SALES 1

[G.R. No. 124242. January 21, 2005]

SAN LORENZO DEVELOPMENT
CORPORATION, petitioner, vs. COURT OF
APPEALS, PABLO S. BABASANTA, SPS.
MIGUEL LU and PACITA ZAVALLA
LU, respondents.
DECISION

On 2 June 1989, respondent Babasanta, as plaintiff,

filed before the Regional Trial Court (RTC), Branch
31, of San Pedro, Laguna, a Complaint for Specific
Performance and Damages[1] against his corespondents herein, the Spouses Lu. Babasanta
alleged that the lands covered by TCT No. T- 39022
and T-39023 had been sold to him by the spouses at
fifteen pesos (P15.00) per square meter. Despite his
repeated demands for the execution of a final deed of
sale in his favor, respondents allegedly refused.

TINGA, J.:
From a coaptation of the records of this case, it
appears that respondents Miguel Lu and Pacita
Zavalla, (hereinafter, the Spouses Lu) owned two (2)
parcels of land situated in Sta. Rosa, Laguna covered
by TCT No. T-39022 and TCT No. T-39023 both
measuring 15,808 square meters or a total of 3.1616
hectares.
On 20 August 1986, the Spouses Lu purportedly sold
the two parcels of land to respondent Pablo
Babasanta, (hereinafter, Babasanta) for the price of
fifteen pesos (P15.00) per square meter. Babasanta
made a downpayment of fifty thousand pesos
(P50,000.00) as evidenced by a memorandum receipt
issued by Pacita Lu of the same date. Several other
payments totaling two hundred thousand pesos
(P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to
Pacita Lu to demand the execution of a final deed of
sale in his favor so that he could effect full payment
of the purchase price. In the same letter, Babasanta
notified the spouses about having received
information that the spouses sold the same property to
another without his knowledge and consent. He
demanded that the second sale be cancelled and that a
final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta
wherein she acknowledged having agreed to sell the
property to him at fifteen pesos (P15.00) per square
meter. She, however, reminded Babasanta that when
the balance of the purchase price became due, he
requested for a reduction of the price and when she
refused, Babasanta backed out of the sale. Pacita
added that she returned the sum of fifty thousand
pesos (P50,000.00) to Babasanta through Eugenio
Oya.

In their Answer,[2] the Spouses Lu alleged that Pacita

Lu obtained loans from Babasanta and when the total
advances of Pacita reached fifty thousand pesos
(P50,000.00), the latter and Babasanta, without the
knowledge and consent of Miguel Lu, had verbally
agreed to transform the transaction into a contract to
sell the two parcels of land to Babasanta with the fifty
thousand pesos (P50,000.00) to be considered as the
downpayment for the property and the balance to be
paid on or before 31 December 1987. Respondents Lu
added that as of November 1987, total payments made
by Babasanta amounted to only two hundred thousand
pesos (P200,000.00) and the latter allegedly failed to
pay the balance of two hundred sixty thousand pesos
(P260,000.00) despite repeated demands. Babasanta
had purportedly asked Pacita for a reduction of the
price from fifteen pesos (P15.00) to twelve pesos
(P12.00) per square meter and when the Spouses Lu
refused to grant Babasantas request, the latter
rescinded the contract to sell and declared that the
original loan transaction just be carried out in that the
spouses would be indebted to him in the amount of
two hundred thousand pesos (P200,000.00).
Accordingly, on 6 July 1989, they purchased
Interbank Managers Check No. 05020269 in the
amount of two hundred thousand pesos (P200,000.00)
in the name of Babasanta to show that she was able
and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17
January 1990[3] wherein he prayed for the issuance of
a writ of preliminary injunction with temporary
restraining order and the inclusion of the Register of
Deeds of Calamba, Laguna as party defendant. He
contended that the issuance of a preliminary
injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property
to other persons.

The Spouses Lu filed their Opposition[4] to the

amended complaint contending that it raised new
matters which seriously affect their substantive rights
under the original complaint. However, the trial court
in its Order dated 17 January 1990[5] admitted the
amended complaint.
On 19 January 1990, herein petitioner San Lorenzo
Development Corporation (SLDC) filed a Motion for
Intervention[6] before the trial court. SLDC alleged
that it had legal interest in the subject matter under
litigation because on 3 May 1989, the two parcels of
land involved, namely Lot 1764-A and 1764-B, had
been sold to it in a Deed of Absolute Sale with
Mortgage.[7] It alleged that it was a buyer in good faith
and for value and therefore it had a better right over
the property in litigation.
In his Opposition to SLDCs motion for intervention,
[8]
respondent Babasanta demurred and argued that the
latter had no legal interest in the case because the two
parcels of land involved herein had already been
conveyed to him by the Spouses Lu and hence, the
vendors were without legal capacity to transfer or
dispose of the two parcels of land to the intervenor.

alleged that it only learned of the filing of the

complaint sometime in the early part of January 1990
which prompted it to file the motion to intervene
without delay. Claiming that it was a buyer in good
faith, SLDC argued that it had no obligation to look
beyond the titles submitted to it by the Spouses Lu
particularly because Babasantas claims were not
annotated on the certificates of title at the time the
lands were sold to it.
After a protracted trial, the RTC rendered
its Decision on 30 July 1993 upholding the sale of the
property to SLDC. It ordered the Spouses Lu to pay
Babasanta the sum of two hundred thousand pesos
(P200,000.00) with legal interest plus the further sum
of fifty thousand pesos (P50,000.00) as and for
attorneys fees. On the complaint-in-intervention, the
trial court ordered the Register of Deeds of Laguna,
Calamba Branch to cancel the notice of lis
pendens annotated on the original of the TCT No. T39022 (T-7218) and No. T-39023 (T-7219).

Applying Article 1544 of the Civil Code, the trial

court ruled that since both Babasanta and SLDC did
not register the respective sales in their favor,
ownership of the property should pertain to the buyer
Meanwhile, the trial court in its Order dated 21 March who first acquired possession of the property. The
1990 allowed SLDC to intervene. SLDC filed
trial court equated the execution of a public
its Complaint-in-Intervention on 19 April 1990.
instrument in favor of SLDC as sufficient delivery of
[9]
Respondent Babasantas motion for the issuance of a the property to the latter. It concluded that symbolic
preliminary injunction was likewise granted by the
possession could be considered to have been first
trial court in its Order dated 11 January
transferred to SLDC and consequently ownership of
1991[10] conditioned upon his filing of a bond in the
the property pertained to SLDC who purchased the
amount of fifty thousand pesos (P50,000.00).
property in good faith.
SLDC in its Complaint-in-Intervention alleged that on
11 February 1989, the Spouses Lu executed in its
favor an Option to Buy the lots subject of the
complaint. Accordingly, it paid an option money in
the amount of three hundred sixteen thousand one
hundred sixty pesos (P316,160.00) out of the total
consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred
forty pesos (P1,264,640.00). After the Spouses Lu
received a total amount of six hundred thirty-two
thousand three hundred twenty pesos (P632,320.00)
they executed on 3 May 1989 a Deed of Absolute Sale
with Mortgage in its favor. SLDC added that the
certificates of title over the property were delivered to
it by the spouses clean and free from any adverse
claims and/or notice of lis pendens. SLDC further

Respondent Babasanta appealed the trial courts

decision to the Court of Appeals alleging in the main
that the trial court erred in concluding that SLDC is a
purchaser in good faith and in upholding the validity
of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the
Court of Appeals. They contended that the trial court
erred in failing to consider that the contract to sell
between them and Babasanta had been novated when
the latter abandoned the verbal contract of sale and
declared that the original loan transaction just be
carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court
should have declared the verbal contract to sell
between Pacita Lu and Pablo Babasanta null and

SALES 2
void ab initio for lack of knowledge and consent of
Miguel Lu. They further averred that the trial court
erred in not dismissing the complaint filed by
Babasanta; in awarding damages in his favor and in
refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered
its Decision[11] which set aside the judgment of the
trial court. It declared that the sale between Babasanta
and the Spouses Lu was valid and subsisting and
ordered the spouses to execute the necessary deed of
conveyance in favor of Babasanta, and the latter to
pay the balance of the purchase price in the amount of
two hundred sixty thousand pesos (P260,000.00). The
appellate court ruled that the Absolute Deed of Sale
with Mortgage in favor of SLDC was null and void on
the ground that SLDC was a purchaser in bad faith.
The Spouses Lu were further ordered to return all
payments made by SLDC with legal interest and to
pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for
reconsideration with the appellate court.[12] However,
in a Manifestation dated 20 December 1995,[13] the
Spouses Lu informed the appellate court that they are
no longer contesting the decision dated 4 October
1995.
In its Resolution dated 11 March 1996,[14] the
appellate court considered as withdrawn the motion
for reconsideration filed by the Spouses Lu in view of
their manifestation of 20 December 1995. The
appellate court denied SLDCs motion for
reconsideration on the ground that no new or
substantial arguments were raised therein which
would warrant modification or reversal of the courts
decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly
committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING
THAT SAN LORENZO WAS NOT A BUYER IN
GOOD FAITH BECAUSE WHEN THE SELLER
PACITA ZAVALLA LU OBTAINED FROM IT THE
CASH ADVANCE OF P200,000.00, SAN
LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.

THE COURT OF APPEALS ERRED IN FAILING

TO APPRECIATE THE ESTABLISHED FACT
THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN
POSSESSION OF THE DISPUTED PROPERTY
WHEN SAN LORENZO BOUGHT AND TOOK
POSSESSION OF THE PROPERTY AND NO
ADVERSE CLAIM, LIEN, ENCUMBRANCE OR
LIS PENDENS WAS ANNOTATED ON THE
TITLES.

SLDC argued that it had every reason to rely on the

correctness of the certificate of title and it was not
obliged to go beyond the certificate to determine the
condition of the property. Invoking the presumption
of good faith, it added that the burden rests on
Babasanta to prove that it was aware of the prior sale
to him but the latter failed to do so. SLDC pointed out
that the notice of lis pendens was annotated only on 2
June 1989 long after the sale of the property to it was
consummated on 3 May 1989.

THE COURT OF APPEALS ERRED IN FAILING

TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED
NO EVIDENCE SHOWING THAT SAN LORENZO
WAS AWARE OF HIS RIGHTS OR INTERESTS IN
THE DISPUTED PROPERTY.

Meanwhile, in an Urgent Ex-Parte

Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints
they have no more interest to pursue their rights in the
instant case and submit themselves to the decision of
the Court of Appeals.[16]

THE COURT OF APPEALS ERRED IN HOLDING

THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT
OF THE TRIAL COURT, IT REVERSED AND SET
ASIDE THE DECISION OF THE TRIAL COURT
UPHOLDING THE TITLE OF SAN LORENZO AS
A BUYER AND FIRST POSSESSOR IN GOOD
FAITH. [15]

On the other hand, respondent Babasanta argued that

SLDC could not have acquired ownership of the
property because it failed to comply with the
requirement of registration of the sale in good faith.
He emphasized that at the time SLDC registered the
sale in its favor on 30 June 1990, there was already a
notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence,
petitioners registration of the sale did not confer upon
it any right. Babasanta further asserted that petitioners
bad faith in the acquisition of the property is evident
from the fact that it failed to make necessary inquiry
regarding the purpose of the issuance of the two
hundred thousand pesos (P200,000.00) managers
check in his favor.

SLDC contended that the appellate court erred in

concluding that it had prior notice of Babasantas
claim over the property merely on the basis of its
having advanced the amount of two hundred thousand
pesos (P200,000.00) to Pacita Lu upon the latters
representation that she needed the money to pay her
obligation to Babasanta. It argued that it had no
reason to suspect that Pacita was not telling the truth
that the money would be used to pay her indebtedness
to Babasanta. At any rate, SLDC averred that the
amount of two hundred thousand pesos (P200,000.00)
which it advanced to Pacita Lu would be deducted
from the balance of the purchase price still due from it
and should not be construed as notice of the prior sale
of the land to Babasanta. It added that at no instance
did Pacita Lu inform it that the lands had been
previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of
the sale in its favor it immediately took possession of
the property and asserted its rights as new owner as
opposed to Babasanta who has never exercised acts of
ownership. Since the titles bore no adverse claim,
encumbrance, or lien at the time it was sold to it,

The core issue presented for resolution in the instant

petition is who between SLDC and Babasanta has a
better right over the two parcels of land subject of the
instant case in view of the successive transactions
executed by the Spouses Lu.
To prove the perfection of the contract of sale in his
favor, Babasanta presented a document signed by
Pacita Lu acknowledging receipt of the sum of fifty
thousand pesos (P50,000.00) as partial payment for
3.6 hectares of farm lot situated at Barangay Pulong,
Sta. Cruz, Sta. Rosa, Laguna.[17] While the receipt
signed by Pacita did not mention the price for which
the property was being sold, this deficiency was
supplied by Pacita Lus letter dated 29 May
1989[18] wherein she admitted that she agreed to sell

the 3.6 hectares of land to Babasanta for fifteen pesos

(P15.00) per square meter.
An analysis of the facts obtaining in this case, as well
as the evidence presented by the parties, irresistibly
leads to the conclusion that the agreement between
Babasanta and the Spouses Lu is a contract to sell and
not a contract of sale.
Contracts, in general, are perfected by mere consent,
[19]
which is manifested by the meeting of the offer and
the acceptance upon the thing which are to constitute
the contract. The offer must be certain and the
acceptance absolute.[20] Moreover, contracts shall be
obligatory in whatever form they may have been
entered into, provided all the essential requisites for
their validity are present.[21]
The receipt signed by Pacita Lu merely states that she
accepted the sum of fifty thousand pesos (P50,000.00)
from Babasanta as partial payment of 3.6 hectares of
farm lot situated in Sta. Rosa, Laguna. While there is
no stipulation that the seller reserves the ownership of
the property until full payment of the price which is a
distinguishing feature of a contract to sell, the
subsequent acts of the parties convince us that the
Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase
price.
Babasantas letter dated 22 May 1989 was quite
telling. He stated therein that despite his repeated
requests for the execution of the final deed of sale in
his favor so that he could effect full payment of the
price, Pacita Lu allegedly refused to do so. In effect,
Babasanta himself recognized that ownership of the
property would not be transferred to him until such
time as he shall have effected full payment of the
price. Moreover, had the sellers intended to transfer
title, they could have easily executed the document of
sale in its required form simultaneously with their
acceptance of the partial payment, but they did not.
Doubtlessly, the receipt signed by Pacita Lu should
legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a
contract of sale is quite germane. In a contract of sale,
title passes to the vendee upon the delivery of the
thing sold; whereas in a contract to sell, by agreement
the ownership is reserved in the vendor and is not to
pass until the full payment of the price.[22] In a

SALES 3
contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is
resolved or rescinded; whereas in a contract to sell,
title is retained by the vendor until the full payment of
the price, such payment being a positive suspensive
condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to
convey title from becoming effective.[23]

consequence of certain contracts, by tradition.

Contracts only constitute titles or rights to the transfer
or acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same.
[29]
Therefore, sale by itself does not transfer or affect
ownership; the most that sale does is to create the
obligation to transfer ownership. It is tradition or
delivery, as a consequence of sale, that actually
transfers ownership.

parties was a sale, ownership could not have passed to

Babasanta in the absence of delivery, since in a
contract of sale ownership is transferred to the vendee
only upon the delivery of the thing sold.[37]
However, it must be stressed that the juridical
relationship between the parties in a double sale is
primarily governed by Article 1544 which lays down
the rules of preference between the two purchasers of
the same property. It provides:

Did the registration of the sale after the annotation of

the notice of lis pendens obliterate the effects of
delivery and possession in good faith which
admittedly had occurred prior to SLDCs knowledge
of the transaction in favor of Babasanta?
We do not hold so.

It must be stressed that as early as 11 February 1989,

the Spouses Lu executed the Option to Buy in favor of
SLDC upon receiving P316,160.00 as option money
Explicitly, the law provides that the ownership of the
from SLDC. After SLDC had paid more than one half
thing sold is acquired by the vendee from the moment Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred
of the agreed purchase price of P1,264,640.00, the
it is delivered to him in any of the ways specified in
to the person who may have first taken possession
Spouses Lu subsequently executed on 3 May 1989
Article 1497 to 1501.[30] The word delivered should
thereof in good faith, if it should be movable property. a Deed of Absolute Salein favor or SLDC. At the time
not be taken restrictively to mean transfer of actual
both deeds were executed, SLDC had no knowledge
physical possession of the property. The law
recognizes two principal modes of delivery, to wit: (1) Should it be immovable property, the ownership shall of the prior transaction of the Spouses Lu with
Babasanta. Simply stated, from the time of execution
actual delivery; and (2) legal or constructive delivery. belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
of the first deed up to the moment of transfer and
Actual delivery consists in placing the thing sold in
delivery of possession of the lands to SLDC, it had
Should there be no inscription, the ownership shall
the control and possession of the vendee.[31] Legal or
acted in good faith and the subsequent annotation
pertain to the person who in good faith was first in the of lis pendenshas no effect at all on the consummated
constructive delivery, on the other hand, may be had
through any of the following ways: the execution of a possession; and, in the absence thereof, to the person
sale between SLDC and the Spouses Lu.
who presents the oldest title, provided there is good
public instrument evidencing the sale;[32] symbolical
faith.
A purchaser in good faith is one who buys property of
tradition such as the delivery of the keys of the place
another without notice that some other person has a
where the movable sold is being kept;[33] traditio
The principle of primus tempore, potior jure (first in
right to, or interest in, such property and pays a full
On the assumption that the transaction between the
longa manu or by mere consent or agreement if the
time, stronger in right) gains greater significance in
and fair price for the same at the time of such
parties is a contract of sale and not a contract to sell,
movable sold cannot yet be transferred to the
case of double sale of immovable property. When the purchase, or before he has notice of the claim or
Babasantas claim of ownership should nevertheless
possession of the buyer at the time of the sale;
[34]
thing sold twice is an immovable, the one who
interest of some other person in the property.
fail.
traditio brevi manu if the buyer already had
[40]
acquires it and first records it in the Registry of
Following the foregoing definition, we rule that
possession of the object even before the sale;
[35]
Property, both made in good faith, shall be deemed
Sale, being a consensual contract, is perfected by
SLDC qualifies as a buyer in good faith since there is
and traditio constitutum possessorium, where the
the owner.[38] Verily, the act of registration must be
mere consent[25] and from that moment, the parties
no evidence extant in the records that it had
seller remains in possession of the property in a
[26]
[36]
coupled with good faith that is, the registrant must
may reciprocally demand performance. The
knowledge of the prior transaction in favor of
different capacity.
have no knowledge of the defect or lack of title of his Babasanta. At the time of the sale of the property to
essential elements of a contract of sale, to wit: (1)
vendor or must not have been aware of facts which
consent or meeting of the minds, that is, to transfer
Following the above disquisition, respondent
SLDC, the vendors were still the registered owners of
should have put him upon such inquiry and
ownership in exchange for the price; (2) object certain Babasanta did not acquire ownership by the mere
the property and were in fact in possession of the
investigation as might be necessary to acquaint him
which is the subject matter of the contract; (3) cause
execution of the receipt by Pacita Lu acknowledging
lands. Time and again, this Court has ruled that a
with the defects in the title of his vendor.[39]
of the obligation which is established.[27]
receipt of partial payment for the property. For one,
person dealing with the owner of registered land is not
the agreement between Babasanta and the Spouses
bound to go beyond the certificate of title as he is
Admittedly, SLDC registered the sale with the
The perfection of a contract of sale should not,
Lu, though valid, was not embodied in a public
charged with notice of burdens on the property which
Registry of Deeds after it had acquired knowledge of
however, be confused with its consummation. In
instrument. Hence, no constructive delivery of the
are noted on the face of the register or on the
Babasantas claim. Babasanta, however, strongly
relation to the acquisition and transfer of ownership, it lands could have been effected. For another,
certificate of title.[41] In assailing knowledge of the
should be noted that sale is not a mode, but merely a
Babasanta had not taken possession of the property at argues that the registration of the sale by SLDC was
transaction between him and the Spouses Lu,
title. A mode is the legal means by which dominion or any time after the perfection of the sale in his favor or not sufficient to confer upon the latter any title to the
Babasanta apparently relies on the principle of
property since the registration was attended by bad
ownership is created, transferred or destroyed, but
exercised acts of dominion over it despite his
constructive notice incorporated in Section 52 of the
title is only the legal basis by which to affect
assertions that he was the rightful owner of the lands. faith. Specifically, he points out that at the time SLDC Property Registration Decree (P.D. No. 1529) which
registered the sale on 30 June 1990, there was already reads, thus:
dominion or ownership.[28] Under Article 712 of the
Simply stated, there was no delivery to Babasanta,
a notice of lis pendens on the file with the Register of
Civil Code, ownership and other real rights over
whether actual or constructive, which is essential to
Deeds, the same having been filed one year before on Sec. 52. Constructive notice upon registration. Every
property are acquired and transmitted by law, by
transfer ownership of the property. Thus, even on the
2 June 1989.
donation, by testate and intestate succession, and in
conveyance, mortgage, lease, lien, attachment, order,
assumption that the perfected contract between the
The perfected contract to sell imposed upon
Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay the
price, Babasanta should have made the proper tender
of payment and consignation of the price in court as
required by law. Mere sending of a letter by the
vendee expressing the intention to pay without the
accompanying payment is not considered a valid
tender of payment.[24] Consignation of the amounts
due in court is essential in order to extinguish
Babasantas obligation to pay the balance of the
purchase price. Glaringly absent from the records is
any indication that Babasanta even attempted to make
the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title
never acquired obligatory force.

SALES 4
judgment, instrument or entry affecting registered
land shall, if registered, filed, or entered in the office
of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive
notice to all persons from the time of such registering,
filing, or entering.

notice of lis pendens and assuming further for the

same nonce that this is a case of double sale, still
Babasantas claim could not prevail over that of
SLDCs. In Abarquez v. Court of Appeals,[46] this Court
had the occasion to rule that if a vendee in a double
sale registers the sale after he has acquired knowledge
of a previous sale, the registration constitutes a
registration in bad faith and does not confer upon him
any right. If the registration is done in bad faith, it is
as if there is no registration at all, and the buyer who
has taken possession first of the property in good faith
shall be preferred.

However, the constructive notice operates as suchby

the express wording of Section 52from the time of the
registration of the notice of lis pendens which in this
case was effected only on 2 June 1989, at which time
the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses
Lu to transfer ownership over the property to SLDC is In Abarquez, the first sale to the spouses Israel was
concerned.
notarized and registered only after the second vendee,
Abarquez, registered their deed of sale with the
More fundamentally, given the superiority of the right Registry of Deeds, but the Israels were first in
of SLDC to the claim of Babasanta the annotation of
possession. This Court awarded the property to the
the notice of lis pendens cannot help Babasantas
Israels because registration of the property by
position a bit and it is irrelevant to the good or bad
Abarquez lacked the element of good faith. While the
faith characterization of SLDC as a purchaser. A
facts in the instant case substantially differ from that
notice of lis pendens, as the Court held in Natao v.
in Abarquez, we would not hesitate to rule in favor of
Esteban,[42] serves as a warning to a prospective
SLDC on the basis of its prior possession of the
purchaser or incumbrancer that the particular property property in good faith. Be it noted that delivery of the
is in litigation; and that he should keep his hands off
property to SLDC was immediately effected after the
the same, unless he intends to gamble on the results of execution of the deed in its favor, at which time
the litigation. Precisely, in this case SLDC has
SLDC had no knowledge at all of the prior transaction
intervened in the pending litigation to protect its
by the Spouses Lu in favor of Babasanta.
rights. Obviously, SLDCs faith in the merit of its
cause has been vindicated with the Courts present
The law speaks not only of one criterion. The first
decision which is the ultimate denouement on the
criterion is priority of entry in the registry of property;
controversy.
there being no priority of such entry, the second is
priority of possession; and, in the absence of the two
The Court of Appeals has made capital[43] of SLDCs
priorities, the third priority is of the date of title, with
averment in its Complaint-in-Intervention[44] that at
good faith as the common critical element. Since
the instance of Pacita Lu it issued a check
SLDC acquired possession of the property in good
for P200,000.00 payable to Babasanta and the
faith in contrast to Babasanta, who neither registered
confirmatory testimony of Pacita Lu herself on cross- nor possessed the property at any time, SLDCs right
examination.[45] However, there is nothing in the said
is definitely superior to that of Babasantas.
pleading and the testimony which explicitly relates
the amount to the transaction between the Spouses Lu At any rate, the above discussion on the rules on
and Babasanta for what they attest to is that the
double sale would be purely academic for as earlier
amount was supposed to pay off the advances made
stated in this decision, the contract between Babasanta
by Babasanta to Pacita Lu. In any event, the incident
and the Spouses Lu is not a contract of sale but
took place after the Spouses Lu had already executed merely a contract to sell. In Dichoso v. Roxas,[47] we
the Deed of Absolute Sale with Mortgage in favor of
had the occasion to rule that Article 1544 does not
SLDC and therefore, as previously explained, it has
apply to a case where there was a sale to one party of
no effect on the legal position of SLDC.
the land itself while the other contract was a mere
promise to sell the land or at most an actual
Assuming ex gratia argumenti that SLDCs
assignment of the right to repurchase the same land.
registration of the sale had been tainted by the prior

Accordingly, there was no double sale of the same

land in that case.
WHEREFORE, the instant petition is hereby
GRANTED. The decision of the Court of Appeals
appealed from is REVERSED and SET ASIDE and
the decision of the Regional Trial Court, Branch 31,
of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.
G.R. No. 166714

February 9, 2007

AMELIA S. ROBERTS, Petitioner,

vs.
MARTIN B. PAPIO, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this petition for review on certiorari is the
Decision1 of the Court of Appeals (CA), in CA-G.R.
CV No. 69034 which reversed and set aside the
Decision2 of the Regional Trial Court (RTC), Branch
150, Makati City, in Civil Case No. 01-431. The RTC
ruling had affirmed with modification the Decision3 of
the Metropolitan Trial Court (MeTC), Branch 64,
Makati City in Civil Case No. 66847. The petition
likewise assails the Resolution of the CA denying the
motion for reconsideration of its decision.
The Antecedents
The spouses Martin and Lucina Papio were the
owners of a 274-square-meter residential lot located
in Makati (now Makati City) and covered by Transfer
Certificate of Title (TCT) No. S-44980.4 In order to
secure aP59,000.00 loan from the Amparo
Investments Corporation, they executed a real estate
mortgage on the property. Upon Papios failure to pay
the loan, the corporation filed a petition for the
extrajudicial foreclosure of the mortgage.
Since the couple needed money to redeem the
property and to prevent the foreclosure of the real
estate mortgage, they executed a Deed of Absolute
Sale over the property on April 13, 1982 in favor of
Martin Papios cousin, Amelia Roberts. Of
the P85,000.00 purchase price, P59,000.00 was paid
to the Amparo Investments Corporation, while

the P26,000.00 difference was retained by the

spouses.5 As soon as the spouses had settled their
obligation, the corporation returned the owners
duplicate of TCT No. S-44980, which was then
delivered to Amelia Roberts.
Thereafter, the parties (Amelia Roberts as lessor and
Martin Papio as lessee) executed a two-year contract
of lease dated April 15, 1982, effective May 1, 1982.
The contract was subject to renewal or extension for a
like period at the option of the lessor, the lessee
waiving thereby the benefits of an implied new lease.
The lessee was obliged to pay monthly rentals
of P800.00 to be deposited in the lessors account at
the Bank of America, Makati City branch.6
On July 6, 1982, TCT No. S-44980 was cancelled,
and TCT No. 114478 was issued in the name of
Amelia Roberts as owner.7
Martin Papio paid the rentals from May 1, 1982 to
May 1, 1984, and thereafter, for another year.8 He then
failed to pay rentals, but he and his family
nevertheless remained in possession of the property
for a period of almost thirteen (13) years.
In a letter dated June 3, 1998, Amelia Roberts,
through counsel, reminded Papio that he failed to pay
the monthly rental of P2,500.00 from January 1, 1986
to December 31, 1997, and P10,000.00 from January
1, 1998 to May 31, 1998; thus, his total liability
was P410,000.00. She demanded that Papio vacate the
property within 15 days from receipt of the letter in
case he failed to settle the amount.9 Because he
refused to pay, Papio received another letter from
Roberts on April 22, 1999, demanding, for the last
time, that he and his family vacate the
property.10 Again, Papio refused to leave the premises.
On June 28, 1999, Amelia Roberts, through her
attorney-in-fact, Matilde Aguilar, filed a
Complaint11 for unlawful detainer and damages
against Martin Papio before the MeTC, Branch 64,
Makati City. She alleged the following in her
complaint:
Sometime in 1982 she purchased from defendant a
274-sq-m residential house and lot situated at No.
1046 Teresa St., Brgy. Valenzuela, Makati
City.12 Upon Papios pleas to continue staying in the
property, they executed a two-year lease

SALES 5
contract13 which commenced on May 1, 1982. The
monthly rental was P800.00. Thereafter, TCT No.
11447814 was issued in her favor and she paid all the
realty taxes due on the property. When the term of the
lease expired, she still allowed Papio and his family to
continue leasing the property. However, he took
advantage of her absence and stopped payment
beginning January 1986, and refused to pay despite
repeated demands. In June 1998, she sent a demand
letter15 through counsel requiring Papio to pay rentals
from January 1986 up to May 1998 and to vacate the
leased property. The accumulated arrears in rental are
as follows: (a)P360,000.00 from January 1, 1986 to
December 31, 1997 at P2,500.00 per month; and
(b) P50,000.00, from January 1, 1998 to May 31,
1998 at P10,000.00 per month.16 She came to the
Philippines but all efforts at an amicable settlement
proved futile. Thus, in April 1999, she sent the final
demand letter to defendant directing him and his
family to pay and immediately vacate the leased
premises.17
Roberts appended to her complaint copies of the April
13, 1982 Deed of Absolute Sale, the April 15, 1982
Contract of Lease, and TCT No. 114478.
In his Answer with counterclaim, Papio alleged the
following:
He executed the April 13, 1982 deed of absolute sale
and the contract of lease. Roberts, his cousin who is a
resident of California, United States of America
(USA), arrived in the Philippines and offered to
redeem the property. Believing that she had made the
offer for the purpose of retaining his ownership over
the property, he accepted. She then
remitted P59,000.00 to the mortgagor for his account,
after which the mortgagee cancelled the real estate
mortgage. However, he was alarmed when the
plaintiff had a deed of absolute sale over the property
prepared (for P83,000.00 as consideration) and asked
him to sign the same. She also demanded that the
defendant turn over the owners duplicate of TCT No.
S-44980. The defendant was in a quandary. He then
believed that if he signed the deed of absolute sale,
Roberts would acquire ownership over the property.
He asked her to allow him to redeem or reacquire the
property at any time for a reasonable amount.18 When
Roberts agreed, Papio signed the deed of absolute
sale.

Pursuant to the right to redeem/repurchase given him

by Roberts, Papio purchased the property
for P250,000.00. In July 1985, since Roberts was by
then already in the USA, he remitted to her authorized
representative, Perlita Ventura, the amount
of P150,000.00 as partial payment for the
property.19 On June 16, 1986, she again
remittedP100,000.00, through Ventura. Both
payments were evidenced by receipts signed by
Ventura.20 Roberts then declared that she would
execute a deed of absolute sale and surrender the title
to the property. However, Ventura had apparently
misappropriated P39,000.00 out of the P250,000.00
that she had received; Roberts then demanded that she
pay the amount misappropriated before executing the
deed of absolute sale. Thus, the sole reason why
Roberts refused to abide by her promise was the
failure of her authorized representative to remit the
full amount of P250,000.00. Despite Papios
demands, Roberts refused to execute a deed of
absolute sale. Accordingly, defendant posited that
plaintiff had no cause of action to demand payment of
rental and eject him from the property.

lease period expired; and his continued possession

was only by mere tolerance. She further alleged that
the Deed of Sale states on its face that the conveyance
of the property was absolute and unconditional. She
also claimed that any right to repurchase the property
must appear in a public document pursuant to Article
1358, Paragraph 1, of the Civil Code of the
Phililppines.24 Since no such document exists,
defendants supposed real interest over the property
could not be enforced without violating the Statute of
Frauds.25 She stressed that her Torrens title to the
property was an "absolute and indefeasible evidence
of her ownership of the property which is binding and
conclusive upon the whole world."

Roberts admitted that she demanded P39,000.00 from

the defendant in her letter dated July 25, 1986.
However, she averred that the amount represented his
back rentals on the property.26 She declared that she
neither authorized Ventura to sell the property nor to
receive the purchase price therefor. She merely
authorized her to receive the rentals from defendant
and to deposit them in her account. She did not know
that Ventura had received P250,000.00 from Papio in
Papio appended to his Answer the following: (1) the
July 1985 and on June 16, 1986, and had signed
letter dated July 18, 1986 of Perlita Ventura to the
receipts therefor. It was only on February 11, 1998
plaintiff wherein the former admitted having used the that she became aware of the receipts when she
money of the plaintiff to defray the plane fares of
received defendant Papios letter to which were
Perlitas parents to the USA, and pleaded that she be
appended the said receipts. She and her husband
allowed to repay the amount within one year; (b) the
offered to sell the property to the defendant in 1984
letter of Eugene Roberts (plaintiffs husband) to
for US$15,000.00 on a "take it or leave it" basis when
Perlita Ventura dated July 25, 1986 where he accused they arrived in the Philippines in May
Ventura of stealing the money of plaintiff Amelia
1984.27However, defendant refused to accept the offer.
(thus preventing the latter from paying her loan on her The spouses then offered to sell the property anew on
house and effect the cancellation of the mortgage),
December 20, 1997, for P670,000.00 inclusive of
and demanded that she deposit the balance;21 and (c)
back rentals.28 However, defendant offered to settle
plaintiffs letter to defendant Papio dated July 25,
his account with the spouses.29 Again, the offer came
1986 requesting the latter to convince Ventura to remit on January 11, 1998, but it was rejected. The
the balance of P39,000.00 so that the plaintiff could
defendant insisted that he had already purchased the
transfer the title of the property to the defendant.22
property in July 1985 for P250,000.00.
Papio asserted that the letters of Roberts and her
husband are in themselves admissions or declarations
against interest, hence, admissible to prove that he
had reacquired the property although the title was still
in her possession.
In her Affidavit and Position Paper,23 Roberts averred
that she had paid the real estate taxes on the property
after she had purchased it; Papios initial right to
occupy the property was terminated when the original

Roberts insisted that Papios claim of the right to

repurchase the property, as well as his claim of
payment therefor, is belied by his own letter in which
he offered to settle plaintiffs claim for back rentals.
Even assuming that the purchase price of the property
had been paid through Ventura, Papio did not adduce
any proof to show that Ventura had been authorized to
sell the property or to accept any payment thereon.
Any payment to Ventura could have no binding effect
on her since she was not privy to the transaction; if at

all, such agreement would be binding only on Papio

and Ventura.
She further alleged that defendants own inaction
belies his claim of ownership over the property: first,
he failed to cause any notice or annotation to be made
on the Register of Deeds copy of TCT No. 114478 in
order to protect his supposed adverse claim; second,
he did not institute any action against Roberts to
compel the execution of the necessary deed of transfer
of title in his favor; and third, the defense of
ownership over the property was raised only after
Roberts demanded him to vacate the property.
Based solely on the parties pleadings, the MeTC
rendered its January 18, 2001 Decision30 in favor of
Roberts. The fallo of the decision reads:
WHEREFORE, premises considered, finding this case
for the plaintiff, the defendant is hereby ordered to:
1. Vacate the leased premises known as 1046 Teresa
St., Valenzuela, Makati City;
2. Pay plaintiff the reasonable rentals accrual for the
period January 1, 1996 to December 13, 1997 at the
rate equivalent to Php2,500.00 per month and
thereafter, Php10,000.00 from January 1998 until he
actually vacates the premises;
3. Pay the plaintiff attorneys fees as Php20,000.00;
and
4. Pay the costs
SO ORDERED.31
The MeTC held that Roberts merely tolerated the stay
of Papio in the property after the expiration of the
contract of lease on May 1, 1984; hence, she had a
cause of action against him since the only elements in
an unlawful detainer action are the fact of lease and
the expiration of its term. The defendant as tenant
cannot controvert the title of the plaintiff or assert any
right adverse thereto or set up any inconsistent right to
change the existing relation between them. The
plaintiff need not prove her ownership over the
property inasmuch as evidence of ownership can be
admitted only for the purpose of determining the
character and extent of possession, and the amount of
damages arising from the detention.

SALES 6
The court further ruled that Papio made no denials as
to the existence and authenticity of Roberts title to
the property. It declared that "the certificate of title is
indefeasible in favor of the person whose name
appears therein and incontrovertible upon the
expiration of the one-year period from the date of
issue," and that a Torrens title, "which enjoys a strong
presumption of regularity and validity, is generally a
conclusive evidence of ownership of the land referred
to therein."
As to Papios claim that the transfer of the property
was one with right of repurchase, the MeTC held it to
be bereft of merit since the Deed of Sale is termed as
"absolute and unconditional." The court ruled that the
right to repurchase is not a right granted to the seller
by the buyer in a subsequent instrument but rather, a
right reserved in the same contract of sale. Once the
deed of absolute sale is executed, the seller can no
longer reserve the right to repurchase; any right
thereafter granted in a separate document cannot be a
right of repurchase but some other right.

REPURCHASE TRANSACTION EXISTED

BETWEEN THE PARTIES ONLY THAT
PLAINTIFF-APPELLEE WITHHELD THE
EXECUTION OF THE ABSOLUTE DEED OF
SALE AND THE TRANSFER OF TITLE OF THE
SAME IN DEFENDANT-APPELLANTS NAME.
III.
THE LOWER COURT GRAVELY ERRED IN NOT
CONSIDERING THAT THE LETTERS OF
PLAINTIFF-[APPELLEE] AND OF HER
HUSBAND ADDRESSED TO DEFENDANTAPPELLANT AND HIS WIFE ARE IN
THEMSELVES ADMISSION AND/OR
DECLARATION OF THE FACT THAT
DEFENDANT-APPELLANT HAD DULY PAID
PLAINTIFF-APPELLEE OF THE PURCHASE
AMOUNT COVERING THE SUBJECT
PROPERTY.
IV.

As to the receipts of payment signed by Ventura, the

court gave credence to Robertss declaration in her
Affidavit that she authorized Ventura only to collect
rentals from Papio, and not to receive the repurchase
price. Papios letter of January 31, 1998, which called
her attention to the fact that she had been sending
people without written authority to collect money
since 1985, bolstered the courts finding that the
payment, if at all intended for the supposed
repurchase, never redounded to the benefit of the
spouses Roberts.

THE LOWER COURT GRAVELY ERRED IN NOT

DISMISSING THE CASE FOR EJECTMENT
OUTRIGHT CONSIDERING THAT PLAINTIFFAPPELLEE WHO IS [AN] AMERICAN CITIZEN
AND RESIDENT THEREIN HAD NOT APPEARED
IN COURT ONCE, NEITHER WAS HER ALLEGED
ATTORNEY-IN-FACT, MATILDE AGUILAR NOR
[DID] THE LATTER EVER [FURNISH] THE
LOWER COURT A SPECIAL POWER OF
ATTORNEY AUTHORIZING HER TO APPEAR IN
COURT IN BEHALF OF HER PRINCIPAL.32

Papio appealed the decision to the RTC, alleging the

following:

II.

Papio maintained that Roberts had no cause of action

for eviction because she had already ceded her right
thereto when she allowed him to redeem and
reacquire the property upon payment of P250,000.00
to Ventura, her duly authorized representative. He also
contended that Robertss claim that the authority of
Ventura is limited only to the collection of the rentals
and not of the purchase price was a mere afterthought,
since her appended Affidavit was executed sometime
in October 1999 when the proceedings in the MeTC
had already started.

THE LOWER COURT GRAVELY ERRED IN NOT

CONSIDERING THE DOCUMENTARY
EVIDENCE ADDUCED BY DEFENDANTAPPELLANT WHICH ESTABLISHED THAT A

On March 26, 2001, Roberts filed a Motion for

Issuance of Writ of Execution.33 The court granted the
motion in an Order34 dated June 19, 2001.
Subsequently, a Writ of Execution35 pending appeal

I.
THE LOWER COURT GRAVELY ERRED IN NOT
DISMISSING THE CASE FOR EJECTMENT
OUTRIGHT ON THE GROUND OF LACK OF
CAUSE OF ACTION.

was issued on September 28, 2001. On October 29,

2001, Sheriff Melvin M. Alidon enforced the writ and
placed Roberts in possession of the property.
Meanwhile, Papio filed a complaint with the RTC of
Makati City, for specific performance with damages
against Roberts. Papio, as plaintiff, claimed that he
entered into a contract of sale with pacto de retro with
Roberts, and prayed that the latter be ordered to
execute a Deed of Sale over `the property in his favor
and transfer the title over the property to and in his
name. The case was docketed as Civil Case No. 01851.
On October 24, 2001, the RTC rendered judgment
affirming the appealed decision of the MeTC. The
fallo of the decision reads:36
Being in accordance with law and the circumstances
attendant to the instant case, the court finds merit in
plaintiff-appellees claim. Wherefore, the challenged
decision dated January 18, 2001 is hereby affirmed in
toto.
SO ORDERED.37
Both parties filed their respective motions for
reconsideration.38 In an Order39 dated February 26,
2002, the court denied the motion of Papio but
modified its decision declaring that the computation
of the accrued rentals should commence from January
1986, not January 1996. The decretal portion of the
decision reads:
Wherefore, the challenged decision dated January 18,
2001 is hereby affirmed with modification that
defendant pay plaintiff the reasonable rentals accrued
for the period January 1, 1986 to December [31,
1997] per month and thereafter and P10,000.00 [per
month] from January 1998 to October 28, 2001 when
defendant-appellant actually vacated the subject
leased premises.
SO ORDERED.40
On February 28, 2002, Papio filed a petition for
review41 in the CA, alleging that the RTC erred in not
finding that he had reacquired the property from
Roberts for P250,000.00, but the latter refused to
execute a deed of absolute sale and transfer the title in
his favor. He insisted that the MeTC and the RTC

erred in giving credence to petitioners claim that she

did not authorize Ventura to receive his payments for
the purchase price of the property, citing Roberts
letter dated July 25, 1986 and the letter of Eugene
Roberts to Ventura of even date. He also averred that
the MeTC and the RTC erred in not considering his
documentary evidence in deciding the case.
On August 31, 2004, the CA rendered judgment
granting the petition. The appellate court set aside the
decision of the RTC and ordered the RTC to dismiss
the complaint. The decretal portion of the
Decision42 reads:
WHEREFORE, the judgment appealed from is hereby
REVERSED and SET ASIDE and a new one entered:
(1) rendering an initial determination that the "Deed
of Absolute Sale" dated April 13, 1982 is in fact an
equitable mortgage under Article 1603 of the New
Civil Code; and (2) resolving therefore that petitioner
Martin B. Papio is entitled to possession of the
property subject of this action; (3) But such
determination of ownership and equitable mortgage
are not clothed with finality and will not constitute a
binding and conclusive adjudication on the merits
with respect to the issue of ownership and such
judgment shall not bar an action between the same
parties respecting title to the land, nor shall it be held
conclusive of the facts therein found in the case
between the same parties upon a different cause of
action not involving possession. All other
counterclaims for damages are hereby dismissed. Cost
against the respondent.
SO ORDERED.43
According to the appellate court, although the MeTC
and RTC were correct in holding that the MeTC had
jurisdiction over the complaint for unlawful detainer,
they erred in ignoring Papios defense of equitable
mortgage, and in not finding that the transaction
covered by the deed of absolute sale by and between
the parties was one of equitable mortgage under
Article 1602 of the New Civil Code. The appellate
court ruled that Papio retained the ownership of the
property and its peaceful possession; hence, the
MeTC should have dismissed the complaint without
prejudice to the outcome of Civil Case No. 01-851
relative to his claim of ownership over the property.

SALES 7
Roberts filed a motion for reconsideration of the
decision on the following grounds:

petitioner and respondent had entered into an

equitable mortgage under the deed of absolute sale.

property; and (3) whether the petitioner is entitled to

the material or de facto possession of the property.

The ruling of the CA, that the contract between

petitioner and respondent was an equitable mortgage,
is incorrect. The fact of the matter is that the
I. Petitioner did not allege in his Answer the defense
Petitioner further avers that respondent was ably
The Ruling of the Court
respondent intransigently alleged in his answer, and
of equitable mortgage; hence, the lower courts
represented by counsel and was aware of the
even in his affidavit and position paper, that petitioner
On the first issue, the CA ruling (which upheld the
[should] not have discussed the same;
difference between a pacto de retro sale and an
had granted him the right to redeem or repurchase the
jurisdiction of the MeTC to resolve the issue of who
equitable mortgage; thus, he could not have been
property at any time and for a reasonable amount; and
II. Even assuming that Petitioner alleged the defense
mistaken in declaring that he repurchased the property between petitioner or respondent is the lawful owner
that, he had, in fact, repurchased the property in July
of equitable mortgage, the MeTC could not have ruled from her.
of the property, and is thus entitled to the material or
1985 for P250,000.00 which he remitted to petitioner
upon the said defense,
de facto possession thereof) is correct. Section 18,
through an authorized representative who signed
As to whether a sale is in fact an equitable mortgage,
Rule 70 of the Rules of Court provides that when the
receipts therefor; he had reacquired ownership and
III. The M[e]TC and the RTC were not remiss in the
petitioner claims that the issue should be properly
defendant raises the defense of ownership in his
juridical possession of the property after his
exercise of their jurisdiction.44
addressed and resolved by the RTC in an action to
pleadings and the question of possession cannot be
repurchase thereof in 1985; and consequently,
enforce ownership, not in an ejectment case before the resolved without deciding the issue of ownership, the petitioner was obliged to execute a deed of absolute
The CA denied the motion.
MeTC where the main issue involved is possession de issue of ownership shall be resolved only to determine sale over the property in his favor.
facto. According to her, the obvious import of the CA the issue of possession. The judgment rendered in an
In this petition for review, Amelia Salvador-Roberts,
Decision is that, in resolving an ejectment case, the
action for unlawful detainer shall be conclusive with
Notably, respondent alleged that, as stated in his letter
as petitioner, avers that:
lower court must pass upon the issue of ownership (in respect to the possession only and shall in no wise
to petitioner, he was given the right to reacquire the
this case, by applying the presumptions under Art.
bind the title or affect the ownership of the land or
property in 1982 within two years upon the payment
I. THE HONORABLE COURT OF APPEALS
1602) which, in effect, would use the same yardstick
building. Such judgment would not bar an action
of P53,000.00, plus petitioners airfare for her trip to
GRIEVEOUSLY (SIC) ERRED IN DECLARING
as though it is the main action. The procedure will not between the same parties respecting title to the land or the Philippines from the USA and back; petitioner
THAT THE M[e]TC AN(D) THE RTC WERE
only promote multiplicity of suits but also place the
building.46
promised to sign the deed
REMISS IN THE EXERCISE OF THAT
new owner in the absurd position of having to first
of absolute sale. He even filed a complaint against the
JURISDICTION ACQUIRED BECAUSE IT DID
The summary nature of the action is not changed by
seek the declaration of ownership before filing an
petitioner in the RTC, docketed as Civil Case No. 01NOT CONSIDER ALL PETITIONERS DEFENSE
the claim of ownership of the property of the
ejectment suit.
851, for specific performance with damages to
OF EQUITABLE MORTGAGE.
defendant.47The MeTC is not divested of its
compel petitioner to execute the said deed of absolute
Respondent counters that the defense of equitable
jurisdiction over the unlawful detainer action simply
sale over the property presumably on the strength of
II. THE HONORABLE COURT OF APPEALS
mortgage need not be particularly stated to apprise
because the defendant asserts ownership over the
Articles 1357 and 1358 of the New Civil Code.
GRIEVEOUSLY (SIC) ERRED IN REQUIRING
petitioner of the nature and character of the
property.
Certainly then, his claim that petitioner had given him
THE M[e]TC AND RTC TO RULE ON A DEFENSE repurchase agreement. He contends that he had amply
the right to repurchase the property is antithetical to
WHICH WAS NEVER AVAILED OF BY
The sole issue for resolution in an action for unlawful an equitable mortgage.
discussed in his pleadings before the trial and
45
RESPONDENT.
detainer is material or de facto possession of the
appellate courts all the surrounding circumstances of
the case, such as the relative situation of the parties at property. Even if the defendant claims juridical
An equitable mortgage is one that, although lacking in
Petitioner argues that respondent is barred from
possession or ownership over the property based on a some formality, form or words, or other requisites
the time; their attitude, acts, conduct, and
raising the issue of equitable mortgage because his
claim that his transaction with the plaintiff relative to demanded by a statute, nevertheless reveals the
declarations; and the negotiations between them that
defense in the MeTC and RTC was that he had
the property is merely an equitable mortgage, or that
led to the repurchase agreement. Thus, he argues that
intention of the parties to change a real property as
repurchased the property from the petitioner; by such the CA correctly ruled that the contract was one of
he had repurchased the property from the plaintiff, the security for a debt and contain nothing impossible or
representation, he had impliedly admitted the
equitable mortgage. He insists that petitioner allowed MeTC may still delve into and take cognizance of the contrary to law.49 A contract between the parties is an
existence and validity of the deed of absolute sale
case and make an initial or provisional determination equitable mortgage if the following requisites are
him to redeem and reacquire the property, and
whereby ownership of the property was transferred to accepted his full payment of the property through
of who between the plaintiff and the defendant is the
present: (a) the parties entered into a contract
petitioner but reverted to him upon the exercise of
owner and, in the process, resolve the issue of who is denominated as a contract of sale; and (b) the
Ventura, the authorized representative, as shown by
said right. The respondent even filed a complaint for
entitled to the possession. The MeTC, in unlawful
the signed receipts.
intention was to secure an existing debt by way of
specific performance with damages, which is now
detainer case, decides the question of ownership only mortgage.50 The decisive factor is the intention of the
pending in the RTC of Makati City, docketed as Civil The threshold issues are the following: (1) whether
if it is intertwined with and necessary to resolve the
parties.
Case No. 01-851 entitled "Martin B. Papio vs. Amelia the MeTC had jurisdiction in an action for unlawful
issue of possession.48 The resolution of the MeTC on
Salvador-Roberts." In that case, respondent claimed
detainer to resolve the issue of who between
the ownership of the property is merely provisional or In an equitable mortgage, the mortgagor retains
that his transaction with the petitioner was a sale
petitioner and respondent is the owner of the property interlocutory. Any question involving the issue of
ownership over the property but subject to foreclosure
with pacto de retro. Petitioner posits that Article 1602 and entitled to the de facto possession thereof; (2)
ownership should be raised and resolved in a separate and sale at public auction upon failure of the
of the Civil Code applies only when the defendant
whether the transaction entered into between the
action brought specifically to settle the question with
mortgagor to pay his obligation.51 In contrast, in a
specifically alleges this defense. Consequently, the
parties under the Deed of Absolute Sale and the
finality, in this case, Civil Case No. 01-851 which
pacto de retro sale, ownership of the property sold is
appellate court was proscribed from finding that
Contract of Lease is an equitable mortgage over the
respondent filed before the RTC.
immediately transferred to the vendee a retro subject

SALES 8
only to the right of the vendor a retro to repurchase
the property upon compliance with legal requirements
for the repurchase. The failure of the vendor a retro to
exercise the right to repurchase within the agreed time
vests upon the vendee a retro, by operation of law,
absolute title over the property.52

states that if the terms of a contract are clear and leave

no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall
control.56 When the language of the contract is
explicit, leaving no doubt as to the intention of the
drafters, the courts may not read into it any other
intention that would contradict its plain import.57 The
One repurchases only what one has previously sold.
clear terms of the contract should never be the subject
The right to repurchase presupposes a valid contract
matter of interpretation. Neither abstract justice nor
of sale between the same parties.53 By insisting that he the rule of liberal interpretation justifies the creation
had repurchased the property, respondent thereby
of a contract for the parties which they did not make
admitted that the deed of absolute sale executed by
themselves, or the imposition upon one party to a
him and petitioner on April 13, 1982 was, in fact and
contract or obligation to assume simply or merely to
in law, a deed of absolute sale and not an equitable
avoid seeming hardships.58Their true meaning must be
mortgage; hence, he had acquired ownership over the enforced, as it is to be presumed that the contracting
property based on said deed. Respondent is, thus,
parties know their scope and effects.59 As the Court
estopped from asserting that the contract under the
held in Villarica, et al. v. Court of Appeals:60
deed of absolute sale is an equitable mortgage unless
there is allegation and evidence of palpable mistake
The right of repurchase is not a right granted the
on the part of respondent;54 or a fraud on the part of
vendor by the vendee in a subsequent instrument, but
petitioner. Respondent made no such allegation in his is a right reserved by the vendor in the same
pleadings and affidavit. On the contrary, he
instrument of sale as one of the stipulations of the
maintained that petitioner had sold the property to
contract. Once the instrument of absolute sale is
him in July 1985 and acknowledged receipt of the
executed, the vendor can no longer reserve the right to
purchase price thereof except the amount
repurchase, and any right thereafter granted the
of P39,000.00 retained by Perlita Ventura. Respondent vendor by the vendee in a separate instrument cannot
is thus bound by his admission of petitioners
be a right of repurchase but some other right like the
ownership of the property and is barred from claiming option to buy in the instant case.61
otherwise.55
In Ramos v. Icasiano,62 we also held that an agreement
Respondents admission that petitioner acquired
to repurchase becomes a promise to sell when made
ownership over the property under the April 13, 1982 after the sale because when the sale is made without
deed of absolute sale is buttressed by his admission in such agreement the purchaser acquires the thing sold
the Contract of Lease dated April 15, 1982 that
absolutely; and, if he afterwards grants the vendor the
petitioner was the owner of the property, and that he
right to repurchase, it is a new contract entered into by
had paid the rentals for the duration of the contract of the purchaser as absolute owner. An option to buy or a
lease and even until 1985 upon its extension.
promise to sell is different and distinct from the right
Respondent was obliged to prove his defense that
of repurchase that must be reserved by means of
petitioner had given him the right to repurchase, and
stipulations to that effect in the contract of sale.63
that petitioner obliged herself to resell the property
There is no evidence on record that, on or before July
for P250,000.00 when they executed the April 13,
1985, petitioner agreed to sell her property to the
1982 deed of absolute sale.
respondent for P250,000.00. Neither is there any
We have carefully reviewed the case and find that
documentary evidence showing that Ventura was
respondent failed to adduce competent and credible
authorized to offer for sale or sell the property for and
evidence to prove his claim.
in behalf of petitioner for P250,000.00, or to receive
the said amount from respondent as purchase price of
As gleaned from the April 13, 1982 deed, the right of the property. The rule is that when a sale of a piece of
respondent to repurchase the property is not
land or any interest therein is through an agent, the
incorporated therein. The contract is one of absolute
authority of the latter shall be in writing; otherwise,
sale and not one with right to repurchase. The law
the sale shall be void64 and cannot produce any legal

effect as to transfer the property from its lawful

owner.65 Being inexistent and void from the very
beginning, said contract cannot be ratified.66 Any
contract entered into by Ventura for and in behalf of
petitioner relative to the sale of the property is void
and cannot be ratified by the latter. A void contract
produces no effect either against or in favor of
anyone.67
Respondent also failed to prove that the negotiations
between him and petitioner has culminated in his offer
to buy the property for P250,000.00, and that they
later on agreed to the sale of the property for the same
amount. He likewise failed to prove that he purchased
and reacquired the property in July 1985. The
evidence on record shows that petitioner had offered
to sell the property for US$15,000 on a "take it or
leave it" basis in May 1984 upon the expiration of the
Contract of Lease68 an offer that was rejected by
respondentwhich is why on December 30, 1997,
petitioner and her husband offered again to sell the
property to respondent for P670,000.00 inclusive of
back rentals and the purchase price of the property
under the April 13, 1982 Deed of absolute Sale.69The
offer was again rejected by respondent. The final offer
appears to have been made on January 11, 199870but
again, like the previous negotiations, no contract was
perfected between the parties.
A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other,
to give something or to render some service.71 Under
Article 1318 of the New Civil Code, there is no
contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the
contract;

according to their nature, may be in keeping with

good faith, usage and law.73
There was no contract of sale entered into by the
parties based on the Receipts dated July 1985 and
June 16, 1986, signed by Perlita Ventura and the letter
of petitioner to respondent dated July 25, 1986.
By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and
deliver a determinate thing and the other, to pay
therefor a price certain in money or its
equivalent.74 The absence of any of the essential
elements will negate the existence of a perfected
contract of sale. As the Court ruled in Boston Bank of
the Philippines v. Manalo:75
A definite agreement as to the price is an essential
element of a binding agreement to sell personal or real
property because it seriously affects the rights and
obligations of the parties. Price is an essential element
in the formation of a binding and enforceable contract
of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by
the other, gives rise to a perfected sale.76
A contract of sale is consensual in nature and is
perfected upon mere meeting of the minds. When
there is merely an offer by one party without
acceptance of the other, there is no contract. 77 When
the contract of sale is not perfected, it cannot, as an
independent source of obligation, serve as a binding
juridical relation between the parties.78
Respondents reliance on petitioners letter to him
dated July 25, 1986 is misplaced. The letter reads in
full:
7-25-86

(3) Cause of the obligation which is established.

Dear Martin & Ising,
Contracts are perfected by mere consent manifested
by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the
contract.72 Once perfected, they bind the contracting
parties and the obligations arising therefrom have the
form of law between the parties which must be
complied with in good faith. The parties are bound not
only to the fulfillment of what has been expressly
stipulated but also to the consequences which,

Enclosed for your information is the letter written by

my husband to Perlita. I hope that you will be able to
convince your cousin that its to her best interest to
deposit the balance of your payment to me
of P39,000.00 in my bank acct. per our agreement and
send me my bank book right away so that we can
transfer the title of the property.

SALES 9
Regards,
Amie 79
We have carefully considered the letter of Perlita
Ventura, dated July 18, 1986, and the letter of Eugene
Roberts, dated July 25, 1986, where Ventura admitted
having used the money of petitioner amounting
to P39,000.00 without the latters knowledge for the
plane fare of Venturas parents. Ventura promised to
refund the amount ofP39,000.00, inclusive of
interests, within one year.80 Eugene Roberts berated
Ventura and called her a thief for stealing his and
petitioners money and that of respondents wife,
Ising, who allegedly told petitioner that she, Ising,
loaned the money to her parents for their plane fare to
the USA. Neither Ventura nor Eugene Roberts
declared in their letters that Ventura had used
the P250,000.00 which respondent gave to her.
Petitioner in her letter to respondent did not admit,
either expressly or impliedly, having
received P211,000.00 from Ventura. Moreover, in her
letter to petitioner, only a week earlier, or on July 18,
1986, Ventura admitted having spent the P39,000.00
and pleaded that she be allowed to refund the amount
within one (1) year, including interests.
Naririto ang total ng pera mo sa bankbook
mo, P55,000.00 pati na yong deposit na sarili mo at
bale ang nagalaw ko diyan ay P39,000.00. Huwag
kang mag-alala ibabalik ko rin sa iyo sa loob ng isang
taon pati interest.
Ate Per81 1awphi1.net
It is incredible that Ventura was able to remit to
petitioner P211,000.00 before July 25, 1986 when
only a week earlier, she was pleading to petitioner for
a period of one year within which to refund
the P39,000.00 to petitioner.
It would have bolstered his cause if respondent had
submitted an affidavit of Ventura stating that she had
remittedP211,000.00 out of the P250,000.00 she
received from respondent in July 1985 and June 20,
1986.
IN LIGHT OF ALL THE FOREGOING, the petition
is GRANTED. The assailed Decision of the Court of
Appeals in CA-G.R. CV No. 69034 is REVERSED

and SET ASIDE. The Decision of the Metropolitan

Trial Court, affirmed with modification by the
Regional Trial Court, is AFFIRMED.

[4]

Nevertheless, XEI continued selling the residential

lots in the subdivision as agent of OBM.[5]

notified of the resumption of the selling operations of

XEI.[9] However, they did not pay the balance of the
downpayment on the lots because Ramos failed to
Sometime in 1972, then XEI president Emerito
prepare a contract of conditional sale and transmit the
SO ORDERED.
Ramos, Jr. contracted the services of Engr. Carlos
same to Manalo for their signature. On August 14,
Manalo, Jr. who was in business of drilling deep water 1973, Perla Manalo went to the XEI office and
BOSTON BANK OF THE G. R. No. 158149
wells and installing pumps under the business name
requested that the payment of the amount representing
Hurricane Commercial, Inc. For P34,887.66, Manalo, the balance of the downpayment be deferred, which,
PHILIPPINES, (formerly BANK
Jr. installed a water pump at Ramos residence at the
however, XEI rejected. On August 10, 1973, XEI
corner ofAurora Boulevard and Katipunan
furnished her with a statement of their account as of
OF COMMERCE),
Avenue, Quezon City. Manalo, Jr. then proposed to
July 31, 1973, showing that they had a balance
XEI, through Ramos, to purchase a lot in the
of P34,724.34 on the downpayment of the two lots
Petitioner, Present:
Xavierville subdivision, and offered as part of the
after deducting the account of Ramos,
downpayment the P34,887.66 Ramos owed him. XEI, plus P3,819.68[10] interest thereon from September 1,
- versus through Ramos, agreed. In a letter dated February 8,
1972 to July 31, 1973, and that the interests on the
1972, Ramos requested Manalo, Jr. to choose which
unpaid balance of the purchase price of P278,448.00
PERLA P. MANALO and CARLOS
lots he wanted to buy so that the price of the lots and
from September 1, 1972 to July 31, 1973 amounted
the terms of payment could be fixed and incorporated to P30,629.28.[11] The spouses were informed that they
MANALO, JR.,
in the conditional sale.[6] Manalo, Jr. met with Ramos were being billed for said unpaid interests.[12]
and informed him that he and his wife Perla had
DECISION
chosen Lots 1 and 2 of Block 2 with a total area of
On January 25, 1974, the spouses Manalo received
1,740.3 square meters.
another statement of account from XEI, inclusive of
CALLEJO, SR., J.:
interests on the purchase price of the lots.[13] In a letter
In a letter dated August 22, 1972 to Perla Manalo,
dated April 6, 1974 to XEI, Manalo, Jr. stated they
Before us is a Petition for Review on Certiorari of the
Ramos confirmed the reservation of the lots. He also
had not yet received the notice of resumption of Leis
[1]
Decision of the Court of Appeals (CA) in CA-G.R.
pegged the price of the lots at P200.00 per square
selling operations, and that there had been no
[2]
CV No. 47458 affirming, on appeal, the Decision of
meter, or a total of P348,060.00, with a 20% down
arrangement on the payment of interests; hence, they
the Regional Trial Court (RTC) of Quezon City,
payment of the purchase price amounting
should not be charged with interest on the balance of
Branch 98, in Civil Case No. Q-89-3905.
to P69,612.00 less the P34,887.66 owing from
the downpayment on the property.[14] Further, they
Ramos, payable on or before December 31, 1972; the demanded that a deed of conditional sale over the two
The Antecedents
corresponding Contract of Conditional Sale would
lots be transmitted to them for their
then be signed on or before the same date, but if the
signatures. However, XEI ignored the
The Xavierville Estate, Inc. (XEI) was the owner of
selling operations of XEI resumed after December 31, demands. Consequently, the spouses refused to pay
parcels of land in Quezon City, known as the
1972, the balance of the downpayment would fall due the balance of the downpayment of the purchase
Xavierville Estate Subdivision, with an area of 42
then, and the spouses would sign the aforesaid
price.[15]
hectares. XEI caused the subdivision of the property
contract within five (5) days from receipt of the notice
into residential lots, which was then offered for sale to
of resumption of such selling operations. It was also
Sometime in June 1976, Manalo, Jr. constructed a
individual lot buyers.[3]
stated in the letter that, in the meantime, the spouses
business sign in the sidewalk near his house. In a
may introduce improvements thereon subject to the
letter dated June 17, 1976, XEI informed Manalo, Jr.
On September 8, 1967, XEI, through its General
rules
and
regulations
imposed
by
XEI
in
the
that business signs were not allowed along the
Manager, Antonio Ramos, as vendor, and The
subdivision.
Perla
Manalo
conformed
to
the
letter
sidewalk. It demanded that he remove the same, on
Overseas Bank of Manila (OBM), as vendee,
agreement.[7]
the ground, among others, that the sidewalk was not
executed a Deed of Sale of Real Estate over some
part of the land which he had purchased on
residential lots in the subdivision, including Lot 1,
The spouses Manalo took possession of the property
installment basis from XEI.[16] Manalo, Jr. did not
Block 2, with an area of 907.5 square meters, and Lot
on September 2, 1972, constructed a house thereon,
respond. XEI reiterated its demand on September 15,
2, Block 2, with an area of 832.80 square meters. The
and installed a fence around the perimeter of the lots. 1977.[17]
transaction was subject to the approval of the Board
of Directors of OBM, and was covered by real estate
In the meantime, many of the lot buyers refused to
Subsequently, XEI turned over its selling operations
mortgages in favor of the Philippine National Bank as
pay their monthly installments until they were assured to OBM, including the receivables for lots already
security for its account amounting to P5,187,000.00,
that they would be issued Torrens titles over the lots
contracted and those yet to be sold.[18] On December
and the Central Bank of the Philippines as security for
they had purchased.[8] The spouses Manalo were
8, 1977, OBM warned Manalo, Jr., that putting up of a
advances amounting toP22,185,193.74.

SALES 10
business sign is specifically prohibited by their
contract of conditional sale and that his failure to
comply with its demand would impel it to avail of the
remedies as provided in their contract of conditional
sale.[19]

property (P313,172.34), per agreement with XEI,

through Ramos. However, on July 28, 1988, CBM
wrote the spouses, through counsel, proposing that the
price of P1,500.00 per square meter of the property
was a reasonable starting point for negotiation of the
settlement.[29] The spouses rejected the counter
Meanwhile, on December 5, 1979, the Register of
proposal,[30] emphasizing that they would abide by
Deeds issued Transfer Certificate of Title (TCT) No.
their original agreement with XEI. CBM moved to
T-265822 over Lot 1, Block 2, and TCT No. T-265823 withdraw its complaint[31] because of the issues raised.
over Lot 2, Block 2, in favor of the OBM.[20] The lien [32]
in favor of the Central Bank of the Philippines was
annotated at the dorsal portion of said title, which was In the meantime, the CBM was renamed the Boston
later cancelled on August 4, 1980.[21]
Bank of the Philippines. After CBM filed its
complaint against the spouses Manalo, the latter filed
Subsequently, the Commercial Bank of Manila
a complaint for specific performance and damages
(CBM) acquired the Xavierville Estate from OBM.
against the bank before the Regional Trial Court
CBM wrote Edilberto Ng, the president of Xavierville (RTC) of Quezon City on October 31, 1989.
Homeowners Association that, as of January 31, 1983,
Manalo, Jr. was one of the lot buyers in the
The plaintiffs alleged therein that they had always
subdivision.[22] CBM reiterated in its letter to Ng that, been ready, able and willing to pay the installments on
as ofJanuary 24, 1984, Manalo was a homeowner in
the lots sold to them by the defendants remote
the subdivision.[23]
predecessor-in-interest, as might be or stipulated in
the contract of sale, but no contract was forthcoming;
In a letter dated August 5, 1986, the CBM requested
they constructed their house worth P2,000,000.00 on
Perla Manalo to stop any on-going construction on the the property in good faith; Manalo, Jr., informed the
property since it (CBM) was the owner of the lot and
defendant, through its counsel, on October 15, 1988
she had no permission for such construction.[24] She
that he would abide by the terms and conditions of his
agreed to have a conference meeting with CBM
original agreement with the defendants predecessorofficers where she informed them that her husband
in-interest; during the hearing of the ejectment case
had a contract with OBM, through XEI, to purchase
on October 16, 1988, they offered to pay P313,172.34
the property. When asked to prove her claim, she
representing the balance on the purchase price of said
promised to send the documents to CBM. However,
lots; such tender of payment was rejected, so that the
she failed to do so.[25] On September 5, 1986, CBM
subject lots could be sold at considerably higher
reiterated its demand that it be furnished with the
prices to third parties.
documents promised,[26] but Perla Manalo did not
respond.
Plaintiffs further alleged that upon payment of
the P313,172.34, they were entitled to the execution
On July 27, 1987, CBM filed a complaint[27] for
and delivery of a Deed of Absolute Sale covering the
unlawful detainer against the spouses with the
subject lots, sufficient in form and substance to
Metropolitan Trial Court of Quezon City. The case
transfer title thereto free and clear of any and all liens
was docketed as Civil Case No. 51618. CBM claimed and encumbrances of whatever kind and nature.
[33]
that the spouses had been unlawfully occupying the
The plaintiffs prayed that, after due hearing,
property without its consent and that despite its
judgment be rendered in their favor, to wit:
demands, they refused to vacate the property. The
latter alleged that they, as vendors, and XEI, as
WHEREFORE, it is respectfully prayed that after due
vendee, had a contract of sale over the lots which had hearing:
not yet been rescinded.[28]
(a) The defendant should be ordered to execute and
While the case was pending, the spouses Manalo
deliver a Deed of Absolute Sale over subject lots in
wrote CBM to offer an amicable settlement,
favor of the plaintiffs after payment of the sum
promising to abide by the purchase price of the
of P313,172.34, sufficient in form and substance to

transfer to them titles thereto free and clear of any and

all liens and encumbrances of whatever kind or
nature;
(b) The defendant should be held liable for moral and
exemplary damages in the amounts of P300,000.00
and P30,000.00, respectively, for not promptly
executing and delivering to plaintiff the necessary
Contract of Sale, notwithstanding repeated demands
therefor and for having been constrained to engage
the services of undersigned counsel for which they
agreed to pay attorneys fees in the sum of P50,000.00
to enforce their rights in the premises and appearance
fee of P500.00;

For its part, defendant presented in evidence the letter

dated August 22, 1972, where XEI proposed to sell
the two lots subject to two suspensive conditions: the
payment of the balance of the downpayment of the
property, and the execution of the corresponding
contract of conditional sale. Since plaintiffs failed to
pay, OBM consequently refused to execute the
corresponding contract of conditional sale and
forfeited the P34,877.66 downpayment for the two
lots, but did not notify them of said forfeiture.[42] It
alleged that OBM considered the lots unsold because
the titles thereto bore no annotation that they had been
sold under a contract of conditional sale, and the
plaintiffs were not notified of XEIs resumption of its
selling operations.

(c) And for such other and further relief as may be just
and equitable in the premises.[34]
On May 2, 1994, the RTC rendered judgment in favor
of the plaintiffs and against the defendant. The fallo of
In its Answer to the complaint, the defendant
the decision reads:
interposed the following affirmative defenses: (a)
plaintiffs had no cause of action against it because the WHEREFORE, judgment is hereby rendered in favor
August 22, 1972 letter agreement between XEI and
of the plaintiffs and against the defendant
the plaintiffs was not binding on it; and (b) it had no
record of any contract to sell executed by it or its
(a) Ordering the latter to execute and deliver a Deed
predecessor, or of any statement of accounts from its
of Absolute Sale over Lot 1 and 2, Block 2 of the
predecessors, or records of payments of the plaintiffs
Xavierville Estate Subdivision after payment of the
or of any documents which entitled them to the
sum ofP942,978.70 sufficient in form and substance
possession of the lots.[35] The defendant, likewise,
to transfer to them titles thereto free from any and all
interposed counterclaims for damages and attorneys
liens and encumbrances of whatever kind and nature.
fees and prayed for the eviction of the plaintiffs from
(b) Ordering the defendant to pay moral and
the property.[36]
exemplary damages in the amount of P150,000.00;
Meanwhile, in a letter dated January 25, 1993,
and
plaintiffs, through counsel, proposed an amicable
(c) To pay attorneys fees in the sum of P50,000.00
settlement of the case by paying P942,648.70,
and to pay the costs.
representing the balance of the purchase price of the
two lots based on the current market value.
[37]
SO ORDERED.[43]
However, the defendant rejected the same and
insisted that for the smaller lot, they
The trial court ruled that under the August 22,
pay P4,500,000.00, the current market value of the
1972 letter agreement of XEI and the plaintiffs, the
property.[38] The defendant insisted that it owned the
parties had a complete contract to sell over the lots,
property since there was no contract or agreement
and that they had already partially consummated the
between it and the plaintiffs relative thereto.
same. It declared that the failure of the defendant to
During the trial, the plaintiffs adduced in evidence the notify the plaintiffs of the resumption of its selling
operations and to execute a deed of conditional sale
separate Contracts of Conditional Sale executed
did not prevent the defendants obligation to convey
between XEI and Alberto Soller;[39] Alfredo Aguila,
[40]
titles to the lots from acquiring binding effect.
and Dra. Elena Santos-Roque[41] to prove that XEI
continued selling residential lots in the subdivision as Consequently, the plaintiffs had a cause of action to
compel the defendant to execute a deed of sale over
agent of OBM after the latter had acquired the said
the lots in their favor.
lots.

SALES 11
Boston Bank appealed the decision to the CA,
alleging that the lower court erred in (a) not
concluding that the letter of XEI to the spouses
Manalo, was at most a mere contract to sell subject to
suspensive conditions, i.e., the payment of the balance
of the downpayment on the property and the
execution of a deed of conditional sale (which were
not complied with); and (b) in awarding moral and
exemplary damages to the spouses Manalo despite the
absence of testimony providing facts to justify such
awards.[44]
On September 30, 2002, the CA rendered a decision
affirming that of the RTC with
modification. The fallo reads:
WHEREFORE, the appealed decision is AFFIRMED
with MODIFICATIONS that (a) the
figure P942,978.70 appearing [in] par. (a) of the
dispositive portion thereof is changed to P313,172.34
plus interest thereon at the rate of 12% per annum
from September 1, 1972 until fully paid and (b) the
award of moral and exemplary damages and attorneys
fees in favor of plaintiffs-appellees is DELETED.

conditions of the sale. It further averred that its claim

for recovery of possession of the aforesaid lots in its
Memorandum dated February 28, 1994 filed before
the trial court constituted a judicial demand for
rescission that satisfied the requirements of the New
Civil Code. However, the appellate court denied the
motion.

Another egregious error of the CA, petitioner avers, is

the application of Republic Act No. 6552. It insists
that such law applies only to a perfected agreement or
perfected contract to sell, not in this case where the
downpayment on the purchase price of the property
was not completely paid, and no installment payments
were made by the buyers.

Boston Bank, now petitioner, filed the instant petition

for review on certiorari assailing the CA rulings. It
maintains that, as held by the CA, the records do not
reflect any schedule of payment of the 80% balance of
the purchase price, or P278,448.00. Petitioner insists
that unless the parties had agreed on the manner of
payment of the principal amount, including the other
terms and conditions of the contract, there would be
no existing contract of sale or contract to sell.
[47]
Petitioner avers that the letter agreement to
respondent spouses dated August 22, 1972 merely
confirmed their reservation for the purchase of Lot
Nos. 1 and 2, consisting of 1,740.3 square meters,
more or less, at the price of P200.00 per square meter
(or P348,060.00), the amount of the downpayment
thereon and the application of theP34,887.00 due
from Ramos as part of such downpayment.

Petitioner also faults the CA for declaring that

petitioner failed to serve a notice on the respondents
of cancellation or rescission of the contract to sell, or
notarial demand therefor. Petitioner insists that
its August 5, 1986 letter requiring respondents to
vacate the property and its complaint for ejectment in
Civil Case No. 51618 filed in the Metropolitan Trial
Court amounted to the requisite demand for a
rescission of the contract to sell. Moreover, the action
of the respondents below was barred by laches
because despite demands, they failed to pay the
balance of the purchase price of the lots (let alone the
downpayment) for a considerable number of years.

SO ORDERED.[45]
The appellate court sustained the ruling of the RTC
that the appellant and the appellees had executed a
Contract to Sell over the two lots but declared that the
balance of the purchase price of the property
amounting to P278,448.00 was payable in fixed
amounts, inclusive of pre-computed interests, from
delivery of the possession of the property to the
appellees on a monthly basis for 120 months, based
on the deeds of conditional sale executed by XEI in
favor of other lot buyers.[46]The CA also declared that,
while XEI must have resumed its selling operations
before the end of 1972 and the downpayment on the
property remained unpaid as of December 31, 1972,
absent a written notice of cancellation of the contract
to sell from the bank or notarial demand therefor as
required by Republic Act No. 6552, the spouses had,
at the very least, a 60-day grace period from January
1, 1973 within which to pay the same.
Boston Bank filed a motion for the reconsideration of
the decision alleging that there was no perfected
contract to sell the two lots, as there was no
agreement between XEI and the respondents on the
manner of payment as well as the other terms and

Petitioner asserts that there is no factual basis for the

CA ruling that the terms and conditions relating to the
payment of the balance of the purchase price of the
property (as agreed upon by XEI and other lot buyers
in the same subdivision) were also applicable to the
contract entered into between the petitioner and the
respondents. It insists that such a ruling is contrary to
law, as it is tantamount to compelling the parties to
agree to something that was not even discussed, thus,
violating their freedom to contract. Besides, the
situation of the respondents cannot be equated with
those of the other lot buyers, as, for one thing, the
respondents made a partial payment on the
downpayment for the two lots even before the
execution of any contract of conditional sale.
Petitioner posits that, even on the assumption that
there was a perfected contract to sell between the
parties, nevertheless, it cannot be compelled to
convey the property to the respondents because the
latter failed to pay the balance of the downpayment of
the property, as well as the balance of 80% of the
purchase price, thus resulting in the extinction of its
obligation to convey title to the lots to the
respondents.

For their part, respondents assert that as long as there

is a meeting of the minds of the parties to a contract
of sale as to the price, the contract is valid despite the
parties failure to agree on the manner of payment. In
such a situation, the balance of the purchase price
would be payable on demand, conformably to Article
1169 of the New Civil Code. They insist that the law
does not require a party to agree on the manner of
payment of the purchase price as a prerequisite to a
valid contract to sell. The respondents cite the ruling
of this Court in Buenaventura v. Court of
Appeals[48] to support their submission.
They argue that even if the manner and timeline for
the payment of the balance of the purchase price of
the property is an essential requisite of a contract to
sell, nevertheless, as shown by their letter agreement
of August 22, 1972 with the OBM, through XEI and
the other letters to them, an agreement was reached as
to the manner of payment of the balance of the
purchase price. They point out that such letters
referred to the terms of the terms of the deeds of
conditional sale executed by XEI in favor of the other
lot buyers in the subdivision, which contained
uniform terms of 120 equal monthly installments
(excluding the downpayment, but inclusive of precomputed interests). The respondents assert that XEI
was a real estate broker and knew that the contracts
involving residential lots in the subdivision contained

uniform terms as to the manner and timeline of the

payment of the purchase price of said lots.
Respondents further posit that the terms and
conditions to be incorporated in the corresponding
contract of conditional sale to be executed by the
parties would be the same as those contained in the
contracts of conditional sale executed by lot buyers in
the subdivision. After all, they maintain, the contents
of the corresponding contract of conditional sale
referred to in the August 22, 1972 letter agreement
envisaged those contained in the contracts of
conditional sale that XEI and other lot buyers
executed. Respondents cite the ruling of this Court
in Mitsui Bussan Kaisha v. Manila E.R.R. & L. Co.[49]
The respondents aver that the issues raised by the
petitioner are factual, inappropriate in a petition for
review on certiorari under Rule 45 of the Rules of
Court. They assert that petitioner adopted a theory in
litigating the case in the trial court, but changed the
same on appeal before the CA, and again in this
Court. They argue that the petitioner is estopped from
adopting a new theory contrary to those it had adopted
in the trial and appellate courts. Moreover, the
existence of a contract of conditional sale was
admitted in the letters of XEI and OBM. They aver
that they became owners of the lots upon delivery to
them by XEI.
The issues for resolution are the following: (1)
whether the factual issues raised by the petitioner are
proper; (2) whether petitioner or its predecessors-ininterest, the XEI or the OBM, as seller, and the
respondents, as buyers, forged a perfect contract to
sell over the property; (3) whether petitioner is
estopped from contending that no such contract was
forged by the parties; and (4) whether respondents has
a cause of action against the petitioner for specific
performance.
The rule is that before this Court, only legal issues
may be raised in a petition for review on certiorari.
The reason is that this Court is not a trier of facts, and
is not to review and calibrate the evidence on record.
Moreover, the findings of facts of the trial court, as
affirmed on appeal by the Court of Appeals, are
conclusive on this Court unless the case falls under
any of the following exceptions:

SALES 12
(1) when the conclusion is a finding grounded entirely
on speculations, surmises and conjectures; (2) when
the inference made is manifestly mistaken, absurd or
impossible; (3) where there is a grave abuse of
discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when the Court of Appeals, in
making its findings went beyond the issues of the case
and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings are
contrary to those of the trial court; (8) when the
findings of fact are conclusions without citation of
specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by
the respondents; and (10) when the findings of fact of
the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence
on record.[50]
We have reviewed the records and we find that,
indeed, the ruling of the appellate court dismissing
petitioners appeal is contrary to law and is not
supported by evidence. A careful examination of the
factual backdrop of the case, as well as the
antecedental proceedings constrains us to hold that
petitioner is not barred from asserting that XEI or
OBM, on one hand, and the respondents, on the other,
failed to forge a perfected contract to sell the subject
lots.
It must be stressed that the Court may consider an
issue not raised during the trial when there is plain
error.[51] Although a factual issue was not raised in the
trial court, such issue may still be considered and
resolved by the Court in the interest of substantial
justice, if it finds that to do so is necessary to arrive at
a just decision,[52] or when an issue is closely related
to an issue raised in the trial court and the Court of
Appeals and is necessary for a just and complete
resolution of the case.[53] When the trial court decides
a case in favor of a party on certain grounds, the
Court may base its decision upon some other points,
which the trial court or appellate court ignored or
erroneously decided in favor of a party.[54]
In this case, the issue of whether XEI had agreed to
allow the respondents to pay the purchase price of the
property was raised by the parties. The trial court
ruled that the parties had perfected a contract to sell,
as against petitioners claim that no such contract

existed. However, in resolving the issue of whether

the petitioner was obliged to sell the property to the
respondents, while the CA declared that XEI or OBM
and the respondents failed to agree on the schedule of
payment of the balance of the purchase price of the
property, it ruled that XEI and the respondents had
forged a contract to sell; hence, petitioner is entitled to
ventilate the issue before this Court.
We agree with petitioners contention that, for a
perfected contract of sale or contract to sell to exist in
law, there must be an agreement of the parties, not
only on the price of the property sold, but also on the
manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a
contract of sale, whether absolute or conditional, one
of the contracting parties obliges himself to transfer
the ownership of and deliver a determinate thing, and
the other to pay therefor a price certain in money or
its equivalent. 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 the
price. From the averment of perfection, the parties are
bound, not only to the fulfillment of what has
been expressly stipulated, but also to all the
consequences which, according to their nature, may
be in keeping with good faith, usage and law.[55] On
the other hand, when the contract of sale or to sell is
not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation
between the parties.[56]
A definite agreement as to the price is an essential
element of a binding agreement to sell personal or real
property because it seriously affects the rights and
obligations of the parties. Price is an essential element
in the formation of a binding and enforceable contract
of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by
the other, gives rise to a perfected sale.[57]

In a contract to sell property by installments, it is not

enough that the parties agree on the price as well as
the amount of downpayment. The parties must,
likewise, agree on the manner of payment of the
balance of the purchase price and on the other terms
and conditions relative to the sale. Even if the buyer
makes a downpayment or portion thereof, such
payment cannot be considered as sufficient proof of
the perfection of any purchase and sale between the
parties. Indeed, this Court ruled in Velasco v. Court of
Appeals[59] that:

all the terms and conditions relating to the sale,

inclusive of the terms of payment of the balance of
the purchase price and the other substantial terms and
conditions in the corresponding contract of
conditional sale, to be later signed by the parties,
simultaneously with respondents settlement of the
balance of the downpayment.

It is not difficult to glean from the aforequoted

averments that the petitioners themselves admit that
they and the respondent still had to meet and agree on
how and when the down-payment and the installment
payments were to be paid. Such being the situation, it
cannot, therefore, be said that a definite and firm sales
agreement between the parties had been perfected
over the lot in question. Indeed, this Court has already
ruled before that a definite agreement on the manner
of payment of the purchase price is an essential
element in the formation of a binding and enforceable
contract of sale. The fact, therefore, that the
petitioners delivered to the respondent the sum
of P10,000.00 as part of the downpayment that they
had to pay cannot be considered as sufficient proof of
the perfection of any purchase and sale agreement
between the parties herein under article 1482 of the
New Civil Code, as the petitioners themselves admit
that some essential matter the terms of payment still
had to be mutually covenanted.[60]

Hurricane Rotary Well Drilling

We agree with the contention of the petitioner that, as

held by the CA, there is no showing, in the records, of
the schedule of payment of the balance of the
purchase price on the property amounting
to P278,448.00. We have meticulously reviewed the
records, including Ramos February 8, 1972 and
August 22, 1972 letters to respondents,[61] and find
that said parties confined themselves to agreeing on
the price of the property (P348,060.00), the 20%
downpayment of the purchase price (P69,612.00), and
It is not enough for the parties to agree on the price of credited respondents for the P34,887.00 owing from
the property. The parties must also agree on the
Ramos as part of the 20% downpayment. The timeline
manner of payment of the price of the property to give for the payment of the balance of the downpayment
rise to a binding and enforceable contract of sale or
(P34,724.34) was also agreed upon, that is, on or
contract to sell. This is so because the agreement as to before XEI resumed its selling operations, on or
the manner of payment goes into the price, such that a before December 31, 1972, or within five (5) days
disagreement on the manner of payment is tantamount from written notice of such resumption of selling
to a failure to agree on the price.[58]
operations. The parties had also agreed to incorporate

The February 8, 1972 letter of XEI reads:

Mr. Carlos T. Manalo, Jr.

Rizal Avenue Ext.,Caloocan City

Dear Mr. Manalo:
We agree with your verbal offer to exchange the
proceeds of your contract with us to form as a down
payment for a lot in our Xavierville Estate
Subdivision.

Please let us know your choice lot so that we can fix

the price and terms of payment in our conditional
sale.
Sincerely yours,
XAVIERVILLE ESTATE, INC.
(Signed)
EMERITO B. RAMOS, JR.President
CONFORME:
(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling[62]
The August 22, 1972 letter agreement of XEI and the
respondents reads:
Mrs. Perla P. Manalo
1548 Rizal Avenue Extension

SALES 13
Caloocan City
Dear Mrs. Manalo:
This is to confirm your reservation of Lot Nos. 1 and
2; Block 2 of our consolidation-subdivision plan as
amended, consisting of 1,740.3 square meters more or
less, at the price ofP200.00 per square meter or a total
price of P348,060.00.
It is agreed that as soon as we resume selling
operations, you must pay a down payment of 20% of
the purchase price of the said lots and sign the
corresponding Contract of Conditional Sale, on or
before December 31, 1972, provided, however, that if
we resume selling after December 31, 1972, then you
must pay the aforementioned down payment and sign
the aforesaid contract within five (5) days from your
receipt of our notice of resumption of selling
operations.
In the meanwhile, you may introduce such
improvements on the said lots as you may desire,
subject to the rules and regulations of the subdivision.
If the above terms and conditions are acceptable to
you, please signify your conformity by signing on the
space herein below provided.
Thank you.
Very truly yours,
XAVIERVILLE ESTATE, INC. CONFORME:
By:
(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO
President Buyer[63]
Based on these two letters, the determination of the
terms of payment of the P278,448.00 had yet to be
agreed upon on or before December 31, 1972, or even
afterwards, when the parties sign the corresponding
contract of conditional sale.
Jurisprudence is that if a material element of a
contemplated contract is left for future negotiations,
the same is too indefinite to be enforceable.[64] And

when an essential element of a contract is reserved for

future agreement of the parties, no legal obligation
arises until such future agreement is concluded.[65]

1972 letter agreement, XEI stated, in part, that

respondents had purchased the property on
installment basis.[71] However, in the said letter, XEI
failed to state a specific amount for each installment,
So long as an essential element entering into the
and whether such payments were to be made monthly,
proposed obligation of either of the parties remains to semi-annually, or annually. Also, respondents, as
be determined by an agreement which they are to
plaintiffs below, failed to adduce a shred of evidence
make, the contract is incomplete and unenforceable.
to prove that they were obliged to pay
[66]
The reason is that such a contract is lacking in the
the P278,448.00 monthly, semi-annually or annually.
necessary qualities of definiteness, certainty and
The allegation that the payment of the P278,448.00
mutuality.[67]
was to be paid in installments is, thus, vague and
indefinite. Case law is that, for a contract to be
There is no evidence on record to prove that XEI or
enforceable, its terms must be certain and explicit,
OBM and the respondents had agreed, after December not vague or indefinite.[72]
31, 1972, on the terms of payment of the balance of
the purchase price of the property and the other
There is no factual and legal basis for the CA ruling
substantial terms and conditions relative to the sale.
that, based on the terms of payment of the balance of
Indeed, the parties are in agreement that there had
the purchase price of the lots under the contracts of
been no contract of conditional sale ever executed by conditional sale executed by XEI and the other lot
XEI, OBM or petitioner, as vendor, and the
buyers, respondents were obliged to pay
respondents, as vendees.[68]
the P278,448.00 with pre-computed interest of 12%
per annum in 120-month installments. As gleaned
The ruling of this Court in Buenaventura v. Court of
from the ruling of the appellate court, it failed to
Appeals has no bearing in this case because the issue
justify its use of the terms of payment under the three
of the manner of payment of the purchase price of the contracts of conditional sale as basis for such ruling,
property was not raised therein.
to wit:
We reject the submission of respondents that they and
Ramos had intended to incorporate the terms of
payment contained in the three contracts of
conditional sale executed by XEI and other lot buyers
in the corresponding contract of conditional sale,
which would later be signed by them.[69] We have
meticulously reviewed the respondents complaint and
find no such allegation therein.[70] Indeed, respondents
merely alleged in their complaint that they were
bound to pay the balance of the purchase price of the
property in installments. When respondent Manalo, Jr.
testified, he was never asked, on direct examination or
even on cross-examination, whether the terms of
payment of the balance of the purchase price of the
lots under the contracts of conditional sale executed
by XEI and other lot buyers would form part of the
corresponding contract of conditional sale to be
signed by them simultaneously with the payment of
the balance of the downpayment on the purchase
price.
We note that, in its letter to the respondents
dated June 17, 1976, or almost three years from the
execution by the parties of their August 22,

On the other hand, the records do not disclose the

schedule of payment of the purchase price, net of the
downpayment. Considering, however, the Contracts
of Conditional Sale (Exhs. N, O and P) entered into
by XEI with other lot buyers, it would appear that the
subdivision lots sold by XEI, under contracts to sell,
were payable in 120 equal monthly installments
(exclusive of the downpayment but including pre
computed interests) commencing on delivery of the
lot to the buyer.[73]
By its ruling, the CA unilaterally supplied an essential
element to the letter agreement of XEI and the
respondents. Courts should not undertake to make a
contract for the parties, nor can it enforce one, the
terms of which are in doubt.[74] Indeed, the Court
emphasized in Chua v. Court of Appeals[75] that it is
not the province of a court to alter a contract by
construction or to make a new contract for the parties;
its duty is confined to the interpretation of the one
which they have made for themselves, without regard
to its wisdom or folly, as the court cannot supply
material stipulations or read into contract words
which it does not contain.

Respondents, as plaintiffs below, failed to allege in

their complaint that the terms of payment of
the P278,448.00 to be incorporated in the
corresponding contract of conditional sale were those
contained in the contracts of conditional sale executed
by XEI and Soller, Aguila and Roque.[76] They
likewise failed to prove such allegation in this Court.
The bare fact that other lot buyers were allowed to
pay the balance of the purchase price of lots
purchased by them in 120 or 180 monthly
installments does not constitute evidence that XEI
also agreed to give the respondents the same mode
and timeline of payment of the P278,448.00.
Under Section 34, Rule 130 of the Revised Rules of
Court, evidence that one did a certain thing at one
time is not admissible to prove that he did the same or
similar thing at another time, although such evidence
may be received to prove habit, usage, pattern of
conduct or the intent of the parties.
Similar acts as evidence. Evidence that one did or did
not do a certain thing at one time is not admissible to
prove that he did or did not do the same or a similar
thing at another time; but it may be received to prove
a specific intent or knowledge, identity, plan, system,
scheme, habit, custom or usage, and the like.
However, respondents failed to allege and prove, in
the trial court, that, as a matter of business usage,
habit or pattern of conduct, XEI granted all lot buyers
the right to pay the balance of the purchase price in
installments of 120 months of fixed amounts with precomputed interests, and that XEI and the respondents
had intended to adopt such terms of payment relative
to the sale of the two lots in question. Indeed,
respondents adduced in evidence the three contracts
of conditional sale executed by XEI and other lot
buyers merely to prove that XEI continued to sell lots
in the subdivision as sales agent of OBM after it
acquired said lots, not to prove usage, habit or pattern
of conduct on the part of XEI to require all lot buyers
in the subdivision to pay the balance of the purchase
price of said lots in 120 months. It further failed to
prive that the trial court admitted the said deeds[77] as
part of the testimony of respondent Manalo, Jr.[78]
Habit, custom, usage or pattern of conduct must be
proved like any other facts. Courts must contend with
the caveat that, before they admit evidence of usage,

SALES 14
of habit or pattern of conduct, the offering party must
establish the degree of specificity and frequency of
uniform response that ensures more than a mere
tendency to act in a given manner but rather, conduct
that is semi-automatic in nature. The offering party
must allege and prove specific, repetitive conduct that
might constitute evidence of habit. The examples
offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on
inference of systematic conduct. Mere similarity of
contracts does not present the kind of sufficiently
similar circumstances to outweigh the danger of
prejudice and confusion.
In determining whether the examples are numerous
enough, and sufficiently regular, the key criteria are
adequacy of sampling and uniformity of response.
After all, habit means a course of behavior of a person
regularly represented in like circumstances.[79] It is
only when examples offered to establish pattern of
conduct or habit are numerous enough to lose an
inference of systematic conduct that examples are
admissible. The key criteria are adequacy of sampling
and uniformity of response or ratio of reaction to
situations.[80]
There are cases where the course of dealings to be
followed is defined by the usage of a particular trade
or market or profession. As expostulated by Justice
Benjamin Cardozo of the United States Supreme
Court: Life casts the moulds of conduct, which will
someday become fixed as law. Law preserves the
moulds which have taken form and shape from life.
[81]
Usage furnishes a standard for the measurement of
many of the rights and acts of men.[82] It is also wellsettled that parties who contract on a subject matter
concerning which known usage prevail, incorporate
such usage by implication into their agreement, if
nothing is said to be contrary.[83]
However, the respondents inexplicably failed to
adduce sufficient competent evidence to prove usage,
habit or pattern of conduct of XEI to justify the use of
the terms of payment in the contracts of the other lot
buyers, and thus grant respondents the right to pay
the P278,448.00 in 120 months, presumably because
of respondents belief that the manner of payment of
the said amount is not an essential element of a
contract to sell. There is no evidence that XEI or
OBM and all the lot buyers in the subdivision,
including lot buyers who pay part of the

downpayment of the property purchased by them in

the form of service, had executed contracts of
conditional sale containing uniform terms and
conditions. Moreover, under the terms of the contracts
of conditional sale executed by XEI and three lot
buyers in the subdivision, XEI agreed to grant 120
months within which to pay the balance of the
purchase price to two of them, but granted one 180
months to do so.[84] There is no evidence on record
that XEI granted the same right to buyers of two or
more lots.

It bears stressing that the respondents failed and

refused to pay the balance of the downpayment and of
the purchase price of the property amounting
toP278,448.00 despite notice to them of the
resumption by XEI of its selling operations. The
respondents enjoyed possession of the property
without paying a centavo.On the other hand, XEI and
OBM failed and refused to transmit a contract of
conditional sale to the respondents. The respondents
could have at least consigned the balance of the
downpayment after notice of the resumption of the
selling operations of XEI and filed an action to
compel XEI or OBM to transmit to them the said
contract; however, they failed to do so.

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. 61247,
dismissing petitioners appeal and affirming the
decision of the Regional Trial Court (RTC) of
Malolos, Bulacan, Branch 79, in Civil Case No. 877M-94.
The antecedent facts are as follows:

Luis V. Cruz and Aida Cruz (petitioners) are

occupants of the front portion of a 710-square meter
property located in Sto. Cristo, Baliuag, Bulacan. On
October 21, 1994, spouses Alejandro Fernando, Sr.
As a consequence, respondents and XEI (or OBM for and Rita Fernando (respondents) filed before the RTC
that matter) failed to forge a perfected contract to sell a complaint for accion publiciana against petitioners,
demanding the latter to vacate the premises and to pay
the two lots; hence, respondents have no cause of
the amount of P500.00 a month as reasonable rental
action for specific performance against
for the use thereof. Respondents alleged in their
petitioner. Republic Act No. 6552 applies only to a
complaint that: (1) they are owners of the property,
perfected contract to sell and not to a contract with
having bought the same from the spouses Clodualdo
no binding and enforceable effect.
and Teresita Glorioso (Gloriosos) per Deed of Sale
IN LIGHT OF ALL THE FOREGOING, the
dated March 9, 1987; (2) prior to their acquisition of
petition is GRANTED. The Decision of the Court of the property, the Gloriosos offered to sell to
Appeals in CA-G.R. CV No. 47458
petitioners the rear portion of the property but the
is REVERSED andSET ASIDE. The Regional Trial transaction did not materialize due to petitioners
Court of Quezon City, Branch 98 is ordered to dismiss failure to exercise their option; (3) the offer to sell is
the complaint. Costs against the respondents.
embodied in a Kasunduan dated August 6, 1983
We have carefully reviewed the August 22, 1972 letter
executed before the Barangay Captain; (4) due to
agreement of the parties and find no direct or implied SO ORDERED.
petitioners failure to buy the allotted portion,
reference to the manner and schedule of payment of
respondents bought the whole property from the
SPS. LUIS V. CRUZ and G.R. NO. 145470
the balance of the purchase price of the lots covered
Gloriosos; and (5) despite repeated demands,
by the deeds of conditional sale executed by XEI and
petitioners refused to vacate the property.[2]
[90]
AIDA
CRUZ,
that of the other lot buyers as basis for or mode of
determination of the schedule of the payment by the
Petitioners, Present:
respondents of the P278,448.00.
Petitioners filed a Motion to Dismiss but the RTC
- versus dismissed it for lack of merit in its Order dated March
The ruling of this Court in Mitsui Bussan Kaisha v.
6, 1995.[3] Petitioners then filed their Answer setting
Manila Electric Railroad and Light Company[91] is not
SPS.
ALEJANDRO
FERNANDO,
forth the affirmative defenses that: (1)
applicable in this case because the basic price fixed in
the Kasunduan is a perfected contract of sale; (2) the
the contract was P9.45 per long ton, but it was
agreement has already been partially consummated as
stipulated that the price was subject to modification in SR., and RITA FERNANDO, Promulgated:
they already relocated their house from the rear
proportion to variations in calories and ash content,
Respondents. December 9, 2005
portion of the lot to the front portion that was sold to
and not otherwise. In this case, the parties did not fix
them; (3) Mrs. Glorioso prevented the complete
in their letters-agreement, any method or mode of
DECISION
consummation of the sale when she refused to have
determining the terms of payment of the balance of
the exact boundaries of the lot bought by petitioners
the purchase price of the property amounting
AUSTRIA-MARTINEZ, J.:
surveyed, and the existing survey was made without
to P278,448.00.
their knowledge and participation; and (4)
respondents are buyers in bad faith having bought that
Irrefragably, under Article 1469 of the New Civil
Code, the price of the property sold may be
considered certain if it be so with reference to another
thing certain. It is sufficient if it can be determined by
the stipulations of the contract made by the parties
thereto[85] or by reference to an agreement
incorporated in the contract of sale or contract to sell
or if it is capable of being ascertained with certainty
in said contract;[86] or if the contract contains express
or implied provisions by which it may be rendered
certain;[87] or if it provides some method or criterion
by which it can be definitely ascertained.[88] As this
Court held in Villaraza v. Court of Appeals,[89] the
price is considered certain if, by its terms, the contract
furnishes a basis or measure for ascertaining the
amount agreed upon.

SALES 15
portion of the lot occupied by them (petitioners) with
full knowledge of the prior sale to them by the
Gloriosos.[4]
After due proceedings, the RTC rendered a Decision
on April 3, 1998 in favor of respondents. The decretal
portion of the decision provides:
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:
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.
SO ORDERED.[5]
Petitioners appealed the RTC decision but it was
affirmed by the CA per its Decision dated October 3,
2000.
Hence, the present petition raising the following
issues:
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?
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?
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 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 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 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.
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:
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;

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;
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);
e. Na ang ipinagsusumbong ay tiyakang ililipat ang
bahay sa bahaging kanilang nabili o mabibili sa
buwan ng Enero 31, 1984;[7] (Emphasis supplied)
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
contract of sale is perfected at the moment there is
meeting of the 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.
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 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 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.
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 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
between the parties with each party giving an amount
of no less than P400.00; and (e) that petitioners will
definitely relocate their house to the portion they
bought or will buy by January 31, 1984.
The foregoing terms and conditions show that it is a
contract to sell and not a contract of sale. For one, the
conspicuous absence of a definite manner of payment
of the purchase price in the agreement confirms the
conclusion that it is a contract to sell. This is because
the manner of payment of 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.
The Kasunduan does not establish any definite
agreement between the parties concerning the terms
of payment. What it merely provides is the purchase
price for the 213-square meter property at P40.00 per
square meter.
For another, the telltale provision in
the Kasunduan that: Na pumayag ang mga
maysumbong na pagbilhan ang mga ipinagsumbong
na bahagi ng lupa at angipagbibili ay may sukat na
213 metrong parisukat humigit kumulang sa
halagang P40.00 bawat metrong parisukat, simply
means that the Gloriosos only agreed to sell a portion
of the property and that the portion to be
sold measures 213 square meters.
Another significant provision is that which reads: Na
ang ipinagsusumbong ay tiyakang ililipat ang bahay
sa bahaging kanilang nabili o mabibili sa buwan ng
Enero 31, 1984. The foregoing indicates that a
contract of sale is yet to be consummated and
ownership of the property remained in the Gloriosos.
Otherwise, why would the alternative
term mabibili be used if indeed the property had
already been sold to petitioners.

SALES 16
In addition, the absence of any formal deed of
conveyance is a strong indication that the parties did
not intend immediate transfer of ownership.[12]
Normally, in a contract to sell, the payment of the
purchase price is the positive suspensive condition
upon which the transfer of ownership depends.[13] The
parties, however, are not prohibited 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]

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 measuring 223
square meters as the portion to be bought by
petitioners.
Petitioners question the survey made, asserting that it
is a table survey made without their knowledge and
participation. It should be pointed out that
theKasunduan 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 the payment of the purchase price.

common sense dictate that they should have sought its

enforcement forthwith. Instead, petitioners whiled
away their time.
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 can be no
rescission of an obligation that is nonexistent,
considering that the suspensive conditions therefor
have not yet 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 kindness of the previous owner, Pedro Hipolito,
Petitioners failed to abide by the express condition
who was their relative,[19] and subsequently, Teresita
that they should relocate to the rear portion of the
Petitioners further claim that respondents have no
Glorioso, who is also their relative. They have no title
property being bought by January 31, 1984. Indeed,
cause of action against them because their obligation
or, at the very least, a contract of lease over the
theKasunduan discloses that it is the rear portion that to pay the purchase price did not yet arise, as the
property. Based as it was on mere tolerance,
was being sold by the Gloriosos, and not the front
agreement did not provide for a period within which
petitioners possession could neither ripen into
portion as petitioners stubbornly claim. This is evident to pay the purchase price. They argue that respondents ownership nor operate to bar any action by
from the provisions establishing a right of way from
should have filed an action for specific performance
respondents to recover absolute possession thereof.[20]
Lopez Jaena road going towards the back of the lot,
or judicial rescission before they can avail of accion
and requiring them to relocate their house to the
There is also no merit to petitioners contention that
publiciana.
portion being sold by January 31, 1984. Petitioners
respondents are buyers in bad faith. As explained
are presently occupying the front portion of the
Notably, petitioners never raised these arguments
in Coronel vs. Court of Appeals:
property. Why the need for a right of way and for
during the proceedings before the RTC. Suffice it to
In a contract to sell, there being no previous sale of
petitioners to relocate if the front portion on which
say that issues raised for the first time on appeal and
their house stands is the portion being sold?
not raised timely in the proceedings in the lower court the property, a third person buying such property
despite the fulfillment of the suspensive condition
are barred by estoppel.[16] Matters, theories or
This condition is a suspensive condition
arguments not brought out in the original proceedings such as the full payment of the purchase price, for
noncompliance of which prevented the Gloriosos
cannot be considered on review or appeal where they instance, cannot be deemed a buyer in bad
from proceeding with the sale and ultimately
faith and the prospective buyer cannot seek the relief
are raised for the first time. To consider the alleged
transferring title to petitioners; and
facts and arguments raised belatedly would amount to of reconveyance of the property. There is no double
the Kasunduan from having obligatory force.[15] It is
sale in such case. Title to the property will transfer to
trampling on the basic principles of fair play, justice
established by evidence that the petitioners did not
the buyer after registration because there is no defect
and due process.[17]
transfer their house located in the front portion of the
in the owner-sellers title per se, but the latter, of
subject property to the rear portion which, under
Moreover, it would be inutile for respondents to first
course, may be sued for damages by the intending
the Kasunduan, they intended to buy. Thus, no
petition the court to fix a period for the performance
buyer.[21] (Emphasis supplied)
obligation arose on the part of the Gloriosos to
of the contract. In the first place, respondents are not
A person who occupies the land of another at the
consider the subject property as having been sold to
parties to the Kasunduan between petitioners and the
latter's forbearance or permission without any contract
petitioners because the latters non-fulfillment of the
Gloriosos, and they have no standing whatsoever to
suspensive condition rendered the contract to sell
seek such recourse. In the second place, such recourse between them is necessarily bound by an implied
promise that he will vacate upon demand.[22]
ineffective and unperfected.
properly pertains to petitioners. It was they who
should have sought the courts intercession. If
Considering that petitioners continued possession of
Petitioners admit that they have not paid a single
petitioners believed that they have an actionable
the property has already been rendered unlawful, they
centavo to the Gloriosos. However, petitioners argue
contract for the sale of the property, prudence and
In the present case, aside from the payment of the
purchase price, there existed another suspensive
condition, i.e.: that petitioners will relocate their
house to the portion they bought or will buy by
January 31, 1984.

are bound to pay reasonable rental for the use and

occupation thereof, which in 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 time that they are raising this point. As
such, petitioners are now barred from seeking such
relief.[23]
WHEREFORE, the petition is DENIED. The
Decision of the Court of Appeals dated October 3,
2000 in CA-G.R. CV No. 61247 is AFFIRMED.
SO ORDERED.
[G.R. No. 146997. April 26, 2005]
SPOUSES GODOFREDO & DOMINICA
FLANCIA, petitioners, vs. COURT OF APPEALS
& WILLIAM ONG GENATO, respondents.
DECISION
CORONA, J.:
Before us is a petition for review under Rule 45 of the
Rules of Court, seeking to set aside the October 6,
2000 decision[1] of the Court of Appeals in CA-G.R.
CV No. 56035.
The facts as outlined by the trial court[2] follow.
This is an action to declare null and void the mortgage
executed by defendant Oakland Development
Resources Corp. xxx in favor of defendant William
Ong Genato over the house and lot plaintiffs spouses
Godofredo and Dominica Flancia purchased from
defendant corporation.
In the complaint, plaintiffs allege that they purchased
from defendant corporation a parcel of land known as
Lot 12, Blk. 3, Phase III-A containing an area of
128.75 square meters situated in Prater Village Subd.
II located at Brgy. Old Balara, Quezon City; that by
virtue of the contract of sale, defendant corporation
authorized plaintiffs to transport all their personal
belongings to their house at the aforesaid lot; that on

SALES 17
December 24, 1992, plaintiffs received a copy of the
execution foreclosing [the] mortgage issued by the
RTC, Branch 98 ordering defendant Sheriff Sula to
sell at public auction several lots formerly owned by
defendant corporation including subject lot of
plaintiffs; that the alleged mortgage of subject lot is
null and void as it is not authorized by plaintiffs
pursuant to Art. 2085 of the Civil Code which
requires that the mortgagor must be the absolute
owner of the mortgaged property; that as a
consequence of the nullity of said mortgage, the
execution foreclosing [the] mortgage is likewise null
and void; that plaintiffs advised defendants to exclude
subject lot from the auction sale but the latter refused.
Plaintiffs likewise prayed for damages in the sum
of P50,000.00.
Defendant William Ong Genato filed a motion to
dismiss the complaint which was opposed by the
plaintiffs and denied by the Court in its Order dated
February 16, 1993.
Defendant Genato, then filed his answer averring that
on May 19, 1989 co-defendant Oakland Development
Resources Corporation mortgaged to Genato two (2)
parcels of land covered by TCT Nos. 356315 and
366380 as security and guaranty for the payment of a
loan in the sum of P2,000,000.00; that it appears in
the complaint that the subject parcel of land is an
unsubdivided portion of the aforesaid TCT No.
366380 which covers an area of 4,334 square meters
more or less; that said real estate mortgage has been
duly annotated at the back of TCT No. 366380 on
May 22, 1989; that for non-payment of the loan
of P2,000,000.00 defendant Genato filed an action for
foreclosure of real estate mortgage against codefendant corporation; that after [trial], a decision was
rendered by the Regional Trial Court of Quezon City,
Branch 98 against defendant corporation which
decision was affirmed by the Honorable Court of
Appeals; that the decision of the Court of Appeals has
long become final and thus, the Regional Trial Court,
Brach 98 of Quezon City issued an Order dated
December 7, 1992 ordering defendant Sheriff Ernesto
Sula to cause the sale at public auction of the
properties covered by TCT No. 366380 for failure of
defendant corporation to deposit in Court the money
judgment within ninety (90) days from receipt of the
decision of the Court of Appeals; that plaintiffs have
no cause of action against defendant Genato; that the
alleged plaintiffs Contract to Sell does not appear to

have been registered with the Register of Deeds of

Quezon City to affect defendant Genato and the latter
is thus not bound by the plaintiffs Contract to Sell;
that the registered mortgage is superior to plaintiffs
alleged Contract to Sell and it is sufficient for
defendant Genato as mortgagee to know that the
subject TCT No. 366380 was clean at the time of the
execution of the mortgage contract with defendant
corporation and defendant Genato is not bound to go
beyond the title to look for flaws in the mortgagors
title; that plaintiffs alleged Contract to Sell is neither a
mutual promise to buy and sell nor a Contract of Sale.
Ownership is retained by the seller, regardless of
delivery and is not to pass until full payment of the
price; that defendant Genato has not received any
advice from plaintiffs to exclude the subject lot from
the auction sale, and by way of counterclaim,
defendant Genato prays for P150,000.00 moral
damages and P20,000.00 for attorneys fees.
On the other hand, defendant Oakland Development
Resources Corporation likewise filed its answer and
alleged that the complaint states no cause of action;
xxx Defendant corporation also prays for attorneys
fees of P20,000.00 in its counterclaim.[3]
After trial, the assisting judge[4] of the trial court
rendered a decision dated August 16, 1996, the
decretal portion of which provided:

2) Ordering said defendant corporation to pay further

to plaintiffs the sum of P30,000.00 for moral
damages, P10,000.00 for exemplary damages
and P20,000.00 for and as reasonable attorneys fees
plus cost;

Hence, this petition.

For resolution before us now are the following issues:
4) Dismissing defendant Genatos counterclaim.[5]
(1) whether or not the registered mortgage constituted
over the property was valid;
On motion for reconsideration, the regular presiding
judge set aside the judgment of the assisting judge and
(2) whether or not the registered mortgage was
rendered a new one on November 27, 1996, the
superior to the contract to sell; and
decretal portion of which read:
WHEREFORE, premises considered, the Motion for
Reconsideration is hereby GRANTED. The decision
dated August 16, 1996 is hereby set aside and a new
one entered in favor of the plaintiffs, declaring the
subject mortgage and the foreclosure proceedings
held thereunder as null and void insofar as they affect
the superior right of the plaintiffs over the subject lot,
and ordering as follows:
1. Defendant Oakland Development Resources to pay
to plaintiffs the amount of P20,000.00 for litigationrelated expenses;

a) the amount of P10,000.00 representing payment for

the option to purchase lot;
b) the amount of P140,000.00 representing the first
downpayment of the contract price;

3. Dismissing the counterclaims of defendants

Oakland and Genato and with costs against them.[6]

c) the amount of P20,520.80 representing five

monthly amortizations for February, March, April,
May and June 1990;

On appeal, the Court of Appeals issued the assailed

order:

1) Ordering defendant Oakland Devt. Resources

Corporation to pay plaintiffs:

d) the amount of P3,000.00 representing amortization

for November 1990; all plus legal interest from the
constitution of the mortgage up to the time the instant
case was filed.

SO ORDERED.[7]

3) Dismissing defendant corporations counterclaim;

2. Ordering defendant Sheriff Ernesto L. Sula to desist

from conducting further proceedings in the extrajudicial foreclosure insofar as they affect the
plaintiffs, or, in the event that title has been
consolidated in the name of defendant William O.
Genato, ordering said defendant to reconvey to
plaintiffs the title corresponding to Lot 12, Blk. 3,
Phase III-A of Prater Village [Subd. II], located in Old
Balara, Quezon City, containing an area of 128.75
square meters; and

Wherefore, premises considered, judgment is hereby

rendered.

August 16, 1996 REINSTATED and AFFIRMED

IN TOTO. No Costs.

Wherefore, foregoing premises considered, the appeal

having merit in fact and in law is hereby GRANTED
and the decision of the Trial Court dated 27
November 1996 hereby SET
ASIDE andREVERSED, and its judgment dated

(3) whether or not the mortgagee was in good faith.

Under the Art. 2085 of the Civil Code, the essential
requisites of a contract of mortgage are: (a) that it be
constituted to secure the fulfillment of a principal
obligation; (b) that the mortgagor be the absolute
owner of the thing mortgaged; and (c) that the persons
constituting the mortgage have the free disposal of
their property, and in the absence thereof, that they be
legally authorized for the purpose.
All these requirements are present in this case.
FIRST ISSUE: WAS THE REGISTERED
MORTGAGE VALID?
As to the first essential requisite of a mortgage, it is
undisputed that the mortgage was executed on May
15, 1989 as security for a loan obtained by Oakland
from Genato.
As to the second and third requisites, we need to
discuss the difference between a contract of sale and a
contract to sell.
In a contract of sale, title to the property passes to the
vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved
by the vendor and is not to pass to the vendee until
full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor
loses ownership over the property and cannot recover
it unless and until the contract is resolved or
rescinded; in a contract to sell, title is retained by the
vendor until full payment of the price.[8]

SALES 18
In the contract between petitioners and Oakland, aside
from the fact that it was denominated as a contract to
sell, the intention of Oakland not to transfer
ownership to petitioners until full payment of the
purchase price was very clear. Acts of ownership over
the property were expressly withheld by Oakland
from petitioner. All that was granted to them by the
occupancy permit was the right to possess it.
Specifically, the contract between Oakland and
petitioners stated:
xxx xxx xxx
7. That the BUYER/S may be allowed to enter into
and take possession of the property upon issuance of
Occupancy Permit by the OWNER/DEVELOPER
exclusively, although title has not yet passed to the
BUYER/S, in which case his possession shall be that
of a possessor by mere tolerance Lessee, subject to
certain restrictions contained in this deed.
xxx xxx xxx
13. That the BUYER/S cannot sell, mortgage, cede,
transfer, assign or in any manner alienate or
dispose of, in whole or in part, the rights acquired by
and the obligations imposed on the BUYER/S by
virtue of this contract, without the express written
consent of the OWNER/DEVELOPER.

The owner has the right to enjoy and dispose of a

thing, without other limitations than those established
by law.
xxx xxx xxx
Aside from the jus utendi and the jus
abutendi [11] inherent in the right to enjoy the thing,
the right to dispose, or the jus disponendi, is the
power of the owner to alienate,encumber, transform
and even destroy the thing owned.[12]
Because Oakland retained all the foregoing rights as
owner of the property, it was entitled absolutely to
mortgage it to Genato. Hence, the mortgage was
valid.

xxx xxx xxx

Clearly, when the property was mortgaged to Genato
in May 1989, what was in effect between Oakland and
petitioners was a contract to sell, not a contract of
sale. Oakland retained absolute ownership over the
property.

In sum, we rule that Genatos registered mortgage was

superior to petitioners contract to sell, subject to any
liabilities Oakland may have incurred in favor of
petitioners by irresponsibly mortgaging the property
to Genato despite its commitments to petitioners
under their contract to sell.
THIRD ISSUE: WAS THE MORTGAGE IN
GOOD FAITH?

SECOND ISSUE: WAS THE REGISTERED

MORTGAGE SUPERIOR TO THE CONTRACT
TO SELL?

The third issue involves a factual matter which should

not be raised in this petition. Only questions of law
may be raised in a Rule 45 petition. This Court is not
a trier of facts. The resolution of factual issues is the
function of the lower courts. We therefore adopt the
factual findings of the Court of Appeals and uphold
the good faith of the mortgagee Genato.

In their memorandum, petitioners cite our ruling

in State

RELIANCE ON WHAT APPEARS IN THE

TITLE

Investment House, Inc. v. Court of Appeals [13] to the

effect that an unregistered sale is preferred over
a registered mortgage over the same property. The
citation is misplaced.

Just as an innocent purchaser for value may rightfully

rely on what appears in the certificate of title, a
mortgagee has the right to rely on what appears in the
title presented to him. In the absence of anything to
arouse suspicion, he is under no obligation to look
beyond the certificate and investigate the title of the
mortgagor appearing on the face of the said
certificate. [14]

This Court in that case explained the rationale behind

the rule:

xxx xxx xxx

24. That this Contract to Sell shall not in any way
[authorize] the BUYER/S to occupy the assigned
house and lot to them.[9]

property under the contract to sell and therefore had

every right to mortgage it.

The unrecorded sale between respondents-spouses

and SOLID is preferred for the reason that if the
original owner xxx had parted with his ownership of
the thing sold then he no longer had ownership and
free disposal of that thing as to be able to mortgage it
again.

State Investment House is completely inapplicable to

the case at bar. A contract of sale and a contract to sell
are worlds apart. State Investment House clearly
pertained to a contract of sale, not to a contract to sell
which was what Oakland and petitioners had. In State
Investment House, ownership had passed completely
Ownership is the independent and general power of a to the buyers and therefore, the former owner no
person over a thing for purposes recognized by law
longer had any legal right to mortgage the property,
and within the limits established thereby.[10] According notwithstanding the fact that the new owner-buyers
to Art. 428 of the Civil Code, this means that:
had not registered the sale. In the case before us,
Oakland retained absolute ownership over the

We agree with the findings and conclusions of the

trial court regarding the liabilities of Oakland in its
August 16, 1996 decision, as affirmed by the Court of
Appeals:
Anent [plaintiffs] prayer for damages, the Court finds
that defendant corporation is liable to return to
plaintiffs all the installments/payments made by
plaintiffs consisting of the amount ofP10,000.00
representing payment for the option to purchase lot;
the amount of P140,000.00 which was the first
downpayment; the sum of P20,520.80 representing
five monthly amortizations for February, March,
April, May and June 1990 and the amount
of P3,000.00 representing amortization for November
1990 plus legal interest from the time of the mortgage
up to the time this instant case was filed. Further,
considering that defendant corporation wantonly and

fraudulently mortgaged the subject property without

regard to [plaintiffs] rights over the same, said
defendant should pay plaintiffs moral damages in the
reasonable amount of P30,000.00. xxx Furthermore,
since defendant [corporations] acts have compelled
the plaintiffs to litigate and incur expenses to protect
their interest, it should likewise be adjudged to pay
plaintiffs attorneys fees of P20,000.00 under Article
2208 paragraph two (2) of the Civil Code.[15]
WHEREFORE, the petition for review is hereby
DENIED. The decision of the Court of Appeals
reinstating the August 16, 1996 decision of the trial
court is hereby AFFIRMED.
SO ORDERED.
[G.R. No. 103577. October 7, 1996]
ROMULO A. CORONEL, ALARICO A.
CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONZALES (for herself and on
behalf of Floraida C. Tupper, as attorney-in-fact),
CIELITO A. CORONEL, FLORAIDA A.
ALMONTE, and CATALINA BALAIS
MABANAG, petitioners, vs. THE COURT OF
APPEALS, CONCEPCION D. ALCARAZ and
RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-infact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for
specific performance to compel herein petitioners
(except the last named, Catalina Balais Mabanag) to
consummate the sale of a parcel of land with its
improvements located along Roosevelt Avenue in
Quezon City entered into by the parties sometime in
January 1985 for the price ofP1,240,000.00.
The undisputed facts of the case were summarized by
respondent court in this wise:

SALES 19
On January 19, 1985, defendants-appellants Romulo
Coronel, et. al. (hereinafter referred to as Coronels)
executed a document entitled Receipt of Down
Payment (Exh. A) in favor of plaintiff Ramona
Patricia Alcaraz (hereinafter referred to as Ramona)
which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
-----------------------------------------P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146
Timog, Quezon City, the sum of Fifty Thousand Pesos
purchase price of our inherited house and lot, covered
by TCT No. 119627 of the Registry of Deeds of
Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names
from our deceased father, Constancio P. Coronel, the
transfer certificate of title immediately upon receipt of
the down payment above-stated.
On our presentation of the TCT already in or name,
We will immediately execute the deed of absolute sale
of said property and Miss Ramona Patricia Alcaraz
shall immediately pay the balance of
the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the
following:
1. Ramona will make a down payment of Fifty
Thousand (P50,000.00) pesos upon execution of the
document aforestated;
2. The Coronels will cause the transfer in their names
of the title of the property registered in the name of
their deceased father upon receipt of the Fifty
Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject
property, the Coronels will execute the deed of
absolute sale in favor of Ramona and the latter will
pay the former the whole balance of One Million One
Hundred Ninety Thousand (P1,190,000.00) Pesos.

On the same date (January 15, 1985), plaintiffappellee Concepcion D. Alcaraz (hereinafter referred
to as Concepcion), mother of Ramona, paid the down
payment of Fifty Thousand (P50,000.00) Pesos (Exh.
B, Exh. 2).

inclusive of their corresponding

submarkings. Adopting these same exhibits as their
own, then defendants (now petitioners) accordingly
offered and marked them as Exhibits 1 through 10,
likewise inclusive of their corresponding
submarkings. Upon motion of the parties, the trial
court gave them thirty (30) days within which to
simultaneously submit their respective memoranda,
and an additional 15 days within which to submit their
corresponding comment or reply thereto, after which,
the case would be deemed submitted for resolution.

A motion for reconsideration was filed by petitioners

before the new presiding judge of the Quezon City
RTC but the same was denied by Judge Estrella T.
Estrada, thusly:

On June 5, 1985, a new title over the subject property

was issued in the name of Catalina under TCT No.
351582 (Exh. H; Exh. 8).

The prayer contained in the instant motion, i.e., to

annul the decision and to render anew decision by the
undersigned Presiding Judge should be denied for the
following reasons: (1) The instant case became
submitted for decision as of April 14, 1988 when the
parties terminated the presentation of their respective
documentary evidence and when the Presiding Judge
On April 14, 1988, the case was submitted for
at that time was Judge Reynaldo Roura. The fact that
resolution before Judge Reynaldo Roura, who was
they were allowed to file memoranda at some future
then temporarily detailed to preside over Branch 82 of date did not change the fact that the hearing of the
the RTC of Quezon City. On March 1, 1989, judgment case was terminated before Judge Roura and therefore
was handed down by Judge Roura from his regular
the same should be submitted to him for decision; (2)
bench at Macabebe, Pampanga for the Quezon
When the defendants and intervenor did not object to
City branch, disposing as follows:
the authority of Judge Reynaldo Roura to decide the
case prior to the rendition of the decision, when they
WHEREFORE, judgment for specific performance is met for the first time before the undersigned Presiding
hereby rendered ordering defendant to execute in
Judge at the hearing of a pending incident in Civil
favor of plaintiffs a deed of absolute sale covering
Case No. Q-46145 on November 11, 1988, they were
that parcel of land embraced in and covered by
deemed to have acquiesced thereto and they are now
Transfer Certificate of Title No. 327403 (now TCT
estopped from questioning said authority of Judge
No. 331582) of the Registry of Deeds for Quezon
Roura after they received the decision in question
City, together with all the improvements existing
which happens to be adverse to them; (3) While it is
thereon free from all liens and encumbrances, and
true that Judge Reynaldo Roura was merely a Judgeonce accomplished, to immediately deliver the said
on-detail at this Branch of the Court, he was in all
document of sale to plaintiffs and upon receipt
respects the Presiding Judge with full authority to act
thereof, the plaintiffs are ordered to pay defendants
on any pending incident submitted before this Court
the whole balance of the purchase price amounting
during his incumbency. When he returned to his
to P1,190,000.00 in cash. Transfer Certificate of Title Official Station at Macabebe, Pampanga, he did not
No. 331582 of the Registry of Deeds for Quezon
lose his authority to decide or resolve cases submitted
City in the name of intervenor is hereby canceled and to him for decision or resolution because he continued
declared to be without force and effect. Defendants
as Judge of the Regional Trial Court and is of coand intervenor and all other persons claiming under
equal rank with the undersigned Presiding Judge. The
them are hereby ordered to vacate the subject property standing rule and supported by jurisprudence is that a
and deliver possession thereof to plaintiffs. Plaintiffs
Judge to whom a case is submitted for decision has
claim for damages and attorneys fees, as well as the
the authority to decide the case notwithstanding his
counterclaims of defendants and intervenors are
transfer to another branch or region of the same court
hereby dismissed.
(Sec. 9, Rule 135, Rule of Court).

(Rollo, pp. 134-136)

No pronouncement as to costs.

In the course of the proceedings before the trial court

(Branch 83, RTC, Quezon City) the parties agreed to
submit the case for decision solely on the basis of
documentary exhibits. Thus, plaintiffs therein (now
private respondents) proffered their documentary
evidence accordingly marked as Exhibits A through J,

So Ordered.

Coming now to the twin prayer for reconsideration of

the Decision dated March 1, 1989 rendered in the
instant case, resolution of which now pertains to the
undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented
by the parties, she is convinced that the Decision of
March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.

On February 6, 1985, the property originally

registered in the name of the Coronels father was
transferred in their names under TCT No. 327043
(Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property
covered by TCT No. 327043 to intervenor-appellant
Catalina B. Mabanag (hereinafter referred to as
Catalina) for One Million Five Hundred Eighty
Thousand (P1,580,000.00) Pesos after the latter has
paid Three Hundred Thousand (P300,000.00) Pesos
(Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the
contract (Exh. A) with Ramona by depositing the
down payment paid by Concepcion in the bank in
trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a
complaint for a specific performance against the
Coronels and caused the annotation of a notice of lis
pendens at the back of TCT No. 327403 (Exh. E; Exh.
5).
On April 2, 1985, Catalina caused the annotation of a
notice of adverse claim covering the same property
with the Registry of Deeds of Quezon City (Exh. F;
Exh. 6).
On April 25, 1985, the Coronels executed a Deed of
Absolute Sale over the subject property in favor of
Catalina (Exh. G; Exh. 7).

Macabebe, Pampanga for Quezon City, March 1,

1989.
(Rollo, p. 106)

SALES 20
IN VIEW OF THE FOREGOING, the Motion for
Reconsideration and/or to Annul Decision and Render
Anew Decision by the Incumbent Presiding Judge
dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but
on December 16, 1991, the Court of Appeals (Buena,
Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its
decision fully agreeing with the trial court.

petitioners on their part insist that what the document

signified was a mere executory contract to sell,
subject to certain suspensive conditions, and because
of the absence of Ramona P. Alcaraz, who left for the
United States of America, said contract could not
possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties
contention is brought about by the way each interprets
the terms and/or conditions set forth in said private
instrument.Withal, based on whatever relevant and
admissible evidence may be available on record, this
Court, as were the courts below, is now called upon to
adjudge what the real intent of the parties was at the
time the said document was executed.

Hence, the instant petition which was filed on March

5, 1992. The last pleading, private respondents Reply
Memorandum, was filed on September 15, 1993. The
case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to
the voluntary inhibition of the Justice to whom the
case was last assigned.

The Civil Code defines a contract of sale, thus:

While we deem it necessary to introduce certain

refinements in the disquisition of respondent court in
the affirmance of the trial courts decision, we
definitely find the instant petition bereft of merit.

Sale, by its very nature, is a consensual contract

because it is perfected by mere consent. The essential
elements of a contract of sale are the following:

The heart of the controversy which is the ultimate key

in the resolution of the other issues in the case at bar
is the precise determination of the legal significance
of the document entitled Receipt of Down Payment
which was offered in evidence by both parties. There
is no dispute as to the fact that the said document
embodied the binding contract between Ramona
Patricia Alcaraz on the one hand, and the heirs of
Constancio P. Coronel on the other, pertaining to a
particular house and lot covered by TCT No. 119627,
as defined in Article 1305 of the Civil Code of the
Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between
two persons whereby one binds himself, with respect
to the other, to give something or to render some
service.
While, it is the position of private respondents that the
Receipt of Down Payment embodied a perfected
contract of sale, which perforce, they seek to enforce
by means of an action for specific performance,

Art. 1458. By the contract of sale one of the

contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or
its equivalent.

a) Consent or meeting of the minds, that is, consent to

transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be
considered as a Contract of Sale because the first
essential element is lacking. In a contract to sell, the
prospective seller explicitly reserves the transfer of
title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the
contract to sell until the happening of an event, which
for present purposes we shall take as the full payment
of the purchase price. What the seller agrees or
obliges himself to do is to fulfill his promise to sell
the subject property when the entire amount of the
purchase price is delivered to him. In other words the
full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and thus,

ownership is retained by the prospective seller

without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this
Court had occasion to rule:
Hence, We hold that the contract between the
petitioner and the respondent was a contract to sell
where the ownership or title is retained by the seller
and is not to pass until the full payment of the price,
such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious,
but simply an event that prevented the obligation of
the vendor to convey title from acquiring binding
force.
Stated positively, upon the fulfillment of the
suspensive condition which is the full payment of the
purchase price, the prospective sellers obligation to
sell the subject property by entering into a contract of
sale with the prospective buyer becomes demandable
as provided in Article 1479 of the Civil Code which
states:
Art. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor of the promise is supported by a
consideration distinct from the price.
A contract to sell may thus be defined as a bilateral
contract whereby the prospective seller, while
expressly reserving the ownership of the subject
property despite delivery thereof to the prospective
buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment
of the condition agreed upon, that is, full payment of
the purchase price.

777 [1984]). However, if the suspensive condition is

fulfilled, the contract of sale is thereby perfected, such
that if there had already been previous delivery of the
property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by
operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the
suspensive condition which is the full payment of the
purchase price, ownership will not automatically
transfer to the buyer although the property may have
been previously delivered to him. The prospective
seller still has to convey title to the prospective buyer
by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell
and a conditional contract of sale specially in cases
where the subject property is sold by the owner not to
the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third
person buying such property despite the fulfillment of
the suspensive condition such as the full payment of
the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot
seek the relief of reconveyance of the property. There
is no double sale in such case. Title to the property
will transfer to the buyer after registration because
there is no defect in the owner-sellers title per se, but
the latter, of course, may be sued for damages by the
intending buyer.

In a conditional contract of sale, however, upon the

fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the
sellers title thereto. In fact, if there had been previous
delivery of the subject property, the sellers ownership
or title to the property is automatically transferred to
the buyer such that, the seller will no longer have any
A contract to sell as defined hereinabove, may not
title to transfer to any third person. Applying Article
even be considered as a conditional contract of sale
1544 of the Civil Code, such second buyer of the
where the seller may likewise reserve title to the
property who may have had actual or constructive
property subject of the sale until the fulfillment of a
knowledge of such defect in the sellers title, or at least
suspensive condition, because in a conditional
was charged with the obligation to discover such
contract of sale, the first element of consent is present, defect, cannot be a registrant in good faith. Such
although it is conditioned upon the happening of a
second buyer cannot defeat the first buyers title. In
contingent event which may or may not occur. If the
case a title is issued to the second buyer, the first
suspensive condition is not fulfilled, the perfection of buyer may seek reconveyance of the property subject
the contract of sale is completely abated (cf. Homesite of the sale.
and Housing Corp. vs. Court of Appeals, 133 SCRA

SALES 21
With the above postulates as guidelines, we now
proceed to the task of deciphering the real nature of
the contract entered into by petitioners and private
respondents.
It is a canon in the interpretation of contracts that the
words used therein should be given their natural and
ordinary meaning unless a technical meaning was
intended (Tan vs. Court of Appeals, 212 SCRA 586
[1992]). Thus, when petitioners declared in the said
Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146
Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and
lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount
of P1,240,000.00.

of sale could not have been executed and

consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in
the case at bar did not merely promise to sell the
property to private respondent upon the fulfillment of
the suspensive condition. On the contrary, having
already agreed to sell the subject property, they
undertook to have the certificate of title change to
their names and immediately thereafter, to execute the
written deed of absolute sale.

Thus, the parties did not merely enter into a contract

to sell where the sellers, after compliance by the
buyer with certain terms and conditions, promised to
sell the property to the latter. What may be perceived
from the respective undertakings of the parties to the
contract is that petitioners had already agreed to sell
the house and lot they inherited from their father,
without any reservation of title until full payment of
completely willing to transfer ownership of the
the entire purchase price, the natural and ordinary idea subject house and lot to the buyer if the documents
conveyed is that they sold their property.
were then in order. It just so happened, however, that
the transfer certificate of title was then still in the
When the Receipt of Down payment is considered in
name of their father. It was more expedient to first
its entirety, it becomes more manifest that there was a effect the change in the certificate of title so as to bear
clear intent on the part of petitioners to transfer title to their names. That is why they undertook to cause the
the buyer, but since the transfer certificate of title was issuance of a new transfer of the certificate of title in
still in the name of petitioners father, they could not
their names upon receipt of the down payment in the
fully effect such transfer although the buyer was then amount of P50,000.00. As soon as the new certificate
willing and able to immediately pay the purchase
of title is issued in their names, petitioners were
price. Therefore, petitioners-sellers undertook upon
committed to immediately execute the deed of
receipt of the down payment from private respondent absolute sale. Only then will the obligation of the
Ramona P. Alcaraz, to cause the issuance of a new
buyer to pay the remainder of the purchase price arise.
certificate of title in their names from that of their
father, after which, they promised to present said title, There is no doubt that unlike in a contract to sell
now in their names, to the latter and to execute the
which is most commonly entered into so as to protect
deed of absolute sale whereupon, the latter shall, in
the seller against a buyer who intends to buy the
turn, pay the entire balance of the purchase price.
property in installment by withholding ownership
over the property until the buyer effects full payment
The agreement could not have been a contract to sell
therefor, in the contract entered into in the case at bar,
because the sellers herein made no express reservation the sellers were the ones who were unable to enter
of ownership or title to the subject parcel of
into a contract of absolute sale by reason of the fact
land.Furthermore, the circumstance which prevented
that the certificate of title to the property was still in
the parties from entering into an absolute contract of
the name of their father. It was the sellers in this case
sale pertained to the sellers themselves (the certificate who, as it were, had the impediment which prevented,
of title was not in their names) and not the full
so to speak, the execution of an contract of absolute
payment of the purchase price. Under the established
sale.
facts and circumstances of the case, the Court may
safely presume that, had the certificate of title been in What is clearly established by the plain language of
the names of petitioners-sellers at that time, there
the subject document is that when the said Receipt of
would have been no reason why an absolute contract
Down Payment was prepared and signed by

petitioners Romulo A. Coronel, et. al., the parties had

agreed to a conditional contract of sale,
consummation of which is subject only to the
successful transfer of the certificate of title from the
name of petitioners father, Constancio P. Coronel, to
their names.
The Court significantly notes that this suspensive
condition was, in fact, fulfilled on February 6, 1985
(Exh. D; Exh. 4). Thus, on said date, the conditional
contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the
only act required for the consummation thereof being
the delivery of the property by means of the execution
of the deed of absolute sale in a public instrument,
which petitioners unequivocally committed
themselves to do as evidenced by the Receipt of
Down Payment.
Article 1475, in correlation with Article 1181, both of
the Civil Code, plainly applies to the case at
bench. Thus,
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition
of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the
happening of the event which constitutes the
condition.
Since the condition contemplated by the parties which
is the issuance of a certificate of title in petitioners
names was fulfilled on February 6, 1985, the
respective obligations of the parties under the contract
of sale became mutually demandable, that is,
petitioners, as sellers, were obliged to present the
transfer certificate of title already in their names to
private respondent Ramona P. Alcaraz, the buyer, and
to immediately execute the deed of absolute sale,
while the buyer on her part, was obliged to forthwith
pay the balance of the purchase price amounting
to P1,190,000.00.

It is also significant to note that in the first paragraph

in page 9 of their petition, petitioners conclusively
admitted that:
3. The petitioners-sellers Coronel bound themselves
to effect the transfer in our names from our deceased
father Constancio P. Coronel, the transfer certificate
of title immediately upon receipt of the downpayment
above-stated". The sale was still subject to this
suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered
into a contract of sale subject to a suspensive
condition. Only, they contend, continuing in the same
paragraph, that:
. . . Had petitioners-sellers not complied with this
condition of first transferring the title to the property
under their names, there could be no perfected
contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for
themselves, for Article 1186 of the Civil Code
expressly provides that:
Art. 1186. The condition shall be deemed fulfilled
when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that
what is more controlling than these mere hypothetical
arguments is the fact that the condition herein
referred to was actually and indisputably fulfilled
on February 6, 1985, when a new title was issued in
the names of petitioners as evidenced by TCT No.
327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985,
as evidenced by the document denominated as
Receipt of Down Payment (Exh. A; Exh. 1), the
parties entered into a contract of sale subject to the
suspensive condition that the sellers shall effect the
issuance of new certificate title from that of their
fathers name to their names and that, on February 6,
1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article
1187 which pertinently provides -

SALES 22
Art. 1187. The effects of conditional obligation to
give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation
...
In obligations to do or not to do, the courts shall
determine, in each case, the retroactive effect of the
condition that has been complied with.

Aside from this, petitioners are precluded from raising

their supposed lack of capacity to enter into an
agreement at that time and they cannot be allowed to
now take a posture contrary to that which they took
when they entered into the agreement with private
respondent Ramona P. Alcaraz. The Civil Code
expressly states that:

Art. 1431. Through estoppel an admission or

the rights and obligations of the parties with respect to representation is rendered conclusive upon the person
the perfected contract of sale became mutually due
making it, and cannot be denied or disproved as
and demandable as of the time of fulfillment or
against the person relying thereon.
occurrence of the suspensive condition on February 6,
1985. As of that point in time, reciprocal obligations
Having represented themselves as the true owners of
of both seller and buyer arose.
the subject property at the time of sale, petitioners
cannot claim now that they were not yet the absolute
Petitioners also argue there could been no perfected
owners thereof at that time.
contract on January 19, 1985 because they were then
not yet the absolute owners of the inherited property.
Petitioners also contend that although there was in
fact a perfected contract of sale between them and
We cannot sustain this argument.
Ramona P. Alcaraz, the latter breach her reciprocal
obligation when she rendered impossible the
Article 774 of the Civil Code defines Succession as a consummation thereof by going to the United States
mode of transferring ownership as follows:
of America, without leaving her address, telephone
number, and Special Power of Attorney (Paragraphs
Art. 774. Succession is a mode of acquisition by
14 and 15, Answer with Compulsory Counterclaim to
virtue of which the property, rights and obligations to the Amended Complaint, p. 2; Rollo, p. 43), for which
the extent and value of the inheritance of a person are reason, so petitioners conclude, they were correct in
transmitted through his death to another or others by
unilaterally rescinding the contract of sale.
his will or by operation of law.
We do not agree with petitioners that there was a valid
Petitioners-sellers in the case at bar being the sons and rescission of the contract of sale in the instant
daughters of the decedent Constancio P. Coronel are
case. We note that these supposed grounds for
compulsory heirs who were called to succession by
petitioners rescission, are mere allegations found only
operation of law. Thus, at the point their father drew
in their responsive pleadings, which by express
his last breath, petitioners stepped into his shoes
provision of the rules, are deemed controverted even
insofar as the subject property is concerned, such that if no reply is filed by the plaintiffs (Sec. 11, Rule 6,
any rights or obligations pertaining thereto became
Revised Rules of Court). The records are absolutely
binding and enforceable upon them. It is expressly
bereft of any supporting evidence to substantiate
provided that rights to the succession are transmitted
petitioners allegations. We have stressed time and
from the moment of death of the decedent (Article
again that allegations must be proven by sufficient
777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850
evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882
[1952]).
[1961]; Recaro vs. Embisan, 2 SCRA 598
[1961]). Mere allegation is not an evidence (Lagasca
Be it also noted that petitioners claim that succession
vs. De Vera, 79 Phil. 376 [1947]).
may not be declared unless the creditors have been
paid is rendered moot by the fact that they were able
Even assuming arguendo that Ramona P. Alcaraz was
to effect the transfer of the title to the property from
in the United States of America on February 6, 1985,
the decedents name to their names on February 6,
we cannot justify petitioners-sellers act of unilaterally
1985.
and extrajudicially rescinding the contract of sale,
there being no express stipulation authorizing the

sellers to extrajudicially rescind the contract of

sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988];
Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the
alleged absence of Ramona P. Alcaraz because
although the evidence on record shows that the sale
was in the name of Ramona P. Alcaraz as the buyer,
the sellers had been dealing with Concepcion D.
Alcaraz, Ramonas mother, who had acted for and in
behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by
Concepcion D. Alcaraz with her own personal Check
(Exh. B; Exh. 2) for and in behalf of Ramona P.
Alcaraz. There is no evidence showing that petitioners
ever questioned Concepcions authority to represent
Ramona P. Alcaraz when they accepted her personal
check. Neither did they raise any objection as regards
payment being effected by a third
person. Accordingly, as far as petitioners are
concerned, the physical absence of Ramona P. Alcaraz
is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be
deemed to be in default, insofar as her obligation to
pay the full purchase price is concerned. Petitioners
who are precluded from setting up the defense of the
physical absence of Ramona P. Alcaraz as aboveexplained offered no proof whatsoever to show that
they actually presented the new transfer certificate of
title in their names and signified their willingness and
readiness to execute the deed of absolute sale in
accordance with their agreement. Ramonas
corresponding obligation to pay the balance of the
purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and,
therefore, she cannot be deemed to have been in
default.
Article 1169 of the Civil Code defines when a party in
a contract involving reciprocal obligations may be
considered in default, to wit:
Art. 1169. Those obliged to deliver or to do
something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the
fulfillment of their obligation.
xxx

In reciprocal obligations, neither party incurs in

delay if the other does not comply or is not ready to
comply in a proper manner with what is
incumbent upon him. From the moment one of the
parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind
the contract of sale between petitioners and
respondents.
With the foregoing conclusions, the sale to the other
petitioner, Catalina B. Mabanag, gave rise to a case of
double sale where Article 1544 of the Civil Code will
apply, to wit:
Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred
to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof to the person
who presents the oldest title, provided there is good
faith.
The record of the case shows that the Deed of
Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the
Registry of Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the
second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes
title or ownership to pass to the buyer, the exceptions
being: (a) when the second buyer, in good faith,
registers the sale ahead of the first buyer, and (b)
should there be no inscription by either of the two
buyers, when the second buyer, in good faith, acquires
possession of the property ahead of the first
buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to
him to the prejudice of the first buyer.

SALES 23
In his commentaries on the Civil Code, an accepted
authority on the subject, now a distinguished member
of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior
jure (first in time, stronger in right). Knowledge by
the first buyer of the second sale cannot defeat the
first buyers rights except when the second buyer first
registers in good faith the second sale (Olivares vs.
Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his
rights even if he is first to register, since knowledge
taints his registration with bad faith (see also Astorga
vs. Court of Appeals, G.R. No. 58530, 26 December
1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June
1984, 129 SCRA 656), it was held that it is essential,
to merit the protection of Art. 1544, second paragraph,
that the second realty buyer must act in good faith in
registering his deed of sale (citingCarbonell vs. Court
of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and
Jurisprudence, 1993 Edition, p. 604).

Mabanag registered the said sale sometime in April,

1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already
been previously sold to private respondents, or, at
least, she was charged with knowledge that a previous
buyer is claiming title to the same property. Petitioner
Mabanag cannot close her eyes to the defect in
petitioners title to the property at the time of the
registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he
has acquired knowledge that there was a previous sale
of the same property to a third party or that another
person claims said property in a previous sale, the
registration will constitute a registration in bad faith
and will not confer upon him any right. (Salvoro vs.
Tanega, 87 SCRA 349 [1978]; citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs.
Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43
Phil. 581.)

Thus, the sale of the subject parcel of land between

petitioners and Ramona P. Alcaraz, perfected on
Petitioners point out that the notice of lis pendens in
February 6, 1985, prior to that between petitioners
the case at bar was annotated on the title of the subject and Catalina B. Mabanag on February 18, 1985, was
property only on February 22, 1985, whereas, the
correctly upheld by both the courts below.
second sale between petitioners Coronels and
Although there may be ample indications that there
petitioner Mabanag was supposedly perfected prior
thereto or on February 18, 1985. The idea conveyed is was in fact an agency between Ramona as principal
that at the time petitioner Mabanag, the second buyer, and Concepcion, her mother, as agent insofar as the
subject contract of sale is concerned, the issue of
bought the property under a clean title, she was
whether or not Concepcion was also acting in her own
unaware of any adverse claim or previous sale, for
behalf as a co-buyer is not squarely raised in the
which reason she is a buyer in good faith.
instant petition, nor in such assumption disputed
We are not persuaded by such argument.
between mother and daughter. Thus, We will not
touch this issue and no longer disturb the lower courts
In a case of double sale, what finds relevance and
ruling on this point.
materiality is not whether or not the second buyer in
good faith but whether or not said second buyer
WHEREFORE, premises considered, the instant
registers such second sale in good faith, that is,
petition is hereby DISMISSED and the appealed
without knowledge of any defect in the title of the
judgment AFFIRMED.
property sold.
SO ORDERED.
As clearly borne out by the evidence in this case,
[G.R. No. 125531. February 12, 1997]
petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985
JOVAN LAND, petitioner, vs. COURT OF
because as early as February 22, 1985, a notice of lis
pendens had been annotated on the transfer certificate APPEALS and EUGENIO QUESADA, INC.,
of title in the names of petitioners, whereas petitioner respondents.

DECISION
HERMOSISIMA, JR. J.:
This is a petition for review on certiorari to reverse
and set aside the decision of the Court of Appeals in
C.A.-G.R. CV No. 47515.
Petitioner Jovan Land, Inc. is a corporation engaged
in the real estate business. Its President and Chairman
of the Board of Directors is one Joseph Sy.
Private respondent Eugenio Quesada is the owner of
the Q Building located on an 801 sq. m. lot at the
corner of Mayhaligue Street and Rizal Avenue, Sta.
Cruz, Manila.The property is covered by TCT No.
77796 of the Registry of Deeds of Manila.
Petitioner learned from co-petitioner Consolacion P.
Mendoza that private respondent was selling the
aforesaid Mayhaligue property. Thus, petitioner
through Joseph Sy made a written offer, dated July 27,
1987 for P10.25 million. This first offer was not
accepted by Conrado Quesada, the General Manager
of private respondent. Joseph Sy sent a second written
offer dated July 31, 1989 for the same price but
inclusive of an undertaking to pay the documentary
stamp tax, transfer tax, registration fees and notarial
charges. Check No. 247048, dated July 31, 1989, for
one million pesos drawn against the Philippine
Commercial and Industrial Bank (PCIB) was enclosed
therewith as earnest money. This second offer, with
earnest money, was again rejected by Conrado
Quesada. Undaunted, Joseph Sy, on August 10, 1989,
sent a third written offer for twelve million pesos with
a similar check for one million pesos as earnest
money. Annotated on this third letter-offer was the
phrase "Received original, 9-4-89" beside which
appears the signature of Conrado Quesada.
On the basis of this annotation which petitioner insists
is the proof that there already exists a valid, perfected
agreement to sell the Mayhaligue property, petitioner
filed with the trial court, a complaint for specific
performance and collection of sum of money with
damages. However, the trial court held that:

court finds, there is nothing in the record to point that

a contract was ever perfected. In fact, there is nothing
in writing which is indispensably necessary in order
that the perfected contract could be enforced under the
Statute of Frauds."[1]
Since the trial court dismissed petitioner's complaint
for lack of cause of action, petitioner appealed[2] to
respondent Court of Appeals before which it assigned
the following errors:
"1. The Court a quo failed to appreciate that there was
already a perfected contract of sale between Jovan
Land, Inc. and the private respondent];
2. The Court a quo erred in its conclusion that there
was no implied acceptance of the offer by appellants
to appellee [private respondent];
3. The Court a quo was in error where it concluded
that the contract of sale was unenforceable;
4.The Court a quo failed to rule that appellant
[petitioner] Mendoza is entitled to her broker's
commission."[3]
Respondent court placed petitioner to task on their
assignment of errors and concluded that not any of
them justifies a reversal of the trial court decision.
We agree.
In the case of Ang Yu Asuncion v. Court of Appeals,
[4]
we held that:
"xxx [A] contract (Art. 1157, Civil Code), x x x is a
meeting of minds between two persons whereby one
binds himself, with respect to the other, to give
something or to render some service xxx. A contract
undergoes various stages that include its negotiation
or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from
the time the prospective contracting parties indicate
interest in the contract to the time the contract is
concluded xxx. The perfection of the contract takes
place upon the concurrence of the essential elements
thereof."

"x x x the business encounters between Joseph Sy and

Conrado Quesada had not passed the negotiation stage Moreover, it is a fundamental principle that before
contract of sale can be valid, the following elements
relating to the intended sale by the defendant
must be present, viz: (a) consent or meeting of the
corporation of the property in question. x x x As the

SALES 24
minds; (b) determinate subject matter; (3) price
certain in money or its equivalent. Until the contract
of sale is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical
relation between the parties.

corrected, and that as per his testimony, Sy had

increased it to P12M. This is the reason according to
Sy why there was a superimposition of the number
Although there was a series of communications
'12' over the number '11' to mean P12M as the revised
through letter-offers and rejections as evident from the consideration for the sale of the property in
facts of this case, still it is undeniable that no written
question."[6]
In the case at bench, petitioner, anchors its main
agreement was reached between petitioner and private
argument on the annotation on its third letter-offer of
respondent with regard to the sale of the
Respondent court thus concluded that:
the phrase "Received original, 9-4-89," beside which
realty. Hence, the alleged transaction is unenforceable
"x x x [since] the matter of evaluation of the
appears the signature of Conrado Quesada. It also
as the requirements under the Statute of Frauds have
credibility of witness[es] is addressed to the trial court
contends that the said annotation is evidence to show
not been complied with. Under the said provision, an
and unless clearly contrary to the records before Us,
that there was already a perfected agreement to sell as agreement for the sale of real property or of an
the findings of the said court are entitled to great
respondent can be said to have accepted petitioner's
interest therein, to be enforceable, must be in writing
respondent on appeal, x x x it was Joseph Sy's idea to
payment in the form of a check which was enclosed in and subscribed by the party charged or by an agent
offer the earnest money, and the evidence to show that
the third letter.
thereof
Joseph Sy accepted the same, is wanting. x x x"[7]
However, as correctly elucidated by the Court of
Petitioner also asseverates that the failure of Conrado
and accordingly affirmed the trial court judgment
Appeals:
Quesada to return the check for one million pesos,
appealed from.
translates to implied acceptance of its third letter"Sy insisted in his testimony that this offer of P12M
offer. It, however, does not rebut the finding of the
As shown elucidated above, we agree with the
was accepted by Conrado Quesada but there is
trial court that private respondent was returning the
findings and conclusions of the trial court and the
nothing written or documentary to show that such
check but petitioner refused to accept the same and
offer was accepted by Conrado Quesada. While Sy
that when Conrado Quesada subsequently sent it back respondent court. Neither has petitioner posited any
new issues in the instant petition that warrant the
claimed that the acceptance could be gleaned from the to petitioner through registered mail, the latter failed
further exercise by this court of its review powers.
notation in the third written offer, the court is not
to claim its mail from the post office.
impressed thereon however because the notation
WHEREFORE, premises considered, this petition is
merely states as follows: "Received Original, (S)Finally, we fittingly apply here the oft-repeated
DENIED.
Conrado Quesada" and below this signature is "9-4doctrine that the factual findings of the trial court,
89". As explained by Conrado Quesada in his
especially as regards the credibility of witnesses, are
testimony what was received by him was the original conclusive upon this court, unless the case falls under Costs against petitioner.
of the written offer.
the jurisprudentially established exceptions. But this
SO ORDERED.
is a case that tenders no exceptional
The court cannot believe that this notation marked as
circumstance; rather, we find the observations of the
[G. R. No. 136773. June 25, 2003]
Exhibit D-2 would signify the acceptance of the
trial court to be legally sound and valid:
offer. Neither does it signify, as Sy had testified that
MILAGROS MANONGSONG, joined by her
the check was duly received on said date. If this were "x x x Joseph Sy's testimony is not impressive
husband, CARLITO MANONGSONG, petitioners,
true Sy, who appears to be an intelligent businessman because of several inconsistencies herein pointed
could have easily asked Conrado Quesada to indicate out. On the matter of earnest money, the same appears vs. FELOMENA JUMAQUIO ESTIMO,
on Exhibit D the alleged fact of acceptance of said
to be the idea solely of the [petitioner], assuming that EMILIANA JUMAQUIO, NARCISO ORTIZ,
check. And better still, Sy could have asked Quesada
he had intended to bind the [petitioner] corporation. In CELESTINO ORTIZ, RODOLFO ORTIZ,
ERLINDA O. OCAMPO, PASTOR ORTIZ, JR.,
the acceptance in writing separate of the written offer the written second offer x x x he had stated that the
ROMEO ORTIZ BENJAMIN DELA CRUZ, SR.,
if indeed there was an agreement as to the price of the check of P1M had been enclosed (attached)
[5]
proposed sale of the property in question."
therewith. The same check x x x was again mentioned BENJAMIN DELA CRUZ, JR., AURORA
NICOLAS, GLORIA RACADIO, ROBERTO
to be enclosed (attached) in the third written offer
DELA CRUZ, JOSELITO DELA CRUZ and
Clearly then, a punctilious examination of the receipt under date August 10, 1989 x x x. Sy testified in his
LEONCIA S. LOPEZ, respondents.
reveals that the same can neither be regarded as a
direct examination that he had personally given this
contract of sale nor a promise to sell. Such an
annotation by Conrado Quesada amounts to neither a
written nor an implied acceptance of the offer of
Joseph Sy. It is merely a memorandum of the receipt
by the former of the latter's offer.The requisites of a

valid contract of sale are lacking in said receipt and

therefore the "sale" is neither valid nor enforceable.

check to Conrado Quesada. But on cross examination,

he reversed himself by saying that the check was
given thru his [co-petitioner] Mendoza. Examining
the third written offer, it appears that when it was first
typewritten, this P11M was noted to have been

DECISION
CARPIO, J.:

The Case
Before this Court is a petition for review[1] assailing
the Decision[2] of 26 June 1998 and the Resolution of
21 December 1998 of the Court of Appeals in CAG.R. CV No. 51643. The Court of Appeals reversed
the Decision dated 10 April 1995 of the Regional Trial
Court of Makati City, Branch 135, in Civil Case No.
92-1685, partitioning the property in controversy and
awarding to petitioners a portion of the property.
Antecedent Facts
Spouses Agatona Guevarra (Guevarra) and Ciriaco
Lopez had six (6) children, namely: (1) Dominador
Lopez; (2) Enriqueta Lopez-Jumaquio, the mother of
respondents Emiliana Jumaquio Rodriguez and
Felomena Jumaquio Estimo (Jumaquio sisters); (3)
Victor Lopez, married to respondent Leoncia Lopez;
(4) Benigna Lopez-Ortiz, the mother of respondents
Narciso, Celestino, Rodolfo, Pastor Jr. and Romeo
Ortiz, and Erlinda Ortiz Ocampo; (5) Rosario Lopezdela Cruz, married to respondent Benjamin dela Cruz,
Sr. and the mother of respondents Benjamin Jr.,
Roberto, and Joselito, all surnamed dela Cruz, and of
Gloria dela Cruz Racadio and Aurora dela Cruz
Nicolas; and (6) Vicente Lopez, the father of
petitioner Milagros Lopez Manongsong
(Manongsong).
The contested property is a parcel of land on San Jose
Street, Manuyo Uno, Las Pias, Metro Manila with an
area of approximately 152 square meters
(Property). The records do not show that the Property
is registered under the Torrens system. The Property
is particularly described in Tax Declaration No. B001-00390[3] as bounded in the north by Juan
Gallardo, south by Calle Velay, east by Domingo
Lavana and west by San Jose Street. Tax Declaration
No. B-001-00390 was registered with the Office of
the Municipal Assessor of Las Pias on 30 September
1984 in the name of Benigna Lopez, et al.[4] However,
the improvements on the portion of the Property
denominated as No. 831 San Jose St., Manuyo Uno,
Las Pias were separately declared in the name of
Filomena J. Estimo under Tax Declaration No. 90001-02145 dated 14 October 1991.[5]
Milagros and Carlito Manongsong (petitioners) filed a
Complaint[6] on 19 June 1992, alleging that
Manongsong and respondents are the owners pro

SALES 25
indiviso of the Property.Invoking Article 494 of the
Civil Code,[7] petitioners prayed for the partition and
award to them of an area equivalent to one-fifth (1/5)
of the Property or its prevailing market value, and for
damages.
Petitioners alleged that Guevarra was the original
owner of the Property. Upon Guevarras death, her
children inherited the Property. Since Dominador
Lopez died without offspring, there were only five
children left as heirs of Guevarra. Each of the five
children, including Vicente Lopez, the father of
Manongsong, was entitled to a fifth of the
Property. As Vicente Lopez sole surviving heir,
Manongsong claims her fathers 1/5 share in the
Property by right of representation.
There is no dispute that respondents, who are the
surviving spouses of Guevarras children and their
offspring, have been in possession of the Property for
as long as they can remember. The area actually
occupied by each respondent family differs, ranging
in size from approximately 25 to 50 square
meters. Petitioners are the only descendants not
occupying any portion of the Property.
Most respondents, specifically Narciso, Rodolfo,
Pastor Jr., and Celestino Ortiz, and Erlinda Ortiz
Ocampo (Ortiz family), as well as Benjamin Sr.,
Benjamin Jr., and Roberto dela Cruz, Aurora dela
Cruz Nicolas and Gloria Dela Cruz Racadio (Dela
Cruz family), entered into a compromise agreement
with petitioners. Under the Stipulation of Facts and
Compromise Agreement[8] dated 12 September 1992
(Agreement), petitioners and the Ortiz and Dela Cruz
families agreed that each group of heirs would receive
an equal share in the Property. The signatories to the
Agreement asked the trial court to issue an order of
partition to this effect and prayed further that those
who have exceeded said one-fifth (1/5) must be
reduced so that those who have less and those who
have none shall get the correct and proper portion.[9]
Among the respondents, the Jumaquio sisters and
Leoncia Lopez who each occupy 50 square meter
portions of the Property and Joselito dela Cruz, did
not sign the Agreement.[10] However, only the
Jumaquio sisters actively opposed petitioners
claim. The Jumaquio sisters contended that Justina
Navarro (Navarro), supposedly the mother of

Guevarra, sold the Property to Guevarras daughter

Enriqueta Lopez Jumaquio.
The Jumaquio sisters presented provincial Tax
Declaration No. 911[11] for the year 1949 in the sole
name of Navarro. Tax Declaration No. 911 described
a residential parcel of land with an area of 172.51
square meters, located on San Jose St., Manuyo, Las
Pias, Rizal with the following boundaries: Juan
Gallardo to the north, I. Guevarra Street to the south,
Rizal Street to the east and San Jose Street to the
west. In addition, Tax Declaration No. 911 stated that
the houses of "Agatona Lopez" and "Enriquita Lopez"
stood on the Property as improvements.
The Jumaquio sisters also presented a
notarized KASULATAN SA BILIHAN NG
LUPA[12] (Kasulatan) dated 11 October 1957, the
relevant portion of which states:
AKO SI JUSTINA NAVARRO, sapat ang gulang,
may asawa, Pilipino at naninirahan sa LAS PIAS, ay
siyang nagma-may-ari at nagtatangkilik ng isang
lagay na lupa na matatagpuan sa Manuyo, Las Pias,
Rizal, lihis sa anomang pagkakautang lalong
napagkikilala sa pamamagitan ng mga sumusunod na
palatandaan:

Simula sa araw na ito ay aking ililipat ang pagmamayari at pagtatangkilik ng nasabing lupa kay
ENRIQUETA LOPEZ sa kanilang/kanyang
tagapagmana at kahalili x x x.
The Clerk of Court of the Regional Trial Court of
Manila certified on 1 June 1994 that the KASULATAN
SA BILIHAN NG LUPA, between Justina Navarro
(Nagbili) and Enriqueta Lopez (Bumili), was
notarized by Atty. Ruperto Q. Andrada on 11 October
1957 and entered in his Notarial Register xxx.[13] The
certification further stated that Atty. Andrada was a
duly appointed notary public for the City of Manila in
1957.
Because the Jumaquio sisters were in peaceful
possession of their portion of the Property for more
than thirty years, they also invoked the defense of
acquisitive prescription against petitioners, and
charged that petitioners were guilty of laches. The
Jumaquio sisters argued that the present action should
have been filed years earlier, either by Vicente Lopez
when he was alive or by Manongsong when the latter
reached legal age. Instead, petitioners filed this action
for partition only in 1992 whenManongsong was
already 33 years old.

xxx The conveyance made by Justina Navarro is

subject to nullity because the property conveyed had a
conjugal character. No positive evidence had been
introduced that it was solely a paraphernal
property. The name of Justina Navarros
spouse/husband was not mentioned and/or whether
the husband was still alive at the time the conveyance
was made to Justina Navarro.Agatona Guevarra as her
compulsory heir should have the legal right to
participate with the distribution of the estate under
question to the exclusion of others. She is entitled to
her legitime. The Deed of Sale [Exhs 4 & 4-1(sic)]
did not at all provide for the reserved legitime or the
heirs, and, therefore it has no force and effect against
Agatona Guevarra and her six (6) legitimate children
including the grandchildren, by right of
representation, as described in the order of intestate
succession. The same Deed of Sale should be declared
a nullity ab initio. The law on the matter is clear. The
compulsory heirs cannot be deprived of their legitime,
except on (sic) cases expressly specified by law like
for instance disinheritance for cause. xxx (Emphasis
supplied)

The Ruling of the Trial Court

Since the other respondents had entered into a

compromise agreement with petitioners, the
dispositive portion of the trial courts decision was
directed against the Jumaquio sisters only, as follows:

After trial on the merits, the trial court in its

Decision[14] of 10 April 1995 ruled in favor of
petitioners. The trial court held that the Kasulatan was
void, even absent evidence attacking its validity. The
trial court declared:

WHEREFORE, premises considered, judgment is

hereby rendered in favor of plaintiffs and against the
remaining active defendants, Emiliana Jumaquio
and Felomena J. Estimo, jointly and severally,
ordering:

It appears that the ownership of the estate in question

is controverted. According to defendants Jumaquios,
it pertains to them through conveyance by means of a
Deed of Sale executed by their common ancestor
Justina Navarro to their mother Enriqueta, which deed
was presented in evidence as Exhs. 4 to 4-A. Plaintiff
Milagros Manongsong debunks the evidence as
fake. The document of sale, in the observance of the
Court, is however duly authenticated by means of a
certificate issued by the RTC of the Manila Clerk of
Court as duly notarized public document (Exh. 5). No
countervailing proof was adduced by plaintiffs to
overcome or impugn the documents legality or its
validity.

1. That the property consisting of 152 square meters

referred to above be immediately partitioned giving
plaintiff Milagros Lopez-Manongsong her lawful
share of 1/5 of the area in square meters, or the
prevailing market value on the date of the decision;

BOUNDARIES:
NORTH: JUAN GALLARDO SOUTH: I.
GUEVARRA ST. EAST: RIZAL ST., WEST: SAN
JOSE ST.,
na may sukat na 172.51 metros cuadrados na may
TAX DECLARATION BILANG 911.
NA DAHIL AT ALANG ALANG sa halagang
DALAWANG DAAN LIMANGPUNG PISO
(P250.00), SALAPING PILIPINO, na sa akin ay
kaliwang iniabot at ibinayad ni ENRIQUETA
LOPEZ, may sapat na gulang, Pilipino, may asawa at
naninirahan sa Las Pias, Rizal, at sa karapatang ito ay
aking pinatutunayan ng pagkakatanggap ng nasabing
halaga na buong kasiyahan ng aking kalooban ay
aking IPINAGBILI, ISINALIN AT INILIPAT sa
nasabing, ENRIQUETA LOPEZ, sa kanyang mga
tagapagmana at kahalili, ang kabuuang sukat ng
lupang nabanggit sa itaas nito sa pamamagitan ng
bilihang walang anomang pasubali. Ang lupang ito ay
walang kasama at hindi taniman ng palay o mais.

2. Defendants to pay plaintiffs the sum of P10,000.00

as compensatory damages for having deprived the
latter the use and enjoyment of the fruits of her 1/5
share;
3. Defendants to pay plaintiffs litigation expenses and
attorneys fee in the sum of P10,000.00; and
4. Defendants to pay the costs of suit.

SALES 26
SO ORDERED.[15] (Emphasis supplied)
When the trial court denied their motion for
reconsideration, the Jumaquio sisters appealed to the
Court of Appeals.
The Ruling of the Court of Appeals
Petitioners, in their appellees brief before the Court of
Appeals, presented for the first time a supposed
photocopy of the death certificate[16] of Guevarra,
which stated that Guevarras mother was a certain
Juliana Gallardo. Petitioner also attached an
affidavit[17] from Benjamin dela Cruz, Sr. attesting that
he knew Justina Navarro only by name and had never
met her personally, although he had lived for some
years with Agatona Guevarra after his marriage with
Rosario Lopez. On the basis of these documents,
petitioners assailed the genuineness and authenticity
of the Kasulatan.
The Court of Appeals refused to take cognizance of
the death certificate and affidavit presented by
petitioners on the ground that petitioners never
formally offered these documents in evidence.
The appellate court further held that the petitioners
were bound by their admission that Navarro was the
original owner of the Property, as follows:
Moreover, plaintiffs-appellees themselves admitted
before the trial court that Justina Navarro and not
Juliana Gallardo was the original owner of the subject
property and was the mother of Agatona Navarro
(sic). Plaintiffs-appellees in their Reply-Memorandum
averred:
As regards the existence of common ownership, the
defendants clearly admit as follows:

should have been proper document to extinguish this

status of co-ownership between the common owners
either by (1) Court action or proper deed of tradition,
xxx xxx xxx.

The trial court confirms these admissions of plaintiffsappellees. The trial court held:
Costs against plaintiffs-appellees.
xxx xxx xxx

SO ORDERED.[18]

With the parties admissions and their conformity to a

factual common line of relationship of the heirs with
one another, it has been elicited ascendant Justina
Navarro is the common ancestor of the heirs herein
mentioned, however, it must be noted that the parties
failed to amplify who was the husband and the
number of compulsory heirs of Justina
Navarro. xxx xxx xxx

Petitioners filed a motion for reconsideration, but the

Court of Appeals denied the same in its Resolution of
21 December 1998.[19]

Therefore, plaintiffs-appellees cannot now be heard

contesting the fact that Justina Navarro was their
common ancestor and was the original owner of the
subject property.
The Court of Appeals further held that the trial court
erred in assuming that the Property was conjugal in
nature when Navarro sold it. The appellate court
reasoned as follows:
However, it is a settled rule that the party who invokes
the presumption that all property of marriage belongs
to the conjugal partnership, must first prove that the
property was acquired during the marriage. Proof of
acquisition during the coveture is a condition sine qua
non for the operation of the presumption in favor of
conjugal ownership.
In this case, not a single iota of evidence was
submitted to prove that the subject property was
acquired by Justina Navarro during her marriage. xxx

xxx xxx xxx

History of this case tells us that originally the property
was owned by JUSTINA NAVARRO who has a
daughter by the name of AGATONA
GUEVARRA who on the other hand has six children
namely: xxx xxx xxx.
which point-out that co-ownership exists on the
property between the parties. Since this is the
admitted history, facts of the case, it follows that there

WHEREFORE, foregoing considered, the appealed

decision is hereby REVERSED and SET ASIDE. A
new one is hereby rendered DISMISSING plaintiffsappellees complaint in so far as defendants-appellants
are concerned.

On 28 January 1999, petitioners appealed the

appellate courts decision and resolution to this
Court. The Court initially denied the petition for
review due to certain procedural defects. The Court,
however, gave due course to the petition in its
Resolution of 31 January 2000.[20]
The Issues
Petitioners raise the following issues before this
Court:
1. WHETHER PETITIONER HAS NO
COUNTERVAILING EVIDENCE ON THE
ALLEGED SALE BY ONE JUSTINA NAVARRO;
2. WHETHER THERE IS PRETERITION AND THE
ISSUES RAISED ARE REVIEWABLE;
3. WHETHER THERE IS CO-OWNERSHIP PRO
INDIVISO;

The issues raised by petitioners are mainly factual in

nature. In general, only questions of law are
appealable to this Court under Rule 45. However,
where the factual findings of the trial court and Court
of Appeals conflict, this Court has the authority to
review and, if necessary, reverse the findings of fact
of the lower courts.[22] This is precisely the situation in
this case.
We review the factual and legal issues of this case in
light of the general rules of evidence and the burden
of proof in civil cases, as explained by this Court
in Jison v. Court of Appeals :[23]
xxx Simply put, he who alleges the affirmative of the
issue has the burden of proof, and upon the plaintiff in
a civil case, the burden of proof never parts. However,
in the course of trial in a civil case, once plaintiff
makes out a prima facie case in his favor, the duty or
the burden of evidence shifts to defendant to
controvert plaintiff's prima facie case, otherwise, a
verdict must be returned in favor of plaintiff.
Moreover, in civil cases, the party having the burden
of proof must produce a preponderance of evidence
thereon, with plaintiff having to rely on the strength of
his own evidence and not upon the weakness of the
defendants. The concept of preponderance of
evidence refers to evidence which is of greater
weight, or more convincing, that which is offered in
opposition to it; at bottom, it means probability of
truth.
Whether the Court of Appeals erred in affirming the
validity of the

4. WHETHER THE RULE OF THE MAJORITY

CO-OWNERS ON THE LAND SHOULD PREVAIL; Kasulatan sa Bilihan ng Lupa
5. WHETHER THE ALLEGED SALE IS VALID
AND BINDS THE OTHER CO-HEIRS;

The findings of the trial court that the subject property

is conjugal in nature is not supported by any evidence. 6. WHETHER PRESCRIPTION APPLIES
AGAINST THE SHARE OF PETITIONERS.[21]
To the contrary, records show that in 1949 the subject
property was declared, for taxation purposes under the The fundamental question for resolution is whether
name of Justina Navarro alone. This indicates that the petitioners were able to prove, by the requisite
quantum of evidence, that Manongsong is a co-owner
land is the paraphernal property of Justina Navarro.
of the Property and therefore entitled to demand for
its partition.
For these reasons, the Court of Appeals reversed the
decision of the trial court, thus:

The petition lacks merit.

The Ruling of the Court

Petitioners anchor their action for partition on the

claim that Manongsong is a co-owner or co-heir of the
Property by inheritance, more specifically, as the heir
of her father, Vicente Lopez. Petitioners likewise
allege that the Property originally belonged to
Guevarra, and that Vicente Lopez inherited from
Guevarra a 1/5 interest in the Property. As the parties
claiming the affirmative of these issues, petitioners
had the burden of proof to establish their case by
preponderance of evidence.

SALES 27
To trace the ownership of the Property, both
contending parties presented tax declarations and the
testimonies of witnesses. However, the Jumaquio
sisters also presented a notarized KASULATAN SA
BILIHAN NG LUPA which controverted petitioners
claim of co-ownership.
The Kasulatan, being a document acknowledged
before a notary public, is a public document
and prima facie evidence of its authenticity and due
execution. To assail the authenticity and due
execution of a notarized document, the evidence must
be clear, convincing and more than merely
preponderant.[24] Otherwise the authenticity and due
execution of the document should be upheld.[25] The
trial court itself held that (n)o countervailing proof
was adduced by plaintiffs to overcome or impugn the
documents legality or its validity.[26]
Even if the Kasulatan was not notarized, it would be
deemed an ancient document and thus still presumed
to be authentic. The Kasulatan is: (1) more than 30
years old, (2) found in the proper custody, and (3)
unblemished by any alteration or by any circumstance
of suspicion. It appears, on its face, to be genuine.[27]
Nevertheless, the trial court held that
the Kasulatan was void because the Property was
conjugal at the time Navarro sold it to Enriqueta
Lopez Jumaquio. We do not agree.The trial courts
conclusion that the Property was conjugal was not
based on evidence, but rather on a misapprehension of
Article 160 of the Civil Code, which provides:
All property of the marriage is presumed to belong to
the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife.
As the Court of Appeals correctly pointed out, the
presumption under Article 160 of the Civil Code
applies only when there is proof that the property was
acquired during the marriage. Proof of acquisition
during the marriage is an essential condition for the
operation of the presumption in favor of the conjugal
partnership.[28]
There was no evidence presented to establish that
Navarro acquired the Property during her
marriage. There is no basis for applying the
presumption under Article 160 of the Civil Code to
the present case. On the contrary, Tax Declaration No.

911 showed that, as far back as in 1949, the Property

Navarro was indeed the mother of Guevarra. These
was declared solely in Navarros name. [29] This tends to documents do not prove that Guevarra owned the
support the argument that the Property was not
Property or that Navarro did not own the Property.
conjugal.
Petitioners admitted before the trial court that Navarro
We likewise find no basis for the trial courts
was the mother of Guevarra. However, petitioners
declaration that the sale embodied in
denied before the Court of Appeals that Navarro was
the Kasulatan deprived the compulsory heirs of
the mother of Guevarra. We agree with the appellate
Guevarra of their legitimes. As opposed to a
court that this constitutes an impermissible change of
disposition inter vivos by lucrative or gratuitous title, theory. When a party adopts a certain theory in the
a valid sale for valuable consideration does not
court below, he cannot change his theory on
diminish the estate of the seller. When the disposition appeal. To allow him to do so is not only unfair to the
is for valuable consideration, there is no diminution of other party, it is also offensive to the basic rules of fair
the estate but merely a substitution of values,[30] that
play, justice and due process.[35]
is, the property sold is replaced by the equivalent
If Navarro were not the mother of Guevarra, it would
monetary consideration.
only further undermine petitioners case. Absent any
Under Article 1458 of the Civil Code, the elements of hereditary relationship between Guevarra and
a valid contract of sale are: (1) consent or meeting of
Navarro, the Property would not have passed from
the minds; (2) determinate subject matter and (3)
Navarro to Guevarra, and then to the latters children,
price certain in money or its equivalent.[31] The
including petitioners, by succession. There would
presence of these elements is apparent on the face of
then be no basis for petitioners claim of co-ownership
the Kasulatan itself. The Property was sold in 1957
by virtue of inheritance from Guevarra. On the other
for P250.00.[32]
hand, this would not undermine respondents position
since they anchor their claim on the sale under
Whether the Court of Appeals erred in not admitting the Kasulatan and not on inheritance from Guevarra.
the documents presented by petitioners for the first
time on appeal
Since the notarized Kasulatan is evidence of greater
weight which petitioners failed to refute by clear and
We find no error in the Court of Appeals refusal to
convincing evidence, this Court holds that petitioners
give any probative value to the alleged birth
were not able to prove by preponderance of evidence
certificate of Guevarra and the affidavit of Benjamin
that the Property belonged to Guevarras estate. There
dela Cruz, Sr. Petitioners belatedly attached these
is therefore no legal basis for petitioners complaint for
documents to their appellees brief. Petitioners could
partition of the Property.
easily have offered these documents during the
proceedings before the trial court. Instead, petitioners WHEREFORE, the Decision of 26 June 1998 of the
presented these documents for the first time on appeal Court of Appeals in CA-G.R. CV No. 51643,
without any explanation. For reasons of their own,
dismissing the complaint of petitioners against
petitioners did not formally offer in evidence these
Felomena Jumaquio Estimo and Emiliana Jumaquio,
documents before the trial court as required by
is AFFIRMED.
Section 34, Rule 132 of the Rules of Court.[33] To
SO ORDERED.
admit these documents now is contrary to due
process, as it deprives respondents of the opportunity
[G.R. No. 137290. July 31, 2000]
to examine and controvert them.
Moreover, even if these documents were admitted,
they would not controvert Navarros ownership of the
Property. Benjamin dela Cruz, Sr.s affidavit stated
merely that, although he knew Navarro by name, he
was not personally acquainted with her.[34] Guevarras
alleged birth certificate casts doubt only as to whether

MENDOZA, J.:
This is a petition for review of the decision,[1] dated
April 8, 1997, of the Court of Appeals which reversed
the decision of the Regional Trial Court, Branch 153,
Pasig City dismissing the complaint brought by
respondents against petitioner for enforcement of a
contract of sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a
domestic corporation engaged in the purchase and
sale of real properties. Part of its inventory are two
parcels of land totalling 1, 738 square meters at the
corner of Meralco Avenue and General Capinpin
Street, Barrio Oranbo, Pasig City, which are covered
by TCT Nos. PT-82395 and PT-82396 of the Register
of Deeds of Pasig City.
On February 21, 1994, the properties were offered for
sale for P52,140,000.00 in cash. The offer was made
to Atty. Helena M. Dauz who was acting for
respondent spouses as undisclosed principals. In a
letter[2] dated March 24, 1994, Atty. Dauz signified her
clients interest in purchasing the properties for the
amount for which they were offered by petitioner,
under the following terms: the sum of P500,000.00
would be given as earnest money and the balance
would be paid in eight equal monthly installments
from May to December, 1994. However, petitioner
refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another
letter[3] proposing the following terms for the purchase
of the properties, viz:
This is to express our interest to buy your-abovementioned property with an area of 1, 738 sq. meters.
For this purpose, we are enclosing herewith the sum
ofP1,000,000.00 representing earnest-deposit money,
subject to the following conditions.
1. We will be given the exclusive option to purchase
the property within the 30 days from date of your
acceptance of this offer.

SAN MIGUEL PROPERTIES PHILIPPINES,

INC., petitioner, vs. SPOUSES ALFREDO HUANG
2. During said period, we will negotiate on the terms
and GRACE HUANG, respondents.
and conditions of the purchase; SMPPI will secure the
DECISION
necessary Management and Board approvals; and we

SALES 28
initiate the documentation if there is mutual
agreement between us.

On August 16, 1994, respondent spouses filed a

complaint for specific performance against petitioner
before the Regional Trial Court, Branch 133, Pasig
City where it was docketed as Civil Case No. 64660.

courts ruling that Isidro A. Sobrecarey had authority

to sell the subject real properties.[8]

In the present case, the P1 million "earnest-deposit"

could not have been given as earnest money as
contemplated in Art. 1482 because, at the time when
3. In the event that we do not come to an agreement
Respondents were required to comment within ten
petitioner accepted the terms of respondents offer of
on this transaction, the said amount of P1,000,000.00
(10) days from notice. However, despite 13 extensions March 29, 1994, their contract had not yet been
shall be refundable to us in full upon demand. . . .
Within the period for filing a responsive pleading,
totalling 142 days which the Court had given to them, perfected. This is evident from the following
petitioner filed a motion to dismiss the complaint
respondents failed to file their comment. They were
conditions attached by respondents to their letter, to
Isidro A. Sobrecarey, petitioners vice-president and
alleging that (1) the alleged "exclusive option" of
thus considered to have waived the filing of a
wit: (1) that they be given the exclusive option to
operations manager for corporate real estate, indicated respondent spouses lacked a consideration separate
comment.
purchase the property within 30 days from acceptance
his conformity to the offer by affixing his signature to and distinct from the purchase price and was thus
of the offer; (2) that during the option period, the
the letter and accepted the "earnest-deposit" of P1
The petition is meritorious.
unenforceable and (2) the complaint did not allege a
parties would negotiate the terms and conditions of
million. Upon request of respondent spouses,
cause of action because there was no "meeting of the
the purchase; and (3) petitioner would secure the
In holding that there is a perfected contract of sale, the necessary approvals while respondents would handle
Sobrecarey ordered the removal of the "FOR SALE"
minds" between the parties and, therefore, no
Court of Appeals relied on the following findings: (1) the documentation.
sign from the properties.
perfected contract of sale. The motion was opposed
earnest money was allegedly given by respondents
by respondents.
Atty. Dauz and Sobrecarey then commenced
and accepted by petitioner through its vice-president
The first condition for an option period of 30 days
negotiations. During their meeting on April 8, 1994,
and operations manager, Isidro A. Sobrecarey; and (2) sufficiently shows that a sale was never perfected. As
On December 12, 1994, the trial court granted
Sobrecarey informed Atty. Dauz that petitioner was
the documentary evidence in the records show that
petitioners motion and dismissed the action.
petitioner correctly points out, acceptance of this
willing to sell the subject properties on a 90-day term. Respondents filed a motion for reconsideration, but it there was a perfected contract of sale.
condition did not give rise to a perfected sale but
Atty. Dauz countered with an offer of six months
was denied by the trial court. They then appealed to
merely to an option or an accepted unilateral promise
With regard to the alleged payment and acceptance of on the part of respondents to buy the subject
within which to pay.
the Court of Appeals which, on April 8, 1997,
earnest money, the Court holds that respondents did
rendered a decision[6] reversing the judgment of the
properties within 30 days from the date of acceptance
On April 14, 1994, the parties again met during which trial court. The appellate court held that all the
not give the P1 million as "earnest money" as
of the offer. Such option giving respondents the
Sobrecarey informed Atty. Dauz that petitioner had
provided by Art. 1482 of the Civil Code. They
requisites of a perfected contract of sale had been
exclusive right to buy the properties within the period
not yet acted on her counter-offer. This prompted Atty. complied with as the offer made on March 29, 1994,
presented the amount merely as a deposit of what
agreed upon is separate and distinct from the contract
Dauz to propose a four-month period of amortization. in connection with which the earnest money in the
would eventually become the earnest money or
of sale which the parties may enter.[11] All that
downpayment should a contract of sale be made by
amount of P1 million was tendered by respondents,
respondents had was just the option to buy the
On April 25, 1994, Atty. Dauz asked for an extension had already been accepted by petitioner. The court
them. The amount was thus given not as a part of the
properties which privilege was not, however,
of 45 days from April 29, 1994 to June 13, 1994
cited Art. 1482 of the Civil Code which provides that purchase price and as proof of the perfection of the
exercised by them because there was a failure to agree
within which to exercise her option to purchase the
contract of sale but only as a guarantee that
"[w]henever earnest money is given in a contract of
on the terms of payment. No contract of sale may thus
property, adding that within that period, "[we] hope to sale, it shall be considered as part of the price and as
respondents would not back out of the sale.
be enforced by respondents.
finalize [our] agreement on the matter." [4] Her request proof of the perfection of the contract." The fact the
Respondents in fact described the amount as an
was granted.
"earnest-deposit." In Spouses Doromal, Sr. v. Court of Furthermore, even the option secured by respondents
parties had not agreed on the mode of payment did
Appeals,[9] it was held:
not affect the contract as such is not an essential
from petitioner was fatally defective. Under the
On July 7, 1994, petitioner, through its president and
element for its validity. In addition, the court found
second paragraph of Art. 1479, an accepted unilateral
chief executive officer, Federico Gonzales, wrote
. . . While the P5,000 might have indeed been paid to promise to buy or sell a determinate thing for a price
that Sobrecarey had authority to act in behalf of
Atty. Dauz informing her that because the parties
Carlos in October, 1967, there is nothing to show that certain is binding upon the promisor only if the
petitioner for the sale of the properties.[7]
failed to agree on the terms and conditions of the sale
the same was in the concept of the earnest money
promise is supported by a distinct consideration.
despite the extension granted by petitioner, the latter
Petitioner moved for reconsideration of the trial courts contemplated in Art. 1482 of the Civil Code, invoked Consideration in an option contract may be anything
was returning the amount of P1 million given as
by petitioner, as signifying perfection of the
decision, but its motion was denied. Hence, this
of value, unlike in sale where it must be the price
"earnest-deposit."[5]
sale. Viewed in the backdrop of the factual milieu
petition.
certain in money or its equivalent. There is no
thereof extant in the record, We are more inclined to
showing here of any consideration for the option.
On July 20, 1994, respondent spouses, through
Petitioner contends that the Court of Appeals erred in believe that the said P5,000.00 were paid in the
Lacking any proof of such consideration, the option is
counsel, wrote petitioner demanding the execution
concept of earnest money as the term was understood unenforceable.
finding that there was a perfected contract of sale
within five days of a deed of sale covering the
between the parties because the March 29, 1994 letter under the Old Civil Code, that is, as a guarantee that
properties. Respondents attempted to return the
the buyer would not back out, considering that it is
of respondents, which petitioner accepted, merely
Equally compelling as proof of the absence of a
"earnest-deposit" but petitioner refused on the ground resulted in an option contract, albeit it was
not clear that there was already a definite agreement
perfected sale is the second condition that, during the
that respondents option to purchase had already
as to the price then and that petitioners were decided
unenforceable for lack of a distinct consideration.
option period, the parties would negotiate the terms
expired.
to buy 6/7 only of the property should respondent
Petitioner argues that the absence of agreement as to
and conditions of the purchase. The stages of a
the mode of payment was fatal to the perfection of the Javellana refuse to agree to part with her 1/7 share.[10] contract of sale are as follows: (1) negotiation,
contract of sale. Petitioner also disputes the appellate
covering the period from the time the prospective

SALES 29
contracting parties indicate interest in the contract to
the time the contract is perfected; (2) perfection,
which takes place upon the concurrence of the
essential elements of the sale which are the meeting of
the minds of the parties as to the object of the contract
and upon the price; and (3) consummation, which
begins when the parties perform their respective
undertakings under the contract of sale, culminating
in the extinguishment thereof.[12] In the present case,
the parties never got past the negotiation stage. The
alleged "indubitable evidence"[13] of a perfected sale
cited by the appellate court was nothing more than
offers and counter-offers which did not amount to any
final arrangement containing the essential elements of
a contract of sale. While the parties already agreed on
the real properties which were the objects of the sale
and on the purchase price, the fact remains that they
failed to arrive at mutually acceptable terms of
payment, despite the 45-day extension given by
petitioner.

sale. The fact, therefore, that the petitioners delivered

to the respondent the sum of P10,000 as part of the
down-payment that they had to pay cannot be
considered as sufficient proof of the perfection of any
purchase and sale agreement between the parties
herein under Art. 1482 of the new Civil Code, as the
petitioners themselves admit that some essential
matter - the terms of the payment - still had to be
mutually covenanted.[18]

The appellate court opined that the failure to agree on

the terms of payment was no bar to the perfection of
the sale because Art. 1475 only requires agreement by
the parties as to the price of the object. This is error.
In Navarro v. Sugar Producers Cooperative
Marketing Association, Inc.,[14] we laid down the rule
that the manner of payment of the purchase price is an
essential element before a valid and binding contract
of sale can exist. 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. As held
in Toyota Shaw, Inc. v. Court of Appeals,[15] agreement
on the manner of payment goes into the price such
that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.
[16]
In Velasco v. Court of Appeals,[17] the parties to a
proposed sale had already agreed on the object of sale
and on the purchase price. By the buyers own
admission, however, the parties still had to agree on
how and when the downpayment and the installments
were to be paid. It was held:

WHEREFORE, the decision of the Court of Appeals

is REVERSED and respondents complaint is
DISMISSED.

. . . Such being the situation, it can not, therefore, be

said that a definite and firm sales agreement between
the parties had been perfected over the lot in
question.Indeed, this Court has already ruled before
that a definite agreement on the manner of payment of
the purchase price is an essential element in the
formation of a binding and enforceable contract of

Thus, it is not the giving of earnest money, but the

proof of the concurrence of all the essential elements
of the contract of sale which establishes the existence
of a perfected sale.
In the absence of a perfected contract of sale, it is
immaterial whether Isidro A. Sobrecarey had the
authority to enter into a contract of sale in behalf of
petitioner. This issue, therefore, needs no further
discussion.

SO ORDERED.
[G.R. No. 119178. June 20, 1997]
LINA LIM LAO, petitioner, vs. COURT OF
APPEALS and PEOPLE OF THE
PHILIPPINES, respondents.
DECISION
PANGANIBAN, J.:
May an employee who, as part of her regular duties,
signs blank corporate checks -- with the name of the
payee and the amount drawn to be filled later by
another signatory -- and, therefore, does so without
actual knowledge of whether such checks are
funded, be held criminally liable for violation of Batas
Pambansa Bilang 22 (B.P. 22), when checks so signed
are dishonored due to insufficiency of funds? Does a
notice of dishonor sent to the main office of the
corporation constitute a valid notice to the said
employee who holds office in a separate branch and
who had no actual knowledge thereof? In other words,
is constructive knowledge of the corporation, but not
of the signatory-employee, sufficient?

These are the questions raised in the petition filed on

March 21, 1995 assailing the Decision[1] of
Respondent Court of Appeals[2] promulgated on
December 9, 1994 in CA-G.R. CR No. 14240
dismissing the appeal of petitioner and affirming the
decision dated September 26, 1990 in Criminal Case
Nos. 84-26967 to 84-26969 of the Regional Trial
Court of Manila, Branch 33. The dispositive portion
of the said RTC decision affirmed by the respondent
appellate court reads:[3]

prejudice to its subsequent prosecution as soon as said

accused is finally apprehended.

WHEREFORE, after a careful consideration of the

evidence presented by the prosecution and that of the
defense, the Court renders judgment as follows:

Version of the Prosecution

Let a warrant issue for the arrest of the accused

Teodulo Asprec which warrant need not be returned to
this Court until the accused is finally arrested.
SO ORDERED.
The Facts

The facts are not disputed. We thus lift them from the
assailed Decision, as follows:

In Criminal Case No. 84-26969 where no evidence

was presented by the prosecution notwithstanding the
fact that there was an agreement that the cases be tried
jointly and also the fact that the accused Lina Lim
Lao was already arraigned, for failure of the
prosecution to adduce evidence against the accused,
the Court hereby declares her innocent of the crime
charged and she is hereby acquitted with cost de
oficio.

Appellant (and now Petitioner Lina Lim Lao) was a

junior officer of Premiere Investment House
(Premiere) in its Binondo Branch. As such officer, she
was authorized to sign checks for and in behalf of the
corporation (TSN, August 16, 1990, p. 6). In the
course of the business, she met complainant Father
Artelijo Pelijo, the provincial treasurer of the Society
of the Divine Word through Mrs. Rosemarie
Lachenal, a trader for Premiere. Father Palijo was
authorized to invest donations to the society and had
For Criminal Case No. 84-26967, the Court finds the
accused Lina Lim Lao guilty beyond reasonable doubt been investing the societys money with Premiere
of the crime charged and is hereby sentenced to suffer (TSN, June 23, 1987, pp. 5, 9-10). Father Palijo had
invested a total of P514,484.04, as evidenced by the
the penalty of ONE (1) YEAR imprisonment and to
Confirmation of Sale No. 82-6994 (Exh A) dated July
pay a fine of P150,000.00 without subsidiary
8, 1993. Father Palijo was also issued Traders Royal
imprisonment in case of insolvency.
Bank (TRB) checks in payment of interest, as follows:
For Criminal Case No. 84-26968, the Court finds the
accused Lina Lim Lao guilty beyond reasonable doubt Check Date Amount
of the crime charged and is hereby sentenced to suffer
the penalty of ONE (1) YEAR imprisonment and to
pay a fine of P150,000.00 without subsidiary
imprisonment in case of of (sic) insolvency.
For the two cases the accused is ordered to pay the
cost of suit.
The cash bond put up by the accused for her
provisional liberty in Criminal Case No. 84-26969
where she is declared acquitted is hereby ordered
cancelled (sic).
With reference to the accused Teodulo Asprec who
has remained at large, in order that the cases as
against him may not remain pending in the docket for
an indefinite period, let the same be archived without

299961 Oct. 7, 1993 (sic) P150,000.00 (Exh. B)

299962 Oct. 7, 1983 P150,000.00 (Exh. C)
323835 Oct. 7, 1983 P 26,010.73
All the checks were issued in favor of Artelijo A.
Palijo and signed by appellant (herein petitioner) and
Teodulo Asprec, who was the head of
operations. Further evidence of the transaction was
the acknowledgment of postdated checks dated July 8,
1983 (Exh . D) and the cash disbursement voucher
(Exh. F, TSN, supra, at pp. 11-16).
When Father Palijo presented the checks for
encashment, the same were dishonored for the reason

SALES 30
Drawn Against Insufficient Funds (DAIF). Father
Palijo immediately made demands on premiere to pay
him the necessary amounts. He first went to the
Binondo Branch but was referred to the Cubao Main
Branch where he was able to talk with the President,
Mr. Cario. For his efforts, he was
paid P5,000.00. Since no other payments followed,
Father Palijo wrote Premiere a formal letter of
demand. Subsequently, Premiere was placed under
receivership (TSN, supra, at pp. 16-19).[4]
Thereafter, on January 24, 1984, Private Complainant
Palijo filed an affidavit-complaint against Petitioner
Lina Lim Lao and Teodulo Asprec for violation of
B.P. 22. After preliminary investigation,[5] three
Informations charging Lao and Asprec with the
offense defined in the first paragraph of Section 1,
B.P. 22 were filed by Assistant Fiscal Felix S.
Caballes before the trial court on May 11, 1984,
[6]
worded as follows:

October 7, 83 well knowing that at the time of issue

he/she did not have sufficient funds in or credit with
the drawee bank for full payment of the said check
upon its presentment as in fact the said check, when
presented within ninety (90) days from the date
thereof, was dishonored by the drawee bank for the
reason: Insuficient Funds; that despite notice of such
dishonor, said accused failed to pay said Artelijo A.
Palijo the amount of the said check or to make
arrangement for full payment of the same within five
(5) banking days from receipt of said notice.
CONTRARY TO LAW.
3. And finally in Criminal Case No. 84-26969:

That on or about July 8, 1983 in the City of Manila,

Philippines, the said accused did then and there
wilfully and unlawfully draw and issue to Artelijo A.
Palijo to apply on account for value a Traders Royal
Bank Check No. 323835 for P26,010.03 payable to
Fr. Artelijo A. Palijo dated October 7, 1983 well
1. In Criminal Case No. 84-26967:
knowing that at the time of issue he/she did not have
That on or about October 7, 1983 in the City of
sufficient funds in or credit with the drawee bank for
Manila, Philippines, the said accused did then and
full payment of the said check upon its presentment as
there wilfully and unlawfully draw and issue to
in fact the said check, when presented within ninety
Artelijo A. Palijo to apply on account or for value a
(90) days from the date thereof, was dishonored by
Traders Royal Bank Check No. 299962
the drawee bank for the reason: Insufficient Funds;
for P150,000.00 payable to Fr. Artelijo A. Palijo dated that despite notice of such dishonor, said accused
October 7, 1983 well knowing that at the time of issue failed to pay said Artelijo A. Palijo the amount of the
he/she did not have sufficient funds in or credit with
said check or to make arrangement for full payment of
the drawee bank for full payment of the said check
the same within five (5) banking days from receipt of
upon its presentment as in fact the said check, when
said notice.
presented within ninety (90) days from the date
CONTRARY TO LAW.
thereof, was dishonored by the drawee bank for the
reason: Insufficient Funds; that despite notice of such
Upon being arraigned, petitioner assisted by counsel
dishonor, said accused failed to pay said Artelijo A.
pleaded not guilty. Asprec was not arrested; he has
Palijo the amount of the said check or to make
remained at large since the trial, and even now on
arrangement for full payment of the same within five
appeal.
(5) banking days from receipt of said notice.
CONTRARY TO LAW.
2. In Criminal Case No. 84-26968:
That on or about October 7, 1983 in the City of
Manila, Philippines, the said accused did then and
there wilfully and unlawfully draw and issue to
Artelijo A. Palijo to apply on account or for value a
Traders Royal Bank Check No. 299961
for P150,000.00 payable to Fr. Artelijo A. Palijo dated

After due trial, the Regional Trial Court convicted

Petitioner Lina Lim Lao in Criminal Case Nos. 8426967 and 84-26968 but acquitted her in Criminal
Case No. 84-26969.[7]On appeal, the Court of Appeals
affirmed the decision of the trial court.

Petitioner Lina Lim Lao was, in 1983, an employee of

Premiere Financing Corporation (hereinafter referred
to as the Corporation), a corporation engaged in
investment management, with principal business
office at Miami, Cubao, Quezon City. She was a
junior officer at the corporation who was, however,
assigned not at its main branch but at the corporations
extension office in (Binondo) Manila. (Ocampo,
T.S.N., 16 August 1990, p. 14)
In the regular course of her duties as a junior officer,
she was required to co-sign checks drawn against the
account of the corporation. The other co-signor was
her head of office, Mr. Teodulo Asprec. Since part of
her duties required her to be mostly in the field and
out of the office, it was normal procedure for her to
sign the checks in blank, that is, without the names of
the payees, the amounts and the dates of maturity. It
was likewise Mr. Asprec, as head of office, who alone
decided to whom the checks were to be ultimately
issued and delivered. (Lao, T.S.N., 28 September
1989, pp. 9-11, 17, 19.)
In signing the checks as part of her duties as junior
officer of the corporation, petitioner had no
knowledge of the actual funds available in the
corporate account. (Lao, T.S.N., 28 September 1989,
p. 21) The power, duty and responsibility of
monitoring and assessing the balances against the
checks issued, and funding the checks thus issued,
devolved on the corporations Treasury Department in
its main office in Cubao, Quezon City, headed then by
the Treasurer, Ms. Veronilyn Ocampo. (Ocampo,
T.S.N., 19 July 1990, p. 4; Lao, T.S.N., 28 September
1989, pp. 21-23)All bank statements regarding the
corporate checking account were likewise sent to the
main branch in Cubao, Quezon City, and not in
Binondo, Manila, where petitioner was holding office.
(Ocampo, T.S.N., 19 July 1990, p. 24; Marqueses,
T.S.N., 22 November 1988, p. 8)
The foregoing circumstances attended the issuance of
the checks subject of the instant prosecution.

The checks were issued to guarantee payment of

investments placed by private complainant Palijo with
Premiere Financing Corporation. In his transactions
Version of the Defense
with the corporation, private complainant
dealt exclusively with one Rosemarie Lachenal, a
Petitioner aptly summarized her version of the facts of trader connected with the corporation, and he never
the case thus:
knew nor in any way dealt with petitioner Lina Lim

Lao at any time before or during the issuance of the

delivery of the checks. (Palijo, T.S.N., 23 June 1987,
pp. 28-29, 32-34; Lao, T.S.N., 15 May 1990, p. 6;
Ocampo, T.S.N., p. 5) Petitioner Lina Lim Lao was
not in any way involved in the transaction which led
to the issuance of the checks.
When the checks were co-signed by petitioner, they
were signed in advance and in blank, delivered to the
Head of Operations, Mr. Teodulo Asprec, who
subsequently filled in the names of the payee, the
amounts and the corresponding dates of
maturity. After Mr. Asprec signed the checks, they
were delivered to private complainant Palijo. (Lao,
T.S.N., 28 September 1989, pp. 8-11, 17, 19; note
also that the trial court in its decision fully accepted
the testimony of petitioner [Decision of the Regional
Trial Court, p. 12], and that the Court of Appeals
affirmed said decision in toto)
Petitioner Lina Lim Lao was not in any way involved
in the completion, and the subsequent delivery of the
check to private complainant Palijo.
At the time petitioner signed the checks, she had no
knowledge of the sufficiency or insufficiency of the
funds of the corporate account. (Lao, T.S.N., 28
September 1989, p. 21) It was not within her powers,
duties or responsibilities to monitor and assess the
balances against the issuance; much less was it within
her (duties and responsibilities) to make sure that the
checks were funded.Premiere Financing Corporation
had a Treasury Department headed by a Treasurer,
Ms. Veronilyn Ocampo, which alone had access to
information as to account balances and which alone
was responsible for funding the issued
checks. (Ocampo, T.S.N., 19 July 1990, p. 4; Lao,
T.S.N., 28 September 1990, p. 23) All statements of
account were sent to the Treasury Department located
at the main office in Cubao, Quezon City. Petitioner
was holding office at the extension in Binondo
Manila. (Lao, T.S.N., 28 September 1989, p. 2425) Petitioner Lina Lim Lao did not have knowledge
of the insufficiency of the funds in the corporate
account against which the checks were drawn.
When the checks were subsequently dishonored,
private complainant sent a notice of said dishonor to
Premier Financing Corporation at its head office in
Cubao, Quezon City. (Please refer to Exh. E; Palijo,
T.S.N., 23 June 1987, p. 51) Private complainant did

SALES 31
not send notice of dishonor to petitioner. (Palijo,
T.S.N., 24 July 1987, p. 10) He did not follow up his
investment with petitioner. (Id.) Private complainant
never contacted, never informed, and never talked
with, petitioner after the checks had bounced. (Id., at
p. 29) Petitioner never had notice of the dishonor of
the checks subject of the instant prosecution.
The Treasurer of Premiere Financing Corporation,
Ms. Veronilyn Ocampo testified that it was the head
office in Cubao, Quezon City, which received notice
of dishonor of the bounced checks.(Ocampo, T.S.N.,
19 July 1990, pp. 7-8) The dishonor of the check
came in the wake of the assassination of the late Sen.
Benigno Aquino, as a consequence of which event a
majority of the corporations clients pre-terminated
their investments. A period of extreme illiquidity and
financial distress followed, which ultimately led to the
corporations being placed under receivership by the
Securities and Exchange Commission. (Ocampo,
T.S.N., 16 August 1990, p. 8, 19; Lao, T.S.N., 28
September 1989, pp. 25-26; Please refer also to
Exhibit 1, the order of receivership issued by the
Securities and Exchange Commission) Despite the
Treasury Departments and (Ms. Ocampos) knowledge
of the dishonor of the checks, however, the main
office in Cubao, Quezon City never informed
petitioner Lina Lim Lao or anybody in the Binondo
office for that matter. (Ocampo, T.S.N., 16 August
1990, pp. 9-10) In her testimony, she justified her
omission by saying that the checks were actually the
responsibility of the main office (Ocampo, T.S.N., 19
July 1990, p. 6) and that, at that time of panic
withdrawals and massive pre-termination of clients
investments, it was futile to inform the Binondo office
since the main office was strapped for cash and in
deep financial distress. (Id., at pp. 7-9) Moreover, the
confusion which came in the wake of the Aquino
assassination and the consequent panic withdrawals
caused them to lose direct communication with the
Binondo office. (Ocampo, T.S.N., 16 August 1990, p.
9-10)
As a result of the financial crisis and distress, the
Securities and Exchange Commission placed Premier
Financing Corporation under receivership, appointing
a rehabilitation receiver for the purpose of settling
claims against the corporation. (Exh. 1) As he himself
admits, private complainant filed a claim for the
payment of the bounced check before and even after
the corporation had been placed under

receivership. (Palijo, T.S.N., 24 July 1987, p. 1017) A check was prepared by the receiver in favor of
the private complainant but the same was not claimed
by him. (Lao, T.S.N., 15 May 1990, p. 18)
Private complainant then filed the instant criminal
action. On 26 September 1990, the Regional Trial
Court of Manila, Branch 33, rendered a decision
convicting petitioner, and sentencing the latter to
suffer the aggregate penalty of two (2) years and to
pay a fine in the total amount of P300,000.00. On
appeal, the Court of Appeals affirmed said
decision. Hence, this petition for review.[8]
The Issue
In the main, petitioner contends that the public
respondent committed a reversible error in concluding
that lack of actual knowledge of insufficiency of
funds was not a defense in a prosecution for violation
of B.P. 22. Additionally, the petitioner argues that the
notice of dishonor sent to the main office of the
corporation, and not to petitioner herself who holds
office in that corporations branch office, does not
constitute the notice mandated in Section 2 of BP 22;
thus, there can be no prima facie presumption that she
had knowledge of the insufficiency of funds.

in full upon its presentment, which check is

subsequently dishonored by the drawee bank for
insufficiency of funds or credit or would have been
dishonored for the same reason had not the drawer,
without any valid reason, ordered the bank to stop
payment, shall be punished by imprisonment of not
less than thirty days but not more than one (1) year or
by a fine of not less than but not more than double the
amount of the check which fine shall in no case
exceed Two hundred thousand pesos, or both such
fine and imprisonment at the discretion of the court.
The same penalty shall be imposed upon any person
who having sufficient funds in or credit with the
drawee bank when he makes or draws and issues a
check, shall fail to keep sufficient funds or to maintain
a credit or to cover the full amount of the check if
presented within a period of ninety (90) days from the
date appearing thereon, for which reason it is
dishonored by the drawee bank.
Where the check is drawn by a corporation, company
or entity, the person or persons who actually signed
the check in behalf of such drawer shall be liable
under this Act.

Justice Luis B. Reyes, an eminent authority in

criminal law, also enumerated the elements of the
offense defined in the first paragraph of Section 1 of
B.P. 22, thus:
1. That a person makes or
draws and issues any check.
2. That the check is made or drawn and issued to
apply on account or for value.
3. That the person who makes or draws and issues the
check knows at the time of issue that he does not have
sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its
presentment.
4. That the check is subsequently dishonored by the
drawee bank for insufficiency of funds or credit, or
would have been dishonored for the same reason had
not the drawer, without any valid reason, ordered the
bank to stop payment.[11]
Crux of the Petition

The salient portions of B.P. 22 read:

Petitioner raised as defense before the Court of

Appeals her lack of actual knowledge of the
insufficiency of funds at the time of the issuance of
the checks, and lack of personal notice of dishonor to
her. The respondent appellate court, however,
affirmed the RTC decision, reasoning that the makers
knowledge of the insufficiency of funds is legally
presumed from the dishonor of his checks for
insufficiency of funds. (People vs. Laggui, 171 SCRA
305; Nieras vs. Hon. Auxencio C. Dacuycuy, 181
SCRA 1)[12] The Court of Appeals also stated that her
alleged lack of knowledge or intent to issue a bum
check would not exculpate her from any responsibility
under B.P. Blg. 22, since the act of making and
[13]
This Court listed the elements of the offense penalized issuing a worthless check is a malum prohibitum. In
the words of the Solicitor General, (s)uch alleged lack
under B.P. 22, as follows: (1) the making, drawing
of knowledge is not material for petitioners liability
and issuance of any check to apply to account or for
under B.P.Blg. 22.[14]
value; (2) the knowledge of the maker, drawer or
issuer that at the time of issue he does not have
Lack of Actual Knowledge of Insufficiency of Funds
sufficient funds in or credit with the drawee bank for

SECTION 1. Checks without sufficient funds. -- Any

person who makes or draws and issues any check to
apply on account or for value, knowing at the time of
issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such check

the payment of such check in full upon its

presentment; and (3) subsequent dishonor of the
check by the drawee bank for insufficiency of funds
or credit or dishonor for the same reason had not the
drawer, without any valid cause, ordered the bank to
stop payment.[10]

The Courts Ruling

The petition is meritorious.
Strict Interpretation of Penal Statutes
It is well-settled in this jurisdiction that penal statutes
are strictly construed against the state and liberally for
the accused, so much so that the scope of a penal
statute cannot be extended by good intention,
implication, or even equity consideration. Thus, for
Petitioner Lina Lim Laos acts to be penalized under
the Bouncing Checks Law or B.P. 22, they must come
clearly within both the spirit and the letter of the
statute.[9]

SECTION 2. Evidence of knowledge of insufficient

funds. -- The making, drawing and issuance of a
check payment of which is refused by the drawee
because of insufficient funds in or credit with such
bank, when presented within ninety (90) days from
the date of the check, shall be prima facie evidence of
knowledge of such insufficiency of funds or credit
unless such maker or drawer pays the holder thereof
the amount due thereon, or makes arrangements for
payment in full by the drawee of such check within
five (5) banking days after receiving notice that such
check has not been paid by the drawee.

Knowledge of insufficiency of funds or credit in the

drawee bank for the payment of a check upon its
presentment is an essential element of the offense.
[15]
There is a prima facie presumption of the existence
of this element from the fact of drawing, issuing or

SALES 32
making a check, the payment of which was
subsequently refused for insufficiency of funds.It is
important to stress, however, that this is not a
conclusive presumption that forecloses or precludes
the presentation of evidence to the contrary.
In the present case, the fact alone that petitioner was a
signatory to the checks that were subsequently
dishonored merely engenders the prima
facie presumption that she knew of the insufficiency
of funds, but it does not render her automatically
guilty under B.P. 22. The prosecution has a duty to
prove all the elements of the crime, including the acts
that give rise to the prima facie presumption;
petitioner, on the other hand, has a right to rebut
the prima facie presumption.[16] Therefore, if such
knowledge of insufficiency of funds is proven to
be actually absent or non-existent, the accused should
not be held liable for the offense defined under the
first paragraph of Section 1 of B.P. 22. Although the
offense charged is a malum prohibitum, the
prosecution is not thereby excused from its
responsibility of proving beyond reasonable doubt all
the elements of the offense, one of which is
knowledge of the insufficiency of funds.
After a thorough review of the case at bar, the Court
finds that Petitioner Lina Lim Lao did not have actual
knowledge of the insufficiency of funds in the
corporate accounts at the time she affixed her
signature to the checks involved in this case, at the
time the same were issued, and even at the time the
checks were subsequently dishonored by the drawee
bank.
The scope of petitioners duties and responsibilities did
not encompass the funding of the corporations checks;
her duties were limited to the marketing department
of the Binondo branch.[17] Under the organizational
structure of Premiere Financing Corporation, funding
of checks was the sole responsibility of the Treasury
Department. Veronilyn Ocampo, former Treasurer of
Premiere, testified thus:
Q Will you please tell us whose (sic) responsible for
the funding of checks in Premiere?
A The one in charge is the Treasury Division up to the
Treasury Disbursement and then they give it directly
to Jose Cabacan, President of Premiere.[18]

Furthermore, the Regional Trial Court itself found

that, since Petitioner Lina Lim Lao was often out in
the field taking charge of the marketing department of
the Binondo branch, she signed the checks in blank as
to name of the payee and the amount to be drawn,
and without knowledge of the transaction for which
they were issued.[19] As a matter of company practice,
her signature was required in addition to that
of Teodulo Asprec, who alone placed the name of the
payee and the amount to be drawn thereon.This is
clear from her testimony:

(to witness)

(for clarification to witness)

q Now, you said that you sign first, after you sign,
who signs the check?

Witness may answer.

q x x x Will you please or will you be able to tell us

the condition of this check when you signed this or
when you first saw this check?

q Now, in the distribution or issuance of checks which

according to you, as a co-signee, you sign. Who
determines to whom to issue or to whom to pay the
check after Teodoro Asprec signs the check?

Witness

a Mr. Teodoro Asprec, sir.

q Is this Teodoro Asprec the same Teodoro Asprec,
one of the accused in all these cases?

q Only to facilitate your business transaction, so you

signed the other checks?
Witness
a Yes, Your Honor.

a Yes, sir.
q So that when ever there is a transaction all is
needed . . . all that is needed is for the other co-signee
to sign?
a Yes, Your Honor.

Witness

COURT

a He is the one.

(To counsel)

Atty. Gonzales

Proceed.
Atty. Gonzales

xxxxxxxxx

q Mr. Asprec is the one in-charge in . . . are you

telling the Honorable Court that it was Teodoro
Asprec who determines to whom to issue the
check? Does he do that all the time?

COURT

Court

(to witness)

q Does he all the time?

q Is that your practice?

(to witness)

Witness

a Yes, Your Honor.

a Procedure, Your Honor.

q So the check can be negotiated? So, the check can

be good only upon his signing? Without his signing or
signature the check cannot be good?

a I signed the check in blank. There were no

payee. No amount, no date, sir.
q Why did you sign this check in blank when there
was no payee, no amount and no date?
a It is in order to facilitate the transaction, sir.

COURT
That is quiet (sic) unusual. That is why I am asking
that last question if that is a practice of your office.

(to witness)
q Why is it necessary for you to sign?
a Because most of the time I am out in the field in the
afternoon, so, in order to facilitate the transaction I
sign so if I am not around they can issue the check. [20]

a Yes, Your Honor.

Petitioner did not have any knowledge either of the

identity of the payee or the transaction which gave
rise to the issuance of the checks. It was her cosignatory, Teodulo Asprec, who alone filled in the
blanks, completed and issued the checks. That
Petitioner Lina Lim Lao did not have any knowledge
or connection with the checks payee, Artelijo Palijo,
is clearly evident even from the latters testimony, viz.:

Atty. Gonzales

ATTY. GONZALES:

(to witness)

Q When did you come to know the accused Lina Lim

Lao?

a As a co-signer, I sign first, sir.

q So the check cannot be encashed without your
signature, co-signature?
a Yes, sir.

q You made reference to a transaction which

according to you, you signed this check in order to
facilitate the transaction . . . I withdraw that
question. I will reform.

A I cannot remember the exact date because in their

office Binondo, -COURT: (before witness could finish)

Atty. Gonzales
COURT

SALES 33
Q More or less?
A It must have been late 1983.
ATTY. GONZALES:
Q And that must or that was after the transactions
involving alleged checks marked in evidence as
Exhibits B and C?

under the organizational structure of the corporation,

she may not be held liable under B.P. 22. For in the
final analysis, penal statutes such as B.P. 22 must be
construed with such strictness as to carefully
safeguard the rights of the defendant x x x.[22] The
element of knowledge of insufficiency of funds
having been proven to be absent, petitioner is
therefore entitled to an acquittal.

This position finds support in Dingle vs. Intermediate

Appellate Court[23] where we stressed that knowledge
of insufficiency of funds at the time of the issuance of
Q And that was also before the transaction involving
the check was an essential requisite for the offense
that confirmation of sale marked in evidence as
penalized under B.P. 22. In that case, the spouses Paz
Exhibit A?
and Nestor Dingle owned a family business known as
PMD Enterprises.Nestor transacted the sale of 400
A It was also.
tons of silica sand to the buyer Ernesto Ang who paid
for the same. Nestor failed to deliver. Thus, he issued
Q And so you came to know the accused Lina Lim
to Ernesto two checks, signed by him and his wife as
Lao when all those transactions were already
authorized signatories for PMD Enterprises, to
consummated?
represent the value of the undelivered silica
sand. These checks were dishonored for having been
A Yes, sir.
drawn against insufficient funds. Nestor thereafter
issued to Ernesto another check, signed by him and
Q And there has never been any occasion where you
his wife Paz, which was likewise subsequently
transacted with accused Lina Lim Lao, is that correct?
dishonored. No payment was ever made; hence, the
spouses were charged with a violation of B.P. 22
A None, sir, there was no occasion.
before the trial court which found them both
guilty. Paz appealed the judgment to the then
Q And your coming to know Lina Lim Lao the
Intermediate Appellate Court which modified the
accused in these cases was by chance when you
same by reducing the penalty of imprisonment to
happened to drop by in the office at Binondo of the
thirty days. Not satisfied, Paz filed an appeal to this
Premier Finance Corporation, is that what you mean?
Court insisting on her innocence and contending that
she did not incur any criminal liability under B.P. 22
A Yes, sir.
because she had no knowledge of the dishonor of the
Q You indicated to the Court that you were introduced checks issued by her husband and, for that matter,
even the transaction of her husband with Ang. The
to the accused Lina Lim Lao, is that correct?
Court ruled in Dingle as follows:
A After the transactions.

A I was introduced.
xxxxxxxxx
Q After that plain introduction there was nothing
which transpired between you and the accused Lina
Lim Lao?
A There was none.[21]
Since Petitioner Lina Lim Lao signed the checks
without knowledge of the insufficiency of funds,
knowledge she was not expected or obliged to possess

her husband without any knowledge of its issuance,

much less of the transaction and the fact of dishonor.
In the case of Florentino Lozano vs. Hon. Martinez,
promulgated December 18, 1986, it was held that an
essential element of the offense is knowledge on the
part of the maker or drawer of the check of the
insufficiency of his funds.
WHEREFORE, on reasonable doubt, the assailed
decision of the Intermediate Appellate Court (now the
Court of Appeals) is hereby SET ASIDE and a new
one is hereby rendered ACQUITTING petitioner on
reasonable doubt."[24]
In rejecting the defense of herein petitioner and ruling
that knowledge of the insufficiency of funds is legally
presumed from the dishonor of the checks for
insufficiency of funds, Respondent Court of Appeals
cited People vs. Laggui[25] and Nierras vs. Dacuycuy.
[26]
These, however, are inapplicable here. The accused
in both cases issued personal -- not corporate -checks and did not aver lack of knowledge of
insufficiency of funds or absence of personal notice of
the checks dishonor. Furthermore, in People vs.
Laggui[27] the Court ruled mainly on the adequacy of
an information which alleged lack of knowledge of
insufficiency of funds at the time the check was
issued and not at the time of its presentment. On the
other hand, the Court in Nierras vs. Dacuycuy[28] held
mainly that an accused may be charged under B.P. 22
and Article 315 of the Revised Penal Code for the
same act of issuing a bouncing check.
The statement in the two cases -- that mere issuance
of a dishonored check gives rise to the presumption of
knowledge on the part of the drawer that he issued the
same without funds -- does not support the CA
Decision. As observed earlier, there is here only
a prima facie presumption which does not preclude
the presentation of contrary evidence. On the
contrary, People vs. Laggui clearly spells out as an
element of the offense the fact that the drawer must
have knowledge of the insufficiency of funds in, or of
credit with, the drawee bank for the payment of the
same in full on presentment; hence, it even supports
the petitioners position.

The Solicitor General in his

Memorandum recommended that petitioner be
acquitted of the instant charge because from the
testimony of the sole prosecution witness Ernesto
Ang, it was established that he dealt exclusively with
Nestor Dingle. Nowhere in his testimony is the name
of Paz Dingle ever mentioned in connection with the
transaction and with the issuance of the check. In fact,
Ang categorically stated that it was Nestor Dingle
who received his two (2) letters of demand. This lends Lack of Adequate Notice of Dishonor
credence to the testimony of Paz Dingle that she
signed the questioned checks in blank together with

There is another equally cogent reason for the

acquittal of the accused. There can be no prima
facie evidence of knowledge of insufficiency of funds
in the instant case because no notice of dishonor was
actually sent to or received by the petitioner.
The notice of dishonor may be sent by the offended
party or the drawee bank. The trial court itself found
absent a personal notice of dishonor to Petitioner Lina
Lim Lao by the drawee bank based on the unrebutted
testimony of Ocampo (t)hat the checks bounced when
presented with the drawee bank but she did not inform
anymore the Binondo branch and Lina Lim Lao as
there was no need to inform them as the corporation
was in distress.[29] The Court of Appeals affirmed this
factual finding. Pursuant to prevailing jurisprudence,
this finding is binding on this Court.[30]
Indeed, this factual matter is borne by the
records. The records show that the notice of dishonor
was addressed to Premiere Financing Corporation and
sent to its main office in Cubao, Quezon
City. Furthermore, the same had not been transmitted
to Premieres Binondo Office where petitioner had
been holding office.
Likewise no notice of dishonor from the offended
party was actually sent to or received by Petitioner
Lao. Her testimony on this point is as follows:
Atty. Gonzales
q Will you please tell us if Father Artelejo Palejo (sic)
ever notified you of the bouncing of the check or the
two (2) checks marked as Exhibit B or C for the
prosecution?
Witness
a No, sir.
q What do you mean no, sir?
a I was never given a notice. I was never given notice
from Father Palejo (sic).
COURT
(to witness)
q Notice of what?

SALES 34
a Of the bouncing check, Your Honor.[31]
Because no notice of dishonor was actually sent to
and received by the petitioner, the prima
facie presumption that she knew about the
insufficiency of funds cannot apply.Section 2 of B.P.
22 clearly provides that this presumption arises not
from the mere fact of drawing, making and issuing a
bum check; there must also be a showing that, within
five banking days from receipt of the notice of
dishonor, such maker or drawer failed to pay the
holder of the check the amount due thereon or to
make arrangement for its payment in full by the
drawee of such check.
It has been observed that the State, under this statute,
actually offers the violator a compromise by allowing
him to perform some act which operates to preempt
the criminal action, and if he opts to perform it the
action is abated. This was also compared to certain
laws[32] allowing illegal possessors of firearms a
certain period of time to surrender the illegally
possessed firearms to the Government, without
incurring any criminal liability.[33] In this light, the full
payment of the amount appearing in the check within
five banking days from notice of dishonor is a
complete defense.[34] The absence of a notice of
dishonor necessarily deprives an accused an
opportunity to preclude a criminal
prosecution.Accordingly, procedural due process
clearly enjoins that a notice of dishonor be actually
served on petitioner. Petitioner has a right to demand
-- and the basic postulates of fairness require -- that
the notice of dishonor be actually sent to and received
by her to afford her the opportunity to avert
prosecution under B.P. 22.
In this light, the postulate of Respondent Court of
Appeals that (d)emand on the Corporation constitutes
demand on appellant (herein petitioner),[35] is
erroneous. Premiere has no obligation to forward the
notice addressed to it to the employee concerned,
especially because the corporation itself incurs no
criminal liability under B.P. 22 for the issuance of a
bouncing check. Responsibility under B.P. 22 is
personal to the accused; hence, personal knowledge of
the notice of dishonor is necessary. Consequently,
constructive notice to the corporation is not enough to
satisfy due process. Moreover, it is petitioner, as an
officer of the corporation, who is the latters agent for
purposes of receiving notices and other documents,

and not the other way around. It is but axiomatic that

notice to the corporation, which has a personality
distinct and separate from the petitioner, does not
constitute notice to the latter.

senior official -- Teodulo Asprec -- who appears

responsible for the issuance, funding and delivery of
the worthless checks has escaped criminal prosecution
simply because he could not be located by the
authorities. The case against him has been archived
Epilogue
while the awesome prosecutory might of the
government and the knuckled ire of the private
In granting this appeal, the Court is not unaware of
complainant were all focused on poor
B.P. 22s intent to inculcate public respect for and trust petitioner. Thus, this Court exhorts the prosecutors
in checks which, although not legal tender, are
and the police authorities concerned to exert their best
deemed convenient substitutes for currency. B.P. 22
to arrest and prosecute Asprec so that justice in its
was intended by the legislature to enhance
pristine essence can be achieved in all fairness to the
commercial and financial transactions in the
complainant, Fr. Artelijo Palijo, and the People of the
Philippines by penalizing makers and issuers of
Philippines. By this Decision, the Court enjoins the
worthless checks. The public interest behind B.P. 22 is Secretary of Justice and the Secretary of Interior and
thus clearly palpable from its intended purpose.[36]
Local Government to see that essential justice is done
and the real culprit(s) duly-prosecuted and punished.
At the same time, this Court deeply cherishes and is in
fact bound by duty to protect our peoples
WHEREFORE, the questioned Decision of the Court
constitutional rights to due process and to be
of Appeals affirming that of the Regional Trial Court,
presumed innocent until the contrary is proven.
is hereby REVERSED and SET ASIDE. Petitioner
[37]
These rights must be read into any interpretation
Lina Lim Lao isACQUITTED. The Clerk of Court is
and application of B.P. 22. Verily, the public policy to hereby ORDERED to furnish the Secretary of Justice
uphold civil liberties embodied in the Bill of Rights
and the Secretary of Interior and Local Government
necessarily outweighs the public policy to build
with copies of this Decision. No costs.
confidence in the issuance of checks. The first is a
basic human right while the second is only proprietary SO ORDERED.
in nature.[38] Important to remember also is B.P. 22s
requirements that the check issuer must know at the
[G.R. No. 112212. March 2, 1998]
time of issue that he does not have sufficient funds in
GREGORIO FULE, petitioner, vs. COURT OF
or credit with the drawee bank and that he must
APPEALS, NINEVETCH CRUZ and JUAN
receive notice that such check has not been paid by
BELARMINO, respondents.
the drawee. Hence, B.P. 22 must not be applied in a
manner which contravenes an accuseds constitutional
DECISION
and statutory rights.
There is also a social justice dimension in this
case. Lina Lim Lao is only a minor employee who
had nothing to do with the issuance, funding and
delivery of checks. Why she was required by her
employer to countersign checks escapes us. Her
signature is completely unnecessary for it serves no
fathomable purpose at all in protecting the employer
from unauthorized disbursements. Because of the
pendency of this case, Lina Lim Lao stood in
jeopardy -- for over a decade -- of losing her liberty
and suffering the wrenching pain and loneliness of
imprisonment, not to mention the stigma of
prosecution on her career and family life as a young
mother, as well as the expenses, effort and aches in
defending her innocence. Upon the other hand, the

ROMERO, J.:
This petition for review on certiorari questions the
affirmance by the Court of Appeals of the
decision[1] of the Regional Trial Court of San Pablo
City, Branch 30, dismissing the complaint that prayed
for the nullification of a contract of sale of a 10hectare property in Tanay, Rizal in consideration of
the amount of P40,000.00 and a 2.5 carat emerald-cut
diamond (Civil Case No. SP-2455). The lower courts
decision disposed of the case as follows:
WHEREFORE, premises considered, the Court
hereby renders judgment dismissing the complaint for
lack of merit and ordering plaintiff to pay:

1. Defendant Dra. Ninevetch M. Cruz the sum

of P300,000.00 as and for moral damages and the sum
of P100,000.00 as and for exemplary damages;
2. Defendant Atty. Juan Belarmino the sum
of P250,000.00 as and for moral damages and the sum
of P150,000.00 as and for exemplary damages;
3. Defendant Dra. Cruz and Atty. Belarmino the sum
of P25,000.00 each as and for attorneys fees and
litigation expenses; and
4. The costs of suit.
SO ORDERED.
As found by the Court of Appeals and the lower court,
the antecedent facts of this case are as follows:
Petitioner Gregorio Fule, a banker by profession and a
jeweler at the same time, acquired a 10-hectare
property in Tanay, Rizal (hereinafter Tanay property),
covered by Transfer Certificate of Title No. 320725
which used to be under the name of Fr. Antonio
Jacobe. The latter had mortgaged it earlier to the
Rural Bank of Alaminos (the Bank), Laguna, Inc. to
secure a loan in the amount of P10,000.00, but the
mortgage was later foreclosed and the property
offered for public auction upon his default.
In July 1984, petitioner, as corporate secretary of the
bank, asked Remelia Dichoso and Oliva Mendoza to
look for a buyer who might be interested in the Tanay
property.The two found one in the person of herein
private respondent Dr. Ninevetch Cruz. It so happened
that at the time, petitioner had shown interest in
buying a pair of emerald-cut diamond earrings owned
by Dr. Cruz which he had seen in January of the same
year when his mother examined and appraised them
as genuine. Dr. Cruz, however, declined petitioners
offer to buy the jewelry for P100,000.00. Petitioner
then made another bid to buy them for US$6,000.00
at the exchange rate of $1.00 to P25.00. At this point,
petitioner inspected said jewelry at the lobby of the
Prudential Bank branch in San Pablo City and then
made a sketch thereof. Having sketched the jewelry
for twenty to thirty minutes, petitioner gave them
back to Dr. Cruz who again refused to sell them since
the exchange rate of the peso at the time appreciated
to P19.00 to a dollar.

SALES 35
Subsequently, however, negotiations for the barter of
the jewelry and the Tanay property ensued. Dr. Cruz
requested herein private respondent Atty. Juan
Belarmino to check the property who, in turn, found
out that no sale or barter was feasible because the
one-year period for redemption of the said property
had not yet expired at the time.
In an effort to cut through any legal impediment,
petitioner executed on October 19, 1984, a deed of
redemption on behalf of Fr. Jacobe purportedly in the
amount ofP15,987.78, and on even date, Fr. Jacobe
sold the property to petitioner for P75,000.00. The
haste with which the two deeds were executed is
shown by the fact that the deed of sale was notarized
ahead of the deed of redemption. As Dr. Cruz had
already agreed to the proposed barter, petitioner went
to Prudential Bank once again to take a look at the
jewelry.
In the afternoon of October 23, 1984, petitioner met
Atty. Belarmino at the latters residence to prepare the
documents of sale.[2] Dr. Cruz herself was not around
but Atty. Belarmino was aware that she and petitioner
had previously agreed to exchange a pair of emeraldcut diamond earrings for the Tanay property. Atty.
Belarmino accordingly caused the preparation of a
deed of absolute sale while petitioner and Dr. Cruz
attended to the safekeeping of the jewelry.
The following day, petitioner, together with Dichoso
and Mendoza, arrived at the residence of Atty.
Belarmino to finally execute a deed of absolute sale.
Petitioner signed the deed and gave Atty. Belarmino
the amount of P13,700.00 for necessary expenses in
the transfer of title over the Tanay property. Petitioner
also issued a certification to the effect that the actual
consideration of the sale was P200,000.00 and
not P80,000.00 as indicated in the deed of absolute
sale. The disparity between the actual contract price
and the one indicated on the deed of absolute sale was
purportedly aimed at minimizing the amount of the
capital gains tax that petitioner would have to
shoulder. Since the jewelry was appraised only
at P160,000.00, the parties agreed that the balance
of P40,000.00 would just be paid later in cash.

other key to the deposit box had already left the

bank. Dr. Cruz and Dichoso, therefore, looked for said
cashier and found him having a haircut. As soon as
his haircut was finished, the cashier returned to the
bank and arrived there at 5:48 p.m., ahead of Dr. Cruz
and Dichoso who arrived at 5:55 p.m. Dr. Cruz and
the cashier then opened the safety deposit box, the
former retrieving a transparent plastic or cellophane
bag with the jewelry inside and handing over the same
to petitioner.The latter took the jewelry from the bag,
went near the electric light at the banks lobby, held
the jewelry against the light and examined it for ten to
fifteen minutes. After a while, Dr. Cruz asked, Okay
na ba iyan? Petitioner expressed his satisfaction by
nodding his head.
For services rendered, petitioner paid the agents,
Dichoso and Mendoza, the amount of US$300.00 and
some pieces of jewelry. He did not, however, give
them half of the pair of earrings in question which he
had earlier promised.
Later, at about 8:00 oclock in the evening of the same
day, petitioner arrived at the residence of Atty.
Belarmino complaining that the jewelry given to him
was fake. He then used a tester to prove the alleged
fakery. Meanwhile, at 8:30 p.m., Dichoso and
Mendoza went to the residence of Dr. Cruz to borrow
her car so that, with Atty. Belarmino, they could
register the Tanay property. After Dr. Cruz had agreed
to lend her car, Dichoso called up Atty.
Belarmino. The latter, however, instructed Dichoso to
proceed immediately to his residence because
petitioner was there. Believing that petitioner had
finally agreed to give them half of the pair of earrings,
Dichoso went posthaste to the residence of Atty.
Belarmino only to find petitioner already
demonstrating with a tester that the earrings were
fake. Petitioner then accused Dichoso and Mendoza
of deceiving him which they, however, denied. They
countered that petitioner could not have been fooled
because he had vast experience regarding
jewelry. Petitioner nonetheless took back the
US$300.00 and jewelry he had given them.

Thereafter, the group decided to go to the house of a

certain Macario Dimayuga, a jeweler, to have the
As pre-arranged, petitioner left Atty. Belarminos
earrings tested. Dimayuga, after taking one look at the
residence with Dichoso and Mendoza and headed for
earrings, immediately declared them counterfeit. At
the bank, arriving there at past 5:00 p.m. Dr. Cruz also around 9:30 p.m., petitioner went to one Atty.
arrived shortly thereafter, but the cashier who kept the Reynaldo Alcantara residing at Lakeside Subdivision

in San Pablo City, complaining about the fake

jewelry. Upon being advised by the latter, petitioner
reported the matter to the police station where
Dichoso and Mendoza likewise executed sworn
statements.
On October 26, 1984, petitioner filed a complaint
before the Regional Trial Court of San Pablo City
against private respondents praying, among other
things, that the contract of sale over the Tanay
property be declared null and void on the ground of
fraud and deceit.
On October 30, 1984, the lower court issued a
temporary restraining order directing the Register of
Deeds of Rizal to refrain from acting on the pertinent
documents involved in the transaction. On November
20, 1984, however, the same court lifted its previous
order and denied the prayer for a writ of preliminary
injunction.
After trial, the lower court rendered its decision on
March 7, 1989. Confronting the issue of whether or
not the genuine pair of earrings used as consideration
for the sale was delivered by Dr. Cruz to petitioner,
the lower court said:
The Court finds that the answer is definitely in the
affirmative. Indeed, Dra. Cruz delivered (the) subject
jewelries (sic) into the hands of plaintiff who even
raised the same nearer to the lights of the lobby of the
bank near the door. When asked by Dra. Cruz if
everything was in order, plaintiff even nodded his
satisfaction (Hearing of Feb. 24, 1988). At that
instance, plaintiff did not protest, complain or beg for
additional time to examine further the jewelries
(sic). Being a professional banker and engaged in the
jewelry business plaintiff is conversant and competent
to detect a fake diamond from the real thing. Plaintiff
was accorded the reasonable time and opportunity to
ascertain and inspect the jewelries (sic) in accordance
with Article 1584 of the Civil Code. Plaintiff took
delivery of the subject jewelries (sic) before 6:00 p.m.
of October 24, 1984. When he went at 8:00 p.m. that
same day to the residence of Atty. Belarmino already
with a tester complaining about some fake jewelries
(sic), there was already undue delay because of the
lapse of a considerable length of time since he got
hold of subject jewelries (sic). The lapse of two (2)
hours more or less before plaintiff complained is
considered by the Court as unreasonable delay.[3]

The lower court further ruled that all the elements of a

valid contract under Article 1458 of the Civil Code
were present, namely: (a) consent or meeting of the
minds; (b) determinate subject matter, and (c) price
certain in money or its equivalent. The same elements,
according to the lower court, were present despite the
fact that the agreement between petitioner and Dr.
Cruz was principally a barter contract. The lower
court explained thus:
x x x. Plaintiffs ownership over the Tanay property
passed unto Dra. Cruz upon the constructive delivery
thereof by virtue of the Deed of Absolute Sale (Exh.
D). On the other hand, the ownership of Dra. Cruz
over the subject jewelries (sic) transferred to the
plaintiff upon her actual personal delivery to him at
the lobby of the Prudential Bank. It is expressly
provided by law that the thing sold shall be
understood as delivered, when it is placed in the
control and possession of the vendee (Art. 1497, Civil
Code; Kuenzle & Straff vs. Watson & Co. 13 Phil.
26). The ownership and/or title over the jewelries (sic)
was transmitted immediately before 6:00 p.m. of
October 24, 1984. Plaintiff signified his approval by
nodding his head. Delivery or tradition, is one of the
modes of acquiring ownership (Art. 712, Civil Code).
Similarly, when Exhibit D was executed, it was
equivalent to the delivery of the Tanay property in
favor of Dra. Cruz. The execution of the public
instrument (Exh. D) operates as a formal or symbolic
delivery of the Tanay property and authorizes the
buyer, Dra. Cruz to use the document as proof of
ownership (Florendo v. Foz, 20 Phil. 399).More so,
since Exhibit D does not contain any proviso or
stipulation to the effect that title to the property is
reserved with the vendor until full payment of the
purchase price, nor is there a stipulation giving the
vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period
(Taguba v. Vda. De Leon, 132 SCRA 722; Luzon
Brokerage Co. Inc. vs. Maritime Building Co. Inc. 86
SCRA 305; Froilan v. Pan Oriental Shipping Co. et al.
12 SCRA 276).[4]
Aside from concluding that the contract of barter or
sale had in fact been consummated when petitioner
and Dr. Cruz parted ways at the bank, the trial court
likewise dwelt on the unexplained delay with which
petitioner complained about the alleged fakery. Thus:

SALES 36
x x x. Verily, plaintiff is already estopped to come
back after the lapse of considerable length of time to
claim that what he got was fake. He is a Business
Management graduate of La Salle University, Class
1978-79, a professional banker as well as a jeweler in
his own right. Two hours is more than enough time to
make a switch of a Russian diamond with the real
diamond. It must be remembered that in July 1984
plaintiff made a sketch of the subject jewelries (sic) at
the Prudential Bank. Plaintiff had a tester at 8:00 p.m.
at the residence of Atty. Belarmino. Why then did he
not bring it out when he was examining the subject
jewelries (sic) at about 6:00 p.m. in the banks
lobby? Obviously, he had no need for it after being
satisfied of the genuineness of the subject jewelries
(sic). When Dra. Cruz and plaintiff left the bank both
of them had fully performed their respective
prestations. Once a contract is shown to have been
consummated or fully performed by the parties
thereto, its existence and binding effect can no longer
be disputed. It is irrelevant and immaterial to dispute
the due execution of a contract if both of them have in
fact performed their obligations thereunder and their
respective signatures and those of their witnesses
appear upon the face of the document (Weldon
Construction v. CA G.R. No. L-35721, Oct. 12, 1987).

good name in the process. Both of them are near the

twilight of their lives after maintaining and nurturing
their good reputation in the community only to be
stunned with a court case. Since the filing of this case
on October 26, 1984 up to the present they were
living under a pall of doubt. Surely, this affected not
only their earning capacity in their practice of their
respective professions, but also they suffered
besmirched reputations. Dra. Cruz runs her own
hospital and defendant Belarmino is a well respected
legal practitioner.
The length of time this case dragged on during which
period their reputation were (sic) tarnished and their
names maligned by the pendency of the case, the
Court is of the belief that some of the damages they
prayed for in their answers to the complaint are
reasonably proportionate to the sufferings they
underwent (Art. 2219, New Civil Code).Moreover,
because of the falsity, malice and baseless nature of
the complaint defendants were compelled to
litigate. Hence, the award of attorneys fees is
warranted under the circumstances (Art. 2208, New
Civil Code).[6]

As to the first allegation, the Court observes that

petitioner is essentially raising a factual issue as it
invites us to examine and weigh anew the facts
regarding the genuineness of the earrings bartered in
exchange for the Tanay property. This, of course, we
cannot do without unduly transcending the limits of
our review power in petitions of this nature which are
confined merely to pure questions of law. We accord,
as a general rule, conclusiveness to a lower courts
findings of fact unless it is shown, inter alia, that:
(1) the conclusion is a finding grounded on
speculations, surmises or conjectures;
(2) the inference is manifestly mistaken, absurd and
impossible; (3) when there is a grave abuse of
discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of
fact are conflicting; and (6) when the Court of
Appeals, in making its findings, went beyond the
issues of the case and the same is contrary to the
admission of both parties.[9] We find nothing,
however, that warrants the application of any of these
exceptions.

Consequently, this Court upholds the appellate courts

findings of fact especially because these concur with
From the trial courts adverse decision, petitioner
those of the trial court which, upon a thorough
[5]
elevated the matter to the Court of Appeals. On
scrutiny of the records, are firmly grounded on
October 20, 1992, the Court of Appeals, however,
evidence presented at the trial.[10] To reiterate, this
rendered a decision[7]affirming in toto the lower courts Courts jurisdiction is only limited to reviewing errors
Finally, in awarding damages to the defendants, the
decision. His motion for reconsideration having been of law in the absence of any showing that the findings
lower court remarked:
denied on October 19, 1993, petitioner now files the
complained of are totally devoid of support in the
The Court finds that plaintiff acted in wanton bad
instant petition alleging that:
record or that they are glaringly erroneous as to
faith. Exhibit 2-Belarmino purports to show that the
constitute serious abuse of discretion.[11]
I. THE TRIAL COURT ERRED IN DISMISSING
Tanay property is worth P25,000.00. However, also
on that same day it was executed, the propertys worth PLAINTIFFS COMPLAINT AND IN HOLDING
Nonetheless, this Court has to closely delve into
THAT THE PLAINTIFF ACTUALLY RECEIVED A petitioners allegation that the lower courts decision of
was magnified at P75,000.00 (Exh. 3-Belarmino).
How could in less than a day (Oct. 19, 1984) the value GENUINE PAIR OF EMERALD CUT DIAMOND
March 7, 1989 is a ready-made one because it was
EARRING(S) FROM DEFENDANT CRUZ x x x;
would (sic) triple under normal circumstances?
handed down a day after the last date of the trial of
Plaintiff, with the assistance of his agents, was able to
the case.[12] Petitioner, in this
II. THE TRIAL COURT ERRED IN AWARDING
exchange the Tanay property which his bank valued
regard, finds it incredible that Judge J. Ausberto
MORAL AND EXEMPLARY DAMAGES AND
only at P25,000.00 in exchange for a genuine pair of
Jaramillo was able to write a 12-page single-spaced
emerald cut diamond worth P200,000.00 belonging to ATTORNEYS FEES IN FAVOR OF DEFENDANTS decision, type it and release it on March 7, 1989, less
AND AGAINST THE PLAINTIFF IN THIS CASE;
Dra. Cruz. He also retrieved the US$300.00 and
than a day after the last hearing on March 6, 1989. He
and
jewelries (sic) from his agents. But he was not
stressed that Judge Jaramillo replaced Judge Salvador
satisfied in being able to get subject jewelries for a
de Guzman and heard only his rebuttal testimony.
III.THE TRIAL COURT ERRED IN NOT
song. He had to file a malicious and unfounded case
DECLARING THE DEED OF SALE OF THE
This allegation is obviously no more than a desperate
against Dra. Cruz and Atty. Belarmino who are well
TANAY PROPERTY (EXH. `D) AS NULL AND
effort on the part of petitioner to disparage the lower
known, respected and held in high esteem in San
VOID OR IN NOT ANNULLING THE SAME, AND courts findings of fact in order to convince this Court
Pablo City where everybody practically knows
to review the same. It is noteworthy that Atty.
everybody. Plaintiff came to Court with unclean hands IN FAILING TO GRANT REASONABLE
DAMAGES IN FAVOR OF THE PLAINTIFF.[8]
Belarmino clarified that Judge Jaramillo had issued
dragging the defendants and soiling their clean and

the first order in the case as early as March 9, 1987 or

two years before the rendition of the decision. In fact,
Atty. Belarmino terminated presentation of evidence
on October 13, 1987, while Dr. Cruz finished hers on
February 4, 1989, or more than a month prior to the
rendition of the judgment. The March 6, 1989 hearing
was conducted solely for the presentation of
petitioner's rebuttal testimony.[13] In other words,
Judge Jaramillo had ample time to study the case and
write the decision because the rebuttal evidence
would only serve to confirm or verify the facts
already presented by the parties.
The Court finds nothing anomalous in the said
situation. No proof has been adduced that Judge
Jaramillo was motivated by a malicious or sinister
intent in disposing of the case with dispatch. Neither
is there proof that someone else wrote the decision for
him. The immediate rendition of the decision was no
more than Judge Jaramillos compliance with his duty
as a judge to dispose of the courts business promptly
and decide cases within the required periods.[14] The
two-year period within which Judge Jaramillo
handled the case provided him with all the time to
study it and even write down its facts as soon as these
were presented to court. In fact, this Court does not
see anything wrong in the practice of writing a
decision days before the scheduled promulgation of
judgment and leaving the dispositive portion for
typing at a time close to the date of promulgation,
provided that no malice or any wrongful conduct
attends its adoption.[15] The practice serves the dual
purposes of safeguarding the confidentiality of draft
decisions and rendering decisions with
promptness. Neither can Judge Jaramillo be made
administratively answerable for the immediate
rendition of the decision. The acts of a judge which
pertain to his judicial functions are not subject to
disciplinary power unless they are committed with
fraud, dishonesty, corruption or bad faith.[16] Hence, in
the absence of sufficient proof to the contrary, Judge
Jaramillo is presumed to have performed his job in
accordance with law and should instead be
commended for his close attention to duty.
Having disposed of petitioners first contention, we
now come to the core issue of this petition which is
whether the Court of Appeals erred in upholding the
validity of the contract of barter or sale under the
circumstances of this case.

SALES 37
The Civil Code provides that contracts are perfected
by mere consent. From this moment, the parties are
bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping
with good faith, usage and law.[17] 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.[18] Being consensual, a
contract of sale has the force of law between the
contracting parties and they are expected to abide in
good faith by their respective contractual
commitments. Article 1358 of the Civil Code which
requires the embodiment of certain contracts in a
public instrument, is only for convenience,[19] and
registration of the instrument only adversely affects
third parties.[20] Formal requirements are, therefore,
for the benefit of third parties. Non-compliance
therewith does not adversely affect the validity of the
contract nor the contractual rights and obligations of
the parties thereunder.
It is evident from the facts of the case that there was a
meeting of the minds between petitioner and Dr.
Cruz. As such, they are bound by the contract unless
there are reasons or circumstances that warrant its
nullification. Hence, the problem that should be
addressed in this case is whether or not under the facts
duly established herein, the contract can be voided in
accordance with law so as to compel the parties to
restore to each other the things that have been the
subject of the contract with their fruits, and the price
with interest.[21]
Contracts that are voidable or annullable, even though
there may have been no damage to the contracting
parties are: (1) those where one of the parties is
incapable of giving consent to a contract; and (2)
those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
[22]
Accordingly, petitioner now stresses before this
Court that he entered into the contract in the belief
that the pair of emerald-cut diamond earrings was
genuine. On the pretext that those pieces of jewelry
turned out to be counterfeit, however, petitioner
subsequently sought the nullification of said contract
on the ground that it was, in fact, tainted with
fraud[23] such that his consent was vitiated.
There is fraud when, through the insidious words or
machinations of one of the contracting parties, the

other is induced to enter into a contract which,

without them, he would not have agreed to.[24] The
records, however, are bare of any evidence
manifesting that private respondents employed such
insidious words or machinations to entice petitioner
into entering the contract of barter. Neither is there
any evidence showing that Dr. Cruz induced
petitioner to sell his Tanay property or that she cajoled
him to take the earrings in exchange for said
property. On the contrary, Dr. Cruz did not initially
accede to petitioners proposal to buy the said jewelry.
Rather, it appears that it was petitioner, through his
agents, who led Dr. Cruz to believe that the Tanay
property was worth exchanging for her jewelry as he
represented that its value was P400,000.00 or more
than double that of the jewelry which was valued only
at P160,000.00. If indeed petitioners property was
truly worth that much, it was certainly contrary to the
nature of a businessman-banker like him to have
parted with his real estate for half its price. In short, it
was in fact petitioner who resorted to machinations to
convince Dr. Cruz to exchange her jewelry for the
Tanay property.
Moreover, petitioner did not clearly allege mistake as
a ground for nullification of the contract of sale. Even
assuming that he did, petitioner cannot successfully
invoke the same. To invalidate a contract, mistake
must refer to the substance of the thing that is the
object of the contract, or to those conditions which
have principally moved one or both parties to enter
into the contract.[25] An example of mistake as to the
object of the contract is the substitution of a specific
thing contemplated by the parties with another.[26] In
his allegations in the complaint, petitioner insinuated
that an inferior one or one that had only Russian
diamonds was substituted for the jewelry he wanted to
exchange with his 10-hectare land. He, however,
failed to prove the fact that prior to the delivery of the
jewelry to him, private respondents endeavored to
make such substitution.
Likewise, the facts as proven do not support the
allegation that petitioner himself could be excused for
the mistake. On account of his work as a bankerjeweler, it can be rightfully assumed that he was an
expert on matters regarding gems. He had the
intellectual capacity and the business acumen as a
banker to take precautionary measures to avert such a
mistake, considering the value of both the jewelry and
his land. The fact that he had seen the jewelry before

October 24, 1984 should not have precluded him from

having its genuineness tested in the presence of Dr.
Cruz. Had he done so, he could have avoided the
present situation that he himself brought
about. Indeed, the finger of suspicion of switching the
genuine jewelry for a fake inevitably points to
him. Such a mistake caused by manifest negligence
cannot invalidate a juridical act.[27] As the Civil Code
provides, (t)here is no mistake if the party alleging it
knew the doubt, contingency or risk affecting the
object of the contract.[28]

transfer of ownership and possession of the things

exchanged considering the fact that their contract is
silent as to when it becomes due and demandable.[32]
Neither may such failure to pay the balance of the
purchase price result in the payment of interest
thereon. Article 1589 of the Civil Code prescribes the
payment of interest by the vendee for the period
between the delivery of the thing and the payment of
the price in the following cases:
(1) Should it have been so stipulated;

Furthermore, petitioner was afforded the reasonable

opportunity required in Article 1584 of the Civil Code
within which to examine the jewelry as he in fact
accepted them when asked by Dr. Cruz if he was
satisfied with the same.[29] By taking the jewelry
outside the bank, petitioner executed an act which was
more consistent with his exercise of ownership over
it. This gains credence when it is borne in mind that
he himself had earlier delivered the Tanay property to
Dr. Cruz by affixing his signature to the contract of
sale. That after two hours he later claimed that the
jewelry was not the one he intended in exchange for
his Tanay property, could not sever the juridical tie
that now bound him and Dr. Cruz. The nature and
value of the thing he had taken preclude its return
after that supervening period within which anything
could have happened, not excluding the alteration of
the jewelry or its being switched with an inferior kind.

(2) Should the thing sold and delivered produce fruits

or income;
(3) Should he be in default, from the time of judicial
or extrajudicial demand for the payment of the price.
Not one of these cases obtains here. This case should,
of course, be distinguished from De la Cruz v.
Legaspi,[33] where the court held that failure to pay the
consideration after the notarization of the contract as
previously promised resulted in the vendees liability
for payment of interest. In the case at bar, there is no
stipulation for the payment of interest in the contract
of sale nor proof that the Tanay property produced
fruits or income. Neither did petitioner demand
payment of the price as in fact he filed an action to
nullify the contract of sale.

All told, petitioner appears to have elevated this case

to this Court for the principal reason of mitigating the
amount of damages awarded to both private
respondents which petitioner considers as
exorbitant. He contends that private respondents do
not deserve at all the award of damages. In fact, he
pleads for the total deletion of the award as regards
private respondent Belarmino whom he considers a
mere nominal party because no specific claim for
damages against him was alleged in the
complaint. When he filed the case, all that petitioner
wanted was that Atty. Belarmino should return to him
the owners duplicate copy of TCT No. 320725, the
deed of sale executed by Fr. Antonio Jacobe, the deed
of redemption and the check alloted for
expenses. Petitioner alleges further that Atty.
While it is true that the amount of P40,000.00 forming Belarmino should not have delivered all those
documents to Dr. Cruz because as the lawyer for both
part of the consideration was still payable to
the seller and the buyer in the sale contract, he should
petitioner, its nonpayment by Dr. Cruz is not a
have protected the rights of both parties. Moreover,
sufficient cause to invalidate the contract or bar the
Both the trial and appellate courts, therefore, correctly
ruled that there were no legal bases for the
nullification of the contract of sale. Ownership over
the parcel of land and the pair of emerald-cut diamond
earrings had been transferred to Dr. Cruz and
petitioner, respectively, upon the actual and
constructive delivery thereof.[30] Said contract of sale
being absolute in nature, title passed to the vendee
upon delivery of the thing sold since there was no
stipulation in the contract that title to the property sold
has been reserved in the seller until full payment of
the price or that the vendor has the right to
unilaterally resolve the contract the moment the buyer
fails to pay within a fixed period.[31] Such stipulations
are not manifest in the contract of sale.

SALES 38
petitioner asserts that there was no firm basis for
damages except for Atty. Belarminos uncorroborated
testimony.[34]

fake jewelry to Dra. Cruz and, more than that, get

back the real property, which his bank owns. Fule has
obtained a genuine jewelry which he could sell
anytime, anywhere and to anybody, without the same
being traced to the original owner for practically
nothing. This is plain and simple, unjust enrichment.

by petitioner. His acts thus failed to accord with what

an ordinary prudent man would have done in the same
situation. Being an experienced banker and a
businessman himself who deliberately skirted a legal
Moral and exemplary damages may be awarded
impediment in the sale of the Tanay property and to
without proof of pecuniary loss. In awarding such
minimize the capital gains tax for its exchange, it was
[40]
damages, the court shall take into account the
actually gross recklessness for him to have merely
circumstances obtaining in the case and assess
conducted a cursory examination of the jewelry when
damages according to its discretion.[35] To warrant the While, as a rule, moral damages cannot be recovered
every opportunity for doing so was not denied him.
award of damages, it must be shown that the person to from a person who has filed a complaint against
Apparently, he carried on his person a tester which he
whom these are awarded has sustained injury. He
another in good faith because it is not sound policy to later used to prove the alleged fakery but which he did
must likewise establish sufficient data upon which the place a penalty on the right to litigate,[41] the same,
not use at the time when it was most needed.
court can properly base its estimate of the amount of
however, cannot apply in the case at bar. The factual
Furthermore, it took him two more hours of
damages.[36] Statements of facts should establish such findings of the courts a quo to the effect
unexplained delay before he complained that the
data rather than mere conclusions or opinions of
that petitioner filed this case because he was the
jewelry he received were counterfeit. Hence, we
witnesses.[37] Thus:
victim of fraud; that he could not have been such a
stated earlier that anything could have happened
victim because he should have examined the jewelry
during all the time that petitioner was in complete
x x x. For moral damages to be awarded, it is essential in question before accepting delivery thereof,
possession and control of the jewelry, including the
that the claimant must have satisfactorily proved
considering his exposure to the banking and jewelry
possibility of substituting them with fake ones,
during the trial the existence of the factual basis of the businesses; and that he filed the action for the
against which respondents would have a great deal of
damages and its causal connection with the adverse
nullification of the contract of sale with unclean
difficulty defending themselves. The truth is that
partys acts. If the court has no proof or evidence upon hands, all deserve full faith and credit to support the
petitioner even failed to successfully prove during
which the claim for moral damages could be based,
conclusion that petitioner was motivated more by ill
trial that the jewelry he received from Dr. Cruz were
such indemnity could not be outrightly awarded. The will than a sincere attempt to protect his rights in
not genuine. Add to that the fact that he had been
same holds true with respect to the award of
commencing suit against respondents.
shrewd enough to bloat the Tanay propertys price only
exemplary damages where it must be shown that the
a few days after he purchased it at a much lower
party acted in a wanton, oppressive or malevolent
As pointed out earlier, a closer scrutiny of the chain of value. Thus, it is our considered view that if this slew
manner.[38]
events immediately prior to and on October 24, 1984
of circumstances were connected, like pieces of fabric
itself would amply demonstrate that petitioner was not sewn into a quilt, they would sufficiently demonstrate
In this regard, the lower court appeared to have
simply negligent in failing to exercise due diligence to that his acts were not merely negligent but rather
awarded damages on a ground analogous to malicious assure himself that what he was taking in exchange
studied and deliberate.
prosecution under Article 2219(8) of the Civil
for his property were genuine diamonds. He had
Code[39] as shown by (1) petitioners wanton bad faith
rather placed himself in a situation from which it
We do not have here, therefore, a situation where
in bloating the value of the Tanay property which he
preponderantly appears that his seeming ignorance
petitioners complaint was simply found later to be
exchanged for a genuine pair of emerald-cut diamond was actually just a ruse. Indeed, he had unnecessarily based on an erroneous ground which, under settled
worth P200,000.00; and (2) his filing of a malicious
dragged respondents to face the travails of litigation
jurisprudence, would not have been a reason for
and unfounded case against private respondents who
in speculating at the possible favorable outcome of his awarding moral and exemplary damages.[42] Instead,
were well known, respected and held in high esteem
complaint when he should have realized that his
the cause of action of the instant case appears to have
in San Pablo City where everybody practically knows supposed predicament was his own making. We,
been contrived by petitioner himself. In other words,
everybody and whose good names in the twilight of
therefore, see here no semblance of an honest and
he was placed in a situation where he could not
their lives were soiled by petitioners coming to court
sincere belief on his part that he was swindled by
honestly evaluate whether his cause of action has a
with unclean hands, thereby affecting their earning
respondents which would entitle him to redress in
semblance of merit, such that it would require the
capacity in the exercise of their respective professions court. It must be noted that before petitioner was able expertise of the courts to put it to a test. His insistent
and besmirching their reputation.
to convince Dr. Cruz to exchange her jewelry for the
pursuit of such case then coupled with circumstances
Tanay property, petitioner took pains to thoroughly
showing that he himself was guilty in bringing about
For its part, the Court of Appeals affirmed the award
examine said jewelry, even going to the extent of
the supposed wrongdoing on which he anchored his
of damages to private respondents for these reasons:
sketching their appearance. Why at the precise
cause of action would render him answerable for all
moment when he was about to take physical
damages the defendant may suffer because of it. This
The malice with which Fule filed this case is
possession thereof he failed to exert extra efforts to
is precisely what took place in the petition at bar and
apparent. Having taken possession of the genuine
check their genuineness despite the large
we find no cogent reason to disturb the findings of the
jewelry of Dra. Cruz, Fule now wishes to return a
consideration involved has never been explained at all courts below that respondents in this case suffered

considerable damages due to petitioners unwarranted

action.
WHEREFORE, the decision of the Court of Appeals
dated October 20, 1992 is hereby AFFIRMED in
toto. Dr. Cruz, however, is ordered to pay petitioner
the balance of the purchase price of P40,000.00
within ten (10) days from the finality of this
decision. Costs against petitioner.
G.R. No. L-11827

July 31, 1961

FERNANDO A. GAITE, plaintiff-appellee,

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

SALES 39
in time extracted therefrom what he claim and
estimated to be approximately 24,000 metric tons of
iron ore.
For some reason or another, Isabelo Fonacier decided
to revoke the authority granted by him to Gaite to
exploit and develop the mining claims in question,
and Gaite assented thereto subject to certain
conditions. As a result, a document entitled
"Revocation of Power of Attorney and Contract" was
executed on December 8, 1954 (Exhibit "A"),wherein
Gaite transferred to Fonacier, for the consideration of
P20,000.00, plus 10% of the royalties that Fonacier
would receive from the mining claims, all his rights
and interests on all the roads, improvements, and
facilities in or outside said claims, the right to use the
business name "Larap Iron Mines" and its goodwill,
and all the records and documents relative to the
mines. In the same document, Gaite transferred to
Fonacier all his rights and interests over the "24,000
tons of iron ore, more or less" that the former had
already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,000.00
of which was paid upon the signing of the agreement,
and
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first
letter of credit covering the first shipment of iron ores
and of the first amount derived from the local sale of
iron ore made by the Larap Mines & Smelting Co.
Inc., its assigns, administrators, or successors in
interests.
To secure the payment of the said balance of
P65,000.00, Fonacier promised to execute in favor of
Gaite a surety bond, and pursuant to the promise,
Fonacier delivered to Gaite a surety bond dated
December 8, 1954 with himself (Fonacier) as
principal and the Larap Mines and Smelting Co. and
its stockholders George Krakower, Segundina Vivas,
Pacifico Escandor, Francisco Dante, and Fernando Ty
as sureties (Exhibit "A-1"). Gaite testified, however,
that when this bond was presented to him by Fonacier
together with the "Revocation of Power of Attorney
and Contract", Exhibit "A", on December 8, 1954, he
refused to sign said Exhibit "A" unless another bond
under written by a bonding company was put up by
defendants to secure the payment of the P65,000.00
balance of their price of the iron ore in the stockpiles
in the mining claims. Hence, a second bond, also

dated December 8, 1954 (Exhibit "B"),was executed

by the same parties to the first bond Exhibit "A-1",
with the Far Eastern Surety and Insurance Co. as
additional surety, but it provided that the liability of
the surety company would attach only when there had
been an actual sale of iron ore by the Larap Mines &
Smelting Co. for an amount of not less then
P65,000.00, and that, furthermore, the liability of said
surety company would automatically expire on
December 8, 1955. Both bonds were attached to the
"Revocation of Power of Attorney and Contract",
Exhibit "A", and made integral parts thereof.

P65,000.00 would be payable out of the first letter of

credit covering the first shipment of iron ore and/or
the first amount derived from the local sale of the iron
ore by the Larap Mines & Smelting Co., Inc.; that up
to the time of the filing of the complaint, no sale of
the iron ore had been made, hence the condition had
not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable.
Defendant Fonacier also contended that only 7,573
tons of the estimated 24,000 tons of iron ore sold to
him by Gaite was actually delivered, and
counterclaimed for more than P200,000.00 damages.

On the same day that Fonacier revoked the power of

attorney he gave to Gaite and the two executed and
signed the "Revocation of Power of Attorney and
Contract", Exhibit "A", Fonacier entered into a
"Contract of Mining Operation", ceding, transferring,
and conveying unto the Larap Mines and Smelting
Co., Inc. the right to develop, exploit, and explore the
mining claims in question, together with the
improvements therein and the use of the name "Larap
Iron Mines" and its good will, in consideration of
certain royalties. Fonacier likewise transferred, in the
same document, the complete title to the
approximately 24,000 tons of iron ore which he
acquired from Gaite, to the Larap & Smelting Co., in
consideration for the signing by the company and its
stockholders of the surety bonds delivered by
Fonacier to Gaite (Record on Appeal, pp. 82-94).

At the trial of the case, the parties agreed to limit the

presentation of evidence to two issues:

Up to December 8, 1955, when the bond Exhibit "B"

expired with respect to the Far Eastern Surety and
Insurance Company, no sale of the approximately
24,000 tons of iron ore had been made by the Larap
Mines & Smelting Co., Inc., nor had the P65,000.00
balance of the price of said ore been paid to Gaite by
Fonacier and his sureties payment of said amount, on
the theory that they had lost right to make use of the
period given them when their bond, Exhibit "B"
automatically expired (Exhibits "C" to "C-24"). And
when Fonacier and his sureties failed to pay as
demanded by Gaite, the latter filed the present
complaint against them in the Court of First Instance
of Manila (Civil Case No. 29310) for the payment of
the P65,000.00 balance of the price of the ore,
consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the
uniform defense that the obligation sued upon by
Gaite was subject to a condition that the amount of

(1) Whether or not the obligation of Fonacier and his

sureties to pay Gaite P65,000.00 become due and
demandable when the defendants failed to renew the
surety bond underwritten by the Far Eastern Surety
and Insurance Co., Inc. (Exhibit "B"), which expired
on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold
by plaintiff Gaite to defendant Fonacier were actually
in existence in the mining claims when these parties
executed the "Revocation of Power of Attorney and
Contract", Exhibit "A."
On the first question, the lower court held that the
obligation of the defendants to pay plaintiff the
P65,000.00 balance of the price of the approximately
24,000 tons of iron ore was one with a term: i.e., that
it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or
before December 8, 1955; that the giving of security
was a condition precedent to Gait's giving of credit to
defendants; and that as the latter failed to put up a
good and sufficient security in lieu of the Far Eastern
Surety bond (Exhibit "B") which expired on
December 8, 1955, the obligation became due and
demandable under Article 1198 of the New Civil
Code.
As to the second question, the lower court found that
plaintiff Gaite did have approximately 24,000 tons of
iron ore at the mining claims in question at the time of
the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of
plaintiff Gaite ordering defendants to pay him, jointly

and severally, P65,000.00 with interest at 6% per

annum from December 9, 1955 until payment, plus
costs. From this judgment, defendants jointly
appealed to this Court.
During the pendency of this appeal, several incidental
motions were presented for resolution: a motion to
declare the appellants Larap Mines & Smelting Co.,
Inc. and George Krakower in contempt, filed by
appellant Fonacier, and two motions to dismiss the
appeal as having become academic and a motion for
new trial and/or to take judicial notice of certain
documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main
allegation therein that the appellants Larap Mines &
Smelting Co., Inc. and Krakower had sold the iron ore
here in question, which allegedly is "property in
litigation", has not been substantiated; and even if
true, does not make these appellants guilty of
contempt, because what is under litigation in this
appeal is appellee Gaite's right to the payment of the
balance of the price of the ore, and not the iron ore
itself. As for the several motions presented by
appellee Gaite, it is unnecessary to resolve these
motions in view of the results that we have reached in
this case, which we shall hereafter discuss.
The main issues presented by appellants in this appeal
are:
(1) that the lower court erred in holding that the
obligation of appellant Fonacier to pay appellee Gaite
the P65,000.00 (balance of the price of the iron ore in
question)is one with a period or term and not one with
a suspensive condition, and that the term expired on
December 8, 1955; and
(2) that the lower court erred in not holding that there
were only 10,954.5 tons in the stockpiles of iron ore
sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the
following provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby
transfers to Isabelo F. Fonacier all his rights and
interests over the 24,000 tons of iron ore, more or
less, above-referred to together with all his rights and
interests to operate the mine in consideration of the
sum of SEVENTY-FIVE THOUSAND PESOS
(P75,000.00) which the latter binds to pay as follows:

SALES 40
a. TEN THOUSAND PESOS (P10,000.00) will be
paid upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first
letter of credit covering the first shipment of iron ore
made by the Larap Mines & Smelting Co., Inc., its
assigns, administrators, or successors in interest.
We find the court below to be legally correct in
holding that the shipment or local sale of the iron ore
is not a condition precedent (or suspensive) to the
payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a
conditional obligation is the fact that its efficacy or
obligatory force (as distinguished from its
demandability) is subordinated to the happening of a
future and uncertain event; so that if the suspensive
condition does not take place, the parties would stand
as if the conditional obligation had never existed. That
the parties to the contract Exhibit "A" did not intend
any such state of things to prevail is supported by
several circumstances:
1) The words of the contract express no contingency
in the buyer's obligation to pay: "The balance of
Sixty-Five Thousand Pesos (P65,000.00) will be
paid out of the first letter of credit covering the first
shipment of iron ores . . ." etc. There is no uncertainty
that the payment will have to be made sooner or later;
what is undetermined is merely the exact date at
which it will be made. By the very terms of the
contract, therefore, the existence of the obligation to
pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and
onerous: not only does each one of the parties assume
a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to
pay the price),but each party anticipates performance
by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated
to an uncertain event, so that the other understands
that he assumes the risk of receiving nothing for what
he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course
of business to do so; hence, the contingent character
of the obligation must clearly appear. Nothing is
found in the record to evidence that Gaite desired or
assumed to run the risk of losing his right over the ore

without getting paid for it, or that Fonacier understood

that Gaite assumed any such risk. This is proved by
the fact that Gaite insisted on a bond a to guarantee
payment of the P65,000.00, an not only upon a bond
by Fonacier, the Larap Mines & Smelting Co., and the
company's stockholders, but also on one by a surety
company; and the fact that appellants did put up such
bonds indicates that they admitted the definite
existence of their obligation to pay the balance of
P65,000.00.

This issue settled, the next point of inquiry is whether

appellants, Fonacier and his sureties, still have the
right to insist that Gaite should wait for the sale or
shipment of the ore before receiving payment; or, in
other words, whether or not they are entitled to take
full advantage of the period granted them for making
the payment.

We agree with the court below that the appellant have

forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale
3) To subordinate the obligation to pay the remaining of the ore before receiving payment of the balance of
P65,000.00 to the sale or shipment of the ore as a
P65,000.00, because of their failure to renew the bond
condition precedent, would be tantamount to leaving
of the Far Eastern Surety Company or else replace it
the payment at the discretion of the debtor, for the sale with an equivalent guarantee. The expiration of the
or shipment could not be made unless the appellants
bonding company's undertaking on December 8, 1955
took steps to sell the ore. Appellants would thus be
substantially reduced the security of the vendor's
able to postpone payment indefinitely. The
rights as creditor for the unpaid P65,000.00, a security
desireability of avoiding such a construction of the
that Gaite considered essential and upon which he had
contract Exhibit "A" needs no stressing.
insisted when he executed the deed of sale of the ore
to Fonacier (Exhibit "A"). The case squarely comes
4) Assuming that there could be doubt whether by the under paragraphs 2 and 3 of Article 1198 of the Civil
wording of the contract the parties indented a
Code of the Philippines:
suspensive condition or a suspensive period (dies ad
quem) for the payment of the P65,000.00, the rules of "ART. 1198. The debtor shall lose every right to make
interpretation would incline the scales in favor of "the use of the period:
greater reciprocity of interests", since sale is
(2) When he does not furnish to the creditor the
essentially onerous. The Civil Code of the
guaranties or securities which he has promised.
Philippines, Article 1378, paragraph 1, in fine,
provides:
(3) When by his own acts he has impaired said
If the contract is onerous, the doubt shall be settled in guaranties or securities after their establishment, and
when through fortuitous event they disappear, unless
favor of the greatest reciprocity of interests.
he immediately gives new ones equally satisfactory.
and there can be no question that greater reciprocity
Appellants' failure to renew or extend the surety
obtains if the buyer' obligation is deemed to be
company's bond upon its expiration plainly impaired
actually existing, with only its maturity (due date)
the securities given to the creditor (appellee Gaite),
postponed or deferred, that if such obligation were
unless immediately renewed or replaced.
viewed as non-existent or not binding until the ore
was sold.
There is no merit in appellants' argument that Gaite's
acceptance of the surety company's bond with full
The only rational view that can be taken is that the
knowledge that on its face it would automatically
sale of the ore to Fonacier was a sale on credit, and
expire within one year was a waiver of its renewal
not an aleatory contract where the transferor, Gaite,
after the expiration date. No such waiver could have
would assume the risk of not being paid at all; and
that the previous sale or shipment of the ore was not a been intended, for Gaite stood to lose and had nothing
to gain barely; and if there was any, it could be
suspensive condition for the payment of the balance
of the agreed price, but was intended merely to fix the rationally explained only if the appellants had agreed
to sell the ore and pay Gaite before the surety
future date of the payment.
company's bond expired on December 8, 1955. But in
the latter case the defendants-appellants' obligation to

pay became absolute after one year from the transfer

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

SALES 41
the ore found in the stockpiles in the mining claims in
questions; Gaite had, therefore, complied with his
promise to deliver, and appellants in turn are bound to
pay the lump price.

to Fonacier, while appellants contend that by actual

measurement, their witness Cirpriano Manlagit
found the total volume of ore in the stockpiles to be
only 6.609 cubic meters. As to the average weight in
tons per cubic meter, the parties are again in
But assuming that plaintiff Gaite undertook to sell and disagreement, with appellants claiming the correct
appellants undertook to buy, not a definite mass, but
tonnage factor to be 2.18 tons to a cubic meter, while
approximately 24,000 tons of ore, so that any
appellee Gaite claims that the correct tonnage factor is
substantial difference in this quantity delivered would about 3.7.
entitle the buyers to recover damages for the shortdelivery, was there really a short-delivery in this case? In the face of the conflict of evidence, we take as the
most reliable estimate of the tonnage factor of iron ore
We think not. As already stated, neither of the parties
in this case to be that made by Leopoldo F. Abad,
had actually measured or weighed the whole mass of
chief of the Mines and Metallurgical Division of the
ore cubic meter by cubic meter, or ton by ton. Both
Bureau of Mines, a government pensionado to the
parties predicate their respective claims only upon an States and a mining engineering graduate of the
estimated number of cubic meters of ore multiplied by Universities of Nevada and California, with almost 22
the average tonnage factor per cubic meter.
years of experience in the Bureau of Mines. This
witness placed the tonnage factor of every cubic
Now, appellee Gaite asserts that there was a total of
meter of iron ore at between 3 metric tons as
7,375 cubic meters in the stockpiles of ore that he sold

minimum to 5 metric tons as maximum. This

estimate, in turn, closely corresponds to the average
tonnage factor of 3.3 adopted in his corrected report
(Exhibits "FF" and FF-1") by engineer Nemesio
Gamatero, who was sent by the Bureau of Mines to
the mining claims involved at the request of appellant
Krakower, precisely to make an official estimate of
the amount of iron ore in Gaite's stockpiles after the
dispute arose.
Even granting, then, that the estimate of 6,609 cubic
meters of ore in the stockpiles made by appellant's
witness Cipriano Manlagit is correct, if we multiply
it by the average tonnage factor of 3.3 tons to a cubic
meter, the product is 21,809.7 tons, which is not very
far from the estimate of 24,000 tons made by appellee
Gaite, considering that actual weighing of each unit of
the mass was practically impossible, so that a
reasonable percentage of error should be allowed
anyone making an estimate of the exact quantity in

tons found in the mass. It must not be forgotten that

the contract Exhibit "A" expressly stated the amount
to be 24,000 tons, more or less. (ch. Pine River
Logging & Improvement Co. vs U.S., 279, 46 L. Ed.
1164).
There was, consequently, no short-delivery in this
case as would entitle appellants to the payment of
damages, nor could Gaite have been guilty of any
fraud in making any misrepresentation to appellants
as to the total quantity of ore in the stockpiles of the
mining claims in question, as charged by appellants,
since Gaite's estimate appears to be substantially
correct.
WHEREFORE, finding no error in the decision
appealed from, we hereby affirm the same, with costs
against appellants