G.R. No.
L-11827 July 31, 1961 improvements and installing facilities therein for use in the
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES
& SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO
DANTE, PACIFICO ESCANDOR and FERNANDO TY,
defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or
holder, either by himself or in a representative capacity, of 11 iron
lode mineral claims, known as the Dawahan Group, situated in the
municipality of Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"),
Fonacier constituted and appointed plaintiff-appellee Fernando A.
Gaite as his true and lawful attorney-in-fact to enter into a contract
with any individual or juridical person for the exploration and
development of the mining claims aforementioned on a royalty
basis of not less than P0.50 per ton of ore that might be extracted
therefrom. On March 19, 1954, Gaite in turn executed a general
assignment (Record on Appeal, pp. 17-19) conveying the
development and exploitation of said mining claims into the Larap
Iron Mines, a single proprietorship owned solely by and belonging
to him, on the same royalty basis provided for in Exhibit "3".
Thereafter, Gaite embarked upon the development and
exploitation of the mining claims in question, opening and paving
roads within and outside their boundaries, making other
development of the mines, and in time extracted therefrom what he
claim and estimated to be approximately 24,000 metric tons of iron
ore.
For some reason or another, Isabelo Fonacier decided to revoke
the authority granted by him to Gaite to exploit and develop the
mining claims in question, and Gaite assented thereto subject to
certain conditions. As a result, a document entitled "Revocation of
Power of Attorney and Contract" was executed on December 8,
1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
consideration of P20,000.00, plus 10% of the royalties that
Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or outside
said claims, the right to use the business name "Larap Iron Mines"
and its goodwill, and all the records and documents relative to the
mines. In the same document, Gaite transferred to Fonacier all his
rights and interests over the "24,000 tons of iron ore, more or less"
that the former had already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,000.00 of which was
paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)
will be paid from and out of the first letter of credit covering the first
shipment of iron ores and of the first amount derived from the local
sale of iron ore made by the Larap Mines & Smelting Co. Inc., its
assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00,
Fonacier promised to execute in favor of Gaite a surety bond, and
pursuant to the promise, Fonacier delivered to Gaite a surety bond
dated December 8, 1954 with himself (Fonacier) as principal and
the Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante,
and Fernando Ty as sureties (Exhibit "A-1"). Gaite testified,
however, that when this bond was presented to him by Fonacier
together with the "Revocation of Power of Attorney and Contract",
Exhibit "A", on December 8, 1954, he refused to sign said Exhibit
"A" unless another bond under written by a bonding company was
put up by defendants to secure the payment of the P65,000.00
balance of their price of the iron ore in the stockpiles in the mining
claims. Hence, a second bond, also dated December 8, 1954
(Exhibit "B"),was executed by the same parties to the first bond
Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as
additional surety, but it provided that the liability of the surety
company would attach only when there had been an actual sale of
iron ore by the Larap Mines & Smelting Co. for an amount of not
less then P65,000.00, and that, furthermore, the liability of said
surety company would automatically expire on December 8, 1955.
Both bonds were attached to the "Revocation of Power of Attorney
and Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he
gave to Gaite and the two executed and signed the "Revocation of
Power of Attorney and Contract", Exhibit "A", Fonacier entered into
a "Contract of Mining Operation", ceding, transferring, and
conveying unto the Larap Mines and Smelting Co., Inc. the right to
develop, exploit, and explore the mining claims in question,
together with the improvements therein and the use of the name
"Larap Iron Mines" and its good will, in consideration of certain
royalties. Fonacier likewise transferred, in the same document, the
complete title to the approximately 24,000 tons of iron ore which
he acquired from Gaite, to the Larap & Smelting Co., in
consideration for the signing by the company and its stockholders
of the surety bonds delivered by Fonacier to Gaite (Record on
Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with
respect to the Far Eastern Surety and Insurance Company, no sale
of the approximately 24,000 tons of iron ore had been made by the
Larap Mines & Smelting Co., Inc., nor had the P65,000.00 balance
of the price of said ore been paid to Gaite by Fonacier and his
sureties payment of said amount, on the theory that they had lost
right to make use of the period given them when their bond, Exhibit
"B" automatically expired (Exhibits "C" to "C-24"). And when
Fonacier and his sureties failed to pay as demanded by Gaite, the
latter filed the present complaint against them in the Court of First
Instance of Manila (Civil Case No. 29310) for the payment of the
P65,000.00 balance of the price of the ore, consequential
damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject to a
condition that the amount of P65,000.00 would be payable out of
the first letter of credit covering the first shipment of iron ore and/or
the first amount derived from the local sale of the iron ore by the
Larap Mines & Smelting Co., Inc.; that up to the time of the filing of
the complaint, no sale of the iron ore had been made, hence the
condition had not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable. Defendant Fonacier
also contended that only 7,573 tons of the estimated 24,000 tons
of iron ore sold to him by Gaite was actually delivered, and
counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation
of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to
pay Gaite P65,000.00 become due and demandable when the
defendants failed to renew the surety bond underwritten by the Far
Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which expired
on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff
Gaite to defendant Fonacier were actually in existence in the
mining claims when these parties executed the "Revocation of
Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the
defendants to pay plaintiff the P65,000.00 balance of the price of
the approximately 24,000 tons of iron ore was one with a term: i.e.,
that it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or before
December 8, 1955; that the giving of security was a condition
precedent to Gait's giving of credit to defendants; and that as the
latter failed to put up a good and sufficient security in lieu of the Far
Eastern Surety bond (Exhibit "B") which expired on December 8,
1955, the obligation became due and demandable under Article
1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite
did have approximately 24,000 tons of iron ore at the mining claims
in question at the time of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and severally, P65,000.00
with interest at 6% per annum from December 9, 1955 until
payment, plus costs. From this judgment, defendants jointly
appealed to this Court.
During the pendency of this appeal, several incidental motions
were presented for resolution: a motion to declare the appellants
Larap Mines & Smelting Co., Inc. and George Krakower in
contempt, filed by appellant Fonacier, and two motions to dismiss
the appeal as having become academic and a motion for new trial
and/or to take judicial notice of certain documents, filed by appellee
Gaite. The motion for contempt is unmeritorious because the main
allegation therein that the appellants Larap Mines & Smelting Co.,
Inc. and Krakower had sold the iron ore here in question, which
allegedly is "property in litigation", has not been substantiated; and
even if true, does not make these appellants guilty of contempt,
because what is under litigation in this appeal is appellee Gaite's
right to the payment of the balance of the price of the ore, and not
the iron ore itself. As for the several motions presented by appellee
Gaite, it is unnecessary to resolve these motions in view of the
results that we have reached in this case, which we shall hereafter
discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of
appellant Fonacier to pay appellee Gaite the P65,000.00 (balance
of the price of the iron ore in question)is one with a period or term
and not one with a suspensive condition, and that the term expired
on December 8, 1955; and
(2) that the lower court erred in not holding that there were only
10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite to
appellant Fonacier.
The first issue involves an interpretation of the following provision
in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to
Isabelo F. Fonacier all his rights and interests over the 24,000 tons
of iron ore, more or less, above-referred to together with all his
rights and interests to operate the mine in consideration of the sum
of SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which the
latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the
signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first letter of credit
covering the first shipment of iron ore made by the Larap Mines &
Smelting Co., Inc., its assigns, administrators, or successors in
interest.
We find the court below to be legally correct in holding that the
shipment or local sale of the iron ore is not a condition precedent
(or suspensive) to the payment of the balance of P65,000.00, but
was only a suspensive period or term. What characterizes a
conditional obligation is the fact that its efficacy or obligatory force
(as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the suspensive
condition does not take place, the parties would stand as if the
conditional obligation had never existed. That the parties to the
contract Exhibit "A" did not intend any such state of things to prevail
is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's
obligation to pay: "The balance of Sixty-Five Thousand Pesos
(P65,000.00) will be paid out of the first letter of credit covering the
first shipment of iron ores . . ." etc. There is no uncertainty that the
payment will have to be made sooner or later; what is
undetermined is merely the exact date at which it will be made. By
the very terms of the contract, therefore, the existence of the
obligation to pay is recognized; only its maturity or demandability
is deferred.
2) A contract of sale is normally commutative and onerous: not only
does each one of the parties assume a correlative obligation (the
seller to deliver and transfer ownership of the thing sold and the
buyer to pay the price),but each party anticipates performance by
the other from the very start. While in a sale the obligation of one
party can be lawfully subordinated to an uncertain event, so that
the other understands that he assumes the risk of receiving nothing
for what he gives (as in the case of a sale of hopes or expectations,
emptio spei), it is not in the usual course of business to do so;
hence, the contingent character of the obligation must clearly
appear. Nothing is found in the record to evidence that Gaite
desired or assumed to run the risk of losing his right over the ore
without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite
insisted on a bond a to guarantee payment of the P65,000.00, an
not only upon a bond by Fonacier, the Larap Mines & Smelting Co.,
and the company's stockholders, but also on one by a surety
company; and the fact that appellants did put up such bonds
indicates that they admitted the definite existence of their obligation
to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00
to the sale or shipment of the ore as a condition precedent, would
be tantamount to leaving the payment at the discretion of the
debtor, for the sale or shipment could not be made unless the
appellants took steps to sell the ore. Appellants would thus be able
to postpone payment indefinitely. The desirability of avoiding such
a construction of the contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of
the contract the parties indented a suspensive condition or a
suspensive period (dies ad quem) for the payment of the
P65,000.00, the rules of interpretation would incline the scales in
favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article 1378,
paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the
greatest reciprocity of interests and there can be no question that
greater reciprocity obtains if the buyer' obligation is deemed to be
actually existing, with only its maturity (due date) postponed or
deferred, that if such obligation were viewed as non-existent or not
binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore
to Fonacier was a sale on credit, and not an aleatory contract
where the transferor, Gaite, would assume the risk of not being
paid at all; and that the previous sale or shipment of the ore was
not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the
payment.
This issue settled, the next point of inquiry is whether appellants,
Fonacier and his sureties, still have the right to insist that Gaite
should wait for the sale or shipment of the ore before receiving
payment; or, in other words, whether or not they are entitled to take
full advantage of the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the
right court below that the appellants have forfeited the right to
compel Gaite to wait for the sale of the ore before receiving
payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace
it with an equivalent guarantee. The expiration of the bonding
company's undertaking on December 8, 1955 substantially
reduced the security of the vendor's rights as creditor for the unpaid
P65,000.00, a security that Gaite considered essential and upon
which he had insisted when he executed the deed of sale of the
ore to Fonacier (Exhibit "A"). The case squarely comes under
paragraphs 2 and 3 of Article 1198 of the Civil Code of the
Philippines:
"ART. 1198. The debtor shall lose every right to make use of the
period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised.
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through fortuitous
event they disappear, unless he immediately gives new ones
equally satisfactory.
Appellants' failure to renew or extend the surety company's bond
upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance
of the surety company's bond with full knowledge that on its face it
would automatically expire within one year was a waiver of its
renewal after the expiration date. No such waiver could have been
intended, for Gaite stood to lose and had nothing to gain barely;
and if there was any, it could be rationally explained only if the
appellants had agreed to sell the ore and pay Gaite before the
surety company's bond expired on December 8, 1955. But in the
latter case the defendants-appellants' obligation to pay became
absolute after one year from the transfer of the ore to Fonacier by
virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite
acted within his rights in demanding payment and instituting this
action one year from and after the contract (Exhibit "A") was
executed, either because the appellant debtors had impaired the
securities originally given and thereby forfeited any further time
within which to pay; or because the term of payment was originally
of no more than one year, and the balance of P65,000.00 became
due and payable thereafter.
Coming now to the second issue in this appeal, which is whether
there were really 24,000 tons of iron ore in the stockpiles sold by
appellee Gaite to appellant Fonacier, and whether, if there had
been a short-delivery as claimed by appellants, they are entitled to
the payment of damages, we must, at the outset, stress two things:
first, that this is a case of a sale of a specific mass of fungible goods
for a single price or a lump sum, the quantity of "24,000 tons of iron
ore, more or less," stated in the contract Exhibit "A," being a mere
estimate by the parties of the total tonnage weight of the mass; and
second, that the evidence shows that neither of the parties had
actually measured of weighed the mass, so that they both tried to
arrive at the total quantity by making an estimate of the volume
thereof in cubic meters and then multiplying it by the estimated
weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron
ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or
perfect the sale, nor was the price of P75,000,00 agreed upon by
the parties based upon any such measurement.(see Art. 1480,
second par., New Civil Code). The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual
number of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to his buyer
all of the ore found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them (Mobile
Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc.
171 So. 872, applying art. 2459 of the Louisiana Civil Code). There
is no charge in this case that Gaite did not deliver to appellants all
the ore found in the stockpiles in the mining claims in questions;
Gaite had, therefore, complied with his promise to deliver, and
appellants in turn are bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants
undertook to buy, not a definite mass, but approximately 24,000
tons of ore, so that any substantial difference in this quantity
delivered would entitle the buyers to recover damages for the
short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually
measured or weighed the whole mass of ore cubic meter by cubic
meter, or ton by ton. Both parties predicate their respective claims
only upon an estimated number of cubic meters of ore multiplied
by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic
meters in the stockpiles of ore that he sold to Fonacier, while
appellants contend that by actual measurement, their witness
Cirpriano Manlañgit found the total volume of ore in the stockpiles
to be only 6.609 cubic meters. As to the average weight in tons per
cubic meter, the parties are again in disagreement, with appellants
claiming the correct tonnage factor to be 2.18 tons to a cubic meter,
while appellee Gaite claims that the correct tonnage factor is about
3.7.
In the face of the conflict of evidence, we take as the most reliable
estimate of the tonnage factor of iron ore in this case to be that
made by Leopoldo F. Abad, chief of the Mines and Metallurgical
Division of the Bureau of Mines, a government pensionado to the
States and a mining engineering graduate of the Universities of
Nevada and California, with almost 22 years of experience in the
Bureau of Mines. This witness placed the tonnage factor of every
cubic meter of iron ore at between 3 metric tons as minimum to 5
metric tons as maximum. This estimate, in turn, closely
corresponds to the average tonnage factor of 3.3 adopted in his
corrected report (Exhibits "FF" and FF-1") by engineer Nemesio
Gamatero, who was sent by the Bureau of Mines to the mining
claims involved at the request of appellant Krakower, precisely to
make an official estimate of the amount of iron ore in Gaite's
stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore
in the stockpiles made by appellant's witness Cipriano Manlañgit is
correct, if we multiply it by the average tonnage factor of 3.3 tons
to a cubic meter, the product is 21,809.7 tons, which is not very far
from the estimate of 24,000 tons made by appellee Gaite,
considering that actual weighing of each unit of the mass was
practically impossible, so that a reasonable percentage of error
should be allowed anyone making an estimate of the exact quantity
in tons found in the mass. It must not be forgotten that the contract
Exhibit "A" expressly stated the amount to be 24,000 tons, more or
less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46
L. Ed. 1164).
There was, consequently, no short-delivery in this case as would
entitle appellants to the payment of damages, nor could Gaite have
been guilty of any fraud in making any misrepresentation to
appellants as to the total quantity of ore in the stockpiles of the
mining claims in question, as charged by appellants, since Gaite's
estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we
hereby affirm the same, with costs against appellants.
BUENAVENTURA VS CA
The Case
This is a petition for review on certiorari1 to annul the Decision2
dated 26 June 1996 of the Court of Appeals in CA-G.R. CV No.
41996. The Court of Appeals affirmed the Decision3 dated 18
February 1993 rendered by Branch 65 of the Regional Trial Court of
Makati (trial court) in Civil Case No. 89-5174. The trial court
dismissed the case after it found that the parties executed the Deeds
of Sale for valid consideration and that the plaintiffs did not have a
cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the
parents of plaintiffs Consolacion, Nora, Emma and Natividad as well
as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and
Gavino, all surnamed JOAQUIN. The married Joaquin children are
joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of
sale of real property executed by defendant parents Leonardo
Joaquin and Feliciana Landrito in favor of their co-defendant children
and the corresponding certificates of title issued in their names, to
wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan
(LRC) Psd-256395 executed on 11 July 1978, in favor of defendant
Felicitas Joaquin, for a consideration of P6,000.00 (Exh. C),
pursuant to which TCT No. [36113/T-172] was issued in her name
(Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan
(LRC) Psd-256394 executed on 7 June 1979, in favor of defendant
Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. D),
pursuant to which TCT No. S-109772 was issued in her name (Exh.
D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan
(LRC) Psd-256394 executed on 12 May 1988, in favor of defendant
spouses Fidel Joaquin and Conchita Bernardo, for a consideration of
P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was
issued to them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan
(LRC) Psd-256394 executed on 12 May 1988, in favor of defendant
spouses Artemio Joaquin and Socorro Angeles, for a consideration
of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was
issued to them (Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of
subdivision plan (LRC) Psd-256395 executed on 9 September 1988,
in favor of Tomas Joaquin, for a consideration of P20,000.00 (Exh.
G), pursuant to which TCT No. 157203 was issued in her name (Exh.
G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan
(LRC) Psd-256395 executed on 7 October 1988, in favor of Gavino
Joaquin, for a consideration of P25,000.00 (Exh. K), pursuant to
which TCT No. 157779 was issued in his name (Exh. K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale
and certificates of title, plaintiffs, in their complaint, aver:
- XX-
The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated
as they are, are NULL AND VOID AB INITIO because
a) Firstly, there was no actual valid consideration for the deeds of
sale xxx over the properties in litis;
b) Secondly, assuming that there was consideration in the sums
reflected in the questioned deeds, the properties are more than
three-fold times more valuable than the measly sums appearing
therein;
c) Thirdly, the deeds of sale do not reflect and express the true
intent of the parties (vendors and vendees); and
d) Fourthly, the purported sale of the properties in litis was the
result of a deliberate conspiracy designed to unjustly deprive the
rest of the compulsory heirs (plaintiffs herein) of their legitime.
- XXI -
Necessarily, and as an inevitable consequence, Transfer Certificates
of Title Nos. 36113/T-172, S-109772, 155329, 155330, 157203
[and 157779] issued by the Registrar of Deeds over the properties
in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a
cause of action against them as well as the requisite standing and
interest to assail their titles over the properties in litis; (2) that the
sales were with sufficient considerations and made by defendants
parents voluntarily, in good faith, and with full knowledge of the
consequences of their deeds of sale; and (3) that the certificates of
title were issued with sufficient factual and legal basis.4(Emphasis in
the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case
against defendant spouses Gavino Joaquin and Lea Asis.5 Instead of
filing an Answer with their co-defendants, Gavino Joaquin and Lea
Asis filed a Motion to Dismiss.6 In granting the dismissal to Gavino
Joaquin and Lea Asis, the trial court noted that compulsory heirs
have the right to a legitime but such right is contingent since said
right commences only from the moment of death of the decedent
pursuant to Article 777 of the Civil Code of the Philippines.7 cräläwvirtual ibrä ry
After trial, the trial court ruled in favor of the defendants and
dismissed the complaint. The trial court stated:
In the first place, the testimony of the defendants, particularly that
of the xxx father will show that the Deeds of Sale were all executed
for valuable consideration. This assertion must prevail over the
negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid
cause of action against defendants since there can be no legitime to
speak of prior to the death of their parents. The court finds this
contention tenable. In determining the legitime, the value of the
property left at the death of the testator shall be considered (Art.
908 of the New Civil Code). Hence, the legitime of a compulsory heir
is computed as of the time of the death of the decedent. Plaintiffs
therefore cannot claim an impairment of their legitime while their
parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind
families together, the counterclaim is likewise DISMISSED.
No costs.
SO ORDERED.8
 The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The
appellate court ruled:
To the mind of the Court, appellants are skirting the real and
decisive issue in this case, which is, whether xxx they have a cause
of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like
their defendant brothers and sisters, are compulsory heirs of
defendant spouses, Leonardo Joaquin and Feliciana Landrito, who
are their parents. However, their right to the properties of their
defendant parents, as compulsory heirs, is merely inchoate and
vests only upon the latters death. While still alive, defendant parents
are free to dispose of their properties, provided that such
dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in
question. Neither do they claim to be creditors of their defendant
parents. Consequently, they cannot be considered as real parties in
interest to assail the validity of said deeds either for gross
inadequacy or lack of consideration or for failure to express the true
intent of the parties. In point is the ruling of the Supreme Court in
Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not
principally or subsidiarily bound thereby; hence, they have no legal
capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment
of their legitime by the dispositions made by their defendant parents
in favor of their defendant brothers and sisters. But, as correctly
held by the court a quo, the legitime of a compulsory heir is
computed as of the time of the death of the decedent. Plaintiffs
therefore cannot claim an impairment of their legitime while their
parents live.
With this posture taken by the Court, consideration of the errors
assigned by plaintiffs-appellants is inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with
costs against plaintiffs-appellants.
SO ORDERED.9 crä läwvirtuali brä ry
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
CONVEYANCE IN QUESTION HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN
ASSUMING THAT THERE WAS A CONSIDERATION, THE SAME IS
GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
DEEDS OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE
PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
CONVEYANCE WAS PART AND PARCEL OF A CONSPIRACY AIMED AT
UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE
SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF
THEIR INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
PETITIONERS HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF
ACTION AGAINST THE PRIVATE RESPONDENTS.10
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject
of the Deeds of Sale before discussing the issues on the purported
lack of consideration and gross inadequacy of the prices of the
Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In
their Complaint, petitioners asserted that the purported sale of the
properties in litiswas the result of a deliberate conspiracy designed
to unjustly deprive the rest of the compulsory heirs (plaintiffs
herein) of their legitime. Petitioners strategy was to have the Deeds
of Sale declared void so that ownership of the lots would eventually
revert to their respondent parents. If their parents die still owning
the lots, petitioners and their respondent siblings will then co-own
their parents estate by hereditary succession.11 cräläwvirt ualib rä ry
It is evident from the records that petitioners are interested in the
properties subject of the Deeds of Sale, but they have failed to show
any legal right to the properties. The trial and appellate courts
should have dismissed the action for this reason alone. An action
must be prosecuted in the name of the real party-in-interest.12 cräläwvirtua lib räry
[T]he question as to real party-in-interest is whether he is the party
who would be benefitted or injured by the judgment, or the party
entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the
real parties are those who are parties to the agreement or are bound
either principally or subsidiarily or are prejudiced in their rights with
respect to one of the contracting parties and can show the detriment
which would positively result to them from the contract even though
they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank,
22 Phil. 572 [1912]) xxx.
These are parties with a present substantial interest, as
distinguished from a mere expectancy or future, contingent,
subordinate, or consequential interest. The phrase present
substantial interest more concretely is meant such interest of a
party in the subject matter of the action as will entitle him, under
the substantive law, to recover if the evidence is sufficient, or that
he has the legal title to demand and the defendant will be protected
in a payment to or recovery by him.13 cräläwvi rtua lib räry
Petitioners do not have any legal interest over the properties subject
of the Deeds of Sale. As the appellate court stated, petitioners right
to their parents properties is merely inchoate and vests only upon
their parents death. While still living, the parents of petitioners are
free to dispose of their properties. In their overzealousness to
safeguard their future legitime, petitioners forget that theoretically,
the sale of the lots to their siblings does not affect the value of their
parents estate. While the sale of the lots reduced the estate, cash
of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay
the prices stated in the Deeds of Sale to their respondent father.
Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract.
As a consensual contract, a contract of sale becomes a binding and
valid contract upon the meeting of the minds as to price. If there is
a meeting of the minds of the parties as to the price, the contract
of sale is valid, despite the manner of payment, or even the breach
of that manner of payment. If the real price is not stated in the
contract, then the contract of sale is valid but subject to reformation.
If there is no meeting of the minds of the parties as to the price,
because the price stipulated in the contract is simulated, then the
contract is void.14 Article 1471 of the Civil Code states that if the
price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of
a contract of sale. Payment of the price has nothing to do with the
perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is
different from lack of consideration. The former results in a right to
demand the fulfillment or cancellation of the obligation under an
existing valid contract while the latter prevents the existence of a
valid contract.15cräläwvirtua lib räry
Petitioners failed to show that the prices in the Deeds of Sale were
absolutely simulated. To prove simulation, petitioners presented
Emma Joaquin Valdozs testimony stating that their father,
respondent Leonardo Joaquin, told her that he would transfer a lot
to her through a deed of sale without need for her payment of the
purchase price.16 The trial court did not find the allegation of
absolute simulation of price credible. Petitioners failure to prove
absolute simulation of price is magnified by their lack of knowledge
of their respondent siblings financial capacity to buy the questioned
lots.17 On the other hand, the Deeds of Sale which petitioners
presented as evidence plainly showed the cost of each lot sold. Not
only did respondents minds meet as to the purchase price, but the
real price was also stated in the Deeds of Sale. As of the filing of the
complaint, respondent siblings have also fully paid the price to their
respondent father.18
Whether the Deeds of Sale are void
for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same
is grossly inadequate as to invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy
of cause shall not invalidate a contract, unless there has been
fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract
of sale, except as may indicate a defect in the consent, or that the
parties really intended a donation or some other act or contract.
(Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles
1355 and 1470 of the Civil Code which would invalidate, or even
affect, the Deeds of Sale. Indeed, there is no requirement that the
price be equal to the exact value of the subject matter of sale. All
the respondents believed that they received the commutative value
of what they gave. As we stated in Vales v. Villa:19 cräläwvirtual ibrä ry
Courts cannot follow one every step of his life and extricate him
from bad bargains, protect him from unwise investments, relieve
him from one-sided contracts, or annul the effects of foolish acts.
Courts cannot constitute themselves guardians of persons who are
not legally incompetent. Courts operate not because one person has
been defeated or overcome by another, but because he has been
defeated or overcome illegally. Men may do foolish things, make
ridiculous contracts, use miserable judgment, and lose money by
them indeed, all they have in the world; but not for that alone can
the law intervene and restore. There must be, in addition, a violation
of the law, the commission of what the law knows as an actionable
wrong, before the courts are authorized to lay hold of the situation
and remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive
on the parties and carry greater weight when they coincide with the
factual findings of the trial court. This Court will not weigh the
evidence all over again unless there has been a showing that the
findings of the lower court are totally devoid of support or are clearly
erroneous so as to constitute serious abuse of discretion.20 In the
instant case, the trial court found that the lots were sold for a valid
consideration, and that the defendant children actually paid the
purchase price stipulated in their respective Deeds of Sale. Actual
payment of the purchase price by the buyer to the seller is a factual
finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in
toto.
SO ORDERED.
G.R. No. L-8506 August 31, 1956
CELESTINO CO & COMPANY, petitioner,
vs.
COLLECTOR OF INTERNAL REVENUE, respondent.
Office of the Solicitor General Ambrosio Padilla, Fisrt Assistant
Solicitor General Guillermo E. Torres and Solicitor Federico V.
Sian for respondent.
BENGZON, J.:
Appeal from a decision of the Court of Tax Appeals.
Celestino Co & Company is a duly registered general
copartnership doing business under the trade name of "Oriental
Sash Factory". From 1946 to 1951 it paid percentage taxes of 7
per cent on the gross receipts of its sash, door and window factory,
in accordance with section one hundred eighty-six of the National
Revenue Code imposing taxes on sale of manufactured articles.
However in 1952 it began to claim liability only to the contractor's
3 per cent tax (instead of 7 per cent) under section 191 of the same
Code; and having failed to convince the Bureau of Internal
Revenue, it brought the matter to the Court of Tax Appeals, where
it also failed. Said the Court:
To support his contention that his client is an ordinary contractor .
. . counsel presented . . . duplicate copies of letters, sketches of
doors and windows and price quotations supposedly sent by the
manager of the Oriental Sash Factory to four customers who
allegedly made special orders to doors and window from the said
factory. The conclusion that counsel would like us to deduce from
these few exhibits is that the Oriental Sash Factory does not
manufacture ready-made doors, sash and windows for the public
but only upon special order of its select customers. . . . I cannot
believe that petitioner company would take, as in fact it has taken,
all the trouble and expense of registering a special trade name for
its sash business and then orders company stationery carrying the
bold print "Oriental Sash Factory (Celestino Co & Company, Prop.)
926 Raon St. Quiapo, Manila, Tel. No. 33076, Manufacturers of all
kinds of doors, windows, sashes, furniture, etc. used season-dried
and kiln-dried lumber, of the best quality workmanships" solely for
the purpose of supplying the needs for doors, windows and sash
of its special and limited customers. One ill note that petitioner has
chosen for its tradename and has offered itself to the public as a
"Factory", which means it is out to do business, in its chosen lines
on a big scale. As a general rule, sash factories receive orders for
doors and windows of special design only in particular cases but
the bulk of their sales is derived from a ready-made doors and
windows of standard sizes for the average home. Moreover, as
shown from the investigation of petitioner's book of accounts,
during the period from January 1, 1952 to September 30, 1952, it
sold sash, doors and windows worth P188,754.69. I find it difficult
to believe that this amount which runs to six figures was derived by
petitioner entirely from its few customers who made special orders
for these items.
Even if we were to believe petitioner's claim that it does not
manufacture ready-made sash, doors and windows for the public
and that it makes these articles only special order of its customers,
that does not make it a contractor within the purview of section 191
of the national Internal Revenue Code. there are no less than fifty
occupations enumerated in the aforesaid section of the national
Internal Revenue Code subject to percentage tax and after reading
carefully each and every one of them, we cannot find under which
the business of manufacturing sash, doors and windows upon
special order of customers fall under the category of "road,
building, navigation, artesian well, water workers and other
construction work contractors" are those who alter or repair
buildings, structures, streets, highways, sewers, street railways
railroads logging roads, electric lines or power lines, and includes
any other work for the construction, altering or repairing for which
machinery driven by mechanical power is used. (Payton vs. City of
Anadardo 64 P. 2d 878, 880, 179 Okl. 68).
Having thus eliminated the feasibility off taxing petitioner as a
contractor under 191 of the national Internal Revenue Code, this
leaves us to decide the remaining issue whether or not petitioner
could be taxed with lesser strain and more accuracy as seller of its
manufactured articles under section 186 of the same code, as the
respondent Collector of Internal Revenue has in fact been doing
the Oriental Sash Factory was established in 1946.
The percentage tax imposed in section 191 of our Tax Code is
generally a tax on the sales of services, in contradiction with the
tax imposed in section 186 of the same Code which is a tax on the
original sales of articles by the manufacturer, producer or importer.
(Formilleza's Commentaries and Jurisprudence on the National
Internal Revenue Code, Vol. II, p. 744). The fact that the articles
sold are manufactured by the seller does not exchange the
contract from the purview of section 186 of the National Internal
Revenue Code as a sale of articles.
There was a strong dissent; but upon careful consideration of the
whole matter are inclines to accept the above statement of the facts
and the law. The important thing to remember is that Celestino Co
& Company habitually makes sash, windows and doors, as it has
represented in its stationery and advertisements to the public. That
it "manufactures" the same is practically admitted by appellant
itself. The fact that windows and doors are made by it only when
customers place their orders, does not alter the nature of the
establishment, for it is obvious that it only accepted such orders as
called for the employment of such material-moulding, frames,
panels-as it ordinarily manufactured or was in a position habitually
to manufacture.
Perhaps the following paragraph represents in brief the appellant's
position in this Court:
Since the petitioner, by clear proof of facts not disputed by the
respondent, manufacturers sash, windows and doors only for
special customers and upon their special orders and in accordance
with the desired specifications of the persons ordering the same
and not for the general market: since the doors ordered by Don
Toribio Teodoro & Sons, Inc., for instance, are not in existence and
which never would have existed but for the order of the party
desiring it; and since petitioner's contractual relation with his
customers is that of a contract for a piece of work or since petitioner
is engaged in the sale of services, it follows that the petitioner
should be taxed under section 191 of the Tax Code and NOT under
section 185 of the same Code." (Appellant's brief, p. 11-12).
But the argument rests on a false foundation. Any builder or
homeowner, with sufficient money, may order windows or doors of
the kind manufactured by this appellant. Therefore it is not true that
it serves special customers only or confines its services to them
alone. And anyone who sees, and likes, the doors ordered by Don
Toribio Teodoro & Sons Inc. may purchase from appellant doors of
the same kind, provided he pays the price. Surely, the appellant
will not refuse, for it can easily duplicate or even mass-produce the
same doors-it is mechanically equipped to do so.
That the doors and windows must meet desired specifications is
neither here nor there. If these specifications do not happen to be
of the kind habitually manufactured by appellant — special forms
for sash, mouldings of panels — it would not accept the order —
and no sale is made. If they do, the transaction would be no
different from a purchasers of manufactured goods held is stock
for sale; they are bought because they meet the specifications
desired by the purchaser.
Nobody will say that when a sawmill cuts lumber in accordance
with the peculiar specifications of a customer-sizes not previously
held in stock for sale to the public-it thereby becomes an employee
1
or servant of the customer, not the seller of lumber. The same
consideration applies to this sash manufacturer.
The Oriental Sash Factory does nothing more than sell the goods
that it mass-produces or habitually makes; sash, panels,
mouldings, frames, cutting them to such sizes and combining them
in such forms as its customers may desire.
On the other hand, petitioner's idea of being a contractor doing
construction jobs is untenable. Nobody would regard the doing of
2
two window panels a construction work in common parlance.
Appellant invokes Article 1467 of the New Civil Code to bolster its
contention that in filing orders for windows and doors according to
specifications, it did not sell, but merely contracted for particular
pieces of work or "merely sold its services".
Said article reads as follows:
A contract for the delivery at a certain price of an article which the Anyway, supposing for the moment that the transactions were not
vendor in the ordinary course of his business manufactures or sales, they were neither lease of services nor contract jobs by a
procures for the general market, whether the same is on hand at contractor. But as the doors and windows had been admittedly
the time or not, is a contract of sale, but if the goods are to be "manufactured" by the Oriental Sash Factory, such transactions
manufactured specially for the customer and upon his special could be, and should be taxed as "transfers" thereof under section
order, and not for the general market, it is contract for a piece of 186 of the National Revenue Code.
work.
It is at once apparent that the Oriental Sash Factory did not merely The appealed decision is consequently affirmed. So ordered.
sell its services to Don Toribio Teodoro & Co. (To take one
instance) because it also sold the materials. The truth of the matter
is that it sold materials ordinarily manufactured by it — sash,
panels, mouldings — to Teodoro & Co., although in such form or
combination as suited the fancy of the purchaser. Such new form
does not divest the Oriental Sash Factory of its character as
manufacturer. Neither does it take the transaction out of the
category of sales under Article 1467 above quoted, because
although the Factory does not, in the ordinary course of its
business, manufacture and keep on stock doors of the kind sold to
Teodoro, it could stock and/or probably had in stock the sash,
mouldings and panels it used therefor (some of them at least).

In our opinion when this Factory accepts a job that requires the use
of extraordinary or additional equipment, or involves services not
generally performed by it-it thereby contracts for a piece of work —
filing special orders within the meaning of Article 1467. The orders
herein exhibited were not shown to be special. They were merely
orders for work — nothing is shown to call them special requiring
extraordinary service of the factory.
The thought occurs to us that if, as alleged-all the work of appellant
is only to fill orders previously made, such orders should not be
called special work, but regular work. Would a factory do business
performing only special, extraordinary or peculiar merchandise?