THIRD DIVISION

[G.R. No. 138018. July 26, 2002]

RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA
ABUCAY, respondents.
DECISION
CARPIO, J.:

The Case
On March 24, 1993, the Regional Trial Court of Cebu City, Branch 18, rendered a Decision [1] declaring
the deed of sale of a parcel of land in favor of petitioner null and void ab initio.The Court of Appeals,[2] in its
July 16, 1998 Decision[3] as well as its February 11, 1999 Order[4] denying petitioners Motion for
Reconsideration, affirmed the trial courts decision in toto.Before this Court now is a Petition for Review on
Certiorari[5] assailing the Court of Appeals decision and order.

The Facts
Respondents Ignacia Reynes (Reynes for brevity) and Spouses Abucay (Abucay Spouses for brevity)
filed on June 20, 1984 a complaint for Declaration of Nullity and Quieting of Title against petitioner Rido
Montecillo (Montecillo for brevity). Reynes asserted that she is the owner of a lot situated in Mabolo, Cebu
City, covered by Transfer Certificate of Title No. 74196 and containing an area of 448 square meters
(Mabolo Lot for brevity). In 1981, Reynes sold 185 square meters of the Mabolo Lot to the Abucay Spouses
who built a residential house on the lot they bought.
Reynes alleged further that on March 1, 1984 she signed a Deed of Sale of the Mabolo Lot in favor of
Montecillo (Montecillos Deed of Sale for brevity). Reynes, being illiterate,[6] signed by affixing her thumbmark[7] on the document. Montecillo promised to pay the agreed P47,000.00 purchase price within one
month from the signing of the Deed of Sale. Montecillos Deed of Sale states as follows:
That I, IGNACIA T. REYNES, of legal age, Filipino, widow, with residence and postal address at Mabolo, Cebu
City, Philippines, for and in consideration of FORTY SEVEN THOUSAND (P47,000.00) PESOS,
Philippine Currency, to me in hand paid by RIDO MONTECILLO, of legal age, Filipino, married, with
residence and postal address at Mabolo, Cebu City, Philippines, the receipt hereof is hereby
acknowledged, have sold, transferred, and conveyed, unto RIDO MONTECILLO, his heirs, executors,
administrators, and assigns, forever, a parcel of land together with the improvements thereon, situated at
Mabolo, Cebu City, Philippines, free from all liens and encumbrances, and more particularly described as
follows:
A parcel of land (Lot 203-B-2-B of the subdivision plan Psd-07-01-00 2370, being a portion of Lot 203-B-2,
described on plan (LRC) Psd-76821, L.R.C. (GLRO) Record No. 5988), situated in the Barrio of Mabolo, City
of Cebu. Bounded on the SE., along line 1-2 by Lot 206; on the SW., along line 2-3, by Lot 202, both of
Banilad Estate; on the NW., along line 4-5, by Lot 203-B-2-A of the subdivision of Four Hundred Forty Eight
(448) square meters, more or less.
of which I am the absolute owner in accordance with the provisions of the Land Registration Act, my title
being evidenced by Transfer Certificate of Title No. 74196 of the Registry of Deeds of the City of Cebu,
Philippines. That This Land Is Not Tenanted and Does Not Fall Under the Purview of P.D. 27. [8] (Emphasis
supplied)
Reynes further alleged that Montecillo failed to pay the purchase price after the lapse of the onemonth period, prompting Reynes to demand from Montecillo the return of the Deed of Sale. Since
Montecillo refused to return the Deed of Sale, [9] Reynes executed a document unilaterally revoking the sale
and gave a copy of the document to Montecillo.
Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay Spouses the
entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a 185-square meter portion of
the lot. This Deed of Sale states:
I, IGNACIA T. REYNES, of legal age, Filipino, widow and resident of Mabolo, Cebu City, do hereby confirm the
sale of a portion of Lot No. 74196 to an extent of 185 square meters to Spouses Redemptor Abucay and

Elisa Abucay covered by Deed per Doc. No. 47, Page No. 9, Book No. V, Series of 1981 of notarial register
of Benedicto Alo, of which spouses is now in occupation;
That for and in consideration of the total sum of FIFTY THOUSAND (P50,000) PESOS, Philippine Currency,
received in full and receipt whereof is herein acknowledged from SPOUSES REDEMPTOR ABUCAY and ELISA
ABUCAY, do hereby in these presents, SELL, TRANSFER and CONVEY absolutely unto said Spouses
Redemptor Abucay and Elisa Abucay, their heirs, assigns and successors-in-interest the whole parcel of
land together with improvements thereon and more particularly described as follows:
TCT No. 74196
A parcel of land (Lot 203-B-2-B of the subdivision plan psd-07-01-002370, being a portion of Lot 203-B-2,
described on plan (LRC) Psd 76821, LRC (GLRO) Record No. 5988) situated in Mabolo, Cebu City, along
Arcilla Street, containing an area of total FOUR HUNDRED FORTY EIGHT (448) Square meters.
of which I am the absolute owner thereof free from all liens and encumbrances and warrant the same
against claim of third persons and other deeds affecting said parcel of land other than that to the said
spouses and inconsistent hereto is declared without any effect.
In witness whereof, I hereunto signed this 23rd day of May, 1984 in Cebu City, Philippines. [10]
Reynes and the Abucay Spouses alleged that on June 18, 1984 they received information that the
Register of Deeds of Cebu City issued Certificate of Title No. 90805 in the name of Montecillo for the
Mabolo Lot.
Reynes and the Abucay Spouses argued that for lack of consideration there (was) no meeting of the
minds[11] between Reynes and Montecillo. Thus, the trial court should declare null and void ab
initio Montecillos Deed of Sale, and order the cancellation of Certificate of Title No. 90805 in the name of
Montecillo.
In his Answer, Montecillo, a bank executive with a B.S. Commerce degree, [12] claimed he was a buyer in
good faith and had actually paid the P47,000.00 consideration stated in his Deed of Sale. Montecillo,
however, admitted he still owed Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00
for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. He further
alleged that he paid for the real property tax as well as the capital gains tax on the sale of the Mabolo Lot.
In their Reply, Reynes and the Abucay Spouses contended that Montecillo did not have authority to
discharge the chattel mortgage, especially after Reynes revoked Montecillos Deed of Sale and gave the
mortgagee a copy of the document of revocation. Reynes and the Abucay Spouses claimed that Montecillo
secured the release of the chattel mortgage through machination. They further asserted that Montecillo
took advantage of the real property taxes paid by the Abucay Spouses and surreptitiously caused the
transfer of the title to the Mabolo Lot in his name.
During pre-trial, Montecillo claimed that the consideration for the sale of the Mabolo Lot was the
amount he paid to Cebu Ice and Cold Storage Corporation (Cebu Ice Storage for brevity) for the mortgage
debt of Bienvenido Jayag (Jayag for brevity). Montecillo argued that the release of the mortgage was
necessary since the mortgage constituted a lien on the Mabolo Lot.
Reynes, however, stated that she had nothing to do with Jayags mortgage debt except that the house
mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated that the payment by
Montecillo to release the mortgage on Jayags house is a matter between Montecillo and Jayag. The
mortgage on the house, being a chattel mortgage, could not be interpreted in any way as an encumbrance
on the Mabolo Lot. Reynes further claimed that the mortgage debt had long prescribed since the
P47,000.00 mortgage debt was due for payment on January 30, 1967.
The trial court rendered a decision on March 24, 1993 declaring the Deed of Sale to Montecillo null and
void. The trial court ordered the cancellation of Montecillos Transfer Certificate of Title No. 90805 and the
issuance of a new certificate of title in favor of the Abucay Spouses. The trial court found that Montecillos
Deed of Sale had no cause or consideration because Montecillo never paid Reynes the P47,000.00
purchase price, contrary to what is stated in the Deed of Sale that Reynes received the purchase price. The
trial court ruled that Montecillos Deed of Sale produced no effect whatsoever for want of
consideration. The dispositive portion of the trial courts decision reads as follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered declaring the deed of
sale in favor of defendant null and void and of no force and effect thereby ordering the cancellation of
Transfer Certificate of Title No. 90805 of the Register of Deeds of Cebu City and to declare plaintiff Spouses
Redemptor and Elisa Abucay as rightful vendees and Transfer Certificate of Title to the property subject
matter of the suit issued in their names. The defendants are further directed to pay moral damages in the
sum of P20,000.00 and attorneys fees in the sum of P2,000.00 plus cost of the suit.
xxx
Not satisfied with the trial courts Decision, Montecillo appealed the same to the Court of Appeals.

Ruling of the Court of Appeals

The appellate court affirmed the Decision of the trial court in toto and dismissed the appeal[13] on the
ground that Montecillos Deed of Sale is void for lack of consideration. The appellate court also denied
Montecillos Motion for Reconsideration[14] on the ground that it raised no new arguments.
Still dissatisfied, Montecillo filed the present petition for review on certiorari.

The Issues
Montecillo raises the following issues:
1. Was there an agreement between Reynes and Montecillo that the stated consideration
of P47,000.00 in the Deed of Sale be paid to Cebu Ice and Cold Storage to secure the release of
the Transfer Certificate of Title?
2. If there was none, is the Deed of Sale void from the beginning or simply rescissible? [15]

The Ruling of the Court

The petition is devoid of merit.

First issue: manner of payment of the P47,000.00 purchase price.

Montecillos Deed of Sale does not state that the P47,000.00 purchase price should be paid by
Montecillo to Cebu Ice Storage. Montecillo failed to adduce any evidence before the trial court showing that
Reynes had agreed, verbally or in writing, that the P47,000.00 purchase price should be paid to Cebu Ice
Storage. Absent any evidence showing that Reynes had agreed to the payment of the purchase price to
any other party, the payment to be effective must be made to Reynes, the vendor in the sale. Article 1240
of the Civil Code provides as follows:
Payment shall be made to the person in whose favor the obligation has been constituted, or his successor
in interest, or any person authorized to receive it.
Thus, Montecillos payment to Cebu Ice Storage is not the payment that would extinguish [16] Montecillos
obligation to Reynes under the Deed of Sale.
It militates against common sense for Reynes to sell her Mabolo Lot for P47,000.00 if this entire
amount would only go to Cebu Ice Storage, leaving not a single centavo to her for giving up ownership of a
valuable property. This incredible allegation of Montecillo becomes even more absurd when one considers
that Reynes did not benefit, directly or indirectly, from the payment of the P47,000.00 to Cebu Ice Storage.
The trial court found that Reynes had nothing to do with Jayags mortgage debt with Cebu Ice
Storage. The trial court made the following findings of fact:
x x x. Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and
Cold Storage Corporation, the obligation being exclusively of Bienvenido Jayag and wife who mortgaged
their residential house constructed on the land subject matter of the complaint. The payment by the
defendant to release the residential house from the mortgage is a matter between him and Jayag and
cannot by implication or deception be made to appear as an encumbrance upon the land. [17]
Thus, Montecillos payment to Jayags creditor could not possibly redound to the benefit [18] of
Reynes. We find no reason to disturb the factual findings of the trial court. In petitions for review on
certiorari as a mode of appeal under Rule 45, as in the instant case, a petitioner can raise only questions of
law.[19] This Court is not the proper venue to consider a factual issue as it is not a trier of facts.

Second issue: whether the Deed of Sale is void ab initio or only rescissible.
Under Article 1318 of the Civil Code, [T]here is no contract unless the following requisites concur: (1)
Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause

of the obligation which is established. Article 1352 of the Civil Code also provides that [C]ontracts without
cause x x x produce no effect whatsoever.
Montecillo argues that his Deed of Sale has all the requisites of a valid contract. Montecillo points out
that he agreed to purchase, and Reynes agreed to sell, the Mabolo Lot at the price of P47,000.00. Thus,
the three requisites for a valid contract concur: consent, object certain and consideration. Montecillo
asserts there is no lack of consideration that would prevent the existence of a valid contract. Rather, there
is only non-payment of the consideration within the period agreed upon for payment.
Montecillo argues there is only a breach of his obligation to pay the full purchase price on time. Such
breach merely gives Reynes a right to ask for specific performance, or for annulment of the obligation to
sell the Mabolo Lot. Montecillo maintains that in reciprocal obligations, the injured party can choose
between fulfillment and rescission,[20] or more properly cancellation, of the obligation under Article
1191[21] of the Civil Code. This Article also provides that the court shall decree the rescission claimed,
unless there be just cause authorizing the fixing of the period. Montecillo claims that because Reynes
failed to make a demand for payment, and instead unilaterally revoked Montecillos Deed of Sale, the court
has a just cause to fix the period for payment of the balance of the purchase price.
These arguments are not persuasive.
Montecillos Deed of Sale states that Montecillo paid, and Reynes received, the P47,000.00 purchase
price on March 1, 1984, the date of signing of the Deed of Sale. This is clear from the following provision of
the Deed of Sale:
That I, IGNACIA T. REYNES, x x x for and in consideration of FORTY SEVEN THOUSAND (P47,000.00)
PESOS, Philippine Currency, to me in hand paid by RIDO MONTECILLO xxx, receipt of which is
hereby acknowledged, have sold, transferred, and conveyed, unto RIDO MONTECILLO, x x x a parcel of
land x x x.
On its face, Montecillos Deed of Absolute Sale [22] appears supported by a valuable consideration.
However, based on the evidence presented by both Reynes and Montecillo, the trial court found that
Montecillo never paid to Reynes, and Reynes never received from Montecillo, the P47,000.00 purchase
price. There was indisputably a total absence of consideration contrary to what is stated in Montecillos
Deed of Sale. As pointed out by the trial court
From the allegations in the pleadings of both parties and the oral and documentary evidence adduced
during the trial, the court is convinced that the Deed of Sale (Exhibits 1 and 1-A) executed by plaintiff
Ignacia Reynes acknowledged before Notary Public Ponciano Alvinio is devoid of any consideration. Plaintiff
Ignacia Reynes through the representation of Baudillo Baladjay had executed a Deed of Sale in favor of
defendant on the promise that the consideration should be paid within one (1) month from the execution of
the Deed of Sale. However, after the lapse of said period, defendant failed to pay even a single centavo of
the consideration. The answer of the defendant did not allege clearly why no consideration was paid by
him except for the allegation that he had a balance of only P10,000.00. It turned out during the pre-trial
that what the defendant considered as the consideration was the amount which he paid for the obligation
of Bienvenido Jayag with the Cebu Ice and Cold Storage Corporation over which plaintiff Ignacia Reynes did
not have a part except that the subject of the mortgage was constructed on the parcel of land in question.
Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and Cold
Storage Corporation, the obligation being exclusively of Bienvenido Jayag and wife who mortgaged their
residential house constructed on the land subject matter of the complaint. The payment by the defendant
to release the residential house from the mortgage is a matter between him and Jayag and cannot by
implication or deception be made to appear as an encumbrance upon the land. [23]
Factual findings of the trial court are binding on us, especially if the Court of Appeals affirms such
findings.[24] We do not disturb such findings unless the evidence on record clearly does not support such
findings or such findings are based on a patent misunderstanding of facts, [25] which is not the case here.
Thus, we find no reason to deviate from the findings of both the trial and appellate courts that no valid
consideration supported Montecillos Deed of Sale.
This is not merely a case of failure to pay the purchase price, as Montecillo claims, which can only
amount to a breach of obligation with rescission as the proper remedy. What we have here is a purported
contract that lacks a cause - one of the three essential requisites of a valid contract. Failure to pay the
consideration is different from lack of consideration. The former results in a right to demand the fulfillment
or cancellation of the obligation under an existing valid contract [26] while the latter prevents the existence
of a valid contract
Where the deed of sale states that the purchase price has been paid but in fact has never been paid,
the deed of sale is null and void ab initio for lack of consideration. This has been the well-settled rule as
early as Ocejo Perez & Co. v. Flores,[27] a 1920 case. As subsequently explained in Mapalo v. Mapalo[28]
In our view, therefore, the ruling of this Court in Ocejo Perez & Co. vs. Flores, 40 Phil. 921, is squarely
applicable herein. In that case we ruled that a contract of purchase and sale is null and void and produces
no effect whatsoever where the same is without cause or consideration in that the purchase price which
appears thereon as paid has in fact never been paid by the purchaser to the vendor.
The Court reiterated this rule in Vda. De Catindig v. Heirs of Catalina Roque,[29] to wit

The Appellate Courts finding that the price was not paid or that the statement in the supposed contracts of
sale (Exh. 6 to 26) as to the payment of the price was simulated fortifies the view that the alleged sales
were void. If the price is simulated, the sale is void . . . (Art. 1471, Civil Code)
A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as
paid, has in fact never been paid by the purchaser to the vendor (Ocejo, Perez & Co. vs. Flores and Bas, 40
Phil. 921; Mapalo vs. Mapalo, L-21489, May 19, 1966, 64 O.G. 331, 17 SCRA 114, 122). Such a sale is nonexistent (Borromeo vs. Borromeo, 98 Phil. 432) or cannot be considered consummated (Cruzado vs. Bustos
and Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229).
Applying this well-entrenched doctrine to the instant case, we rule that Montecillos Deed of Sale is null and
void ab initio for lack of consideration.
Montecillo asserts that the only issue in controversy is the mode and/or manner of payment and/or
whether or not payment has been made. [30] Montecillo implies that the mode or manner of payment is
separate from the consideration and does not affect the validity of the contract. In the recent case of San
Miguel Properties Philippines, Inc. v. Huang,[31] we ruled that
In Navarro v. Sugar Producers Cooperative Marketing Association, Inc. (1 SCRA 1181 [1961]), 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 (244 SCRA 320 [1995]),
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. (Emphasis supplied)
One of the three essential requisites of a valid contract is consent of the parties on the object and
cause of the contract. In a contract of sale, the parties must agree not only on the price, but also on the
manner of payment of the price. An agreement on the price but a disagreement on the manner of its
payment will not result in consent, thus preventing the existence of a valid contract for lack of
consent. This lack of consent is separate and distinct from lack of consideration where the contract
states that the price has been paid when in fact it has never been paid.
Reynes expected Montecillo to pay him directly the P47,000.00 purchase price within one month after
the signing of the Deed of Sale. On the other hand, Montecillo thought that his agreement with Reynes
required him to pay the P47,000.00 purchase price to Cebu Ice Storage to settle Jayags mortgage
debt. Montecillo also acknowledged a balance of P10,000.00 in favor of Reynes although this amount is not
stated in Montecillos Deed of Sale. Thus, there was no consent, or meeting of the minds, between Reynes
and Montecillo on the manner of payment. This prevented the existence of a valid contract because of lack
of consent.
In summary, Montecillos Deed of Sale is null and void ab initio not only for lack of consideration, but
also for lack of consent. The cancellation of TCT No. 90805 in the name of Montecillo is in order as there
was no valid contract transferring ownership of the Mabolo Lot from Reynes to Montecillo.
WHEREFORE, the petition is DENIED and the assailed Decision dated July 16, 1998 of the Court of
Appeals in CA-G.R. CV No. 41349 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Panganiban, and Sandoval-Gutierrez, JJ., concur.

[1]

Penned by Judge Galicano C. Arriesgado; Records of Civil Case No. CEB-2335, pp. 70-77.

[2]

Fourth Division composed of Justices Omar U. Amin (ponente), Minerva P. Gonzaga-Reyes (now retired
Justice of the Supreme Court) and Hector L. Hofilena; CA-G.R. CV No. 41349.
[3]

Rollo, pp. 18-24.

[4]

Rollo, pp. 14-15; signed by Justice Omar U. Amin and concurred in by Justices Hector L. Hofilena and
Presbitero J. Velasco, Jr. (now Court Administrator of the Supreme Court).
[5]

Under Rule 45 of the Revised Rules on Civil Procedure.

[6]

TSN dated December 16, 1987, cross-examination of Natividad Branzuela, p. 3.

[7]

TSN dated October 27, 1987, cross-examination of Ignacia Reynes, p. 5; Exhibit 1, Defendants Offer of
Exhibits dated August 26, 1989.
[8]

Records of Civil Case No. CEB-2335, p. 115.

[9]

TSN dated August 26, 1985, direct testimony of Bartolome Reynes, p. 29.

[10]

Records of Civil Case No. CEB-2335, p. 17.

[11]

Amended Complaint dated December 4, 1984, p. 2.

[12]

TSN dated December 19, 1988, cross-examination of Rido Montecillo, p. 8.

[13]

Rollo, pp. 18-24; Court Of Appeals Decision dated July 16, 1998.

[14]

Rollo, pp. 14-15; Court Of Appeals Resolution dated February 11, 1999.

[15]

Rollo, p. 66; Petitioners Memorandum dated May 25, 2000.

[16]

Article 1231 of the Civil Code provides as follows: Obligations are extinguished: (1) By payment or
performance; x x x.
[17]

Records of Civil Case No. CEB-2335, pp. 134-135.

[18]

The second paragraph of Article 1241 of the Civil Code provides as follows: Payment made to a third
person shall also be valid insofar as it has redounded to the benefit of the creditor. x x x.
[19]

Cormero v. Court of Appeals, 247 SCRA 291 (1995).

[20]

As used here, the term rescission refers to cancellation of a reciprocal obligation under Article 1191 of
the Civil Code, and does not mean a rescissible contract under Article 1381 of the same Code.
[21]

Article 1191 of the Civil Code provides as follows:

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.
The inured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of
the period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing in
accordance with Articles 1385 and 1388 and the Mortgage Law.
[22]

Records of Civil Case No. CEB-2335, p. 115.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179653

July 31, 2009

UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. represented by its
President, MANUEL V. BUEN, Petitioner,
vs.
BRYC-V DEVELOPMENT CORPORATION represented by its President, BENJAMIN QUIDILLA; and
SEA FOODS CORPORATION, represented by its Executive Vice President, VICENTE T.
HERNANDEZ,Respondents.
DECISION
NACHURA, J.:
This petition for review on certiorari seeks to set aside the Decision1 of the Court of Appeals (CA) in CA G.R.
CV No. 62557 which affirmed in toto the Decision2 of the Regional Trial Court (RTC), Branch 16, Zamboanga
City in Civil Case No. 467(4544).
The facts are simple.
Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan,
Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T-576).
Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an
organization of squatters occupying Lot No. 300, through its President, Carmen T. Diola, initiated
negotiations with SFC for the purchase thereof. UMCUPAI expressed its intention to buy the subject
property using the proceeds of its pending loan application with National Home Mortgage Finance
Corporation (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent
to Purchase by UMCUPAI, providing, in pertinent part:
WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No. 300 situated in Lower
Calarian, Zamboanga City, consisting of 61,736 square meters, and more particularly described in Transfer
Certificate of Title No. 576 of the Registry of Deeds of Zamboanga City;
WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No. 403410) and duly
accredited with the Presidential Commission for the Urban Poor, has approached [SFC] and negotiated for
the ACQUISITION of the above-described property of [SFC];
WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter has taken steps with
the proper government authorities particularly the Mayor of Zamboanga City and its City Housing Board
which will act as "Originator" in the acquisition of said property which will enable UMCUPAI to avail of its
Community Mortgage Program;
WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation
for a loan to pay the acquisition price of said land;
WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive
a formal manifestation of Intent to Sell from [SFC];
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree as follows:
1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736 square meters
situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of the Registry of Deeds of
Zamboanga City to UMCUPAI at the price of P105.00 per square meter, free from all liens, charges
and encumbrances;
2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property and shall
endeavor to raise the necessary funds to acquire same at the abovementioned price of P105.00 per
square meter;

3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title
and all other pertinent documents upon full payment of the purchase price;
4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration, transfer tax and
other expenses shall be paid by the UMCUPAI.3
However, the intended sale was derailed due to UMCUPAIs inability to secure the loan from NHMF as not
all its members occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject
property, UMCUPAI, in a series of conferences with SFC, proposed the subdivision of Lot No. 300 to allow
the squatter-occupants to purchase a smaller portion thereof.
Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by
separate titles:
1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448;
2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-117,449; and
3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-117,450.
On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58. In turn, Lot No. 300-B was
constituted as road right of way and donated by SFC to the local government.
UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew
with SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite
the extension, the three-month period lapsed with the sale not consummated because UMCUPAI still failed
to obtain a loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to
respondent BRYC-V Development Corporation (BRYC).
A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC seeking to annul
the sale of Lot No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale
between the respondents violated its valid and subsisting agreement with SFC embodied in the Letter of
Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC
in the purchase of Lot No. 300-C.
In refutation, BRYC said that UMCUPAIs complaint did not state a cause of action since UMCUPAI had
unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a Letter of
Intent dated August 18, 1995 imploring BRYC to re-sell the subject lot.
In a separate Answer, SFC countered that the Letter of Intent dated October 4, 1991 is not, and cannot be
considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was
drawn and executed merely to accommodate UMCUPAI and enable it to comply with the loan
documentation requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4,
1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI failed to do when it
did not obtain the loan from NHMF.
After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that the Letter of Intent was
executed to facilitate the approval of UMCUPAIs loan from NHMF for its intended purchase of Lot No. 300.
According to the RTC, the Letter of Intent was simply SFCs declaration of intention to sell, and not a
promise to sell, the subject lot. On the whole, the RTC concluded that the Letter of Intent was neither a
promise, nor an option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a
bilateral contract to sell and buy.
As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling.
Hence, this recourse by UMCUPAI positing a sole issue for our resolution:
IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL RECIPROCAL CONTRACT
WITHIN THE MEANING OR CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF THE
PHILIPPINES?4
The petition deserves scant consideration. We completely agree with the lower courts rulings.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed
by the appellate court, are accorded the highest degree of respect and are considered conclusive between
the parties.5A review of such findings by this Court is not warranted except upon a showing of highly
meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on
speculation, surmises or conjectures; (2) when a lower courts inference from its factual findings is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation
of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice

certain relevant facts which, if properly considered, would justify a different conclusion; (5) when there is a
misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific
evidence on which they are based, or are premised on the absence of evidence, or are contradicted by
evidence on record.6 None of the foregoing exceptions necessitating a reversal of the assailed decision
obtain in this instance.
UMCUPAI is adamant, however, that the CA erred when it applied the second paragraph of Article 1479 of
the Civil Code instead of the first paragraph thereof. UMCUPAI urges us that the first paragraph of Article
1479 contemplates a bilateral reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful
not to designate the Letter of Intent as a Contract to Sell. UMCUPAI simply insists that the Letter of Intent is
not a unilateral promise to sell or buy which has to be supported by a consideration distinct from the price
for it to be binding on the promissor. In short, UMCUPAI claims that the Letter of Intent did not merely grant
the parties the option to respectively sell or buy the subject property. Although not stated plainly, UMCUPAI
claims that the Letter of Intent is equivalent to a conditional contract of sale subject only to the suspensive
condition of payment of the purchase price.
UMCUPAI appears to labor under a cloud of confusion. The first paragraph of Article 1479 contemplates the
bilateral relationship of a contract to sell as distinguished from a contract of sale which may be absolute or
conditional under Article 14587 of the same code. It reads:
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 if the promise is supported by a consideration distinct from the price.
The case of Coronel v. Court of Appeals8 is illuminating and explains the distinction between a conditional
contract of sale under Article 1458 of the Civil Code and a bilateral contract to sell under Article 1479 of
the same code:
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale
where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if
the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already
been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically
transfers to the buyer by operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have
been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases
where the subject property is sold by the owner not to the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third
person buying such property despite the fulfillment of the suspensive condition such as the full payment of
the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot
seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property
will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but
the latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous
delivery of the subject property, the sellers ownership or title to the property is automatically transferred
to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying
Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive
knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case
a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the
sale.
In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor
a conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was
executed to accommodate UMCUPAI and facilitate its loan application with NHMF. The 4th and 5th
paragraphs of the recitals (whereas clauses) specifically provide:

WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation
for a loan to pay the acquisition price of said land;
WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive
a formal manifestation of Intent to Sell from [SFC].
Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property,
subject only to the condition of complete payment of the purchase price; nor, at the least, that SFC,
although expressly retaining ownership thereof, binds itself to sell the property exclusively to UMCUPAI.
The Letter of Intent to Buy and Sell is just that a manifestation of SFCs intention to sell the property and
UMCUPAIs intention to acquire the same. This is quite obvious from the reference to the execution of an
Absolute Deed of Sale in paragraph three9 of the Letter of Intent.
As the CA did, we quote with favor the RTCs disquisition:
The Decision in this case hinges on the legal interpretation of the Agreement entered into by SFC and
UMCUPAI denominated as "Letter of Intent to Sell by Landowner and Letter of Intent to Purchase by United
Muslim and Christian Urban Poor Association, Inc."
Blacks Law Dictionary says that a Letter of Intent is customarily employed to reduce to writing a
preliminary understanding of parties who intend to enter into contract. It is a phrase ordinarily used to
denote a brief memorandum of the preliminary understanding of parties who intend to enter into a
contract. It is a written statement expressing the intention of the parties to enter into a formal agreement
especially a business arrangement or transaction.
In their Agreement, SFC expressly declared its "intention" to sell and UMCUPAI expressly declared its
"intention" to buy subject property. An intention is a mere idea, goal, or plan. It simply signifies a course of
action that one proposes to follow. It simply indicates what one proposes to do or accomplish. A mere
"intention" cannot give rise to an obligation to give, to do or not to do (Article 1156, Civil Code). One
cannot be bound by what he proposes or plans to do or accomplish. A Letter of Intent is not a contract
between the parties thereto because it does not bind one party, with respect to the other, to give
something, or to render some service (Art. 1305, Civil Code).
xxx

xxx

xxx

The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding
of the parties wherein they declared their intention to enter into a contract of sale. It is subject to the
condition that UMCUPAI will "apply with the Home Mortgage and Finance Corporation for a loan to pay the
acquisition price of said land." One of the requirements for such loan is "a formal manifestation of Intent to
Sell" from SFC. Thus, the Letter of Intent to Sell fell short of an "offer" contemplated in Article 1319 of the
Civil Code because it is not a certain and definite proposal to make a contract but merely a declaration of
SFCs intention to enter into a contract. UMCUPAIs declaration of intention to buy is also not certain and
definite as it is subject to the condition that UMCUPAI shall endeavor to raise funds to acquire subject land.
The acceptance of the offer must be absolute; it must be plain and unconditional. Moreover, the Letter of
Intent/Agreement does not contain a promise or commitment to enter into a contract of sale as it merely
declared the intention of the parties to enter into a contract of sale upon fulfillment of a condition that
UMCUPAI could secure a loan to pay for the price of a land.
The Letter of Intent/Agreement is not an "option contract" because aside from the fact that it is merely a
declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary
funds to pay the price of the land, and does not contain a binding promise to sell and buy, it is not
supported by a distinct consideration distinct from the price of the land intended to be sold and to be
bought x x x No option was granted to UMCUPAI under the Letter of Intent/Agreement to buy subject land
to the exclusion of all others within a fixed period nor was SFC bound under said Agreement to Sell
exclusively to UMCUPAI only the said land within the fixed period.lavvph!l
Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy
contemplated under Article 1479 of the Civil Code which is reciprocally demandable. The Letter of
Intent/Agreement does not contain a PROMISE to sell and to buy subject property. There was no promise or
commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its intention to
buy the land, subject to the condition that UMCUPAI could raise the necessary funds to acquire the same at
the price of P105.00 per square meter x x x
While UMCUPAI succeeded in raising funds to acquire a portion of Lot No. 300-A, it failed to raise funds to
pay for Lot No. 300-C. From October 4, 1991 when the Letter of Intent was signed to June, 1995, UMCUPAI
had about three (3) years and eight (8) months within which to pursue its intention to buy subject land
from SFC. Within that period, UMCUPAI had ample time within which to acquire Lot No. 300-C, as in fact it
had acquired Lot No. 300-A which is much bigger than Lot No. 300-C and occupied by more members of
UMCUPAI. The failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V cannot be blamed
on SFC because all that UMCUPAI had to do was to raise funds to pay for Lot No. 300-C which it did with
respect to Lot No. 300-A. SFC had nothing to do with SFCs unilateral action through Mrs. Antonina

Graciano to "postpone" the processing of the acquisition of Lot No. 300-C, which it referred to as Phase II,
until after the payment to SFC of the acquisition price for Lot No. 300-A or Phase I x x x
WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in
CA G.R. CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against
the petitioner.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MINITA V. CHICO-NAZARIO
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

DIOSDADO M. PERALTA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify
that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

Footnotes
1

Penned by Associate Justice Ramon R. Garcia with Associate Justices Romulo V. Bora and Antonio
Villamor, concurring; rollo, pp. 13-29.
2

Penned by Judge Jesus C. Carbon, Jr.; rollo, 55-68.

Rollo, pp. 15-16.

Id. at 44.

Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, March 7, 2007, 517
SCRA 180; Sigaya v. Mayuga, G.R. No. 143254, August 18, 2005, 467 SCRA 341.
6

Ilao-Quianay v. Mapile, G.R. No. 154087, October 25, 2005, 474 SCRA 246, 247. See Child Learning
Center, Inc. v. Tagorio, G.R. No. 150920, November 25, 2005, 476 SCRA 236, 236-237.
7

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 contract of sale may be absolute or conditional.
8

G.R. No. 103577, October 7, 1996, 331 Phil. 294.

3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title
and all other pertinent documents upon full payment of the purchase price.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 186014

June 26, 2013

ALI AKANG, Petitioner,

vs.
MUNICIPALITY OF ISULAN, SULTAN KUDARA T PROVINCE, represented by its MUNICIPAL MAYOR
AND MUNICIPAL VICE MAYOR AND MUNICIPAL COUNCILORS/KAGAWADS, Respondent.
DECISION
REYES, J.:
This case was originally filed as a petition for certiorari under Rule 65 of the Rules of Court. In the Court's
Resolution dated March 9, 2009, however, the petition was treated as one for review under
Rule.45.1 Assailed is the Decision2 dated April 25, 2008 and Resolution3 dated October 29, 2008 of the
Court of Appeals Mindanao Station (CA) in CA-G.R. CV No. 00156, which reversed the Judgment 4 dated
January 14, 2004 of the Regional Trial Court (RTC) of Isulan, Sultan Kudarat, Branch 19 in Civil Case No.
1007 for Recovery of Possession of Subject Property and/or Quieting of Title thereon and Damages.
The Facts
Ali Akang (petitioner) is a member of the national and cultural community belonging to the Maguindanaon
tribe of Isulan, Province of Sultan Kudarat and the registered owner of Lot 5-B-2-B-14-F (LRC) Psd 1100183
located at Kalawag III, Isulan, Sultan Kudarat, covered by Transfer Certificate of Title (TCT) No. T-3653, 5 with
an area of 20,030 square meters.6
Sometime in 1962, a two-hectare portion of the property was sold by the petitioner to the Municipality of
Isulan, Province of Sultan Kudarat (respondent) through then Isulan Mayor Datu Ampatuan under a Deed of
Sale executed on July 18, 1962, which states:
"That for and in consideration of the sum of THREE THOUSAND PESOS ([P]3,000.00), Philippine Currency,
value to be paid and deliver to me, and of which receipt of which shall be acknowledged by me to my full
satisfaction by the MUNICIPAL GOVERNMENT OF ISULAN, represented by the Municipal Mayor, Datu Sama
Ampatuan, hereinafter referred to as the VENDEE, I hereby sell, transfer, cede, convey and assign as by
these presents do have sold, transferred, ceded, conveyed and assigned, an area of TWO (2) hectares,
more or less, to and in favor of the MUNICIPAL GOVERNMENT OF ISULAN, her (sic) heirs, assigns and
administrators to have and to hold forevery (sic) and definitely, which portion shall be utilized purposely
and exclusively as a GOVERNMENT CENTER SITE x x x."7
The respondent immediately took possession of the property and began construction of the municipal
building.8
Thirty-nine (39) years later or on October 26, 2001, the petitioner, together with his wife, Patao Talipasan,
filed a civil action for Recovery of Possession of Subject Property and/or Quieting of Title thereon and
Damages against the respondent, represented by its Municipal Mayor, et al. 9
In his complaint, the petitioner alleged, among others, that the agreement was one to sell, which was not
consummated as the purchase price was not paid.10
In its answer, the respondent denied the petitioners allegations, claiming, among others: that the
petitioners cause of action was already barred by laches; that the Deed of Sale was valid; and that it has
been in open, continuous and exclusive possession of the property for forty (40) years. 11
After trial, the RTC rendered judgment in favor of the petitioner. The RTC construed the Deed of Sale as a
contract to sell, based on the wording of the contract, which allegedly showed that the consideration was
still to be paid and delivered on some future date a characteristic of a contract to sell. 12 In addition, the
RTC observed that the Deed of Sale was not determinate as to its object since it merely indicated two (2)
hectares of the 97,163 sq m lot, which is an undivided portion of the entire property owned by the

petitioner. The RTC found that segregation must first be made to identify the parcel of land indicated in the
Deed of Sale and it is only then that the petitioner could execute a final deed of absolute sale in favor of
the respondent.13
As regards the payment of the purchase price, the RTC found the same to have not been made by the
respondent. According to the RTC, the Municipal Voucher is not a competent documentary proof of
payment but is merely evidence of admission by the respondent that on the date of the execution of the
Deed of Sale, the consideration stipulated therein had not yet been paid. The RTC also ruled that the
Municipal Vouchers validity and evidentiary value is in question as it suffers infirmities, that is, it was
neither duly recorded, numbered, signed by the Municipal Treasurer nor was it pre-audited. 14
The RTC also ruled that the Deed of Sale was not approved pursuant to Section 145 of the Administrative
Code for Mindanao and Sulu or Section 120 of the Public Land Act (PLA), as amended. Resolution No.
70,15 which was issued by the respondent, appropriating the amount of P3,000.00 as payment for the
property, and Resolution No. 644 of the Provincial Board of Cotabato, which approved Resolution No. 70,
cannot be considered proof of the sale as said Deed of Sale was not presented for examination and
approval of the Provincial Board.16 Further, since the respondents possession of the property was not in
the concept of an owner, laches cannot be a valid defense for claiming ownership of the property, which
has been registered in the petitioners name under the Torrens System. 17
The dispositive portion of the RTC Decision18 dated January 14, 2004 reads:
WHEREFORE, upon all the foregoing considerations, judgment is hereby rendered:
a. Declaring the contract entered into between the plaintiffs and the defendant, Municipal
Government of Isulan, Cotabato (now Sultan Kudarat), represented by its former Mayor, Datu Suma
Ampatuan, dated July 18, 1962, as a contract to sell, without its stipulated consideration having
been paid; and for having been entered into between plaintiff Ali Akang, an illiterate non-Christian,
and the defendant, Municipal Government of Isulan, in violation of Section 120 of C.A. No. 141, said
contract/agreement is hereby declared null and void;
b. Declaring the Deed of Sale (Exh. "1"-"E") dated July 18, 1962, null and void ab initio, for having
been executed in violation of Section 145 of the Administrative Code of Mindanao and Sulu, and of
Section 120 of the Public Land Law, as amended by R.A. No. 3872;
c. Ordering the defendants to pay plaintiffs, the value of the lot in question, Lot No. 5-B-2-B-14-F
(LRC) Psd 110183, containing an area of 20,030 Square Meters, at the prevailing market value, as
may be reflected in its Tax Declaration, or in the alternative, to agree on the payment of monthly
back rentals, retroactive to 1996, until defendants should decide to buy and pay the value of said
lot as aforestated, with legal interest in both cases;
d. Ordering the defendant, Municipal Government of Isulan, Sultan Kudarat, to pay plaintiffs, by way
of attorneys fee, the equivalent of 30% of the value that defendants would pay the plaintiffs for the
lot in question; and to pay plaintiffs the further sum of P100,000.00, by way of moral and exemplary
damages;
e. Ordering the defendants, members of the Sangguniang Bayan of Isulan, Sultan Kudarat, to pass a
resolution/ordinance for the appropriation of funds for the payment of the value of plaintiffs Lot 5B-2-B-14-F (LRC) Psd-110183, and of the damages herein awarded to the plaintiffs; and
f. Ordering the defendants to pay the costs of suit.
For lack of merit, the counterclaims of the defendants should be, as it is hereby, dismissed.
IT IS SO ORDERED.19
By virtue of said RTC decision, proceedings for the Cancellation of Certificate of Title No. T-49349 registered
under the name of the respondent was instituted by the petitioner under Miscellaneous Case No. 866 and
as a result, the respondents title over the property was cancelled and a new one issued in the name of the
petitioner.
The respondent appealed the RTC Decision dated January 14, 2004 and in the Decision 20 dated April 25,
2008, the CA reversed the ruling of the RTC and upheld the validity of the sale. The dispositive portion of
the CA Decision provides:
WHEREFORE, the assailed decision dated January 14, 2004 is hereby REVERSED and a new one entered,
upholding the contract of sale executed on July 18, 1962 between the parties.
SO ORDERED.21

The CA sustained the respondents arguments and ruled that the petitioner is not entitled to recover
ownership and possession of the property as the Deed of Sale already transferred ownership thereof to the
respondent. The CA held that the doctrines of estoppel and laches must apply against the petitioner for the
reasons that: (1) the petitioner adopted inconsistent positions when, on one hand, he invoked the
interpretation of the Deed of Sale as a contract to sell but still demanded payment, and called for the
application of Sections 145 and 146 of the Administrative Code for Mindanao and Sulu, on the other; and
(2) the petitioner did not raise at the earliest opportunity the nullity of the sale and remained passive for
39 years, as it was raised only in 2001.22
The CA also ruled that the Deed of Sale is not a mere contract to sell but a perfected contract of sale.
There was no express reservation of ownership of title by the petitioner and the fact that there was yet no
payment at the time of the sale does not affect the validity or prevent the perfection of the sale. 23
As regards the issue of whether payment of the price was made, the CA ruled that there was actual
payment, as evidenced by the Municipal Voucher, which the petitioner himself prepared and signed
despite the lack of approval of the Municipal Treasurer. Even if he was not paid the consideration, it does
not affect the validity of the contract of sale for it is not the fact of payment of the price that determines its
validity.24
In addition, the CA noted that there was an erroneous cancellation of the certificate of title in the name of
the respondent and the registration of the same property in the name of the petitioner in Miscellaneous
Case No. 866. According to the CA, this does not affect in any way the ownership of the respondent over
the subject property because registration or issuance of a certificate of title is not one of the modes of
acquiring ownership.25
The petitioner sought reconsideration of the CA Decision, which was denied by the CA in its
Resolution26 dated October 29, 2008.
Hence, this petition.
Issue
WHETHER THE PETITIONER IS ENTITLED TO RECOVER OWNERSHIP AND POSSESSION OF THE PROPERTY IN
DISPUTE.
Resolution of the above follows determination of these questions: (1) whether the Deed of Sale dated July
18, 1962 is a valid and perfected contract of sale; (2) whether there was payment of consideration by the
respondent; and (3) whether the petitioners claim is barred by laches.
The petitioner claims that the acquisition of the respondent was null and void because: (1) he is an
illiterate non-Christian who only knows how to sign his name in Arabic and knows how to read the Quran
but can neither read nor write in both Arabic and English; (2) the respondent has not paid the price for the
property; (3) the Municipal Voucher is not admissible in evidence as proof of payment; (4) the Deed of Sale
was not duly approved in accordance with Sections 145 and 146 of the Administrative Code of Mindanao
and Sulu, and Section 120 of the PLA, as amended; and (4) the property is a registered land covered by a
TCT and cannot be acquired by prescription or adverse possession. 27 The petitioner also explained that the
delayed filing of the civil action with the RTC was due to Martial Law and the Ilaga-Blackshirt Troubles in the
then Province of Cotabato.28
The respondent, however, counters that: (1) the petitioner is not an illiterate non-Christian and he, in fact,
was able to execute, sign in Arabic, and understand the terms and conditions of the Special Power of
Attorney dated July 23, 1996 issued in favor of Baikong Akang (Baikong); (2) the Deed of Sale is valid as its
terms and conditions were reviewed by the Municipal Council of Isulan and the Provincial Board of
Cotabato; and (3) the Deed of Sale is a contract of sale and not a contract to sell. 29
Ruling of the Court
The Court finds the petition devoid of merit.
Issue Raised for the First Time
on Appeal is Barred by Estoppel
The petitioner asserts that the Deed of Sale was notarized by Atty. Gualberto B. Baclig who was not
authorized to administer the same, hence, null and void. This argument must be rejected as it is being
raised for the first time only in this petition. In his arguments before the RTC and the CA, the petitioner
focused mainly on the validity and the nature of the Deed of Sale, and whether there was payment of the
purchase price. The rule is settled that issues raised for the first time on appeal and not raised in the
proceedings in the lower court are barred by estoppel. To consider the alleged facts and arguments raised
belatedly would amount to trampling on the basic principles of fair play, justice, and due
process.30 Accordingly, thepetitioners attack on the validity of the Deed of Sale vis--vis its compliance
with the 2004 New Notarial Law must be disregarded.31

The Deed of Sale is a Valid Contract of Sale

The petitioner alleges that the Deed of Sale is merely an agreement to sell, which was not perfected due to
non-payment of the stipulated consideration.32 The respondent, meanwhile, claims that the Deed of Sale is
a valid and perfected contract of absolute sale.33
A contract of sale is defined under Article 1458 of the Civil Code:
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 therefore a price certain in money or its equivalent.
The elements of a contract of sale are: (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.34
A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:
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.
In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold,
whereas in a contract to sell, the ownership is, by agreement, retained by the seller and is not to pass to
the vendee until full payment of the purchase price.35
The Deed of Sale executed by the petitioner and the respondent is a perfected contract of sale, all its
elements being present. There was mutual agreement between them to enter into the sale, as shown by
their free and voluntary signing of the contract. There was also an absolute transfer of ownership of the
property by the petitioner to the respondent as shown in the stipulation: "x x x I petitioner hereby sell,
transfer, cede, convey and assign as by these presents do have sold, transferred, ceded, conveyed and
assigned, x x x."36 There was also a determine subject matter, that is, the two-hectare parcel of land as
described in the Deed of Sale. Lastly, the price or consideration is at Three Thousand Pesos (P3,000.00),
which was to be paid after the execution of the contract. The fact that no express reservation of ownership
or title to the property can be found in the Deed of Sale bolsters the absence of such intent, and the
contract, therefore, could not be one to sell. Had the intention of the petitioner been otherwise, he could
have: (1) immediately sought judicial recourse to prevent further construction of the municipal building; or
(2) taken legal action to contest the agreement. 37 The petitioner did not opt to undertake any of such
recourses.
Payment of consideration or purchase price
The petitioners allegation of non-payment is of no consequence taking into account the Municipal Voucher
presented before the RTC, which proves payment by the respondent of Three Thousand Pesos (P3,000.00).
The petitioner, notwithstanding the lack of the Municipal Treasurers approval, admitted that the signature
appearing on the Municipal Voucher was his and he is now estopped from disclaiming payment.
Even assuming, arguendo, that the petitioner was not paid, such non payment is immaterial and has no
effect on the validity of the contract of sale. A contract of sale is a consensual contract and what is
required is the meeting of the minds on the object and the price for its perfection and validity. 38 In this
case, the contract was perfected the moment the petitioner and the respondent agreed on the object of
the sale the two-hectare parcel of land, and the price Three Thousand Pesos (P3,000.00). Non-payment
of the purchase price merely gave rise to a right in favor of the petitioner to either demand specific
performance or rescission of the contract of sale.39
Sections 145 and 146 of the Administrative Code of Mindanao and Sulu, and Section 120 of the PLA, as
amended, are not applicable
The petitioner relies on the foregoing laws in assailing the validity of the Deed of Sale, claiming that the
contract lacks executive approval and that he is an illiterate non-Christian to whom the benefits of Sections
145 and 146 of the Administrative Code of Mindanao and Sulu should apply.
Section 145 of the Administrative Code of Mindanao and Sulu essentially provides for the requisites of the
contracts entered into by a person with any Moro or other non-Christian inhabitants. 40 Section
146,41 meanwhile, provides that contracts entered into in violation of Section 145 are void. These
provisions aim to safeguard the patrimony of the less developed ethnic groups in the Philippines by
shielding them against imposition and fraud when they enter into agreements dealing with realty. 42
Section 120 of the PLA (Commonwealth Act No. 141) affords the same protection. 43 R.A. No. No.
387244 likewise provides that conveyances and encumbrances made by illiterate non-Christian or literate
non-Christians where the instrument of conveyance or encumbrance is in a language not understood by

said literate non-Christians shall not be valid unless duly approved by the Chairman of the Commission on
National Integration.
In Jandoc-Gatdula v. Dimalanta,45 however, the Court categorically stated that while the purpose of
Sections 145 and 146 of the Administrative Code of Mindanao and Sulu in requiring executive approval of
contracts entered into by cultural minorities is indeed to protect them, the Court cannot blindly apply that
law without considering how the parties exercised their rights and obligations. In this case, Municipality
Resolution No. 70, which approved the appropriation of P3,000.00, was, in fact, accepted by the Provincial
Board of Cotabato. In approving the appropriation of P3,000.00, the Municipal Council of Isulan and the
Provincial Board of Cotabato, necessarily, scrutinized the Deed of Sale containing the terms and conditions
of the sale. Moreover, there is nothing on record that proves that the petitioner was duped into signing the
contract, that he was taken advantage of by the respondent and that his rights were not protected.
The courts duty to protect the native vendor, however, should not be carried out to such an extent as to
deny justice to the vendee when truth and justice happen to be on the latters side. The law cannot be
used to shield the enrichment of one at the expense of another. More important, the law will not be applied
so stringently as to render ineffective a contract that is otherwise valid, except for want of approval by the
CNI. This principle holds, especially when the evils sought to be avoided are not obtaining. 46
The Court must also reject the petitioners claim that he did not understand the import of the
agreement.1wphi1 He alleged that he signed in Arabic the Deed of Sale, the Joint Affidavit and the
Municipal Voucher, which were all in English, and that he was not able to comprehend its contents. Records
show the contrary. The petitioner, in fact, was able to execute in favor of Baikong a Special Power of
Attorney (SPA) dated July 23, 1996, which was written in English albeit signed by the petitioner in Arabic.
Said SPA authorized Baikong, the petitioners sister, to follow-up the payment of the purchase price. This
raises doubt on the veracity of the petitioners allegation that he does not understand the language as he
would not have been able to execute the SPA or he would have prevented its enforcement.
The Petitioners Claim for Recovery of Possession and Ownership is Barred by Laches
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to
do that which, by exercising due diligence could or should have been done earlier. 47 It should be stressed
that laches is not concerned only with the mere lapse of time. 48
As a general rule, an action to recover registered land covered by the Torrens System may not be barred
by laches.49 Neither can laches be set up to resist the enforcement of an imprescriptible legal right. 50 In
exceptional cases, however, the Court allowed laches as a bar to recover a titled property. Thus, in Romero
v. Natividad,51the Court ruled that laches will bar recovery of the property even if the mode of transfer was
invalid. Likewise, in Vda. de Cabrera v. CA,52 the Court ruled:
In our jurisdiction, it is an enshrined rule that even a registered owners of property may be barred from
recovering possession of property by virtue of laches. Under the Land Registration Act (now the Property
Registration Decree), no title to registered land in derogation to that of the registered owner shall be
acquired by prescription or adverse possession. The same is not true with regard to laches. x x
x.53 (Citation omitted and emphasis supplied)
More particularly, laches will bar recovery of a property, even if the mode of transfer used by an alleged
member of a cultural minority lacks executive approval.54 Thus, in Heirs of Dicman v. Cario,55 the Court
upheld the Deed of Conveyance of Part Rights and Interests in Agricultural Land executed by Ting-el
Dicman in favor of Sioco Cario despite lack of executive approval. The Court stated that "despite the
judicial pronouncement that the sale of real property by illiterate ethnic minorities is null and void for lack
of approval of competent authorities, the right to recover possession has nonetheless been barred through
the operation of the equitable doctrine of laches."56Similarly in this case, while the respondent may not be
considered as having acquired ownership by virtue of its long and continued possession, nevertheless, the
petitioners right to recover has been converted into a stale demand due to the respondents long period of
possession and by the petitioners own inaction and neglect.57The Court cannot accept the petitioners
explanation that his delayed filing and assertion of rights was due to Martial Law and the Cotabato IlagaBlack Shirt Troubles. The Martial Law regime was from 1972 to 1986, while the Ilaga-Black Shirt Troubles
were from the 1970s to the 1980s. The petitioner could have sought judicial relief, or at the very least
made his demands to the respondent, as early as the third quarter of 1962 after the execution of the Deed
of Sale and before the advent of these events. Moreover, even if, as the petitioner claims, access to courts
were restricted during these times, he could have immediately filed his claim after Martial Law and after
the Cotabato conflict has ended. The petitioner's reliance on the Court's treatment of Martial Law as force
majeure that suspended the running of prescription in Development Bank of the Philippines v.
Pundogar58 is inapplicable because the Court's ruling therein pertained to prescription and not laches.
Consequently, the petitioner's lengthy inaction sufficiently warrants the conclusion that he acquiesced or
conformed to the sale.
Vigilantibus sed non dormientibus jura subverniunt. The law aids the vigilant, not those who sleep on their
rights. This legal percept finds application in the petitioner's case.

WHEREFORE, the appeal is DENIED. The Decision dated April 25, 2008 and Resolution dated October 29,
2008 of the Court of Appeals Mindanao Station in CA-G.R. CV No. 00156 are AFFIRMED.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
Chairperson
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court's
Division.
MARIA LOURDES P. A. SERENO
Chief Justice

Footnotes
1

Initially, the Court dismissed the petition in its Resolution dated March 3, 2010 for failure of the
petitioner to file a reply to the respondent's comment as directed by the Court in its Resolution
dated July 15, 2009. The Court, however, later reinstated the petition per Resolution dated July 21,
2010.
2

Penned by Associate Justice Rodrigo F. Lim, Jr. (now retired), with Associate Justices Michael P.
Elbinias and Edgardo T. Lloren, concurring; rollo, pp. 20-41.
3

Id. at 42-43.

Penned by Judge German M. Malcampo; id. at 44-93.

Under the name of Ali Akang married to Patao Talipasan stating on its face that it was originally
registered on the 1st day of December 1965 with Original Certificate of Title No. P-26626 pursuant
to Homestead Patent No. V-4454 granted on the 17th day of March 1955 under Act 141; id. at 44.
6

Id.

Id. at 34-35.

Id. at 25.

Id.

10

Id. at 27-28.

11

Id. at 46-47.

12

Id. at 77-78.

13

Id. at 79.

14

Id. at 80.

15

Resolution No. 70, passed on October 6, 1962, states: "Furthermore, by virtue of the provision on
Section 3 of Republic Act No. 2264, let there be appropriated as appropriations be made from funds
not unless otherwise appropriated in the sum of P3,000.00 to be expended for payment of the
purchase price of the two-hectare lot and be made payable to Ali Akang subject to audit rules and
regulations."
16

Rollo, p. 85.

17

Id. at 81-82.

18

Id. at 44-93.

19

Id. at 91-93.

20

Id. at 20-41.

21

Id. at 40.

22

Id. at 28-30.

23

Id. at 35-36.

24

Id. at 37-39.

25

Id. at 39.

26

Id. at 42-43.

27

Id. at 7-8.

28

Id. at 15.

29

Id. at 100-120.

30

Imani v. Metropolitan Bank & Trust Company, G.R. No. 187023, November 17, 2010, 635 SCRA
357, 371.
31

Lorzano v. Tabayag, Jr., G.R. No. 189647, February 6, 2012, 665 SCRA 38.

32

Rollo, p. 45.

33

Id. at 108.

34

David v. Misamis Occidental II Electric Cooperative, Inc., G.R. No. 194785, July 11, 2012, 676
SCRA 367, 376-377.
35

Heirs of Paulino Atienza v. Espidol, G.R. No. 180665, August 11, 2010, 628 SCRA 256, 262, citing
Lim v. Court of Appeals, 261 Phil. 690, 695 (1990).
36

Rollo, p. 35.

37

Id. at 36-37.

38

Province of Cebu v. Heirs of Rufina Morales, G.R. No. 170115, February 19, 2008, 546 SCRA 315,
323.
39

Id. at 324.

40

These provisions read:

Sec. 145. Contracts with non-Christians: requisites.Save and except contracts of sale or
barter of personal property and contracts of personal service comprehended in chapter
seventeen hereof no contract or agreement shall be made in the Department by any person
with any Moro or other non-Christian inhabitant of the same for the payment or delivery of
money or other thing of value in present or in prospective, or any manner affecting or
relating to any real property, unless such contract or agreement be executed and approved
as follows:

(a) Such contract or agreement shall be in writing, and a duplicate thereof delivered to each
party.
(b) It shall be executed before a judge of a court of record, justice or auxiliary justice of the
peace, or notary public, and shall bear the approval of the provincial governor wherein the
same was executed or his representative duly authorized in writing for such purpose,
indorsed upon it.
(c) It shall contain the names of all parties in interest, their residence and occupation; x x x
(d) It shall state the time when and place where made, the particular purpose for which
made, the special thing or things to be done under it, and, if for the collection of money, the
basis of the claim, the source from which it is to be collected and the person or persons to
whom payment is to be made, the disposition to be made thereof when collected, the
amount or rate per centum of the fee in all cases; and if any contingent matter or condition
constitutes a part of the contract or agreement, the same shall be specifically set forth.
(e) x x x
(f) The judge, justice or auxiliary justice of the peace, or notary public before whom such
contract or agreement is executed shall certify officially thereon the time when and the
place where such contract or agreement was executed, and that it was in his presence, and
who are the interested parties thereto, as stated to him at the time; the parties making the
same; the source and extent of authority claimed at the time by the contracting parties to
make the contract or agreement, and whether made in person or by agent or attorney of
any party or parties thereto.
41

Sec. 146. Void contracts. Every contract or agreement made in violation of the next preceding
section shall be null and void; x x x.
42

Jandoc-Gatdula v. Dimalanta, 528 Phil. 839, 858-859 (2006), citing Cunanan v. CA, 134 Phil. 338,
341-342 (1968).
43

Sec.120 states:

Conveyance and encumbrance made by persons belonging to the so-called "non-christian Filipinos"
or national cultural minorities, when proper, shall be valid if the person making the conveyance or
encumbrance is able to read and can understand the language in which the instrument of
conveyance or encumbrances is written. Conveyances or encumbrances made by illiterate nonChristian or literate non-Christians where the instrument of conveyance or encumbrance is in a
language not understood by the said literate non-Christians shall not be valid unless duly approved
by the Chairman of the Commission on National Integration.
44

Entitled, "An Act to Amend Sections Forty-four, forty-eight and one hundred Twenty of
Commonwealth Act Numbered One Hundred Forty-one, As Amended otherwise Known as the Public
Land Act, and for other Purposes," approved on June 18, 1964.
45

528 Phil. 839 (2006).

46

Id. at 859.

47

Id. at 854; Isabela Colleges, Inc. v. The Heirs of Tolentino-Rivera, 397 Phil. 955, 969 (2000).

48

Pineda v. Heirs of Eliseo Guevara, 544 Phil. 554, 562 (2007).

49

Mateo v. Diaz, 424 Phil. 772, 781 (2002).

50

Heirs of Ingjug-Tiro v. Spouses Casals, 415 Phil. 665, 674 (2001).

51

500 Phil. 322 (2005).

52

335 Phil. 19 (1997).

53

Id. at 34.

54

Supra note 45, at 854.

55

523 Phil. 630 (2006).

56

Id. at 661.

57

Mejia de Lucas v. Gamponia, 100 Phil. 277, 282-284 (1956).

58

G.R. No. 96921, January 29, 1993, 218 SCRA 118.

Republic of the Philippines

Supreme Court
Baguio City

SECOND DIVISION
ESTELITA VILLAMAR,
Petitioner,

G.R. No. 188661

Present:

- versus -

BALBINO MANGAOIL,
Respondent.

CARPIO, J.,
Chairperson,
BRION,
PEREZ,
SERENO, and
REYES, JJ.
Promulgated:
April 11, 2012

x--------------------------------------------------------------------------------------------x
DECISION
REYES, J.:
The Case
Before us is a petition for review on certiorari[1] under Rule 45 of the Rules of Court filed by Estelita Villamar
(Villamar) to assail the Decision[2] rendered by the Court of Appeals (CA) on February 20, 2009 in CA-G.R.
CV No. 86286, the dispositive portion of which reads:
WHEREFORE, the instant appeal is DISMISSED. The assailed decision is AFFIRMED
in toto.
SO ORDERED.[3]

The resolution[4] issued by the CA on July 8, 2009 denied the petitioner's motion for reconsideration
to the foregoing.

The ruling[5] of Branch 23, Regional Trial Court (RTC) of Roxas, Isabela, which was affirmed by the CA
in the herein assailed decision and resolution, ordered the (1) rescission of the contract of sale of real
property entered into by Villamar and Balbino Mangaoil (Mangaoil); and (2) return of the down payment
made relative to the said contract.
Antecedents Facts
The CA aptly summarized as follows the facts of the case prior to the filing by Mangaoil of the
complaint[6] for rescission of contract before the RTC:
Villamar is the registered owner of a 3.6080 hectares parcel of land [hereinafter referred as
the subject property] in San Francisco, Manuel, Isabela covered by Transfer Certificate of
Title (TCT) No. T-92958-A. On March 30, 1998, she entered into an Agreement with
Mangaoil for the purchase and sale of said parcel of land, under the following terms and
conditions:
1. The price of the land is ONE HUNDRED AND EIGHTY THOUSAND
(180,000.00) PESOS per hectare but only the 3.5000 hec. shall be paid and
the rest shall be given free, so that the total purchase or selling price shall be
[P]630,000.00 only;
2. ONE HUNDRED EIGHTY FIVE THOUSAND (185,000.00) PESOS of the
total price was already received on March 27, 1998 for payment of the loan
secured by the certificate of title covering the land in favor of the
Rural Bank of Cauayan, San Manuel Branch, San Manuel, Isabela [Rural
Bank of Cauayan], in order that the certificate of title thereof be withdrawn
and released from the said bank, and the rest shall be for the payment of
the mortgag[e]s in favor of Romeo Lacaden and Florante Parangan;
3. After the release of the certificate of title covering the land subject-matter
of this agreement, the necessary deed of absolute sale in favor of the
PARTY OF THE SECOND PART shall be executed and the transfer be
immediately effected so that the latter can apply for a loan from any lending
institution using the corresponding certificate of title as collateral
therefor, and the proceeds of the loan, whatever be the amount, be given to
the PARTY OF THE FIRST PART;
4. Whatever balance left from the agreed purchase price of the land subject
matter hereof after deducting the proceed of the loan and the [P]185,000.00
already received as above-mentioned, the PARTY OF THE SECOND PART shall
pay unto the PARTY OF THE FIRST PART not later than June 30, 1998 and
thereafter the parties shall be released of any obligations for and against each
other; xxx
On April 1, 1998, the parties executed a Deed of Absolute Sale whereby Villamar (then
Estelita Bernabe) transferred the subject parcel of land to Mangaoil for and in consideration
of [P]150,000.00.
In a letter dated September 18, 1998, Mangaoil informed Villamar that he was backing out
from the sale agreed upon giving as one of the reasons therefor:
3. That the area is not yet fully cleared by incumbrances as there are tenants
who are not willing to vacate the land without giving them back the amount
that they mortgaged the land.
Mangaoil demanded refund of his [P]185,000.00 down payment. Reiterating said demand in
another letter dated April 29, 1999, the same, however, was unheeded. [7] x x x (Citations
omitted)
On January 28, 2002, the respondent filed before the RTC a complaint [8] for rescission of contract
against the petitioner. In the said complaint, the respondent sought the return of P185,000.00 which he
paid to the petitioner, payment of interests thereon to be computed from March 27, 1998 until the suit's
termination, and the award of damages, costs and P20,000.00 attorney's fees. The respondent's factual
allegations were as follows:

5. That as could be gleaned the Agreement (Annex A), the plaintiff [Mangaoil] handed
to the defendant [Villamar] the sum of [P]185,000.00 to be applied as follows; [P]80,000 was
for the redemption of the land which was mortgaged to the Rural Bank of Cauayan, San
Manuel Branch, San Manuel, Isabela, to enable the plaintiff to get hold of the title and
register the sale x x xand [P]105,000.00 was for the redemption of the said land from private
mortgages to enable plaintiff to posses[s] and cultivate the same;
6. That although the defendant had already long redeemed the said land from the
said bank and withdrawn TCT No. T-92958-A, she has failed and refused, despite repeated
demands, to hand over the said title to the plaintiff and still refuses and fails to do so;
7. That, also, the plaintiff could not physically, actually and materially posses[s] and
cultivate the said land because the private mortgage[e]s and/or present possessors refuse
to vacate the same;
xxxx
11. That on September 18, 1998, the plaintiff sent a letter to the defendant
demanding a return of the amount so advanced by him, but the latter ignored the same, x x
x;
12. That, again, on April 29, 1999, the plaintiff sent to the defendant another demand
letter but the latter likewise ignored the same, x x x;
13. That, finally, the plaintiff notified the defendant by a notarial act of his desire and
intention to rescind the said contract of sale, xxx;
x x x x.[9] (Citations omitted)

In the respondents answer to the complaint, she averred that she had complied with her obligations to the
respondent. Specifically, she claimed having caused the release of TCT No. T-92958-A by the Rural Bank of
Cauayan and its delivery to a certain Atty. Pedro C. Antonio (Atty. Antonio). The petitioner alleged that Atty.
Antonio was commissioned to facilitate the transfer of the said title in the respondent's name. The
petitioner likewise insisted that it was the respondent who unceremoniously withdrew from their
agreement for reasons only the latter knew.
The Ruling of the RTC
On September 9, 2005, the RTC ordered the rescission of the agreement and the deed of absolute sale
executed between the respondent and the petitioner. The petitioner was, thus directed to return to the
respondent the sum of P185,000.00 which the latter tendered as initial payment for the purchase of the
subject property. The RTC ratiocinated that:
There is no dispute that the defendant sold the LAND to the plaintiff for [P]630,000.00 with
down payment of [P]185,000.00. There is no evidence presented if there were any other
partial payments made after the perfection of the contract of sale.
Article 1458 of the Civil Code provides:
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 therefore a price certain in
money or its equivalent.
As such, in a contract of sale, the obligation of the vendee to pay the price is correlative of
the obligation of the vendor to deliver the thing sold. It created or established at the same
time, out of the same course, and which result in mutual relations of creditor and debtor
between the parties.
The claim of the plaintiff that the LAND has not been delivered to him was not refuted by the
defendant. Considering that defendant failed to deliver to him the certificate of title and of
the possession over the LAND to the plaintiff, the contract must be rescinded pursuant to
Article 1191 of the Civil Code which, in part, provides:
Art. 1191. The power of rescind obligations is implied in reciprocal
ones in case one of the obligors should not comply with what is
incumbent upon him.[10]

The petitioner filed before the CA an appeal to challenge the foregoing. She ascribed error on the part of
the RTC when the latter ruled that the agreement and deed of sale executed by and between the parties
can be rescinded as she failed to deliver to the respondent both the subject property and the certificate of
title covering the same.
The Ruling of the CA
On February 20, 2009, the CA rendered the now assailed decision dismissing the petitioners appeal based
on the following grounds:
Burden of proof is the duty of a party to prove the truth of his claim or defense, or any fact
in issue necessary to establish his claim or defense by the amount of evidence required by
law. In civil cases, the burden of proof is on the defendant if he alleges, in his
answer, an affirmative defense, which is not a denial of an essential ingredient in the
plaintiff's cause of action, but is one which, if established, will be a good defense i.e., an
avoidance of the claim, which prima facie, the plaintiff already has because of the
defendant's own admissions in the pleadings.
Defendant-appellant Villamar's defense in this case was an affirmative defense. She did
not deny plaintiff-appellees allegation that she had an agreement with plaintiff-appellee for
the sale of the subject parcel of land. Neither did she deny that she was obliged under the
contract to deliver the certificate of title to plaintiff-appellee immediately after said
title/property was redeemed from the bank. What she rather claims is that she already
complied with her obligation to deliver the title to plaintiff-appellee when she
delivered the same to Atty. Antonio as it was plaintiff-appellee himself who engaged the
services of said lawyer to precisely work for the immediate transfer of said title in his name.
Since, however, this affirmative defense as alleged in defendant-appellant's answer was not
admitted by plaintiff-appellee, it then follows that it behooved the defendant-appellant to
prove her averments by preponderance of evidence.
Yet, a careful perusal of the record shows that the defendant-appellant failed to sufficiently
prove said affirmative defense. She failed to prove that in the first place, Atty. Antonio
existed to receive the title for and in behalf of plaintiff-appellee. Worse, the
defendant-appellant
failed
to
prove
that
Atty.
Antonio
received
said
title as allegedly agreed upon.
We likewise sustain the RTC's finding that defendant-appellant V[i]llamar failed to deliver
possession of the subject property to plaintiff-appellee Mangaoil. As correctly observed by
the RTC - [t]he claim of the plaintiff that the land has not been delivered to him was not
refuted by the defendant. Not only that. On cross-examination, the defendant-appellant
gave Us insight on why no such delivery could be made, viz.:
xxxx
Q: So, you were not able to deliver this property to Mr.
Mangaoil just after you redeem the property because of the presence
of these two (2) persons, is it not?
xxx
A: Yes, sir.
Q: Forcing you to file the case against them and which according to you, you
have won, is it not?
A: Yes, sir.
Q: And now at present[,] you are in actual possession of the land?
A: Yes, sir. x x x
With the foregoing judicial admission, the RTC could not have erred in finding that
defendant-[appellant] failed to deliver the possession of the property sold, to plaintiffappellee.
Neither can We agree with defendant-appellant in her argument that the execution of the
Deed of Absolute Sale by the parties is already equivalent to a valid and constructive

delivery of the property to plaintiff-appellee. Not only is it doctrinally settled that in a

contract of sale, the vendor is bound to transfer the ownership of, and to deliver
the thing that is the object of the sale, the way Article 1547 of the Civil Code is
worded, viz.:
Art. 1547. In a contract of sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part of the seller that he has a right to
sell the thing at the time when the ownership is to pass, and that the buyer
shall from that time have and enjoy the legal and peaceful
possession of the thing;
(2) An implied warranty that the thing shall be free from any hidden defaults
or defects, or any change or encumbrance not declared or known to the buyer.
x x x.
shows that actual, and not mere constructive delivery is warrantied by the seller to the
buyer. (P)eaceful possession of the thing sold can hardly be enjoyed in a mere
constructive delivery.
The obligation of defendant-appellant Villamar to transfer ownership and deliver possession
of the subject parcel of land was her correlative obligation to plaintiff-appellee in exchange
for the latter's purchase price thereof. Thus, if she fails to comply with what is incumbent
upon her, a correlative right to rescind such contract from plaintiff-appellee arises, pursuant
to Article 1191 of the Civil Code.[11] x x x (Citations omitted)

The Issues
Aggrieved, the petitioner filed before us the instant petition and submits the following issues for resolution:
I.
WHETHER THE FAILURE OF PETITIONER-SELLER TO DELIVER THE CERTIFICATE OF TITLE OVER
THE PROPERTY TO RESPONDENT-BUYER IS A BREACH OF OBLIGATION IN A CONTRACT
OF SALE OF REAL PROPERTY THAT WOULD WARRANT RESCISSION OF THE CONTRACT;
II.
WHETHER PETITIONER IS LIABLE FOR BREACH OF OBLIGATION IN A CONTRACT OF SALE FOR
FAILURE OF RESPONDENT[-]BUYER TO IMMEDIATELY TAKE ACTUAL POSSESSION OF THE
PROPERTY NOTWITHSTANDING THE ABSENCE OF ANY STIPULATION IN THE CONTRACT
PROVIDING FOR THE SAME;
III.
WHETHER THE EXECUTION OF A DEED OF SALE OF REAL PROPERTY IN THE PRESENT CASE IS
ALREADY EQUIVALENT TO A VALID AND CONSTRUCTIVE DELIVERY OF THE PROPERTY TO THE
BUYER;
IV.
WHETHER OR NOT THE CONTRACT OF SALE SUBJECT MATTER OF THIS CASE SHOULD BE
RESCINDED ON SLIGHT OR CASUAL BREACH;
V.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE RTC
ORDERING THE RESCISSION OF THE CONTRACT OF SALE[.][12]

The Petitioner's Arguments

The petitioner avers that the CA, in ordering the rescission of the agreement and deed of sale, which she
entered into with the respondent, on the basis of her alleged failure to deliver the certificate of title,
effectively imposed upon her an extra duty which was neither stipulated in the contract nor required by
law. She argues that under Articles 1495 [13]and 1496[14] of the New Civil Code (NCC), the obligation to

deliver the thing sold is complied with by a seller who executes in favor of a buyer an instrument of sale in
a public document. Citing Chua v. Court of Appeals,[15] she claims that there is a distinction between
transferring a certificate of title in the buyer's name, on one hand, and transferring ownership over the
property sold, on the other. The latter can be accomplished by the seller's execution of an instrument of
sale in a public document. The recording of the sale with the Registry of Deeds and the transfer of the
certificate of title in the buyer's name are necessary only to bind third parties to the transfer of ownership.
[16]

The petitioner contends that in her case, she had already complied with her obligations under the
agreement and the law when she had caused the release of TCT No. T-92958-A from the Rural Bank of
Cauayan, paid individual mortgagees Romeo Lacaden (Lacaden) and Florante Parangan (Paranga), and
executed an absolute deed of sale in the respondent's favor. She adds that before T-92958-A can be
cancelled and a new one be issued in the respondent's favor, the latter decided to withdraw from their
agreement. She also points out that in the letters seeking for an outright rescission of their agreement sent
to her by the respondent, not once did he demand for the delivery of TCT.
The petitioner insists that the respondent's change of heart was due to (1) the latter's realization of the
difficulty in determining the subject property's perimeter boundary; (2) his doubt that the property he
purchased would yield harvests in the amount he expected; and (3) the presence of mortgagees who were
not willing to give up possession without first being paid the amounts due to them. The petitioner contends
that the actual reasons for the respondent's intent to rescind their agreement did not at all constitute a
substantial breach of her obligations.
The petitioner stresses that under Article 1498 of the NCC, when a sale is made through a public
instrument, its execution is equivalent to the delivery of the thing which is the contract's object, unless in
the deed, the contrary appears or can be inferred. Further, in Power Commercial and Industrial Corporation
v. CA,[17] it was ruled that the failure of a seller to eject lessees from the property he sold and to deliver
actual and physical possession, cannot be considered a substantial breach, when such failure was not
stipulated as a resolutory or suspensive condition in the contract and when the effects and consequences
of the said failure were not specified as well. The execution of a deed of sale operates as a formal or
symbolic delivery of the property sold and it already authorizes the buyer to use the instrument as proof of
ownership.[18]
The petitioner argues that in the case at bar, the agreement and the absolute deed of sale contains no
stipulation that she was obliged to actually and physically deliver the subject property to the respondent.
The respondent fully knew Lacaden's and Parangan's possession of the subject property. When they agreed
on the sale of the property, the respondent consciously assumed the risk of not being able to take
immediate physical possession on account of Lacaden's and Parangan's presence therein.
The petitioner likewise laments that the CA allegedly misappreciated the evidence offered before it when it
declared that she failed to prove the existence of Atty. Antonio. For the record, she emphasizes that the
said lawyer prepared and notarized the agreement and deed of absolute sale which were executed
between the parties. He was also the petitioners counsel in the proceedings before the RTC. Atty. Antonio
was also the one asked by the respondent to cease the transfer of the title over the subject property in the
latter's name and to return the money he paid in advance.
The Respondent's Contentions
In the respondent's comment,[19] he seeks the dismissal of the instant petition. He invokes Articles 1191
and 1458 to argue that when a seller fails to transfer the ownership and possession of a property sold, the

buyer is entitled to rescind the contract of sale. Further, he contends that the execution of a deed of
absolute sale does not necessarily amount to a valid and constructive delivery. In Masallo v. Cesar,[20] it
was ruled that a person who does not have actual possession of real property cannot transfer constructive
possession by the execution and delivery of a public document by which the title to the land is transferred.
In Addison v. Felix and Tioco,[21] the Court was emphatic that symbolic delivery by the execution of a public
instrument is equivalent to actual delivery only when the thing sold is subject to the control of the vendor.
Our Ruling
The instant petition is bereft of merit.
There is only a single issue for resolution in the instant petition, to wit, whether or not the failure of the
petitioner to deliver to the respondent both the physical possession of the subject property and the
certificate of title covering the same amount to a substantial breach of the former's obligations to the
latter constituting a valid cause to rescind the agreement and deed of sale entered into by the parties.
We rule in the affirmative.
The RTC and the CA both found that the petitioner failed to comply with her obligations to deliver to the
respondent both the possession of the subject property and the certificate of title covering the same.
Although Articles 1458, 1495 and 1498 of the NCC and
case law do not generally require the seller to deliver to
the buyer the physical possession of the property
subject of a contract of sale and the certificate of title
covering the same, the agreement entered into by the
petitioner and the respondent provides otherwise.
However, the terms of the agreement cannot be
considered as violative of law, morals, good customs,
public order, or public policy, hence, valid.

Article 1458 of the NCC obliges the seller to transfer the ownership of and to deliver a determinate thing to
the buyer, who shall in turn pay therefor a price certain in money or its equivalent. In addition thereto,
Article 1495 of the NCC binds the seller to warrant the thing which is the object of the sale. On the other
hand, Article 1498 of the same code provides that when the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from
the deed, the contrary does not appear or cannot clearly be inferred.
In the case of Chua v. Court of Appeals,[22] which was cited by the petitioner, it was ruled that when the
deed of absolute sale is signed by the parties and notarized, then delivery of the real property is deemed
made by the seller to the buyer. [23] The transfer of the certificate of title in the name of the buyer is not
necessary to confer ownership upon him.
In the case now under our consideration, item nos. 2 and 3 of the agreement entered into by the petitioner
and the respondent explicitly provide:
2. ONE HUNDRED EIGHTY FIVE THOUSAND (P185,000.00) PESOS of the total price was
already received on March 27, 1998 for payment of the loan secured by the certificate of
title covering the land in favor of the Rural Bank of Cauayan, San Manuel Branch, San
Manuel, Isabela, in order that the certificate of title thereof be withdrawn and released from
the said bank, and the rest shall be for the payment of the mortgages in favor of Romeo
Lacaden and Florante Parangan;

3. After the release of the certificate of title covering the land subject-matter of this
agreement, the necessary deed of absolute sale in favor of the PARTY OF THE SECOND PART
shall be executed and the transfer be immediately effected so that the latter can apply for a
loan from any lending institution using the corresponding certificate of title as
collateral therefor, and the proceeds of the loan, whatever be the amount, be given to the
PARTY OF THE FIRST PART;[24] (underlining supplied)

As can be gleaned from the agreement of the contending parties, the respondent initially paid the
petitioner P185,000.00 for the latter to pay the loan obtained from the Rural Bank of Cauayan and to cause
the release from the said bank of the certificate of title covering the subject property. The rest of the
amount shall be used to pay the mortgages over the subject property which was executed in favor of
Lacaden and Parangan. After the release of the TCT, a deed of sale shall be executed and transfer shall be
immediately effected so that the title covering the subject property can be used as a collateral for a loan
the respondent will apply for, the proceeds of which shall be given to the petitioner.
Under Article 1306 of the NCC, the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order or public policy.
While Articles 1458 and 1495 of the NCC and the doctrine enunciated in the case of Chua do not impose
upon the petitioner the obligation to physically deliver to the respondent the certificate of title covering
the subject property or cause the transfer in the latter's name of the said title, a stipulation requiring
otherwise is not prohibited by law and cannot be regarded as violative of morals, good customs, public
order or public policy. Item no. 3 of the agreement executed by the parties expressly states that transfer
[shall] be immediately effected so that the latter can apply for a loan from any lending institution using the
corresponding certificate of title as collateral therefore. Item no. 3 is literal enough to mean that there
should be physical delivery of the TCT for how else can the respondent use it as a collateral to obtain a
loan if the title remains in the petitioners possession. We agree with the RTC and the CA that the petitioner
failed to prove that she delivered the TCT covering the subject property to the respondent. What the
petitioner attempted to establish was that she gave the TCT to Atty. Antonio whom she alleged was
commissioned to effect the transfer of the title in the respondent's name. Although Atty. Antonio's
existence is certain as he was the petitioners counsel in the proceedings before the RTC, there was no
proof that the former indeed received the TCT or that he was commissioned to process the transfer of the
title in the respondent's name.
It is likewise the petitioners contention that pursuant to Article 1498 of the NCC, she had already complied
with her obligation to deliver the subject property upon her execution of an absolute deed of sale in the
respondents favor. The petitioner avers that she did not undertake to eject the mortgagors Parangan and
Lacaden, whose presence in the premises of the subject property was known to the respondent.
We are not persuaded.
In the case of Power Commercial and Industrial Corporation[25] cited by the petitioner, the Court ruled that
the failure of the seller to eject the squatters from the property sold cannot be made a ground for
rescission if the said ejectment was not stipulated as a condition in the contract of sale, and when in the
negotiation stage, the buyer's counsel himself undertook to eject the illegal settlers.
The circumstances surrounding the case now under our consideration are different. In item no. 2 of the
agreement, it is stated that part of the P185,000.00 initially paid to the petitioner shall be used to pay the

mortgagors, Parangan and Lacaden. While the provision does not expressly impose upon the petitioner the
obligation to eject the said mortgagors, the undertaking is necessarily implied. Cessation of occupancy of
the subject property is logically expected from the mortgagors upon payment by the petitioner of the
amounts due to them.
We note that in the demand letter [26] dated September 18, 1998, which was sent by the respondent to the
petitioner, the former lamented that the area is not yet fully cleared of incumbrances as there are tenants
who are not willing to vacate the land without giving them back the amount that they mortgaged the land.
Further, in the proceedings before the RTC conducted after the complaint for rescission was filed, the
petitioner herself testified that she won the ejectment suit against the mortgagors only last year. [27] The
complaint was filed on September 8, 2002 or more than four years from the execution of the parties'
agreement. This means that after the lapse of a considerable period of time from the agreement's
execution, the mortgagors remained in possession of the subject property.
Notwithstanding the absence of stipulations in the
agreement and absolute deed of sale entered into by
Villamar
and
Mangaoil
expressly
indicating
the
consequences of the former's failure to deliver the
physical possession of the subject property and the
certificate of title covering the same, the latter is
entitled to demand for the rescission of their
contract pursuant to Article 1191 of the NCC.
We note that the agreement entered into by the petitioner and the respondent only contains three items
specifying the parties' undertakings. In item no. 5, the parties consented to abide with all the terms and
conditions set forth in this agreement and never violate the same. [28]
Article 1191 of the NCC is clear that the power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him. The respondent cannot be
deprived of his right to demand for rescission in view of the petitioners failure to abide with item nos. 2
and 3 of the agreement. This remains true notwithstanding the absence of express stipulations in the
agreement indicating the consequences of breaches which the parties may commit. To hold otherwise
would render Article 1191 of the NCC as useless.
Article 1498 of the NCC generally considers the
execution of a public instrument as constructive delivery
by the seller to the buyer of the property subject of a
contract of sale. The case at bar, however, falls among
the exceptions to the foregoing rule since a mere
presumptive and not conclusive delivery is created as
the respondent failed to take material possession of the
subject property.

Further, even if we were to assume for argument's sake that the agreement entered into by the contending
parties does not require the delivery of the physical possession of the subject property from the
mortgagors to the respondent, still, the petitioner's claim that her execution of an absolute deed of sale
was already sufficient as it already amounted to a constructive delivery of the thing sold which Article
1498 of the NCC allows, cannot stand.
In Philippine Suburban Development Corporation v. The Auditor General,[29] we held:
When the sale of real property is made in a public instrument, the execution thereof is
equivalent to the delivery of the thing object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred.

In other words, there is symbolic delivery of the property subject of the sale by the execution
of the public instrument, unless from the express terms of the instrument, or by clear
inference therefrom, this was not the intention of the parties. Such would be the case, for
instance, x x x where the vendor has no control over the thing sold at the moment of the
sale, and, therefore, its material delivery could not have been made.[30] (Underlining supplied
and citations omitted)

Stated differently, as a general rule, the execution of a public instrument amounts to a constructive
delivery of the thing subject of a contract of sale. However, exceptions exist, among which is when mere
presumptive and not conclusive delivery is created in cases where the buyer fails to take material
possession of the subject of sale. A person who does not have actual possession of the thing sold cannot
transfer constructive possession by the execution and delivery of a public instrument.
In the case at bar, the RTC and the CA found that the petitioner failed to deliver to the respondent the
possession of the subject property due to the continued presence and occupation of Parangan and
Lacaden. We find no ample reason to reverse the said findings. Considered in the light of either the
agreement entered into by the parties or the pertinent provisions of law, the petitioner failed in her
undertaking to deliver the subject property to the respondent.
IN VIEW OF THE FOREGOING, the instant petition is DENIED. The February 20, 2009 Decision and July
8, 2009 Resolution of the Court of Appeals, directing the rescission of the agreement and absolute deed of
sale entered into by Estelita Villamar and Balbino Mangaoil and the return of the down payment made for
the purchase of the subject property, are AFFIRMED. However, pursuant to our ruling in Eastern Shipping
Lines, Inc. v. CA,[31] an interest of 12% per annum is imposed on the sum ofP185,000.00 to be returned
to Mangaoil to be computed from the date of finality of this Decision until full satisfaction thereof.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

ARTURO D. BRION
Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify
that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice
[1]

Rollo, pp. 26-77.

Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Edgardo P. Cruz and Ricardo R.
Rosario, concurring; id. at 11-22.
[3]
Id. at 22.
[4]
Id. at 24.
[5]
Id. at 102-107.
[6]
Id. at 98-100.
[7]
Id. at 12-14.
[8]
Supra note 6.
[9]
Id. at 98-99.
[10]
Rollo, pp. 106-107.
[11]
Id. at 17-21.
[12]
Id. at 40.
[13]
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing
which is the object of the sale.
[14]
Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to
him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee.
[15]
449 Phil. 25 (2003).
[16]
Id. at 50.
[17]
340 Phil. 705 (1997).
[18]
Id. at 715.
[19]
Rollo, pp. 121-123.
[20]
39 Phil. 134 (1918).
[21]
38 Phil. 404 (1918).
[22]
Supra note 15.
[23]
Id. at 47.
[24]
Rollo, p. 108.
[25]
Supra note 17.
[26]
Rollo, p. 111.
[27]
Id. at 19.
[28]
Supra note 24.
[29]
159 Phil. 998 (1975).
[30]
Id. at 1007-1008. also see Addison v. Felix and Tioco, supra note 19; Masallo v. Cesar, supra note
18; Leonardo v. Maravilla, 441 Phil. 409 (2002); Asset Privatization Trust v. T.J. Enterprises, G.R. No.
167195, May 8, 2009, 587 SCRA 481.
[31]
G.R. No. 97412, July 12, 1994, 234 SCRA 78.
[2]

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 139173

February 28, 2007

SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners

vs.
GODOFREDO CAGUIAT, Respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision1 of the Court of Appeals dated January 29, 1999 and its Resolution dated
July 14, 1999 in CA-G.R. CV No. 48824.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias,
Metro Manila covered by Transfer Certificate of Title No. T-9905.

Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to
sell it atP1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial
payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised
to pay the balance of the purchase price on or before March 23, 1990, thus:
Las Pias, Metro Manila
March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIAS, METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS
(P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T9905 AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990,
AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.
SIGNED THIS 19th DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA

(SGD) ONNIE SERRANO"2

On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing
them of his readiness to pay the balance of the contract price and requesting them to prepare the final
deed of sale.3
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter 4 to respondent stating that
petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the
transaction. Petitioners also informed respondent that he can recover the earnest money of P100,000.00
anytime.
Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his counsel Philippine
National Bank Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to
him.
In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court,
Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil
Case No. 90-1067.6
On June 27, 1994, after hearing, the trial court rendered its Decision 7 finding there was a perfected
contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of
respondent. The trial court held:
xxx
In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply
with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiffs position
deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or
earnest money showed that there was already a perfected contract. Art. 1482 of the Civil Code of the
Philippines, reads as follows, to wit:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending
defendants the letter dated March 25, 1990. (Exh. D) and reiterated the same intent to pursue the sale in
a letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh.
C). Defendants mere allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing.
Defendants letters (Exhs. 2 and 5) appear to be mere afterthought.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial courts
judgment.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its
Resolution8 dated July 14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled "Receipt for Partial Payment" signed by
both parties earlier mentioned is a contract to sell or a contract of sale.

Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458 9 in
relation to Article 147510 of the Civil Code. The delivery to them of P100,000.00 as down payment cannot
be considered as proof of the perfection of a contract of sale under Article 1482 11 of the same Code
since there was no clear agreement between the parties as to the amount of consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed
except for cogent reasons.14 Indeed, they should not be changed on appeal in the absence of a clear
showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight
and significance, which if considered would have altered the result of the case.1awphi1.net12 In
the present case, we find that both the trial court and the Court of Appeals interpreted some significant
facts resulting in an erroneous resolution of the issue involved.
In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money
given by respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that
"Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract."
We are not convinced.
In San Miguel Properties Philippines, Inc. v. Spouses Huang,13 we held that the stages of a contract of sale
are: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest
in the contract to the time the contract is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale, which is 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.
With the above postulates as guidelines, we now proceed to determine the real nature of the contract
entered into by the parties.
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. 14 Thus, when petitioners declared in the said
"Receipt for Partial Payment" that they
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS
(P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T9905 AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990,
AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.
there can be no other interpretation than that they agreed to a conditional contract of sale, consummation
of which is subject only to the full payment of the purchase price.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's
obligation to transfer title 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. The suspensive condition is commonly full payment of the purchase price.15
The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early
as 1951, in Sing Yee v. Santos,16 we held that:
x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon
delivery of the thing sold and a contract to sell x x x where by agreement the ownership is reserved in the
seller and is not to pass until the full payment, of the purchase price is made. In the first case, nonpayment of the price is a negative resolutory condition; in the second case, full payment is a positive
suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor
has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself
resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not
comply with the condition precedent of making payment at the time specified in the contract.
In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until
full payment of the price.17
In this case, the "Receipt for Partial Payment" shows that the true agreement between the parties is
a contract to sell.
First, ownership over the property was retained by petitioners and was not to pass to respondent
until full payment of the purchase price. Thus, petitioners need not push through with the sale
should respondent fail to remit the balance of the purchase price before the deadline on March 23,

1990. In effect, petitioners have the right to rescind unilaterally the contract the moment
respondent fails to pay within the fixed period.18
Second, the agreement between the parties was not embodied in a deed of sale. The absence of a
formal deed of conveyance is a strong indication that the parties did not intend immediate transfer
of ownership, but only a transfer after full payment of the purchase price. 19
Third, petitioners retained possession of the certificate of title of the lot. This is an additional
indication that the agreement did not transfer to respondent, either by actual or constructive
delivery, ownership of the property.20
It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is given in a contract
of sale, it shall be considered as part of the price and proof of the perfection of the contract." However, this
article speaks ofearnest money given in a contract of sale. In this case, the earnest money was given
in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated
upon full payment of the purchase price.21 Now, since the earnest money was given in a contract to sell,
Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by respondent) did not take
place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.
WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals
isREVERSED and respondents complaint is DISMISSED.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
(On official leave)
ADOLFO S. AZCUNA
Asscociate Justice

RENATO C. CORONA
Associate Justice
CANCIO C. GARCIA
Associate Justice
CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the opinion of
the Courts Division.
REYNATO S. PUNO
Chief Justice

Footnotes
1

Penned by Associate Justice Conchita Carpio Morales (now a member of this Court) and concurred
in by Associate Justice Jainal D. Rasul and Associate Justice Bernardo P. Abesamis (both retired).
2

Exhibit "B," Records, p. 124.

Exhibit "D," id., p. 125.

Exhibit "2," id., p. 173.

Exhibit "5," Rollo, p. 177.

Records, pp. 1-4.

Id., pp. 423-430.

Id., p. 25.

Article 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 himself to pay therefore a price
certain in money or its equivalent. A contract of sale may be absolute or conditional.
10

Article 1475. The 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.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
11

Article 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part
of the price and as proof of the perfection of the contract.
12

Gamaliel C. Villanueva and Irene C. Villanueva v. Court of Appeals, Spouses Jose and Leonila Dela
Cruz, and Spouses Guido and Felicitas Pile, G.R. No. 107624, January 28, 1997, 267 SCRA 89.
13

G.R. No. 137290, July 31, 2000, 336 SCRA 737, citing Ang Yu Asuncion v. Court of Appeals, 238
SCRA 602 (1994).
14

Tan v. Court of Appeals, G.R. No. 100942, August 12, 1992, 212 SCRA 586.

15

Philippine National Bank v. Court of Appeals and Lapaz Kaw Ngo, G.R. No. 119580, September 26,
1996, citing Rose Packing Co., Inc. v. Court of Appeals, 167 SCRA 309, 318 (1988) and Lim v. Court
of Appeals, 182 SCRA 564, 670 (1990), with citations.

SECOND DIVISION
[G.R. No. 158646. June 23, 2005]
HEIRS OF JESUS M. MASCUANA, represented by JOSE MA. R. MASCUANA, petitioners, vs. COURT
OF
APPEALS,
AQUILINO
BARTE,
and
SPOUSES
RODOLFO
and
CORAZON
LAYUMAS, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV
No. 53117 affirming the Decision[2] of the Regional Trial Court (RTC) of San Carlos City, Negros Occidental,
which ordered the dismissal of the petitioners complaint for recovery of possession and damages.
The Antecedents
Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of land identified as Lot
No. 124 of the San Carlos City, Negros Occidental Cadastre, with an area of 1,729 square meters and
covered by Transfer Certificate of Title (TCT) No. 1453-R (T-29937)-38. [3] Over time, Gertrudis and two other

co-owners sold each of their one-seventh (1/7) shares, or a total area of 741 square meters, to Jesus
Mascuana. The latter then sold a portion of his 140-square-meter undivided share of the property to
Diosdado Sumilhig. Mascuana later sold an additional 160-square-meter portion to Sumilhig on April 7,
1961. However, the parties agreed to revoke the said deed of sale and, in lieu thereof, executed a Deed of
Absolute Sale on August 12, 1961. In the said deed, Mascuana, as vendor, sold an undivided 469-squaremeter portion of the property for P4,690.00, with P3,690.00 as down payment, and under the following
terms of payment:
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto the VENDOR as
soon as the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers
pertinent and necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall
have been prepared.[4]
On December 31, 1961, Mascuana and Jose G. Estabillo executed a Deed of Exchange and Absolute
Sale of Real Estate,[5] in which Estabillo deeded to Mascuana a portion of his property abutting that of
Sumilhig on the southeast.
In the meantime, a survey was conducted for the co-owners of Lot No. 124 on July 9, 1962. The
subdivision plan of the said lot was approved by the Director of Lands on August 2, 1962. The portion of
the property deeded to Sumilhig was identified in the said plan as Lot No. 124-B. [6]
Meanwhile, Mascuana died intestate on April 20, 1965 and was survived by his heirs, Eva M. Ellisin,
Renee Hewlett, Carmen Vda. de Opea, Marilou Dy and Jose Ma. R. Mascuana.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property [7] on a portion of Lot No. 124-B
with an area of 469 square meters and the improvements thereon, in favor of Corazon Layumas, the wife
of Judge Rodolfo Layumas, for the price of P11,000.00. The spouses Layumas then had the property
subdivided into two lots: Lot No. 124-B-2 with an area of 71 square meters under the name of Jesus
Mascuana, and Lot No. 124-B-1, with an area of 469 square meters under their names. [8] The spouses
Layumas took possession of the property and caused the cutting of tall grasses thereon. Upon the plea of a
religious organization, they allowed a chapel to be constructed on a portion of the property. [9] In January
1985, the spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward off
squatters.[10] Barte and his kin, Rostom Barte, then had their houses constructed on the property.
On October 1, 1985, the spouses Layumas received a Letter [11] from the counsel of Renee Tedrew,
offering to buy their share of the property for US$1,000.00. For her part, Corazon Layumas wrote Pepito
Mascuana, offering to pay the amount of P1,000.00, the balance of the purchase price of the property
under the deed of absolute sale executed by Mascuana and Sumilhig on August 12, 1961. [12] However, the
addressee refused to receive the mail matter.[13]
Unknown to the spouses Layumas, TCT No. 8986[14] was issued over Lot No. 124-B in the name of Jesus
Mascuana on March 17, 1986.
On November 17, 1986, the heirs of Mascuana filed a Complaint [15] for recovery of possession of Lot
No. 124-B and damages with a writ of preliminary injunction, alleging that they owned the subject lot by
virtue of successional rights from their deceased father. They averred that Barte surreptitiously entered the
premises, fenced the area and constructed a house thereon without their consent. Attached as annexes to
the complaint were TCT No. 8986 and a certification [16] from the Office of the City Treasurer, Land Tax
Division, vouching that the property in question was owned by the petitioners and that they had paid the
taxes thereon until 1992.
In his answer to the complaint, Barte admitted having occupied a portion of Lot No. 124-B, but claimed
that he secured the permission of Rodolfo Layumas, the owner of the subject property. He added that he
did not fence the property, and that the petitioners did not use the same as a passageway in going to
Broce Street from their house. Barte raised the following special defenses: (a) the petitioners were
estopped from asserting ownership over the lot in question because they did not object when he occupied
the said portion of the lot; (b) neither did the petitioners protest when a church was built on the property,
or when residential houses were constructed thereon; (c) the petitioners still asked Barte and the other
occupants whether they had notified Rodolfo Layumas of the constructions on the property; and (d) the
heirs of Mascuana, through the lawyer of Mrs. Renee M. Tedrew, even wrote a letter [17] to Rodolfo Layumas
on October 1, 1985, expressing her willingness to buy the subject property for US$1,000.00.
On April 8, 1991, the spouses Layumas filed a Motion for Leave to Intervene, [18] alleging therein that
they had a legal interest in Lot No. 124-B-1 as its buyers from Sumilhig, who in turn purchased the same

from Mascuana. In their answer in intervention, [19] the spouses Layumas alleged that they were the true
owners of the subject property and that they had wanted to pay the taxes thereon, but the Land Tax clerk
refused to receive their payments on account that the petitioners had already made such payment. The
spouses Layumas further maintained that the petitioners had no cause of action against Barte, as they had
authorized him to occupy a portion of Lot No. 124-B-1. The spouses Layumas also averred that the
petitioners were estopped from denying their right of ownership and possession of the subject lot, as one
of them had even offered to repurchase a portion of Lot No. 124-B via letter. The said spouses interposed a
counterclaim for damages, claiming ownership over the property, and prayed, thus:
WHEREFORE, it is most respectfully prayed that this HONORABLE COURT render judgment in favor of the
Intervenors and the defendant Aquilino Barte, ordering:
1. That the complaint against Aquilino Barte be dismissed with costs against the plaintiff;
2. That the Intervenors spouses Judge Rodolfo S. Layumas and Corazon A. Layumas be declared as
the legal and true owners of Lot 124-B;
3. That the plaintiffs should deliver immediately to the Intervenors, TCT No. 8986 which is in their
possession;
4. That the plaintiffs be made to pay to the Intervenors the sum of THIRTY THOUSAND
(P30,000.00) PESOS moral damages; TEN THOUSAND (P10,000.00) PESOS attorneys fees plus
THREE HUNDRED (P300.00) PESOS as appearance fee per hearing.
Intervenors pray for such other relief and remedies as may be deemed by this Honorable Court as just and
equitable in the premises.
At the trial, intervenor Rodolfo Layumas testified that he and his wife bought the subject property in
1968, and that nobody objected to their possession of the land, including the petitioners. In 1970, a
religious organization asked his permission to construct a chapel on the disputed lot; he allowed the
construction since the same would be used for the fiesta. He further declared that part of the chapel still
stood on the property. In 1985, a fire razed the towns public market, thereby dislocating numerous people.
Barte was one of the fire victims, who also happened to be a good friend and political supporter of Rodolfo.
Out of goodwill, Barte was allowed to occupy a portion of the said lot, along with some other fire victims.
Rodolfo clarified that the others were to stay there only on a temporary basis, but admitted that Bartes
children also stayed in the subject property.[20]
Rodolfo Layumas further narrated that in 1987, Corazon wrote one of the petitioners-heirs, Pepito
Mascuana, requesting that the title of the lot be transferred in Sumilhigs name so that they could likewise
arrange for the conveyance of the title in their names. Pepito failed to claim the letter, and thereafter, filed
a case of ejectment against Barte and Rodolfo Layumas brother-in-law, Pepito Antonio. The case, the
witness added, was dismissed as against the two parties. Offered in evidence were the following: a Sworn
Statement on the Current and Fair Market Value of the Real Property issued in 1973 as required by
Presidential Decree No. 76, and tax receipts.[21]
Rodolfo Layumas admitted on cross-examination that at the time they bought the property from
Sumilhig, the title was still in the possession of the Wuthrich family. He added that he filed an adverse
claim before the Register of Deeds of San Carlos City, Negros Occidental, on Lot No. 124-B in January 1986,
or after the case had already been filed in court. Lastly, the witness deposed that he did not fence the
property after buying the same, but that his brother-in-law constructed a coco-lumber yard thereon upon
his authority.[22]
On January 30, 1996, the trial court rendered judgment in favor of Barte and the spouses Layumas.
The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of Intervenors-counterclaimants
and defendant and against plaintiffs-counterclaim defendants ordering as follows:
1. The dismissal of the plaintiffs complaint with costs against them;
2. The plaintiffs to jointly pay Intervenors-counterclaimants now RTC Judge Rodolfo S. Layumas
and Corazon A. Layumas:
(a) P10,000.00 for attorneys fees; and

(b) P30,000.00 as moral damages;

3. The plaintiffs, as counterclaim defendants, to comply with the above-stated obligation of their
late father, Mr. Jesus Mascuana, under the Deed of Absolute Sale, Exh. 3, pp. 92-93, Exp., thru
plaintiff Mr. Jose Mascuana, including the desegragation (sic) survey to desegregate the 469square-meter portion of said Lot No. 124-B, San Carlos Cadastre, this province, sold to the late
Diosdado Sumilhig, if the same has not yet been done despite what has been said herein
earlier to said effect, and the execution of the Final Deed of Sale in their capacity as the heirs
and successors-in-interest of the late Mr. Jesus Mascuana, thru Mr. Jose Mascuana, covering the
469-square-meter desegregated portion of said Lot No. 124-B, within sixty (60) days counted
from the finality of this Decision, in favor of the Intervenors-spouses, after which the said
Intervenors-spouses shall pay them, thru Mr. Jose Mascuana, the P1,000.00 balance due to
them as successors-in-interest of the late Mr. Jesus Mascuana;
4. In case plaintiffs fail to comply with what are herein ordered for them to do, the Clerk of Court V
of this Court to do all that they were to do as herein ordered in the text and dispositive portion
hereof, at the expense of Intervenors spouses to be later reimbursed by plaintiffs, including the
desegragation (sic) survey of said 469-square-meter portion of said Lot [No.] 124-B, San Carlos
Cadastre, Negros Occidental, if the same has not yet been done and the execution of the Final
Deed of Sale on behalf of all the plaintiffs as heirs and successors-in-interest of the late Mr.
Jesus Mascuana covering the said desegregated portion of 469 square meters of the aforesaid
lot, in favor of Intervenors spouses, to the end that separate title therefor may be issued in
their names, after they shall have paid the P1,000.00 balance due plaintiffs under said Deed of
Absolute Sale, Exh. 3.
SO ORDERED.[23]
Forthwith, the petitioners appealed the case to the CA, raising the following issues of fact and law:
a. Whether or not the contract of alienation of Lot No. 124-B in favor of Diosdado Sumilhig in 1961
was a contract to sell or a contract of sale;
b. Whether or not Diosdado Sumilhig had any right to sell Lot No. 124-B in favor of intervenor
Corazon Layumas in 1968.[24]
On May 5, 2003, the CA affirmed the decision of the trial court. It ruled that the contract between the
petitioners father and Sumilhig was one of sale. Foremost, the CA explained, the contract was
denominated as a Deed of Absolute Sale. The stipulations in the contract likewise revealed the clear
intention on the part of the vendor (Mascuana) to alienate the property in favor of the vendee (Sumilhig).
In three various documents, the late Mascuana even made declarations that Sumilhig was already the
owner of the disputed land. The CA added that the admission may be given in evidence against Mascuana
and his predecessors-in-interest under Section 26, Rule 130 of the Revised Rules on Evidence. As to the
argument that the contract between Mascuana and Sumilhig was not effective because it was subject to a
suspensive condition that did not occur, the CA ruled that the condition referred to by the petitioners refers
only to the payment of the balance of the purchase price and not to the effectivity of the contract.
As to the petitioners contention that even if the contract were one of sale, ownership cannot be
transferred to Sumilhig because Mascuana was not yet the owner of the lot at the time of the alleged sale,
the appellate court ruled that the registration of the land to be sold is not a prerequisite to a contract of
sale.
The Present Petition
Aggrieved, the petitioners filed the instant petition for review on certiorari with this Court, where the
following lone legal issue was raised:
WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUANA IN FAVOR OF DIOSDADO SUMILHIG A
CONTRACT TO SELL OR CONTRACT OF SALE? [25]
We note that the original action of the petitioners against Aquilino Barte was one for recovery of
possession of Lot No. 124-B. With the intervention of the respondents Rodolfo and Corazon Layumas who
claimed ownership over the property, and the acquiescence of the parties, evidence was adduced to prove
who, between the petitioners (as plaintiffs) and the respondents (as defendants-intervenors) were the
lawful owners of the subject property and entitled to its possession.

The petitioners resolutely contend that the Deed of Absolute Sale dated August 12, 1961 between
their father and Sumilhig was a mere contract to sell because at the time of the said sale, the late
Mascuana was not yet the registered owner of Lot No. 124 or any of its portions. They assert that Sumilhig
could not have acquired any rights over the lot due to the fact that a person can only sell what he owns or
is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally. Finally,
the petitioners insist that the document in controversy was subject to a suspensive condition, not a
resolutory condition, which is a typical attribute of a contract of sale.
The petition is denied for lack of merit.
The issues raised by the petitioners in this case are factual, and under Rule 45 of the Rules of Court,
only questions of law may be raised in this Court, the reason being that this Court is not a trier of facts. It
is not to re-examine the evidence on record and to calibrate the same. Moreover, the findings and
conclusions of the trial court as affirmed by the CA are conclusive on the Court, absent of any evidence
that the trial court, as well as the CA ignored, misinterpreted and misconstrued facts and circumstances of
substance which, if considered, would alter or reverse the outcome of the case. [26]
We have reviewed the records and find no justification for a reversal or even a modification of the
assailed decision of the CA.
Even on the merits of the petition, the Court finds that the decision of the trial court as well as the
ruling of the CA are based on the evidence on record and the applicable law.
The petitioners reiterated their pose that the deed of absolute sale over the property executed by their
father, Jesus Mascuana, as vendor, and Diosdado Sumilhig as vendee, was a contract to sell and not a
contract of sale. They assert that on its face, the contract appears to be a contract to sell, because the
payment of the P1,000.00 balance of the purchase price was subject to a suspensive condition: the survey
of the property, the segregation of the portion thereof subject of the sale, and the completion of the
documents necessary for the issuance of a Torrens title over the property to and in the name of Sumilhig
who was the vendee. The petitioners assert that Sumilhig never paid the aforesaid amount to the vendor;
hence, the obligation of the latter and his predecessors-in-interest (herein petitioners) to execute a final
deed of sale never arose. As such, they aver, title to the property remained reserved in the vendor and his
heirs even after his death. There was no need for the vendor to rescind the deed or collect the said amount
of P1,000.00 under Article 1191 of the New Civil Code because such a remedy applies only to contracts of
sale. The petitioners insist that Sumilhig never acquired title over the property; he could not have
transferred any title to the respondents. Sumilhig could not have transferred that which he did not own.
The petitioners contention has no factual and legal bases.
The deed of absolute sale executed by Jesus Mascuana and Sumilhig, provides, thus:
That the VENDOR is the true and absolute owner of a parcel of land known as Lot No. 124 of the Cadastral
Survey of San Carlos, situated at Broce Street and is free from liens and encumbrances, and covered by
O.C.T. No. T-299[3]7 (R-1453) of Reg. of Deeds, Negros Occ.
That for and in consideration of the sum of FOUR THOUSAND SIX HUNDRED NINETY PESOS (P4,690.00),
Philippine Currency, to be paid by the VENDEE in the manner hereinafter stated, the VENDOR does hereby
sell, transfer, cede and convey, a portion of the above-described property containing an area of 469 square
meters, the sketch of which can be found at the back of this document and having a frontage at Broce
Street of around 14 meters, and from the Broce Street to the interior on its Southwest side with a length of
30.9 meters, with a length of 24.8 meters on its Northeast side where it turned to the right with a length of
2.8 meters and continuing to Northwest with a length of 6.72 meters, the backyard dimension is 17.5
meters to the Northwest, unto the VENDEE, his heirs and assigns, by way of Absolute Sale, upon the
receipt of the down payment of THREE THOUSAND SIX HUNDRED NINETY PESOS (P3,690.00), which is
hereby acknowledged by the VENDOR as received by him.
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto the VENDOR as
soon as the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers
pertinent and necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall
have been prepared.
The evidence on record shows that during the lifetime of vendor Jesus Mascuana, and even after his
death, his heirs, the petitioners herein, unequivocably declared that Diosdado Sumilhig was the owner of
the property subject of this case, and that the respondents acquired title over the property, having

purchased the same via a deed of absolute sale from Diosdado Sumilhig. Thus, on December 31, 1961,
Jesus Mascuana and Jose Estabillo executed a Deed of Exchange and Absolute Sale of Real Estate, in which
both parties declared that they were co-owners of portions of Lot No. 124 abutted by the property owned
by Diosdado Sumilhig.[27]
In the subdivision plan of Lot No. 124, signed by Ricardo Quilop, Private Land Surveyor, following his
survey of Lot No. 124 on July 9, 1962 for and in behalf of Jesus Mascuana, et al., it appears that Lot No.
124-B with an area of 540 square meters belonged to Diosdado Sumilhig, [28] which is abutted by Lot No.
124-C, owned by Jesus Mascuana.
On October 1, 1985, long after the death of Jesus Mascuana, one of his heirs, petitioner Renee Tedrew,
through counsel, wrote respondent Rodolfo Layumas offering to buy the property occupied by his overseer
Aquilino Barte for US$1,000.00:
ATTY. RODOLFO S. LAYUMAS
San Carlos City
Negros Occidental
Dear Atty. Layumas:
This has reference to the lot located at Broce Street, portions of which are presently occupied by Mr. Barte.
Mrs. Renee Tedrew (nee Agapuyan), who is now in the United States, would like to offer the amount of
$1,000.00 to buy your share of the said lot.
If you are amenable, kindly inform the undersigned for him to communicate [with] Mrs. Tedrew in
California.
Very truly yours,
(Sgd.)
SAMUEL SM LEZAMA[29]
It was only after the respondents rejected the proposal of petitioner Renee Tedrew that the petitioners
secured title over the property on March 17, 1986 in the name of Jesus Mascuana (already deceased at the
time), canceling TCT No. 967 issued on July 6, 1962 under the name of Jesus Mascuana, who appears to be
a co-owner of Lot No. 124 with an undivided two-seventh (2/7) portion thereof. [30]
While it is true that Jesus Mascuana executed the deed of absolute sale over the property on August
12, 1961 in favor of Diosdado Sumilhig for P4,690.00, and that it was only on July 6, 1962 that TCT No. 967
was issued in his name as one of the co-owners of Lot No. 124, Diosdado Sumilhig and the respondents
nevertheless acquired ownership over the property. The deed of sale executed by Jesus Mascuana in favor
of Diosdado Sumilhig on August 12, 1961 was a perfected contract of sale over the property. It is settled
that a perfected contract of sale cannot be challenged on the ground of the non-transfer of ownership of
the property sold at that time of the perfection of the contract, since it is consummated upon delivery of
the property to the vendee. It is through tradition or delivery that the buyer acquires ownership of the
property sold. As provided in Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing which is the object of the
contract, unless the contrary appears or can be inferred. The record of the sale with the Register of Deeds
and the issuance of the certificate of title in the name of the buyer over the property merely bind third
parties to the sale. As between the seller and the buyer, the transfer of ownership takes effect upon the
execution of a public instrument covering the real property. [31] Long before the petitioners secured a
Torrens title over the property, the respondents had been in actual possession of the property and had
designated Barte as their overseer.
Article 1458 of the New Civil Code provides:
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 contract of sale may be absolute or conditional.

Thus, there are three essential elements of sale, to wit:

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.[32]
In this case, there was a meeting of the minds between the vendor and the vendee, when the vendor
undertook to deliver and transfer ownership over the property covered by the deed of absolute sale to the
vendee for the price of P4,690.00 of which P3,690.00 was paid by the vendee to the vendor as down
payment. The vendor undertook to have the property sold, surveyed and segregated and a separate title
therefor issued in the name of the vendee, upon which the latter would be obliged to pay the balance
of P1,000.00. There was no stipulation in the deed that the title to the property remained with the vendor,
or that the right to unilaterally resolve the contract upon the buyers failure to pay within a fixed period was
given to such vendor. Patently, the contract executed by the parties is a deed of sale and not a contract to
sell. As the Court ruled in a recent case:
In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a Deed of
Conditional Sale, a sale is still absolute where the contract is devoid of any proviso that title is reserved or
the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be
transferred to the buyer upon actual or constructive delivery (e.g. by the execution of a public document)
of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure
of the condition would prevent such perfection. If the condition is imposed on the obligation of a party
which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale.
(Art. 1545, Civil Code)
Thus, in one case, when the sellers declared in a Receipt of Down Payment that they received an amount
as purchase price for a house and lot without any reservation of title until full payment of the entire
purchase price, the implication was that they sold their property. In Peoples Industrial and Commercial
Corporation v. Court of Appeals, it was stated:
A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to
the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the
right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.
Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is
absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral
rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent.
Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.[33]
The condition in the deed that the balance of P1,000.00 shall be paid to the vendor by the vendee as
soon as the property sold shall have been surveyed in the name of the vendee and all papers pertinent
and necessary to the issuance of a separate certificate of title in the name of the vendee shall have been
prepared is not a condition which prevented the efficacy of the contract of sale. It merely provides the
manner by which the total purchase price of the property is to be paid. The condition did not prevent the
contract from being in full force and effect:
The stipulation that the payment of the full consideration based on a survey shall be due and payable in
five (5) years from the execution of a formal deed of sale is not a condition which affects the efficacy of the
contract of sale. It merely provides the manner by which the full consideration is to be computed and the
time within which the same is to be paid. But it does not affect in any manner the effectivity of the
contract. [34]
In a contract to sell, ownership is retained by a seller and is not to be transferred to the vendee until
full payment of the price. Such payment is a positive suspensive condition, the failure of which is not a
breach of contract but simply an event that prevented the obligation from acquiring binding force. [35]
It bears stressing that in a contract of sale, the non-payment of the price is a resolutory condition
which extinguishes the transaction that, for a time, existed and discharges the obligation created under
the transaction.[36] A seller cannot unilaterally and extrajudicially rescind a contract of sale unless there is

an express stipulation authorizing it. In such case, the vendor may file an action for specific performance
or judicial rescission.[37]
Article 1169 of the New Civil Code provides that 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 fulfills his obligation, delay by the other begins. In this case, the
vendor (Jesus Mascuana) failed to comply with his obligation of segregating Lot No. 124-B and the issuance
of a Torrens title over the property in favor of the vendee, or the latters successors-in-interest, the
respondents herein. Worse, petitioner Jose Mascuana was able to secure title over the property under the
name of his deceased father.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the
petitioners.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 118509 December 1, 1995

LIMKETKAI SONS MILLING, INC., petitioner,

vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK
STORE, respondents.

MELO, J.:
The issue in the petition before us is whether or not there was a perfected contract between petitioner
Limketkai Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering the sale of a
parcel of land, approximately 3.3 hectares in area, and located in Barrio Bagong Ilog, Pasig City, Metro
Manila.
Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig ruled that
there was a perfected contract of sale between petitioner and BPI. It stated that there was mutual consent
between the parties; the subject matter is definite; and the consideration was determined. It concluded
that all the elements of a consensual contract are attendant. It ordered the cancellation of a sale effected
by BPI to respondent National Book Store (NBS) while the case was pending and the nullification of a title
issued in favor of said respondent NBS.
Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected
because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code. The
decision of the trial court was reversed and the complaint dismissed.
Hence, the instant petition.
Shorn of the interpretations given to the acts of those who participated in the disputed sale, the findings of
facts of the trial court and the Court of Appeals narrate basically the same events and occurrences. The
records show that on May 14, 1976, Philippine Remnants Co., Inc. constituted BPI as its trustee to manage,
administer, and sell its real estate property. One such piece of property placed under trust was the
disputed lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig, Metro Manila covered by Transfer
Certificate of Title No. 493122.
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to sell
the lot for P1,000.00 per square meter. This arrangement was concurred in by the owners of the Philippine
Remnants.
Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8, 1988,
petitioner's officials and Revilla were given permission by Rolando V. Aromin, BPI Assistant Vice-President,
to enter and view the property they were buying.
On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On July 11,
1988, petitioner's officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were
entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. Petitioner asked that the
price of P1,000.00 per square meter be reduced to P900.00 while Albano stated the price to be P1,100.00.
The parties finally agreed that the lot would be sold at P1,000.00 per square meter to be paid in cash.
Since the authority to sell was on a first come, first served and non-exclusive basis, it may be mentioned at
this juncture that there is no dispute over petitioner's being the first comer and the buyer to be first
served.
Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso Lim
asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask
for payment on terms because in previous transactions, the same had been allowed. It was the
understanding, however, that should the term payment be disapproved, then the price shall be paid in
cash.
It was Albano who dictated the terms under which the installment payment may be approved, and acting
thereon, Alfonso Lim, on the same date, July 11, 1988, wrote BPI through Merlin Albano embodying the
payment initially of 10% and the remaining 90% within a period of 90 days.
Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim went
to BPI on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The payment was
refused because Albano stated that the authority to sell that particular piece of property in Pasig had been

withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also refused
to receive payment.
An action for specific performance with damages was thereupon filed on August 25, 1988 by petitioner
against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under
litigation to NBS on July 14, 1989. The complaint was thus amended to include NBS.
On June 10, 1991, the trial court rendered judgment in the case as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants Bank
of the Philippine Islands and National Book Store, Inc.:
1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the name of
the Bank of the Philippine Islands, situated in Barrio Bagong Ilog, Pasig, Metro Manila, in
favor of National Book Store, Inc., null and void;
2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer Certificate of
Title which may have been issued in favor of National Book Store, Inc. by virtue of the
aforementioned Deed of Sale dated July 14, 1989;
3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of P33,056,000.00, to
execute a Deed of Sale in favor of plaintiff of the aforementioned property at the price of
P1,000.00 per square meter; in default thereof, the Clerk of this Court is directed to execute
the said deed;
4. Ordering the Register of Deeds of Pasig, upon registration of the said deed, whether
executed by defendant BPI or the Clerk of Court and payment of the corresponding fees and
charges, to cancel said T.C.T. No. 493122 and to issue, in lieu thereof, another transfer
certificate of title in the name of plaintiff;
5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and severally, to the
plaintiff the sums of P10,000,000.00 as actual and consequential damages and P150,000.00
as attorney's fees and litigation expenses, both with interest at 12% per annum from date
hereof;
6. On the cross-claim of defendant bank against National Book Store, ordering the latter to
indemnify the former of whatever amounts BPI shall have paid to the plaintiff by reason
hereof; and
7. Dismissing the counterclaims of the defendants against the plaintiff and National Book
Store's cross-claim against defendant bank.
Costs against defendants.
(pp. 44-45, Rollo.)
As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and
Mabutas,JJ.), on August 12, 1994, reversed the trial court's decision and dismissed petitioner's complaint
for specific performance and damages.
The issues raised by the parties revolve around the following four questions:
(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the subject
matter of the contract and the cause of the obligation?
(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned
contract?
(3) Is there competent and admissible evidence to support the alleged meeting of the minds?
(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?

There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine Remnant
Co. authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square meter; (b) that
Philippine Remnants confirmed the authority to sell of Revilla and the price at which he may sell the lot; (c)
that petitioner and Revilla agreed on the former buying the property; (d) that BPI Assistant Vice-President
Rolando V. Aromin allowed the broker and the buyer to inspect the property; and (e) that BPI was formally
informed about the broker having procured a buyer.
The controversy revolves around the interpretation or the significance of the happenings or events at this
point.
Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top officials
and broker Revilla finalized the details with BPI Vice-Presidents Merlin Albano and Rolando V. Aromin at the
BPI offices.
Respondents, however, contend that what transpired on this date were part of continuing negotiations to
buy the land and not the perfection of the sale. The arguments of respondents center on two propositions
(1) Vice-Presidents Aromin and Albano had no authority to bind BPI on this particular transaction and (2)
the subsequent attempts of petitioner to pay under terms instead of full payment in cash constitutes a
counter-offer which negates the existence of a perfected contract.
The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record.
At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed lot.
Exhibit B dated June 23, 1988 states, "this will serve as your authority to sell on an as is, where is basis the
property located at Pasig Blvd., Bagong Ilog . . . ." We agree with Revilla's testimony that the authority
given to him was to sell and not merely to look for a buyer, as contended by respondents.
Revilla testified that at the time he perfected the agreement to sell the litigated property, he was acting for
and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up the sale of the
land, Revilla saw it fit to bring BPI officials into the transaction. If BPI could give the authority to sell to a
licensed broker, we see no reason to doubt the authority to sell of the two BPI Vice-Presidents whose
precise job in the Bank was to manage and administer real estate property.
Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made up of top
bank officials. It appears from the record that this trust committee meets rather infrequently and it does
not have to pass on regular transactions.
Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI Real
Property Management Unit. He had been in the Real Estate Division since 1985 and was the head
supervising officer of real estate matters. Aromin had been with the BPI Trust Department since 1968 and
had been involved in the handling of properties of beneficial owners since 1975 (tsn., December 3, 1990,
p. 5).
Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while
purporting to inform Aromin of his poor performance, is an admission of BPI that Aromin was in charge of
Torrens titles, lease contracts, problems of tenants, insurance policies, installment receivables,
management fees, quitclaims, and other matters involving real estate transactions. His immediate
superior, Vice-President Merlin Albano had been with the Real Estate Division for only one week but he was
present and joined in the discussions with petitioner.
There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident. Revilla
brought the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a perfectly natural
manner on the transaction before him with not the slightest indication that he was acting ultra vires. This
shows that BPI held Aromin out to the public as the officer routinely handling real estate transactions and,
as Trust Officer, entering into contracts to sell trust properties.
Respondents state and the record shows that the authority to buy and sell this particular trust property
was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have any authority to
act as alleged, there was no need to withdraw authority which he never possessed.
Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank
vs. Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co. (52 ND
752, 204 NW 818, 40 ALR 1021), to wit:

Accordingly a banking corporation is liable to innocent third persons where the

representation is made in the course of its business by an agent acting within the general
scope of his authority even though, in the particular case, the agent is secretly abusing his
authority and attempting to perpetrate a fraud upon his principal or some other person for
his own ultimate benefit.
(at pp. 652-653.)
In the present case, the position and title of Aromin alone, not to mention the testimony and documentary
evidence about his work, leave no doubt that he had full authority to act for BPI in the questioned
transaction. There is no allegation of fraud, nor is there the least indication that Aromin was acting for his
own ultimate benefit. BPI later dismissed Aromin because it appeared that a top official of the bank was
personally interested in the sale of the Pasig property and did not like Aromin's testimony. Aromin was
charged with poor performance but his dismissal was only sometime after he testified in court. More than
two long years after the disputed transaction, he was still Assistant Vice-President of BPI.
The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine Remnants
Co. regarding the sale of the firm's property was addressed to Aromin. The P1,000.00 figure on the first
page of broker Revilla's authority to sell was changed to P1,100.00 by Aromin. The price was later brought
down again to P1,000.00, also by Aromin. The permission given to petitioner to view the lot was signed by
Aromin and honored by the BPI guards. The letter dated July 9, 1988 from broker Revilla informing BPI that
he had a buyer was addressed to Aromin. The conference on July 11, 1988 when the contract was
perfected was with Aromin and Vice-President Albano. Albano and Aromin were the ones who assured
petitioner Limketkai's officers that term payment was possible. It was Aromin who called up Miguel
Bicharra of Philippine Remnants to state that the BPI rejected payment on terms and it was to Aromin that
Philippine Remnants gave the go signal to proceed with the cash sale. Everything in the record points to
the full authority of Aromin to bind the bank, except for the self-serving memoranda or letters later
produced by BPI that Aromin was an inefficient and undesirable officer and who, in fact, was dismissed
after he testified in this case. But, of course, Aromin's alleged inefficiency is not proof that he was not fully
clothed with authority to bind BPI.
Respondents' second contention is that there was no perfected contract because petitioner's request to
pay on terms constituted a counter-offer and that negotiations were still in progress at that point.
Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among his
statements is one to the effect that
. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano
counter-offered to sell the property at P1,100.00 per square meter but after the usual
haggling, we finally agreed to sell the property at the price of P1,000.00 per square meter . .
.
(tsn, 12-3-90, p. 17; Emphasis supplied.)
Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of
P1,000.00 per square meter, Aromin answered:
Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price is
concerned, sir.
(ibid, p. 17.)
The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI
Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the possibility of
paying on terms was referred to the Trust Committee but with the mutual agreement that "if the proposed
payment on terms will not be approved by our Trust Committee, Limketkai should pay in cash . . . the
amount was no longer subject to the approval or disapproval of the Committee, it is only on the terms."
(ibid, p. 19). This is incontrovertibly established in the following testimony of Aromin:
A. After you were able to agree on the price of P1,000.00/sq. m., since the
letter or authority says the payment must be in cash basis, what transpired
later on?

B. After we have agreed on the price, the Lim brothers inquired on how to go
about submitting the covering proposal if they will be allowed to pay on terms.
They requested us to give them a guide on how to prepare the corresponding
letter of proposal. I recall that, upon the request of Mr. Albino Limketkai, we
dictated a guide on how to word a written firm offer that was to be submitted
by Mr. Lim to the bank setting out the terms of payment but with the mutual
agreement that if his proposed payment on terms will not be approved by our
trust committee, Limketkai should pay the price in cash.
Q And did buyer Limketkai agree to pay in cash in case the offer of terms will
be cash (disapproved).
A Yes, sir.
Q At the start, did they show their willingness to pay in cash?
A Yes, sir.
Q You said that the agreement on terms was to be submitted to the trust
committee for approval, are you telling the Court that what was to be
approved by the trust committee was the provision on the payment on terms?
A Yes, sir.
Q So the amount was no longer subject to the approval or disapproval of the
committee, it is only on the terms?
A Yes, sir.
(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)
The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But
because petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent to
higher officials. Immediately upon learning that payment on terms was frozen and/or denied, Limketkai
exercised his right within the period given to him and tendered payment in full. The BPI rejected the
payment.
In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of Appeals (238 SCRA
602 [1994]) to bolster its case. Contrarywise, it would seem that the legal principles found in said case
strengthen and support petitioner's submission that the contract was perfected upon the meeting of the
minds of the parties.
The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell
the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to broker Revilla
to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property and finally (d) the
negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and
Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at
P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and the
authorized broker. There was a concurrence of offer and acceptance, on the object, and on the cause
thereof.
The phases that a contract goes through may be summarized as follows:
a. preparation, conception or generation, which is the period of negotiation and bargaining,
ending at the moment of agreement of the parties;
b. perfection or birth of the contract, which is the moment when the parties come to agree
on the terms of the contract; and
c. consummation or death, which is the fulfillment or performance of the terms agreed upon
in the contract (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).

But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:
. . . 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 (perfected). Theperfection of the contract takes place upon the concurrence of
the essential elements thereof. A contract which is consensual as to perfection is so
established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on
the object and on the cause thereof. A contract which requires, in addition to the above, the
delivery of the object of the agreement, as in a pledge orcommodatum, is commonly
referred to as a real contract. In a solemn contract, compliance with certain formalities
prescribed by law, such as in a donation of real property, is essential in order to make the
act valid, the prescribed form being thereby an essential element thereof. The stage of
consummation begins when the parties perform their respective undertakings under the
contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation. In sales, particularly, to which the topic for discussion about the
case at bench belongs, the contract is perfected when a person, called the seller, obligates
himself, for a price certain, to deliver and to transfer ownership of a thing or right to
another, called the buyer, over which the latter agrees.
(238 SCRA 602; 611 [1994].)
In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecendents similar to
this case, the Court, through Justice Aquino (later to be Chief Justice), quoting authorities, upheld the
perfection of the contract of sale thusly:
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. 1475,Ibid.)
xxx xxx xxx
Consent is manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer (Art. 1319, Civil Code). "An
acceptance may be express or implied." (Art. 1320, Civil Code).
xxx xxx xxx
It is true that an acceptance may contain a request for certain changes in the terms of the
offer and yet be a binding acceptance. "So long as it is clear that the meaning of the
acceptance is positively and unequivocally to accept the offer, whether such request is
granted or not, a contract is formed." (Stuart vs. Franklin Life Ins. Co., 105 Fed. 2nd 965,
citing Sec. 79, Williston on Contracts).
xxx xxx xxx
. . . the vendor's change in a phrase of the offer to purchase, which change does not
essentially change the terms of the offer, does not amount to a rejection of the offer and the
tender or a counter-offer. (Stuart vs. Franklin Life Ins. Co., supra.)
(at pp. 362-363; 365-366.)
In the case at bench, the allegation of NBS that there was no concurrence of the offer and acceptance
upon the cause of the contract is belied by the testimony of the very BPI official with whom the contract
was perfected. Aromin and Albano concluded the sale for BPI. The fact that the deed of sale still had to be
signed and notarized does not mean that no contract had already been perfected. A sale of land is valid
regardless of the form it may have been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119
[1991]). The requisite form under Article 1458 of the Civil Code is merely for greater efficacy or
convenience and the failure to comply therewith does not affect the validity and binding effect of the act
between the parties (Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, p. 552). If

the law requires a document or other special form, as in the sale of real property, the contracting parties
may compel each other to observe that form, once the contract has been perfected. Their right may be
exercised simultaneously with action upon the contract (Article 1359, Civil Code).
Regarding the admissibility and competence of the evidence adduced by petitioner, respondent Court of
Appeals ruled that because the sale involved real property, the statute of frauds is applicable.
In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was held that contracts
infringing the Statute of Frauds are ratified when the defense fails to object, or asks questions on crossexamination. The succinct words of Justice Araullo still ring in judicial cadence:
As no timely objection or protest was made to the admission of the testimony of the plaintiff
with respect to the contract; and as the motion to strike out said evidence came too late;
and, furthermore, as the defendants themselves, by the cross-questions put by their counsel
to the witnesses in respect to said contract, tacitly waived their right to have it stricken out,
that evidence, therefore, cannot be considered either inadmissible or illegal, and court, far
from having erred in taking it into consideration and basing his judgment thereon,
notwithstanding the fact that it was ordered to be stricken out during the trial, merely
corrected the error he committed in ordering it to be so stricken out and complied with the
rules of procedure hereinbefore cited.
(at p. 748.)
In the instant case, counsel for respondents cross-examined petitioner's witnesses at length on the
contract itself, the purchase price, the tender of cash payment, the authority of Aromin and Revilla, and
other details of the litigated contract. Under the Abrenica rule (reiterated in a number of cases, among
them Talosig vs. Vda. de Nieba 43 SCRA 472 [1972]), even assuming that parol evidence was initially
inadmissible, the same became competent and admissible because of the cross-examination, which
elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is
deemed a waiver of the defense of the Statute of Frauds (Vitug, Compendium of Civil Law and
Jurisprudence, 1993 Revised Edition, supra, p. 563).
The reason for the rule is that as pointed out in Abrenica "if the answers of those witnesses were stricken
out, the cross-examination could have no object whatsoever, and if the questions were put to the
witnesses and answered by them, they could only be taken into account by connecting them with the
answers given by those witnesses on direct examination" (pp. 747-748).
Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts pursuant
to the Statute of Frauds is the existence of a written note or memorandum evidencing the contract. The
memorandum may be found in several writings, not necessarily in one document. The memorandum or
memoranda is/are written evidence that such a contract was entered into.
We cite the findings of the trial court on this matter:
In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a written
contract of the sale is not necessary so long as the agreement to sell real property is
evidenced by a written note or memorandum, embodying the essentials of the contract and
signed by the party charged or his agent. Thus, it has been held:
The Statute of Frauds, embodied in Article 1403 of the Civil Code of the
Philippines,does not require that the contract itself be written. The plain test
of Article 1403, Paragraph (2) is clear that a written note or memorandum,
embodying the essentials of the contract and signed by the party charged, or
his agent suffices to make the verbal agreement enforceable, taking it out of
the operation of the statute. (Emphasis supplied)
xxx xxx xxx
In the case at bar, the complaint in its paragraph 3 pleads that the deal had
been closed by letter and telegram (Record on Appeal, p. 2), and the letter
referred to was evidently the one copy of which was appended as Exhibit A to
plaintiffs opposition to the motion to dismiss. The letter, transcribed above in
part, together with the one marked as Appendix B, constitute an adequate
memorandum of the transaction. They are signed by the defendant-appellant;

refer to the property sold as a Lot in Puerto Princesa, Palawan, covered by

T.C.T. No. 62, give its area as 1,825 square meters and the purchase price of
four (P4.00) pesos per square meter payable in cash. We have in them,
therefore, all the essential terms of the contract and they satisfy the
requirements of the Statute of Frauds.
(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).
While there is no written contract of sale of the Pasig property executed by BPI in favor of
plaintiff, there are abundant notes and memoranda extant in the records of this case
evidencing the elements of a perfected contract. There is Exhibit P, the letter of Kenneth
Richard Awad addressed to Roland Aromin, authorizing the sale of the subject property at
the price of P1,000.00 per square meter giving 2% commission to the broker and instructing
that the sale be on cash basis. Concomitantly, on the basis of the instruction of Mr. Awad,
(Exh. P), an authority to sell, (Exh. B) was issued by BPI to Pedro Revilla, Jr., representing
Assetrade Co., authorizing the latter to sell the property at the initial quoted price of
P1,000.00 per square meter which was altered on an unaccepted offer by Technoland. After
the letter authority was issued to Mr. Revilla, a letter authority was signed by Mr. Aromin
allowing the buyer to enter the premises of the property to inspect the same (Exh. C). On
July 9, 1988, Pedro Revilla, Jr., acting as agent of BPI, wrote a letter to BPI informing it that he
had procured a buyer in the name of Limketkai Sons Milling, Inc. with offices at Limketkai
Bldg., Greenhills, San Juan, Metro Manila, represented by its Exec. Vice-President, Alfonso
Lim (Exh. D). On July 11, 1988, the plaintiff, through Alfonso Lim, wrote a letter to the bank,
through Merlin Albano, confirming their transaction regarding the purchase of the subject
property (Exh. E). On July 18, 1988, the plaintiff tendered upon the officials of the bank a
check for P33,056,000.00 covered by Check No. CA510883, dated July 18, 1988. On July 1,
1988, Alfonso Zamora instructed Mr. Aromin in a letter to resubmit new offers only if there is
no transaction closed with Assetrade Co. (Exh. S). Combining all these notes and
memoranda, the Court is convinced of the existence of perfected contract of sale. Aptly, the
Supreme Court, citing American cases with approval, held:
No particular form of language or instrument is necessary to constitute a
memorandum or note in writing under the statute of frauds; any document or
writing, formal or informal, written either for the purpose of furnishing
evidence of the contract or for another purpose, which satisfies all the
requirements of the statute as to contents and signature, as discussed
respectively infra secs. 178-200, and infra secs. 201-205, is a sufficient
memorandum or note. A memorandum may be written as well with lead pencil
as with pen and ink. It may also be filled in on a printed form. (37 C.J.S., 653654).
The note or memorandum required by the statute of frauds need not be
contained in a single document, nor, when contained in two or more papers,
need each paper be sufficient as to contents and signature to satisfy the
statute. Two or more writings properly connected may be considered together,
matters missing or uncertain in one may be supplied or rendered certain by
another, and their sufficiency will depend on whether, taken together, they
meet the requirements of the statute as to contents and the requirements of
the statutes as to signature, as considered respectively infra secs. 179-200
and secs. 201-215.
(pp. 460-463, Original RTC Record).
The credibility of witnesses is also decisive in this case. The trial court directly observed the demeanor and
manner of testifying of the witnesses while the Court of Appeals relied merely on the transcript of
stenographic notes.
In this regard, the court of origin had this to say:
Apart from weighing the merits of the evidence of the parties, the Court had occasion to
observe the demeanor of the witnesses they presented. This is one important factor that
inclined the Court to believe in the version given by the plaintiff because its witnesses,
including hostile witness Roland V. Aromin, an assistant vice-president of the bank, were
straightforward, candid and unhesitating in giving their respective testimonies. Upon the

other hand, the witnesses of BPI were evasive, less than candid and hesitant in giving their
answers to cross examination questions. Moreover, the witnesses for BPI and NBS
contradicted each other. Fernando Sison III insisted that the authority to sell issued to Mr.
Revilla was merely an evidence by which a broker may convince a prospective buyer that he
had authority to offer the property mentioned therein for sale and did not bind the bank. On
the contrary, Alfonso Zamora, a Senior Vice-President of the bank, admitted that the
authority to sell issued to Mr. Pedro Revilla, Jr. was valid, effective and binding upon the bank
being signed by two class "A" signatories and that the bank cannot back out from its
commitment in the authority to sell to Mr. Revilla.
While Alfredo Ramos of NBS insisted that he did not know personally and was not acquainted
with Edmundo Barcelon, the latter categorically admitted that Alfredo Ramos was his friend
and that they have even discussed in one of the luncheon meetings the matter of the sale of
the Pasig property to NBS. George Feliciano emphatically said that he was not a consultant
of Mr. Ramos nor was he connected with him in any manner, but his calling card states that
he was a consultant to the chairman of the Pacific Rim Export and Holdings Corp. whose
chairman is Alfredo Ramos. This deliberate act of Mr. Feliciano of concealing his being a
consultant to Mr. Alfredo Ramos evidently was done by him to avoid possible implication that
he committed some underhanded maneuvers in manipulating to have the subject property
sold to NBS, instead of being sold to the plaintiff.
(pp. 454-455, Original RTC Record.)
On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and the
trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of Appeals (196
SCRA 107 [1991]) bears stressing:
It is a settled principle of civil procedure that the conclusions of the trial court regarding the
credibility of witnesses are entitled to great respect from the appellate courts because the
trial court had an opportunity to observe the demeanor of witnesses while giving testimony
which may indicate their candor or lack thereof. While the Supreme Court ordinarily does not
rule on the issue of credibility of witnesses, that being a question of fact not properly raised
in a petition under Rule 45, the Court has undertaken to do so in exceptional situations
where, for instance, as here, the trial court and the Court of Appeals arrived at divergent
conclusions on questions of fact and the credibility of witnesses.
(at p. 110.)
On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows that it is
not. It acted in bad faith.
Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It was the
willingness and design of NBS to buy property already sold to another party which led BPI to dishonor the
contract with Limketkai.
Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner from
paying the agreed price and getting possession of the property:
1. The sale was supposed to be done through an authorized broker, but top officials of BPI personally and
directly took over this particular sale when a close friend became interested.
2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo Ramos, was his
friend; that they had lunch meetings before this incident and discussed NBS's purchase of the lot.
Barcelon's father was a business associate of Ramos.
3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop the
case and give up the lot. Feliciano went to petitioner's office and haggled with Alfonso Lim but failed to
convince him inspite of various and increasing offers.
4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse marked
by easy portability. The warehouse is bolted to its foundations and can easily be dismantled.
It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly negates any
allegation of good faith on the part of the buyer. Instead of the vendee insisting that the vendor guarantee

its title to the land and recognize the right of the vendee to proceed against the vendor if the title to the
land turns out to be defective as when the land belongs to another person, the reverse is found in the deed
of sale between BPI and NBS. Any losses which NBS may incur in the event the title turns out to be vested
in another person are to be borne by NBS alone. BPI is expressly freed under the contract from any
recourse of NBS against it should BPI's title be found defective.
NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply cites
the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 [1912]) and argues that the
enumeration there is exclusive. The decision in said case plainly states "the following are some of the
circumstances attending sales which have been denominated by courts (as) badges of fraud." There are
innumerable situations where fraud is manifested. One enumeration in a 1912 decision cannot possibly
cover all indications of fraud from that time up to the present and into the future.
The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the amended
complaint to implead NBS, sheriffs fees, registration fees, plane fare and hotel expenses of Cebu-based
counsel. Petitioner also claimed, and the trial court awarded, damages for the profits and opportunity
losses caused to petitioner's business in the amount of P10,000,000.00.
We rule that the profits and the use of the land which were denied to petitioner because of the noncompliance or interference with a solemn obligation by respondents is somehow made up by the
appreciation in land values in the meantime.
Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner
Limketkai; that the BPI officials who transacted with petitioner had full authority to bind the bank; that the
evidence supporting the sale is competent and admissible; and that the sale of the lot to NBS during the
trial of the case was characterized by bad faith.
WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET ASIDE. The
June 10, 1991 judgment of Branch 151 of the Regional Trial Court of The National Capital Judicial Region
stationed in Pasig, Metro Manila is REINSTATED except for the award of Ten Million Pesos (P10,000,000.00)
damages which is hereby DELETED.
SO ORDERED.
Feliciano, Romero, Vitug and Panganiban, JJ., concur.

FIRST DIVISION

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

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA

and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD
JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and
FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES
TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO
ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO
CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and
SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.
DECISION
CARPIO, J.:

The Case
This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of
Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3]dated 18 February
1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 89-5174. The
trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid
consideration and that the plaintiffs did not have a cause of action against the defendants.

The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora,
Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all
surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the
corresponding certificates of title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on
11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. C),
pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7
June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. D),
pursuant to which TCT No. S-109772 was issued in her name (Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12
May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a
consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to them
(Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on
12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a
consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued to them
(Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395
executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00
(Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh. G-1).

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

The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino
Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis
filed a Motion to Dismiss. [6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted
that compulsory heirs have the right to a legitime but such right is contingent since said right commences
only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines.
[7]

After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court
stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the
Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the negative
allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against defendants since
there can be no legitime to speak of prior to the death of their parents. The court finds this contention
tenable. In determining the legitime, the value of the property left at the death of the testator shall be
considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the
time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while
their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the counterclaim is
likewise DISMISSED.
No costs.

SO ORDERED.[8]

The Ruling of the Court of Appeals

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether
xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are
compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their
parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely
inchoate and vests only upon the latters death. While still alive, defendant parents are free to dispose of
their properties, provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be
creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to
assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express
the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al.,
101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound
thereby; hence, they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions
made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by
the court a quo, the legitime of a compulsory heir is computed as of the time of the death of the
decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is
inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.
SO ORDERED.[9]
Hence, the instant petition.

Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION HAD NO
VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A
CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS
THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND
PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE
SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE
SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT
AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS. [10]

The Ruling of the Court

We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the
Deeds of Sale.

Whether Petitioners have a legal interest

over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted
that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners strategy
was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their
respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will
then co-own their parents estate by hereditary succession. [11]
It is evident from the records that petitioners are interested in the properties subject of the Deeds of
Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should
have dismissed the action for this reason alone. An action must be prosecuted in the name of the real
party-in-interest.[12]
[T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured by
the judgment, or the party entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the real parties are those who are parties to
the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to
one of the contracting parties and can show the detriment which would positively result to them from the
contract even though they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912])
xxx.
These are parties with a present substantial interest, as distinguished from a mere expectancy or future,
contingent, subordinate, or consequential interest. The phrase present substantial interest more concretely
is meant such interest of a party in the subject matter of the action as will entitle him, under the
substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and the
defendant will be protected in a payment to or recovery by him. [13]
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the
appellate court stated, petitioners right to their parents properties is merely inchoate and vests only upon
their parents death. While still living, the parents of petitioners are free to dispose of their properties. In
their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of
the lots to their siblings does not affect the value of their parents estate. While the sale of the lots reduced
the estate, cash of equivalent value replaced the lots taken from the estate.

Whether the Deeds of Sale are void

for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of
Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is
a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then
the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as
to the price, because the price stipulated in the contract is simulated, then the contract is void. [14] Article
1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract. Payment of the price goes into the performance
of the contract. Failure to pay the consideration is different from lack of consideration. The former results in
a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the
latter prevents the existence of a valid contract. [15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove
simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent
Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her
payment of the purchase price.[16] The trial court did not find the allegation of absolute simulation of price
credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of
their respondent siblings financial capacity to buy the questioned lots. [17] On the other hand, the Deeds of
Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of
Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent
father.[18]

Whether the Deeds of Sale are void

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

[1]

Under Rule 45 of the Rules of Court.

[2]

Penned by Associate Justice Artemio G. Tuquero, with Associate Justices Cancio C. Garcia and Romeo J.
Callejo, Sr., concurring.

[3]

Penned by Judge Salvador S. Abad Santos.

[4]

Rollo, pp. 29-31.

[5]

Records, pp. 189, 204.

[6]

Ibid., pp. 170-175.

[7]

Ibid., p. 189.

[8]

Ibid., pp. 355-356.

[9]

Rollo, pp. 32-33.

[10]

Ibid., pp. 16-17.

[11]

Article 1078 of the Civil Code of the Philippines states: Where there are two or more heirs, the whole
estate of the decedent is, before its partition, owned in common by such heirs, subject to the
payment of debts of the deceased.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
MANUEL CATINDIG, represented by his G.R. No. 165851
legal
representative
EMILIANO
CATINDIG-RODRIGO,
Petitioner,
- versus AURORA IRENE VDA. DE MENESES,
Respondent.
x-----------------------------------------------x
SILVINO ROXAS, SR., represented G.R. No. 168875
by FELICISIMA VILLAFUERTE
ROXAS, Present:
Petitioner,
CARPIO, J., Chairperson,
- versus - NACHURA,
PERALTA,
ABAD, and
COURT OF APPEALS and MENDOZA, JJ.
AURORA IRENE VDA. DE
MENESES, Promulgated:
Respondents.
February 2, 2011
x--------------------------------------------------x
DECISION
PERALTA, J.:

Before this Court are two consolidated cases, namely, (1) Petition for Review on Certiorari under Rule 45 of
the Rules of Court, docketed as G.R. No. 165851, filed by petitioner Manuel Catindig, represented by
Emiliano Catindig-Rodrigo, assailing the Decision [1] of the Court of Appeals (CA) in CA-G.R. CV No. 65697,
which affirmed the Decision of the Regional Trial Court of Malolos, Bulacan in Civil Case No. 320-M-95; and
(2) Petition for Certiorari under Rule 65 of the Rules of Court, docketed as G.R. No. 168875, filed by
petitioner Silvino Roxas, Sr., represented by Felicisima Villafuerte Roxas, seeking to set aside the
Decision[2] and Resolution[3] of the CA in CA-G.R. CV No. 65697, which affirmed the decision of the Regional
Trial Court of Malolos, Bulacan in Civil Case No. 320-M-95.
The property subject of this controversy pertains to a parcel of land situated in Malolos, Bulacan, with an
area of 49,139 square meters, titled in the name of the late Rosendo Meneses, Sr., under Transfer
Certificate of Title (TCT) No. T-1749 (hereinafter referred to as the Masusuwi Fishpond). Respondent Aurora
Irene C. Vda. de Meneses is the surviving spouse of the registered owner, Rosendo Meneses, Sr.. She was

issued Letters of Administration over the estate of her late husband in Special Proceedings Case No. 91498
pending before the then Court of First Instance of the City of Manila, Branch 22. On May 17, 1995,
respondent, in her capacity as administratrix of her husband's estate, filed a Complaint for Recovery of
Possession, Sum of Money and Damages against petitioners Manuel Catindig and Silvino Roxas, Sr. before
the Regional Trial Court of Malolos, Bulacan, to recover possession over the Masusuwi Fishpond.

Respondent alleged that in September 1975, petitioner Catindig, the first cousin of her husband, deprived
her of the possession over the Masusuwi Fishpond, through fraud, undue influence and intimidation. Since
then, petitioner Catindig unlawfully leased the property to petitioner Roxas. Respondent verbally
demanded that petitioners vacate the Masusuwi Fishpond, but all were futile, thus, forcing respondent to
send demand letters to petitioners Roxas and Catindig. However, petitioners still ignored said
demands.Hence, respondent filed a suit against the petitioners to recover the property and demanded
payment of unearned income, damages, attorney's fees and costs of suit.

In his Answer, petitioner Catindig maintained that he bought the Masusuwi Fishpond from respondent and
her children in January 1978, as evidenced by a Deed of Absolute Sale. Catindig further argued that even
assuming that respondent was indeed divested of her possession of the Masusuwi Fishpond by fraud, her
cause of action had already prescribed considering the lapse of about 20 years from 1975, which was
allegedly the year when she was fraudulently deprived of her possession over the property.

Petitioner Roxas, on the other hand, asserted in his own Answer that respondent has no cause of action
against him, because Catindig is the lawful owner of the Masusuwi Fishpond, to whom he had paid his
rentals in advance until the year 2001.
After trial, the trial court ruled in favor of respondent, thus:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff [respondent herein],
(a) Ordering the defendants [petitioners herein] to vacate the Masusuwi Fishpond and
turn over the possession/occupancy thereof to plaintiff [respondent herein];
(b) Ordering the defendants [petitioners herein] to pay and/or reimburse plaintiff
[respondent herein] the amount of P90,000.00 per year since 1985 up to the time
possession of the fishpond is surrendered to plaintiff [respondent herein];
(c) Ordering the defendants [petitioners herein] jointly and severally to pay plaintiff
[respondent herein] the amount of P100,000.00 as attorney's fees, and to pay the costs of
suit.
The counterclaims of defendants [petitioners herein] are ordered dismissed, for lack
of merit.
SO ORDERED.[4]

The trial court found that the Deed of Absolute Sale executed between respondent and petitioner Catindig
was simulated and fictitious, and therefore, did not convey title over the Masusuwi Fishpond to petitioner
Catindig. It gave due credence to the testimony of respondent that petitioner Catindig convinced her to
sign the said deed of sale, because it was intended to be a mere proposal subject to the approval of the

trial court wherein the proceedings for the settlement of the estate of Rosendo Meneses, Sr. was still
pending. The court a quo was further convinced that the Deed of Absolute Sale lacked consideration,
because respondent and her children never received the stipulated purchase price for the Masusuwi
Fishpond which was pegged at PhP150,000.00. Since ownership over the property never transferred to
Catindig, the trial court declared that he has no right to lease it to Roxas. The court also found that
petitioner Roxas cannot claim good faith in leasing the Masusuwi Fishpond, because he relied on an
incomplete and unnotarized Deed of Sale.

Aggrieved, petitioners separately challenged the trial court's Decision before the CA. The CA dismissed
both the petitioners' appeals and affirmed the RTC. The CA ruled that the trial court properly rejected
petitioners' reliance on the deed of absolute sale executed between respondent and petitioner Catindig.
The CA also found that since it is settled that a Torrens title is a constructive notice to the whole world of a
property's lawful owner, petitioner Roxas could not invoke good faith by relying on the Deed of Absolute
Sale in favor of his lessor, petitioner Catindig.

Hence, petitioner Catindig filed this Petition for Review on Certiorari under Rule 45, raising the following
issues:
1.
WHETHER THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE
TRIAL COURT'S DECISION IN NOT HOLDING THAT RESPONDENT'S CAUSE OF ACTION IS IN
REALITY, ONE FOR ANNULMENT OF CONTRACT UNDER ARTICLES 1390 AND 1391 OF THE
NEW CIVIL CODE.
2.
WHETHER THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE
TRIAL COURT'S DECISION IN NOT HOLDING THAT RESPONDENT'S CAUSE OF ACTION IS
BASED ON ALLEGED FRAUD AND/OR INTIMIDATION, HAS NOT PRESCRIBED.
3.
WHETHER THE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN
DISREGARDING THE GENUINENESS AND DUE EXECUTION OF THE DEED OF ABSOLUTE SALE.

On the other hand, petitioner Silvino Roxas, Sr. filed a Petition for Certiorari under Rule 65, raising this lone
issue:
WHETHER THE HONORABLE COURT OF APPEALS HAS ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDING THAT THE
PETITIONER IS JOINTLY AND SOLIDARILY LIABLE WITH HIS CO-DEFENDANT; AND IN NOT
CONSIDERING THAT HE WAS A LESSEE IN GOOD FAITH OF THE SUBJECT PROPERTY.

The issues raised by petitioner Catindig could be reduced into whether the Deed of Sale was genuine or
simulated.

Petitioner Catindig maintains that the deed of sale was voluntarily signed by respondent and her children,
and that they received the consideration of PhP150,000.00 stipulated therein. Even on the assumption that
they were defrauded into signing the agreement, this merely makes the deed voidable, at most, due to
vitiated consent. Therefore, any cause of action respondent may have, had already prescribed, and the
contract was already ratified by respondent's failure to file any action to annul the deed within four years
from 1978, the year when respondent discovered the fraud.

Respondent, on the other hand, insists that the deed of sale is not merely voidable, but void for being
simulated. Hence, she could not have filed an action for annulment of contract under Articles 1390 and
1391 of the Civil Code, because this remedy applies to voidable contracts. Instead, respondent filed an
action for recovery of possession of the Masusuwi Fishpond.

The issue on the genuineness of the deed of sale is essentially a question of fact. It is settled that this
Court is not duty-bound to analyze and weigh again the evidence considered in the proceedings below.
This is especially true where the trial court's factual findings are adopted and affirmed by the CA as in the
present case. Factual findings of the trial court, affirmed by the CA, are final and conclusive and may not
be reviewed on appeal.[5]

The Court finds that there exists no reason for Us to disturb the trial court's finding that the deed of sale
was simulated. The trial court's discussion on the said issue is hereby quoted:
After evaluating the evidence, both testimonial and documentary, presented by the parties,
this court is convinced that the Deed of Absolute Sale relied upon by the defendants
[petitioners herein] is simulated and fictitious and has no consideration.
On its face, the Deed of Absolute sale (Exh. G, Exh. 1) is not complete and is not in due form.
It is a 3-page document but with several items left unfilled or left blank, like the day the
document was supposed to be entered into, the tax account numbers of the persons
appearing as signatories to the document and the names of the witnesses. In other words, it
was not witnessed by any one. More importantly, it was not notarized. While the name
Ramon E. Rodrigo, appeared typed in the Acknowledgement, it was not signed by him (Exhs.
G, G-1, G-4).
The questioned deed was supposedly executed in January, 1978. Defendant [petitioner
herein] Catindig testified that his brother Francisco Catindig was with him when plaintiff
[respondent herein] signed the document. The evidence, however, shows that Francisco
Catindig died on January 1, 1978 as certified to by the Office of the Municipal Civil Registrar
of Malolos, Bulacan and the Parish Priest of Sta. Maria Assumpta Parish, Bulacan, Bulacan.
The document mentions 49,130 square meters, as the area sold by plaintiff [respondent
herein] and her two (2) children to defendant [petitioner herein] Catindig. But this is the
entire area of the property as appearing in the title and they are not the only owners. The
other owner is Rosendo Meneses, Jr. [stepson of herein respondent] whose name does not
appear in the document. The declaration of defendant [petitioner herein] Catindig that
Rosendo Meneses, Jr. likewise sold his share of the property to him in another document does
not inspire rational belief. This other document was not presented in evidence and Rosendo
Meneses, Jr., did not testify, if only to corroborate defendant's [petitioner herein] claim. [6]
The Court also finds no compelling reason to depart from the court a quo's finding that respondent never
received the consideration stipulated in the simulated deed of sale, thus:
Defendant [petitioner herein] Catindig declared that plaintiff [respondent herein] and her
children signed the instrument freely and voluntarily and that the consideration
of P150,000.00 as so stated in the document was paid by him to plaintiff [respondent
herein]. However, it is not denied that the title to this property is still in the name of Rosendo
Meneses, Sr., and the owner's duplicate copy of the title is still in the possession of the
plaintiff [respondent herein]. If defendant [petitioner herein] Catindig was really a legitimate
buyer of the property who paid the consideration with good money, why then did he not
register the document of sale or had it annotated at the back of the title, or better still, why
then did he not have the title in the name of Rosendo Meneses, Sr. canceled so that a new
title can be issued in his name? After all, he claims that Rosendo Meneses, Jr. [stepson of
herein respondent] also sold his share of the property to him. This will make him the owner
of the entire property. But the owner's duplicate copy of the title remains in the possession of
the plaintiff [respondent herein] and no evidence was presented to show that at anytime
from 1978, he ever attempted to get it from her. Equally telling is defendant's (Catindig)
failure to pay the real estate taxes for the property from 1978 up to the present. x x x [7]

It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in
fact has never been paid, the deed of sale is null and void ab initio for lack of consideration. Moreover,
Article 1471 of the Civil Code, provides that if the price is simulated, the sale is void, which applies to the
instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no
payment was actually made.[8]
Since it was well established that the Deed of Sale is simulated and, therefore void, petitioners claim that
respondent's cause of action is one for annulment of contract, which already prescribed, is unavailing,
because only voidable contracts may be annulled. On the other hand, respondent's defense for the
declaration of the inexistence of the contract does not prescribe.[9]
Besides, it must be emphasized that this case is one for recovery of possession, also known as accion
publiciana, which is a plenary action for recovery of possession in an ordinary civil proceeding, in order to
determine the better and legal right to possess, independently of title. [10] The objective of the plaintiffs
in accion publiciana is to recover possession only, not ownership. However, where the parties raise the
issue of ownership, the courts may pass upon the issue to determine who between the parties has the
right to possess the property. This adjudication, however, is not a final and binding determination of the
issue of ownership; it is only for the purpose of resolving the issue of possession where the issue of
ownership is inseparably linked to the issue of possession. The adjudication of the issue of ownership,
being provisional, is not a bar to an action between the same parties involving title to the property. [11]

Thus, even if we sustain petitioner Catindig's arguments and rule that the Deed of Sale is valid, this would
still not help petitioners' case. It is undisputed that the subject property is covered by TCT No. T-1749,
registered in the name of respondent's husband. On the other hand, petitioner Catindig's claim of
ownership is based on a Deed of Sale. InPascual v. Coronel,[12] the Court held that as against the registered
owners and the holder of an unregistered deed of sale, it is the former who has a better right to possess. In
that case, the court held that:
Even if we sustain the petitioner's arguments and rule that the deeds of sale are valid
contracts, it would still not bolster the petitioners case. In a number of cases, the Court had
upheld the registered owners' superior right to possess the property. In Co v. Militar, the
Court was confronted with a similar issue of which between the certificate of title and an
unregistered deed of sale should be given more probative weight in resolving the issue of
who has the better right to possess. There, the Court held that the court a quo correctly
relied on the transfer certificate of title in the name of petitioner as opposed to the
unregistered deeds of sale of respondents. x x x
Likewise, in the recent case of Umpoc v. Mercado, the Court declared that the trial court did
not err in giving more probative weight to the TCT in the name of the decedent vis-a-vis the
contested unregistered Deed of Sale. x x x[13]
There is even more reason to apply this doctrine here, because the subject Deed of Sale is not only
unregistered, it is undated and unnotarized.

Further, it is a fundamental principle in land registration that the certificate of title serves as evidence of
an indefeasible and incontrovertible title to the property in favor of the person whose name appears
therein.[14] It is conclusive evidence with respect to the ownership of the land described therein.

[15]

Moreover, the age-old rule is that the person who has a Torrens title over a land is entitled to possession

thereof.[16]

In addition, as the registered owner, respondent's right to evict any person illegally occupying her property
is imprescreptible. In the recent case of Gaudencio Labrador, represented by Lulu Labrador Uson, as
Attorney-in-Fact v. Sps. Ildefonso Perlas and Pacencia Perlas and Sps. Rogelio Pobre and Melinda Fogata
Pobre,[17] the Court held that:
As a registered owner, petitioner has a right to eject any person illegally occupying
his property. This right is imprescriptible and can never be barred by laches. In Bishop
v. Court of Appeals, we held, thus:
As registered owners of the lots in question, the private respondents have a
right to eject any person illegally occupying their property. This right is
imprescriptible. Even if it be supposed that they were aware of the petitioners'
occupation of the property, and regardless of the length of that possession,
the lawful owners have a right to demand the return of their property at any
time as long as the possession was unauthorized or merely tolerated, if at all.
This right is never barred by laches.[18]

Petitioner Roxas assailed the Decision and the Resolution of the CA via Petition for Certiorari under Rule 65,
when the proper remedy should have been the filing of a Petition for Review on Certiorari under Rule 45.

While petitioner Roxas claims that the CA committed grave abuse of discretion, this Court finds that the
assailed findings of the CA, that Roxas is jointly and severally liable with petitioner Catindig and in not
considering him as a lessee in good faith of the subject property, amount to nothing more than errors of
judgment, correctible by appeal. When a court, tribunal, or officer has jurisdiction over the person and the
subject matter of the dispute, the decision on all other questions arising in the case is an exercise of that
jurisdiction. Consequently, all errors committed in the exercise of said jurisdiction are merely errors of
judgment. Under prevailing procedural rules and jurisprudence, errors of judgment are not proper subjects
of a special civil action for certiorari.[19] Where the issue or question involved affects the wisdom or legal
soundness of the decision, and not the jurisdiction of the court to render said decision, the same is beyond
the province of a special civil action for certiorari.[20]

Settled is the rule that where appeal is available to the aggrieved party, the special civil action
for certiorari will not be entertained remedies of appeal and certiorari are mutually exclusive, not
alternative or successive.[21] Under Rule 45, decisions, final orders or resolutions of the Court of Appeals in
any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to us by
filing a petition for review, which would be but a continuation of the appellate process over the original
case. On the other hand, a special civil action under Rule 65 is an independent action based on the specific
ground therein provided and, as a general rule, cannot be availed of as a substitute for the lost remedy of
an ordinary appeal, including that to be taken under Rule 45. [22] One of the requisites of certiorari is that
there be no available appeal or any plain, speedy and adequate remedy. Where an appeal is
available, certiorari will not prosper, even if the ground therefor is grave abuse of discretion. Accordingly,
when a party adopts an improper remedy, his petition may be dismissed outright. [23]

In the present case, the CA issued its Decision and Resolution dated October 22, 2004 and May 20, 2005,
respectively, dismissing the appeal filed by petitioner Roxas. Records show that petitioner Roxas received a
copy of the May 20, 2005 Resolution of the CA denying the motion for reconsideration on May 30, 2005.
Instead of filing a petition for review on certiorari under Rule 45 within 15 days from receipt thereof,
[24]

petitioner, in addition to his several motions for extension, waited for almost four months before filing

the instant petition on September 22, 2005. Indubitably, the Decision and the Resolution of the CA, as to
petitioner Roxas, had by then already become final and executory, and thus, beyond the purview of this
Court to act upon.[25]

It is settled that a decision that has acquired finality becomes immutable and unalterable and may no
longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of
fact or law and whether it will be made by the court that rendered it or by the highest court of the land.
[26]

When a decision becomes final and executory, the court loses jurisdiction over the case and not even

an appellate court will have the power to review the said judgment. Otherwise, there will be no end to
litigation and this will set to naught the main role of courts of justice to assist in the enforcement of the
rule of law and the maintenance of peace and order by settling justifiable controversies with finality. [27]

Finally, while it is true that this Court, in accordance with the liberal spirit which pervades the Rules of
Court and in the interest of justice, may treat a Petition for Certiorari as having been filed under Rule 45,
the instant Petition cannot be treated as such, primarily because it was filed way beyond the 15-day
reglementary period within which to file the Petition for Review. [28] Though there are instances
when certiorari was granted despite the availability of appeal, [29] none of these recognized exceptions were
shown to be present in the case at bar.
WHEREFORE, the petition in G.R. No. 165851 is DENIED. The Decision of the Court of Appeals
dated October 22, 2004 in CA-G.R. CV No. 65697, which affirmed the decision of the Regional Trial Court of
Malolos, Bulacan in Civil Case No. 320-M-95, is AFFIRMED. The petition in G.R. No. 168875 is DISMISSED.
The Decision and the Resolution of the Court of Appeals, dated October 22, 2004 and May 20, 2005,
respectively, in CA-G.R. CV No. 65697, which affirmed the Decision of the Regional Trial Court of Malolos,
Bulacan in Civil Case No. 320-M-95, are AFFIRMED.
SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ANTONIO EDUARDO B. NACHURA

Associate Justice

ROBERTO A. ABAD
Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Second Division, Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

[1]

Penned by Associate Justice Magdangal M. De Leon, with Associate Justices Romeo A. Brawner and
Mariano C. Del Castillo, concurring; rollo, (G.R. No. 165851), pp. 27-36; (G.R. No. 168875), pp. 5-14.
[2]
Id. at 5-14; id. at 27-36.
[3]
Rollo, (G.R. No. 168875), pp. 15-16.
[4]
Rollo (G.R. No. 165851), p. 77.
[5]
Pascual v. Coronel, G.R. No. 159292, July 12, 2007, 527 SCRA 474, 483.
[6]
Rollo (G.R. No. 165851), p. 74.
[7]
Id. at 74-75.
[8]
Lequin v. Vizconde, G.R. No. 177710, October 12, 2009, 603 SCRA 407, 422.
[9]
Civil Code, Art. 1410.
[10]
Bejar v. Caluag, G.R. No. 171277, February 17, 2007, 516 SCRA 84, 90.
[11]
Asuncion Urieta Vda. de Aguilar, represented by Orlando U. Aguilar v. Spouses Ederlina B. Alfaro and
Raul Alfaro, G.R. No. 164402, July 5, 2010.
[12]
Supra note 5.
[13]
Id. at 484-485.
[14]
Caa v. Evangelical Free Church of the Philippines, G.R. No. 157573, February 11, 2008, 544 SCRA 225,
238.
[15]
Asuncion Urieta Vda. de Aguilar, represented by Orlando U. Aguilar v. Spouses Ederlina B. Alfaro and
Raul Alfaro, supra note 11.
[16]
Caa v Evangelical Free Church of the Philippines, supra note 14, at 238-239.
[17]
G.R. No. 173900, August 8, 2010.
[18]
Id. (Emphasis supplied.)
[19]
Sebastian v Hon. Morales, 445 Phil. 595, 608 (2003).
[20]
Land Bank of the Phils. v Court of Appeals, 456 Phil. 755, 787 (2003).
[21]
Iloilo La Filipina Uygongco Corporation v. Court of Appeals, G.R. No. 170244, November 28, 2007, 539
SCRA 178, 189.
[22]
Sable v. People, G.R. No. 177961, April 7, 2009, 584 SCRA 619, 629.

[23]

Artistica Ceramica, Inc., Ceralinda, Inc., Cyber Ceramics, Inc. and Millennium, Inc. v. Ciudad Del Carmen
Homeowner's Association, Inc. and Bukluran Purok II Residents Association, G.R. Nos. 167583-84, June 16,
2010.
[24]
Rule 45, Section 2 states: The petition shall be filed within fifteen (15) days from notice of the judgment,
or final order or resolution appealed from or of the denial of the petitioner's motion for new trial or
reconsideration filed in due time after notice of the judgment. x x x.
[25]
Land Bank of the Phils. v. Court of Appeals, supra note 20, at 791.
[26]
Pea v. Government Service Insurance System, G.R. No.159520, September 19, 2006, 502 SCRA 383,
404.
[27]
Estinozo v. Court of Appeals, G.R. No. 150276, February 12, 2008, 544 SCRA 422, 431-432.
[28]
Iloilo La Filipina Uygongco Corporation v. Court of Appeals, supra note 21, at 190.
[29]
(a) when public welfare and the advancement of public policy dictates; (b) when the broader interest of
justice so requires; (c) when the writs issued are null and void; or (d) when the questioned order amounts
to an oppressive exercise of judicial authority. (Iloilo La Filipina Uygongco Corporation v. Court of
Appeals, supra note 21)

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

G.R. No. 188064

MILA A. REYES ,
Petitioner,

Present:

CARPIO, J., Chairperson,

NACHURA,

PERALTA,
- versus -

ABAD, and
MENDOZA, JJ.

Promulgated:
June 1, 2011
VICTORIA T. TUPARAN,
Respondent.

X -----------------------------------------------------------------------------------------------------X

DECISION

MENDOZA, J.:

Subject of this petition for review is the February 13, 2009 Decision[1] of the Court of
Appeals (CA) which affirmed with modification the February 22, 2006 Decision [2]of the Regional Trial Court,
Branch 172, Valenzuela City (RTC), in Civil Case No. 3945-V-92, an action for Rescission of Contract with
Damages.

On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with
Damages against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged,
among others, that she was the registered owner of a 1,274 square meter residential and commercial lot
located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that on that property, she put up a
three-storey commercial building known as RBJ Building and a residential apartment building; that since
1990, she had been operating a drugstore and cosmetics store on the ground floor of RBJ Building where
she also had been residing while the other areas of the buildings including the sidewalks were being leased
and occupied by tenants and street vendors.

In December 1989, respondent leased from petitioner a space on the ground floor of
the RBJ Building for her pawnshop business for a monthly rental of 4,000.00. A close friendship developed
between the two which led to the respondent investing thousands of pesos in petitioners financing/lending
business from February 7, 1990 to May 27, 1990, with interest at the rate of 6% a month.

On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank
and Loan Bank, Inc. (FSL Bank) to secure a loan of 2,000,000.00 payable in installments. On November
15, 1990, petitioners outstanding account on the mortgage reached 2,278,078.13. Petitioner then

decided to sell her real properties for at least 6,500,000.00 so she could liquidate her bank loan and
finance her businesses. As a gesture of friendship, respondent verbally offered to conditionally buy
petitioners real properties for 4,200,000.00 payable on installment basis without interest and to assume
the bank loan. To induce the petitioner to accept her offer, respondent offered the following
conditions/concessions:

1. That the conditional sale will be cancelled if the plaintiff (petitioner) can find a
buyer of said properties for the amount of 6,500,000.00 within the next three (3) months
provided all amounts received by the plaintiff from the defendant (respondent) including
payments actually made by defendant to Farmers Savings and Loan Bank would be refunded
to the defendant with additional interest of six (6%) monthly;

2. That the plaintiff would continue using the space occupied by her and drugstore
and cosmetics store without any rentals for the duration of the installment payments;

3. That there will be a lease for fifteen (15) years in favor of the plaintiff over the
space for drugstore and cosmetics store at a monthly rental of only 8,000.00 after full
payment of the stipulated installment payments are made by the defendant;

4. That the defendant will undertake the renewal and payment of the fire insurance
policies on the two (2) subject buildings following the expiration of the then existing fire
insurance policy of the plaintiff up to the time that plaintiff is fully paid of the total purchase
price of 4,200,000.00.[3]

After petitioners verbal acceptance of all the conditions/concessions, both parties worked together
to obtain FSL Banks approval for respondent to assume her (petitioners) outstanding bank account. The
assumption would be part of respondents purchase price for petitioners mortgaged real properties. FSL
Bank approved their proposal on the condition that petitioner would sign or remain as co-maker for the
mortgage obligation assumed by respondent.

On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional
Sale of Real Properties with Assumption of Mortgage. Due to their close personal friendship and business
relationship, both parties chose not to reduce into writing the other terms of their agreement mentioned in
paragraph 11 of the complaint. Besides, FSL Bank did not want to incorporate in the Deed of Conditional
Sale of Real Properties with Assumption of Mortgage any other side agreement between petitioner and
respondent.

Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, respondent was
bound to pay the petitioner a lump sum of 1.2 million pesos without interest as part of the purchase price
in three (3) fixed installments as follows:

a)

200,000.00 due January 31, 1991

b)

200,000.00 due June 30, 1991

c)

800,000.00 due December 31, 1991

Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of
paying the amounts due in lump sum on their respective maturity dates, respondent paid petitioner in
small amounts from time to time. To compensate for her delayed payments, respondent agreed to pay
petitioner an interest of 6% a month. As ofAugust 31, 1992, respondent had only paid 395,000.00, leaving
a balance of 805,000.00 as principal on the unpaid installments and 466,893.25 as unpaid accumulated
interest.

Petitioner further averred that despite her success in finding a prospective buyer for the subject real
properties within the 3-month period agreed upon, respondent reneged on her promise to allow the
cancellation of their deed of conditional sale. Instead, respondent became interested in owning the subject
real properties and even wanted to convert the entire property into a modern commercial complex.
Nonetheless, she consented because respondent repeatedly professed friendship and assured her that all
their verbal side agreement would be honored as shown by the fact that since December 1990, she
(respondent) had not collected any rentals from the petitioner for the space occupied by her drugstore and
cosmetics store.

On March 19, 1992, the residential building was gutted by fire which caused the petitioner to lose
rental income in the amount of 8,000.00 a month since April 1992. Respondent neglected to renew the
fire insurance policy on the subject buildings.

Since December 1990, respondent had taken possession of the subject real properties and had
been continuously collecting and receiving monthly rental income from the tenants of the buildings and
vendors of the sidewalk fronting the RBJ building without sharing it with petitioner.

On September 2, 1992, respondent offered the amount of 751,000.00 only payable on September
7, 1992, as full payment of the purchase price of the subject real properties and demanded the
simultaneous execution of the corresponding deed of absolute sale.

Respondents Answer

Respondent countered, among others, that the tripartite agreement erroneously designated by the
petitioner as a Deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a pure
and absolute contract of sale with a term period. It could not be considered a conditional sale because the
acquisition of contractual rights and the performance of the obligation therein did not depend upon a

future and uncertain event. Moreover, the capital gains and documentary stamps and other miscellaneous
expenses and real estate taxes up to 1990 were supposed to be paid by petitioner but she failed to do so.

Respondent further averred that she successfully rescued the properties from a definite foreclosure
by paying the assumed mortgage in the amount of 2,278,078.13 plus interest and other finance charges.
Because of her payment, she was able to obtain a deed of cancellation of mortgage and secure a release
of mortgage on the subject real properties including petitioners ancestral residential property in Sta. Maria,
Bulacan.

Petitioners claim for the balance of the purchase price of the subject real properties was baseless
and unwarranted because the full amount of the purchase price had already been paid, as she did pay
more than 4,200,000.00, the agreed purchase price of the subject real properties, and she had even
introduced improvements thereon worth more than 4,800,000.00. As the parties could no longer be
restored to their original positions, rescission could not be resorted to.

Respondent added that as a result of their business relationship, petitioner was able to obtain from
her a loan in the amount of 400,000.00 with interest and took several pieces of jewelry worth
120,000.00. Petitioner also failed and refused to pay the monthly rental of 20,000.00 since November
16, 1990 up to the present for the use and occupancy of the ground floor of the building on the subject real
property, thus, accumulating arrearages in the amount of 470,000.00 as of October 1992.

Ruling of the RTC

On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full the
4.2 million total purchase price of the subject real properties leaving a balance of 805,000.00. It stated
that the checks and receipts presented by respondent refer to her payments of the mortgage obligation
with FSL Bank and not the payment of the balance of 1,200,000.00. The RTC also considered the Deed of
Conditional Sale of Real Property with Assumption of Mortgage executed by and among the two parties and
FSL Bank a contract to sell, and not a contract of sale. It was of the opinion that although the petitioner
was entitled to a rescission of the contract, it could not be permitted because her non-payment in full of
the purchase price may not be considered as substantial and fundamental breach of the contract as to
defeat the object of the parties in entering into the contract. [4] The RTC believed that the respondents offer
stated in her counsels letter dated September 2, 1992 to settle what she thought was her unpaid balance
of 751,000.00 showed her sincerity and willingness to settle her obligation. Hence, it would be more
equitable to give respondent a chance to pay the balance plus interest within a given period of time.

Finally, the RTC stated that there was no factual or legal basis to award damages and attorneys fees
because there was no proof that either party acted fraudulently or in bad faith.

Thus, the dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is hereby rendered as follows:

1. Allowing the defendant to pay the plaintiff within thirty (30) days from the finality
hereof the amount of 805,000.00, representing the unpaid purchase price of the subject
property, with interest thereon at 2% a month from January 1, 1992 until fully paid. Failure of
the defendant to pay said amount within the said period shall cause the automatic rescission
of the contract (Deed of Conditional Sale of Real Property with Assumption of Mortgage) and
the plaintiff and the defendant shall be restored to their former positions relative to the
subject property with each returning to the other whatever benefits each derived from the
transaction;

2. Directing the defendant to allow the plaintiff to continue using the space occupied
by her for drugstore and cosmetic store without any rental pending payment of the aforesaid
balance of the purchase price.

3. Ordering the defendant, upon her full payment of the purchase price together with
interest, to execute a contract of lease for fifteen (15) years in favor of the plaintiff over the
space for the drugstore and cosmetic store at a fixed monthly rental of 8,000.00; and

4. Directing the plaintiff, upon full payment to her by the defendant of the purchase
price together with interest, to execute the necessary deed of sale, as well as to pay the
Capital Gains Tax, documentary stamps and other miscellaneous expenses necessary for
securing the BIR Clearance, and to pay the real estate taxes due on the subject property up
to 1990, all necessary to transfer ownership of the subject property to the defendant.

No pronouncement as to damages, attorneys fees and costs.

SO ORDERED.[5]

Ruling of the CA

On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The CA
agreed with the RTC that the contract entered into by the parties is a contract to sell but ruled that the
remedy of rescission could not apply because the respondents failure to pay the petitioner the balance of
the purchase price in the total amount of 805,000.00 was not a breach of contract, but merely an event
that prevented the seller (petitioner) from conveying title to the purchaser (respondent). It reasoned that
out of the total purchase price of the subject property in the amount of 4,200,000.00, respondents
remaining unpaid balance was only 805,000.00. Since respondent had already paid a substantial amount
of the purchase price, it was but right and just to allow her to pay the unpaid balance of the purchase price
plus interest. Thus, the decretal portion of the CA Decision reads:

WHEREFORE, premises considered, the Decision dated 22 February 2006 and Order
dated 22 December 2006 of the Regional Trial Court of Valenzuela City, Branch 172 in Civil
Case No. 3945-V-92 are AFFIRMED with MODIFICATION in that defendant-appellant Victoria T.
Tuparan is hereby ORDERED to pay plaintiff-appellee/appellant Mila A. Reyes, within 30 days
from finality of this Decision, the amount of 805,000.00 representing the unpaid balance of
the purchase price of the subject property, plus interest thereon at the rate of 6% per annum
from 11 September 1992 up to finality of this Decision and, thereafter, at the rate of 12%
per annum until full payment. The ruling of the trial court on the automatic rescission of the
Deed of Conditional Sale with Assumption of Mortgage is hereby DELETED. Subject to the
foregoing, the dispositive portion of the trial courts decision is AFFIRMED in all other
respects.

SO ORDERED.[6]

After the denial of petitioners motion for reconsideration and respondents motion for partial
reconsideration, petitioner filed the subject petition for review praying for the reversal and setting aside of
the CA Decision anchored on the following
ASSIGNMENT OF ERRORS

A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN DISALLOWING THE OUTRIGHT RESCISSION OF THE SUBJECT DEED OF
CONDITIONAL SALE OF REAL PROPERTIES WITH ASSUMPTION OF MORTGAGE ON
THE GROUND THAT RESPONDENT TUPARANS FAILURE TO PAY PETITIONER REYES
THE BALANCE OF THE PURCHASE PRICE OF 805,000.00 IS NOT A BREACH OF
CONTRACT DESPITE ITS OWN FINDINGS THAT PETITIONER STILL RETAINS
OWNERSHIP AND TITLE OVER THE SUBJECT REAL PROPERTIES DUE TO
RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE TOTAL PURCHASE PRICE OF
805,000.00 WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF
4,200,000.00 OR 66% OF THE STIPULATED LAST INSTALLMENT OF 1,200,000.00
PLUS THE INTEREST THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED AND
ADOPTED THE TRIAL COURTS CONCLUSION THAT THE RESPONDENTS NONPAYMENT OF THE 805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH OF
CONTRACT.

B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN DISREGARDING AS GROUND FOR THE RESCISSION OF THE SUBJECT CONTRACT
THE OTHER FRAUDULENT AND MALICIOUS ACTS COMMITTED BY THE RESPONDENT
AGAINST THE PETITIONER WHICH BY THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL
OF A GRACE PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN WHICH TO
PAY TO THE PETITIONER THE 805,000.00 PLUS INTEREST THEREON.

C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED TO THE

RESCISSION OF THE SUBJECT CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY
ERRED AND ABUSED ITS DISCRETION IN REDUCING THE INTEREST ON THE
805,000.00 TO ONLY 6% PER ANNUM STARTING FROM THE DATE OF FILING OF
THE COMPLAINT ON SEPTEMBER 11, 1992 DESPITE THE PERSONAL COMMITMENT
OF THE RESPONDENT AND AGREEMENT BETWEEN THE PARTIES THAT RESPONDENT

WILL PAY INTEREST ON THE 805,000.00 AT THE RATE OF 6% MONTHLY STARTING

THE DATE OF DELINQUENCY ON DECEMBER 31, 1991.

D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN THE APPRECIATION AND/OR MISAPPRECIATION OF FACTS RESULTING INTO THE
DENIAL OF THE CLAIM OF PETITIONER REYES FOR ACTUAL DAMAGES WHICH
CORRESPOND TO THE MILLIONS OF PESOS OF RENTALS/FRUITS OF THE SUBJECT
REAL PROPERTIES WHICH RESPONDENT TUPARAN COLLECTED CONTINUOUSLY
SINCE DECEMBER 1990, EVEN WITH THE UNPAID BALANCE OF 805,000.00 AND
DESPITE THE FACT THAT RESPONDENT DID NOT CONTROVERT SUCH CLAIM OF THE
PETITIONER AS CONTAINED IN HER AMENDED COMPLAINT DATED APRIL 22, 2006.

E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN THE APPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF
PETITIONER REYES FOR THE 29,609.00 BACK RENTALS THAT WERE COLLECTED BY
RESPONDENT TUPARAN FROM THE OLD TENANTS OF THE PETITIONER.

F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN DENYING THE PETITIONERS EARLIER URGENT MOTION FOR ISSUANCE OF A
PRELIMINARY MANDATORY AND PROHIBITORY INJUNCTION DATED JULY 7, 2008
AND THE SUPPLEMENT THERETO DATED AUGUST 4, 2008 THEREBY CONDONING
THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO ALEJO TO RESOLVE WITHIN
ELEVEN (11) YEARS THE PETITIONERS THREE (3) SEPARATE MOTIONS FOR
PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING ORDER, ACCOUNTING AND
DEPOSIT OF RENTAL INCOME DATED MARCH 17, 1995, AUGUST 19, 1996 AND
JANUARY 7, 2006 THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY ENRICH
HERSELF BY CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS OF THE
SUBJECT REAL PROPERTIES WITHOUT ANY ACCOUNTING AND COURT DEPOSIT OF
THE COLLECTED RENTALS/FRUITS AND THE PETITIONERS URGENT MOTION TO
DIRECT DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED UNPAID REAL
ESTATE TAXES AND SEF TAXES ON THE SUBJECT REAL PROPERTIES DATED JANUARY
13, 2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES TO IMMINENT
AUCTION SALE BY THE CITY TREASURER OF VALENZUELA CITY.

G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN DENYING THE PETITIONERS CLAIM FOR MORAL AND EXEMPLARY DAMAGES AND
ATTORNEYS FEES AGAINST THE RESPONDENT.

In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in ruling
that there was no legal basis for the rescission of the Deed of Conditional Sale with Assumption of
Mortgage.

Position of the Petitioner

The petitioner basically argues that the CA should have granted the rescission of the subject Deed of
Conditional Sale of Real Properties with Assumption of Mortgage for the following reasons:

1. The subject deed of conditional sale is a reciprocal obligation whose outstanding

characteristic is reciprocity arising from identity of cause by virtue of which one obligation is
correlative of the other.

2. The petitioner was rescinding not enforcing the subject Deed of Conditional Sale
pursuant to Article 1191 of the Civil Code because of the respondents failure/refusal to pay
the 805,000.00 balance of the total purchase price of the petitioners properties within the
stipulated period ending December 31, 1991.

3. There was no slight or casual breach on the part of the respondent because she
(respondent) deliberately failed to comply with her contractual obligations with the
petitioner by violating the terms or manner of payment of the 1,200,000.00 balance and
unjustly enriched herself at the expense of the petitioner by collecting all rental payments
for her personal benefit and enjoyment.

Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of 6% per
month on her unpaid installment of 805,000.00 from the date of the delinquency, December 31, 1991,
because she obligated herself to do so.
Finally, the petitioner asserts that her claim for damages or lost income as well as for the back
rentals in the amount of 29,609.00 has been fully substantiated and, therefore, should have been granted
by the CA. Her claim for moral and exemplary damages and attorneys fees has been likewise
substantiated.

Position of the Respondent

The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage entered
into between the parties is a contract to sell and not a contract of sale because the title of the subject
properties still remains with the petitioner as she failed to pay the installment payments in accordance
with their agreement.

Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may
not be considered as a substantial and fundamental breach of the subject contract and it would be more
equitable if she would be allowed to pay the balance including interest within a certain period of time. She
claims that as early as 1992, she has shown her sincerity by offering to pay a certain amount which was,
however, rejected by the petitioner.

Finally, respondent states that the subject deed of conditional sale explicitly provides that the installment
payments shall not bear any interest. Moreover, petitioner failed to prove that she was entitled to back
rentals.

The Courts Ruling

The petition lacks merit.

The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with
Assumption of Mortgage entered into by and among the two parties and FSL Bank on November 26,
1990 is a contract to sell and not a contract of sale. The subject contract was correctly classified as a
contract to sell based on the following pertinent stipulations:

8. That the title and ownership of the subject real properties shall remain with the
First Party until the full payment of the Second Party of the balance of the purchase price
and liquidation of the mortgage obligation of 2,000,000.00. Pending payment of the
balance of the purchase price and liquidation of the mortgage obligation that was assumed
by the Second Party, the Second Party shall not sell, transfer and convey and otherwise
encumber the subject real properties without the written consent of the First and Third Party.

9. That upon full payment by the Second Party of the full balance of the purchase
price and the assumed mortgage obligation herein mentioned the Third Party shall issue the
corresponding Deed of Cancellation of Mortgage and the First Party shall execute the
corresponding Deed of Absolute Sale in favor of the Second Party.[7]

Based on the above provisions, the title and ownership of the subject properties remains with the
petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage
obligation. Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of mortgage and
the petitioner shall execute the corresponding deed of absolute sale in favor of the respondent.

Accordingly, the petitioners obligation to sell the subject properties becomes demandable only upon
the happening of the positive suspensive condition, which is the respondents full payment of the purchase
price. Without respondents full payment, there can be no breach of contract to speak of because petitioner
has no obligation yet to turn over the title. Respondents failure to pay in full the purchase price is not the
breach of contract contemplated under Article 1191 of the New Civil Code but rather just an eventthat
prevents the petitioner from being bound to convey title to the respondent. The 2009 case of Nabus
v. Joaquin & Julia Pacson[8] is enlightening:

The Court holds that the contract entered into by the Spouses Nabus and
respondents was a contract to sell, not a contract of sale.

A contract of sale is defined in Article 1458 of the Civil Code, thus:

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.

xxx

Sale, by its very nature, is a consensual contract because it is perfected by mere

consent. The essential elements of a contract of sale are the following:

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

exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, which for present purposes we shall take as
the full payment of the purchase price. What the seller agrees or obliges himself to do is to
fulfill his promise to sell the subject property when the entire amount of the purchase price
is delivered to him. In other words, the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising
and, thus, ownership is retained by the prospective seller without further remedies by the
prospective buyer.

xxx xxx xxx

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 if the promise is supported by a consideration distinct
from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the
purchase price.

A contract to sell as defined hereinabove, may not even be considered as a

conditional contract of sale where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition is
not fulfilled, the perfection of the contract of sale is completely abated. 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.

Further, Chua v. Court of Appeals, cited this distinction between a contract of sale
and a contract to sell:
In a contract of sale, the 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 in 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
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.
It is not the title of the contract, but its express terms or stipulations that determine
the kind of contract entered into by the parties. In this case, the contract entitled Deed of
Conditional Sale is actually a contract to sell. The contract stipulated that as soon as the full
consideration of the sale has been paid by the vendee, the corresponding transfer
documents shall be executed by the vendor to the vendee for the portion sold. Where the
vendor promises to execute a deed of absolute sale upon the completion by the vendee of
the payment of the price, the contract is only a contract to sell. The aforecited stipulation
shows that the vendors reserved title to the subject property until full payment of the
purchase price.
xxx
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in
their favor was merely a contract to sell, the obligation of the seller to sell becomes
demandable only upon the happening of the suspensive condition. The full payment of the
purchase price is the positive suspensive condition, the failure of which is not a breach of
contract, but simply an event that prevented the obligation of the vendor to convey
title from acquiring binding force. Thus, for its non-fulfilment, there is no contract to
speak of, the obligor having failed to perform the suspensive condition which enforces a
juridical relation. With this circumstance, there can be no rescission or fulfillment of an
obligation that is still non-existent, the suspensive condition not having occurred as yet.
Emphasis should be made that the breach contemplated in Article 1191 of the New
Civil Code is the obligors failure to comply with an obligation already extant, not a
failure of a condition to render binding that obligation. [Emphases and underscoring
supplied]

Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v.
Espidol, [9] where it was written:

Regarding the right to cancel the contract for non-payment of an

installment, there is need to initially determine if what the parties had was a
contract of sale or a contract to sell. In a contract of sale, the title to the property
passes to the buyer upon the delivery of the thing sold. In a contract to sell, on the other
hand, the ownership is, by agreement, retained by the seller and is not to pass to the
vendee until full payment of the purchase price. In the contract of sale, the buyers nonpayment of the price is a negative resolutory condition; in the contract to sell, the buyers full
payment of the price is a positive suspensive condition to the coming into effect of the

agreement. In the first case, the seller has lost and cannot recover the ownership of the
property unless he takes action to set aside the contract of sale. In the second case, the title
simply remains in the seller if the buyer does not comply with the condition precedent of
making payment at the time specified in the contract. Here, it is quite evident that the
contract involved was one of a contract to sell since the Atienzas, as sellers, were to retain
title of ownership to the land until respondent Espidol, the buyer, has paid the agreed
price. Indeed, there seems no question that the parties understood this to be the case.

Admittedly, Espidol was unable to pay the second installment of P1,750,000.00 that
fell due in December 2002. That payment, said both the RTC and the CA, was a positive
suspensive condition failure of which was not regarded a breach in the sense that there
can be no rescission of an obligation (to turn over title) that did not yet exist
since the suspensive condition had not taken place . x x x. [Emphases and
underscoring supplied]

Thus, the Court fully agrees with the CA when it resolved: Considering, however, that the Deed of
Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of
the subject property in the amount of 4,200,000.00, the remaining unpaid balance of Tuparan
(respondent) is only 805,000.00, a substantial amount of the purchase price has already been paid. It is
only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes. [10]

Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the
reason that, considering the circumstances, there was only a slight or casual breach in the fulfillment of
the obligation.

Unless the parties stipulated it, rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or substantial
is largely determined by the attendant circumstances. [11] In the case at bench, the subject contract
stipulated the following important provisions:

2. That the purchase price of 4,200,000.00 shall be paid as follows:

a) 278,078.13 received in cash by the First Party but directly paid to the Third Party
as partial payment of the mortgage obligation of the First Party in order to reduce the
amount to 2,000,000.00 only as of November 15, 1990;

b) 721,921.87 received in cash by the First Party as additional payment of the

Second Party;

c)

1,200,000.00 to be paid in installments as follows:

1.

200,000.00 payable on or before January 31, 1991;

2.

200,000.00 payable on or before June 30, 1991;

3.

800,000.00 payable on or before December 31, 1991;

Note: All the installments shall not bear any interest.

d)
2,000,000.00 outstanding balance of the mortgage obligation as
of November 15, 1990 which is hereby assumed by the Second Party.

xxx
3.
That the Third Party hereby acknowledges receipts from the Second
Party P278,078.13 as partial payment of the loan obligation of First Party in order to reduce
the account to only 2,000,000.00 as of November 15, 1990 to be assumed by the Second
Party effective November 15, 1990.[12]

From the records, it cannot be denied that respondent paid to FSL Bank petitioners mortgage
obligation in the amount of 2,278,078.13, which formed part of the purchase price of the subject property.
Likewise, it is not disputed that respondent paid directly to petitioner the amount of 721,921.87
representing the additional payment for the purchase of the subject property. Clearly, out of the total price
of 4,200,000.00, respondent was able to pay the total amount of 3,000,000.00, leaving a balance of
1,200,000.00 payable in three (3) installments.

Out of the 1,200,000.00 remaining balance, respondent paid on several dates the first and second
installments of 200,000.00 each. She, however, failed to pay the third and last installment of 800,000.00
due on December 31, 1991. Nevertheless, on August 31, 1992, respondent, through counsel, offered to
pay the amount of 751,000.00, which was rejected by petitioner for the reason that the actual balance
was 805,000.00 excluding the interest charges.

Considering that out of the total purchase price of 4,200,000.00, respondent has already paid the
substantial amount of 3,400,000.00, more or less, leaving an unpaid balance of only 805,000.00, it is
right and just to allow her to settle, within a reasonable period of time, the balance of the unpaid purchase
price. The Court agrees with the courts below that the respondent showed her sincerity and willingness to
comply with her obligation when she offered to pay the petitioner the amount of 751,000.00.

On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal
commitment to pay a 6% monthly interest on the 805,000.00 from the date of delinquency, December
31, 1991. As can be gleaned from the contract, there was a stipulation stating that: All the installments
shall not bear interest. The CA was, however, correct in imposing interest at the rate of 6% per annum
starting from the filing of the complaint on September 11, 1992.

Finally, the Court upholds the ruling of the courts below regarding the non-imposition of damages
and attorneys fees. Aside from petitioners self-serving statements, there is not enough evidence on record

to prove that respondent acted fraudulently and maliciously against the petitioner. In the case of Heirs of
Atienza v. Espidol,[13] it was stated:

Respondents are not entitled to moral damages because contracts are not referred to
in Article 2219 of the Civil Code, which enumerates the cases when moral damages may be
recovered. Article 2220 of the Civil Code allows the recovery of moral damages in breaches
of contract where the defendant acted fraudulently or in bad faith. However, this case
involves a contract to sell, wherein full payment of the purchase price is a positive
suspensive condition, the non-fulfillment of which is not a breach of contract, but merely an
event that prevents the seller from conveying title to the purchaser. Since there is no
breach of contract in this case, respondents are not entitled to moral damages.
In the absence of moral, temperate, liquidated or compensatory damages,
exemplary damages cannot be granted for they are allowed only in addition to any of the
four kinds of damages mentioned.
WHEREFORE, the petition is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ANTONIO EDUARDO B. NACHURA DIOSDADO M. PERALTA

Associate Justice Associate Justice

ROBERTO A. ABAD
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

PLATINUM PLANS PHILS V. CUCUECO, 488 SCRA 156 (2006)

1.
a.
b.
c.
1.
2.
3.
a.
b.
c.
4.
5.
6.

FACTS: Respondent Cucueco filed a case for specific performance with damages against petitioner
Platinum Plans pursuant to an alleged contract of sale executed by them for the purchase of a
condominium unit.
According to the respondent: sometime in July 1993, he offered to buy from petitioner Platinum Plans
Phils a condominium unit he was leasing from the latter for P 4 million payable in 2 installments of P2
million with the following terms and conditions:
Cucueco will issue a check for P100,00 as earnest money
He will issue a post-dated check for P1.9 million to be encashed on September 30, 1993 on the condition
that he will stop paying rentals for the said unit after September 30
In case Platinum Plans has an outstanding loan of less than P2 million with the bank as of December
1993, Cucueco shall assume the same and pay the difference from the remaining P2 million
Cucueco likewise claimed that Platinum Plans accepted his offerby encashing the checks he issued.
However, he was surprised to learn that Platinum Plans had changed the due date of the installment
payment to September 30, 1993.
Respondent argued that there was a perfected sale between him and Platinum plans and as such, he
may validly demand from the petitioner to execute the necessary deed of sale transferring ownership and
title over the property in his favor
Platinum Plans denied Cucuecos allegations and asserted that Cucuecos initial down payment was
forfeited based on the following terms and conditions:
The terms of payment only includes two installments (August 1993 and September 1993)
In case of non-compliance on the part of the vendee, all installments made shall be forfeited in favor of
the vendor Platinum Plans
Ownership over the property shall not pass until payment of the full purchase price
Petitioners anchor their argument on the claim that there was no meeting of the minds between the two
parties, as evidenced by their letter of non-acceptance.
The trial court ruled in favor of Platinum, citing that since the element of consent was absent there was
no perfected contract. The trial court ordered Platinum Plans to return the P2 million they had received
from Cucueco, and for Cucueco to pay Platinum Plans rentals in arrears for the use of the unit
Upon appeal, CA held that there was a perfected contract despite the fact that both parties never agreed
on the date of payment of the remaining balance. CA ordered Cucueco to pay the remaining balance of the
purchase price and for Platinum Plans, to execute a deed of sale over the property
ISSUE: WON the contract there is a perfected contract of sale
HELD: No, it is a contract to sell.
In a contract of sale, the vendor cannot recover ownership of the thing sold until and unless the contract
itself is resolved and set aside. Art 1592 provides:
In the sale of immovable property, even though it may have been stipulated that upon failure to pay the
price at the time agreed upon, the rescission of the contract shall of right take place, the vendee may pay,
even after the expiration of the period, as long as no demand for rescission of the contract has
been upon him either judicially or by a notarial act. After the demand, the court may not grant him a
new term.
Based on the above provision, a party who fails to invoke judicially or by notarial act would be
prevented from blocking the consummation of the same in light of the precept that mere
failure to fulfill the contract does not by itself have the effect of rescission.
On the other hand, a contract to sell is bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite its delivery to the prospective buyer, commits to
sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e.,
full payment of the purchase price. Full payment here is considered as a positive suspensive condition.
As a result if the party contracting to sell, because of non-compliance with the suspensive
condition, seeks to eject the prospective buyer from, the land, the seller is enforcing the
contract and is not resolving it. The failure to pay is not a breach of contract but an event
which prevent the obligation to convey title from materializing.

In the present case, neither side was able to produce any written evidence documenting the actual terms
of their agreement. The trial court was correct in finding that there was no meeting of minds in this
case considering that the acceptance of the offer was not absolute and uncondition. In earlier
cases, the SC held that before a valid and binding contract of sale can exist, the manner of payment of the
purchase price must first be established.
Furthermore, the reservation of the title in the name of Platinum Plans clearly indicates an
intention of the parties to enter into a contract of sell.Where the seller promises to execute a deed
of absolute sale upon completion of the payment of purchase price, the agreement is a contract to sell.
The court cannot, in this case, step in to cure the deficiency by fixing the period pursuant to
1.

The relief sought by Cucueco was for specific performance to compel Platinum Plans to receive the
balance of the purchase price
2.
The relief provide in Art 1592 only applies to contracts of sale
3.
Because of the differing dates set by both parties, the court would have no basis for granting Cucueco
an extension of time within which to pay the outstanding balance
SELLER CANNOT TREAT THE CONTRACT AS CANCELLED WITHOUT SERVING NOTICE
The act of a party in treating the contract as cancelled should be made known to the other party because
this act is subject to scrutiny and review by the courts in cased the alleged defaulter brings the matter for
judicial determination as explained in UP v. De los Angeles. In the case at bar, there were repeated written
notices sent by Platinum Plans to Cucueco that failure to pay the balance would result in the cancellation
of the contract and forfeiture of the down payment already made. Under these circumstance, the
cancellation made by Platinum Plans is valid and reasonable (except for the forfeiture of the down
payment because Cucueco never agreed to the same)
EFFECTS OF CONTRACT TO SELL
A contract to sell would be rendered ineffective and without force and effect by the non-fulfillment of the
buyers obligation to pay since this is a suspensive condition to the obligation of the seller to sell and
deliver the title of the property. As an effect, the parties stand as if the conditional obligation had
never existed. There can be no rescission of an obligation that is still non-existent as the suspensive
condition has not yet occurred.
CAS RELIANCE ON LEVY HERMANOS V. GERVACIO IS MISPLACED
It was unnecessary for CA to distinguish whether the transaction between the parties was an installment
sale or a straight sale. In the first place, there is no valid and enforceable contract to speak of.

FIRST DIVISION
BOSTON BANK OF THE G. R. No. 158149
PHILIPPINES, (formerly BANK
OF COMMERCE),
Petitioner, Present:
PANGANIBAN, J., Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR., and
CHICO-NAZARIO, JJ.
PERLA P. MANALO and CARLOS
MANALO, JR.,

Promulgated:

Respondents. February 9, 2006

x-------------------------------------------------- x
DECISION
CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV
No. 47458 affirming, on appeal, the Decision [2] of the Regional Trial Court (RTC) of Quezon City, Branch 98,
in Civil Case No. Q-89-3905.

The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the Xavierville
Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the property into residential
lots, which was then offered for sale to individual lot buyers. [3]
On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The
Overseas Bank of Manila (OBM), as vendee, executed a Deed of Sale of Real Estate over some residential
lots in the subdivision, including Lot 1, Block 2, with an area of 907.5 square meters, and Lot 2, Block 2,
with an area of 832.80 square meters. The transaction was subject to the approval of the Board of
Directors of OBM, and was covered by real estate mortgages in favor of the Philippine National Bank as
security for its account amounting to P5,187,000.00, and the Central Bank of the Philippines as security for
advances amounting to P22,185,193.74.[4] Nevertheless, XEI continued selling the residential lots in the
subdivision as agent of OBM.[5]
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos
Manalo, Jr. who was in business of drilling deep water wells and installing pumps under the business name
Hurricane Commercial, Inc. For P34,887.66, Manalo, Jr. installed a water pump at Ramos residence at the
corner of Aurora Boulevardand Katipunan Avenue, Quezon City. Manalo, Jr. then proposed to XEI, through
Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the downpayment
the P34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a letter dated February 8, 1972, Ramos
requested Manalo, Jr. to choose which lots he wanted to buy so that the price of the lots and the terms of
payment could be fixed and incorporated in the conditional sale. [6] Manalo, Jr. met with Ramos and
informed him that he and his wife Perla had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3
square meters.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. He
also pegged the price of the lots at P200.00 per square meter, or a total of P348,060.00, with a 20% down
payment of the purchase price amounting to P69,612.00 less the P34,887.66 owing from Ramos, payable
on or before December 31, 1972; the corresponding Contract of Conditional Sale would then be signed on
or before the same date, but if the selling operations of XEI resumed after December 31, 1972, the balance
of the downpayment would fall due then, and the spouses would sign the aforesaid contract within five (5)
days from receipt of the notice of resumption of such selling operations. It was also stated in the letter
that, in the meantime, the spouses may introduce improvements thereon subject to the rules and
regulations imposed by XEI in the subdivision. Perla Manalo conformed to the letter agreement. [7]
The spouses Manalo took possession of the property on September 2, 1972, constructed a house
thereon, and installed a fence around the perimeter of the lots.

In the meantime, many of the lot buyers refused to pay their monthly installments until they were
assured that they would be issued Torrens titles over the lots they had purchased. [8] The spouses Manalo
were 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 prepare a contract of conditional sale and transmit
the same to Manalo for their signature. On August 14, 1973, Perla Manalo went to the XEI office and
requested that the payment of the amount representing the balance of the downpayment be deferred,
which, however, XEI rejected. On August 10, 1973, XEI furnished her with a statement of their account as
of July 31, 1973, showing that they had a balance of P34,724.34 on the downpayment of the two lots after
deducting the account of Ramos, plus P3,819.68[10] interest thereon from September 1, 1972 to July 31,
1973, and that the interests on the unpaid balance of the purchase price ofP278,448.00 from September 1,
1972 to July 31, 1973 amounted to P30,629.28.[11] The spouses were informed that they were being billed
for said unpaid interests.[12]
On January 25, 1974, the spouses Manalo received another statement of account from XEI, inclusive
of interests on the purchase price of the lots. [13] In a letter dated April 6, 1974 to XEI, Manalo, Jr. stated they
had not yet received the notice of resumption of Leis selling operations, and that there had been no
arrangement on the payment of interests; hence, they should not be charged with interest on the balance
of the downpayment on the property.[14] Further, they demanded that a deed of conditional sale over the
two lots be transmitted to them for their signatures. However, XEI ignored the demands. Consequently, the
spouses refused to pay the balance of the downpayment of the purchase price. [15]
Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house. In a
letter dated June 17, 1976, XEI informed Manalo, Jr. that business signs were not allowed along the
sidewalk. It demanded that he remove the same, on the ground, among others, that the sidewalk was not
part of the land which he had purchased on installment basis from XEI. [16] Manalo, Jr. did not respond. XEI
reiterated its demand on September 15, 1977.[17]
Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots
already contracted and those yet to be sold. [18] On December 8, 1977, OBM warned Manalo, Jr., that putting
up of a 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]
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title (TCT) No.
T-265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor of the OBM.[20] The lien in
favor of the Central Bank of the Philippines was annotated at the dorsal portion of said title, which was
later cancelled on August 4, 1980.[21]
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM. CBM
wrote Edilberto Ng, the president of Xavierville Homeowners Association that, as of January 31, 1983,
Manalo, Jr. was one of the lot buyers in the subdivision. [22] CBM reiterated in its letter to Ng that, as
of January 24, 1984, Manalo was a homeowner in the subdivision. [23]
In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going construction
on the property since it (CBM) was the owner of the lot and she had no permission for such construction.
[24]

She agreed to have a conference meeting with CBM officers where she informed them that her husband

had a contract with OBM, through XEI, to purchase the property. When asked to prove her claim, she
promised to send the documents to CBM. However, she failed to do so. [25] On September 5, 1986, CBM

reiterated its demand that it be furnished with the documents promised, [26] but Perla Manalo did not
respond.
On July 27, 1987, CBM filed a complaint [27] for unlawful detainer against the spouses with the
Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No. 51618. CBM claimed that
the spouses had been unlawfully occupying the property without its consent and that despite its demands,
they refused to vacate the property.The latter alleged that they, as vendors, and XEI, as vendee, had a
contract of sale over the lots which had not yet been rescinded. [28]
While the case was pending, the spouses Manalo wrote CBM to offer an amicable settlement,
promising to abide by the purchase price of the 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 proposal,[30] emphasizing that they would abide by their
original agreement with XEI. CBM moved to withdraw its complaint [31] because of the issues raised.[32]
In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its
complaint against the spouses Manalo, the latter filed a complaint for specific performance and damages
against the bank before the Regional Trial Court (RTC) of Quezon City on October 31, 1989.
The plaintiffs alleged therein that they had always been ready, able and willing to pay the
installments on the lots sold to them by the defendants remote predecessor-in-interest, as might be or
stipulated in the contract of sale, but no contract was forthcoming; they constructed their house
worth P2,000,000.00 on the property in good faith; Manalo, Jr., informed the defendant, through its
counsel, on October 15, 1988 that he would abide by the terms and conditions of his original agreement
with the defendants predecessor-in-interest; during the hearing of the ejectment case on October 16,
1988, they offered to pay P313,172.34 representing the balance on the purchase price of said lots; such
tender of payment was rejected, so that the subject lots could be sold at considerably higher prices to third
parties.
Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the execution
and delivery of a Deed of Absolute Sale covering the subject lots, sufficient in form and substance to
transfer title thereto free and clear of any and all liens and encumbrances of whatever kind and nature.
[33]

The plaintiffs prayed that, after due hearing, judgment be rendered in their favor, to wit:
WHEREFORE, it is respectfully prayed that after due hearing:
(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale
over subject lots in favor of the plaintiffs after payment of the sum 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;
(c) And for such other and further relief as may be just and equitable in the premises.
[34]

In its Answer to the complaint, the defendant interposed the following affirmative defenses: (a)
plaintiffs had no cause of action against it because the August 22, 1972 letter agreement between XEI and
the plaintiffs was not binding on it; and (b) it had no record of any contract to sell executed by it or its

predecessor, or of any statement of accounts from its predecessors, or records of payments of the
plaintiffs or of any documents which entitled them to the possession of the lots. [35] The defendant, likewise,
interposed counterclaims for damages and attorneys fees and prayed for the eviction of the plaintiffs from
the property.[36]
Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an amicable
settlement of the case by paying P942,648.70, representing the balance of the purchase price of the two
lots based on the current market value. [37] However, the defendant rejected the same and insisted that for
the smaller lot, they pay P4,500,000.00, the current market value of the property.[38] The defendant insisted
that it owned the property since there was no contract or agreement between it and the plaintiffs relative
thereto.
During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional Sale
executed between XEI and Alberto Soller; [39] Alfredo Aguila,[40] and Dra. Elena Santos-Roque[41] to prove that
XEI continued selling residential lots in the subdivision as agent of OBM after the latter had acquired the
said lots.
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.
On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the
defendant. The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant
(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and
2, Block 2 of the Xavierville Estate Subdivision after payment of the sum of P942,978.70
sufficient in form and substance to transfer to them titles thereto free from any and all liens
and encumbrances of whatever kind and nature.
(b) Ordering the defendant to pay moral and exemplary damages in the amount
of P150,000.00; and
(c) To pay attorneys fees in the sum of P50,000.00 and to pay the costs.
SO ORDERED.[43]

The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs, the
parties had a complete contract to sell over the lots, and that they had already partially consummated the
same. It declared that the failure of the defendant to notify the plaintiffs of the resumption of its selling
operations and to execute a deed of conditional sale did not prevent the defendants obligation to convey
titles to the lots from acquiring binding effect. Consequently, the plaintiffs had a cause of action to compel
the defendant to execute a deed of sale over the lots in their favor.
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

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
toP313,172.34 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.
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 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.
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 the P34,887.00 due from
Ramos as part of such downpayment.
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.
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.
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.
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 pre-computed 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-in-interest, 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:
(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]
It is not enough for the parties to agree on the price of the property. The parties must also agree on
the manner of payment of the price of the property to give rise to a binding and enforceable contract of
sale or contract to sell. This is so because the agreement as to 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. [58]
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:
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]

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 credited
respondents for the P34,887.00 owing from Ramos as part of the 20% downpayment. The timeline for the
payment of the balance of the downpayment (P34,724.34) was also agreed upon, that is, on or before XEI
resumed its selling operations, on or before December 31, 1972, or within five (5) days from written notice
of such resumption of selling operations. The parties had also agreed to incorporate 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.

The February 8, 1972 letter of XEI reads:

Mr. Carlos T. Manalo, Jr.
Hurricane Rotary Well Drilling
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
Caloocan City
Dear Mrs. Manalo:
This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidationsubdivision plan as amended, consisting of 1,740.3 square meters more or less, at the price
of P200.00 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 contractwithin 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]
So long as an essential element entering into the proposed obligation of either of the parties
remains to be determined by an agreement which they are to make, the contract is incomplete and
unenforceable.[66] The reason is that such a contract is lacking in the necessary qualities of definiteness,
certainty and mutuality.[67]
There is no evidence on record to prove that XEI or OBM and the respondents had agreed,
after December 31, 1972, on the terms of payment of the balance of the purchase price of the property
and the other substantial terms and conditions relative to the sale. Indeed, the parties are in agreement
that there had been no contract of conditional sale ever executed by XEI, OBM or petitioner, as vendor,
and the respondents, as vendees.[68]
The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because the
issue of the manner of payment of the purchase price of the property was not raised therein.
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, 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, and whether such payments were to be made monthly, semiannually, or annually. Also, respondents, as plaintiffs below, failed to adduce a shred of evidence to prove
that they were obliged to pay the P278,448.00 monthly, semi-annually or annually. The allegation that the
payment of the P278,448.00 was to be paid in installments is, thus, vague and indefinite. Case law is that,
for a contract to be enforceable, its terms must be certain and explicit, not vague or indefinite.[72]
There is no factual and legal basis for the CA ruling that, based on the terms of payment of the
balance of the purchase price of the lots under the contracts of conditional sale executed by XEI and the
other lot buyers, respondents were obliged to pay the P278,448.00 with pre-computed interest of 12% per
annum in 120-month installments. As gleaned from the ruling of the appellate court, it failed to justify its
use of the terms of payment under the three contracts of conditional sale as basis for such ruling, to wit:
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 pre-computed 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 buyersmerely 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, 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 well-settled 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.
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.
We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no direct
or implied reference to the manner and schedule of payment of the balance of the purchase price of the
lots covered by the deeds of conditional sale executed by XEI and that of the other lot buyers [90] as basis
for or mode of determination of the schedule of the payment by the respondents of the P278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light Company [91] is
not applicable in this case because the basic price fixed in the contract was P9.45 per long ton, but it was
stipulated that the price was subject to modification in proportion to variations in calories and ash content,
and not otherwise. In this case, the parties did not fix in their letters-agreement, any method or mode of
determining the terms of payment of the balance of the purchase price of the property amounting
toP278,448.00.
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 to P278,448.00 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.
As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected
contract to sell the two lots; hence, respondents have no cause of action for specific performance against
petitioner. Republic Act No. 6552 applies only to a perfected contract to sell and not to a contract with no
binding and enforceable effect.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City,
Branch 98 is ordered to dismiss the complaint. Costs against the respondents.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above decision were reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

[1]

Penned by Associate Justice Edgardo P. Cruz, with Associate Justices Oswaldo D. Agcaoili (retired) and
Amelita G. Tolentino, concurring; rollo, pp. 9-19.
[2]
Penned by Judge Justo M. Sultan; records, pp. 295-304.
[3]
Exhibits N, O and P, folder of exhibits, pp. 37-57.
[4]
Exhibit L, id. at 19.
[5]
Exhibits N, O and P, id. at 37-57.
[6]
Exhibit A, id. at 1.
[7]
Exhibit B, id. at 2.
[8]
Exhibit Q-1, id. at 60.
[9]
TSN, May 21, 1990, p. 11.
[10]
Exhibit E-1, id. at 6.
[11]
Id.
[12]
Exhibit E, id. at 5.
[13]
Exhibit F, id. at 7.
[14]
Id.
[15]
TSN, 20 January 1992, p. 5.

[16]

Exhibit G, folder of exhibits, p. 8.

Exhibit H, id. at 9.
[18]
TSN, July 17, 1992, pp. 14-18.
[19]
Exhibit H, folder of exhibits, p. 9.
[20]
Exhibits 1 and 2, id. at 79-84.
[21]
Id.
[22]
Exhibit I-1, id. at 11.
[23]
Exhibit J-1, id. at 13.
[24]
Exhibit 6, id. at 91.
[25]
Exhibit 7, id. at 92.
[26]
Id.
[27]
Exhibit S, id. at 68.
[28]
Exhibit T, id. at 71.
[29]
Exhibit R, id. at 65.
[30]
Exhibit R-1, id. at 67.
[31]
Exhibit U, id. at 74.
[32]
Id.
[33]
Records, pp. 3-6.
[34]
Id. at 6-7.
[35]
Id. at 35-36.
[36]
Id. at 36-38.
[37]
Exhibit V, folder of exhibits, p. 77.
[38]
TSN, December 17, 1993, pp. 1-5.
[39]
Exhibit N, folder of exhibits, p. 17.
[40]
Exhibit O, id. at 44.
[41]
Exhibit P, id. at 51.
[42]
TSN, 17 July 1992, pp. 7-25.
[43]
Records, p. 304.
[44]
CA rollo, p. 32.
[45]
Rollo, p. 85.
[46]
Exhibits N, O and P, folder of exhibits, p. 82.
[47]
Rollo, pp. 46-47.
[48]
G.R. No. 126376, November 20, 2003, 416 SCRA 263 (2003).
[49]
39 Phil. 624 (1919).
[50]
Siasat v. Court of Appeals, 425 Phil. 139,145 (2002)
[51]
Del Rosario v. Bonga, G.R. No. 136308, January 23, 2001, 350 SCRA 101, 110.
[52]
Abra Valley College, Inc. v. Aquino, G.R. No. L-39086, June 15, 1988, 162 SCRA 106, 116, citing Perez v.
Court of Appeals, 127 SCRA 645 (1984).
[53]
F.F. Maacop Construction Co., Inc. v. Court of Appeals, 334 Phil. 208, 212 (1997), citing Garrido v.
CA, 236 SCRA 450 (1994).
[54]
See Relativo v. Castro, 76 Phil. 563 (1946).
[55]
GSIS v. Province of Tarlac, G.R. No. 157860, December 1, 2003, 417 SCRA 60.
[56]
Jovan Land, Inc. v. Court of Appeals, 335 Phil. 626, 629 (1997).
[57]
Article 1473, New Civil Code.
[58]
Montecillo v. Reynes, 434 Phil. 456 (2002); San Miguel Proprietor Philippines, Inc. v. Huang, 391 Phil.
636 (2000); Co v. Court of Appeals, 349 Phil. 749 (1998); Uraca v. Court of Appeals,344 Phil. 253
(1997); Toyota Car, Inc. v. Court of Appeals,314 Phil. 201 (1995.
[59]
151-A Phil. 868 (1973).
[60]
Id. at 887.
[61]
Infra.
[62]
Exhibit A, folder of exhibits, p. 1 (Underscoring supplied)
[63]
Exhibit B, id. at 2.
[64]
Ansorge v. Kane, 155 N.E. 683 (1927); A.M. Webb & Co. v. Robert P. Miller Co., 157 F.2d 865 (1946).
[65]
Boatright v. Steinite Radio Corporation, 46 F. 2d 385 (1931).
[66]
WILLISTON ON CONTRACTS, VOLUME I, SECTION 45, 149 (3rd ed. 1957).
[67]
Weigham v. Kilifer, 215 F. 168.
[68]
TSN, May 21, 1990, pp. 17-18; TSN, July 17, 1992, p. 25.
[69]
Exhibits N, O & P, folder of exhibits, pp. 37-57.
[70]
Supra, at note 22.
[71]
Exhibit G, folder of exhibits, p. 8
[72]
Potter v. Leitenberger Mach. Co., 166 Pa. Super 31, 70 A. 2d 390 (1950).
[73]
Rollo, p. 82.
[74]
Id.
[75]
361 Phil. 308, 317 (1999), citing Bacolod Murcia Milling Co., Inc., v. Bana Nacional Filipino, 74 Phil. 675,
680 (1944).
[76]
Supra, at note 66.
[77]
EXHIBIT N Conditional Contract of Sale executed by Xavierville Estate, Inc. in favor of Alberto Soller
dated December 8, 1969, to prove that after Xavierville Estate sold its lots, it continued to execute sales
contracts over same in its name; EXHIBIT O Xerox copy of Deed of Absolute Sale executed by Xavierville
Estate, Inc. in favor of Alfredo Aguila dated May 20, 1970, to prove that although the lots in said
subdivision were already sold by virtue of EXHIBIT L, Commercial Bank of Manila (COMBANK) the VENDEE
still allowed Xavierville Estate to sign contracts in its name; EXHIBIT P Xerox copy of Deed of Absolute Sale
executed by Xavierville Estate, Inc. in favor of Elena Roque Santos dated June 29, 1970, to prove that
[17]

although lots in Xavierville Estate were already sold to Combank, the latter still allowed Xavierville Estate
to sign contracts in its name;

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-116650 May 23, 1995

TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.

DAVIDE, JR., J.:

At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent,
which was signed by a sales representative of Toyota Shaw, Inc. named Popong Bernardo. The document
reads as follows:

4 June 1
AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
SHAW, INC.
1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a
week after, upon arrival of Mr. Sosa from the Province (Marinduque) where the unit will be
used on the 19th of June.
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA
SHAW, INC. on the 17th of June at 10 a.m.
Very
truly
yours,
(Sgd.) POPONG
BERNARDO.
Was this document, executed and signed by the petitioner's sales representative, a perfected contract of
sale, binding upon the petitioner, breach of which would entitle the private respondent to damages and

attorney's fees? The trial court and the Court of Appeals took the affirmative view. The petitioner
disagrees. Hence, this petition for review oncertiorari.
The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as in
the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa
(hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite
Ace. It was then a seller's market and Sosa had difficulty finding a dealer with an available unit for sale.
But upon contacting Toyota Shaw, Inc., he was told that there was an available unit. So on 14 June 1989,
Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro Manila. There they met
Popong Bernardo, a sales representative of Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his
family, and abalikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province,
where he would celebrate his birthday on the 19th of June. He added that if he does not arrive in his
hometown with the new car, he would become a "laughing stock." Bernardo assured Sosa that a unit would
be ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted "Agreements
Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties that the
balance of the purchase price would be paid by credit financing through B.A. Finance, and for this Gilbert,
on behalf of his father, signed the documents of Toyota and B.A. Finance pertaining to the application for
financing.
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00.
They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. 928, 2 on which
Gilbert signed under the subheading CONFORME. This document shows that the customer's name is "MR.
LUNA SOSA" with home address at No. 2316 Guijo Street, United Paraaque II; that the model series of the
vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that payment is by "installment," to be financed
by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down as follows:

a)

downpayment

P 53,148.00

b)

insurance

P 13,970.00

c)

BLT registration fee

P 1,067.00

CHMO fee

P 2,715.00

service fee

P 500.00

accessories

P 29,000.00

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" were
not filled-up. It also contains the following pertinent provisions:
CONDITIONS OF SALES
1. This sale is subject to availability of unit.
2. Stated Price is subject to change without prior notice, Price prevailing and in effect at time
of selling will apply. . . .
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.
On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle would not be
ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that same day. At 2:00 p.m.,
Sosa and Gilbert met Bernardo at the latter's office. According to Sosa, Bernardo informed them that the
Lite Ace was being readied for delivery. After waiting for about an hour, Bernardo told them that the car
could not be delivered because "nasulot ang unit ng ibang malakas."

Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A.
Finance of the credit financing application of Sosa. It further alleged that a particular unit had already been
reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the
balance of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full
purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be
refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of
P100,000.00, 4 the receipt of which was shown by a check voucher of Toyota, 5 which Sosa signed with the
reservation, "without prejudice to our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, he
demanded the refund, within five days from receipt, of the downpayment of P100,000.00 plus interest from
the time he paid it and the payment of damages with a warning that in case of Toyota's failure to do so he
would be constrained to take legal action. 6 The second, dated 4 November 1989 and signed by M. O.
Caballes, Sosa's counsel, demanded one million pesos representing interest and damages, again, with a
warning that legal action would be taken if payment was not made within three days. 7 Toyota's counsel
answered through a letter dated 27 November 1989 8 refusing to accede to the demands of Sosa. But even
before this answer was made and received by Sosa, the latter filed on 20 November 1989 with Branch 38
of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages under Articles 19
and 21 of the Civil Code in the total amount of P1,230,000.00. 9 He alleges, inter alia, that:
9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff
suffered embarrassment, humiliation, ridicule, mental anguish and sleepless nights because:
(i) he and his family were constrained to take the public transportation from Manila to
Lucena City on their way to Marinduque; (ii) his balikbayan-guest canceled his scheduled
first visit to Marinduque in order to avoid the inconvenience of taking public transportation;
and (iii) his relatives, friends, neighbors and other provincemates, continuously irked him
about "his Brand-New Toyota Lite Ace that never was." Under the circumstances,
defendant should be made liable to the plaintiff for moral damages in the amount of One
Million Pesos (P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that
Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A" in
his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of
delivery; Sosa had not completed the documents required by the financing company, and as a matter of
policy, the vehicle could not and would not be released prior to full compliance with financing
requirements, submission of all documents, and execution of the sales agreement/invoice; the
P100,000.00 was returned to and received by Sosa; the venue was improperly laid; and Sosa did not have
a sufficient cause of action against it. It also interposed compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered on 18 February
1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND
POPONG BERNARDO," was a valid perfected contract of sale between Sosa and Toyota which bound Toyota
to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to
another the unit already reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held
that the extent of Bernardo's authority "was not made known to plaintiff," for as testified to by Quirante,
"they do not volunteer any information as to the company's sales policy and guidelines because they are
internal matters." 13 Moreover, "[f]rom the beginning of the transaction up to its consummation when the
downpayment was made by the plaintiff, the defendants had made known to the plaintiff the impression
that Popong Bernardo is an authorized sales executive as it permitted the latter to do acts within the scope
of an apparent authority holding him out to the public as possessing power to do these acts." 14 Bernardo
then "was an agent of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15
The court further declared that "Luna Sosa proved his social standing in the community and suffered
besmirched reputation, wounded feelings and sleepless nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor of the
plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff the sum of P75,000.00 for
moral damages;
2. ordering the defendant to pay the plaintiff the sum of P10,000.00 for
exemplary damages;

3. ordering the defendant to pay the sum of P30,000.00 attorney's fees plus
P2,000.00 lawyer's transportation fare per trip in attending to the hearing of
this case;
4. ordering the defendant to pay the plaintiff the sum of P2,000.00
transportation fare per trip of the plaintiff in attending the hearing of this
case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was
docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994, 17 the Court of Appeals
affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of
the ponenciaand also the following related issues: (a) whether or not the standard VSP was the true and
documented understanding of the parties which would have led to the ultimate contract of sale, (b)
whether or not Sosa has any legal and demandable right to the delivery of the vehicle despite the nonpayment of the consideration and the non-approval of his credit application by B.A. Finance, (c) whether or
not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) whether or not Toyota
may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected
contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
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 contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
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.
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It is not a
contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa
and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The
provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was
intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the
following day confirmed. But nothing was mentioned about the full purchase price and the manner the
installments were to be paid.
This Court had already ruled that 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. 18 This is so because the
agreement as to 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. Definiteness as to the price is an essential
element of a binding agreement to sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing,
Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW,
INC.
that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that
he had the authority to sell any Toyota vehicle. He knew that Bernardo was only a sales representative of
Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence
and reasonable diligence to know the extent of Bernardo's authority as an

agent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the agent. 21
At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation
stage of a contract of sale. There are three stages in the contract of sale, namely:
(a) preparation, conception, or generation, which is the period of negotiation and bargaining,
ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come to agree
on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the terms agreed upon
in the contract. 22
The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must
be emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while the balance
to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed
that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in
the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D.
No. 1793, as "corporations or partnerships, except those regulated by the Central Bank of the Philippines,
the Insurance Commission and the Cooperatives Administration Office, which are primarily organized for
the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural
enterprises, either by discounting or factoring commercial papers or accounts receivables, or by buying
and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor
vehicles, heavy equipment and industrial machinery, business and office machines and equipment,
appliances and other movable property." 23
Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus
involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing
purchased on installment, the seller who assigns the notes or discounts them with a financing company,
and the financing company which is subrogated in the place of the seller, as the creditor of the installment
buyer. 24 Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on the
sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which
reason it suggested to Sosa that he pay the full purchase price. When the latter refused, Toyota cancelled
the VSP and returned to him his P100,000.00. Sosa's version that the VSP was cancelled because,
according to Bernardo, the vehicle was delivered to another who was "mas malakas" does not inspire belief
and was obviously a delayed afterthought. It is claimed that Bernardo said, "Pasensiya kayo, nasulot ang
unit ng ibang malakas," while the Sosas had already been waiting for an hour for the delivery of the
vehicle in the afternoon of 17 June 1989. However, in paragraph 7 of his complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales representative,
Mr. Popong Bernardo, called plaintiff's house and informed the plaintiff's son that the vehicle
will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day
instead. Plaintiff and his son went to defendant's office on June 17 1989 at 2:00 p.m. in
order to pick-up the vehicle but the defendant for reasons known only to its representatives,
refused and/or failed to release the vehicle to the plaintiff. Plaintiff demanded for an
explanation, but nothing was given; . . . (Emphasis supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP
created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did
not cause any legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal
basis. Besides, the only ground upon which Sosa claimed moral damages is that since it was known to his
friends, townmates, and relatives that he was buying a Toyota Lite Ace which they expected to see on his
birthday, he suffered humiliation, shame, and sleepless nights when the van was not delivered. The van
became the subject matter of talks during his celebration that he may not have paid for it, and this created
an impression against his business standing and reputation. At the bottom of this claim is nothing but
misplaced pride and ego. He should not have announced his plan to buy a Toyota Lite Ace knowing that he
might not be able to pay the full purchase price. It was he who brought embarrassment upon himself by
bragging about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or
compensatory damages, he is likewise not entitled to exemplary damages. Under Article 2229 of the Civil
Code, exemplary or corrective damages are imposed by way of example or correction for the public good,
in addition to moral, temperate, liquidated, or compensatory damages.

Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body of the
decision, and not only in the dispositive portion thereof, the legal reason for the award of attorney's
fees. 26 No such explicit determination thereon was made in the body of the decision of the trial court. No
reason thus exists for such an award.
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R.
CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case No. 89-14
are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The counterclaim
therein is likewise DISMISSED.
No pronouncement as to costs.
SO ORDERED.
Padilla, Bellosillo and Kapunan, JJ., concur.
Quiason, J., is on leave.