Republic of the PhilippinesSUPREME COURTManila THIRD DIVISION G.R. No.

167004 February 7, 2011 DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs.BEN P. MEDRANO and PRIVATIZATION MANAGEMENT OFFICE [PMO], Respondents. DECISION VILLARAMA, JR., J.: This petition for review on certiorari assails the Decision1 dated December 14, 2004 and Resolution2 dated February 8, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 65436. The CA affirmed in toto the Decision3 dated January 26, 1999 of the Regional Trial Court (RTC) of Pasig City, Branch 158, ordering petitioner Development Bank of the Philippines (DBP) to pay respondent Ben Medrano the following: (1) the amount of P2,449,265.00 representing the value of the purchase price of Medranos 37,681 shares in Paragon Paper Industries, Inc. plus legal interest from date of first demand; (2) attorneys fees in the amount of P100,000.00; and (3) the cost of suit. The facts, as culled from the records, are as follows. Respondent Ben Medrano was the President and General Manager of Paragon Paper Industries, Inc. (Paragon) wherein he owned 37,681 shares. Sometime in 1980, petitioner DBP sought to consolidate its ownership in Paragon. In one of the meetings of the Paragon Executive Committee, the Chairman Jose B. de Ocampo, instructed Medrano, as President and General Manager of Paragon, to contact or sound off the minority stockholders and to convince them to sell their shares to DBP at P65.00 per share, or 65% of the stocks par value of P100.00. Medrano followed the instructions and began to contact each member of the minority stockholders. He was able to contact all except one who was in Singapore. Medrano testified that all, including himself, agreed to sell, and all took steps to have their shares surrendered to DBP for payment.4 They made proposals to DBP and the Board of Directors of DBP approved the sale under DBP Resolution No. 4270 subject to the following terms and conditions: (1) that prior to the implementation of the approval, 57,596 shares of Paragons stock issued to the stockholders concerned shall first be surrendered to the DBP; (2) that all the parties concerned shall give their written conformity to the arrangement; and (3) that the transaction shall be implemented within forty-five (45) days from the date of approval (December 24, 1980); otherwise, the same shall be deemed canceled. Medrano then indorsed and delivered to DBP all his 37,681 shares which had a value of P2,449,265.00. DBP accepted said shares and took over Paragon.

DBP, through Jose de Ocampo, who was also a member of its Board of Governors, also offered Medrano a commission of P185,010.00 if the latter could persuade all the other Paragon minority stockholders to sell their shares. Medrano was able to convince only two stockholders, Alberto Wong and Gerardo Ledonio III, to sell their respective shares. Thus, his commission was reduced to P155,455.00. Thereafter, Medrano demanded that DBP pay the value of his shares, which he had already turned over, and his P155,455.00 commission. When DBP did not heed his demand, Medrano filed a complaint for specific performance and damages against DBP on September 2, 1981. DBP filed an Answer arguing that there was no perfected contract of sale as the three conditions in DBP Resolution No. 4270 were not fulfilled. Likewise, certain minority stockholders owning 17,635 shares refused to sell their shares. Hence, DBP exercised its right to cancel the sale under Resolution No. 4270. Later, during the pendency of the case, DBP conveyed the shares to the Asset Privatization Trust (APT) in a Deed of Transfer when the APT took over certain assets, and assumed the liabilities, of government financial institutions including DBP. As the transferee of the shares, the APT was impleaded as party-defendant. DBP thereafter filed a crossclaim against the APT which was later on substituted by the Privatization Management Office (PMO). Medrano adopted his evidence against DBP as his evidence against the APT while the APT adopted DBPs evidence and defenses against Medrano. On the cross-claim, the APT raised the defense that the liabilities assumed by the National Government and referred to in the Deed of Transfer are liabilities to local and foreign intermediaries and guarantees and not to individual persons like Medrano. On January 26, 1999, the RTC ruled in Medranos favor and dismissed DBPs cross-claim against the APT, to wit: WHEREFORE, in view of the foregoing, judgment is rendered in favor of the plaintiff and against defendant Development Bank of the Philippines ordering the latter to pay the former the following: (1) the amount of P2,449,265.00 representing the value of the purchase price of plaintiff's 37,681 shares in Paragon plus legal rate of interest from date of first demand; (2) attorneys fees in the amount of P100,000.00; and (3) the cost of suit. The cross-claim of defendant DBP against the other defendant Asset Privatization Trust is dismissed because defendant Development Bank of the Philippines accountability to the plaintiff [is] based on act[s] solely imputable to it. SO ORDERED.5 Dissatisfied, DBP elevated the case to the CA. DBP prayed that the trial

courts decision be reversed and that DBP be absolved from any and all liabilities to Medrano. Medrano, for his part, prayed in his appellees brief that DBP be ordered to pay his commission of P155,445.00.6 On December 14, 2004, the CA issued the challenged Decision7 and affirmed the decision of the trial court. The CA, however, refused to grant Medranos prayer for the payment of commission because Medrano did not appeal the trial courts decision but instead prayed for the payment of his commission only in his appellees brief. The CA held that there existed between DBP and Medrano a contract of sale and the conditions imposed by Resolution No. 4270 were merely conditions imposed on the performance of an obligation. Hence, while under Article 15458 of the Civil Code, DBP had the right not to proceed with the agreement upon Medranos failure to comply with the conditions, DBP was deemed to have waived the performance of the conditions when it chose to retain Medranos shares and later transfer them to the APT. The CA noted that the retention of the shares was contrary to DBPs claim of rescission because if indeed DBP rescinded the sale, then it should have returned to Medrano his shares together with their fruits and the price with interests, as provided by Article 13859 of the Civil Code. DBP filed a motion for reconsideration, but the same was denied by the CA in a Resolution10 dated February 8, 2005. Hence, this appeal. DBP alleges that the CA erred I WHEN IT REACHED A CONCLUSION WHICH IS NOT A LOGICAL CONSEQUENCE OF ITS FINDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN DBP AND MEDRANO AND PROCEEDED TO MAKE A CONTRACT FOR THE PARTIES IN THE INSTANT CASE. II WHEN IT APPLIED ARTICLE 1545 OF THE CIVIL CODE OF THE PHILIPPINES NOTWITHSTANDING ITS FINDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN MEDRANO AND DBP. III WHEN IT FAILED TO EXERCISE ITS AUTHORITY TO RULE ON MATTERS WHICH ARE THE NATURAL AND LOGICAL CONSEQUENCE OF ITS FINDINGS OF FACTS OR THAT ARE INDISPENSABLE AND NECESSARY TO THE JUST RESOLUTION OF THE PLEADED ISSUES, EVEN IF NOT RAISED AS ISSUES IN THE APPEAL.

IV WHEN IT FAILED TO CONSIDER THE ESTABLISHED FACT THAT THE ASSETS OF PARAGON PAPER INDUSTRIES, INC., INCLUDING THE SUBJECT CERTIFICATE OF STOCKS, WERE TRANSFERRED TO THE ASSET PRIVATIZATION TRUST, NOW THE PRIVATIZATION MANAGEMENT OFFICE, HEREIN CO-DEFENDANT. HENCE, THE PMO SHOULD BE THE PARTY THAT SHOULD BE MADE TO RETURN THE SUBJECT CERTIFICATES OF STOCKS OR PAY THE SAID SHARES OF STOCKS. V WHEN IT AFFIRMED THE AWARD OF ATTORNEYS FEES, DAMAGES AND COST OF SUIT IN FAVOR OF RESPONDENT MEDRANO CONTRARY TO LAW AND THE PERTINENT DECISIONS OF THIS HONORABLE SUPREME COURT.11 Essentially, the issue in this case is whether the CA erred in applying Article 1545 of the Civil Code and holding that DBP exercised the second option under the said article to justify the order against DBP to pay the value of Medranos shares of stock. As a side issue, DBP also questions the award of attorneys fees in Medranos favor. In fine, DBP contends that the trial court and the CA both ruled that there was no perfected contract of sale in this case and that accordingly, it was erroneous for them to order DBP to pay Medrano the value or price of the object of the sale. DBP insists that the proper order was to direct DBP or the PMO, which now has possession of the shares, to return the shares of stock. By ordering DBP to pay the purchase price of the stocks, DBP argues that the CA in effect created a new contract of sale between the parties.12 DBP adds that the CA erred in applying Article 1545 of the Civil Code. According to DBP, Article 1545 of the Civil Code only applies to a perfected contract of sale and since there is no such perfected contract in this case because of Medranos failure to meet all the conditions agreed upon, the application of this article by the CA is misplaced. Lastly, DBP questions the award of attorneys fees to Medrano. DBP maintains that there was no unjustified refusal to pay for the shares of stock transferred to DBP as there was no perfected contract of sale. Medrano, for his part, argues that by retaining the shares of stock transferred to it and later even appropriating and transferring them to the APT, DBP is deemed to have exercised the second option under Article 1545 of the Civil Code, that is, it waived performance of the conditions imposed by Resolution No. 4270. The original conditional sale was thus converted into, and correctly treated by the courts a quo, as an absolute, unconditional sale where compliance with the obligation of the buyer to pay the purchase price may be demanded.

As regards the award of attorneys fees, Medrano maintains that he was constrained to acquire the services of a lawyer and use legal means to enforce his rights over the shares in question. He argues that since DBP refused to pay for or return the shares that he transferred to it, he was left with no other option but to go to court. Hence, the award of attorney's fees is legally justified. We sustain the CA. As a rule, a contract is perfected upon the meeting of the minds of the two parties. Under Article 147513 of the Civil Code, a contract of sale is perfected the moment there is a meeting of the minds on the thing which is the object of the contract and on the price. In the case of Traders Royal Bank v. Cuison Lumber Co., Inc.,14 the Court ruled: Under the law, a contract is perfected by mere consent, that is, from the moment that there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. The law requires that the offer must be certain and the acceptance absolute and unqualified. An acceptance of an offer may be express and implied; a qualified offer constitutes a counter-offer. Case law holds that an offer, to be considered certain, must be definite, while an acceptance is considered absolute and unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting of the minds. We have also previously held that the ascertainment of whether there is a meeting of minds on the offer and acceptance depends on the circumstances surrounding the case. the offer must be certain and definite with respect to the cause or consideration and object of the proposed contract, while the acceptance of this offer - express or implied - must be unmistakable, unqualified, and identical in all respects to the offer. The required concurrence, however, may not always be immediately clear and may have to be read from the attendant circumstances; in fact, a binding contract may exist between the parties whose minds have met, although they did not affix their signatures to any written document. (Italics supplied.) Also, in Manila Metal Container Corporation v. Philippine National Bank,15 the Court ruled, A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the

offer annuls the offer. The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. (Italics supplied.) In the present case, Medranos offer to sell the shares of the minority stockholders at the price of 65% of the par value was not absolutely and unconditionally accepted by DBP. DBP imposed several conditions to its acceptance and it is clear that Medrano indeed tried in good faith to comply with the conditions given by DBP but unfortunately failed to do so. Hence, there was no birth of a perfected contract of sale between the parties. The petitioner is also correct that Paragraph 1, Article 1545 of the Civil Code speaks of a perfected contract of sale. Paragraph 1, Article 1545 of the Civil Code provides: ART. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. x x x x (Italics supplied.) It is clear from a plain reading of this article that it speaks of a party to a contract of sale who fails in the performance of his/her obligation. The application of this article presupposes that there is a perfected contract between the parties and that one of them fails in the performance of an obligation under the contract. The present case does not fall under this article because there is no perfected contract of sale to speak of. Medranos failure to comply with the conditions set forth by DBP prevented the perfection of the contract of sale. Hence, Medrano and DBP remained as prospectiveseller and prospective-buyer and not parties to a contract of sale. This notwithstanding, however, we cannot simply agree with DBPs argument that since there is no perfected contract of sale, DBP should not be ordered to pay Medrano any amount. The factual scenario of this case took place in 1980 or over thirty (30) years ago. Medrano had turned over and delivered his own shares of stock to DBP in his attempt to comply with the conditions given by DBP. DBP then accepted the shares of stock as partial fulfillment of the conditions that it imposed on Medrano. However, after the lapse of some time and after it became clear that Medrano would not be able to comply with the conditions, DBP decided to retain Medranos shares of stock without paying Medrano. After the realization that DBP would in fact not pay him for his shares of stock, Medrano was constrained to file a suit to enforce his rights.16

In civil law, DBPs act of keeping the shares delivered by Medrano without paying for them constitutes unjust enrichment. As we held in Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation17, "[t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience." Article 22 of the Civil Code provides that "[e]very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at anothers expense or damage. It was not proper for DBP to hold on to Medranos shares of stock after it became obvious that he will not be able to comply with the conditions for the contract of sale. From that point onwards, the prudent and fair thing to do for DBP was to return Medranos shares because DBP had no just or legal ground to retain them. We find that equitable considerations militate against DBPs claimed right over the subject shares.1avvphi1 First, it is clear that DBP did not buy the shares from Medrano as it even asserts there was no perfected contract of sale because of the failure of the latter to comply with DBPs conditions. Second, it cannot be said that Medrano voluntarily donated his shares of stock as he is in fact still trying to recover them 30 years later. Third, it cannot be said that DBP was merely holding the shares of stock for safekeeping as DBP even claims that the shares were transferred to the APT (now PMO). In fine, there is no reason whatsoever for DBP to continue in the possession of the shares of stock against Medrano. For nearly 30 years, Medrano was deprived of his shares without any compensation at all from DBP. To this Court, such situation is tantamount to the loss of respondent's shares of stock, by reason of DBPs unjustified retention. As to the issue of attorneys fees, it is well settled that the law allows the courts discretion as to the determination of whether or not attorney's fees are appropriate. The surrounding circumstances of each case are to be considered in order to determine if such fees are to be awarded. In the case of Servicewide Specialists, Incorporated v. Court of Appeals,18 the Court ruled: Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission on the part of the party from whom it is sought.

In the present case, it is clear that Medrano was constrained to use legal means to recover his shares of stock. Records showed that indeed respondent Medrano followed up19 the payment of his shares of stock that were transferred to DBP. After some time, he became convinced that DBP will not pay for the shares of stock for reasons unknown to him. That was when he decided to bring the matter to court. DBPs unjustified refusal to pay for the shares or even offer an explanation to Medrano why payment was being withheld indicates bad faith on its part. Besides having no legal or just reason to hold on to Medranos shares of stock, DBP also refused to enlighten Medrano of the reason why he was being denied payment. Further, Medranos failure to comply with the conditions of the acceptance should have prompted DBP either to return the shares of Medrano or accept the shares of Medrano as a sale and pay a fair price or at least communicate to Medrano why his shares were being withheld. Instead, DBP did nothing but to hold on to the shares. Because of this, Medrano was left with no other option but to seek redress from the courts. WHEREFORE, the Decision dated December 14, 2004 and Resolution dated February 8, 2005 of the Court of Appeals in CA-G.R. CV No. 65436 are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. MARTIN S. VILLARAMA, JR.Associate Justice WE CONCUR: CONCHITA CARPIO MORALESAssociate JusticeChairperson ARTURO D. BRIONAssociate Justice LUCAS P. BERSAMINAssociate Justice

MARIA LOURDES P. A. SERENOAssociate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONCHITA CARPIO MORALESAssociate JusticeChairperson, Third Division CERTIFICATION Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONAChief Justice Footnotes Rollo, pp. 51-56. Penned by Associate Justice Jose Catral Mendoza (now a member of this Court) with Associate Justices Godardo A. Jacinto and Edgardo P. Cruz concurring.
1 2 3 4 5 6 7 8

Id. at 58-59. Id. at 101-106. TSN, June 16, 1983, pp. 10-13, 30. Rollo, pp. 105-106. CA rollo, p. 100. Supra note 1.

ART. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Where the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. ART. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore.
9

Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. In this case, indemnity for damages may be demanded from the person causing the loss.
10 11 12 13

Supra note 2. Id. at 34. Id. at 36-37. Art. 1475. The contract of sale is perfected at the moment

there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.
14 15

G.R. No. 174286, June 5, 2009, 588 SCRA 690, 701, 703.

G.R. No. 166862, December 20, 2006, 511 SCRA 444, 465-466, citing Logan v. Philippine Acetylene Co., 33 Phil. 177, 183-184 (1916) and ABS-CBN Broadcasting Corporation v. Court of Appeals, G.R. No. 128690, January 21, 1999, 301 SCRA 572, 592593.
16 17

TSN, June 16, 1983, pp. 22-25.

G.R. No. 138088, January 23, 2006, 479 SCRA 404, 412, citing Reyes v. Lim, G.R. No. 134241, August 11, 2003, 408 SCRA 560 and 1 J. Vitug, Civil Law 30 (2003). G.R. No. 110597, May 8, 1996, 256 SCRA 649, 655, citing Gonzales v. National Housing Corporation, No. L-50092, December 18, 1979, 94 SCRA 786.
18 19

TSN, June 16, 1983, p. 24. Republic of the PhilippinesSUPREME COURTManila FIRST DIVISION

G.R. No. 156405

February 28, 2007

SPS. GIL TORRECAMPO and BRENDA TORRECAMPO, Petitioners vs.DENNIS ALINDOGAN, SR. and HEIDE DE GUZMAN ALINDOGAN, Respondents. DECISION SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari1 assailing the Decision2 of the Court of Appeals dated November 18, 2002 in CA-G.R. CV No. 68583. The facts are: On May 24, 1997, spouses Jose and Lina Belmes executed a deed of sale in favor of spouses Dennis and Heide Alindogan, respondents, over Lot No. 5524-H and the house constructed thereon located in Rawis, Legazpi City. On July 4, 1997, Lina Belmes wrote respondents wherein she delivered the constructive possession of the house and lot to them. However, on July 5, 1997, before they could take actual possession of the property, spouses Gil and Brenda Torrecampo, petitioners, and spouses Jonathan Lozares and Jocelyn Torrecampo, entered and occupied the premises.

Despite respondents repeated demands, petitioners failed and refused to vacate the property. Thus, respondents filed with the Regional Trial Court (RTC) Branch 10, Legazpi City, a Complaint for Recovery of Ownership, Possession and Damages against petitioners, docketed as Civil Case No. 9421.1avvphi1.net In their Answer to the complaint, petitioners claimed that on March 25, 1997, spouses Belmes received from them P73,000.00 as advance payment for the sale of the house and lot. On April 8, 1997, petitioners and spouses Belmes executed a "Contract to Buy and Sell" covering the same property. The parties agreed as follows: that the total consideration is P350,000.00; that upon the signing of the contract, petitioners shall pay spouses Belmes P220,000.00; and that the balance of P130,000.00 shall be paid upon the issuance of the certificate of title in the names of petitioners. To complete the agreed partial payment of P220,000.00 mentioned in the contract, petitioners paid spouses Belmes P130,000.00, but the latter refused to accept the amount. Thus, on July 7, 1997, petitioners filed with the RTC, Branch 18, Tabaco, Albay, Civil Case No. T-1914, a Complaint for Specific Performance against spouses Belmes. On July 14, 2000, the RTC, in Civil Case No. 9421, now before us, rendered a Decision3 in favor of respondents, thus: WHEREFORE, premises considered, judgment is hereby rendered: a) declaring the plaintiffs as the owners and entitled to the possession of the lot in question more particularly described in par. 2 of the complaint including the improvements thereon; b) ordering the defendants or anyone acting for or with them to vacate the premises; and c) directing the defendants and/or their agents to turn over the possession of the property in question to the plaintiffs. No pronouncement as to costs. SO ORDERED. The trial court held that the transaction between petitioners and spouses Belmes is a mere contract to sell. Thus, the latter did not transfer ownership of the house and lot to petitioners. On appeal, the Court of Appeals, in its assailed Decision,4 affirmed in toto the RTC judgment. In affirming the trial courts finding that the transaction between petitioners and spouses Belmes is a mere contract to sell, the Court of Appeals held: Thus, we shall now look into the transaction entered into by the defendants with the Belmeses, with reference to the intention of the parties. The Contract to Buy and Sell reads:

"That whereas, the vendor agreed to sell and the vendee agreed to buy the above-described parcel of land, together with improvements therein, for the sum of Three Hundred Fifty Thousand Pesos (P350, 000.00), Philippine currency, under the following terms and conditions xxx"1awphi1.net The tenor of the afore-quoted provision of the contract clearly confirms that the transaction between the transaction between the defendants and the Belmeses was not a contract of sale, as defined by Art. 1458 of the Civil Code. The reason for the same was clearly explained by defendants own witness, Lourdes Narito, during her direct examination. She testified that herein defendants themselves refused to enter into a contract of sale and execute a deed of sale unless and until the Belmeses will transfer the title to the property. This was the reason why a mere contract to sell was executed. x x x (Emphasis ours) In a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, we review only errors of law and not errors of facts. The factual findings of the appellate court are generally binding on this Court. This applies with greater force when both the trial court and the Court of Appeals are in complete agreement on their factual findings, as in this case. Here, the facts relied upon by the trial and appellate courts are sustained by the record. There is no reason to deviate from their findings.5 Nevertheless, in order to put rest all doubts on the matter, we hold that the agreement between petitioners and spouses Belmes is not a contract of sale but only a contract to sell. The distinction between a contract of sale and a contract to sell is well-settled: In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. (Underscoring supplied)6 Indeed, the true agreement between petitioners and spouses Belmes is a contract to sell. Not only did the parties denominate their contract as "Contract to Buy and Sell," but also specified therein that the balance of the purchase price in the amount of P130,000.00 is to be paid by petitioners upon the issuance of a certificate of title. That spouses Belmes have in their possession the certificate of title indicates that

ownership of the subject property did not pass to petitioners. In Ursal v. Court of Appeals, et al.,7 we held: Indeed, in contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a contract to sell between them. Petitioners further contend that when respondents bought the property on May 24, 1997 from spouses Belmes, they knew that the same property was previously sold to them (petitioners). Therefore, since respondents are buyers in bad faith, ownership of the property must pertain to petitioners who, in good faith, were first in possession. The argument is misplaced. Petitioners invoke Article 1544 of the Civil Code which reads: Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith. (Emphasis ours) The above provision does not apply to the instant case considering that the transaction between petitioners and spouses Belmes is a mere contract to sell, not a contract of sale. WHEREFORE, we DENY the petition and AFFIRM the assailed Decision of the Court of Appeals dated November 18, 2002 in CA-G.R. CV No. 68583. Costs against petitioners. SO ORDERED. ANGELINA SANDOVAL-GUTIERREZAssociate Justice WE CONCUR: REYNATO S. PUNOChief Justice Chairperson RENATO C. CORONAAssociate (On official leave)ADOLFO S.

Justice

AZCUNAAsscociate Justice CERTIFICATION

CANCIO C. GARCIAAssociate Justice Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNOChief Justice Footnotes
1 2

Filed under Rule 45, 1997 Rules of Civil Procedure, as amended.

Penned by Associate Justice Salvador J. Valdez, Jr. (retired) and concurred in by Associate Justice Edgardo P. Cruz and Associate Justice Mario L. Guaria.
3 4 5

Annex "A," Rollo, pp. 31-37. Id., pp. 22-30.

Alfredo v. Borras, G.R. No. 144225, June 17, 2003, 404 SCRA 145, citing W-Red Construction and Development Corporation v. Court of Appeals, 338 SCRA 341 (2000). Salazar v. Court of Appeals, G.R. No. 118203, July 5, 1996, 258 SCRA 317, with citations.
6

G.R. No. 142411, October 14, 2005, 473 SCRA 52, citing Chua v. Court of Appeals, 401 SCRA 54 (2003).
7

Republic of the PhilippinesSUPREME COURTManila EN BANC G.R. No. L-11311 May 28, 1958 MARTA C. ORTEGA, plaintiff-appellant, vs.DANIEL LEONARDO, defendant-appellee. Jose Ma. Reyes for appellant.Tomas A. Leonardo for appellee. BENGZON, J.: Well known is the general rule in the Statute of Frauds precluding enforcement of oral contracts for the sale of land. Not so well known is exception concerning the partially executed contracts1 least our jurisprudence offers few, if any, apposite illustrations. This appeal exemplifies such exception. Alleging partial performance, plaintiff sought to compel defendant to comply with their oral contract of sale of a parcel of land. Upon a motion to dismiss, the Manila court of first instance ordered dismissal

following the above general rule. Hence this appeal. It should be sustained if the allegations of the complaint which the motion to dismiss admitted set out an instance of partial performance. Stripped of non-essentials, the complaint averred that long before and until her house had been completely destroyed during the liberation of the City of Manila, plaintiff occupied a parcel of land, designated as Lot 1, Block 3 etc. (hereinafter called Lot I) located at San Andres Street, Malate, Manila; that after liberation she re-occupied it; that when the administration and disposition of the said Lot I (together with other lots in the Ana Sarmiento Estate) were assigned by the Government to the Rural Progress Administration2 plaintiff asserted her right thereto (as occupant) for purposes of purchase; that defendant also asserted a similar right, alleging occupancy of a portion of the land subsequent to plaintiff's; that during the investigation of such conflicting interests, defendant asked plaintiff to desist from pressing her claim and definitely promised that if and when he succeeded in getting title to Lot I3 , he would sell to her a portion thereof with an area of 55.60 square meters (particularly described) at the rate of P25.00 per square meter, provided she paid for the surveying and subdivision of the Lot and provided further that after he acquired title, she could continue holding the lot as tenant by paying a monthly rental of P10.00 until said portion shall have been segregated and the purchase price fully paid; that plaintiff accepted defendant's offer, and desisted from further claiming Lot I; that defendant finally acquired title thereto; that relying upon their agreement, plaintiff caused the survey and segregation of the portion which defendant had promised to sell incurring expenses therefor, said portion being now designated as Lot I-B in a duly prepared and approved subdivision plan; that in remodelling her son's house constructed on a lot adjoining Lot I she extended it over said Lot I-B; that after defendant had acquired Lot I plaintiff regularly paid him the monthly rental of P10.00; that in July 1954, after the plans of subdivision and segregation of the lot had been approved by the Bureau of Lands, plaintiff tendered to defendant the purchase price which the latter refused to accept, without cause or reason. The court below explained in its order of dismissal: It is admitted by both parties that an oral agreement to sell a piece of land is not enforceable. (Art. 1403, Civil Code, Section 21, Rule 123, Rules of Court.) Plaintiff, however, argues that the contract in question, although verbal, was partially performed because plaintiff desisted from claiming the portion of lot I in question due to the promise of defendant to transfer said portion to her after the issuance of title to defendant. The court thinks

that even granting that plaintiff really desisted to claim not on oral promise to sell made by defendant, the oral promise to sell cannot be enforced. The desistance to claim is not a part of the contract of sale of the land. Only in essential part of the executory contract will, if it has already been performed, make the verbal contract enforceable, payment of price being an essential part of the contract of sale. If the above means that partial performance of a sale contract occurs only when part of the purchase price is paid, it surely constitutes a defective statement of the law. American Jurisprudence in its title "Statute of Frauds" lists other acts of partial performance, such as possession, the making of improvements, rendition of services, payment of taxes, relinquishment of rights, etc. Thus, it is stated that "The continuance in possession may, in a proper case, be sufficiently referable to the parol contract of sale to constitute a part performance thereof. There may be additional acts or peculiar circumstances which sufficiently refer the possession to the contract. . . . Continued possession under an oral contract of sale, by one already in possession as a tenant, has been held a sufficient part performance, where accompanied by other acts which characterize the continued possession and refer it to the contract of purchase. Especially is this true where the circumstances of the case include the making of substantial, permanent, and valuable improvements." (49 American Jurisprudence 44) It is also stated that "The making of valuable permanent improvements on the land by the purchaser, in pursuance of the agreement and with the knowledge of the vendor, has been said to be the strongest and the most unequivocal act of part performance by which a verbal contract to sell land is taken out of the statute of frauds, and is ordinarily an important element in such part performance. . . . Possession by the purchaser under a parol contract for the purchase of real property, together with his making valuable and permanent improvements on the property which are referable exclusively to the contract, in reliance on the contract, in the honest belief that he has a right to make them, and with the knowledge and consent or acquiescence of the vendor, is deemed a part performance of the contract. The entry into possession and the making of the improvements are held on amount to such an alteration in the purchaser's position as will warrant the court's entering a degree of specific performance." (49 American Jurisprudence p.755, 756.) Again, it is stated that "A tender or offer of payment, declined by the vendor, has been said to be equivalent to actual payment, for the purposes of determining whether or not there has been a part performance of the contract. This is apparently true where the tender

is by a purchaser who has made improvements. But the doctrine now generally accepted, that not even the payment of the purchase price, without something more, . . . is a sufficient part performance. (49 American Jurisprudence p. 772.) And the relinquishment of rights or the compromise thereof has likewise been held to constitute part performance. (See same title secs. 473, 474, 475.) In the light of the above four paragraphs, it would appear that the complaint in this case described several circumstance indicating partial performance: relinquishment of rights4 continued possession, building of improvements, tender of payment plus the surveying of the lot at plaintiff's expense and the payment of rentals. We shall not take, time to discuss whether one or the other or any two or three of them constituted sufficient performance to take the matter away from the operation of the Statute of Frauds. Enough to hold that the combination of all of them amounted to partial performance; and we do so line with the accepted basis of the doctrine, that it would be a fraud upon the plaintiff if the defendant were permitted to oppose performance of his part after he has allowed or induced the former to perform in reliance upon the agreement. (See 49 American Jurisprudence p. 725.) The paragraph immediately preceding will serve as our comment on the appellee's quotations from American Jurisprudence itself to the effect that "relinquishment" is not part performance, and that neither "surveying the land"5 nor tender of payment is sufficient. The precedents hereinabove transcribed oppose or explain away or qualify the appellee's citations. And at the risk of being repetitious we say: granting that none of the three circumstances indicated by him, (relinquishment, survey, tender) would separately suffice, still the combination of the three with the others already mentioned, amounts to more than enough. Hence, as there was partial performance, the principle excluding parol contracts for the sale of realty, does not apply. The judgment will accordingly be reversed and the record remanded for further proceedings. With costs against appellee. Paras, C.J., Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ., concur. Footnotes
1 2

See Moran, Rules of Court, 1957 Ed. Vol. 3, p. 178.

Evidently in connection with purchase of landed estates for resale to occupants.

3 4 5

Of about 234 square meters. An occupant of the landed estate has preference to buy.

Here the survey was at plaintiff's expense and pursuant to their agreement. R Republic of the PhilippinesSUPREME COURTManila S EN BANC G.R. No. L-2277 December 29, 1950 MONICO CONCEPCION, plaintiff-appellant, vs.PACIENCIA STA. v ANA, defendant-appellee. Y Yap and Garcia for appellant.Tomas Yumol for appellee. FERIA, J.: An action was instituted by Monico Concepcion vs. Paciencia Sta. Ana to annul the sale made by the late Perpetua Concepcion, sister of the plaintiff, of three parcels of land with the improvements thereon to the defendant. The complaint alleges, among others, that the plaintiff is the only surviving legitimate brother of Perpetua Concepcion, who died on or about January 28, 1948, without issue and without leaving any will; that in her life time or on about June 29, 1945, said Perpetua Concepcion, in connivance with the defendant and with intent to defraud the plaintiff, sold and conveyed three parcels of land for a false and fictitious consideration to the defendant, who secured transfer certificates of title of said lands issued under her name; and that the defendant has been in possession of the properties sold since the death of Perpetua Concepcion, thereby causing damages to the plaintiff in the amount of not less than two hundred (P200) pesos. Defendant filed a motion to dismiss the complaint on the ground that it does not state a cause of action, because the deceased being the owner of the properties sold had the right to enjoy and dispose of them without further limitation than those established by law. The Court of First Instance of Manila granted the motion to dismiss and dismissed the complaint on the ground that "the plaintiff is not a party to the deed of sale executed by Perpetua Concepcion in favor of the defendant. Even in the assumption that the consideration of the contract is fictitious, the plaintiff has no right of action against the defendant. Under article 1302 of the Civil Code, "the action to annul a contract may be brought by any person principally or subsidiarily bound thereby." The plaintiff is not bound by the deed of sale executed by the deceased in favor of the defendant. He has no obligation under the deed." Plaintiff appealed from the order of the court dismissing his complaint, and now assigns as erroneous the order appealed from on the following grounds: (1) that a simulated or fictitious sale for a fictitious or false consideration is null and void per se or non-existence, hence it cannot transfer ownership; and (2) that according to article 1302 of the

same code, "the action to annul a contract may be brought by a person principally or subsidiarily bound thereby," and as under article 1257 of the Civil Code "contracts shall be binding only upon the parties who make them and their heirs," the plaintiff as heir of the deceased contracting party can bring action to annul the contract of sale under consideration. (1) The plaintiff's contention that a simulated or fictitious contract of sale with a false consideration is null and void per se, or is a contrato inexistente, not merely a contrato nulo, is not correct. Article 1276 of the Civil Code 1 expressly provides that "the statement of a false

consideration in contract shall be ground for annulment," and article 1301 of the same code provided for the limitation of actions for annulment of a contract. In support of his contention that the contract of sale under consideration being a fictitious contract or contract with a false consideration is null per se or non-existent, plaintiff quotes Manresa's comment on article 1274 to 1277, Vol. 8, p. 623, which says: "Recognizing this analogy, it was held by the Supreme Court of Spain that a fictitious contract, or contract entered into with false consideration does not confer any right or produce any legal effect, citing the judgments of the Supreme Court of Spain of October 31, 1865, of March 21, 1884, and of November 23, 1877." Appellant's conclusion is not correct. By stating that contracts with false consideration confer no right and produce no legal effect, Manresa does not mean to say that they are null and void per se or non-existent as contradistinguished from annullable, for the effects of both non-existent and annullable contracts that have been annulled are the same: they confer no right and produce no legal effect. What Manresa says on page 700 of the same volume, commenting on article 1301, is the following: "The expression of a false cause or consideration in the contract does not make it non-existent, and it shall only be a ground for an action for nullity as provided by article 1276 and confirmed by article 1301 of the Civil Code. There are some who consider this somewhat confused under the Code; for us it is very clear, for the code repeatedly provides that the effect of a false consideration is limited to making the contract voidable, and we have already pointed out that in this particular, our Civil Code has deviated deliberately from the French Code, which includes indistinctly in one and the same provision contracts without consideration and contracts in which the consideration

is illicit or false." In the case of De Belen vs. Collector of Customs and Sheriff of Manila (46 Phil. 241), this court, through Mr. Justice Street, said that "The distinction between entire absence of contract (inexistencia) and the situation requiring an action of rescission or nullity is fully expounded by Manresa in his comment on article 1300 of the Civil Code (q.v.)." (2) As to the appellant's second and last contention, under the law action to annul a contract entered into with all the requisites mentioned in article 1261 whenever they are tainted with the vice which invalidate them in accordance with law, may be brought, not only by any person principally bound or who made them, but also by his heir to whom the right and obligation arising from the contract are transmitted. Hence if no such rights, actions or obligations have been transmitted to the heir, the latter can not bring an action to annul the contract in representation of the contracting party who made it. In Wolfson vs. Estate of Martinez, 20 Phil., 340, this Supreme Court quoted with approval the judgment of the Supreme Court of Spain of April 18, 1901, in which it was held that "he who is not a party to a contract, or an assignee thereunder, or does not represent those who took part therein, has under articles 1257 and 1302 of the Civil Code no legal capacity to challenge the validity of such contract." And in Irlanda vs. Pitargue (22 Phil. 383) we held that "the testamentary or legal heir continues in law as the juridical personality of his predecessor in interest, who transmit to him from the moment of his death such of his rights, actions and obligations as are not extinguished thereby."lawphil.net The question to be resolved is, therefore, whether the deceased Perpetua Concepcion has transmitted to the plaintiff any right arising from the contract under consideration in order that he can bring an action to annul the sale voluntarily made by her to the defendant with a false consideration. We are of the opinion and so hold, that the late Perpetua Concepcion has not transmitted to the plaintiff any right arising from the contract of conveyance or sale of her lands to the defendant, and therefore the plaintiff cannot file an action to annul such contract as representative of the deceased. According to the complaint, the deceased, in connivance with the defendant and with intent to defraud the plaintiff, (that is,

in order not to leave the properties above mentioned upon her death to the plaintiff) sold and conveyed them to the latter, for a false and fictitious consideration. It is, therefore obvious, that the conveyance or sale of said properties to the defendant was voluntarily made by the deceased to said defendant. As the deceased had no forced heir, she was free to dispose of all her properties as absolute owner thereof, without further limitation than those established by law, and the right to dispose of a thing involves the right to give or to convey it to another without any consideration. The only limitation established by law on her right to convey said properties to the defendant without any consideration is, that she could not dispose of or transfer her property to another in fraud of her creditors. And this court, in Solis vs. Chua Pua Hermanos (50 Phil. 636), through Mr. Justice Street, held that "a voluntary conveyance, without any consideration whatever, is prima facie good as between the parties, and such an instrument can not be declared fraudulent as against creditors in the absence of proof, that there was at the time of the execution of the conveyance a creditor who could be defrauded by the conveyance, 27 C. J., 470." Even a forced heir of the deceased Perpetua Concepcion would have no right to institute as representative of the decedent, an action of nullity of a contract made by the decedent to defraud his creditors, because such a contract being considered illicit under article 1306 of the Civil Code, Perpetua Concepcion herself had no right of action to annul it and recover the properties she had conveyed to the defendant. But the forced heir could in such case bring an action to rescind the contract under article 1291 (3) of the Civil Code. Manresa in his comments on articles 1305 and 1306 of the Civil Code (4th edition, volume 8, pp. 717, 718), says: "As to heirs, it is interesting that the judgment of May 6, 1902, of the Supreme Court of Spain which denied a forced heir the right to institute an action to annul contracts considered a illicit, for having been entered into by his predecessor in interest for the purpose of depriving the forced heir of his legitime. The judgment purported to hold that the proper action would have been an action to rescind conformity with what we indicated in commenting on article 1291, and declared that 'even forced heirs who accept an inheritance under the benefit of inventory

are within the rule 2 of article 1806, that denies to the guilty party the right to recover anything he may have given, or to enforce the performance of any undertaking in his favor, when the other party has nothing to do with the illicit consideration; a doctrine laid down in the judgment of July 4, 1896.'" The reason why a forced heir has the right to institute an action of rescission is that the right to the legitime is similar to a credit of a creditor. As the same Spanish author correctly states in commenting on article 1291 of the Civil Code: "The rights of a forced heir to the legitime are undoubtedly similar to a credit of a creditor in so far as the rights to the legitime may be defeated by fraudulent contracts, and are superior to the will of those bound to respect them. In its judgment of October 28, 1897, the Supreme Court of Spain held that the forced heirs instituted as such by their father to the latter's testament have the undeniable right to institute an action to annul contracts entered into by the father to their prejudice. As it is seen the action is called action of nullity, but it is rather an action of rescission taking into account the purpose for which it is instituted and the confusion of ideas that has prevailed in this matter. The doctrine we shall expound in commenting on articles 1302 and 1306 will confirm what we have just stated." (Manresa Codigo Civil, 4th edition, Vol. 8, pp. 667 and 668.) Therefore, as the plaintiff in the present case, not being a forced heir of the late Perpetua Concepcion, can not institute an action to annul under article 1300 or to rescind under article 1291 (3) of the Civil Code the contract under consideration entered into by the deceased with the defendant. In view of the foregoing, the judgment of the lower court is affirmed with costs against the appellant. So ordered. Moran, C.J., Bengzon, Padilla, Tuason, Reyes, and Bautista A Angelo, JJ., concur.Montemayor, and Jugo, JJ., concur in the result. PABLO, M.: Concurro con la parte dispositiva.
R Republic of the PhilippinesSUPREME COURTManila S EN BANC G.R. No. L-17074 March 31, 1964 NATIONAL MARKETING CORPORATION, petitioner, vs.THE v HONORABLE BIENVENIDO TAN, Judge of Branch XIII of the C Court of First Instance of Manila, FEDERATION OF UNITED N NAMARCO DISTRIBUTOR INC., JUSTO MANALO, TELESFORO

M MANALO, ARTURO MENDOZA, GERMAN VALERO, JOSE LIMJUCO, N NEMENCIO MEDINA, PEDRO LABINGDALAWA, AMADO M MENDOZA, FIRMO HOMERADO, LUCAS KABIGTING, Spouses C CIRILO GARCIA and FERNANDA GARCIA, ANGELINA VELORIA a and her husband MINADOR VELORIA, CAREDAD CARARROGUIS a and her husband RUPERTO CABARROGUIS, TRINIDAD ESTONINA a and her husband PAULINO ESTONINA, and VALINTINA DE JESUS and her husband MARCELO ESCUETA, respondents. A Angel Gamboa for respondents.Government Corporate Counsel S. M. Gopengco and Romualdo Valera for petitioner. MAKALINTAL, J.: Petitioner National Marketing Corporation (NAMARCO) is a governmentowned and controlled corporation organized under Republic Act 1345. Respondent Federation of United NAMARCO Distributors, Inc., hereinafter referred to as the Federation, is a private corporation, the members of which are bona fide distributors and retailers of NAMARCO goods. Said members have been joined in this case as individual respondents. On August 8, 1959, the Board of Directors of the Federation addressed a letter to the President of the Philippines requesting his intervention to have NAMARCO set aside $2,001,031.00, out of a special allocation of $10,000,000.00 granted to it by the Central Bank, with which to import commodities to be in turn allocated to the members of the Federation for distribution. The commodities sought to be imported were itemized in the letter. The conditions under which they were to be allocated to the Federation were likewise specified, as follows: (a) the Federation would pay on cash basis the procurement costs, plus 5% mark-up; (b) all handling and storage charges of the goods imported should be for the account of the Federation; and the Federation should distribute said goods among its members and retailers in accordance with NAMARCO rules and regulations governing such distribution. The President indorsed the letter favorably and expressed his desire that the request be approved by NAMARCO. On November 3, 1954, the NAMARCO Board of Directors passed resolution No. 524 authorizing the importation. On November 16, 1959, upon payment by the Federation to NAMARCO of the sum of P200,000.00 as partial advance on the procurement cost, a contract between them was executed whereby NAMARCO sold to the Federation the commodities to be thus imported. The contract contained a list thereof, with the corresponding prices, and embodied the three (3) conditions enumerated in Resolution No. 524. In view of the stipulation concerning the handling and storage of the goods, the Federation entered into an agreement with the owner of the "Pasig River Bodegas" for the purpose. The agreement was duly approved by NAMARCO. As the commodities arrived in Manila they were taken care of by and stored in the said "bodegas" with the

express consent of NAMARCO, and the corresponding storage charges were paid by the Federation. After the initial advance of P200,000.00 additional payments were made by the Federation, aggregating P2,000,000.00, in consideration of which NAMARCO voiced to the Federation the items that had been paid for. On the strength of the invoices the "Pasig River Bodegas" released the commodities covered thereby to the Federation. The same procedure was followed until about the end of January 1960, when NAMARCO was taken over a new Board of Directors and a new General Manager. The new management thereafter refused further release of goods imported under the contract and resolved allocate them to distribution outlets other than the members of the Federation. In view of this development Federation and its members filed an action for s performance in the Court of First Instance of Manila (Civil Case No. 42684). In its answer to the complaint NAMARCO alleged, by way of defenses, that the contract of sale sought to enforced had been executed by its former General Manager Benjamin P. Estrella, without authority of the Board of Directors; that the contract had not been approved by the Auditor General; that according to Resolution No. 530 adopted on October 1, 1959 by the old NAMARCO Board, the commodities specified in Resolution No. 524 should be distributed and allocated only to regular outlets of the NAMARCO in accordance with its regulate and practices; and that in any event NAMARCO was no longer obligated to comply with the contract for the reason that the Federation had violated its terms and conditions. In its complaint the Federation prayed for a writ preliminary injunction to restrain NAMARCO and all other persons acting under it from allocating the commodities subject of the contract of sale sued upon distributors other than those who were members of the Federation and from removing such commodities from the bodegas or wherever they were stored. The writ prayed for was issued on a bond of P20,000.00. On March 17, 1960 the Federation filed a "Motion and Consignation" alleging that it had deposited P80,689.92 with respondent Court, which amount, together with a certified check for P28,489.82 previously delivered to NAMARCO, covered the estimated landed costs, plus 5% mark-up, of certain commodities which had already arrived. It was prayed in said motion that the release of said goods be authorized. NAMARCO opposed the motion but the Court granted it by order dated March 26, 1960. On different dates thereafter the Federation made similar deposits in Court for the same purpose, the amounts deposited being P443,179.51; P261,308.16; P457,343.87; P196,493.87; P208,269.90; and P231,519.42, respectively. In several orders issued by respondent Court it directed the release to the Federation of the Commodities covered by the amounts deposited.1wph1.t Motions for reconsideration filed by NAMARCO having been denied, it

filed the instant petition for certiorari alleging that the writ of preliminary injunction as well as the different orders for the release of the commodities to the Federation constituted a grave abuse of discretion, principally on the ground that they prejudged the issues in the case, and on the further ground that the consignations made by the Federation were not in accordance with the law. Pursuant to the prayer in the petition we issued a writ of preliminary injunction to restrain respondent from carrying out the orders complained of. Respondents, in their answer, stated among other things that NAMARCO had asked the Court to increase the bond for the maintenance of the injunction it had issued to P400,000.00 which was granted and duly complied with. On November 7, 1960 respondents filed a supplement to the answer, alleging that on the previous October 15 respondent Court decided the main case in favor of the Federation and declared the writ of preliminary injunction permanent. Copy of the decision was attached to the supplemental answer. On January 31, 1961 respondent filed a second supplement to their answer, alleging that on the previous January 25 petitioner filed a complaint in the Court of First Instance of Manila against the Federation (Civil Case No. 46124) precisely to enforce compliance with the contract of sale, the validity of which had been denied by NAMARCO in the previous action as well as in instant petition. We are of the opinion that the writ prayed for by petitioner must be denied. Contrary to petitioner's contention, the contract of sale sued upon below was duly authorized and approved. The authorization is contained in Resolution No. 524 of the NAMARCO Board of Directors for "the immediate importation of the following items in the quantities he mentioned," which items were the very ones listed in the letter-request of the Federation to the President of the Philippines. The resolution was passed pursuant to favorable indorsement of that request by the President and hence contemplated that the goods to be imported were for allocation to the Federation and its members. The contract of sale signed for NAMARCO by its General Manager on November 16, 1959 expressly states that it was entered into by virtue of Resolution No. 524. Aside from such authorization, the contract was subsequently approve by the Board in its Resolution No. 14, passed on January 12, 1960, which reads as follows: RESOLVED that the Board of Directors approve as hereby approves, the contract entered into by and between the NAMARCO and the Federation of United NAMARCO Distributor Inc., for the sale of $2,001,031.00 worth of NAMARCO commodities, executed on November 16, 1959, which contract the subject of an inquiry of the Auditor in his 1st indorsement dated December 21, 1959, the approval hereof to be subject the terms and conditions laid down by the Board in Resolute No. 524

adopted on November 3, 1959 and in Resolution No. 530 adopted on November 19, 1959. Petitioner contends, however, that Resolution No. 530, referred in Resolution No. 14, in effect nullified, or least modified, the terms of the contract, because Resolution No. 530 prohibited "forward sales" of NAMARCO goods, that is, sales thereof prior to their arrival, and the said contract provides for such kind of sales, since it was executed before the goods subject thereof arrived. It is at least seriously to be doubted if NAMARCO could unilaterally annul or modify the contract. Concerning Resolution No. 530 respondent court states in its decision: Counsel for the defendant has maintained that this resolution (No. 14) did not approve the contract of sale because in his understanding, the contract of sale is inconsistent with the provisions of the Resolution No. 530 to which that contract, in approving it, is made subject. In the words of counsel for the defendant, the inconsistency is that while Resolution No. 530 "Prohibits "forward sales", the contract of sale in question partakes the nature of a "forward sales" for it is a sale of merchandise before arrival thereof; under paragraph 3 of Resolution No. 530, it is the NAMARCO that will distribute and allocated the merchandise in question to regular NAMARCO outlets, while under paragraph 4 of the contract of sale, plaintiff FEDERATION is the one authorized to distribute the merchandise among its members and retailers." (See Memorandum for defendant p. 6.) Counsel for the defendant argued that, according to the testimony of Rodolfo E. Tecson, supervisor of defendant's Marketing Department, who was a witness for the defendant, "it is a regular practice of defendant corporation that goods imported should be allocated and distributed to all regular NAMARCO outlets or authorized distributors who are willing to purchase and market the same" (Ibid., p, 6). The witness said so. But with respect to the importation now under consideration, the fact is that it is an exception to such a regular practice, in that it was recommended to the defendant's board of directors by the President of the Philippines to be distributed, through the FEDERATION, among the defendants' distributors and the retailers, who are members of the FEDERATION, the defendant's board of directors acquiesced in that recommendation as its Resolution No. 524 shows, and it was implemented with the execution of the contract of sale so as to defeat the effects of the strike on the defendant against the distribution of goods. On the other hand, it is not shown that other distributors or retailers of the defendant, who are not members of the FEDERATION, also are willing to purchase and market said commodities. The Resolution No. 530 does not require that the commodities subject matter of said contract of sale should be distributed to all

regular outlets of the defendant; it states that "The goods shall be distributed and allocated only to regular NAMARCO outlets ...", meaning that, considering the fact that the Resolution No. 530 is but amendatory to Resolution No. 524, only the FEDERATION'S members who are defendant's regular outlets should participate in the distribution of said commodities. The requirement is satisfied by the fact that all the FEDERATION'S members are defendant's regular outlets as the defendant itself has admitted. At any rate, contract of sale in question having been formally approved by defendant's board of directors and the defendant thereby is bound, the provisions of said contract should be followed, one of which provides "that the items and/or merchandise sold by NAMARCO to the FEDERATION shall be distributed among its members and retailers in accordance with NAMARCO'S existing rules and regulations governing the distribution of NAMARCO goods. ... Petitioner also contends that the contract of sale question was never approved by the Auditor General. In its decision respondent court ruled on the contention follows: Passing on the defendant's defense that the contract of sale has not been approved by the Auditor General under Administrative Order No. 290 (Exh. 12), the evidence for the plaintiff shows that on December 17, 1959, the then General Manager Benjamin F. Estrella of the defendant forwarded said contract to the auditor for the defendant for examination an review pursuant to that Administrative Order (Exh. N plaintiffs; Exh. 1 for defendant). The auditor did not take action thereon until December 21, 1959 when he had referred said contract to defendant's former board of directors, requesting that, if the Resolution No. 530 had not nullified the same contract, it "be first approved by the Board before it is forwarded to the Auditor General for examination and review" (Exh. N for plaintiffs; Exh. 2 for defendant). As already stated, said contract was formally approved by defendant's former board of directors on January 12, 1960, and until March 2, 1960 when the plaintiffs instituted this action no objection to said contract from the Auditor General was ever expressed. The failure of the Auditor General to take action was explained by him in his indorsement to the NAMARCO auditor dated March 30, 1960, concerning the contract of sale. It is there stated: It appearing that the within contract is the subject-matter of Civil Case No. 42684 for Specific Performance with Injunction, filed with the Court of First Instance of Manila by the Federation of United NAMARCO Distributors, Inc. against the NAMARCO on March 1, 1960, the said contract is herewith returned to that Office without action, pending the results of the aforementioned case.

In other words, the Auditor General did not disapprove the contract, but decided to subordinate his action to whatever the court would decide in the case already pending. Concerning the alleged failure of respondent Federation to comply with its obligations under the contract of sale, the Court declared in its decision that petitioner "did not even attempt to prove any commission or omission by the Federation, constitutive of violation of the terms and conditions of the contract of sale." The decision is not before us for review; indeed the record does not show that an appeal from it has been taken. For purposes of the resolution of the issue now before us, namely, whether or not a grave abuse of discretion, correctible by certiorari, has been committed by respondent Court, its reason and findings in the said decision may be properly taken into consideration. On the basis thereof, we conclude that there was no such abuse. It may be added, as a last observation, that NAMARCO, until the end of January 1960, voluntarily complied with the contract and accepted benefits thereunder, and on October 15, 1960 filed Civil Case No. 46124 against the Federation for the collection of the of P611,053.38, but unpaid. These circumstances show that petitioner recognized the validity of such contract; and it should not be heard to raise its nullity in the instant proceeding for the purpose of setting aside certain interlocutory orders of respondent court. WHEREFORE, the writ prayed for is denied, and the injunction issued by this Court is dissolved, with costs against petitioner. Bengzon, C.J., Bautista Angelo, Labrador, Concepcion. Reyes, J.B.L., B Barrera, Paredes, Dizon and Regala, JJ., concur.Padilla, J., took no part. R Republic of the PhilippinesSUPREME COURTManila S EN BANC G.R. No. L-5054 March 15, 1910 MARIA FALCON, plaintiff-appellee, vs.NARCISO L. MANZANO, v defendant-appellant. J J. C. Knudson, and Godofredo Reyes, for appellant. Agustin Alvarez, for appellee. JOHNSON, J.: The plaintiff herein alleged that she, together with her former husband (now deceased) Paulino Rendon, in the month of July, 1900, sold to the defendant a parcel of land, with the improvements thereon, located in the municipality of Atimonan in the Province of Tayabas, for the sum of $1,250 gold, or the sum of 2,999 pesos, Mexican currency, the sum of 2,999 pesos. Mexican currency, being the alleged value of the $1,250 gold at the time of the alleged sale. The plaintiff admitted that the defendant had paid on the said contact the sum of 2,500 pesos, and alleged that there was still due the sum of 499 pesos. The plaintiff prayed in her petition that the contract of sale be declared void for the failure of the defendant to comply with its

terms, and that said property be returned to her upon the payment by her, to the defendant, of the sum which the defendant had actually paid upon the said contract. To this petition the defendant demurred, which demurrer the court overruled. Upon the overruling of the demurrer, the defendant answered denying each and all of the facts alleged in the complaint and, for a special defense, alleged that the said action was prescribed; that the plaintiff had no interest in the litigation of the question presented, and that she signed the contract of purchase simply as the wife of Paulino Rendon; that he had never entered into a contract with the plaintiff for the purchase of the land in question. The lower court, after hearing the evidence adduced during the trial of the cause, said: The undisputed testimony shows that Paulino Rendon with his wife, the plaintiff in this case, sold a house and lot in Atimonan for $1,250, gold coin of the United States that being in circulation at the time. When the contract of sale came to be drawn up and signed to insure the payment in gold the consideration was made 2,999 pesos. It is admitted that only 2,500 pesos was paid on this sale, but it is insisted that silver being worth at that time 2 pesos for one gold dollar, that the obligation was discharged. This could not have been the agreement or the reasonable construction of it, or 2,999 pesos would not have been named as the consideration in the written contract of sale. It is urged that this plaintiff can not recover, because this amount of 499 pesos, if due any one, is due the estate of the deceased Paulino Rendon, and that only his administrator could maintain a suit for the amount. I can not agree with this theory of the plaintiff. It was the undisputed proof that she and her husband acquired the property long after their marriage in 1881; she is the absolute owner of one-half of the property under the law, and if there is no administration of her husband's estate this can not debar her of her right to recover her part of the estate. The children of the deceased Paulino Rendon may or may not be of age and may not wish to join in this suit. They are not parties to this suit and do not ask for an adjudication of their rights, but the plaintiff does. I am of the opinion that she has a legal rights to recover one-half of the amount contracted by the defendant to pay for the house, if not paid in $1,250 gold coin, less the 2,500 pesos, paid on the contract price. Therefore it is the order and judgment of this court that the plaintiff recover of the defendant 249.50 pesos, with interest at 6 per cent per annum, from this date, until paid, and the cost of this suit.

From this judgment of the lower court the defendant appealed and made the following assignments of error: First. That the lower court committed an error in conceding to the plaintiff, in his sentence, a remedy which was not prayed for in the complaint. Second. That the lower court committed an error in holding that the plaintiff was the proper person to maintain the action in question. With reference to the first assignment of error it will be noted that the plaintiff prayed that the contract of purchase be declared null and that the property be returned to her upon her returning to the defendant the amount of money which the defendant had already paid upon said contract. The lower court rendered a judgment in favor of the plaintiff for onehalf of the unpaid purchase price. The question presented in the petition was not even discussed by the lower court, to wit: the rights of the plaintiff to have the contract declared null and the property in question returned to her. The court, in rendering its decision, ought to have limited itself to the issues presented by the parties in their pleadings. With reference to the second assignment of error, the defendant and appellant, relying upon section 685 of the Code of Procedure in Civil Actions, contends that the plaintiff was without authority to maintain the present action. Said section 685 provides as follows: Community property. One-half the community property, as determined by the law in force in the Philippine Islands before the 13th day of August, 1898, belonging to a husband or wife, and shall be inventoried and accounted for, and distributed as a part of the estate, in the same manner as all other property belonging to the estate. This section has already been interpreted by this court in the case of Alfonso vs. Natividad (6 Phil. Rep., 240). In that case it was said (p.243): This section can not be so construed as to require one-half of the property of the conjugal partnership to be inventoried as the exclusive property of the deceased spouse before any settlement of the affairs of the partnership. Such a construction would be in direct violation of the law, which requires that the partnership property be used to pay its debts, and provides that one-half of the net proceeds only belong to each spouse. (Art. 1426, Civil Code.) This section (685) must that when the partnership affairs have been settled, and all its debts and obligations discharged, the one-half of the net proceeds shall be considered as the exclusive property of the deceased spouse. By the provisions of the new Code of Civil Procedure, in the settlement of the estates of deceased person, it is necessary to appoint

commissioners, before whom the creditors of the deceased must present their claims, within a time fixed by the court. The husband is the administrator of the conjugal partnership (art. 1512, Civil Code). Debts constructed during this administration by the husbands are payable out of the conjugal partnership property (art. 1422, Civil Code). The amount of the conjugal property to be distributed can not therefore, be determined until after the debts are paid. The surviving spouse can not claim one-half of the conjugal property until after the liquidation of the debts. While the proportion of the participation of the surviving spouse in the conjugal property is fixed by law, the amount can not be determined until after the debts are paid. It is true, under the provisions of the Code of Procedure in Civil Actions, that the heirs, if adults, may agree upon a division of the estate (sec. 596, Code of Procedure) by assuming the payment of the debts, if any, against the estate. Until it appears that the heirs may have by mutual agreement among themselves agreed to a division of the estate, assuming thereby the obligation to pay the debts, the wife, no more that any of the other heirs, has a right to sue for her participation in the conjugal property. Unless the adult heirs agree to a division of the inheritance, the estate must be administered in accordance with law, by the appointment of an administrator, and by the appointment of commissioners to hear claims against the estate. The judgment of the lower court is therefore declared to be of no effect and the cause is hereby remanded to the lower court with direction that such steps be taken as may be necessary for the proper division or administration of the estate of Paulino Rendon. Without any finding as to costs, it is ordered. Arellano, C.J., Torres, Mapa, Carson and Moreland, JJ., concur. Republic of the PhilippinesSUPREME COURTManila FIRST DIVISION G.R. No. 139173 February 28, 2007 SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners vs.GODOFREDO CAGUIAT, Respondent. DECISION SANDOVAL-GUTIERREZ, J.: Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision1 of the Court of Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824. Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.

Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised to pay the balance of the purchase price on or before March 23, 1990, thus: Las Pias, Metro Manila March 19, 1990 RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIAS, METRO MANILA RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE. SIGNED THIS 19th DAY OF MARCH, 1990 AT LAS PIAS, M.M. (SGD) AMPARO HERRERA (SGD) ONNIE SERRANO"2 On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of his readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale.3 On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter4 to respondent stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction. Petitioners also informed respondent that he can recover the earnest money of P100,000.00 anytime. Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his counsel Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him. In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067.6 On June 27, 1994, after hearing, the trial court rendered its Decision7 finding there was a perfected contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held:

xxx In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiffs position deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed that there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads as follows, to wit: Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending defendants the letter dated March 25, 1990. (Exh. D) and reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh. C). Defendants mere allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere afterthought. On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial courts judgment. Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its Resolution8 dated July 14, 1999. Hence, the present recourse. The basic issue to be resolved is whether the document entitled "Receipt for Partial Payment" signed by both parties earlier mentioned is a contract to sell or a contract of sale. Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 14589 in relation to Article 147510 of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the perfection of a contract of sale under Article 148211 of the same Code since there was no clear agreement between the parties as to the amount of consideration. Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except for cogent reasons.14 Indeed, they should not be changed on appeal in the absence of a clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight and significance, which if considered would have altered the result of the case.1awphi1.net12 In the present case, we find that both the trial court and the Court of Appeals interpreted some significant facts resulting in an erroneous resolution of the issue involved.

In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract." We are not convinced. In San Miguel Properties Philippines, Inc. v. Spouses Huang,13 we held that the stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into by the parties. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended.14 Thus, when petitioners declared in the said "Receipt for Partial Payment" that they RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE. there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price. A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price.15 The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v. Santos,16

we held that: x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not to pass until the full payment, of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract. In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price.17 In this case, the "Receipt for Partial Payment" shows that the true agreement between the parties is a contract to sell. First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Thus, petitioners need not push through with the sale should respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within the fixed period.18 Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price.19 Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property.20 It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price.21 Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. As previously discussed, the suspensive condition (payment of the

balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him. WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals is REVERSED and respondents complaint is DISMISSED. SO ORDERED. ANGELINA SANDOVAL-GUTIERREZAssociate Justice WE CONCUR: REYNATO S. PUNOChief JusticeChairperson C RENATO C. CORONAAssociate Justice (On official leave)ADOLFO S. AZCUNAAsscociate Justice

CANCIO C. GARCIAAssociate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNOChief Justice Footnotes Penned by Associate Justice Conchita Carpio Morales (now a member of this Court) and concurred in by Associate Justice Jainal D. Rasul and Associate Justice Bernardo P. Abesamis (both retired).
1 2 3 4 5 6 7 8 9

Exhibit "B," Records, p. 124. Exhibit "D," id., p. 125. Exhibit "2," id., p. 173. Exhibit "5," Rollo, p. 177. Records, pp. 1-4. Id., pp. 423-430. Id., p. 25.

Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other himself to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional.
10

Article 1475. The contract of sale is perfected at the moment

there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Article 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.
11

Gamaliel C. Villanueva and Irene C. Villanueva v. Court of Appeals, Spouses Jose and Leonila Dela Cruz, and Spouses Guido and Felicitas Pile, G.R. No. 107624, January 28, 1997, 267 SCRA 89.
12

G.R. No. 137290, July 31, 2000, 336 SCRA 737, citing Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994).
13

Tan v. Court of Appeals, G.R. No. 100942, August 12, 1992, 212 SCRA 586.
14

Philippine National Bank v. Court of Appeals and Lapaz Kaw Ngo, G.R. No. 119580, September 26, 1996, citing Rose Packing Co., Inc. v. Court of Appeals, 167 SCRA 309, 318 (1988) and Lim v. Court of Appeals, 182 SCRA 564, 670 (1990), with citations.
15 16 17 18

47 O.G. 6372 (1951). Id., citing Jacinto v. Kaparaz, 209 SCRA 246, 254 (1992).

Tomas K. Chua v. Court of Appeals and Encarnacion ValdesChoy, G.R. No. 119255, April 9, 2003, 401 SCRA 54.
19 20 21

Id. Id. Id. Republic of the PhilippinesSUPREME COURTManila FIRST DIVISION

G.R. No. 165168

July 9, 2010

SPS. NONILON (MANOY) and IRENE MONTECALVO, Petitioners, vs. HEIRS (Substitutes) OF EUGENIA T. PRIMERO, represented by their Attorney-in-Fact, ALFREDO T. PRIMERO, JR., Respondents. DECISION DEL CASTILLO, J.: Jurisprudence is replete with rulings that in civil cases, the party who alleges a fact has the burden of proving it. Burden of proof is the duty of a party to present evidence on the facts in issue necessary to prove the truth of his claim or defense by the amount of evidence required

by law.11 In this case, the petitioners awfully failed to discharge their burden to prove by preponderance of evidence that the Agreement they entered into with respondents' predecessor-in-interest is a contract of sale and not a mere contract to sell, or that said Agreement was novated after the latter subsequently entered into an oral contract of sale with them over a determinate portion of the subject property more than a decade ago. Petitioners filed this appeal from the Decision of the Court of Appeals (CA) affirming the Regional Trial Court's (RTC's) dismissal of their action for specific performance where they sought to compel the respondents to convey the property subject of their purported oral contract of sale. Factual Antecedents The property involved in this case is a portion of a parcel of land known as Lot No. 263 located at Sabayle Street, Iligan City. Lot No. 263 has an area of 860 square meters covered by Original Certificate of Title (OCT) No. 0-2712 registered in the name of Eugenia Primero (Eugenia), married to Alfredo Primero, Sr. (Alfredo). In the early 1980s, Eugenia leased the lot to petitioner Irene Montecalvo (Irene) for a monthly rental of P500.00. On January 13, 1985, Eugenia entered into an un-notarized Agreement3 with Irene, where the former offered to sell the property to the latter for P1,000.00 per square meter. They agreed that Irene would deposit the amount of P40,000.00 which shall form part of the down payment equivalent to 50% of the purchase price. They also stipulated that during the term of negotiation of 30 to 45 days from receipt of said deposit, Irene would pay the balance of P410,000.00 on the down payment. In case Irene defaulted in the payment of the down payment, the deposit would be returned within 10 days from the lapse of said negotiation period and the Agreement deemed terminated. However, if the negotiations pushed through, the balance of the full value of P860,000.00 or the net amount of P410,000.00 would be paid in 10 equal monthly installments from receipt of the down payment, with interest at the prevailing rate. Irene failed to pay the full down payment within the stipulated 30-45day negotiation period. Nonetheless, she continued to stay on the disputed property, and still made several payments with an aggregate amount of P293,000.00. On the other hand, Eugenia did not return the P40,000.00 deposit to Irene, and refused to accept further payments only in 1992. Thereafter, Irene caused a survey of Lot No. 263 and the segregation of a portion equivalent to 293 square meters in her favor. However, Eugenia opposed her claim and asked her to vacate the property. Then on May 13, 1996, Eugenia and the heirs of her deceased husband Alfredo filed a complaint for unlawful detainer against Irene and her

husband, herein petitioner Nonilon Montecalvo (Nonilon) before the Municipal Trial Court (MTC) of Iligan City. During the preliminary conference, the parties stipulated that the issue to be resolved was whether their Agreement had been rescinded and novated. Hence, the MTC dismissed the case for lack of jurisdiction since the issue is not susceptible of pecuniary estimation. The MTC's Decision dismissing the ejectment case became final as Eugenia and her children did not appeal therefrom.4 On June 18, 1996, Irene and Nonilon retaliated by instituting Civil Case No. II-3588 with the RTC of Lanao del Norte for specific performance, to compel Eugenia to convey the 293-square meter portion of Lot No. 263.5 Proceedings before the Regional Trial Court Trial on the merits ensued and the contending parties adduced their respective testimonial and documentary evidence before the trial court. Irene testified that after their Agreement for the purpose of negotiating the sale of Lot No. 263 failed to materialize, she and Eugenia entered into an oral contract of sale and agreed that the amount of P40,000.00 she earlier paid shall be considered as down payment. Irene claimed that she made several payments amounting to P293,000.00 which prompted Eugenia's daughters Corazon Calacat (Corazon) and Sylvia Primero (Sylvia) to ask Engr. Antonio Ravacio (Engr. Ravacio) to conduct a segregation survey on the subject property. Thereafter, Irene requested Eugenia to execute the deed of sale, but the latter refused to do so because her son, Atty. Alfredo Primero, Jr. (Atty. Primero), would not agree. On March 22, 1999, herein respondents filed with the court a quo a "Notice of Death of the Defendant"6 manifesting that Eugenia passed away on February 28, 1999 and that the decedent's surviving legal heirs agreed to appoint their co-heir Atty. Primero, to act as their representative in said case. In an Order7 dated April 8, 1999, the trial court substituted the deceased defendant with Atty. Primero. Respondents, on the other hand, presented the testimony of Atty. Primero to establish that Eugenia could not have sold the disputed portion of Lot No. 263 to the petitioners. According to Atty. Primero, at the time of the signing of the Agreement on January 13, 1985, Eugenia's husband, Alfredo, was already dead. Eugenia merely managed or administered the subject property and had no authority to dispose of the same since it was a conjugal property. In addition, respondents asserted that the deposit of P40,000.00 was retained as rental for the subject property. Respondents likewise presented Sylvia, who testified that the receipts

issued to petitioners were for the lot rentals.8 Another sister of Atty. Primero, Corazon, testified that petitioners were their tenants in subject land, which she co-owns with her mother Eugenia.9 She denied having sold the purported 293-square meter portion of Lot No. 263 to the petitioners.10 As rebuttal witness, petitioners presented Engr. Ravacio, a surveyor who undertook the segregation of the 293-square meter portion out of the subject property.11 On October 22, 2001, the RTC rendered a Decision:12 (1) dismissing the complaint and the counterclaim for lack of legal and factual bases; (2) ordering petitioners to pay respondents P2,500.00 representing rentals due, applying therefrom the amount deposited and paid; and (3) ordering petitioner to pay 12% legal interest from finality of decision until full payment of the amount due.13 Aggrieved, petitioners appealed the Decision of the trial court to the CA. Proceedings before the Court of Appeals Both parties filed their respective briefs before the appellate court.14 Thereafter, on November 28, 2003, the CA rendered a Decision15 affirming the RTC Decision.16 Petitioners timely filed a Motion for Reconsideration.17 However, in a Resolution18 dated June 27, 2004, the CA resolved to deny the same for lack of merit.19 Issues Petitioners thus filed this Petition for Review on Certiorari anchored on the following grounds. 1. WHETHER AN ORAL CONTRACT OF SALE OF A PORTION OF [A] LOT IS BINDING [UPON] THE SELLER. 2. WHETHER A SELLER IN AN ORAL CONTRACT OF SALE OF A PORTION OF [A] LOT CAN BE COMPELLED TO EXECUTE THE REQUIRED DEED OF SALE AFTER THE AGREED CONSIDERATION WAS PAID AND POSSESSION THEREOF DELIVERED TO AND ENJOYED BY THE BUYER. 3. WHETHER THE BUYER HAS A RIGHT TO ENFORCE AN ORAL CONTRACT OF SALE AFTER THE PORTION SOLD IS SEGREGATED BY AGREEMENT OF THE PARTIES. 4. WHETHER THE SELLER IS BOUND BY THE HANDWRITTEN RECEIPTS PREPARED AND SIGNED BY HER EXPRESSLY INDICATING PAYMENTS OF LOTS. 5. WHETHER THE TRIAL COURT COULD RENDER A JUDGMENT ON ISSUES NOT DEFINED IN THE PRE-TRIAL ORDER.

Our Ruling The petition lacks merit. The Agreement dated January 13, 1985 is a contract to sell. Hence, with petitioners' non-compliance with its terms and conditions, the obligation of the respondents to deliver and execute the corresponding deed of sale never arose. The CA found that the Agreement dated January 13, 1985 is not a contract of sale but a mere contract to sell, the efficacy of which is dependent upon the resolutory condition that Irene pay at least 50% of the purchase price as down payment within 30-45 days from the day Eugenia received the P40,000.00 deposit.20 Said court further found that such condition was admittedly not met.21 Petitioners admit that the Agreement dated January 13, 1985 is at most, "a preliminary agreement for an eventual contract."22 However, they argue that contrary to the findings of the appellate court, it was not only the buyer, Irene, who failed to meet the condition of paying the balance of the 50% down payment.23 They assert that the Agreement explicitly required Eugenia to return the deposit of P40,000.00 within 10 days, in case Irene failed to pay the balance of the 50% down payment within the stipulated period.24 Thus, petitioners posit that for the cancellation clause to operate, two conditions must concur, namely, (1) buyer fails to pay the balance of the 50% down payment within the agreed period and (2) seller should return the deposit of P40,000.00 within 10 days if the first condition was not complied with. Petitioners conclude that since both seller and buyer failed to discharge their reciprocal obligations, being in pari delictu, the seller could not repudiate their agreement to sell. The petitioners' contention is without merit. There is no dispute as to the due execution and existence of the Agreement. The issue thus presented is whether the said Agreement is a contract of sale or a contract to sell. For a better understanding and resolution of the issue at hand, it is apropos to reproduce herein the Agreement in haec verba: Agreement This Agreement, made and executed by and between: EUGENIA T. PRIMERO, a Filipino of legal age and residing in Camague, Iligan City (hereinafter called the OWNER) - and IRENE P. MONTECALVO, Filipino of legal age and presently residing at Sabayle St., Iligan City (hereinafter [called] the INTERESTED PARTY);

WITNESSETH: 1. That the OWNER is the true and absolute owner of a parcel of land located at Sabayle St. immediately fronting the St. Peter's College which is presently leased to the INTERESTED PARTY; 2. That the property referred to contains an area of EIGHT HUNDRED SIXTY SQUARE METERS at the value of One Thousand Pesos (P1,000.00) per square meters; 3. That this agreement is entered into for the purpose of negotiating the sale of the above referred property between the same parties herein under the following terms and conditions, to wit: a) That the term of this negotiation is for a period of Thirty to Forty Five (30-45) days from receipt of a deposit; b) That Forty Thousand Pesos (P40,000.00) shall be deposited to demonstrate the interest of the Interested Party to acquire the property referred to above, which deposit shall not earn any interest; c) That should the contract or agreement push through the deposit shall form part of the down payment of Fifty percent (50%) of the total or full value. Otherwise the deposit shall be returned within TEN (10) days from the lapse of the period of negotiation; 4. That should this push through, the balance of Four Hundred Ten Thousand on the down payment shall be made upon execution of the Agreement to Sell and the balance of the full value of Eight Hundred Sixty Thousand or Four Hundred Ten Thousand Pesos shall be paid in equal monthly installment within Ten (10) months from receipt of the down payment with [sic] according to prevailing interest. IN WITNESS WHEREOF, the parties have signed these presents in the City of Iligan this 13th day of January 1985. (Signed)IRENE PEPITO MONTECALVO (Signed)EUGENIA TORRES PRIMERO

SIGNED IN THE PRESENCE OF: (Signed) (Signed)

In Salazar v. Court of Appeals,25 we distinguished a contract of sale from a contract to sell in that in a contract of sale the title to the property passes to the buyer upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the seller and is not to pass to the buyer until full payment of the purchase price.

Otherwise stated, in a contract of sale, the seller loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the seller until full payment of the price.26 In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.27 In the Agreement, Eugenia, as owner, did not convey her title to the disputed property to Irene since the Agreement was made for the purpose of negotiating the sale of the 860-square meter property.28 On this basis, we are more inclined to characterize the agreement as a contract to sell rather than a contract of sale. Although not by itself controlling, the absence of a provision in the Agreement transferring title from the owner to the buyer is taken as a strong indication that the Agreement is a contract to sell.29 In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price.30 What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him.31 In other words, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.32 A contract to sell is commonly entered into in order to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor.33 In this case, the Agreement expressly provided that it was "entered into for the purpose of negotiating the sale of the above referred property between the same parties herein x x x." The term of the negotiation shall be for a period of 30-45 days from receipt of the P40,000.00 deposit and the buyer has to pay the balance of the 50% down payment amounting to P410,000.00 within the said period of negotiation. Thereafter, an Agreement to Sell shall be executed by the parties and the remainder of the purchase price amounting to another P410,000.00 shall be paid in 10 equal monthly installments from receipt of the down payment. The assumption of both parties that the purpose of the Agreement was for negotiating the sale of Lot No. 263, in its entirety, for a definite price, with a specific period for payment of a specified down payment, and the execution of a subsequent contract for the sale of the same on installment payments leads to no other

conclusion than that the predecessor-in-interest of the herein respondents and the herein petitioner Irene entered into a contract to sell. As stated in the Agreement, the payment of the purchase price, in installments within the period stipulated, constituted a positive suspensive condition, the failure of which is not really a breach but an event that prevents the obligation of the seller to convey title in accordance with Article 1184 of the Civil Code.34 Hence, for petitioners' failure to comply with the terms and conditions laid down in the Agreement, the obligation of the predecessor-in-interest of the respondents to deliver and execute the corresponding deed of sale never arose. The fact that the predecessor-in-interest of the respondents failed to return the P40,000.00 deposit subsequent to the expiration of the period of negotiation did not prevent the respondents from repudiating the Agreement. The obligation of the respondent to convey the property never came to pass as the petitioners did not comply with the positive suspensive condition of full payment of the purchase price within the period as stipulated. The alleged oral contract of sale for the 293-square meter portion of the property was not proved by preponderant evidence. Hence, petitioners cannot compel the successors-in-interest of the deceased Eugenia to execute a deed of absolute sale in their favor. Petitioners alleged in their Complaint that in 1992, Eugenia refused to accept further payments and suggested that she will convey to petitioners 293 square meters of her 860-square meter property, in proportion to payments already made. Thus, Eugenia caused the segregation of the area where the petitioners' building now stands, consisting of 293 square meters.1avvphi1 In support of their contention, petitioners presented the testimony of Irene, who testified that Eugenia segregated for them an area of 293 square meters for the agreed price of P1,000.00 per square meter.35 The total purchase price allegedly agreed upon by the parties, amounting to P293,000.00, corresponded to the amount of payments already made by Irene.36 They likewise presented (1) 82 receipts covering the period October 13, 1986 to July 10, 1994;37 (2) the testimony of the surveyor, Engr. Ravacio, to show that the segregation survey of the 293-square meter portion of the property was made with the knowledge and consent of Eugenia; and (3) the resulting subdivision plan. On the other hand, respondents counter that the alleged contract of sale is contradicted by petitioners' own evidence. We cannot sustain the contention of the petitioners. The primal issue

to be resolved is whether the parties subsequently entered into a contract of sale over the segregated 293-square meter portion of Lot No. 263. It is a fundamental principle that for a contract of sale to be valid, the following elements must be present: (a) consent or meeting of the minds; (b) determinate subject matter; and (3) price certain in money or its equivalent.38 Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.39 Contrary to petitioners' allegations that the 82 receipts indicated that they were issued "for payment of lot (at Sabayle)",40 a cursory examination thereof shows that the receipts from 1986 to 1992 do not consistently indicate "Sabayle Lot" or "Sabayle Lot Deposit". More than half of the receipts presented merely indicated receipt of differing sums of money from the petitioners. In addition, the receipts for the years 1993 to 1994 do not establish installment payments for the purchase of the disputed portion of Lot No. 263. Rather, the receipts indicate that the same were issued as proof of "cash advance",41 "cash for groceries, electric bill, water bill, telephone/long distance",42 "cash",43 "cash for mktg"44 and "x x x cash to be paid a month after".45 These are not consistent with the allegation of the petitioners that they have paid the full amount of the purchase price for the 293-square meter portion of the lot by 1992. Moreover, the testimony of petitioners' witness, surveyor Engr. Ravacio, shows that Eugenia was neither around when the survey was conducted nor gave her express consent to the conduct of the same.46 On the other hand, respondents' witness, Sylvia, testified that the receipts issued to the petitioners were for the lot rentals.47 In addition, respondents' third witness, Corazon, testified that petitioners were their tenants in subject land, which she co-owns with her mother Eugenia, and disclaimed any sale of any portion of their lot to the petitioners.48 Thirdly, since the surveyor himself, Engr. Ravacio, admitted that Eugenia did not give her express consent to the conduct of the segregation plan, the resulting subdivision plan, submitted by the petitioners to the trial court to prove that Eugenia caused the segregation of the 293-square meter area, cannot be appreciated. Section 1 of Rule 133 of the Rules of Court provides that in civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. However, the evidence presented by the petitioners, as considered above, fails to convince this Court that Eugenia gave her consent to the purported oral deed of sale for the 293-square meter portion of her property. We are hence in agreement with the finding of the CA that there was no contract of sale between the parties. As a consequence, petitioners cannot rightfully compel the

successors-in-interest of Eugenia to execute a deed of absolute sale in their favor. The courts below correctly modified the rental award to P2,500.00 per month. Lastly, petitioners argue that the courts below erred in imposing a P2,500.00 monthly rental from 1985 onwards, since said amount is far greater than the last agreed monthly rental (December 1984) of P500.00. In its Decision, the CA affirmed the ruling of the RTC "that the trial court had authority to fix a reasonable value for the continued use and occupancy of the leased premises after the termination of the lease contract, and that it was not bound by the stipulated rental in the contract of lease since it is equally settled that upon termination or expiration of the contract of lease, the rental stipulated therein may no longer be the reasonable value for the use and occupation of the premises as a result of the change or rise in values. Moreover, the trial court can take judicial notice of the general increase in rentals of real estate especially of business establishments".49 The appellate court likewise held that the petitioners failed to discharge their burden to show that the said price was exorbitant or unconscionable.50 Hence, the CA found no reason to disturb the trial court's decision ordering the petitioners to pay P2,500.00 as monthly rentals.51 The appellate court further held that "to deprive Eugenia of the rentals due her as the owner-lessor of the subject property would result to unjust enrichment on the part of Irene."52 The courts below correctly took judicial notice of the nature of the leased property subject of the case at bench based on its location and commercial viability. As described in the Agreement, the property is immediately in front of St. Peter's College.53 More significantly, it is stated in the Declaration of Real Property submitted by the petitioners as evidence in the trial court, that the property is used predominantly for commercial purposes.54 The assessment by the trial court of the area where the property is located is therefore fairly grounded. Furthermore, the trial court also had factual basis in arriving at the said conclusion, the same being based on the un-rebutted testimony of a witness who is a real estate broker. With respect to the prevailing valuation of the property in litigation, witness Atty. Primero, a licensed real estate broker testified that: x x x There is no fixed pricing for each year because it always depends on the environment so that if the price in 1986, as you were referring to 1986, it would have risen or increased from P1,000.00, then it would increase to P3,000.00, then it would increase to P7,000.00 and again increase to P15,000.00 and right now the current price of property in that area is P25,000.00 per square meter.55

The RTC rightly modified the rental award to P2,500.00 per month, considering that it is settled jurisprudence that courts may take judicial notice of the general increase in rentals, particularly in business establishments. WHEREFORE, the petition is DENIED. The November 28, 2003 Decision of the Court of Appeals affirming the October 22, 2001 Decision of the Regional Trial Court of Lanao del Norte, Branch 2, is hereby AFFIRMED. SO ORDERED. MARIANO C. DEL CASTILLOAssociate Justice WE CONCUR: RENATO C. CORONAChief JusticeChairperson ARTURO D. BRION*Associate Justice ROBERTO A. ABAD**Associate Justice

JOSE PORTUGAL PEREZAssociate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. RENATO C. CORONAChief Justice Footnotes
* ** 1 2 3 4 5 6 7 8 9

Per Special Order No. 856 dated July 1, 2010. Per Special Order No. 869 dated July 5, 2010. Rules of Court, Rule 131, Section 1. Folder of Exhibits, p. 88. Id. at 1. CA rollo, pp. 55-56. Records, pp. 1-5. Id. at 208. Id. at 219; penned by Presiding Judge Maximo B. Ratunil. TSN, August 16, 2000, pp. 9-10. TSN, October 11, 2000, pp. 5-12. Id. TSN, January 30, 2001, pp. 19-21.

10 11

Records, pp. 360-379; penned by Presiding Judge Maximo B. Ratunil.

12 13 14 15

Rollo, p. 96. CA rollo, p. 46-170.

Id. at 203-210; penned by Associate Justice Elvi John S. Asuncion and concurred in by Associate Justices Renato C. Dacudao and Lucas P. Bersamin (now a Member of this Court).
16

Id. at 209. The dispositive portion of the said Decision reads: WHEREFORE, the foregoing considered, the October 22, 2001 Decision of the Regional Trial Court of Lanao del Norte, Iligan City, Branch 02 is AFFIRMED.

17 18 19

Id. at 211-224. Id. at 242. Id. The July 27, 2004 Resolution of the Court of Appeals reads: Acting on the plaintiffs-appellants' "Motion for Reconsideration of our November 28, 2003 Decision, the Court finds no new matters which were not taken into consideration in arriving at the said decision and/or which would warrant a reversal or modification thereof. Since there exists no plausible, factual or legal basis to grant the reconsideration sought, the above motion is hereby DENIED for lack of merit. SO ORDERED.

20 21 22 23 24 25 26 27 28

Rollo, p. 44. Id. Id. at 203. Id. at 20. Id. 327 Phil. 944, 955 (1996). Id. Id.

Exhibit "A", Formal Offer of Evidence for the plaintiff, herein petitioners, p.1.
29 30 31 32

Lacanilao v. Court of Appeals, 330 Phil. 1074, 1080 (1996). Coronel v. Court of Appeals, 331 Phil. 294, 309 (1996). Id. Id.

33 34

The City of Cebu v. Heirs of Rubi, 366 Phil. 70, 80 (1999).

Art. 1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place.
35 36 37

TSN, April 3, 1997, p. 57. Id.

Formal Offer of Evidence for the plaintiffs, herein petitioners, pp. 2-83. Del Prado v. Spouses Caballero, G.R. No. 148225, March 3, 2010.
38 39 40 41

Abalos v. Dr. Macatangay, Jr., 482 Phil. 877, 885 (2004). Rollo, p. 25.

Exhibit "B-73", Formal Offer of Evidence by the plaintiffs, herein petitioners, p. 75.
42 43 44 45 46

Exhibit "B-74", id. at 76. Exhibit "B-75", id. at 77. Exhibit "B-76", id. at 78. Exhibit "B-77", id. at 79. TSN, January 30,2001, pp. 19- 21 reads: xxxx Q: You never attempted to inform Mrs. Eugenia Primero with respect to the survey? A: No, Your Honor. Q: So, you mean to say that there was no knowledge that said Eugenia Primero was not around during the second survey? A: Yes, Your Honor. Court: Proceed. Atty. Tampus: Why was Atty. Primero present during the first schedule of your segregation? A: I think, that he was there to witness this segregation survey but as I have said the segregation was aborted because there was no agreement about the area and the portions to be segregated.

Atty. Tampus: Okay. Now who was represented by Atty. Primero? A: His Mother. xxxx Court: Now do you know Eugenia Primero? A: Yes, Your Honor. Q: Personally you know her, Eugenia Primero? A: Yes, Your Honor. xxxx [47 TSN, August 16, 2000, pp. 9-10 reads: xxxx Atty. Marohombsar: Q: Will you go over these receipts again and tell the Honorable Court how did you come to prepare these receipts or why did you prepare these receipts? A: Oftentimes, my mother is not around so I am the one issuing the receipts. Q: And why did you issue these receipts? A: So that they can have the duplicate of the payments which we received. Q: Payment for what? A: For the lot rentals. Q: When you issued these receipts, [was] Mrs. Montecalvo present? A: Yes, sir. Q: And these receipts were issued in relation to the lot which was rented by your mother to them and which was located in Sabayle? A: Yes Sir. xxxx Q: In what capacity [do] the Montecalvos [occupy or possess]? A: They are just renting. xxxx
48

TSN, October 11, 2000, pp. 5-12 reads:

xxxx Q: In other words, the properties are owned by all of you in common? A: Yes, sir. xxxx Q: What is this lot in Sabayle, who owns this lot in Sabayle? A: My parents and the children. Q: And were the Montecalvos able to rent this lot? A: Yes, sir. Q: When, if you know, more or less? A: If I can recall, it was [sometime] in 1979 or 1980. I cannot recall anymore it was between them. xxxx Q: Who was, if you know, collecting this monthly rental? A: My sister, Sylvia. xxxx Q: You said that plaintiffs are no longer paying rentals. Do you remember when they ceased to pay rentals? A: I think when they filed the case. Q: You are referring to this instant case? A: Yes. Q: When? A: 1994. xxxx Q: Do you know on your personal knowledge why they are no longer paying rentals? A: They considered themselves as the owner because the lot was sold to them. Q: Who sold the lot to them, if you know? A: Nobody. That was according to them that they already bought it. Q: Who sold it? A: According to them it was my mother. Q: In fact, the lot was sold to them by your mother? A: No.

Q: Mrs. Montecalvo testified here that you and Sylvia engaged the services of Engineer Ravacio to undertake the survey of the Sabayle lot for the purpose of segregating a portion thereof in favor of Mrs. Montecalvo. Did you engage the services of Engineer Ravacio to undertake the survey? A: No, sir. Q: Did you know Engineer Ravacio? A: No. xxxx Q: By the way, Madam Witness, did you agree for the sale of the lot to the Montecalvos? A: No, sir. Rollo, p. 47 citing Spouses Catungal v. Hao, 407 Phil. 309, 322323 (2001).
49 50 51 52 53

Id. Id. Id.

Exhibit "A", Formal Offer of Evidence for the plaintiffs, herein petitioners, p. 1.
54 55

Exhibit "C", id at 84. TSN, March 13, 2000, p. 95. Republic of the PhilippinesSUPREME COURTManila EN BANC

G.R. No. L-13299

July 25, 1960

PERFECTO ADRID, ET AL., plaintiff-appellant, vs.ROSARIO MORGA, ETC., defendant-appellee,and MAMERTO MORGA, ET AL., intervenors-appellees. F Fortunato Jose for appellants.Apolinar S. Fojas for appellee. MONTEMAYOR, J.: On August 8, 1938, Perfecto Adrid and his wife Carmen Silangcruz, then owners of No. 550 of the San Francisco Malabon Estate Subdivision, situated in General Trias, Cavite, execution a document entitled "Sale with Right to Repurchase", Exhibit A, purporting to sell the lot to Eugenio Morga for the sum of P2,000 with the right to repurchase the same within two yeas for the same sum of P2,000, plus 12% interest per annum. The vendors never repurchased said Lot No. 550. But in 1956, Perfecto Adrid and his son, (Carmen Silangcruz then being already dead) brought the present action against the administratrix of the deceased Eugenio Morga to recover the same Lot

No. 550, offering to pay the sum of P2,000, and asking for accounting of all the produce of the lot since 1938, this on the theory that the original contract of sale with pacto de retro (Exhibit A) was by acts of the parties to the said contract, converted into one of antichresis. The parties plaintiff and defendant instead of presenting evidence, submitted a stipulation of facts with the prayer that decision be rendered on the basis of such facts. For purposes of reference, we reproduce the pertinent portions of said stipulation of facts: 1. That on August 8, 1938, the spouses Perfecto Adrid and Carmen Silangcruz executed a deed of sale for P2,000.00 with 12% interest per annum with right to repurchase Lot No. 550 of the Malabon Estate within the period of two (2) years from date and covered by Trans. Cert. of Title No. 10028, Exh. "A"; 3. That said deed of sale was registered in the office of the Register of Deed of Cavite and inscribed at the back of Trans. Cert. of Title No. 10028, covering lot 550, on August 11, 1939, a copy of which is hereto attached as Exh. "B"; 4. That on August 8, 1938, the date of the execution of said deed of sale with the right to repurchase, the vendee Eugenio Morga took possession of the land and benefited himself of the yearly produce of palay, and upon his death on August 25, 1952, said possession and yearly harvest of palay were transferred to his heirs, the herein defendant and intervenors; 5. That in par. 5 of the national document Exh. "A" there is stipulation which reads: "Should we Perfecto Adrid and Carmen Silangcruz, fail to repurchase the abovementioned parcel of land under the stipulations above mentioned, then Eugenio Morga shall be the complete and absolute owner of the same without the necessity of further executing a deed of conveyance or any other document"; 6. That this lot 550 appears assessed in the names of the spouses Perfecto Adrid and Carmen Silangcruz under Tax Declaration No. 47, Exh. "C', and its yearly taxes amounting to P17.00 were being paid by Eugenio Morga; 11. That the yearly harvest of palay of this lot No. 550 (is) 30 cavanes net since its area is 35,844 square meter, as stated in Trans. Cert. of Title No. 10028, and that the price cavan is P10.00. The Court of First Instance of Cavite on July 15, 1957, rendered a decision, the disposition part of which reads as follows: In view of the foregoing considerations, this Court is of the opinion and so holds that the contract entered into between the spouses Perfecto Adrid and Carmen Silangcruz on one hand, and

the spouses Eugenio Morga and Genoveva Vasquez on the other, is a contract of sale with the right to repurchase. The plaintiffs having failed to repurchase the land within the stipulated period of two years from the date of the execution of the contract, the title of the deceased vendee a retro, Eugenio Morga and Genoveva Vasquez, became consolidated by operation of law. . . . Wherefore judgment is hereby rendered against the plaintiffs, with costs. They are likewise ordered to pay the amount of P1,350.00 as attorney's fees. We have carefully studied this case, examined the document entitled "Sale with Right to Repurchase" (Exhibit A) and the acts of the parties thereto subsequent to its execution and we have come to the conclusion that the intention of the parties was merely for Perfecto and his wife Carmen to borrow the sum of P2,000 from Eugenio Morga, Lot No. 550 being given as security. In other words, we have here a clear case of equitable mortgage. Otherwise, there would be no reason for the agreement made for the payment of 12% interest per annum. This interest must refer to the use of P2,000 by the alleged vendors until the same shall have been paid to Eugenio. The parties to the contract must have contemplated the lot remaining in the possession of the vendors inasmuch as it was considered a mere security. However, after the execution of the contract, the creditor, Morga according to the contention of the plaintiff, decision to take possession of the land, pending payment of the loan , finding it financially advantageous to receive the products thereof, valued at P300.00 a year, in lieu of the payment of interest at 12% a year, which would only be P240.00. But this did not convert, as contended by plaintiffs, the contract from a sale with pacto de retro to that of antichresis. Some of the the reasons behind our conclusion that the present case is one of equitable mortgage, are the following. Despite the expiration of the two year period for the alleged repurchase, which should have been done in 1940, neither Morga nor his heir have consolidated their title to the land. The certificate of title remained in the name of the alleged vendors. Not only this, but the tax declaration for the lot also remained in the name of said vendors, and all these years, Eugenio during his lifetime, and his heirs after his death, continued to pay the real estate tax in the name of the vendors.1 It is also a fact that the price of P2,000 would be rather inadequate for the supposed sale of Lot No. 550 which has an area of about 3 1\2 hectares and has a yearly production of thirty cavans of palay valued P10.00 a cavan, that is top say, P300.00 a year. A parcel of land with an annual production of P300.00 would or should command more than P2,000.00 for its sale. Besides, the contract provided for the payment of interest which is characteristic of a loan or equitable mortgage.2

The contention of plaintiffs that although the original contract was one of sale with right to repurchase, it was converted into one of antichresis just because the vendee took possession of the land, is clearly untenable. There is nothing in the document, Exhibit A, nor in the acts of the parties subsequent to its execution to show that the parties had entered into a contract of antichresis. In the case of Alojado vs. Lim Siongco, 51 Phil., 339 this Court said: What characterizes a contract of antichresis is that the creditor acquires the right to receive the fruits of the property of his debtor with the obligation to apply them to the payment of interest, if any is due, and then to the principal of his credit, and when such a covenant is not made in the contract which speaks unequivocally of a sale with right of repurchase, the contract is a sale with the right to repurchase and not an antichresis. In view of the foregoing, the appealed decision is hereby reversed. The defendants are hereby ordered to give up the possession of the lot in question to the appellants upon the payment of P2,000. No interest will be paid inasmuch as Eugenio and his heir have received the products of the land in lieu of the payment of interest. No costs. Paras, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Endencia, Barrera and Gutierrez David, JJ., concur. Footnotes
1 2

Escoto vs. Arcilla, 89 Phil., 199. Ocampo vs. Potenciano, 89 Phil., 159. R Republic of the PhilippinesSUPREME COURTManila S THIRD DIVISION

G.R. No. 70789 October 19, 1992 RUSTAN PULP & PAPER MILLS, INC., BIENVENIDO R. TANTOCO, SR., and ROMEO S. VERGARA, petitioners, vs.THE INTERMEDIATE APPELLATE COURT and ILIGAN DIVERSIFIED PROJECTS, INC., ROMEO A. LLUCH and ROBERTO G. BORROMEO, respondents. MELO, J.: When petitioners informed herein private respondents to stop the delivery of pulp wood supplied by the latter pursuant to a contract of sale between them, private respondents sued for breach of their covenant. The court of origin dismissed the complaint but at the same time enjoined petitioners to respect the contract of sale if circumstances warrant the full operation in a commercial scale of petitioners' Baloi plant and to continue accepting and paying for deliveries of pulp wood products from Romeo Lluch (page 14, Petition;

page 20, Rollo). On appeal to the then Intermediate Appellate Court, Presiding Justice Ramon G. Gaviola, Jr., who spoke for the First Civil Cases Division, with Justices Caguioa, Quetulio-Losa, and Luciano, concurring, modified the judgment by directing herein petitioners to pay private respondents, jointly and severally, the sum of P30,000.00 as moral damages and P15,000.00 as attorney's fees (pages 48-58, Rollo). In the petition at bar, it is argued that the Appellate Court erred;

A. . . . IN HOLDING PERSONALLY LIABLE UNDER THE CONTRACT OF SALE PETITIONER TANTOCO WHO SIGNED MERELY AS REPRESENTATIVE OF PETITIONER RUSTAN, AND PETITIONER VERGARA WHO DID NOT SIGN AT ALL; B. . . . IN HOLDING THAT PETITIONER RUSTAN'S DECISION TO SUSPEND TAKING DELIVERY OF PULP WOOD FROM RESPONDENT LLUCH, WHICH WAS PROMPTED BY SERIOUS AND UNFORESEEN DEFECTS IN THE MILL, WAS NOT IN THE LAWFUL EXERCISE OF ITS RIGHTS UNDER THE CONTRACT OF SALE; and C. . . . IN AWARDING MORAL DAMAGES AND ATTORNEY'S FEES IN THE ABSENCE OF FRAUD OR BAD FAITH. (page 18, Petition; page 24, Rollo)

The generative facts of the controversy, as gathered from the pleadings, are fairly simple. Sometime in 1966, petitioner Rustan established a pulp and paper mill in Baloi, Lano del Norte. On March 20, 1967, respondent Lluch, who is a holder of a forest products license, transmitted a letter to petitioner Rustan for the supply of raw materials by the former to the latter. In response thereto, petitioner Rustan proposed, among other things, in the letter-reply:
2. That the contract to supply is not exclusive because Rustan shall have the option to buy from other suppliers who are qualified and holder of appropriate government authority or license to sell and dispose pulp wood.

These prefatory business proposals culminated in the execution, during the month of April, 1968, of a contract of sale whereby Romeo A. Lluch agreed to sell, and Rustan Pulp and Paper Mill, Inc. undertook to pay the price of P30.00 per cubic meter of pulp wood raw materials to be delivered at the buyer's plant in Baloi, Lanao del Norte. Of pertinent significance to the issue at hand are the following stipulations in the bilateral undertaking:
3. That BUYER shall have the option to buy from other SELLERS who are equally qualified and holders of appropriate government authority or license to sell or dispose, that BUYER shall not buy from any other seller whose pulp woods being sold shall have been established to have emanated from the SELLER'S lumber and/or firewood concession. . . . And that SELLER has the priority to supply the pulp wood materials requirement of the BUYER; xxx xxx xxx 7. That the BUYER shall have the right to stop delivery of the said raw materials by the seller covered by this contract when supply of the

same shall become sufficient until such time when need for said raw materials shall have become necessarily provided, however, that the SELLER is given sufficient notice. (pages 8-9, Petition; pages 14-15, Rollo)

In the installation of the plant facilities, the technical staff of Rustan Pulp and Paper Mills, Inc. recommended the acceptance of deliveries from other suppliers of the pulp wood materials for which the corresponding deliveries were made. But during the test run of the pulp mill, the machinery line thereat had major defects while deliveries of the raw materials piled up, which prompted the Japanese supplier of the machinery to recommend the stoppage of the deliveries. The suppliers were informed to stop deliveries and the letter of similar advice sent by petitioners to private respondents reads:
Iligan Diversified Projects, Inc.Iligan City Attention: Mr. Romeo A. Lluch Dear Mr. Lluch: This is to inform you that the supply of raw materials to us has become sufficient and we will not be needing further delivery from you. As per the terms of our contract, please stop delivery thirty (30) days from today.

September 30, 196

RUSTA N PULP AND PAPER MILLS, INC. B y : DR. ROMEO S. VERGARA Resident Manager

Very truly yours,

Private respondent Romeo Lluch sought to clarify the tenor of the letter as to whether stoppage of delivery or termination of the contract of sale was intended, but the query was not answered by petitioners. This alleged ambiguity notwithstanding, Lluch and the other suppliers resumed deliveries after the series of talks between Romeo S. Vergara and Romeo Lluch. On January 23, 1969, the complaint for contractual breach was filed which, as earlier noted, was dismissed. In the process of discussing the merits of the appeal interposed therefrom, respondent Court clarified the eleven errors assigned below by herein petitioners and it seems that petitioners were quite satisfied with the Appellate Court's in seriatim response since petitioners trimmed down their discourse before this Court to three basic matters, relative to the nature of liability, the propriety of the stoppage, and the feasibility of awarding

moral damages including attorney's fees. Respondent Court found it ironic that petitioners had to exercise the prerogative regarding the stoppage of deliveries via the letter addressed to Iligan Diversified Project, Inc. on September 30, 1968 because petitioners never really stopped accepting deliveries from private respondents until December 23, 1968. Petitioner's paradoxial stance portrayed in this manner:

. . . We cannot accept the reasons given by appellees as to why they were stopping deliveries of pulp wood materials. First, We find it preposterous for a business company like the appellee to accumulate stockpiles of cut wood even after its letter to appellants dated September 30, 1968 stopping the deliveries because the supply of raw materials has become sufficient. The fact that appellees were buying and accepting pulp wood materials from other sources other than the appellants even after September 30, 1968 belies that they have more than sufficient supply of pulp wood materials, or that they are unable to go into full commercial operation or that their machineries are defective or even that the pulp wood materials coming from appellants are sub-standard. Second, We likewise find the court a quo's finding that "even with one predicament in which defendant Rustan found itself wherein commercial operation was delayed, it accommodated all its suppliers of raw materials, including plaintiff, Romeo Lluch, by allowing them to deliver all its stockpiles of cut wood" (Decision, page 202, Record on Appeal) to be both illogical and inconsistent. Illogical, because as appellee Rustan itself claimed "if the plant could not be operated on a commercial scale, it would then be illogical for defendant Rustan to continue accepting deliveries of raw materials." Inconsistent because this kind of "concern" or "accommodation" is not usual or consistent with ordinary business practice considering that this would mean adequate losses to the company. More so, if We consider that appellee is a new company and could not therefore afford to absorb more losses than it already allegedly incurred by the consequent defects in the machineries. Clearly therefore, this is a breach of the contract entered into by and between appellees and appellants which warrants the intervention of this Court. xxx xxx xxx . . . The letter of September 30, 1968, Exh. "D" shows that defendants were terminating the contract of sale (Exh. "A"), and refusing any future or further delivery whether on the ground that they had sufficient supply of pulp wood materials or that appellants cannot meet the standard of quality of pulp wood materials that Rustan needs or that there were defects in appellees' machineries resulting in an inability to continue full commercial operations. Furthermore, there is evidence on record that appellees have been accepting deliveries of pulp wood materials from other sources, i.e. Salem Usman, Fermin Villanueva and Pacasum even after September 30, 1968. Lastly, it would be unjust for the court a quo to rule that the contract of sale be temporarily suspended until Rustan, et al., are ready to accept deliveries from appellants. This would make the resumption of the contract purely dependent on the will of one party the appellees, and they could always claim, as they did in the instant case, that they have more than sufficient supply of pulp wood when in fact they have

been accepting the same from other sources. Added to this, the court a quo was imposing a new condition in the contract, one that was not agreed upon by the parties. (Pages B-10, Decision; Pages 55-57, Rollo)

The matter of Tantoco's and Vergara's joint and several liability as a result of the alleged breach of the contract is dependent, first of all, on whether Rustan Pulp and Paper Mills may legally exercise the right of stoppage should there be a glut of raw materials at its plant. And insofar as the express discretion on the part of petitioners is concerned regarding the right of stoppage, We feel that there is cogent basis for private respondent's apprehension on the illusory resumption of deliveries inasmuch as the prerogative suggests a condition solely dependent upon the will of petitioners. Petitioners can stop delivery of pulp wood from private respondents if the supply at the plant is sufficient as ascertained by petitioners, subject to re-delivery when the need arises as determined likewise by petitioners. This is Our simple understanding of the literal import of paragraph 7 of the obligation in question. A purely potestative imposition of this character must be obliterated from the face of the contract without affecting the rest of the stipulations considering that the condition relates to the fulfillment of an already existing obligation and not to its inception (Civil Code Annotated, by Padilla, 1987 Edition, Volume 4, Page 160). It is, of course, a truism in legal jurisprudence that a condition which is both potestative (or facultative) and resolutory may be valid, even though the saving clause is left to the will of the obligor like what this Court, through Justice Street, said in Taylor vs. Uy Tieng Piao and Tan Liuan (43 Phil. 873; 879; cited in Commentaries and Jurisprudence on the Civil Code, by Tolentino, Volume 4, 1991 edition, page 152). But the conclusion drawn from the Taylor case, which allowed a condition for unilateral cancellation of the contract when the machinery to be installed on the factory did not arrive in Manila, is certainly inappropriate for application to the case at hand because the factual milieu in the legal tussle dissected by Justice Street conveys that the proviso relates to the birth of the undertaking and not to the fulfillment of an existing obligation. In support of the second ground for allowance of the petition, petitioners are of the impression that the letter dated September 30, 1968 sent to private respondents is well within the right of stoppage guaranteed to them by paragraph 7 of the contract of sale which was construed by petitioners to be a temporary suspension of deliveries. There is no doubt that the contract speaks loudly about petitioners' prerogative but what diminishes the legal efficacy of such right is the condition attached to it which, as aforesaid, is dependent exclusively on their will for which reason, We have no alternative but to treat the controversial stipulation as inoperative (Article 1306, New Civil Code). It is for this same reason that We are not inclined to follow the

interpretation of petitioners that the suspension of delivery was merely temporary since the nature of the suspension itself is again conditioned upon petitioner's determination of the sufficiency of supplies at the plant. Neither are We prepared to accept petitioners' exculpation grounded on frustration of the commercial object under Article 1267 of the New Civil Code, because petitioners continued accepting deliveries from the suppliers. This conduct will estop petitioners from claiming that the breakdown of the machinery line was an extraordinary obstacle to their compliance to the prestation. It was indeed incongruous for petitioners to have sent the letters calling for suspension and yet, they in effect disregarded their own advice by accepting the deliveries from the suppliers. The demeanor of petitioners along this line was sought to be justified as an act of generous accommodation, which entailed greater loss to them and "was not motivated by the usual businessman's obsession with profit" (Page 34, Petition; Page 40, Rollo). Altruism may be a noble gesture but petitioners' stance in this respect hardly inspires belief for such an excuse is inconsistent with a normal business enterprise which takes ordinary care of its concern in cutting down on expenses (Section 3, (d), Rule 131, Revised Rules of Court). Knowing fully well that they will encounter difficulty in producing output because of the defective machinery line, petitioners opted to open the plant to greater loss, thus compounding the costs by accepting additional supply to the stockpile. Verily, the petitioner's action when they acknowledged that "if the plant could not be operated on a commercial scale, it would then be illogical for defendant Rustan to continue accepting deliveries of raw materials." (Page 202, Record on Appeal; Page 8, Decision; Page 55, Rollo). Petitioners argue next that Tantoco and Vergara should not have been adjudged to pay moral damages and attorney's fees because Tantoco merely represented the interest of Rustan Pulp and Paper Mills, Inc. while Romeo S. Vergara was not privy to the contract of sale. On this score, We have to agree with petitioners' citation of authority to the effect that the President and Manager of a corporation who entered into and signed a contract in his official capacity, cannot be made liable thereunder in his individual capacity in the absence of stipulation to that effect due to the personality of the corporation being separate and distinct from the person composing it (Bangued Generale Belge vs. Walter Bull and Co., Inc., 84 Phil. 164). And because of this precept, Vergara's supposed non-participation in the contract of sale although he signed the letter dated September 30, 1968 is completely immaterial. The two exceptions contemplated by Article 1897 of the New Civil Code where agents are directly responsible are absent and wanting. WHEREFORE, the decision appealed from is hereby MODIFIED in the sense that only petitioner Rustan Pulp and Paper Mills is ordered to pay

moral damages and attorney's fees as awarded by respondent Court. SO ORDERED. Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur. Republic of the PhilippinesSUPREME COURTManila THIRD DIVISION G.R. No. 170405 February 2, 2010 RAYMUNDO S. DE LEON, Petitioner, vs.BENITA T. ONG.1 Respondent. DECISION CORONA, J.: On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage3 stating: xxx xxx xxx That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions: 1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of [respondent] without any further cost whatsoever; 2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis supplied) xxx xxx xxx Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent and release the certificates of title.

Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed RSLAI of her agreement with petitioner for her to assume petitioners outstanding loan. RSLAI required her to undergo credit investigation. Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the certificates of title. Respondent persistently contacted petitioner but her efforts proved futile. On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus, petitioner fraudulently deprived her of the properties. Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition (i.e., that RSLAI approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the properties. Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with gross and evident bad faith. Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was subject to a condition. The perfection of a contract of sale depended on RSLAIs approval of the assumption of mortgage. Since RSLAI did not allow respondent to assume petitioners obligation, the RTC held that the sale was never perfected. In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of cause of action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorneys fees and the cost of suit. Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the court a quo erred in dismissing the complaint. The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he sold them to Viloria, it declared

the second sale void. Moreover, it found petitioner liable for moral and exemplary damages for fraudulently depriving respondent of the properties. In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to respondent and pay her P50,000 moral damages and P15,000 exemplary damages. Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.10 Hence, this petition,11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell. Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive condition, that is, the approval by RSLAI of respondents assumption of mortgage. Because RSLAI did not allow respondent to assume his (petitioners) obligation, the condition never materialized. Consequently, there was no sale. Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full ownership of the subject properties upon the execution of the deed. We modify the decision of the CA. Contract of Sale or Contract to Sell? The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to sell while the CA held that it was a contract of sale. In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.12 On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller can only sue for damages.13 The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a manner absolute and irrevocable" for a sum of P1.1 million.14 With regard to the manner of payment, it required respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance15 payable directly to

RSLAI (on behalf of petitioner) within a reasonable time.16 Nothing in said instrument implied that petitioner reserved ownership of the properties until the full payment of the purchase price.17 On the contrary, the terms and conditions of the deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the performance of the contract, not the perfection thereof nor the transfer of ownership. Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer.18 In this regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing sold. In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent and release his certificates of title to her. The totality of petitioners acts clearly indicates that he had unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into. Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this connection, Article 1186 of the Civil Code provides: Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Void Sale Or Double Sale? Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate occasions.20 However, the second sale was not void for the sole reason that petitioner had previously sold the same properties to respondent. On this account, the CA erred. This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller to the two different buyers in good faith. Article 1544 of the Civil Code provides: Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong

to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (emphasis supplied) This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith. A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or an 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 some other persons claim or interest in the property.21 The law requires, on the part of the buyer, lack of notice of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any defect in the sellers title. Was respondent a purchaser in good faith? Yes. Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the balance of petitioners outstanding obligation to RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioners obligation. However, because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself rendered respondents obligation to assume petitioners indebtedness to RSLAI impossible to perform. Article 1266 of the Civil Code provides: Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible without the fault of the obligor. Since respondents obligation to assume petitioners outstanding balance with RSLAI became impossible without her fault, she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition vis--vis the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is deemed to have fully complied with the condition of the payment of the remainder of the purchase price. Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the properties from petitioner after

the latter sold them to respondent. Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable. Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of deeds, the one who took prior possession of the properties shall be the lawful owner thereof. In this instance, petitioner delivered the properties to respondent when he executed the notarized deed22 and handed over to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became the lawful owner of the properties. Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled, respondents obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner. Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is because the provisions, terms and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title to respondent. We likewise affirm the award of damages. WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing the balance of the purchase price as provided in their March 10, 1993 agreement. Costs against petitioner. SO ORDERED. RENATO C. CORONAAssociate JusticeChairperson WE CONCUR: ANTONIO T. CARPIOAssociate Justice ANTONIO EDUARDO B. NACHURAAssociate Justice PRESBITERO J. VELASCO, JR. Associate Justice DIOSDADO M. PERALTA Associate Justice

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

of the Courts Division. RENATO C. CORONAAssociate JusticeChairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNOChief Justice Footnotes
* 1

Per Special Order No. 818 dated January 18, 2010.

The Court of Appeals was impleaded as respondent but was excluded pursuant to Section 4, Rule 45 of the Rules of Court. Covered by TCT Nos. 226469, 226470 and 226471 registered in the name of petitioner.
2

Rollo, pp. 55-56. There is a marked discrepancy between the total amount and the sum of the payments to be made by respondent (or P1,099,500).
3

The records of this case revealed that petitioners outstanding obligation to RSLAI amounted to P715,000 as of April 1, 1993.
4

Respondent had the properties cleaned and landscaped. She likewise had the house (built thereon) painted and repaired.
5 6 7 8 9

Docketed as Civil Case No. 93-2739. Penned by Judge Francisco A. Querubin. Id., pp. 129-151. Docketed as CA-G.R. CV No. 59748.

Penned by Associate Justice Eugenio S. Labitoria and concurred in by Associate Justices Eliezer R. delos Santos and Arturo D. Brion (now a member of this Court) of the Third Division of the Court of Appeals. Rollo, pp. 30-34.
10 11 12

Id., pp. 46-47. Under Rule 45 of the Rules of Court.

Dijamco v. Court of Appeals. G.R. No. 113665, 7 October 2004, 440 SCRA 190, 197. See also J.B.L. Reyes, 5 Outline of Philippine Civil Law, 2-3 (1957).
13 14 15 16

Id. Supra note 3. Supra note 4. Paragraph 2 of the deed did not prescribe a period within

which respondent should settle petitioners obligation to RSLAI.

17

See Civil Code, Art. 1370 which provides: Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the stipulations shall control. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

18

Civil Code, Art. 1495 provides: Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.

19

Civil Code, Art. 1498 provides: Article 1498. When a sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed. the contrary does not appear or cannot be clearly inferred. With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. (emphasis supplied)

See Delfin v. Lagon, G.R. No. 132262, 15 September 2006, 502 SCRA 24, 31.
20 21 22

Centeno v. Spouses Viray, 440 Phil. 881, 885 (2002). See Civil Code, Art. 1498. Republic of the PhilippinesSUPREME COURTManila SECOND DIVISION

G.R. No. 173881

December 1, 2010

HYATT ELEVATORS and ESCALATORS CORPORATION, Petitioner, vs.CATHEDRAL HEIGHTS BUILDING COMPLEX ASSOCIATION, INC., Respondent. DECISION PERALTA, J.: Before this Court is a petition for review on certiorari,1 under Rule 45 of the Rules of Court, seeking to set aside the April 20, 2006 Decision2 and July 31, 2006 Resolution3 of the Court of Appeals (CA), in CA-G.R. CV No. 80427. The facts of the case are as follows: On October 1, 1994, petitioner Hyatt Elevators and Escalators Corporation entered into an "Agreement to Service Elevators" (Service

Agreement)4 with respondent Cathedral Heights Building Complex Association, Inc., where petitioner was contracted to maintain four passenger elevators installed in respondent's building. Under the Service Agreement, the duties and obligations of petitioner included monthly inspection, adjustment and lubrication of machinery, motors, control parts and accessory equipments, including switches and electrical wirings.5 Section D (2) of the Service Agreement provides that respondent shall pay for the additional charges incurred in connection with the repair and supply of parts. Petitioner claims that during the period of April 1997 to July 1998 it had incurred expenses amounting to Php 1,161,933.47 in the maintenance and repair of the four elevators as itemized in a statement of account.6 Petitioner demanded from respondent the payment of the aforesaid amount allegedly through a series of demand letters, the last one sent on July 18, 2000.7 Respondent, however, refused to pay the amount. Petitioner filed with the Regional Trial Court (RTC), Branch 100, Quezon City, a Complaint for sum of money against respondent. Said complaint was docketed as Civil Case No. Q-01-43055. On March 5, 2003, the RTC rendered Judgment8 ruling in favor of petitioner, the dispositive portion of which reads: WHEREFORE, premises considered, JUDGMENT IS HEREBY RENDERED IN FAVOR OF THE PLAINTIFF AND AGAINST THE DEFENDANT ordering the latter to pay Plaintiff as follows: 1. The sum of P1,161,933.27 representing the costs of the elevator parts used, and for services and maintenance, with legal rate of interest from the filing of the complaint; 2. The sum of P50,000.00 as attorney's fees; 3. The costs of suit. SO ORDERED.9 The RTC held that based on the sales invoices presented by petitioner, a contract of sale of goods was entered into between the parties. Since petitioner was able to fulfill its obligation, the RTC ruled that it was incumbent on respondent to pay for the services rendered. The RTC did not give credence to respondent's claim that the elevator parts were never delivered and that the repairs were questionable, holding that such defense was a mere afterthought and was never raised by respondent against petitioner at an earlier time. Respondent filed a Motion for Reconsideration.10 On August 17, 2003, the RTC issued a Resolution11 denying respondent's motion. Respondent then filed a Notice of Appeal.12 On April 20, 2006, the CA rendered a Decision finding merit in respondent's appeal, the dispositive portion of which reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The Judgment of the Regional Trial Court, Branch 100, Quezon City, dated March 5, 2003, is hereby REVERSED and SET ASIDE. The complaint below is dismissed. SO ORDERED.13 In reversing the RTC, the CA ruled that respondent did not give its consent to the purchase of the spare parts allegedly installed in the defective elevators. Aside from the absence of consent, the CA also held that there was no perfected contract of sale because there was no meeting of minds upon the price. On this note, the CA ruled that the Service Agreement did not give petitioner the unbridled license to purchase and install any spare parts and demand, after the lapse of a considerable length of time, payment of these prices from respondent according to its own dictated price. Aggrieved, petitioner filed a Motion for Reconsideration,14 which was, however, denied by the CA in a Resolution dated July 31, 2006. Hence, herein petition, with petitioner raising a lone issue for this Court's resolution, to wit: WHETHER OR NOT THERE IS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND RESPONDENT WITH REGARDS TO THE SPARE PARTS DELIVERED AND INSTALLED BY PETITIONER ON THE FOUR ELEVATORS OF RESPONDENT AT ITS HOSPITAL UNDER THE AGREEMENT TO SERVICE ELEVATORS AS TO RENDER RESPONDENT LIABLE FOR THEIR PRICES?15 Before anything else, this Court shall address a procedural issue raised by respondent in its Comment16 that the petition should be denied due course for raising questions of fact. The determination of whether there exists a perfected contract of sale is essentially a question of fact. It is already a well-settled rule that the jurisdiction of this Court in cases brought before it from the CA by virtue of Rule 45 of the Revised Rules of Court is limited to reviewing errors of law. Findings of fact of the CA are conclusive upon this Court. There are, however, recognized exceptions to the foregoing rule, namely: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when, in making its findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the

petition, as well as in the petitioners main and reply briefs, are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.17 The present case falls under the 7th exception, as the RTC and the CA arrived at conflicting findings of fact. Having resolved the procedural aspect, this Court shall now address the substantive issue raised by petitioner. Petitioner contends that the CA erred when it ruled that there was no perfected contract of sale between petitioner and respondent with regard to the spare parts delivered and installed. It is undisputed that a Service Agreement was entered into by petitioner and respondent where petitioner was commissioned to maintain respondent's four elevators. Embodied in the Service Agreement is a stipulation relating to expenses incurred on top of regular maintenance of the elevators, to wit: SERVICE AND INSPECTION FEE: xxxx (2) In addition to the service fee mentioned in the preceding paragraph under this article, the Customer shall pay whatever additional charges in connection with the repair, supply of parts other than those specifically mentioned in ARTICLE A.2., or servicing of the elevator/s subject of this contract.18 Petitioner claims that during the period of April 1997 to July 1998, it had used parts in the maintenance and repair of the four elevators in the total amount of P1,161,933.47 as itemized in a statement of account19 and supported by sales invoices, delivery receipts, trouble call reports and maintenance and checking reports. Respondent, however, refuses to pay the said amount arguing that petitioner had not complied with the Standard Operating Procedure (SOP) following a breakdown of an elevator. As testified to by respondent's witness Celestino Aguilar, the SOP following an elevator breakdown is as follows: (a) they (respondent) will notify petitioner's technician; (b) the technician will evaluate the problem and if the problem is manageable the repair was done right there and then; (c) if some parts have to be replaced, petitioner will present the defective parts to the building administrator and a quotation is made; (d) the quotation is then indorsed to respondent's Finance Department; and (e) a purchase order is then prepared and submitted to the Board of Directors for approval.20 Based on the foregoing procedure, respondent contends that petitioner had failed to follow the SOP since no purchase orders from respondent's Finance Manager, or Board of Directors relating to the

supposed parts used were secured prior to the repairs. Consequently, since the repairs were not authorized, respondent claims that it has no way of verifying whether the parts were actually delivered and installed as alleged by petitioner. At the outset, this Court observes that the SOP is not embodied in the Service Agreement nor was a document evidencing the same presented in the RTC. The SOP appears, however, to be the industry practice and as such was not contested by petitioner. Nevertheless, petitioner offers an excuse for non-compliance with the SOP on its claim that the SOP was not followed upon the behest and request of respondent. A perusal of petitioner's petition and evidence in the RTC shows that the main thrust of its case is premised on the following claims: first, that the nature and operations of a hospital necessarily dictate that the elevators are in good running condition at all times; and, second, that there was a verbal agreement between petitioner's service manager and respondent's building engineer that the elevators should be running in good condition at all times and breakdowns should only last one day. In order to prove its allegations, petitioner presented Wilson Sua, its finance manager, as its sole witness. Sua testified to the procedure followed by petitioner in servicing respondent's elevators, to wit: Q: Can you tell us Mr. witness, what is the procedure actually followed whenever there is a need for trouble call maintenance or repair? A: The St. Lukes Cathedrals personnel, which includes the administrative officers, the guard on duty, or the receptionist, will call us through the phone if their elevators brake (sic) down. Q: Then, what happened? A: Immediately, we dispatched our technicians to check the trouble. Q: And who were these technicians whom you normally or regularly dispatched to attend to the trouble of the elevators of the defendant? A: With regard to this St. Lukes, we dispatched Sunny Jones and Gilbert Cinamin. Q: And what happened after dispatching these technicians? A: They come back immediately to the office to request the parts needed for the troubleshooting of the elevators. Q: Then what happened? A: A part will be brought to the project cite and they will install it

and note it in the trouble call report and have it received properly by the building guard or the receptionist or by the building engineers, and they will test it for a couple of weeks to determine if the parts are the correct part needed for that elevator and we will secure their approval, thereafter we will issue our invoices and delivery receipts. Q: This trouble call reports, are these in writing? A: Yes, sir. These are in writing and these are being written within that day. Q: Within the day of? A: Of the trouble. And have it received by the duly personnel of St. Lukes Cathedral. Q: And who prepared this trouble call reports? A: The technician who actually checked the elevator. Q: When do the parts being installed? A: On the same date they brought the parts on the project cite. Q: You mentioned sales invoice and delivery receipts. Who prepared these invoice? A: Those were prepared by our inventory clerk under my supervision? Q: How about the delivery receipts? A: Just the same. Q: When would the sales invoice be prepared? A: After the approval of the building engineer. Q: But at the time that the sales invoice and delivery receipts were being prepared after the approval of the building engineer, what happened to the parts? Were they already installed or what? A: They were already installed. Q: Now, why would the parts be installed before the preparation of the sales invoice and the delivery receipts? A: There was an agreement between the building engineer and our service manager that the elevator should be running in good condition at all times, breakdown should be at least one day only. It cannot stop for more than a day.21 On cross examination, Sua testified that the procedure was followed on the authority of a verbal agreement between petitioner's service

manager and respondent's engineer, thus: Q: So, you mean to say that despite the fact that material are expensive you immediately installed these equipments without the prior approval of the board? A: There is no need for the approval of the board since there is a verbal agreement between the building engineer and the Hyatt service manager to have the elevator run. Q: Aside from the building engineer, there is a building administrator? A: No, ma'am. He is already the building administrator and the building engineer. That is engineer Tisor. Q: And with regard to the fact that the delivery receipts were acknowledged by the engineer, is that true? A: Yes, ma'am. Q: You also mentioned earlier that aside from the building engineer, the receptionist and guards are also authorized. Are you sure that they are authorized to receive the delivery receipts? A: Yes, ma'am. It was an instruction given by Engineer Tisor, the building engineer and also the building administrator to have it received. Q: So, all these agreements are only verbally, it is not in writing? A: Yes, ma'am.22 In its petition, petitioner claims that because of the special circumstances of the building being a hospital, the procedure actually followed since October 1, 1994 was as follows: 1. Whenever any of the four elevators broke down, the administrative officers, security guard or the receptionist of respondent called petitioner by telephone; 2. Petitioner dispatched immediately a technician to the St. Lukes Cathedral Heights Building to check the trouble; 3. If the breakdown could be repaired without installation of parts, repair was done on the spot; 4. If the repair needed replacement of damaged parts, the technician went back to petitioners office to get the necessary replacement parts; 5. The technician then returned to the St. Lukes Cathedral Heights Building and installed the replacement parts and finished the repair; 6. The placement parts, which were installed in the presence of

the security guard, building engineers or receptionist of respondents whoever was available, were indicated in the trouble call report or sometimes in the delivery receipt and copy of the said trouble call report or delivery receipt was then given to the blue security guard, building engineers or receptionist, who duly acknowledged the same; 7. Based on the trouble call report or the delivery receipts, which already indicated the replacement parts installed and the services rendered, respondent should prepare the purchase order, but this step was never followed by respondent for whatever reason; 8. In the meantime, the elevator was tested for a couple of weeks to see if the replacement parts were correct and the approval of the building engineers was secured; 9. After the building engineers gave their approval that the replacement parts were correct or after the lapse of two weeks and nothing was heard or no complaint was lodged, then the corresponding sales invoices and delivery receipts, if nothing had been issued yet, were prepared by petitioner and given to respondent, thru its receptionists or security guards; 10. For its purposes, respondent should compare the trouble call reports or delivery receipts which indicated the replacement parts installed or with the sales invoices and delivery receipts to confirm the correctness of the transaction; 11. If respondent had any complaint that the parts were not actually installed or delivered or did not agree with the price of the parts indicated in the sales invoices, then it should bring its complaint or disagreement to the attention of petitioner. In this regard, no complaint or disagreement as to the prices of the spare parts has been lodged by respondent.23 In varying language, our Rules of Court, in speaking of burden of proof in civil cases, states that each party must prove his own affirmative allegations and that the burden of proof lies on the party who would be defeated if no evidence were given on either side.1avvphi1 Thus, in civil cases, the burden of proof is generally on the plaintiff, with respect to his complaint.24 In the case at bar, it is petitioner's burden to prove that it is entitled to its claims during the period in dispute. After an extensive review of the records and evidence on hand, this Court rules that petitioner has failed to discharge its burden. This Court finds that the testimony of Sua alone is insufficient to prove the existence of the verbal agreement, especially in view of the fact that respondent insists that the SOP should have been followed. It is an age-old rule in civil cases that one who alleges a fact has the burden of

proving it and a mere allegation is not evidence.25 The testimony of Sua, at best, only alleges but does not prove the existence of the verbal agreement. It may even be hearsay. It bears stressing, that the agreement was supposedly entered into by petitioner's service manager and respondent's building engineer. It behooves this Court as to why petitioner did not present their service manager and Engineer Tisor, respondent's building engineer, the two individuals who were privy to the transactions and who could ultimately lay the basis for the existence of the alleged verbal agreement. It should have occurred to petitioner during the course of the trial that said testimonies would have proved vital and crucial to its cause. Therefore, absent such testimonies, the existence of the verbal agreement cannot be sustained by this Court. Moreover, even assuming arguendo, that this Court were to believe the procedure outlined by Sua, his testimony26 clearly mentions that prior to the preparation of the sales invoices and delivery receipts, the parts delivered and installed must have been accepted by respondent's engineer or building administrator. However, again, petitioner offered no evidence of such acceptance by respondents engineer prior to the preparation of the sales invoices and delivery receipts. This Court is not unmindful of the fact that petitioner also alleges in its petition that the non-observance of the SOP was the practice way back in 1994 when petitioner started servicing respondent's elevators. On this note, petitioner argued in the following manner: And most importantly, the Court of Appeals failed to appreciate that the parts being sought to be paid by petitioner in the Complaint were delivered and installed during the period from April 1997 to July 1998, which followed the same actual procedure adopted since October 1, 1994. Based on the same procedure adopted because of the special circumstances of St. Luke's Cathedral Heights Building being a hospital, respondent has paid the replacement parts installed from October 1994 to March 1997. Never did respondent question the adopted actual procedure from October 1994 to March 1997. x x x27 Was the procedure claimed by petitioner the adopted practice since 1994? This Court rules that other than the foregoing allegation, petitioner has failed to prove the same. A perusal of petitioner's Formal Offer of Evidence28 would show that the only documents presented by it are sales invoices, trouble call reports and delivery receipts, all relating to the alleged transactions between 1997 to 1998. It is unfortunate that petitioner had failed to present in the RTC the documents from 1994 to 1996 for it may have proven that the nonobservance of the SOP was the practice since 1994. Such documents could have shown that respondent had paid petitioner in the past without objection on similar transactions under similar billing

procedures. The same would have also validated petitioner's claim that the secretary and security guards were all authorized to sign the documents. Unfortunately, for petitioner's cause, this Court has no basis to validate its claim, because other than its bare allegation in the petition, petitioner offers no proof to substantiate the same. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.29 The absence of any of the essential elements will negate the existence of a perfected contract of sale. In the case at bar, the CA ruled that there was no perfected contract of sale between petitioner and respondent, to wit: Aside from the absence of consent, there was no perfected contract of sale because there was no meeting of minds upon the price. As the law provides, the fixing of the price can never be left to the discretion of one of the contracting parties. In this case, the absence of agreement as to the price is evidenced by the lack of purchase orders issued by CHBCAI where the quantity, quality and price of the spare parts needed for the repair of the elevators are stated. In these purchase orders, it would show that the quotation of the cost of the spare parts earlier informed by Hyatt is acceptable to CHBCAI. However, as revealed by the records, it was only Hyatt who determined the price, without the acceptance or conformity of CHBCAI. From the moment the determination of the price is left to the judgment of one of the contracting parties, it cannot be said that there has been an arrangement on the price since it is not possible for the other contracting party to agree on something of which he does not know beforehand.30 Based on the evidence presented in the RTC, it is clear to this Court that petitioner had failed to secure the necessary purchase orders from respondent's Board of Directors, or Finance Manager, to signify their assent to the price of the parts to be used in the repair of the elevators. In Boston Bank of the Philippines v. Manalo,31 this Court explained that the fixing of the price can never be left to the decision of one of the contracting parties, to wit: A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.32 There would have been a perfected contract of sale had respondent

accepted the price dictated by petitioner even if such assent was given after the services were rendered. There is, however, no proof of such acceptance on the part of respondent. This Court shares the observation of the CA that the signatures of receipt by the information clerk or the guard on duty on the sales invoices and delivery receipts merely pertain to the physical receipt of the papers. It does not indicate that the parts stated were actually delivered and installed. Moreover, because petitioner failed to prove the existence of the verbal agreement which allegedly authorized the aforementioned individuals to sign in respondents behalf, such signatures cannot be tantamount to an approval or acceptance by respondent of the parts allegedly used and the price quoted by petitioner. Furthermore, what makes the claims doubtful and questionable is that the date of the sales invoice and the date stated in the corresponding delivery receipt are too far apart as aptly found by the CA, to wit: Further, We note that the date stated in the sales invoice vis-a-vis the date stated in the corresponding delivery receipt is too far apart. For instance, Delivery Receipt No. 3492 dated February 13, 1998 has a corresponding Sales Invoice No. 7147 dated June 30, 1998. What puts doubt to this transaction is the fact that the sales invoice was prepared only after four (4) months from the delivery. The considerable length of time that has lapsed from the delivery to the issuance of the sales invoice is questionable. Further the delivery receipts were received months after its preparation. In the case of Delivery Receipt No. 3850 dated November 26, 1997, Gumisad received this only on July 20, 1998, or after a lapse of eight (8) months. Such kind of procedure followed by Hyatt is certainly contrary to usual business practice, especially since in this case, it involves considerable amount of money.33 Based on the foregoing, the CA was thus correct when it concluded that "the Service Agreement did not give petitioner the unbridled license to purchase and install any spare parts and demand, after the lapse of a considerable length of time, payment of these prices from respondent according to its own dictated price."34 Withal, this Court rules that petitioner's claim must fail for the following reasons: first, petitioner failed to prove the existence of the verbal agreement that would authorize non-observance of the SOP; second, petitioner failed to prove that such procedure was the practice since 1994; and, third, there was no perfected contract of sale between the parties as there was no meeting of minds upon the price. To stress, the burden of proof is on the plaintiff. He must rely on the strength of his case and not on the weakness of respondent's defense. Based on the manner by which petitioner had presented its claim, this

Court is of the opinion that petitioner's case leaves too much to be desired. WHERFORE, premises considered, the petition is DENIED. The April 20, 2006 Decision and July 31, 2006 Resolution of the Court of Appeals, in CA-G.R. CV No. 80427, are AFFIRMED. SO ORDERED. DIOSDADO M. PERALTAAssociate Justice WE CONCUR: ANTONIO T. CARPIOAssociate JusticeChairperson ANTONIO EDUARDO B. NACHURAAssociate Justice ROBERTO A. ABADAssociate Justice

JOSE CATRAL MENDOZAAssociate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIOAssociate JusticeSecond Division, Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONAChief Justice Footnotes
1 2

Rollo, pp. 8-22.

Penned by Associate Justice Rosmari D. Carandang, with Associate Justices Andres B. Reyes, Jr. and Japar B. Dimaampao, concurring; id. at 27-39.
3 4 5 6 7 8 9

Id. at 41-42. Id. at 46-49. Id. at 47. Id. at 50-51. Id. at 52. Id. at 62-64. Id. at 64.

10 11 12 13 14 15 16 17

Records, pp. 141-153. Id. at 160. Rollo, p. 38. CA rollo, pp. 76-83. Id. at 164-165.

Rollo, p. 15. Id. at 67-105.

Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, G.R. No. 156132, October 16, 2006, 504 SCRA 378, 409; Herbosa v. Court of Appeals, 425 Phil. 431, 444 (2002).
18 19 20 21 22 23 24

Rollo, p. 48. Id. at 50-51. TSN, March 18, 2002, p. 11. TSN, January 25, 2002, pp. 7-9. (Emphasis supplied). Id. at 16-17. Rollo, pp. 18-19.

Villanueva v. Balaguer, G.R. No. 180197, June 23, 2009, 590 SCRA 661, 670. Heirs of Cipriano Reyes v. Calumpang, G.R. No.138463, October 30, 2006, 506 SCRA 56, 72.
25 26

Q: Then what happened? A: A part will be brought to the project cite and they will install it and note it in the trouble call report and have it received properly by the building guard or the receptionist or by the building engineers, and they will test it for a couple of weeks to determine if the parts are the correct part needed for that elevator and we will secure their approval, thereafter we will issue our invoices and delivery receipts. xxxx Q: How about the delivery receipts? A: Just the same. Q: When would the sales invoice be prepared? A: After the approval of the building engineer. (TSN, January 25, 2002, pp. 7-9) (Emphasis supplied.)

27 28

Rollo, p. 20. Folder of Exhibits, pp. 1-3.

29 30 31 32 33 34

New Civil Code, Art. 1458. G.R. No. 158149, February 9, 2006, 482 SCRA 108. Id. at 129. (Emphasis supplied.) Rollo, p. 36. Id. at 37-38. Republic of the PhilippinesSUPREME COURTManila FIRST DIVISION

Rollo, pp. 36-37.

G.R. No. 125531 February 12, 1997 JOVAN LAND, petitioner, vs.COURT OF APPEALS and EUGENIO QUESADA INC., respondents. HERMOSISIMA, JR., J.: This is a petition for review on certiorari to reverse and set aside the decision of the Court of Appeals in C.A.-G.R. CV No. 47515. Petitioner Jovan Land, Inc. is a corporation engaged in the real estate business. Its President and Chairman of the Board of Directors is one Joseph Sy. Private respondent Eugenio Quesada is the owner of the Q Building located on an 801 sq. m. lot at the corner of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. The property is covered by TCT No. 77796 of the Registry of Deeds of Manila. Petitioner learned from co-petitioner Consolacion P. Mendoza that private respondent was selling the aforesaid Mayhaligue property. Thus, petitioner through Joseph Sy made a written offer, dated July 27, 1987 for P10.25 million. This first offer was not accepted by Conrado Quesada, the General Manager of private respondent. Joseph Sy sent a second written offer dated July 31, 1989 for the same price but inclusive of an undertaking to pay the documentary stamp tax, transfer tax, registration fees and notarial charges. Check No. 247048, dated July 31, 1989, for one million pesos drawn against the Philippine Commercial and Industrial Bank (PCIB) was enclosed therewith as earnest money. This second offer, with earnest money, was again rejected by Conrado Quesada. Undaunted, Joseph Sy, on August 10, 1989, sent a third written offer for twelve million pesos with a similar check for one million pesos as earnest money. Annotated on this third letter-offer was the phrase "Received original, 9-4-89" beside which appears the signature of Conrado Quesada. On the basis of this annotation which petitioner insists is the proof that there already exists a valid, perfected agreement to sell the Mayhaligue property, petitioner filed with the trial court, a complaint for specific performance and collection of sum of money with damages. However, the trial court held that:

. . . the business encounters between Joseph Sy and Conrado Quesada had not passed the negotiation stage relating to the intended sale by the defendant corporation of the property in question. . . . As the court finds, there is nothing in the record to point that a contract was ever perfected. In fact, there is nothing in writing which is indispensably necessary in order that the perfected contract could be enforced under the Statute of Frauds. 1

Since the trial court dismissed petitioner's complaint for lack of cause of action, petitioner appealed 2 to respondent Court of Appeals before which it assigned the following errors:
1. The Court a quo failed to appreciate that there was already a perfected contract of sale between Jovan Land, Inc. and the private respondent]; 2. The Court a quo erred in its conclusion that there was no implied acceptance of the offer by appellants to appellee [private respondent]; 3. The Court a quo was in error where it concluded that the contract of sale was unenforceable; 4. The Court a quo failed to rule that appellant [petitioner] Mendoza is entitled to her broker's commission. 3

Respondent court placed petitioner to task on their assignment of errors and concluded that not any of them justifies a reversal of the trial court decision. We agree. In the case of Ang Yu Asuncion v. Court of Appeals, 4 we held that:

. . . [A] contract (Art. 1157, Civil Code), . . . is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. . . . A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded . . . . The perfection of the contract takes place upon the concurrence of the essential elements thereof.

Moreover, it is a fundamental principle that before contract of sale can be valid, the following elements must be present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. In the case at bench, petitioner, anchors its main argument on the annotation on its third letter-offer of the phrase "Received original, 9-489," beside which appears the signature of Conrado Quesada. It also contends that the said annotation is evidence to show that there was already a perfected agreement to sell as respondent can be said to have accepted petitioner's payment in the form of a check which was enclosed in the third letter. However, as correctly elucidated by the Court of Appeals:
Sy insisted in his testimony that this offer of P12M was accepted by Conrado Quesada but there is nothing written or documentary to show that such offer was accepted by Conrado Quesada. While Sy claimed that the acceptance could be gleaned from the notation in the third

written offer, the court is not impressed thereon however because the notation merely states as follows: "Received Original, (S) Conrado Quesada" and below this signature is "9-4-89". As explained by Conrado Quesada in his testimony what was received by him was the original of the written offer. The court cannot believe that this notation marked as Exhibit D-2 would signify the acceptance of the offer. Neither does it signify, as Sy had testified that the check was duly received on said date. If this were true Sy, who appears to be an intelligent businessman could have easily asked Conrado Quesada to indicate on Exhibit D the alleged fact of acceptance of said check. And better still, Sy could have asked Quesada the acceptance in writing separate of the written offer if indeed there was an agreement as to the price of the proposed sale of the property in question. 5

Clearly then, a punctilious examination of the receipt reveals that the same can neither be regarded as a contract of sale nor a promise to sell. Such an annotation by Conrado Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latter's offer. The requisites of a valid contract of sale are lacking in said receipt and therefore the "sale" is neither valid nor enforceable. Although there was a series of communications through letter-offers and rejections as evident from the facts of this case, still it is undeniable that no written agreement was reached between petitioner and private respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the requirements under the Statute of Frauds have not been complied with. Under the said provision, an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof. Petitioner also asseverates that the failure of Conrado Quesada to return the check for one million pesos, translates to implied acceptance of its third letter-offer. It, however, does not rebut the finding of the trial court that private respondent was returning the check but petitioner refused to accept the same and that when Conrado Quesada subsequently sent it back to petitioner through registered mail, the latter failed to claim its mail from the post office. Finally, we fittingly apply here the oft-repeated doctrine that the factual findings of the trial court, especially as regards the credibility of witnesses, are conclusive upon this court, unless the case falls under the jurisprudentially established exceptions. But this is a case that tenders no exceptional circumstance; rather, we find the observations of the trial court to be legally sound and valid:
. . . Joseph Sy's testimony is not impressive because of several inconsistencies herein pointed out. On the matter of earnest money, the same appears to be the idea solely of the [petitioner], assuming that he had intended to bind the [petitioner] corporation. In the written second offer . . . he had stated that the check of P1M had been enclosed (attached) therewith. The same check . . . was again

mentioned to be enclosed (attached) in the third written offer under date August 10, 1989 . . . . Sy testified in his direct examination that he had personally given this check to Conrado Quesada. But on cross examination, he reversed himself by saying that the check was given thru his [co-petitioner] Mendoza. Examining the third written offer, it appears that when it was first typewritten, this P11M was noted to have been corrected, and that as per his testimony, Sy had increased it to P12M. This is the reason according to Sy why there was a superimposition of the number "12" over the number "11" to mean P12M as the revised consideration for the sale of the property in question. 6

Respondent court thus concluded that:

. . . [since] the matter of evaluation of the credibility of witness[es] is addressed to the trial court and unless clearly contrary to the records before Us, the findings of the said court are entitled to great respondent on appeal, . . . it was Joseph Sy's idea to offer the earnest money, and the evidence to show that Joseph Sy accepted the same, is wanting. . . . 7

and accordingly affirmed the trial court judgment appealed from. As shown elucidated above, we agree with the findings and conclusions of the trial court and the respondent court. Neither has petitioner posited any new issues in the instant petition that warrant the further exercise by this court of its review powers. WHEREFORE, premises considered, this petition is DENIED. Costs against petitioner. Padilla, Bellosillo, Vitug and Kapunan, JJ., concur. Footnotes
1 As quoted in the Decision of the Court of Appeals dated June 28, 1996, pp. 3-4, Rollo, pp. 9-10. 2 Appeal was docketed as CA-G.R CV No. 47515 and raffled to the Eleventh Division with members: Associate Justices Minerva P. Gonzaga-Reyes, Ramon U. Mabutas, Jr. and Salvador J. Valdez, Jr. 3 Decision of the Court of Appeals, supra, p. 4, Rollo. p. 10. 4 238 SCRA 602 (1994). 5 Rollo, p. 55. 6 Id., p. 7, Rollo, p. 13. 7 Id., p. 9, Rollo, p. 15.

R Republic of the PhilippinesSUPREME COURTManila S THIRD DIVISION G.R. No. 107207 November 23, 1995 VIRGILIO R. ROMERO, petitioner, vs.HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG, respondents. VITUG, J.: The parties pose this question: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period? Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture and exportation of perlite filter

aids, permalite insulation and processed perlite ore. In 1988, petitioner and his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000 square meters. The project was made known to several freelance real estate brokers. A day or so after the announcement, Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring 1,952 square meters. Located in Barangay San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT No. 361402 in the name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the property and, except for the presence of squatters in the area, he found the place suitable for a central warehouse. Later, the Flores spouses called on petitioner with a proposal that should he advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters, private respondent would agree to sell the property for only P800.00 per square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional Sale," was executed between petitioner and private respondent. The simply-drawn contract read:
DEED OF CONDITIONAL SALE KNOW ALL MEN BY THESE PRESENTS: This Contract, made and executed in the Municipality of Makati, Philippines this 9th day of June, 1988 by and between: ENRIQUETA CHUA VDA. DE ONGSIONG, of legal age, widow, Filipino and residing at 105 Simoun St., Quezon City, Metro Manila, hereinafter referred to as the VENDOR; -andVIRGILIO R. ROMERO, married to Severina L. Lat, of Legal age, Filipino, and residing at 110 San Miguel St., Plainview Subd., Mandaluyong Metro Manila, hereinafter referred to as the VENDEE: W I T N E S S E T H : That WHEREAS, the VENDOR is the owner of One (1) parcel of land with a total area of ONE THOUSAND NINE HUNDRED FIFTY TWO (1,952) SQUARE METERS, more or less, located in Barrio San Dionisio, Municipality of Paraaque, Province of Rizal, covered by TCT No. 361402 issued by the Registry of Deeds of Pasig and more particularly described as follows: xxx xxx xxx WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land and the VENDOR has accepted the offer, subject to the terms and conditions hereinafter stipulated: NOW, THEREFORE, for and in consideration of the sum of ONE MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS (P1,561,600.00) ONLY, Philippine Currency, payable by VENDEE to in to (sic) manner set forth, the VENDOR agrees to sell to the VENDEE, their heirs, successors, administrators, executors, assign, all her rights, titles and interest in and to the property mentioned in the FIRST WHEREAS CLAUSE, subject to the following terms and conditions: 1. That the sum of FIFTY THOUSAND PESOS (P50,000.00) ONLY Philippine Currency, is to be paid upon signing and

execution of this instrument. 2. The balance of the purchase price in the amount of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY shall be paid 45 days after the removal of all squatters from the above described property. 3. Upon full payment of the overall purchase price as aforesaid, VENDOR without necessity of demand shall immediately sign, execute, acknowledged (sic) and deliver the corresponding deed of absolute sale in favor of the VENDEE free from all liens and encumbrances and all Real Estate taxes are all paid and updated. It is hereby agreed, covenanted and stipulated by and between the parties hereto that if after 60 days from the date of the signing of this contract the VENDOR shall not be able to remove the squatters from the property being purchased, the downpayment made by the buyer shall be returned/reimbursed by the VENDOR to the VENDEE. That in the event that the VENDEE shall not be able to pay the VENDOR the balance of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY after 45 days from written notification to the VENDEE of the removal of the squatters from the property being purchased, the FIFTY THOUSAND PESOS (P50,000.00) previously paid as downpayment shall be forfeited in favor of the VENDOR. Expenses for the registration such as registration fees, documentary stamp, transfer fee, assurances and such other fees and expenses as may be necessary to transfer the title to the name of the VENDEE shall be for the account of the VENDEE while capital gains tax shall be paid by the VENDOR. IN WITNESS WHEREOF, the parties hereunto signed those (sic) presents in the City of Makati MM, Philippines on this 9th day of June, 1988. (Sgd.) (Sgd.) VIRGILIO R. ROMERO ENRIQUETA CHUA VDA. DE ONGSIONG Vendee Vendor SIGNED IN THE PRESENCE OF: (Sgd.) (Sgd.) Rowena C. Ongsiong Jack M. Cruz 1

Alfonso Flores, in behalf of private respondent, forthwith received and acknowledged a check for P50,000.00 2 from petitioner. 3 Pursuant to the agreement, private respondent filed a complaint for ejectment (Civil Case No. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Paraaque. A few months later, or on 21 February 1989, judgment was rendered ordering the defendants to vacate the premises. The decision was handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the contract. The writ of execution of the judgment was issued, still later, on 30 March 1989. In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received from petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol,

counsel for petitioner, in his reply of 17 April 1989, refused the tender and stated:.

Our client believes that with the exercise of reasonable diligence considering the favorable decision rendered by the Court and the writ of execution issued pursuant thereto, it is now possible to eject the squatters from the premises of the subject property, for which reason, he proposes that he shall take it upon himself to eject the squatters, provided, that expenses which shall be incurred by reason thereof shall be chargeable to the purchase price of the land. 4

Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its Regional Director for Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of Paraaque for a grace period of 45 days from 21 April 1989 within which to relocate and transfer the squatter families. Acting favorably on the request, the court suspended the enforcement of the writ of execution accordingly. On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day grace period and his client's willingness to "underwrite the expenses for the execution of the judgment and ejectment of the occupants." 5 In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent, advised Atty. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his client's failure to evict the squatters from the premises within the agreed 60-day period. He added that private respondent had "decided to retain the property."
6

On 23 June 1989, Atty. Apostol wrote back to explain:

The contract of sale between the parties was perfected from the very moment that there was a meeting of the minds of the parties upon the subject lot and the price in the amount of P1,561,600.00. Moreover, the contract had already been partially fulfilled and executed upon receipt of the downpayment of your client. Ms. Ongsiong is precluded from rejecting its binding effects relying upon her inability to eject the squatters from the premises of subject property during the agreed period. Suffice it to state that, the provision of the Deed of Conditional Sale do not grant her the option or prerogative to rescind the contract and to retain the property should she fail to comply with the obligation she has assumed under the contract. In fact, a perusal of the terms and conditions of the contract clearly shows that the right to rescind the contract and to demand the return/reimbursement of the downpayment is granted to our client for his protection. Instead, however, of availing himself of the power to rescind the contract and demand the return, reimbursement of the downpayment, our client had opted to take it upon himself to eject the squatters from the premises. Precisely, we refer you to our letters addressed to your client dated April 17, 1989 and June 8, 1989. Moreover, it is basic under the law on contracts that the power to rescind is given to the injured party. Undoubtedly, under the circumstances, our client is the injured party. Furthermore, your client has not complied with her obligation under their contract in good faith. It is undeniable that Ms. Ongsiong deliberately refused to exert efforts to eject the squatters from the

premises of the subject property and her decision to retain the property was brought about by the sudden increase in the value of realties in the surrounding areas. Please consider this letter as a tender of payment to your client and a demand to execute the absolute Deed of Sale. 7

A few days later (or on 27 June 1989), private respondent, prompted by petitioner's continued refusal to accept the return of the P50,000.00 advance payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for rescission of the deed of "conditional" sale, plus damages, and for the consignation of P50,000.00 cash. Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of execution in Civil Case No. 7579 on motion of private respondent but the squatters apparently still stayed on. Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of Makati 8 rendered decision holding that private respondent had no right to rescind the contract since it was she who "violated her obligation to eject the squatters from the subject property" and that petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The court ruled that the provisions in the contract relating to (a) the return/reimbursement of the P50,000.00 if the vendor were to fail in her obligation to free the property from squatters within the stipulated period or (b), upon the other hand, the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price, amounted to "penalty clauses". The court added:
This Court is not convinced of the ground relied upon by the plaintiff in seeking the rescission, namely: (1) he (sic) is afraid of the squatters; and (2) she has spent so much to eject them from the premises (p. 6, tsn, ses. Jan. 3, 1990). Militating against her profession of good faith is plaintiffs conduct which is not in accord with the rules of fair play and justice. Notably, she caused the issuance of an alias writ of execution on August 25, 1989 (Exh. 6) in the ejectment suit which was almost two months after she filed the complaint before this Court on June 27, 1989. If she were really afraid of the squatters, then she should not have pursued the issuance of an alias writ of execution. Besides, she did not even report to the police the alleged phone threats from the squatters. To the mind of the Court, the so-called squatter factor is simply factuitous (sic). 9

The lower court, accordingly, dismissed the complaint and ordered, instead, private respondent to eject or cause the ejectment of the squatters from the property and to execute the absolute deed of conveyance upon payment of the full purchase price by petitioner. Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate court rendered its decision. 10 It opined that the contract entered into by the parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the object of the contract; that private respondent substantially complied with her obligation to evict the

squatters; that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract, and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the squatters within the 60-day period was not a penal clause. Thus, it concluded.

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE, and a new one entered declaring the contract of conditional sale dated June 9, 1988 cancelled and ordering the defendant-appellee to accept the return of the downpayment in the amount of P50,000.00 which was deposited in the court below. No pronouncement as to costs. 11

Failing to obtain a reconsideration, petitioner filed this petition for review on certiorari raising issues that, in fine, center on the nature of the contract adverted to and the P50,000.00 remittance made by petitioner. A perfected contract of sale may either be absolute or conditional 12 depending on whether the agreement is devoid of, or subject to, any condition imposed on the passing of title of the thing to be conveyed or on the obligation of a party thereto. When ownership is retained until the fulfillment of a positive condition the breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force. If the condition is imposed on an obligation of a party which is not complied with, the other party may either refuse to proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon the perfection of the contract itself, the failure of such condition would prevent the juridical relation itself from coming into existence. 13 In determining the real character of the contract, the title given to it by the parties is not as much significant as its substance. For example, a deed of sale, although denominated as a deed of conditional sale, may be treated as absolute in nature, if title to the property sold is not reserved in the vendor or if the vendor is not granted the right to unilaterally rescind the contract predicated on the fulfillment or nonfulfillment, as the case may be, of the prescribed condition. 14 The term "condition" in the context of a perfected contract of sale pertains, in reality, to the compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal prestation of the other party. The reciprocal obligations referred to would normally be, in the case of vendee, the payment of the agreed purchase price and, in the case of the vendor, the fulfillment of certain express warranties (which, in the case at bench is the timely eviction of the squatters on the property). It would be futile to challenge the agreement here in question as not being a duly perfected contract. A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. 15 The object of the sale, in the case before us, was specifically identified

to be a 1,952-square meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title No. 361402 of the Registry of Deeds for Pasig and therein technically described. The purchase price was fixed at P1,561,600.00, of which P50,000.00 was to be paid upon the execution of the document of sale and the balance of P1,511,600.00 payable "45 days after the removal of all squatters from the above described property." From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Under the agreement, private respondent is obligated to evict the squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. 16 This option clearly belongs to petitioner and not to private respondent. We share the opinion of the appellate court that the undertaking required of private respondent does not constitute a "potestative condition dependent solely on his will" that might, otherwise, be void in accordance with Article 1182 of the Civil Code 17 but a "mixed" condition "dependent not on the will of the vendor alone but also of third persons like the squatters and government agencies and personnel concerned." 18 We must hasten to add, however, that where the so-called "potestative condition" is imposed not on the birth of the obligation but on its fulfillment, only the obligation is avoided, leaving unaffected the obligation itself. 19 In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the obligee to choose between proceeding with the agreement or waiving the performance of the condition. It is this provision which is the pertinent rule in the case at bench. Here, evidently, petitioner has waived the performance of the condition imposed on private respondent to free the property from squatters. 20 In any case, private respondent's action for rescission is not warranted. She is not the injured party. 21 The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. 22 It is private respondent who has failed in her obligation under the contract. Petitioner did not breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and demanded forthwith the

execution of the deed of absolute sale. Parenthetically, this offer to pay, having been made prior to the demand for rescission, assuming for the sake of argument that such a demand is proper under Article 1592 23 of the Civil Code, would likewise suffice to defeat private respondent's prerogative to rescind thereunder. There is no need to still belabor the question of whether the P50,000.00 advance payment is reimbursable to petitioner or forfeitable by private respondent, since, on the basis of our foregoing conclusions, the matter has ceased to be an issue. Suffice it to say that petitioner having opted to proceed with the sale, neither may petitioner demand its reimbursement from private respondent nor may private respondent subject it to forfeiture. WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED AND SET ASIDE, and another is entered ordering petitioner to pay private respondent the balance of the purchase price and the latter to execute the deed of absolute sale in favor of petitioner. No costs. SO ORDERED. Feliciano, Romero, Melo and Panganiban, JJ., concur. Footnotes
1 Records, pp. 60-61. 2 Exh. 9. 3 Exh. 2. 4 Records, p. 116. 5 Exh. 8-B. 6 Exh. D. 7 Records, pp. 74-75. 8 Presided by Judge Buenaventura J. Guerrero. 9 Records, p. 205. 10 Penned by Associate Justice Fermin A. Martin, Jr. and concurred in by Associate Justices Emeterio C. Cui and Cezar D. Francisco. 11 Rollo, p. 46. 12 Art. 1458, second paragraph, Civil Code of the Philippines. 13 See Ang Yu Asuncion, et al., vs. Court of Appeals, 238 SCRA 602. 14 Ibid., Vol. V, p. 3 citing Dignos v. Court of Appeals, No. L-59266, February 29, 1988, 158 SCRA 375. 15 Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. 16 Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his

promise to accept and pay for the thing. 17 Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. 18 Decision, p. 17. 19 See Osmea vs. Rama, 14 Phil. 99. 20 See: Intestate Estate of the Late Ricardo P. Presbitero, Sr. v. Court of Appeals, 217 SCRA 372. 21 In Boysaw v. Interphil. Promotions, Inc. (148 SCRA 635, 643), the Court has said: "The power to rescind is given to the injured party. 'Where the plaintiff is the party who did not perform the undertaking which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the contract by the defendant, or recover damages by reason of his own breach.'" 22 Deiparine, Jr. v. Court of Appeals, 221 SCRA 503, 513 citing Universal Food Corporation v. Court of Appeals, 33 SCRA 1. 23 See Ocampo v. Court of Appeals, supra. Art. 1592 states: "In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term."

Republic of the PhilippinesSUPREME COURTManila FIRST DIVISION G.R. No. 123655 January 19, 2000 ANGEL BAUTISTA, petitioner, vs.COURT OF APPEALS, PEDRO ATIENZA (for himself and as Attorney-in-Fact of Julita Atienza, Benedicto De Leon and Rizalino Atienza), AMELIA ATIENZA, GREGORIO ATIENZA, CONRADO ATIENZA and REALTY BARON CORPORATION, respondents. PUNO, J.: This case arose from an action for specific performance and damages filed by Angel Bautista1 (petitioner) against the Atienzas (respondents), namely, Pedro Atienza (for himself and as the Attorney-in-Fact of Julita Atienza, Benedicto De Leon and Rizalino Atienza), Amelia Atienza, Gregorio Atienza and Conrado Atienza, all compulsory heirs of spouses Artemio Atienza and Esperenza Trinidad. The records show that on April 13, 1977, respondents sold to petitioner a parcel of land in Tagaytay City, with an area of approximately 158,386 square meters, for one million five hundred thousand pesos (P1,500,000.00).2 At the time of the sale, the lot was still registered in the names of the deceased parents of the respondents under TCT No. T-6744 of the Register of Deeds of Cavite. The Contract of Sale3 provides, inter alia:

CONTRACT OF SALE xxx xxx xxx WHEREAS, the above named forced and/or compulsory heirs, herein referred to as the SELLERS, have agreed as they hereby agree, to enter into a Contract of Sale with the BUYER involving the property covered by TCT No. T-6744; NOW, THEREFORE, for and in consideration of ONE MILLION FIVE HUNDRED THOUSAND PESOS (P1,500,000.00) the SELLERS hereby cede, transfer and convey and sell, as by these presents, the SELLERS ceded, transfer(red), convey(ed) and sold, unto the BUYER, his heirs, successors in interest, assigns, executor or administrator, any and all their rights, title, interest, share or participation, in and over the property covered by TCT No. T6744 under the following terms and conditions: TERMS OF PAYMENT: a) The sum of TEN THOUSAND PESOS (P10,000.00) shall be paid by the BUYER to the SELLERS upon the signing of this Contract of Sale; b) The sum of NINETY THOUSAND PESOS (P90,000.00) shall be paid by the BUYER to the SELLERS upon presentation of the SELLERS to the BUYER of a new transfer certificate of title of the property subject of this sale, already registered under the names of the SELLERS herein. However, the BUYER may advance the necessary amount to the SELLERS for the payment of their back taxes, inheritance tax and other taxes which might be required by the Register of Deeds of Tagaytay City before transfer certificate of title from the registered owners to the sellers can be effected, but not exceeding NINETY THOUSAND PESOS (P90,000.00). Any and all cash advances shall be deducted from the second payment of NINETY THOUSAND PESOS (P90,000.00); c) The sum of TWO HUNDRED SIXTY THOUSAND PESOS (P260,000.00) shall be paid by the BUYER to the SELLERS thirty (30) days after the Transfer Certificate of Title to the heirs and/or the SELLERS have been effected; and d) The balance of ONE MILLION ONE HUNDRED FORTY THOUSAND PESOS (P1,140,000.00) shall be paid by the BUYER to the SELLERS within two (2) years from the date of the last payment of TWO HUNDRED SIXTY THOUSAND PESOS (P260,000.00). . . . (emphasis supplied)

Petitioner paid the down payment of ten thousand pesos (P10,000.00) on the date of the sale.4 In July 1977, respondent Pedro Atienza wrote a letter to petitioner, asking him for an additional sum of fifty thousand pesos (P50,000.00). The money was intended for the inheritance and realty taxes due on the subject property and other incidental expenses to facilitate the transfer of the title of the subject property in their names.5 Petitioner refused to give the additional money. In a letter dated August 25, 1977, he pointed out that under paragraph (b) of their Contract of Sale, the sum of ninety thousand pesos (P90,000.00) would be due only upon presentation by the respondents of the new TCT showing that the subject property was already registered in their names. Petitioner then asked respondent Pedro Atienza to turn over to him the documents required by the Register of Deeds, namely: the owner's duplicate copy of TCT No. T-6744, the original copies of the annexes of the Contract of Sale, the Petition for Extra-judicial Partition, the Certificate of Publication of the Petition for Extra-judicial Partition, and the Affidavit that the property is not planted with rice or corn. Respondents did not comply. Thereafter, respondent's counsel, Atty. Antonio Jose Cortes, sent a demand letter to petitioner, requiring him to pay the amount of ninety thousand pesos (P90,000.00) within three (3) days from receipt of the letter.6 Petitioner insisted that paragraph (b) of the contract merely states that he "may" advance the necessary amount to the respondents for the settlement of their back taxes, hence, such payment would be discretionary on his part.7 On November 1, 1977, petitioner retained the services of Mariano Jumarang as overseer of the subject property for a monthly salary of P200.00 plus a 50% share in the net harvest of the crops to be planted on the subject property.8 While awaiting the registration of the subject property in the names of the respondents, petitioner also prepared project studies and subdivision plans for the property.1wphi1.nt In the same month of November 1977, petitioner met Nicanor Papa, Sr., then Chairman of the Board of Directors of Realty Baron Corporation (intervenor), through a broker named Ligaya Sangalang. They discussed the possible sale of the subject property in favor of Realty Baron Corporation. Petitioner showed Papa some of the plans for the Tagaytay property. He also gave Papa a copy of the Contract of Sale dated April 13, 1977, as proof of his ownership over the subject property.9 Upon ocular inspection, however, Papa changed his mind and wanted to buy only the one-half western portion of the property, with an area of approximately 87,555 square meters. He found the other portion of the lot too steep and occupied by squatters. The sale did not push through.

In a letter dated January 8, 1978, petitioner again asked the respondents to deliver to him the certificate of title of the subject property and other documents needed by the Register of Deeds of Tagaytay City to effect the transfer of the title in his name.10 On January 31, 1978, Atty. Cortes executed a document called "Notarial Act for the Cancellation of Contract to Sell as Provided for in Article 1592 of the New Civil Code and Republic Act 6552."11 A copy of the said document was sent by registered mail to petitioner. Respondent Pedro Atienza also returned the down payment and cash advances to petitioner through Philippine Trust Company Check no. 309276.12 Petitioner, through his lawyer, returned the check to the respondents on March 1, 1978.13 Meanwhile, real estate agents persuaded the respondents to sell the property to Realty Baron Corporation. Respondents agreed provided the corporation would advance the payment for the taxes due on the property, as well as the documentation and registration expenses related to the projected sale. Thus, Realty Baron Corporation advanced the amount of P100,000.00 as down payment. Eventually, respondents managed to have the subject property subdivided into two (2) lots. One lot was registered in their names under TCT No. 12107. The other lot, with an area of approximately eighty seven thousand five hundred fifty five (87,555) square meters, was covered by TCT No. 12106.14 On October 30, 1978,15 the lot covered by TCT No. 12106 was sold by respondents to Realty Baron Corporation for eight hundred seventy five thousand five hundred fifty pesos (P875,550.00). Accordingly, TCT No. T-12113 was issued in favor of Realty Baron Corporation. On January 26, 1979, petitioner verified from the Register of Deeds of Tagaytay if respondents had already secured a new title for the property. He discovered that the property sold to him has been subdivided into two lots.16 He also learned that the respondents sold to Realty Baron Corporation the property covered by TCT No. 12106 (now TCT No. 12113), the same area which Papa was planning to buy from him.17 On January 27, 1979, petitioner wrote a letter18 to Felicito Papa, son of Nicanor Papa, Sr. and President of Realty Baron Corporation, reminding the latter that he is the owner of the property sold by the respondents.19 On April 3, 1979, a Notice of Adverse Claim was registered by petitioner in the Register of Deeds of Tagaytay City, against TCT No.T12107.20 Petitioner also filed an adverse claim over the lot covered by TCT No. 12113. The adverse claims were cancelled after the lapse of the period provided by law.

On December 29, 1979, petitioner filed the present action for specific performance and damages, docketed as Civil Case No. 35608 before the Regional Trial Court of Pasig, to compel the respondents to comply with their obligation to deliver the title over the property. Petitioner also caused the annotation of a notice of lis pendens over TCT Nos. 12107 and 12113 before the Register of Deeds of Tagaytay City.21 Thus, Realty Baron Corporation decided not to pay the balance of the contract price in the amount of P520,000.00.22 It also intervened in the specific performance case. Petitioner claimed that due to respondents' nonperformance of their obligations under the contract, he would need to spend more to develop the property. He also suffered sleepless nights and experienced serious anxieties.23 Moreover, he was constrained to engage the services of a lawyer to file the complaint for specific performance against the respondents for a P20,000.00 legal fee.24 On September 17, 1986, the lower court rendered its decision,25 declaring that there was a perfected contract to sell between petitioner and the respondents. It held that title over the subject lot did not pass to petitioner because the sale was subject to the condition that petitioner would advance the necessary expenses for the registration of the property in the names of respondents. Further, it held that petitioner was the one who reneged on his obligation so he could not successfully demand for specific performance nor ask for damages. It ordered petitioner to pay P100,000.00 as actual damages and P50,000.00 as attorney's fees. Realty Baron Corporation was also directed to complete its payment of P500,000.00 to the respondents. Petitioner's motion for reconsideration was denied. He appealed to the Court of Appeals. On January 31, 1996, the Court of Appeals rendered its Decision in CAG.R. CV No. 33213, affirming the lower court ruling. Hence, the present petition. Petitioner contends that the appellate court erred: I IN AFFIRMING THE TRIAL COURT'S DECISION NOTWITHSTANDING ITS FINDING THAT "THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES"; II IN CONCLUDING THAT PETITIONER "AGREED AND ASSUMED THE OBLIGATION TO EXTEND CASH ADVANCES IN ORDER TO FACILITATE THE TRANSFER OF TITLE OF THE PROPERTY SUBJECT OF THE CONTRACT IN FAVOR OF (THE ATIENZAS)"; III IN DECLARING THAT THE ATIENZAS HAD THE RIGHT TO RESCIND

THE CONTRACT OF SALE BECAUSE OF PETITIONER'S REFUSAL TO ADVANCE THE PAYMENT INTENDED TO PAY FOR TAXES AND OTHER FEES; IV IN DECLARING THAT, IN THE CASE AT BENCH, PETITIONER WAS "THE PARTY WHO DID NOT PERFORM THE UNDERTAKING WHICH HE IS BOUND BY THE TERMS OF THE AGREEMENT TO PERFORM, THUS, HE CANNOT INSIST ON THE PERFORMANCE OF THE CONTRACT BY (THE ATIENZAS) OR RECOVER DAMAGES BY REASON OF HIS OWN BREACH"; V IN AFFIRMING THE TRIAL COURT'S CONCLUSION THAT THE GROUND FOR THE AWARD OF DAMAGES AND ATTORNEY'S FEES WAS BASED ON JUDICIOUS FINDINGS'; AND VI IN AFFIRMING THE TRIAL COURT'S DECISION DISMISSING PETITIONER'S COMPLAINT FOR SPECIFIC PERFORMANCE AND DAMAGES. We grant the petition. We agree with the initial ruling of the respondent court characterizing the contract in the case at bar as a contract of sale. We quote its pertinent ruling: Construing the foregoing, it can be seen that defendantsappellees (Atienzas) agreed to sell and the plaintiff-appellant (petitioner) agreed to buy a definite object, that is 158,386 sq. m. lot covered by TCT No. 6744 registered in the name of deceased spouses Atienza. The parties also agreed on a definite price of One Million Five Hundred Thousand (P1,500,000.00) Pesos. The contract here is complete since the parties have already agreed not only on the thing and the price but also on who should bear the expenses with respect to the transfer of title of the property subject of the sale. Hence, it cannot be denied that there was a perfected contract of sale between the parties. Article 1475 of the Civil Code of the Philippines reads: Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of law governing the form of contracts. From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly

stipulated but also to all consequences which according to their nature, may be in keeping with good faith, usage and law. A perfected contract of sale, however, may either be absolute, or conditional. Depending on whether the agreement is devoid of, or subject to, any condition imposed on the passing of the title of the thing to be conveyed or on the obligation of a party thereto. When ownership is retained until fulfillment of a positive condition the breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force. If the condition is imposed on an obligation of a party which is not complied with, the other party may either refuse to proceed or waive said condition. In this case, the contract entered into by the parties is subject to the following terms and conditions, to wit: a. P10,000.00 upon signing of the contract; b. P90,000.00 upon the defendants' (Atienzas) presentation to the plaintiff of a new certificate of title of the property subject of the sale, registered in their name. However, the plaintiff (buyer) may advance the necessary amount to the defendants (sellers) for payment of their back taxes, inheritance tax and other taxes which might be required by the Register of Deeds of Tagaytay City before the transfer certificate of title from the registered owners (parents of the defendants) to the defendants (sellers) can be effected but not exceeding P90,000.00 Any and all cash advances made by the plaintiff to the defendants shall be deducted from the second payment of P90,000.00; Thus, the foregoing provides a (sic) reciprocal obligations to be performed by the parties. Compliance by one party of the aforementioned undertaking would, in turn, demand performance of the reciprocal obligation of the other. There is no dispute that defendants-appellees upon execution of the contract forthwith received and acknowledged the initial payment of Ten Thousand (P10,000.00) Pesos, thus, the issue now is whether or not defendants-appellants (sic) can reject the binding effects of the contract. We disagree, however, with the respondent court that under paragraph (b) of the above contract, "plaintiff-appellant (i.e., petitioner) agreed and (sic) assumed the obligation to extend cash advances in order to facilitate the transfer of title of the property subject of the contract in favor of the defendants (i.e., respondent Atienzas) and any amount extended to defendants (i.e., respondent Atienzas) is deductible from the amount of Ninety Thousand (P90,000.00) Pesos." On these bases, the respondent court held that the respondent Atienzas had a valid

ground to rescind their contract and sell half of the subject lot to the respondent Baron Corporation. The rule is that where the language of a contract is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean, unless some good reason can be assigned to show that the words used should be understood in a different sense. Courts cannot make for the parties better or more equitable agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve one of the parties from terms which he voluntarily consented to, or impose on him those which he did not.26 In the case at bar, paragraph (b) of the Contract of Sale is plain and unambiguous. It provides that: (1) the petitioner as buyer shall pay to the respondent Atienzas as seller the sum of P90,000.00 upon presentation to the buyer of a new certificate of title already registered in the name of the sellers. At the time of the sale, the subject land was still in the name of the deceased parents of the sellers; (2) the petitioner as buyer MAY advance to the respondents as sellers the necessary amount (not exceeding P90,000.00) for the payment of such taxes as may be required before the transfer certificate of title in favor of the sellers can be effected, and (3) in the event such advances are made, they shall be deducted from the second payment of P90,000.00. The use of the word MAY is significant. It meant that petitioner has the discretion whether or not to advance the P90,000.00. He has no duty to do it. It is purely optional on his part. It is incomprehensible for the respondent court to construe it as mandatory. Needless to state, petitioner did not violate the contract when he refused to pay the advance money. Corollarily, the respondent Atienzas had no right to rescind said contract on that ground. We now come to the validity of the sale by the respondent Atienzas to respondent Baron Corporation. We hold that it has no force and effect. As had above-discussed, the respondent Atienzas had no right to rescind the sale of the subject lot to petitioner. Moreover, respondent Baron Corporation cannot pretend to be a buyer in good faith. In Uraca vs. Court of Appeals,27 we held that ". . . knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second buyer of the first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that before the second can

obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyer's rights from the time of acquisition until title is transferred to him by registration or failing registration, by delivery of possession." There is no dispute that respondent Baron Corporation knew that petitioner was the first buyer of the subject lot. Its initial plan was to buy the whole lot from the petitioner. It changed its plan only when if found squatters on the hilly portion of the property. Thus, it cannot claim the right of an innocent purchaser for value. We have held that:28 One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim good faith as well as one who has knowledge of facts which should have put him upon such inquiry or investigation as might be necessary to acquaint him with the defects in the title of his vendor . . . His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of existence of a defect in the vendor's title, will not make him an innocent purchaser for value if it afterwards develop that title was in fact defective and it appears that he had such notice of defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. On the other hand, we reject the petitioner's claim for damages. The court a quo held that "the records do not disclose that the plaintiff (i.e., petitioner) ever adduced evidence to prove damages."29 This factual finding binds this Court. IN VIEW WHEREOF, the questioned judgment of the Court of Appeals in CA-G.R. C.V. No. 33213 is REVERSED and SET ASIDE. Instead, we render the following judgment: 1. The notarial rescission executed by Atty. Cortes on January 31, 1978, is declared null and void and without force and effect on the Contract of Sale, dated April 13, 1977, executed between petitioner and the respondents; 2. The estate of petitioner Angel Bautista and/or his legal heirs are declared as the true and rightful owner of the subject parcel of land in Tagaytay City, formerly covered by TCT No. T-6744, with an area of approximately 158,386 square meters, pursuant to the Contract of Sale of April 13, 1977; 3. The Deed of Sale with Mortgage, dated October 30, 1978 and TCT No. T-12113 issued in favor of respondent Realty Baron Corporation is declared null and void; 4. The administrator of petitioner's estate and/or the authorized representative of petitioner's legal heirs are ordered to pay the

balance of the purchase price of the Contract of Sale of April 13, 1977, pursuant to the terms and conditions specified therein; 5. Respondent Atienzas are ordered to deliver TCT No. 12107 to the authorized representative of the legal heirs of petitioner and/or the administrator of petitioner's estate and to execute all the necessary documents as may be required by the Register of Deeds of Tagaytay City to facilitate the issuance of the TCT in the names of petitioner's legal heirs; 6. The Regional Trial Court of Pasig, Branch CLX, is ordered to cause the cancellation by the Register of Deeds of Tagaytay City of TCT No. T-12113 and TCT No. 12107 and the issuance, in lieu thereof, of the corresponding certificate of title in the names of petitioner's legal heirs. SO ORDERED.1wphi1.nt Davide, Jr., C.J., Kapunan, Pardo and Ynares-Santiago, JJ., concur. Footnotes Angel Bautista died on June 30, 1992, during the pendency of his appeal before the Court of Appeals. He was substituted by his legal heirs, represented by his son, Crisostomo, who died on June 23, 1998. Maria Veronica B. Bautista substituted Crisostomo as legal representative of the heirs of deceased petitioner Angel Bautista.
1 2 3 4 5 6 7 8 9

Folder of Exhibits I, p. 1. Rollo, p. 54. Exhibits "J", "K" and "K-1", Folder of Exhibits I, pp. 19-a-21. Exhibits "G", "G-1" to"G-5", Folder of Exhibits I, pp. 12-16. Exhibit "2", Folder of Exhibits II, p. 6. Exhibit "3", Folder of Exhibits II, p. 7. Exhibit "F", Folder of Exhibits I, p. 11. TSN, April 30, 1981, pp. 8-9. TSN, March 27, 1981, pp. 6-8. Folder of Exhibits II, p. 8. Exhibit "6-a."

10 11 12 13

TSN, January 22, 1982, pp. 35-39. Folder of Exhibits II, pp. 1214 and 14-a.
14 15

Rollo, pp. 65-68. Deed of Sale with Mortgage, Rollo, pp. 58-64.

16 17 18 19 20 21 22 23 24 25 26 27 28 29

TSN, March 27, 1981 pp. 8-10. Ibid., pp. 12-13. Ibid., pp. 14-16; Exhibit "LL", Folder of Exhibits I, p. 22. Ibid., pp. 20-23. Exhibit "8", Folder of Exhibits II, p. 21. Exhibit "7", Folder of Exhibits III, p. 10. TSN, January 22, 1982, pp. 53-55. TSN, March 27, 1981, pp. 20-23. Ibid., pp. 23-24. Rollo, pp. 74-85. 17A Am. Jur. 2d 348-349. 278 SCRA 702 (1997). Leung Yee vs. F.L. Strong Machinery Co., 37 Phil. 644 (1918). Decision, September 17, 1986, Rollo, p. 84.