declared to be 14,475 sq
m, with an excess of 10,475 sq m. In accordance with Article 1542,
respondents are, therefore, duty-bound to deliver the whole area within
the boundaries stated, without any corresponding increase in the
price.Thus, petitioner concludes that she is entitled to have the
certificate of title, covering the whole Lot No. 11909, which was
originally issued in the names of respondents, transferred to her name.
We do not agree.
In Esguerra v. Trinidad,[13] the Court had occasion to discuss the
matter of sales involving real estates. The Courts pronouncement is
quite instructive:
In sales involving real estate, the parties may choose between two
types of pricing agreement: a unit price contract wherein the
purchase price is determined by way of reference to a stated rate per
unit area (e.g., P1,000 per square meter), or a lump sum
contract which states a full purchase price for an immovable the area
of which may be declared based on the estimate or where both the
area and boundaries are stated (e.g., P1 million for 1,000 square
 meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals (478 SCRA
circumstances. Citing change in the physical nature of the property, it
451), the Court discussed the distinction:
was therein established that the excess area at the southern portion
was a product of reclamation, which explained why the lands technical
In a unit price contract, the statement of area of immovable is not
conclusive and the price may be reduced or increased depending on description in the deed of sale indicated the seashore as its southern
the area actually delivered. If the vendor delivers less than the area boundary, hence, the inclusion of the reclaimed area was declared
agreed upon, the vendee may oblige the vendor to deliver all that
unreasonable.[15]
may be stated in the contract or demand for the proportionate
reduction of the purchase price if delivery is not possible. If the
vendor delivers more than the area stated in the contract, the vendee In the instant case, the deed of sale is not one of a unit price
has the option to accept only the amount agreed upon or to accept contract. The parties agreed on the purchase price of P40,000.00 for
the whole area, provided he pays for the additional area at the
a predetermined area of 4,000 sq m, more or less, bounded on the
contract rate.
North by Lot No. 11903, on the East by Lot No. 11908, on the South
xxxx
by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. In a
In the case where the area of an immovable is stated in the contract
contract of sale of land in a mass, the specific boundaries stated in the
based on an estimate, the actual area delivered may not measure up
exactly with the area stated in the contract. According to Article 1542 contract must control over any other statement, with respect to the
of the Civil Code, in the sale of real estate, made for a lump sum and
area contained within its boundaries.[16]
not at the rate of a certain sum for a unit of measure or number, there
shall be no increase or decrease of the price, although there be a
Blacks Law Dictionary[17] defines the phrase more or less to
greater or less areas or number than that stated in the contract. . . .
mean:
Where both the area and the boundaries of the immovable are
declared, the area covered within the boundaries of the
About; substantially; or approximately; implying that both
immovable prevails over the stated area. In cases of conflict
between areas and boundaries, it is the latter which should parties assume the risk of any ordinary discrepancy. The words are
prevail. What really defines a piece of ground is not the area,
intended to cover slight or unimportant inaccuracies in quantity,
calculated with more or less certainty, mentioned in its description, but
the boundaries therein laid down, as enclosing the land and indicating Carter v. Finch, 186 Ark. 954, 57 S.W.2d 408; and are ordinarily to be
its limits. In a contract of sale of land in a mass, it is well established interpreted as taking care of unsubstantial differences or differences
that the specific boundaries stated in the contract must control over
any statement with respect to the area contained within its of small importance compared to the whole number of items
boundaries. It is not of vital consequence that a deed or contract of transferred.
sale of land should disclose the area with mathematical accuracy. It is
sufficient if its extent is objectively indicated with sufficient precision to Clearly, the discrepancy of 10,475 sq m cannot be
enable one to identify it. An error as to the superficial area is
immaterial. Thus, the obligation of the vendor is to deliver everything considered a slight difference in quantity. The difference in the area is
within the boundaries, inasmuch as it is the entirety thereof that obviously sizeable and too substantial to be overlooked. It is not a
distinguishes the determinate object.[14]
reasonable excess or deficiency that should be deemed included in
The Court, however, clarified that the rule laid down in Article 1542 is
the deed of sale.
not hard and fast and admits of an exception. It held:
We take exception to the avowed rule that this Court is not
A caveat is in order, however. The use of more or less or
a trier of facts. After an assiduous scrutiny of the records, we lend
similar words in designating quantity covers only a reasonable
credence to respondents claim that they intended to sell only 4,000 sq
excess or deficiency. A vendee of land sold in gross or with the
m of the whole Lot No. 11909, contrary to the findings of the lower
description more or less with reference to its area does not
court. The records reveal that when the parties made an ocular
thereby ipso facto take all risk of quantity in the land..Numerical data
inspection, petitioner specifically pointed to that portion of the lot,
are not of course the sole gauge of unreasonableness of the excess
which she preferred to purchase, since there were mango trees
or deficiency in area. Courts must consider a host of other factors. In
planted and a deep well thereon. After the sale, respondents delivered
one case (see Roble v. Arbasa, 414 Phil. 343 [2001]), the Court found
substantial discrepancy in area due to contemporaneous

and segregated the area of 4,000 sq m in favor of petitioner by fencing
off the area of 10,475 sq m belonging to them.[18]
Contracts are the law between the contracting parties. Sale,
by its very nature, is a consensual contract, because it is perfected by
mere consent. The essential elements of a contract of sale are the
following: (a) consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; (b) determinate subject
matter; and (c) price certain in money or its equivalent. All these
elements are present in the instant case.[19]
More importantly, we find no reversible error in the decision
of the CA. Petitioners recourse, by filing the petition for registration in
the same cadastral case, was improper. It is a fundamental principle
in land registration that a certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the
person whose name appears therein. Such indefeasibility commences
after one year from the date of entry of the decree of
registration.[20] Inasmuch as the petition for registration of document
did not interrupt the running of the period to file the appropriate petition
for review and considering that the prescribed one-year period had
long since expired, the decree of registration, as well as the certificate
of title issued in favor of respondents, had become incontrovertible.[21]
WHEREFORE, the petition is DENIED. SO ORDERED.
G.R. No. L-59266 February 29, 1988
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.
BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the: (1)
Decision * of the 9th Division, Court of Appeals dated July 31,1981,
affirming with modification the Decision, dated August 25, 1972 of the
Court of First Instance ** of Cebu in civil Case No. 23-L entitled Atilano
G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos and
Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L.
de Cabigas; and (2) its Resolution dated December 16, 1981, denying
defendant-appellant's (Petitioner's) motion for reconsideration, for lack
of merit.
The undisputed facts as found by the Court of Appeals are as follows:
The Dignos spouses were owners of a parcel of land, known as Lot
No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On June
7, 1965, appellants (petitioners) Dignos spouses sold the said parcel
of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of
P28,000.00, payable in two installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of
P12,000.00, which was paid and acknowledged by the vendors in the
deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the
next installment in the sum of P4,000.00 to be paid on or before
September 15, 1965.On November 25, 1965, the Dignos spouses sold
the same land in favor of defendants spouses, Luciano Cabigas and
Jovita L. De Cabigas, who were then U.S. citizens, for the price of
P35,000.00. A deed of absolute sale (Exh. J, also marked Exh. 3) was
executed by the Dignos spouses in favor of the Cabigas spouses, and
which was registered in the Office of the Register of Deeds pursuant
to the provisions of Act No. 3344. As the Dignos spouses refused to
accept from plaintiff-appellant the balance of the purchase price of the
land, and as plaintiff- appellant discovered the second sale made by
defendants-appellants to the Cabigas spouses, plaintiff-appellant
brought the present suit. (Rollo, pp. 27-28)
After due trial, the Court of first Instance of Cebu rendered its Decision
on August 25,1972, the decretal portion of which reads:
WHEREFORE, the Court hereby declares the deed of sale executed
on November 25, 1965 by defendant Isabela L. de Dignos in favor of
defendant Luciano Cabigas, a citizen of the United States of America,
null and void ab initio, and the deed of sale executed by defendants
Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded.
Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the
sum, of Sixteen Thousand Pesos (P16,000.00) to the defendants-
spouses upon the execution of the Deed of absolute Sale of Lot No.
3453, Opon Cadastre and when the decision of this case becomes
final and executory. The plaintiff Atilano G. Jabil is ordered to
reimburse the defendants Luciano Cabigas and Jovita L. de Cabigas,
through their attorney-in-fact, Panfilo Jabalde, reasonable amount
corresponding to the expenses or costs of the hollow block fence, so
far constructed.
It is further ordered that defendants-spouses Silvestre T. Dignos and
Isabela Lumungsod de Dignos should return to defendants-spouses
Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as
equity demands that nobody shall enrich himself at the expense of
another.
The writ of preliminary injunction issued on September 23, 1966,
automatically becomes permanent in virtue of this decision.
With costs against the defendants.
From the foregoing, the plaintiff (respondent herein) and defendants-
spouss (petitioners herein) appealed to the Court of Appeals, which
appeal was docketed therein as CA-G.R. No. 54393-R, "Atilano G.
Jabil v. Silvestre T. Dignos, et al."
On July 31, 1981, the Court of Appeals affirmed the decision of the
lower court except as to the portion ordering Jabil to pay for the
expenses incurred by the Cabigas spouses for the building of a fence
upon the land in question. The disposive portion of said decision of the
Court of Appeals reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the
modification of the judgment as pertains to plaintiff-appellant above
indicated, the judgment appealed from is hereby AFFIRMED in all
other respects
With costs against defendants-appellants.
SO ORDERED.
Judgment MODIFIED.
A motion for reconsideration of said decision was filed by the
defendants- appellants (petitioners) Dignos spouses, but on
December 16, 1981, a resolution was issued by the Court of Appeals
denying the motion for lack of merit.
Hence, this petition.
In the resolution of February 10, 1982, the Second Division of this
Court denied the petition for lack of merit. A motion for reconsideration
of said resolution was filed on March 16, 1982. In the resolution dated
April 26,1982, respondents were required to comment thereon, which
comment was filed on May 11, 1982 and a reply thereto was filed on
July 26, 1982 in compliance with the resolution of June 16,1 982. On
August 9,1982, acting on the motion for reconsideration and on all
subsequent pleadings filed, this Court resolved to reconsider its
resolution of February 10, 1982 and to give due course to the instant
petition. On September 6, 1982, respondents filed a rejoinder to reply
of petitioners which was noted on the resolution of September 20,
1982.
Petitioners raised the following assignment of errors:
I lack of merit, but on motion for reconsideration and on the basis of all
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW
IN GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF
THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE
SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE
PROPERTY IN QUESTION TO THE RESPONDENT AND NOT
MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE
COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS
WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS
ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE
TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO
SELL.
II
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE
1592 OF THE NEW CIVIL CODE AS WARRANTING THE
ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION,
EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN
JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT.
III
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
REJECTING THE APPLICABILITY OF ARTICLES 2208,2217 and
2219 OF THE NEW CIVIL CODE AND ESTABLISHED
JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES
AND ATTORNEY'S FEES TO PETITIONERS.
IV
PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE
SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO COURT
WITH UNCLEAN HANDS.
V
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN
ERROR IN AFFIRMING WITH MODIFICATION THE DECISION OF
THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION,
MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF
THE QUESTIONED CONTRACT AND THE LAW APPLICABLE
THERETO.
The foregoing assignment of errors may be synthesized into two main
issues, to wit:
I. Whether or not subject contract is a deed of
absolute sale or a contract Lot sell.
II. Whether or not there was a valid rescission
thereof.
There is no merit in this petition.
It is significant to note that this petition was denied by the Second
Division of this Court in its Resolution dated February 1 0, 1 982 for
subsequent pleadings filed, the petition was given due course.
I.
The contract in question (Exhibit C) is a Deed of Sale, with the
following conditions:
1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos
P12,000.00) Phil. Philippine Currency as advance payment;
2. That Atilano G. Jabil is to assume the balance of Twelve Thousand
Pesos (P12,000.00) Loan from the First Insular Bank of Cebu;
3. That Atilano G. Jabil is to pay the said spouses the balance of Four.
Thousand Pesos (P4,000.00) on or before September 15,1965;
4. That the said spouses agrees to defend the said
Atilano G. Jabil from other claims on the said
property;
5. That the spouses agrees to sign a final deed of absolute sale in favor
of Atilano G. Jabil over the above-mentioned property upon the
payment of the balance of Four Thousand Pesos. (Original Record,
pp. 10-11)
In their motion for reconsideration, petitioners reiterated their
contention that the Deed of Sale (Exhibit "C") is a mere contract to sell
and not an absolute sale; that the same is subject to two (2) positive
suspensive conditions, namely: the payment of the balance of
P4,000.00 on or before September 15,1965 and the immediate
assumption of the mortgage of P12,000.00 with the First Insular Bank
of Cebu. It is further contended that in said contract, title or ownership
over the property was expressly reserved in the vendor, the Dignos
spouses until the suspensive condition of full and punctual payment of
the balance of the purchase price shall have been met. So that there
is no actual sale until full payment is made (Rollo, pp. 51-52).
In bolstering their contention that Exhibit "C" is merely a contract to
sell, petitioners aver that there is absolutely nothing in Exhibit "C" that
indicates that the vendors thereby sell, convey or transfer their
ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or
6) is a private instrument and the absence of a formal deed of
conveyance is a very strong indication that the parties did not intend
"transfer of ownership and title but only a transfer after full payment"
(Rollo, p. 52). Moreover, petitioners anchored their contention on the
very terms and conditions of the contract, more particularly paragraph
four which reads, "that said spouses has agreed to sell the herein
mentioned property to Atilano G. Jabil ..." and condition number five
which reads, "that the spouses agrees to sign a final deed of absolute
sale over the mentioned property upon the payment of the balance of
four thousand pesos."
Such contention is untenable.
By and large, the issues in this case have already been settled by this
Court in analogous cases.
Thus, it has been held that a deed of sale is absolute in nature although
denominated as a "Deed of Conditional Sale" where nowhere in the
contract in question is a proviso or stipulation to the effect that title to
the property sold is reserved in the vendor until full payment of the
purchase price, nor is there a stipulation giving the vendor the right to
unilaterally rescind the contract the moment the vendee fails to pay
within a fixed period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305).
A careful examination of the contract shows that there is no such
stipulation reserving the title of the property on the vendors nor does it
give them the right to unilaterally rescind the contract upon non-
payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under
Article 1458 of the Civil Code, are present, such as: (1) consent or
meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent. In addition, Article 1477 of the same
Code provides that "The ownership of the thing sold shall be
transferred to the vendee upon actual or constructive delivery thereof."
As applied in the case of Froilan v. Pan Oriental Shipping Co., et al.
(12 SCRA 276), this Court held that in the absence of stipulation to the
contrary, the ownership of the thing sold passes to the vendee upon
actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of
the land sold in the case at bar, as subject Deed of Sale is a private
instrument, it is beyond question that there was actual delivery thereof.
As found by the trial court, the Dignos spouses delivered the
possession of the land in question to Jabil as early as March 27,1965
so that the latter constructed thereon Sally's Beach Resort also known
as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort
on January 15,1966 and Bevirlyn's Beach Resort on September 1,
1965. Such facts were admitted by petitioner spouses (Decision, Civil
Case No. 23-L; Record on Appeal, p. 108).
Moreover, the Court of Appeals in its resolution dated December
16,1981 found that the acts of petitioners, contemporaneous with the
contract, clearly show that an absolute deed of sale was intended by
the parties and not a contract to sell.
Be that as it may, it is evident that when petitioners sold said land to
the Cabigas spouses, they were no longer owners of the same and the
sale is null and void.
II.
Petitioners claim that when they sold the land to the Cabigas spouses,
the contract of sale was already rescinded.
Applying the rationale of the case of Taguba v. Vda. de Leon (supra)
which is on all fours with the case at bar, the contract of sale being
absolute in nature is governed by Article 1592 of the Civil Code. It is
undisputed that petitioners never notified private respondents Jabil by
notarial act that they were rescinding the contract, and neither did they
file a suit in court to rescind the sale. The most that they were able to
show is a letter of Cipriano Amistad who, claiming to be an emissary
of Jabil, informed the Dignos spouses not to go to the house of Jabil
because the latter had no money and further advised petitioners to sell
the land in litigation to another party (Record on Appeal, p. 23). As
correctly found by the Court of Appeals, there is no showing that
Amistad was properly authorized by Jabil to make such extra-judicial
rescission for the latter who, on the contrary, vigorously denied having
sent Amistad to tell petitioners that he was already waiving his rights
to the land in question. Under Article 1358 of the Civil Code, it is
required that acts and contracts which have for their object the
extinguishment of real rights over immovable property must appear in
a public document.
Petitioners laid considerable emphasis on the fact that private
respondent Jabil had no money on the stipulated date of payment on
September 15,1965 and was able to raise the necessary amount only
by mid-October 1965.
It has been ruled, however, that "where time is not of the essence of
the agreement, a slight delay on the part of one party in the
performance of his obligation is not a sufficient ground for the
rescission of the agreement" (Taguba v. Vda. de Leon, supra).
Considering that private respondent has only a balance of P4,000.00
and was delayed in payment only for one month, equity and justice
mandate as in the aforecited case that Jabil be given an additional
period within which to complete payment of the purchase price.
WHEREFORE, the petition filed is hereby Dismissed for lack of merit
and the assailed decision of the Court of Appeals is Affirmed in toto.
[G.R. No. 103577. October 7, 1996]
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and
on behalf of Floraida C. Tupper, as attorney-in-fact),
CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and
CATALINA BALAIS MABANAG, petitioners, vs. THE
COURT OF APPEALS, CONCEPCION D. ALCARAZ and
RAMONA PATRICIA ALCARAZ, assisted by GLORIA F.
NOEL as attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last named,
Catalina Balais Mabanag) to consummate the sale of a parcel of land
with its improvements located along Roosevelt Avenue in Quezon City
entered into by the parties sometime in January 1985 for the price
of P1,240,000.00.
The undisputed facts of the case were summarized by
respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al.
(hereinafter referred to as Coronels) executed a document entitled
Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia
Alcaraz (hereinafter referred to as Ramona) which is reproduced
hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon
City, the sum of Fifty Thousand Pesos purchase price of our inherited
house and lot, covered by TCT No. 119627 of the Registry of Deeds
of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our
deceased father, Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will
immediately execute the deed of absolute sale of said property and
Miss Ramona Patricia Alcaraz shall immediately pay the balance of
the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00)
pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt
of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the
Coronels will execute the deed of absolute sale in favor of Ramona
and the latter will pay the former the whole balance of One Million One
Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion
D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona,
paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh.
B, Exh. 2).
On February 6, 1985, the property originally registered in the name of
the Coronels father was transferred in their names under TCT No.
327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT
No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter
referred to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred
Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh.
A) with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a
specific performance against the Coronels and caused the annotation
of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh.
5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse
claim covering the same property with the Registry of Deeds of
Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale
over the subject property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in
the name of Catalina under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch
83, RTC, Quezon City) the parties agreed to submit the case for
decision solely on the basis of documentary exhibits.Thus, plaintiffs
therein (now private respondents) proffered their documentary
evidence accordingly marked as Exhibits A through J, inclusive of their
corresponding submarkings. Adopting these same exhibits as their
own, then defendants (now petitioners) accordingly offered and
marked them as Exhibits 1 through 10, likewise inclusive of their
corresponding submarkings.Upon motion of the parties, the trial court
gave them thirty (30) days within which to simultaneously submit their
respective memoranda, and an additional 15 days within which to
submit their corresponding comment or reply thereto, after which, the
case would be deemed submitted for resolution.
 On April 14, 1988, the case was submitted for resolution before
Judge Reynaldo Roura, who was then temporarily detailed to preside
over Branch 82 of the RTC of Quezon City. On March 1, 1989,
judgment was handed down by Judge Roura from his regular bench at
Macabebe, Pampanga for the Quezon City branch, disposing as
follows:
WHEREFORE, judgment for specific performance is hereby rendered
ordering defendant to execute in favor of plaintiffs a deed of absolute
sale covering that parcel of land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No. 331582) of the Registry
of Deeds for Quezon City, together with all the improvements existing
thereon free from all liens and encumbrances, and once
accomplished, to immediately deliver the said document of sale to
plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay
defendants the whole balance of the purchase price amounting
to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of
the Registry of Deeds for Quezon City in the name of intervenor is
hereby canceled and declared to be without force and
effect. Defendants and intervenor and all other persons claiming under
them are hereby ordered to vacate the subject property and deliver
possession thereof to plaintiffs. Plaintiffs claim for damages and
attorneys fees, as well as the counterclaims of defendants and
intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the
new presiding judge of the Quezon City RTC but the same was denied
by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision
and to render anew decision by the undersigned Presiding Judge
should be denied for the following reasons: (1) The instant case
became submitted for decision as of April 14, 1988 when the parties
terminated the presentation of their respective documentary evidence
and when the Presiding Judge at that time was Judge Reynaldo
Roura. The fact that they were allowed to file memoranda at some
future date did not change the fact that the hearing of the case was
terminated before Judge Roura and therefore the same should be
submitted to him for decision; (2) When the defendants and intervenor
did not object to the authority of Judge Reynaldo Roura to decide the
case prior to the rendition of the decision, when they met for the first
time before the undersigned Presiding Judge at the hearing of a
pending incident in Civil Case No. Q-46145 on November 11, 1988,
they were deemed to have acquiesced thereto and they are now
estopped from questioning said authority of Judge Roura after they
received the decision in question which happens to be adverse to
them; (3) While it is true that Judge Reynaldo Roura was merely a
Judge-on-detail at this Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he returned
to his Official Station at Macabebe, Pampanga, he did not lose his
authority to decide or resolve cases submitted to him for decision or
resolution because he continued as Judge of the Regional Trial Court
and is of co-equal rank with the undersigned Presiding Judge. The
standing rule and supported by jurisprudence is that a Judge to whom
a case is submitted for decision has the authority to decide the case
notwithstanding his transfer to another branch or region of the same
court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision
dated March 1, 1989 rendered in the instant case, resolution of which
now pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties,
she is convinced that the Decision of March 1, 1989 is supported by
evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration
and/or to Annul Decision and Render Anew Decision by the Incumbent
Presiding Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December
16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos
(P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5,
1992. The last pleading, private respondents Reply Memorandum,
was filed on September 15, 1993. The case was, however, re-raffled
to undersigned ponente only on August 28, 1996, due to the voluntary
inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in
the disquisition of respondent court in the affirmance of the trial courts
decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the
resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled Receipt
of Down Payment which was offered in evidence by both
parties. There is no dispute as to the fact that the said document
embodied the binding contract between Ramona Patricia Alcaraz on
the one hand, and the heirs of Constancio P. Coronel on the other,
pertaining to a particular house and lot covered by TCT No. 119627,
as defined in Article 1305 of the Civil Code of the Philippines which
reads as follows:
Art. 1305. A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something
or to render some service.
While, it is the position of private respondents that the Receipt of
Down Payment embodied a perfected contract of sale, which perforce,
they seek to enforce by means of an action for specific performance,
petitioners on their part insist that what the document signified was a
mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who
left for the United States of America, said contract could not possibly
ripen into a contract of absolute sale.
 Plainly, such variance in the contending parties contention is
brought about by the way each interprets the terms and/or conditions
set forth in said private instrument. Withal, based on whatever relevant
and admissible evidence may be available on record, this Court, as
were the courts below, is now called upon to adjudge what the real
intent of the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract of
sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is lacking. In
a contract to sell, the prospective seller explicitly reserves the transfer
of title to the prospective buyer, meaning, the prospective seller does
not as yet agree or consent to transfer ownership of the property
subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase
price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full payment of
the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further
remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741
[1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the
respondent was a contract to sell where the ownership or title is
retained by the seller and is not to pass until the full payment of the
price, such payment being a positive suspensive condition and failure
of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring
binding force.
Stated positively, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, the prospective sellers
obligation to sell the subject property by entering into a contract of sale
with the prospective buyer becomes demandable as provided in Article
1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable. An accepted unilateral promise to
buy or to sell a determinate thing for a price certain is binding upon the
promissor of the promise is supported by a consideration distinct from
the price.
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract
of sale, the first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or
may not occur. If the suspensive condition is not fulfilled, the perfection
of the contract of sale is completely abated (cf. Homesite and Housing
Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery of the
property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, ownership
will not automatically transfer to the buyer although the property may
have been previously delivered to him. The prospective seller still has
to convey title to the prospective buyer by entering into a contract of
absolute sale.
It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted with,
but to a third person, as in the case at bench. In a contract to sell, there
being no previous sale of the property, a third person buying such
property despite the fulfillment of the suspensive condition such as the
full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such
case. Title to the property will transfer to the buyer after registration
because there is no defect in the owner-sellers title per se, but the
latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of
the suspensive condition, the sale becomes absolute and this will
definitely affect the sellers title thereto. In fact, if there had been
previous delivery of the subject property, the sellers ownership or title
to the property is automatically transferred to the buyer such that, the
seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second buyer of
the property who may have had actual or constructive knowledge of
such defect in the sellers title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good
faith. Such second buyer cannot defeat the first buyers title. In case a
title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the
task of deciphering the real nature of the contract entered into by
petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used
therein should be given their natural and ordinary meaning unless a
technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA
586 [1992]). Thus, when petitioners declared in the said Receipt of
Down Payment that they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon
City, the sum of Fifty Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No. 1199627 of the Registry
of Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase
price, the natural and ordinary idea conveyed is that they sold their
property.
When the Receipt of Down payment is considered in its entirety,
it becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate
of title was still in the name of petitioners father, they could not fully
effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title
in their names from that of their father, after which, they promised to
present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because
the sellers herein made no express reservation of ownership or title to
the subject parcel of land. Furthermore, the circumstance which
prevented the parties from entering into an absolute contract of sale
pertained to the sellers themselves (the certificate of title was not in
their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely
presume that, had the certificate of title been in the names of
petitioners-sellers at that time, there would have been no reason why
an absolute contract of sale could not have been executed and
consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at
bar did not merely promise to sell the property to private respondent
upon the fulfillment of the suspensive condition. On the contrary,
having already agreed to sell the subject property, they undertook to
have the certificate of title change to their names and immediately
thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell
where the sellers, after compliance by the buyer with certain terms and
conditions, promised to sell the property to the latter.What may be
perceived from the respective undertakings of the parties to the
contract is that petitioners had already agreed to sell the house and lot
they inherited from their father, completely willing to transfer ownership
of the subject house and lot to the buyer if the documents were then in
order. It just so happened, however, that the transfer certificate of title
was then still in the name of their father. It was more expedient to first
effect the change in the certificate of title so as to bear their
names. That is why they undertook to cause the issuance of a new
transfer of the certificate of title in their names upon receipt of the down
payment in the amount of P50,000.00. As soon as the new certificate
of title is issued in their names, petitioners were committed to
immediately execute the deed of absolute sale. Only then will the
obligation of the buyer to pay the remainder of the purchase price
arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installment by withholding ownership
over the property until the buyer effects full payment therefor, in the
contract entered into in the case at bar, the sellers were the ones who
were unable to enter into a contract of absolute sale by reason of the
fact that the certificate of title to the property was still in the name of
their father. It was the sellers in this case who, as it were, had the
impediment which prevented, so to speak, the execution of an contract
of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said Receipt of Down Payment was
prepared and signed by petitioners Romulo A. Coronel, et. al., the
parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title
from the name of petitioners father, Constancio P. Coronel, to their
names.
The Court significantly notes that this suspensive condition was,
in fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said
date, the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act
required for the consummation thereof being the delivery of the
property by means of the execution of the deed of absolute sale in a
public instrument, which petitioners unequivocally committed
themselves to do as evidenced by the Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil
Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.
From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well
as the extinguishment or loss of those already acquired, shall depend
upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioners names was fulfilled on
February 6, 1985, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as
sellers, were obliged to present the transfer certificate of title already
in their names to private respondent Ramona P. Alcaraz, the buyer,
and to immediately execute the deed of absolute sale, while the buyer
on her part, was obliged to forthwith pay the balance of the purchase
price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9
of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to
effect the transfer in our names from our deceased
father Constancio P. Coronel, the transfer certificate of
title immediately upon receipt of the downpayment
above-stated". The sale was still subject to this
suspensive condition. (Emphasis supplied.)
Petitioners themselves recognized that they entered into a
contract of sale subject to a suspensive condition. Only, they contend,
continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first
transferring the title to the property under their names, there could be
no perfected contract of sale. (Emphasis supplied.) not aware that they
have set their own trap for themselves, for Article 1186 of the Civil
Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more
controlling than these mere hypothetical arguments is the fact that
the condition herein referred to was actually and indisputably
fulfilled on February 6, 1985, when a new title was issued in the
names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh.
4).
The inevitable conclusion is that on January 19, 1985, as
evidenced by the document denominated as Receipt of Down
Payment (Exh. A; Exh. 1), the parties entered into a contract of sale
subject to the suspensive condition that the sellers shall effect the
issuance of new certificate title from that of their fathers name to their
names and that, on February 6, 1985, this condition was fulfilled (Exh.
D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides -
Art. 1187. The effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the constitution
of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each
case, the retroactive effect of the condition that has been complied
with.
the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time
of fulfillment or occurrence of the suspensive condition on February 6,
1985. As of that point in time, reciprocal obligations of both seller and
buyer arose.
Petitioners also argue there could been no perfected contract on
January 19, 1985 because they were then not yet the absolute owners
of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the
property, rights and obligations to the extent and value of the
inheritance of a person are transmitted through his death to another or
others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and
daughters of the decedent Constancio P. Coronel are compulsory
heirs who were called to succession by operation of law.Thus, at the
point their father drew his last breath, petitioners stepped into his
shoes insofar as the subject property is concerned, such that any rights
or obligations pertaining thereto became binding and enforceable upon
them. It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article 777,
Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not
be declared unless the creditors have been paid is rendered moot by
the fact that they were able to effect the transfer of the title to the
property from the decedents name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their
supposed lack of capacity to enter into an agreement at that time and
they cannot be allowed to now take a posture contrary to that which
they took when they entered into the agreement with private
respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be denied
or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject
property at the time of sale, petitioners cannot claim now that they were
not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a
perfected contract of sale between them and Ramona P. Alcaraz, the
latter breach her reciprocal obligation when she rendered impossible
the consummation thereof by going to the United States of America,
without leaving her address, telephone number, and Special Power of
Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which
reason, so petitioners conclude, they were correct in unilaterally
rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission
of the contract of sale in the instant case. We note that these supposed
grounds for petitioners rescission, are mere allegations found only in
their responsive pleadings, which by express provision of the rules, are
deemed controverted even if no reply is filed by the plaintiffs (Sec. 11,
Rule 6, Revised Rules of Court). The records are absolutely bereft of
any supporting evidence to substantiate petitioners allegations. We
have stressed time and again that allegations must be proven by
sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961];
Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the
United States of America on February 6, 1985, we cannot justify
petitioners-sellers act of unilaterally and extrajudicially rescinding the
contract of sale, there being no express stipulation authorizing the
sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA,
158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722
[1984])
Moreover, petitioners are estopped from raising the alleged
absence of Ramona P. Alcaraz because although the evidence on
record shows that the sale was in the name of Ramona P. Alcaraz as
the buyer, the sellers had been dealing with Concepcion D. Alcaraz,
Ramonas mother, who had acted for and in behalf of her daughter, if
not also in her own behalf. Indeed, the down payment was made by
Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2)
for and in behalf of Ramona P. Alcaraz. There is no evidence showing
that petitioners ever questioned Concepcions authority to represent
Ramona P. Alcaraz when they accepted her personal check. Neither
did they raise any objection as regards payment being effected by a
third person. Accordingly, as far as petitioners are concerned, the
physical absence of Ramona P. Alcaraz is not a ground to rescind the
contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in
default, insofar as her obligation to pay the full purchase price is
concerned. Petitioners who are precluded from setting up the defense
of the physical absence of Ramona P. Alcaraz as above-explained
offered no proof whatsoever to show that they actually presented the
new transfer certificate of title in their names and signified their
willingness and readiness to execute the deed of absolute sale in
accordance with their agreement. Ramonas corresponding obligation
to pay the balance of the purchase price in the amount
of P1,190,000.00 (as buyer) never became due and demandable and,
therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract
involving reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay
from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation.
In reciprocal obligations, neither party incurs in delay if the other does
not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfill his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the
contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner,
Catalina B. Mabanag, gave rise to a case of double sale where Article
1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof to the person who presents the oldest title, provided
there is good faith.
The record of the case shows that the Deed of Absolute Sale
dated April 25, 1985 as proof of the second contract of sale was
registered with the Registry of Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the name of Catalina B.
Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544
shall apply.
The above-cited provision on double sale presumes title or
ownership to pass to the buyer, the exceptions being: (a) when the
second buyer, in good faith, registers the sale ahead of the first buyer,
and (b) should there be no inscription by either of the two buyers, when
the second buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice
of the first buyer.
In his commentaries on the Civil Code, an accepted authority on
the subject, now a distinguished member of the Court, Justice Jose C.
Vitug, explains:
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second sale
cannot defeat the first buyers rights except when the second buyer first
registers in good faith the second sale (Olivares vs. Gonzales, 159
SCRA 33). Conversely, knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see also Astorga vs.
Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held
that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69
SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993
Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at
bar was annotated on the title of the subject property only on February
22, 1985, whereas, the second sale between petitioners Coronels and
petitioner Mabanag was supposedly perfected prior thereto or on
February 18, 1985. The idea conveyed is that at the time petitioner
Mabanag, the second buyer, bought the property under a clean title,
she was unaware of any adverse claim or previous sale, for which
reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is
not whether or not the second buyer in good faith but whether or not
said second buyer registers such second sale in good faith, that is,
without knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner
Mabanag could not have in good faith, registered the sale entered into
on February 18, 1985 because as early as February 22, 1985, a notice
of lis pendens had been annotated on the transfer certificate of title in
the names of petitioners, whereas petitioner Mabanag registered the
said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged
with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners title to the property at the time of the registration of the
property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired
knowledge that there was a previous sale of the same property to a
third party or that another person claims said property in a previous
sale, the registration will constitute a registration in bad faith and will
not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349
[1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs.
Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners
and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that
between petitioners and Catalina B. Mabanag on February 18, 1985,
was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact
an agency between Ramona as principal and Concepcion, her mother,
as agent insofar as the subject contract of sale is concerned, the issue
of whether or not Concepcion was also acting in her own behalf as a
co-buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not
touch this issue and no longer disturb the lower courts ruling on this
point.
WHEREFORE, premises considered, the instant petition is
hereby DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.
.GR. No. 123672 December 14, 2005
FERNANDO CARRASCOSO, JR., Petitioner,
vs.
THE HONORABLE COURT OF APPEALS, LAURO LEVISTE, as
Director and Minority Stockholder and On Behalf of Other
Stockholders of El Dorado Plantation, Inc. and EL DORADO
PLANTATION, INC., represented by one of its minority
stockholders, Lauro P. Leviste, Respondents.
G.R. No. 164489 December 14, 2005
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner,
vs.
LAURO LEVISTE, as Director and Minority Stockholder and On
Behalf of Other Stockholders of El Dorado Plantation, Inc., EL
DORADO PLANTATION, INC., represented by Minority
Stockholder, Lauro P. Leviste, and FERNANDO CARRASCOSO,
JR., Respondents.
DECISION
CARPIO MORALES, J.:
El Dorado Plantation, Inc. (El Dorado) was the registered owner of a
parcel of land (the property) with an area of approximately 1,825
hectares covered by Transfer Certificate of Title (TCT) No. T-
931 situated in Sablayan, Occidental Mindoro.
On February 15, 1972, at a special meeting of El Dorado’s Board of
Directors, a Resolution2 was passed authorizing Feliciano Leviste,
then President of El Dorado, to negotiate the sale of the property and
sign all documents and contracts bearing thereon.
On March 23, 1972, by a Deed of Sale of Real Property,3 El Dorado,
through Feliciano Leviste, sold the property to Fernando O.
Carrascoso, Jr. (Carrascoso).
The pertinent provisions of the Deed of Sale read:
NOW, THEREFORE, for and in consideration of the sum of ONE
MILLION EIGHT HUNDRED THOUSAND (1,800,000.00) PESOS,
Philippine Currency, the Vendor hereby sells, cedes, and transfer (sic)
unto the herein VENDEE, his heirs, successors and assigns, the
above-described property subject to the following terms and conditions
(sic):
1. Of the said sum of P1,800,000.00 which constitutes the full
consideration of this sale, P290,000.00 shall be paid, as it is hereby
paid, to the Philippines (sic) National Bank, thereby effecting the
release and cancellation of (sic) the present mortgage over the above-
described property.
2. That the sum of P210,000.00 shall be paid, as it is hereby paid by
the VENDEE to the VENDOR, receipt of which amount is hereby
acknowledged by the VENDOR.
3. The remaining balance of P1,300,000.00 plus interest thereon at the
rate of 10% per annum shall be paid by the VENDEE to the VENDOR
within a period of three (3) years, as follows:
(a) One (1) year from the date of the signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED
NINETEEN THOUSAND EIGHT HUNDRED THIRTY THREE &
33/100 (P519,833.33) PESOS.
(b) Two (2) years from the date of signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED
NINETTEN (sic) THOUSAND EIGHT HUNDRED AND THIRTY-
THREE & 33/100 (P519,833.33) PESOS.
(c) Three (3) years from the date of signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE Hundred
NINETEEN THOUSAND EIGHT HUNDRED AND THIRTY-THREE &
33/100 (P519,833.33) PESOS.
4. The title of the property, subject of this agreement, shall pass and
be transferred to the VENDEE who shall have full authority to register
the same and obtain the corresponding transfer certificate of title in his
name.
xxx
6. THE VENDOR certifies and warrants that the property above-
described is not being cultivated by any tenant and is therefore not
covered by the provisions of the Land Reform Code. If, therefore, the
VENDEE becomes liable under the said law, the VENDOR shall
reimburse the VENDEE for all expenses and damages he may incur
thereon.4(Underscoring supplied)
From the above-quoted provisions of the Deed of Sale, Carrascoso
was to pay the full amount of the purchase price on March 23, 1975.
On even date, the Board of Directors of El Dorado passed a Resolution
reading:
“RESOLVED that by reason of the sale of that parcel of land covered
by TCT No. T-93 to Dr. FERNANDO O. CARRASCOSO, JR., the
corporation interposes no objection to the property being
mortgage (sic) by Dr. FERNANDO O. CARRASCOSO, JR. to any
bank of his choice as long as the balance on the Deed of Sale
shall be recognized by Dr. FERNANDO O. CARRASCOSO, JR.;
“RESOLVED, FURTHER, that the corporation authorizes the preferred
(sic) claim on the property to be subordinated to any mortgage that
may be constituted by Dr. FERNANDO O. CARRASCOSO, JR.;
“RESOLVED, FINALLY, that in case of any mortgage on the property,
the corporation waives the preference of any vendor’s lien on the
property.”5 (Emphasis and underscoring supplied)
Feliciano Leviste also executed the following affidavit on the same day:
1. That by reason of the sale of that parcel of land covered by Transfer
Certificate of Title T-93 as evidenced by the Deed of Sale attached
hereto as Annex “A” and made an integral part hereof, the El Dorado
Plantation, Inc. has no objection to the aforementioned property
being mortgaged by Dr. Fernando O. Carrascoso, Jr. to any bank
of his choice, as long as the payment of the balance due the El
Dorado Plantation, Inc. under the Deed of Sale, Annex “A” hereof,
shall be recognized by the vendee therein, Dr. Fernando O.
Carrascoso, Jr.though subordinated to the preferred claim of the
mortgagee bank.
2. That in case of any mortgage on the property, the vendor hereby
waives the preference of any vendor’s lien on the property, subject
matter of the deed of sale.
3. That this affidavit is being executed to avoid any question on the
authority of Dr. Fernando O. Carrascoso, Jr. to mortgage the property
subject of the Deed of Sale, Annex “A” hereof, where the purchase
price provided therein has not been fully paid.
4. That this affidavit has been executed pursuant to a board resolution
of El Dorado Plantation, Inc.6(Emphasis and underscoring supplied)
On the following day, March 24, 1972, Carrascoso and his wife
Marlene executed a Real Estate Mortgage7 over the property in favor
of Home Savings Bank (HSB) to secure a loan in the amount
of P1,000,000.00. Of this amount, P290,000.00 was paid to Philippine
National Bank to release the mortgage priorly constituted on the
property and P210,000.00 was paid to El Dorado pursuant to above-
quoted paragraph Nos. 1 and 2 of the terms and conditions of the Deed
of Sale.8
The March 23, 1972 Deed of Sale of Real Property was registered and
annotated on El Dorado’s TCT No. T-93 as Entry No. 152409 on April
5, 1972. On even date, TCT No. T-93 covering the property was
cancelled and TCT No. T-605510 was in its stead issued by the
Registry of Deeds of Occidental Mindoro in the name of Carrascoso
on which the real estate mortgage in favor of HSB was annotated as
Entry No. 15242.11
On May 18, 1972, the real estate mortgage in favor of HSB was
amended to include an additional three year loan of P70,000.00 as
requested by the spouses Carrascoso.12 The Amendment of Real
Estate Mortgage was also annotated on TCT No. T-6055 as Entry No.
15486 on May 24, 1972.13
The 3-year period for Carrascoso to fully pay for the property on March
23, 1975 passed without him having complied therewith.
In the meantime, on July 11, 1975, Carrascoso and the Philippine Long
Distance Telephone Company (PLDT), through its President Ramon
Cojuangco, executed an Agreement to Buy and Sell14 whereby the
former agreed to sell 1,000 hectares of the property to the latter at a
consideration of P3,000.00 per hectare or a total ofP3,000,000.00.
The July 11, 1975 Agreement to Buy and Sell was not registered and
annotated on Carrascoso’s TCT No. T-6055.
Lauro Leviste (Lauro), a stockholder and member of the Board of
Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, by
letter15 dated December 27, 1976, called the attention of the Board to
Carrascoso’s failure to pay the balance of the purchase price of the
property amounting to P1,300,000.00. And Lauro’s lawyer manifested
that:
Because of the default for a long time of Mr. Carrascoso to pay the
balance of the consideration of the sale, Don Lauro Leviste, in his
behalf and in behalf of the other shareholders similarly situated like
him, want a rescission of the sale made by the El Dorado Plantation,
Inc. to Mr. Carrascoso. He desires that the Board of Directors take the
corresponding action for rescission.16
Lauro’s desire to rescind the sale was reiterated in two other
letters17 addressed to the Board dated January 20, 1977 and March 3,
1977.
Jose P. Leviste, as President of El Dorado, later sent a letter of
February 21, 197718 to Carrascoso informing him that in view of his
failure to pay the balance of the purchase price of the property, El
Dorado was seeking the rescission of the March 23, 1972 Deed of Sale
of Real Property.
The pertinent portions of the letter read:
xxx
I regret to inform you that the balance of P1,300,000.00 and the
interest thereon have long been due and payable, although you have
mortgaged said property with the Home Savings Bank for
P1,000,000.00 on March 24, 1972, which was subsequently increased
to P1,070,000.00 on May 18, 1972.
You very well know that the El Dorado Plantation, Inc., is a close family
corporation, owned exclusively by the members of the Leviste family
and I am one of the co-owners of the land. As nothing appears to have
been done on your part after our numerous requests for payment of
the said amount of P1,300,000.00 and the interest of 10% per annum
due thereon, please be advised that we would like to rescind the
contract of sale of the land.19(Underscoring supplied)
Jose Leviste, by letter20 dated March 10, 1977, informed Lauro’s
counsel Atty. Aquino of his (Jose’s) February 21, 1977 letter to
Carrascoso, he lamenting that “Carrascoso has not deemed it fit to
give [his] letter the courtesy of a reply” and advis[ing] that some of the
Directors of [El Dorado] could not see their way clear in complying with
the demands of your client [Lauro] and have failed to reach a
consensus to bring the corresponding action for rescission of the
contract against . . . Carrascoso.”21
Lauro and El Dorado finally filed on March 15, 1977 a complaint22 for
rescission of the March 23, 1972 Deed of Sale of Real Property
between El Dorado and Carrascoso with damages before the Court of
First Instance (CFI) of Occidental Mindoro, docketed as Civil Case No.
R-226.
Lauro and El Dorado also sought the cancellation of TCT No. T-6055
in the name of Carrascoso and the revival of TCT No. T-93 in the name
of El Dorado, free from any liens and encumbrances. Furthermore, the
two prayed for the issuance of an order for Carrascoso to: (1) reconvey
the property to El Dorado upon return to him of P500,000.00, (2)
secure a discharge of the real estate mortgage constituted on the
property from HSB, (3) submit an accounting of the fruits of the
property from March 23, 1972 up to the return of possession of the
land to El Dorado, (4) turn over said fruits or the equivalent value
thereof to El Dorado and (5) pay the amount ofP100,000.00 for
attorney’s fees and other damages.23
Also on March 15, 1977, Lauro and El Dorado caused to be annotated
on TCT No. T-6055 a Notice of Lis Pendens, inscribed as Entry No.
39737.24
In the meantime, Carrascoso, as vendor and PLDT, as vendee forged
on April 6, 1977 a Deed of Absolute Sale25over the 1,000 hectare
portion of the property subject of their July 11, 1975 Agreement to Buy
and Sell. The pertinent portions of the Deed are as follows:
WHEREAS, the VENDOR and the VENDEE entered into an
agreement To Buy and Sell on July 11, 1975, which is made a part
hereof by reference;
WHEREAS, the VENDOR and the VENDEE are now decided to
execute the Deed of Absolute Sale referred to in the aforementioned
agreement to Buy and Sell;
WHEREFORE, for and in consideration of the foregoing premises and
the terms hereunder stated, the VENDOR and the VENDEE have
agreed as follows:
1. For and in consideration of the sum of THREE MILLION PESOS
(P3,000,000.00), Philippine currency, of which ONE HUNDRED
TWENTY THOUSAND PESOS P120,000.00 have (sic) already been
received by the VENDOR, the VENDOR hereby sells, transfers and
conveys unto the VENDEE one thousand hectares (1,000 has.) of his
parcel of land covered by T.C.T. No. T-6055 of the Registry of Deeds
of Mindoro, delineated as Lot No. 3-B-1 in the subdivision survey plan
xxx
2. The VENDEE shall pay to the VENDOR upon the signing of this
agreement, the sum of TWO MILLION FIVE HUNDRED THOUSAND
PESOS (P2,500,000.00) in the following manner:
a) The sum of TWO MILLION THREE HUNDRED THOUSAND
PESOS (P2,300,000.00) to Home Savings Bank in full payment of the
VENDOR’s mortgaged obligation therewith;
b) The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00)
to VENDOR;
The remaining balance of the purchase price in the sum of THREE
HUNDRED EIGHTY THOUSAND PESOS (P380,000.00), less such
expenses which may be advanced by the VENDEE but which are for
the account of the VENDOR under Paragraph 6 of the Agreement to
Buy and Sell, shall be paid by the VENDEE to the VENDOR upon
issuance of title to the VENDEE.26 (Underscoring supplied)
In turn, PLDT, by Deed of Absolute Sale27 dated May 30, 1977,
conveyed the aforesaid 1,000 hectare portion of the property to its
subsidiary, PLDT Agricultural Corporation (PLDTAC), for a
consideration of P3,000,000.00, the amount of P2,620,000.00 of
which was payable to PLDT upon signing of said Deed,
and P380,000.00 to Carrascoso upon issuance of title to PLDTAC.
In the meantime, on October 19, 1977, the El Dorado Board of
Directors, by a special meeting,28 adopted and approved a Resolution
ratifying and conferring “the prosecution of Civil Case No. R-226 of the
Court of First Instance of Occidental Mindoro, entitled ‘Lauro P. Leviste
vs. Fernando Carascoso (sic), etc.’ initiated by stockholder Mr. Lauro
P. Leviste.”29
In his Answer with Compulsory Counterclaim,30 Carrascoso alleged
that: (1) he had not paid his remaining P1,300,000.00 obligation under
the March 23, 1972 Deed of Sale of Real Property in view of the
extensions of time to comply therewith granted him by El Dorado; (2)
the complaint suffered from fatal defects, there being no showing of
compliance with the condition precedent of exhaustion of intra-
corporate remedies and the requirement that a derivative suit instituted
by a complaining stockholder be verified under oath; (3) El Dorado
committed a gross misrepresentation when it warranted that the
property was not being cultivated by any tenant to take it out of the
coverage of the Land Reform Code; and (4) he suffered damages due
to the premature filing of the complaint for which Lauro and El Dorado
must be held liable.
On February 21, 1978, the April 6, 1977 and May 30, 1977 Deeds of
Absolute Sale and the respective Articles of Incorporation of PLDT and
PLDTAC were annotated on TCT No. T-6055 as Entry Nos.
24770,31 42774,324276933 and 24772,34 respectively. On even date,
Carrascoso’s TCT No. T-6055 was cancelled and TCT No. T-
1248035 covering the 1,000 hectare portion of the property was issued
in the name of PLDTAC. The March 15, 1977 Notice of Lis
Pendens was carried over to TCT No. T-12480.
On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for
Intervention36 which was granted by the trial court by Order37 of
September 7, 1978.
PLDT and PLDTAC thereupon filed their Answer In Intervention with
Compulsory Counterclaim and Crossclaim38against Carrascoso on
November 13, 1978, alleging that: (1) when Carrascoso executed the
April 6, 1977 Deed of Absolute Sale in favor of PLDT, PLDT was not
aware of any litigation involving the 1,000 hectare portion of the
property or of any flaw in his title, (2) PLDT is a purchaser in good faith
and for value; (3) when PLDT executed the May 30, 1977 Deed of
Absolute Sale in favor of PLDTAC, they had no knowledge of any
pending litigation over the property and neither were they aware that a
notice of lis pendens had been annotated on Carrascoso’s title; and
(4) Lauro and El Dorado knew of the sale by Carrascoso to PLDT and
PLDT’s actual possession of the 1,000 hectare portion of the property
since June 30, 1975 and of its exercise of exclusive rights of ownership
thereon through agricultural development.39
By Decision40 of January 28, 1991, Branch 45 of the San Jose
Occidental Mindoro Regional Trial Court to which the CFI has been
renamed, dismissed the complaint on the ground of prematurity,
disposing as follows, quoted verbatim:
WHEREFORE, in view of all the foregoing considerations, judgment is
hereby rendered:
1. Dismissing the plaintiffs’ complaint against the defendant on the
ground of prematurity;
2. Ordering the plaintiffs to pay to the defendant the sum of
P2,980,000.00 as actual and compensatory damages, as well as the
sum of P100,000.00 as and for attorneys fees; provided, however, that
the aforesaid amounts must first be set off from the latter’s unpaid
balance to the former;
3. Dismissing the defendants-intervenors’ counterclaim and cross-
claim; and
4. Ordering the plaintiffs to pay to (sic) the costs of suit.
SO ORDERED.41 (Underscoring supplied)
Carrascoso, PLDT and PLDTAC filed their respective appeals to the
Court of Appeals.
By Decision42 of January 31, 1996, the appellate court reversed the
decision of the trial court, disposing as follows, quoted verbatim:
WHEREFORE, not being meritorious, PLDT’s/PLDTAC’s appeal is
hereby DISMISSED and finding El Dorado’s appeal to be impressed
with merit, We REVERSE the appealed Decision and render the
following judgment:
1. The Deed of Sale of Real Property (Exhibit C) is hereby rescinded
and TCT No. T-12480 (Exhibit Q) is cancelled while TCT No. T-93
(Exhibit A), is reactivated.
2. Fernando Carrascoso, Jr. is commanded to:
2.1. return the possession of the 825 [hectare-] remaining portion of
the land to El Dorado Plantation, Inc. without prejudice to the
landholdings of legitimate tenants thereon;
2.2. return the net fruits of the land to El Dorado Plantation, Inc. from
March 23, 1972 to July 11, 1975, and of the 825-hectare-remaining
portion minus the tenants’ landholdings, from July 11, 1975 up to its
delivery to El Dorado Plantation, Inc. including whatever he may have
received from the tenants if any by way of compensation under the
Operation Land Transfer or under any other pertinent agrarian law;
2.3 Pay El Dorado Plantation, Inc. an attorney’s fee of P20,000.00 and
litigation expenses of P30,000.00;
2.4 Return to Philippine Long Distance Telephone Company/PLDT
Agricultural Corporation P3,000,000.00 plus legal interest from April 6,
1977 until fully paid;
3. PLDT Agricultural Corporation is ordered to surrender the
possession of the 1000-hectare Farm to El Dorado Plantation, Inc.;
4. El Dorado Plantation, Inc. is directed to return the P500,000.00 to
Fernando Carrascoso, Jr. plus legal interest from March 23, 1972 until
fully paid. The performance of this obligation will however await the full
compliance by Fernando Carrascoso, Jr. of his obligation to account
for and deliver the net fruits of the land mentioned above to El Dorado
Plantation, Inc.
5. To comply with paragraph 2.2 herein, Carrascoso is directed to
submit in (sic) the court a quo a full accounting of the fruits of the land
during the period mentioned above for the latter’s approval, after which
the net fruits shall be delivered to El Dorado, Plantation, Inc.
6. El Dorado Plantation, Inc. should inform Philippine Long Distance
Telephone Co. and PLDT Agricultural Corporation in writing within ten
(10) days after finality of this decision regarding the exercise of its
option under Art. 448 of the Civil Code.
SO ORDERED.43 (Underscoring supplied)
PLDT and PLDTAC filed on February 22, 1996, a Motion for
Reconsideration44 of the January 31, 1996 CA Decision, while
Carrascoso went up this Court by filing on March 25, 1996 a petition
for review,45 docketed as G.R. No. 123672, assailing the January 31,
1996 CA Decision and seeking the reinstatement of the January 28,
1991 Decision of the trial court except with respect to its finding that
the acquisition of PLDT and PLDTAC of the 1,000 hectare portion of
the property was subject to the notice of lis pendens.
Lauro, in the meantime, died, hence, on April 16, 1996, a Motion for
Substitution of Party46 was filed praying that his heirs, represented by
Conrad C. Leviste, be substituted as respondents. The Motion was
granted by Resolution47 of July 10, 1996.
PLDT and PLDTAC filed their Comment48 to Carrascoso’s petition and
prayed that judgment be rendered finding them to be purchasers in
good faith to thus entitle them to possession and ownership of the
1,000 hectare portion of the property, together with all the
improvements they built thereon. Reiterating that they were not
purchasers pendente lite, they averred that El Dorado and Lauro had
actual knowledge of their interests in the said portion of the property
prior to the annotation of the notice of lis pendens to thereby render
said notice ineffective.
El Dorado and the heirs of Lauro, both represented by Conrad C.
Leviste, also filed their Comment49 to Carrascoso’s petition, praying
that it be dismissed for lack of merit and that paragraph 6 of the
dispositive portion of the January 31, 1996 CA Decision be modified to
read as follows:
6. El Dorado Plantation, Inc. should inform Philippine Long Distance
Telephone Co. and PLDT Agricultural Corporation in writing within ten
(10) days after finality of this decision regarding the exercise of its
option under Arts. 449 and 450 of the Civil Code, without right to
indemnity on the part of the latter should the former decide to keep the
improvements under Article 449.50(Underscoring supplied)
Carrascoso filed on November 13, 1996 his Reply51 to the Comment
of El Dorado and the heirs of Lauro.
In the meantime, as the February 22, 1996 Motion for Reconsideration
filed by PLDT and PLDTAC of the CA decision had remained
unresolved, this Court, by Resolution52 of June 30, 2003, directed the
appellate court to resolve the same.
By Resolution53 of July 8, 2004, the CA denied PLDT and PLDTAC’s
Motion for Reconsideration for lack of merit.
PLDT54 thereupon filed on September 2, 2004 a petition for
review55 before this Court, docketed as G.R. No. 164489, seeking to
reverse and set aside the January 31, 1996 Decision and the July 8,
2004 Resolution of the appellate court. It prayed that judgment be
rendered upholding its right, interest and title to the 1,000 hectare
portion of the property and that it and its successors-in-interest be
declared owners and legal possessors thereof, together with all
improvements built, sown and planted thereon.
By Resolution56 of August 25, 2004, G.R. No. 164489 was
consolidated with G.R. No. 123672.
In his petition, Carrascoso faults the CA as follows:
I
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED A MISTAKE OF LAW IN NOT
DECLARING THAT THE ACTION FOR RESCISSION WAS
PREMATURELY FILED.
II
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED A MISTAKE OF LAW IN
DISREGARDING THE CRUCIAL SIGNIFICANCE OF THE
WARRANTY OF NON-TENANCY EXPRESSLY STIPULATED IN
THE CONTRACT OF SALE.
III
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION IN REVERSING THE DECISION OF THE TRIAL
COURT.57 (Underscoring supplied)
PLDT, on the other hand, faults the CA as follows:
I
THE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR IN HOLDING THAT PETITIONER AND PLTAC (sic) TOOK
THEIR RIGHT, INTEREST AND TITLE TO THE FARM SUBJECT TO
THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF
THE PROTECTION ACCORDED THEM UNDER ARTICLES 1181
AND 1187 OF THE NEW CIVIL CODE.
II THE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR IN HOLDING THAT PETITIONER AND PLDTAC TOOK
THEIR RIGHT, INTEREST AND TITLE TO THE FARM SUBJECT TO In the case at bar, El Dorado already performed its obligation through
THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF the execution of the March 23, 1972 Deed of Sale of Real Property
THE LEGAL PRINCIPLE THAT RESPONDENTS EL DORADO ET which effectively transferred ownership of the property to Carrascoso.
AL.’s PRIOR, ACTUAL KNOWLEDGE OF PETITIONER PLDT’S The latter, on the other hand, failed to perform his correlative obligation
AGREEMENT TO BUY AND SELL WITH RESPONDENT of paying in full the contract price in the manner and within the period
CARRASCOSO RESULTING IN THE DELIVERY TO, AND agreed upon.
POSSESSION, OCCUPATION AND DEVELOPMENT BY, SAID
The terms of the Deed are clear and unequivocal: Carrascoso was to
PETITIONER OF THE FARM, IS EQUIVALENT TO REGISTRATION
pay the balance of the purchase price of the property amounting
OF SUCH RIGHT, INTEREST AND TITLE AND, THEREFORE, A
to P1,300,000.00 plus interest thereon at the rate of 10% per annum
PRIOR REGISTRATION NOT AFFECTED BY THE LATER NOTICE
within a period of three (3) years from the signing of the contract on
OF LIS PENDENS.58 (Underscoring supplied)
March 23, 1972. When Jose Leviste informed him that El Dorado was
Carrascoso posits that in the El Dorado Board Resolution and the seeking rescission of the contract by letter of February 21, 1977, the
Affidavit of Feliciano Leviste, both dated March 23, 1972, no objection period given to him within which to fully satisfy his obligation had long
was interposed to his mortgaging of the property to any bank provided lapsed.
that the balance of the purchase price of the property under the March
The El Dorado Board Resolution and the Affidavit of Jose Leviste
23, 1972 Deed of Sale of Real Property is recognized, hence, El
interposing no objection to Carrascoso’s mortgaging of the property to
Dorado could collect the unpaid balance of P1,300,000.00 only after
any bank did not have the effect of suspending the period to fully pay
the mortgage in favor of HSB is paid in full; and the filing of the
the purchase price, as expressly stipulated in the Deed, pending full
complaint for rescission with damages on March 15, 1977 was
payment of any mortgage obligation of Carrascoso.
premature as he fully paid his obligation to HSB only on April 5, 1977
as evidenced by the Cancellation of Mortgage59 signed by HSB As the CA correctly found:
President Gregorio B. Licaros.
The adverted resolution (Exhibit 2) does not say that the obligation of
Carrascoso further posits that extensions of the period to pay El Carrascoso to pay the balance was extended. Neither can We see in
Dorado were verbally accorded him by El Dorado’s directors and it anything that can logically infer said accommodation.
officers, particularly Jose and Angel Leviste.
A partially unpaid seller can agree to the buyer’s mortgaging the
Article 1191 of the Civil Code provides: subject of the sale without changing the time fixed for the payment of
the balance of the price. The two agreements are not incompatible with
Art. 1191. The power to rescind obligations is implied in reciprocal
each other such that when one is to be implemented, the other has to
ones, in case one of the obligors should not comply with what is
be suspended. In the case at bench, there was no impediment for
incumbent upon him.
Carrascoso to pay the balance of the price after mortgaging the land.
The injured party may choose between the fulfillment and the
Also, El Dorado’s subordinating its “preferred claim” or waiving its
rescission of the obligation, with the payment of damages in either
superior “vendor’s lien” over the land in favor of the mortgagee of said
case. He may also seek rescission, even after he has chosen
property only means that in a situation where the unpaid price of the
fulfillment, if the latter should become impossible.
Land and loan secured by the mortgage over the Land both become
The court shall decree the rescission claimed, unless there be just due and demandable, the mortgagee shall have precedence in going
cause authorizing the fixing of a period. after the Land for the satisfaction of the loan. Such accommodations
do not necessarily imply the modification of the period fixed in the
This is understood to be without prejudice to the rights of third persons
contract of sale for the payment by Carrascoso of the balance.
who have acquired the thing, in accordance with Articles 1385 and
1388 and the Mortgage Law. The palpable purpose of El Dorado in not raising any objection to
Carrascoso’s mortgaging the land was to eliminate any legal
Reciprocal obligations are those which arise from the same cause, and
impediment to such a contract. That was so succinctly expressed in
in which each party is a debtor and a creditor of the other, such that
the Affidavit (Exhibit 2-A) of President Feleciano (sic) Leviste. El
the obligation of one is dependent upon the obligation of the
Dorado’s yielding its “superior lien” over the land in favor of the
other.60 They are to be performed simultaneously such that the
mortgagee was plainly intended to overcome the natural reluctance of
performance of one is conditioned upon the simultaneous fulfillment of
lending institutions to accept a land whose price has not yet been fully
the other.61
paid as collateral of a loan.66 (Underscoring supplied)
The right of rescission of a party to an obligation under Article 1191 is
Respecting Carrascoso’s insistence that he was granted verbal
predicated on a breach of faith by the other party who violates the
extensions within which to pay the balance of the purchase price of the
reciprocity between them.62
property by El Dorado’s directors and officers Jose and Angel Leviste,
A contract of sale is a reciprocal obligation. The seller obligates itself this Court finds the same unsubstantiated by the evidence on record.
to transfer the ownership of and deliver a determinate thing, and the
It bears recalling that Jose Leviste wrote Carrascoso, by letter of
buyer obligates itself to pay therefor a price certain in money or its
February 21, 1977, calling his attention to his failure to comply, despite
equivalent.63 The non-payment of the price by the buyer is a resolutory
“numerous” requests, with his obligation to pay the amount
condition which extinguishes the transaction that for a time existed,
of P1,300,000.00 and 10% annual interest thereon, and advising him
and discharges the obligations created thereunder.64 Such failure to
that “we would like to rescind the contract of sale.” This letter reiterated
pay the price in the manner prescribed by the contract of sale entitles
the term of payment agreed upon in the March 23, 1972 Deed of Sale
the unpaid seller to sue for collection or to rescind the contract.65
of Real Property and Carrascosos’s non-compliance therewith.
Carrascoso, harping on Jose Leviste’s March 10, 1977 letter to Lauro’s
counsel wherein he (Jose Leviste) stated that “some of the Directors
of the corporation could not see their way clear in complying with the
demands of [Lauro] and have failed to reach a consensus to bring the
corresponding action for rescission of the contract against Dr.
Fernando Carrascoso,” argues that the extensions priorly given to him
“no doubt lead to the logical conclusion on some of the directors’
inability to file suit against him.”67
The argument is specious. As the CA found, even if some officers of
El Dorado were initially reluctant to file suit against him, the same
should not be interpreted to mean that this was brought about by a
prior extension of the period to pay the balance of the purchase price
of the property as such reluctance could have been due to a myriad of
reasons totally unrelated to the period of payment of the balance.
The bottomline however is, if El Dorado really intended to extend the
period of payment of the balance there was absolutely no reason why
it did not do it in writing in clear and unmistakable terms. That there is
no such writing negates all the speculations of the court a quo and
pretensions of Carrascoso.
xxx
The unalterable fact here remains that on March 23, 1973, with or
without demand, the obligation of Carrascoso to pay P519,933.33
became due. The same was true on March 23, 1974 and on March 23,
1975 for equal amounts. Since he did not perform his obligation under
the contract of sale, he, therefore, breached it. Having breached the
contract, El Dorado’s cause of action for rescission of that contract
arose.68 (Underscoring supplied)
Carrascoso goes on to argue that the appellate court erred in ignoring
the import of the warranty of non-tenancy expressly stipulated in the
March 23, 1972 Deed of Sale of Real Property. He alleges that on
March 8, 1972 or two weeks prior to the execution of the Deed of Sale,
he discovered, while inspecting the property on board a helicopter, that
there were people and cattle in the area; when he confronted El
Dorado about it, he was told that the occupants were caretakers of
cattle who would soon leave;69 four months after the execution of the
Deed of Sale, upon inquiry with the Bureau of Lands and the Bureau
of Soils, he was informed that there were people claiming to be tenants
in certain portions of the property;70 and he thus brought the matter
again to El Dorado which informed him that the occupants were not
tenants but squatters.71
Carrascoso now alleges that as a result of what he concludes to be a
breach of the warranty of non-tenancy committed by El Dorado, he
incurred expenses in the amount of P2,890,000.00 for which he should
be reimbursed, his unpaid obligation to El Dorado amounting
to P1,300,000.00 to be deducted therefrom.72
The breach of an express warranty makes the seller liable for
damages.73 The following requisites must be established in order that
there be an express warranty in a contract of sale: (1) the express
warranty must be an affirmation of fact or any promise by the seller
relating to the subject matter of the sale; (2) the natural tendency of
such affirmation or promise is to induce the buyer to purchase the
thing; and (3) the buyer purchases the thing relying on such affirmation
or promise thereon.74
Under the March 23, 1972 Deed of Sale of Real Property, El Dorado
warranted that the property was not being cultivated by any tenant and
was, and therefore, not covered by the provisions of the Land Reform
Code. If Carrascoso would become liable under the said law, he would
be reimbursed for all expenses and damages incurred thereon.
Carrascoso claims to have incurred expenses in relocating persons
found on the property four months after the execution of the Deed of
Sale. Apart from such bare claim, the records are bereft of any proof
that those persons were indeed tenants.75 The fact of tenancy76 not
having been priorly established,77 El Dorado may not be held liable for
actual damages.
Carrascoso further argues that both the trial and appellate courts erred
in holding that the sale of the 1,000 hectare portion of the property to
PLDT, as well as its subsequent sale to PLDTAC, is subject to the
March 15, 1977 Notice of Lis Pendens.
PLDT additionally argues that the CA incorrectly ignored the
Agreement to Buy and Sell which it entered into with Carrascoso on
July 11, 1975, positing that the efficacy of its purchase from
Carrascoso, upon his fulfillment of the condition it imposed resulting in
its decision to formalize their transaction and execute the April 6, 1977
Deed of Sale, retroacted to July 11, 1975 or before the annotation of
the Notice of Lis Pendens.78
The pertinent portions of the July 11, 1975 Agreement to Buy and Sell
between PLDT and Carrascoso read:
2. That the VENDOR hereby agrees to sell to the VENDEE and the
latter hereby agrees to purchase from the former, 1,000 hectares of
the above-described parcel of land as shown in the map hereto
attached as Annex “A” and made an integral part hereof and as
hereafter to be more particularly determined by the survey to be
conducted by Certeza & Co., at the purchase price of P3,000.00 per
hectare or for a total consideration of Three Million Pesos
(P3,000,000.00) payable in cash.
3. That this contract shall be considered rescinded and cancelled and
of no further force and effect, upon failure of the VENDOR to clear the
aforementioned 1,000 hectares of land of all the occupants therein
located, within a period of one (1) year from the date of execution of
this Agreement. However, the VENDEE shall have the option to extend
the life of this Agreement by another six months, during which period
the VENDEE shall definitely inform the VENDOR of its decision on
whether or not to finalize the deed of absolute sale for the
aforementioned 1,000 hectares of land.
The VENDOR agrees that the amount of P500.00 per family within the
aforementioned 1,000 hectares of land shall be spent by him for
relocation purposes, which amount however shall be advanced by the
VENDEE and which shall not exceed the total amount of P120,000.00,
the same to be thereafter deducted by the VENDEE from the
aforementioned purchase price of P3,000,000.00.
The aforementioned advance of P120,000.00 shall be remitted by the
VENDEE to the VENDOR upon the signing of this Agreement.
xxx
It is likewise further agreed that the VENDEE shall have the right to
enter into any part of the aforementioned 1,000 hectares at any time
within the period of this Agreement for purposes of commencing the
development of the same.
xxx
5. Title to the aforementioned land shall also be cleared of all liens or
encumbrances and if there are any unpaid taxes, existing mortgages,
liens and encumbrances on the land, the payments to be made by the
VENDEE to the VENDOR of the purchase price shall first be applied
to liquidate said mortgages, liens and/or encumbrances, such that said
payments shall be made directly to the corresponding creditors. Thus,
the balance of the purchase price will be paid to the VENDOR after the
title to the land is cleared of all such liens and encumbrances.
xxx
7. The VENDOR agrees that, during the existence of this Agreement
and without the previous written permission from the VENDEE, he
shall not sell, cede, assign and/or transfer the parcel of land subject of
this Agreement.79
A notice of lis pendens is an announcement to the whole world that a
particular real property is in litigation, and serves as a warning that one
who acquires an interest over said property does so at his own risk, or
that he gambles on the result of the litigation over said property.80
Once a notice of lis pendens has been duly registered, any
cancellation or issuance of title over the land involved as well as any
subsequent transaction affecting the same would have to be subject
to the outcome of the suit. In other words, a purchaser who buys
registered land with full notice of the fact that it is in litigation between
the vendor and a third party stands in the shoes of his vendor and his
title is subject to the incidents and result of the pending litigation.81
x x x Notice of lis pendens has been conceived and, more often than
not, availed of, to protect the real rights of the registrant while the case
involving such rights is pending resolution or decision. With the notice
of lis pendens duly recorded, and while it remains uncancelled, the
registrant could rest secure that he would not lose the property or any
part of it during the litigation.
The filing of a notice of lis pendens in effect (1) keeps the subject
matter of litigation within the power of the court until the entry of the
final judgment so as to prevent the defeat of the latter by successive
alienations; and (2) binds a purchaser of the land subject of the
litigation to the judgment or decree that will be promulgated thereon
whether such a purchaser is a bona fide purchaser or not; but (3) does
not create a non-existent right or lien.
The doctrine of lis pendens is founded upon reason of public policy
and necessity, the purpose of which is to keep the subject matter of
the litigation within the power of the court until the judgment or decree
shall have been entered; otherwise by successive alienations pending
the litigation, its judgment or decree shall be rendered abortive and
impossible of execution. The doctrine of lis pendens is based on
considerations of public policy and convenience, which forbid a litigant
to give rights to others, pending the litigation, so as to affect the
proceedings of the court then progressing to enforce those rights, the
rule being necessary to the administration of justice in order that
decisions in pending suits may be binding and may be given full effect,
by keeping the subject matter in controversy within the power of the
court until final adjudication, that there may be an end to litigation, and
to preserve the property that the purpose of the pending suit may not
be defeated by successive alienations and transfers of title.82 (Italics in
the original)
In ruling against PLDT and PLDTAC, the appellate court held:
PLDT and PLDTAC argue that in reality the Farm was bought by the
former on July 11, 1975 when Carrascoso and it entered into the
Agreement to Buy and Sell (Exhibit 15). How can an agreement to buy
and sell which is a preparatory contract be the same as a contract of
sale which is a principal contract? If PLDT’s contention is correct that
it bought the Farm on July 11, 1975, why did it buy the same property
again on April 6, 1977? There is simply no way PLDT and PLDTAC
can extricate themselves from the effects of said Notice of Lis
Pendens. It is admitted that PLDT took possession of the Farm on July
11, 1975 after the execution of the Agreement to Buy and Sell but it
did so not as owner but as prospective buyer of the property. As
prospective buyer which had actual on (sic) constructive notice of the
lis pendens, why did it pursue and go through with the sale if it had not
been willing to gamble with the result of this case?83 (Underscoring
supplied)
Further, in its July 8, 2004 Resolution, the CA held:
PLDT cannot shield itself from the notice of lis pendens because all
that it had at the time of its inscription was an Agreement to Buy and
Sell with CARRASCOSO, which in effect is a mere contract to sell that
did not pass to it the ownership of the property.
xxx
Ownership was retained by CARRASCOSO which EL DORADO may
very well recover through its action for rescission.
xxx
PLDT’s possession at the time the notice of lis pendens was registered
not being a legal possession based on ownership but a mere
possession in fact and the Agreement to Buy and Sell under which it
supposedly took possession not being registered, it is not protected
from an adverse judgment that may be rendered in the case subject of
the notice of lis pendens.84 (Underscoring supplied)
In a contract of sale, the title passes to the vendee upon the delivery
of the thing sold; whereas in a contract to sell, ownership is not
transferred upon delivery of the property but upon full payment of the
purchase price.85 In the former, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded;
whereas in the latter, title is retained by the vendor until
the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an event
that prevents the obligation of the vendor to convey title from becoming
effective.86
PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a
conditional contract of sale, thus calling for the application of Articles
118187 and 118788 of the Civil Code as held in Coronel v. Court of
Appeals.89
The Court is not persuaded.
For in a conditional contract of sale, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the sale to
the buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the
seller.90 Whereas in a contract to sell, upon fulfillment of the
suspensive condition, ownership will not automatically transfer to the
buyer although the property may have been previously delivered to
him. The prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.91
A perusal of the contract92 adverted to in Coronel reveals marked
differences from the Agreement to Buy and Sell in the case at bar. In
the Coronel contract, there was a clear intent on the part of the therein
petitioners-sellers to transfer title to the therein respondent-buyer. In
the July 11, 1975 Agreement to Buy and Sell, PLDT still had to
“definitely inform Carrascoso of its decision on whether or not to
finalize the deed of absolute sale for the 1,000 hectare portion of the
property,” such that in the April 6, 1977 Deed of Absolute Sale
subsequently executed, the parties declared that they “are now
decided to execute” such deed, indicating that the Agreement to Buy
and Sell was, as the appellate court held, merely a preparatory
contract in the nature of a contract to sell. In fact, the parties even had
to stipulate in the said Agreement to Buy and Sell that Carrascoso,
“during the existence of the Agreement, shall not sell, cede, assign
and/or transfer the parcel of land,” which provision this Court has held
to be a typical characteristic of a contract to sell.93
Being a contract to sell, what was vested by the July 11, 1975
Agreement to Buy and Sell to PLDT was merely the beneficial title to
the 1,000 hectare portion of the property.
The right of Daniel Jovellanos to the property under the contract [to
sell] with Philamlife was merely an inchoate and expectant right which
would ripen into a vested right only upon his acquisition of
ownership which, as aforestated, was contingent upon his full payment
of the rentals and compliance with all his contractual obligations
thereunder. A vested right is an immediate fixed right of present and
future enjoyment. It is to be distinguished from a right that is expectant
or contingent. It is a right which is fixed, unalterable, absolute,
complete and unconditional to the exercise of which no obstacle exists,
and which is perfect in itself and not dependent upon a contingency.
Thus, for a property right to be vested, there must be a transition from
the potential or contingent to the actual, and the proprietary interest
must have attached to a thing; it must have become fixed or
established and is no longer open to doubt or
controversy.94 (Underscoring supplied)
In the case at bar, the July 11, 1975 Agreement to Buy and Sell was
not registered, which act of registration is the operative act to convey
and affect the land.
An agreement to sell is a voluntary instrument as it is a willful act of
the registered owner. As such voluntary instrument, Section 50 of Act
No. 496 [now Section 51 of PD 1529] expressly provides that the act
of registration shall be the operative act to convey and affect the land.
And Section 55 of the same Act [now Section 53 of PD 1529] requires
the presentation of the owner’s duplicate certificate of title for the
registration of any deed or voluntary instrument. As the agreement to
sell involves an interest less than an estate in fee simple, the same
should have been registered by filing it with the Register of Deeds who,
in turn, makes a brief memorandum thereof upon the original and
owner’s duplicate certificate of title. The reason for requiring the
production of the owner’s duplicate certificate in the registration of a
voluntary instrument is that, being a willful act of the registered owner,
it is to be presumed that he is interested in registering the instrument
and would willingly surrender, present or produce his duplicate
certificate of title to the Register of Deeds in order to accomplish such
registration. However, where the owner refuses to surrender the
duplicate certificate for the annotation of the voluntary instrument, the
grantee may file with the Register of Deeds a statement setting forth
his adverse claim, as provided for in Section 110 of Act No. 496.
xxx95 (Underscoring supplied)
In Valley Golf Club, Inc. v. Salas,96 where a Deed of Absolute Sale
covering a parcel of land was executed prior to the annotation of a
notice of lis pendens by the original owner thereof but which Deed was
registered after such annotation, this Court held:
The advance payment of P15,000.00 by the CLUB on October 18,
1960 to ROMERO, and the additional payment by the CLUB of
P54,887.50 as full payment of the purchase price on October 26, 1960,
also to ROMERO, cannot be held to be the dates of sale such as to
precede the annotation of the adverse claim by the SISTERS on
October 25, 1960 and the lis pendens on October 27, 1960. It is basic
that it is the act of registration of the sale that is the operative act to
convey and affect the land. That registration was not effected by the
CLUB until December 4, 1963, or three (3) years after it had made full
payment to ROMERO. xxx
xxx
As matters stand, therefore, in view of the prior annotations of the
adverse claim and lis pendens, the CLUB must be legally held to have
been aware of the flaws in the title. By virtue of the lis pendens, its
acquisition of the property was subject to whatever judgment was to
be rendered in Civil Case No. 6365. xxx The CLUB’s cause of action
lies, not against the SISTERS, to whom the property had been
adjudged by final judgment in Civil Case No. 6365, but against
ROMERO who was found to have had no right to dispose of the
land.97 (Underscoring supplied)
PLDT further argues that El Dorado’s prior, actual knowledge of the
July 11, 1975 Agreement to Buy and Sell is equivalent to prior
registration not affected by the Notice of Lis Pendens. As such, it
concludes that it was not a purchaser pendente lite nor a purchaser in
bad faith.
PLDT anchors its argument on the testimony of Lauro and El Dorado’s
counsel Atty. Aquino from which it infers that Atty. Aquino filed the
complaint for rescission and caused the notice of lis pendens to be
annotated on Carrascoso’s title only after reading newspaper reports
on the sale to PLDT of the 1,000 hectare portion of the property.
The pertinent portions of Atty. Aquino’s testimony are reproduced
hereunder:
Q: Do you know, Atty. Aquino, what you did after the filing of the
complaint in the instant case of Dr. Carrascoso?
A: Yes, I asked my associates to go to Mamburao and had the notice
of Lis Pendens covering the property as a result of the filing of the
instant complaint.
Q: Do you know the notice of Lis Pendens?
A: Yes, it is evidenced by a [Transfer] Certificate Copy of Title of Dr.
Carrascoso entitled “Notice of Lis Pendens”.
Q: As a consequence of the filing of the complaint which was
annotated, you have known that?
A: Yes.
xxx
Q: After the annotation of the notice of Lis Pendens, do you know, if
any further transaction was held on the property?
A: As we have read in the newspaper, that Dr. Carrascoso had sold
the property in favor of the PLDT, Co.
Q: And what did you do?
A: We verified the portion of the property having recorded under entry
No. 24770 xxx and we also discovered that the articles incorporated
(sic) and other corporate matters had been organized and established
of the PLDT, Co., and had been annotated.
xxx
Q: Do you know what happened to the property?
A: It was sold by the PLDT to its sub-PLDT Agitating (sic) Co. when at
that time there was already notice of Lis Pendens.
xxx
Q: In your testimony, you mentioned that you had come cross- (sic)
reading the sale of the subject litigation (sic) between Dr. Fernando
Carrascoso, the defendant herein and the PLDT, one of defendants-
intervenor, may I say when?
A: I cannot remember now, but it was in the newspaper where it was
informed or mentioned of the sold property to PLDT.
xxx
Q: Will you tell to the Honorable Court what newspaper was that?
A: Well, I cannot remember what is that newspaper. That is only a
means of [confirming] the transaction. What was [confirmed] to us is
whether there was really transaction (sic) and we found out that there
was in the Register of Deeds and that was the reason why we obtained
the case.
Q: Well, may I say, is there any reason, the answer is immaterial. The
question is as regard the matter of time when counsel is being able
(sic) to read the newspaper allegedly (interrupted)
xxx
Q: The idea of the question, your Honor, is to establish and ask further
the notice of [lis pendens] with regards (sic) to the transfer of property
to PLDT, would have been accorded prior to the pendency of the case.
xxx
A: I cannot remember.98
PLDT also relies on the following testimony of Carrascoso:
Q: You mentioned Doctor a while ago that you mentioned to the late
Governor Feliciano Leviste regarding your transaction with the PLDT
in relation to the subject property you allegedly mention (sic) your
intention to sell with the PLDT?
A: It was Dr. Jose Leviste and Dr. Angel Leviste that was constantly in
touched (sic) with me with respect to my transaction with the PLDT,
sir.
Q: Any other officer of the corporation who knows with instruction aside
from Dr. Angel Leviste and Dr. Jose Leviste?
A: Yes, sir. It was Trinidad Andaya Leviste and Assemblyman Expedito
Leviste.
xxx
Q: What is the position of Mrs. Trinidad Andaya Leviste with the
plaintiff-corporation?
A: One of the stockholders and director of the plaintiff-corporation, sir.
Q: Will you please tell us the other officers?
A: Expedito Leviste, sir.
Q: Will you tell the position of Expedito Leviste?
A: He was the corporate secretary, sir.
Q: If you know, was Dr. Jose Leviste also a director at that time?
A: Yes, sir.99
On the other hand, El Dorado asserts that it had no knowledge of the
July 11, 1975 Agreement to Buy and Sell prior to the filing of the
complaint for rescission against Carrascoso and the annotation of the
notice of lis pendens on his title. It further asserts that it always acted
in good faith:
xxx The contract to sell between the Petitioner [Carrascoso] and PLDT
was executed in July 11, 1975. There is no evidence that El Dorado
was notified of this contract. The property is located in Mindoro, El
Dorado is based in Manila. The land was planted to rice. This was not
an unusual activity on the land, thus it could have been the Petitioner
who was using the land. Not having been notified of this sale, El
Dorado could not have stopped PLDT from developing the land.
The absolute sale of the land to PLDT took place on April 6, 1977, or
AFTER the filing of this case on March 15, 1977 and the annotation of
a notice of lis pendens on March 16, 1977. Inspite of the notice of lis
pendens, PLDT then PLDTAC persisted not only in buying the land but
also in putting up improvements on the property such as buildings,
roads, irrigation systems and drainage. This was done during the
pendency of this case, where PLDT and PLDTAC actively participated
as intervenors. They were not innocent bystanders. xxx100
This Court finds the above-quoted testimony of Atty. Aquino to be
susceptible of conflicting interpretations. As such, it cannot be the
basis for inferring that El Dorado knew of the July 11, 1975 Agreement
to Buy and Sell prior to the annotation of the notice of lis pendens on
Carrascoso’s title.
Respecting Carrascoso’s allegation that some of the directors and
officers of El Dorado had knowledge of his dealings with PLDT, it is
true that knowledge of facts acquired or possessed by an officer or
agent of a corporation in the course of his employment, and in relation
to matters within the scope of his authority, is notice to the corporation,
whether he communicates such knowledge or not.101 In the case at
bar, however, apart from Carrascoso’s claim that he in fact notified
several of the directors about his intention to sell the 1,000 hectare
portion of the property to PLDT, no evidence was presented to
substantiate his claim. Such self-serving, uncorroborated assertion is
indubitably inadequate to prove that El Dorado had notice of the July
11, 1975 Agreement to Buy and Sell before the annotation of the notice
of lis pendens on his title.
PLDT is, of course, not without recourse. As held by the CA:
Between Carrascoso and PLDT/PLDTAC, the former acted in bad faith
while the latter acted in good faith. This is so because it was
Carrascoso’s refusal to pay his just debt to El Dorado that caused
PLDT/PLDTAC to suffer pecuniary losses. Therefore, Carrascoso
should return to PLDT/PLDTAC the P3,000,000.00 price of the farm
plus legal interest from receipt thereof until paid.102 (Underscoring
supplied)
The appellate court’s decision ordering the rescission of the March 23,
1972 Deed of Sale of Real Property between El Dorado and
Carrascoso being in order, mutual restitution follows to put back the
parties to their original situation prior to the consummation of the
contract.
The exercise of the power to rescind extinguishes the obligatory
relation as if it had never been created, the extinction having a
retroactive effect. The rescission is equivalent to invalidating and
unmaking the juridical tie, leaving things in their status before the
celebration of the contract.
Where a contract is rescinded, it is the duty of the court to require both
parties to surrender that which they have respectively received and to
place each other as far as practicable in his original situation, the
rescission has the effect of abrogating the contract in all
parts.103 (Underscoring supplied)
The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being
subject to the notice of lis pendens, and as the Court affirms the
declaration by the appellate court of the rescission of the Deed of Sale In the case at bar, it is undisputed that PLDT commenced construction
executed by El Dorado in favor of Carrascoso, possession of the 1,000 of improvements on the 1,000 hectare portion of the property
hectare portion of the property should be turned over by PLDT to El immediately after the execution of the July 11, 1975 Agreement to Buy
Dorado. and Sell with the full consent of Carrascoso.109 Thus, until March 15,
1977 when the Notice of Lis Pendens was annotated on Carrascoso’s
As regards the improvements introduced by PLDT on the 1,000
TCT No. T-6055, PLDT is deemed to have been in good faith in
hectare portion of the property, a distinction should be made between
introducing improvements on the 1,000 hectare portion of the property.
those which it built prior to the annotation of the notice of lis
pendens and those which it introduced subsequent thereto. After March 15, 1977, however, PLDT could no longer invoke the rights
of a builder in good faith.
When a person builds in good faith on the land of another, Article 448
of the Civil Code governs: Should El Dorado then opt to appropriate the improvements made by
PLDT on the 1,000 hectare portion of the property, it should only be
Art. 448. The owner of the land on which anything has been built, sown
made to pay for those improvements at the time good faith existed on
or planted in good faith, shall have the right to appropriate as his own
the part of PLDT or until March 15, 1977,110 to be pegged at its current
the works, sowing or planting, after payment of the indemnity provided
fair market value.111
for in Articles 546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the proper rent. The commencement of PLDT’s payment of reasonable rent should
However, the builder or planter cannot be obliged to buy the land if its start on March 15, 1977 as well, to be paid until such time that the
value is considerably more than that of the building or trees. In such a possession of the 1,000 hectare portion is delivered to El Dorado,
case, he shall pay reasonable rent, if the owner of the land does not subject to the reimbursement of expenses as aforestated, that is, if El
choose to appropriate the building or trees after the proper indemnity. Dorado opts to appropriate the improvements.112
The parties shall agree upon the terms of the lease and in case of
If El Dorado opts for compulsory sale, however, the payment of rent
disagreement, the court shall fix the terms thereof.
should continue up to the actual transfer of ownership.113
The above provision covers cases in which the builders, sowers or
WHEREFORE, the petitions are DENIED. The Decision dated January
planters believe themselves to be owners of the land or, at least, to
13, 1996 and Resolution dated July 8, 2004 of the Court of Appeals
have a claim of title thereto.104 Good faith is thus identified by the belief
are AFFIRMED with MODIFICATION in that
that the land is owned; or that by some title one has the right to build,
plant, or sow thereon.105 1) the Regional Trial Court of San Jose, Occidental Mindoro, Branch
45 is further directed to:
The owner of the land on which anything has been built, sown or
planted in good faith shall have the right to appropriate as his own the a. determine the present fair price of the 1,000 hectare portion of the
building, planting or sowing, after payment to the builder, planter or property and the amount of the expenses actually spent by PLDT for
sower of the necessary and useful expenses,106 and in the proper the improvements thereon as of March 15, 1977;
case, expenses for pure luxury or mere pleasure.107
b. include for determination the increase in value (“plus value”) which
The owner of the land may also oblige the builder, planter or sower to the 1,000 hectare portion may have acquired by reason of the
purchase and pay the price of the land. existence of the improvements built by PLDT before March 15, 1977
and the current fair market value of said improvements;
If the owner chooses to sell his land, the builder, planter or sower must
purchase the land, otherwise the owner may remove the 2. El Dorado is ordered to exercise its option under the law, whether
improvements thereon. The builder, planter or sower, however, is not to appropriate the improvements, or to oblige PLDT to pay the price of
obliged to purchase the land if its value is considerably more than the the land, and
building, planting or sowing. In such case, the builder, planter or sower
3. PLDT shall pay El Dorado the amount of Two Thousand Pesos
must pay rent to the owner of the land.
(P2,000.00) per month as reasonable compensation for its occupancy
If the parties cannot come to terms over the conditions of the lease, of the 1,000 hectare portion of the property from the time that its good
the court must fix the terms thereof. faith ceased to exist until such time that possession of the same is
delivered to El Dorado, subject to the reimbursement of the aforesaid
The right to choose between appropriating the improvement or selling
expenses in favor of PLDT or until such time that the payment of the
the land on which the improvement of the builder, planter or sower
purchase price of the 1,000 hectare portion is made by PLDT in favor
stands, is given to the owner of the land.108
of El Dorado in case the latter opts for its compulsory sale.
On the other hand, when a person builds in bad faith on the land of
Costs against petitioners.
another, Articles 449 and 450 govern:
SO ORDERED.
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.
Art. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work,
or that the planting or sowing be removed, in order to replace things in
their former condition at the expense of the person who built, planted
or sowed; or he may compel the builder or planter to pay the price of
the land, and the sower the proper rent.
 LUZON DEVELOPMENT BANK, G.R. No. 168646 Development Bank the value of the subject lot subject matter of the
Petitioner, Contract to Sell between Delta Development and Management
Services, Inc. and the private respondent [Catherine Angeles
- versus - Enriquez].

ANGELES CATHERINE SO ORDERED.[4]

ENRIQUEZ,
Respondent.
x---------------------------- Factual Antecedents
x

DELTA DEVELOPMENT and G.R. No. 168666 The BANK is a domestic financial corporation that extends loans to subdivision
MANAGEMENT SERVICES, INC.,
Petitioner, developers/owners.[5]
Present:

CORONA, C.J., Petitioner DELTA is a domestic corporation engaged in the business of

Chairperson,
- versus - VELASCO, JR., developing and selling real estate properties, particularly Delta Homes I in
LEONARDO-DE CASTRO, Cavite. DELTA is owned by Ricardo De Leon (De Leon),[6] who is the
DEL CASTILLO, and
PEREZ, JJ. registered owner of a parcel of land covered by Transfer Certificate of Title
ANGELES CATHERINE (TCT) No. T-637183[7] of the Registry of Deeds of the Province of Cavite, which
ENRIQUEZ and LUZON Promulgated:
DEVELOPMENT BANK, corresponds to Lot 4 of Delta Homes I. Said Lot 4 is the subject matter of these
Respondents. January 12, 2011
cases.
x--------------------------------------------------------x

DECISION On July 3, 1995, De Leon and his spouse obtained a P4 million loan from the
BANK for the express purpose of developing Delta Homes I.[8] To secure the
loan, the spouses De Leon executed in favor of the BANK a real estate
DEL CASTILLO, J.:
mortgage (REM) on several of their properties,[9] including Lot 4. Subsequently,

The protection afforded to a subdivision lot buyer under Presidential Decree this REM was amended[10] by increasing the amount of the secured loan

(PD) No. 957 or The Subdivision and Condominium Buyers Protective from P4 million to P8 million. Both the REM and the amendment were

Decree will not be defeated by someone who is not an innocent purchaser for annotated on TCT No. T-637183.[11]

value. The lofty aspirations of PD 957 should be read in every provision of the DELTA then obtained a Certificate of Registration[12] and a License to

statute, in every contract that undermines its objects, in every transaction which Sell[13] from the Housing and Land Use Regulatory Board (HLURB).

threatens its fruition. For a statute derives its vitality from the purpose for which
it is enacted and to construe it in a manner that disregards or defeats such Sometime in 1997, DELTA executed a Contract to Sell with respondent

purpose is to nullify or destroy the law.[1] Angeles Catherine Enriquez (Enriquez)[14] over the house and lot in Lot 4 for
the purchase price of P614,950.00.Enriquez made a downpayment

These cases involve the separate appeals of Luzon Development of P114,950.00. The Contract to Sell contained the following provisions:

Bank[2] (BANK) and Delta Development and Management Services,

That the vendee/s offered to buy and the Owner agreed to sell the
Inc.[3] (DELTA) from the November 30, 2004 Decision of the Court of Appeals above-described property subject to the following terms and
(CA), as well as its June 22, 2005 Resolution in CA-G.R. SP No. 81280. The conditions to wit:

dispositive portion of the assailed Decision reads: xxxx

6. That the (sic) warning shall be served upon the Vendee/s for
WHEREFORE, premises considered, the Decision dated June 17,
failure to pay x x x Provided, however, that for failure to pay three (3)
2003 and Resolution dated November 24, 2003 are AFFIRMED
successive monthly installment payments, the Owner may consider
with [m]odification in so far as Delta Development and Management
this Contract to Sell null and void ab initio without further
Services, Inc. is liable and directed to pay petitioner Luzon
proceedings or court action and all payments shall be forfeited in
favor of the Owner as liquidated damages and expenses for
documentations. x x x
That upon full payment of the total consideration if payable in cash,
the Owner shall execute a final deed of sale in favor of the
Vendee/s. However, if the term of the contract is for a certain period
of time, only upon full payment of the total consideration that a final
deed of sale shall be executed by the Owner in favor of the
Vendee/s.[15]
When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing
the REM, agreed to a dation in payment or a dacion en pago. The Deed of
Assignment in Payment of Debt was executed on September 30, 1998 and
stated that DELTA assigns, transfers, and conveys and sets over [to] the
assignee that real estate with the building and improvements existing thereon
x x x in payment of the total obligation owing to [the Bank] x x x.[16] Unknown to
Enriquez, among the properties assigned to the BANK was the house and lot
of Lot 4,[17] which is the subject of her Contract to Sell with DELTA. The records
do not bear out and the parties are silent on whether the BANK was able to
transfer title to its name. It appears, however, that the dacion en pago was not
annotated on the TCT of Lot 4.[18]
On November 18, 1999, Enriquez filed a complaint against DELTA and the
BANK before the Region IV Office of the HLURB[19] alleging that DELTA
violated the terms of its License to Sell by: (a) selling the house and lots for a
price exceeding that prescribed in Batas Pambansa (BP) Bilang 220;[20] and (b)
failing to get a clearance for the mortgage from the HLURB.Enriquez sought a
full refund of the P301,063.42 that she had already paid to DELTA, award of
damages, and the imposition of administrative fines on DELTA and the BANK.
In his June 1, 2000 Decision,[21] HLURB Arbiter Atty. Raymundo A. Foronda
upheld the validity of the purchase price, but ordered DELTA to accept payment
of the balance of P108,013.36 from Enriquez, and (upon such payment) to
deliver to Enriquez the title to the house and lot free from liens and
encumbrances. The dispositive portion reads:
WHEREFORE, premises considered, a decision is hereby
rendered as follows:
1. Ordering [DELTA] to accept complainant[]s payments in the
amount of P108,013.36 representing her balance based on the
maximum selling price of P375,000.00;
2. Upon full payment, ordering Delta to deliver the title in favor of the
complainant free from any liens and encumbrances;
3. Ordering [DELTA] to pay complainant the amount of P50,000.00
as and by way of moral damages;
4. Ordering [DELTA] to pay complainant the amount of P50,000.00
as and by way of exemplary damages;
5. Ordering [DELTA] to pay complainant P10,000.00 as costs of
suit; and
6. Respondent DELTA to pay administrative fine
of P10,000.00[[22]] for violation of Section 18 of P.D. 957[[23]] and
another P10,000.00 for violation of Section 22 of P.D. 957.[[24]]
SO ORDERED.[25]
DELTA appealed the arbiters Decision to the HLURB Board of
Commissioners.[26] DELTA questioned the imposition of an administrative fine
for its alleged violation of Section 18 of PD 957. It argued that clearance was
not required for mortgages that were constituted on a subdivision project prior
to registration. According to DELTA, it did not violate the terms of its license
because it did not obtain a new mortgage over the subdivision project. It
likewise assailed the award of moral and exemplary damages to Enriquez on
the ground that the latter has no cause of action.[27]
Ruling of the Board of Commissioners (Board)[28]
The Board held that all developers should obtain a clearance for mortgage from
the HLURB, regardless of the date when the mortgage was secured, because
the law does not distinguish. Having violated this legal requirement, DELTA
was held liable to pay the administrative fine.
The Board upheld the validity of the contract to sell between DELTA and
Enriquez despite the alleged violation of the price ceilings in BP 220. The Board
held that DELTA and Enriquez were presumed to have had a meeting of the
minds on the object of the sale and the purchase price. Absent any
circumstance vitiating Enriquezconsent, she was presumed to have willingly
and voluntarily agreed to the higher purchase price; hence, she was bound by
the terms of the contract.
The Board, however, deleted the arbiters award of damages to Enriquez on
the ground that the latter was not free from liability herself, given that she was
remiss in her monthly amortizations to DELTA.
The dispositive portion of the Boards Decision reads:
Wherefore, in view of the foregoing, the Office belows decision
dated June 01, 2000 is hereby modified to read as follows:
1. Ordering [Enriquez] to pay [DELTA] the amount due from the
time she suspended payment up to filing of the complaint with 12%
interest thereon per annum; thereafter the provisions of the Contract Enriquez filed a motion for reconsideration, insisting that she was entitled to a
to Sell shall apply until full payment is made;
reduction of the purchase price, in order to conform to the provisions of BP
2. Ordering [DELTA] to pay an [a]dministrative [f]ine of P10,000.00 220.[38] The motion was denied for lack of merit.[39]
for violation of its license to sell and for violation of Section 18 of P.D.
957.
Only the BANK appealed the OPs Decision to the CA.[40] The BANK reiterated
So ordered. Quezon City.[29]
that DELTA can no longer deliver Lot 4 to Enriquez because DELTA had sold
the same to the BANK by virtue of the dacion en pago.[41] As an alternative
Enriquez moved for a reconsideration of the Boards Decision[30] upholding the
argument, in case the appellate court should find that DELTA retained
contractual purchase price. She maintained that the price for Lot 4 should not
ownership over Lot 4 and could convey the same to Enriquez, the BANK
exceed the price ceiling provided in BP 220.[31]
prayed that its REM over Lot 4 be respected such that DELTA would have to
redeem it first before it could convey the same to Enriquez in accordance with
Finding Enriquezs arguments as having already been passed upon in the
Section 25[42] of PD 957.[43]
decision, the Board denied reconsideration. The board, however, modified its
decision, with respect to the period for the imposition of interest payments. The
The BANK likewise sought an award of exemplary damages and attorneys
Boards resolution[32] reads:
fees in its favor because of the baseless suit filed by Enriquez against it.[44]

WHEREFORE, premises considered, to [sic] directive No. 1 of the

dispositive portion of the decision of our decision [sic] is MODIFIED Ruling of the Court of Appeals[45]
as follows:

1. Ordering complainant to pay respondent DELTA the amount due The CA ruled against the validity of the dacion en pago executed in favor of the
from the time she suspended (sic) at 12% interest per annum,
reckoned from finality of this decision[,] thereafter the provisions of BANK on the ground that DELTA had earlier relinquished its ownership over
the Contract to Sell shall apply until full payment is made. Lot 4 in favor of Enriquez via the Contract to Sell.[46]
In all other respects, the decision is AFFIRMED.
Since the dacion en pago is invalid with respect to Lot 4, the appellate court
SO ORDERED.[33]
held that DELTA remained indebted to the BANK to the extent of Lot 4s
value. Thus, the CA ordered DELTA to pay the corresponding value of Lot 4 to
Both Enriquez and the BANK appealed to the Office of the President
the BANK.[47]
(OP).[34] The BANK disagreed with the ruling upholding Enriquezs Contract to
Sell; and insisted on its ownership over Lot 4. It argued that it has become
The CA also rejected the BANKs argument that, before DELTA can deliver the
impossible for DELTA to comply with the terms of the contract to sell and to
title to Lot 4 to Enriquez, DELTA should first redeem the mortgaged property
deliver Lot 4s title to Enriquez given that DELTA had already relinquished all its
from the BANK. The CA held that the BANK does not have a first lien on Lot 4
rights to Lot 4 in favor of the BANK[35] via the dation in payment.
because its real estate mortgage over the same had already been extinguished
by the dacion en pago. Without a mortgage, the BANK cannot require DELTA
Meanwhile, Enriquez insisted that the Board erred in not applying the ceiling
to redeem Lot 4 prior to delivery of title to Enriquez.[48]
price as prescribed in BP 220.[36]

The CA denied the BANKs prayer for the award of exemplary damages and
Ruling of the Office of the President[37]
attorneys fees for lack of factual and legal basis.[49]

The OP adopted by reference the findings of fact and conclusions of law of the
Both DELTA[50] and the BANK[51] moved for a reconsideration of the CAs
HLURB Decisions, which it affirmed in toto.
Decision, but both were denied.[52]

Hence, these separate petitions of the BANK and DELTA.
Petitioner Deltas arguments[53]
DELTA assails the CA Decision for holding that DELTA conveyed its
ownership over Lot 4 to Enriquez via the Contract to Sell. DELTA points out
that the Contract to Sell contained a condition that ownership shall only be
transferred to Enriquez upon the latters full payment of the purchase price to
DELTA. Since Enriquez has yet to comply with this suspensive condition,
ownership is retained by DELTA.[54] As the owner of Lot 4, DELTA had every
right to enter into a dation in payment to extinguish its loan obligation to the
BANK. The BANKs acceptance of the assignment, without any reservation or
exception, resulted in the extinguishment of the entire loan obligation; hence,
DELTA has no more obligation to pay the value of Enriquezs house and lot to
the BANK.[55]
DELTA prays for the reinstatement of the OP Decision.
The BANKs arguments[56]
Echoing the argument of DELTA, the BANK argues that the Contract to Sell
did not involve a conveyance of DELTAs ownership over Lot 4 to Enriquez. The
Contract to Sell expressly provides that DELTA retained ownership over Lot 4
until Enriquez paid the full purchase price. Since Enriquez has not yet made
such full payment, DELTA retained ownership over Lot 4 and could validly
convey the same to the BANK via dacion en pago.[57]
Should the dacion en pago over Lot 4 be invalidated and the property ordered
to be delivered to Enriquez, the BANK contends that DELTA should pay the
corresponding value of Lot 4 to the BANK. It maintains that the loan obligation
extinguished by the dacion en pago only extends to the value of the properties
delivered; if Lot 4 cannot be delivered to the BANK, then the loan obligation of
DELTA remains to the extent of Lot 4s value.[58]
The BANK prays to be declared the rightful owner of the subject house and lot
and asks for an award of exemplary damages and attorneys fees.
Enriquezs waiver
Enriquez did not file comments[59] or memoranda in both cases; instead, she
manifested that she will just await the outcome of the case.[60]
Issues
The following are the issues raised by the two petitions:
1. Whether the Contract to Sell conveys ownership;
2. Whether the dacion en pago extinguished the loan obligation,
such that DELTA has no more obligations to the BANK;
3. Whether the BANK is entitled to damages and attorneys fees for
being compelled to litigate; and
4. What is the effect of Enriquezs failure to appeal the OPs Decision
regarding her obligation to pay the balance on the purchase price.
Our Ruling
Mortgage contract void
As the HLURB Arbiter and Board of Commissioners both found, DELTA
violated Section 18 of PD 957 in mortgaging the properties in Delta Homes I
(including Lot 4) to the BANK without prior clearance from the HLURB. This
point need not be belabored since the parties have chosen not to appeal the
administrative fine imposed on DELTA for violation of Section 18.
This violation of Section 18 renders the mortgage executed by
DELTA void. We have held before that a mortgage contract executed in breach
of Section 18 of [PD 957] is null and void.[61] Considering that PD 957 aims to
protect innocent subdivision lot and condominium unit buyers against
fraudulent real estate practices, we have construed Section 18 thereof as
prohibitory and acts committed contrary to it are void.[62]
Because of the nullity of the mortgage, neither DELTA nor the
BANK could assert any right arising therefrom. The BANKs loan of P8 million
to DELTA has effectively become unsecured due to the nullity of the
mortgage. The said loan, however, was eventually settled by the two
contracting parties via a dation in payment. In the appealed Decision, the CA
invalidated this dation in payment on the ground that DELTA, by previously
entering into a Contract to Sell, had already conveyed its ownership over Lot 4
to Enriquez and could no longer convey the same to the BANK. This is error,
prescinding from a wrong understanding of the nature of a contract to sell.
Contract to sell does not transfer ownership
Both parties are correct in arguing that the Contract to Sell executed by DELTA
in favor of Enriquez did not transfer ownership over Lot 4 to Enriquez. A
contract to sell is one where the prospective seller reserves the transfer of title
to the prospective buyer until the happening of an event, such as full payment
of the purchase price. What the seller obliges himself to do is to sell the subject
property only when the entire amount of the purchase price has already been
delivered to him. In other words, the full payment of the purchase price partakes
of a suspensive condition, the non-fulfillment of which prevents the obligation to
sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.[63] It does not, by itself,
transfer ownership to the buyer.[64]
In the instant case, there is nothing in the provisions of the contract entered into
by DELTA and Enriquez that would exempt it from the general definition of a
contract to sell. The terms thereof provide for the reservation of DELTAs
ownership until full payment of the purchase price; such that DELTA even
reserved the right to unilaterally void the contract should Enriquez fail to pay
three successive monthly amortizations.
Since the Contract to Sell did not transfer ownership of Lot 4 to Enriquez, said
ownership remained with DELTA. DELTA could then validly transfer such
ownership (as it did) to another person (the BANK). However, the transferee
BANK is bound by the Contract to Sell and has to respect Enriquezs rights
thereunder. This is because the Contract to Sell, involving a subdivision lot, is
covered and protected by PD 957. One of the protections afforded by PD 957
to buyers such as Enriquez is the right to have her contract to sell registered
with the Register of Deeds in order to make it binding on third parties. Thus,
Section 17 of PD 957 provides:
Section 17. Registration. All contracts to sell, deeds of sale, and
other similar instruments relative to the sale or conveyance of the
subdivision lots and condominium units, whether or not the
purchase price is paid in full, shall be registered by the seller in the
Office of the Register of Deeds of the province or city where the
property is situated.
x x x x (Emphasis supplied.)
The purpose of registration is to protect the buyers from any future
unscrupulous transactions involving the object of the sale or contract to sell,
whether the purchase price therefor has been fully paid or not. Registration of
the sale or contract to sell makes it binding on third parties; it serves as a notice
to the whole world that the property is subject to the prior right of the buyer of
the property (under a contract to sell or an absolute sale), and anyone who
wishes to deal with the said property will be held bound by such prior right.
While DELTA, in the instant case, failed to register Enriquezs Contract to Sell
with the Register of Deeds, this failure will not prejudice Enriquez or relieve the
BANK from its obligation to respect Enriquezs Contract to Sell. Despite the non-
registration, the BANK cannot be considered, under the circumstances, an
innocent purchaser for value of Lot 4 when it accepted the latter (together with
other assigned properties) as payment for DELTAs obligation. The BANK was
well aware that the assigned properties, including Lot 4, were subdivision lots
and therefore within the purview of PD 957. It knew that the loaned amounts
were to be used for the development of DELTAs subdivision project, for this
was indicated in the corresponding promissory notes. The technical description
of Lot 4 indicates its location, which can easily be determined as included within
the subdivision development. Under these circumstances, the BANK knew or
should have known of the possibility and risk that the assigned properties were
already covered by existing contracts to sell in favor of subdivision lot
buyers. As observed by the Court in another case involving a bank regarding a
subdivision lot that was already subject of a contract to sell with a third party:
[The Bank] should have considered that it was dealing with a
property subject of a real estate development project. A reasonable
person, particularly a financial institution x x x, should have been
aware that, to finance the project, funds other than those obtained
from the loan could have been used to serve the purpose, albeit
partially. Hence, there was a need to verify whether any part of the
property was already intended to be the subject of any other
contract involving buyers or potential buyers. In granting the loan,
[the Bank] should not have been content merely with a clean title,
considering the presence of circumstances indicating the need for
a thorough investigation of the existence of buyers x x x. Wanting in
care and prudence, the [Bank] cannot be deemed to be an innocent
mortgagee. x x x[65]
Further, as an entity engaged in the banking business, the BANK is required to
observe more care and prudence when dealing with registered properties. The
Court cannot accept that the BANK was unaware of the Contract to Sell existing
in favor of Enriquez. In Keppel Bank Philippines, Inc. v. Adao,[66] we held that a
bank dealing with a property that is already subject of a contract to sell and is
protected by the provisions of PD 957, is bound by the contract to sell (even if
the contract to sell in that case was not registered). In the Courts words:

It is true that persons dealing with registered property can rely solely
on the certificate of title and need not go beyond it. However, x x x,
this rule does not apply to banks. Banks are required to exercise
more care and prudence than private individuals in dealing even
with registered properties for their business is affected with public
interest. As master of its business, petitioner should have sent its
representatives to check the assigned properties before signing the
compromise agreement and it would have discovered that
respondent was already occupying one of the condominium units
and that a contract to sell existed between [the vendee] and [the
developer]. In our view, petitioner was not a purchaser in good faith
and we are constrained to rule that petitioner is bound by the
contract to sell.[67]
Bound by the terms of the Contract to Sell, the BANK is obliged to respect the
same and honor the payments already made by Enriquez for the purchase
price of Lot 4. Thus, the BANK can only collect the balance of the purchase
price from Enriquez and has the obligation, upon full payment, to deliver to
Enriquez a clean title over the subject property.[68]
Dacion en pago extinguished the loan obligation
The BANK then posits that, if title to Lot 4 is ordered delivered to Enriquez,
DELTA has the obligation to pay the BANK the corresponding value of Lot
4. According to the BANK, the dation in payment extinguished the loan only to
the extent of the value of the thing delivered. Since Lot 4 would have no value
to the BANK if it will be delivered to Enriquez, DELTA would remain indebted
to that extent.
We are not persuaded. Like in all contracts, the intention of the
parties to the dation in payment is paramount and controlling. The contractual
intention determines whether the property subject of the dation will be
considered as the full equivalent of the debt and will therefore serve as full
satisfaction for the debt. The dation in payment extinguishes the obligation to
the extent of the value of the thing delivered, either as agreed upon by the
parties or as may be proved, unless the parties by agreement, express or
implied, or by their silence, consider the thing as equivalent to the obligation, in
which case the obligation is totally extinguished.[69]
In the case at bar, the Dacion en Pago executed by DELTA and the BANK
indicates a clear intention by the parties that the assigned properties would
serve as full payment for DELTAs entire obligation:
KNOW ALL MEN BY THESE PRESENTS:
This instrument, made and executed by and between:
xxxx
THAT, the ASSIGNOR acknowledges to be justly
indebted to the ASSIGNEE in the sum of ELEVEN
MILLION EIGHT HUNDRED SEVENTY-EIGHT
THOUSAND EIGHT HUNDRED PESOS
(P11,878,800.00), Philippine Currency as of August 25,
1998. Therefore, by virtue of this instrument,
ASSIGNOR hereby ASSIGNS, TRANSFERS, and
CONVEYS AND SETS OVER [TO] the ASSIGNEE that
real estate with the building and improvements existing
thereon, more particularly described as follows:
xxxx
of which the ASSIGNOR is the registered owner being
evidenced by TCT No. x x x issued by the Registry of
Deeds of Trece Martires City.
THAT, the ASSIGNEE does hereby accept
this ASSIGNMENT IN PAYMENT OF THE TOTAL
OBLIGATION owing to him by the ASSIGNOR as
above-stated;[70]
Without any reservation or condition, the Dacion stated that the assigned
properties served as full payment of DELTAs total obligation to the BANK. The
BANK accepted said properties as equivalent of the loaned amount and as full
satisfaction of DELTAs debt. The BANK cannot complain if, as it turned out,
some of those assigned properties (such as Lot 4) are covered by existing
contracts to sell. As noted earlier, the BANK knew that the assigned properties
were subdivision lots and covered by PD 957. It was aware of the nature of
DELTAs business, of the location of the assigned properties within DELTAs
subdivision development, and the possibility that some of the properties may
be subjects of existing contracts to sell which enjoy protection under PD
957. Banks dealing with subdivision properties are expected to conduct a
thorough due diligence review to discover the status of the properties they deal
with. It may thus be said that the BANK, in accepting the assigned properties
as full payment of DELTAs total obligation, has assumed the risk that some of
the assigned properties (such as Lot 4) are covered by contracts to sell which
it is bound to honor under PD 957.
A dacion en pago is governed by the law of sales.[71] Contracts of sale come
with warranties, either express (if explicitly stipulated by the parties) or implied
(under Article 1547 et seq. of the Civil Code). In this case, however, the BANK
does not even point to any breach of warranty by DELTA in connection with the
Dation in Payment. To be sure, the Dation in Payment has no express
warranties relating to existing contracts to sell over the assigned properties. As
to the implied warranty in case of eviction, it is waivable[72] and cannot be
invoked if the buyer knew of the risks or danger of eviction and assumed its
consequences.[73] As we have noted earlier, the BANK, in accepting the
assigned properties as full payment of DELTAs total obligation, has assumed
the risk that some of the assigned properties are covered by contracts to sell
which must be honored under PD 957.
Award of damages
There is nothing on record that warrants the award of exemplary
damages[74] as well as attorneys fees[75] in favor of the BANK.
Balance to be paid by Enriquez
As already mentioned, the Contract to Sell in favor of Enriquez must
be respected by the BANK. Upon Enriquezs full payment of the balance of the
purchase price, the BANK is bound to deliver the title over Lot 4 to her. As to
the amount of the balance which Enriquez must pay, we adopt the OPs ruling
thereon which sustained the amount stipulated in the Contract to Sell.We will
not review Enriquezs initial claims about the supposed violation of the price
ceiling in BP 220, since this issue was no longer pursued by the parties, not
even by Enriquez, who chose not to file the required pleadings[76] before the
Court. The parties were informed in the Courts September 5, 2007 Resolution
that issues that are not included in their memoranda shall be deemed waived
or abandoned. Since Enriquez did not file a memorandum in either petition, she
is deemed to have waived the said issue.
WHEREFORE, premises considered, the appealed November 30, 2004
Decision of the Court of Appeals, as well as its June 22, 2005 Resolution in CA-
G.R. SP No. 81280 are hereby AFFIRMED with the MODIFICATIONS that
Delta Development and Management Services, Inc. is NOT LIABLE TO
PAY Luzon Development Bank the value of the subject lot; and respondent
Angeles Catherine Enriquez is ordered to PAY the balance of the purchase
price and the interests accruing thereon, as decreed by the Court of Appeals,
to the Luzon Development Bank, instead of Delta Development and
Management Services, Inc., within thirty (30) days from finality of this
Decision. The Luzon Development Bank is ordered to DELIVER a CLEAN
TITLE to Angeles Catherine Enriquez upon the latters full payment of the
balance of the purchase price and the accrued interests.
SO ORDERED.
OMINGO CARABEO,
Petitioner, G.R. No. 190823
Present:
- versus - CARPIO,* J.,
CARPIO MORALES, J., Chairperson,
BRION,
BERSAMIN, and
SPOUSES NORBERTO and SERENO, JJ.
SUSAN DINGCO,
Respondents. Promulgated:
April 4, 2011
x--------------------------------------------------x
DECISION
CARPIO MORALES, J.:
On July 10, 1990, Domingo Carabeo (petitioner) entered into a
contract denominated as Kasunduan sa Bilihan ng Karapatan sa
Lupa[1] (kasunduan) with Spouses Norberto and Susan Dingco
(respondents) whereby petitioner agreed to sell his rights over a 648
square meter parcel of unregistered land situated in Purok III,
Tugatog, Orani, Bataan to respondents for P38,000.
Respondents tendered their initial payment of P10,000 upon signing
of the contract, the remaining balance to be paid on September 1990.
Respondents were later to claim that when they were about to hand in
the balance of the purchase price, petitioner requested them to keep it
first as he was yet to settle an on-going squabble over the land.
Nevertheless, respondents gave petitioner small sums of
money from time to time which totaled P9,100, on petitioners request
according to them; due to respondents inability to pay the amount of
the remaining balance in full, according to petitioner.
By respondents claim, despite the alleged problem over the
land, they insisted on petitioners acceptance of the remaining balance
of P18,900 but petitioner remained firm in his refusal, proffering as
reason therefor that he would register the land first.
 Sometime in 1994, respondents learned that the alleged
problem over the land had been settled and that petitioner had caused
its registration in his name on December 21, 1993 under Transfer
Certificate of Title No. 161806. They thereupon offered to pay the
balance but petitioner declined, drawing them to file a complaint before
the Katarungan Pambarangay. No settlement was reached, however,
hence, respondent filed a complaint for specific performance before
the Regional Trial Court (RTC) of Balanga, Bataan.
Petitioner countered in his Answer to the Complaint that the
sale was void for lack of object certain, the kasunduan not having
specified the metes and bounds of the land.In any event, petitioner
alleged that if the validity of the kasunduan is upheld, respondents
failure to comply with their reciprocal obligation to pay the balance of
the purchase price would render the action premature. For, contrary to
respondents claim, petitioner maintained that they failed to pay the
balance of P28,000 on September 1990 to thus constrain him to
accept installment payments totaling P9,100.
After the case was submitted for decision or on January 31,
2001,[2] petitioner passed away. The records do not show that
petitioners counsel informed Branch 1 of the Bataan RTC, where the
complaint was lodged, of his death and that proper substitution was
effected in accordance with Section 16, Rule 3, Rules of Court.[3]
By Decision of February 25, 2001,[4] the trial court ruled in
favor of respondents, disposing as follows:
WHEREFORE, premises considered,
judgment is hereby rendered ordering:
1. The defendant to sell his right over 648
square meters of land pursuant to the
contract dated July 10, 1990 by executing a
Deed of Sale thereof after the payment of
P18,900 by the plaintiffs;
2. The defendant to pay the costs of the suit.
SO ORDERED.[5]
Petitioners counsel filed a Notice of Appeal on March 20,
2001.
By the herein challenged Decision dated July 20,
2009,[6] the Court of Appeals affirmed that of the trial court.
Petitioners motion for reconsideration having been denied
by Resolution of January 8, 2010, the present petition for review was
filed by Antonio Carabeo, petitioners son,[7] faulting the appellate court:
(A)in holding that the element of a contract, i.e., an object
certain is present in this case.
(B)in considering it unfair to expect respondents who are not
lawyers to make judicial consignation after herein petitioner
allegedly refused to accept payment of the balance of the
purchase price.
(C)in upholding the validity of the contract, Kasunduan sa
Bilihan ng Karapatan sa Lupa, despite the lack of spousal
consent, (underscoring supplied)and proffering that
(D) [t]he death of herein petitioner causes the dismissal of
the action filed by respondents; respondents cause of action
being an action in personam. (underscoring supplied)
The petition fails.The pertinent portion of
the kasunduan reads:[8]
xxxx
Na ako ay may isang partial na lupa
na matatagpuan sa Purok 111, Tugatog, Orani
Bataan, na may sukat na 27 x 24 metro
kuwadrado, ang nasabing lupa ay may sakop na
dalawang punong santol at isang punong
mangga, kayat ako ay nakipagkasundo sa mag-
asawang Norby Dingco at Susan Dingco na
ipagbili sa kanila ang karapatan ng nasabing lupa
sa halagang P38,000.00.
x x x x (underscoring supplied)
That the kasunduan did not specify the technical boundaries
of the property did not render the sale a nullity. The requirement that a
sale must have for its object a determinate thing is satisfied as long as,
at the time the contract is entered into, the object of the sale is capable
of being made determinate without the necessity of a new or further
agreement between the parties.[9] As the above-quoted portion of
the kasunduan shows, there is no doubt that the object of the sale is
determinate.
Clutching at straws, petitioner proffers lack of spousal
consent. This was raised only on appeal, hence, will not be
considered, in the present case, in the interest of fair play, justice and
due process.[10]
Respecting the argument that petitioners death rendered respondents
complaint against him dismissible, Bonilla v. Barcena[11] enlightens:
The question as to whether an action
survives or not depends on the nature of the action
and the damage sued for. In the causes of action
which survive, the wrong complained [of] affects
primarily and principally property and property
rights, the injuries to the person being merely
incidental, while in the causes of action which
do not survive, the injury complained of is to the
person, the property and rights of property
affected being incidental. (emphasis and
underscoring supplied)
In the present case, respondents are pursuing a property
right arising from the kasunduan, whereas petitioner is invoking nullity
of the kasunduan to protect his proprietary
interest. Assuming arguendo, however, that the kasunduan is
deemed void, there is a corollary obligation of petitioner to return the
money paid by respondents, and since the action involves property
rights,[12] it survives.
It bears noting that trial on the merits was already
concluded before petitioner died. Since the trial court was not informed
of petitioners death, it may not be faulted for proceeding to render
judgment without ordering his substitution. Its judgment is thus valid
and binding upon petitioners legal representatives or successors-in-
interest, insofar as his interest in the property subject of the action is
concerned.[13]
In another vein, the death of a client immediately divests the
counsel of authority.[14] Thus, in filing a Notice of Appeal, petitioners
counsel of record had no personality to act on behalf of the already
deceased client who, it bears reiteration, had not been substituted as
a party after his death. The trial courts decision had thereby become
final and executory, no appeal having been perfected.
WHEREFORE, the petition is DENIED.
NATIONAL GRAINS AUTHORITY and WILLLAM
CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON
SORIANO, respondents.
Cordoba, Zapanta, Rola & Garcia for petitioner National Grains
Authority.
Plaridel Mar Israel for respondent Leon Soriano.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the
Intermediate Appellate Court (now Court of Appeals) dated December
23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano, Plaintiff-
Appellee versus National Grains Authority and William Cabal,
Defendants Appellants", which affirmed the decision of the Court of
First Instance of Cagayan, in Civil Case No. 2754 and its resolution (p.
28, Rollo) dated April 17, 1986 which denied the Motion for
Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority,
NFA for short) is a government agency created under Presidential
Decree No. 4. One of its incidental functions is the buying of palay
grains from qualified farmers.
On August 23, 1979, private respondent Leon Soriano offered to sell
palay grains to the NFA, through William Cabal, the Provincial
Manager of NFA stationed at Tuguegarao, Cagayan. He submitted the
documents required by the NFA for pre-qualifying as a seller, namely:
(1) Farmer's Information Sheet accomplished by Soriano and certified
by a Bureau of Agricultural Extension (BAEX) technician, Napoleon
Callangan, (2) Xerox copies of four (4) tax declarations of the riceland
leased to him and copies of the lease contract between him and Judge
Concepcion Salud, and (3) his Residence Tax Certificate. Private
respondent Soriano's documents were processed and accordingly, he
was given a quota of 2,640 cavans of palay. The quota noted in the
Farmer's Information Sheet represented the maximum number of
cavans of palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August
24, 1979, Soriano delivered 630 cavans of palay. The palay delivered
during these two days 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 tide 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 August 28, 1979, Cabal wrote Soriano advising
him to withdraw from the NFA warehouse the 630 cavans Soriano
delivered 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, private respondent
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 November 2, 1979, against the National Food Authority
and Mr. William Cabal, Provincial Manager of NFA with the Court of
First Instance of Tuguegarao, and docketed as Civil Case No. 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. An inventory was made by the sheriff as
representative of the Court, a representative of Soriano and a
representative of NFA (p. 13, Rollo).
On September 30, 1982, the trial court rendered judgment ordering
petitioner National Food Authority, its officers and agents to pay
respondent Soriano (as plaintiff in Civil Case No. 2754) the amount of
P 47,250.00 representing the unpaid price of the 630 cavans of palay
plus legal interest thereof (p. 1-2, CA Decision). The dispositive portion
reads as follows:
WHEREFORE, the Court renders judgment in favor of the plaintiff and
against the defendants National Grains Authority, and William Cabal
and hereby orders:
1. The National Grains Authority, now the National Food Authority, its
officers and agents, and Mr. William Cabal, the Provincial Manager of
the National Grains Authority at the time of the filing of this case,
assigned at Tuguegarao, Cagayan, whomsoever is his successors, to
pay to the plaintiff Leon T. Soriano, the amount of P47,250.00,
representing the unpaid price of the palay deliveries made by the
plaintiff to the defendants consisting of 630 cavans at the rate Pl.50
per kilo of 50 kilos per cavan of palay;
2. That the defendants National Grains Authority, now National Food
Authority, its officer and/or agents, and Mr. William Cabal, the
Provincial Manager of the National Grains Authority, at the time of the
filing of this case assigned at Tuguegarao, Cagayan or whomsoever
is his successors, are likewise ordered to pay the plaintiff Leon T.
Soriano, the legal interest at the rate of TWELVE (12%) percent per
annum, of the amount of P 47,250.00 from the filing of the complaint
on November 20, 1979, up to the final payment of the price of P
47,250.00;
3. That the defendants National Grains Authority, now National Food
Authority, or their agents and duly authorized representatives can now
withdraw the total number of bags (630 bags with an excess of 13
bags) now on deposit in the bonded warehouse of Eng. Ben de
Guzman at Tuguegarao, Cagayan pursuant to the order of this court,
and as appearing in the written inventory dated October 10, 1980,
(Exhibit F for the plaintiff and Exhibit 20 for the defendants) upon
payment of the price of P 47,250.00 and TWELVE PERCENT (12%)
legal interest to the plaintiff,
4. That the counterclaim of the defendants is hereby dismissed;
5. That there is no pronouncement as to the award of moral and
exemplary damages and attorney's fees; and
6. That there is no pronouncement as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was denied on
December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate
Appellate Court. In a decision promulgated on December 23, 1986 (pp.
9-21, Rollo) the then Intermediate Appellate Court upheld 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.
Petitioners' motion for reconsideration of the appellate court's decision
was denied in a resolution dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority and
Mr. William Cabal on May 15, 1986 assailing the decision of the
Intermediate Appellate Court on the sole issue of whether or not there
was a contract of sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by Soriano
on August 23, 1979 was made only for purposes of having it offered
for sale. Further, petitioners stated that the procedure then prevailing
in matters of palay procurement from qualified farmers were: firstly,
there is a rebagging wherein the palay is transferred from a private
sack of a farmer to the NFA sack; secondly, after the rebagging has
been undertaken, classification of the palay is made to determine its
variety; thirdly, after the determination of its variety and convinced that
it passed the quality standard, the same will be weighed to determine
the number of kilos; and finally, it will be piled inside the warehouse
after the preparation of the Warehouse Stock Receipt (WSP) indicating
therein the number of kilos, the variety and the number of bags. Under
this procedure, rebagging is the initial operative act signifying
acceptance, and acceptance will be considered complete only after the
preparation of the Warehouse Stock Receipt (WSR). When the 630
cavans of palay were brought by Soriano to the Carig warehouse of
NFA they were only offered for sale. Since the same were not
rebagged, classified and weighed in accordance with the palay
procurement program of NFA, there was no acceptance of the offer
which, to petitioners' mind is a clear case of solicitation or an
unaccepted offer to sell.
The petition is not impressed with merit.
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.
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.
In the case at bar, Soriano initially offered to sell palay grains produced
in his farmland to NFA. When the latter accepted the offer by noting in
Soriano's Farmer's 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 Soriano's farmland
and the NFA was to pay the same depending upon its quality. 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: ". . .. 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 this 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.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986,
petitioners further contend that there was no contract of sale because
of the absence of an essential requisite in contracts, namely, consent.
It cited Section 1319 of the Civil Code which states: "Consent is
manifested by the meeting of the offer and the acceptance of the thing
and the cause which are to constitute the contract. ... " Following this
line, petitioners contend that there was no consent because there was
no acceptance of the 630 cavans of palay in question.
The above contention of petitioner is not correct 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) This is provided by
Article 1475 of the Civil Code which states:
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.
xxx
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 as contended by petitioners.
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.).
The reason why NFA initially refused acceptance of the 630 cavans of
palay delivered by Soriano is that it (NFA) cannot legally accept the
said delivery because Soriano is allegedly not a bona fide farmer. The
trial court and the appellate court found that Soriano was a bona fide
farmer and therefore, he was qualified to sell palay grains to NFA.
Both courts likewise agree that NFA's refusal to accept was without
just cause. The above factual findings which are supported by the
record should not be disturbed on appeal.
ACCORDINGLY, the instant petition for review is DISMISSED. The
assailed decision of the then Intermediate Appellate Court (now Court
of Appeals) is affirmed. No costs.
SERVICEWIDE SPECIALISTS, INCORPORATED, petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT,
GALICANO SITON AND JUDGE JUSTINIANO DE
DUMO respondents.
Labaguis, Loyola, Angara & Associates for petitioner.
Godofredo de Guzman for respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of a decision of the
Intermediate Appellate Court (now Court of Appeals) in ACG.R. CV
No. 03876 affirming in toto the decision of the Regional Trial Court of
Manila in Civil Case No. 82-4364 entitled, "Servicewide Specialists,
Inc. vs. Galicano Siton and John Doe."
The antecedent facts in this case as found by the lower court are as
follows:
The private respondent Galicano Siton purchased from Car Traders
Philippines, Inc. a vehicle described as Mitsubishi Celeste two-door
with air-conditioning, Engine 2M-62799, Serial No. A73-2652 and paid
P 25,000.00 as downpayment of the price. The remaining balance of
P 68,400.00, includes not only the remaining principal obligation but
also advance interests and premiums for motor vehicle insurance
policies.
On August 14, 1979, Siton executed a promissory note in favor of Car
Traders Philippines, Inc. expressly stipulating that the face value of the
note which is P 68,400. 00, shall "be payable, without need of notice
of demand, in installments of the amounts following and at the dates
hereinafter set forth, to wit: P 1,900.00 monthly for 36 months due and
payable on the 14th day of each month starting September 14, 1979,
thru and inclusive of August 14, 1982" (p. 84, Rollo). There are
additional stipulations in the Promissory Note consisting of, among
others:
1 Interest at the rate of 14% per annum to be added on each unpaid
installment from maturity;
2 If default is made in the payment of any of the installments or interest
thereon, the total principal sum then remaining unpaid, together with
accrued interest thereon shall at once become due and demandable;
3 In case of default, and attorney's services are availed of, there shall
be added a sum equal to 25% of the total sum due thereon to cover
attorney's fees, aside from expenses of collection and legal costs (p.
84, Rollo).
As further security, Siton executed a Chattel Mortgage over the subject
motor vehicle in favor of Car Traders Philippines, Inc. (pp. 85-88,
Rollo). The Chattel Mortgage Contract provides additional stipulations,
such as: a) the waiver by the mortgagor of his rights under Art. 1252
of the Civil Code to designate the application of his payments and
authorize the mortgagee or its assigns to apply such payments to
either his promissory note or to any of his existing obligations to the
mortgagee or its assigns at the latter's discretion; and b) concerning
the insurance of the subject motor vehicle, the mortgagor is under
obligation to secure the necessary policy in an amount not less than
the outstanding balance of the mortgage obligation and that loss
thereof shall be made payable to the mortgagee or its assigns as its
interest may appear, with the further obligation of the mortgagor to
deliver the policy to the mortgagee. The mortgagor further agrees that
in default of his effecting or renewing the insurance and delivering the
policy as endorsed to the mortgagee within five (5) days after the
execution of the mortgage or the expiry date of the insurance, the
mortgagee may, at his option but without any obligation to do so, effect
such insurance or obtain such renewal for the account of the
mortgagor.
The credit covered by the promissory note and chattel mortgage
executed by respondent Galicano Siton was first assigned by Car
Traders Philippines, Inc. in favor of Filinvest Credit Corporation.
Subsequently, Filinvest Credit Corporation likewise reassigned said
credit in favor of petitioner Servicewide Specialists, Inc. and
respondent Siton was advised of this second assignment.
Alleging that Siton failed to pay the part of the installment which fell
due on November 2, 1981 as well as the subsequent installments
which fell due on December 2, 1981 and January 2, 1982, respectively,
the petitioner filed this action against Galicano Siton and "John Doe."
The relief sought by the plaintiff is a Writ of Replevin over subject motor
vehicle or, in the alternative, for a sum of money of P 20,319.42 plus
interest thereon at the rate of 14% per annum from January 11, 1982
until fully paid; and in either case, for defendants to pay certain sum of
money for attorney's fees, liquidated damages, bonding fees and other
expenses incurred in the seizure of the motor vehicle plus costs of suit.
After the service of summons, Justiniano de Dumo, identifying himself
as the "John Doe" in the Complaint, inasmuch as he is in possession
of the subject vehicle, filed his Answer with Counterclaim and with
Opposition to the prayer for a Writ of Replevin. Said defendant, alleged
the fact that he has bought the motor vehicle from Galicano Siton on
November 24, 1979; that as such successor, he stepped into the rights
and obligations of the seller; that he has religiously paid the
installments as stipulated upon in the promissory note. He also
manifested that the Answer he has filed in his behalf should likewise
serve as a responsive pleading for his co-defendant Galicano Siton.
On January 12, 1984, the Regional Trial Court rendered a decision,
the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered as follows:
1. Denying the issuance of a Writ of Replevin in this case;
2. Ordering defendants to pay jointly and severally, the plaintiff, the
remaining balance on the motor vehicle reckoned as of January 25,
1982, without additional interest and charges, and the same to be paid
by installments, per the terms of the Promissory Note, payable on the
14th day of each month starting the month after this Decision shall
have become final, until the full payment of the remaining obligation;
3. The Chattel Mortgage contract is deemed to cover the obligation
petition stated in par. 2, supra, without prejudice to the parties,
including defendant de Dumo, to now execute a new promissory note
and/or chattel mortgage contract;
4. Ordering defendants to pay, jointly and severally, the sum of another
P 3,859.90 to the plaintiff by way of refunding the premium payments
in the past on insurance policies over subject car;
5. Each party shall bear his own expenses and attorney's fees; and
6. The claim of one party against the other(s) for damages, and vice-
versa are hereby denied and dismissed. There is no pronouncement
as to costs.
SO ORDERED. (pp. 95-96, Rollo)
Not satisfied with the decision of the trial court, the petitioner appealed
to the Intermediate Appellate Court.
On April 25, 1986, the respondent Appellate Court rendered judgment
affirming in toto the decision of the trial court. The dispositive portion
of the judgment states:
WHEREFORE, the appealed judgment is in full accord with the
evidence and the law is hereby therefore affirmed in all its parts. Costs
against plaintiff-appellant.
SO ORDERED. (p. 42, Rollo).
Hence, the instant petition was filed, praying for a reversal of the
above-mentioned decision in favor of private respondents, with the
petitioner assigning the following errors:
2.1 The Honorable Respondent, the Intermediate Appellate Court
erred and gravely abused its discretion in concluding that there was a
valid sale of the mortgaged vehicle between Siton and De Dumo;
2.2 The Honorable Respondent, the Intermediate Appellate Court
erred and gravely abused its discretion in holding that the petitioner
(plaintiff) and its predecessors-in-interest are bound by the
questionable and invalid unnotarized Deed of Sale between Siton and
De Dumo, even as neither petitioner (plaintiff) nor its predecessors-in-
interest had knowledge nor had they given their written or verbal
consent thereto;
2.3 The Honorable Respondent, the Intermediate Appellate Court
erred and gravely abused its discretion in ruling that the mortgagee
(petitioner) has the obligation to make demands to De Dumo for
payment on the Promissory Note when De Dumo is not privy thereto;
2.4 The Honorable Respondent, the Intermediate Appellate Court
erred and acted with grave abuse of discretion in refusing to issue the
Writ of Replevin despite due compliance by petitioner of the
requirements of Rule 60, Sections 1 and 2 of REVISED RULES OF
COURT;
2.5 The Honorable Respondent, the Intermediate Appellate Court
acted with grave abuse of discretion in ruling that petitioner (creditor-
mortgagee) is obliged to inform respondent De Dumo (not privy to the
mortgage) to submit the insurance policy over the mortgaged "res" and
to demand the payor-third-party (De Dumo) to redeem his rubber
check; (pp. 4-5, Rollo).
In its first assigned error, petitioner alleges that the sale of the
mortgaged vehicle between the mortgagor Siton and De Dumo was
void, as the sale is prohibited under the provisions of the Deed of
Chattel Mortgage, the Chattel Mortgage Act (Act 1508) and the
Revised Penal Code. The Deed of Chattel Mortgage executed by the
petitioner and Siton stipulates:
The Mortgagor shall not sell, mortgage or in any other way, encumber
or dispose of the property herein mortgaged without the previous
written consent of the Mortgagee. (p. 85, Rollo).
The rule is settled that the chattel mortgagor continues to be the owner
of the property, and therefore, has the power to alienate the same;
however, he is obliged under pain of penal liability, to secure the
written consent of the mortgagee. (Francisco, Vicente, Jr., Revised
Rules of Court in the Philippines, (1972), Volume IV-B Part I, p. 525).
Thus, the instruments of mortgage are binding, while they subsist, not
only upon the parties executing them but also upon those who later,
by purchase or otherwise, acquire the properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the
mortgaged property in favor of a third person, therefore, affects not the
validity of the sale but only the penal liability of the mortgagor under
the Revised Penal Code and the binding effect of such sale on the
mortgagee under the Deed of Chattel Mortgage.
Anent its second, third and fifth assigned errors, petitioner submits that
it is not bound by the deed of sale made by Siton in favor of De Dumo,
as neither petitioner nor its predecessor has given their written or
verbal consent thereto pursuant to the Deed of Chattel Mortgage.
On this matter, the appellate court upheld the findings of the trial court,
as follows, to wit:
The first issue is whether or not the sale and transfer of the motor
vehicle, subject matter of the chattel mortgage, made by Siton in favor
of Atty. de Dumo is illegal and violative of the Chattel Mortgage Law.
The supposition is that if it were illegal, then plaintiff has all the right to
file this action and to foreclose on the chattel mortgage. Both
defendants testified that, before the projected sale, they went to a
certain. Atty. Villa of Filinvest Credit Corporation advising the latter of
the intended sale and transfer. Defendants were accordingly advised
that the verbal information given to the corporation would suffice, and
that it would be tedious and impractical to effect a change of transfer
of ownership as that would require a new credit investigation as to the
capacity and worthiness of Atty. De Dumo, being the new debtor. The
further suggestion given by Atty. Villa is that the account should be
maintained in the name of Galicano Siton. Plaintiff claims that it and its
predecessor had never been notified of the sale much less were they
notified in writing as required by the contract. On this particular issue,
it would really appear that, since the transfer, it was Atty. de Dumo who
had been paying said account, almost invariably with his personal
checks. In fact, one of the checks that supposedly bounced, marked
Exhibit J and the relative receipt as Exhibit 16, was Atty. de Dumo's
personal check. Note that plaintiff has been accepting such payments
by defendant de Dumo. It would appear, therefore, that there was an
implied acceptance by the plaintiff and its predecessor of the transfer.
Another reasonable conclusion is that, while there was failure on the
part of defendants to comply strictly and literaly with their contract,
there was substantial compliance therewith. (pp. 92-93, Rollo)
We agree with the aforequoted findings and conclusions of the lower
court which were affirmed on appeal by the Court of Appeals. The
conclusions and findings of facts by the trial court are entitled to great
weight and will not be disturbed on appeal unless for strong and cogent
reasons because the trial court is in a better position to examine real
evidence as well as to observe the demeanor of witnesses while
testifying on the case. (Macua vs. Intermediate Appellate Court, No. L-
70810, October 26, 1987,155 SCRA 29)
There is no dispute that the Deed of Chattel Mortgage executed
between Siton and the petitioner requires the written consent of the
latter as mortgagee in the sale or transfer of the mortgaged vehicle.
We cannot ignore the findings, however, that before the sale, prompt
inquiries were made by private respondents with Filinvest Credit
Corporation regarding any possible future sale of the mortgaged
property; and that it was upon the advice of the company's credit
lawyer that such a verbal notice is sufficient and that it would be
convenient if the account would remain in the name of the mortgagor
Siton.
Even the personal checks of de Dumo were accepted by petitioner as
payment of some of the installments under the promissory note (p. 92,
Rollo). If it is true that petitioner has not acquiesced in the sale, then,
it should have inquired as to why de Dumo's checks were being used
to pay Siton's obligations.
Based on the foregoing circumstances, the petitioner is bound by its
predecessor company's representations. This is based on the doctrine
of estoppel, through which, "an admission or representation is
rendered conclusive upon the person making it, and cannot be denied
or disproved as against the person relying thereon" (Art. 1431, Civil
Code). Like the related principles of volenti non lit injuria (consent to
injury), waiver and acquiescence, estoppel finds its origin generally in
the equitable notion that one may not change his position, and profit
from his own wrongdoing when he has caused another to rely on his
former representations (Sy vs. Central Bank, No. L-41480, April 30,
1976, 70 SCRA 570).
Further, it is worthy to note that despite the arguments of petitioner that
it is not bound by the sale of the vehicle to de Dumo, and that the latter
is a stranger to the transaction between Filinvest and Siton,
nevertheless, it admitted de Dumo's obligation as purchaser of the
property when it named the latter as one of the defendants in the lower
court. Petitioner even manifested in its prayer in the appellant's brief
and in the petition before Us, that de Dumo be ordered to pay
petitioner, jointly and severally with Siton the unpaid balance on the
promissory note (pp. 32 and 72, Rollo).
In the fourth assigned error by petitioner, the latter claims that the
appellate court gravely erred in upholding the trial court's refusal to
issue that Writ of Replevin despite compliance with the requirements
of the Rules. This contention is devoid of merit.
Article 1484 of the New Civil Code prescribes three remedies which a
vendor may pursue in a contract of sale of personal property the price
of which is payable in installments, to wit: 1) to exact fulfillment of the
obligation; 2) cancel the sale; and 3) foreclose the mortgage on the
thing sold. These remedies are alternative and the vendor cannot avail
of them at the same time.
It is clear from the prayer of petitioner in its brief on appeal to the
appellate court that it had chosen the remedy of fulfillment when it
asked the appellate court to order private respondents to pay the
remaining unpaid sums under the promissory note (p. 31, Rollo). By
having done so, it has deemed waived the third remedy of foreclosure,
and it cannot therefore ask at the same time for a Writ of Replevin as
preparatory remedy to foreclosure of mortgage. In a similar case,
where the vendor filed an action containing three remedies: to collect
the purchase price; to seize the property purchased by suing for
replevin and to foreclose the mortgage executed thereon, We held that
such a scheme is not only irregular but is a flagrant circumvention of
the prohibition of the law (Luneta Motor Company vs. Dimagiba No. L-
17061, December 30, 1961, 3 SCRA 884).
Finally, the petitioner argues that the judgment of the appellate court
was not in accordance with its own findings and those of the trial court
showing private respondents' default in the payment of three monthly
installments as a result of the dishonor of three checks issued as
payments; and that as a consequence thereof, the full amount of the
unpaid balance under the promissory note became due and
demandable pursuant to the terms of the promissory note.
This contention is impressed with merit. The findings of the trial court
on this issue, which were affirmed by the appellate court, state, as
follows:
The second point of issue is whether or not defendants were in arrears
when the complaint was filed on January 25, 1982. Plaintiff claims that
there were three payments by checks made by defendants, which are
ineffective (Art. 1249, Civil Code) as said checks bounced for
insufficient finding. .... The debtor/obligor is allegedly obliged, as per
the Chattel Mortgage Contract, to have the motor vehicle insured and,
failing which, the creditor may insure the same for the account of the
debtor. Such payments, therefore, together with the value of the three
checks that had been dishonored, are the reasons for defendants'
delinquency. On defendant's part, more particularly Atty. de Dumo's,
they submit that there was no delinquency as, in fact, defendants have
receipts to evidence payment for the months of November 1981
(Exhibit 18 dated November 3, 1981), December 1981 (Exhibit 17
dated December 2, 1981), and January, 1982 (Exhibit 30, dated
January 5, 1982).
On cross-examination, Atty. de Dumo admitted that really one of his
checks (Exhibit J) was dishonored. There is no evidence on way [or]
the other whether said check was replaced subsequently with a good
one. Likewise, there is no clarification in the record as to whether the
two other dishonored checks had been replaced. As to the insurance
policies, defendants claimed on the witness stand that they were the
ones who had the vehicle insured, for, otherwise, defendant de Dumo
could not have registered the motor vehicle for the years 1980 up to
1982. Defendants further contend that they complied with their
undertaking by notifying verbally the creditor of that fact. There is no
denying the fact however, that the insurance policies obtained were
not endorsed, much less surrendered, to the plaintiff; in fact such
policies were not shown in court to evidence the proper indorsement
of the policies in favor of the creditor. (pp. 93-94, Rollo). (Emphasis
supplied)
It is evident from the foregoing findings that the checks issued by the
defendants as payment for the installments for November and
December, 1981 and January, 1982 were dishonored and were not
shown to have been replaced. The delivery of promissory notes
payable to order, or bills of exchange or other mercantile documents
shall produce the effect of payment only when they have been cashed.
(Art. 1249, Civil Code). When the existence of the debt is fully
established by the evidence contained in the record, the burden of
proving that it has been extinguished by payment devolves upon the
debtor who offers such a defense to the claim of the creditor. (Chua
Chienco vs. Vargas, 11 Phil. 219). In the absence of any showing that
the aforestated checks were replaced and subsequently cashed, We
can only infer that the monthly installments for November, 1981,
December, 1981 and January, 1982 have not been paid. In view of the
above, it is not correct for the appellate court to ignore the evidence on
record showing the default of private respondents in their obligations.
The fact that Siton and de Dumo were not advised or notified of their
failure to comply with their obligations under the note and under the
Deed of Chattel Mortgage is of no importance. Article 1169 of the Civil
Code provides:
Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order
that delay may exist:
1. When the obligation or the law expressly so declares;
The promissory note executed by Siton in favor of Car Traders
Philippines, Inc. expressly stipulates that the unpaid balance shall be
payable, without need of notice or demand, in fixed monthly
installments; and that if default be made in the payment of any of the
installments or interest thereon as and when the same becomes due
and payable as specified above, the total principal sum then remaining
unpaid, together with accrued interest thereon, shall at once become
due and payable (p. 84, Rollo). The parties are bound by this
agreement.
In view of the foregoing, We find it correct to hold both the respondents
Galicano Siton and Justiniano de Dumo liable for their obligations to
petitioner herein. In the case at bar, the purchase of the car by
respondent de Dumo from respondent Siton does not necessarily
imply the extinguishment of the liability of the latter. Since it was neither
established nor shown that Siton was released from responsibility
under the promissory note, the same does not constitute novation by
substitution of debtors under Article 1293 of the Civil Code. Likewise,
the fact that petitioner company accepts payments from a third person
like respondent de Dumo, who has assumed the obligation, will result
merely to the addition of debtors and not novation. Hence, the creditor
may therefore enforce the obligation against both debtors. (Straight vs.
Hashell, 49 Phil. 614; Mata vs. Serra, 47 Phil. 464; McCullough vs.
Veloso, 46 Phil. 1; Pacific Commercial vs. Sotto, 34 Phil. 237). If there
is no agreement as to solidarity, the first and new debtors are
considered obligated jointly. (Lopez vs. Court of Appeals, et al., No. L-
33157, June 29, 1982, 114 SCRA 671; Dungo vs. Lopena, et al., L-
18377, December 29, 1962, 6 SCRA 1007).
ACCORDINGLY, the petition is GRANTED and the assailed decision
of the Court of Appeals dated April 25, 1986 is hereby REVERSED
and SET ASIDE, and a new one entered, ordering the private
respondents Galicano Siton and Justiniano de Dumo, jointly to pay to
petitioner Servicewide Specialists, Incorporated, the total sum of the
remaining unpaid balance on the promissory note with interest thereon
at fourteen percent per annum from January 25, 1982 until fully paid,
as well as stipulated attorney's fees and liquidated damages; and to
reimburse to petitioner the sum of P 3,859.90 for the premium
payments on the insurance policies over the subject vehicle. Costs
against private respondents.
SO ORDERED.
SECOND DIVISION
MAKATI SPORTS CLUB, INC.,
Petitioner,
- versus -
CECILE H. CHENG, MC FOODS, INC., and RAMON SABARRE,
Respondents.
x in her Affidavit that in October 1995, she talked to Cheng
DECISION
NACHURA, J.:
This is a petition for review on certiorari[1] under Rule 45 of the Rules
of Court, assailing the Decision[2] dated June 25, 2007 of the Court of
Appeals (CA) in CA-G.R. CV No. 80631, affirming the decision[3] dated
August 20, 2003 of the Regional Trial Court (RTC), Branch
138, Makati City in Civil Case No. 01-837.
The facts of the case, as narrated by the RTC and adopted
by the CA, are as follows:
On October 20, 1994, plaintiffs Board of Directors adopted a
resolution (Exhibit 7) authorizing the sale of 19 unissued
shares at a floor price of P400,000 and P450,000 per share
for Class A and B, respectively.
Defendant Cheng was a Treasurer and Director of plaintiff in
1985. On July 7, 1995, Hodreal expressed his interest to buy
a share, for this purpose he sent the letter, Exhibit 13. In said
letter, he requested that his name be included in the waiting
list.
It appears that sometime in November 1995, McFoods
expressed interest in acquiring a share of the plaintiff, and
one was acquired with the payment to the plaintiff by
McFoods of P1,800,000 through Urban Bank (Exhibit 3). On
December 15, 1995, the Deed of Absolute Sale, Exhibit 1,
was executed by the plaintiff and McFoods Stock Certificate
No. A 2243 was issued to McFoods on January 5, 1996. On
December 27, 1995, McFoods sent a letter to the plaintiff
giving advise (sic) of its offer to resell the share.
It appears that while the sale between the plaintiff and
McFoods was still under negotiations, there were
negotiations between McFoods and Hodreal for the
purchase by the latter of a share of the plaintiff. On
November 24, 1995, Hodreal paid
McFoods P1,400,000. Another payment of P1,400,000 was
made by Hodreal to McFoods on December 27, 1995, to
G.R.complete the purchase price of P2,800,000.
No. 178523
On February 7, 1996, plaintiff was advised of the sale by
Present:
McFoods to Hodreal of the share evidenced by Certificate
No. 2243
CARPIO, J., for P2.8 Million. Upon request, a new certificate
Chairperson, In 1997, an investigation was conducted and the
was issued.
committee held that there is prima facie evidence to show
NACHURA,
that defendant Cheng profited from the transaction because
PERALTA,
of her
ABAD, andknowledge.
PEREZ,* JJ.
Plaintiffs evidence of fraud are [a] letter of Hodreal dated
Promulgated:
July 7, 1995 where he expressed interest in buying one (1)
Juneshare from the plaintiff with the request that he be included
16, 2010
in the waiting list of buyers; [b] declaration of Lolita Hodreal
who assured her that there was one (1) available share at
the price of P2,800,000. The purchase to be validated by
paying 50% immediately and the balance after thirty (30)
days; [c] Marian Punzalan, Head, Membership Section of the
plaintiff declared that she informed Cheng of the intention of
Hodreal to purchase one (1) share and she gave to Cheng
the contact telephone number of Hodreal; and [d] the
authorization from Sabarre to claim the stock certificate.[4]
Thus, petitioner sought judgment that would order respondents to pay
the sum of P1,000,000.00, representing the amount allegedly
defrauded, together with interest and damages.
After trial on the merits, the RTC rendered its August 20,
2003 decision, dismissing the complaint, including all counterclaims.
Aggrieved, Makati Sports Club, Inc. (MSCI) appealed to the
CA, arguing that the RTC erred in finding neither direct nor
circumstantial evidence that Cecile H. Cheng (Cheng) had any
fraudulent participation in the transaction between MSCI and Mc
Foods, Inc. (Mc Foods), while it allegedly ignored MSCIs

overwhelming evidence that Cheng and Mc Foods confabulated with
one another at the expense of MSCI.
After the submission of the parties respective briefs, the CA
promulgated its assailed Decision, affirming the August 20, 2003
decision of the RTC. Hence, this petition anchored on the grounds that
THE APPELLATE COURT ERRED IN UPHOLDING THE
CONCLUSION OF THE TRIAL COURT THAT PETITIONER
DID NOT PROFFER CLEAR AND CONVINCING
EVIDENCE SHOWING THAT THE RESPONDENTS
DEFRAUDED THE PETITIONER DESPITE
OVERWHELMING EVIDENCE TO THE CONTRARY AS
SHOWN BY THE FOLLOWING:
(A) RESPONDENTS CHENG AND SABARRES OWN
ADMISSIONS, MARIAN PUNZALANS AFFIDAVIT, AND
OTHER PERTINENT DOCUMENTARY EVIDENCE ALL
UNEQUIVOCALLY PROVE THAT RESPONDENT CHENG
HAD INTIMATE PARTICIPATION IN THE SALE OF MSCIS
UNISSUED CLASS A SHARE TO MC FOODS, INC. FOR
THE CONSIDERATION OF ONE MILLION EIGHT
HUNDRED THOUSAND PESOS (PHP1,800,000.00).
(B) RESPONDENT CHENGS ADMISSIONS AND OTHER
PERTINENT DOCUMENTARY EVIDENCE RELATED TO THE
SALE OF MSCIS UNISSUED CLASS A SHARE TO RESPONDENT
MC FOODS, INC. AND THE RESALE OF THE SAME TO SPOUSES
HODREAL PROVE THAT THE SALE OF THE SAID UNISSUED
SHARE TO MC FOODS, INC. AT ONE MILLION EIGHT HUNDRED
THOUSAND PESOS (PHP1,800,000.00) WAS MADE WITH A VIEW
TO RESELL THE SAME AT A PROFIT TO THE HODREAL
SPOUSES AT THE AMOUNT OF TWO MILLION EIGHT HUNDRED
PESOS (PHP2,800,000.00); THE RESALE OF THE SAID SHARE
TO THE SPOUSES HODREAL OCCURRING EVEN BEFORE MC
FOODS, INC. GAINED OWNERSHIP OVER THE SAID UNISSUED
SHARE.
(C) THE UTTER LACK OF DOCUMENTARY EVIDENCE SHOWING
THAT MC FOODS, INC. EVINCED A DESIRE TO PURCHASE
PETITIONERS UNISSUED SHARES CONCLUSIVELY PROVES
THAT MC FOODS, INC. NEVER MADE ANY FORMAL OFFER TO
BUY AN UNISSUED M[SC]I SHARE FROM PETITIONERS BOARD
OF DIRECTORS AND/OR MEMBERSHIP COMMITTEE,
COURSING THE SAID TRANSACTION CLANDESTINELY
THROUGH RESPONDENT CHENG.
(D) RESPONDENT CHENGS OWN ADMISSIONS INDUBITABLY
PROVE THAT SHE DELIBERATELY CONCEALED THE FACT
THAT THERE WERE OTHER UNISSUED M[SC]I SHARES
AVAILABLE FOR PURCHASE BY THE SPOUSES HODREAL,
CHOOSING INSTEAD TO BROKER THE RESALE OF THE SHARE
PURCHASED BY MC FOODS, INC. FROM MSCI TO THE
SPOUSES HODREAL AT THE PRICE OF TWO MILLION EIGHT
HUNDRED THOUSAND PESOS (PHP2,800,000.00) TO THE
DETRIMENT OF THE PETITIONER.
(E) RESPONDENTS CHENG AND SABARRES ADMISSIONS,
MSCIS BY-LAWS AND DOCUMENTARY EVIDENCE RELATING TO
THE TWO IRREGULAR SALES TRANSACTIONS ALL POINT TO
THE CONCLUSION THAT MC FOODS, INC. IN RESELLING ITS
MSCI SHARE TO SPOUSES HODREAL FAILED TO GIVE MSCI A
CREDIBLE OPPORTUNITY TO REPURCHASE THE SAME IN
ACCORDANCE WITH SECTION 30 (E) OF MSCIS BY-LAWS.
\(F) RESPONDENT CHENGS OWN DOCUMENTARY EVIDENCE
PROVES THAT RESPONDENTS FALSIFIED AN ENTRY IN MC
FOODS, INC.S OFFER TO SELL ITS SHARE TO MSCI IN AN
EFFORT TO COAT THE RESELLING OF THE SAID SHARE TO
SPOUSES HODREAL WITH A SEMBLANCE OF REGULARITY[.]
(G) FINALLY, PERHAPS THE MOST OVERLOOKED MATTER BY
THE TRIAL COURT AND THE APPELLATE COURT IS THE
SINGULAR UNDENIABLE FACT THAT RESPONDENT CHENG
DURING THE PERIOD IN WHICH THE ABOVE-MENTIONED
TRANSACTIONS CAME INTO FRUITION WAS A MEMBER OF
THE BOARD OF DIRECTORS AND THE TREASURER OF MSCI,
THIS FACT ALONE TAINTS THE PARTICIPATION OF
RESPONDENT CHENG IN THE SAID IRREGULAR
TRANSACTIONS WITH BAD FAITH.[5]
The petition should be denied.
At the outset, we note that this recourse is a petition for
review on certiorari under Rule 45 of the Rules of Court. Under Section
1 of the Rule, such a petition shall raise only questions of law which
must be distinctly alleged in the appropriate pleading. In a case
involving a question of law, the resolution of the issue must rest solely
on what the law provides for a given set of facts drawn from the
evidence presented. Stated differently, there should be nothing in
dispute as to the state of facts; the issue to be resolved is merely the
correctness of the conclusion drawn from the said facts. Once it is
clear that the issue invites a review of the probative value of the
evidence presented, the question posed is one of fact. If the query
requires a reevaluation of the credibility of witnesses, or the existence
or relevance of surrounding circumstances and their relation to each
other, then the issue is necessarily factual.[6]
A perusal of the assignment of errors and the discussion set
forth by MSCI would readily show that the petition seeks a review of
all the evidence presented before the RTC and reviewed by the CA;
therefore, the issue is factual. Accordingly, the petition should be
dismissed outright, especially considering that the very same factual
circumstances in this petition have already been ruled upon by the CA.
 However, MSCI seeks to evade this rule that the findings of
fact made by the trial court, particularly when affirmed by the appellate
court, are entitled to great weight and even finality, claiming that its
case falls under two of the well-recognized exceptions, to wit: (1) that
the judgment of the appellate court is premised on a misapprehension
of facts or that it has failed to consider certain relevant facts which, if
properly considered, will justify a different conclusion; and (2) that the
findings of fact of the appellate court are ostensibly premised on the
absence of evidence, but are contradicted by the evidence on record.[7]
MSCI insists that Cheng, in collaboration with Mc Foods,
committed fraud in transacting the transfers involving Stock Certificate
No. A 2243 (Certificate A 2243) on account of the following
circumstances(1) on November 24, 1995, Joseph L. Hodreal (Hodreal)
paid the first installment of P1,400,000.00 for the purchase of a Class
A share in favor of Mc Foods;[8] (2) on November 28, 1995, Mc Foods
deposited to MSCIs account an Allied Banking Corporation managers
check for the purchase of the same share in the amount
of P1,800,000.00,[9] sans an official receipt from MSCI;[10] (3) on
December 15, 1995, MSCI and Mc Foods executed a Deed of Sale for
the purchase of a Class A share;[11] (4) on December 27, 1995,
Hodreal paid the last installment of P1,400,000.00 to Mc Foods;[12] (5)
on December 27, 1995, Mc Foods sent a letter to MSCI, offering to sell
its purchased share of stock in the amount of P2,800,000.00;[13] (6) on
January 5, 1996, Certificate A 2243 was issued to Mc Foods by
MSCI;[14] and (7) on January 29, 1996, Mc Foods and Hodreal
executed a Deed of Sale for the same share of stock.[15]
Based on the above incidents, MSCI asserts that Mc Foods
never intended to become a legitimate holder of its purchased Class A
share but did so only for the purpose of realizing a profit in the amount
of P1,000,000.00 at the expense of the former. MSCI further claims
that Cheng confabulated with Mc Foods by providing it with an insiders
information as to the status of the shares of stock of MSCI and even,
allegedly with unusual interest, facilitated the transfer of ownership of
the subject share of stock from Mc Foods to Hodreal, instead of an
original, unissued share of stock. According to MSCI, Chengs
fraudulent participation was clearly and overwhelmingly proven by the
following circumstances: (1) sometime in October 1995, Lolita
Hodreal, wife of Hodreal, talked to Cheng about the purchase of one
Class A share of stock and the latter assured her that there was
already an available share for P2,800,000.00;[16] (2) the second
installment payment of P1,400,000.00 of spouses Hodreal to Mc
Foods was received by Cheng on the latters behalf; [17] (3) Marian N.
Punzalan (Punzalan), head of MSCIs membership section, informed
Cheng about Hodreals intention to purchase a share of stock and
Cheng asked her if there was a quoted price for it, and for Hodreals
contact number;[18] and (4) on January 29, 1996, Cheng claimed
Certificate A 2243 on behalf of Mc Foods,[19] per letter of authority
dated January 26, 1996, executed by Mc Foods in favor of Cheng.[20]
The Court is not convinced.
It is noteworthy that, as early as July 7, 1995, Hodreal
already expressed to the MSCI Membership Committee his intent to
purchase one Class A share and even requested if he could be
included in the waiting list of buyers. However, there is no evidence on
record that the Membership Committee acted on this letter by replying
to Hodreal if there still were original, unissued shares then or if he
would indeed be included in the waiting list[21] of buyers. All that
Punzalan did was to inform Cheng of Hodreals intent and nothing
more, even as Cheng asked for Hodreals contact number. It may also
be observed that, although established by Punzalans affidavit that she
informed Cheng about Hodreals desire to purchase a Class A share
and that Cheng asked for Hodreals contact number, it is not clear when
Punzalan relayed the information to Cheng or if Cheng indeed initiated
contact with Hodreal to peddle Mc Foods purchased share.
While Punzalan declared that, in December 1995, she
received a Deed of Absolute Sale between MSCI and Mc Foods of a
Class A share for P1,800,000.00 signed by Atty. Rico Domingo and
Cheng, in their respective capacities as then President and Treasurer
of MSCI, and by Ramon Sabarre, as President of Mc Foods, what she
merely did was to inquire from her immediate superior Becky Pearanda
what share to issue; and the latter, in turn, replied that it should be an
original share. Thereafter, Punzalan prepared a letter, signed by then
corporate secretary, Atty. Rafael Abiera, to be sent to MSCIs stock
transfer agent for the issuance of the corresponding certificate of
stock. Then, Certificate A 2243 was issued in favor of Mc Foods on
January 5, 1996.

Also in point are the powers and duties of the MSCIs
Membership Committee, viz.:
SEC. 29. (a) The Membership Committee shall
process applications for membership; ascertain
that the requirements for stock ownership,
including citizenship, are complied with; submit to
the Board its recommended on applicants for
inclusion in the Waiting List; take charge of auction
sales of shares of stock; and exercise such other
powers and perform such other functions as may
be authorized by the Board.[22]
Charged with ascertaining the compliance of all the requirements for
the purchase of MSCIs shares of stock, the Membership Committee
failed to question the alleged irregularities attending Mc Foods
purchase of one Class A share at P1,800,000.00. If there was really
any irregularity in the transaction, this inaction of the Management
Committee belies MSCIs cry of foul play on Mc Foods purchase of the
subject share of stock. In fact, the purchase price of P1,800,000.00
cannot be said to be detrimental to MSCI, considering that it is the
same price paid for a Class A share in the last sale of an original share
to Land Bank of the Philippines on September 25, 1995, and in the
sale by Marina Properties Corporation to Xanland Properties, Inc. on
October 23, 1995.[23] These circumstances have not been denied by
MSCI. What is more, the purchase price of P1,800,000.00
is P1,400,000.00 more than the floor price set by the MSCI Board of
Directors for a Class A share in its resolution dated October 20,
1994.[24]
Further, considering that Mc Foods tendered its payment
of P1,800,000.00 to MSCI on November 28, 1995, even
assuming arguendo that it was driven solely by the intent to speculate
on the price of the share of stock, it had all the right to negotiate and
transact, at least on the anticipated and expected ownership of the
share, with Hodreal.[25] In other words, there is nothing wrong with the
fact that the first installment paid by Hodreal preceded the payment of
Mc Foods for the same share of stock to MSCI because eventually Mc
Foods became the owner of a Class A share covered by Certificate A
2243. Upon payment by Mc Foods of P1,800,000.00 to MSCI and the
execution of the Deed of Absolute Sale on December 15, 1995, it then
had the right to demand the delivery of the stock certificate in its
name. The right of a transferee to have stocks transferred to its name
is an inherent right flowing from its ownership of the stocks. [26]
It is MSCIs stance that Mc Foods violated Section 30(e) of MSCIs
Amended By-Laws on its pre-emptive rights, which provides
SEC. 30. x x x .
(e) Sale of Shares of Stockholder. Where the
registered owner of share of stock desires to sell
his share of stock, he shall first offer the same in
writing to the Club at fair market value and the club
shall have thirty (30) days from receipt of written
offer within which to purchase such share, and
only if the club has excess revenues over
expenses (unrestricted retained earning) and with
the approval of two-thirds (2/3) vote of the Board
of Directors. If the Club fails to purchase the share,
the stockholder may dispose of the same to other
persons who are qualified to own and hold shares
in the club. If the share is not purchased at the
price quoted by the stockholder and he reduces
said price, then the Club shall have the same pre-
emptive right subject to the same conditions for
the same period of thirty (30) days. Any transfer of
share, except by hereditary succession, made in
violation of these conditions shall be null and void
and shall not be recorded in the books of the Club.
The share of stock so acquired shall be offered
and sold by the Club to those in the Waiting List in
the order that their names appear in such list, or in
the absence of a Waiting List, to any applicant.[27]
We disagree.
Undeniably, on December 27, 1995, when Mc Foods offered
for sale one Class A share of stock to MSCI for the price
of P2,800,000.00 for the latter to exercise its pre-emptive right as
required by Section 30(e) of MSCIs Amended By-Laws, it legally had
the right to do so since it was already an owner of a Class A share by
virtue of its payment on November 28, 1995, and the Deed of Absolute
Share dated December 15, 1995, notwithstanding the fact that the
stock certificate was issued only on January 5, 1996. A certificate of
stock is the paper representative or tangible evidence of the stock itself
and of the various interests therein. The certificate is not a stock in the
corporation but is merely evidence of the holders interest and status in
the corporation, his ownership of the share represented thereby. It is
not in law the equivalent of such ownership. It expresses the contract
between the corporation and the stockholder, but is not essential to the
existence of a share of stock or the nature of the relation of shareholder
to the corporation.[28]
Therefore, Mc Foods properly complied with the requirement of
Section 30(e) of the Amended By-Laws on MSCIs pre-emptive
rights. Without doubt, MSCI failed to repurchase Mc Foods Class A
share within the thirty (30) day pre-emptive period as provided by the
Amended By-Laws. It was only on January 29, 1996, or 32 days after
December 28, 1995, when MSCI received Mc Foods letter of offer to
sell the share, that Mc Foods and Hodreal executed the Deed of
Absolute Sale over the said share of stock. While Hodreal had the right
to demand the immediate execution of the Deed of Absolute Sale after
his full payment of Mc Foods Class A share, he did not do so. Perhaps,
he wanted to wait for Mc Foods to first comply with the pre-emptive
requirement as set forth in the Amended By-Laws. Neither can MSCI
argue that Mc Foods was not yet a registered owner of the share of
stock when the latter offered it for resale, in order to void the transfer
from Mc Foods to Hodreal. The corporations obligation to register is
ministerial upon the buyers acquisition of ownership of the share of
stock. The corporation, either by its board, its by-laws, or the act of its
officers, cannot create restrictions in stock transfers.[29]
the damage to another or by which an undue and unconscionable
advantage is taken of another.[30] It is a question of fact that must be
alleged and proved. It cannot be presumed and must be established
by clear and convincing evidence, not by mere preponderance of
evidence.[31] The party alleging the existence of fraud has the burden
of proof.[32] On the basis of the above disquisitions, this Court finds that
petitioner has failed to discharge this burden. No matter how strong
the suspicion is on the part of petitioner, such suspicion does not
translate into tangible evidence sufficient to nullify the assailed
transactions involving the subject MSCI Class A share of stock.
WHEREFORE, the petition is DENIED for lack of merit. The
Decision dated June 25, 2007 of the Court of Appeals in CA-G.R. CV
No. 80631, affirming the decision dated August 20, 2003 of the
Regional Trial Court, Branch 138, Makati City in Civil Case No. 01-
837, is AFFIRMED. Costs against petitioner.
.

Moreover, MSCIs ardent position that Cheng was in cahoots with Mc

Foods in depriving it of selling an original, unissued Class A share of
stock for P2,800,000.00 is not supported by the evidence on
record. The mere fact that she performed acts upon authority of Mc
Foods, i.e., receiving the payments of Hodreal in her office and
claiming the stock certificate on behalf of Mc Foods, do not by
themselves, individually or taken together, show badges of fraud, since
Mc Foods did acts well within its rights and there is no proof that Cheng
personally profited from the assailed transaction. Even the statement
of MSCI that Cheng doctored the books to give a semblance of
regularity to the transfers involving the share of stock covered by
Certificate A 2243 remains merely a plain statement not buttressed by
convincing proof.

Fraud is deemed to comprise anything calculated to deceive,

including all acts, omissions, and concealment involving a breach of
legal or equitable duty, trust or confidence justly reposed, resulting in