Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-11491 August 23, 1918

ANDRES QUIROGA, plaintiff-appellant, vs. PARSONS HARDWARE CO., defendant-appellee. Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. Crossfield & O'Brien for appellee. AVANCEA, J.: On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), as party of the second part: CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS. ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the following conditions: (A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles. (B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from the date of their shipment. (C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons. (D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice. The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash. (E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given. (F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds. ART. 2. In compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprised with the Visayan group. ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval. ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party. Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds. In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and who established and managed the latter's business in Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble with the defendant, had maintained a civil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned as to what was his purpose in contracting with the plaintiff, replied that it was to be an agent for his

beds and to collect a commission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea in contracting with the plaintiff is of no importance, inasmuch as the agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said, a contract of purchase and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties. The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement. In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will. For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law. The judgment appealed from is affirmed, with costs against the appellant. So ordered. Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.

SPOUSES NESTOR CASTILLO and ROSIE REYES-CASTILLO, G.R. No. 170917 Petitioners, - versus SPOUSES RUDY REYES and CONSOLACION REYES, Respondents. x------------------------------------------------------------------------------------x RESOLUTION NACHURA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the December 6, 2005 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 79385. On November 7, 1997, Emmaliza Bohler and respondents negotiated for the sale of the formers house and lot located at Poblacion, New Washington, Aklan, to the latter for the consideration of P165,000.00.[2] On the following day, November 8, they signed an Agreement which pertinently reads as follows: We, the undersigned, agree to the following terms and conditions regarding the sale of the house and lot located at Poblacion, New Washington, Aklan: 1. That the total amount to be paid shall be One Hundred Sixty-Five Thousand Pesos (P165,000.00) to be paid in full on or before the 15th of December 1997; 2. That a partial payment (sic) a total amount of One Hundred Thirty Thousand Pesos (P130,000.00) shall be made today, the 8th of November 1997; 3. That the remaining balance in the amount (sic) of Thirty-Five Thousand Pesos (P35,000.00) shall be made as per #1 above; 4. That the buyers, represented by the Spouses Rudy and Consolacion Reyes (sic) shall be responsible for all the legal and other related documents and procedures regarding this sale; 5. That the seller, represented by Ms. Emmaliza M. Bohler, shall vacate the said house and lot on or (sic) the 31st of January, 1998; 6. That the tenants, represented by the Spouses Romeo and Epifania Vicente, shall vacate the same on or before the th of April, 1998; and 30 7. That all parties concerned shall agree to all the terms and conditions stipulated herein.[3] Upon the signing of the said contract, respondents handed to Bohler P20,000.00 cash and allegedly a P110,000.00-check. Bohler nonetheless insisted that the entire partial payment should be in cash as she needed it to redeem the subject property from the bank on the following Monday. She hence demanded for its payment up to midnight on that day otherwise she would cancel the sale. Because the respondents failed to make good the P110,000.00, Bohler subsequently sold the property to the petitioners.[4] Having learned of the subsequent sale, the respondents immediately tendered the check, asked the bank for a certification that it was funded and consulted their lawyer who sent a notice of lis pendens to the Register of Deeds and the Provincial Assessor.[5]Civil Case No. 6070 for Promulgated: November 28, 2007

annulment of sale, specific performance and damages was subsequently filed by the respondents with the Regional Trial Court (RTC) of Kalibo, Aklan against Bohler and the petitioners. On February 21, 2003, the RTC rendered its Decision[6] declaring the November 8, 1997 Agreement a contract to sell. Considering that no actual sale happened between Bohler and the respondents, the former could validly sell the property to the petitioners. Thus, the trial court dismissed the complaint. Aggrieved, respondents appealed the case to the CA. In the challenged December 6, 2005 Decision,[7] the appellate court reversed the trial courts ruling, declared the November 8, 1997 Agreement a contract of sale, and annulled the subsequent sale to the petitioners. The CA ruled, among others, that the wordings of the agreement and the conduct of the parties suggest that they intended to enter into a contract of sale. Ownership was not reserved by the vendor and non-payment of the purchase price was not made a condition for the contracts effectivity.[8] Petitioners, thus, filed the instant petition for review on certiorari imputing the following errors to the CA: 1. The appellate court erred in declaring the contract styled AGREEMENT dated 08 November 1997 as a contract of sale and not a contract to sell. 2. The appellate court erred in declaring the petitioners in bad faith when they bought the subject matter house and lot on 02 March 1998from Emmaliza H. Bohler.[9] The pivotal question to be addressed by the Court in this petition is whether the transaction between Bohler and the respondents is a perfected contract of sale or a mere contract to sell. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on the subject matter, price and terms of payment of the price.[10] In the instant case, the November 8, 1997 Agreement clearly indicates that Bohler and the Spouses Reyes had a meeting of the minds on the subject matter of the contract, the house and lot; on the price, P165,000.00; and on the terms of payment, an initial payment of P130,000.00 on the date of execution of the agreement and the remaining balance on or before December 15, 1997. At that precise moment when the consent of both parties was given, the contract of sale was perfected. The said agreement cannot be considered a contract to sell. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.[11] The November 8, 1997 Agreement herein cannot be characterized as a contract to sell because the seller made no express reservation of ownership or title to the subject house and lot.[12] Instead, the Agreement contains all the requisites of a contract of sale. WHEREFORE, premises considered, the petition for review on certiorari is DENIED DUE COURSE. SO ORDERED. THIRD DIVISION ADELAIDA AMADO AND THE HEIRS AND/OR ESTATE OF THE LATE JUDGE NOE AMADO, Petitioners, - versus RENATO SALVADOR, Respondent. G . R. No . 1 71 4 01 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: December 13, 2007 x---------------------------- ---------------------x DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision dated 25 August 2005rendered by the Court of Appeals in CA-G.R. CV No. 71816.[1] In reversing the Decision,[2] dated 28 November 2000, of the Regional Trial Court (RTC), Branch 76, of San Mateo, Rizal, the Court of Appeals declared that the late Judge Noe Amado (JudgeAmado), the petitioners predecessor-in-interest, already sold the subject property to respondent, Renato Salvador (Salvador). Petitioners are the heirs of the late Judge Amado, who was the owner of a parcel of land situated at Barangay Burgos, Rodriguez, Rizal, with an area of 5,928 square meters.[3] The property subject of the present controversy is a portion thereof, consisting of 1,106 square meters and registered under Original Certificate of Title (OCT) No. N-191954-A with the Registry of Deeds of Rizal[4] in the name of Judge Amado. Salvador alleges that in or around September 1979, Judge Amado agreed to sell to him the subject property for P60.00 per square meter, or in the total sum of P66,360.00, payable in cash or construction materials which would be delivered to Judge Amado, or to whomsoever the latter wished during his lifetime.[5] Salvador though failed to state the terms of payment, such as the period within which the payment was supposed to be completed, or how much of the payment should be made in cash. In view of the sale in his favor, Salvador undertook the transfer and relocation of about five squatter families residing on the subject property. Thereafter, Judge Amado allowed Salvador to take possession of the subject property and to build thereon a residential structure, office, warehouse, perimeter fence and a deep well pump.[6] Salvador claims that by October 1980, he had already given JudgeAmado total cash advances of P30,310.93 and delivered construction materials amounting to P36,904.45, the total of which exceeded the agreed price for the subject property.[7]

According to the petitioners, on the other hand, Judge Amado let Salvador use the subject property, upon the request of the latters father and grandfather, who were Judge Amados friends. Salvador used the subject property for his business of manufacturing hollow blocks.[8] The petitioners maintain that the cash advances and the various construction materials were received by Judge Amado fromSalvador in connection with a loan agreement, and not as payment for the sale of the subject property. Petitioners offered in evidence a loan agreement executed on 15 August 1980 wherein Salvador and Judge Amado and their respective spouses appeared as co-borrowers with Capitol City Development Bank as lender. The property belonging to Judge Amado was used as collateral, while Salvador undertook the obligation to construct a perimeter fence over Judge Amados land covered by OCT No. N-191954-A and to deliver hollow blocks to Judge Amados son, Valeriano Amado. Petitioners aver that Salvador and Judge Amado agreed to divide the proceeds of the loan among themselves. Since the bank delivered the proceeds of the loan to Salvador, Judge Amadosshare in the proceeds were paid to him in several installments, some of which Salvador alleged were payments for the sale of the subject property.[9] Petitioners assert that when Salvadors business folded up, he failed to pay his share of the monthly amortization of the loan with the bank. Judge Amado paid the loan to prevent the foreclosure of his mortgaged property. Salvador also allowed his brotherLamberto Salvador to occupy the premises without the consent of Judge Amado.[10] On 4 November 1983, Judge Amado sent a demand letter to Salvador directing the latter to vacate the subject property, [11]which Salvador merely ignored.[12] Judge Amado filed an ejectment suit against Salvador before the Municipal Trial Court (MTC) of Rodriguez, Rizal, docketed as Civil Case No. 700. During the hearing before the MTC, Salvador and his brother, Lamberto Salvador, defendants therein, stated in their Answer with Counterclaim that a balance of P4,040.62 from the purchase price of the subject property was left unpaid due to the failure of Judge Amado to execute and deliver a deed of sale.[13] In a Decision dated 16 July 1990, the MTC dismissed theejectment suit on the ground of lack of jurisdiction because of Salvadors claim of ownership over the subject property.[14] The case was appealed to the RTC and docketed as Civil Case No. 704. The RTC affirmed the dismissal of Judge Amados ejectmentsuit by the MTC based on lack of jurisdiction.[15] On 22 August 1996, Salvador filed before the RTC Civil Case No. 1252, an action for specific performance with damages against the petitioners.[16] As evidence that the sale of the subject property was perfected between Judge Amado and himself,Salvador presented a note written by Judge Amado, which reads[17]: San Mateo October 1, 1980 Dear Reny, Meron naniningil sa akin ng P500.00 kayat ako ay bigyan ng ganoong halaga ngayon. Hindi ko nilagdaan iyong papel na dala ni Kapitan Maeng at ito ay nasa akin pa. Saka ko na ibabalik iyon pa gang aking plano ay napaayos ko na. Ang lupa ay gagawin kong dalawang lote. Ako, Noe Amado Salvador also offered in evidence the testimony of Ismael Angeles to prove that Judge Amado agreed to sell the subject property to him. To prove that he paid the purchase price, Salvador submitted the following documents showing he paid cash and delivered construction materials to Judge Amado: (1) a statement of account of cash advances made from 1 September 1979 to 23 September 1980 in the total amount of P30,310.93[18]; (2) statements of account of construction materials delivered from 23 August 1979 to 20 October 1979 with a total cost of P17,656.85, from 26 December 1979 to 25 August 1980 with a total cost of P1,711.20, and from 26 August 1980 to 24 September 1980 with a total cost of P10,447.40[19]; (3) Invoice No. 50 dated 8 December 1980 for construction materials worth P924.00[20]; and (4) delivery receipts of construction materials from 21 November 1979 to 6 January 1981 with a total cost of P1,665.00.[21] The RTC dismissed Salvadors complaint in Civil Case No. 1252. The trial court observed that it was not indicated in the documentary evidence presented by Salvador that the money and construction materials were intended as payment for the subject property. It gave little probative value to tax declarations in the name of Salvador since they referred to the improvements on the land and not the land itself. The testimonial evidence given by Ismael Angeles was considered insufficient to prove the fact of sale because the witness failed to categorically state that a sale transaction had taken place between Salvador and Judge Amado. Moreover, the RTC held that Salvador was disqualified under the Dead Mans Statute[22] from testifying on any matter of fact involving a transaction between him and Judge Amado which occurred before the death of the latter.[23] Salvador appealed the Decision of the RTC in Civil Case No. 1252 before the Court of Appeals. In reversing the decision of the RTC of San Mateo, the Court of Appeals found that Salvador paid for the subject land with cash advances and construction materials, since petitioners failed to present any evidence showing that the construction materialsSalvador delivered to Judge Amado had been paid for. It construed as adequate proof of the sale the handwritten note of JudgeAmado wherein the latter promised to sign an unidentified deed after the subdivision of an unnamed property, in light of IsmaelAngeles testimony that Judge Amado had promised to sign a deed of sale over the subject property in favor of Salvador. According to the appellate court, the testimony of Salvador was not barred by Section 23, Rule 130 of the Rules of Court, also known as the Dead Mans Statute, and was, therefore, admissible because the petitioners filed a counterclaim against Salvador. It also gave great weight to the tax declarations presented by Salvador and his efforts to relocate the five squatter families which previously resided on the subject property as proof of ownership. Lastly, the Court of Appeals awarded Salvador P100,000.00 as moral damages andP100,000.00 as exemplary damages. The dispositive part of the said Decision reads: 1. Ordering [herein petitioners] to execute a Deed of Sale in favor of [herein respondent Salvador] covering the parcel of land with an area of 1,106 square meters located at 18 Amado-Liamzon Street, Brgy. Burgos, Rodriguez, Rizal which is a portion of the 5,928 square meter parcel of land in the name of Judge Noe Amado, married to Adelaida A. Amado in the Registration Book as Original Certificate of Title No. ON-191954-A of the Register of Deeds of Rizal, Marikina Branch; 2. Ordering the [petitioners] to deliver to [Salvador] the Original Certificate of Title No. ON-191954-A of the Register of Deeds of Rizal, MarikinaBranch, bearing page number 54-A, Book A-6, and execute receipts and other documents which may be necessary for the registration and titling of the parcel of land in [Salvador]s name; and 3. Ordering the [petitioners] to pay [Salvador] P100,000.00 as moral damages, P100,000.00 as exemplary damages, and costs of suits.[24]

Hence, the present petition. Petitioners rely on the following grounds:[25] THE COURT A QUO ERRED ON A QUESTION OF LAW IN REVERSING THE TRIAL COURTS DECISION AND HOLDING THAT RESPONDENT HAS SUCCESSFULLY DISCHARGED THE BURDEN OF EVIDENCE THAT THERE WAS A SALE OF LOT, THE CONSIDERATION OF WHICH WAS TO BE PAID IN CASH AND CONSTRUCTION MATERIALS II THE COURT A QUO ERRED ON A QUESTION OF LAW IN HOLDING THAT RESPONDENT WAS NOT DISQUALIFIED TO TESTIFY UNDER THE DEAD MANS STATUTE AS PROVIDED IN SECTION 23, RULE 130 OF THE RULES OF COURT III THE COURT A QUO ERRED ON A QUESTION OF LAW IN RULING THAT PETITIONERS ARE LIABLE FOR MORAL OR EXEMPLARY DAMAGES IN THE TOTAL AMOUNT OF P200,000.00[26] The petition at bar is meritorious. The main controversy in the petition is whether or not there was a perfected contract of sale of the subject property. In resolving this issue, this Court would necessarily re-examine the factual findings of the Court of Appeals, as well as the contrary findings of the trial court. It is a recognized principle that while this Court is not a trier of facts and does not normally embark on the evaluation of evidence adduced during trial, this rule allows exceptions,[27] such as when the findings of the trial court and the Court of Appeals are conflicting or contradictory.[28] A contract of sale is perfected by mere consent, upon a meeting of the minds in the offer and the acceptance thereof based on subject matter, price and terms of payment.[29] Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.[30] Consent is essential for the existence of a contract, and where it is absent, the contract is non-existent. Consent in contracts presupposes the following requisites: (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous.[31] Moreover, a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale.[32] This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price or consideration.[33] In the present case, Salvador fails to allege the manner of payment of the purchase price on which the parties should have agreed. No period was set within which the payment must be made. Of the purchase price of P66,360.00, which the parties purportedly agreed upon, the amount which should be paid in cash and the amount for construction materials was not determined. This means that the parties had no exact notion of the consideration for the contract to which they supposedly gave their consent. Thus, such failure is fatal to Salvadors claim that a sale had been agreed upon by the parties. Furthermore, after carefully examining the records, serious doubts became apparent as to whether cash advances and deliveries of construction materials evidenced by numerous statements of accounts and delivery receipts were actually intended as payment for the land. First of all, the statements of accounts and the delivery receipts do not indicate that the construction materials or the cash advances were made in connection with the sale of the subject property. Any doubt as to the real meaning of the contract must be resolved against the person who drafted the instrument and is responsible for the ambiguity thereof.[34] Since Salvador prepared these statements of accounts and therefore caused the ambiguity, he cannot benefit from the resulting ambiguity. Salvador is hardly an ignorant and illiterate person; rather, he is a businessman engaged in manufacturing and distributing construction materials and operates no less than two branches. It should have been noted in the statement of accounts, or even in another document, that the cash advances and deliveries of construction materials were made in connection with a transaction as important as a sale of land. As they are, the statements of accounts and especially the straightforward delivery receipts are insufficient proof that Judge Amado sold his property to Salvador. Secondly, one of the delivery receipts presented by Salvador as Annex I of his Complaint in RTC Civil Case No. 1252 was partially paid.[35] If Judge Amado had already agreed that the construction materials delivered to him and his family constituted the payment for the subject property, the act of partially paying for construction materials would be incongruous to such intention. Thirdly, Salvador himself gave conflicting statements on whether he has completed payment. Among the findings of fact made by the MTC in its Decision dated 16 July 1990 in Civil Case No. 700, based on the very statements made by the Salvador brothers in their Answer with Counterclaim, was that Salvador paid Judge Amado P62,319.38 in cash and construction materials for the subject property, and a balance of P4,040.62 was left unpaid due to the failure of Judge Amado to execute and deliver the deed of sale.[36] However, in the proceedings before the RTC in Civil Case No. 1252, Salvador claimed that he paid Judge Amado P67,215.38 in cash and construction materials, which was more than the purchase price of P66,360.00 upon which they agreed.[37] Lastly, Salvador again contradicts himself as to the date he supposedly completed the payments for the subject property. In his Complaint in Civil Case No. 1252, he alleges that by October 1980, he had already fully paid Judge Amado P67,215.38 in cash and construction materials. [38] Yet in the same pleading, he included 11 separate deliveries of construction materials made from 8 December 1980 to 6 January 1981 as evidence of payment.[39] This Court cannot presume the existence of a sale of land, absent any direct proof of it. The construction of the terms of a contract, which would amount to impairment or loss of rights, is not favored. Conservation and preservation, not waiver or abandonment or forfeiture of a right, is the rule.[40] While it is apparent that Salvador paid cash advances and delivered construction materials to Judge Amado, this fact alone does not attest to the existence of a sale of land. In truth, the inconsistent statements made by Salvador regarding the amount paid to Judge Amado, the date when he was supposed to have completed the payment, and the dissimilarity between the price allegedly agreed upon and the amount supposedly paid show the absence of a uniform intention to apply these cash advances and construction materials as payment for the purchase of the subject property. Absent any tangible connection with the sale of land, these transactions stand by themselves as loans and purchases of construction materials. Other than the statements of accounts and delivery receipts scrutinized above, the other pieces of evidence that Salvadoroffered are similarly inadequate to establish his allegation of a perfected sale.

Salvador presented as evidence of a perfected sale a handwritten note dated 1 October 1980 as Annex GG of the Complaint dated 16 August 1996, written by Judge Amado, wherein the latter asked Salvador for P500.00. In the same note, Judge Amadoinformed Salvador that he had not yet signed an unidentified document, which he promised to sign after his plan to divide a certain parcel of land was completed.[41] This note is not conclusive proof of the existence of a perfected sale. What this note proves is that Judge Amado was hesitant to sign the unidentified document and was still waiting for the completion of his plan to divide the land referred to in the note. To say that the document is the deed of sale and the land is the subject property claimed by Salvadorwould be based on pure surmise and conjecture without a more specific reference to them in the note. Moreover, the P500.00 which Judge Amado was demanding from Salvador could not have been payment pursuant to the purported sale of the subject property. The list of cash advances, which were supposedly part of the payment for the subject property, made by Salvador to Judge Amadofrom 1 September 1979 to 23 September 1980 and attached as Annex D of his Complaint in Civil Case No. 1252, did not include the P500.00 which Judge Amado demanded from Salvador on 1 October 1980. The testimony of Ismael Angeles is likewise insufficient to support the allegation that Judge Amado agreed to sell the subject property to Salvador. The factual findings of the trial court, especially as regards the credibility of witnesses, are conclusive upon this court.[42] The findings of fact and assessment of credibility of witnesses is a matter best left to the trial court because of its unique position of having observed that elusive and incommunicable evidence of the witnesses deportment on the stand while testifying, which opportunity is denied to the appellate courts. Only the trial judge can observe the furtive glance, blush of conscious shame, hesitation, flippant or sneering tone, calmness, sigh or the scant or full realization of an oath--all of which are useful for an accurate determination of a witness honesty and sincerity.[43] Thus, the assessment by the RTC of Angeles testimony, which it deemed insufficient, is entitled to great respect: Moreover, [herein respondent Salvador]s corroborative testimonial evidence, that is, the testimony of one Ismael Angeles, is likewise deemed insufficient as even that witness failed to categorically state any sale transaction of the lot between [respondent] Salvador and the late Judge Amado, as in fact, Mr. Angeles manifested uncertainty when he said siguro nagkaroon sila ng bilihan. The findings of the trial court are well supported by the records of this case. At the time that Judge Amado and Salvadorallegedly entered into the sale agreement, Ismael Angeles testified that I was inside the house, but I did not hear their conversation because I was far from them.[44] Even if Ismael Angeles testimony was given full credence, it would still be insufficient to establish that a sale agreement was perfected between Salvador and Judge Amado. His testimony that Judge Amado ordered the preparation of the deed of sale only proves that Judge Amado and Salvador were in the process of negotiating the sale of the subject property, not that they had already set and agreed to the terms and conditions of the sale.[45] In fact, Ismael Angeles testimony that Judge Amado refused to sign the contract reinforces the fact that the latter had not consented to the sale of the subject property.[46] In addition, Salvadors act of relocating the squatter families formerly residing on the subject property[47] is not substantial proof of ownership. Such act is only consistent with the petitioners allegations that Salvador was allowed to use the subject property for his business, and it would redound to his benefit to relocate the squatters previously occupying it. From the evidence presented, an agreement of sale of the subject property between him and Judge Amado had not yet reached the stage of perfection. The stages of a contract are, thus, explained: A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiationcovers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of the minds, i.e. the concurrence of offer and acceptance, on the object and on the cause thereof. x x x. The stage of consummation begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof. Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees.[48] In the present case, the terms of payment have not even been alleged. No positive proof was adduced that Judge Amado had fully accepted Salvadors sketchy proposal. Even if the handwritten note actually referred to the subject property, it merely points to the fact that the parties were, at best, negotiating a contract of sale. At the time it was written, on 1 October 1980, Judge Amado had not expressed his unconditional acceptance of Salvadors offer. He merely expressed that he was considering the sale of the subject property, but it was nevertheless clear that he still was unprepared to sign the contract. Salvador himself admitted before the MTC in Civil Case No. 700 that the sale agreement did not push through as he testified that I considered that dead investment because our sale did not materialize because he always made promises.[49] Absent the valid sale agreement between Salvador and Judge Amado, the formers possession of the subject property hinges on the permission and goodwill of Judge Amado and the petitioners, as his successors-in-interest. In the demand letter dated 4 November 1983, Judge Amado had already directed Salvador to vacate the subject property. Thus, there is no more basis forSalvador and his brother, Lamberto Salvador, to retain possession over it, and such possession must now be fully surrendered to the petitioners. The Court of Appeals imposed moral damages and exemplary damages in view of the petitioners refusal to execute a Deed of Sale and the social humiliation suffered by Salvador due to his ouster from the property.[50] Since petitioners had no demandable obligation to deliver the subject property, the award of moral and exemplary damages, as well as cost of suit, in favor of Salvador is without legal basis. Moral damages may be recovered if they were the proximate result of defendants wrongful acts or omissions.[51] Two elements are required. First, the act or omission must be the proximate result of the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Second, the act must be wrongful.[52] In this case, petitioners were not under any obligation to execute a Deed of Sale or guarantee Salvadors possession of the property. Absent any wrongful act which may be attributed to petitioners, an award of moral damages is inappropriate. The award of exemplary damages is also improper. Exemplary damages are awarded only when a wrongful act is accompanied by bad faith or when the guilty party acted in a wanton, fraudulent, reckless or malevolent manner.[53] Moreover, where a party is not entitled to actual or moral damages, an award of exemplary damages is likewise baseless.[54] As this Court has found, petitioners refusal to turn over the subject property to Salvador is justified and cannot be the basis for the award of exemplary damages.

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED and the assailed Decision of the Court of Appeals in CA-G.R. No. 71816, promulgated on 25 August 2005, is REVERSED AND SET ASIDE. The Order dated 28 November 2000 of the Rizal RTC is REINSTATED. Renato Salvador and Lamberto Salvador are ordered to vacate the subject property. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 166714 February 9, 2007

AMELIA S. ROBERTS, Petitioner, vs. MARTIN B. PAPIO, Respondent. DECISION CALLEJO, SR., J.: Assailed in this petition for review on certiorari is the Decision1 of the Court of Appeals (CA), in CA-G.R. CV No. 69034 which reversed and set aside the Decision2 of the Regional Trial Court (RTC), Branch 150, Makati City, in Civil Case No. 01-431. The RTC ruling had affirmed with modification the Decision3 of the Metropolitan Trial Court (MeTC), Branch 64, Makati City in Civil Case No. 66847. The petition likewise assails the Resolution of the CA denying the motion for reconsideration of its decision. The Antecedents The spouses Martin and Lucina Papio were the owners of a 274-square-meter residential lot located in Makati (now Makati City) and covered by Transfer Certificate of Title (TCT) No. S-44980.4 In order to secure aP59,000.00 loan from the Amparo Investments Corporation, they executed a real estate mortgage on the property. Upon Papios failure to pay the loan, the corporation filed a petition for the extrajudicial foreclosure of the mortgage. Since the couple needed money to redeem the property and to prevent the foreclosure of the real estate mortgage, they executed a Deed of Absolute Sale over the property on April 13, 1982 in favor of Martin Papios cousin, Amelia Roberts. Of the P85,000.00 purchase price, P59,000.00 was paid to the Amparo Investments Corporation, while the P26,000.00 difference was retained by the spouses.5 As soon as the spouses had settled their obligation, the corporation returned the owners duplicate of TCT No. S-44980, which was then delivered to Amelia Roberts. Thereafter, the parties (Amelia Roberts as lessor and Martin Papio as lessee) executed a two-year contract of lease dated April 15, 1982, effective May 1, 1982. The contract was subject to renewal or extension for a like period at the option of the lessor, the lessee waiving thereby the benefits of an implied new lease. The lessee was obliged to pay monthly rentals of P800.00 to be deposited in the lessors account at the Bank of America, Makati City branch.6 On July 6, 1982, TCT No. S-44980 was cancelled, and TCT No. 114478 was issued in the name of Amelia Roberts as owner.7 Martin Papio paid the rentals from May 1, 1982 to May 1, 1984, and thereafter, for another year.8 He then failed to pay rentals, but he and his family nevertheless remained in possession of the property for a period of almost thirteen (13) years. In a letter dated June 3, 1998, Amelia Roberts, through counsel, reminded Papio that he failed to pay the monthly rental of P2,500.00 from January 1, 1986 to December 31, 1997, and P10,000.00 from January 1, 1998 to May 31, 1998; thus, his total liability was P410,000.00. She demanded that Papio vacate the property within 15 days from receipt of the letter in case he failed to settle the amount.9 Because he refused to pay, Papio received another letter from Roberts on April 22, 1999, demanding, for the last time, that he and his family vacate the property.10 Again, Papio refused to leave the premises. On June 28, 1999, Amelia Roberts, through her attorney-in-fact, Matilde Aguilar, filed a Complaint11 for unlawful detainer and damages against Martin Papio before the MeTC, Branch 64, Makati City. She alleged the following in her complaint: Sometime in 1982 she purchased from defendant a 274-sq-m residential house and lot situated at No. 1046 Teresa St., Brgy. Valenzuela, Makati City.12 Upon Papios pleas to continue staying in the property, they executed a two-year lease contract13 which commenced on May 1, 1982. The monthly rental was P800.00. Thereafter, TCT No. 11447814 was issued in her favor and she paid all the realty taxes due on the property. When the term of the lease expired, she still allowed Papio and his family to continue leasing the property. However, he took advantage of her absence and stopped payment beginning January 1986, and refused to pay despite repeated demands. In June 1998, she sent a demand letter15 through counsel requiring Papio to pay rentals from January 1986 up to May 1998 and to vacate the leased property. The accumulated arrears in rental are as follows: (a) P360,000.00 from January 1, 1986 to December 31, 1997 at P2,500.00 per month; and (b) P50,000.00, from January 1, 1998 to May 31, 1998 at P10,000.00 per month.16 She came to the Philippines but all efforts at an amicable settlement proved futile. Thus, in April 1999, she sent the final demand letter to defendant directing him and his family to pay and immediately vacate the leased premises.17 Roberts appended to her complaint copies of the April 13, 1982 Deed of Absolute Sale, the April 15, 1982 Contract of Lease, and TCT No. 114478. In his Answer with counterclaim, Papio alleged the following: He executed the April 13, 1982 deed of absolute sale and the contract of lease. Roberts, his cousin who is a resident of California, United States of America (USA), arrived in the Philippines and offered to redeem the property. Believing that she had made the offer for the purpose of retaining his ownership over the property, he accepted. She then remitted P59,000.00 to the mortgagor for his account, after which the mortgagee cancelled the real estate mortgage. However, he was alarmed when the plaintiff had a deed of absolute sale over the property prepared (for P83,000.00 as consideration) and asked him to sign the same. She also demanded that the defendant turn over the owners duplicate of TCT No. S-44980. The defendant was in a quandary. He then believed that if he signed the deed of absolute sale, Roberts would acquire ownership over the property. He asked her to allow him to redeem or reacquire the property at any time for a reasonable amount.18 When Roberts agreed, Papio signed the deed of absolute sale. Pursuant to the right to redeem/repurchase given him by Roberts, Papio purchased the property for P250,000.00. In July 1985, since Roberts was by then already in the USA, he remitted to her authorized representative, Perlita Ventura, the amount of P150,000.00 as partial payment for the property.19 On June 16, 1986, she again remittedP100,000.00, through Ventura. Both payments were evidenced by receipts signed by Ventura.20 Roberts then declared that she would execute a deed of absolute sale and surrender the title to the property. However, Ventura had apparently misappropriated P39,000.00 out of the P250,000.00 that she had received; Roberts then demanded that she pay the amount misappropriated before executing the deed of absolute sale. Thus, the sole reason why Roberts refused to abide by her promise was the failure of her authorized representative to remit the full amount of P250,000.00. Despite Papios demands, Roberts refused to execute a deed of absolute sale. Accordingly, defendant posited that plaintiff had no cause of action to demand payment of rental and eject him from the property.

Papio appended to his Answer the following: (1) the letter dated July 18, 1986 of Perlita Ventura to the plaintiff wherein the former admitted having used the money of the plaintiff to defray the plane fares of Perlitas parents to the USA, and pleaded that she be allowed to repay the amount within one year; (b) the letter of Eugene Roberts (plaintiffs husband) to Perlita Ventura dated July 25, 1986 where he accused Ventura of stealing the money of plaintiff Amelia (thus preventing the latter from paying her loan on her house and effect the cancellation of the mortgage), and demanded that she deposit the balance;21 and (c) plaintiffs letter to defendant Papio dated July 25, 1986 requesting the latter to convince Ventura to remit the balance of P39,000.00 so that the plaintiff could transfer the title of the property to the defendant.22 Papio asserted that the letters of Roberts and her husband are in themselves admissions or declarations against interest, hence, admissible to prove that he had reacquired the property although the title was still in her possession. In her Affidavit and Position Paper,23 Roberts averred that she had paid the real estate taxes on the property after she had purchased it; Papios initial right to occupy the property was terminated when the original lease period expired; and his continued possession was only by mere tolerance. She further alleged that the Deed of Sale states on its face that the conveyance of the property was absolute and unconditional. She also claimed that any right to repurchase the property must appear in a public document pursuant to Article 1358, Paragraph 1, of the Civil Code of the Phililppines.24 Since no such document exists, defendants supposed real interest over the property could not be enforced without violating the Statute of Frauds.25 She stressed that her Torrens title to the property was an "absolute and indefeasible evidence of her ownership of the property which is binding and conclusive upon the whole world." Roberts admitted that she demanded P39,000.00 from the defendant in her letter dated July 25, 1986. However, she averred that the amount represented his back rentals on the property.26 She declared that she neither authorized Ventura to sell the property nor to receive the purchase price therefor. She merely authorized her to receive the rentals from defendant and to deposit them in her account. She did not know that Ventura had received P250,000.00 from Papio in July 1985 and on June 16, 1986, and had signed receipts therefor. It was only on February 11, 1998 that she became aware of the receipts when she received defendant Papios letter to which were appended the said receipts. She and her husband offered to sell the property to the defendant in 1984 for US$15,000.00 on a "take it or leave it" basis when they arrived in the Philippines in May 1984.27 However, defendant refused to accept the offer. The spouses then offered to sell the property anew on December 20, 1997, for P670,000.00 inclusive of back rentals.28 However, defendant offered to settle his account with the spouses.29Again, the offer came on January 11, 1998, but it was rejected. The defendant insisted that he had already purchased the property in July 1985 for P250,000.00. Roberts insisted that Papios claim of the right to repurchase the property, as well as his claim of payment therefor, is belied by his own letter in which he offered to settle plaintiffs claim for back rentals. Even assuming that the purchase price of the property had been paid through Ventura, Papio did not adduce any proof to show that Ventura had been authorized to sell the property or to accept any payment thereon. Any payment to Ventura could have no binding effect on her since she was not privy to the transaction; if at all, such agreement would be binding only on Papio and Ventura. She further alleged that defendants own inaction belies his claim of ownership over the property: first, he failed to cause any notice or annotation to be made on the Register of Deeds copy of TCT No. 114478 in order to protect his supposed adverse claim; second, he did not institute any action against Roberts to compel the execution of the necessary deed of transfer of title in his favor; and third, the defense of ownership over the property was raised only after Roberts demanded him to vacate the property. Based solely on the parties pleadings, the MeTC rendered its January 18, 2001 Decision30 in favor of Roberts. The fallo of the decision reads: WHEREFORE, premises considered, finding this case for the plaintiff, the defendant is hereby ordered to: 1. Vacate the leased premises known as 1046 Teresa St., Valenzuela, Makati City; 2. Pay plaintiff the reasonable rentals accrual for the period January 1, 1996 to December 13, 1997 at the rate equivalent to Php2,500.00 per month and thereafter, Php10,000.00 from January 1998 until he actually vacates the premises; 3. Pay the plaintiff attorneys fees as Php20,000.00; and 4. Pay the costs SO ORDERED.31 The MeTC held that Roberts merely tolerated the stay of Papio in the property after the expiration of the contract of lease on May 1, 1984; hence, she had a cause of action against him since the only elements in an unlawful detainer action are the fact of lease and the expiration of its term. The defendant as tenant cannot controvert the title of the plaintiff or assert any right adverse thereto or set up any inconsistent right to change the existing relation between them. The plaintiff need not prove her ownership over the property inasmuch as evidence of ownership can be admitted only for the purpose of determining the character and extent of possession, and the amount of damages arising from the detention. The court further ruled that Papio made no denials as to the existence and authenticity of Roberts title to the property. It declared that "the certificate of title is indefeasible in favor of the person whose name appears therein and incontrovertible upon the expiration of the one-year period from the date of issue," and that a Torrens title, "which enjoys a strong presumption of regularity and validity, is generally a conclusive evidence of ownership of the land referred to therein." As to Papios claim that the transfer of the property was one with right of repurchase, the MeTC held it to be bereft of merit since the Deed of Sale is termed as "absolute and unconditional." The court ruled that the right to repurchase is not a right granted to the seller by the buyer in a subsequent instrument but rather, a right reserved in the same contract of sale. Once the deed of absolute sale is executed, the seller can no longer reserve the right to repurchase; any right thereafter granted in a separate document cannot be a right of repurchase but some other right. As to the receipts of payment signed by Ventura, the court gave credence to Robertss declaration in her Affidavit that she authorized Ventura only to collect rentals from Papio, and not to receive the repurchase price. Papios letter of January 31, 1998, which called her attention to the fact that she had been sending people without written authority to collect money since 1985, bolstered the courts finding that the payment, if at all intended for the supposed repurchase, never redounded to the benefit of the spouses Roberts. Papio appealed the decision to the RTC, alleging the following: I. THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT ON THE GROUND OF LACK OF CAUSE OF ACTION. II. THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THE DOCUMENTARY EVIDENCE ADDUCED BY DEFENDANT-APPELLANT WHICH ESTABLISHED THAT A REPURCHASE TRANSACTION EXISTED BETWEEN THE PARTIES ONLY THAT PLAINTIFF-APPELLEE WITHHELD THE EXECUTION OF THE ABSOLUTE DEED OF SALE AND THE TRANSFER OF TITLE OF THE SAME IN DEFENDANT-APPELLANTS NAME. III. THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THAT THE LETTERS OF PLAINTIFF-[APPELLEE] AND OF HER HUSBAND ADDRESSED TO DEFENDANT-APPELLANT AND HIS WIFE ARE IN THEMSELVES ADMISSION

AND/OR DECLARATION OF THE FACT THAT DEFENDANT-APPELLANT HAD DULY PAID PLAINTIFF-APPELLEE OF THE PURCHASE AMOUNT COVERING THE SUBJECT PROPERTY. IV. THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT CONSIDERING THAT PLAINTIFF-APPELLEE WHO IS [AN] AMERICAN CITIZEN AND RESIDENT THEREIN HAD NOT APPEARED IN COURT ONCE, NEITHER WAS HER ALLEGED ATTORNEY-IN-FACT, MATILDE AGUILAR NOR [DID] THE LATTER EVER [FURNISH] THE LOWER COURT A SPECIAL POWER OF ATTORNEY AUTHORIZING HER TO APPEAR IN COURT IN BEHALF OF HER PRINCIPAL.32 Papio maintained that Roberts had no cause of action for eviction because she had already ceded her right thereto when she allowed him to redeem and reacquire the property upon payment of P250,000.00 to Ventura, her duly authorized representative. He also contended that Robertss claim that the authority of Ventura is limited only to the collection of the rentals and not of the purchase price was a mere afterthought, since her appended Affidavit was executed sometime in October 1999 when the proceedings in the MeTC had already started. On March 26, 2001, Roberts filed a Motion for Issuance of Writ of Execution.33 The court granted the motion in an Order34 dated June 19, 2001. Subsequently, a Writ of Execution35 pending appeal was issued on September 28, 2001. On October 29, 2001, Sheriff Melvin M. Alidon enforced the writ and placed Roberts in possession of the property. Meanwhile, Papio filed a complaint with the RTC of Makati City, for specific performance with damages against Roberts. Papio, as plaintiff, claimed that he entered into a contract of sale with pacto de retro with Roberts, and prayed that the latter be ordered to execute a Deed of Sale over `the property in his favor and transfer the title over the property to and in his name. The case was docketed as Civil Case No. 01-851. On October 24, 2001, the RTC rendered judgment affirming the appealed decision of the MeTC. The fallo of the decision reads:36 Being in accordance with law and the circumstances attendant to the instant case, the court finds merit in plaintiff-appellees claim. Wherefore, the challenged decision dated January 18, 2001 is hereby affirmed in toto. SO ORDERED.37 Both parties filed their respective motions for reconsideration.38 In an Order39 dated February 26, 2002, the court denied the motion of Papio but modified its decision declaring that the computation of the accrued rentals should commence from January 1986, not January 1996. The decretal portion of the decision reads: Wherefore, the challenged decision dated January 18, 2001 is hereby affirmed with modification that defendant pay plaintiff the reasonable rentals accrued for the period January 1, 1986 to December [31, 1997] per month and thereafter and P10,000.00 [per month] from January 1998 to October 28, 2001 when defendant-appellant actually vacated the subject leased premises. SO ORDERED.40 On February 28, 2002, Papio filed a petition for review41 in the CA, alleging that the RTC erred in not finding that he had reacquired the property from Roberts for P250,000.00, but the latter refused to execute a deed of absolute sale and transfer the title in his favor. He insisted that the MeTC and the RTC erred in giving credence to petitioners claim that she did not authorize Ventura to receive his payments for the purchase price of the property, citing Roberts letter dated July 25, 1986 and the letter of Eugene Roberts to Ventura of even date. He also averred that the MeTC and the RTC erred in not considering his documentary evidence in deciding the case. On August 31, 2004, the CA rendered judgment granting the petition. The appellate court set aside the decision of the RTC and ordered the RTC to dismiss the complaint. The decretal portion of the Decision42 reads: WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered: (1) rendering an initial determination that the "Deed of Absolute Sale" dated April 13, 1982 is in fact an equitable mortgage under Article 1603 of the New Civil Code; and (2) resolving therefore that petitioner Martin B. Papio is entitled to possession of the property subject of this action; (3) But such determination of ownership and equitable mortgage are not clothed with finality and will not constitute a binding and conclusive adjudication on the merits with respect to the issue of ownership and such judgment shall not bar an action between the same parties respecting title to the land, nor shall it be held conclusive of the facts therein found in the case between the same parties upon a different cause of action not involving possession. All other counterclaims for damages are hereby dismissed. Cost against the respondent. SO ORDERED.43 According to the appellate court, although the MeTC and RTC were correct in holding that the MeTC had jurisdiction over the complaint for unlawful detainer, they erred in ignoring Papios defense of equitable mortgage, and in not finding that the transaction covered by the deed of absolute sale by and between the parties was one of equitable mortgage under Article 1602 of the New Civil Code. The appellate court ruled that Papio retained the ownership of the property and its peaceful possession; hence, the MeTC should have dismissed the complaint without prejudice to the outcome of Civil Case No. 01-851 relative to his claim of ownership over the property. Roberts filed a motion for reconsideration of the decision on the following grounds: I. Petitioner did not allege in his Answer the defense of equitable mortgage; hence, the lower courts [should] not have discussed the same; II. Even assuming that Petitioner alleged the defense of equitable mortgage, the MeTC could not have ruled upon the said defense, III. The M[e]TC and the RTC were not remiss in the exercise of their jurisdiction.44 The CA denied the motion. In this petition for review, Amelia Salvador-Roberts, as petitioner, avers that: I. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN DECLARING THAT THE M[e]TC AN(D) THE RTC WERE REMISS IN THE EXERCISE OF THAT JURISDICTION ACQUIRED BECAUSE IT DID NOT CONSIDER ALL PETITIONERS DEFENSE OF EQUITABLE MORTGAGE. II. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN REQUIRING THE M[e]TC AND RTC TO RULE ON A DEFENSE WHICH WAS NEVER AVAILED OF BY RESPONDENT.45 Petitioner argues that respondent is barred from raising the issue of equitable mortgage because his defense in the MeTC and RTC was that he had repurchased the property from the petitioner; by such representation, he had impliedly admitted the existence and validity of the deed of absolute sale whereby ownership of the property was transferred to petitioner but reverted to him upon the exercise of said right. The respondent even filed a complaint for specific performance with damages, which is now pending in the RTC of Makati City, docketed as Civil Case No. 01-851 entitled "Martin B. Papio vs. Amelia Salvador-Roberts." In that case, respondent claimed that his transaction with the petitioner was a sale with pacto de retro. Petitioner posits that Article 1602 of the Civil Code applies only when the defendant specifically alleges this defense. Consequently, the appellate court was proscribed from finding that petitioner and respondent had entered into an equitable mortgage under the deed of absolute sale.

Petitioner further avers that respondent was ably represented by counsel and was aware of the difference between a pacto de retro sale and an equitable mortgage; thus, he could not have been mistaken in declaring that he repurchased the property from her. As to whether a sale is in fact an equitable mortgage, petitioner claims that the issue should be properly addressed and resolved by the RTC in an action to enforce ownership, not in an ejectment case before the MeTC where the main issue involved is possession de facto. According to her, the obvious import of the CA Decision is that, in resolving an ejectment case, the lower court must pass upon the issue of ownership (in this case, by applying the presumptions under Art. 1602) which, in effect, would use the same yardstick as though it is the main action. The procedure will not only promote multiplicity of suits but also place the new owner in the absurd position of having to first seek the declaration of ownership before filing an ejectment suit. Respondent counters that the defense of equitable mortgage need not be particularly stated to apprise petitioner of the nature and character of the repurchase agreement. He contends that he had amply discussed in his pleadings before the trial and appellate courts all the surrounding circumstances of the case, such as the relative situation of the parties at the time; their attitude, acts, conduct, and declarations; and the negotiations between them that led to the repurchase agreement. Thus, he argues that the CA correctly ruled that the contract was one of equitable mortgage. He insists that petitioner allowed him to redeem and reacquire the property, and accepted his full payment of the property through Ventura, the authorized representative, as shown by the signed receipts. The threshold issues are the following: (1) whether the MeTC had jurisdiction in an action for unlawful detainer to resolve the issue of who between petitioner and respondent is the owner of the property and entitled to the de facto possession thereof; (2) whether the transaction entered into between the parties under the Deed of Absolute Sale and the Contract of Lease is an equitable mortgage over the property; and (3) whether the petitioner is entitled to the material or de facto possession of the property. The Ruling of the Court On the first issue, the CA ruling (which upheld the jurisdiction of the MeTC to resolve the issue of who between petitioner or respondent is the lawful owner of the property, and is thus entitled to the material or de facto possession thereof) is correct. Section 18, Rule 70 of the Rules of Court provides that when the defendant raises the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession. The judgment rendered in an action for unlawful detainer shall be conclusive with respect to the possession only and shall in no wise bind the title or affect the ownership of the land or building. Such judgment would not bar an action between the same parties respecting title to the land or building.46 The summary nature of the action is not changed by the claim of ownership of the property of the defendant.47The MeTC is not divested of its jurisdiction over the unlawful detainer action simply because the defendant asserts ownership over the property. The sole issue for resolution in an action for unlawful detainer is material or de facto possession of the property. Even if the defendant claims juridical possession or ownership over the property based on a claim that his transaction with the plaintiff relative to the property is merely an equitable mortgage, or that he had repurchased the property from the plaintiff, the MeTC may still delve into and take cognizance of the case and make an initial or provisional determination of who between the plaintiff and the defendant is the owner and, in the process, resolve the issue of who is entitled to the possession. The MeTC, in unlawful detainer case, decides the question of ownership only if it is intertwined with and necessary to resolve the issue of possession.48 The resolution of the MeTC on the ownership of the property is merely provisional or interlocutory. Any question involving the issue of ownership should be raised and resolved in a separate action brought specifically to settle the question with finality, in this case, Civil Case No. 01-851 which respondent filed before the RTC. The ruling of the CA, that the contract between petitioner and respondent was an equitable mortgage, is incorrect. The fact of the matter is that the respondent intransigently alleged in his answer, and even in his affidavit and position paper, that petitioner had granted him the right to redeem or repurchase the property at any time and for a reasonable amount; and that, he had, in fact, repurchased the property in July 1985 for P250,000.00 which he remitted to petitioner through an authorized representative who signed receipts therefor; he had reacquired ownership and juridical possession of the property after his repurchase thereof in 1985; and consequently, petitioner was obliged to execute a deed of absolute sale over the property in his favor. Notably, respondent alleged that, as stated in his letter to petitioner, he was given the right to reacquire the property in 1982 within two years upon the payment of P53,000.00, plus petitioners airfare for her trip to the Philippines from the USA and back; petitioner promised to sign the deed of absolute sale. He even filed a complaint against the petitioner in the RTC, docketed as Civil Case No. 01-851, for specific performance with damages to compel petitioner to execute the said deed of absolute sale over the property presumably on the strength of Articles 1357 and 1358 of the New Civil Code. Certainly then, his claim that petitioner had given him the right to repurchase the property is antithetical to an equitable mortgage. An equitable mortgage is one that, although lacking in some formality, form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to change a real property as security for a debt and contain nothing impossible or contrary to law. 49 A contract between the parties is an equitable mortgage if the following requisites are present: (a) the parties entered into a contract denominated as a contract of sale; and (b) the intention was to secure an existing debt by way of mortgage.50 The decisive factor is the intention of the parties. In an equitable mortgage, the mortgagor retains ownership over the property but subject to foreclosure and sale at public auction upon failure of the mortgagor to pay his obligation.51 In contrast, in a pacto de retro sale, ownership of the property sold is immediately transferred to the vendee a retro subject only to the right of the vendor a retro to repurchase the property upon compliance with legal requirements for the repurchase. The failure of the vendor a retro to exercise the right to repurchase within the agreed time vests upon the vendee a retro, by operation of law, absolute title over the property.52 One repurchases only what one has previously sold. The right to repurchase presupposes a valid contract of sale between the same parties.53 By insisting that he had repurchased the property, respondent thereby admitted that the deed of absolute sale executed by him and petitioner on April 13, 1982 was, in fact and in law, a deed of absolute sale and not an equitable mortgage; hence, he had acquired ownership over the property based on said deed. Respondent is, thus, estopped from asserting that the contract under the deed of absolute sale is an equitable mortgage unless there is allegation and evidence of palpable mistake on the part of respondent;54 or a fraud on the part of petitioner. Respondent made no such allegation in his pleadings and affidavit. On the contrary, he maintained that petitioner had sold the property to him in July 1985 and acknowledged receipt of the purchase price thereof except the amount of P39,000.00 retained by Perlita Ventura. Respondent is thus bound by his admission of petitioners ownership of the property and is barred from claiming otherwise.55 Respondents admission that petitioner acquired ownership over the property under the April 13, 1982 deed of absolute sale is buttressed by his admission in the Contract of Lease dated April 15, 1982 that petitioner was the owner of the property, and that he had paid the rentals for the duration of the contract of lease and even until 1985 upon its extension. Respondent was obliged to prove his defense that petitioner had given him the right to repurchase, and that petitioner obliged herself to resell the property for P250,000.00 when they executed the April 13, 1982 deed of absolute sale. We have carefully reviewed the case and find that respondent failed to adduce competent and credible evidence to prove his claim. As gleaned from the April 13, 1982 deed, the right of respondent to repurchase the property is not incorporated therein. The contract is one of absolute sale and not one with right to repurchase. The law states that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.56 When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the courts may not read into it any other intention that would contradict its plain import.57 The clear terms of the contract

should never be the subject matter of interpretation. Neither abstract justice nor the rule of liberal interpretation justifies the creation of a contract for the parties which they did not make themselves, or the imposition upon one party to a contract or obligation to assume simply or merely to avoid seeming hardships.58Their true meaning must be enforced, as it is to be presumed that the contracting parties know their scope and effects.59 As the Court held in Villarica, et al. v. Court of Appeals:60 The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case.61 In Ramos v. Icasiano,62 we also held that an agreement to repurchase becomes a promise to sell when made after the sale because when the sale is made without such agreement the purchaser acquires the thing sold absolutely; and, if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the purchaser as absolute owner. An option to buy or a promise to sell is different and distinct from the right of repurchase that must be reserved by means of stipulations to that effect in the contract of sale.63 There is no evidence on record that, on or before July 1985, petitioner agreed to sell her property to the respondent for P250,000.00. Neither is there any documentary evidence showing that Ventura was authorized to offer for sale or sell the property for and in behalf of petitioner for P250,000.00, or to receive the said amount from respondent as purchase price of the property. The rule is that when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void64 and cannot produce any legal effect as to transfer the property from its lawful owner.65 Being inexistent and void from the very beginning, said contract cannot be ratified.66 Any contract entered into by Ventura for and in behalf of petitioner relative to the sale of the property is void and cannot be ratified by the latter. A void contract produces no effect either against or in favor of anyone.67 Respondent also failed to prove that the negotiations between him and petitioner has culminated in his offer to buy the property for P250,000.00, and that they later on agreed to the sale of the property for the same amount. He likewise failed to prove that he purchased and reacquired the property in July 1985. The evidence on record shows that petitioner had offered to sell the property for US$15,000 on a "take it or leave it" basis in May 1984 upon the expiration of the Contract of Lease68 an offer that was rejected by respondentwhich is why on December 30, 1997, petitioner and her husband offered again to sell the property to respondent for P670,000.00 inclusive of back rentals and the purchase price of the property under the April 13, 1982 Deed of absolute Sale.69The offer was again rejected by respondent. The final offer appears to have been made on January 11, 199870but again, like the previous negotiations, no contract was perfected between the parties. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.71 Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. Contracts are perfected by mere consent manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.72 Once perfected, they bind the contracting parties and the obligations arising therefrom have the form of law between the parties which must be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law.73 There was no contract of sale entered into by the parties based on the Receipts dated July 1985 and June 16, 1986, signed by Perlita Ventura and the letter of petitioner to respondent dated July 25, 1986. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing and the other, to pay therefor a price certain in money or its equivalent.74 The absence of any of the essential elements will negate the existence of a perfected contract of sale. As the Court ruled in Boston Bank of the Philippines v. Manalo:75 A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.76 A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract.77 When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.78 Respondents reliance on petitioners letter to him dated July 25, 1986 is misplaced. The letter reads in full: 7-25-86 Dear Martin & Ising, Enclosed for your information is the letter written by my husband to Perlita. I hope that you will be able to convince your cousin that its to her best interest to deposit the balance of your payment to me ofP39,000.00 in my bank acct. per our agreement and send me my bank book right away so that we can transfer the title of the property. Regards, Amie 79 We have carefully considered the letter of Perlita Ventura, dated July 18, 1986, and the letter of Eugene Roberts, dated July 25, 1986, where Ventura admitted having used the money of petitioner amounting to P39,000.00 without the latters knowledge for the plane fare of Venturas parents. Ventura promised to refund the amount ofP39,000.00, inclusive of interests, within one year.80 Eugene Roberts berated Ventura and called her a thief for stealing his and petitioners money and that of respondents wife, Ising, who allegedly told petitioner that she, Ising, loaned the money to her parents for their plane fare to the USA. Neither Ventura nor Eugene Roberts declared in their letters that Ventura had used the P250,000.00 which respondent gave to her. Petitioner in her letter to respondent did not admit, either expressly or impliedly, having received P211,000.00 from Ventura. Moreover, in her letter to petitioner, only a week earlier, or on July 18, 1986, Ventura admitted having spent the P39,000.00 and pleaded that she be allowed to refund the amount within one (1) year, including interests.

Naririto ang total ng pera mo sa bankbook mo, P55,000.00 pati na yong deposit na sarili mo at bale ang nagalaw ko diyan ay P39,000.00. Huwag kang mag-alala ibabalik ko rin sa iyo sa loob ng isang taon pati interest. Ate Per81 1awphi1.net It is incredible that Ventura was able to remit to petitioner P211,000.00 before July 25, 1986 when only a week earlier, she was pleading to petitioner for a period of one year within which to refund the P39,000.00 to petitioner. It would have bolstered his cause if respondent had submitted an affidavit of Ventura stating that she had remittedP211,000.00 out of the P250,000.00 she received from respondent in July 1985 and June 20, 1986. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 69034 is REVERSED and SET ASIDE. The Decision of the Metropolitan Trial Court, affirmed with modification by the Regional Trial Court, is AFFIRMED. SO ORDERED. SECOND DIVISION

ALEXANDER ALEX MACASAET, Petitioner, - versus -

G.R. No. 172446 Present: QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.

R. TRANSPORT CORPORATION, Respondent. Promulgated: October 10, 2007 x-----------------------------------------------------------------------------------x DECISION TINGA, J.: This petition seeks the reversal of the Decision[1] of the Court of Appeals dated 5 October 2005 in CA G.R. CV No. 70585, as well as its Resolution[2] dated 28 March 2006 denying petitioners motion for reconsideration. First, the factual background. On 3 January 1996, a Complaint for Recovery of Possession and Damages[3] was filed by herein respondent R. Transport Corporation against herein petitioner Alexander Macasaet before the Regional Trial Court (RTC) of Makati, Branch 147. The complaint alleged that R. Transport was a holder of Certificates of Public Convenience (CPC) to operate a public utility bus service within Metro Manila and the provinces whereas New Mindoro Transport Classic (NMTC), represented by petitioner, operates a transportation company in Oriental Mindoro. On 11 October 1995, and Macasaet entered into a Deed of Sale with Assumption of Mortgage (deed of sale)[4] over four (4) passenger buses[5] whereby Macasaet undertook to pay the consideration of twelve million pesos (P12,000,000.00) and assume the existing mortgage obligation on the said buses in favor of Phil. Hino Sales Corporation. Accordingly, R. Transport delivered to Macasaet two (2) passenger buses. Despite repeated demands, however, Macasaet failed to pay the stipulated purchase price. This prompted R. Transport to file a complaint seeking the issuance of a writ of replevin, praying for judgment declaring R. Transport as the lawful owner and possessor of the passenger buses and ordering Macasaet to remit the amount of P660,000.00 representing the income generated by the two buses from 16 October 1995 to 2 January 1996.[6] Prior to the execution of the contract, Special Trip Contract was entered into by the parties on 8 October 1995.[7] This contract stipulated that R. Transport would lease the four buses subject of the deed of sale to Macasaet for the sum of P10,000.00 a day per bus or a total of P280,000.00 for the duration of one week, from 15-22 October 1995.[8] Respondents finance officer testified that the purpose of the contract was to support the delivery of the first two buses pending formal execution of the deed of sale.[9] On 8 January 1996, on R. Transports motion, the trial court issued a writ of seizure[10] ordering the sheriff to take possession of the two buses in NMTC subject to R. Transports filing of a bond in the amount of P12,000,000.00. The sheriff recovered the two buses and delivered them to R. Transport on 16 January 1996.[11] For his defense, petitioner alleged that he had paid respondent the full consideration of P12,000,000.00 and had agreed to assume the mortgage obligation in favor of Phil. Hino Sales Corporation. He claimed ownership over the four passenger buses, including the two buses already delivered to him. He further contended that he had already remitted P120,000.00 to respondent as partial payment of the mortgage obligation. Petitioner admitted that he had been earning at least P7,000.00 per day on each of the buses.[12] For his counterclaim, he prayed for the return of the bus units seized and the immediate delivery of the other two units, as well as for payment of damages.[13] In its Decision[14] dated 15 February 2001, the RTC upheld the right of respondent to possess the two buses but dismissed its claim for recovery of unpaid rentals for the use of the two buses. The dispositive portion of the decision reads as follows: WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the defendant and against plaintiff, dismissing the Complaint as regards the claim for recovery of the unpaid rentals of the two (2) passenger buses which were used by the defendant from October 16, 1995 until January 16, 1996 for lack of evidence. SO ORDERED. [15]

The trial court observed that there was no basis for the payment of unpaid rentals because respondent failed to formally offer in evidence the records of operational expenses incurred by the buses delivered to petitioner and marked as Exhibits W, W-1 to W-3.[16] The trial court did not bother to give a definitive ruling on the issues related to the counterclaim for specific performance of the deed of sale on the ground that the issuance of a writ of replevin effectively disposed of the cause of action in the principal complaint, which is recovery of possession. The trial court was likewise silent with respect to the status of the deed of sale.[17] Dissatisfied with the RTCs refusal to award rentals, respondent filed a petition for review before the Court of Appeals asserting its right as an owner to the fruits of the two passenger buses, over the fruits thereof, i.e., the income derived from their use. The Court of Appeals, in its Decision dated 5 October 2005, sustained the trial courts finding that ownership over the passenger buses remained with respondent. Unlike the RTC, the Court of Appeals ruled that the deed of sale was not perfected, thus, respondent retained ownership over the buses. It further ordered petitioner to remit the income from the passenger buses in the amount of P7,000.00 per day for the period between 16 October 1995 and 16 January 1996, deducting therefrom the amount of P120,000.00 which had already been remitted to respondent.[18] Macasaet filed a motion for reconsideration which the appellate court denied. Hence, the instant petition raising this sole issue: Is Section 34 of Rule 132 of the Rules of Court which states that the court shall consider no evidence which has not been formally offered applicable in the case at bar?[19] However, other interrelated issues have to be looked into to resolve the controversy. Petitioner argues in the main that there was no legal and factual basis for the Court of Appeals to order the remittance of income. He harps on the fact that there was no lease agreement alleged in respondents complaint to support its claim for unpaid rentals. He reiterates the trial courts finding that the exhibits tending to prove the rentals were not formally offered in evidence. Moreover, no other competent evidence was presented to substantiate its claim for unpaid rentals.[20] Respondent, in its comment, merely parrots the ruling of the Court of Appeals, petitioner notes.[21] Crucial to the resolution of the case is the continuing efficacy of the deed of sale, which in turn is the basis in determining the ownership of the buses. Respondent, on the other hand, claims that the contract was never consummated for lack of consideration and because of the subsequent disapproval of the security finance needed for petitioner to assume the mortgage obligation. On the other hand, petitioner asserts ownership over the subject buses by virtue of payment of the stipulated consideration for the sale. The appellate court declared that the non-perfection of the deed of sale precluded petitioner from possessing and enjoying the buses, including the income thereof. Explained the appellate court: True, the plaintiff-appellant and the defendant-appellee have no agreement as to the payment of rentals for the subject passenger buses, since what was actually agreed upon by the parties herein, was not the lease, but the sale of the subject buses to the defendant-appellee in the amount ofP12,000,000.00, with assumption of mortgage, as evidenced by the Deed of Sale with Assumption of Mortgage. It was pursuant to this Deed of Sale with Assumption of Mortgage that the subject two passenger buses were delivered by the plaintiff-appellant to the defendant-appellee in October,[sic] 1995. The said contract was the basis of the defendantappellees possession and enjoyment of the subject property, which includes entitlement to the income thereof. However, the aforementioned contract of sale has never been perfected. Firstly, the court a quo found that no payment has been made by the defendant-appellee, for otherwise, it could not have upheld the plaintiff-appellants possession over the subject buses.[22] The Court of Appeals erred in stating that the deed of sale was not perfected, for it was. There was no consummation, though. However, the rescission or resolution of the deed of sale is in order. The essential requisites of a contract under Article 1318 of the New Civil Code are: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. Thus, contracts, other than real contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Once perfected, they bind other contracting parties and the obligations arising therefrom have the force of law between the parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law.[23] Being a consensual contract, 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.[24] A perfected contract of sale imposes reciprocal obligations on the parties whereby the vendor obligates himself to transfer the ownership of and to deliver a determinate thing to the buyer who, in turn, is obligated to pay a price certain in money or its equivalent.[25] Failure of either party to comply with his obligation entitles the other to rescission as the power to rescind is implied in reciprocal obligations.[26] Applying these legal precepts to the case at bar, we hold that respondent has the right to rescind or cancel the deed of sale in view of petitioners failure to pay the stipulated consideration. Montecillo v. Reynes,[27] cited by the appellate court, is particularly instructive in distinguishing the legal effects of failure to pay consideration and lack of consideration: x x x Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing contract, while the latter prevents the existence of a valid contract. Where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initiofor lack of consideration. x x x [28] The Court of Appeals however failed to consider that in the instant case, there was failure on the part of petitioner to pay the purchase price and to complete the assumption of mortgage. The latter argued before the lower court that payment was in fact made and counterclaimed for the immediate delivery of the two other passenger buses and payment of damages.[29] However, this claim remained a claim and was not substantiated.

While the Court of Appeals relied on the text of the deed of sale which adverts to payment of the purchase price,[30] the non-payment of the purchase price was no longer an issue at the appellate level. Respondent presented strong evidence that petitioner did not pay the purchase price, and that paved the way for the issuance of a writ of replevin. Petitioner did not challenge the finding of the trial court before the Court of Appeals and this Court. He did not also controvert the non-consummation of the assumption of mortgage at any level of the proceedings. Non-payment of the purchase price of property constitutes a very good reason to rescind a sale for it violates the very essence of the contract of sale.[31] While it is preferable that respondent instead should have filed an action to resolve or cancel the deed as the right to do so must be invoked judicially,[32] this shortcoming was cured when the complaint itself made out a case for rescission or resolution for failure of petitioner to comply with his obligation to pay the full purchase price. The complaint relevantly alleged: xxxx 3. (a) That on October 11, 1995, the plaintiff and the defendant entered into and executed a Deed of Sale with Assumption of Mortgage with plaintiff as Vendor and the defendant as Vendee covering four (4) units of passenger airconditioned buses. x x x 3. (b) That the plaintiff and the defendant in said Deed of Sale with Assumption of Mortgage x x x hereof agreed that the price of the sale of the above-described motor vehicles is in the sum of PESOS TWELVE MILLION (P12,000,000.00), Philippine Currency, with the stipulation that the defendant as Vendee will assume the existing mortgage of the above-described motor vehicle with PHIL. HINO SALES CORPORATION and consequently, will assume the balance of the remaining obligation due to PHIL. HINO SALES CORPORATION as agreed upon in the said Deed of Sale with Assumption of Mortgage; 3. (c) That pursuant to said Deed of Sale with Assumption of Mortgage, the plaintiff delivered to the defendant at Calapan, Oriental Mindoro, the first two (2) motor vehicles x x x withholding the other two (2) passenger buses pending the payment by the defendant to the plaintiff of the purchase price of the sale of PESOS TWELVE MILLION (P12,000,000.00), Philippine currency and assumption of mortgage by said defendant obligating himself to pay the remaining balance of the obligation due to the PHIL. HINO SALES CORPORATION constituted over the above-described motor vehicles; 3. (d) That inspite of repeated demands made by the plaintiff to the defendant to pay the purchase price of the sale x x x the defendant, in evident bad faith, refused and failed and continue to refuse and fail to pay the plaintiff the purchase price of the said vehicles; xxxx 4. b.) That the plaintiff-applicant is the owner of the two (2) buses claimed as above-described and is entitled to the rightful possession thereof x x x 4. c.) That the above-described two (2) units of passenger buses are wrongfully detained by the defendant pretending that he is the owner under the Deed of Sale with Assumption of Mortgage which pretension is false because the defendant has not paid the plaintiff any single centavo out of the PESOS TWELVE MILLION (P12,000,000.00), Philippine currency, the purchase price of the sale of the four (4) passenger buses,[33] xxxx As previously noted, petitioner did not pay the full purchase price as stipulated in the contract whereas respondent complied with its obligation when it delivered the two buses to petitioner. A necessary consequence of rescission is restitution with payment of damages. Article 1191 provides: x x x x The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. x x xx Also, corollary to the rescission of the contract of sale is the recovery of possession of the object thereof. Thus, petitioners possession over the passenger buses became unlawful when upon demand for return, he wrongfully retained possession over the same. In ordering petitioner to remit to respondent the income derived from the passenger buses, the appellate court ratiocinated thus: Although the parties herein did not agree on the rentals for the use of the property, the fact that the defendant-appellee was able to use the two passenger buses for the months of October, [sic] 1995 to January, [sic] 1996, and has derived income therefrom, was acknowledged by the court a quo and the defendant-appellee himself. Under such circumstances, it is but fair that the defendant-appellee be made to pay reasonable rentals for the use of the two passenger buses from the time that they were delivered, until they were seized from him. It would be against the equitable proscription against unjust enrichment for the defendant-appellee to keep the income from a property over which he has no legal right. It would be unfair to excuse the defendant-appellee from the payment of reasonable rentals because he enjoyed and made use of the subject passenger buses. It is a basic rule in law that no one shall unjustly enrich himself at the expense of another. Niguno non deue enriquecerse tortizamente condao de otro. Thus, a modification of the decision of the court a quo is in order. In view of the plaintiff-appellants failure to substantiate its claim for the unpaid rentals amounting to P660,000.00, we could not grant the same. However, we deem it just for the defendant-appellee to remit the plaintiff-appellant the income he derived from the subject passenger buses in the amount of P7,000.00 per day within the period that they were in the defendant-appellants

possession, that is from October 16, 1997 to January 16, 1995, minus the amount of P120,000.00 which the defendant-appellee already remitted to the plaintiff-appellant.[34] It can be inferred from this decision that the appellate court did not consider petitioner liable for the unpaid rentals when it noted that respondent had failed to support its claim over it. Instead, it concluded that he was liable to respondent for damages, in the form of reasonable rentals for the use of the passenger buses. However, with respect to the amount of damages, we differ from the award of the appellate court. Settled is the rule that actual damages must be proved with reasonable degree of certainty. A party is entitled only up to such compensation for the pecuniary loss that he has duly proven. It cannot be presumed. Absent proof of the amount of actual damages sustained, the court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof.[35] The appellate court arrived at the amount of P7,000.00 per day as income for the use of the two passenger buses due to respondent on the basis of the allegations in the answer of petitioner.[36] The award cannot be sustained because no evidence was produced to support this averment made by petitioner. Petitioner did not present any record or journal that would have evidenced the earnings of the passenger buses for said period. Bare allegations would not suffice. Since the amount of damages awarded by the Court of Appeals was founded merely on speculations, we turn to the provisions of the Special Trip Contract. In said contract, the rental is fixed at P10,000.00 per day for each bus. This duly executed contract was presented, marked and formally offered in evidence. The fact that Macasaet voluntarily signed the contract evinced his acquiescence to its terms, particularly the amount of rentals. Therefore, the amount of P1,460,000.00 is deemed reasonable compensation for the use of the passenger buses, computed as follows: Amt of rentals per bus: x No. of buses: Amt of rentals per day: x No. of days (16 Oct-2 Jan) - Payment by Macasaet TOTAL P10,000.00 2 __________ P 20,000.00 79 ____________ P1,580,000.00 120,000.00 ____________ P1,460,000.00

Since the amount awarded as damages in the form of reasonable rentals is more than the amount of rentals specified in the complaint, additional filing fees corresponding to the difference between the amount prayed for in the complaint and the award based on the evidence should be assessed as a lien on the judgment, as mandated by Section 2, Rule 141 of the Rules of Court, to wit:

SEC. 2. Fees in lien. Where the court in its final judgment awards a claim not alleged, or a relief different from, or more than that claimed in the pleading, the party concerned shall pay the additional fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect the corresponding fees.[37] WHEREFORE, the petition is DENIED. However, the decision of the Court of Appeals is MODIFIED in that petitioner is ORDERED to pay respondent damages in the form of reasonable rentals in the amount of P1,460,000.00 with interest at 12% per annum from the finality of this decision, with a lien thereon corresponding to the additional filing fees adverted to above. The Clerk of Court of the Regional Trial Court of Makati is directed to assess and collect the additional filing fees. SO ORDERED.