1.Spouses Firmer v.

Bukal Enterprise
G.R. No. 146608. October 23, 2003]
SPOUSES CONSTANTE FIRME AND AZUCENA E.
FIRME, petitioners, vs. BUKAL ENTERPRISES AND
DEVELOPMENT CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari of the
Decision[1] dated 3 January 2001 of the Court of Appeals in CA-G.R.
CV No. 60747. The Court of Appeals reversed the Decision [2] of the
Regional Trial Court, Branch 223, Quezon City (trial court), which
held that there was no perfected contract of sale since there was
no consent on the part of the seller.
The Facts
Petitioner Spouses Constante and Azucena Firme (Spouses
Firme) are the registered owners of a parcel of land [3] (Property)
located on Dahlia Avenue, Fairview Park, Quezon City. Renato de
Castro (De Castro), the vice president of Bukal Enterprises and
Development Corporation (Bukal Enterprises) authorized his
friend, Teodoro Aviles (Aviles), a broker, to negotiate with the
Spouses Firme for the purchase of the Property.
On 28 March 1995, Bukal Enterprises filed a complaint for
specific performance and damages with the trial court, alleging
that the Spouses Firme reneged on their agreement to sell the
Property. The complaint asked the trial court to order the Spouses
Firme to execute the deed of sale and to deliver the title to the
Property to Bukal Enterprises upon payment of the agreed
purchase price.
During trial, Bukal Enterprises presented five witnesses,
namely, Aviles, De Castro, Antonio Moreno, Jocelyn Napa and
Antonio Ancheta.

Aviles testified that De Castro authorized him to negotiate on

behalf of Bukal Enterprises for the purchase of the
Property. According to Aviles, he met with the Spouses Firme on 23
January 1995 and he presented them with a draft deed of
sale[4] (First Draft) dated February 1995. The First Draft of the
deed of sale provides:
DEED OF ABSOLUTE SALE
KNOW ALL MEN BY THESE PRESENTS:
This DEED OF ABSOLUTE SALE made and executed by and between
the Spouses CONSTANTE FIRME and AZUCENA E. FIRME, both of
legal age, Filipino citizens and with postal address at No. 1450
Union, Paco, City of Manila, hereinafter called the VENDOR, and
BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a
corporation duly organized and registered in accordance with
Philippine Laws, with business address atDahlia
Avenue, Fairview Park, Quezon City, herein represented by its
PRESIDENT, MRS. ZENAIDA A. DE CASTRO, hereinafter called the
VENDEE.
WITNESSETH:
That the VENDOR is the absolute and registered owner of a certain
parcel of land located at Fairview Park, Quezon City, and more
particularly described as follows:
A parcel of land (Lot 4, Block 33 of the consolidation-subdivision
plan (LRC) Pcs-8124, Sheet No. I, being a portion of the
consolidation of Lots 41-B-2-A and 41-B-2-C, Psd-1136 and Lot
(LRC) Pcs-2665, (LRC) GLRO) Record. No. 1037), situated in Quezon
City, Island of Luzon. Bounded on the NE., points 2 to 5 by Road
Lot 24, of the consolidation-subdivision plan. Beginning at a point
marked 1 on plan, being S. 67 deg. 23W., 9288.80 m. from BLLM
I, Mp of Montalban, Rizal; thence N. 85 deg. 35E., 17.39 m. to
point 2; thence S. 54 deg. 22E., 4.00 m. to point 3; thence S. 14

deg. 21E., 17.87 m. to point 4; thence 3 deg. 56E., 17.92 m. to

point 5; thence N. 85 deg. 12 W., 23.38 m. to point 6; thence N. 4
deg. 55 W., 34.35 m. to the point of beginning; containing an area
of EIGHT HUNDRED AND SIX (806) SQUARE METERS, more or less.

AZUCENA E. FIRME
CASTRO
VENDOR

ZENAIDA A. DE
President

xxx
VENDORS title thereto being evidenced by Transfer Certificate of
Title No. 264243 issued by the Register of Deeds of Quezon City;
That the VENDOR, for and in consideration of the sum of THREE
MILLION TWO HUNDRED TWENTY FOUR THOUSAND PESOS
(P3,224,000.00) Philippine Currency, to them in hand paid and
receipt whereof is hereby acknowledged, do hereby SELL,
TRANSFER and CONVEY unto the said VENDEE, its assigns,
transferees and successors in interest the above described
property, free from all liens and encumbrances whatsoever;
It is hereby mutually agreed that the VENDEE shall bear all the
expenses for the capital gains tax, documentary stamps,
documentation, notarization, removal and relocation of the
squatters, registration, transfer tax and other fees as may be
required by law;
That the VENDOR shall pay the real estate tax for the current year
and back real estate taxes, charges and penalties if there are any.
IN WITNESS WHEREOF, we have hereunto affixed our signatures
this ____ day of February, 1995, at Quezon City, Philippines.
CONSTANTE FIRME
ENTERPRISES AND

BUKAL
DEV
ELOPM
ENT
CORP.
BY:

The Spouses Firme rejected this First Draft because of several

objectionable conditions, including the payment of capital gains
and other government taxes by the seller and the relocation of the
squatters at the sellers expense. During their second
meeting, Aviles presented to the Spouses Firme another draft deed
of sale[5] (Second Draft) dated March 1995. The Spouses Firme
allegedly accepted the Second Draft in view of the deletion of the
objectionable conditions contained in the First Draft. According
to Aviles, the Spouses Firme were willing to sell the Property
at P4,000 per square meter. They then agreed that payment would
be made at the Far East Bank and Trust Company (FEBTC), Padre
Faura Branch, Manila. However, the scheduled payment had to be
postponed due to problems in the transfer of funds. The Spouses
Firme later informed Aviles that they were no longer interested in
selling the Property.[6]
De Castro testified that he authorized Aviles to negotiate for
Bukal Enterprises the purchase of the Property owned by the
Spouses Firme. The Property was located beside the Dahlia
Commercial Complex owned by Bukal Enterprises. Aviles informed
him that the Spouses Firme agreed to sell the Property atP4,000
per square meter, payable in cash for a lump sum of P3,224,000.
Furthermore, Bukal Enterprises agreed to pay the taxes due and to
undertake the relocation of the squatters on the Property. For this
purpose, Bukal Enterprises applied for a loan of P4,500,000 which
FEBTC granted. Bukal Enterprises then relocated the four families
squatting on the Property at a cost of P60,000 per family. After the
squatters vacated the Property, Bukal Enterprises fenced the area,
covered it with filling materials, and constructed posts and riprap.
Bukal Enterprises spent approximately P300,000 for these
improvements. In a letter[7] dated 7 March 1995, Bukal Enterprises
offered to pay the purchase price of P3,224,000 to the Spouses
Firme upon execution of the transfer documents and delivery of the
owners duplicate copy of TCT No. 264243. The Spouses Firme did

not accept this offer but instead sent Bukal Enterprises a letter
demanding that its workers vacate the Property. Bukal Enterprises
then filed a complaint for specific performance and damages.[8]

Firme a copy of a draft deed of sale[12] (Third Draft)

which Aviles prepared. The Third Draft of the deed of sale provides:

Antonio Moreno, one of the alleged squatters on the Property,

testified that he constructed his house on the Property sometime in
1982. On 26 February 1995, he was summoned together with the
other squatters to a meeting with Aviles regarding their
relocation. They agreed to relocate provided they would be given
financial assistance of P60,000 per family. Thus, on 6 March 1995,
the squatter families were each paid P60,000 in the presence of De
Castro andAviles. Thereafter, they voluntarily demolished
their houses and vacated the Property.[9]

CONRACT OF SALE

Jocelyn Mapa, the manager of FEBTC, Padre Faura Branch,

testified that Bukal Enterprises has been their client since 1994.
According to her, Bukal Enterprises applied for a loan of P4,500,000
on the third week of February 1995 allegedly to buy a lot
in Fairview. FEBTC approved the loan on the last week of February
and released the proceeds on the first week of March.[10]
Antonio Ancheta (Ancheta), barangay captain of Barangay
Fairview, testified that he was present when one of the officers of
Bukal Enterprises, a certain Renato, paid each of the four squatter
families around P60,000 to P100,000. Ancheta informed Dr.
Constante Firme that he told the squatters to leave considering
that they already received payment for their relocation. According
to Ancheta, Dr. Constante Firme must have misunderstood him and
thought that the squatters left through Anchetas own efforts. [11]
On the other hand, Dr. Constante Firme (Dr. Firme) was the
sole witness for the defendant spouses.
Dr. Firme testified that on 30 January 1995, he and his wife
met with Aviles at the Aristocrat Restaurant in Quezon
City. Aviles arranged the meeting with the Spouses Firme involving
their Property in Fairview. Aviles offered to buy the Property
at P2,500 per square meter. The Spouses Firme did not accept the
offer because they were reserving the Property for their
children. On 6 February 1995, the Spouses Firme met again
with Aviles upon the latters insistence. Aviles showed the Spouses

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT, executed this ___ day of February, 1995, by and
between the Spouses CONSTANTE FIRME and AZUCENA E. FIRME,
both of legal age, Filipino citizen and with postal address at
__________, Quezon City, hereinafter referred to as the VENDORS,
and BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a
corporation duly organized and registered in accordance with
Philippine Laws, with postal address at Fairview Park, Quezon City,
herein represented by its President and Chief Executive Officer,
hereinafter referred to as the VENDEE.
WITNESSETH:
That for and in consideration of the sum of THREE MILLION TWO
HUNDRED TWENTY FOUR THOUSAND PESOS (P3,224,000.00),
Philippine Currency, payable in the form hereinafter expressed,
agreed to sell to the VENDEE and the VENDEE has agreed to buy
from the VENDORS, a parcel of land situated at Dahlia Avenue
corner Rolex Street, Fairview Park, Quezon City, containing an area
of 806 Square Meters more or less, of which the VENDORS are the
absolute registered owners in accordance with the Land
Registration Act, as evidenced by Transfer Certificate of Title No.
264243 issued by the Register of Deeds of Quezon City, more
particularly described and bounded as follows:
(DESCRIPTION AND BOUNDARIES OF PROPERTY)
THE FURTHER TERMS AND CONDITIONS OF THE CONTRACT ARE AS
FOLLOWS:
1. The VENDEE agrees to pay the VENDORS upon
execution of this Contract the sum of ONE MILLION

PESOS (P1,000,000.00), Philippine Currency, as

downpayment and agrees to pay the balance of TWO
MILLION TWO HUNDRED TWENTY FOUR THOUSAND
PESOS (P2,224,000.00) at the post office address of
the VENDORS in Quezon City, or such other place
or Office as the VENDORS may designate within a
period of sixty (60) days counted from the date of this
Contract;
2. The VENDORS have hereunto authorized the VENDEE
to mortgage the property and submit this Contract,
together with a certified true copy of the TCT, Tax
Declaration, Tax Clearance and Vicinity/Lot Plan, with
their Lending Bank. The proceeds of the VENDEES
Loan shall directly be paid and remitted by the Bank to
the VENDORS;
3. The said parcel of land shall remain in the name of
the VENDORS until the Lending Bank of the VENDEE
shall have issued a Letter Guaranty Payment in favor
of the VENDORS, at which time the VENDORS agree to
execute a Deed of Absolute Sale in favor of the
VENDEE and cause the issuance of the Certificate of
Title in the name of the latter. The Capital Gains Tax
and Documentary Stamps shall be charged from the
VENDORS in accordance with law;
4. The payment of the balance of P2,224,000.00 by the
VENDEE to the VENDORS shall be within a period of
sixty (60) days effective from the date of this
Contract. After the lapse of 60 days and the loan has
not yet been released due to fortuitous events the
VENDEE shall pay an interest of the balance a
monthly interest based on existing bank rate
until said fortuitous event is no longer present;
5. The VENDEE shall remove and relocate the Squatters,
however, such actual, reasonable and necessary
expenses shall be charged to the VENDORS upon
presentation of receipts and documents to support
the act;

6. The VENDEE shall be allowed for all legal purposes to

take possession of the parcel of land after the
execution of this Contract and payment of the
downpayment;
7. The VENDEE shall shoulder all expenses like the
documentation, registration, transfer tax and
relocation of the property.
IN WITNESS WHEREOF, we have hereunto affixed our signatures
this ____ day of February, 1995, at Quezon City, Philippines.
CONSTANTE E. FIRME
DEV. CORP.
VENDOR
NDEE
AZUCENA E. FIRME
VENDOR
_

BUKAL ENTERPRISES
VE
BY:
_______________________
President & Chief Executive

Officer
xxx
The Spouses Firme did not accept the Third Draft because
they found its provisions one-sided. The Spouses Firme particularly
opposed the provision on the delivery of the Propertys title to
Bukal Enterprises for the latter to obtain a loan from the bank and
use the proceeds to pay for the Property. The Spouses Firme
repeatedly told Aviles that the Property was not for sale
when Aviles called on 2 and 4 March 1995 regarding the Property.
On 6 March 1995, the Spouses Firme visited their Property and
discovered that there was a hollow block fence on one side,
concrete posts on another side and bunkers occupied by workers of
a certain Florante de Castro. On 11 March 1995, Spouses Firme
visited the Property again with a surveyor. Dr. Firme talked with
Ancheta who told him that the squatters had voluntarily
demolished their shanties. The Spouses Firme sent a
letter[13] dated 20 March 1995 to Bukal Enterprises demanding
removal of the bunkers and vacation by the occupants of the

Property. On 22 March 1995, the Spouses Firme received a

letter[14] dated 7 March 1995 from Bukal Enterprises demanding
that they sell the Property.[15]
On 7 August 1998, the trial court rendered judgment against
Bukal Enterprises as follows:
WHEREFORE, in the light of the foregoing premises, the aboveentitled case [is] hereby DISMISSED and plaintiff BUKAL
ENTERPRISES DEVELOPMENT CORPORATION is hereby ordered to
pay the defendants Spouses Constante and Azucena Firme:
1.

the sum of Three Hundred Thirty Five Thousand

Nine Hundred Sixty Four and 90/100 (P335,964.90)
as and by way of actual and compensatory
damages;

2.

the sum of Five Hundred Thousand Pesos

(P500,000.00) as and by way of moral damages;

3.

the sum of One Hundred Thousand Pesos

(P100,000.00) as and by way of attorneys fees;
and

4.

the costs of the suit.

proper to effect the transfer of the property covered by TCT No.

264243 to appellant. Appellant is directed to deliver the payment
of the purchase price of the property within sixty days from the
finality of this judgment. Costs against appellees.
SO ORDERED.[17]
Hence, the instant petition.

The Ruling of the Trial Court

The trial court held there was no perfected contract of
sale. Bukal Enterprises failed to establish that the Spouses Firme
gave their consent to the sale of the Property. The parties did not
go beyond the negotiation stage and there was no evidence of
meeting of the minds between the parties. Furthermore,Aviles had
no valid authority to bind Bukal Enterprises in the sale
transaction. Under Sections 23 and 36 (No. 7) of the Corporation
Code, the corporate power to purchase a specific property is
exercised by the Board of Directors of the corporation. Without an
authorization from the Board of Directors, Avilescould not validly
finalize the purchase of the Property on behalf of Bukal Enterprises.
There is no basis to apply the Statute of Frauds since there was no
perfected contract of sale.

SO ORDERED.[16]
Bukal Enterprises appealed to the Court of Appeals, which
reversed and set aside the decision of the trial court. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, the Decision, dated August 7,
1998, is hereby REVERSED and SET ASIDE. The complaint is
granted and the appellees are directed to henceforth execute the
Deed of Absolute Sale transferring the ownership of the subject
property to the appellant immediately upon receipt of the purchase
price ofP3,224,000.00 and to perform all such acts necessary and

The Ruling of the Court of Appeals

The Court of Appeals held that the lack of a board resolution
authorizing Aviles to act on behalf of Bukal Enterprises in the
purchase of the Property was cured by ratification. Bukal
Enterprises ratified the purchase when it filed the complaint for the
enforcement of the sale.
The Court of Appeals also held there was a perfected contract
of sale. The appellate court ruled that the Spouses Firme revealed

their intent to sell the Property when they met

with Aviles twice. The Spouses Firme rejected the First Draft
because they considered the terms unacceptable.
When Avilespresented the Second Draft without the objectionable
provisions, the Spouses Firme no longer had any cause for refusing
to sell the Property. On the other hand, the acts of Bukal
Enterprises in fencing the Property, constructing posts, relocating
the squatters and obtaining a loan to purchase the Property are
circumstances supporting their claim that there was a perfected
contract of sale.
The Spouses Firme allowed Bukal Enterprises to exercise acts
of ownership over the Property when the latter introduced
improvements on the Property and evicted the squatters. These
acts constitute partial performance of the contract of sale that
takes the oral contract out of the scope of the Statute of Frauds.

The Issues
The Spouses Firme raise the following issues:
1. WHETHER THE COURT OF APPEALS ERRED IN FINDING
THAT THERE WAS A PERFECTED CONTRACT
OF SALE BETWEEN PETITIONERS AND RESPONDENT
DESPITE THE ADDUCED EVIDENCE PATENTLY TO THE
CONTRARY;
2. WHETHER THE COURT OF APPEALS ERRED IN NOT
FINDING THAT THE ALLEGED CONTRACT OF SALE IS
ENFORCEABLE DESPITE THE FACT THAT THE SAME IS
COVERED BY THE STATUTE OF FRAUDS;
3. WHETHER THE COURT OF APPEALS ERRED IN
DISREGARDING THE FACT THAT IT WAS NOT LEGALLY
AND FACTUALLY POSSIBLE FOR RESPONDENT TO
PERFECT A CONTRACT OF SALE; AND
4. THE COURT OF APPEALS ERRED IN RULING THAT THE
AWARD BY THE TRIAL COURT OF MORAL AND

COMPENSATORY DAMAGES TO PETITIONERS IS

IMPROPER.[18]

The Ruling of the Court

The petition is meritorious.
The fundamental question for resolution is whether there was
a perfected contract of sale between the Spouses Firme and Bukal
Enterprises. This requires a review of the factual and legal issues
of this case. As a rule, only questions of law are appealable to this
Court under Rule 45[19] of the Rules of Civil Procedure. The findings
of fact by the Court of Appeals are generally conclusive and
binding on the parties and are not reviewable by this Court.
[20]
However, when the factual findings of the Court of Appeals are
contrary to those of the trial court or when the inference made is
manifestly mistaken, this Court has the authority to review the
findings of fact.[21] Likewise, this Court may review findings of fact
when the judgment of the Court of Appeals is premised on a
misapprehension of facts.[22] This is the situation in this case.

Whether there was a perfected contract of sale

We agree with the finding of the trial court that there was no
perfected contract of sale. Clearly, the Court of Appeals
misapprehended the facts of the case in ruling otherwise.
First, the records indubitably show that there was no consent
on the part of the Spouses Firme. Aviles did not present any draft
deed of sale during his first meeting with the Spouses Firme on 30
January 1995.[23] Dr. Firme was consistent in his testimony that he
and his wife rejected the provisions of the Third Draft presented
by Aviles during their second meeting on 6 February 1995. The
Spouses Firme found the terms and conditions unacceptable and
toldAviles that they would not sell the property.[24] Aviles showed
them only one draft deed of sale (Third Draft) during their second

and last meeting on 6 February 1995.[25] When shown a copy of the

First Draft, Dr. Firme testified that it was not the deed of sale shown
to them by Aviles during their second meeting[26] and that the Third
Draft was completely different from the First Draft.[27]

Q: May I see the document Exhibit 5 L?[31]

On the other hand, Aviles gave conflicting testimony as to

what transpired during the two meetings with the Spouses
Firme. In his direct examination,Aviles testified that during his first
meeting with the Spouses Firme on 23 January 1995, he showed
them the First Draft which the Spouses Firme rejected.[28]On their
second meeting, Aviles showed the Spouses Firme the Second
Draft, which the Spouses Firme allegedly approved because the
objectionable conditions contained in the First Draft were already
deleted. However, a perusal of the First Draft and the Second Draft
would show that both deeds of sale contain exactly the same
provisions. The only difference is that the date of the First Draft is
February 1995 while that of the Second Draft is March 1995.

ATTY. MARQUEDA:

When Aviles testified again as rebuttal witness, his testimony

became more confusing. Aviles testified that during his first
meeting with the Spouses Firme on 30 January 1995, he showed
them the Third Draft, which was not acceptable to the latter.
[29]
However, upon further questioning by his
counsel,Aviles concurred with Dr. Firmes testimony that he
presented the Third Draft (Exh. 5; Exh. L) to the Spouses Firme
only during their second meeting. He also stated that he prepared
and presented to the Spouses Firme the First Draft (Exh. C) and
the Second Draft (Exh. C-1) during their first or second meeting.
He testified:

A:

ATTY. MARQUEDA:
Q: On page 11 of the tsn dated August 5, 1997 a
question was posed How did you find this draft the
Contract of Sale which was presented to you by Mr.
Aviles on the second meeting? The answer is On
the first meeting(sic), we find it totally
unacceptable, sir.[30] What can you say on
this? Before that, Mr. Witness, what is this Contract
of Sale that you presented to Mr. Aviles on the
second meeting? Is this different from the Contract
of Sale that was marked as Exhibit 5-L?

INTERPRETER:
Witness going over the record.

Q: Is that the same document that was presented

by you to Mr. Firme on the second meeting or
there is a different contract?
A:

This is the same document draft of the

document that I submitted to them during our
second meeting. That was February. This was
the draft.

Q: What about Exhibit C and C-1 [which] were identified

by you. When was this presented to Dr. Firme?
This is the same.

Q: Exhibit C and C-1?

A:

Yes because I prepared two documents during our

meeting. One already with notarial, the one without
notarial page and the other one with notarial page
already, so I prepared two documents but with the
same contents both were dated February of 1995.[32]

Q: So, you are referring now to Exhibit C and C-1 for

the plaintiff?
A:

C-1 is already in the final form because we agreed

already as to the date of the payment, so I prepared
already another document which is dated March
1995.[33] (Emphasis supplied)

In his cross-examination, Aviles again changed his

testimony. According to him, he presented the Third Draft to the
Spouses Firme during their first meeting.[34] However, when he
went over the records, he again changed his answer and stated
that he presented the Third Draft during their second meeting. [35]

In his re-direct examination, Aviles gave another version of

what he presented to the Spouses Firme during the two
meetings. According to him, he presented the Third Draft during
the first meeting. On their second meeting, he presented the First
and the Second Drafts to the Spouses Firme.[36]

answer of Dr. Firme was When I found out that he

was calling, I told him that the property is not for
sale. What can you say on this?
A.

Furthermore, Aviles admitted that the first proposal of Bukal

Enterprises was at P2,500 per square meter for the Property.[37] But
the First, Second and Third Drafts of the deed of sale prepared by
Aviles all indicated a purchase price of P4,000 per square meter or
a lump sum of P3,224,000 (P4,000 per sq.m. x 806 sq.m.
= P3,224,000) for the Property. Hence, Aviles could not have
presented any of these draft deeds of sale to the
Spouses Firme during their first meeting.

Q. The next question So, what happened next? The

answer is He called up two days later, March 4 and
my wife answered the telephone and told him that
the property is not for sale, sir. What can you say
on this?

Considering the glaring inconsistencies in Aviles testimony, it

was proper for the trial court to give more credence to the
testimony of Dr. Firme.
Even after the two meetings with Aviles, the
Spouses Firme were firm in their decision not to sell the
Property. Aviles called the Spouses Firme twice after their last
meeting. The Spouses Firme informed Aviles that they were not
selling the Property.[38] Aviles himself admitted this during his
testimony, thus:
Q. Now, the next question which states: But did you not
have any occasion to talk to him after that second
meeting? and the answer of Dr. Firme is He called
up a month after, thats March 2, 1995. What can
you say on this?
A.

I called him to inform him that the loan was already

transferred from Makati to Padre Faura Branch of the
Far East Bank, so I scheduled already the payment of
their property.

He mentioned that they are no longer

interested to sell their property, perhaps they
would like a higher price of the property. They did
not mention to me. I do not know what was their
reason.

A.

That is true. That is what Mrs. Firme told me

during our conversation on the telephone that
they are no longer interested to sell the
property for obvious reason.

Q. When was that?

A.

March 4, 1995, your honor.[39] (Emphasis supplied)

Significantly, De Castro also admitted that he was aware of

the Spouses Firmes refusal to sell the Property.[40]
The confusing testimony of Aviles taken together with De
Castros admission that he was aware of the Spouses Firmes
refusal to sell the Property reinforces Dr. Firmes testimony that he
and his wife never consented to sell the Property.
Consent is one of the essential elements of a valid contract.
The Civil Code provides:

Q. When?

Art. 1318. There is no contract unless the following requisites

concur:

A.

1.

On March 4, 1995.

Q. And then the next question which also states: What

did you talked (sic) about over the telephone? The

Consent of the contracting parties;

2.
Object certain which is the subject matter of the
contract;

3.

Cause of the obligation which is established.

The absence of any of these essential elements will negate

the existence of a perfected contract of sale.[41] Thus, where there
is want of consent, the contract is non-existent. [42] As held
in Salonga, et al. v. Farrales, et al.:[43]
It is elementary that consent is an essential element for the
existence of a contract, and where it is wanting, the contract is
non-existent. The essence of consent is the conformity of
the parties on the terms of the contract, the acceptance by
one of the offer made by the other. The contract to sell is a
bilateral contract. Where there is merely an offer by one party,
without the acceptance of the other, there is no consent.
(Emphasis supplied)
In this case, the Spouses Firme flatly rejected the offer
of Aviles to buy the Property on behalf of Bukal Enterprises. There
was therefore no concurrence of the offer and the acceptance on
the subject matter, consideration and terms of payment as would
result in a perfected contract of sale.[44] Under Article 1475 of the
Civil Code, the contract of sale is perfected at the moment there is
a meeting of minds on the thing which is the object of the contract
and on the price.
Another piece of evidence which supports the contention of
the Spouses Firme that they did not consent to the contract of sale
is the fact they never signed any deed of sale. If the Spouses Firme
were already agreeable to the offer of Bukal Enterprises as
embodied in the Second Draft, then the Spouses Firme could have
simply affixed their signatures on the deed of sale, but they did
not.
Even the existence of a signed document purporting to be a
contract of sale does not preclude a finding that the contract is
invalid when the evidence shows that there was no meeting of the
minds between the seller and buyer.[45] In this case, what were
offered in evidence were mere unsigned deeds of sale which have
no probative value.[46] Bukal Enterprises failed to show the
existence of a perfected contract of sale by competent proof.

Second, there was no approval from the Board of Directors of

Bukal Enterprises as would finalize any transaction with the
Spouses Firme. Aviles did not have the proper authority to
negotiate for Bukal Enterprises. Aviles testified that his friend, De
Castro, had asked him to negotiate with the Spouses Firme to buy
the Property.[47] De Castro, as Bukal Enterprises vice president,
testified that he authorized Aviles to buy the Property.[48] However,
there is no Board Resolution authorizing Aviles to negotiate and
purchase the Property on behalf of Bukal Enterprises.[49]
It is the board of directors or trustees which exercises almost
all the corporate powers in a corporation. Thus, the Corporation
Code provides:
SEC. 23. The board of directors or trustees. Unless otherwise
provided in this Code, the corporate powers of all corporations
formed under this Code shall be exercised, all business conducted
and all property of such corporations controlled and held by the
board of directors or trustees to be elected from among the holders
of stock, or where there is no stock, from among the members of
the corporation, who shall hold office for one (1) year and until
their successors are elected and qualified. x x x
SEC. 36. Corporate powers and capacity. Every corporation
incorporated under this Code has the power and capacity:
xxx
7. To purchase, receive, take or grant, hold, convey, sell,
lease, pledge, mortgage and otherwise deal with such
real and personal property, including securities and bonds
of other corporations, as the transaction of a lawful
business of the corporation may reasonably and
necessarily require, subject to the limitations prescribed
by the law and the Constitution.
xxx
Under these provisions, the power to purchase real property is
vested in the board of directors or trustees. While a corporation
may appoint agents to negotiate for the purchase of real property
needed by the corporation, the final say will have to be with the
board, whose approval will finalize the transaction. [50] A corporation

can only exercise its powers and transact its business through its
board of directors and through its officers and agents when
authorized by a board resolution or its by-laws.[51] As held in AF
Realty & Development, Inc. v. Dieselman Freight Services,
Co.:[52]
Section 23 of the Corporation Code expressly provides that the
corporate powers of all corporations shall be exercised by the
board of directors. Just as a natural person may authorize another
to do certain acts in his behalf, so may the board of directors of a
corporation validly delegate some of its functions to individual
officers or agents appointed by it. Thus, contracts or acts of a
corporation must be made either by the board of directors
or by a corporate agent duly authorized by the board.
Absent such valid delegation/authorization, the rule is that
the declarations of an individual director relating to the
affairs of the corporation, but not in the course of, or
connected with, the performance of authorized duties of
such director, are held not binding on the
corporation. (Emphasis supplied)
In this case, Aviles, who negotiated the purchase of the
Property, is neither an officer of Bukal Enterprises nor a member of
the Board of Directors of Bukal Enterprises. There is no Board
Resolution authorizing Aviles to negotiate and purchase the
Property for Bukal Enterprises. There is also no evidence to prove
that Bukal Enterprises approved whatever transaction Aviles made
with the Spouses Firme. In fact, the president of Bukal Enterprises
did not sign any of the deeds of sale presented to the Spouses
Firme. Even De Castro admitted that he had never met the
Spouses Firme.[53] Considering all these circumstances, it is highly
improbable for Aviles to finalize any contract of sale with the
Spouses Firme.
Furthermore, the Court notes that in the Complaint filed by
Bukal Enterprises with the trial court, Aviles signed[54] the
verification and certification of non-forum shopping.[55] The
verification and certification of non-forum shopping was not
accompanied by proof that Bukal Enterprises authorized Aviles to
file the complaint on behalf of Bukal Enterprises.

The power of a corporation to sue and be sued is exercised by

the board of directors. The physical acts of the corporation, like
the signing of documents, can be performed only by natural
persons duly authorized for the purpose by corporate by-laws or by
a specific act of the board of directors.[56]
The purpose of verification is to secure an assurance that the
allegations in the pleading are true and correct and that it is filed in
good faith.[57] True, this requirement is procedural and not
jurisdictional. However, the trial court should have ordered the
correction of the complaint since Aviles was neither an officer of
Bukal Enterprises nor authorized by its Board of Directors to act on
behalf of Bukal Enterprises.

Whether the Statute of Frauds is applicable

The Court of Appeals held that partial performance of the
contract of sale takes the oral contract out of the scope of the
Statute of Frauds. This conclusion arose from the appellate courts
erroneous finding that there was a perfected contract of sale. The
records show that there was no perfected contract of sale. There is
therefore no basis for the application of the Statute of Frauds. The
application of the Statute of Frauds presupposes the existence of a
perfected contract.[58] Article 1403 of the Civil Code provides:
Art. 1403. The following contracts are unenforceable, unless they
are ratified:
(1)
Those entered into in the name of another person
by one who has been given no authority or legal
representation, or who has acted beyond his powers;
(2)
Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement hereafter
made shall be unenforceable by action, unless the same, or some
note or memorandum thereof, be in writing and subscribed by the
party charged or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a secondary
evidence of its contents:

xxx
(e)
An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;
xxx

Whether Bukal Enterprises is a builder in good faith

Q: When were the squatters removed?

WITNESS:
A:

ATTY. EJERCITO:
Q: When did you find out that the Spouses Firme did not
want to sell the same?
A:

Bukal Enterprises is not a builder in good faith. The Spouses

Firme did not accept Aviles offer to purchase the
Property. Aviles testified that when he called the
Spouses Firme on 2 March 1995, Dr. Firme informed him that they
were no longer interested in selling the Property. On 4 March
1995, Avilescalled again and this time Mrs. Firme told him that they
were not selling the Property. Aviles informed De Castro of the
refusal of the Spouses Firme to sell the Property. However, Bukal
Enterprises still proceeded in relocating the squatters and
constructing improvements on the Property. De Castro testified:
ATTY. EJERCITO:
Q: The truth of the matter, Mr. Witness, is that the post
was constructed sometime late 1994. Is that not
correct?
A:

No, sir. It is not true.

Q: When was it constructed?

March 6 and 7 because there were four (4)

squatters.

First week of March 1995.

Q: In your Complaint you said you find out on March 3,

1995. Is that not correct?
A:

I cannot exactly remember, sir.

ATTY. MARQUEDA:
In the Complaint it does not state March 3. Maybe
counsel was thinking of this Paragraph 6 which
states, When the property was rid of the squatters
onMarch 2, 1995 for the documentation and
payment of the sale, xxx.
ATTY. EJERCITO:
Q: So, you found out on March 2, 1995 that the
defendants were no longer interested in
selling to you the property. Is that correct?
A:

Yes, sir, because Mr. Aviles relayed it to me.

Q: When in March?

Q: Mr. Aviles relayed to you that the Spouses

Firme were no longer interested in selling to
you the property in March 2, 1995. Is that
correct?

A:

A:

A:

That March.

1995.

Q: When in March 1995?

A:

From the period of March 2, 1995 or two (2)

weeks after the removal of the squatters.

Yes, sir. Mr. Aviles told me.

Q: In so many words, Mr. Witness, you learned

that the Spouses Firme were no longer
interested in selling the property before you

spent allegedly all the sum of money for the

relocation of squatters for all this construction
that you are telling this Court now?
WITNESS:
A:

The refusal to sell is not yet formal and the

lawyer sent a letter tendering full payment of
the purchase price.

ATTY. EJERCITO:
Q: You mean to say that you did not believe Mr. Aviles
when he told you that the Spouses Firme were no
longer selling the property?
A:

No, sir.

Q: Was there anything formal when you say the

Spouses Firme agreed to sell the property?
A:

None, sir.

Q: And yet that time you believe Mr. Aviles when

he verbally told you that the Sps. Firme agreed
to sell the property? At what point of the
transaction with the Spouses Firme were you
advised by your lawyer?
WITNESS:
A:

At the time when they refused to sell the lot.

ATTY. EJERCITO:
Q: Was that before the squatters were relocated
allegedly by Bukal Enterprises?
A:

Yes, sir.

Q: In fact, it was the lawyer who advised you to relocate

the squatters. Is it not true?
A:

No, sir.[59] (Emphasis supplied)

Bukal Enterprises is obviously a builder in bad faith. No deed

of sale has been executed in this case. Despite the refusal of the
Spouses Firme to sell the Property, Bukal Enterprises still
proceeded to introduce improvements on the Property. Bukal
Enterprises introduced improvements on the Property without the
knowledge and consent of the Spouses Firme. When the
Spouses Firme learned about the unauthorized constructions made
by Bukal Enterprises on the Property, they advised the latter to
desist from further acts of trespass on their Property. [60]
The Civil Code provides:
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 of
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 owner the proper
rent.
Under these provisions the Spouses Firme have the following
options: (1) to appropriate what Bukal Enterprises has built without
any obligation to pay indemnity; (2) to ask Bukal Enterprises to
remove what it has built; or (3) to compel Bukal Enterprises to pay
the value of the land.[61] Since the SpousesFirme are undoubtedly
not selling the Property to Bukal Enterprises, they may exercise
any of the first two options. They may appropriate what has been
built without paying indemnity or they may ask Bukal Enterprises
to remove what it has built at Bukal Enterprises own expense.
Bukal Enterprises is not entitled to reimbursement for the
expenses incurred in relocating the squatters. Bukal Enterprises
spent for the relocation of the squatters even after learning that
the Spouses Firme were no longer interested in selling the Property.
De Castro testified that even though the SpousesFirme did not
require them to remove the squatters, they chose to spend for the

relocation of the squatters since they were interested in purchasing

the Property.[62]

Whether the Spouses Firme are entitled to

compensatory and moral damages
The Court agrees with the Court of Appeals to delete the
award for compensatory and moral damages. In awarding actual
damages, the trial court took into account the traveling expenses
incurred by the Spouses Firme who are already residing in
the United States. However, the trial court failed to consider the
testimony of Dr. Firme that they normally travel to
the Philippines more than once a year to visit their children.
[63]
Thus, the expenses for the roundtrip tickets dated 1996-1997
could not be attributed solely for the attendance of hearings in the
case.
Nevertheless, an award of nominal damages of P30,000 is
warranted since Bukal Enterprises violated the property rights
of the Spouses Firme.[64] The Civil Code provides:
Art. 2221. Nominal damages are adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in every
obligation arising from any source enumerated in article 1157, or in
every case where any property right has been invaded.
The award of damages is also in accordance with Article 451
of the Civil Code which states that the landowner is entitled to
damages from the builder in bad faith.[65]
WHEREFORE, we SET ASIDE the Decision of the Court of
Appeals and RENDER a new one:

1.

Declaring that there was no perfected contract of

sale;

2.

Ordering Bukal Enterprises to pay the Spouses

Firme P30,000 as nominal damages.

SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, and Azcuna, JJ., concur.
Ynares-Santiago, J., on official leave.
2.Yason v. Arciaga
[G.R. No. 145017. January 28, 2005]
DR. JOSE and AIDA YASON, petitioners, vs. FAUSTINO
ARCIAGA, FELIPE NERI ARCIAGA, DOMINGO ARCIAGA,
and ROGELIO ARCIAGA, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, assailing the
Amended Decision[1] of the Court of Appeals dated September 13,
2000 in CA G.R. CV No. 55668, entitled Faustino Arciaga, et. al. vs.
Dr. Jose Yason and Aida Yason.
The factual antecedents as borne by the records are:
Spouses Emilio and Claudia Arciaga were owners of Lot No.
303-B situated in Barangay Putatan, Muntinlupa City, with an area
of 5,274 square meters covered by TCT No. 40913 of the Registry
of Deeds of Makati City. On March 28, 1983, they executed a Deed
of Conditional Sale whereby they sold Lot No. 303-B
for P265,000.00 to spouses Dr. Jose and Aida Yason, petitioners.
They tendered an initial payment of P150,000.00. On April 19,
1983, upon payment of the balance of P115,000.00, spouses Emilio

and Claudia Arciaga executed a Deed of Absolute Sale. That day,

Claudia died. She was survived by her spouse and their six (6)
children, namely: Faustino, Felipe Neri, Domingo, Rogelio, Virginia,
and Juanita.
Petitioners had the Deed of Absolute Sale registered in the
Registry of Deeds of Makati City. They entrusted its registration to
one Jesus Medina to whom they delivered the document of sale
and the amount of P15,000.00 as payment for the capital gains
tax. Without their knowledge, Medina falsified the Deed of
Absolute Sale and had the document registered in the Registry of
Deeds of Makati City. He made it appear that the sale took place
on July 2, 1979, instead of April 19, 1983, and that the price of the
lot was only P25,000.00, instead of P265,000.00. On the basis of
the fabricated deed, TCT No. 40913 in the names of spouses
Arciaga was cancelled and in lieu thereof, TCT No. 120869 was
issued in the names of petitioners.
Subsequently, petitioners had Lot No. 303-B subdivided into
23 smaller lots. Thus, TCT No. 120869 was cancelled and in lieu
thereof, TCT Nos. 132942 to 132964 were issued. Petitioners then
sold several lots to third persons, except the 13 lots covered by
TCT Nos. 132942, 132943, 132945, 132946, 132948, 132950,
132951, 132953, 132954, 132955, 132958, 132962 and 132963,
which they retained.
Sometime in April 1989, spouses Arciagas children learned of
the falsified document of sale. Four of them, namely: Faustino,
Felipe Neri, Domingo and Rogelio, herein respondents, caused
the filing with the Office of the Provincial Prosecutor of Makati City
a complaint for falsification of documents against petitioners,
docketed as I.S No. 89-1966. It was only after receiving the
subpoena in April 1989 when they learned that the Deed of
Absolute Sale was falsified. However, after the preliminary
investigation, the Provincial Prosecutor dismissed the complaint for
falsification for lack of probable cause.
Undaunted, respondents, on October 12, 1989, filed with the
Regional Trial Court (RTC), Branch 62, Makati City, a complaint for

annulment of the 13 land titles, mentioned earlier, against

petitioners. Respondents alleged inter alia that the Deed of
Absolute Sale is void ab initio considering that (1) Claudia Arciaga
did not give her consent to the sale as she was then seriously ill,
weak, and unable to talk and (2) Jesus Medina falsified the Deed of
Absolute Sale; that without Claudias consent, the contract is void;
and that the 13 land titles are also void because a forged deed
conveys no title.
In their answer, petitioners specifically denied the allegations
in the complaint and averred that they validly acquired the
property by virtue of the notarized Deed of Conditional Sale and
the Deed of Absolute Sale executed by spouses Emilio and Claudia
Arciaga, respondents parents. The Deed of Absolute Sale was duly
signed by the parties in the morning of April 19, 1983 when Claudia
was still alive. It was in the evening of the same day when she
died. Hence, the contract of sale is valid. Furthermore, they have
no participation in the falsification of the Deed of Absolute Sale by
Medina. In fact, they exerted efforts to locate him but to no avail.
On August 29, 1995, the trial court rendered a Decision
dismissing respondents complaint and sustaining the validity of
the Deed of Conditional Sale and the Deed of Absolute Sale. The
dispositive portion reads:
WHEREFORE, Premises Considered, the COMPLAINT is hereby
ordered DISMISSED, without pronouncement as to costs.
SO ORDERED.
In their appeal to the Court of Appeals, respondents alleged
that the trial court clearly overlooked vital and significant facts
which, if considered, would alter the result. Likewise, the trial court
erred in concluding that the Deed of Absolute Sale forged by
Medina transferred ownership to the vendees, being buyers in good
faith; and in finding that Claudia Arciaga consented to the sale of
the lots to petitioner spouses.[2]

Initially, the Court of Appeals in its Decision dated February

21, 2000 affirmed the trial courts ruling. But upon respondents
motion for reconsideration, the Appellate Court reconsidered its
Decision. In its Amended Decision, it declared the Deed of
Absolute Sale void, thus:

It appears, however, that a Deed of Conditional Sale dated March

28, 1983 (Exh. 1, Record, p. 289) and a Deed of Absolute Sale
dated April 19, 1983 (Exh. 2, Record, p. 290) were purportedly
executed by Emilio Arciaga and the appellees and that the said
property was allegedly sold for P265,000.00.

WHEREFORE, Our decision dated February 21, 2000 is hereby SET

ASIDE. The Deed of Absolute Sale dated April 19, 1983 is hereby
declared null and void. The Registry of Deeds for Makati City is
hereby ordered to cancel TCT Nos. 132942, 132943, 132945,
132946, 132948, 132950, 132951, 132953, 132954, 132955,
132958, 132962 and 132963 issued in the name of Jose Yason and
to reinstate TCT No. 40913 in the name of Emilio Arciaga.

xxx
The curious part about the controversial deeds is the date of their
supposed execution, especially the date of the Absolute Deed of
Sale which coincides with the date of the death of Claudia Arciaga.
Also intriguing is the fact that only a thumbmark and not a
signature of Claudia Arciaga was affixed on the supposed deeds,
when in fact she could definitely read and write.

SO ORDERED.
In reversing its own Decision, the Appellate Court held:
There is no evidence showing that said July 2, 1979 Deed of
Absolute Sale covering the subject property was ever executed by
the parties. The appellees themselves who were supposedly the
vendees did not even know of the existence of such sale. What the
appellees were claiming was that they entrusted to one Jesus
Medina the original copies of the purported Deed of Absolute Sale
dated April 19, 1983 and the owners copy of TCT No. 40913
together with the amount of P15,000.00 for capital gains tax and
expenses for registration.
xxx
It turned out that Medina did not use the Deed of Sale dated April
19, 1983 but fabricated a Deed of Absolute Sale dated July 2, 1979
with a reduced consideration ofP25,000.00.

Appellants claimed that their mother Claudia Rivera never gave her
consent to the sale. They said that the thumbmark of their mother
Claudia Arciaga was allegedly fixed on the Deed of Conditional
Sale, if indeed it was prepared before the death of their mother on
April 19, 1983, when she was already very ill and bedridden and
could not anymore give her consent thereto, and the Deed of
Absolute Sale was thumbmarked when she was already dead.
xxx
As between the testimony of the appellants and their sister Virginia
Arciaga-Reyes, We are inclined to believe the claim of the former
that their mother Claudia Rivera Arciaga died at around 10:00 in
the morning.
xxx
The time when Claudia Rivera Arciaga actually died, to Us, is
crucial if only to determine the credibility of witnesses.

xxx
Being a forged document, the July 2, 1979 Deed of Absolute Sale is
indeed null and void.

As between Virginia Arciaga Reyes and Jacklyn de Mesa, the latter

is more credible. She did not have any interest in the controverted
property, unlike the appellants and Virginia Reyes, who are the

children of Claudia Rivera Arciaga. The cardinal rule in the law of

evidence is that the testimony must not only proceed from the
mouth of a credible witness but must also be credible in itself
(People vs. Serdan, G.R. 87318, September 2, 1992).
xxx
We certainly cannot believe the testimony of Virginia Arciaga Reyes
that her mother Claudia went to the house of Atty. Fresnedi for the
execution of the Deed of Conditional Sale. A person who is
physically fit to travel can definitely write his signature, as only
minimal effort is needed to perform this simple mechanical act.
But what appeared in the deed was only a purported thumb mark
of Claudia. Even Virginia Reyes said that her mother could write.
Her testimony only supports the claim of the appellants that
Claudia Rivera Arciaga was already very ill and weak when the
Deed of Conditional Sale was purportedly executed, and was
already dead when she was made to affix her thumb mark on the
Deed of Absolute Sale.

exceptions, such as when the findings of the Court of Appeals are

contrary to those of the trial court,[4] as in this case.
In determining whether the Deed of Absolute Sale dated April
19, 1983 is valid, it must contain the essential requisites of
contracts, viz: (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.[5] A contract of sale is perfected
at the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price. [6] Consent
is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to
constitute the contract.[7] To enter into a valid legal agreement,
the parties must have the capacity to do so.
The law presumes that every person is fully competent to
enter into a contract until satisfactory proof to the contrary is
presented. The burden of proof is on the individual asserting a lack
of capacity to contract, and this burden has been characterized as
requiring for its satisfaction clear and convincing evidence.

xxx
In sum, the inconsistent testimonies of the appellee and his
witnesses, particularly that of Virginia Arciaga Reyes, clearly show
that Claudia Rivera Arciaga did not voluntarily affix her thumb
mark on the Deed of Conditional Sale and Deed of Absolute Sale.
Hence, this petition for review on certiorari alleging that the
Court of Appeals erred in declaring the Deed of Absolute Sale void
for lack of consent on the part of Claudia Arciaga and because the
same document was forged by Medina.
The petition is impressed with merit.
The rule is that only questions of law may be raised in a
petition for review on certiorari; and that the factual findings of the
trial court, when adopted and confirmed by the Court of Appeals,
are final and conclusive on this Court.[3] However, there are

The Appellate Court, in its Amended Decision, held that the

Deed of Absolute Sale is void for lack of consent on the part of
Claudia Arciaga who could not have affixed her thumbmark thereon
since she was very ill then. In fact, she died a few hours thereafter.
Thus, the basic issue for our resolution is whether Claudia
Arciaga voluntarily affixed her thumbmark on the documents of
sale.
Respondents contend that Claudia did not give her consent to
the contracts of sale. Since she knew how to read and write, she
should have signed each document instead of merely affixing her
thumbmark thereon.
Domingo Arciaga, one of the respondents, testified that her
mother Claudia was 82 years old when she died on April 19, 1983
due to old age and illness for four (4) months. On March 28,
1983, when the Conditional Deed of Sale was allegedly executed,

she was already very weak and thin and could no longer speak.
Considering her physical condition, she could not have affixed her
thumbmark on the Conditional Deed of Sale that day.[8]
Domingo further testified that their mother Claudia, at the
time of her death, was being attended to by his sisters Juanita and
Virginia Arciaga; that he saw Virginia holding the thumb of their
mother to enable her to affix her thumbmark on the Deed of
Absolute Sale, then being held by Juanita, thus:
Q:

When my mother died.

Q:

When?

A:

April 19, 1983.

A:

My sister also.

Q:

How about Rogelio Arciaga?

A:

Q:

Q:

At what particular occasion or will you please tell

the Honorable Court the circumstances how you
were able to see this document on April 19, 1983?
This is like this. While my mother was being
attended, I went over to the porch and I saw Mr.
Rogelio Arciaga. We talked with each other. After
that I went inside the house wherein I saw Juliana
Arciaga holding that document, the Deed of Sale,
and Virginia Arciaga was holding the thumb of
mother affixing said thumb to the document.

Q:

Who is Virginia Arciaga?

A:

My sister.

Q:

How about Juanita Arciaga?

I have also a brother named Rogelio Arciaga but the

one I mentioned has the same name as my brother.

After that what happened?

A:

Now, you have examined the document entitled

Deed of Sale dated April 19, 1983, when for the
first time did you see this document?

A:

Q:

A:

I asked, what is that? And they told me that one

parcel of land was sold already by us and they said
that this is the Deed of Absolute Sale as proof that
we have sold that parcel of land. I asked them: Why
did you do that? It cannot be! Our mother is a good
mother, why still permit her to commit a sin.

After that what happened next?

A:

They told me that they are not going to pursue with

it and I told them it cannot be really done.[9]

Domingos testimony was corroborated by his brother Felipe

Arciaga who testified that their mother was already dead when her
thumbmark was affixed on the document of sale, thus:
Q:

Did you hear any conversation between Domingo

and your sisters holding the document?

A:

Yes, sir.

Q:

What was the conversation that you heard?

A:

My brother said that it should not be thumbmarked

since my mother is already dead. My sisters
Virginia and Juanita replied that the thumb marking
will no longer proceed.[10]

Upon the other hand, petitioners maintain that Claudia

voluntarily affixed her thumbmark on the Deeds of Conditional and
Absolute Sale which were notarized by Atty. Jaime Fresnedi. and
Absolute Sale which were notarized by Atty. Jaime Fresnedi.
Virginia Arciaga Andres, daughter of Claudia, testified that she took
care of her mother. Five (5) months prior to the execution of the
Conditional Deed of Sale on March 28, 1983, her parents informed
her and her siblings that they would sell their land. After the sale,
her brother Felipe Neri borrowed P50,000.00 from their father. Her
father signed the two documents of sale, while her mother affixed
her thumbmark thereon. Then Atty. Jaime Fresnedi notarized the
Conditional Deed of Sale in his office, while the Deed of Absolute
Sale was notarized in her house. Her brothers (respondents herein)
were all notified of the sale.[11]
Atty. Jaime Fresnedi testified that he notarized the subject
documents and knew that Claudia affixed her thumbmark thereon,
thus:
Q:

What is the importance of the signatures in these

two (2) documents?

A:

That the parties who executed these documents

appeared before me, your Honor.

xxx
Q:

A:

Do you know personally Claudia Arciaga, the wife of

Emilio Arciaga?

No, I do not know her personally.

xxx
Q:

A:

Prior to the execution of this document, Absolute

Deed of Sale dated April 19, 1983, have you not
met Claudia Rivera?

I cannot remember.
xxx
Q:

A:

When you notarized this document on April 19,

1983, did you talk to Claudia Rivera?

I cannot remember.[13]
xxx

xxx
COURT:
Q:

And when did you notarize the said document, this

Deed of Absolute Sale dated April 19, 1983?

A:

It was notarized in the same date.

Q:

Where was it notarized?

A:

It was also notarized in my office.

A:

Yes, sir.[12]

Q:

A:

Did you ascertain whether the person who affixed

that thumbmark was really CLAUDIA ARCIAGA?

Yes, your Honor.

Q:

What means did you take to ascertain that the one

who affixed that thumbmark was CLAUDIA
ARCIAGA?

A:

Because, your Honor, when there is a party, not

necessarily your Honor in this case, whenever a
party would request me to prepare a document and
notarize such document, I asked his name and he
answered. Let us say for example, this Mr. dela
Cruz, he says he is Mr. dela Cruz or Mrs. Arciaga.
That thru that introduction I knew that they were
the ones who affixed their signatures or affix their
thumbmarks.

Q:

In this particular case, did you do that?

A:

Yes, your Honor.[14]

The Court of Appeals, reversing the trial court, held that

respondents were able to prove that Claudia Arciaga could not
have affixed her thumbmark voluntarily on the Conditional Deed of
Sale as she was already very ill and bedridden and could not
anymore give her consent thereto; and that the Absolute Deed of
Sale was thumbmarked when she was already dead.
While it is true that Claudia was sick and bedridden,
respondents failed to prove that she could no longer understand
the terms of the contract and that she did not affix her thumbmark
thereon. Unfortunately, they did not present the doctor or the
nurse who attended to her to confirm that indeed she was mentally
and physically incapable of entering into a contract. Mere
weakness of mind alone, without imposition of fraud, is not a
ground for vacating a contract.[15] Only if there is unfairness in the
transaction, such as gross inadequacy of consideration, the low
degree of intellectual capacity of the party, may be taken into
consideration for the purpose of showing such fraud as will afford a
ground for annulling a contract.[16] Hence, a person is not
incapacitated to enter into a contract merely because of advanced
years or by reason of physical infirmities, unless such age and
infirmities impair his mental faculties to the extent that he is
unable to properly, intelligently and fairly understand the
provisions of said contract. Respondents failed to show that
Claudia was deprived of reason or that her condition hindered her

from freely exercising her own will at the time of the execution of
the Deed of Conditional Sale.
Also, it is of no moment that Claudia merely affixed her
thumbmark on the document. The signature may be made by a
persons cross or mark even though he is able to read and write
and is valid if the deed is in all other respects a valid one. [17]
Significantly, there is no evidence showing that Claudia was
forced or coerced in affixing her thumbmark on the Deed of
Conditional Sale.
Respondents insist that their mother died in the morning of
April 19, 1983, hence, she could no longer affix her thumbmark on
the Deed of Absolute Sale. Petitioners, however, maintain that she
died in the evening of that day and that she affixed her thumbmark
on the deed in the morning of that same day.
Respondents should have offered in evidence the Certificate of
Death of Claudia to show the exact date and time of her death.
Again, they should have presented the attending physician to
testify whether or not Claudia could still affix her thumbmark then.
As earlier mentioned, the burden is on the respondents to
prove the lack of capacity on the part of Claudia to enter into a
contract. And in proving this, they must offer clear and convincing
evidence. This they failed to do.
The Court of Appeals also held that there is inconsistency in
the testimonies of Virginia Arciaga and Atty. Jaime Fresnedi. While
Virginia testified that the Deed of Absolute Sale was notarized in
her house where Claudia lived, Atty. Fresnedi declared on the
witness stand that he notarized the document in his office. The
Appellate Court concluded that such inconsistency clearly shows
that Claudia did not voluntarily affix her thumbmark on the
document of absolute sale.

Records disclose, however, that when Atty. Fresnedi testified in

court, nine (9) years had passed from the time he notarized the
Deed of Absolute Sale. Considering the length of time that passed
and the numerous documents he must have notarized, his failure
to remember exactly where he notarized the contract of sale is
understandable. Thus, we cannot sustain the finding and
conclusion of the Court of Appeals on this point.

3. Sps. Ramos v. Spouses Heruela

SPOUSES GOMER and
145330
LEONOR RAMOS,
Petitioners,

G.R. No.
Present:
Davide,

Jr., C.J.,
In Chilianchin vs. Coquinco, this Court held that a notarial
document must be sustained in full force and effect so long as he
who impugns it does not present strong, complete, and conclusive
proof of its falsity or nullity on account of some flaws or defects
provided by law. Here, respondents failed to present such proof.
[18]

It bears emphasis that a notarized Deed of Absolute Sale has

in its favor the presumption of regularity, and it carries the
evidentiary weight conferred upon it with respect to its execution.
[19]

All told, we are convinced and so hold that there was consent
on the part of Claudia Arciaga when she executed the Conditional
Deed of Sale and the Deed of Absolute Sale being assailed by
respondents. These documents, therefore, are valid.
WHEREFORE, the challenged Decision of the Court of Appeals
in CA-G.R. CV No. 55668 is REVERSED. The Decision of the RTC,
Branch 62, Makati City dismissing respondents complaint is
AFFIRMED.
SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia,
JJ., concur

- versus Santiago,

Chairman,
Quisumbing,
YnaresCarpio, and

Azcuna, JJ.
SPOUSES SANTIAGO and
MINDA HERUELA, and
Promulgated:
SPOUSES CHERRY and
RAYMOND PALLORI,
Respondents.
2005

October 14,

x-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO, J.:
The Case

Before the Court is a petition for review[1] assailing the

contract of conditional sale. The spouses Heruela allege that the

Decision[2] dated 23 August 2000 and the Order dated 20

September 2000 of the Regional Trial Court (trial court) of
Misamis Oriental, Branch 21, in Civil Case

contract is a sale on installment basis.

No. 98-060. The trial

court dismissed the plaintiffs action for recovery of ownership with

damages.

On 27 January 1998, the spouses Ramos filed a complaint for

Recovery of Ownership with Damages against the spouses
Heruela. The case was docketed as Civil Case No. 98-060. The

The Antecedent Facts

spouses Ramos allege that out of the P15,300[4] consideration for

the sale of the land, the spouses Heruela paid only P4,000. The

The spouses Gomer and Leonor Ramos (spouses Ramos)

last installment that the spouses Heruela paid was on 18
own a parcel of land, consisting of 1,883 square meters, covered
December 1981. The spouses Ramos assert that the spouses
by Transfer Certificate of Title (TCT) No. 16535 of the Register of
Heruelas unjust refusal to pay the balance of the purchase price
Deeds of Cagayan de Oro City. On 18 February 1980, the spouses
caused the cancellation of the Deed of Conditional Sale. In June
Ramos made an agreement with the spouses Santiago and Minda
1982, the spouses Ramos discovered that the spouses Heruela
Heruela (spouses Heruela)[3] covering 306 square meters of the
were already occupying a portion of the land. Cherry and Raymond
land (land). According to the spouses Ramos, the agreement is a
Pallori (spouses Pallori), daughter and son-in-law, respectively, of
the spouses Heruela, erected another house on the land. The

spouses Heruela and the spouses Pallori refused to vacate the land

they expressed their willingness to pay the balance of P11,300 but

despite demand by the spouses Ramos.

the spouses Ramos refused their offer.

The spouses Heruela allege that the contract is a sale on

The Ruling of the Trial Court

installment basis. They paid P2,000 as down payment and made

the following installment payments:
31 March 1980
2 May 1980
20 June 1980
8 October 1980

In its Decision[5] dated 23 August 2000, the trial court

P200
P400
P200
P500

that the contract is a sale by installment. The trial

(for April and Mayruled
1980)
(for June 1980)
(for July, August and
part
of that the spouses Ramos failed to comply with Section 4
court
ruled
September 1980)
5 March 1981
P400
(for October and November
1980)
of Republic Act No. 6552 (RA 6552),[6] as follows:
18 December 1981
P300
(for December 1980 and part of
January 1981)
SEC. 4. In case where less than two years
of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days
from the date the installment became due. If the
buyer fails to pay the installments due at the
expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by
The spouses Heruela further allege that the 306 square
the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial
meters specified in the contract was reduced to 282 square meters
act.
because upon subdivision of the land, 24 square meters became
part of the road. The spouses Heruela claim that in March 1982,
The dispositive portion of the Decision reads:

WHEREFORE, the complaint is hereby

dismissed and plaintiff[s] are ordered to execute
the corresponding Deed of Sale in favor of
defendants after the latter have paid the remaining
balance of Eleven Thousand and Three Hundred
Pesos (P11,300.00).

III.

Whether the spouses Ramos have a right

to cancel the sale;

IV.

Whether the spouses Heruela have a

right to damages.[9]

Plaintiffs are further ordered to pay

defendants the sum of P20,000.00, as Attorneys
fees and P10,000.00 as litigation expenses.
SO ORDERED.[7]
The Ruling of the Court

In an Order[8] dated 20 September 2000, the trial court

The petition is partly meritorious.

denied the spouses Ramos motion for reconsideration.

Hence, this petition.

The Agreement is a Contract to Sell

In its Decision, the trial court ruled on whether the contract

The Issues

made by the parties is a conditional sale or a sale on installment.

The spouses Ramos raise the following issues:

The spouses Ramos premise is that since the trial court ruled that

I.

Whether RA 6552 is applicable to an

absolute sale of land;

the contract is a sale on installment, the trial court also in effect

II.

Whether Articles 1191 and 1592 of the

Civil Code are applicable to the present
case;

declared that the sale is an absolute sale. The spouses Ramos

allege that RA 6552 is not applicable to an absolute sale.

In this case, the agreement of the parties is embodied in a

Article 1458 of the Civil Code provides that a contract of
one-page, handwritten document.[15] The document does not
sale may be absolute or conditional. A contract of sale is absolute
contain the usual terms and conditions of a formal deed of sale.
when title to the property passes to the vendee upon delivery of
The original document, elevated to this Court as part of the
the thing sold.[10] A deed of sale is absolute when there is no
Records, is torn in part. Only the words LMENT BASIS is legible on
stipulation in the contract that title to the property remains with
the title. The names and addresses of the parties and the identity
the seller until full payment of the purchase price. [11] The sale is
of the property cannot be ascertained. The agreement only
also absolute if there is no stipulation giving the vendor the right to
provides for the following terms of the sale:
cancel unilaterally the contract the moment the vendee fails to pay
TERM[S] OF SALE:
within a fixed period.

[12]

In a conditional sale, as in a contract to

sell, ownership remains with the vendor and does not pass to the
vendee until full payment of the purchase price.[13] The full
payment of the purchase price partakes of a suspensive condition,
and non-fulfillment of the condition prevents the obligation to sell
from arising.[14]

PRICE PER SQM P50.00 X 306 SQM

P 15,300.00
DOWN PAYMENT (TWO THOUSAND
PESOS)
2,000.00
BALANCE PAYABLE AT MINIMUM
OF P200.00
P 13,300.00
PER MONTH UNTIL FULLY PAID
=======

In Manuel v. Rodriguez, et al.,[16] the Court ruled that to

The records show that the spouses Heruela did not

be a written contract, all the terms must be in writing, so that a

immediately take actual, physical possession of the land.

contract partly in writing and partly oral is in legal effect an oral

According to the spouses Ramos, in March 1981, they allowed the

contract. The Court reiterated the Manuel ruling in Alfonso v.

niece of the spouses Heruela to occupy a portion of the land.

Court of Appeals:[17]

Indeed, the spouses Ramos alleged that they only discovered in

xxx In Manuel, only the price and the

terms of payment were in writing, but the most
important matter in the controversy, the alleged
transfer of title was never reduced to any written
document.[] It was held that the contract should
not be considered as a written but an oral one; not
a sale but a promise to sell; and that the absence
of a formal deed of conveyance was a strong
indication that the parties did not intend
immediate transfer of title, but only a transfer after
full payment of the price. Under these
circumstances, the Court ruled Article 1504 of the
Civil Code of 1889 (Art. 1592 of the present Code)
to be inapplicable to the contract in controversy a
contract to sell or promise to sell where title
remains with the vendor until fulfillment of a
positive suspensive condition, such as full payment
of the price x x [x].

June 1982 that the spouses Heruela were already occupying the
land. In their answer to the complaint, the spouses Heruela and
the spouses Pallori alleged that their occupation of the land is
lawful because having made partial payments of the purchase
price, they already considered themselves owners of the land. [18]
Clearly, there was no transfer of title to the spouses Heruela. The
spouses Ramos retained their ownership of the land. This only
shows that the parties did not intend the transfer of ownership
until full payment of the purchase price.

RA 6552 is the Applicable Law

The trial court did not err in applying RA 6552 to the

lots, commercial buildings and sales to tenants

under Republic Act Numbered Thirty-eight hundred
forty-four as amended by Republic Act Numbered
Sixty-three hundred eighty-nine, where the buyer
has paid at least two years of installments, the
buyer is entitled to the following rights in case he
defaults in the payment of succeeding
installments:

present case.
(a)

To pay, without additional

interest, the unpaid
installments due within the
total grace period earned by
him, which is hereby fixed at
the rate of one month grace
period for every one year of
installment payments
made: Provided, That this
right shall be exercised by the
buyer only once in every five
years of the life of the
contract and its extensions, if
any.

(b)

If the contract is cancelled,

the seller shall refund to the
buyer the cash surrender
value of the payments on the
property equivalent to fifty
per cent of the total
payments made and, after
five years of installments, an
additional five per cent every
year but not to exceed ninety
per cent of the total
payments
made: Provided, That the
actual cancellation of the
contract shall take place after
thirty days from receipt by
the buyer of the notice of

Articles 1191[19] and 1592[20] of the Civil Code are applicable

to contracts of sale. In contracts to sell, RA 6552 applies. In Rillo
v. Court of Appeals,[21] the Court declared:
xxx Known as the Maceda Law, R.A. No. 6552
recognizes in conditional sales of all kinds of real
estate (industrial, commercial, residential) the right
of the seller to cancel the contract upon nonpayment of an installment by the buyer, which is
simply an event that prevents the obligation of the
vendor to convey title from acquiring binding
force. It also provides the right of the buyer on
installments in case he defaults in the payment of
succeeding installments xxx.

Sections 3 and 4 of RA 6552 provide:

Sec. 3. In all transactions or contracts
involving the sale or financing of real estate on
installment payments, including residential
condominium apartments but excluding industrial

cancellation or the demand

for rescission of the contract
by a notarial act and upon full
payment of the cash
surrender value to the buyer.

a notarial act of rescission. However, an action for reconveyance is

not an action for rescission. The Court explained in Olympia:

Down payments, deposits or options on the

contract shall be included in the computation of the
total number of installments made.
Sec. 4. In case where less than two years
of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days
from the date the installment became due. If the
buyer fails to pay the installments due at the
expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by
the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial
act.

In this case, the spouses Heruela paid less than two years
of installments. Thus, Section 4 of RA 6552 applies. However,

The action for reconveyance filed by

petitioner was predicated on an assumption that its
contract to sell executed in favor of respondent
buyer had been validly cancelled or rescinded. The
records would show that, indeed, no such
cancellation took place at any time prior to the
institution of the action for reconveyance. xxx
xxx
xxx Not only is an action for reconveyance
conceptually different from an action for rescission
but that, also, the effects that flow from an
affirmative judgment in either case would be
materially dissimilar in various respects. The
judicial resolution of a contract gives rise to mutual
restitution which is not necessarily the situation
that can arise in an action for reconveyance.
Additionally, in an action for rescission (also often
termed as resolution), unlike in an action for
reconveyance predicated on an extrajudicial
rescission (rescission by notarial act), the Court,
instead of decreeing rescission, may authorize for a
just cause the fixing of a period.[23]

there was neither a notice of cancellation nor demand for

rescission by notarial act to the spouses Heruela. In Olympia
Housing, Inc. v. Panasiatic Travel Corp.,[22]the Court ruled that
the vendor could go to court to demand judicial rescission in lieu of

In the present case, there being no valid rescission of the

contract to sell, the action for reconveyance is premature. Hence,

the spouses Heruela have not lost the statutory grace period within

spouses Pallori, to construct a house on the land. Under the

which to pay. The trial court should have fixed the grace period to

circumstances, the Court deems it proper to award interest at 6%

sixty days conformably with Section 4 of RA 6552.

per annum on the balance of the purchase price.

The spouses Heruela are not entirely fault-free. They have

The records do not show when the spouses Ramos made a

been remiss in performing their obligation. The trial court found

demand from the spouses Heruela for payment of the balance of

that the spouses Heruela offered once to pay the balance of the

the purchase price. The complaint only alleged that the spouses

purchase price. However, the spouses Heruela did not consign the

Heruelas unjust refusal to pay in full the purchase price xxx has

payment during the pendency of the case. In the meanwhile, the

caused the Deed of Conditional Sale to be rescinded, revoked and

spouses Heruela enjoyed the use of the land.

annulled.[26] The complaint did not specify when the spouses

Ramos made the demand for payment. For purposes of computing

For the breach of obligation, the court, in its discretion, and

the legal interest, the reckoning period should be the filing on 27
applying Article 2209 of the Civil Code,[24] may award interest at
January 1998 of the complaint for reconveyance, which the
the rate of 6% per annum on the amount of damages.[25] The
spouses Ramos erroneously considered an action for rescission of
spouses Heruela have been enjoying the use of the land since
the contract.
1982. In 1995, they allowed their daughter and son-in-law, the

The Court notes the reduction of the land area from 306

stipulation. None of the enumerated exceptions applies to this

square meters to 282 square meters. Upon subdivision of the land,

case. Further, the policy of the law is to put no premium on the

24 square meters became part of the road. However, Santiago

right to litigate.[29] Hence, the award of attorneys fees and

Heruela expressed his willingness to pay for the 306 square meters

litigation expenses should be deleted.

agreed upon despite the reduction of the land area.[27] Thus, there
WHEREFORE, we AFFIRM the Decision dated 23 August
is no dispute on the amount of the purchase price even with the
2000 of the Regional Trial Court of Misamis Oriental, Branch 21,
reduction of the land area.
dismissing the complaint for Recovery of Ownership with Damages,
with the following MODIFICATION:
On the Award of Attorneys Fees and Litigation Expenses
1.

The spouses Heruela shall pay the spouses

The trial court ordered the spouses Ramos to pay the

Ramos P11,300 as balance of the purchase price plus
spouses Heruela and the spouses Pallori the amount
interest at 6% per annum from 27 January 1998. The
of P20,000 as attorneys fees and P10,000 as litigation
spouses Heruela shall pay within 60 days from finality
expenses. Article 2208

[28]

of the Civil Code provides that subject to

of this Decision;

certain exceptions, attorneys fees and expenses of litigation, other

than judicial costs, cannot be recovered in the absence of

2.

Upon payment, the spouses Ramos shall execute a

deed of absolute sale of the land and deliver the
certificate of title in favor of the spouses Heruela;

3.

In case of failure to thus pay within 60 days from

finality of this Decision, the spouses Heruela and the
spouses Pallori shall immediately vacate the premises

SPS. LUIS V. CRUZ and

AIDA CRUZ,
Petitioners,

G.R. NO. 145470

Present:

PUNO, Chairman,
- versus -

AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-

NAZARIO, JJ.
SPS. ALEJANDRO FERNANDO,
SR., and RITA FERNANDO,
Promulgated:
Respondents.
December 9,
2005
x------------------------------------------- - - - - - - -x

without need of further demand, and the down

DECISION
payment and installment payments of P4,000 paid by

AUSTRIA-MARTINEZ, J.:

the spouses Heruela shall constitute rental for the

land;
4.

The award of P20,000 as attorneys fees and P10,000

For resolution is a petition for review on certiorari under

Rule 45 of the Rules of Court, assailing the Decision [1] dated
October 3, 2000 of the Court of Appeals (CA) in CA-G.R. CV No.

as litigation expenses in favor of the spouses Heruela

and the spouses Pallori is deleted.

SO ORDERED.
4. Sps. Cruz vs. Sps. Fernando

61247, dismissing petitioners appeal and affirming the decision of

the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 79, in
Civil Case No. 877-M-94.

The antecedent facts are as follows:

Luis V. Cruz and Aida Cruz (petitioners) are occupants of the

Petitioners filed a Motion to Dismiss but the RTC dismissed it

front portion of a 710-square meter property located in Sto. Cristo,

for lack of merit in its Order dated March 6, 1995. [3] Petitioners

Baliuag, Bulacan. On October 21, 1994, spouses Alejandro

then filed their Answer setting forth the affirmative defenses that:

Fernando, Sr. and Rita Fernando (respondents) filed before the RTC

(1) the Kasunduan is a perfected contract of sale; (2) the

a complaint for accion publiciana against petitioners, demanding

agreement has already been partially consummated as they

the latter to vacate the premises and to pay the amount of P500.00

already relocated their house from the rear portion of the lot to the

a month as reasonable rental for the use thereof. Respondents

front portion that was sold to them; (3) Mrs. Glorioso prevented the

alleged in their complaint that: (1) they are owners of the property,

complete consummation of the sale when she refused to have the

having bought the same from the spouses Clodualdo and Teresita

exact boundaries of the lot bought by petitioners surveyed, and the

Glorioso (Gloriosos) per Deed of Sale dated March 9, 1987; (2) prior

existing survey was made without their knowledge and

to their acquisition of the property, the Gloriosos offered to sell to

participation; and (4) respondents are buyers in bad faith having

petitioners the rear portion of the property but the transaction did

bought that portion of the lot occupied by them (petitioners) with

not materialize due to petitioners failure to exercise their option;

full knowledge of the prior sale to them by the Gloriosos. [4]

(3) the offer to sell is embodied in a Kasunduan dated August 6,

1983 executed before the Barangay Captain; (4) due to petitioners
failure to buy the allotted portion, respondents bought the whole
property from the Gloriosos; and (5) despite repeated demands,
petitioners refused to vacate the property.

After due proceedings, the RTC rendered a Decision on April

3, 1998 in favor of respondents. The decretal portion of the

[2]

decision provides:

Petitioners appealed the RTC decision but it was affirmed by

PREMISES CONSIDERED, the herein
plaintiffs was able to prove by preponderance of
evidence the case of accion publiciana, against the
defendants and judgment is hereby rendered as
follows:

the CA per its Decision dated October 3, 2000.

Hence, the present petition raising the following issues:

1. Ordering defendants and all persons
claiming under them to vacate placefully (sic) the
premises in question and to remove their house
therefore (sic);

2. Ordering defendants to pay plaintiff the

sum of P500.00 as reasonable rental per month
beginning October 21, 1994 when the case was
filed before this Court and every month thereafter
until they vacate the subject premises and to pay
the costs of suit.

The counter claim is hereby DISMISSED for

lack of merit.

1. Whether the Honorable Court of Appeals

committed an error of law in holding that the
Agreement (Kasunduan) between the parties was a
mere offer to sell, and not a perfected Contract
of Purchase and Sale?

2. Whether the Honorable Court of Appeals

committed an error of law in not holding that where
the parties clearly gave the petitioners a period of
time within which to pay the price, but did not fix
said period, the remedy of the vendors is to ask the
Court to fix the period for the payment of the price,
and not an accion publiciana?

SO ORDERED.[5]
3. Whether the Honorable Court of Appeals
committed an error of law in not ordering
respondents to at least deliver the back portion
of the lot in question upon payment of the agreed

price thereof by petitioners, assuming that the

Regional Trial Court was correct in finding that the
subject matter of the sale was said back portion,
and not the front portion of the property?

cause of action against them, as the obligation set in

the Kasunduan did not set a period, consequently, there is no
breach of any obligation by petitioners.

4. Whether the Honorable Court of Appeals

committed an error of law in affirming the decision
of the trial court ordering the petitioners, who are
possessors in good faith, to pay rentals for the
portion of the lot possessed by them?[6]

The resolution of the issues in this case principally is

dependent on the interpretation of the Kasunduan dated August 6,
1983 executed by petitioners and the Gloriosos.
The Kasunduan provided the following pertinent stipulations:

The RTC dwelt on the issue of which portion was being sold
by the Gloriosos to petitioners, finding that it was the rear portion
and not the front portion that was being sold; while the CA

a.

Na pumayag ang mga maysumbong

(referring to the Gloriosos) na pagbilhan
ang mga ipinagsumbong (referring to
petitioners) na bahagi ng lupa at ang
ipagbibili ay may sukat na 213 metrong
parisukat humigit kumulang sa
halagang P40.00 bawat metrong parisukat;

b.

Na sa titulong papapanaugin ang magiging

kabuuang sukat na mauukol sa mga
ipinagsusumbong ay 223 metrong
parisukat at ang 10 metro nito ay bilang
kaloob ng mga maysumbong sa mga
Ipinagsusumbong na bahagi ng right of
way;

construed the Kasunduan as a mere contract to sell and due to

petitioners failure to pay the purchase price, the Gloriosos were
not obliged to deliver to them (petitioners) the portion being sold.

Petitioners, however, insist that the agreement was a

perfected contract of sale, and their failure to pay the purchase
price is immaterial. They also contend that respondents have no

contract of sale is perfected at the moment there is meeting of the

c.

Na ang right of way ay may luwang na 1.75

meters magmula sa daang Lopez
Jaena patungo sa likuran ng lote na
pagtatayuan ng bahay ng mga
Ipinagsusumbong na kanyang bibilhin;

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.

d.

Na ang gugol sa pagpapasukat at

pagpapanaog ng titulo ay paghahatian ng
magkabilang panig na ang panig ay
magbibigay ng halagang hindi kukulanging
sa halagang tig-AAPAT NA DAANG PISO
(P400.00);

In a contract of sale, the title to the property passes to the

vendee upon the delivery of the thing sold, as distinguished from a
contract to sell where ownership is, by agreement, reserved in the

e.

Na ang ipinagsusumbong ay tiyakang

ililipat ang bahay sa bahaging kanilang
nabili o mabibili sa buwan ng Enero 31,
1984;[7] (Emphasis supplied)

vendor and is not to pass to the vendee until full payment of the
purchase price.[8] Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and cannot recover it
until and unless the contract is resolved or rescinded; whereas, in a
contract to sell, title is retained by the vendor until full payment of

Under Article 1458 of the Civil Code, a contract of sale is a

contract by which one of the contracting parties obligates himself
to transfer the ownership and to deliver a determinate thing, and
the other to pay therefor a price certain in money or
its equivalent. Article 1475 of the Code further provides that the

the price. In the latter contract, payment of the price is a positive

suspensive condition, failure of which is not a breach but an event
that prevents the obligation of the vendor to convey title from
becoming effective.

purchase price in the agreement confirms the conclusion that it is a

contract to sell. This is because the manner of payment of
The Kasunduan provides for the following terms and
conditions: (a) that the Gloriosos agreed to sell to petitioners a
portion of the property with an area of 213 meters at the price
of P40.00 per square meter; (b) that in the title that will be caused
to be issued, the aggregate area is 223 square meters with 10
meters thereof serving as right of way; (c) that the right of way
shall have a width of 1.75 meters from Lopez Jaena road going
towards the back of the lot where petitioners will build their house

the purchase price is an essential element before a valid

and binding contract of sale can exist.[9] Although the Civil
Code does not expressly state that the minds of the parties must
also meet on the terms or manner of payment of the price, the
same is needed, otherwise there is no sale.[10] As held in Toyota
Shaw, Inc. vs. Court of Appeals,[11] a definite agreement on the
manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale.

on the portion of the lot that they will buy; (d) that the expenses
for the survey and for the issuance of the title will be divided

The Kasunduan does not establish any definite agreement

between the parties with each party giving an amount of no less

between the parties concerning the terms of payment. What it

than P400.00; and (e) that petitioners will definitely relocate their

merely provides is the purchase price for the 213-square meter

house to the portion they bought or will buy by January 31, 1984.

property at P40.00 per square meter.

The foregoing terms and conditions show that it is a

For another, the telltale provision in the Kasunduan that:

contract to sell and not a contract of sale. For one, the

Na pumayag ang mga maysumbong na pagbilhan ang mga

conspicuous absence of a definite manner of payment of the

ipinagsumbong na bahagi ng lupa at ang ipagbibili ay may sukat

na 213 metrong parisukat humigit kumulang sa halagang P40.00

Normally, in a contract to sell, the payment of the purchase

bawat metrong parisukat, simply means that the Gloriosos

price is the positive suspensive condition upon which the transfer

only agreed to sell a portion of the property and that the portion to

of ownership depends.[13] The parties, however, are not prohibited

be sold measures 213 square meters.

from stipulating other lawful conditions that must be fulfilled in

order for the contract to be converted from a contract to sell or at
the most an executory sale into an executed one.[14]

Another significant provision is that which reads: Na ang

ipinagsusumbong ay tiyakang ililipat ang bahay sa bahaging
kanilang nabili omabibili sa buwan ng Enero 31, 1984. The

In the present case, aside from the payment of the

foregoing indicates that a contract of sale is yet to be

purchase price, there existed another suspensive condition, i.e.:

consummated and ownership of the property remained in the

that petitioners will relocate their house to the portion they bought

Gloriosos. Otherwise, why would the alternative term mabibili be

or will buy by January 31, 1984.

used if indeed the property had already been sold to petitioners.

Petitioners failed to abide by the express condition that

In addition, the absence of any formal deed of conveyance

they should relocate to the rear portion of the property being

is a strong indication that the parties did not intend immediate

bought by January 31, 1984. Indeed, the Kasunduan discloses that

transfer of ownership.[12]

it is the rear portion that was being sold by the Gloriosos, and not
the front portion as petitioners stubbornly claim. This is evident

from the provisions establishing a right of way from Lopez Jaena

road going towards the back of the lot, and requiring them to
relocate their house to the portion being sold by January 31, 1984.
Petitioners are presently occupying the front portion of the
property. Why the need for a right of way and for petitioners to
relocate if the front portion on which their house stands is the
portion being sold?

Petitioners admit that they have not paid a single centavo

to the Gloriosos. However, petitioners argue that their
nonpayment of the purchase price was due to the fact that there is
yet to be a survey made of the property. But evidence shows, and
petitioners do not dispute, that as early as August 12, 1983, or six
days after the execution of the Kasunduan, a survey has already
been made and the property was subdivided into Lot Nos. 565-B-1
(front portion) and 565-B-2 (rear portion), with Lot No. 565-B-2

This condition is a suspensive condition noncompliance of

which prevented the Gloriosos from proceeding with the sale and

measuring 223 square meters as the portion to be bought by

petitioners.

ultimately transferring title to petitioners; and the Kasunduan from

having obligatory force.[15] It is established by evidence that the
petitioners did not transfer their house located in the front portion
of the subject property to the rear portion which, under
the Kasunduan, they intended to buy. Thus, no obligation arose on
the part of the Gloriosos to consider the subject property as having
been sold to petitioners because the latters non-fulfillment of the
suspensive condition rendered the contract to sell ineffective and
unperfected.

Petitioners question the survey made, asserting that it is a

table survey made without their knowledge and participation. It
should be pointed out that the Kasunduan merely provides that the
expenses for the survey will be divided between them and that
each party should give an amount of no less than P400.00.

Nowhere is it stated that the survey is a condition precedent for

belatedly would amount to trampling on the basic principles of fair

the payment of the purchase price.

play, justice and due process.[17]

Petitioners further claim that respondents have no cause of

Moreover, it would be inutile for respondents to first

action against them because their obligation to pay the purchase

petition the court to fix a period for the performance of the

price did not yet arise, as the agreement did not provide for a

contract. In the first place, respondents are not parties to

period within which to pay the purchase price. They argue that

the Kasunduan between petitioners and the Gloriosos, and they

respondents should have filed an action for specific performance or

have no standing whatsoever to seek such recourse. In the second

judicial rescission before they can avail of accion publiciana.

place, such recourse properly pertains to petitioners. It was they

who should have sought the courts intercession. If petitioners
believed that they have an actionable contract for the sale of the

Notably, petitioners never raised these arguments during

the proceedings before the RTC. Suffice it to say that issues raised
for the first time on appeal and not raised timely in the

property, prudence and common sense dictate that they should

have sought its enforcement forthwith. Instead, petitioners whiled
away their time.

proceedings in the lower court are barred by estoppel. [16] Matters,

theories or arguments not brought out in the original proceedings
cannot be considered on review or appeal where they are raised for
the first time. To consider the alleged facts and arguments raised

Furthermore, there is no need for a judicial rescission of

the Kasunduan for the simple reason that the obligation of the

Gloriosos to transfer the property to petitioners has not yet arisen.

There is also no merit to petitioners contention that

There can be no rescission of an obligation that is nonexistent,

respondents are buyers in bad faith. As explained in Coronel vs.

considering that the suspensive conditions therefor have not yet

Court of Appeals:

happened.[18]

Hence, petitioners have no superior right of ownership or

possession to speak of. Their occupation of the property was
merely through the tolerance of the owners. Evidence on record
shows that petitioners and their predecessors were able to live and
build their house on the property through the permission and

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.[21] (Emphasis supplied)

kindness of the previous owner, Pedro Hipolito, who was their

relative,[19] and subsequently, Teresita Glorioso, who is also their
relative. They have no title or, at the very least, a contract of lease
over the property. Based as it was on mere tolerance, petitioners

A person who occupies the land of another at the latter's

possession could neither ripen into ownership nor operate to bar

forbearance or permission without any contract between them is

any action by respondents to recover absolute possession thereof.

necessarily bound by an implied promise that he will vacate upon

[20]

demand.[22]

Considering that petitioners continued possession of the

WHEREFORE, the petition is DENIED. The Decision of the

property has already been rendered unlawful, they are bound to

Court of Appeals dated October 3, 2000 in CA-G.R. CV No. 61247

pay reasonable rental for the use and occupation thereof, which in

isAFFIRMED.

this case was appropriately pegged by the RTC at P500.00 per

month beginning October 21, 1994 when respondents filed the
case against them until they vacate the premises.

Finally, petitioners seek compensation for the value of the

improvements introduced on the property. Again, this is the first

SO ORDERED.

5. Ursal vs. Court of Appeals

WINIFREDA URSAL,

G.R. No. 142411

Petitioner,
Present:

time that they are raising this point. As such, petitioners are now
barred from seeking such relief.[23]

- versus -

COURT OF APPEALS, THE RURAL BANK OF

LARENA (SIQUIJOR), INC. and SPOUSES JESUS
MONESET and CRISTITA MONESET,
Respondents.

PUNO, Chairman,
AUSTRIA-MARTINEZ
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ

Promulgated:
October 14, 2005

x---------------------------------------------------------- x
DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45

of the Rules of Court seeking the reversal of the Decision [1] of the
Court of Appeals (CA) dated June 28, 1999 and the Resolution
dated January 31, 2000 denying petitioners motion for
reconsideration.[2]
These are the facts:

The spouses Jesus and Cristita Moneset (Monesets) are the

registered owners of a 333-square meter land together with a
house thereon situated at Sitio Laguna, Basak, Cebu City covered
by Transfer Certificate of Title No. 78374.[3] On January 9, 1985,
they executed a Contract to Sell Lot & House in favor of
petitioner Winifreda Ursal (Ursal), with the following terms and
conditions:

That the VENDOR (Cristita R. Moneset) offers to SELL

and the VENDEE accepts to BUY at the agreed lump
sum price of P130,000.00 payable on the installment
basis as follows:
1.
That on the date of the signing of this agreement,
the VENDEE will tender an earnest money or
downpayment of P50,000.00 to the VENDOR, and by

these presents, the latter hereby acknowledges receipt

of said amount from the former;
2.
That the balance of the selling price
of P80,000.00 shall be paid by the VENDEE to the
VENDOR in equal monthly installments of P3,000.00
starting the month of February, 1985, until said
balance of the selling price shall be fully paid;
3.
That if the VENDEE shall fail or in default to pay
six (6) monthly installments to the VENDOR the herein
agreement is deemed cancelled, terminated and/or
rescinded and in such event, the VENDEE (sic) binds to
refund to the VENDOR (sic) the deposit of P50,000.00
and with the latters (sic) obligation to pay the former
(sic) as a corresponding refund for cost of
improvements made in the premises by VENDEE;
4.
That on the date of receipt of the downpayment
of P50,000.00 by the VENDOR, it is mutually agreed for
VENDEE to occupy and take physical possession of the
premises as well as for the latter (VENDEE) to keep and
hold in possession the corresponding transfer
certificate of title No. ______ of the land in question
which is the subject of this agreement;
5.
That on the date of final payment by the VENDEE
to the VENDOR, the latter shall execute at her expense
the corresponding document of DEED OF ABSOLUTE
SALE for the former as well as the payment of realty
clearances, BIR Capital Gain Tax, sales tax or transfer
fees and attorneys fees; that, for the issuance of title
in VENDEEs name shall be the exclusive account of
said VENDEE.[4]

Petitioner paid the down payment and took possession of the

property. She immediately built a concrete perimeter fence and an
artesian well, and planted fruit bearing trees and flowering plants

thereon which all amounted to P50,000.00. After paying six

island, Siquijor; and the Bank acted in bad faith since it granted the

monthly installments, petitioner stopped paying due to the

real estate mortgage in spite of its knowledge that the property

Monesets failure to deliver to her the transfer certificate of title of

was in the possession of petitioner. [11]

the property as per their agreement; and because of the failure of

the Monesets to turn over said title, petitioner failed to have the
contract of sale annotated thereon.[5]

The Monesets answered that it was Ursal who stopped

paying the agreed monthly installments in breach of their
agreement.[12] The Bank, on the other hand, averred that the title

Unknown to petitioner, the Monesets executed on November

5, 1985 an absolute deed of sale in favor of Dr. Rafael Canora, Jr.

of the property was in the name of Cristita Radaza Moneset

married to Jesus Moneset and did not show any legal infirmity. [13]

over the said property for P14,000.00.[6] On September 15, 1986,

the Monesets executed another sale, this time with pacto de
retro with Restituto Bundalo.[7] On the same day, Bundalo, as
attorney-in-fact of the Monesets, executed a real estate mortgage

Bundalo, meanwhile, was not served summons because he

could no longer be found at his given address.[14]

over said property with Rural Bank of Larena (hereafter Bank)

located in Siquijor for the amount of P100,000.00.[8] The special
power of attorney made by the Monesets in favor of Bundalo as

Trial on the merits proceeded. Thereafter, the Regional Trial

well as the real estate mortgage was then annotated on the title on

Court of Cebu City, Branch 24, rendered its decision finding that

September 16, 1986.

Ursal is more credible than the Monesets and that the Monesets

[9]

For the failure of the Monesets to pay the

loan, the Bank served a notice of extrajudicial foreclosure dated

January 27, 1988 on Bundalo.

are liable for damages for fraud and breach of the contract to sell:

[10]

On September 30, 1989, Ursal filed an action for declaration

of non-effectivity of mortgage and damages against the Monesets,
Bundalo and the Bank. She claimed that the defendants
committed fraud and/or bad faith in mortgaging the property she
earlier bought from the Monesets with a bank located in another

The evidence of [Ursal] show that she was

the first to acquire a substantial interest over the
lot and house by virtue of the execution of the
Contract to Sell (Exh. A). After the execution of
Exh. A plaintiff took possession of the questioned
lot and houseafter she made a downpayment
of P50,000.00. [S]he paid the installments for
six (6) months without fail. [However] plaintiff

(stopped) paying the installment because

defendant spouses failed to give her the Transfer
Certificate of Title over the lot and house despite
repeated demands. It is evident then that the first
to violate the conditions of Exh. A were the
defendants Spouses Moneset. This is the reason
why plaintiff was not able to annotate Exh. A on
the TCT. The evidence of plaintiff show that there
was no intention on her part to discontinue paying
the installments. In a reciprocal obligation, one
cannot be compelled to do if the other party fails to
do his part (Art. 1169, New Civil Code).

their behalf the Real Estate Mortgage with the

Rural Bank of Larena knowing fully well that the
Contract to Sell house and lot, Exh. A was still
existing notwithstanding their violation to the
provisions thereto. It is therefore crystal clear that
defendant spouses Moneset are liable for damages.
[15]

As to the real estate mortgage, the trial court held that the
same was valid and the Bank was not under any obligation to look
beyond the title, although the present controversy could have been
avoided had the Bank been more astute in ascertaining the nature

The acts of defendant Spouses Moneset in

selling again the lot and house in question to Dr.
Canora by executing a Deed of Absolute Sale; in
selling the same on pacto de retro to defendant
Bundalo; and in mortgaging the same to defendant
Rural Bank of Larena are plainly and clearly
fraudulent because they were done while Exh. A
was still existing and the transaction was done
without notice to the plaintiff. As provided in Art.
1170 of the New Civil Code, those who are guilty of
fraud in the performance of their obligation --- and
those who in any manner contravene the tenor
thereof, are liable for damages.

Another ground for liability under this

article is when there is fraud/deceit. In the instant
case, there was fraud/deceit on the part of the
defendant spouses Moneset when they executed
the Deed of Sale to Dr. Canora; the Deed of Sale
with Pacto de Retro to Bundalo and the Special
Power of Attorney for Bundalo to execute for and in

of petitioners possession of the property, thus:

The Real Estate Mortgage and the

Foreclosure Proceedings cannot be considered null
and void in the sense that per se the formalities
required by law were complied with except for the
fact that behind their execution there was fraud,
deceit and bad faith on the part of defendant
spouses Moneset and Bundalo.
The defendant Rural Bank of Larena for its
part could have avoided this situation if the bank
appraiser who made the ocular inspection of the
subject house and lot went deeper and
investigated further when he learned that the
owner is not the actual occupant. He was however
told by Moneset that the actual occupant was only
a lessee. Banking on this information that the
actual occupant was only a lessee with no other
right over and above such, the bank approved a
loan of P100,000.00 in favor of Moneset through
Bundalo their attorney-in-fact.

2.

pay to plaintiff the following:

a.) moral damages
----------------P30,000.00
b.) exemplary damages
----------P20,000.00
c.) litigation expenses------------P 5,000.00
d.) attorneys fees ----------------P10,000.00
e.) costs

3.

order the defendant Rural Bank of

Larena to give the plaintiff the
preferential right to redeem the subject
house and lot.

Likewise the Rural Bank of Larena had the

right to rely on what appeared on the certificate of
title of the Monesets and it was under no obligation
to look beyond the certificate and investigate the
title of the mortgagor appearing on the face of the
certificate.
The approval of the P100,000.00 loan from
the Rural Bank of Larena was made possible
through the deception and bad faith of defendant
spouses Moneset and Bundalo but the pertinent
documents were per se in order. The court is of the
honest belief that the case against the defendant
bank be dismissed for lack of merit. The court
however believes that for reasons of equity the
bank should give the plaintiff Ursal the preferential
right to redeem the subject house and lot.[16]

SO ORDERED.[17]

Both Ursal and the Monesets appealed the decision to the

The trial court then disposed of the case as follows:

CA. Ursal alleged that the Bank was guilty of bad faith for
not investigating the

Wherefore premises considered, judgment

is hereby rendered in favor of the defendant Rural
Bank of Larena dismissing the complaint against it
for lack of merit and against the defendant spouses
Moneset ordering them to:
1.

reimburse to plaintiff Ursal the

following:
a.) downpayment of P50,000.00
b.) monthly installments for six
months at P3,000.00 per month
--- P18,000.00
c.) expenses improvements P61,
676.52

presence of Ursal on the property in question, while the Monesets

claimed that the trial court erred in giving preferential right to Ursal
to redeem the property and in ordering them to pay damages.[18]

The CA affirmed in toto the decision of the trial court. It held

that the Bank did not have prior knowledge of the contract to sell
the house and lot and the Monesets acted fraudulently thus they
cannot be given preferential right to redeem the property and were
therefore correctly ordered to pay damages.[19]

title, he cannot claim that he is a purchaser in good faith; Sec. 50

The Monesets filed a motion for reconsideration which was
denied outright for having been filed out of time.[20] Ursals motion

of Act 496 provides that where a party has knowledge of a prior

existing interest which is unregistered at the time he acquired the

for reconsideration was denied by the CA on January 31, 2000 for

land, his knowledge of that prior unregistered interest has the

lack of merit.[21]

effect of registration as to him and the Torrens system cannot be

used as a shield against fraud; following Art. 2176 of the Civil

Hence, the present petition raising the sole error:

Code, respondent Bank is obliged to pay for the damage done. [23]

Petitioner then prayed that the Deed of Real Estate Mortgage

That with grave abuse of discretion
amounting to excess of jurisdiction, the
Honorable Court of Appeals erred in
rendering a decision and Resolution NOT in
accordance with law and the applicable
rulings of the Supreme Court.[22]

be declared as non-effective and non-enforceable as far as

petitioner is concerned; that she be declared as the absolute owner
of the house and lot in question; that the Monesets be ordered to
execute a deed of absolute sale covering the subject property; and
that the Bank be ordered to direct the collection or payment of the
loan of P100,000.00 plus interest from the Monesets for they were
the ones who received and enjoyed the said loan.[24]

Petitioner claims that: the Bank was duly informed through

its appraiser that the house and lot to be mortgaged by Monesets

On the other hand, respondent Bank in its Comment argues

that: its interest in the property was only that of mortgagee
and not a purchaser thus its interest is limited only to

were in the possession of a lessee; the Bank should have taken this

ascertaining that the mortgagor is the registered owner; the case

as a cue to investigate further the Monesets right over the same;

cited is inapplicable at bar since it involves the purchase of real

the case of Embrado vs. Court of Appeals (233 SCRA 335) held that

property; Ursal was purportedly only a lessee of the property, thus

where a purchaser neglects to make the necessary inquiry and

closes his eyes to facts which should put a reasonable man on his
guard to the possibility of the existence of a defect in his vendors

as mortgagor who is not entitled to possess the mortgaged

property, they no longer considered the lease in the processing and
approval of the loan; Sec. 50 of Act No. 496 is also inapplicable
since the alleged prior existing interest was only that of a lessee; in

any case, it was the Monesets who lied to the Bank anent the real

two respondents bear jointly and severally the consequences of

nature of the encumbrance, thus, it is the Monesets who are guilty

their transaction and let the innocent petitioner ultimately own the

of fraud and not the Bank.

house and lot in question.[27]

[25]

In her Rejoinder,[26] petitioner argued that: under the law

The petitioner, in her Memorandum dated July 31, 2005,

on mortgage, the mortgagor must be the owner of the property he

raised the issues of: (1) Whether or not the document captioned:

offers as security of his loan; the mortgagee like herein Bank which

Contract to Sell Lot and House (Exh. A) is valid and binding so

neglects to verify the ownership of the property offered as security

much so that the herein Petitioner who is the Vendee is the lawful

of the loan runs the risk of his folly; the Banks negligence is not

and true owner of the lot and house in question; (2) Whether or not

excusable because an adverse claim and notice of lis

the herein respondents spouses Jesus Moneset and Cristita

pendens were already annotated on the certificate of title when the

Moneset who were the vendors and/or mortgagors together with

mortgage was constituted or when the deed of real estate

respondent Restituto Bundalo were conniving and acting in bad

mortgage was annotated; it would be unfair to put the blame on

faith; and (3) Whether or not respondent Rural Bank of Larena

petitioner who was innocent of the transaction; the trial court

measured up to the strict requirement of making a thorough

found that the Bank even provided its appraiser the amount

investigation of the property offered as collateral before granting a

of P15,000.00 to redeem the pacto de retro sale allegedly executed

loan and be considered as innocent mortgagee and entitled to the

in favor of Dr. Canora; this should have aroused the Banks

protection of the law.[28] Petitioner reiterated her arguments in

suspicion and prompted it to investigate further the property; the

support of the first and third issues raised in the Memorandum

trial court recognized the bad faith committed by the Monesets and

while she merely adopted the CA findings in support of the second

ordered them to pay the sum of P126,676.52 in damages but

issue, i.e., when the Monesets encumbered the Transfer Certificate

exonerated the Bank who is equally guilty of bad faith; the

of Title (TCT) to Dr. Canora and thereafter to Bundalo, they

Monesets cannot pay the damages as they have no money and

committed bad faith or fraud since the contract to sell with Ursal

property thus if the decision of the trial court as affirmed by the CA

was still valid and subsisting. [29]

is to be enforced, they will only be holding an empty bag while the

Bank which is equally guilty will go free; what would be fair is to
let the

Respondent Bank, in its Memorandum dated July 20, 2005,

reiterated the arguments it made in its Comment that: the case

cited by petitioner requiring extra ordinary diligence is inapplicable

in this case since what is involved here is mortgage and not sale;
as mortgagee, its interest is limited only to determining whether
the mortgagor is the registered owner of the property whose
certificate of title showed that there were no existing
encumbrances thereon; and even with unregistered
encumbrances, the Bank has priority by the registration of the loan

Respondent is not an ordinary mortgagee; it

is a mortgagee-bank. As such, unlike private
individuals, it is expected to exercise greater care and
prudence in its dealings, including those involving
registered lands. A banking institution is expected to
exercise due diligence before entering into a mortgage
contract. The ascertainment of the status or condition
of a property offered to it as security for a loan must be
a standard and indispensable part of its operations. [34]

documents.[30]

Our agreement with petitioner on this point of law,

No memorandum is filed by respondent Monesets.

notwithstanding, we are constrained to refrain from granting the

prayers of her petition, to wit: that the Deed of Real Estate
Mortgage be declared as non-effective and non-enforceable as far

The crux of petitioners contention is that the Bank failed to

as petitioner is concerned; that she be declared as the absolute

look beyond the transfer certificate of title of the property for which

owner of the house and lot in question; that the Monesets be

it must be held liable.

ordered to execute a deed of absolute sale covering the subject

property; and that the Bank be ordered to direct the collection or
payment of the loan of P100,000.00 plus interest from the

We agree. Banks cannot merely rely on certificates of title in

ascertaining the status of mortgaged properties; as their business

Monesets for they were the ones who received and enjoyed the
said loan.[35]

is impressed with public interest, they are expected to exercise

more care and prudence in their dealings than private individuals.
[31]

Indeed, the rule that persons dealing with registered lands can

rely solely on the certificate of title does not apply to banks. [32]

The reason is that, the contract between petitioner and the

Monesets being one of Contract to Sell Lot and House, petitioner,
under the circumstances, never acquired ownership over the

As enunciated in Cruz vs. Bancom:[33]

property and her rights were limited to demand for specific

performance from the Monesets, which at this juncture however is

no longer feasible as the property had already been sold to other

persons.

upon the delivery of the thing sold. In contracts of sale the vendor
loses ownership over the property and cannot recover it unless and
until the contract is resolved or rescinded, while in contracts to sell,
title is retained by the vendor until full payment of the price. [38]
In contracts to sell, full payment is a positive suspensive condition

A contract to sell is a bilateral contract whereby the

prospective seller, while expressly reserving the ownership of the

while incontracts of sale, non-payment is a negative resolutory

condition.[39]

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. [36]

A contract to sell may further be distinguished from

a conditional contract of sale, in that, the fulfillment of the
suspensive condition, which is the full payment of the purchase
price, will not automatically transfer ownership to the buyer

In such contract, the prospective seller expressly reserves

although the property may have been previously delivered to

the transfer of title to the prospective buyer, until the happening of

him. The prospective vendor still has to convey title to the

an event, which in this case is the full payment of the purchase

prospective buyer by entering into a contract of absolute sale.

price. What the seller agrees or obligates himself to do is to fulfill

While in a conditional contract of sale, the fulfillment of the

his promise to sell the subject property when the entire amount of

suspensive condition renders the sale absolute and affects the

the purchase price is delivered to him. Stated differently, the full

sellers title thereto such that if there was previous delivery of the

payment of the purchase price partakes of a suspensive condition,

property, the sellers ownership or title to the property is

the non-fulfillment of which prevents the obligation to sell from

automatically transferred to the buyer. [40]

arising and thus, ownership is retained by the prospective seller

without further remedies by the prospective buyer.[37]
Indeed, in contracts to sell the obligation of the seller to
sell becomes demandable only upon the happening of the
It is different from contracts of sale, since ownership

suspensive condition, that is, the full payment of the purchase

in contracts to sell is reserved by the vendor and is not to pass to

price by the buyer. It is only upon the existence of the contract of

the vendee until full payment of the purchase price, while

sale that the seller becomes obligated to transfer the ownership of

in contracts of sale, title to the property passess to the vendee

the thing sold to the buyer. Prior to the existence of the contract of

payment of P50,000.00. On this point, the trial court was correct in

sale, the seller is not obligated to transfer the ownership to the

holding that for such failure, the Monesets are liable to pay

buyer, even if there is a contract to sell between them.

damages pursuant to Art. 1169 of the Civil Code on reciprocal

[41]

obligations.[47]

In this case, the parties not only titled their contract as

Contract to Sell Lot and House but specified in their agreement
that the vendor shall only execute a deed of absolute sale on the

The vendors breach of the contract, notwithstanding,

ownership still remained with the Monesets and petitioner cannot
justify her failure to complete the payment.

date of the final payment by vendee. [42] Such provision signifies

that the parties truly intended their contract to be that of contract
to sell.[43]

In Pangilinan vs. Court of Appeals,[48] the vendees

contended that their failure to pay the balance of the total contract
price was because the vendor reneged on its obligation to improve

Since the contract in this case is a contract to sell, the

the subdivision and its facilities. In said case, the Court held that

ownership of the property remained with the Monesets even after

the vendees were barred by laches from asking for specific

petitioner has paid the down payment and took possession of the

performance eight years from the date of last installment. The

property. In Flancia vs. Court of Appeals,[44] where the vendee in

Court held that:

the contract to sell also took possession of the property, this Court
held that the subsequent mortgage constituted by the owner over
said property in favor of another person was valid since the vendee
retained absolute ownership over the property.[45] At most, the
vendee in the contract to sell was entitled only to damages. [46]

Petitioner attributes her decision to stop paying

installments to the failure of the Monesets to comply with their
agreement to deliver the transfer certificate of title after the down

(the vendees) instead of being vigilant

and diligent in asserting their rights over the
subject property had failed to assert their rights
when the law requires them to act. Laches or
stale demands is based upon grounds of public
policy which requires, for the peace of society, the
discouragement of stale claims and unlike the
statute of limitations, is not a mere question of
time but is principally a question of the inequity or
unfairness of permitting a right or claim to be
enforced or asserted.

The legal adage finds application in the

case at bar. Tempus enim modus tollendi
obligations et actiones, quia tempus currit contra
desides et sui juris contemptoresFor time is a
means of dissipating obligations and actions,
because time runs against the slothful and careless
of their own rights.[49]

In other words, petitioner did not acquire ownership over

the subject property as she did not pay in full the equal price of the
contract to sell. Further, the Monesets breach did not entitle
petitioner to any preferential treatment over the property
especially when such property has been sold to other persons.

In this case, petitioner instituted an action for Declaration

of Non-Effectivity of Mortgage with Damages four years from the

As explained in Coronel vs. Court of Appeals:[52]

date of her last installment and only as a reaction to the

foreclosure proceedings instituted by respondent Bank. After the
Monesets failed to deliver the TCT, petitioner merely stopped
paying installments and did not institute an action for specific
performance, neither did she consign payment of the remaining
balance as proof of her willingness and readiness to comply with
her part of the obligation. As we held in San Lorenzo Development
Corp. vs. Court of Appeals,[50] the perfected contract to sell
imposed on the vendee the obligation to pay the balance of the
purchase price. There being an obligation to pay the price, the
vendee should have made the proper tender of payment and
consignation of the price in court as required by law. Consignation

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.[53] (Emphasis supplied)

of the amounts due in court is essential in order to extinguish the

vendees obligation to pay the balance of the purchase price. [51]
Since there is no indication in the records that petitioner even
attempted to make the proper consignation of the amounts due,

In this case, the lower courts found that the property was

the obligation on the part of the Monesets to transfer ownership

sold to Dr. Canora and then to Bundalo who in turn acted as

never acquired obligatory force.

attorney-in-fact for the Monesets in mortgaging the property to

respondent Bank. The trial court and the CA erred in giving

petitioner the preferential right to redeem the property as such

property. She therefore cannot ask to be declared the owner of the

would prejudice the rights of the subsequent buyers who were not

property, this late, especially since the same has already passed

parties in the proceedings below. While the matter of giving

hands several times, neither can she question the mortgage

petitioner preferential right to redeem the property was not put in

constituted on the property years after title has already passed to

issue before us, in the exercise of our discretionary power to

another person by virtue of a deed of absolute sale.

correct manifest and palpable error, we deem it proper to delete

said portion of the decision for being erroneous.[54]
At this point, let it be stated that the courts below and even
Petitioners rights were limited to asking for specific

this Court have no jurisdiction to resolve the issue whether there

performance and damages from the Monesets. Specific

was bad faith among the Monesets, Canora and Bundalo. Canora

performance, however, is no longer feasible at this point as

was never impleaded. Bundalo has not been served with

explained above. This being the case, it follows that petitioner

summons.

never had any cause of action against respondent Bank. Having no

cause of action against the bank and not being an owner of the
subject property, petitioner is not entitled to redeem the subject
property.

WHEREFORE, the petition is DENIED. The decision of the

Regional Trial Court of Cebu City, Branch 24, promulgated on
February 5, 1993 and the decision of the Court of Appeals dated
June 28, 1999 are hereby AFFIRMED. However, in the higher

Petitioner had lost her right to demand specific

interest of substantial justice, the Court MODIFIES the same to the

performance when the Monesets executed a Deed of Absolute Sale

effect that the portion ordering the Rural Bank of Larena (Siquijor),

in favor of Dr. Canora. Contrary to what she claims, petitioner had

Inc. to give petitioner the preferential right to redeem the house

no vested right over the property.

and lot covered by Transfer Certificate of Title No. 78374

is DELETED for lack of legal basis.

Indeed, it is the Monesets who first breached their

obligation towards petitioner and are guilty of fraud against her. It
cannot be denied however that petitioner is also not without fault.
She sat on her rights and never consigned the full amount of the

No costs.

SO ORDERED.