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Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 176841 June 29, 2010

ANTHONY ORDUA, DENNIS ORDUA, and ANTONITA ORDUA, Petitioners,


vs.
EDUARDO J. FUENTEBELLA, MARCOS S. CID, BENJAMIN F. CID, BERNARD G. BANTA, and ARMANDO
GABRIEL, JR., Respondents.

DECISION

VELASCO, JR., J.:

In this Petition for Review1 under Rule 45 of the Rules of Court, Anthony Ordua, Dennis Ordua and Antonita Ordua
assail and seek to set aside the Decision2 of the Court of Appeals (CA) dated December 4, 2006 in CA-G.R. CV No.
79680, as reiterated in its Resolution of March 6, 2007, which affirmed the May 26, 2003 Decision 3 of the Regional Trial
Court (RTC), Branch 3 in Baguio City, in Civil Case No. 4984-R, a suit for annulment of title and reconveyance
commenced by herein petitioners against herein respondents.

Central to the case is a residential lot with an area of 74 square meters located at Fairview Subdivision, Baguio City,
originally registered in the name of Armando Gabriel, Sr. (Gabriel Sr.) under Transfer Certificate of Title (TCT) No. 67181
of the Registry of Deeds of Baguio City.4

As gathered from the petition, with its enclosures, and the comments thereon of four of the five respondents, 5 the Court
gathers the following relevant facts:

Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner Antonita Ordua (Antonita), but no formal
deed was executed to document the sale. The contract price was apparently payable in installments as Antonita remitted
from time to time and Gabriel Sr. accepted partial payments. One of the Orduas would later testify that Gabriel Sr.
agreed to execute a final deed of sale upon full payment of the purchase price. 6

As early as 1979, however, Antonita and her sons, Dennis and Anthony Ordua, were already occupying the subject lot
on the basis of some arrangement undisclosed in the records and even constructed their house thereon. They also paid
real property taxes for the house and declared it for tax purposes, as evidenced by Tax Declaration No. (TD) 96-04012-
1110877 in which they place the assessed value of the structure at PhP 20,090.

After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT No. T-714998 over the subject
lot and continued accepting payments from the petitioners. On December 12, 1996, Gabriel Jr. wrote Antonita authorizing
her to fence off the said lot and to construct a road in the adjacent lot. 9 On December 13, 1996, Gabriel Jr. acknowledged
receipt of a PhP 40,000 payment from petitioners.10 Through a letter11 dated May 1, 1997, Gabriel Jr. acknowledged that
petitioner had so far made an aggregate payment of PhP 65,000, leaving an outstanding balance of PhP 60,000. A receipt
Gabriel Jr. issued dated November 24, 1997 reflected a PhP 10,000 payment.

Despite all those payments made for the subject lot, Gabriel Jr. would later sell it to Bernard Banta (Bernard) obviously
without the knowledge of petitioners, as later developments would show.

As narrated by the RTC, the lot conveyance from Gabriel Jr. to Bernard was effected against the following backdrop:
Badly in need of money, Gabriel Jr. borrowed from Bernard the amount of PhP 50,000, payable in two weeks at a fixed
interest rate, with the further condition that the subject lot would answer for the loan in case of default. Gabriel Jr. failed to
pay the loan and this led to the execution of a Deed of Sale12 dated June 30, 1999 and the issuance later of TCT No. T-
7278213 for subject lot in the name of Bernard upon cancellation of TCT No. 71499 in the name of Gabriel, Jr. As the RTC
decision indicated, the reluctant Bernard agreed to acquire the lot, since he had by then ready buyers in respondents
Marcos Cid and Benjamin F. Cid (Marcos and Benjamin or the Cids).
Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed with a Deed of Absolute Sale of a
Registered Land14 dated January 19, 2000, the Cids were able to cancel TCT No. T-72782 and secure TCT No.
7278315 covering the subject lot. Just like in the immediately preceding transaction, the deed of sale between Bernard and
the Cids had respondent Eduardo J. Fuentebella (Eduardo) as one of the instrumental witnesses.

Marcos and Benjamin, in turn, ceded the subject lot to Eduardo through a Deed of Absolute Sale 16 dated May 11, 2000.
Thus, the consequent cancellation of TCT No. T-72782 and issuance on May 16, 2000 of TCT No. T-327617over subject
lot in the name of Eduardo.

As successive buyers of the subject lot, Bernard, then Marcos and Benjamin, and finally Eduardo, checked, so each
claimed, the title of their respective predecessors-in-interest with the Baguio Registry and discovered said title to be free
and unencumbered at the time each purchased the property. Furthermore, respondent Eduardo, before buying the
property, was said to have inspected the same and found it unoccupied by the Orduas. 18

Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo, through his lawyer, sent a letter
addressed to the residence of Gabriel Jr. demanding that all persons residing on or physically occupying the subject lot
vacate the premises or face the prospect of being ejected.19

Learning of Eduardos threat, petitioners went to the residence of Gabriel Jr. at No. 34 Dominican Hill, Baguio City. There,
they met Gabriel Jr.s estranged wife, Teresita, who informed them about her having filed an affidavit-complaint against
her husband and the Cids for falsification of public documents on March 30, 2000. According to Teresita, her signature on
the June 30, 1999 Gabriel Jr.Bernard deed of sale was a forgery. Teresita further informed the petitioners of her intent to
honor the aforementioned 1996 verbal agreement between Gabriel Sr. and Antonita and the partial payments they gave
her father-in-law and her husband for the subject lot.

On July 3, 2001, petitioners, joined by Teresita, filed a Complaint20 for Annulment of Title, Reconveyance with
Damages against the respondents before the RTC, docketed as Civil Case No. 4984-R, specifically praying that TCT No.
T-3276 dated May 16, 2000 in the name of Eduardo be annulled. Corollary to this prayer, petitioners pleaded that Gabriel
Jr.s title to the lot be reinstated and that petitioners be declared as entitled to acquire ownership of the same upon
payment of the remaining balance of the purchase price therefor agreed upon by Gabriel Sr. and Antonita.

While impleaded and served with summons, Gabriel Jr. opted not to submit an answer.

Ruling of the RTC

By Decision dated May 26, 2003, the RTC ruled for the respondents, as defendants a quo, and against the petitioners, as
plaintiffs therein, the dispositive portion of which reads:

WHEREFORE, the instant complaint is hereby DISMISSED for lack of merit. The four (4) plaintiffs are hereby ordered by
this Court to pay each defendant (except Armando Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who did not
testify on these damages), Moral Damages of Twenty Thousand (P20,000.00) Pesos, so that each defendant shall
receive Moral Damages of Eighty Thousand (P80,000.00) Pesos each. Plaintiffs shall also pay all defendants (except
Armando Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Exemplary
Damages of Ten Thousand (P10,000.00) Pesos each so that each defendant shall receive Forty Thousand (P40,000.00)
Pesos as Exemplary Damages. Also, plaintiffs are ordered to pay eachdefendant (except Armando Gabriel, Jr., Benjamin
F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Fifty Thousand (P50,000.00) Pesos as
Attorneys Fees, jointly and solidarily.

Cost of suit against the plaintiffs.21

On the main, the RTC predicated its dismissal action on the basis of the following grounds and/or premises:

1. Eduardo was a purchaser in good faith and, hence, may avail himself of the provision of Article 154422 of the
Civil Code, which provides that in case of double sale, the party in good faith who is able to register the property
has better right over the property;

2. Under Arts. 135623 and 135824 of the Code, conveyance of real property must be in the proper form, else it is
unenforceable;
3. The verbal sale had no adequate consideration; and

4. Petitioners right of action to assail Eduardos title prescribes in one year from date of the issuance of such title
and the one-year period has already lapsed.

From the above decision, only petitioners appealed to the CA, their appeal docketed as CA-G.R. CV No. 79680.

The CA Ruling

On December 4, 2006, the appellate court rendered the assailed Decision affirming the RTC decision. The falloreads:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED and the 26 May 2003 Decision of the
Regional Trial Court, Branch 3 of Baguio City in Civil Case No. 4989-R is hereby AFFIRMED.

SO ORDERED.25

Hence, the instant petition on the submission that the appellate court committed reversible error of law:

1. xxx WHEN IT HELD THAT THE SALE OF THE SUBJECT LOT BY ARMANDO GABRIEL, SR. AND
RESPONDENT ARMANDO GABRIEL, JR. TO THE PETITIONERS IS UNENFORCEABLE.

2. xxx IN NOT FINDING THAT THE SALE OF THE SUBJECT LOT BY RESPONDENT ARMANDO GABRIEL,
JR. TO RESPONDENT BERNARD BANTA AND ITS SUBSEQUENT SALE BY THE LATTER TO HIS CO-
RESPONDENTS ARE NULL AND VOID.

3. xxx IN NOT FINDING THAT THE RESPONDENTS ARE BUYERS IN BAD FAITH

4. xxx IN FINDING THAT THE SALE OF THE SUBJECT LOT BETWEEN GABRIEL, SR. AND RESPONDENT
GABRIEL, JR. AND THE PETITIONERS HAS NO ADEQUATE CONSIDERATION.

5. xxx IN RULING THAT THE INSTANT ACTION HAD ALREADY PRESCRIBED.

6. xxx IN FINDING THAT THE PLAINTIFFS-APPELLANTS ARE LIABLE FOR MORAL AND EXEMPLARY
DAMAGES AND ATTORNEYS FEES.26

The Courts Ruling

The core issues tendered in this appeal may be reduced to four and formulated as follows, to wit: first, whether or not the
sale of the subject lot by Gabriel Sr. to Antonita is unenforceable under the Statute of Frauds; second, whether or not
such sale has adequate consideration; third, whether the instant action has already prescribed; and, fourth, whether or not
respondents are purchasers in good faith.

The petition is meritorious.

Statute of Frauds Inapplicable to Partially Executed Contracts

It is undisputed that Gabriel Sr., during his lifetime, sold the subject property to Antonita, the purchase price payable on
installment basis. Gabriel Sr. appeared to have been a recipient of some partial payments. After his death, his son duly
recognized the sale by accepting payments and issuing what may be considered as receipts therefor. Gabriel Jr., in a
gesture virtually acknowledging the petitioners dominion of the property, authorized them to construct a fence around it.
And no less than his wife, Teresita, testified as to the fact of sale and of payments received.

Pursuant to such sale, Antonita and her two sons established their residence on the lot, occupying the house they earlier
constructed thereon. They later declared the property for tax purposes, as evidenced by the issuance of TD 96-04012-
111087 in their or Antonitas name, and paid the real estates due thereon, obviously as sign that they are occupying the
lot in the concept of owners.
Given the foregoing perspective, Eduardos assertion in his Answer that "persons appeared in the property" 27 only after
"he initiated ejectment proceedings"28 is clearly baseless. If indeed petitioners entered and took possession of the
property after he (Eduardo) instituted the ejectment suit, how could they explain the fact that he sent a demand letter to
vacate sometime in May 2000?

With the foregoing factual antecedents, the question to be resolved is whether or not the Statute of Frauds bars the
enforcement of the verbal sale contract between Gabriel Sr. and Antonita.

The CA, just as the RTC, ruled that the contract is unenforceable for non-compliance with the Statute of Frauds.

We disagree for several reasons. Foremost of these is that the Statute of Frauds expressed in Article 1403, par. (2), 29 of
the Civil Code applies only to executory contracts, i.e., those where no performance has yet been made. Stated a bit
differently, the legal consequence of non-compliance with the Statute does not come into play where the contract in
question is completed, executed, or partially consummated.30

The Statute of Frauds, in context, provides that a contract for the sale of real property or of an interest therein shall be
unenforceable unless the sale or some note or memorandum thereof is in writing and subscribed by the party or his agent.
However, where the verbal contract of sale has been partially executed through the partial paymentsmade by one
party duly received by the vendor, as in the present case, the contract is taken out of the scope of the Statute.

The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence
on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a
writing signed by the party to be charged.31 The Statute requires certain contracts to be evidenced by some note or
memorandum in order to be enforceable. The term "Statute of Frauds" is descriptive of statutes that require certain
classes of contracts to be in writing. The Statute does not deprive the parties of the right to contract with respect to the
matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable.32

Since contracts are generally obligatory in whatever form they may have been entered into, provided all the essential
requisites for their validity are present, 33 the Statute simply provides the method by which the contracts enumerated in Art.
1403 (2) may be proved but does not declare them invalid because they are not reduced to writing. In fine, the form
required under the Statute is for convenience or evidentiary purposes only.

There can be no serious argument about the partial execution of the sale in question. The records show that petitioners
had, on separate occasions, given Gabriel Sr. and Gabriel Jr. sums of money as partial payments of the purchase price.
These payments were duly receipted by Gabriel Jr. To recall, in his letter of May 1, 1997, Gabriel, Jr. acknowledged
having received the aggregate payment of PhP 65,000 from petitioners with the balance of PhP 60,000 still remaining
unpaid. But on top of the partial payments thus made, possession of the subject of the sale had been transferred to
Antonita as buyer. Owing thus to its partial execution, the subject sale is no longer within the purview of the Statute of
Frauds.

Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by the acceptance of benefits under the
contract.34 Evidently, Gabriel, Jr., as his father earlier, had benefited from the partial payments made by the petitioners.
Thus, neither Gabriel Jr. nor the other respondentssuccessive purchasers of subject lotscould plausibly set up the
Statute of Frauds to thwart petitioners efforts towards establishing their lawful right over the subject lot and removing any
cloud in their title. As it were, petitioners need only to pay the outstanding balance of the purchase price and that would
complete the execution of the oral sale.

There was Adequate Consideration

Without directly saying so, the trial court held that the petitioners cannot sue upon the oral sale since in its own words: "x x
x for more than a decade, [petitioners] have not paid in full Armando Gabriel, Sr. or his estate, so that the sale transaction
between Armando Gabriel Sr. and [petitioners] [has] no adequate consideration."

The trial courts posture, with which the CA effectively concurred, is patently flawed. For starters, they equated incomplete
payment of the purchase price with inadequacy of price or what passes as lesion, when both are different civil law
concepts with differing legal consequences, the first being a ground to rescind an otherwise valid and enforceable
contract. Perceived inadequacy of price, on the other hand, is not a sufficient ground for setting aside a sale freely entered
into, save perhaps when the inadequacy is shocking to the conscience. 35
The Court to be sure takes stock of the fact that the contracting parties to the 1995 or 1996 sale agreed to a purchase
price of PhP 125,000 payable on installments. But the original lot owner, Gabriel Sr., died before full payment can be
effected. Nevertheless, petitioners continued remitting payments to Gabriel, Jr., who sold the subject lot to Bernard on
June 30, 1999. Gabriel, Jr., as may be noted, parted with the property only for PhP 50,000. On the other hand, Bernard
sold it for PhP 80,000 to Marcos and Benjamin. From the foregoing price figures, what is abundantly clear is that what
Antonita agreed to pay Gabriel, Sr., albeit in installment, was very much more than what his son, for the same lot,
received from his buyer and the latters buyer later. The Court, therefore, cannot see its way clear as to how the RTC
arrived at its simplistic conclusion about the transaction between Gabriel Sr. and Antonita being without "adequate
consideration."

The Issues of Prescription and the Bona


Fides of the Respondents as Purchasers

Considering the interrelation of these two issues, we will discuss them jointly.

There can be no quibbling about the fraudulent nature of the conveyance of the subject lot effected by Gabriel Jr. in favor
of Bernard. It is understandable that after his fathers death, Gabriel Jr. inherited subject lot and for which he was issued
TCT No. No. T-71499. Since the Gabriel Sr. Antonita sales transaction called for payment of the contract price in
installments, it is also understandable why the title to the property remained with the Gabriels. And after the demise of his
father, Gabriel Jr. received payments from the Orduas and even authorized them to enclose the subject lot with a fence.
In sum, Gabriel Jr. knew fully well about the sale and is bound by the contract as predecessor-in-interest of Gabriel Sr.
over the property thus sold.

Yet, the other respondents (purchasers of subject lot) still maintain that they are innocent purchasers for value whose
rights are protected by law and besides which prescription has set in against petitioners action for annulment of title and
reconveyance.

The RTC and necessarily the CA found the purchaser-respondents thesis on prescription correct stating in this regard
that Eduardos TCT No. T-3276 was issued on May 16, 2000 while petitioners filed their complaint for annulment only on
July 3, 2001. To the courts below, the one-year prescriptive period to assail the issuance of a certificate of title had
already elapsed.

We are not persuaded.

The basic complaint, as couched, ultimately seeks the reconveyance of a fraudulently registered piece of residential land.
Having possession of the subject lot, petitioners right to the reconveyance thereof, and the annulment of the covering
title, has not prescribed or is not time-barred. This is so for an action for annulment of title or reconveyance based on
fraud is imprescriptible where the suitor is in possession of the property subject of the acts, 36 the action partaking as it
does of a suit for quieting of title which is imprescriptible.37 Such is the case in this instance. Petitioners have possession
of subject lots as owners having purchased the same from Gabriel, Sr. subject only to the full payment of the agreed
price.

The prescriptive period for the reconveyance of fraudulently registered real property is 10 years, reckoned from the date
of the issuance of the certificate of title, if the plaintiff is not in possession, but imprescriptible if he is in possession of the
property.38 Thus, one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his right. 39As it is, petitioners action for
reconveyance is imprescriptible.

This brings us to the question of whether or not the respondent-purchasers, i.e., Bernard, Marcos and Benjamin, and
Eduardo, have the status of innocent purchasers for value, as was the thrust of the trial courts disquisition and
disposition.

We are unable to agree with the RTC.

It is the common defense of the respondent-purchasers that they each checked the title of the subject lot when it was his
turn to acquire the same and found it clean, meaning without annotation of any encumbrance or adverse third party
interest. And it is upon this postulate that each claims to be an innocent purchaser for value, or one who buys the property
of another without notice that some other person has a right to or interest in it, and who pays therefor a full and fair price
at the time of the purchase or before receiving such notice.40
The general rule is that one dealing with a parcel of land registered under the Torrens System may safely rely on the
correctness of the certificate of title issued therefor and is not obliged to go beyond the certificate. 41 Where, in other
words, the certificate of title is in the name of the seller, the innocent purchaser for value has the right to rely on what
appears on the certificate, as he is charged with notice only of burdens or claims on the res as noted in the certificate.
Another formulation of the rule is that (a) in the absence of anything to arouse suspicion or (b) except where the party has
actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or (c)
when the purchaser has knowledge of a defect of title in his vendor or of sufficient facts to induce a reasonably prudent
man to inquire into the status of the title of the property,42 said purchaser is without obligation to look beyond the
certificate and investigate the title of the seller.

Eduardo and, for that matter, Bernard and Marcos and Benjamin, can hardly claim to be innocent purchasers for value or
purchasers in good faith. For each knew or was at least expected to know that somebody else other than Gabriel, Jr. has
a right or interest over the lot. This is borne by the fact that the initial seller, Gabriel Jr., was not in possession of subject
property. With respect to Marcos and Benjamin, they knew as buyers that Bernard, the seller, was not also in possession
of the same property. The same goes with Eduardo, as buyer, with respect to Marcos and Benjamin.ten.lihpwa1

Basic is the rule that a buyer of a piece of land which is in the actual possession of persons other than the seller must be
wary and should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be
regarded as a buyer in good faith. When a man proposes to buy or deal with realty, his duty is to read the public
manuscript, i.e., to look and see who is there upon it and what his rights are. A want of caution and diligence which an
honest man of ordinary prudence is accustomed to exercise in making purchases is, in contemplation of law, a want of
good faith. The buyer who has failed to know or discover that the land sold to him is in adverse possession of another is a
buyer in bad faith.43

Where the land sold is in the possession of a person other than the vendor, the purchaser must go beyond the certificates
of title and make inquiries concerning the rights of the actual possessor. 44 And where, as in the instant case, Gabriel Jr.
and the subsequent vendors were not in possession of the property, the prospective vendees are obliged to investigate
the rights of the one in possession. Evidently, Bernard, Marcos and Benjamin, and Eduardo did not investigate the rights
over the subject lot of the petitioners who, during the period material to this case, were in actual possession thereof.
Bernard, et al. are, thus, not purchasers in good faith and, as such, cannot be accorded the protection extended by the
law to such purchasers.45 Moreover, not being purchasers in good faith, their having registered the sale, will not, as
against the petitioners, carry the day for any of them under Art. 1544 of the Civil Code prescribing rules on preference in
case of double sales of immovable property. Occea v. Esponilla46laid down the following rules in the application of Art.
1544: (1) knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second
buyer first register in good faith the second sale; and (2) knowledge gained by the second buyer of the first sale defeats
his rights even if he is first to register, since such knowledge taints his registration with bad faith.

Upon the facts obtaining in this case, the act of registration by any of the three respondent-purchasers was not coupled
with good faith. At the minimum, each was aware or is at least presumed to be aware of facts which should put him upon
such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.

The award by the lower courts of damages and attorneys fees to some of the herein respondents was predicated on the
filing by the original plaintiffs of what the RTC characterized as an unwarranted suit. The basis of the award, needless to
stress, no longer obtains and, hence, the same is set aside.

WHEREFORE, the petition is hereby GRANTED. The appealed December 4, 2006 Decision and the March 6, 2007
Resolution of the Court of Appeals in CA-G.R. CV No. 79680 affirming the May 26, 2003 Decision of the Regional Trial
Court, Branch 3 in Baguio City are hereby REVERSED and SET ASIDE. Accordingly, petitioner Antonita Ordua is
hereby recognized to have the right of ownership over subject lot covered by TCT No. T-3276 of the Baguio Registry
registered in the name of Eduardo J. Fuentebella. The Register of Deeds of Baguio City is hereby ORDERED to cancel
said TCT No. T-3276 and to issue a new one in the name of Armando Gabriel, Jr. with the proper annotation of the
conditional sale of the lot covered by said title in favor of Antonita Ordua subject to the payment of the PhP 50,000
outstanding balance. Upon full payment of the purchase price by Antonita Ordua, Armando Gabriel, Jr. is ORDERED to
execute a Deed of Absolute Sale for the transfer of title of subject lot to the name of Antonita Ordua, within three (3) days
from receipt of said payment.

No pronouncement as to costs.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 111238 January 25, 1995

ADELFA PROPERTIES, INC., petitioner,


vs.
COURT OF APPEALS, ROSARIO JIMENEZ-CASTAEDA and SALUD JIMENEZ, respondents.

REGALADO, J.:

The main issues presented for resolution in this petition for review on certiorari of the judgment of respondent Court of
appeals, dated April 6, 1993, in CA-G.R. CV No. 34767 1 are (1) whether of not the "Exclusive Option to Purchase"
executed between petitioner Adelfa Properties, Inc. and private respondents Rosario Jimenez-Castaeda and Salud
Jimenez is an option contract; and (2) whether or not there was a valid suspension of payment of the purchase price by
said petitioner, and the legal effects thereof on the contractual relations of the parties.

The records disclose the following antecedent facts which culminated in the present appellate review, to wit:

1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were the registered co-owners of a parcel
of land consisting of 17,710 square meters, covered by Transfer Certificate of Title (TCT) No. 309773, 2situated in Barrio
Culasi, Las Pias, Metro Manila.

2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-half of said parcel of land,
specifically the eastern portion thereof, to herein petitioner pursuant to a "Kasulatan sa Bilihan ng Lupa." 3Subsequently, a
"Confirmatory Extrajudicial Partition Agreement" 4 was executed by the Jimenezes, wherein the eastern portion of the
subject lot, with an area of 8,855 square meters was adjudicated to Jose and Dominador Jimenez, while the western
portion was allocated to herein private respondents.

3. Thereafter, herein petitioner expressed interest in buying the western portion of the property from private respondents.
Accordingly, on November 25, 1989, an "Exclusive Option to Purchase" 5 was executed between petitioner and private
respondents, under the following terms and conditions:

1. The selling price of said 8,655 square meters of the subject property is TWO MILLION EIGHT
HUNDRED FIFTY SIX THOUSAND ONE HUNDRED FIFTY PESOS ONLY (P2,856,150.00)

2. The sum of P50,000.00 which we received from ADELFA PROPERTIES, INC. as an option money
shall be credited as partial payment upon the consummation of the sale and the balance in the sum of
TWO MILLION EIGHT HUNDRED SIX THOUSAND ONE HUNDRED FIFTY PESOS (P2,806,150.00) to
be paid on or before November 30, 1989;

3. In case of default on the part of ADELFA PROPERTIES, INC. to pay said balance in accordance with
paragraph 2 hereof, this option shall be cancelled and 50% of the option money to be forfeited in our
favor and we will refund the remaining 50% of said money upon the sale of said property to a third party;

4. All expenses including the corresponding capital gains tax, cost of documentary stamps are for the
account of the VENDORS, and expenses for the registration of the deed of sale in the Registry of Deeds
are for the account of ADELFA PROPERTIES, INC.

Considering, however, that the owner's copy of the certificate of title issued to respondent Salud Jimenez had been lost, a
petition for the re-issuance of a new owner's copy of said certificate of title was filed in court through Atty. Bayani L.
Bernardo, who acted as private respondents' counsel. Eventually, a new owner's copy of the certificate of title was issued
but it remained in the possession of Atty. Bernardo until he turned it over to petitioner Adelfa Properties, Inc.

4. Before petitioner could make payment, it received summons 6 on November 29, 1989, together with a copy of a
complaint filed by the nephews and nieces of private respondents against the latter, Jose and Dominador Jimenez, and
herein petitioner in the Regional Trial Court of Makati, docketed as Civil Case No. 89-5541, for annulment of the deed of
sale in favor of Household Corporation and recovery of ownership of the property covered by TCT No. 309773. 7

5. As a consequence, in a letter dated November 29, 1989, petitioner informed private respondents that it would hold
payment of the full purchase price and suggested that private respondents settle the case with their nephews and nieces,
adding that ". . . if possible, although November 30, 1989 is a holiday, we will be waiting for you and said plaintiffs at our
office up to 7:00 p.m." 8 Another letter of the same tenor and of even date was sent by petitioner to Jose and Dominador
Jimenez. 9 Respondent Salud Jimenez refused to heed the suggestion of petitioner and attributed the suspension of
payment of the purchase price to "lack of word of honor."

6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its option contract with private
respondents, and its contract of sale with Jose and Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4,
respectively.

7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty. Bernardo, in his capacity as
petitioner's counsel, and to inform the latter that they were cancelling the transaction. In turn, Atty. Bernardo offered to pay
the purchase price provided that P500,000.00 be deducted therefrom for the settlement of the civil case. This was
rejected by private respondents. On December 22, 1989, Atty. Bernardo wrote private respondents on the same matter
but this time reducing the amount from P500,000.00 to P300,000.00, and this was also rejected by the latter.

8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case No. 89-5541. Thus, on February 28,
1990, petitioner caused to be annotated anew on TCT No. 309773 the exclusive option to purchase as Entry No. 4442-4.

9. On the same day, February 28, 1990, private respondents executed a Deed of Conditional Sale 10 in favor of Emylene
Chua over the same parcel of land for P3,029,250, of which P1,500,000.00 was paid to private respondents on said date,
with the balance to be paid upon the transfer of title to the specified one-half portion.

10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter that in view of the dismissal of the
case against them, petitioner was willing to pay the purchase price, and he requested that the corresponding deed of
absolute sale be executed. 11 This was ignored by private respondents.

11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing therein a check for P25,000.00
representing the refund of fifty percent of the option money paid under the exclusive option to purchase. Private
respondents then requested petitioner to return the owner's duplicate copy of the certificate of title of respondent Salud
Jimenez. 12 Petitioner failed to surrender the certificate of title, hence private respondents filed Civil Case No. 7532 in the
Regional Trial Court of Pasay City, Branch 113, for annulment of contract with damages, praying, among others, that the
exclusive option to purchase be declared null and void; that defendant, herein petitioner, be ordered to return the owner's
duplicate certificate of title; and that the annotation of the option contract on TCT No. 309773 be cancelled. Emylene
Chua, the subsequent purchaser of the lot, filed a complaint in intervention.

12. The trial court rendered judgment 13 therein on September 5, 1991 holding that the agreement entered into by the
parties was merely an option contract, and declaring that the suspension of payment by herein petitioner constituted a
counter-offer which, therefore, was tantamount to a rejection of the option. It likewise ruled that herein petitioner could not
validly suspend payment in favor of private respondents on the ground that the vindicatory action filed by the latter's kin
did not involve the western portion of the land covered by the contract between petitioner and private respondents, but the
eastern portion thereof which was the subject of the sale between petitioner and the brothers Jose and Dominador
Jimenez. The trial court then directed the cancellation of the exclusive option to purchase, declared the sale to intervenor
Emylene Chua as valid and binding, and ordered petitioner to pay damages and attorney's fees to private respondents,
with costs.

13. On appeal, respondent Court of appeals affirmed in toto the decision of the court a quo and held that the failure of
petitioner to pay the purchase price within the period agreed upon was tantamount to an election by petitioner not to buy
the property; that the suspension of payment constituted an imposition of a condition which was actually a counter-offer
amounting to a rejection of the option; and that Article 1590 of the Civil Code on suspension of payments applies only to a
contract of sale or a contract to sell, but not to an option contract which it opined was the nature of the document subject
of the case at bar. Said appellate court similarly upheld the validity of the deed of conditional sale executed by private
respondents in favor of intervenor Emylene Chua.

In the present petition, the following assignment of errors are raised:

1. Respondent court of appeals acted with grave abuse of discretion in making its finding that the agreement entered into
by petitioner and private respondents was strictly an option contract;

2. Granting arguendo that the agreement was an option contract, respondent court of Appeals acted with grave abuse of
discretion in grievously failing to consider that while the option period had not lapsed, private respondents could not
unilaterally and prematurely terminate the option period;

3. Respondent Court of Appeals acted with grave abuse of discretion in failing to appreciate fully the attendant facts and
circumstances when it made the conclusion of law that Article 1590 does not apply; and

4. Respondent Court of Appeals acted with grave abuse of discretion in conforming with the sale in favor of appellee Ma.
Emylene Chua and the award of damages and attorney's fees which are not only excessive, but also without in fact and in
law. 14

An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between the parties is a contract to sell, and not an option contract or a contract of sale.

1. In view of the extended disquisition thereon by respondent court, it would be worthwhile at this juncture to briefly
discourse on the rationale behind our treatment of the alleged option contract as a contract to sell, rather than a contract
of sale. The distinction between the two is important for in contract of sale, the title passes to the vendee upon the delivery
of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass
until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless
the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of
the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective. Thus, 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 the 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. 15

There are two features which convince us that the parties never intended to transfer ownership to petitioner except upon
the full payment of the purchase price. Firstly, the exclusive option to purchase, although it provided for automatic
rescission of the contract and partial forfeiture of the amount already paid in case of default, does not mention that
petitioner is obliged to return possession or ownership of the property as a consequence of non-payment. There is no
stipulation anent reversion or reconveyance of the property to herein private respondents in the event that petitioner does
not comply with its obligation. With the absence of such a stipulation, although there is a provision on the remedies
available to the parties in case of breach, it may legally be inferred that the parties never intended to transfer ownership to
the petitioner to completion of payment of the purchase price.

In effect, there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the price.
Article 1478 of the civil code does not require that such a stipulation be expressly made. Consequently, an implied
stipulation to that effect is considered valid and, therefore, binding and enforceable between the parties. It should be
noted that under the law and jurisprudence, a contract which contains this kind of stipulation is considered a contract to
sell.

Moreover, that the parties really intended to execute a contract to sell, and not a contract of sale, is bolstered by the fact
that the deed of absolute sale would have been issued only upon the payment of the balance of the purchase price, as
may be gleaned from petitioner's letter dated April 16, 1990 16 wherein it informed private respondents that it "is now ready
and willing to pay you simultaneously with the execution of the corresponding deed of absolute sale."

Secondly, it has not been shown there was delivery of the property, actual or constructive, made to herein petitioner. The
exclusive option to purchase is not contained in a public instrument the execution of which would have been considered
equivalent to delivery. 17 Neither did petitioner take actual, physical possession of the property at any given time. It is true
that after the reconstitution of private respondents' certificate of title, it remained in the possession of petitioner's counsel,
Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner. Normally, under the law, such
possession by the vendee is to be understood as a delivery. 18 However, private respondents explained that there was
really no intention on their part to deliver the title to herein petitioner with the purpose of transferring ownership to it. They
claim that Atty. Bernardo had possession of the title only because he was their counsel in the petition for reconstitution.
We have no reason not to believe this explanation of private respondents, aside from the fact that such contention was
never refuted or contradicted by petitioner.

2. Irrefragably, the controverted document should legally be considered as a perfected contract to sell. On this particular
point, therefore, we reject the position and ratiocination of respondent Court of Appeals which, while awarding the correct
relief to private respondents, categorized the instrument as "strictly an option contract."

The important task in contract interpretation is always the ascertainment of the intention of the contracting parties and that
task is, of course, to be discharged by looking to the words they used to project that intention in their contract, all the
words not just a particular word or two, and words in context not words standing alone. 19 Moreover, judging from the
subsequent acts of the parties which will hereinafter be discussed, it is undeniable that the intention of the parties was to
enter into a contract to sell. 20 In addition, the title of a contract does not necessarily determine its true nature. 21 Hence,
the fact that the document under discussion is entitled "Exclusive Option to Purchase" is not controlling where the text
thereof shows that it is a contract to sell.

An option, as used in the law on sales, is a continuing offer or contract by which the owner stipulates with another that the
latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with, certain
terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is also sometimes
called an "unaccepted offer." An option is not of itself a purchase, but merely secures the privilege to buy. 22 It is not a sale
of property but a sale of property but a sale of the right to purchase. 23 It is simply a contract by which the owner of
property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time.
He does not sell his land; he does not then agree to sell it; but he does sell something, that it is, the right or privilege to
buy at the election or option of the other party. 24 Its distinguishing characteristic is that it imposes no binding obligation on
the person holding the option, aside from the consideration for the offer. Until acceptance, it is not, properly speaking, a
contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject matter, but is
merely a contract by which the owner of property gives the optionee the right or privilege of accepting the offer and buying
the property on certain terms. 25

On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons whereby one binds himself,
with respect to the other, to give something or to render some service. 26 Contracts, in general, are perfected by mere
consent, 27 which 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. 28

The distinction between an "option" and a contract of sale is that an option is an unaccepted offer. It states the terms and
conditions on which the owner is willing to sell the land, if the holder elects to accept them within the time limited. If the
holder does so elect, he must give notice to the other party, and the accepted offer thereupon becomes a valid and
binding contract. If an acceptance is not made within the time fixed, the owner is no longer bound by his offer, and the
option is at an end. A contract of sale, on the other hand, fixes definitely the relative rights and obligations of both parties
at the time of its execution. The offer and the acceptance are concurrent, since the minds of the contracting parties meet
in the terms of the agreement. 29

A perusal of the contract in this case, as well as the oral and documentary evidence presented by the parties, readily
shows that there is indeed a concurrence of petitioner's offer to buy and private respondents' acceptance thereof. The rule
is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made
and must be evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an
informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest a present
intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or
words of a party recognizing the existence of the contract of sale. 30

The records also show that private respondents accepted the offer of petitioner to buy their property under the terms of
their contract. At the time petitioner made its offer, private respondents suggested that their transfer certificate of title be
first reconstituted, to which petitioner agreed. As a matter of fact, it was petitioner's counsel, Atty. Bayani L. Bernardo, who
assisted private respondents in filing a petition for reconstitution. After the title was reconstituted, the parties agreed that
petitioner would pay either in cash or manager's check the amount of P2,856,150.00 for the lot. Petitioner was supposed
to pay the same on November 25, 1989, but it later offered to make a down payment of P50,000.00, with the balance of
P2,806,150.00 to be paid on or before November 30, 1989. Private respondents agreed to the counter-offer made by
petitioner. 31 As a result, the so-called exclusive option to purchase was prepared by petitioner and was subsequently
signed by private respondents, thereby creating a perfected contract to sell between them.

It cannot be gainsaid that the offer to buy a specific piece of land was definite and certain, while the acceptance thereof
was absolute and without any condition or qualification. The agreement as to the object, the price of the property, and the
terms of payment was clear and well-defined. No other significance could be given to such acts that than they were meant
to finalize and perfect the transaction. The parties even went beyond the basic requirements of the law by stipulating that
"all expenses including the corresponding capital gains tax, cost of documentary stamps are for the account of the
vendors, and expenses for the registration of the deed of sale in the Registry of Deeds are for the account of Adelfa
properties, Inc." Hence, there was nothing left to be done except the performance of the respective obligations of the
parties.

We do not subscribe to private respondents' submission, which was upheld by both the trial court and respondent court of
appeals, that the offer of petitioner to deduct P500,000.00, (later reduced to P300,000.00) from the purchase price for the
settlement of the civil case was tantamount to a counter-offer. It must be stressed that there already existed a perfected
contract between the parties at the time the alleged counter-offer was made. Thus, any new offer by a party becomes
binding only when it is accepted by the other. In the case of private respondents, they actually refused to concur in said
offer of petitioner, by reason of which the original terms of the contract continued to be enforceable.

At any rate, the same cannot be considered a counter-offer for the simple reason that petitioner's sole purpose was to
settle the civil case in order that it could already comply with its obligation. In fact, it was even indicative of a desire by
petitioner to immediately comply therewith, except that it was being prevented from doing so because of the filing of the
civil case which, it believed in good faith, rendered compliance improbable at that time. In addition, no inference can be
drawn from that suggestion given by petitioner that it was totally abandoning the original contract.

More importantly, it will be noted that the failure of petitioner to pay the balance of the purchase price within the agreed
period was attributed by private respondents to "lack of word of honor" on the part of the former. The reason of "lack of
word of honor" is to us a clear indication that private respondents considered petitioner already bound by its obligation to
pay the balance of the consideration. In effect, private respondents were demanding or exacting fulfillment of the
obligation from herein petitioner. with the arrival of the period agreed upon by the parties, petitioner was supposed to
comply with the obligation incumbent upon it to perform, not merely to exercise an option or a right to buy the property.

The obligation of petitioner on November 30, 1993 consisted of an obligation to give something, that is, the payment of the
purchase price. The contract did not simply give petitioner the discretion to pay for the property. 32 It will be noted that
there is nothing in the said contract to show that petitioner was merely given a certain period within which to exercise its
privilege to buy. The agreed period was intended to give time to herein petitioner within which to fulfill and comply with its
obligation, that is, to pay the balance of the purchase price. No evidence was presented by private respondents to prove
otherwise.

The test in determining whether a contract is a "contract of sale or purchase" or a mere "option" is whether or not the
agreement could be specifically enforced. 33 There is no doubt that the obligation of petitioner to pay the purchase price is
specific, definite and certain, and consequently binding and enforceable. Had private respondents chosen to enforce the
contract, they could have specifically compelled petitioner to pay the balance of P2,806,150.00. This is distinctly made
manifest in the contract itself as an integral stipulation, compliance with which could legally and definitely be demanded
from petitioner as a consequence.

This is not a case where no right is as yet created nor an obligation declared, as where something further remains to be
done before the buyer and seller obligate themselves. 34 An agreement is only an "option" when no obligation rests on the
party to make any payment except such as may be agreed on between the parties as consideration to support the option
until he has made up his mind within the time specified. 35 An option, and not a contract to purchase, is effected by an
agreement to sell real estate for payments to be made within specified time and providing forfeiture of money paid upon
failure to make payment, where the purchaser does not agree to purchase, to make payment, or to bind himself in any
way other than the forfeiture of the payments made. 36 As hereinbefore discussed, this is not the situation obtaining in the
case at bar.

While there is jurisprudence to the effect that a contract which provides that the initial payment shall be totally forfeited in
case of default in payment is to be considered as an option contract, 37 still we are not inclined to conform with the findings
of respondent court and the court a quo that the contract executed between the parties is an option contract, for the
reason that the parties were already contemplating the payment of the balance of the purchase price, and were not
merely quoting an agreed value for the property. The term "balance," connotes a remainder or something remaining from
the original total sum already agreed upon.

In other words, the alleged option money of P50,000.00 was actually earnest money which was intended to form part of
the purchase price. The amount of P50,000.00 was not distinct from the cause or consideration for the sale of the
property, but was itself a part thereof. It is a statutory rule that whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the perfection of the contract. 38 It constitutes an advance payment
and must, therefore, be deducted from the total price. Also, earnest money is given by the buyer to the seller to bind the
bargain.

There are clear distinctions between earnest money and option money, viz.: (a) earnest money is part of the purchase
price, while option money ids the money given as a distinct consideration for an option contract; (b) earnest money is
given only where there is already a sale, while option money applies to a sale not yet perfected; and (c) when earnest
money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not
required to buy. 39

The aforequoted characteristics of earnest money are apparent in the so-called option contract under review, even though
it was called "option money" by the parties. In addition, private respondents failed to show that the payment of the balance
of the purchase price was only a condition precedent to the acceptance of the offer or to the exercise of the right to buy.
On the contrary, it has been sufficiently established that such payment was but an element of the performance of
petitioner's obligation under the contract to sell. 40

II

1. This brings us to the second issue as to whether or not there was valid suspension of payment of the purchase price by
petitioner and the legal consequences thereof. To justify its failure to pay the purchase price within the agreed period,
petitioner invokes Article 1590 of the civil Code which provides:

Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should
he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of
mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or
danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A
mere act of trespass shall not authorize the suspension of the payment of the price.

Respondent court refused to apply the aforequoted provision of law on the erroneous assumption that the true agreement
between the parties was a contract of option. As we have hereinbefore discussed, it was not an option contract but a
perfected contract to sell. Verily, therefore, Article 1590 would properly apply.

Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed against the parties herein involved only
the eastern half of the land subject of the deed of sale between petitioner and the Jimenez brothers, it did not, therefore,
have any adverse effect on private respondents' title and ownership over the western half of the land which is covered by
the contract subject of the present case. We have gone over the complaint for recovery of ownership filed in said
case 41 and we are not persuaded by the factual findings made by said courts. At a glance, it is easily discernible that,
although the complaint prayed for the annulment only of the contract of sale executed between petitioner and the Jimenez
brothers, the same likewise prayed for the recovery of therein plaintiffs' share in that parcel of land specifically covered by
TCT No. 309773. In other words, the plaintiffs therein were claiming to be co-owners of the entire parcel of land described
in TCT No. 309773, and not only of a portion thereof nor, as incorrectly interpreted by the lower courts, did their claim
pertain exclusively to the eastern half adjudicated to the Jimenez brothers.

Such being the case, petitioner was justified in suspending payment of the balance of the purchase price by reason of the
aforesaid vindicatory action filed against it. The assurance made by private respondents that petitioner did not have to
worry about the case because it was pure and simple harassment 42 is not the kind of guaranty contemplated under the
exceptive clause in Article 1590 wherein the vendor is bound to make payment even with the existence of a vindicatory
action if the vendee should give a security for the return of the price.

2. Be that as it may, and the validity of the suspension of payment notwithstanding, we find and hold that private
respondents may no longer be compelled to sell and deliver the subject property to petitioner for two reasons, that is,
petitioner's failure to duly effect the consignation of the purchase price after the disturbance had ceased; and, secondarily,
the fact that the contract to sell had been validly rescinded by private respondents.
The records of this case reveal that as early as February 28, 1990 when petitioner caused its exclusive option to be
annotated anew on the certificate of title, it already knew of the dismissal of civil Case No. 89-5541. However, it was only
on April 16, 1990 that petitioner, through its counsel, wrote private respondents expressing its willingness to pay the
balance of the purchase price upon the execution of the corresponding deed of absolute sale. At most, that was merely a
notice to pay. There was no proper tender of payment nor consignation in this case as required by law.

The mere sending of a letter by the vendee expressing the intention to


pay, without the accompanying payment, is not considered a valid tender of payment. 43 Besides, a mere tender of
payment is not sufficient to compel private respondents to deliver the property and execute the deed of absolute sale. It is
consignation which is essential in order to extinguish petitioner's obligation to pay the balance of the purchase
price. 44 The rule is different in case of an option contract 45 or in legal redemption or in a sale with right to
repurchase, 46 wherein consignation is not necessary because these cases involve an exercise of a right or privilege (to
buy, redeem or repurchase) rather than the discharge of an obligation, hence tender of payment would be sufficient to
preserve the right or privilege. This is because the provisions on consignation are not applicable when there is no
obligation to pay. 47 A contract to sell, as in the case before us, involves the performance of an obligation, not merely the
exercise of a privilege of a right. consequently, performance or payment may be effected not by tender of payment alone
but by both tender and consignation.

Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased with the dismissal of the
civil case filed against it. Necessarily, therefore, its obligation to pay the balance again arose and resumed after it
received notice of such dismissal. Unfortunately, petitioner failed to seasonably make payment, as in fact it has deposit
the money with the trial court when this case was originally filed therein.

By reason of petitioner's failure to comply with its obligation, private respondents elected to resort to and did announce the
rescission of the contract through its letter to petitioner dated July 27, 1990. That written notice of rescission is deemed
sufficient under the circumstances. Article 1592 of the Civil Code which requires rescission either by judicial action or
notarial act is not applicable to a contract to sell. 48 Furthermore, judicial action for rescission of a contract is not
necessary where the contract provides for automatic rescission in case of breach, 49 as in the contract involved in the
present controversy.

We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that the right to rescind is not
absolute, being ever subject to scrutiny and review by the proper court. It is our considered view, however, that this rule
applies to a situation where the extrajudicial rescission is contested by the defaulting party. In other words, resolution of
reciprocal contracts may be made extrajudicially unless successfully impugned in court. If the debtor impugns the
declaration, it shall be subject to judicial determination 51 otherwise, if said party does not oppose it, the extrajudicial
rescission shall have legal effect. 52

In the case at bar, it has been shown that although petitioner was duly furnished and did receive a written notice of
rescission which specified the grounds therefore, it failed to reply thereto or protest against it. Its silence thereon suggests
an admission of the veracity and validity of private respondents' claim. 53 Furthermore, the initiative of instituting suit was
transferred from the rescinder to the defaulter by virtue of the automatic rescission clause in the contract. 54 But then, the
records bear out the fact that aside from the lackadaisical manner with which petitioner treated private respondents' latter
of cancellation, it utterly failed to seriously seek redress from the court for the enforcement of its alleged rights under the
contract. If private respondents had not taken the initiative of filing Civil Case No. 7532, evidently petitioner had no
intention to take any legal action to compel specific performance from the former. By such cavalier disregard, it has been
effectively estopped from seeking the affirmative relief it now desires but which it had theretofore disdained.

WHEREFORE, on the foregoing modificatory premises, and considering that the same result has been reached by
respondent Court of Appeals with respect to the relief awarded to private respondents by the court a quo which we find to
be correct, its assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-9871 January 31, 1958

ATKINS, KROLL and CO., INC., petitioner,


vs.
B. CUA HIAN TEK, respondent.

Ross Selph, Carrascoso and Janda for petitioner.


Ponciano T. Castro for respondent.

BENGZON, J.:

Review of a Court of Appeals' decision. For its failure to deliver one thousand cartons of sardines, which it had sold to B.
Cua Hian Tek, petitioner was sued, and after trial was ordered by the Manila court of first instance to Pay damages, which
on appeal was reduced by the Court of Appeals to P3,240.15 representing unrealized profits.

There was no such contract of sale, says petitioner, but only an option to buy, which was not enforceable for lack of
consideration because in accordance with Art. 1479 of the New Civil Code "an accepted unilatateral promise to buy or to
sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration
distinct from the price.

Simple are the facts of this case: Dated September 13, 1951, petitioner sent to respondent a letter of the following tenor:

Sir (s) /Madam:

We are pleased to make you herewith the following firm offer, subject to reply by September 23, 1951:

Quantity and Commodity:

400 Ctns. Luneta brand Sardines in Tomato Sauce 48/15-oz. Ovals at $8.25 Ctn.

300 Ctns. Luntea brand Sardines Natural 48/15 oz. talls at $6.25 Ct.

300 Ctns. Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 Ct.

Price(s):

All prices C ad F Manila Cosular Fees of $6.00 to be added.

Shipmet:

Durig September/October from US Ports.

Supplier:

Atkins, Kroll & Co., Sa Frasisco, Cal. U.S.A.

We are looking forward to receive your valued order and remain .

Very truly yours,


The Court of first instance and the Court of Appeals 1 found that B. Cua Hian Tek accepted the offer unconditionally and
delivered his letter of acceptance Exh. B on September 21, 1951. However, due to shortage of catch of sardines by the
packers in California, Atkins Kroll & Co., failed to deliver the commodities it had offered for sale. There are other details to
which reference shall not be made, as they touch the question whether the acceptance had been handed on time; and on
that issue of Court of Appeals definitely found for plaintiff.

Ayway, in presenting its case before this Court petitioner does not dispute such timely acceptance. It merely raises the
point that the acceptance only created an option, which, lacking consideration, had no obligatory force.

The offer Exh. A, petitioner argues, "was a promise to sell a determinate thing for a price certain. Upon its acceptance by
respondent, the offer became an accepted unilateral promise to sell a determinate thing for price certain. Inasmuch as
there was no consideration to support the promise to sell distinct from the price, it follows that under Art. 1479
aforequoted, the promise is not binding on the petitioner even if it was accepted by respondent." (p. 12 brief of petitioner.).

The argument, maifestly assumes that only a unilateral promise arose when the offeree accepted. Such assumption is a
mistake, because a bilateral cotract to sell and to buy was created upon acceptance. So much so that B. Cua Hian Tek
could be sued, he had backed out after accepting, by refusing to get the sardines and/or to pay for their price. Indeed, the
word "option" is found neither in the offer nor in the acceptance. On the copntrary Exh. B accepted "the firm offer for the
sale" and adds, "the undersigned buyer has immediately filed an application for import license . . ." (Emphasis Ours.).

Petitioner, however, insists the offer was a mere offer of option, because the "firm offer" Exh. A. was a continuing offer to
sell until September 23, "an option is nothing more than a continuing offer" for a specified time. In our opinion implies
more than that: it implies the legal obligation to keep open for the time specified. 2 Yet the letter Exh. A did not by itself
produce the legal obligation of keeping the offer open up ot Septmber 23. It could be withdrawn before acceptance,
because it is admitted, there was no consideration for it.

ART. 1324. When the offerer has showed the offeree a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such withdrawal, except when the option is founded upon a
consideration, as somnething paid or promissed. (n) (New Civil Code.).

Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce, even though the offer
provides that it will not be withdrawn or countermanded, or allows the offeree a certain time within which to accept
it, unless such provision or agreement is supported by an independent consideration. . . (77 Corpus Juris
Secundum p. 636.).

Furthermore, an option is unilateral: a promise to sell3 at the price fixed whenever the offeree should decide to exercise
his option within the specified time. After accepting the promise and before he exercises his option, the holder of the
option is not bound to buy. He is free either to buy or not to later. In this case, however, upon accepeting herein
petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligations of a
purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilalteral
contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold
that .

If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until
accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even
though the option was not supported by a sufficient consideration. . . (77 Corpus Juris Secundum p. 652. See also
27 Ruling Case Law 339 and cases cited.).

It can be taken for granted, as contended by the defendants, that the option contract was not valid for lack of
consideration. But it was, at least, an offer to sell, which was accepted by letter, and of this acceptance the offerer
had knowledge before said offer was withdrawn. The concurrence of both actsthe offer and the acceptance
could at all events have generated a contract, if none there was before (atrs. 1254 and 1262 of the Civil Code).
(Zayco vs. Serra, 44 Phil. 331.).

One additional observation should be made before the closing this opinion. The defense in the court of first instance
rested on the proposition or propositions that the offer had not been precedent had not been fulfilled. This option-without-
consideration idea was never mentioned in the answer. A Change of theory in the appellate courts is not permitted.
In order that a question may be raised on appeal, it is essential that it be within the issues made by the parties in
their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and
decided upon that theory in the court below, he will not be permitted to change his theory on appeal because, to
permit him to do so, would be unfair to the adverse party. (Rules of Court by Moran1957 Ed. Vol. I p.715 citing
Agoncillo vs. Javier, 38 Phil. 424; American Express Company vs. Natividad, 46 Phil. 207; San Agustin vs.
Barrios, 68 Phil. 465, 480; Toribio vs. Dacasa, 55 Phil. 461.) .

We must therefore hold, as the lower courts have held that there was a contract of sale between the parties. And as no
legal excuse has been proven, the seller's failure to comply therewith gave around to an award for damages, which has
been fixed by the Court of Appeals at P3,240.15-amount which petitioner does not dispute in this final instance.

Consequently, the decision under review should be, and it is hereby affirmed, with cost against petitioner.

Paras, C.J., Padilla, Montemayor, Reyes, A., Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ., concur.
Bautista Angelo, J., concurs in the result.

Footnotes

1 p. 6 brief of petitioner.

2 Morase vs. Burleigh 170 La. 270, 127 So. 624.

3 Or to buy as the case may be.


Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 106063 November 21, 1996

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners,
vs.
MAYFAIR THEATER, INC., respondent.

HERMOSISIMA, JR., J.:

Before us is a petition for review of the decision 1 of the Court of


Appeals 2 involving questions in the resolution of which the respondent appellate court analyzed and interpreted
particular provisions of our laws on contracts and sales. In its assailed decision, the respondent court reversed
the trial court 3 which, in dismissing the complaint for specific performance with damages and annulment of
contract, 4 found the option clause in the lease contracts entered into by private respondent Mayfair Theater, Inc.
(hereafter, Mayfair) and petitioner Carmelo & Bauermann, Inc. (hereafter, Carmelo) to be impossible of
performance and unsupported by a consideration and the subsequent sale of the subject property to petitioner
Equatorial Realty Development, Inc. (hereafter, Equatorial) to have been made without any breach of or prejudice
to, the said lease contracts. 5

We reproduce below the facts as narrated by the respondent court, which narration, we note, is almost verbatim
the basis of the statement of facts as rendered by the petitioners in their pleadings:

Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon located at Claro
M Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds of
Manila.

On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter's lease of a portion of
Carmelo's property particularly described, to wit:

A PORTION OF THE SECOND FLOOR of the two-storey building, situated at C.M. Recto
Avenue, Manila, with a floor area of 1,610 square meters.

THE SECOND FLOOR AND MEZZANINE of the two-storey building, situated at C.M.
Recto Avenue, Manila, with a floor area of 150 square meters.

for use by Mayfair as a motion picture theater and for a term of twenty (20) years. Mayfair thereafter
constructed on the leased property a movie house known as "Maxim Theatre."

Two years later, on March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the
lease of another portion of Carmelo's property, to wit:

A PORTION OF THE SECOND FLOOR of the two-storey building, situated at C.M. Recto
Avenue, Manila, with a floor area of 1,064 square meters.

THE TWO (2) STORE SPACES AT THE GROUND FLOOR and MEZZANINE of the two-
storey building situated at C.M. Recto Avenue, Manila, with a floor area of 300 square
meters and bearing street numbers 1871 and 1875,
for similar use as a movie theater and for a similar term of twenty (20) years. Mayfair put up another
movie house known as "Miramar Theatre" on this leased property.

Both contracts of lease provides (sic) identically worded paragraph 8, which reads:

That if the LESSOR should desire to sell the leased premises, the LESSEE shall be
given 30-days exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than the
LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to
stipulate in the Deed of Sale hereof that the purchaser shall recognize this lease and be
bound by all the terms and conditions thereof.

Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair,
through a telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto
property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for
US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six
to Seven Million Pesos.

Mr. Yang replied that he would let Mr. Pascal know of his decision. On August 23, 1974, Mayfair replied
through a letter stating as follows:

It appears that on August 19, 1974 your Mr. Henry Pascal informed our client's Mr. Henry
Yang through the telephone that your company desires to sell your above-mentioned
C.M. Recto Avenue property.

Under your company's two lease contracts with our client, it is uniformly provided:

8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be
given 30-days exclusive option to purchase the same. In the event, however, that the
leased premises is sold to someone other than the LESSEE, the LESSOR is bound and
obligated, as it is (sic) herebinds (sic) and obligates itself, to stipulate in the Deed of Sale
thereof that the purchaser shall recognize this lease and be bound by all the terms and
conditions hereof (sic).

Carmelo did not reply to this letter.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring
not only the leased premises but "the entire building and other improvements if the price is reasonable.
However, both Carmelo and Equatorial questioned the authenticity of the second letter.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which
included the leased premises housing the "Maxim" and "Miramar" theatres, to Equatorial by virtue of a
Deed of Absolute Sale, for the total sum of P11,300,000.00.

In September 1978, Mayfair instituted the action a quo for specific performance and annulment of the sale
of the leased premises to Equatorial. In its Answer, Carmelo alleged as special and affirmative defense
(a) that it had informed Mayfair of its desire to sell the entire C.M. Recto Avenue property and offered the
same to Mayfair, but the latter answered that it was interested only in buying the areas under lease, which
was impossible since the property was not a condominium; and (b) that the option to purchase invoked by
Mayfair is null and void for lack of consideration. Equatorial, in its Answer, pleaded as special and
affirmative defense that the option is void for lack of consideration (sic) and is unenforceable by reason of
its impossibility of performance because the leased premises could not be sold separately from the other
portions of the land and building. It counterclaimed for cancellation of the contracts of lease, and for
increase of rentals in view of alleged supervening extraordinary devaluation of the currency. Equatorial
likewise cross-claimed against co-defendant Carmelo for indemnification in respect of Mayfair's claims.

During the pre-trial conference held on January 23, 1979, the parties stipulated on the following:
1. That there was a deed of sale of the contested premises by the defendant Carmelo . . .
in favor of defendant Equatorial . . .;

2. That in both contracts of lease there appear (sic) the stipulation granting the plaintiff
exclusive option to purchase the leased premises should the lessor desire to sell the
same (admitted subject to the contention that the stipulation is null and void);

3. That the two buildings erected on this land are not of the condominium plan;

4. That the amounts stipulated and mentioned in paragraphs 3 (a) and (b) of the
contracts of lease constitute the consideration for the plaintiff's occupancy of the leased
premises, subject of the same contracts of lease, Exhibits A and B;

xxx xxx xxx

6. That there was no consideration specified in the option to buy embodied in the
contract;

7. That Carmelo & Bauermann owned the land and the two buildings erected thereon;

8. That the leased premises constitute only the portions actually occupied by the
theaters; and

9. That what was sold by Carmelo & Bauermann to defendant Equatorial Realty is the
land and the two buildings erected thereon.

xxx xxx xxx

After assessing the evidence, the court a quo rendered the appealed decision, the decretal portion of
which reads as follows:

WHEREFORE, judgment is hereby rendered:

(1) Dismissing the complaint with costs against the plaintiff;

(2) Ordering plaintiff to pay defendant Carmelo & Bauermann P40,000.00 by way of
attorney's fees on its counterclaim;

(3) Ordering plaintiff to pay defendant Equatorial Realty P35,000.00 per month as
reasonable compensation for the use of areas not covered by the contract (sic) of lease
from July 31, 1979 until plaintiff vacates said area (sic) plus legal interest from July 31,
1978; P70,000 00 per month as reasonable compensation for the use of the premises
covered by the contracts (sic) of lease dated (June 1, 1967 from June 1, 1987 until
plaintiff vacates the premises plus legal interest from June 1, 1987; P55,000.00 per
month as reasonable compensation for the use of the premises covered by the contract
of lease dated March 31, 1969 from March 30, 1989 until plaintiff vacates the premises
plus legal interest from March 30, 1989; and P40,000.00 as attorney's fees;

(4) Dismissing defendant Equatorial's crossclaim against defendant Carmelo &


Bauermann.

The contracts of lease dated June 1, 1967 and March 31, 1969 are declared expired and
all persons claiming rights under these contracts are directed to vacate the premises. 6

The trial court adjudged the identically worded paragraph 8 found in both aforecited lease contracts to be an
option clause which however cannot be deemed to be binding on Carmelo because of lack of distinct
consideration therefor.
The court a quo ratiocinated:

Significantly, during the pre-trial, it was admitted by the parties that the option in the contract of lease is
not supported by a separate consideration. Without a consideration, the option is therefore not binding on
defendant Carmelo & Bauermann to sell the C.M. Recto property to the former. The option invoked by the
plaintiff appears in the contracts of lease . . . in effect there is no option, on the ground that there is no
consideration. Article 1352 of the Civil Code, provides:

Contracts without cause or with unlawful cause, produce no effect whatever. The cause
is unlawful if it is contrary to law, morals, good custom, public order or public policy.

Contracts therefore without consideration produce no effect whatsoever. Article 1324 provides:

When the offeror has allowed the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by communicating such withdrawal, except
when the option is founded upon consideration, as something paid or promised.

in relation with Article 1479 of the same Code:

A promise to buy and sell a determine thing for a price certain is reciprocally
demandable.

An accepted unilateral promise to buy or to sell a determine thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price.

The plaintiff cannot compel defendant Carmelo to comply with the promise unless the former establishes
the existence of a distinct consideration. In other words, the promisee has the burden of proving the
consideration. The consideration cannot be presumed as in Article 1354:

Although the cause is not stated in the contract, it is presumed that it exists and is lawful
unless the debtor proves the contrary.

where consideration is legally presumed to exists. Article 1354 applies to contracts in general, whereas
when it comes to an option it is governed particularly and more specifically by Article 1479 whereby the
promisee has the burden of proving the existence of consideration distinct from the price. Thus, in the
case of Sanchez vs. Rigor, 45 SCRA 368, 372-373, the Court said:

(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article
1479 refers to sales in particular, and, more specifically, to an accepted unilateral
promise to buy or to sell. In other words, Article 1479 is controlling in the case at bar.

(2) In order that said unilateral promise may be binding upon the promissor, Article 1479
requires the concurrence of a condition, namely, that the promise be supported by a
consideration distinct from the price.

Accordingly, the promisee cannot compel the promissor to comply with the promise,
unless the former establishes the existence of said distinct consideration. In other words,
the promisee has the burden of proving such consideration. Plaintiff herein has not even
alleged the existence thereof in his complaint. 7

It follows that plaintiff cannot compel defendant Carmelo & Bauermann to sell the C.M. Recto property to
the former.

Mayfair taking exception to the decision of the trial court, the battleground shifted to the respondent Court of
Appeals. Respondent appellate court reversed the court a quo and rendered judgment:

1. Reversing and setting aside the appealed Decision;


2. Directing the plaintiff-appellant Mayfair Theater Inc. to pay and return to Equatorial the amount of
P11,300,000.00 within fifteen (15) days from notice of this Decision, and ordering Equatorial Realty
Development, Inc. to accept such payment;

3. Upon payment of the sum of P11,300,000, directing Equatorial Realty Development, Inc. to execute the
deeds and documents necessary for the issuance and transfer of ownership to Mayfair of the lot
registered under TCT Nos. 17350, 118612, 60936, and 52571; and

4. Should plaintiff-appellant Mayfair Theater, Inc. be unable to pay the amount as adjudged, declaring the
Deed of Absolute Sale between the defendants-appellants Carmelo & Bauermann, Inc. and Equatorial
Realty Development, Inc. as valid and binding upon all the parties. 8

Rereading the law on the matter of sales and option contracts, respondent Court of Appeals differentiated
between Article 1324 and Article 1479 of the Civil Code, analyzed their application to the facts of this case, and
concluded that since paragraph 8 of the two lease contracts does not state a fixed price for the purchase of the
leased premises, which is an essential element for a contract of sale to be perfected, what paragraph 8 is, must
be a right of first refusal and not an option contract. It explicated:

Firstly, the court a quo misapplied the provisions of Articles 1324 and 1479, second paragraph, of the
Civil Code.

Article 1324 speaks of an "offer" made by an offeror which the offeree may or may not accept within a
certain period. Under this article, the offer may be withdrawn by the offeror before the expiration of the
period and while the offeree has not yet accepted the offer. However, the offer cannot be withdrawn by
the offeror within the period if a consideration has been promised or given by the offeree in exchange for
the privilege of being given that period within which to accept the offer. The consideration is distinct from
the price which is part of the offer. The contract that arises is known as option. In the case of Beaumont
vs. Prieto, 41 Phil. 670, the Supreme court, citing Bouvier, defined an option as follows: "A contract by
virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying
from or selling to B, certain securities or properties within a limited time at a specified price," (pp. 686-7).

Article 1479, second paragraph, on the other hand, contemplates of an "accepted unilateral promise to
buy or to sell a determinate thing for a price within (which) is binding upon the promisee if the promise is
supported by a consideration distinct from the price." That "unilateral promise to buy or to sell a
determinate thing for a price certain" is called an offer. An "offer", in laws, is a proposal to enter into a
contract (Rosenstock vs. Burke, 46 Phil. 217). To constitute a legal offer, the proposal must be certain as
to the object, the price and other essential terms of the contract (Art. 1319, Civil Code).

Based on the foregoing discussion, it is evident that the provision granting Mayfair "30-days exclusive
option to purchase" the leased premises is NOT AN OPTION in the context of Arts. 1324 and 1479,
second paragraph, of the Civil Code. Although the provision is certain as to the object (the sale of the
leased premises) the price for which the object is to be sold is not stated in the provision Otherwise
stated, the questioned stipulation is not by itself, an "option" or the "offer to sell" because the clause does
not specify the price for the subject property.

Although the provision giving Mayfair "30-days exclusive option to purchase" cannot be legally
categorized as an option, it is, nevertheless, a valid and binding stipulation. What the trial court failed to
appreciate was the intention of the parties behind the questioned proviso.

xxx xxx xxx

The provision in question is not of the pro-forma type customarily found in a contract of lease. Even
appellees have recognized that the stipulation was incorporated in the two Contracts of Lease at the
initiative and behest of Mayfair. Evidently, the stipulation was intended to benefit and protect Mayfair in its
rights as lessee in case Carmelo should decide, during the term of the lease, to sell the leased property.
This intention of the parties is achieved in two ways in accordance with the stipulation. The first is by
giving Mayfair "30-days exclusive option to purchase" the leased property. The second is, in case Mayfair
would opt not to purchase the leased property, "that the purchaser (the new owner of the leased property)
shall recognize the lease and be bound by all the terms and conditions thereof."
In other words, paragraph 8 of the two Contracts of lease, particularly the stipulation giving Mayfair "30-
days exclusive option to purchase the (leased premises)," was meant to provide Mayfair the opportunity
to purchase and acquire the leased property in the event that Carmelo should decide to dispose of the
property. In order to realize this intention, the implicit obligation of Carmelo once it had decided to sell the
leased property, was not only to notify Mayfair of such decision to sell the property, but, more importantly,
to make an offer to sell the leased premises to Mayfair, giving the latter a fair and reasonable opportunity
to accept or reject the offer, before offering to sell or selling the leased property to third parties. The right
vested in Mayfair is analogous to the right of first refusal, which means that Carmelo should have offered
the sale of the leased premises to Mayfair before offering it to other parties, or, if Carmelo should receive
any offer from third parties to purchase the leased premises, then Carmelo must first give Mayfair the
opportunity to match that offer.

In fact, Mr. Pascal understood the provision as giving Mayfair a right of first refusal when he made the
telephone call to Mr. Yang in 1974. Mr. Pascal thus testified:

Q Can you tell this Honorable Court how you made the offer to Mr. Henry
Yang by telephone?

A I have an offer from another party to buy the property and having the
offer we decided to make an offer to Henry Yang on a first-refusal basis.
(TSN November 8, 1983, p. 12.).

and on cross-examination:

Q When you called Mr. Yang on August 1974 can you remember exactly
what you have told him in connection with that matter, Mr. Pascal?

A More or less, I told him that I received an offer from another party to
buy the property and I was offering him first choice of the enter property.
(TSN, November 29, 1983, p. 18).

We rule, therefore, that the foregoing interpretation best renders effectual the intention of the parties. 9

Besides the ruling that paragraph 8 vests in Mayfair the right of first refusal as to which the requirement of distinct
consideration indispensable in an option contract, has no application, respondent appellate court also addressed
the claim of Carmelo and Equatorial that assuming arguendo that the option is valid and effective, it is impossible
of performance because it covered only the leased premises and not the entire Claro M. Recto property, while
Carmelo's offer to sell pertained to the entire property in question. The Court of Appeals ruled as to this issue in
this wise:

We are not persuaded by the contentions of the defendants-appellees. It is to be noted that the Deed of
Absolute Sale between Carmelo and Equatorial covering the whole Claro M. Recto property, made
reference to four titles: TCT Nos. 17350, 118612, 60936 and 52571. Based on the information submitted
by Mayfair in its appellant's Brief (pp. 5 and 46) which has not been controverted by the appellees, and
which We, therefore, take judicial notice of the two theaters stand on the parcels of land covered by TCT
No. 17350 with an area of 622.10 sq. m and TCT No. 118612 with an area of 2,100.10 sq. m. The
existence of four separate parcels of land covering the whole Recto property demonstrates the legal and
physical possibility that each parcel of land, together with the buildings and improvements thereof, could
have been sold independently of the other parcels.

At the time both parties executed the contracts, they were aware of the physical and structural conditions
of the buildings on which the theaters were to be constructed in relation to the remainder of the whole
Recto property. The peculiar language of the stipulation would tend to limit Mayfair's right under
paragraph 8 of the Contract of Lease to the acquisition of the leased areas only. Indeed, what is being
contemplated by the questioned stipulation is a departure from the customary situation wherein the
buildings and improvements are included in and form part of the sale of the subjacent land. Although this
situation is not common, especially considering the non-condominium nature of the buildings, the sale
would be valid and capable of being performed. A sale limited to the leased premises only, if
hypothetically assumed, would have brought into operation the provisions of co-ownership under which
Mayfair would have become the exclusive owner of the leased premises and at the same time a co-owner
with Carmelo of the subjacent land in proportion to Mayfair's interest over the premises sold to it. 10

Carmelo and Equatorial now comes before us questioning the correctness and legal basis for the decision of
respondent Court of Appeals on the basis of the following assigned errors:

THE COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT THE OPTION CLAUSE IN THE
CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST REFUSAL PROVISO. IN DOING SO THE
COURT OF APPEALS DISREGARDED THE CONTRACTS OF LEASE WHICH CLEARLY AND
UNEQUIVOCALLY PROVIDE FOR AN OPTION, AND THE ADMISSION OF THE PARTIES OF SUCH
OPTION IN THEIR STIPULATION OF FACTS.

II

WHETHER AN OPTION OR RIGHT OF FIRST REFUSAL, THE COURT OF APPEALS ERRED IN


DIRECTING EQUATORIAL TO EXECUTE A DEED OF SALE EIGHTEEN (18) YEARS AFTER MAYFAIR
FAILED TO EXERCISE ITS OPTION (OR, EVEN ITS RIGHT OF FIRST REFUSAL ASSUMING IT WAS
ONE) WHEN THE CONTRACTS LIMITED THE EXERCISE OF SUCH OPTION TO 30 DAYS FROM
NOTICE.

III

THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DIRECTED IMPLEMENTATION OF ITS


DECISION EVEN BEFORE ITS FINALITY, AND WHEN IT GRANTED MAYFAIR A RELIEF THAT WAS
NOT EVEN PRAYED FOR IN THE COMPLAINT.

IV

THE COURT OF APPEALS VIOLATED ITS OWN INTERNAL RULES IN THE ASSIGNMENT OF
APPEALED CASES WHEN IT ALLOWED THE SAME DIVISION XII, PARTICULARLY JUSTICE
MANUEL HERRERA, TO RESOLVE ALL THE MOTIONS IN THE "COMPLETION PROCESS" AND TO
STILL RESOLVE THE MERITS OF THE CASE IN THE "DECISION STAGE". 11

We shall first dispose of the fourth assigned error respecting alleged irregularities in the raffle of this case in the
Court of Appeals. Suffice it to say that in our Resolution, 12 dated December 9, 1992, we already took note of this
matter and set out the proper applicable procedure to be the following:

On September 20, 1992, counsel for petitioner Equatorial Realty Development, Inc. wrote a letter-
complaint to this Court alleging certain irregularities and infractions committed by certain lawyers, and
Justices of the Court of Appeals and of this Court in connection with case CA-G.R. CV No. 32918 (now
G.R. No. 106063). This partakes of the nature of an administrative complaint for misconduct against
members of the judiciary. While the letter-complaint arose as an incident in case CA-G.R. CV No. 32918
(now G.R. No. 106063), the disposition thereof should be separate and independent from Case G.R. No.
106063. However, for purposes of receiving the requisite pleadings necessary in disposing of the
administrative complaint, this Division shall continue to have control of the case. Upon completion thereof,
the same shall be referred to the Court En Banc for proper disposition. 13

This court having ruled the procedural irregularities raised in the fourth assigned error of Carmelo and Equatorial,
to be an independent and separate subject for an administrative complaint based on misconduct by the lawyers
and justices implicated therein, it is the correct, prudent and consistent course of action not to pre-empt the
administrative proceedings to be undertaken respecting the said irregularities. Certainly, a discussion thereupon
by us in this case would entail a finding on the merits as to the real nature of the questioned procedures and the
true intentions and motives of the players therein.
In essence, our task is two-fold: (1) to define the true nature, scope and efficacy of paragraph 8 stipulated in the
two contracts of lease between Carmelo and Mayfair in the face of conflicting findings by the trial court and the
Court of Appeals; and (2) to determine the rights and obligations of Carmelo and Mayfair, as well as Equatorial, in
the aftermath of the sale by Carmelo of the entire Claro M. Recto property to Equatorial.

Both contracts of lease in question provide the identically worded paragraph 8, which reads:

That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days
exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR
is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale thereof that
the purchaser shall recognize this lease and be bound by all the terms and conditions thereof. 14

We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for a right of
first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first
refusal.

As early as 1916, in the case of Beaumont vs. Prieto, 15 unequivocal was our characterization of an option
contract as one necessarily involving the choice granted to another for a distinct and separate consideration as to
whether or not to purchase a determinate thing at a predetermined fixed price.

It is unquestionable that, by means of the document Exhibit E, to wit, the letter of December 4, 1911,
quoted at the beginning of this decision, the defendant Valdes granted to the plaintiff Borck the right to
purchase the Nagtajan Hacienda belonging to Benito Legarda, during the period of three months and for
its assessed valuation, a grant which necessarily implied the offer or obligation on the part of the
defendant Valdes to sell to Borck the said hacienda during the period and for the price mentioned . . .
There was, therefore, a meeting of minds on the part of the one and the other, with regard to the
stipulations made in the said document. But it is not shown that there was any cause or consideration for
that agreement, and this omission is a bar which precludes our holding that the stipulations contained in
Exhibit E is a contract of option, for, . . . there can be no contract without the requisite, among others, of
the cause for the obligation to be established.

In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:

A contract by virtue of which A, in consideration of the payment of a certain sum to B,


acquires the privilege of buying from, or selling to B, certain securities or properties within
a limited time at a specified price. (Story vs. Salamon, 71 N.Y., 420.)

From vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs. Leiser (24 Pac., 695;
10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been taken:

An agreement in writing to give a person the option to purchase lands within a given
time at a named price is neither a sale nor an agreement to sell. It is simply a contract by
which the owner of property agrees with another person that he shall have the right to
buy his property at a fixed price within a certain time. He does not sell his land; he does
not then agree to sell it; but he does sell something; that is, the right or privilege to buy at
the election or option of the other party. The second party gets in praesenti, not lands,
nor an agreement that he shall have lands, but he does get something of value; that is,
the right to call for and receive lands if he elects. The owner parts with his right to sell his
lands, except to the second party, for a limited period. The second party receives this
right, or, rather, from his point of view, he receives the right to elect to buy.

But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to
the case where there was cause or consideration for the obligation, the subject of the agreement made by
the parties; while in the case at bar there was no such cause or consideration. 16 (Emphasis ours.)

The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in
order to be valid and enforceable, must, among other things, indicate the definite price at which the person
granting the option, is willing to sell.
Notably, in one case we held that the lessee loses his right to buy the leased property for a named price per square meter
upon failure to make the purchase within the time specified; 17 in one other case we freed the landowner from her promise
to sell her land if the prospective buyer could raise P4,500.00 in three weeks because such option was not supported by a
distinct consideration; 18 in the same vein in yet one other case, we also invalidated an instrument entitled, "Option to
Purchase" a parcel of land for the sum of P1,510.00 because of lack of consideration; 19 and as an exception to the
doctrine enumerated in the two preceding cases, in another case, we ruled that the option to buy the leased premises for
P12,000.00 as stipulated in the lease contract, is not without consideration for in reciprocal contracts, like lease, the
obligation or promise of each party is the consideration for that of the other. 20 In all these cases, the selling price of the
object thereof is always predetermined and specified in the option clause in the contract or in the separate deed of option.
We elucidated, thus, in the very recent case of Ang Yu Asuncion vs. Court of Appeals 21 that:

. . . 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. 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 therefor
a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the
ownership of the thing sold in retained until the fulfillment of a positive suspensive condition (normally, the
full payment of the purchase price), the breach of the condition will prevent the obligation to convey title
from acquiring an obligatory force. . . .

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price
is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted.

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when
coupled with a valuable consideration distinct and separate from the price, is what may properly be
termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the
second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . .

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct from the
price. (1451a).

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the
option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to
comply with their respective undertakings.

Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is
merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere
invitations to make offers or only as proposals. These relations, until a contract is perfected, are not
considered binding commitments. Thus, at any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is
effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree
learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within
which to accept the offer, the following rules generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has
the right to withdraw the offer before its acceptance, or if an acceptance has been made, before the
offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art. 1324,
Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a
unilateral promise to sell under Art. 1479, modifying the previous decision in South Western Sugar vs.
Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc. vs. Remolado,
135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be
exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the
Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good faith."

(2) If the period has a separate consideration, a contract of "option" deemed perfected, and it would be a
breach of that contract to withdraw the offer during the agreed period. The option, however, is an
independent contract by itself; and it is to be distinguished from the projected main agreement (subject
matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the
offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not sue for
specific performance on the proposed contract ("object" of the option) since it has failed to reach its own
stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the
opinion. . .

In the light of the foregoing disquisition and in view of the wording of the questioned provision in the two lease
contracts involved in the instant case, we so hold that no option to purchase in contemplation of the second
paragraph of Article 1479 of the Civil Code, has been granted to Mayfair under the said lease contracts.

Respondent Court of Appeals correctly ruled that the said paragraph 8 grants the right of first refusal to Mayfair
and is not an option contract. It also correctly reasoned that as such, the requirement of a separate consideration
for the option, has no applicability in the instant case.

There is nothing in the identical Paragraphs "8" of the June 1, 1967 and March 31, 1969 contracts which would
bring them into the ambit of the usual offer or option requiring an independent consideration.

An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a
separate and distinct contract from that which the parties may enter into upon the consummation of the option. It
must be supported by consideration. 22 In the instant case, the right of first refusal is an integral part of the
contracts of lease. The consideration is built into the reciprocal obligations of the parties.

To rule that a contractual stipulation such as that found in paragraph 8 of the contracts is governed by Article
1324 on withdrawal of the offer or Article 1479 on promise to buy and sell would render in effectual or "inutile" the
provisions on right of first refusal so commonly inserted in leases of real estate nowadays. The Court of Appeals
is correct in stating that Paragraph 8 was incorporated into the contracts of lease for the benefit of Mayfair which
wanted to be assured that it shall be given the first crack or the first option to buy the property at the price which
Carmelo is willing to accept. It is not also correct to say that there is no consideration in an agreement of right of
first refusal. The stipulation is part and parcel of the entire contract of lease. The consideration for the lease
includes the consideration for the right of first refusal. Thus, Mayfair is in effect stating that it consents to lease the
premises and to pay the price agreed upon provided the lessor also consents that, should it sell the leased
property, then, Mayfair shall be given the right to match the offered purchase price and to buy the property at that
price. As stated in Vda. De Quirino vs. Palarca, 23 in reciprocal contract, the obligation or promise of each party is
the consideration for that of the other.

The respondent Court of Appeals was correct in ascertaining the true nature of the aforecited paragraph 8 to be
that of a contractual grant of the right of first refusal to Mayfair.

We shall now determine the consequential rights, obligations and liabilities of Carmelo, Mayfair and Equatorial.

The different facts and circumstances in this case call for an amplification of the precedent in Ang Yu Asuncion
vs. Court of Appeals. 24

First and foremost is that the petitioners acted in bad faith to render Paragraph 8 "inutile".

What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will have the right of
first refusal in the event Carmelo sells the leased premises. It is undisputed that Carmelo did recognize this right
of Mayfair, for it informed the latter of its intention to sell the said property in 1974. There was an exchange of
letters evidencing the offer and counter-offers made by both parties. Carmelo, however, did not pursue the
exercise to its logical end. While it initially recognized Mayfair's right of first refusal, Carmelo violated such right
when without affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite
offer and a possible corresponding acceptance within the "30-day exclusive option" time granted Mayfair,
Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without prior notice to Mayfair,
the entire Claro M Recto property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible.
We agree with respondent Appellate Court that the records bear out the fact that Equatorial was aware of the
lease contracts because its lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot
tenably claim to be a purchaser in good faith, and, therefore, rescission lies.

. . . Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381(3) of the Civil Code, a
contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons,
like creditors. The status of creditors could be validly accorded the Bonnevies for they had substantial
interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their
right of first priority under the Contract of Lease.

According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third
persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by
means of the restoration of things to their condition at the moment prior to the celebration of said contract.
It is a relief allowed for the protection of one of the contracting parties and even third persons from all
injury and damage the contract may cause, or to protect some incompatible and preferent right created by
the contract. Rescission implies a contract which, even if initially valid, produces a lesion or pecuniary
damage to someone that justifies its invalidation for reasons of equity.

It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the
action for its rescission where it is shown that such third person is in lawful possession of the subject of
the contract and that he did not act in bad faith. However, this rule is not applicable in the case before us
because the petitioner is not considered a third party in relation to the Contract of Sale nor may its
possession of the subject property be regarded as acquired lawfully and in good faith.

Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale. Moreover, the petitioner
cannot be deemed a purchaser in good faith for the record shows that it categorically admitted it was
aware of the lease in favor of the Bonnevies, who were actually occupying the subject property at the time
it was sold to it. Although the Contract of Lease was not annotated on the transfer certificate of title in the
name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such
lease which was equivalent to and indeed more binding than presumed notice by registration.

A purchaser in good faith and for value is one who buys the property of another without notice that some
other person has a right to or interest in such property and pays a full and fair price for the same at the
time of such purchase or before he has notice of the claim or interest of some other person in the
property. Good faith connotes an honest intention to abstain from taking unconscientious advantage of
another. Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith as it
had notice of the lease of the property by the Bonnevies and such knowledge should have cautioned it to
look deeper into the agreement to determine if it involved stipulations that would prejudice its own
interests.

The petitioner insists that it was not aware of the right of first priority granted by the Contract of Lease.
Assuming this to be true, we nevertheless agree with the observation of the respondent court that:

If Guzman-Bocaling failed to inquire about the terms of the Lease Contract, which
includes Par. 20 on priority right given to the Bonnevies, it had only itself to blame.
Having known that the property it was buying was under lease, it behooved it as a
prudent person to have required Reynoso or the broker to show to it the Contract of
Lease in which Par. 20 is contained. 25

Petitioners assert the alleged impossibility of performance because the entire property is indivisible property. It
was petitioner Carmelo which fixed the limits of the property it was leasing out. Common sense and fairness
dictate that instead of nullifying the agreement on that basis, the stipulation should be given effect by including the
indivisible appurtenances in the sale of the dominant portion under the right of first refusal. A valid and legal
contract where the ascendant or the more important of the two parties is the landowner should be given effect, if
possible, instead of being nullified on a selfish pretext posited by the owner. Following the arguments of
petitioners and the participation of the owner in the attempt to strip Mayfair of its rights, the right of first refusal
should include not only the property specified in the contracts of lease but also the appurtenant portions sold to
Equatorial which are claimed by petitioners to be indivisible. Carmelo acted in bad faith when it sold the entire
property to Equatorial without informing Mayfair, a clear violation of Mayfair's rights. While there was a series of
exchanges of letters evidencing the offer and counter-offers between the parties, Carmelo abandoned the
negotiations without giving Mayfair full opportunity to negotiate within the 30-day period.

Accordingly, even as it recognizes the right of first refusal, this Court should also order that Mayfair be authorized
to exercise its right of first refusal under the contract to include the entirety of the indivisible property. The
boundaries of the property sold should be the boundaries of the offer under the right of first refusal. As to the
remedy to enforce Mayfair's right, the Court disagrees to a certain extent with the concluding part of the dissenting
opinion of Justice Vitug. The doctrine enunciated in Ang Yu Asuncion vs.Court of Appeals should be modified, if
not amplified under the peculiar facts of this case.

As also earlier emphasized, the contract of sale between Equatorial and Carmelo is characterized by bad faith,
since it was knowingly entered into in violation of the rights of and to the prejudice of Mayfair. In fact, as correctly
observed by the Court of Appeals, Equatorial admitted that its lawyers had studied the contract of lease prior to
the sale. Equatorial's knowledge of the stipulations therein should have cautioned it to look further into the
agreement to determine if it involved stipulations that would prejudice its own interests.

Since Mayfair has a right of first refusal, it can exercise the right only if the fraudulent sale is first set aside or
rescinded. All of these matters are now before us and so there should be no piecemeal determination of this case
and leave festering sores to deteriorate into endless litigation. The facts of the case and considerations of justice
and equity require that we order rescission here and now. Rescission is a relief allowed for the protection of one
of the contracting parties and even third persons from all injury and damage the contract may cause or to protect
some incompatible and preferred right by the contract. 26 The sale of the subject real property by Carmelo to
Equatorial should now be rescinded considering that Mayfair, which had substantial interest over the subject
property, was prejudiced by the sale of the subject property to Equatorial without Carmelo conferring to Mayfair
every opportunity to negotiate within the 30-day stipulated period. 27

This Court has always been against multiplicity of suits where all remedies according to the facts and the law can
be included. Since Carmelo sold the property for P11,300,000.00 to Equatorial, the price at which Mayfair could
have purchased the property is, therefore, fixed. It can neither be more nor less. There is no dispute over it. The
damages which Mayfair suffered are in terms of actual injury and lost opportunities. The fairest solution would be
to allow Mayfair to exercise its right of first refusal at the price which it was entitled to accept or reject which is
P11,300,000.00. This is clear from the records.

To follow an alternative solution that Carmelo and Mayfair may resume negotiations for the sale to the latter of the
disputed property would be unjust and unkind to Mayfair because it is once more compelled to litigate to enforce
its right. It is not proper to give it an empty or vacuous victory in this case. From the viewpoint of Carmelo, it is like
asking a fish if it would accept the choice of being thrown back into the river. Why should Carmelo be rewarded
for and allowed to profit from, its wrongdoing? Prices of real estate have skyrocketed. After having sold the
property for P11,300,000.00, why should it be given another chance to sell it at an increased price?

Under the Ang Yu Asuncion vs. Court of Appeals decision, the Court stated that there was nothing to execute
because a contract over the right of first refusal belongs to a class of preparatory juridical relations governed not
by the law on contracts but by the codal provisions on human relations. This may apply here if the contract is
limited to the buying and selling of the real property. However, the obligation of Carmelo to first offer the property
to Mayfair is embodied in a contract. It is Paragraph 8 on the right of first refusal which created the obligation. It
should be enforced according to the law on contracts instead of the panoramic and indefinite rule on human
relations. The latter remedy encourages multiplicity of suits. There is something to execute and that is for Carmelo
to comply with its obligation to the property under the right of the first refusal according to the terms at which they
should have been offered then to Mayfair, at the price when that offer should have been made. Also, Mayfair has
to accept the offer. This juridical relation is not amorphous nor is it merely preparatory. Paragraphs 8 of the two
leases can be executed according to their terms.

On the question of interest payments on the principal amount of P11,300,000.00, it must be borne in mind that
both Carmelo and Equatorial acted in bad faith. Carmelo knowingly and deliberately broke a contract entered into
with Mayfair. It sold the property to Equatorial with purpose and intend to withhold any notice or knowledge of the
sale coming to the attention of Mayfair. All the circumstances point to a calculated and contrived plan of non-
compliance with the agreement of first refusal.
On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with notice and full
knowledge that Mayfair had a right to or interest in the property superior to its own. Carmelo and Equatorial took
unconscientious advantage of Mayfair.

Neither may Carmelo and Equatorial avail of considerations based on equity which might warrant the grant of
interests. The vendor received as payment from the vendee what, at the time, was a full and fair price for the
property. It has used the P11,300,000.00 all these years earning income or interest from the amount. Equatorial,
on the other hand, has received rents and otherwise profited from the use of the property turned over to it by
Carmelo. In fact, during all the years that this controversy was being litigated, Mayfair paid rentals regularly to the
buyer who had an inferior right to purchase the property. Mayfair is under no obligation to pay any interests
arising from this judgment to either Carmelo or Equatorial.

WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R.
CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty
Development, Inc. and Carmelo & Bauermann, Inc. is hereby deemed rescinded; petitioner Carmelo &
Bauermann is ordered to return to petitioner Equatorial Realty Development the purchase price. The latter is
directed to execute the deeds and documents necessary to return ownership to Carmelo and Bauermann of the
disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for
P11,300,000.00.

SO ORDERED.

Regalado, Davide, Jr., Bellosillo, Melo, Puno, Kapunan, Mendoza and Francisco, JJ., concur.

Narvasa, C.J., took no part.

Separate Opinions

PADILLA, J., concurring:

I am of the considered view (like Mr. Justice Jose A. R. Melo) that the Court in this case should categorically recognize
Mayfair's right of first refusal under its contract of lease with Carmelo and Bauermann, Inc. (hereafter, Carmelo) and,
because of Carmelo's and Equatorial's bad faith in riding "roughshod" over Mayfair's right of first refusal, the Court should
order the rescission of the sale of the Claro M. Recto property by the latter to Equatorial (Art. 1380-1381[3], Civil Code).
The Court should, in this same case, to avoid multiplicity of suits, likewise allow Mayfair to effectively exercise said right of
first refusal, by paying Carmelo the sum of P11,300,000.00 for the entire subject property, without any need of instituting a
separate action for damages against Carmelo and/or Equatorial.

I do not agree with the proposition that, in addition to the aforesaid purchase price, Mayfair should be required to pay a
compounded interest of 12% per annum of said amount computed from 1 August 1978. Under the Civil Code, a party to a
contract may recover interest as indemnity for damages in the following instances:

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of
contract.

There appears to be no basis in law for adding 12% per annum compounded interest to the purchase price of
P11,300,000.00 payable by Mayfair to Carmelo since there was no such stipulation in writing between the parties
(Mayfair and Carmelo) but, more importantly, because Mayfair neither incurred in delay in the performance of its
obligation nor committed any breach of contract. Indeed, why should Mayfair be penalized by way of making it
pay 12% per annum compounded interest when it was Carmelo which violated Mayfair's right of first refusal under
the contract?

The equities of the case support the foregoing legal disposition. During the intervening years between 1 August 1978 and
this date, Equatorial (after acquiring the C.M. Recto property for the price of P11,300,000.00) had been leasing the
property and deriving rental income therefrom. In fact, one of the lessees in the property was Mayfair. Carmelo had, in
turn, been using the proceeds of the sale, investment-wise and/or operation-wise in its own business.

It may appear, at first blush, that Mayfair is unduly favored by the solution submitted by this opinion, because the price of
P11,300,000.00 which it has to pay Carmelo in the exercise of its right of first refusal, has been subjected to the inroads of
inflation so that its purchasing power today is less than when the same amount was paid by Equatorial to Carmelo. But
then it cannot be overlooked that it was Carmelo's breach of Mayfair's right of first refusal that prevented Mayfair from
paying the price of P11,300,000.00 to Carmelo at about the same time the amount was paid by Equatorial to Carmelo.
Moreover, it cannot be ignored that Mayfair had also incurred consequential or "opportunity" losses by reason of its failure
to acquire and use the property under its right of first refusal. In fine, any loss in purchasing power of the price of
P11,300,000.00 is for Carmelo to incur or absorb on account of its bad faith in breaching Mayfair's contractual right of first
refusal to the subject property.

ACCORDINGLY, I vote to order the rescission of the contract of sale between Carmelo and Equatorial of the Claro M.
Recto property in question, so that within thirty (30) days from the finality of the Court's decision, the property should be
retransferred and delivered by Equatorial to Carmelo with the latter simultaneously returning to Equatorial the sum of
P11,300, 000.00.

I also vote to allow Mayfair to exercise its right of first refusal, by paying to Carmelo the sum of P11,300,000.00 without
interest for the entire subject property, within thirty (30) days from re-acquisition by Carmelo of the titles to the property,
with the corresponding obligation of Carmelo to sell and transfer the property to Mayfair within the same period of thirty
(30) days.

PANGANIBAN, J., concurring:

In the main, I concur with the ponencia of my esteemed colleague, Mr. Justice Regino C. Hermosisima, Jr., especially with
the following doctrinal pronouncements:

1. That while no option to purchase within the meaning of the second paragraph of Article 1479 of the
Civil Code was given to Mayfair Theater, Inc. ("Mayfair"), under the two lease contracts a right of first
refusal was in fact granted, for which no separate consideration is required by law to be paid or given so
as to make it binding upon Carmelo & Bauermann, Inc. ("Carmelo");

2. That such right was violated by the latter when it sold the entire property to Equatorial Realty
Development, Inc. ("Equatorial") on July 30, 1978, for the sum of P11,300,000.00;

3. That Equatorial is a buyer in bad faith as it was aware of the lease contracts, its own lawyers having
studied said contracts prior to the sale; and

4. That, consequently, the contract of sale is rescissible.

5. That, finally, under the proven facts, the right of first refusal may be enforced by an action for specific
performance.

There appears to be unanimity in the Court insofar as items 1, 2 and 3 above are concerned. It is in items 4 and 5 that
there is a marked divergence of opinion. Hence, I shall limit the discussion in this Separate Concurring Opinion to such
issues, namely: Is the contract of sale between Carmelo and Equatorial rescissible, and corollarily, may the right of first
refusal granted to Mayfair be enforced by an action for specific performance?
It is with a great amount of trepidation that I respectfully disagree with the legal proposition espoused by two equally well-
respected colleagues, Mme. Justice Flerida Ruth P. Romero and Mr. Justice Jose C. Vitug who are both acknowledged
authorities on Civil Law that a breach of the covenanted right of first refusal, while warranting a suit for damages under
Article 19 of the Civil Code, cannot sanction an action for specific performance without thereby negating the indispensable
element of con-sensuality in the perfection of contracts.

Ang Yu Asuncion Not In Point

Such statement is anchored upon a pronouncement in Ang Yu Asuncion vs. CA, 1 which was penned by Mr. Justice Vitug
himself. I respectfully submit, however, that that case turned largely on the issue of whether or not the sale of an
immovable in breach of a right of first refusal that had been decreed in a final judgment would justify the issuance of
certain orders of execution in the same case. The validity of said orders was the subject of the attack before this Court.
These orders had not only directed the defendants to execute a deed of sale in favor of the plaintiffs, when there was
nothing in the judgment itself decreeing it, but had also set aside the sale made in breach of said right of first refusal and
even canceled the title that had been issued to the buyer, who was not a party to the suit and had obviously not been
given its day in court. It was thus aptly held:

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first
refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has
heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of
private respondents to honor the right of first refusal, the remedy is not a writ of execution on the
judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser
of the property, has acted in good faith or bad faith and whether or not it should, in any case, be
considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters
that must be independently addressed in appropriate proceedings. Buen Realty, not having been
impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by
respondent Judge, let alone ousted from the ownership and possession of the property, without first being
duly afforded its day in court. 2

In other words, the question of whether specific performance of one's right of first refusal is available as a remedy in case
of breach thereof was not before the Supreme Court at all in Ang Yu Asuncion. Consequently, the pronouncements there
made bearing on such unlitigated question were mere obiter. Moreover, as will be shown later, the pronouncement that a
breach of the right of first refusal would not sanction an action for specific performance but only an action for damages (at
p. 615) is at best debatable (and in my humble view, imprecise or incorrect), on top of its being contradicted by extant
jurisprudence.

Worth bearing in mind is the fact that two juridical relations, both contractual, are involved in the instant case: (1) the deed
of sale between the petitioners dated July 30, 1978, and (2) the contract clause establishing Mayfair's right of first refusal
which was violated by said sale.

With respect to the sale of the property, Mayfair was not a party. It therefore had no personality to sue for its annulment,
since Art. 1397 of the Civil Code provides, inter alia, that "(t)he action for the annulment of contracts may be instituted by
all who are thereby obliged principally or subsidiarily."

But the facts as alleged and proved clearly in the case at bar make out a case for rescission under Art. 1177, in relation to
Art. 1381(3), of the Civil Code, which pertinently read as follows:

Art. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their
claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those
which are inherent in his person; they may also impugn the acts which the debtor may have done to
defraud them.

Art. 1381. The following contracts are rescissible:

xxx xxx xxx

(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims
due them;
xxx xxx xxx

(emphasis supplied)

The term "creditors" as used in these provisions of the Civil Code is broad enough to include the obligee under an option
contract 3 as well as under a right of first refusal, sometimes known as a right of first priority. 4 Thus, in Nietes, the
Supreme Court, speaking through then Mr. Chief Justice Roberto Concepcion, repeatedly referred to the grantee or
optionee as "the creditor" and to the grantor or optioner as "the debtor". 5 In any case, the personal elements of an
obligation are the active and passive subjects thereof, the former being known as creditors or obligees and the latter as
debtors or obligors. 6Insofar as the right of first refusal is concerned, Mayfair is the obligee or creditor.

As such creditor, Mayfair had, therefore, the right to impugn the sale in question by way of accion pauliana under the last
clause of Art. 1177, aforequoted, because the sale was an act done by the debtor to defraud him of his right to acquire the
property. 7 Rescission was also available under par. 3, Art. 1381, abovequoted, as was expressly held in Guzman,
Bocaling & Co., a case closely analogous to this one as it was also an action brought by the lessee to enforce his "right of
first priority" which is just another name for the right of first refusal and to annul a sale made by the lessor in violation
of such right. In said case, this Court, speaking through Mr. Justice Isagani A. Cruz, affirmed the invalidation of the sale
and the enforcement of the lessee's right of first priority this wise: 8

The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could
bring an action to annul it pursuant to Article 1397 of the Civil Code. It is stressed that private
respondents are strangers to that agreement and therefore have no personality to seek its annulment.

The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under
Article(s) 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently
rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly
accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject
property to the petitioner without recognizing their right of first priority under the Contract of Lease.
(emphasis supplied)

By the same token, the status of a defrauded creditor can, and should, be granted to Mayfair, for it certainly had
substantial interests that were prejudiced by the sale of the subject property to petitioner Equatorial in open violation of
Mayfair's right of first refusal under its existing contracts with Carmelo.

In fact, the parity between that case and the present one does not stop there but extends to the crucial and critical fact
that there was manifest bad faith on the part of the buyer. Thus, in Guzman, this Court affirmed in toto the appealed
judgment of the Court of Appeals which, in turn, had affirmed the trial court's decision insofar as it invalidated the deed of
sale in favor of the petitioner-buyer, cancelled its TCT, and ordered the lessor to execute a deed of sale over the leased
property in favor of the lessee for the same price and "under the same terms and conditions", aside from affirming as well
the damages awarded, but at a reduced amount. 9 In other words, the aggrieved party was allowed to acquire the property
itself.

The inescapable conclusion from all of the foregoing is not only that rescission is the proper remedy but also and more
importantly that specific performance was actually used and given free rein as an effective remedy to enforce a right of
first refusal in the wake of its violation, in the cited case of Guzman.

On the other hand, and as already commented on above, the pronouncement in Ang Yu Asuncion to the effect that
specific performance is unavailable to enforce a violated right of first refusal is at best a debatable legal proposition, aside
from being contradicted by extant jurisprudence. Let me explain why.

The consensuality required for a contract of sale is distinct from, and should not be confused with, the consensuality
attendant to the right of first refusal itself. While indeed, prior to the actual sale of the property to Equatorial and the filing
of Mayfair's complaint for specific performance, no perfected contract of sale involving the property ever existed between
Carmelo as seller and Mayfair as buyer, there already was, in law and in fact, a perfected contract between them which
established a right of first refusal, or of first priority.

Specific Performance Is
Viable Remedy
The question is: Can this right (of first refusal) be enforced by an action for specific performance upon a showing of its
breach by an actual sale of the property under circumstances showing palpable bad faith on the part of both seller and
buyer?

The answer, I respectfully submit, should be 'yes'.

As already noted, Mayfair's right of first refusal in the case before us is embodied in an express covenant in the lease
contracts between it as lessee and Carmelo as lessor, hence the right created is one springing from
contract. 10 Indubitably, this had the force of law between the parties, who should thus comply with it in good faith. 11 Such
right also established a correlative obligation on the part of Carmelo to give or deliver to Mayfair a formal offer of sale of
the property in the event Carmelo decides to sell it. The decision to sell was eventually made. But instead of giving or
tendering to Mayfair the proper offer to sell, Carmelo gave it to its now co-petitioner, Equatorial, with whom it eventually
perfected and consummated, on July 30, 1978, an absolute sale of the property, doing so within the period of effectivity of
Mayfair's right of first refusal. Less than two months later, or in September 1978, with the lease still in full force, Mayfair
filed the present suit.

Worth stressing at this juncture is the fact that Mayfair had the right to require that the offer to sell the property be sent to it
by Carmelo, and not to anybody else. This was violated when the offer was made to Equatorial. Under its covenant with
Carmelo, Mayfair had the right, at that point, to sue for either specific performance or rescission, with damages in either
case, pursuant to Arts. 1165 and 1191, Civil Code. 12 An action for specific performance and damages seasonably filed,
fortified by a writ of preliminary injunction, would have enabled Mayfair to prevent the sale to Equatorial from taking place
and to compel Carmelo to sell the property to Mayfair for the same terms and price, for the reason that the filing of the
action for specific performance may juridically be considered as a solemn, formal, and unqualified acceptance by Mayfair
of the specific terms of the offer of sale. Note that by that time, the price and other terms of the proposed sale by Carmelo
had already been determined, being set forth in the offer of sale that had wrongfully been directed to Equatorial.

As it turned out, however, Mayfair did not have a chance to file such suit, for it learned of the sale to Equatorial only after it
had taken place. But it did file the present action for specific performance and for invalidation of the wrongful sale
immediately after learning about the latter act. The act of promptly filing this suit, coupled with the fact that it is one for
specific performance, indicates beyond cavil or doubt Mayfair's unqualified acceptance of the misdirected offer of sale,
giving rise, thereby, to a demandable obligation on the part of Carmelo to execute the corresponding document of sale
upon the payment of the price of P11,300,000.00. In other words, the principle of consensuality of a contract of sale
should be deemed satisfied. The aggrieved party's consent to, or acceptance of, the misdirected offer of sale should be
legally presumed in the context of the proven facts.

To say, therefore, that the wrongful breach of a right of first refusal does not sanction an action for specific performance
simply because, factually, there was no meeting of the minds as to the particulars of the sale since ostensibly no offer was
ever made to, let alone accepted by, Mayfair, is to ignore the proven fact of presumed consent. To repeat, that consent
was deemed given by Mayfair when it sued for invalidation of the sale and for specific performance of Carmelo's
obligation to Mayfair. Nothing in the law as it now stands will be violated, or even simply emasculated, by this holding. On
the contrary, the decision in Guzman supports it.

Moreover, under the Civil Code provisions on the nature, effect and kinds of obligations, 13 Mayfair's right of first refusal
may be classified as one subject to a suspensive condition namely, if Carmelo should decide to sell the leased
premises during the life of the lease contracts, then it should make an offer of sale to Mayfair. Futurity and uncertainty,
which are the essential characteristics of a condition, 14 were distinctly present. Before the decision to sell was made,
Carmelo had absolutely no obligation to sell the property to Mayfair, nor even to make an offer to sell, because in
conditional obligations, where the condition is suspensive, the acquisition of rights depends upon the happening of the
event which constitutes the condition. 15 Had the decision to sell not been made at all, or had it been made after the expiry
of the lease, the parties would have stood as if the conditional obligation had never existed. 16 But the decision to sell was
in fact made. And it was made during the life and efficacy of the lease. Undoubtedly, the condition was duly fulfilled; the
right of first refusal effectively accrued and became enforceable; and correlatively, Carmelo's obligation to make and send
the offer to Mayfair became immediately due and demandable. 17 That obligation was to deliver to Mayfair an offer to sell
a determinate thing for a determinate price. As things turned out, a definite and specific offer to sell the entire property for
the price of P11,300,000.00 was actually made by Carmelo but to the wrong party. It was that particular offer, and no
other, which Carmelo should have delivered to Mayfair, but failed to deliver. Hence, by the time the obligation of Carmelo
accrued through the fulfillment of the suspensive condition, the offer to sell had become a determinate thing.

Art. 1165 of the Civil Code, earlier quoted in footnote 12, indicates the remedies available to the creditor against the
debtor, when it provides that "(w)hen what is to be delivered is a determinate thing, the creditor, in addition to the right
granted him by article 1170, may compel the debtor to make the delivery," clearly authorizing not only the recovery of
damages under Art. 1170 but also an action for specific performance.

But even assuming that Carmelo's prestation did not involve the delivery of a determinate offer but only a generic one, the
second paragraph of Art. 1165 explicitly gives to the creditor the right "to ask that the obligation be complied with at the
expense of the debtor." The availability of an action for specific performance is thus clear and beyond doubt. And the
correctness of Guzman becomes all the more manifest.

Upon the other hand, the obiter in Ang Yu Asuncion is further weakened by the fact that the jurisprudence upon which it
supposedly rests namely, the cases of Madrigal & CO. vs. Stevenson & Co. 18 and Salonga vs. Farrales 19 did NOT
involve a right of first refusal or of first priority. Nor did those two cases involve an option to buy. In Madrigal, plaintiff sued
defendant for damages claiming wrongful breach of an alleged contract of sale of 2,000 tons of coal. The case was
dismissed because "the minds of the parties never met upon a contract of sale by defendant to plaintiff", 20 each party
having signed the broker's memorandum as buyer, erroneously thinking that the other party was the seller! In Salonga, a
lessee, who was one of several lessees ordered by final judgment to vacate the leased premises, sued the lessor to
compel the latter to sell the leased premises to him, but his suit was not founded upon any right of first refusal and was
therefore dismissed on the ground that there was no perfected sale in his favor. He just thought that because the lessor
had decided to sell and in fact sold portions of the property to her other lessees, she was likewise obligated to sell to him
even in the absence of a perfected contract of sale. In fine, neither of the two cases cited in support of the legal
proposition that a breach of the right of first refusal does not sanction an action for specific performance but, at best, only
one for damages, provides such support.

Finally, the fact that what was eventually sold to Equatorial was the entire property, not just the portions leased to Mayfair,
is no reason to deprive the latter of its right to receive a formal and specific offer. The offer of a larger property might have
led Mayfair to reject the offer, but until and unless such rejection was actually made, its right of first refusal still stood.
Upon the other hand, an acceptance by Mayfair would have saved all concerned the time, trouble, and expense of this
protracted litigation. In any case, the disquisition by the Court of Appeals on this point can hardly be faulted; in fact, it
amply justifies the conclusions reached in its decision, as well as the dispositions made therein.

IN VIEW OF THE FOREGOING, I vote to DENY the petition and to AFFIRM the assailed Decision.

ROMERO, J., concurring and dissenting:

I share the opinion that the right granted to Mayfair Theater under the identical par 8 of the June 1, 1967 and March 31,
1969 contracts constitute a right of first refusal.

An option is a privilege granted to buy a determinate thing at a price certain within a specified time and is usually
supported by a consideration which is why, it may be regarded as a contract in itself. The option results in a perfected
contract of sale once the person to whom it is granted decides to exercise it. The right of first refusal is unlike an option
which requires a certainty as to the object and consideration of the anticipated contract. When the right of first refusal is
exercised, there is no perfected contract of sale because the other terms of the sale have yet to be determined. Hence, in
case the offeror reneges on his promise to negotiate with offeree, the latter may only recover damages in the belief that a
contract could have been perfected under Article 19 of the New Civil Code.

I beg to disagree, however, with the majority opinion that the contract of sale entered into by Carmelo and Bauermann,
Inc. and Equatorial Realty Inc., should be rescinded. Justice Hermosisima, in citing Art. 1381 (3) as ground for recission
apparently relied on the case of Guzman, Bocaling and Co. v. Bonnevie (206 SCRA 668 [1992]) where the offeree was
likened to the status of a creditor. The case, in citing Tolentino, stated that rescission is a remedy granted by law to
contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this
should be valid, by means of restoration of things to their condition prior to celebration of the contract. It is my opinion that
"third persons" should be construed to refer to the wards, creditors, absentees, heirs and others enumerated under the
law who are prejudiced by the contract sought to be rescinded.

It should be borne in mind that rescission is an extreme remedy which may be exercised only in the specific instances
provided by law. Article 1381 (3) specifically refers to contracts undertaken in fraud of creditors when the latter cannot in
any manner collect the claims due them. If rescission were allowed for analogous cases, the law would have so stated.
While Article 1381 (5) itself says that rescission may be granted to all other contracts specially declared by law to be
subject to rescission, there is nothing in the law that states that an offeree who failed to exercise his right of refusal
because of bad faith on the part of the offeror may rescind the subsequent contract entered into by the offeror and a third
person. Hence, there is no legal justification to rescind the contract between Carmelo and Bauermann, Inc. and Equatorial
Realty.

Neither do I agree with Justice Melo that Mayfair Theater should pay Carmelo and Bauermann, Inc. the amount of
P11,300,000.00 plus compounded interest of 12% p.a. Justice Melo rationalized that had Carmelo and Bauermann sold
the property to Mayfair, the latter would have paid the property for the same price that Equatorial bought it. It bears
emphasis that Carmelo and Bauermann, Inc. and Mayfair never reached an agreement as to the price of the property in
dispute because the negotiations between the two parties were not pursued to its very end. We cannot, even for reasons
of equity, compel Carmelo to sell the entire property to Mayfair at P11,300,000.00 without violating the consensual nature
of contracts.

I vote, therefore, not to rescind the contract of sale entered into by Carmelo and Bauermann, Inc. and Equatorial Realty
Development Corp.

VITUG, J., dissenting:

I share the opinion that the right granted to Mayfair Theater, Inc., is neither an offer nor an option but merely a right of first
refusal as has been so well and amply essayed in the ponencia of our distinguished colleague Mr. Justice Regino C.
Hermosisima, Jr.

Unfortunately, it would seem that Article 1381 (paragraph 3) of the Civil Code invoked to be the statutory authority for the
rescission of the contract of sale between Carmelo & Bauermann, Inc., and Equatorial Realty Development, Inc., has
been misapplied. The action for rescission under that provision of the law, unlike in the resolution of reciprocal obligations
under Article 1191 of the Code, is merely subsidiary and relates to the specific instance when a debtor, in an attempt to
defraud his creditor, enters into a contract with another that deprives the creditor to recover his just claim and leaves
him with no other legal means, than by rescission, to obtain reparation. Thus, the rescission is only to the extent
necessary to cover the damages caused (Article 1384, Civil Code) and, consistent with its subsidiary nature, would
require the debtor to be an indispensable party in the action (see Gigante vs. Republic Savings Bank, 135 Phil. 359).

The concept of a right of first refusal as a simple juridical relation, and so governed (basically) by the Civil Code's title on
"Human Relations," is not altered by the fact alone that it might be among the stipulated items in a separate document or
even in another contract. A "breach" of the right of first refusal can only give rise to an action for damages primarily under
Article 19 of the Civil Code, as well as its related provisions, but not to an action for specific performance set out under
Book IV of the Code on "Obligations and Contracts." That right, standing by itself, is far distant from being the obligation
referred to in Article 1159 of the Code which would have the force of law sufficient to compel compliance per se or to
establish a creditor-debtor or obligee-obligor relation between the parties. If, as it is rightly so, a right of first refusal cannot
even be properly classed as an offer or as an option, certainly, and with much greater reason, it cannot be the equivalent
of, nor be given the same legal effect as, a duly perfected contract. It is not possible to cross out, such as we have said in
Ang Yu Asuncion vs. Court of Appeals (238 SCRA 602), the indispensable element of consensuality in the perfection of
contracts. It is basic that without mutual consent on the object and on the cause, a contract cannot exist (Art. 1305, Civil
Code); corollary to it, no one can be forced, least of all perhaps by a court, into a contract against his will or compelled to
perform thereunder.

It is sufficiently clear, I submit, that, there being no binding contract between Carmelo and Mayfair, neither the rescission
of the contract between Carmelo and Equatorial nor the directive to Carmelo to sell the property to Mayfair would be
legally appropriate.

My brief disquisition should have ended here except for some personal impressions expressed by my esteemed
colleague, Mr. Justice Artemio V. Panganiban, on the Ang Yu decision which perhaps need to be addressed.

The discussion by the Court in Ang Yu on the right of first refusal is branded as a mere obiter dictum. Justice Panganiban
states: The case "turned largely on the issue of whether or not the sale of an immovable in breach of a right of first refusal
that had been decreed in a final judgment would justify the issuance of certain orders of execution in the same case. . . . .
In other words, the question of whether specific performance of one's right of first refusal is available as a remedy in case
of breach thereof was not before the Supreme Court at all in Ang Yu Asuncion."
Black defines an obiter dictum as "an opinion entirely unnecessary for the decision of the case" and thus "are not binding
as precedent." (Black's Law Dictionary, 6th edition, 1990). A close look at the antecedents of Ang Yu as found by the
Court of Appeals and as later quoted by this Court would readily disclose that the "right of first refusal" was a major point
in the controversy. Indeed, the trial and the appellate courts had rule on it. With due respect, I would not deem it "entirely
unnecessary" for this Court to itself discuss the legal connotation and significance of the decreed (confirmatory) right of
first refusal. I should add that when the ponencia recognized that, in the case of Buen Realty Development Corporation
(the alleged purchaser of the property), the latter could not be held subject of the writ of execution and be ousted from the
ownership and possession of the disputed property without first affording it due process, the Court decided to simply put a
cap in the final disposition of the case but it could not have intended to thereby mitigate the import of its basic ratio
decidendi.

Justice Panganiban opines that the pronouncement in Ang Yu, i.e., that a breach of the right of first refusal does not
sanction an action for specific performance but only an action for damages, "is at best debatable (. . . imprecise or
incorrect), on to top of its being contradicted by extant jurisprudence." He then comes up with the novel proposition that
"Mayfair's right of first refusal may be classified as one subject to a suspensive condition namely, if Carmelo should
decide to sell the leased premises during the life of the lease contracts, then it should make an offer of sale to Mayfair,"
presumably enforceable by action for specific performance.

It would be perilous a journey, first of all, to try to seek out a common path for such juridical relations as contracts, options,
and rights of first refusal since they differ, substantially enough, in their concepts, consequences and legal implications.
Very briefly, in the area on sales particularly, I borrow from Ang Yu, a unanimous decision of the Supreme Court En Banc,
which held:

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point
out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the
right of first refusal, understood in its normal concept, per se be brought within the purview of an option
under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 of the
same Code. An option or an offer would require, among other things, a clear certainty on both the object
and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might
be made determinate, the exercise of the right, however, would be dependent not only on the grantor's
eventual intention to enter into a binding juridical relation with another but also on terms, including the
price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely
belonging to a class of preparatory juridical relations governed not by contracts (since the essential
elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

An obligation, and so a conditional obligation as well (albeit subject to the occurrence of the condition), in its context under
Book IV of the Civil Code, can only be "a juridical necessity to give, to do or not to do" (Art. 1156, Civil Code), and one
that is constituted by law, contracts, quasi-contracts, delicts and quasi-delicts (Art. 1157, Civil Code) which all have their
respective legal significance rather well settled in law. The law certainly must have meant to provide
congruous, albeit contextual, consequences to its provisions. Interpretare et concordore legibus est optimus interpretendi.
As a valid source of an obligation, a contract must have the concurrence of (a) consent of the contracting parties, (b)
object certain (subject matter of the contract) and (c) cause (Art. 1318, Civil Code). These requirements, clearly defined,
are essential. The consent contemplated by the law is that which is manifested by the meeting of the offer and of the
acceptance upon the object and the cause of the obligation. The offer must be certain and the acceptance absolute
(Article 1319 of the Civil Code). Thus, a right of first refusal cannot have the effect of a contract because, by its very
essence, certain basic terms would have yet to be determined and fixed. How its "breach" be also its perfection escapes
me. It is only when the elements concur that the juridical act would have the force of law between the contracting parties
that must be complied with in good faith (Article 1159 of the Civil Code; see also Article 1308, of the Civil Code), and, in
case of its breach, would allow the creditor or obligee (the passive subject) to invoke the remedy that specifically
appertains to it.

The judicial remedies, in general, would, of course, include: (a) The principal remedies (i) of specific performance in
obligations to give specific things (Articles 1165 and 1167 of the Civil Code), substitute performance in an obligation to do
or to deliver generic things (Article 1165 of the Civil Code) and equivalent performance for damages (Articles 1168 and
1170 of the Civil Code); and (ii) of rescission or resolution of reciprocal obligations; and (b) the subsidiary remedies that
may be availed of when the principal remedies are unavailable or ineffective such as (i) accion subrogatoria or
subrogatory action (Article 1177 of the Civil Code; see also Articles 1729 and 1893 of the Civil Code); and (ii) accion
pauliana or rescissory action (Articles 1177 and 1381 of the Civil Code). And, in order to secure the integrity of final
judgments, such ancillary remedies as attachments, replevin, garnishments, receivership, examination of the debtor, and
similar remedies, are additionally provided for in procedural law.
Might it be possible, however, that Justice Panganiban was referring to how Ang Yu could relate to the instant case for,
verily, his remark, earlier quoted, was followed by an extensive discussion on the factual and case milieu of the present
petition? If it were, then I guess it was the applicability of the Ang Yu decision to the instant case that he questioned, but
that would not make Ang Yu "imprecise" or "incorrect."

Justice Panganiban would hold the Ang Yu ruling to be inconsistent with Guzman, Bocaling & Co. vs. Bonnevie (206
SCRA 668). I would not be too hasty in concluding similarly. In Guzman, the stipulation involved, although loosely termed
a "right of first priority," was, in fact, a contract of option. The provision in the agreement there stated:

20. In case the LESSOR desires or decides to sell the leased property, the LESSEES shall be given
a first priority to purchase the same, all things and considerations being equal.(At page 670; emphasis
supplied.)

In the above stipulation, the Court ruled, in effect, that the basic terms had been adequately, albeit briefly, spelled
out with the lease consideration being deemed likewise to be the essential cause for the option. The situation
undoubtedly was not the same that prevailed in Ang Yu or, for that matter, in the case at bar. The stipulation
between Mayfair Theater, Inc., and Carmelo & Bauermann, Inc., merely read:

That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days
exclusive option to purchase the same.

The provision was too indefinite to allow it to even come close to within the area of the Guzman ruling.

Justice Panganiban was correct in saying that the "cases of Madrigal & Co. vs. Stevenson & Co. and Salonga vs. Farrales
(cited in Ang Yu) did NOT involve a right of first refusal or of first priority. Nor did those two cases involve an option to
buy." The two cases, to set the record straight, were cited, not because they were thought to involve a right of first refusal
or an option to buy but to emphasize the indispensability of consensuality over the object and cause of contracts in their
perfection which would explain why, parallel therewith, Articles 1315 and 1318 of the Civil Code were also mentioned.

One final note: A right of first refusal, in its proper usage, is not a contract; when parties instead make certain the object
and the cause thereof and support their understanding with an adequate consideration, that juridical relation is not to be
taken as just a right of first refusal but as a contract in itself (termed an "option"). There is, unfortunately, in law a limit to
an unabated use of common parlance.

With all due respect, I hold that the judgment of the trial court, although not for all the reasons it has advanced, should be
REINSTATED.

Separate Opinions

PADILLA, J., concurring:

I am of the considered view (like Mr. Justice Jose A. R. Melo) that the Court in this case should categorically recognize
Mayfair's right of first refusal under its contract of lease with Carmelo and Bauermann, Inc. (hereafter, Carmelo) and,
because of Carmelo's and Equatorial's bad faith in riding "roughshod" over Mayfair's right of first refusal, the Court should
order the rescission of the sale of the Claro M. Recto property by the latter to Equatorial (Art. 1380-1381[3], Civil Code).
The Court should, in this same case, to avoid multiplicity of suits, likewise allow Mayfair to effectively exercise said right of
first refusal, by paying Carmelo the sum of P11,300,000.00 for the entire subject property, without any need of instituting a
separate action for damages against Carmelo and/or Equatorial.

I do not agree with the proposition that, in addition to the aforesaid purchase price, Mayfair should be required to pay a
compounded interest of 12% per annum of said amount computed from 1 August 1978. Under the Civil Code, a party to a
contract may recover interest as indemnity for damages in the following instances:

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.
Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of
contract.

There appears to be no basis in law for adding 12% per annum compounded interest to the purchase price of
P11,300,000.00 payable by Mayfair to Carmelo since there was no such stipulation in writing between the parties
(Mayfair and Carmelo) but, more importantly, because Mayfair neither incurred in delay in the performance of its
obligation nor committed any breach of contract. Indeed, why should Mayfair be penalized by way of making it
pay 12% per annum compounded interest when it was Carmelo which violated Mayfair's right of first refusal under
the contract?

The equities of the case support the foregoing legal disposition. During the intervening years between 1 August 1978 and
this date, Equatorial (after acquiring the C.M. Recto property for the price of P11,300,000.00) had been leasing the
property and deriving rental income therefrom. In fact, one of the lessees in the property was Mayfair. Carmelo had, in
turn, been using the proceeds of the sale, investment-wise and/or operation-wise in its own business.

It may appear, at first blush, that Mayfair is unduly favored by the solution submitted by this opinion, because the price of
P11,300,000.00 which it has to pay Carmelo in the exercise of its right of first refusal, has been subjected to the inroads of
inflation so that its purchasing power today is less than when the same amount was paid by Equatorial to Carmelo. But
then it cannot be overlooked that it was Carmelo's breach of Mayfair's right of first refusal that prevented Mayfair from
paying the price of P11,300,000.00 to Carmelo at about the same time the amount was paid by Equatorial to Carmelo.
Moreover, it cannot be ignored that Mayfair had also incurred consequential or "opportunity" losses by reason of its failure
to acquire and use the property under its right of first refusal. In fine, any loss in purchasing power of the price of
P11,300,000.00 is for Carmelo to incur or absorb on account of its bad faith in breaching Mayfair's contractual right of first
refusal to the subject property.

ACCORDINGLY, I vote to order the rescission of the contract of sale between Carmelo and Equatorial of the Claro M.
Recto property in question, so that within thirty (30) days from the finality of the Court's decision, the property should be
retransferred and delivered by Equatorial to Carmelo with the latter simultaneously returning to Equatorial the sum of
P11,300, 000.00.

I also vote to allow Mayfair to exercise its right of first refusal, by paying to Carmelo the sum of P11,300,000.00 without
interest for the entire subject property, within thirty (30) days from re-acquisition by Carmelo of the titles to the property,
with the corresponding obligation of Carmelo to sell and transfer the property to Mayfair within the same period of thirty
(30) days.

PANGANIBAN, J., concurring:

In the main, I concur with the ponencia of my esteemed colleague, Mr. Justice Regino C. Hermosisima, Jr., especially with
the following doctrinal pronouncements:

1. That while no option to purchase within the meaning of the second paragraph of Article 1479 of the
Civil Code was given to Mayfair Theater, Inc. ("Mayfair"), under the two lease contracts a right of first
refusal was in fact granted, for which no separate consideration is required by law to be paid or given so
as to make it binding upon Carmelo & Bauermann, Inc. ("Carmelo");

2. That such right was violated by the latter when it sold the entire property to Equatorial Realty
Development, Inc. ("Equatorial") on July 30, 1978, for the sum of P11,300,000.00;

3. That Equatorial is a buyer in bad faith as it was aware of the lease contracts, its own lawyers having
studied said contracts prior to the sale; and

4. That, consequently, the contract of sale is rescissible.

5. That, finally, under the proven facts, the right of first refusal may be enforced by an action for specific
performance.
There appears to be unanimity in the Court insofar as items 1, 2 and 3 above are concerned. It is in items 4 and 5 that
there is a marked divergence of opinion. Hence, I shall limit the discussion in this Separate Concurring Opinion to such
issues, namely: Is the contract of sale between Carmelo and Equatorial rescissible, and corollarily, may the right of first
refusal granted to Mayfair be enforced by an action for specific performance?

It is with a great amount of trepidation that I respectfully disagree with the legal proposition espoused by two equally well-
respected colleagues, Mme. Justice Flerida Ruth P. Romero and Mr. Justice Jose C. Vitug who are both acknowledged
authorities on Civil Law that a breach of the covenanted right of first refusal, while warranting a suit for damages under
Article 19 of the Civil Code, cannot sanction an action for specific performance without thereby negating the indispensable
element of con-sensuality in the perfection of contracts.

Ang Yu Asuncion Not In Point

Such statement is anchored upon a pronouncement in Ang Yu Asuncion vs. CA, 1 which was penned by Mr. Justice Vitug
himself. I respectfully submit, however, that that case turned largely on the issue of whether or not the sale of an
immovable in breach of a right of first refusal that had been decreed in a final judgment would justify the issuance of
certain orders of execution in the same case. The validity of said orders was the subject of the attack before this Court.
These orders had not only directed the defendants to execute a deed of sale in favor of the plaintiffs, when there was
nothing in the judgment itself decreeing it, but had also set aside the sale made in breach of said right of first refusal and
even canceled the title that had been issued to the buyer, who was not a party to the suit and had obviously not been
given its day in court. It was thus aptly held:

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first
refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has
heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of
private respondents to honor the right of first refusal, the remedy is not a writ of execution on the
judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser
of the property, has acted in good faith or bad faith and whether or not it should, in any case, be
considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters
that must be independently addressed in appropriate proceedings. Buen Realty, not having been
impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by
respondent Judge, let alone ousted from the ownership and possession of the property, without first being
duly afforded its day in court. 2

In other words, the question of whether specific performance of one's right of first refusal is available as a remedy in case
of breach thereof was not before the Supreme Court at all in Ang Yu Asuncion. Consequently, the pronouncements there
made bearing on such unlitigated question were mere obiter. Moreover, as will be shown later, the pronouncement that a
breach of the right of first refusal would not sanction an action for specific performance but only an action for damages (at
p. 615) is at best debatable (and in my humble view, imprecise or incorrect), on top of its being contradicted by extant
jurisprudence.

Worth bearing in mind is the fact that two juridical relations, both contractual, are involved in the instant case: (1) the deed
of sale between the petitioners dated July 30, 1978, and (2) the contract clause establishing Mayfair's right of first refusal
which was violated by said sale.

With respect to the sale of the property, Mayfair was not a party. It therefore had no personality to sue for its annulment,
since Art. 1397 of the Civil Code provides, inter alia, that "(t)he action for the annulment of contracts may be instituted by
all who are thereby obliged principally or subsidiarily."

But the facts as alleged and proved clearly in the case at bar make out a case for rescission under Art. 1177, in relation to
Art. 1381(3), of the Civil Code, which pertinently read as follows:

Art. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their
claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those
which are inherent in his person; they may also impugn the acts which the debtor may have done to
defraud them.

Art. 1381. The following contracts are rescissible:


xxx xxx xxx

(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims
due them;

xxx xxx xxx

(emphasis supplied)

The term "creditors" as used in these provisions of the Civil Code is broad enough to include the obligee under an option
contract 3 as well as under a right of first refusal, sometimes known as a right of first priority. 4 Thus, in Nietes, the
Supreme Court, speaking through then Mr. Chief Justice Roberto Concepcion, repeatedly referred to the grantee or
optionee as "the creditor" and to the grantor or optioner as "the debtor". 5 In any case, the personal elements of an
obligation are the active and passive subjects thereof, the former being known as creditors or obligees and the latter as
debtors or obligors. 6Insofar as the right of first refusal is concerned, Mayfair is the obligee or creditor.

As such creditor, Mayfair had, therefore, the right to impugn the sale in question by way of accion pauliana under the last
clause of Art. 1177, aforequoted, because the sale was an act done by the debtor to defraud him of his right to acquire the
property. 7 Rescission was also available under par. 3, Art. 1381, abovequoted, as was expressly held in Guzman,
Bocaling & Co., a case closely analogous to this one as it was also an action brought by the lessee to enforce his "right of
first priority" which is just another name for the right of first refusal and to annul a sale made by the lessor in violation
of such right. In said case, this Court, speaking through Mr. Justice Isagani A. Cruz, affirmed the invalidation of the sale
and the enforcement of the lessee's right of first priority this wise: 8

The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could
bring an action to annul it pursuant to Article 1397 of the Civil Code. It is stressed that private
respondents are strangers to that agreement and therefore have no personality to seek its annulment.

The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under
Article(s) 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently
rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly
accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject
property to the petitioner without recognizing their right of first priority under the Contract of Lease.
(emphasis supplied)

By the same token, the status of a defrauded creditor can, and should, be granted to Mayfair, for it certainly had
substantial interests that were prejudiced by the sale of the subject property to petitioner Equatorial in open violation of
Mayfair's right of first refusal under its existing contracts with Carmelo.

In fact, the parity between that case and the present one does not stop there but extends to the crucial and critical fact
that there was manifest bad faith on the part of the buyer. Thus, in Guzman, this Court affirmed in toto the appealed
judgment of the Court of Appeals which, in turn, had affirmed the trial court's decision insofar as it invalidated the deed of
sale in favor of the petitioner-buyer, cancelled its TCT, and ordered the lessor to execute a deed of sale over the leased
property in favor of the lessee for the same price and "under the same terms and conditions", aside from affirming as well
the damages awarded, but at a reduced amount. 9 In other words, the aggrieved party was allowed to acquire the property
itself.

The inescapable conclusion from all of the foregoing is not only that rescission is the proper remedy but also and more
importantly that specific performance was actually used and given free rein as an effective remedy to enforce a right of
first refusal in the wake of its violation, in the cited case of Guzman.

On the other hand, and as already commented on above, the pronouncement in Ang Yu Asuncion to the effect that
specific performance is unavailable to enforce a violated right of first refusal is at best a debatable legal proposition, aside
from being contradicted by extant jurisprudence. Let me explain why.

The consensuality required for a contract of sale is distinct from, and should not be confused with, the consensuality
attendant to the right of first refusal itself. While indeed, prior to the actual sale of the property to Equatorial and the filing
of Mayfair's complaint for specific performance, no perfected contract of sale involving the property ever existed between
Carmelo as seller and Mayfair as buyer, there already was, in law and in fact, a perfected contract between them which
established a right of first refusal, or of first priority.
Specific Performance Is
Viable Remedy

The question is: Can this right (of first refusal) be enforced by an action for specific performance upon a showing of its
breach by an actual sale of the property under circumstances showing palpable bad faith on the part of both seller and
buyer?

The answer, I respectfully submit, should be 'yes'.

As already noted, Mayfair's right of first refusal in the case before us is embodied in an express covenant in the lease
contracts between it as lessee and Carmelo as lessor, hence the right created is one springing from
contract. 10 Indubitably, this had the force of law between the parties, who should thus comply with it in good faith. 11 Such
right also established a correlative obligation on the part of Carmelo to give or deliver to Mayfair a formal offer of sale of
the property in the event Carmelo decides to sell it. The decision to sell was eventually made. But instead of giving or
tendering to Mayfair the proper offer to sell, Carmelo gave it to its now co-petitioner, Equatorial, with whom it eventually
perfected and consummated, on July 30, 1978, an absolute sale of the property, doing so within the period of effectivity of
Mayfair's right of first refusal. Less than two months later, or in September 1978, with the lease still in full force, Mayfair
filed the present suit.

Worth stressing at this juncture is the fact that Mayfair had the right to require that the offer to sell the property be sent to it
by Carmelo, and not to anybody else. This was violated when the offer was made to Equatorial. Under its covenant with
Carmelo, Mayfair had the right, at that point, to sue for either specific performance or rescission, with damages in either
case, pursuant to Arts. 1165 and 1191, Civil Code. 12 An action for specific performance and damages seasonably filed,
fortified by a writ of preliminary injunction, would have enabled Mayfair to prevent the sale to Equatorial from taking place
and to compel Carmelo to sell the property to Mayfair for the same terms and price, for the reason that the filing of the
action for specific performance may juridically be considered as a solemn, formal, and unqualified acceptance by Mayfair
of the specific terms of the offer of sale. Note that by that time, the price and other terms of the proposed sale by Carmelo
had already been determined, being set forth in the offer of sale that had wrongfully been directed to Equatorial.

As it turned out, however, Mayfair did not have a chance to file such suit, for it learned of the sale to Equatorial only after it
had taken place. But it did file the present action for specific performance and for invalidation of the wrongful sale
immediately after learning about the latter act. The act of promptly filing this suit, coupled with the fact that it is one for
specific performance, indicates beyond cavil or doubt Mayfair's unqualified acceptance of the misdirected offer of sale,
giving rise, thereby, to a demandable obligation on the part of Carmelo to execute the corresponding document of sale
upon the payment of the price of P11,300,000.00. In other words, the principle of consensuality of a contract of sale
should be deemed satisfied. The aggrieved party's consent to, or acceptance of, the misdirected offer of sale should be
legally presumed in the context of the proven facts.

To say, therefore, that the wrongful breach of a right of first refusal does not sanction an action for specific performance
simply because, factually, there was no meeting of the minds as to the particulars of the sale since ostensibly no offer was
ever made to, let alone accepted by, Mayfair, is to ignore the proven fact of presumed consent. To repeat, that consent
was deemed given by Mayfair when it sued for invalidation of the sale and for specific performance of Carmelo's
obligation to Mayfair. Nothing in the law as it now stands will be violated, or even simply emasculated, by this holding. On
the contrary, the decision in Guzman supports it.

Moreover, under the Civil Code provisions on the nature, effect and kinds of obligations, 13 Mayfair's right of first refusal
may be classified as one subject to a suspensive condition namely, if Carmelo should decide to sell the leased
premises during the life of the lease contracts, then it should make an offer of sale to Mayfair. Futurity and uncertainty,
which are the essential characteristics of a condition, 14 were distinctly present. Before the decision to sell was made,
Carmelo had absolutely no obligation to sell the property to Mayfair, nor even to make an offer to sell, because in
conditional obligations, where the condition is suspensive, the acquisition of rights depends upon the happening of the
event which constitutes the condition. 15 Had the decision to sell not been made at all, or had it been made after the expiry
of the lease, the parties would have stood as if the conditional obligation had never existed. 16 But the decision to sell was
in fact made. And it was made during the life and efficacy of the lease. Undoubtedly, the condition was duly fulfilled; the
right of first refusal effectively accrued and became enforceable; and correlatively, Carmelo's obligation to make and send
the offer to Mayfair became immediately due and demandable. 17 That obligation was to deliver to Mayfair an offer to sell
a determinate thing for a determinate price. As things turned out, a definite and specific offer to sell the entire property for
the price of P11,300,000.00 was actually made by Carmelo but to the wrong party. It was that particular offer, and no
other, which Carmelo should have delivered to Mayfair, but failed to deliver. Hence, by the time the obligation of Carmelo
accrued through the fulfillment of the suspensive condition, the offer to sell had become a determinate thing.
Art. 1165 of the Civil Code, earlier quoted in footnote 12, indicates the remedies available to the creditor against the
debtor, when it provides that "(w)hen what is to be delivered is a determinate thing, the creditor, in addition to the right
granted him by article 1170, may compel the debtor to make the delivery," clearly authorizing not only the recovery of
damages under Art. 1170 but also an action for specific performance.

But even assuming that Carmelo's prestation did not involve the delivery of a determinate offer but only a generic one, the
second paragraph of Art. 1165 explicitly gives to the creditor the right "to ask that the obligation be complied with at the
expense of the debtor." The availability of an action for specific performance is thus clear and beyond doubt. And the
correctness of Guzman becomes all the more manifest.

Upon the other hand, the obiter in Ang Yu Asuncion is further weakened by the fact that the jurisprudence upon which it
supposedly rests namely, the cases of Madrigal & CO. vs. Stevenson & Co. 18 and Salonga vs. Farrales 19 did NOT
involve a right of first refusal or of first priority. Nor did those two cases involve an option to buy. In Madrigal, plaintiff sued
defendant for damages claiming wrongful breach of an alleged contract of sale of 2,000 tons of coal. The case was
dismissed because "the minds of the parties never met upon a contract of sale by defendant to plaintiff", 20 each party
having signed the broker's memorandum as buyer, erroneously thinking that the other party was the seller! In Salonga, a
lessee, who was one of several lessees ordered by final judgment to vacate the leased premises, sued the lessor to
compel the latter to sell the leased premises to him, but his suit was not founded upon any right of first refusal and was
therefore dismissed on the ground that there was no perfected sale in his favor. He just thought that because the lessor
had decided to sell and in fact sold portions of the property to her other lessees, she was likewise obligated to sell to him
even in the absence of a perfected contract of sale. In fine, neither of the two cases cited in support of the legal
proposition that a breach of the right of first refusal does not sanction an action for specific performance but, at best, only
one for damages, provides such support.

Finally, the fact that what was eventually sold to Equatorial was the entire property, not just the portions leased to Mayfair,
is no reason to deprive the latter of its right to receive a formal and specific offer. The offer of a larger property might have
led Mayfair to reject the offer, but until and unless such rejection was actually made, its right of first refusal still stood.
Upon the other hand, an acceptance by Mayfair would have saved all concerned the time, trouble, and expense of this
protracted litigation. In any case, the disquisition by the Court of Appeals on this point can hardly be faulted; in fact, it
amply justifies the conclusions reached in its decision, as well as the dispositions made therein.

IN VIEW OF THE FOREGOING, I vote to DENY the petition and to AFFIRM the assailed Decision.

ROMERO, J., concurring and dissenting:

I share the opinion that the right granted to Mayfair Theater under the identical par 8 of the June 1, 1967 and March 31,
1969 contracts constitute a right of first refusal.

An option is a privilege granted to buy a determinate thing at a price certain within a specified time and is usually
supported by a consideration which is why, it may be regarded as a contract in itself. The option results in a perfected
contract of sale once the person to whom it is granted decides to exercise it. The right of first refusal is unlike an option
which requires a certainty as to the object and consideration of the anticipated contract. When the right of first refusal is
exercised, there is no perfected contract of sale because the other terms of the sale have yet to be determined. Hence, in
case the offeror reneges on his promise to negotiate with offeree, the latter may only recover damages in the belief that a
contract could have been perfected under Article 19 of the New Civil Code.

I beg to disagree, however, with the majority opinion that the contract of sale entered into by Carmelo and Bauermann,
Inc. and Equatorial Realty Inc., should be rescinded. Justice Hermosisima, in citing Art. 1381 (3) as ground for recission
apparently relied on the case of Guzman, Bocaling and Co. v. Bonnevie (206 SCRA 668 [1992]) where the offeree was
likened to the status of a creditor. The case, in citing Tolentino, stated that rescission is a remedy granted by law to
contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this
should be valid, by means of restoration of things to their condition prior to celebration of the contract. It is my opinion that
"third persons" should be construed to refer to the wards, creditors, absentees, heirs and others enumerated under the
law who are prejudiced by the contract sought to be rescinded.

It should be borne in mind that rescission is an extreme remedy which may be exercised only in the specific instances
provided by law. Article 1381 (3) specifically refers to contracts undertaken in fraud of creditors when the latter cannot in
any manner collect the claims due them. If rescission were allowed for analogous cases, the law would have so stated.
While Article 1381 (5) itself says that rescission may be granted to all other contracts specially declared by law to be
subject to rescission, there is nothing in the law that states that an offeree who failed to exercise his right of refusal
because of bad faith on the part of the offeror may rescind the subsequent contract entered into by the offeror and a third
person. Hence, there is no legal justification to rescind the contract between Carmelo and Bauermann, Inc. and Equatorial
Realty.

Neither do I agree with Justice Melo that Mayfair Theater should pay Carmelo and Bauermann, Inc. the amount of
P11,300,000.00 plus compounded interest of 12% p.a. Justice Melo rationalized that had Carmelo and Bauermann sold
the property to Mayfair, the latter would have paid the property for the same price that Equatorial bought it. It bears
emphasis that Carmelo and Bauermann, Inc. and Mayfair never reached an agreement as to the price of the property in
dispute because the negotiations between the two parties were not pursued to its very end. We cannot, even for reasons
of equity, compel Carmelo to sell the entire property to Mayfair at P11,300,000.00 without violating the consensual nature
of contracts.

I vote, therefore, not to rescind the contract of sale entered into by Carmelo and Bauermann, Inc. and Equatorial Realty
Development Corp.

VITUG, J., dissenting:

I share the opinion that the right granted to Mayfair Theater, Inc., is neither an offer nor an option but merely a right of first
refusal as has been so well and amply essayed in the ponencia of our distinguished colleague Mr. Justice Regino C.
Hermosisima, Jr.

Unfortunately, it would seem that Article 1381 (paragraph 3) of the Civil Code invoked to be the statutory authority for the
rescission of the contract of sale between Carmelo & Bauermann, Inc., and Equatorial Realty Development, Inc., has
been misapplied. The action for rescission under that provision of the law, unlike in the resolution of reciprocal obligations
under Article 1191 of the Code, is merely subsidiary and relates to the specific instance when a debtor, in an attempt to
defraud his creditor, enters into a contract with another that deprives the creditor to recover his just claim and leaves
him with no other legal means, than by rescission, to obtain reparation. Thus, the rescission is only to the extent
necessary to cover the damages caused (Article 1384, Civil Code) and, consistent with its subsidiary nature, would
require the debtor to be an indispensable party in the action (see Gigante vs. Republic Savings Bank, 135 Phil. 359).

The concept of a right of first refusal as a simple juridical relation, and so governed (basically) by the Civil Code's title on
"Human Relations," is not altered by the fact alone that it might be among the stipulated items in a separate document or
even in another contract. A "breach" of the right of first refusal can only give rise to an action for damages primarily under
Article 19 of the Civil Code, as well as its related provisions, but not to an action for specific performance set out under
Book IV of the Code on "Obligations and Contracts." That right, standing by itself, is far distant from being the obligation
referred to in Article 1159 of the Code which would have the force of law sufficient to compel compliance per se or to
establish a creditor-debtor or obligee-obligor relation between the parties. If, as it is rightly so, a right of first refusal cannot
even be properly classed as an offer or as an option, certainly, and with much greater reason, it cannot be the equivalent
of, nor be given the same legal effect as, a duly perfected contract. It is not possible to cross out, such as we have said in
Ang Yu Asuncion vs. Court of Appeals (238 SCRA 602), the indispensable element of consensuality in the perfection of
contracts. It is basic that without mutual consent on the object and on the cause, a contract cannot exist (Art. 1305, Civil
Code); corollary to it, no one can be forced, least of all perhaps by a court, into a contract against his will or compelled to
perform thereunder.

It is sufficiently clear, I submit, that, there being no binding contract between Carmelo and Mayfair, neither the rescission
of the contract between Carmelo and Equatorial nor the directive to Carmelo to sell the property to Mayfair would be
legally appropriate.

My brief disquisition should have ended here except for some personal impressions expressed by my esteemed
colleague, Mr. Justice Artemio V. Panganiban, on the Ang Yu decision which perhaps need to be addressed.

The discussion by the Court in Ang Yu on the right of first refusal is branded as a mere obiter dictum. Justice Panganiban
states: The case "turned largely on the issue of whether or not the sale of an immovable in breach of a right of first refusal
that had been decreed in a final judgment would justify the issuance of certain orders of execution in the same case. . . . .
In other words, the question of whether specific performance of one's right of first refusal is available as a remedy in case
of breach thereof was not before the Supreme Court at all in Ang Yu Asuncion."
Black defines an obiter dictum as "an opinion entirely unnecessary for the decision of the case" and thus "are not binding
as precedent." (Black's Law Dictionary, 6th edition, 1990). A close look at the antecedents of Ang Yu as found by the
Court of Appeals and as later quoted by this Court would readily disclose that the "right of first refusal" was a major point
in the controversy. Indeed, the trial and the appellate courts had rule on it. With due respect, I would not deem it "entirely
unnecessary" for this Court to itself discuss the legal connotation and significance of the decreed (confirmatory) right of
first refusal. I should add that when the ponencia recognized that, in the case of Buen Realty Development Corporation
(the alleged purchaser of the property), the latter could not be held subject of the writ of execution and be ousted from the
ownership and possession of the disputed property without first affording it due process, the Court decided to simply put a
cap in the final disposition of the case but it could not have intended to thereby mitigate the import of its basic ratio
decidendi.

Justice Panganiban opines that the pronouncement in Ang Yu, i.e., that a breach of the right of first refusal does not
sanction an action for specific performance but only an action for damages, "is at best debatable (. . . imprecise or
incorrect), on to top of its being contradicted by extant jurisprudence." He then comes up with the novel proposition that
"Mayfair's right of first refusal may be classified as one subject to a suspensive condition namely, if Carmelo should
decide to sell the leased premises during the life of the lease contracts, then it should make an offer of sale to Mayfair,"
presumably enforceable by action for specific performance.

It would be perilous a journey, first of all, to try to seek out a common path for such juridical relations as contracts, options,
and rights of first refusal since they differ, substantially enough, in their concepts, consequences and legal implications.
Very briefly, in the area on sales particularly, I borrow from Ang Yu, a unanimous decision of the Supreme Court En Banc,
which held:

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point
out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the
right of first refusal, understood in its normal concept, per se be brought within the purview of an option
under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 of the
same Code. An option or an offer would require, among other things, a clear certainty on both the object
and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might
be made determinate, the exercise of the right, however, would be dependent not only on the grantor's
eventual intention to enter into a binding juridical relation with another but also on terms, including the
price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely
belonging to a class of preparatory juridical relations governed not by contracts (since the essential
elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

An obligation, and so a conditional obligation as well (albeit subject to the occurrence of the condition), in its context under
Book IV of the Civil Code, can only be "a juridical necessity to give, to do or not to do" (Art. 1156, Civil Code), and one
that is constituted by law, contracts, quasi-contracts, delicts and quasi-delicts (Art. 1157, Civil Code) which all have their
respective legal significance rather well settled in law. The law certainly must have meant to provide
congruous, albeit contextual, consequences to its provisions. Interpretare et concordore legibus est optimus interpretendi.
As a valid source of an obligation, a contract must have the concurrence of (a) consent of the contracting parties, (b)
object certain (subject matter of the contract) and (c) cause (Art. 1318, Civil Code). These requirements, clearly defined,
are essential. The consent contemplated by the law is that which is manifested by the meeting of the offer and of the
acceptance upon the object and the cause of the obligation. The offer must be certain and the acceptance absolute
(Article 1319 of the Civil Code). Thus, a right of first refusal cannot have the effect of a contract because, by its very
essence, certain basic terms would have yet to be determined and fixed. How its "breach" be also its perfection escapes
me. It is only when the elements concur that the juridical act would have the force of law between the contracting parties
that must be complied with in good faith (Article 1159 of the Civil Code; see also Article 1308, of the Civil Code), and, in
case of its breach, would allow the creditor or obligee (the passive subject) to invoke the remedy that specifically
appertains to it.

The judicial remedies, in general, would, of course, include: (a) The principal remedies (i) of specific performance in
obligations to give specific things (Articles 1165 and 1167 of the Civil Code), substitute performance in an obligation to do
or to deliver generic things (Article 1165 of the Civil Code) and equivalent performance for damages (Articles 1168 and
1170 of the Civil Code); and (ii) of rescission or resolution of reciprocal obligations; and (b) the subsidiary remedies that
may be availed of when the principal remedies are unavailable or ineffective such as (i) accion subrogatoria or
subrogatory action (Article 1177 of the Civil Code; see also Articles 1729 and 1893 of the Civil Code); and (ii) accion
pauliana or rescissory action (Articles 1177 and 1381 of the Civil Code). And, in order to secure the integrity of final
judgments, such ancillary remedies as attachments, replevin, garnishments, receivership, examination of the debtor, and
similar remedies, are additionally provided for in procedural law.
Might it be possible, however, that Justice Panganiban was referring to how Ang Yu could relate to the instant case for,
verily, his remark, earlier quoted, was followed by an extensive discussion on the factual and case milieu of the present
petition? If it were, then I guess it was the applicability of the Ang Yu decision to the instant case that he questioned, but
that would not make Ang Yu "imprecise" or "incorrect."

Justice Panganiban would hold the Ang Yu ruling to be inconsistent with Guzman, Bocaling & Co. vs. Bonnevie (206
SCRA 668). I would not be too hasty in concluding similarly. In Guzman, the stipulation involved, although loosely termed
a "right of first priority," was, in fact, a contract of option. The provision in the agreement there stated:

20. In case the LESSOR desires or decides to sell the leased property, the LESSEES shall be given
a first priority to purchase the same, all things and considerations being equal.(At page 670; emphasis
supplied.)

In the above stipulation, the Court ruled, in effect, that the basic terms had been adequately, albeit briefly, spelled
out with the lease consideration being deemed likewise to be the essential cause for the option. The situation
undoubtedly was not the same that prevailed in Ang Yu or, for that matter, in the case at bar. The stipulation
between Mayfair Theater, Inc., and Carmelo & Bauermann, Inc., merely read:

That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days
exclusive option to purchase the same.

The provision was too indefinite to allow it to even come close to within the area of the Guzman ruling.

Justice Panganiban was correct in saying that the "cases of Madrigal & Co. vs. Stevenson & Co. and Salonga vs. Farrales
(cited in Ang Yu) did NOT involve a right of first refusal or of first priority. Nor did those two cases involve an option to
buy." The two cases, to set the record straight, were cited, not because they were thought to involve a right of first refusal
or an option to buy but to emphasize the indispensability of consensuality over the object and cause of contracts in their
perfection which would explain why, parallel therewith, Articles 1315 and 1318 of the Civil Code were also mentioned.

One final note: A right of first refusal, in its proper usage, is not a contract; when parties instead make certain the object
and the cause thereof and support their understanding with an adequate consideration, that juridical relation is not to be
taken as just a right of first refusal but as a contract in itself (termed an "option"). There is, unfortunately, in law a limit to
an unabated use of common parlance.

With all due respect, I hold that the judgment of the trial court, although not for all the reasons it has advanced, should be
REINSTATED.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 103338 January 4, 1994

FEDERICO SERRA, petitioner,


vs.
THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL BANKING CORPORATION, respondents.

Andres R. Amante, Jr. for petitioner.

R.C. Domingo, Jr. & Associates for private respondent.

NOCON, J.:

A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral
promise to buy and sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by
a consideration distinct from the price. (Article 1479, New Civil Code) The first is the mutual promise and each has the
right to demand from the other the fulfillment of the obligation. While the second is merely an offer of one to another,
which if accepted, would create an obligation to the offeror to make good his promise, provided the acceptance is
supported by a consideration distinct from the price.

Disputed in the present case is the efficacy of a "Contract of Lease with Option to Buy", entered into between petitioner
Federico Serra and private respondent Rizal Commercial Banking Corporation. (RCBC).

Petitioner is the owner of a 374 square meter parcel of land located at Quezon St., Masbate, Masbate. Sometime in 1975,
respondent bank, in its desire to put up a branch in Masbate, Masbate, negotiated with petitioner for the purchase of the
then unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION TO BUY was instead forged by the
parties, the pertinent portion of which reads:

1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in lease, the parcel of land
described in the first WHEREAS clause, to have and to hold the same for a period of twenty-five (25)
years commencing from June 1, 1975 to June 1, 2000. The LESSEE, however, shall have the option to
purchase said parcel of land within a period of ten (10) years from the date of the signing of this Contract
at a price not greater than TWO HUNDRED TEN PESOS (P210.00) per square meter. For this purpose,
the LESSOR undertakes, within such ten-year period, to register said parcel of land under the TORRENS
SYSTEM and all expenses appurtenant thereto shall be for his sole account.

If, for any reason, said parcel of land is not registered under the TORRENS SYSTEM within the
aforementioned ten-year period, the LESSEE shall have the right, upon termination of the lease to be
paid by the LESSOR the market value of the building and improvements constructed on said parcel of
land.

The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register said parcel of land under
the TORRENS SYSTEM in case the LESSOR, for any reason, fails to comply with his obligation to effect
said registration within reasonable time after the signing of this Agreement, and all expenses appurtenant
to such registration shall be charged by the LESSEE against the rentals due to the LESSOR.

2. During the period of the lease, the LESSEE covenants to pay the LESSOR, at the latter's residence, a
monthly rental of SEVEN HUNDRED PESOS (P700.00), Philippine Currency, payable in advance on or
before the fifth (5th) day of every calendar month, provided that the rentals for the first four (4) months
shall be paid by the LESSEE in advance upon the signing of this Contract.
3. The LESSEE is hereby authorized to construct as its sole expense a building and such other
improvements on said parcel of land, which it may need in pursuance of its business and/or operations;
provided, that if for any reason the LESSEE shall fail to exercise its option mentioned in paragraph (1)
above in case the parcel of land is registered under the TORRENS SYSTEM within the ten-year period
mentioned therein, said building and/or improvements, shall become the property of the LESSOR after
the expiration of the 25-year lease period without the right of reimbursement on the part of the LESSEE.
The authority herein granted does not, however, extend to the making or allowing any unlawful, improper
or offensive used of the leased premises, or any use thereof, other than banking and office purposes. The
maintenance and upkeep of such building, structure and improvements shall likewise be for the sole
account of the LESSEE. 1

The foregoing agreement was subscribed before Notary Public Romeo F. Natividad.

Pursuant to said contract, a building and other improvements were constructed on the land which housed the branch
office of RCBC in Masbate, Masbate. Within three years from the signing of the contract, petitioner complied with his part
of the agreement by having the property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232 was issued by the Register of
Deeds of the Province of Masbate.

Petitioner alleges that as soon as he had the property registered, he kept on pursuing the manager of the branch to effect
the sale of the lot as per their agreement. It was not until September 4, 1984, however, when the respondent bank
decided to exercise its option and informed petitioner, through a letter, 2 of its intention to buy the property at the agreed
price of not greater than P210.00 per square meter or a total of P78,430.00. But much to the surprise of the respondent,
petitioner replied that he is no longer selling the property. 3

Hence, on March 14, 1985, a complaint for specific performance and damages were filed by respondent against
petitioner. In the complaint, respondent alleged that during the negotiations it made clear to petitioner that it intends to
stay permanently on property once its branch office is opened unless the exigencies of the business requires otherwise.
Aside from its prayer for specific performance, it likewise asked for an award of P50,000.00 for attorney's fees
P100,000.00 as exemplary damages and the cost of the suit. 4

A special and affirmative defenses, petitioner contended:

1. That the contract having been prepared and drawn by RCBC, it took undue advantage on him when it
set in lopsided terms.

2. That the option was not supported by any consideration distinct from the price and hence not binding
upon him.

3. That as a condition for the validity and/or efficacy of the option, it should have been exercised within
the reasonable time after the registration of the land under the Torrens System; that its delayed action on
the option have forfeited whatever its claim to the same.

4. That extraordinary inflation supervened resulting in the unusual decrease in the purchasing power of
the currency that could not reasonably be forseen or was manifestly beyond the contemplation of the
parties at the time of the establishment of the obligation, thus, rendering the terms of the contract
unenforceable, inequitable and to the undue enrichment of RCBC. 5

and as counterclaim petitioner alleged that:

1. The rental of P700.00 has become unrealistic and unreasonable, that justice and equity will require its
adjustment.

2. By the institution of the complaint he suffered moral damages which may be assessed at P100,000.00
and award of attorney's fee of P25,000.00 and exemplary damages at P100,000.00. 6

Initially, after trial on the merits, the court dismissed the complaint. Although it found the contract to be valid, the court
nonetheless ruled that the option to buy in unenforceable because it lacked a consideration distinct from the price and
RCBC did not exercise its option within reasonable time. The prayer for readjustment of rental was denied, as well as that
for moral and exemplary damages. 7

Nevertheless, upon motion for reconsideration of respondent, the court in the order of January 9, 1989, reversed itself, the
dispositive portion reads:

WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and hereby renders judgment as
follows:

1. The defendant is hereby ordered to execute and deliver the proper deed of sale in favor of plaintiff
selling, transferring and
conveying the property covered by and described in the Original Certificate of Title 0-232 of the Registry
of Deeds of Masbate for the sum of Seventy Eight Thousand Five Hundred Forty Pesos (P78,540,00),
Philippine Currency;

2. Defendant is ordered to pay plaintiff the sum of Five Thousand (P5,000.00) Pesos as attorney's fees;

3. The counter claim of defendant is hereby dismissed; and

4. Defendants shall pay the costs of suit. 8

In a decision promulgated on September 19, 1991, 9 the Court of Appeals affirmed the findings of the trial court that:

1. The contract is valid and that the parties perfectly understood the contents thereof;

2. The option is supported by a distinct and separate consideration as embodied in the agreement;

3. There is no basis in granting an adjustment in rental.

Assailing the judgment of the appellate court, petitioner would like us to consider mainly the following:

1. The disputed contract is a contract of adhesion.

2. There was no consideration to support the option, distinct from the price, hence the option cannot be
exercised.

3. Respondent court gravely abused its discretion in not granting currency adjustment on the already
eroded value of the stipulated rentals for twenty-five years.

The petition is devoid of merit.

There is no dispute that the contract is valid and existing between the parties, as found by both the trial court and the
appellate court. Neither do we find the terms of the contract unfairly lopsided to have it ignored.

A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the
other party merely affixes his signature or his "adhesion" thereto. These types of contracts are as binding as ordinary
contracts. Because in reality, the party who adheres to the contract is free to reject it entirely. Although, this Court will not
hesitate to rule out blind adherence to terms where facts and circumstances will show that it is basically one-sided. 10

We do not find the situation in the present case to be inequitable. Petitioner is a highly educated man, who, at the time of
the trial was already a CPA-Lawyer, and when he entered into the contract, was already a CPA, holding a respectable
position with the Metropolitan Manila Commission. It is evident that a man of his stature should have been more cautious
in transactions he enters into, particularly where it concerns valuable properties. He is amply equipped to drive a hard
bargain if he would be so minded to.

Petitioner contends that the doctrines laid down in the cases of


Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca 13 were misapplied in the present
case, because 1) the option given to the respondent bank was not supported by a consideration distinct from the price;
and 2) that the stipulated price of "not greater than P210.00 per square meter" is not certain or definite.

Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain period to accept, the offer
maybe withdrawn at anytime before acceptance by communicating such withdrawal, except when the option is founded
upon consideration, as something paid or promised. On the other hand, Article 1479 of the Code provides that an
accepted unilateral promise to buy and sell a determinate thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price.

In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the
transaction becomes a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by
the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which
is certain. 14 In which case, the parties may then reciprocally demand performance.

Jurisprudence has taught us that an optional contract is a privilege existing only in one party the buyer. For a separate
consideration paid, he is given the right to decide to purchase or not, a certain merchandise or property, at any time within
the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy
before the time
expires. 15

On the other hand, what may be regarded as a consideration separate from the price is discussed in the case of Vda. de
Quirino v. Palarca 16 wherein the facts are almost on all fours with the case at bar. The said case also involved a lease
contract with option to buy where we had occasion to say that "the consideration for the lessor's obligation to sell the
leased premises to the lessee, should he choose to exercise his option to purchase the same, is the obligation of the
lessee to sell to the lessor the building and/or improvements constructed and/or made by the former, if he fails to exercise
his option to buy leased premises." 17

In the present case, the consideration is even more onerous on the part of the lessee since it entails transferring of the
building and/or improvements on the property to petitioner, should respondent bank fail to exercise its option within the
period stipulated. 18

The bugging question then is whether the price "not greater than TWO HUNDRED PESOS" is certain or definite. A price
is considered certain if it is so with reference to another thing certain or when the determination thereof is left to the
judgment of a specified person or persons. 19 And generally, gross inadequacy of price does not affect a contract of
sale. 20

Contracts are to be construed according to the sense and meaning of the terms which the parties themselves have used.
In the present dispute, there is evidence to show that the intention of the parties is to peg the price at P210 per square
meter. This was confirmed by petitioner himself in his testimony, as follows:

Q. Will you please tell this Court what was the offer?

A. It was an offer to buy the property that I have in Quezon City (sic).

Q. And did they give you a specific amount?

xxx xxx xxx

A. Well, there was an offer to buy the property at P210 per square meters (sic).

Q. And that was in what year?

A . 1975, sir.

Q. And did you accept the offer?

A. Yes, sir. 21
Moreover, by his subsequent acts of having the land titled under the Torrens System, and in pursuing the bank manager
to effect the sale immediately, means that he understood perfectly the terms of the contract. He even had the same
property mortgaged to the respondent bank sometime in 1979, without the slightest hint of wanting to abandon his offer to
sell the property at the agreed price of P210 per square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or factual, in adjusting the amount of the rent. The
contract is the law between the parties and if there is indeed reason to adjust the rent, the parties could by themselves
negotiate for the amendment of the contract. Neither could we consider the decline of the purchasing power of the
Philippine peso from 1983 to the time of the commencement of the present case in 1985, to be so great as to result in an
extraordinary inflation. Extraordinary inflation exists when there in an unimaginable increase or decrease of the
purchasing power of the Philippine currency, or fluctuation in the value of pesos manifestly beyond the contemplation of
the parties at the time of the establishment of the obligation. 23

Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY" between petitioner and respondent
bank is valid, effective and enforceable, the price being certain and that there was consideration distinct from the price to
support the option given to the lessee.

WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate court is hereby AFFIRMED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City

SECOND DIVISION

G.R. No. 135929 April 20, 2001

LOURDES ONG LIMSON, petitioner,


vs.
COURT OF APPEALS, SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR.
and SUNVAR REALTY DEVELOPMENT CORPORATION, respondents.

BELLOSILLO, J.:

Filed under Rule 45 of the Rules of Court this Petition for Review on Certiorari seeks to review, reverse and set aside
the Decision1 of the Court of Appeals dated 18 May 1998 reversing that of the Regional Trial Court dated 30 June 1993.
The petitioner likewise assails the Resolution2 of the appellate court of 19 October 1998 denying petitioners Motion for
Reconsideration.

Petitioner Lourdes Ong Limson, in her 14 may 1979 Complaint filed before the trial court,3 alleged that in July 1978
respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez, offered to
sell to petitioner a parcel of land consisting of 48, 260 square meters, more or less, situated in Barrio San Dionisio,
Paraaque, Metro Manila; that respondent spouses informed her that they were the owners of the subject property; that
on 31 July 1978 she agreed to buy the property at the price of P34.00 per square meter and gave the sum of P20,000.00
to respondent spouses as "earnest money;" that respondent spouses signed a receipt therefor and gave her a 10-day
option period to purchase the property; that respondent Lorenzo de Vera then informed her that the subject property was
mortgaged to Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to pay the balance of the
purchase price to enable him and his wife to settle their obligation with the Ramoses.1wphi1.nt

Petitioner also averred that she agreed to meet respondent spouses and the Ramoses on 5 August 1978 at the Office of
the Registry of deeds of Makati, Metro Manila, to consummate the transaction but due to the failure of respondent
Asuncion Santos-de Vera and the Ramoses to appear, no transaction was formalized. In a second meeting scheduled on
11 August 1978 she claimed that she was willing and ready to pay the balance of the purchase price but the transaction
again did not materialize as respondent spouses failed to pay the back taxes of subject property. Subsequently, on 23
August 1978 petitioner allegedly gave respondent Lorenzo de Vera three (3) checks in the total amount of P36, 170.00 for
the settlement of the back taxes of the property and for the payment of the quitclaims of the three (3) tenants of subject
land. The amount was purportedly considered part of purchase price and respondent Lorenzo de Vera signed the receipts
therefor.

Petitioner alleged that on 5 September 1978 she was surprised to learn from the agent of respondent spouses that the
property was the subject of a negotiation for the sale to respondent Sunvar Realty Development Corporation (SUNVAR)
represented by respondent Tomas Cuenca, Jr. On 15 September 1978 petitioner discovered that although respondent
spouses purchased the property from the Ramoses on 20 March 1970 it was only on 15 September 1978 that TCT No. S-
72946 covering the property was issued to respondent spouses. As a consequence, she file on the same day an affidavit
of Adverse Claim with the Office of the Registry of Deeds of Makati, Metro, which was annotated on TCT No. S-72946.
She also claimed that on the same day she informed respondent Cuenca of her "contract" to purchase the property.

The Deed of Sale between respondent spouses and respondent SUNVAR was executed on 15 September 1978 and TCT
N0. S-72377 was issued in favor of the latter on 26 September 1978 with the adverse Claim of petitioner annotated
thereon. Petitioner claimed that when respondent spouses sold the property in dispute to SUNVAR, her valid and legal
right to purchase it was ignored if not violated. Moreover, she maintained that SUNVAR was in bad faith, as it knew of her
"contract" to purchase the subject property fro respondent spouse.

Finally, for the alleged unlawful and unjust acts of respondent spouses, which caused her damage, prejudice and injury,
petitioner claimed that the Deed of Sale, should be annuled and TCT No. S-72377 in the name of respondent SUNVAR
canceled and TCT No. S-72946 restored. She also insisted that a Deed of Sale between her an respondent spouses be
now executed upon her payment of the balance of the purchase price agreed upon, plus damages and attorneys fees.
In their Answer4 respondent spouses maintained that petitioner had no sufficient cause of action against them; that she
was not the real party in interest; that the option to buy the property had long expired; that there was no perfected contract
to sell between them; and, that petitioner had no legal capacity to sue. Additionally, respondent spouses claimed actual,
moral and exemplary damages, and attorneys fees against petitioner.

On the other hand, respondents SUNVAR and Cuenca, in their Answer5 alleged that petitioner was not the proper party in
interest and/or had no cause of action against them. But, even assuming that petitioner was the proper party in interest,
they claimed that she could only be entitled to the return of any amount received by respondent spouses. In the
alternative, they argued that petitioner had lost her option to buy the property for failure to comply with the terms and
conditions of the agreement as embodied in the receipt issued therefor. Moreover, they contended that at the time of the
execution of the Deed of Sale and the payment of consideration to respondent spouses, they "did not know nor was
informed" of petitioners interest or claim over the subject property. They claimed furthermore that it was only after the
signing of the Deed of Sale and the payment of the corresponding amounts to respondent spouses that they came to
know of the claim of petitioner as it was only then that they were furnished copy to the title to the properly where
the Adverse Claim of petitioner was annotated. Consequently, they also instituted a Cross-Claim against respondent
spouses for bad faith in encouraging the negotiations between them without telling them of the claim of petitioner. The
same respondents maintained that had they known of the claim of petitioner, they would not have initiated negotiations
with respondent spouses for the purchase of the property. Thus, they prayed for reimbursement of all amounts and
monies received from them by respondent spouses, attorneys fees and expenses for litigation in the event that the trial
court should annul the Deed of Sale and deprive them of their ownership and possessio of the subject land.

In their Answer to the Cross-Claim6 of respondents SUNVAR and Cuenca, respondent spouses insisted that they
negotiated with the former only after expiration of the option period given to petitioner and her failure with her
commitments thereunder. Respondent spouses contended that they acted legally and validly, in all honesty and good
faith. According to them, respondent SUNVAR made a verification of the title with the office of the register of Deeds of
Metro Manila District IV before the execution of the Deed of Absolute Sale. Also, they claimed that the Cross-Claim was
written executed by respondent SUNVAR in their favor. Thus, respondent spouses prayed for actual damages for the
unjustified filling of the Cross-Claim, moral damages for the mental anguish and similar injuries they suffered by reason
thereof, exemplary damages "to prevent others from emulation the bad example" of respondents SUNVAR and Cuenca,
plus attorneys fees.

After a protracted trial and reconstitution of the court records due to the fire that razed the Pasay City Hall on 18 January
1992, the Regional Trial Court rendered its 30 June 1993 Decision7 in favor of petitioner. It ordered (a) the annulment and
rescission of the Deed of Absolute Sale executed on 15 September 1978 by respondent spouses in favor of respondent
SUNVAR; (b) the cancellation and revocation of TCT No. S-75377 of the Registry of Deeds, Makati, Metro Manila, issued
in the name of respondent Sunvar Realty Development Corporation, and the restoration or reinstatement of TCT No. S-
72946 of the same Registry issued in the name of respondent spouses; (c) respondent spouses to execute a deed of sale
conveying ownership of the property covered by TCT No. S-72946 in favor of petitioner upon her payment of the balance
of the purchase price agreed upon; and, (d) respondent spouses to pay petitioner P50,000.00 as and for attorneys fees,
and to pay the costs.

On appeal, the Court of Appeals completely reversed the decision of the trial court. It ordered (a) the Register of Deeds of
Makati City to lift the Adverse Claim and such other encumbrances petitioner might have filed or caused to be annotated
on TCT No. S-75377; and, (b) petitioner to pay (1) respondent SUNVAR P50,000.00 as nominal damages, P30,000.00 as
exemplary damages and P20,000 as attorneys fees; (2) respondent spouses, P15,000.00 as nominal damages,
P10,000.00 as exemplary damages and P10,000.00 as attorneys fees; and, (3) the costs.

Petitioner timely filed a Motion for Reconsideration which was denied by the Court of Appeals on 19 October 1998.
Hence, this petition.

At issue for resolution by the Court is the nature of the contract entered into between petitioner Lourdes Ong Limson on
one hand, and respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera on the other.

The main argument of petitioner is that there was a perfected contract to sell between her and respondent spouses. On
the other hand, respondent spouses and respondents SUNVAR and Cuenca argue that what was perfected between
petitioner and respondent spouses was a mere option.

A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the conclusion that the agreement
between the parties was a contract of option and not a contract to sell.
An option, as used in the law of sales, is a continuing offer or contract by which the owner sitpulates with another that the
latter shall have the right to buy the property at a fixed price within a time certain, or under, or in compliance with, certain
terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is also sometimes
called an "unaccepted offer." An option is not itself a purchase, but merely secures the privilege to buy. 8 It is not a sale of
property but a sale of right to purchase.9 It is simply a contract by which the owner of property agrees with another person
that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not
then agree to sell it; but he does not sell something, i.e., the right or privilege to buy at the election or option of the other
party.10 Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside
from the consideration for the offer. Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer,
or agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the owner
of the property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms. 11

On the other hand, a contract, like a contract to sell, involves the meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some service.12 Contracts, in general, are
perfected by mere consent,13 which 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. 14

The Receipt15 that contains the contract between petitioner and respondent spouses provides

Received from Lourdes Limson the sum of Twenty Thousand Peso (P20,000.00) under Check No. 22391 dated
July 31, 1978 as earnest money with option to purchase a parcel of land owned by Lorenzo de Vera located at
Barrio San Dionisio, Municipality of Paraaque, Province of Rizal with an area of forty eight thousand two hundred
sixty square meters more or less at the price of Thirty Four Pesos (34.00) 16 cash subject to the condition and
stipulation that have been agreed upon by the buyer and me which will form part of the receipt. Should the
transaction of the property not materialize not on the fault of the buyer, I obligate myself to return the full amount
of P20,000.00 earnest money with option to buy or forfeit on the fault of the buyer. I guarantee to notify the buyer
Lourdes Limson or her representative and get her conformity should I sell or encumber this property to a third
person. This option to buy is good within ten (10) days until the absolute deed of sale is finally signed by the
parties or the failure of the buyer to comply with the terms of the option to buy as herein attached.

In the interpretation of contracts, the ascertainment of the intention of the contracting parties is to be discharged by
looking to the words they used to project that intention in their contracts, all the words standing alone. 17 The
above Receipt readily shows that respondent spouses and petitioner only entered into a contract of option; a contract by
which respondent spouses agreed with petitioner that the latter shall have the right to buy the former's property at a fixed
price of P34.00 per square meter within ten (10) days from 31 July 1978. Respondent spouses did not sell their property;
they did not also agree to sell it; but they sold something, i.e., the privilege to buy at the election or option of petitioner.
The agreement imposed no binding obligation on petitioner, aside from the consideration for the offer.

The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as "earnest money." However,
a careful examination of the words used indicated that the money is not earnest money but option money."Earnest
money" and "option money" are not the same but distinguished thus; (a) earnest money is part of the purchase price,
while option money is the money given as a distinct consideration for an option contract; (b) earnest money given only
where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is
given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to
buy,18 but may even forfeit it depending on the terms of the option.

There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price. Moreover, it was not
shown that there was a perfected sale between the parties where earnest money was given. Finally, when petitioner gave
the "earnest money" the Receipt did not reveal that she was bound to pay the balance of the purchase price. In fact, she
could even forfeit the money given if the terms of the option were not met. Thus, the P20,000.00 could only be money
given as consideration for the option contract. That the contract between the parties is one of option is buttressed by the
provision therein that should the transaction of the provision therein that should the transaction of the property not
materialize without fault of petitioner as buyer, respondent Lorenzo de Vera obligates himself to return the full amount of
P20,000.00 "earnest money" with option to buy or forfeit the same on the fault of petitioner. It is further bolstered by the
provision therein that guarantees petitioner that she or her representative would be notified in case the subject property
was sold or encumbered to a third person. Finally, the Receipt provided for a period within which the option to buy was to
be exercised, i.e., "within ten (10) days" from 31 July 1978.

Doubtless, the agreement between respondent spouses and petitioner was an "option contract" or what is sometimes
called an "unaccepted offer." During the option period the agreement was not converted into a bilateral promise to sell and
to buy where both respondent spouses and petitioner were then reciprocally bound to comply with their respective
undertakings as petitioner did not timely, affirmatively and clearly accept the offer of respondent spouses.

The rule is that except where a formal acceptance is not required, although the acceptance must be affirmatively and
clearly made and evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an
informal manner, and may be shown by acts, conduct or words by the accepting party that clearly manifest a present
intention or determination to accept the offer to buy the property of respondent spouses within the 10-day option period.
The only occasion within the option period when petitioner could have demonstrated her acceptance was on 5 August
1978 when, according to her, she agreed to meet respondent spouses and the Ramoses at the Office of the Registrar of
Deeds of Makati. Petitioners agreement to meet with respondent spouses presupposes an invitation from the latter, which
only emphasizes their persistence in offering the property to the former. But whether that showed acceptance by petitioner
of the offer is hazy and dubious.

On or before 10 August 1978, the last day of the option period, no affirmative or clear manifestation was made by
petitioner to accept the offer. Certainly, there was no concurrence of private respondent spouses offer and petitioners
acceptance thereof within the option period. Consequently, there was no perfected contract to sell between the parties.

On 11 August 1978 the option period expired and the exclusive right of petitioner to buy the property of respondent
spouses ceased. The subsequent meetings and negotiations, specifically on 11 and 23 August 1978, between the parties
only showed the desire of respondent spouses to sell their property to petitioner. Also, on 14 September 1978 when
respondent spouses sent a telegram to petitioner demanding full payment of the purchase price on even date simply
demonstrated an inclination to give her preference to buy subject property. Collectively, these instances did not indicate
that petitioner still had the exclusive right to purchase subject property. Verily, the commencement of negotiations
between respondent spouses and respondent SUNVAR clearly manifested that their offer to sell subject property to
petitioner was no longer exclusive to her.

We cannot subscribe to the argument of petitioner that respondent spouses extended the option period when they
extended the authority of their until 31 August 1978. The extension of the contract of agency could not operate to extend
the option period between the parties in the instant case. The extension must not be implied but categorical and must
show the clear intention of the parties.1wphi1.nt

As to whether respondent spouses were at fault for the non-consummation of their contract with petitioner, we agree with
the appellate court that they were not to be blammed. First, within the option period, or on 4 August 1978, it was
respondent spouses and not petitioner who initiated the meeting at the Office of The Register of Deeds of
Makati. Second, that the Ramoses filed to appear on 4 August 1978 was beyond the control of respondent
spouses. Third,the succeeding meetings that transpired to consummate the contract were all beyond the option period
and, as declared by the Court of Appeals, the question of who was at fault was already immaterial. Fourth, even assuming
that the meetings were within the option period, the presence of petitioner was not enough as she was not even prepared
to pay the purchase price in cash as agreed upon. Finally, even without the presence of the Ramoses, petitioner could
have easily made the necessary payment in cash as the price of the property was already set at P34.00 per square meter
and payment of the mortgage could every well be left to respondent spouses.

Petitioner further claims that when respondent spouses sent her a telegram demanding full payment of the purchase price
on 14 September 1978 it was an acknowledgment of their contract to sell, thus denying them the right to claim otherwise.

We do not agree. As explained above, there was no contract to sell between petitioner and respondent spouses to speak
of. Verily, the telegram could not operate to estop them from claiming that there was such contract between them and
petitioner. Neither could it mean that respondent spouses extended the option period. The telegram only showed that
respondent spouses were willing to give petitioner a chance to buy subject property even if it no longer exclusive.

The option period having expired and acceptance was not effectively made by petitioner, the purchase of subject property
by respondent SUNVAR was perfectly valid and entered into in good faith. Petitioner claims that in August 1978
Hermigildo Sanchez, the son of respondent spouses agent, Marcosa Snachez, informed Marixi Prieto, a member of the
Board of Directors of respondent SUNVAR, that the property was already sold to petitioner. Also, petitioner maintains that
on 5 September 1978 respondent Cuenca met with her and offered to buy the property from her at P45.00 per square
meter. Petitioner contends that these incidents, including the annotation of her Adverse Claim on the title of subject
property on 15 September 1978 show that respondent SUNVAR was aware of the perfected sale between her and
respondent spouses, thus making respondent SUNVAR a buyer in bad faith.
Petitioner is not correct. The dates mentioned, at least 5 and 15 September 1978, are immaterial as they were beyond the
option period given to petitioner. On the other hand, the referral to sometime in August 1978 in the testimony of
Hermigildo Sanchez as emphasized by petitioner in her petition is very vague. It could be within or beyond the option
period. Clearly then, even assuming that the meeting with Marixi Prieto actually transpired, it could not necessarily mean
that she knew of the agreement between petitioner and respondent spouses for the purchase of subject property as the
meeting could have occurred beyond the option period. In which case, no bad faith could be attributed to respondent
SUNVAR. If, on the other hand, the meeting was within the option period, petitioner was remiss in her duty to prove so.
Necessarily, we are left with the conclusion that respondent SUNVAR bought subject property from respondent spouses
in good faith, for value and without knowledge of any flaw or defect in its title.

The appellate court awarded nominal and exemplary damages plus attorneys fees to respondent spouses and
respondent SUNVAR. But nominal damages are adjudicated to vindicate or recognize the right of the plaintiff that has
been violated or invaded by the defendant.19 In the instant case, the Court recognizes the rights of all the parties and finds
no violation or invasion of the rights of respondents by petitioner. Petitioner, in filing her complaint, only seeks relief, in
good faith, for what she believes she was entitled to and should not be awarded to respondents as they are imposed only
by way of example or correction for the public good and only in addition to the moral, temperate, liquidated or
compensatory damages.20 No such kinds of damages were awarded by the Court of Appeals, only nominal, which was
not justified in this case. Finally, attorneys fees could not also be recovered as the Court does not deem it just and
equitable under the circumtances.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals ordering the Register of Deeds of Makati City
to lift the adverse claim and such other encumbrances petitioners Lourdes Ong Limson may have filed or caused to be
annotated on TCT No. S-75377 is AFFIRMED, with the MODIFICATION that the award of nominal and exemplary
damages as well as attorneys fees is DELETED.

SO ORDERED.
G.R. No. L-1720 March 4, 1950

SIA SUAN and GAW CHIAO, petitioners,


vs.
RAMON ALCANTARA, respondent.

Antonio Barredo for petitioners.


Zosimo D. Tanalega for respondents.

PARAS, J.:

On August 3, 1931, a deed of sale was executed by Rufino Alcantara and his sons Damaso Alcantara and Ramon
Alcantara conveying to Sia Suan five parcels of land. Ramon Alcantara was then 17 years, 10 months and 22 days old.
On August 27, 1931, Gaw Chiao (husband of Sia Suan) received a letter from Francisco Alfonso, attorney of Ramon
Alcantara, informing Gaw Chiao that Ramon Alcantara was a minor and accordingly disavowing the contract. After being
contacted by Gaw Chiao, however, Ramon Alcantara executed an affidavit in the office of Jose Gomez, attorney of Gaw
Chiao, wherein Ramon Alcantara ratified the deed of sale. On said occasion Ramon Alcantara received from Gaw Chiao
the sum of P500. In the meantime, Sia Suan sold one of the lots to Nicolas Azores from whom Antonio Azores inherited
the same.

On August 8, 1940, an action was instituted by Ramon Alcantara in the Court of First Instance of Laguna for the
annulment of the deed of sale as regards his undivided share in the two parcels of land covered by certificates of title Nos.
751 and 752 of Laguna. Said action was against Sia Suan and her husband Gaw Chiao, Antonio, Azores, Damaso
Alcantara and Rufino Alcantara (the latter two being, respectively, the brother and father of Ramon Alcantara appealed to
the Court of Appealed which reversed the decision of the trial court, on the ground that the deed of sale is not binding
against Ramon Alcantara in view of his minority on the date of its execution, and accordingly sentenced Sia Suan to pay
to Ramon Alcantara the sum of P1,750, with legal interest from December 17, 1931, in lieu of his share in the lot sold to
Antonio Azores (who was absolved from the complaint), and to reconvey to Ramon Alcantara an undivided one-fourth
interest in the lot originally covered by certificate of title NO. 752 of Laguna plus the cost of the suit. From this judgment
Sia Suan and Gaw Chiao have come to us on appeal by certiorari.

It is undeniable that the deed of sale signed by the appellee, Ramon Alcantara, On August 3, 1931, showed that he, like
his co-signers (father and brother), was then of legal age. It is not pretend and there is nothing to indicate that the
appellants did not believe and rely on such recital of fact. This conclusion is decisive and very obvious in the decision of
the Court of Appeals It is true that in the resolution on the for reconsideration, the Court of Appeals remarked that "The
fact that when informed of appellant's minority, the appellees too no steps for nine years to protect their interest beyond
requiring the appellant to execute a ratification of the sale while still a minor, strongly indicates that the appellees knew of
his minority when the deed of sale was executed." But the feeble insinuation is sufficiently negative by the following
positive pronouncements of the Court of Appeals as well in said resolution as in the decision.

As to the complaint that the defendant is guilty of laches, suffice it to say that the appellees were informed of his
minority within one (1) month after the transaction was completed. (Resolution.)

Finally, the appellees were equally negligent in not taking any action to protect their interest form and after August
27, 1931, when they were notified in writing of appellant's minority. (Resolution.)

. . . The fact remains that the appellees were advised within the month that appellant was a minor, through the
letter of Attorney Alfonso (Exhibit 1) informing appellees of his client's desire to disaffirm the contract . . .
(Decision.)

The purchaser having been apprised of incapacity of his vendor shortly after the contract was made, the delay in
bringing the action of annulment will not serve to bar it unless the period fixed by the statute of limitations expired
before the filing of the complaint. . . . (Decision.)

In support of the contend that the deed of sale is binding on the appellee, counsel for the appellants invokes the decision
in Mercado and Mercado vs. Espiritu (37 Phil., 215), wherein this court held:

The courts, in their interpretation of the law, have laid down the rule that the sale of real estate, made by minors
who pretend to be of legal age, when it fact they are not, is valid, and they will not be permitted to excuse
themselves from the fulfillment of the obligations contracted by them, or to have them annulled in pursuance of
the provisions of Law 6 title 19, of the 6th Partida; and the judgment that holds such a sale to valid and absolves
the purchaser from the complaint filed against him does not violate the laws relative to the sale of minors'
property, nor the juridical rules established in consonance therewith. (Decisions of the Supreme Court of Spain, of
April 27, 1840, July 11, 1868, and March 1, 1875.)

The Court of Appeals has refused to apply this doctrine on the ground that the appellants did not actually pay any amount
in cash to the appellee and therefore did not suffer any detriment by reason of the deed of sale, it being stipulated that the
consideration therefore was a pre-existing indebtedness of appellee's father, Rufino Alcantara. We are of the opinion that
the Court of Appeals erred. In the first place, in the case cited, the consideration for sale consisted in greater part of pre-
existing obligation. In the second place, under the doctrine, to bind a minor who represents himself to be of legal age, it is
not necessary for his vendee to actually part with cash, as long as the contract is supported by a valid consideration.
Since appellee's conveyance to the appellants was admittedly for and in virtue of a pre-existing indebtedness
(unquestionably a valid consideration), it should produce its full force and effect in the absence of any other vice that may
legally invalidate the same. It is not here claimed that the deed of sale is null and void on any ground other than the
appellee's minority. Appellee's contract has become fully efficacious as a contract executed by parties with full legal
capacity.

The circumstance that, about one month after the date of the conveyance, the appellee informed the appellants of his
minority, is of no moment, because appellee's previous misrepresentation had already estopped him from disavowing the
contract. Said belated information merely leads to the inference that the appellants in fact did not know that the appellee
was a minor on the date of the contract, and somewhat emphasizes appellee's had faith, when it is borne in mind that no
sooner had he given said information than he ratified his deed of sale upon receiving from the appellants the sum of P500.

Counsel for the appellees argues that the appellants could not have been misled as to the real age of the appellee
because they were free to make the necessary investigation. The suggestion, while perhaps practicable, is conspicuously
unbusinesslike and beside the point, because the findings of the Court of Appeals do not show that the appellants knew or
could suspected appellee's minority.

The Court of Appeals seems to be of the opinion that the letter written by the appellee informing the appellants of his
minority constituted an effective disaffirmance of the sale, and that although the choice to disaffirm will not by itself avoid
the contract until the courts adjudge the agreement to be invalid, said notice shielded the appellee from laches and
consequent estoppel. This position is untenable since the effect of estoppel in proper cases is unaffected by the
promptness with which a notice to disaffirm is made.

The appealed decision of the Court of Appeals is hereby reversed and the appellants absolved from the complaint, with
costs against the appellee, Ramon Alcantara. So ordered.

Ozaeta, Tuason, Montemayor and Torres, JJ., concur.

Separate Opinions

PADILLA, J., concurring:

I concur in the result not upon the grounds stated in the majority opinion but for the following reasons: The deed of sale
executed by Ramon Alcantara on 3 August 1931 conveying to Sia Suan five parcels of land is null and void insofar as the
interest, share, or participation of Ramon Alcantara in two parcels of land is concerned, because on the date of sale he
was 17 years, 10 months and 22 days old only. Consent being one of the essential requisites for the execution of a valid
contract, a minor, such as Ramon Alcantara was, could not give his consent thereof. The only misrepresentation as to his
age, if any, was the statement appearing in the instrument that he was of age. On 27 August 1931, or 24 days after the
deed was executed, Gaw Chiao, the husband of the vendee Sia Suan, was advised by Atty. Francisco Alfonso of the fact
that his client Ramon Alcantara was a minor. The fact that the latter, for and in consideration of P500, executed an
affidavit, whereby he ratified the deed of sale, is of no moment. He was still minor. The majority opinion invokes the rule
laid down in the case of Mercado et al. vs. Espiritu, 37 Phil., 215. The rule laid down by this Court in that case is based on
three judgments rendered by the Supreme Court of Spain on 27 April 1960, 11 July 1868, and 1 March 1875. In these
decisions the Supreme Court of Spain applied Law 6, Title 19, of the 6th Partida which expressly provides:
"Diziendo o ortogando el que fuese menor, que era mayor de XXV aos, si ouiesse persona que paresciesse de
tal tiempo, si lo faze enganosamente, valdria el pleyto que assi fuere fecho con el e non deue ser desatado
despues, como quier que non era de edad quando lo fizo: esto es, porque las leyes ayudan a los enganados, e
non a los enganadores. . . ." (Alcubilla, Codigos Antigous de Espaa, p. 613.)

The contract of sale involved in the case of Mercado vs. Espiritu, supra, was executed by the minors on 17 May 1910.
The Law in force on this last-mentioned date was not Las Siete Partidas, 1 which was the in force at the time the cases
decided by the Supreme Court of Spain referred to, but the Civil Code which took effect in the Philippines on 8 December
1889. As already stated, the Civil Code requires the consent of both parties for the valid execution of a contract (art. 1261,
Civil Code). As a minor cannot give his consent, the contract made or executed by him has no validity and legal effect.
There is no provision in the Civil Code similar to that of Law 6, Title 19, of the 6th Partida which is equivalent to the
common law principle of estoppel. If there be an express provision in the Civil Code similar law 6, Title 19, of the
6th Partida, I would agree to the reasoning of the majority. The absence of such provision in the Civil Code is fatal to the
validity of the contract executed by a minor. It would be illogical to uphold the validity of a contract on the ground of
estoppel, because if the contract executed by a minor is null and void for lack of consent and produces no legal effect,
how could such a minor be bound by misrepresentation about his age? If he could not be bound by a direct act, such as
the execution of a deed of sale, how could he be bound by an indirect act, such as misrepresentation as to his age? The
rule laid down in Young vs. Tecson, 39 O. G. 953, in my opinion, is the correct one.

Nevertheless, as the action in this case was brought on 8 August 1940, the same was barred, because it was not brought
within four (4) years after the minor had become of age, pursuant to article 1301 of the Civil Code. Ramon Alcantara
became of age sometime in September 1934.

Moran, C.J. and Bengzon, J., concur.


Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-11872 December 1, 1917

DOMINGO MERCADO and JOSEFA MERCADO, plaintiffs-appellants,


vs.
JOSE ESPIRITU, administrator of the estate of the deceased Luis Espiritu, defendant-appellee.

Perfecto Salas Rodriguez for appellants.


Vicente Foz for appellee.

TORRES, J.:

This is an appeal by bill of exceptions, filed by the counsel for the plaintiffs from the judgment of September 22, 1914, in
which the judge of the Seventh Judicial District dismissed the complaint filed by the plaintiffs and ordered them to keep
perpetual silence in regard to the litigated land, and to pay the costs of the suit.

By a complaint dated April 9, 1913, counsel for Domingo and Josefa Mercado brought suit in the Court of First Instance of
Bulacan, against Luis Espiritu, but, as the latter died soon thereafter, the complaint was amended by being directed
against Jose Espiritu in his capacity of his administrator of the estate of the deceased Luis Espiritu. The plaintiffs alleged
that they and their sisters Concepcion and Paz, all surnamed Mercado, were the children and sole heirs of Margarita
Espiritu, a sister of the deceased Luis Espiritu; that Margarita Espiritu died in 1897, leaving as her paraphernal property a
tract of land of 48 hectares in area situated in the barrio of Panducot, municipality of Calumpit, Bulacan, and bounded as
described in paragraph 4 of the amended complaint, which hereditary portion had since then been held by the plaintiffs
and their sisters, through their father Wenceslao Mercado, husband of Margarita Espiritu; that, about the year 1910, said
Luis Espiritu, by means of cajolery, induced, and fraudulently succeeded in getting the plaintiffs Domingo and Josefa
Mercado to sign a deed of sale of the land left by their mother, for the sum of P400, which amount was divided among the
two plaintiffs and their sisters Concepcion and Paz, notwithstanding the fact that said land, according to its assessment,
was valued at P3,795; that one-half of the land in question belonged to Margarita Espiritu, and one-half of this share, that
is, one-fourth of said land , to the plaintiffs, and the other one-fourth, to their two sisters Concepcion and Paz; that the part
of the land belonging to the two plaintiffs could produce 180 cavanes of rice per annum, at P2.50 per cavan, was
equivalent to P450 per annum; and that Luis Espiritu had received said products from 1901 until the time of his death.
Said counsel therefore asked that judgment be rendered in plaintiffs' favor by holding to be null and void the sale they
made of their respective shares of their land, to Luis Espiritu, and that the defendant be ordered to deliver and restore to
the plaintiffs the shares of the land that fell to the latter in the partition of the estate of their deceased mother Margarita
Espiritu, together with the products thereof, uncollected since 1901, or their equivalent, to wit, P450 per annum, and to
pay the costs of the suit.

In due season the defendant administrator answered the aforementioned complaint, denying each and all of the
allegations therein contained, and in special defense alleged that the land, the subject-matter of the complaint, had an
area of only 21 cavanes of seed rice; that, on May 25, 1894, its owner, the deceased Margarita Espiritu y Yutoc, the
plaintiffs' mother, with the due authorization of her husband Wenceslao Mercado y Arnedo Cruz sold to Luis Espiritu for
the sum of P2,000 a portion of said land, to wit, an area such as is usually required for fifteen cavanes of seed; that
subsequently, on May 14, 1901, Wenceslao Mercado y Arnedo Cruz, the plaintiffs' father, in his capacity as administrator
of the property of his children sold under pacto de retro to the same Luis Espiritu at the price of P375 the remainder of the
said land, to wit, an area covered by six cavanes of seed to meet the expenses of the maintenance of his (Wenceslao's)
children, and this amount being still insufficient the successively borrowed from said Luis Espiritu other sums of money
aggregating a total of P600; but that later, on May 17,1910, the plaintiffs, alleging themselves to be of legal age, executed,
with their sisters Maria del Consejo and Maria dela Paz, the notarial instrument inserted integrally in the 5th paragraph of
the answer, by which instrument, ratifying said sale under pacto de retro of the land that had belonged to their mother
Margarita Espiritu, effected by their father Wenceslao Mercado in favor of Luis Espiritu for the sum of P2,600, they sold
absolutely and perpetually to said Luis Espiritu, in consideration of P400, the property that had belonged to their deceased
mother and which they acknowledged having received from the aforementioned purchaser. In this cross-complaint the
defendant alleged that the complaint filed by the plaintiffs was unfounded and malicious, and that thereby losses and
damages in the sum of P1,000 had been caused to the intestate estate of the said Luis Espiritu. He therefore asked that
judgment be rendered by ordering the plaintiffs to keep perpetual silence with respect to the land in litigation and, besides,
to pay said intestate estate P1,000 for losses and damages, and that the costs of the trial be charged against them.

In reply to the cross-complaint, the plaintiffs denied each and all of the facts therein set forth, and in special defense
alleged that at the time of the execution of the deed of sale inserted in the cross-complaint the plaintiffs were still minors,
and that since they reached their majority the four years fixed by law for the annulment of said contract had not yet
elapsed. They therefore asked that they be absolved from the defendant's cross-complaint.

After trial and the introduction of evidence by both parties, the court rendered the judgment aforementioned, to which the
plaintiffs excepted and in writing moved for a reopening of the case and a new trial. This motion was overruled, exception
was taken by the petitioners, and the proper bill of exceptions having been presented, the same was approved and
transmitted to the clerk of this court.

As the plaintiffs assailed the validity of the deed of sale, Exhibit 3, executed by them on May 17, 1910, on the ground that
they were minors when they executed it, the questions submitted to the decision of this court consist in determining
whether it is true that the plaintiffs were then minors and therefore incapable of selling their property on the date borne by
the instrument Exhibit 3; and in case they then were such, whether a person who is really and truly a minor and,
notwithstanding, attests that he is of legal age, can, after the execution of the deed and within legal period, ask for the
annulment of the instrument executed by him, because of some defect that invalidates the contract, in accordance with
the law (Civ. Code, arts. 1263 and 1300), so that he may obtain the restitution of the land sold.

The records shows it to have been fully proven that in 1891 Lucas Espiritu obtained title by composition with the State, to
three parcels of land, adjoining each other, in the sitio of Panducot of the pueblo of Calumpit, Bulacan, containing
altogether an area of 75 hectares, 25 ares, and 59 centares, which facts appear in the title Exhibit D; that, upon Luis
Espiritu's death, his said lands passed by inheritance to his four children named Victoria, Ines, Margarita, and Luis; and
that, in the partition of said decedent's estate, the parcel of land described in the complaint as containing forty-seven and
odd hectares was allotted to the brother and sister Luis and Margarita, in equal shares. Margarita Espiritu, married to
Wenceslao Mercado y Ardeno Cruz, had by this husband five children, Maria Consejo, Maria de la Paz, Domingo, Josefa,
and Amalia, all surnamed Mercado y Espiritu, who, at the death of their mother in 1896 inherited, by operation of law, one-
half of the land described in the complaint.

The plaintiffs' petition for annulment of the sale and the consequent restitution to them of two-fourths of the land left by
their mother, that is, of one-fourth of all the land described in the complaint, and which, they stated, amounts to 11
hectares, 86 ares and 37 centares. To this claim the defendant excepted, alleging that the land in question comprised only
an area such as is customarily covered by 21 cavanes of seed.

It was also duly proven that, by a notarial instrument of May 25, 1894, the plaintiffs' mother conveyed by actual and
absolute sale for the sum of P2,000, to her brother Luis Espiritu a portion of the land now on litigation, or an area such as
is usually covered by about 15 cavanes of seed; and that, on account of the loss of the original of said instrument, which
was on the possession of the purchaser Luis Espiritu, and furthermore because, during the revolution, the protocols or
registers of public documents of the Province of Bulacan were burned, Wenceslao Mercado y Arnedo Cruz, the widower
of the vendor and father of the plaintiffs, executed, at the instance of the interested party Luis Espiritu, the notarial
instrument Exhibit 1, of the date of May 20, 1901, in his own name and those of his minor children Maria Consejo, Maria
de la Paz, Domingo, Josefa, and Amalia, and therein set forth that it was true that the sale of said portion of land had
been made by his aforementioned wife, then deceased, to Luis Espiritu in 1894.

However, even prior to said date, to wit, on May 14th of the same year, 1901, the widower Wenceslao Mercado,
according to the private document Exhibit 2, pledged or mortgaged to the same man, Luis Espiritu, for P375, a part, or an
area covered by six cavanes of seed, of the land that had belonged to this vendor's deceased wife, to the said Luis
Espiritu and which now forms a part of the land in question a transaction which Mercado was obliged to make in order
to obtain funds with which "to cover his children's needs." Wenceslao Mercado, the plaintiffs' father, having died, about
the year 1904, the plaintiffs Domingo and Josefa Mercado, together with their sisters Consejo and Paz, declaring
themselves to be of legal age and in possession of the required legal status to contract, executed and subscribed before a
notary the document Exhibit 3, on May 17, 1910, in which referring to the previous sale of the land, effected by their
deceased mother for the sum of P2,600 and with her husband's permission and authorization, they sold absolutely and in
perpetuity to Luis Espiritu, for the sum of P400 "as an increase" of the previous purchase price, the land described in said
instrument and situated in Panducot, pueblo of Calumpit, Bulacan, of an area equal to that usually sown with 21 cavanes
of seed bounded on the north by the lands of Flaviano Abreu and the heirs of Pedro Espiritu, on the east by those of
Victoria Espiritu and Ines Espiritu, on the south by those of Luis Espiritu, and on the west by those of Hermogenes Tan-
Toco and by the Sapang-Maitu stream.
In this status of the case the plaintiffs seek the annulment of the deed Exhibit 3, on the ground that on the date of its
execution they were minors without legal capacity to contract, and for the further reason that the deceased purchaser Luis
Espiritu availed himself of deceit and fraud in obtaining their consent for the execution of said deed.

As it was proven by the testimony of the clerk of the parochial church of Apalit (plaintiffs were born in Apalit) that the
baptismal register books of that parish pertaining to the years 1890-1891, were lost or burned, the witness Maria Consejo
Mercado recognized and identified the book Exhibit A, which she testified had been kept and taken care of by her
deceased father Wenceslao Mercado, pages 396 and 397 of which bear the attestation that the plaintiff Domingo Mercado
was born on August 4, 1890, and Josefa Mercado, on July 14, 1891. Furthermore, this witness corroborated the averment
of the plaintiffs' minority, by the personal registration certificate of said Domingo Mercado, of the year 1914, Exhibit C, by
which it appears that in 1910 he was only 23 years old, whereby it would also be appear that Josefa Mercado was 22
years of age in 1910, and therefore, on May 17,1910, when the instrument of purchase and sale, Exhibit 3, was executed,
the plaintiffs must have been, respectively, 19 and 18 years of age.

The witness Maria Consejo Mercado also testified that after her father's death her brother and sisters removed to Manila
to live there, although her brother Domingo used to reside with his uncle Luis Espiritu, who took charge of the
administration of the property left by his predecessors in interest; that it was her uncle Luis who got for her brother
Domingo the other cedula, Exhibit B, pertaining to the year 1910, where in it appears that the latter was then already 23
years of age; that she did not know why her uncle did so; that she and her brother and sisters merely signed the deed of
May 17, 1910; and that her father Wenceslao Mercado, prior to his death had pledged the land to her uncle Luis Espiritu.

The witness Ines Espiritu testified that after the death of the plaintiffs' father, it was Luis Espiritu who directed the
cultivation of the land in litigation. This testimony was corroborated by her sister Victoria Espiritu, who added that her
nephew, the plaintiff Domingo, had lived for some time, she did not know just how long, under the control of Luis Espiritu.

Roque Galang, married to a sister of Luis Espiritu, stated that the land that fell to his wife and to his sister-in-law Victoria,
and which had an area of about 8 hectares less than that of the land allotted to the aforementioned Luis and Margarita
produced for his wife and his sister-in-law Victoria a net and minimum yield of 507 cavanes in 1907, in spite of its being
high land and of inferior quality, as compared with the land in dispute, and that its yield was still larger in 1914, when the
said two sisters' share was 764 cavanes.

Patricio Tanjucto, the notary before whom the deed Exhibit 3 was ratified, was a witness for the defendant. He testified
that this deed was drawn up by him at the request of the plaintiff Josefa Mercado; that the grantors of the instrument
assured him that they were all of legal age; that said document was signed by the plaintiffs and the other contracting
parties, after it had been read to them and had been translated into the Pampangan dialect for those of them who did not
understand Spanish. On cross-examination, witness added that ever since he was 18 years of age and began to court, he
had known the plaintiff Josefa Mercado, who was then a young maiden, although she had not yet commenced to attend
social gatherings, and that all this took place about the year 1898, for witness said that he was then [at the time of his
testimony, 1914,] 34 years of age.

Antonio Espiritu, 60 years of age, who knew Lucas Espiritu and the properties owned by the latter, testified that Espiritu's
land contained an area of 84 cavanes, and after its owner's death, was under witness' administration during to harvest two
harvest seasons; that the products yielded by a portion of this land, to wit, an area such as is sown by about 15 cavanes
of seed, had been, since 1894, utilized by Luis Espiritu, by reason of his having acquired the land; and that, after
Margarita Espiritu's death, her husband Wenceslao Mercado took possession of another portion of the land, containing an
area of six cavanes of seed and which had been left by this deceased, and that he held same until 1901, when he
conveyed it to Luis Espiritu. lawphi1.net

The defendant-administrator, Jose Espiritu, son of the deceased Luis Espiritu, testified that the plaintiff Domingo Mercado
used to live off and on in the house of his deceased father, about the year 1909 or 1910, and used to go back and forth
between his father's house and those of his other relatives. He denied that his father had at any time administered the
property belonging to the Mercado brother and sisters.

In rebuttal, Antonio Mercado, a cousin of Wenceslao, father of the plaintiffs, testified that he mediate in several
transactions in connection with a piece of land belonging to Margarita Espiritu. When shown the deed of purchase and
sale Exhibit 1, he stated that he was not acquainted with its contents. This same witness also testified that he mediated in
a transaction had between Wenceslao Mercado and Luis Espiritu (he did not remember the year), in which the former sold
to the latter a parcel of land situated in Panducot. He stated that as he was a witness of the deed of sale he could identify
this instrument were it exhibited to him; but he did not do so, for no instrument whatever was presented to him for
identification. The transaction mentioned must have concerned either the ratification of the sale of the land of 15 cavanes,
in 1901, attested in Exhibit 1, or the mortgage or pledge of the other parcel of 6 cavanes, given on May 14, 1901, by
Wenceslao Mercado to Luis Espiritu, as may be seen by the private document Exhibit 2. In rebuttal, the plaintiff Josefa
Mercado denied having gone to the house of the notary Tanjutco for the purpose of requesting him to draw up any
document whatever. She stated that she saw the document Exhibit 3 for the first time in the house of her uncle Luis
Espiritu on the day she signed it, on which occasion and while said document was being signed said notary was not
present, nor were the witnesses thereto whose names appear therein; and that she went to her said uncle's house,
because he had sent for her, as well as her brother and sisters, sending a carromata to fetch them. Victoria Espiritu
denied ever having been in the house of her brother. Luis Espiritu in company with the plaintiffs, for the purpose of giving
her consent to the execution of any deed in behalf of her brother.

The evidence adduced at the trial does not show, even circumstantially, that the purchaser Luis Espiritu employed fraud,
deceit, violence, or intimidation, in order to effect the sale mentioned in the document Exhibit 3, executed on May 17,
1910. In this document the vendors, the brother and the sisters Domingo, Maria del Consejo, Paz and, Josefa surnamed
Mercado y Espiritu, attested the certainty of the previous sale which their mother, during her lifetime, had made in behalf
of said purchaser Luis Espiritu, her brother with the consent of her husband Wenceslao Mercado, father of the vendors of
the portion of land situated in the barrio of Panducot, pueblo of Calumpit, Bulacan; and in consideration of the fact that the
said vendor Luis Espiritu paid them, as an increase, the sum of P400, by virtue of the contract made with him, they
declare having sold to him absolutely and in perpetuity said parcel of the land, waive and thenceforth any and all rights
they may have, inasmuch as said sum constitutes the just price of the property.

So that said document Exhibit 3 is virtually an acknowledgment of the contract of sale of the parcel or portion of land that
would contain 15 cavanes of seed rice made by the vendors' mother in favor of the purchaser Luis Espiritu, their uncle,
and likewise an acknowledgment of the contract of pledge or mortgage of the remainder of said land, an area of six
cavanes, made with the same purchaser, at an increase of P400 over the price of P2,600, making an aggregate sum of
P3,000, decomposed as follows: P2,000, collected during her lifetime, by the vendors' father; and the said increase of
P400, collected by the plaintiffs.

In the aforementioned sale, according to the deed of May 25, 1894, Margarita Espiritu conveyed to her brother Luis the
parcel of 15 cavanes of seed, Exhibit 1, and after her death the plaintiffs' widowed father mortgaged or pledged the
remaining parcel or portion of 6 cavanes of seed to her brother-in-law, Luis Espiritu, in May, 1901 (Exhibit 2). So it is that
the notarial instrument Exhibit 3, which was assailed by the plaintiffs, recognized the validity of the previous contracts, and
the totality of the land, consisting of an area containing 21 cavanes of seed rice, was sold absolutely and in perpetuity, the
vendors receiving in exchange P400 more; and there is no conclusive proof in the record that this last document was false
and simulated on account of the employment of any violence, intimidation, fraud, or deceit, in the procuring of the consent
of the vendors who executed it.

Considering the relation that exists between the document Exhibit 3 and those of previous dates, Exhibits 1 and 2, and
taking into the account the relationship between the contracting parties, and also the general custom that prevails in many
provinces of these Islands for the vendor or debtor to obtain an increase in the price of the sale or of the pledge, or an
increase in the amount loaned, without proof to the contrary, it would be improper and illegal to hold, in view of the facts
hereinabove set forth, that the purchaser Luis Espiritu, now deceased, had any need to forge or simulate the document
Exhibit 3 inasmuch as, since May, 1894, he has held in the capacity of owner by virtue of a prior acquisition, the parcel of
land of 15 cavanes of seed, and likewise, since May, 1901, according to the contract of mortgage or pledge, the parcel of
6 cavanes, or the remainder of the total area of 21 cavanes.

So that Luis Espiritu was, during his lifetime, and now, after his death, his testate or intestate estate is in lawful
possession of the parcel of land situated in Panducot that contains 21 cavanes of seed, by virtue of the title of conveyance
of ownership of the land measuring 15 cavanes, and, in consequence of the contract of pledge or mortgage in security for
the sum of P600, is likewise in lawful possession of the remainder of the land, or an area containing 6 cavanes of seed.

The plaintiffs have absolutely no right whatever to recover said first parcel of land, as its ownership was conveyed to the
purchaser by means of a singular title of purchase and sale; and as to the other portion of 6 cavanes of seed, they could
have redeemed it before May 17, 1910, upon the payment or the return of the sum which their deceased father
Wenceslao Mercado had, during his lifetime, received as a loan under security of the pledged property; but, after the
execution of the document Exhibit 3, the creditor Luis Espiritu definitely acquired the ownership of said parcel of 6
cavanes. It is therefore a rash venture to attempt to recover this latter parcel by means of the contract of final and
absolute sale, set forth in the deed Exhibit 3.

Moreover, the notarial document Exhibit 1, are regards the statements made therein, is of the nature of a public document
and is evidence of the fact which gave rise to its execution and of the date of the latter, even against a third person and
his predecessors in interest such as are the plaintiffs. (Civ. Code, art. 1218.)
The plaintiffs' father, Wenceslao Mercado, recognizing it to be perfectly true that his wife Margarita Espiritu sold said
parcel of land which she inherited from her father, of an area of about "15 cavanes of seed," to her brother Luis Espiritu,
by means of an instrument executed by her on May 25,1894 an instrument that disappeared or was burned and
likewise recognizing that the protocols and register books belonging to the Province of Bulacan were destroyed as a result
of the past revolution, at the request of his brother-in-law Luis Espiritu he had no objection to give the testimony recorded
in said notarial instrument, as it was the truth regarding what had occurred, and in so doing he acted as the plaintiffs'
legitimate father in the exercise of his parental authority, inasmuch as he had personal knowledge of said sale, he himself
being the husband who authorized said conveyance, notwithstanding that his testimony affected his children's interest and
prejudiced his own, as the owner of any fruits that might be produced by said real property.

The signature and handwriting of the document Exhibit 2 were identified as authentic by one of the plaintiffs, Consejo
Mercado, and as the record shows no evidence whatever that this document is false, and it does not appear to have been
assailed as such, and as it was signed by the plaintiffs' father, there is no legal ground or well-founded reason why it
should be rejected. It was therefore properly admitted as evidence of the certainty of the facts therein set forth.

The principal defect attributed by the plaintiffs to the document Exhibit 3 consists in that, on the date of May 17, 1910,
when it was executed that they signed it, they were minors, that is, they had not yet attained the age of 21 years fixed by
Act No. 1891, though no evidence appears in the record that the plaintiffs Josefa and Domingo Mercado were in fact
minors, for no certified copies were presented of their baptismal certificates, nor did the plaintiffs adduce any
supplemental evidence whatever to prove that Domingo was actually 19 and Josefa 18 years of age when they signed the
document Exhibit 3, on May 17, 1910, inasmuch as the copybook, Exhibit A, notwithstanding the testimony of the plaintiff
Consejo Mercado, does not constitute sufficient proof of the dates of births of the said Domingo and Josefa.

However, even in the doubt whether they certainly were of legal age on the date referred to, it cannot be gainsaid that in
the document Exhibit 3 they stated that they were of legal age at the time they executed and signed it, and on that
account the sale mentioned in said notarial deed Exhibit 3 is perfectly valid a sale that is considered as limited solely to
the parcel of land of 6 cavanes of seed, pledged by the deceased father of the plaintiffs in security for P600 received by
him as a loan from his brother-in-law Luis Espiritu, for the reason that the parcel of 15 cavanes had been lawfully sold by
its original owner, the plaintiffs' mother.

The courts, in their interpretation of the law, have laid down the rule that the sale of real estate, made by minors who
pretend to be of legal age, when in fact they are not, is valid, and they will not be permitted to excuse themselves from the
fulfillment of the obligations contracted by them, or to have them annulled in pursuance of the provisions of Law 6, title 19,
of the 6th Partida; and the judgment that holds such a sale to be valid and absolves the purchaser from the complaint filed
against him does not violate the laws relative to the sale of minors' property, nor the juridical rules established in
consonance therewith. (Decisions of the supreme court of Spain, of April 27, 1860, July 11, 1868, and March 1,
1875.) itc@alf

With respect to the true age of the plaintiffs, no proof was adduced of the fact that it was Luis Espiritu who took out
Domingo Mercado's personal registration certificate on April 13, 1910, causing the age of 23 years to be entered therein
in order to corroborate the date of the notarial instrument of May 17th of the same year; and the supposition that he did,
would also allow it to be supposed, in order to show the propriety of the claim, that the cedula Exhibit C was taken out on
February 14, 1914, where in it is recorded that Domingo Mercado was on that date 23 years of age, for both these facts
are not proved; neither was any proof adduced against the statement made by the plaintiffs Domingo and Josefa in the
notarial instrument Exhibit 3, that, on the date when they executed it, they were already of legal age, and, besides the
annotation contained in the copybook Exhibit A, no supplemental proof of their true ages was introduced.

Aside from the foregoing, from a careful examination of the record in this case, it cannot be concluded that the plaintiffs,
who claim to have minors when they executed the notarial instrument Exhibit 3, have suffered positive and actual losses
and damages in their rights and interests as a result of the execution of said document, inasmuch as the sale effected by
the plaintiffs' mother, Margarita Espiritu, in May, 1894, of the greater part of the land of 21 cavanes of seed, did not
occasion any damage or prejudice to the plaintiffs, inasmuch as their father stated in the document Exhibit 2 that he was
obliged to mortgage or pledge said remaining portion of the land in order to secure the loan of the P375 furnished by Luis
Espiritu and which was subsequently increased to P600 so as to provide for certain engagements or perhaps to meet the
needs of his children, the plaintiff; and therefore, to judge from the statements made by their father himself, they received
through him, in exchange for the land of 6 cavanes of seed, which passed into the possession of the creditor Luis Espiritu,
the benefit which must have accrued to them from the sums of money received as loans; and, finally, on the execution of
the impugned document Exhibit 3, the plaintiffs received and divided between themselves the sum of P400, which sum,
added to that P2,000 received by Margarita Espiritu, and to that of the P600 collected by Wenceslao Mercado, widower of
the latter and father of the plaintiffs, makes all together the sum of P3,000, the amount paid by the purchaser as the price
of all the land containing 21 cavanes of seed, and is the just price of the property, was not impugned, and, consequently,
should be considered as equivalent to, and compensatory for, the true value of said land.

For the foregoing reasons, whereby the errors assigned to the judgment appealed from have been refuted, and deeming
said judgment to be in accordance with law and the evidence of record, we should, and do hereby, affirm the same, with
costs against the appellants. So ordered.

Arellano, C. J., Johnson, Street, and Malcolm, JJ., concur.

Separate Opinions

CARSON, J., concurring:

I concur.

But in order to avoid misunderstanding, I think it well to indicate that the general statement, in the prevailing opinion to the
effect that the making of false representations as to his age by an infant executing a contract will preclude him from
disaffirming the contract or setting up the defense of infancy, must be understood as limited to cases wherein, on account
of the minor's representations as to his majority, and because of his near approach thereto, the other party had good
reason to believe, and did in fact believe the minor capable of contracting.

The doctrine set forth in the Partidas, relied upon by the supreme court of Spain in the cases cited in the prevailing
opinion, is substantially similar to the doctrine of estoppel as applied in like instances by many of the courts in the United
States.

For the purposes of convenient comparison, I here insert some citations of authority, Spanish and American, recognizing
the limitations upon the general doctrine to which I am inviting attention at this time; and in this connection it is worthy of
note that the courts of the United States look with rather less favor than the supreme court of Spain upon the application
of the doctrine, doubtless because the cases wherein it may properly be applied, are much less likely to occur in a
jurisdiction where majority is reached at the age of 21 than a jurisdiction wherein majority is not ordinarily attained until the
infant reaches the age of 25.

Ley 6, tit. 19, Partida 6. is, in part, as follows:

If he who is minor (1) deceitfully says or sets forth in an instrument that he is over twenty-five years of age, and
this assertion is believed by another person who takes him to be of about that age, (2) in an action at law he
should be deemed to be of the age he asserted, and should no (3) afterwards be released from liability on the
plea that he was not of said age when he assumed the obligation. The reason for this is that the law helps the
deceived and not the deceivers.

In the glossary to these provisions of the Partidas by Gregorio Lopez, I find the following:

(1) De tal tiempo. Nota bene hoc verbum, nam si appareret ex aspectu eum esse minorem, tunc adversarius non
potest dicere se deceptum; imo tam ipse, quam minor videntur esse in dolo, quo casu competit minori restitutio,
quia facta doli compensatione, perinde ast ac si nullus fuiset in dolo, et ideo datur restitutio; et quia scienti dolus
non infertur, l. 1. D. de act. empt. secundum Cyn. Alberic et Salic. in l. 3. C. si minor se major. dixer. adde
Albericum tenentem, quabndo per aspectum a liter constaret, in authent. sacramenta puberum, col. 3. C. si
advers vendit.

(2) Engoosamente. Adde 1. 2. et 3. C. si minor se major. dixer. Et adverte nam per istam legem Partitarum, que
non distinguit, an adultus, vel pupillus talem assertionem faciat, videtur comprobari dictum Guillielm. de Cun. de
quo per Paul. de Castr. in 1. qui jurasse. in princ. D. de jurejur. quod si pupillus proximus pubertari juret, cum
contrahit, se esse puberem, et postea etiam juret, quod non veniet contra contractum quod habebit locum
dispositio authenticae sacramenta puberum, sicut si esset pubes: et cum isto dicto transit ibi Paul. de Cast.
multum commendans, dicens, se alibi non legisse; si tamen teneamus illam opinionem, quod etiam pupillus doli
capax obligatur ex juramento, non esset ita miranda dicat, decissio; vide per Alexand. in dict. 1. qui jurasse, in
princ. Item lex ista Partitarum expresse sentit de adulto, non de pupillo, cum superius dixit, que paresciere de tal
tiempo: Doctores etiam intelligunt de adulto 11. dict. tit. C. si minor. se major. dixer. et patet ex 11. illius tituli. Quid
autem dicemus in dubio, cum non constat de dolo minoris? Azon. in summa illius tit. in fin. Cynus tamen, et alli,
tenent oppositum, quia dolus non praesumitur, nisi probetur, 1. quotiens, s., qui dolo, D. de probat. Et hoc etiam
vult ista lex Partitarum, cum dicit, si lo faze engoosamente: et ita tenent Alberic. et Salicet. in dict. 1. 3. ubi etiam
Bart. in fin. Si autem minor sui facilitate asserat se mojorem, et ita juret, tunc distingue, ut habetur dict. 1. 3 quia
aut juravit verbo tenus, et tunc non restituitur, nisi per instrumentum seu scripturam probet se minorem; et si
juravit corporaliter, nullo modo restituitur, ut ibi; et per quae instrumenta probentur, cum verbo tenus juravit, vide
per Specul. tit. de restit, in integr. s. quis autem, col. 4. vers. sed cujusmodi erit scriptura, ubi etiam vide per
Speculatorem aliquas notabiles quaestiones in ista materia, in col. 5. videlicet, an praejudicet sibi minor ex tali
juramento in aliis contractibus, et tenet, quod non; et tenet glossa finalis in 1. de aetate, D. de minor. in fin. gloss.
vide ibi per Speculat. ubi etiam de aliis in ista materia.

In the decision of the supreme court of Spain dated the 27th of April, 1860, I find an excellent illustration of the conditions
under which that court applied the doctrine, as appears from the following resolution therein set forth.

Sales of real estate made by minors are valid when the latter pretend to be twenty-five years of age and, due to
the circumstances that they are nearly of that age, are married, or have administration of their property, or on
account of other special circumstances affecting them, the other parties to the contract believe them to be of legal
age.

With these citations compare the general doctrine in the United States as set forth in 22 Cyc. (p. 610), supported by
numerous citations of authority.

Estoppel to disaffirm (I) In General. The doctrine of estoppel not being as a general rule applicable to
infants, the court will not readily hold that his acts during infancy have created an estoppel against him to disaffirm
his contracts. Certainly the infant cannot be estopped by the acts or admissions of other persons.

(II) False representations as to age. According to some authorities the fact that an infant at the time of entering
into a contract falsely represented to the person with whom he dealt that he had attained the age of majority does
not give any validity to the contract or estop the infant from disaffirming the same or setting up the defense of
infancy against the enforcement of any rights thereunder; but there is also authority for the view that such false
representations will create an estoppel against the infant, and under the statutes of some states no contract can
be disaffirmed where, on account of the minor's representations as to his majority, the other party had good
reason to believe the minor capable of contracting. Where the infant has made no representations whatever as to
his age, the mere fact that the person with whom he dealt believed him to be of age, even though his belief was
warranted by the infant's appearance and the surrounding circumstances, and the infant knew of such belief, will
not render the contract valid or estop the infant to disaffirm.
G.R. No. L-28771 March 31, 1971 - CORNELIA MATABUENA v. PETRONILA CERVANTES

PHILIPPINE SUPREME COURT DECISIONS

EN BANC

[G.R. No. L-28771. March 31, 1971.]

CORNELIA MATABUENA, Plaintiff-Appellant, v. PETRONILA CERVANTES, Defendant-Appellee.

Alegre, Roces, Salazar & Saez, for Plaintiff-Appellant.

Fernando Gerona, Jr., for Defendant-Appellee.

SYLLABUS

1. CIVIL LAW; PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE; DONATIONS BY REASON OF MARRIAGE;
PROHIBITION AGAINST DONATION BETWEEN SPOUSES DURING MARRIAGE; APPLICABLE TO COMMON LAW
RELATIONSHIP. While Art. 133 of the Civil Code considers as void a "donation between the spouses during the
marriage", policy considerations of the most exigent character as well as the dictates of morality require that the same
prohibition should apply to a common-law relationship. A 1954 Court of Appeals decision Buenaventura v. Bautista, (50
O.G. 3679) interpreting a similar provision of the old Civil Code speaks unequivocally. If the policy of the law is, in the
language of the opinion of the then Justice J.B.L. Reyes of that Court, "to prohibit donations in favor of the other consort
and his descendants because of fear of undue and improper pressure and influence upon the donor, a prejudice deeply
rooted in our ancient law; porque no se engaen despojandose el uno al otro por amor que han de consuno, [according
to] the Partidas (Part. IV, Tit. Xl, LAW IV), reiterating the rationale Ne mutuato amore invicem spoliarentur of the
Pandects (Bk 24, Tit. I, De donat, inter virum et uxorem); then there is every reason to apply the same prohibitive policy to
persons living together as husband and wife without benefit of nuptials. For it is not to be doubted that assent to such
irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law
seeks to avoid is correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1),
it would not be just that such donations should subsist lest the condition of those who incurred guilt should turn out to be
better. So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the
disabilities attached to marriage should likewise attach to concubinage.

2. ID.; SUCCESSION; INTESTATE SUCCESSION; SURVIVING SPOUSE; RULE WHERE A SISTER SURVIVES WITH
THE WIDOW. The lack of validity of the donation made b~ the deceased to defendant Petronila Cervantes does not
necessarily result in plaintiff having exclusive right to the disputed property. Prior to the death of Felix Matabuena, the
relationship between him and the defendant was legitimated by their marriage on March 28. 1962. She is therefore his
widow. As provided in the Civil Code, she is entitled to one-half of the inheritance and the plaintiff, as the surviving sister
to the other half.

DECISION

FERNANDO, J.:

A question of first impression is before this Court in this litigation. We are called upon to decide whether the ban on a
donation between the spouses during a marriage applies to a common-law relationship. 1 The plaintiff, now appellant
Cornelia Matabuena, a sister to the deceased Felix Matabuena, maintains that a donation made while he was living
maritally without benefit of marriage to defendant, now appellee Petronila Cervantes, was void. Defendant would uphold
its validity. The lower court, after noting that it was made at a time before defendant was married to the donor, sustained
the latters stand. Hence this appeal. The question, as noted, is novel in character, this Court not having had as yet the
opportunity of ruling on it. A 1954 decision of the Court of Appeals, Buenaventura v. Bautista, 2 by the then Justice J. B. L.
Reyes, who was appointed to this Court later that year, is indicative of the appropriate response that should be given. The
conclusion reached therein is that a donation between common-law spouses falls within the prohibition and is "null and
void as contrary to public policy." 3 Such a view merits fully the acceptance of this Court. The decision must be reversed.

In the decision of November 23, 1965, the lower court, after stating that in plaintiffs complaint alleging absolute ownership
of the parcel of land in question, she specifically raised the question that the donation made by Felix Matabuena to
defendant Petronila Cervantes was null and void under the aforesaid article of the Civil Code and that defendant on the
other hand did assert ownership precisely because such a donation was made in 1956 and her marriage to the deceased
did not take place until 1962, noted that when the case was called for trial on November 19, 1965, there was stipulation of
facts which it quoted. 4 Thus: "The plaintiff and the defendant assisted by their respective counsels, jointly agree and
stipulate: (1) That the deceased Felix Matabuena owned the property in question; (2) That said Felix Matabuena executed
a Deed of Donation inter vivos in favor of Defendant, Petronila Cervantes over the parcel of land in question on February
20, 1956, which same donation was accepted by defendant; (3) That the donation of the land to the defendant which took
effect immediately was made during the common law relationship as husband and wife between the defendant-done and
the now deceased donor and later said donor and done were married on March 28, 1962; (4) That the deceased Felix
Matabuena died intestate on September 13, 1962; (5) That the plaintiff claims the property by reason of being the only
sister and nearest collateral relative of the deceased by virtue of an affidavit of self-adjudication executed by her in 1962
and had the land declared in her name and paid the estate and inheritance taxes thereon" 5

The judgment of the lower court on the above facts was adverse to plaintiff. It reasoned out thus: "A donation under the
terms of Article 133 of the Civil Code is void if made between the spouses during the marriage. When the donation was
made by Felix Matabuena in favor of the defendant on February 20, 1956, Petronila Cervantes and Felix Matabuena were
not yet married. At that time they were not spouses. They became spouses only when they married on March 28, 1962,
six years after the deed of donation had been executed." 6

We reach a different conclusion. While Art. 133 of the Civil Code considers as void a "donation between the spouses
during the marriage," policy considerations of the most exigent character as well as the dictates of morality require that the
same prohibition should apply to a common-law relationship. We reverse.

1. As announced at the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura v. Bautista, 7 interpreting a
similar provision of the old Civil Code 8 speaks unequivocally. If the policy of the law is, in the language of the opinion of
the then Justice J.B.L. Reyes of that Court, "to prohibit donations in favor of the other consort and his descendants
because of fear of undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient
law; porque no se engaen despojandose el uno al otro por amor que han de consuno [according to] the Partidas (Part
IV, Tit. XI, LAW IV), reiterating the rationale Ne mutuato amore invicem spoliarentur of the Pandects (Bk. 24, Tit. 1, De
donat, inter virum et uxorem); then there is every reason to apply the same prohibitive policy to persons living together as
husband and wife without the benefit of nuptials. For it is not to be doubted that assent to such irregular connection for
thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is
correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), it would not be
just that such donations should subsist, lest the condition of those who incurred guilt should turn out to be better. So long
as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to
marriage should likewise attach to concubinage." 9

2. It is hardly necessary to add that even in the absence of the above pronouncement, any other conclusion cannot stand
the test of scrutiny. It would be to indict the framers of the Civil Code for a failure to apply a laudable rule to a situation
which in its essentials cannot be distinguished. Moreover, if it is at all to be differentiated, the policy of the law which
embodies a deeply-rooted notion of what is just and what is right would be nullified if such irregular relationship instead of
being visited with disabilities would be attended with benefits. Certainly a legal norm should not be susceptible to such a
reproach. If there is ever any occasion where the principle of statutory construction that what is within the spirit of the law
is as much a part of it as what is written, this is it. Otherwise the basic purpose discernible in such codal provision would
not be attained. Whatever omission may be apparent in an interpretation purely literal of the language used must be
remedied by an adherence to its avowed objective. In the language of Justice Pablo: "El espiritu que informa la ley debe
ser la luz que ha de guiar a los tribunales en la aplicacin de sus disposiciones. 10

3. The lack of validity of the donation made by the deceased to defendant Petronila Cervantes does not necessarily result
in plaintiff having exclusive right to the disputed property. Prior to the death of Felix Matabuena, the relationship between
him and the defendant was legitimated by their marriage on March 28, 1962. She is therefore his widow. As provided for
in the Civil Code, she is entitled to one-half of the inheritance and the plaintiff, as the surviving sister, to the other half. 11

WHEREFORE, the lower court decision of November 23, 1965 dismissing the complaint with costs is reversed. The
questioned donation is declared void, with the rights of plaintiff and defendant as pro indiviso heirs to the property in
question recognized. The case is remanded to the lower court for its appropriate disposition in accordance with the above
opinion. Without pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Barredo, Villamor and Makasiar, JJ., concur.

Teehankee, J, took no part.


Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 165879 November 10, 2006

MARIA B. CHING, Petitioner,


vs.
JOSEPH C. GOYANKO, JR., EVELYN GOYANKO, JERRY GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO,
MARY ELLEN GOYANKO AND JESS GOYANKO, Respondents.

DECISION

CARPIO MORALES, J.:

On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married.1 Out of the union
were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko.

Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu
City but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt,
Sulpicia Ventura (Sulpicia).

On May 1, 1993, Sulpicia executed a deed of sale2 over the property in favor of respondents father Goyanko. In turn,
Goyanko executed on October 12, 1993 a deed of sale3 over the property in favor of his common-law-wife-herein
petitioner Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioners name.

After Goyankos death on March 11, 1996, respondents discovered that ownership of the property had already been
transferred in the name of petitioner. Respondents thereupon had the purported signature of their father in the deed of
sale verified by the Philippine National Police Crime Laboratory which found the same to be a forgery. 4

Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages
against petitioner, praying for the nullification of the deed of sale and of TCT No. 138405 and the issuance of a new one in
favor of their father Goyanko.

In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price.
To disprove that Goyankos signature in the questioned deed of sale is a forgery, she presented as witness the notary
public who testified that Goyanko appeared and signed the document in his presence.

By Decision of October 16, 1998,5 the trial court dismissed the complaint against petitioner, the pertinent portions of which
decision read:

There is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated. The signature on the
questioned Deed of Sale is genuine. The testimony of Atty. Salvador Barrameda who declared in court that Joseph
Goyanko, Sr. and Maria Ching together with their witnesses appeared before him for notarization of Deed of Sale in
question is more reliable than the conflicting testimonies of the two document examiners. Defendant Maria Ching asserted
that the Deed of Sale executed by Joseph Goyanko, Sr. in her favor is valid and genuine. The signature of Joseph
Goyanko, Sr. in the questioned Deed of Absolute Sale is genuine as it was duly executed and signed by Joseph Goyanko,
Sr. himself.

The parcel of lands known as Lot No. 6 which is sought to be recovered in this case could never be considered as the
conjugal property of the original Spouses Joseph C. Goyanko and Epifania dela Cruz or the exclusive capital property of
the husband. The acquisition of the said property by defendant Maria Ching is well-elicited from the aforementioned
testimonial and documentary evidence presented by the defendant. Although for a time being the property passed through
Joseph Goyanko, Sr. as a buyer yet his ownership was only temporary and transitory for the reason that it was
subsequently sold to herein defendant Maria Ching. Maria Ching claimed that it was even her money which was used by
Joseph Goyanko, Sr. in the purchase of the land and so it was eventually sold to her. In her testimony, defendant Ching
justified her financial capability to buy the land for herself. The transaction undertaken was from the original owner
Sulpicia Ventura to Joseph Goyanko, Sr. and then from Joesph Goyanko, Sr. to herein defendant Maria Ching.

The land subject of the litigation is already registered in the name of defendant Maria Ching under TCT No. 138405. By
virtue of the Deed of Sale executed in favor of Maria Ching, Transfer Certificate of Title No. 138405 was issued in her
favor. In recognition of the proverbial virtuality of a Torrens title, it has been repeatedly held that, unless bad faith can be
established on the part of the person appearing as owner on the certificate of title, there is no other owner than that in
whose favor it has been issued. A Torrens title is not subject to collateral attack. It is a well-known doctrine that a Torrens
title, as a rule, is irrevocable and indefeasible, and the duty of the court is to see to it that this title is maintained and
respected unless challenged in a direct proceedings [sic].6 (Citations omitted; underscoring supplied)

Before the Court of Appeals where respondents appealed, they argued that the trial court erred:

1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between
Joseph, Sr. and the defendant-appellee, despite the proliferation in the records and admissions by both parties
that defendant-appellee was the "mistress" or "common-law wife" of Joseph, Sr..

2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between
Joseph, Sr. and the defendant-appellee, despite the fact that the marriage of Joseph, Sr. and Epifania was then
still subsisting thereby rendering the subject property as conjugal property of Joseph, Sr. and Epifania.

3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of the sale of the subject property
between Joseph, Sr. and the defendant-appellee, despite the clear findings of forgery and the non-credible
testimony of notary public.7

By Decision dated October 21, 2003,8 the appellate court reversed that of the trial court and declared null and void the
questioned deed of sale and TCT No. 138405. Held the appellate court:

. . . The subject property having been acquired during the existence of a valid marriage between Joseph Sr. and Epifania
dela Cruz-Goyanko, is presumed to belong to the conjugal partnership. Moreover, while this presumption in favor of
conjugality is rebuttable with clear and convincing proof to the contrary, we find no evidence on record to conclude
otherwise. The record shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and
defendant-appellant Maria Ching, have in fact been living together as common-law husband and wife, there has never
been a judicial decree declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore
undeniable that the 661-square meter property located at No. 29 F. Cabahug Street, Cebu City belongs to the conjugal
partnership.

Even if we were to assume that the subject property was not conjugal, still we cannot sustain the validity of the sale of the
property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on records that they
have been living together as common-law husband and wife. On this score, Art. 1352 of the Civil Code provides:

"Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is
contrary to law, morals, good customs, public order or public policy."

We therefore find that the contract of sale in favor of the defendant-appellant Maria Ching was null and void for being
contrary to morals and public policy. The purported sale, having been made by Joseph Sr. in favor of his concubine,
undermines the stability of the family, a basic social institution which public policy vigilantly protects. Furthermore, the law
emphatically prohibits spouses from selling property to each other, subject to certain exceptions. And this is so because
transfers or conveyances between spouses, if allowed during the marriage would destroy the system of conjugal
partnership, a basic policy in civil law. The prohibition was designed to prevent the exercise of undue influence by one
spouse over the other and is likewise applicable even to common-law relationships otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal union.9 (Underscoring supplied)

Hence, the present petition, petitioners arguing that the appellate court gravely erred in:

I.

. . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF


PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY, THE
SAME BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE PROPERTY OF PETITIONER, AND
THAT THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE BETWEEN
RESPONDENTS MOTHER EPIFANIA GOYANKO AND PETITIONERS COMMON LAW HUSBAND, JOSEPH
GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE
THE SAME WAS VALIDLY ACQUIRED BY PETITIONER.

II.

. . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS PROVIDED FOR UNDER ARTICLES 1448
AND 1450 OF THE NEW CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW SPOUSES.

III.

. . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE BY A TRUSTEE, WHO BECAME AS
SUCH IN CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND OF THE
BENEFICIARY, IS NOT A VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST CONVEYANCES
AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES.

IV.

. . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL THEORY OF THEIR CASE DURING


APPEAL.10

The pertinent provisions of the Civil Code which apply to the present case read:

ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is
contrary to law, morals, good customs, public order or public policy.

ART. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of the transaction;

(4) Those whose object is outside the commerce of men;

(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;

(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

ARTICLE 1490. The husband and wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or

(2) When there has been a judicial separation of property under Article 191. (Underscoring supplied)

The proscription against sale of property between spouses applies even to common law relationships. So this Court ruled
in Calimlim-Canullas v. Hon. Fortun, etc., et al.:11

Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public
policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the
conjugal home where his wife and children lived and from whence they derived their support. The sale was
subversive of the stability of the family, a basic social institution which public policy cherishes and protects.

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes is contrary to law, morals,
good customs, public order, or public policy are void and inexistent from the very beginning.

Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The
cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain
exceptions.1wphi1 Similarly, donations between spouses during marriage are prohibited. And this is so because
if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal
partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over
the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply
to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest
and their criterion must be imposed upon the will of the parties. . . . 12 (Italics in the original; emphasis and underscoring
supplied)

As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein petitioner, it was null and
void.

Petitioners argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as
provided in Articles 1448 and 1450 of the Civil Code which read:

ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is
paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter
is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.

ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the
conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of
the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a
conveyance thereof to him.

does not persuade.

For petitioners testimony that it was she who provided the purchase price is uncorroborated. That she may have been
considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her
claim.

As to the change of theory by respondents from forgery of their fathers signature in the deed of sale to sale contrary to
public policy, it too does not persuade. Generally, a party in a litigation is not permitted to freely and substantially change
the theory of his case so as not to put the other party to undue disadvantage by not accurately and timely apprising him of
what he is up against,13 and to ensure that the latter is given the opportunity during trial to refute all allegations against
him by presenting evidence to the contrary. In the present case, petitioner cannot be said to have been put to undue
disadvantage and to have been denied the chance to refute all the allegations against her. For the nullification of the sale
is anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-35702 May 29, 1973

DOMINGO D. RUBIAS, plaintiff-appellant,


vs.
ISAIAS BATILLER, defendant-appellee.

Gregorio M. Rubias for plaintiff-appellant.

Vicente R. Acsay for defendant-appellee.

TEEHANKEE, J.:

In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we affirm the dismissal
order rendered by the Iloilo court of first instance after pre-trial and submittal of the pertinent documentary exhibits.

Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the record that the
application for registration of the land in question filed by Francisco Militante, plaintiff's vendor and predecessor interest,
had been dismissed by decision of 1952 of the land registration court as affirmed by final judgment in 1958 of the Court of
Appeals and hence, there was no title or right to the land that could be transmitted by the purported sale to plaintiff.

As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by final judgment
defendant's "better right to possess the land in question . having been in the actual possession thereof under a claim of
title many years before Francisco Militante sold the land to the plaintiff."

Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956 by him in favor of
plaintiff at a time when plaintiff was concededly his counsel of record in the land registration case involving the very land
in dispute (ultimately decided adversely against Militante by the Court of Appeals' 1958 judgment affirming the lower
court's dismissal of Militante's application for registration) was properly declared inexistent and void by the lower court, as
decreed by Article 1409 in relation to Article 1491 of the Civil Code.

The appellate court, in its resolution of certification of 25 July 1972, gave the following backgrounder of the appeal at bar:

On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and
possession of certain portions of lot under Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo
which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant
defendant, Isaias Batiller, who illegally entered said portions of the lot on two occasions in 1945 and in
1959. Plaintiff prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In his answer
with counter-claim defendant claims the complaint of the plaintiff does not state a cause of action, the
truth of the matter being that he and his predecessors-in-interest have always been in actual, open and
continuous possession since time immemorial under claim of ownership of the portions of the lot in
question and for the alleged malicious institution of the complaint he claims he has suffered moral
damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney's fees. ...

On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial conference between the
parties and their counsel which order reads as follows..

'When this case was called for a pre-trial conference today, the plaintiff appeared
assisted by himself and Atty. Gregorio M. Rubias. The defendant also appeared, assisted
by his counsel Atty. Vicente R. Acsay.
A. During the pre-trial conference, the parties have agreed that the following facts are
attendant in this case and that they will no longer introduced any evidence, testimonial or
documentary to prove them:

1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna,
municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed on July 18-31, 1934,
whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land claimed contained an area of 171:3561
hectares.)

2. Before the war with Japan, Francisco Militante filed with the Court of First Instance of Iloilo an
application for the registration of the title of the land technically described in psu-99791 (Exh.
"B") opposed by the Director of Lands, the Director of Forestry and other oppositors. However, during the
war with Japan, the record of the case was lost before it was heard, so after the war Francisco Militante
petitioned this court to reconstitute the record of the case. The record was reconstituted on the Court of
the First Instance of Iloilo and docketed as Land Case No. R-695, GLRO Rec. No. 54852. The Court of
First Instance heard the land registration case on November 14, 1952, and after the trial this court
dismissed the application for registration. The appellant, Francisco Militante, appealed from the decision
of this Court to the Court of Appeals where the case was docketed as CA-GR No. 13497-R..

3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly on June 18, 1956,
Francisco Militante sold to the plaintiff, Domingo Rubias the land technically described in psu-99791 (Exh.
"A"). The sale was duly recorded in the Office of the Register of Deeds for the province of Iloilo as Entry
No. 13609 on July 11, 1960 (Exh. "A-1").

(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiff-appellant, his son-in-
law,for the sum of P2,000.00 was "a parcel of untitled land having an area Of 144.9072 hectares ...
surveyed under Psu 99791 ... (and) subject to the exclusions made by me, under (case) CA-i3497, Land
Registration Case No. R-695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These
exclusions referred to portions of the original area of over 171 hectares originally claimed by Militante as
applicant, but which he expressly recognized during the trial to pertain to some oppositors, such as the
Bureau of Public Works and Bureau of Forestry and several other individual occupants and accordingly
withdrew his application over the same. This is expressly made of record in Exh. A, which is the Court of
Appeals' decision of 22 September 1958 confirming the land registration court's dismissal of Militante's
application for registration.)

4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated its judgment
confirming the decision of this Court in Land Case No. R-695, GLRO Rec. No. 54852 which dismissed the
application for Registration filed by Francisco Militante (Exh. "I").

5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes under Tax Dec. No. 8585
(Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the year 1961; Tax Dec.
No. 9868 (Exh. "C-2") for the year 1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh.
"D", "D-1", "G-6").

6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared the land for
taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh.
"E-1") for 1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-
7"), for 1945 46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"),
and for 1948 and 1949 (Exh. "G-5").

7. Tax Declaration No. 2434 in the name of Liberato Demontao for the land described therein (Exh. "F")
was cancelled by Tax. Dec. No. 5172 of Francisco Militante (Exh. "E"). Liberato Demontao paid the land
tax under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H").

8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241 under Tax Dec. Not.
8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax
No. 8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of the defendant (Exh. "2-B") and Tax
Dec. No. 8584 (Exh. "2-A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh.
"2-C"). The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9, 1960 for the years 1945 and
1946, for the year 1950, and for the year 1960 as shown by the certificate of the treasurer (Exh. "3"). The
defendant may present to the Court other land taxes receipts for the payment of taxes for this lot.

9. The land claimed by the defendant as his own was surveyed on June 6 and 7,1956, and a
plan approved by Director of Land on November 15, 1956 was issued, identified as Psu 155241 (Exh.
"5").

10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the
Justice of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4") to which the defendant Isaias
Batiller riled his answer on August 29, 1960 (Exh. "4-A"). The Municipal Court of Barotac Viejo after
trial, decided the case on May 10, 1961 in favor of the defendant and against the plaintiff (Exh. "4-B").
The plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was docketed in
this Court as Civil Case No. 5750 on June 3, 1961, to which the defendant, Isaias Batiller, on June 13,
1961 filed his answer (Exh. "4-C"). And this Court after the trial. decided the case on November 26, 1964,
in favor of the defendant, Isaias Batiller and against the plaintiff (Exh. "4-D").

(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26 November
1964 dismissing plaintiff's therein complaint for ejectment against defendant, the iloilo court expressly
found "that plaintiff's complaint is unjustified, intended to harass the defendant" and "that the defendant,
Isaias Batiller, has a better right to possess the land in question described in Psu 155241 (Exh. "3"),
Isaias Batiller having been in the actual physical possession thereof under a claim of title many years
before Francisco Militante sold the land to the plaintiff-hereby dismissing plaintiff's complaint and ordering
the plaintiff to pay the defendant attorney's fees ....")

B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the following:

1. That the land he purchased from Francisco Militante under Exh. "A" was formerly owned and
possessed by Liberato Demontao but that on September 6, 1919 the land was sold at public auction by
virtue of a judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontao Francisco
Balladeros and Gregorio Yulo, defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The
sale was registered in the Office of the Register of Deeds of Iloilo on August 4, 1920, under Primary Entry
No. 69 (Exh. "1"), and a definite Deed of Sale was executed by Constantino A. Canto, provincial Sheriff of
Iloilo, on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been registered in the Office of
the Register of Deeds of Iloilo on February 10, 1934 (Exh. "1-1").

2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced by a notarial
deed (Exh. "J") which was registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1").

3. That plaintiff suffered damages alleged in his complaint.

C. Defendants, on the other hand will prove by competent evidence during the trial of this case the following facts:

1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe Batiller,
grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his sole heir. Isaias
Batiller succeeded his father , Basilio Batiller, in the ownership and possession of the land in the year
1930, and since then up to the present, the land remains in the possession of the defendant, his
possession being actual, open, public, peaceful and continuous in the concept of an owner, exclusive of
any other rights and adverse to all other claimants.

2. That the alleged predecessors in interest of the plaintiff have never been in the actual possession of
the land and that they never had any title thereto.

3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has
been approved.

4. The damages suffered by the defendant, as alleged in his counterclaim."' 1

The appellate court further related the developments of the case, as follows:
On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the
case could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging
thatplaintiff does not have cause of action against him because the property in dispute which he (plaintiff)
allegedly bought from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in
the CFI of Iloilo, which case was brought on appeal to this Court and docketed as CA-G.R. No. 13497-R
in which aforesaid case plaintiff was the counsel on record of his father-in-law, Francisco Militante.
Invoking Arts. 1409 and 1491 of the Civil Code which reads:

'Art. 1409. The following contracts are inexistent and void from the beginning:

xxx xxx xxx

(7) Those expressly prohibited by law.

'ART. 1491. The following persons cannot acquire any purchase, even at a public
auction, either in person of through the mediation of another: .

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights of in litigation or levied
upon an execution before the court within whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring an assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of any litigation in which they may take part by
virtue of their profession.'

defendant claims that plaintiff could not have acquired any interest in the property in dispute as the
contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-31, Record on
Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke
Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of
illegality of contracts is not available to third persons whose interests are not directly affected' (See pp.
32-35 Record on Appeal).

On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-49, Record
on Appeal.) In the aforesaid order of dismissal the lower court practically agreed with defendant's
contention that the contract (Exh. A) between plaintiff and Francism Militante was null and void. In due
season plaintiff filed a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by the
lower court on January 14, 1966 (p. 57, Record on Appeal).

Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14, 1966.

Plaintiff-appellant imputes to the lower court the following errors:

'1. The lower court erred in holding that the contract of sale between the plaintiff-
appellant and his father-in-law, Francisco Militante, Sr., now deceased, of the property
covered by Plan Psu-99791, (Exh. "A") was void, not voidable because it was made
when plaintiff-appellant was the counsel of the latter in the Land Registration case.

'2. The lower court erred in holding that the defendant-appellee is an interested person to
question the validity of the contract of sale between plaintiff-appellant and the deceased,
Francisco Militante, Sr.

'3. The lower court erred in entertaining the motion to dismiss of the defendant-appellee
after he had already filed his answer, and after the termination of the pre-trial, when the
said motion to dismiss raised a collateral question.

'4. The lower court erred in dismissing the complaint of the plaintiff-appellant.'
The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers (1) whether or not
the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property subject of Plan
Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case
involving the property in dispute; and (2) whether or not the lower court was correct in entertaining defendant-appellee's
motion to dismiss after the latter had already filed his answer and after he (defendant) and plaintiff-appellant had agreed
on some matters in a pre-trial conference. Hence, its elevation of the appeal to this Court as involving pure questions of
law.

It is at once evident from the foregoing narration that the pre-trial conference held by the trial court at which the parties
with their counsel agreed and stipulated on the material and relevant facts and submitted their respective documentary
exhibits as referred to in the pre-trial order, supra, 2 practically amounted to a fulldress trial which placed on record all the
facts and exhibits necessary for adjudication of the case.

The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the source of the alleged
right and title of Francisco Militante's predecessors, supra, 3 actually are already made of record in the stipulated
facts and admitted exhibits. The chain of Militante's alleged title and right to the land as supposedly traced back to
Liberato Demontao was actually asserted by Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in the land
registration case and rejected by the Iloilo land registration court which dismissed Militante's application for registration of
the land. Such dismissal, as already stated, was affirmed by the final judgment in 1958 of the Court of Appeals. 4

The four points on which defendant on his part reserved the presentation of evidence at the trial dealing with his and his
ancestors' continuous, open, public and peaceful possession in the concept of owner of the land and the Director of
Lands' approval of his survey plan thereof, supra, 5 are likewise already duly established facts of record, in the land
registration case as well as in the ejectment case wherein the Iloilo court of first instance recognized the superiority of
defendant's right to the land as against plaintiff.

No error was therefore committed by the lower court in dismissing plaintiff's complaint upon defendant's motion after the
pre-trial.

1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of action and justified the
outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question was predicated on the sale thereof
for P2,000.00 made in 1956 by his father-in- law, Francisco Militante, in his favor, at a time when Militante's application for
registration thereof had already been dismissed by the Iloilo land registration court and was pending appeal in the Court of
Appeals.

With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for registration, the lack of
any rightful claim or title of Militante to the land was conclusively and decisively judicially determined. Hence, there was no
right or title to the land that could be transferred or sold by Militante's purported sale in 1956 in favor of plaintiff.

Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land and to be restored to
possession thereof with damages was bereft of any factual or legal basis.

2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in litigation
from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code,
reproduced supra; 6 and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that
his client could sell the same since as already shown above, his client's claim to the property was defeated and rejected)
was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that
contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot be ratified.
Neither can the right to set up the defense of illegality be waived."

The 1911 case of Wolfson vs. Estate of Martinez 7 relied upon by plaintiff as holding that a sale of property in litigation to
the party litigant's lawyer "is not void but voidable at the election of the vendor" was correctly held by the lower court to
have been superseded by the later 1929 case of Director of Lands vs. Abagat. 8 In this later case of Abagat, the Court
expressly cited two antecedent cases involving the same transaction of purchase of property in litigation by the lawyer
which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code
of the Philippines is the counterpart) upon challenge thereof not by the vendor-client but by the adverse parties against
whom the lawyer was to enforce his rights as vendee thus acquired.

These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating the previous ruling
in Wolfson:
The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land. Vicenta
Macaraeg died in November, 1909, leaving a large number of collateral heirs but no descendants.
Litigation between the surviving husband, Juan Soriano, and the heirs of Vicenta immediately arose, and
the herein appellant Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a
deed for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on the following day, May
3, 1918, Palarca filed an application for the registration of the land in the deed. After hearing, the Court of
First Instance declared that the deed was invalid by virtue of the provisions of article 1459 of the Civil
Code, which prohibits lawyers and solicitors from purchasing property rights involved in any litigation in
which they take part by virtue of their profession. The application for registration was consequently
denied, and upon appeal by Palarca to the Supreme Court, the judgement of the lower court was affirmed
by a decision promulgated November 16,1925. (G.R. No. 24329, Palarca vs. Director of Lands, not
reported.)

In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August 21, 1923,
Eleuteria Macaraeg, as administratrix of the estate of Vicente Macaraeg, filed claims for the parcels in
question. Buenaventura Lavitoria administrator of the estate of Juan Soriano, did likewise and so did
Sisenando Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge Carballo
presiding, rendered judgment in favor of Palarea and ordered the registration of the land in his
name. Upon appeal to this court by the administration of the estates of Juan Soriano and Vicente
Macaraeg, the judgment of the court below was reversed and the land adjudicated to the two estates as
conjugal property of the deceased spouses. (G.R. No. 28226, Director of Lands vs. Abagat, promulgated
May 21, 1928, not reported.) 9

In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's purchase of the land in
litigation from his client, ordered the issuance of a writ of possession for the return of the land by the lawyer to the adverse
parties without reimbursement of the price paid by him and other expenses, and ruled that "the appellant Palarca is a
lawyer and is presumed to know the law. He must, therefore, from the beginning, have been well aware of the defect in
his title and is, consequently, a possessor in bad faith."

As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code of Spain then adopted
here, until it was superseded on August 30, 1950 by the Civil Code of the Philippines whose counterpart provision is
Article 1491.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons,
by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or
control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3)
administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and
(6) others especially disqualified by law.

In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer, Wolfson, whose right
to so purchase the judgment was being challenged by the judgment debtor, the Court, through Justice Moreland, then
expressly reserved decision on "whether or not the judgment in question actually falls within the prohibition of the article"
and held only that the sale's "voidability can not be asserted by one not a party to the transaction or his representative,"
citing from Manresa 10 that "(C)onsidering the question from the point of view of the civil law, the view taken by the code,
we must limit ourselves to classifying as void all acts done contrary to the express prohibition of the statute. Now then: As
the code does not recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore referred to must
be asserted by the person having the necessary legal capacity to do so and decreed by a competent
court." 11

The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish Civil
Code as merely voidable at the instance and option of the vendor and not void "that the Code does not recognize such
nullity de pleno derecho" is no longer true and applicable to our own Philippine Civil Code which does recognize the
absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public order or
public policy" or which are "expressly prohibited or declared void by law" and declares such contracts "inexistent and void
from the beginning." 12

The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the Spanish codal
provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled that the prohibition of Article 1459 of
the Spanish Civil Code is based on public policy, that violation of the prohibition contract cannot be validated by
confirmation or ratification, holding that:
... la prohibicion que el articulo 1459 del C.C. establece respecto a los administradores y apoderados, la
cual tiene conforme a la doctrina de esta Sala, contendia entre otras, en S. de 27-5-1959, un fundamento
de orden moral lugar la violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y
prohibicion legal, afectante orden publico, no cabe con efecto alguno la aludida retification ... 13

The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code (Article 1491 of our Civil
Code) as a matter of public order and policy as applied by the Supreme Court of Spain to administrators and agents in its
above cited decision should certainly apply with greater reason to judges, judicial officers, fiscals and lawyers under
paragraph 5 of the codal article.

Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de Derecho Civil, (Contratos
Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article 1459, Spanish Civil Code:.

Que caracter tendra la compra que se realice por estas personas? Porsupuesto no cabe duda de que el
caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo de la prohibicion es de orden publico. 14

Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la consequencia de la infraccion es la
nulidad radical y ex lege." 15

Castan, quoting Manresa's own observation that.

"El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la ocasion al fraude;
persiguese, ademasel proposito de rodear a las personas que intervienen en la administrcionde justicia de todos los
retigios que necesitan pora ejercer su ministerio librandolos de toda suspecha, que aunque fuere in fundada, redundura
endescredito de la institucion." 16 arrives at the contrary and now accepted view that "Puede considerace en nuestro
derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando el contrato se ha
celebrado en violacion de una prescripcion 'o prohibicion legal, fundada sobre motivos de orden publico (hipotesis del art.
4 del codigo) ..." 17

It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public policy render void and
inexistent such expressly prohibited purchase (e.g. by public officers and employees of government property intrusted to
them and by justices, judges, fiscals and lawyers of property and rights in litigation and submitted to or handled by them,
under Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code, viz,
Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning." 18

Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public
interest and public policy remain paramount and do not permit of compromise or ratification. In his aspect, the permanent
disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of
guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions it had been opined that they
may be "ratified" by means of and in "the form of a new contact, in which cases its validity shall be determined only by the
circumstances at the time the execution of such new contract. The causes of nullity which have ceased to exist cannot
impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already
become lawful at the time of the ratification or second contract; or the service which was impossible may have become
possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second
contract would then be valid from its execution; however, it does not retroact to the date of the first contract." 19

As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's motion to dismiss on
the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's alleged cause of
action founded thereon were being asserted against defendant-appellant. The principles governing the nullity of such
prohibited contracts and judicial declaration of their nullity have been well restated by Tolentino in his treatise on our Civil
Code, as follows:

Parties Affected. Any person may invoke the in existence of the contract whenever juridical effects
founded thereon are asserted against him. Thus, if there has been a void transfer of property, the
transferor can recover it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to the
transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has been
alienated by the latter under a void contract; a mortgagee can allege the inexistence of a prior
encumbrance; a debtor can assert the nullity of an assignment of credit as a defense to an action by the
assignee.
Action On Contract. Even when the contract is void or inexistent, an action is necessary to declare its
inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence, the
intervention of the competent court is necessary to declare the absolute nullity of the contract and to
decree the restitution of what has been given under it. The judgment, however, will retroact to the very
day when the contract was entered into.

If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any
party should bring an action to enforce it, the other party can simply set up the nullity as a defense. 20

ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances against plaintiff-
appellant. So ordered.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 112954 August 25, 2000

RICARDO DISTAJO, ERNESTO DISTAJO, RAUL DISTAJO, FEDERICO DISTAJO, ZACARIAS A. DISTAJO,
EDUARDO DISTAJO, and PILAR DISTAJO TAPAR, petitioners,
vs.
COURT OF APPEALS and LAGRIMAS SORIANO DISTAJO, respondents.

DECISION

PARDO, J.:

The case under consideration is a petition for review on certiorari of a decision of the Court of Appeals1 , which modified
the ruling of the Regional Trial Court, Roxas City regarding seven parcels of land located in Barangay Hipona,
Pontevedra, Capiz.2

During the lifetime of Iluminada Abiertas, she designated one of her sons, Rufo Distajo, to be the administrator of her
parcels of land denoted as Lot Nos. 1018, 1046, 1047, and 1057 situated in Barangay Hipona, Pontevedra, Capiz.

On May 21, 1954, Iluminada Abiertas sold a portion of Lot No. 1018 (1018-A) to her other children, namely, Raul Distajo,
Ricardo Distajo, Ernesto Distajo, Federico Distajo, and Eduardo Distajo. 3

On May 29, 1963, Iluminada Abiertas certified to the sale of Lot Nos. 1046 and 1047 in favor of Rufo Distajo. 4

On June 4, 1969, Iluminada Abiertas sold Lot No. 1057 to Rhodora Distajo, the daughter of Rufo Distajo. 5

On July 12, 1969, Iluminada Abiertas sold Lot No. 1018 to Rufo Distajo.6

Meanwhile, Justo Abiertas, Jr., the brother of Iluminada Abiertas, died leaving behind his children, Teresita, Alicia, Josefa
and Luis Abiertas. Teresita paid for the real estate taxes of the following properties, which she inherited from her father:
Lot Nos. 1001, 1048, 1049, and a portion of Lot No. 1047, all located in Capiz. On May 26, 1954, Teresita Abiertas sold
Lot No. 1001 in favor of Rufo Distajo.7 On June 2, 1965, Teresita Abiertas, for herself and representing her sisters and
brother, sold Lot Nos. 1048, 1049, and a portion of Lot No. 1047 to Rufo Distajo. 8

After purchasing the above-mentioned parcels of land, Rufo Distajo took possession of the property and paid the
corresponding real estate taxes thereon. Rhodora Distajo likewise paid for the real estate taxes of Lot No. 1057.

When Iluminada Abiertas died in 1971, Zacarias Distajo, Pilar Distajo-Tapar, and Rizaldo Distajo,9 demanded possession
of the seven parcels of land from Lagrimas S. Distajo, and her husband, Rufo Distajo. The latter refused.

Consequently, on June 5, 1986, Ricardo Distajo, with the other heirs of Iluminada Abiertas, namely, Ernesto Distajo, Raul
Distajo, Federico Distajo, Zacarias Distajo, Eduardo Distajo, and Pilar Distajo, filed with the Regional Trial Court, Roxas
City a complaint for recovery of possession and ownership of Lot No. 1018, partition of Lot Nos. 1001, 1018-B, 1046,
1047, 1048, 1049, 1057, and damages.

On September 4, 1986, private respondent Lagrimas Distajo10 filed an answer with counterclaim.

On April 9, 1990, the trial court dismissed the complaint for lack of cause of action, laches and prescription. The
counterclaim was likewise dismissed. The parties appealed to the Court of Appeals. 11

On August 21, 1992, the Court of Appeals rendered its decision,12 the dispositive portion of which states as follows:

"PREMISES CONSIDERED, the decision appealed from is hereby SET ASIDE and a new judgment rendered, as follows:
WHEREFORE, the Court decides the case in favor of the defendant and dismisses the plaintiffs complaint for lack of
cause of action except with regard to the plaintiffs claim over a 238 sq. m. portion of Lot No. 1018 (the portion adjoining
the market site and measuring seventeen meters and that adjoining the property of E. Rodriguez measuring 14 meters).
The Court hereby Orders the partition of Lot No. 1018 to conform to the following: 238 sq. m. as above specified to belong
to the plaintiffs as prayed for by them while the rest is declared property of the defendant.

Upon partition of Lot No. 1018 in accordance with this Courts Order, the City Assessor of Roxas City is hereby Ordered to
cancel Tax Declaration 2813 in the name of Rufo Distajo (or any subsequent tax declaration/s issued relative to the
above-cited Tax Declaration No. 2813) and forthwith to issue the corresponding tax declarations in the names of the
respective parties herein.

SO ORDERED."

On September 10, 1992, Ricardo Distajo filed a motion for reconsideration. 13 On December 9, 1993, the Court of Appeals
denied the motion.14

Hence, this petition.15

Petitioner alleges that Iluminada Abiertas exclusively owns the seven parcels of land delineated as Lot Nos. 1001, 1018,
1046, 1047, 1048, 1049, and 1057, all of which should be partitioned among all her heirs. Furthermore, Rufo Distajo
cannot acquire the subject parcels of land owned by Iluminada Abiertas because the Civil Code prohibits the administrator
from acquiring properties under his administration.16 Rufo Distajo merely employed fraudulent machinations in order to
obtain the consent of his mother to the sale, and may have even forged her signature on the deeds of sale of the parcels
of land.

In her comment dated May 13, 1994, private respondent Lagrimas S. Distajo contends that Rufo Distajo rightfully owns
the subject parcels of land because of various deeds of sale executed by Iluminada Abiertas selling Lot Nos. 1018-B,
1047 and 1046 in favor of Rufo Distajo and Lot No. 1057 in favor of Rhodora Distajo. Private respondent also avers that
petitioner cannot claim any right over Lot Nos. 1001, 1048 and 1049, considering that such lands belong to the brother of
Iluminada Abiertas, namely, Justo Abiertas, Jr., whose heirs sold said parcels of land to Rufo Distajo.

The petition lacks merit.

Factual findings of the trial court will not be disturbed on appeal unless the court has overlooked or ignored some fact or
circumstance of sufficient weight or significance, which, if considered, would alter the result of the case. 17When there is no
conflict between the findings of the trial and appellate courts, a review of the facts found by the appellate court is
unnecessary.18

Since the trial court and the Court of Appeals agree that Iluminada Abiertas owned Lot Nos. 1046, 1057 and a portion of
Lot No. 1047, and that Justo Abiertas Jr. owned Lot Nos. 1001, 1048, and 1049, such findings are binding on this Court,
which is not a trier of facts.19 However, the record shows that Lot No. 1018 should be divided into Lot No. 1018-A and
1018-B, the delineation of which the Court of Appeals clarified in its decision.

The issues in this case, therefore, are limited to those properties which were owned by Iluminada Abiertas, ascendant of
petitioner, consisting of Lot Nos. 1018-A, 1046, 1057, and a portion of 1047.

In his petition, Ricardo Distajo assails the genuineness of the signatures of Iluminada Abiertas in the deeds of sale of the
parcels of land, and claims that Rufo Distajo forged the signature of Iluminada Abiertas. However, no handwriting expert
was presented to corroborate the claim of forgery. Petitioner even failed to present a witness who was familiar with the
signature of Iluminada Abiertas. Forgery should be proved by clear and convincing evidence, and whoever alleges it has
the burden of proving the same.20

Petitioner likewise contends that the sale transactions are void for having been entered into by the administrator of the
properties.1wphi1 We disagree. The pertinent Civil Code provision provides:

"Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or
through the mediation of another:

(1) The guardian, the property of the person or persons who may be under guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the
principal has been given;

(3) Executors and administrators, the property of the estate under administration;" x x x

Under paragraph (2) of the above article, the prohibition against agents purchasing property in their hands for sale or
management is not absolute. It does not apply if the principal consents to the sale of the property in the hands of the
agent or administrator. In this case, the deeds of sale signed by Iluminada Abiertas shows that she gave consent to the
sale of the properties in favor of her son, Rufo, who was the administrator of the properties. Thus, the consent of the
principal Iluminada Abiertas removes the transaction out of the prohibition contained in Article 1491(2).

Petitioner also alleges that Rufo Distajo employed fraudulent machinations to obtain the consent of Iluminada Abiertas to
the sale of the parcels of land. However, petitioner failed to adduce convincing evidence to substantiate his allegations.

In the absence of any showing of lack of basis for the conclusions made by the Court of Appeals, this Court finds no
cogent reason to reverse the ruling of the appellate court.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals in CA-G.R. CV No.
30063.

SO ORDERED.

Davide, Jr., C.J., (Chairman), and Ynares-Santiago, JJ., concur.


Puno, and Kapunan, JJ., no part.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. Nos. 1302, 1391 and 1543 April 26, 1991

PAULINO VALENCIA, complainant,


vs.
ATTY. ARSENIO FER CABANTING, respondent.

CONSTANCIA L. VALENCIA, complainant,


vs.
ATTY. DIONISIO C. ANTINIW, ATTY. EDUARDO U. JOVELLANOS and ATTY. ARSENIO FER.
CABANTING,respondents.

LYDIA BERNAL, complainant,


vs.
ATTY. DIONISIO C. ANTINIW, respondent.

PER CURIAM:

These consolidated administrative cases seek to disbar respondents Dionisio Antiniw, Arsenio Fer. Cabanting and
Eduardo Jovellanos (the last named, now an MCTC Judge) for grave malpractice and misconduct in the exercise of their
legal profession committed in the following manner:

1. Administrative Cases No. 1302 and 1391.

In 1933, complainant Paulino Valencia (Paulino in short) and his wife Romana allegedly bought a parcel of land, where
they built their residential house, from a certain Serapia Raymundo, an heir of Pedro Raymundo the original owner.
However, they failed to register the sale or secure a transfer certificate of title in their names.

Sometime in December, 1968, a conference was held in the house of Atty. Eduardo Jovellanos to settle the land dispute
between Serapia Raymundo (Serapia in short) another heir of Pedro Raymundo, and the Valencia spouses since both
were relatives and distant kin of Atty. Jovellanos. Serapia was willing to relinquish ownership if the Valencias could show
documents evidencing ownership. Paulino exhibited a deed of sale written in the Ilocano dialect. However, Serapia
claimed that the deed covered a different property. Paulino and Serapia were not able to settle their differences. (Report
of Investigating Judge Catalino Castaneda, Jr., pp. 21-22).

On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer. Cabanting, filed a complaint against Paulino for the
recovery of possession with damages. The case was docketed as Civil Case No. V-2170, entitled "Serapia Raymundo,
Plaintiff, versus Paulino Valencia, Defendant." (Report, p. 11).

Summoned to plead in Civil Case No. V-2170, the Valencias engaged the services of Atty. Dionisio Antiniw. Atty. Antiniw
advised them to present a notarized deed of sale in lieu of the private document written in Ilocano. For this purpose,
Paulino gave Atty. Antiniw an amount of P200.00 to pay the person who would falsify the signature of the alleged vendor
(Complaint, p. 2; Rollo, p. 7). A "Compraventa Definitiva" (Exh. B) was executed purporting to be a sale of the questioned
lot.

On January 22, 1973, the Court of First Instance of Pangasinan, Branch V, rendered a decision in favor of plaintiff,
Serapia Raymundo. The lower court expressed the belief that the said document is not authentic. (Report, p. 14)

Paulino, thereafter, filed a Petition for Certiorari, under Rule 65, with Preliminary Injunction before the Court of Appeals
alleging that the trial court failed to provide a workable solution concerning his house. While the petition was pending, the
trial court, on March 9, 1973, issued an order of execution stating that "the decision in this case has already become final
and executory" (Exhibits 3 and 3-A). On March 14, 1973, a writ of execution was issued.

On March 20, 1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the remaining portion she
sold to her counsel, Atty. Arsenio Fer. Cabanting, on April 25, 1973. (Annex "A" of Administrative Case No. 1302).

On March 4, 1974, Paulino filed a disbarment proceeding (docketed as Administrative Case No. 1302) against Atty.
Cabanting on the ground that said counsel allegedly violated Article 1491 of the New Civil Code as well as Article II of the
Canons of Professional Ethics, prohibiting the purchase of property under litigation by a counsel.

On March 21, 1974 the appellate court dismissed the petition of Paulino.

On October 14, 1974, Constancia Valencia, daughter of Paulino, filed a disbarment proceeding (docketed as
Administrative Case No. 1391) against Atty. Dionisio Antiniw for his participation in the forgery of "Compraventa Definitiva"
and its subsequent introduction as evidence for his client; and also, against Attys. Eduardo Jovellanos and Arsenio
Cabanting for purchasing a litigated property allegedly in violation of Article 1491 of the New Civil Code; and against the
three lawyers, for allegedly rigging Civil Case No. V-2170 against her parents. On August 17, 1975, Constancia Valencia
filed additional charges against Atty. Antiniw and Atty. Jovellanos as follows:

1. AGAINST ATTY. DIONISIO ANTINIW:

In the year 1973 Atty. Dionisio Antiniw fraudulently and in confabulation with one Lydia Bernal had a deed of sale,
fabricated, executed and ratified before him as Notary Public by one Santiago Bernal in favor of Lydia Bernal
when as a matter of fact said Santiago Bernal had died already about eight years before in the year 1965.

2. AGAINST ATTY. EDUARDO JOVELLANOS:

In the year 1954 Atty. Eduardo Jovellanos, fraudulently and in bad faith, in confabulation with Rosa de los Santos
as vendee had, as Notary Public, executed and ratified before him, two (2) deeds of sale in favor of said Rosa de
los Santos when as a matter of fact the said deeds were not in fact executed by the supposed vendor Rufino
Rincoraya and so Rufino Rincoraya had filed a Civil Case in Court to annul and declare void the said sales (p. 7,
Report)

2. Administrative Case No. 1543.

A deed of donation propter nuptias involving the transfer of a piece of land by the grandparents of Lydia Bernal
(complainant,) in favor of her parents, was lost during the last world war. For this reason, her grandmother (the living
donor) executed a deed of confirmation of the donation propter nuptias with renunciation of her rights over the property.
(Complaint, p. 1). Notwithstanding the deed, her grandmother still offered to sell the same property in favor of the
complainant, ostensibly to strengthen the deed of donation (to prevent others from claim-ing the property).

On consultation, Atty., Antiniw advised them to execute a deed of sale. Atty. Antiniw allegedly prepared and notarized the
deed of sale in the name of her grandfather (deceased at the time of signing) with her grandmother's approval.

Felicidad Bernal-Duzon, her aunt who had a claim over the property filed a complaint against her (Lydia Bernal) and her
counsel, Atty. Antiniw for falsification of a public document. (Complaint, pp. 1-2) The fiscal exonerated the counsel for lack
of evidence, while a case was filed in court against Lydia Bernal.

On October 3, 1975, Lydia Bernal filed a disbarment proceeding (docketed as Administrative Case No.1543) against Atty.
Antiniw for illegal acts and bad advice.

Pursuant to the resolution of the First Division of this Court dated December 9, 1974, the resolution of the Second Division
dated March 3, 1975 and the two resolutions of the Second Division both dated December 3, 1975, Administrative Cases
Nos. 1302, 1391 and 1543 were referred to the Office of the Solicitor General for investigation, report and
recommendation.

Upon formal request of Constancia L. Valencia and Lydia Bernal dated March 3, 1976, all of these cases were ordered
consolidated by Solicitor General Estelito P. Mendoza per his handwritten directive of March 9, 1976.
On April 12, 1988, We referred the investigation of these cases to the Integrated Bar of the Philippines.1wphi1 When
Atty. Jovellanos was appointed as Municipal Circuit Trial Court Judge of Alcala-Bautista, Pangasinan, We referred the
investigation of these cases to Acting Presiding Judge Cesar Mindaro, Regional Trial Court, Branch 50, Villasis,
Pangasinan, for further investigation.

In view of the seriousness of the charge against the respondents and the alleged threats against the person of
complainant Constancia L. Valencia, We directed the transfer of investigation to the Regional Trial Court of Manila.

The three administrative cases were raffled to Branch XVII of the Regional Trial Court of Manila, under the sala of Judge
Catalino Castaneda, Jr.

After investigation, Judge Catalino Castaeda, Jr., recommended the dismissal of cases against Atty. Jovellanos and Atty.
Arsenio Fer. Cabanting; dismissal of Administrative Case No. 1543 and the additional charges in Administrative Case No.
1391 against Antiniw and Judge Jovellanos; however, he recommended the suspension of Atty. Antiniw from the practice
of law for six months finding him guilty of malpractice in falsifying the "Compraventa Definitiva."

The simplified issues of these consolidated cases are:

I. Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of the New Civil Code.

II. Whether or not Attys. Antiniw and Jovellanos are guilty of malpractice in falsifying notarial documents.

III. Whether or not the three lawyers connived in rigging Civil Case No. V-2170.

Under Article 1491 of the New Civil Code:

The following persons cannot acquire by purchase, even at a public of judicial auction, either in person or through
the mediation of another:

xxx xxx xxx

(5) . . . this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation in which they make take part by virtue of their
profession.

Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to curtail any undue
influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any
violation of this prohibition would constitute malpractice (In re: Attorney Melchor Ruste, 40 O.G. p. 78) and is a ground for
suspension. (Beltran vs. Fernandez, 70 Phil. 248).

Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending. (Director of Lands vs.
Adaba, 88 SCRA 513; Hernandez vs. Villanueva, 40 Phil. 775).

In the case at bar, while it is true that Atty. Arsenio Fer. Cabanting purchased the lot after finality of judgment, there was
still a pending certiorari proceeding. A thing is said to be in litigation not only if there is some contest or litigation over it in
court, but also from the moment that it becomes subject to the judicial action of the judge. (Gan Tingco vs. Pabinguit, 35
Phil. 81). Logic indicates, in certiorari proceedings, that the appellate court may either grant or dismiss the petition. Hence,
it is not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the judgment of the trial
court become final while a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty.
Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of Professional Ethics. Clearly, this
malpractice is a ground for suspension.

The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-client relationship between
Serapia and Atty. Jovellanos, considering that the latter did not take part as counsel in Civil Case No. V-2170. The
transaction is not covered by Art. 1491 nor by the Canons adverted to.
II

It is asserted by Paulino that Atty. Antiniw asked for and received the sum of P200.00 in consideration of his executing the
document "Compraventa Definitiva" which would show that Paulino bought the property. This charge, Atty. Antiniw simply
denied. It is settled jurisprudence that affirmative testimony is given greater weight than negative testimony (Bayasen vs.
CA, L-25785, Feb. 26, 1981; Vda. de Ramos vs. CA, et al., L40804, Jan. 31, 1978). When an individual's integrity is
challenged by evidence, it is not enough that he deny the charges against him; he must meet the issue and overcome the
evidence for the relator and show proofs that he still maintains the highest degree of morality and integrity which at all
time is expected of him. (De los Reyes vs. Aznar, Adm. Case No. 1334, Nov. 28, 1989).

Although Paulino was a common farmer who finished only Grade IV, his testimony, even if not corroborated by another
witness, deserves credence and can be relied upon. His declaration dwelt on a subject which was so delicate and
confidential that it would be difficult to believe the he fabricated his evidence.

There is a clear preponderant evidence that Atty. Antiniw committed falsification of a deed of sale, and its subsequent
introduction in court prejudices his prime duty in the administration of justice as an officer of the court.

A lawyer owes entire devotion to the interest of his client (Santos vs. Dichoso, 84 SCRA 622), but not at the expense of
truth. (Cosmos Foundry Shopworkers Union vs. La Bu, 63 SCRA 313). The first duty of a lawyer is not to his client but to
the administration of justice. (Lubiano vs. Gordalla, 115 SCRA 459) To that end, his client's success is wholly subordinate.
His conduct ought to and must always be scrupulously observant of law and ethics. While a lawyer must advocate his
client's cause in utmost earnestness and with the maximum skill he can marshal, he is not at liberty to resort to illegal
means for his client's interest. It is the duty of an attorney to employ, for the purpose of maintaining the causes confided to
him, such means as are consistent with truth and honor. (Pangan vs. Ramos, 93 SCRA 87).

Membership in the Bar is a privilege burdened with conditions. By far, the most important of them is mindfulness that a
lawyer is an officer of the court. (In re: Ivan T. Publico, 102 SCRA 722). This Court may suspend or disbar a lawyer whose
acts show his unfitness to continue as a member of the Bar. (Halili vs. CIR, 136 SCRA 112). Disbarment, therefore, is not
meant as a punishment depriving him of a source of livelihood but is rather intended to protect the administration of justice
by requiring that those who exercise this function should be competent, honorable and reliable in order that courts and the
public may rightly repose confidence in them. (Noriega vs. Sison, 125 SCRA 293). Atty. Antiniw failed to live up to the high
standards of the law profession.

The other charges of malpractice against Atty. Antiniw and Atty. Jovellanos should be dismissed for lack of evidence.

During the proceedings in Administrative Case No. 1543, Lydia Bernal testified in full on direct examination, but she never
submitted herself for cross-examination. Several subpoenas for cross-examination were unheeded. She eventually
requested the withdrawal of her complaint.

Procedural due process demands that respondent lawyer should be given an opportunity to cross-examine the witnesses
against him.1wphi1 He enjoys the legal presumption that he is innocent of the charges against him until the contrary is
proved. (Santos vs. Dichoso, 84 SCRA 622). The case must be established by clear, convincing and satisfactory proof.
(Camus vs. Diaz, Adm. Case No. 1616, February 9, 1989), Since Atty. Antiniw was not accorded this procedural due
process, it is but proper that the direct testimony of Lydia Bernal be stricken out.

In view also of the affidavit of desistance executed by the complainant, Administrative Case No. 1543 should be
dismissed. Although the filing of an affidavit of desistance by complainant for lack of interest does not ipso factoresult in
the termination of a case for suspension or disbarment of an erring lawyer (Munar vs. Flores, 122 SCRA 448), We are
constrained in the case at bar, to dismiss the same because there was no evidence to substantiate the charges.

The additional charge against Atty. Antiniw in Administrative Case No. 1391 is predicated on the information furnished by
Lydia Bernal. It was not based on the personal knowledge of Constancia L. Valencia: hence, hearsay. "Any evidence,
whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but
on the knowledge of some other person not on the witness stand." (Regalado, Remedial Law Compendium, 6th ed., vol.
2, 1989, p. 486). Being hearsay, the evidence presented is inadmissible.

The additional charge filed by Constancia L. Valencia against Atty. Jovellanos in Administrative Case No. 1391 was not
proved at all. Complainant failed to prove her additional charges.

III
There is no evidence on record that the three lawyers involved in these administrative cases conspired in executing the
falsified "Compraventa Definitiva" and rigged the Civil Case No. V-2170.

Atty. Jovellanos is a distant kin of the Raymundos and Valencias. In fact, he and the Valencias are neighbors and only
two meters separate their houses. It would not be believable that Atty. Jovellanos, a practicing lawyer, would hold a
meeting with the heirs of Pedro Raymundo in his house with the intention of inducing them to sue the Valencias. Atty.
Jovellanos even tried to settle the differences between the parties in a meeting held in his house. He appeared in Civil
Case No. V-2170 as an involuntary witness to attest to the holding of the conference.

Besides, the camaraderie among lawyers is not proof of conspiracy, but a sign of brotherhood among them. One of the
fourfold duties of a lawyer is his duty to the Bar. A lawyer should treat the opposing counsel, and his brethren in the law
profession, with courtesy, dignity and civility. They may "do as adversaries do in law: strive mightily but (they) eat and
drink as friends." This friendship does not connote conspiracy.

WHEREFORE, judgment is hereby rendered declaring: 1. Dionisio Antiniw DISBARRED from the practice of law, and his
name is ordered stricken off from the roll of attorneys; 2. Arsenio Fer. Cabanting SUSPENDED from the practice of law for
six months from finality of this judgment; and 3. Administrative Case No. 1391 against Attorney Eduardo Jovellanos and
additional charges therein, and Administrative Case No. 1543 DISMISSED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

A.C. No. 6210 December 9, 2004

FEDERICO N. RAMOS, complainant,


vs.
ATTY. PATRICIO A. NGASEO, respondent.

DECISION

YNARES-SANTIAGO, J.:

This is a complaint for suspension of respondent Atty. Patricio A. Ngaseo for violation of the Code of Professional
Responsibility and Article 1491 of the Civil Code by demanding from his client, complainant Federico N. Ramos, the
delivery of 1,000 square meters of land, a litigated property, as payment for his appearance fees.

The facts as narrated by the complainant are as follows:

Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio Ngaseo's Makati office to engage his
services as counsel in a case1 involving a piece of land in San Carlos, Pangasinan. Respondent agreed to handle the
case for an acceptance fee of P20,000.00, appearance fee of P1,000.00 per hearing and the cost of meals, transportation
and other incidental expenses. Complainant alleges that he did not promise to pay the respondent 1,000 sq. m. of land as
appearance fees.2

On September 16, 1999, complainant went to the respondent's office to inquire about the status of the case. Respondent
informed him that the decision was adverse to them because a congressman exerted pressure upon the trial judge.
Respondent however assured him that they could still appeal the adverse judgment and asked for the additional amount
of P3,850.00 and another P2,000.00 on September 26, 2000 as allowance for research made. 3

Although an appeal was filed, complainant however charges the respondent of purposely failing to submit a copy of the
summons and copy of the assailed decision. Subsequently, complainant learned that the respondent filed the notice of
appeal 3 days after the lapse of the reglementary period.

On January 29, 2003, complainant received a demand-letter from the respondent asking for the delivery of the 1,000 sq.
m. piece of land which he allegedly promised as payment for respondent's appearance fee. In the same letter, respondent
also threatened to file a case in court if the complainant would not confer with him and settle the matter within 30 days.

Respondent alleged that sometime in the late 1997, a former client, Federico Ramos and his brother, Dionisio, went to his
Makati office to engage his professional services in connection with a 2-hectare parcel of land situated in San Carlos,
Pangasinan which the complainant's family lost 7 years earlier through an execution sale in favor of one Alfredo T. Castro.
Complainant, who was deaf and could only speak conversational Tagalog haltingly, was assisted by his brother Dionisio.
They came all the way from Pangasinan because no lawyer in San Carlos City was willing to handle the case.
Complainant, through Dionisio, avers that he has consulted 2 local lawyers but did not engage their services because they
were demanding exorbitant fees. One local lawyer was willing to handle the case for at least one-half of the land involved
as his attorney's fee, plus cash expenses, while the other asked for of the land in addition to a large sum of money.
Respondent agreed to handle the case for an acceptance fee of P60,000.00 plus an appearance fee of P3,000.00 per
hearing. Complainant told him that he would consult his siblings on the matter.

Six months later, i.e., in April 1998, complainant, assisted by one Jose Castillo, went to respondent's office to discuss the
legal fees. Complainant, through Castillo, told respondent that he was willing to pay an acceptance fee of P40,000.00,
P20,000.00 of which shall be paid upon engagement and the remaining P20,000.00 to be paid after their treasure hunt
operations in Nueva Viscaya were terminated. Further, complainant offered, in lieu of P3,000.00 per appearance, 1,000
sq. m. of land from the land subject matter of the case, if they win, or from another piece of property, if they lose. In
addition, complainant also offered to defray the expenses for transportation, meals and other incidental expenses.
Respondent accepted the complainant's offer.
Respondent claims that after the trial court dismissed Civil Case No. SCC 2128, he filed a timely notice of appeal and
thereafter moved to be discharged as counsel because he had colon cancer. Complainant, now assisted by one Johnny
Ramos, implored respondent to continue handling the case, with an offer to double the 1,000 sq. m. piece of land earlier
promised and the remaining balance of P20,000.00 acceptance fee. Johnny Ramos made a written commitment and gave
respondent's secretary P2,000.00 of the P3,850.00 expenses for the preparation of the appellant's brief.

On July 18, 2001, the Court of Appeals rendered a favorable decision ordering the return of the disputed 2-hectare land to
the complainant and his siblings. The said decision became final and executory on January 18, 2002. Since then
complainant allegedly failed to contact respondent, which compelled him to send a demand letter on January 29, 2003.

On February 14, 2003, complainant filed a complaint before the IBP charging his former counsel, respondent Atty.
Ngaseo, of violation of the Code of Professional Responsibility for demanding the delivery of 1,000 sq. m. parcel of land
which was the subject of litigation.

In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the respondent guilty of grave
misconduct and conduct unbecoming of a lawyer in violation of the Code of Professional Responsibility and
recommended that he be suspended from the practice of law for 1 year. 4

On August 30, 2003, the IBP Board of Governors passed Resolution No. XVI-2003-47 the full text of which reads:5

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and
Recommendation of the Investigating Commissioner of the above-entitled case, herein made part of this
Resolution/Decision as Annex "A"; and, finding the recommendation fully supported by the evidence on record
and the applicable laws and rules, with modification, and considering that respondent have violated the Code of
Professional Responsibility for grave misconduct and conduct unbecoming of a lawyer Atty. Patricio A. Ngaseo is
hereby SUSPENDED from the practice of law for six (6) months.

On December 11, 2003, respondent filed a petition for review assailing IBP Resolution No. XVI-2003-47 for having been
issued without or in excess of jurisdiction.6

Respondent argues that he did not violate Article 1491 of the Civil Code because when he demanded the delivery of the
1,000 sq. m. of land which was offered and promised to him in lieu of the appearance fees, the case has been terminated,
when the appellate court ordered the return of the 2-hectare parcel of land to the family of the complainant.

Respondent further contends that he can collect the unpaid appearance fee even without a written contract on the basis of
the principle of quantum meruit. He claims that his acceptance and appearance fees are reasonable because a Makati
based legal practitioner, would not handle a case for an acceptance fee of only P20,000.00 and P1,000.00 per court
appearance.

Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by purchase or assignment the
property or rights involved which are the object of the litigation in which they intervene by virtue of their profession. 7The
prohibition on purchase is all embracing to include not only sales to private individuals but also public or judicial sales. The
rationale advanced for the prohibition is that public policy disallows the transactions in view of the fiduciary relationship
involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons. 8 It is founded on
public policy because, by virtue of his office, an attorney may easily take advantage of the credulity and ignorance of his
client and unduly enrich himself at the expense of his client. 9 However, the said prohibition applies only if the sale or
assignment of the property takes place during the pendency of the litigation involving the client's property. Consequently,
where the property is acquired after the termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code
attaches.

Invariably, in all cases where Article 1491 was violated, the illegal transaction was consummated with the actual transfer
of the litigated property either by purchase or assignment in favor of the prohibited individual. In Biascan v.
Lopez, respondent was found guilty of serious misconduct and suspended for 6 months from the practice of law when he
registered a deed of assignment in his favor and caused the transfer of title over the part of the estate despite pendency
of Special Proceedings No. 98037 involving the subject property. 10 In the consolidated administrative cases of Valencia v.
Cabanting,11 the Court suspended respondent Atty. Arsenio Fer Cabanting for six (6) months from the practice of law
when he purchased his client's property which was still the subject of a pending certiorari proceeding.

In the instant case, there was no actual acquisition of the property in litigation since the respondent only made a written
demand for its delivery which the complainant refused to comply. Mere demand for delivery of the litigated property does
not cause the transfer of ownership, hence, not a prohibited transaction within the contemplation of Article 1491. Even
assuming arguendo that such demand for delivery is unethical, respondent's act does not fall within the purview of Article
1491. The letter of demand dated January 29, 2003 was made long after the judgment in Civil Case No. SCC-2128
became final and executory on January 18, 2002.

We note that the report of the IBP Commissioner, as adopted by the IBP Board of Governors in its Resolution No. XVI-
2003-47, does not clearly specify which acts of the respondent constitute gross misconduct or what provisions of the
Code of Professional Responsibility have been violated. We find the recommended penalty of suspension for 6 months
too harsh and not proportionate to the offense committed by the respondent. The power to disbar or suspend must be
exercised with great caution. Only in a clear case of misconduct that seriously affects the standing and character of the
lawyer as an officer of the Court and member of the bar will disbarment or suspension be imposed as a penalty. 12 All
considered, a reprimand is deemed sufficient and reasonable.

WHEREFORE, in view of the foregoing, respondent Atty. Patricio A. Ngaseo is found guilty of conduct unbecoming a
member of the legal profession in violation of Rule 20.04 of Canon 20 of the Code of Professional Responsibility. He
is REPRIMANDED with a warning that repetition of the same act will be dealt with more severely.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 72306 October 6, 1988

DAVID P. FORNILDA, JUAN P. FORNILDA, EMILIA P. FORNILDA OLILI, LEOCADIA P. FORNILDA LABAYEN and
ANGELA P. FORNILDA GUTIERREZ, petitioners,
vs.
THE BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIAL REGION, PASIG, JOAQUIN C. ANTONIO Deputy
Sheriff, RTC, 4JR Tanay, Rizal and ATTY. SERGIO I. AMONOY respondents.

Irene C. Ishiwata for petitioner A. Gutierrez.

Sergio L Amonoy for and in his own behalf.

MELENCIO-HERRERA, J.:

The Petition entitled "Petisiyung Makapagpasuri Taglay ang Pagpapapigil ng Utos", translated as one for certiorari with
Preliminary Injunction, was filed on 27 September 1985 by three (3) petitioners, namely David P. Fornilda, Emilia P.
Fornilda-Olili and Angela P. Fornilda-Gutierrez. They seek the reversal of the Order of respondent Trial Court, dated 25
July 1985, granting a Writ of Possession, as well as its Orders, dated 25 April 1986 and 16 May 1986 (p. 241, Rollo),
directing and authorizing respondent Sheriff to demolish the houses of petitioners Angela and Leocadia Fornilda (who is
listed as a petitioner but who did not sign the Petition). Neither is Juan P. Fornilda a signatory.

The facts disclose that the deceased, Julio M. Catolos formerly owned six (6) parcels of land located in Tanay, Rizal,
which are the controverted properties in the present litigation. His estate was the subject of settlement in Special
Proceedings No. 3103 of the then Court of First Instance of Rizal, at Pasig, Branch 1. Francesca Catolos Agnes Catolos
Alfonso I. ForniIda and Asuncion M. Pasamba were some of the legal heirs and were represented in the case by Atty.
Sergio Amonoy (hereinafter referred to as Respondent Amonoy). A Project of Partition was filed in the Intestate Court
whereby the Controverted Parcels were adjudicated to Alfonso I. Fornilda and Asuncion M. Pasamba.

On 12 January 1965, the Court approved the Project of Partition. It was not until 6 August 1969, however, that the estate
was declared closed and terminated after estate and inheritance taxes had been paid, the claims against the estate
settled and all properties adjudicated.

Eight (8) days thereafter, or on 20 January 1965, Alfonso 1. Fornilda and Asuncion M. Pasamba executed a Contract of
Mortgage wherein they mortgaged the Controverted Parcels to Respondent Amonoy as security for the payment of his
attorney's fees for services rendered in the aforementioned intestate proceedings, in the amount of P27,600.00 (Annex
"A", Comment).

Asuncion M. Pasamba died on 24 February 1969 while Alfonso 1. Fornilda passed away on 2 July 1969. Petitioners are
some of the heirs of Alfonso I. Fornilda.

Since the mortgage indebtedness was not paid, on 21 January 1970, Respondent Amonoy instituted foreclosure
proceedings before the Court of First Instance of Rizal, at Pasig, Branch VIII entitled "Sergio I. Amonoy vs. Heirs of
Asuncion M. Pasamba and Heirs of Alfonso 1. Fornilda" [Civil Case No. 12726] (Annex "B", Ibid.). Petitioners, as
defendants therein, alleged that the amount agreed upon as attorney's fees was only Pll,695.92 and that the sum of
P27,600.00 was unconscionable and unreasonable. Appearing as signatory counsel for Respondent Amonoy was Atty.
Jose S. Balajadia.

On 28 September 1972, the Trial Court 1 rendered judgement in the Foreclosure Case ordering the Pasamba and
Fornilda heirs to pay Respondent Amonoy, within ninety (90).days from receipt of the decision, the sums of P27,600.00
representing the attorney's fees secured by the mortgage; Pl l,880.00 as the value of the harvest from two (2) parcels of
land; and 25% of the total of the two amounts, or P9,645.00, as attorney's fees, failing which the Controverted Parcels
would be sold at public auction (Annex "C", Ibid.).

On 6 February 1973, the Controverted Parcels were foreclosed and on 23 March 1973, an auction sale was held with
Respondent Amonoy as the sole bidder for P23,760.00 (Annex "D", Ibid.). Said sale was confirmed by the Trial Court on 2
May 1973 (Annex "E", Ibid.). To satisfy the deficiency, another execution sale was conducted with Respondent Amonoy
as the sole bidder for P12,137.50. On the basis of an Affidavit of Consolidation of Ownership by Respondent Amonoy, the
corresponding tax declarations covering the Controverted Parcels were consolidated in his name.

On 19 December 1973, or a year after the judgment in the Foreclosure Case, an action for Annulment of Judgment
entitled "Maria Penano et al. vs. Sergio Amonoy, et al." (Civil Case No. 18731) was filed before the then Court of First
Instance of Rizal, at Pasig the Annulment Case (Annex "F", Ibid.) Petitioners were also included as plaintiffs. Appearing
for the plaintiffs in that case was Atty. Jose F. Tiburcio. Squarely put in issue were the propriety of the mortgage, the
validity of the judgment in the Foreclosure Case, and the tenability of the acquisitions by Respondent Amonoy at the
Sheriffs sale. Of particular relevance to the instant Petition is the contention that the mortgage and the Sheriffs sales were
null and void as contrary to the positive statutory injunction in Article 1491 (5) of the Civil Code, which prohibits attorneys
from purchasing, even at a public or judicial auction, properties and rights in litigation, and that the Trial Court, in the
Foreclosure Case, had never acquired jurisdiction over the subject matter of the action, i.e., the Controverted Parcels.

On 7 November 1977, the Trial Court 2 dismissed the Annulment Case holding that the particular disqualification in Article
1491 of the Civil Code is not of general application nor of universal effect but must be reconciled with the rule that permits
judgment creditors to be bidders at sheriffs sales, so that Respondent Amonoy was "clearly not prohibited from bidding his
judgment and his acquisitions therefore are sanctioned by law" (Annex "G", Ibid.).

On 22 July 1981, the Court of Appeals (in CA-G.R. No. 63214-R) (the Appealed Case) 3 affirmed the aforesaid judgment
predicated on three principal grounds: (1) that no legal impediment exists to bar an heir from encumbering his share of the
estate after a project of partition has been approved, that act being a valid exercise of his right of ownership; (2) res
judicata, since petitioners never questioned the capacity of Respondent Amonoy to acquire the property in the
Foreclosure Case; and (3) the complaint in the Annulment Case did not allege extrinsic fraud nor collusion in obtaining the
judgment so that the action must fail.

Upon remand of the Foreclusure Case to respondent Regional Trial Court, Branch 164, at Pasig, Respondent Sheriff, on
26 August 1985, notified petitioners to vacate the premises (p. 17, Rollo), subject of the Writ of Possession issued on 25
July 1985 (p. 18, Rollo).

On 27 September 1985, petitioners came to this Court in a pleading entitled "Petisiyung Makapagpasuri Taglay ang
Pagpapapigil ng Utos". On 11 November 1985, we dismissed the petition for non-payment of docket and other fees.
However, upon payment thereof, the Order of dismissal was set aside and respondents were directed to submit their
Comment. In his Comment, Respondent Amonoy denies that he had acquired the Controverted Parcels through immoral
and illegal means contending that "the question of attorney's fees, the mortgage to secure the same, the sale of the
mortgaged properties at public auction, which was confirmed by the Court, and ultimately, the ownership and possession
over them, have all been judicially adjudicated (p. 146, Rollo)

We gave due course to the petition and required the filing of the parties' respective memoranda.

Meanwhile, on motion of Respondent Amonoy, dated 24 April 1986, respondent Trial Court, in the Foreclosure Case,
issued Orders dated 25 April and 16 May 1986 authorizing the demolition of the houses and other structures of petitioners
Leocadia and Angela Fornilda (p. 241, Rollo).

On 1 June 1986 the house of Angela Fornilda was totally demolished while that of Leocadia was spared due to the latter's
assurance that she would seek postponement. On 1 June 1986, in a pleading entitled "Mahigpit na Musiyung Para
Papanagutin Kaugnay ng Paglalapastangan", followed by a Musiyung Makahingi ng Utos sa Pagpapapigil ng
Pagpapagiba at Papanagutin sa Paglalapastangan' petitioners applied for a Restraining Order, which we granted on 2
June 1986, enjoining respondents and the Sheriff of Rizal from demolishing petitioners' houses (p. 221, Rollo). In a
pleading entitled 'Mahigpit na Musiyung para Papanagutin Kaugnay ng Paglapastangan' and 'Masasamang Gawain (Mal-
Practices)' and 'Paninindigan (Memorandum)' both filed on 16 June 1988, petitioners likewise charged Respondent
Amonoy with malpractice and prayed for his disbarment (pp. 224; 226, Rollo).

In Respondent Amonoy's "Comment and Manifestations" filed on 30 June 1986, he indicated that the Restraining Order
received by the Deputy Sheriff of Rizal only on 6 June 1986 had already become moot and academic as Angela Fornilda's
house had been demolished on 2 June 1986 while Leocadia offered to buy the small area of the land where her house is
built and he had relented.

In the interim, Respondent Amonoy was appointed as Assistant Provincial Fiscal of Rizal, and subsequently as a Regional
Trial Court Judge in Pasay City.

The threshold issue is whether or not the mortgage constituted on the Controverted Parcels in favor of Respondent
Amonoy comes within the scope of the prohibition in Article 1491 of the Civil Code.

The pertinent portions of the said Articles read:

Art. 1491. The following persons cannot acquire by purchase even at a public or judicial or auction, either
in person or through the mediation of another:

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, ... the property and rights in litigation or levied upon on
execution before the court within whose junction or territory they exercise their respective functions; this
prohibition includes the act of acquitting by assignment and shall apply to lawyers with respect to the
property and rights which may be the object of any litigation in which they may take part by virtue of their
profession. (Emphasis supplied)

Under the aforequoted provision, a lawyer is prohibited from acquiring either by purchase or assignment the property or
rights involved which are the object of the litigation in which they intervene by virtue of their profession ( Padilla Vol. H
Civil Law, 1974 Ed., p. 230 citing Hernandez vs. Villanueva, 40 Phil. 773 and Rubias vs. Batiller 51 SCRA 130). The
prohibition on purchase is all embracing to include not only sales to private individuals but also public or judicial sales
(ibid., p. 221).

The rationale advanced for the prohibition is that public policy disallows the transactions in view of the fiduciary
relationship involved i.e., the relation of trust and confidence and the peculiar control exercised by these persons (Paras,
Civil Code, Vol. V, 1973., p. 70).

In the instant case, it is undisputed that the Controverted Parcels were part of the estate of the late Julio M. Catolos
subject of intestate estate proceedings, wherein Respondent Amonoy acted as counsel for some of the heirs from 1959
until 1968 by his own admission (Comment, p. 145, Rollo); that these properties were adjudicated to Alfonso Fornilda and
Asuncion M. Pasamba in the Project of Partition approved by the Court on 12 January 1965; that on 20 January 1965, or
only eight (8) days thereafter, and while he was still intervening in the case as counsel, these properties were mortgaged
by petitioners' predecessor-in-interest to Respondent Amonoy to secure payment of the latter's attorney's fees in the
amount of P27,600.00; that since the mortgage indebtedness was not paid, Respondent Amonoy instituted an action for
judicial foreclosure of mortgage on 21 January 1970; that the mortgage was subsequently ordered foreclosed and auction
sale followed where Respondent Amonoy was the sole bidder for P23,600.00; and that being short of the mortgage
indebtedness, he applied for and further obtained a deficiency judgment.

Telling, therefore, is the fact that the transaction involved falls squarely within the prohibition against any acquisition by a
lawyer of properties belonging to parties they represent which are still in suit. For, while the Project of Partition was
approved on 12 January 1965, it was not until 6 August 1969 that the estate was declared closed and terminated (Record
on Appeal, Civil Case No. 3103, p. 44). At the time the mortgage was executed, therefore, the relationship of lawyer and
client still existed, the very relation of trust and confidence sought to be protected by the prohibition, when a lawyer
occupies a vantage position to press upon or dictate terms to an harassed client. What is more, the mortgage was
executed only eight (8) days after approval of the Project of Partition thereby evincing a clear intention on Respondent
Amonoy's part to protect his own interests and ride roughshod over that of his clients. From the time of the execution of
the mortgage in his favor, Respondent Amonoy had already asserted a title adverse to his clients' interests at a time when
the relationship of lawyer and client had not yet been severed.

The fact that the properties were first mortgaged and only subsequently acquired in an auction sale long after the
termination of the intestate proceedings will not remove it from the scope of the prohibition. To rule otherwise would be to
countenance indirectly what cannot be done directly.

There is no gainsaying that petitioners' predecessor-in-interest, as an heir, could encumber the property adjudicated to
him; that the Complaint in the Annulment Case did not contain any specific allegation of fraud or collusion in obtaining the
judgment appealed from as opined by the Court of appeals in the Appealed Case; and that the auction sale of the
properties to Respondent Amonoy was judicially confirmed and ownership and possession of the Controverted Parcels
ultimately transferred to him.

Nonetheless, considering that the mortgage contract, entered into in contravention of Article 1491 of the Civil Code, supra,
is expressly prohibited by law, the same must be held inexistent and void ab initio (Director of Lands vs. Abagat, 53 Phil.
147).

Art. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public
policy;

xxx xxx xxx

(7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can
the right to set up the defense of illegality be waived. (Civil Code)

Being a void contract, the action or defense for the declaration of its inesistence is imprescriptible (Article 1410, Civil
Code). The defect of a void or inexistence contract is permanent. Mere lapse of time cannot give it efficacy. Neither can
the right to set up the defense of illegality be waived (Article 1409, Civil Code).

The Controverted Parcels could not have been the object of any mortgage contract in favor of Respondent Amonoy and
consequently neither of a foreclosure sale. By analogy, the illegality must be held to extend to whatsover results directly
from the illegal source (Article 1422, Civil Code). Such being the case, the Trial Court did not acquire any jurisdiction over
the subject matter of the Foreclosure Case and the judgment rendered therein could not have attained any finality and
could be attacked at any time. Neither could it have been a bar to the action brought by petitioners for its annulment by
reason of res judicata. (Municipality of Antipolo vs. Zapanta, No. L-65334, December 26, 1984, 133 SCRA 820). Two of
the requisites of the rule of prior judgment as a bar to a subsequent case, namely, (1) a final judgment and (2) that it must
have been rendered by a Court having jurisdiction over the subject matter, are conspicuously absent.

And since the nullity of the transaction herein involved proceeds from the illegality of the cause or object of the contract,
and the act does not constitute a criminal offense, the return to petitioners of the Controverted Parcels is in order.

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:

xxx xxx xxx

(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of
the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may
demand the return of what he has given without any obligation to comply with his promise. (Civil Code).

WHEREFORE, certiorari is granted; the Order of respondent Trial Court, dated 25 July 1985, granting a Writ of
Possession, as well as its Orders, dated 25 April 1986 and 16 May 1986, directing and authorizing respondent Sheriff to
demolish the houses of petitioners Angela and Leocadia Fornilda are hereby set aside, and the Temporary Restraining
Order heretofore issued, is made permanent. The six (6) parcels of land herein controverted are hereby ordered returned
to petitioners unless some of them have been conveyed to innocent third persons.

With respect to petitioners' prayer for disbarment by reason of malpractice of Respondent Amonoy embodied in their
pleading entitled 'Mahigpit na Musiyung para Papanagutin Kaugnay ng Paglalapastangan' and 'Masasamang Gawain
(Mal-Pracrices) and "Paninindigan (Memorandum)" both filed on Sergio I. Amonoy is hereby required, within fifteen (15)
days from notice hereof, to submit an Answer thereto. After receipt of the same, a new docket number will be assigned to
the case.

Costs against respondent, Sergio I. Amonoy.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

A.M. No. 3216 March 16, 1992

DOMINGA VELASCO ORDONIO, petitioner,


vs.
ATTY. JOSEPHINE PALOGAN EDUARTE, respondent.

RESOLUTION

PER CURIAM:

This is a complaint for the disbarment of respondent Atty. Josephine Palogan-Eduarte originally filed with this Court on
April 18, 1988. On August 10, 1989, the Commission on Bar Discipline of the Integrated Bar of the Philippines, to which
the case was referred for investigation, submitted a report confirming in substance the charge of violation of Art. 1491 of
the Civil Code and part of the Oath of Office of a lawyer and recommending the suspension of herein respondent.

The evidence discloses that on July 18, 1983, Antonia Ulibari filed with the RTC, Branch XXII, Cabagan, Isabela, Civil
Case No. 391 for annulment of a document (known as Affidavit of Adjudication of the Estate of Felicisimo Velasco and
Quitclaim Thereof) against her children. The case was handled by Atty. Henedino Eduarte, herein respondent's husband,
until his appointment as RTC judge on October 26, 1984. His wife, Atty. Josephine Palogan-Eduarte, took over. On
August 22, 1985, decision in Civil Case No. 391 was rendered in favor of Antonia Ulibari. Except for Dominga Velasco-
Ordonio, one of the children of Antonia Ulibari and complainant in the instant case, the rest of the defendants did not
appeal. On June 13, 1987, while Civil Case No. 391 was pending appeal in the Court of Appeals, Antonia Ulibari
conveyed some parcels of her land to her children in the form of deeds of absolute sale, prepared and notarized by herein
respondent. Significantly, on the same day, Antonia Ulibari also conveyed 20 hectares of land to herein respondent and
her husband as their Attorney's fees for legal services rendered. All the titles of the lands subject of the deeds of absolute
sale and the deed of conveyance however remained in the name of Antonia Ulibari.

On April 4, 1988, Dominga Velasco-Ordonio filed this complaint for disbarment against herein respondent on the basis of
an affidavit executed by her mother Antonia Ulibari on March 2, 1988 stating that affiant never conveyed the subject
parcel of land to respondent as her attorney's fees and that the deeds of absolute sale executed in favor of her children
were not known to her (and that she received no consideration therefor).

On August 10, 1989, the Investigation Commissioner submitted a report finding the charges to be true and recommending
a one-year suspension of the respondent from the practice of law.

The first issue to be resolved is whether Antonia Ulibari was defrauded into signing the Deed of Conveyance transferring
to her lawyer (herein respondent) the subject parcel of land containing 298,420 square meters as the latter's attorney's
fees. It is clear from Antonia Ulibari's affidavit and deposition that she never conveyed the said land to her lawyer as
attorney's fees.

Even granting for the sake argument that Antonia Ulibari knowingly and voluntarily conveyed the subject property in favor
of the respondent and her husband, the respondent, in causing the execution of the Deed of Conveyance during the
pendency of the appeal of the case involving the said property, has violated Art. 1491 of the Civil Code which prohibits
lawyers from "acquiring by assignment property and rights which may be the object of any litigation in which they may
take part by virtue of their profession."

In the case at bar, the property (which includes the more than 20 hectares of land allegedly conveyed to the respondent)
was already in actual litigation first in the lower court and then in the Court of Appeals. Whether the deed of conveyance
was executed at the instance of the client driven by financial necessity or of the lawyers is of no moment (In re: Atty.
Melchor E. Ruste, 70 Phil. 243). "In either case, an attorney occupies a vantage position to press upon or dictate his terms
to a harrased client, in breach of the rule so amply protective of the confidential relations, which must necessarily exist
between attorney and client, and of the rights of both." The act constitutes malpractice, even if the lawyer had purchased
the property in litigation. (Hernandez v. Villanueva, 40 Phil. 775; In re: Calderon, 7 Phil. 427). We agree with the
Investigating Commissioner's opinion that the prohibition applies when the lawyer has not paid money for it and the
property was merely assigned to him in consideration of legal services rendered at a time when the property is still the
subject of a pending case.

For having improperly acquired the subject property, under the foregoing circumstances, respondent has violated not only
Art. 1491 of the Civil Code but also Rule 10 of the Canons of Professional Ethics which provides that "the lawyer should
not purchase any interest in the subject matter of the litigation which he is conducting."

The last issue to be resolved is whether respondent violated any law in preparing and notarizing the deeds of absolute
sale in making it appear that there were considerations therefor, when in truth there were none so received by the seller.
In her answer, respondent admitted that Antonia Ulibari did not actually sell the parcels of land to her children for the
considerations stated in the deeds of sale and that she (respondent) "utilized the form of deed of sale as the most
convenient and appropriate document to effect the transfer of the parcels of land to Antonia Ulibari's children in
accordance with her wish that said parcels of land be given to them.

In so doing, respondent has manifestly violated that part of her oath as a lawyer that she shall not do any falsehood. Not
only that. In preparing the documents which do not reflect the true transaction, respondent has likewise violated Rule
10.01 of the Code of Professional Responsibility which provides:

Rule 10.01. A lawyer shall not do any falsehood, nor consent to the doing of any in court; nor shall be
mislead or allow the court to be mislead by any artifice.

ACCORDINGLY, for having violated Article 1491 of the Civil Code, respondent is hereby ordered suspended from the
practice of law for a period of six (6) months, and, for having stated falsehoods in the four (4) deeds of absolute sale she
prepared and notarized, in violation of the lawyer's oath and Rule 10.01 of the Code of Professional Responsibility,
respondent is also ordered suspended from the practice or law for a period of another six (6) months, resulting in a total
period on one year, effective from the date this judgment becomes final.

SUSPENSION ORDERED.