Republic of the Philippines

SUPREME COURT
Manila

On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall
site together with the building thereon, to the University of the Philippines (Iloilo branch). The site
donated consisted of Lots Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square meters,
more or less.

EN BANC
G.R. No. L-24732

April 30, 1968

Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian
Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the
value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff, the City did not
have funds (p. 9, Appellant's Brief.)

PIO SIAN MELLIZA, petitioner,

vs.
CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS, respondents.

The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the
three lots, Nos. 1214-B, 1214-C and 1214-D.

Cornelio P. Ravena for petitioner.

Office of the Solicitor General for respondents.

On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against Iloilo
City and the University of the Philippines for recovery of Lot 1214-B or of its value.

BENGZON, J.P., J.:

The defendants answered, contending that Lot 1214-B was included in the public instrument executed by
Juliana Melliza in favor of Iloilo municipality in 1932. After stipulation of facts and trial, the Court of First
Instance rendered its decision on August 15, 1957, dismissing the complaint. Said court ruled that the
instrument executed by Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214B. In support of this conclusion, it referred to the portion of the instrument stating:

Juliana Melliza during her lifetime owned, among other properties, three parcels of residential land in
Iloilo City registered in her name under Original Certificate of Title No. 3462. Said parcels of land were
known as Lots Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square meters.
On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square meters of Lot 1214,
to serve as site for the municipal hall. 1 The donation was however revoked by the parties for the reason
that the area donated was found inadequate to meet the requirements of the development plan of the
municipality, the so-called "Arellano Plan". 2

Asimismo hago constar que la cesion y traspaso que arriba se mencionan es de venta difinitiva,
y que para la major identificacion de los lotes y porciones de los mismos que son objeto de la
presente, hago constar que dichos lotes y porciones son los que necesita el Gobierno municipal
de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government
Center de Iloilo, segun el plano Arellano.

Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And
still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As
approved by the Bureau of Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot 1214-B;
Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C; and Lot 1214-B-13, with 4,135
square meters, became Lot 1214-D.

and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but also such other
portions of lots as were necessary for the municipal hall site, such as Lot 1214-B. And thus it held that
Iloilo City had the right to donate Lot 1214-B to the U.P.

On November 15, 1932 Juliana Melliza executed an instrument without any caption containing the
following:
Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS VEINTIDOS PESOS
(P6,422.00), moneda filipina que por la presente declaro haber recibido a mi entera satisfaccion
del Gobierno Municipal de Iloilo, cedo y traspaso en venta real y difinitiva a dicho Gobierno
Municipal de Iloilo los lotes y porciones de los mismos que a continuacion se especifican a
saber: el lote No. 5 en toda su extension; una porcion de 7669 metros cuadrados del lote No.
2, cuya porcion esta designada como sub-lotes Nos. 2-B y 2-C del piano de subdivision de
dichos lotes preparado por la Certeza Surveying Co., Inc., y una porcion de 10,788 metros
cuadrados del lote No. 1214 cuya porcion esta designada como sub-lotes Nos. 1214-B-2 y
1214-B-3 del mismo plano de subdivision.
Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de venta difinitiva,
y que para la mejor identificacion de los lotes y porciones de los mismos que son objeto de la
presente, hago constar que dichos lotes y porciones son los que necesita el Gobierno Municipal
de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government
Center de iloilo, segun el plano Arellano.
On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva
who thereafter obtained her own registered title thereto, under Transfer Certificate of Title No. 18178.
Remedios in turn on November 4, 1946 transferred her rights to said portion of land to Pio Sian Melliza,
who obtained Transfer Certificate of Title No. 2492 thereover in his name. Annotated at the back of Pio
Sian Melliza's title certificate was the following:
... (a) that a portion of 10,788 square meters of Lot 1214 now designated as Lots Nos. 1214-B2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument
dated November 15, 1932....

Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the Court of Appeals
affirmed the interpretation of the Court of First Instance, that the portion of Lot 1214 sold by Juliana
Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was
needed for the construction of avenues, parks and the city hall site. Nonetheless, it ordered the remand
of the case for reception of evidence to determine the area actually taken by Iloilo City for the
construction of avenues, parks and for city hall site.
The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant maintains that the
public instrument is clear that only Lots Nos. 1214-C and 1214-D with a total area of 10,788 square
meters were the portions of Lot 1214 included in the sale; that the purpose of the second paragraph,
relied upon for a contrary interpretation, was only to better identify the lots sold and none other; and that
to follow the interpretation accorded the deed of sale by the Court of Appeals and the Court of First
Instance would render the contract invalid because the law requires as an essential element of sale, a
"determinate" object (Art. 1445, now 1448, Civil Code).
Appellees, on the other hand, contend that the present appeal improperly raises only questions of fact.
And, further, they argue that the parties to the document in question really intended to include Lot 1214B therein, as shown by the silence of the vendor after Iloilo City exercised ownership thereover; that not
to include it would have been absurd, because said lot is contiguous to the others admittedly included in
the conveyance, lying directly in front of the city hall, separating that building from Lots 1214-C and
1214-D, which were included therein. And, finally, appellees argue that the sale's object was determinate,
because it could be ascertained, at the time of the execution of the contract, what lots were needed by
Iloilo municipality for avenues, parks and city hall site "according to the Arellano Plan", since the Arellano
plan was then already in existence.
The appeal before Us calls for the interpretation of the public instrument dated November 15, 1932. And
interpretation of such contract involves a question of law, since the contract is in the nature of law as
between the parties and their successors-in-interest.

At the outset, it is well to mark that the issue is whether or not the conveyance by Juliana Melliza to Iloilo
municipality included that portion of Lot 1214 known as Lot 1214-B. If not, then the same was included,
in the instrument subsequently executed by Juliana Melliza of her remaining interest in Lot 1214 to
Remedios Sian Villanueva, who in turn sold what she thereunder had acquired, to Pio Sian Melliza. It
should be stressed, also, that the sale to Remedios Sian Villanueva from which Pio Sian Melliza derived
title did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as were not included
in the previous sale to Iloilo municipality(Stipulation of Facts, par. 5, Record on Appeal, p. 23). And thus,
if said Lot 1214-B had been included in the prior conveyance to Iloilo municipality, then it was excluded
from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.
The point at issue here is then the true intention of the parties as to the object of the public instrument
Exhibit "D". Said issue revolves on the paragraph of the public instrument aforequoted and its purpose,
i.e., whether it was intended merely to further describe the lots already specifically mentioned, or
whether it was intended to cover other lots not yet specifically mentioned.
First of all, there is no question that the paramount intention of the parties was to provide Iloilo
municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its
avenues and parks. For this matter, a previous donation for this purpose between the same parties was
revoked by them, because of inadequacy of the area of the lot donated.
Secondly, reading the public instrument in toto, with special reference to the paragraphs describing the
lots included in the sale, shows that said instrument describes four parcels of land by their lot numbers
and area; and then it goes on to further describe, not only those lots already mentioned, but the
lots object of the sale, by stating that said lots are the ones needed for the construction of the city hall
site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the
specified lots Lots 2, 5, 1214-C and 1214-D, there would scarcely have been any need for the next
paragraph, since these lots are already plainly and very clearly described by their respective lot number
and area. Said next paragraph does not really add to the clear description that was already given to them
in the previous one.

Register of Deeds and such registration was annotated at the back of the corresponding title certificate of
Juliana Melliza. From these stipulated facts, it can be inferred that Pio Sian Melliza knew of the aforesaid
terms of the instrument or is chargeable with knowledge of them; that knowing so, he should have
examined the Arellano plan in relation to the public instrument Exhibit "D"; that, furthermore, he should
have taken notice of the possession first by the Municipality of Iloilo, then by the City of Iloilo and later by
the University of the Philippines of Lot 1214-B as part of the city hall site conveyed under that public
instrument, and raised proper objections thereto if it was his position that the same was not included in
the same. The fact remains that, instead, for twenty long years, Pio Sian Melliza and his predecessors-ininterest, did not object to said possession, nor exercise any act of possession over Lot 1214-B. Applying,
therefore, principles of civil law, as well as laches, estoppel, and equity, said lot must necessarily be
deemed included in the conveyance in favor of Iloilo municipality, now Iloilo City.
WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the Court of First
Instance, and the complaint in this case is dismissed. No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion , C.J., is on leave.
Footnotes
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9935

February 1, 1915

It is therefore the more reasonable interpretation, to view it as describing those other portions of land
contiguous to the lots aforementioned that, by reference to the Arellano plan, will be found needed for the
purpose at hand, the construction of the city hall site.

YU TEK and CO., plaintiff-appellant,

vs.
BASILIO GONZALES, defendant-appellant.

Appellant however challenges this view on the ground that the description of said other lots in the
aforequoted second paragraph of the public instrument would thereby be legally insufficient, because the
object would allegedly not be determinate as required by law.

Beaumont, Tenney and Ferrier for plaintiff.

Buencamino and Lontok for defendant.
TRENT, J.:

Such contention fails on several counts. The requirement of the law that a sale must have for its object a
determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is
capable of being made determinate without the necessity of a new or further agreement between the
parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots
plus the statement that the lots object of the sale are the ones needed for city hall site, avenues and
parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the
contract, for rendering determinate said lots without the need of a new and further agreement of the
parties.
The Arellano plan was in existence as early as 1928. As stated, the previous donation of land for city hall
site on November 27, 1931 was revoked on March 6, 1932 for being inadequate in area under said
Arellano plan. Appellant claims that although said plan existed, its metes and bounds were not fixed until
1935, and thus it could not be a basis for determining the lots sold on November 15, 1932. Appellant
however fails to consider that thearea needed under that plan for city hall site was then already known;
that the specific mention of some of the lots covered by the sale in effect fixed the corresponding location
of the city hall site under the plan; that, therefore, considering the said lots specifically mentioned in the
public instrument Exhibit "D", and the projected city hall site, with its area, as then shown in the Arellano
plan (Exhibit 2), it could be determined which, and how much of the portions of land contiguous to those
specifically named, were needed for the construction of the city hall site.
And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C and 1214-D,
admittedly covered by the public instrument. It is stipulated that, after execution of the contract Exhibit
"D", the Municipality of Iloilo possessed it together with the other lots sold. It sits practically in the heart
of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts, was the notary public of
the public instrument. As such, he was aware of its terms. Said instrument was also registered with the

The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of which follow:
1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine
currency from Messrs. Yu Tek and Co., and that in consideration of said sum be obligates
himself to deliver to the said Yu Tek and Co., 600 piculs of sugar of the first and second grade,
according to the result of the polarization, within the period of three months, beginning on the
1st day of January, 1912, and ending on the 31st day of March of the same year, 1912.
2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said Messrs. Yu Tek and
Co., of this city the said 600 piculs of sugar at any place within the said municipality of Santa
Rosa which the said Messrs. Yu Tek and Co., or a representative of the same may designate.
3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek and Co. the 600
piculs of sugar within the period of three months, referred to in the second paragraph of this
document, this contract will be rescinded and the said Mr. Basilio Gonzales will then be
obligated to return to Messrs. Yu Tek and Co. the P3,000 received and also the sum of P1,200
by way of indemnity for loss and damages.
Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover
the P3,000. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200 under paragraph 4,
supra. Judgment was rendered for P3,000 only, and from this judgment both parties appealed.

The points raised by the defendant will be considered first. He alleges that the court erred in refusing to
permit parol evidence showing that the parties intended that the sugar was to be secured from the crop
which the defendant raised on his plantation, and that he was unable to fulfill the contract by reason of
the almost total failure of his crop. This case appears to be one to which the rule which excludes parol
evidence to add to or vary the terms of a written contract is decidedly applicable. There is not the
slightest intimation in the contract that the sugar was to be raised by the defendant. Parties are
presumed to have reduced to writing all the essential conditions of their contract. While parol evidence is
admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of
incorporating into the contract additional contemporaneous conditions which are not mentioned at all in
the writing, unless there has been fraud or mistake. In an early case this court declined to allow parol
evidence showing that a party to a written contract was to become a partner in a firm instead of a
creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in Eveland vs. Eastern Mining Co. (14
Phil. Rep., 509) a contract of employment provided that the plaintiff should receive from the defendant a
stipulated salary and expenses. The defendant sought to interpose as a defense to recovery that the
payment of the salary was contingent upon the plaintiff's employment redounding to the benefit of the
defendant company. The contract contained no such condition and the court declined to receive parol
evidence thereof.
In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised
by the defendant. There is no clause in the written contract which even remotely suggests such a
condition. The defendant undertook to deliver a specified quantity of sugar within a specified time. The
contract placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at
liberty to purchase it on the market or raise it himself. It may be true that defendant owned a plantation
and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our
conclusion is that the condition which the defendant seeks to add to the contract by parol evidence
cannot be considered. The rights of the parties must be determined by the writing itself.
The second contention of the defendant arises from the first. He assumes that the contract was limited to
the sugar he might raise upon his own plantation; that the contract represented a perfected sale; and
that by failure of his crop he was relieved from complying with his undertaking by loss of the thing due.
(Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that there was a perfected
sale. Article 1450 defines a perfected sale as follows:
The sale shall be perfected between vendor and vendee and shall be binding on both of them, if
they have agreed upon the thing which is the object of the contract and upon the price, even
when neither has been delivered.
Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been
perfected, be governed by the provisions of articles 1096 and 1182."
This court has consistently held that there is a perfected sale with regard to the "thing" whenever the
article of sale has been physically segregated from all other articles Thus, a particular tobacco factory
with its contents was held sold under a contract which did not provide for either delivery of the price or of
the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the
recent case of Barretto vs. Santa Marina(26 Phil. Rep., 200) where specified shares of stock in a tobacco
factory were held sold by a contract which deferred delivery of both the price and the stock until the latter
had been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil.
Rep., 49) a sale of a specific house was held perfected between the vendor and vendee, although the
delivery of the price was withheld until the necessary documents of ownership were prepared by the
vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into
the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing
the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for
payment, the hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held
that the hemp having been already delivered, the title had passed and the loss was the vendee's. It is our
purpose to distinguish the case at bar from all these cases.
In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of the
first and second classes. Was this an agreement upon the "thing" which was the object of the contract
within the meaning of article 1450, supra? Sugar is one of the staple commodities of this country. For the
purpose of sale its bulk is weighed, the customary unit of weight being denominated a "picul." There was
no delivery under the contract. Now, if called upon to designate the article sold, it is clear that the
defendant could only say that it was "sugar." He could only use this generic name for the thing sold.
There was no "appropriation" of any particular lot of sugar. Neither party could point to any specific
quantity of sugar and say: "This is the article which was the subject of our contract." How different is this

from the contracts discussed in the cases referred to above! In the McCullough case, for instance, the
tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other
tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to
transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject
of the contract, it was shown that that quantity had been deposited in a specific warehouse, and thus set
apart and distinguished from all other hemp.
A number of cases have been decided in the State of Louisiana, where the civil law prevails, which
confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47 Sou.,
444). In this case a contract was entered into by a traveling salesman for a quantity of shoes, the sales
having been made by sample. The court said of this contract:
But it is wholly immaterial, for the purpose of the main question, whether Mitchell was
authorized to make a definite contract of sale or not, since the only contract that he was in a
position to make was an agreement to sell or an executory contract of sale. He says that
plaintiff sends out 375 samples of shoes, and as he was offering to sell by sample shoes, part
of which had not been manufactured and the rest of which were incorporated in plaintiff's stock
in Lynchburg, Va., it was impossible that he and Seegars and Co. should at that time have
agreed upon the specific objects, the title to which was to pass, and hence there could have
been no sale. He and Seegars and Co. might have agreed, and did (in effect ) agree, that the
identification of the objects and their appropriation to the contract necessary to make a sale
should thereafter be made by the plaintiff, acting for itself and for Seegars and Co., and the
legend printed in red ink on plaintiff's billheads ("Our responsibility ceases when we take
transportation Co's. receipt `In good order'" indicates plaintiff's idea of the moment at which
such identification and appropriation would become effective. The question presented was
carefully considered in the case of State vs. Shields, et al. (110 La., 547, 34 Sou., 673) (in
which it was absolutely necessary that it should be decided), and it was there held that in
receiving an order for a quantity of goods, of a kind and at a price agreed on, to be supplied
from a general stock, warehoused at another place, the agent receiving the order merely enters
into an executory contract for the sale of the goods, which does not divest or transfer the title
of any determinate object, and which becomes effective for that purpose only when specific
goods are thereafter appropriated to the contract; and, in the absence of a more specific
agreement on the subject, that such appropriated takes place only when the goods as ordered
are delivered to the public carriers at the place from which they are to be shipped, consigned to
the person by whom the order is given, at which time and place, therefore, the sale is perfected
and the title passes.
This case and State vs. Shields, referred to in the above quotation are amply illustrative of the position
taken by the Louisiana court on the question before us. But we cannot refrain from referring to the case
of Larue and Prevost vs. Rugely, Blair and Co. (10 La. Ann., 242) which is summarized by the court itself
in the Shields case as follows:
. . . It appears that the defendants had made a contract for the sale, by weight, of a lot of
cotton, had received $3,000 on account of the price, and had given an order for its delivery,
which had been presented to the purchaser, and recognized by the press in which the cotton
was stored, but that the cotton had been destroyed by fire before it was weighed. It was held
that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000
paid on account of the price.
We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale
and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not
applicable. The defendant having defaulted in his engagement, the plaintiff is entitled to recover the
P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must
therefore be affirmed.
The plaintiff has appealed from the judgment of the trial court on the ground that it is entitled to recover
the additional sum of P1,200 under paragraph 4 of the contract. The court below held that this paragraph
was simply a limitation upon the amount of damages which could be recovered and not liquidated
damages as contemplated by the law. "It also appears," said the lower court, "that in any event the
defendant was prevented from fulfilling the contract by the delivery of the sugar by condition over which
he had no control, but these conditions were not sufficient to absolve him from the obligation of returning
the money which he received."

The above quoted portion of the trial court's opinion appears to be based upon the proposition that the
sugar which was to be delivered by the defendant was that which he expected to obtain from his own
hacienda and, as the dry weather destroyed his growing cane, he could not comply with his part of the
contract. As we have indicated, this view is erroneous, as, under the contract, the defendant was not
limited to his growth crop in order to make the delivery. He agreed to deliver the sugar and nothing is
said in the contract about where he was to get it.
We think is a clear case of liquidated damages. The contract plainly states that if the defendant fails to
deliver the 600 piculs of sugar within the time agreed on, the contract will be rescinded and he will be
obliged to return the P3,000 and pay the sum of P1,200 by way of indemnity for loss and damages. There
cannot be the slightest doubt about the meaning of this language or the intention of the parties. There is
no room for either interpretation or construction. Under the provisions of article 1255 of the Civil Code
contracting parties are free to execute the contracts that they may consider suitable, provided they are
not in contravention of law, morals, or public order. In our opinion there is nothing in the contract under
consideration which is opposed to any of these principles.
For the foregoing reasons the judgment appealed from is modified by allowing the recovery of P1,200
under paragraph 4 of the contract. As thus modified, the judgment appealed from is affirmed, without
costs in this instance.
Arellano,
C.J.,
Johnson, J., dissents.

Torres,

Carson

and

Araullo,

Callangan, (2) Xerox copies of four (4) tax declarations of the riceland leased to him and copies of the
lease contract between him and Judge Concepcion Salud, and (3) his Residence Tax Certificate. Private
respondent Soriano's documents were processed and accordingly, he was given a quota of 2,640 cavans
of palay. The quota noted in the Farmer's Information Sheet represented the maximum number of cavans
of palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered 630
cavans of palay. The palay delivered during these two days were not rebagged, classified and weighed.
when Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be
held in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was
not a bona tide farmer and the palay delivered by him was not produced from his farmland but was taken
from the warehouse of a rice trader, Ben de Guzman. On August 28, 1979, Cabal wrote Soriano advising
him to withdraw from the NFA warehouse the 630 cavans Soriano delivered stating that NFA cannot
legally accept the said delivery on the basis of the subsequent certification of the BAEX technician,
Napoleon Callangan that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, private respondent Soriano insisted that the palay grains
delivered be paid. He then filed a complaint for specific performance and/or collection of money with
damages on November 2, 1979, against the National Food Authority and Mr. William Cabal, Provincial
Manager of NFA with the Court of First Instance of Tuguegarao, and docketed as Civil Case No. 2754.

JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, respondents.
Cordoba, Zapanta, Rola & Garcia for petitioner National Grains Authority.
Plaridel Mar Israel for respondent Leon Soriano.

MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate Appellate Court (now
Court of Appeals) dated December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano, PlaintiffAppellee versus National Grains Authority and William Cabal, Defendants Appellants", which affirmed the
decision of the Court of First Instance of Cagayan, in Civil Case No. 2754 and its resolution (p. 28, Rollo)
dated April 17, 1986 which denied the Motion for Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority, NFA for short) is a government agency
created under Presidential Decree No. 4. One of its incidental functions is the buying of palay grains from
qualified farmers.
On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to the NFA, through
William Cabal, the Provincial Manager of NFA stationed at Tuguegarao, Cagayan. He submitted the
documents required by the NFA for pre-qualifying as a seller, namely: (1) Farmer's Information Sheet
accomplished by Soriano and certified by a Bureau of Agricultural Extension (BAEX) technician, Napoleon

Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in
question were withdrawn from the warehouse of NFA. An inventory was made by the sheriff as
representative of the Court, a representative of Soriano and a representative of NFA (p. 13, Rollo).
On September 30, 1982, the trial court rendered judgment ordering petitioner National Food Authority, its
officers and agents to pay respondent Soriano (as plaintiff in Civil Case No. 2754) the amount of P
47,250.00 representing the unpaid price of the 630 cavans of palay plus legal interest thereof (p. 1-2, CA
Decision). The dispositive portion reads as follows:
WHEREFORE, the Court renders judgment in favor of the plaintiff and against the
defendants National Grains Authority, and William Cabal and hereby orders:
1. The National Grains Authority, now the National Food Authority, its officers and
agents, and Mr. William Cabal, the Provincial Manager of the National Grains
Authority at the time of the filing of this case, assigned at Tuguegarao, Cagayan,
whomsoever is his successors, to pay to the plaintiff Leon T. Soriano, the amount of
P47,250.00, representing the unpaid price of the palay deliveries made by the
plaintiff to the defendants consisting of 630 cavans at the rate Pl.50 per kilo of 50
kilos per cavan of palay;
2. That the defendants National Grains Authority, now National Food Authority, its
officer and/or agents, and Mr. William Cabal, the Provincial Manager of the National
Grains Authority, at the time of the filing of this case assigned at Tuguegarao,
Cagayan or whomsoever is his successors, are likewise ordered to pay the plaintiff
Leon T. Soriano, the legal interest at the rate of TWELVE (12%) percent per annum,
of the amount of P 47,250.00 from the filing of the complaint on November 20, 1979,
up to the final payment of the price of P 47,250.00;
3. That the defendants National Grains Authority, now National Food Authority, or
their agents and duly authorized representatives can now withdraw the total number
of bags (630 bags with an excess of 13 bags) now on deposit in the bonded
warehouse of Eng. Ben de Guzman at Tuguegarao, Cagayan pursuant to the order of
this court, and as appearing in the written inventory dated October 10, 1980, (Exhibit
F for the plaintiff and Exhibit 20 for the defendants) upon payment of the price of P
47,250.00 and TWELVE PERCENT (12%) legal interest to the plaintiff,
4. That the counterclaim of the defendants is hereby dismissed;
5. That there is no pronouncement as to the award of moral and exemplary damages
and attorney's fees; and

6. That there is no pronouncement as to costs.

36249, March 29, 1985, 135 SCRA 557, 560) This is provided by Article 1475 of the Civil Code which
states:

SO ORDERED (pp. 9-10, Rollo)

Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.

Petitioners' motion for reconsideration of the decision was denied on December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate Appellate Court. In a decision
promulgated on December 23, 1986 (pp. 9-21, Rollo) the then Intermediate Appellate Court upheld the
findings of the trial court and affirmed the decision ordering NFA and its officers to pay Soriano the price
of the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of the appellate court's
decision was denied in a resolution dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority and Mr. William Cabal on May 15, 1986
assailing the decision of the Intermediate Appellate Court on the sole issue of whether or not there was a
contract of sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by Soriano on August 23, 1979 was made only
for purposes of having it offered for sale. Further, petitioners stated that the procedure then prevailing in
matters of palay procurement from qualified farmers were: firstly, there is a rebagging wherein the palay
is transferred from a private sack of a farmer to the NFA sack; secondly, after the rebagging has been
undertaken, classification of the palay is made to determine its variety; thirdly, after the determination of
its variety and convinced that it passed the quality standard, the same will be weighed to determine the
number of kilos; and finally, it will be piled inside the warehouse after the preparation of the Warehouse
Stock Receipt (WSP) indicating therein the number of kilos, the variety and the number of bags. Under
this procedure, rebagging is the initial operative act signifying acceptance, and acceptance will be
considered complete only after the preparation of the Warehouse Stock Receipt (WSR). When the 630
cavans of palay were brought by Soriano to the Carig warehouse of NFA they were only offered for sale.
Since the same were not rebagged, classified and weighed in accordance with the palay procurement
program of NFA, there was no acceptance of the offer which, to petitioners' mind is a clear case of
solicitation or an unaccepted offer to sell.

xxx
The acceptance referred to which determines consent is the acceptance of the offer of one party by the
other and not of the goods delivered as contended by petitioners.
From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with their
mutual obligations or "the parties may reciprocally demand performance" thereof. (Article 1475, Civil
Code, 2nd par.).
The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is that it
(NFA) cannot legally accept the said delivery because Soriano is allegedly not a bona fide farmer. The trial
court and the appellate court found that Soriano was a bona fide farmer and therefore, he was qualified
to sell palay grains to NFA.
Both courts likewise agree that NFA's refusal to accept was without just cause. The above factual findings
which are supported by the record should not be disturbed on appeal.
ACCORDINGLY, the instant petition for review is DISMISSED. The assailed decision of the then
Intermediate Appellate Court (now Court of Appeals) is affirmed. No costs.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

The petition is not impressed with merit.

Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the contracting
parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other
party to pay therefore a price certain in money or its equivalent. A contract, on the other hand, is a
meeting of minds between two (2) persons whereby one binds himself, with respect to the other, to give
something or to render some service (Art. 1305, Civil Code of the Philippines). The essential requisites of
contracts 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 (Art. 1318, Civil Code of the Philippines.
In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA. When the
latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there
was already a meeting of the minds between the parties. The object of the contract, being the palay
grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The
fact that the exact number of cavans of palay to be delivered has not been determined does not affect the
perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact that the quantity is
not determinate shall not be an obstacle to the existence of the contract, provided it is possible to
determine the same, without the need of a new contract between the parties." In this case, there was no
need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay
to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners further contend that there
was no contract of sale because of the absence of an essential requisite in contracts, namely, consent. It
cited Section 1319 of the Civil Code which states: "Consent is manifested by the meeting of the offer and
the acceptance of the thing and the cause which are to constitute the contract. ... " Following this line,
petitioners contend that there was no consent because there was no acceptance of the 630 cavans of
palay in question.
The above contention of petitioner is not correct Sale is a consensual contract, " ... , there is perfection
when there is consent upon the subject matter and price, even if neither is delivered." (Obana vs. C.A., L-

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 105387 November 11, 1993

JOHANNES
SCHUBACK
&
SONS
PHILIPPINE
TRADING
CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing business under the name and
style "PHILIPPINE SJ INDUSTRIAL TRADING," respondents.
Hernandez, Velicaria, Vibar & Santiago for petitioner.
Ernesto M. Tomaneng for private respondent.

ROMERO, J.:
In this petition for review on certiorari, petitioner questions the reversal by the Court of Appeals 1 of the
trial court's ruling that a contract of sale had been perfected between petitioner and private respondent
over bus spare parts.

The facts as quoted from the decision of the Court of Appeals are as follows:
Sometime in 1981, defendant 2 established contact with plaintiff 3 through the
Philippine Consulate General in Hamburg, West Germany, because he wanted to
purchase MAN bus spare parts from Germany. Plaintiff communicated with its trading
partner. Johannes Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback
Hamburg) regarding the spare parts defendant wanted to order.
On October 16, 1981, defendant submitted to plaintiff a list of the parts (Exhibit B)
he wanted to purchase with specific part numbers and description. Plaintiff referred
the list to Schuback Hamburg for quotations. Upon receipt of the quotations, plaintiff
sent to defendant a letter dated 25 November, 1981 (Exh. C) enclosing its offer on
the items listed by defendant.
On December 4, 1981, defendant informed plaintiff that he preferred genuine to
replacement parts, and requested that he be given 15% on all items (Exh. D).
On December 17, 1981, plaintiff submitted its formal offer (Exh. E) containing the
item number, quantity, part number, description, unit price and total to defendant. On
December, 24, 1981, defendant informed plaintiff of his desire to avail of the prices of
the parts at that time and enclosed Purchase Order No. 0101 dated 14 December
1981 (Exh. F to F-4). Said Purchase Order contained the item number, part number
and description. Defendant promised to submit the quantity per unit he wanted to
order on December 28 or 29 (Exh. F).

open a letter of credit or cancel the order and pay the cancellation fee of 30% of
F.O.B. value, or plaintiff will endorse the case to its lawyers (Exh. N).
Schuback Hamburg issued a Statement of Account (Exh. P) to plaintiff enclosing
therewith Debit Note (Exh. O) charging plaintiff 30% cancellation fee, storage and
interest charges in the total amount of DM 51,917.81. Said amount was deducted
from plaintiff's account with Schuback Hamburg (Direct Interrogatories, 07 October,
1985).
Demand letters sent to defendant by plaintiff's counsel dated March 22, 1983 and
June 9, 1983 were to no avail (Exhs R and S).
Consequently, petitioner filed a complaint for recovery of actual or compensatory damages, unearned
profits, interest, attorney's fees and costs against private respondent.
In its decision dated June 13, 1988, the trial court 4 ruled in favor of petitioner by ordering private
respondent to pay petitioner, among others, actual compensatory damages in the amount of DM
51,917.81, unearned profits in the amount of DM 14,061.07, or their peso equivalent.
Thereafter, private respondent elevated his case before the Court of Appeals. On February 18, 1992, the
appellate court reversed the decision of the trial court and dismissed the complaint of petitioner. It ruled
that there was no perfection of contract since there was no meeting of the minds as to the price between
the last week of December 1981 and the first week of January 1982.

On December 29, 1981, defendant personally submitted the quantities he wanted to

Mr. Dieter Reichert, General Manager of plaintiff, at the latter's residence (t.s.n., 13
December, 1984, p. 36). The quantities were written in ink by defendant in the same
Purchase Order previously submitted. At the bottom of said Purchase Order,
defendant wrote in ink above his signature: "NOTE: Above P.O. will include a 3%
discount. The above will serve as our initial P.O." (Exhs. G to G-3-a).

The issue posed for resolution is whether or not a contract of sale has been perfected between the
parties.

Plaintiff immediately ordered the items needed by defendant from Schuback

Hamburg to enable defendant to avail of the old prices. Schuback Hamburg in turn
ordered (Order No. 12204) the items from NDK, a supplier of MAN spare parts in
West Germany. On January 4, 1982, Schuback Hamburg sent plaintiff a proforma
invoice (Exhs. N-1 to N-3) to be used by defendant in applying for a letter of credit.
Said invoice required that the letter of credit be opened in favor of Schuback
Hamburg. Defendant acknowledged receipt of the invoice (t.s.n., 19 December 1984,
p. 40).

Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance
upon the thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter offer." The facts presented to us
indicate that consent on both sides has been manifested.

An order confirmation (Exhs. I, I-1) was later sent by Schuback Hamburg to plaintiff
which was forwarded to and received by defendant on February 3, 1981 (t.s.n., 13
Dec. 1984, p. 42).
On February 16, 1982, plaintiff reminded defendant to open the letter of credit to
avoid delay in shipment and payment of interest (Exh. J). Defendant replied,
mentioning, among others, the difficulty he was encountering in securing: the
required dollar allocations and applying for the letter of credit, procuring a loan and
looking for a partner-financier, and of finding ways 'to proceed with our orders" (Exh.
K).
In the meantime, Schuback Hamburg received invoices from, NDK for partial
deliveries on Order No.12204 (Direct Interrogatories., 07 Oct, 1985, p. 3). Schuback
Hamburg paid NDK. The latter confirmed receipt of payments made on February 16,
1984 (Exh.C-Deposition).
On October 18, 1982, Plaintiff again reminded defendant of his order and advised
that the case may be endorsed to its lawyers (Exh. L). Defendant replied that he did
not make any valid Purchase Order and that there was no definite contract between
him and plaintiff (Exh. M). Plaintiff sent a rejoinder explaining that there is a valid
Purchase Order and suggesting that defendant either proceed with the order and

We reverse the decision of the Court of Appeals and reinstate the decision of the trial court. It bears
emphasizing that a "contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. . . . " 5

The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal
containing the item number, quantity, part number, description, the unit price and total to private
respondent. On December 24, 1981, private respondent informed petitioner of his desire to avail of the
prices of the parts at that time and simultaneously enclosed its Purchase Order No. 0l01 dated December
14, 1981. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of
the contract: being the spare parts and the consideration, the price stated in petitioner's offer dated
December 17, 1981 and accepted by the respondent on December 24,1981.
Although said purchase order did not contain the quantity he wanted to order, private respondent made
good, his promise to communicate the same on December 29, 1981. At this juncture, it should be pointed
out that private respondent was already in the process of executing the agreement previously reached
between the parties.
Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement made by private respondent:
"Note. above P.O. will include a 3% discount. The above will serve as our initial P.O." This notation on the
purchase order was another indication of acceptance on the part of the vendee, for by requesting a 3%
discount, he implicitly accepted the price as first offered by the vendor. The immediate acceptance by the
vendee of the offer was impelled by the fact that on January 1, 1982, prices would go up, as in fact, the
petitioner informed him that there would be a 7% increase, effective January 1982. On the other hand,
concurrence by the vendor with the said discount requested by the vendee was manifested when
petitioner immediately ordered the items needed by private respondent from Schuback Hamburg which in
turn ordered from NDK, a supplier of MAN spare parts in West Germany.

When petitioner forwarded its purchase order to NDK, the price was still pegged at the old one. Thus, the
pronouncement of the Court Appeals that there as no confirmed price on or about the last week of
December 1981 and/or the first week of January 1982 was erroneous.

Republic of the Philippines

SUPREME COURT
Manila

While we agree with the trial court's conclusion that indeed a perfection of contract was reached between
the parties, we differ as to the exact date when it occurred, for perfection took place, not on December
29, 1981. Although the quantity to be ordered was made determinate only on December 29, 1981,
quantity is immaterial in the perfection of a sales contract. What is of importance is the meeting of the
minds as to the object and cause, which from the facts disclosed, show that as of December 24, 1981,
these essential elements had already occurred.

FIRST DIVISION

On the part of the buyer, the situation reveals that private respondent failed to open an irrevocable letter
of credit without recourse in favor of Johannes Schuback of Hamburg, Germany. This omission, however.
does not prevent the perfection of the contract between the parties, for the opening of the letter of credit
is not to be deemed a suspensive condition. The facts herein do not show that petitioner reserved title to
the goods until private respondent had opened a letter of credit. Petitioner, in the course of its dealings
with private respondent, did not incorporate any provision declaring their contract of sale without effect
until after the fulfillment of the act of opening a letter of credit.

EDILBERTO NOEL (now PINITO W. MERCADO) as ADMINISTRATOR OF THE INTESTATE ESTATE

OF
GREGORIO
NANAMAN
and
HILARIA
TABUCLIN, petitioner,
vs.
COURT OF APPEALS and JOSE C. DELESTE, respondents.

The opening of a etter of credit in favor of a vendor is only a mode of payment. It is not among the
essential requirements of a contract of sale enumerated in Article 1305 and 1474 of the Civil Code, the
absence of any of which will prevent the perfection of the contract from taking place.

PINITO W. MERCADO, as SPECIAL ADMINISTRATOR OF THE INTESTATE ESTATE OF GREGORIO

NANAMAN
and
HILARIA
TABUCLIN, petitioner,
vs.
HONORABLE COURT OF APPEALS and JOSE C. DELESTE, respondents.

To adopt the Court of Appeals' ruling that the contract of sale was dependent on the opening of a letter of
credit would be untenable from a pragmatic point of view because private respondent would not be able
to avail of the old prices which were open to him only for a limited period of time. This explains why
private respondent immediately placed the order with petitioner which, in turn promptly contacted its
trading partner in Germany. As succinctly stated by petitioner, "it would have been impossible for
respondent to avail of the said old prices since the perfection of the contract would arise much later, or
after the end of the year 1981, or when he finally opens the letter of credit." 6

G.R. No. 59550 January 11, 1995

G.R. No. 60636 January 11, 1995

QUIASON, J.:

WHEREFORE, the petition is GRANTED and the decision of the trial court dated June 13, 1988 is
REINSTATED with modification.

The consolidated cases, G.R. Nos. 59550 and 60636, are petitions for review on certiorari under Rule 45
of the Revised Rules of court of the Amended Decision dated May 14, 1981 of the Court of Appeals in CAG.R. No. 56303-R, which affirmed in toto the decision of the Court of First Instance, Branch II, Lanao del
Norte in Special Proceedings No. 596 (II-94) in favor of Jose C. Deleste, private respondent herein.

SO ORDERED.

Feliciano, Bidin, Melo and Vitug, JJ., concur.

Gregorio Nanaman and Hilaria Tabuclin (Nanaman spouses) were a childless, legally-married couple.
Gregorio, however, had a child named Virgilio Nanaman by another woman. Since he was two years old,
Virgilio was reared by Gregorio and Hilaria. He was sent to school by the couple until he reached third
year of the law course.

# Footnotes

During their marriage, Gregorio and Hilaria acquired certain property including a 34.7-hectare land in
Tambo, Iligan City on which they planted sugarcane, corn and bananas. They also lived there with Virgilio
and fifteen tenants.

1 Penned by Justice Artemon D. Luna and concurred in by Justices Serafin E. Camilon

and Celso L. Magsino.
2 Herein private respondent.
3 Herein petitioner.
4 Regional Trial Court of Makati, Metro Manila, Branch 146. (Penned by Justice Jose L.
Coscolluela, Jr.)
5 Civil Code, Article 1475, C & C Commercial Corp. v. PNB, G.R. No. 92499, July 5,
1989, 175 SCRA; NGA v. Intermediate Appellate Court, G.R. No. 79970, March 8,
1989, 171 SCRA 131.
6 Rollo, p. 46.

On October 2, 1945, Gregorio died. Hilaria then administered the property with the help of Virgilio
enjoyed the procedure of the land to the exclusion of Juan Nanaman, the brother of Gregorio, and
Esperanza and Caridad Nanaman, Gregorio's daughters by still another woman. In 1953, Virgilio declared
the property in his name for taxation purposes under Tax Declaration No. 5534 (Exhs. 13 & 13-A). On
November 1, 1952, Hilaria and Virgilio, mortgaged the 34.7-hectare land in favor of private respondent,
in consideration of the amount of P4,800.00 (Exh. 5).
On February 16, 1954, Hilaria and Virgilio executed a deed of sale over the same tract of land also in
favor of private respondent in consideration of the sum of P16,000.00 (Exh. 7). Witnesses to the sale
were the wife of Virgilio, Rosita S. Nanaman, Rufo C. Salas, the driver of private respondent, and
Remedios Pilotan. The document was notarized on February 17, 1954 and was registered with the
Register of Deeds of Iligan city on March 2, 1954. The tax declaration in the name of Virgilio was
cancelled and a new tax declaration was issued in the name of private respondent. Having discovered that
the property was in arrears in the payment of taxes from 1952, private respondent paid the taxes for
1952, 1953 and 1954 (Exhs. 13-B, 13-C & 14-B). From then on, private respondent has paid the taxes on
the property.

On May 15, 1954, Hilaria died. On October 27, 1954, Esperanza and Caridad Nanaman filed intestate
estate proceedings concerning the estate of their father, Gregorio. Included in the list of property of the
estate was the 34.7-hectare land. Inasmuch as only Esperanza, Caridad and Virgilio Nanaman were
named as heirs of Gregorio in the petition, Juan Nanaman, Gregorio's brother, opposed it. On November
26, 1954, the petition was amended to include the estate of Hilaria with Alejo Tabuclin, Hilaria's brother,
and Julio Tabuclin, a son of Hilaria's deceased brother, Jose, as additional petitioners.

WHEREFORE, the judgment appealed from is set aside and another is hereby entered
declaring the intestate estate of Gregorio Nanaman and the defendant-appellee coowners of the land in question in the proportion of one-half (1/2) interest each;
ordering defendant-appellee Jose C. Deleste to return to plaintiff-appellant, as
administrator of Gregorio Nanaman's estate the land in question, and to pay plaintiff
as such administrator the sum of P2,500.00 as rental of the 1/2 interest of the estate
from the year 1957 until the land is returned to the estate with legal interest from
the filing of plaintiff's complaint; and, to, pay the expenses of litigation and attorney's
fees to plaintiff in the sum of P3,000.00. Costs against the appellee, Jose C. Deleste
(G.R. No. 60636, Rollo, p. 42).

Having been appointed special administrator of the estate of the Nanaman couple, Juan Nanaman
included the 34.7-hectare land in the list of the assets of the estate.
Juan also reported that Virgilio took the amount of P350.00 from the procedure of the estate without prior
permission and that five tenants in contempt of court. Accordingly, in its Order of January 30, 1956, the
probate court required private respondent and said tenants to appear before it and "show cause why they
should not be cited for contempt for illegally interfering in the land" under special administration.
On June 16, 1956, when Edilberto Noel took over as regular administrator of the estate, he was not able
to take possession of the land in question because it was in the possession of private respondent and
some heirs of Hilaria.
On July 18, 1957, private respondent and the heirs of the Nanaman spouses executed an amicable
settlement of the Nanaman estate. In the document, private respondent agreed "to relinquish his rights
to one-half (1/2) of the entire parcel of land in Tambo, Iligan City, indicated in item 1 under the Estate,
sold to him by Hilaria Tabuclin, in favor of all the heirs of the abovementioned intestate [estate] for the
reason that not all of the heirs of Gregorio Nanaman have signed and agreed" (G.R. No. 60636, Rollo, p.
67). The court approved the amicable settlement but when it was questioned by some heirs, the court set
aside its approval and declared it null and void (Exh. H-1).
The court thereafter ordered Noel, as regular administrator, to file an action to recover the 34.7-hectare
land from private respondent. Consequently, on April 30, 1963, Noel filed an action against private
respondent for the version of title over the 34.7-hectare land to the Nanaman estate and to order private
respondent to pay the rentals and attorney's fees to the estate.
On December 14, 1973, the trial court rendered a decision, holding that the action for annulment of the
deed of sale had prescribed in 1958 inasmuch as the sale was registered in 1954 and that Gregorio's heirs
had slept on their rights by allowing Hilaria to exercise rights of ownership over Gregorio's share of the
conjugal property after his death in 1945. On the issue that Hilaria had no authority to dispose of one-half
of the property pertaining to her husband, the trial court ruled: (1) that Hilaria in effect acted as
administratrix over the estate of Gregorio; (2) that she sold the 34.7- hectare land in order to pay the
debts of the conjugal partnership; and (3) that out of the purchase price of P16,000.00, P4,000.00 was in
payment to private respondent (who was a doctor of medicine) for medical services rendered and
medicine administered during Gregorio's ailment and P800.00 was used to pay taxes in arrears.
Noel appealed to the Court of Appeals. In its Decision of February 18, 1980, the appellate court ruled that
the transaction between Hilaria and Virgilio on one hand and private respondent on the other, was indeed
a sale. It found that no fraud, mistake or misrepresentation attended in the execution of the deed of sale
and that no proof was shown that the contract was merely a mortgage.
The appellate court, however, agreed with Noel that Hilaria could not validly sell the 37.7-hectare land
because it was conjugal property, and Hilaria could sell only her one-half share thereof.
On the issue of prescription, the appellate court ruled that since no fraud, mistake or misrepresentation
attended the execution of the deed of sale, the prescriptive period of ten years had not yet elapsed when
the action to recover the property was filed in 1963. Moreover, the appellate court held that in the
absence of proof of adverse possession by Hilaria, she should be considered as holding the property
pursuant to her usufructuary rights over the same under the provisions of the Spanish Civil Code of 1889,
the law in force at the time of the death of Gregorio.
Finding that Noel's claim for rentals of P5,000.00 per annum from 1957 was uncontroverted, the
appellate court ruled that one-half thereof belonged to the estate of Gregorio. The dispositive portion of
the decision states:

Private respondent filed a motion for the reconsideration of said decision praying for the total affirmance
of the decision of the trial court. Noel also filed a motion for reconsideration praying for the return of
ownership and possession of the entire tract of land to the estate of the 34.7-hectare land.
The appellate court took into account that since Gregorio's death, Hilaria and Virgilio took physical
possession of the property and enjoyed its fruits which were delivered to them by the tenants; that
Virgilio instituted said tenants; and that he declared the property in his own name for tax purposes. The
court also ruled that the non-payment of the real estate taxes by Juan constituted abandonment of the
property and his non-filing of an action to recover the same from the time that private respondent
"usurped" the property until the filing of the complaint in 1963 by Noel amounted to laches (G.R. No.
60636, Rollo, p. 50).
Hence, the appellate court tacked "the physical possession of Hilaria and Virgilio to the possession of the
defendant for another nine (9) years up to the time the complaint was filed." It considered the "change of
conditions or relations" which had transpired in the case such as private respondent's registration of his
muniment of title over the property; the cancellation of Virgilio's tax declaration and the issuance of
another tax declaration in the name of private respondent; private respondent's payment of taxes from
1952 "up to the present;" the execution of a new tenancy agreement between private respondent and the
tenants; and private respondent's purchase of plows, a carabao and insecticides for use in the ricefield.
Stating that it was "proscribed from taking away property from the alert and the industrious and dumping
it into the hands and possession of one has previously slept on his rights," the appellate court in its
amended decision decreed:
WHEREFORE, Our decision of February 18, 1980 is hereby affirmed and reiterated
insofar as it upheld the regularity and due execution of the deed of sale (Exh. A or 7)
and the transaction affecting the undivided one-half portion of the property described
in par. 3 of the complaint appertaining to the share of Hilaria Tabuclin, as evidenced
by said Exh. A or 7, and is reconsidered and set aside and another one entered
affirming the decision of the lower court in all its parts, including the award of
damages and the costs of suit. No costs in this instance (G.R. No.
60636, Rollo, p. 52).
II
Pinito W. Mercado, as new administrator of the estate, appealed to this Court, questioning the court of
Appeals' Amended Decision applying the doctrine of laches and equating the said doctrine with acquisitive
prescription (G.R. No. 59550).
Subsequently, another petition for certiorari to declare the sale to private respondent as an equitable
mortgage, was filed by Atty. Bonifacio Legaspi (G.R. No. 60636). Said counsel explained that he
represented the heirs of Hilaria while the counsel in G.R. No. 59550 represented the heirs of Gregorio
(G.R. No. 60636, Rollo, pp. 104-107). These two cases, arising as they do from the same decision of the
Court of Appeals, were consolidated in the resolution of September 2, 1991 and are herein jointly
considered.
III
There are no cogent reasons to deviate from the ruling of the Court of Appeals that the contract involving
the 34.7-hectare property was one of sale and not of mortgage in the absence of a showing that the
findings complained of are totally devoid of support in the record or that they are so glaringly erroneous

as to constitute serious abuse of discretion (Andres v. Manufacturers Hanover & Trust Corporation, 177
SCRA 618 [1989]). It should be noted that two contracts had been executed involving said property (the
November 1, 1952 mortgage and the February 16, 1954 sale). In the absence of proof of gross
inadequacy of the price, that the sale was made with what might appear as an inadequate consideration
does not make the contract one of mortgage (Askay v. Cosalan, 46 Phil. 179 [1924]).
We find, however, that the resolution of these petitions hinges on whether Hilaria and Virgilio could
dispose of the entire property sold to private respondent and assuming that they did not have full
ownership thereof, whether the right of action to recover the share of the collateral heirs of Gregorio had
prescribed or been lost through laches.
Gregorio died in 1945 long before the effectivity of the Civil Code of the Philippines on August 30, 1950.
Under Article 2263 of the said Code, "rights to the inheritance of a person who died, with or without a
will, before the effectivity of this Code, shall be governed by the Civil Code of 1889, by other previous
laws, and by the rules of Court."
Thus, succession to the estate of Gregorio was governed primarily by the provisions of the Spanish Civil
Code of 1889. Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters or
children of brothers or sisters of the decedent, as is obtaining in this case, was entitled to receive in
usufruct the part of the inheritance pertaining to said heirs. Hilaria, however, had full ownership, not
merely usufruct, over the undivided half of the estate (Spanish Civil Code of 1889, Art. 493). It is only
this undivided half-interest that she could validly alienate.
On the other hand, Virgilio was not an heir of Gregorio under the Spanish Civil Code of 1889. Although he
was treated as a child by the Nanaman spouses, illegitimate children who were not natural were
disqualified to inherit under the said Code (Cid v. Burnaman, 24 SCRA 434 [1968]). Article 998 of the
Civil Code of the Philippines, which gave an illegitimate child certain hereditary rights, could not benefit
Virgilio because the right of ownership of the collateral heirs of Gregorio had become vested upon his
death (Civil Code of the Philippines, Art. 2253; Uson v. Del Rosario, 92 Phil. 530 [1953]). Therefore,
Virgilio had no right at all to transfer ownership over which he did not own.
In a contract of sale, it is essential that the seller is the owner of the property he is selling. The principal
obligation of a seller is "to transfer the ownership of" the property sold (Civil Code of the Philippines, Art.
1458). This law stems from the principle that nobody can dispose of that which does not belong to him
(Azcona v. Reyes, 59 Phil. 446 [1934]; Coronel v. Ona, 33 Phil. 456 [1916). NEMO DAT QUAD NON
HABET .
While it cannot be said that fraud attended the sale to private respondent, clearly there was a mistake on
the part of Hilaria and Virgilio in selling an undivided interest in the property which belonged to the
collateral heirs of Gregorio.
The sale, having been made in 1954, was governed by the Civil Code of the Philippines. Under Article
1456 of said Code, an implied trust was created on the one-half undivided interest over the 34.7-hectare
land in favor of the real owners.

In its Amended Decision, the Court of Appeals reckoned the prescriptive period from the death of
Gregorio on October 2, 1945.
Under the law in force in 1945, the surviving spouse was given the management of the conjugal property
until the affairs of the conjugal partnership were terminated. The surviving spouse became the owner of
one-half interest of the conjugal estate in his own right. he also became a trustee with respect to the
other half for the benefit of whoever may be legally entitled to inherit the said portion. "He could
therefore no more acquire a title by prescription against those for whom he was administering the
conjugal estate than could a guardian his ward or a judicial administrator against the heirs of an
estate. . . . The surviving husband as the administrator and liquidator of the conjugal estate occupies the
position of a trustee of the highest order and is not permitted by the law to hold that estate or any
portion thereof adversely to those for whose benefit the law imposes upon him duty of administration and
liquidation" (Pamittan v. Lasam, 60 Phil. 908 [1934]).
The possession of Virgilio, his registration of the land in his name for tax purposes, his hiring of tenants to
till the land, and his enjoyment of the produce of the tenants, appear more as acts done to help Hilaria in
managing the conjugal property. There is no evidence to prove indubitably that Virgilio asserted a claim of
ownership over the property in his own right and adverse to all including Hilaria.
In the same manner, the doctrine of laches does not apply. Upon orders of the court in the intestate
proceedings, Noel, the administrator of the estate of the Nanaman spouses, immediately filed an action to
recover possession and ownership of the property. There is no evidence showing any failure or neglect on
his part, for an unreasonable and unexplained length of time, to do that which, by exercising due
diligence, could or should have been done earlier (Cristobal v. Melchor, 78 SCRA 175 [1977]). The
doctrine of stale demands would apply only where by reason of the lapse of time, "[i]t would be
inequitable to allow a party to enforce his legal rights" (Z.E. Lotho, Inc. v. Ice and cold Storage Industries
of the Philippines, Inc., 3 SCRA 744 [1961]). Moreover, this Court, except for every strong reasons, is not
disposed to sanction the application of the doctrine of laches to prejudice or defeat the right of an owner
or original transferee (Raneses v. Intermediate Appellate Court, 187 SCRA 397 [1990]).
The action to recover the undivided half-interest of the collateral heirs of Gregorio prescribes in ten years.
The cause of action is based on Article 1456 of the Civil Code of the Philippines, which made private
respondent a trustee of an implied trust in favor of the said heirs. Under Article 1144 of the Civil Code of
the Philippines, actions based upon an obligation created by law, can be brought within ten years from
the time the right of action accrues (Rosario v. Auditor General, 103 Phil. 1132 [1958]).
The ten-year prescriptive period within which the collateral heirs of Gregorio could file an action to
recover their share in the property sold to private respondent ( prescripcion extintiva) accrued only on
march 2, 1954, when the deed of sale was registered with the Register of Deeds (Cf. Arradaza v. Court of
Appeals, 170 SCRA 12 [1987]). From march 2, 1954 to April 30, 1963, when the complaint for the
recovery of the property was filed, less than ten years had elapsed. Therefore, the action had not been
barred by prescription.
The ten-year prescriptive period before title to real estate shall vest by adverse possession ( prescripcion
adquisitiva) is also reckoned in the case of private respondent from March 2, 1954 (Corporacion de PP.
Agustinos Recoletos v. Crisostomo, 32 Phil. 427 [1915]).

Said Article provides:

If property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.

WHEREFORE, the Amended Decision dated May 14, 1981 of the Court of Appeals is REVERSED and SET
ASIDE and the Decision dated February 18, 1980 is REINSTATED and AFFIRMED in toto.
SO ORDERED.

In Diaz v. Gorricho, 103 Phil. 261 (1958), the Court said that Article 1456 merely expresses a rule
recognized inGayondato v. Insular Treasurer, 49 Phil. 244 (1926). Applying said rule,
the Gayondato court held that the buyer of a parcel of land at a public auction to satisfy a judgment
against a widow acquired only one-half interest the land corresponding to the share of the window and
the other half belonging to the heirs of her husband became impressed with a constructive trust in behalf
of said heirs.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

On the issue of prescription, we hold that the action for recovery of title or possession over the 34.7hectare land had not yet prescribed when the complaint was filed on April 30, 1963.

[G.R. No. 116635. July 24, 1997]

THIRD DIVISION

CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner, vs. COURT OF APPEALS, ANACLETO
NOOL and EMILIA NEBRE, respondents.

DECISION
PANGANIBAN, J.:
A contract of repurchase arising out of a contract of sale where the seller did not have any title to
the property sold is not valid. Since nothing was sold, then there is also nothing to repurchase.

Statement of the Case

This postulate is explained by this Court as it resolves this petition for review on certiorari assailing
the January 20, 1993 Decision [1] of Respondent Court of Appeals [2] in CA-G.R. CV No. 36473, affirming the
decision[3] of the trial court[4] which disposed as follows:[5]
WHEREFORE, judgment is hereby rendered dismissing the complaint for no cause of action,
and hereby:
1. Declaring the private writing, Exhibit C, to be an option to sell, not
binding and considered validly withdrawn by the defendants for want of
consideration;
2. Ordering the plaintiffs to return to the defendants the sum of P30,000.00
plus interest thereon at the legal rate, from the time of filing of
defendants counterclaim until the same is fully paid;
3. Ordering the plaintiffs to deliver peaceful possession of the two hectares
mentioned in paragraph 7 of the complaint and in paragraph 31 of
defendants answer (counterclaim);
4. Ordering the plaintiffs to pay reasonable rents on said two hectares
at P5,000.00 per annum or at P2,500.00 per cropping from the time of
judicial demand mentioned in paragraph 2 of the dispositive portion of
this decision, until the said two hectares shall have been delivered to the
defendants; and
5. To pay the costs.
SO ORDERED.

plaintiffs asked the defendants to return the same but despite the intervention of the Barangay Captain of
their place, defendants refused to return the said parcels of land to plaintiffs; thereby impelling them
(plaintiffs) to come to court for relief.
In their answer defendants-appellees theorized that they acquired the lands in question from
the Development Bank of the Philippines, through negotiated sale, and were misled by
plaintiffs when defendant Anacleto Nool signed the private writing agreeing to return subject
lands when plaintiffs have the money to redeem the same; defendant Anacleto having been
made to believe, then, that his sister, Conchita, still had the right to redeem the said
properties.
The pivot of inquiry here, as aptly observed below, is the nature and significance of the
private document, marked Exhibit D for plaintiffs, which document has not been denied by
the defendants, as defendants even averred in their Answer that they gave an advance
payment of P30,000.00 therefor, and acknowledged that they had a balance of P14,000.00 to
complete their payment. On this crucial issue, the lower court adjudged the said private
writing (Exhibit D) as an option to sell not binding upon and considered the same validly
withdrawn by defendants for want of consideration; and decided the case in the manner
abovementioned.
There is no quibble over the fact that the two (2) parcels of land in dispute were mortgaged to the
Development Bank of the Philippines, to secure a loan obtained by plaintiffs from DBP (Ilagan Branch),
Ilagan, Isabela. For the non-payment of said loan, the mortgage was foreclosed and in the process,
ownership of the mortgaged lands was consolidated in DBP (Exhibits 3 and 4 for defendants). After DBP
became the absolute owner of the two parcels of land, defendants negotiated with DBP and succeeded in
buying the same. By virtue of such sale by DBP in favor of defendants, the titles of DBP were cancelled
and corresponding Transfer Certificates of Title (Annexes C and D to the complaint) issued to the
dependants.[8]
It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the one-year
redemption period was from March 16, 1982 up to March 15, 1983 and that the Mortgagors right of
redemption was not exercised within this period. [9] Hence, DBP became the absolute owner of said parcels
of land for which it was issued new certificates of title, both entered on May 23, 1983 by the Registry of
Deeds for the Province of Isabela. [10] About two years thereafter, on April 1, 1985, DBP entered into a
Deed of Conditional Sale [11] involving the same parcels of land with Private Respondent Anacleto Nool as
vendee. Subsequently, the latter was issued new certificates of title on February 8, 1988.[12]
The Court of Appeals ruled:[13]
WHEREFORE, finding no reversible error infirming it, the appealed Judgment is hereby
AFFIRMED in toto. No pronouncement as to costs.

The Antecedent Facts

The facts, which appear undisputed by the parties, are narrated by the Court of Appeals as follows:
Two (2) parcels of land are in dispute and litigated upon here. The first has an area of 1
hectare . It was formerly owned by Victorino Nool and covered by Transfer Certificate of Title
No. T-74950. With an area of 3.0880 hectares, the other parcel was previously owned by
Francisco Nool under Transfer Certificate of Title No. T-100945. Both parcels are situated in
San Manuel, Isabela. The plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the
appellants, seek recovery of the aforementioned parcels of land from the defendants, Anacleto
Nool, a younger brother of Conchita, and Emilia Nebre, now the appellees.
In their complaint, plaintiff-appellants alleged inter alia that they are the owners of subject parcels of
land, and they bought the same from Conchitas other brothers, Victorino Nool and Francisco Nool; that
as plaintiffs were in dire need of money, they obtained a loan from the Iligan Branch of the Development
Bank of the Philippines, in Ilagan, Isabela, secured by a real estate mortgage on said parcels of land,
which were still registered in the names of Victorino Nool and Francisco Nool, at the time, and for the
failure of plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the
mortgage was foreclosed; that within the period of redemption, plaintiffs contacted defendant Anacleto
Nool for the latter to redeem the foreclosed properties from DBP, which the latter did; and as a result, the
titles of the two (2) parcels of land in question were transferred to Anacleto Nool; that as part of their
arrangement or understanding, Anacleto Nool agreed to buy from the plaintiff Conchita Nool the two (2)
parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to
Conchita, and upon payment of the balance of P14,000.00, plaintiffs were to regain possession of the two
(2) hectares of land, which amounts defendants failed to pay, and the same day the said
arrangement[6] was made; another covenant [7] was entered into by the parties, whereby defendants
agreed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that

The Issues
Petitioners impute to Respondent Court the following alleged errors:
1.
The Honorable Court of Appeals, Second Division has misapplied the legal import
or meaning of Exhibit C in a way contrary to law and existing jurisprudence in stating
that it has no binding effect between the parties and considered validly withdrawn by
defendants-appellees for want of consideration.
2.
The Honorable Court of Appeals, Second Division has miserably failed to give
legal significance to the actual possession and cultivation and appropriating exclusively
the palay harvest of the two (2) hectares land pending the payment of the remaining
balance of fourteen thousand pesos (P14,000.00) by defendants-appellees as indicated
in Exhibit C.
3.
The Honorable Court of Appeals has seriously erred in affirming the decision of the
lower court by awarding the payment of rents per annum and the return of P30,000.00 and
not allowing the plaintiffs-appellants to re-acquire the four (4) hectares, more or less upon
payment of one hundred thousand pesos (P100,000.00) as shown in Exhibit D.[14]

The Courts Ruling

The petition is bereft of merit.

First Issue: Are Exhibits C and D Valid and Enforceable?

The petitioner-spouses plead for the enforcement of their agreement with private respondents as
contained in Exhibits C and D, and seek damages for the latters alleged breach thereof. In Exhibit C,
which was a private handwritten document labeled by the parties as Resibo ti Katulagan or Receipt of
Agreement, the petitioners appear to have sold to private respondents the parcels of land in controversy
covered by TCT No. T-74950 and TCT No. T-100945. On the other hand, Exhibit D, which was also a
private handwritten document in Ilocano and labeled as Kasuratan, private respondents agreed that
Conchita Nool can acquire back or repurchase later on said land when she has the money.[15]

As borne out by the evidence on record, the private respondents bought the two parcels of land
directly from DBP on April 1, 1985 after discovering that petitioners did not own said property, the subject
of Exhibits C and D executed on November 30, 1984. Petitioners, however, claim that they can exercise
their alleged right to repurchase the property, after private respondents had acquired the same from
DBP.[22]We cannot accede to this, for it clearly contravenes the intention of the parties and the nature of
their agreement. Exhibit D reads:

W R I T I N G
Nov. 30, 1984
That I, Anacleto Nool have bought from my sister Conchita Nool a land an area of four
hectares (4 has.) in the value of One Hundred Thousand (100,000.00) Pesos. It is our
agreement as brother and sister that she canacquire back or repurchase later on said land
when she has the money. [Underscoring supplied]

In seeking to enforce her alleged right to repurchase the parcels of land, Conchita (joined by her
co-petitioner-husband) invokes Article 1370 of the Civil Code which mandates that (i)f the terms of a
contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of
its stipulation shall control. Hence, petitioners contend that the Court of Appeals erred in affirming the
trial courts finding and conclusion that said Exhibits C and D were not merely voidable but utterly void
and inexistent.

As proof of this agreement we sign as brother and sister this written document this day of
Nov. 30, 1984, at District 4, San Manuel, Isabela.
Sgd ANACLETO NOOL

We cannot sustain petitioners view. Article 1370 of the Civil Code is applicable only to valid and
enforceable contracts. The Regional Trial Court and the Court of Appeals ruled that the principal contract
of sale contained in Exhibit C and the auxilliary contract of repurchase in Exhibit D are both void. This
conclusion of the two lower courts appears to find support in Dignos vs. Court of Appeals,[16] where the
Court held:
Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses,
they were no longer owners of the same and the sale is null and void.
In the present case, it is clear that the sellers no longer had any title to the parcels of land at the
time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit
C, it is itself void. A void contract cannot give rise to a valid one. [17] Verily, Article 1422 of the Civil Code
provides that (a) contract which is the direct result of a previous illegal contract, is also void and
inexistent.
We should however add that Dignos did not cite its basis for ruling that a sale is null and void
where the sellers were no longer the owners of the property. Such a situation (where the sellers were
no longer owners) does not appear to be one of the void contracts enumerated in Article 1409 of the Civil
Code.[18] Moreover, the Civil Code[19] itself recognizes a sale where the goods are to be acquired x x x by
the seller after the perfection of the contract of sale, clearly implying that a sale is possible even if the
seller was not the owner at the time of sale, provided he acquires title to the property later on.
In the present case however, it is likewise clear that the sellers can no longer deliver the object of
the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the
rightful owner, the DBP. Thus, such contract may be deemed to be inoperative [20] and may thus fall, by
analogy, under item no. 5 of Article 1409 of the Civil Code: Those which contemplate an impossible
service. Article 1459 of the Civil Code provides that the vendor must have a right to transfer the
ownership thereof [object of the sale] at the time it is delivered. Here, delivery of ownership is no longer
possible. It has become impossible.
Furthermore, Article 1505 of the Civil Code provides that where goods are sold by a person who is
not the owner thereof, and who does not sell them under authority or with consent of the owner, the
buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his
conduct precluded from denying the sellers authority to sell. Here, there is no allegation at all that
petitioners were authorized by DBP to sell the property to the private respondents. Jurisprudence, on the
other hand, teaches us that a person can sell only what he owns or is authorized to sell; the buyer can
as a consequence acquire no more than what the seller can legally transfer. [21] No one can give what he
does not have neno dat quod non habet. On the other hand, Exhibit D presupposes that petitioners
could repurchase the property that they sold to private respondents. As petitioners sold nothing, it
follows that they can also repurchase nothing. Nothing sold, nothing to repurchase. In this light, the
contract of repurchase is also inoperative and by the same analogy, void.

Contract of Repurchase
Dependent on Validity of Sale

Anacleto Nool
Sgd Emilio Paron
Witness
Sgd Conchita
Nool
Conchita
Nool[23]
One repurchases only what one has previously sold. In other words, the right to repurchase
presupposes a valid contract of sale between the same parties. Undisputedly, private respondents
acquired title to the property from DBP, and not from the petitioners.
Assuming arguendo that Exhibit D is separate and distinct from Exhibit C and is not affected by the
nullity of the latter, still petitioners do not thereby acquire a right to repurchase the property. In that
scenario, Exhibit D ceases to be a right to repurchase ancillary and incidental to the contract of sale;
rather, it becomes an accepted unilateral promise to sell. Article 1479 of the Civil Code, however,
provides that an accepted unilateral promise to buy or sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the price. In the
present case, the alleged written contract of repurchase contained in Exhibit D is bereft of any
consideration distinct from the price. Accordingly, as an independent contract, it cannot bind private
respondents. The ruling inDiamante vs. CA[24] supports this. In that case, the Court through Mr. Justice
Hilario G. Davide, Jr. explained:
Article 1601 of the Civil Code provides:
Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of
article 1616 and other stipulations which may have been agreed upon.
In Villarica, et al. Vs. Court of Appeals, et al., decided on 29 November 1968, or
barely seven (7) days before the respondent Court promulgated its decisions in
this case, this Court, interpreting the above Article, held:
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 not 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. x x x.
In the earlier case of Ramos, et al. vs. Icasiano, et al., decided in 1927, this Court
had already ruled that an agreement to repurchase becomes a promise to sell

when made after the sale, because when the sale is made without such an
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 already of the object. In that case the vendor has
nor reserved to himself the right to repurchase.
In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found another occasion to
apply the foregoing principle.
Hence, the Option to Repurchase executed by private respondent in the present case, was
merely a promise to sell, which must be governed by Article 1479 of the Civil Code which
reads as follows:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.

Right to Repurchase Based on

Homestead or Trust Non-Existent
Petitioners also base their alleged right to repurchase on (1) Sec. 119 of the Public Land Act [25] and
(2) an implied trust relation as brother and sister.[26]
The Court notes that Victorino Nool and Francisco Nool mortgaged the land to DBP. The brothers,
together with Conchita Nool and Anacleto Nool, were all siblings and heirs qualified to repurchase the two
parcels of land under Sec. 119 of the Public Land Act which provides that (e)very conveyance of land
acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by
the applicant, his widow or legal heirs, within a period of five years from the date of
conveyance. Assuming the applicability of this statutory provision to the case at bar, it is indisputable
that Private Respondent Anacleto Nool already repurchased from DBP the contested properties. Hence,
there was no more right of repurchase that his sister Conchita or brothers Victorino and Francisco could
exercise. The properties were already owned by an heir of the homestead grantee and the rationale of
the of the provision to keep homestead lands within the family of the grantee was thus fulfilled. [27]
The claim of a trust relation is likewise without merit. The records show that private respondents
did not purchase the contested properties from DBP in trust for petitioners. The former, as previously
mentioned, in fact bought the land from DBP upon realization that the latter could not validly sell the
same. Obviously, petitioners bought it for themselves. There is no evidence at all in the records that
they bought the land in trust for private respondents. The fact that Anacleto Nool was the younger
brother of Conchita Nool and that they signed a contract of repurchase, which as discussed earlier was
void, does not prove the existence of an implied trust in favor of petitioners.

Second Issue: No Estoppel in Impugning the

Validity of Void Contracts
Petitioners argue that when Anacleto Nool took the possession of the two hectares, more or less,
and let the other two hectares to be occupied and cultivated by plaintiffs-appellants, Anacleto Nool cannot
later on disclaim the terms or contions (sic) agreed upon and his actuation is within the ambit of estoppel
x x x.[28] We disagree. The private respondents cannot be estopped from raising the defense of nullity of
contract, specially in this case where they acted in good faith, believing that indeed petitioners could sell
the two parcels of land in question. Article 1410 of the Civil Code mandates that (t)he action or defense
for the declaration of the inexistence of a contract does not prescribe. It is well-settled doctrine that as
between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or it is
against public policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away
what public policy by law seeks to preserve. [29] Thus, it is immaterial that private respondents initially
acted to implement the contract of sale, believing in good faith that the same was valid. We stress that a
contract void at inception cannot be validated by ratification or prescription and certainly cannot be
binding on or enforceable against private respondents. [30]

Third Issue: Return of P30,000.00 with Interest

and Payment of Rent
Petitioners further argue that it would be a miscarriage of justice to order them (1) to return the
sum of P30,000.00 to private respondents when allegedly it was Private Respondent Anacleto Nool who
owed the former a balance of P14,000.00 and (2) to order petitioners to pay rent when they were
allowed to cultivate the said two hectares.[31]
We are not persuaded. Based on the previous discussion, the balance of P14,000.00 under the void
contract of sale may not be enforced. Petitioners are the ones who have an obligation to return what
they unduly and improperly received by reason of the invalid contract of sale. Since they cannot legally
give title to what they sold, they cannot keep the money paid for the object of the sale. It is basic that
(e)very person who through an act of performance by another, or any other means, acquires or comes
into possession of something at the expense of the latter without just or legal ground, shall return the
same.[32]Thus, if a void contract has already been performed, the restoration of what has been given is
in order.[33] Corollarily and as aptly ordered by respondent appellate court, interest thereon will run only
from the time of private respondents demand for the return of this amount in their counterclaim. [34] In
the same vein, petitioners possession and cultivation of the two hectares are anchored on private
respondents tolerance. Clearly, the latters tolerance ceased upon their counterclaim and demand on the
former to vacate. Hence, their right to possess and cultivate the land ipso facto ceased.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals affirming
that of the trial court is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.
THIRD DIVISION

[G.R. No. 95694. October 9, 1997]

VICENTE VILLLAFLOR, substituted by his heirs, petitioner, vs. COURT OF APPEALS and NASIPIT
LUMBER CO., INC., respondents.
DECISION
PANGANIBAN ,J.:
In this rather factually complicated case, the Court reiterates the binding force and effect of findings
of specialized administrative agencies as well as those of trial courts when affirmed by the Court of
Appeals; rejects petitioners theory of simulation of contracts; and passes upon the qualifications of
private respondent corporation to acquire disposable public agricultural lands prior to the effectivity of the
1973 Constitution.

The Case
Before us is a petition for review on certiorari seeking the reversal of the Decision [1] of the Court of
Appeals, dated September 27, 1990, in C.A. G.R. CV No. 09062, affirming the dismissal by the trial court
of Petitioner Vicente Villaflors complaint against Private Respondent Nasipit Lumber Co., Inc. The
disposition of both the trial and the appellate courts are quoted in the statement of facts below.

The Facts
The facts of this case, as narrated in detail by Respondent Court of Appeals, are as follows: [2]
The evidence, testimonial and documentary, presented during the trial show that on January 16, 1940,
Cirilo Piencenaves, in a Deed of Absolute Sale (exh. A), sold to [petitioner], a parcel of agricultural land
containing an area of 50 hectares,[3] more or less, and particularly described and bounded as follows:

A certain parcel of agricultural land planted to abaca with visible concrete monuments marking the
boundaries and bounded on the NORTH by Public Land now Private Deeds on the East by Serafin Villaflor,
on the SOUTH by Public Land; and on the West by land claimed by H. Patete, containing an area of 60
hectares more or less, now under Tax Dec. 29451 in the (sic) of said Vicente Villaflor, the whole parcel of
which this particular parcel is only a part, is assessed at P22,550.00 under the above said Tax Dec.
Number.
This deed states:
That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but no
formal document was then executed, and since then until the present time, the said Vicente Villaflor has
been in possession and occupation of (the same); (and)
That the above described property was before the sale, of my exclusive property having inherited from
my long dead parents and my ownership to it and that of my [sic] lasted for more than fifty (50) years,
possessing and occupying same peacefully, publicly and continuously without interruption for that length
of time.
Also on January 16, 1940, Claudio Otero, in a Deed of Absolute Sale (exh. C) sold to Villaflor a parcel of
agricultural land, containing an area of 24 hectares, more or less, and particularly described and bounded
as follows:
A certain land planted to corn with visible concrete measurements marking the boundaries and bounded
on the North by Public Land and Tungao Creek; on the East by Agusan River; on the South by Serafin
Villaflor and Cirilo Piencenaves; and on the West by land of Fermin Bacobo containing an area of 24
hectares more or less, under Tax Declaration No. 29451 in the name already of Vicente Villaflor, the whole
parcel of which this particular land is only a part, is assessed at P22,550.00 under the above said Tax
Declaration No. 29451.
This deed states:
That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but no
sound document was then executed, however since then and until the present time, the said Vicente
Villaflor has been in open and continuous possession and occupation of said land; (and)
That the above described land was before the sale, my own exclusive property, being inherited from my
deceased parents, and my ownership to it and that of my predecessors lasted more than fifty (50) years,
possessing and occupying the same, peacefully, openly and continuously without interruption for that
length of time.
Likewise on January 16, 1940, Hermogenes Patete, in a Deed of Absolute Sale (exh. D), sold to Villaflor, a
parcel of agricultural land, containing an area of 20 hectares, more or less, and particularly described and
bounded as follows:
A certain parcel of agricultural land planted to abaca and corn with visible concrete monuments marking
the boundaries and bounded on the North by Public Land area-private Road; on the East by land claimed
by Cirilo Piencenaves; on the South by Public Land containing an area of 20 hectares more or less, now
under Tax Declaration No. 29451 in the name of Vicente Villaflor the whole parcel of which this particular
parcel, is assessed at P22,550.00 for purposes of taxation under the above said Tax Declaration No.
29451.

(50) years, possessing and occupying same, peacefully, openly and continuously without interruption for
that length of time.
On February 15, 1940, Fermin Bocobo, in a Deed of Absolute Sale (exh. B), sold to Villaflor, a parcel of
agricultural land, containing an area of 18 hectares, more or less, and particularly described and bounded
as follows:
A certain parcel of agricultural land planted with abaca with visible part marking the corners and bounded
on the North by the corners and bounded on the North by Public Land; on the East by Cirilo Piencenaves;
on the South by Hermogenes Patete and West by Public Land, containing an area of 18 hectares more or
less now under Tax Declaration No. 29451 in the name of Vicente Villaflor. The whole parcel of which this
particular parcel is only a part is assessed as P22,550.00 for purposes of taxation under the above said
Tax Declaration Number (Deed of Absolute Sale executed by Fermin Bocobo date Feb. 15, 1940). This
document was annotated in Registry of Deeds on February 16, 1940).
This deed states:
That the above described property was before the sale of my own exclusive property, being inherited
from my deceased parents, and my ownership to it and that of my predecessors lasted more than fifty
(50) years, possessing and occupying the same peacefully, openly and continuously without interruption
for that length of time.
On November 8, 1946, Villaflor, in a Lease Agreement (exh. Q), [4] leased to Nasipit Lumber Co., Inc. a
parcel of land, containing an area of two (2) hectares, together with all the improvements existing
thereon, for a period of five (5) years from June 1, 1946 at a rental of P200.00 per annum to cover the
annual rental of house and building sites for thirty three (33) houses or buildings. This agreement also
provides:[5]
3.
During the term of this lease, the Lessee is authorized and empowered to build and construct
additional houses in addition to the 33 houses or buildings mentioned in the next preceding paragraph,
provided however, that for every additional house or building constructed the Lessee shall pay unto the
Lessor an amount of fifty centavos (50) per month for every house or building. The Lessee is
empowered and authorized by the Lessor to sublot (sic) the premises hereby leased or assign the same
or any portion of the land hereby leased to any person, firm and corporation; (and)
4.
The Lessee is hereby authorized to make any construction and/or improvement on the
premises hereby leased as he may deem necessary and proper thereon, provided however, that any and
all such improvements shall become the property of the Lessor upon the termination of this lease without
obligation on the part of the latter to reimburse the Lessee for expenses incurred in the construction of
the same.
Villaflor claimed having discovered that after the execution of the lease agreement, that Nasipit Lumber
in bad faith x x x surreptitiously grabbed and occupied a big portion of plaintiffs property x x x; that
after a confrontation with the corporates (sic) field manager, the latter, in a letter dated December 3,
1973 (exh. R),[6] stated recalling having made some sort of agreement for the occupancy (of the property
at Acacia, San Mateo), but I no longer recall the details and I had forgotten whether or not we did occupy
your land. But if, as you say, we did occupy it, then (he is ) sure that the company is obligated to pay the
rental.
On July 7, 1948, in an Agreement to Sell (exh. 2), Villaflor conveyed to Nasipit Lumber, two (2) parcels
of land xxx described as follows: [7]

This deed states:

PARCEL ONE

xxx (O)n June 22, 1937 but the formal document was then executed, and since then until the present
time, the said VICENTE VILLAFLOR has been in continuous and open possession and occupation of the
same; (and)

Bounded on the North by Public Land and Tungao Creek; on the East by Agusan River and Serafin
Villaflor; on the South by Public Land, on the West by Public Land. Improvements thereon consist of
abaca, fruit trees, coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber
Company. Divided into Lot Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851,
5854, 5855, 5859, 5858, 5857, 5853, and 5852. Boundaries of this parcel of land are marked by
concrete monuments of the Bureau of Lands. Containing an area of 112,000 hectares. Assessed at
P17,160.00 according to Tax Declaration No. V-315 dated April 14, 1946.

That the above described property was before the sale, my own and exclusive property, being inherited
from my deceased parents and my ownership to it and that of my predecessors lasted more than fifty

PARCEL TWO
Bounded on the North by Pagudasan Creek; on the East by Agusan River; on the South by Tungao Creek;
on the West by Public Land. Containing an area of 48,000 hectares more or less. Divided into Lot Nos.
5411, 5410, 5409, and 5399. Improvements 100 coconut trees, productive, and 300 cacao
trees. Boundaries of said land are marked by concrete monuments of the Bureau pf (sic)
Lands. Assessed value -- P6,290.00 according to Tax No. 317, April 14, 1946.

3.
That on July 7, 1948, a contract of Agreement to Sell was executed between the contracting
parties herein, covering the said two parcels of land, copy of said Agreement to Sell is hereto attached
marked as Annex A and made an integral part of this document. The parties hereto agree that the said
Agreement to Sell be maintained in full force and effect with all its terms and conditions of this present
agreement and in no way be considered as modified.
4.
follows:

That paragraph 4 of the Contract of Agreement to Sell, marked as annex, A stipulates as

This Agreement to Sell provides:

3.
That beginning today, the Party of the Second Part shall continue to occupy the property not
anymore in concept of lessee but as prospective owners, it being the sense of the parties hereto that the
Party of the Second Part shall not in any manner be under any obligation to make any compensation to
the Party of the First Part, for the use, and occupation of the property herein before described in such
concept of prospective owner, and it likewise being the sense of the parties hereto to terminate as they do
hereby terminate, effective on the date of this present instrument, the Contract of Lease, otherwise
known as Doc. No. 420, Page No. 36, Book No. II, Series of 1946 of Notary Public Gabriel R. Banaag, of
the Province of Agusan.
4.
That the Party of the Second Part has bound as it does hereby bind itself, its executors and
administrators, to pay unto the party of the First Part the sum of Five Thousand Pesos ( P5,000.00),
Philippine Currency, upon presentation by the latter to the former of satisfactory evidence that:
(a) The Bureau of Lands will not have any objection to the obtainment by the Party of the First Part of a
Certificate of Torrens Title in his favor, either thru ordinary land registration proceedings or thru
administrative means procedure.
(b)

Par. 4.
That the Party of the Second Part has bound as it does hereby bind itself, its executors and
administrators, to pay unto the Party of the First Part of the sum of FIVE THOUSAND PESOS
(P5,000.00) Philippine Currency, upon presentation by the latter to the former of satisfactory evidence
that:
a) The Bureau of Lands will have any objection to the obtainment by Party of the First Part of a favor,
either thru ordinary land registration proceedings or thru administrative means and procedure.
b)

That there is no other private claimant to the properties hereinabove described.

That the First Party has on December 2, 1948, submitted to the Bureau of Lands, a Sales Application for
the twenty-two (22) lots comprising the two abovementioned parcels of land, the said Sales Application
was registered in the said Bureau under No. V-807;
6.
That in reply to the request made by the First Party to the Bureau of Lands, in connection with
the Sales Application No. V-807, the latter informed the former that action on his request will be
expedited, as per letter of the Chief, Public Land Division, dated December 2, 1948, copy of which is
hereto attached marked as annex B and made an integral part of this agreement:

That there is no other private claimant to the properties hereinbefore described.

5.
That the Party of the First Part has bound as he does hereby bind to undertake immediately
after the execution of these presents to secure and obtain, or cause to be secured and obtained, a
Certificate of Torrens Title in his favor over the properties described on Page (One) hereof, and after
obtainment of such Certificate of Torrens Title, the said Party of the First Part shall execute a (D)eed of
Absolute Sale unto and in favor of the Party of the Second Part, its executors, administrators and assigns,
it being the sense of the parties that the Party of the Second Part upon delivery to it of such deed of
absolute sale, shall pay unto the Party of the First Part in cash, the sum of Twelve Thousand ( P12,000.00)
Pesos in Philippine Currency, provided, however, that the Party of the First Part, shall be reimbursed by
the Party of the Second Part with one half of the expenses incurred by the Party of the First Part for
survey and attorneys fees; and other incidental expenses not exceeding P300.00.
On December 2, 1948, Villaflor filed Sales Application No. V-807 [8] (exh. 1) with the Bureau of Lands,
Manila, to purchase under the provisions of Chapter V, XI or IX of Commonwealth Act. No. 141 (The
Public Lands Act), as amended, the tract of public lands x x x and described as follows: North by Public
Land; East by Agusan River and Serafin Villaflor; South by Public Land and West by public land (Lot Nos.
5379, 5489, 5412, 5490, 5491, 5492, 5849, 5850, 5851, 5413, 5488, 5489, 5852, 5853, 5854, 5855,
5856, 5857, 5858, 5859 and 5860 x x x containing an area of 140 hectares xxx. Paragraph 6 of the
Application, states: I understand that this application conveys no right to occupy the land prior to its
approval, and I recognized (sic) that the land covered by the same is of public domain and any and all
rights I may have with respect thereto by virtue of continuous occupation and cultivation are hereby
relinquished to the Government.[9] (exh. 1-D)
On December 7, 1948, Villaflor and Nasipit Lumber executed an Agreement (exh 3). [10] This contract
provides:
1.
That the First Party is the possessor since 1930 of two (2) parcels of land situated in sitio
Tungao, Barrio of San Mateo, Municipality of Butuan, Province of Agusan;
2.
That the first parcel of land abovementioned and described in Plan PLS-97 filed in the office of
the Bureau of Lands is made up of Lots Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5849, 5850, 5851,
5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 and the second parcel of land is made of
Lots Nos. 5399, 5409, 5410 and 5411;

7.
That for and in consideration of the premises above stated and the amount of TWENTY FOUR
THOUSAND (P24,000.00) PESOS that the Second Party shall pay to the First Party, by these presents,
the First Party hereby sells, transfers and conveys unto the Second Party, its successors and assigns, his
right, interest and participation under an(d) by virtue of the Sales Application No. V-807, which he has or
may have in the lots mentioned in said Sales Application No. V-807;
8.
That the amount of TWENTY FOUR THOUSAND (P24,000.00) PESOS, shall be paid by the
Second Party to the First Party, as follows:
a) The amount of SEVEN THOUSAND (P7,000.00) PESOS, has already been paid by the Second Party to
the First Party upon the execution of the Agreement to Sell, on July 7, 1948;
b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this present
agreement; and
c) The balance of TWELVE THOUSAND (P12,000.00) PESOS, shall be paid upon the execution by the
First Party of the Absolute Deed of Sale of the two parcels of land in question in favor of the Second Party,
and upon delivery to the Second Party of the Certificate of Ownership of the said two parcels of land.
9.
It is specially understood that the mortgage constituted by the First Party in favor of the
Second Party, as stated in the said contract of Agreement to Sell dated July 7, 1948, shall cover not only
the amount of SEVEN THOUSAND (P7,000.00) PESOS as specified in said document, but shall also cover
the amount of FIVE THOUSAND (P5,000.00) PESOS to be paid as stipulated in paragraph 8, subparagraph (b) of this present agreement, if the First Party should fail to comply with the obligations as
provided for in paragraphs 2, 4, and 5 of the Agreement to Sell;
10.
It is further agreed that the First Party obligates himself to sign, execute and deliver to and in
favor of the Second Party, its successors and assigns, at anytime upon demand by the Second Party such
other instruments as may be necessary in order to give full effect to this present agreement;

In the Report dated December 31, 1949 by the public land inspector, District Land Office, Bureau of
Lands, in Butuan, the report contains an Indorsement of the aforesaid District Land Officer recommending
rejection of the Sales Application of Villaflor for having leased the property to another even before he had
acquired transmissible rights thereto.
In a letter of Villaflor dated January 23, 1950, addressed to the Bureau of Lands, he informed the Bureau
Director that he was already occupying the property when the Bureaus Agusan River Valley Subdivision
Project was inaugurated, that the property was formerly claimed as private properties (sic), and that
therefore, the property was segregated or excluded from disposition because of the claim of private
ownership. In a letter of Nasipit Lumber dated February 22, 1950 (exh. X) [11] addressed to the Director of
Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner, claimant and
occupant of the land; that since June 1946, Villaflor leased two (2) hectares inside the land to the
company; that it has no other interest on the land; and that the Sales Application of Villaflor should be
given favorable consideration.
xxx

xxx
xxx

On July 24, 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit
Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to
equal the bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of the
bid price and then paid the assessment in full.
xxx

xxx
xxx

On August 16, 1950, Villaflor executed a document, denominated as a Deed of Relinquishment of Rights
(exh. N),[12] pertinent portion of which reads:
5. That in view of my present business in Manila, and my change in residence from Butuan, Agusan to
the City of Manila, I cannot, therefore, develope (sic) or cultivate the land applied for as projected before;
6. That the Nasipit Lumber Company, Inc., a corporation duly organized xxx is very much interested in
acquiring the land covered by the aforecited application xxx;
7. That I believe the said company is qualified to acquire public land, and has the means to develop (sic)
the above-mentioned land;
xxx

xxx
xxx

WHEREFORE, and in consideration of the amount of FIVE THOUSAND PESOS (P5,000.00) to be

reimbursed to me by the aforementioned Nasipit Lumber Company, Inc., after its receipt of the order of
award, the said amount representing part of the purchase price of the land aforesaid, the value of the
improvements I introduced thereon, and the expenses incurred in the publication of the Notice of Sale, I,
the applicant, Vicente J. Villaflor, hereby voluntarily renounce and relinquish whatever rights to, and
interests I have in the land covered by my above-mentioned application in favor of the Nasipit Lumber
Company, Inc.
Also on August 16, 1950, Nasipit Lumber filed a Sales Application over the two (2) parcels of land,
covering an area of 140 hectares, more or less. This application was also numbered V-807 (exh. Y).
On August 17, 1950 the Director of Lands issued an Order of Award [13] in favor of Nasipit Lumber
Company, Inc., pertinent portion of which reads:
4. That at the auction sale of the land held on July 24, 1950 the highest bid received was that of Nasipit
Lumber Company, Inc. which offered P41.00 per hectare or P5,740.00 for the whole tract, which bid was
equaled by applicant Vicente J. Villaflor, who deposited the amount of P574.00 under Official Receipt No.
B-1373826 dated July 24, 1950 which is equivalent to 10% of the bid. Subsequently, the said xxx
Villaflor paid the amount of P5,160.00 in full payment of the purchase price of the above-mentioned land
and for some reasons stated in an instrument of relinquishment dated August 16, 1950, he (Vicente J.

Villaflor) relinquished his rights to and interest in the said land in favor of the Nasipit Lumber Company,
Inc. who filed the corresponding application therefore.
In view of the foregoing, and it appearing that the proceedings had xxx were in accordance with law and
in [sic] existing regulations, the land covered thereby is hereby awarded to Nasipit Lumber Company, Inc.
at P41.00 per hectare or P5,740.00 for the whole tract.
This application should be entered in the record of this Office as Sales Entry No. V-407.
It is Villaflors claim that he only learned of the Order of Award on January 16, 1974, or after his arrival to
the Philippines, coming from Indonesia, where he stayed for more than ten (10) years; that he went to
Butuan City in the latter part of 1973 upon the call of his brother Serafin Villaflor, who was then sick and
learned that Nasipit Lumber (had) failed and refused to pay the agreed rentals, although his brother was
able to collect during the early years; and that Serafin died three days after his (Vicentes) arrival, and so
no accounting of the rentals could be made; that on November 27, 1973, Villaflor wrote a letter to Mr.
G.E.C. Mears of Nasipit Lumber, reminding him of their verbal agreement in 1955 xxx that Mr. Mears in a
Reply dated December 3, 1973, appears to have referred the matter to Mr. Noriega, the corporate general
manager, but the new set of corporate officers refused to recognize (Villaflors) claim, for Mr. Florencio
Tamesis, the general manager of Nasipit Lumber, in a letter dated February 19, 1974, denied Villaflors
itemized claim dated January 5, 1974 (exh. V) to be without valid and legal basis. In that 5th January,
1974 letter, Villaflor claimed the total amount of P427,000.00 x x x.
In a formal protest dated January 31, 1974 [14] which Villaflor filed with the Bureau of Lands, he protested
the Sales Application of Nasipit Lumber, claiming that the company has not paid him P5,000.00 as
provided in the Deed of Relinquishment of Rights dated August 16, 1950.
xxx

xxx
xxx

x x x (T)hat in a Decision dated August 8, 1977 (exh. 8), the Director of Lands found that the payment of
the amount of P5,000.00 in the Deed xxx and the consideration in the Agreement to Sell were duly
proven, and ordered the dismissal of Villaflors protest and gave due course to the Sales Application of
Nasipit Lumber. Pertinent portion of the Decision penned by Director of Lands, Ramon Casanova, in the
Matter of SP No. V-807 (C-V-407) xxx reads:
xxx

xxx
xxx

During the proceedings, Villaflor presented another claim entirely different from his previous claim -- this
time, for recovery of rentals in arrears arising from a supposed contract of lease by Villaflor as lessor in
favor of Nasipit as lessee, and indemnity for damages supposedly caused improvements on his other
property xxx in the staggering amount of Seventeen Million (P17,000,000.00) Pesos. Earlier, he had also
demanded from NASIPIT xxx (P427,000.00) xxx also as indemnity for damages to improvements
supposedly caused by NASIPIT on his other real property as well as for reimbursement of realty taxes
allegedly paid by him thereon.
xxx

xxx
xxx

It would seem that xxx Villaflor has sought to inject so many collaterals, if not extraneous claims, into
this case. It is the considered opinion of this Office that any claim not within the sphere or scope of its
adjudicatory authority as an administrative as well as quasi-judicial body or any issue which seeks to
delve into the merits of incidents clearly outside of the administrative competence of this Office to decide
may not be entertained.
There is no merit in the contention of Villaflor that owing to Nasipits failure to pay the amount of xxx
(P5,000.00) xxx (assuming that Nasipit had failed) the deed of relinquishment became null and void for
lack of consideration. xxxx.
xxx

xxx
xxx

x x x The records clearly show, however, that since the execution of the deed of relinquishment xxx
Villaflor has always considered and recognized NASIPIT as having the juridical personality to acquire
public lands for agricultural purposes. xxxx.
xxx

xxx
xxx

Even this Office had not failed to recognize the juridical personality of NASIPIT to apply for the purchase
of public lands xxx when it awarded to it the land so relinquished by Villaflor (Order of Award dated
August 17, 1950) and accepted its application therefor. At any rate, the question whether an applicant is
qualified to apply for the acquisition of public lands is a matter between the applicant and this Office to
decide and which a third party like Villaflor has no personality to question beyond merely calling the
attention of this Office thereto.
xxx

xxx
xxx

Villaflor offered no evidence to support his claim of non-payment beyond his own self-serving assertions
and expressions that he had not been paid said amount. As protestant in this case, he has the
affirmative of the issue. He is obliged to prove his allegations, otherwise his action will fail. For, it is a
well settled principle () that if plaintiff upon whom rests the burden of proving his cause of action fails to
show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no
obligation to prove his exceptions or special defenses (Belen vs. Belen, 13 Phil. 202; Mendoza vs.
Fulgencio, 8 Phil. 243).
xxx

xxx
xxx

Consequently, Villaflors claim that he had not been paid must perforce fail.
On the other hand, there are strong and compelling reasons to presume that Villaflor had already been
paid the amount of Five Thousand (P5,000.00) Pesos.
First, xxx What is surprising, however, is not so much his claims consisting of gigantic amounts as his
having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand ( P5,000.00)
Pesos during the investigation proceedings when he had all the time and opportunity to do so. xxx The
fact that he did not adduce or even attempt to adduce evidence in support thereof shows either that he
had no evidence to offer xxx that NASIPIT had already paid him in fact. What is worse is that Villaflor did
not even bother to command payment, orally or in writing, of the Five Thousand ( P5,000.00) Pesos which
was supposed to be due him since August 17, 1950, the date when the order of award was issued to
Nasipit, and when his cause of action to recover payment had accrued. The fact that he only made a
command (sic) for payment on January 31, 1974, when he filed his protest or twenty-four (24) years
later is immediately nugatory of his claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that the order of award had already been
issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all
those twenty-four (24) years. This of course taxes credulity. xxx.
Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of
Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was
issued to NASIPIT on August 17, 1950. The said deed of relinquishment was prepared and notarized in
Manila with Villaflor and NASIPIT signing the instrument also in Manila on August 16, 1950 (p.77,
(sic)). The following day or barely a day after that, or on August 17, 1950, the order of award was issued
by this Office to NASIPIT also in Manila. Now, considering that Villaflor is presumed to be more assiduous
in following up with the Bureau of Lands the expeditious issuance of the order of award as the payment of
the Five Thousand (P5,000.00) Pesos (consideration) would depend on the issuance of said order to
award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the award was
issued to NASIPIT on August 17, 1950, or barely a day which (sic) he executed the deed of
relinquishment on August 16, 1950, in Manila? xxx.
Third, on the other hand, NASIPIT has in his possession a sort of order upon itself -- (the deed of
relinquishment wherein he (sic) obligated itself to reimburse or pay Villaflor the xxx consideration of the
relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the

moment the order of award is issued to it. It is reasonable to presume that NASIPIT has paid the Five
Thousand (P5,000.00) Pesos to Villaflor.
A person in possession of an order on himself for the payment of money, or the delivery of anything, has
paid the money or delivered the thing accordingly. (Section 5(k) B-131-Revised Rules of Court.
It should be noted that NASIPIT did not produce direct evidence as proof of its payment of the Five
Thousand (P5,000.00) Pesos to Villaflor. Nasipits explanation on this point is found satisfactory.
x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to
cope up with all the records necessary to show that the consideration for the deed of relinquishment had
been fully paid. To expect NASIPIT to keep intact all records pertinent to the transaction for the whole
quarter of a century would be to require what even the law does not. Indeed, even the applicable law
itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be preserved
for only a maximum of five years.
NASIPIT may well have added that at any rate while there are transactions where the proper evidence is
impossible or extremely difficult to produce after the lapse of time xxx the law creates presumptions of
regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in an
action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules of
Evidence; 9 Wigmore, Sec. 2491).
Anent Villaflors claim that the 140-hectare land relinquished and awarded to NASIPIT is his private
property, little (need) be said. xxxx The tracks of land referred to therein are not identical to the lands
awarded to NASIPIT. Even in the assumption that the lands mentioned in the deeds of transfer are the
same as the 140-hectare area awarded to NASIPIT, their purchase by Villaflor (or) the latters occupation
of the same did not change the character of the land from that of public land to a private property. The
provision of the law is specific that public lands can only be acquired in the manner provided for therein
and not otherwise (Sec. 11, C.A. No. 141, as amended). The records show that Villaflor had applied for
the purchase of the lands in question with this Office (Sales Application No. V-807) on December 2, 1948.
xxxx There is a condition in the sales application signed by Villaflor to the effect that he recognizes that
the land covered by the same is of public domain and any and all rights he may have with respect thereto
by virtue of continuous occupation and cultivation are relinquished to the Government (paragraph 6,
Sales Application No. V-807 xxx) of which Villaflor is very much aware. It also appears that Villaflor had
paid for the publication fees appurtenant to the sale of the land. He participated in the public auction
where he was declared the successful bidder. He had fully paid the purchase prive (sic) thereof (sic). It
would be a (sic) height of absurdity for Villaflor to be buying that which is owned by him if his claim of
private ownership thereof is to be believed. The most that can be said is that his possession was merely
that of a sales applicant to when it had not been awarded because he relinquished his interest therein in
favor of NASIPIT who (sic) filed a sales application therefor.
xxx

xxx
xxx

x x x During the investigation proceedings, Villaflor presented as his Exhibit (sic) (which NASIPIT
adopted as its own exhibit and had it marked in evidence as Exhibit 1) a duly notarized agreement to
Sell dated July 7, 1948, by virtue of which Villaflor undertook to sell to Nasipit the tracts of land
mentioned therein, for a consideration of Twenty-Four Thousand (P24,000.00) Pesos. Said tracts of land
have been verified to be identical to the parcels of land formerly applied for by Villaflor and which the
latter had relinquished in favor of NASIPIT under a deed of relinquishment executed by him on August 16,
1950. In another document executed on December 7, 1948 xxx Villaflor as FIRST PARTY and NASIPIT
as SECOND PARTY confirmed the Agreement to Sell of July 7, 1948, which was maintained in full force
and effect with all its terms and conditions x x x (Exh. 38-A); and that for and in consideration of xxx
TWENTY FOUR THOUSAND (P24,000.00) PESOS that the Second Party shall pay to the First Party xxx the
First Party hereby sells, transfers and conveys unto the Second Party xxx his right interest and
participation under and by virtue of the Sales Application No. V-807 and, in its paragraph 8, it made
stipulations as to when part of the said consideration xxx was paid and when the balance was to be paid,
to wit:
a) the amount of SEVEN THOUSAND xxx PESOS has already been paid by the Second Party to the First
Party upon the execution of the Agreement to Sell, on July 17, 1948;

b) the amount of FIVE THOUSAND xxx PESOS shall be paid upon the signing of this present agreement;
and
c) the amount of TWELVE THOUSAND xxx PESOS, shall be paid upon the execution by the First Party of
the Absolute Sale of the Two parcels of land in question in favor of the Second Party of the Certificate of
Ownership of the said two parcels of land. (Exh. 38-B). (Emphasis ours)
It is thus clear from this subsequent document marked Exhibit 38 ANALCO that of the consideration of
the Agreement to Sell dated July7, 1948, involving the 140-hectare area relinquished by Villaflor in favor
of NASIPIT, in the amount of Twenty-Four Thousand (P24,000.00) Pesos:
(1)
the amount of Seven Thousand (P7,000.00) Pesos was already paid upon the execution of the
Agreement to Sell on July 7, 1948, receipt of which incidentally was admitted by Villaflor in the
document of December 7, 1948;
(2)
the amount of Five Thousand (P5,000.00) Pesos was paid when said document was signed by
Vicente J. Villaflor as the First Party and Nasipit thru its President, as the Second Party, on December 7,
1948; and
(3)
the balance of Twelve Thousand (P12,000.00) Pesos to be paid upon the execution by the First
Party of the Absolute Deed of Sale of the two parcels of land in favor of the Second Party, and upon
delivery to the Second Party of the Certificate of Ownership of the said two parcels of land.
Villaflor contends that NASIPIT could not have paid Villaflor the balance of Twelve Thousand (P12,000.00)
Pesos x x x consideration in the Agreement to Sell will only be paid to applicant-assignor (referring to
Villaflor) upon obtaining a Torrens Title in his favor over the 140-hectare of land applied for and upon
execution by him of a Deed of Absolute Sale in favor of Nasipit Lumber Company, Inc. x x x. Inasmuch as
applicant-assignor was not able to obtain a Torrens Title over the land in question he could not execute an
absolute Deed of (sic) Nasipit Lumber Co., Inc. Hence, the Agreement to Sell was not carried out and no
Twelve Thousand (P12,000.00) Pesos was overpaid either to the applicant-assignor, much less to Howard
J. Nell Company. (See MEMORANDUM FOR THE APPLICANT-ASSIGNOR, dated January 5, 1977). xxx.
xxx Villaflor did not adduce evidence in support of his claim that he had not been paid the xxx
(P12,000.00) xxx consideration of the Agreement to Sell dated July 7, 1948 (Exh. 38 NALCO) beyond his
mere uncorroborated assertions. On the other hand, there is strong evidence to show that said Twelve
Thousand (P12,000.00) Pesos had been paid by (private respondent) to Edward J. Nell Company by virtue
of the Deed of Assignment of Credit executed by Villaflor (Exh. 41 NALCO) for the credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT who is in a position to know the facts, testified for
NASIPIT. He described that it was he who notarized the Agreement to Sell (Exh. F); that he knew
about the execution of the document of December 7, 1948 (Exh. 38) confirming the said Agreement to
Sell having been previously consulted thereon by Jose Fernandez, who signed said document on behalf of
NASIPIT xxx that subsequently, in January 1949, Villaflor executed a Deed of Assignment of credit in
favor of Edward J. Nell Company (Exh. 41 NALCO) whereby Villaflor ceded to the latter his receivable for
NASIPIT corresponding to the remaining balance in the amount of Twelve Thousand xxx Pesos of the
total consideration xxx stipulated in both the Agreement to Sell (Exh. F) and the document dated
December 7, 1948 (Exh. 39); xxx. He further testified that the said assignment of credit was
communicated to (private respondent) under cover letter dated January 24, 1949 (Exh. 41-A) and not
long thereafter, by virtue of the said assignment of credit, (private respondent) paid the balance of Twelve
Thousand xxx due to Villaflor to Edward J. Nell Company xxx. Atty. Banaags aforesaid testimony stand
unrebutted; hence, must be given full weight and credit. xxx Villaflor and his counsel were present when
Atty. Banaags foregoing testimony was given. Yet, Villaflor did not demur, nor did he rebut the same,
despite having been accorded full opportunity to do so.
xxx

xxx
xxx

Having found that both the Five Thousand xxx consideration of the deed of Relinquishment xxx and that
the remaining balance of xxx (P12,000.00) to complete the Twenty-Four Thousand (P24,000.00) Pesos
consideration of both the Agreement to Sell dated July 7, 1948, and the document, dated December 7,
1948, executed by the former in favor of the latter, have been paid Villaflor the issue on prescription and
laches becomes academic and needs no further discussion.

But more than all the questions thus far raised and resolved is the question whether a sales patent can be
issued to NASIPIT for the 140-hectare area awarded to it in the light of Section 11, Article XIV of the new
Constitution which provides in its pertinent portion to wit:
x x x No private corporation or association may hold alienable land of the public domain except by lease
not to exceed one thousand hectares in area xxx.
The Secretary of Justice had previous occasion to rule on this point in his opinion No. 140, s. 1974. Said
the Honorable Justice Secretary:
On the second question, (referring to the questions when may a public land be considered to have been
acquired by purchase before the effectivity of the new Constitution posed by the Director of Lands in his
query on the effect on pending applications for the issuance of sales patent in the light of Section 11, Art.
XIV of the New Constitution aforecited), you refer to this Offices Opinion No. 64 series of 1973 in which I
stated:
On the other hand, with respect to sales applications ready for issuance of sales patent, it is my opinion
that where the applicant had, before the Constitution took effect, fully complied with all this obligations
under the Public Land Act in order to entitle him to a Sales patent, there would be no legal or equitable
justification for refusing to issue or release the sales patent.
With respect to the point as to when the Sales applicant has complied with all the terms and conditions
which would entitle him to a sales patent, the herein above Secretary of Justice went on:
That as to when the applicant has complied with all the terms and conditions which would entitle him to
a patent is a questioned (sic) fact which your office would be in the best position to determine. However,
relating this to the procedure for the processing of applications mentioned above, I think that as
the applicant has fulfilled the construction/cultivation requirements and has fully paid the purchase price,
he should be deemed to have acquired by purchase the particular tract of land and (sic) the area (sic) in
the provision in question of the new constitution would not apply.
From the decision of the Director of Lands, Villaflor filed a Motion for Reconsideration which was
considered as an Appeal M.N.R. Case 4341, to the Ministry of Natural Resources.
On June 6, 1979, the Minister of Natural Resources rendered a Decision (exh. 9), [15] dismissing the appeal
and affirming the decision of the Director of Lands, pertinent portions of which reads:
After a careful study of the records and the arguments of the parties, we believe that the appeal is not
well taken.
Firstly, the area in dispute is not the private property of appellant.
The evidence adduced by appellant to establish his claim of ownership over the subject area consists of
deeds of absolute sale executed in his favor on January 16, and February 15, 1940, by four (4) different
persons, namely, Cirilo Piencenaves, Fermin Balobo, Claudio Otero and Hermogenes Patete.
However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will
disclose that said parcels are not identical to, and do not tally with, the area in controversy.
It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless
alienated in accordance with law, it retains its rights over the same as dominus, (Santiago vs. de los
Santos, L-20241, November 22, 1974, 61 SCRA 152).
For, it is well-settled that no public land can be acquired by private persons without any grant, express or
implied from the government. It is indispensable then that there be showing of title from the state or any
other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389, December
27, 1972, 48 SCRA 379.)

It is well-settled that all lands remain part of the public domain unless severed therefrom by state grant
or unless alienated in accordance with law.

c. land was surveyed and survey returns already submitted to the Director of Lands for verification and
approval; and

We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to
establish that the contested area is of private ownership. Hence, the property must be held to be public
domain.

d.

There being no evidence whatever that the property in question was ever acquired by the applicants or
their ancestors either by composition title from the Spanish Government or by possessory information
title or by any other means for the acquisition of public lands, the property must be held to be public
domain. (Lee Hong Hok, et al., vs. David , et al., L-30389 December 27, 1972, 48 SCRA 378-379 citing
Heirs of Datu Pendatun vs. Director of Lands; see also Director of Lands vs. Reyes, L-27594, November
28, 1975, 68 SCRA 177).
Be that as it may, appellant, by filing a sales application over the controverted land, acknowledged
unequivocably [sic] that the same is not his private property.
As such sales applicant, appellant manifestly acknowledged that he does not own the land and that the
same is a public land under the administration of the Bureau of Lands, to which the application was
submitted, xxx All of its acts prior thereof, including its real estate tax declarations, characterized its
possessions of the land as that of a sales applicant and consequently, as one who expects to buy it, but
has not as yet done so, and is not, therefore, its owner. (Palawan Agricultural and Industrial Co., Inc. vs.
Director of Lands, L-25914, March 21, 1972, 44 SCRA 20, 21).
Secondly, appellants alleged failure to pay the consideration stipulated in the deed of relinquishment
neither converts said deed into one without a cause or consideration nor ipso facto rescinds the
same. Appellant, though, has the right to demand payment with legal interest for the delay or to demand
rescission.
xxx

xxx
xxx

However, appellants cause of action, either for specific performance or rescission of contract, with
damages, lies within the jurisdiction of civil courts, not with administrative bodies.
xxx

xxx
xxx

Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by
the new constitutional provision that no private corporation may hold alienable land of the public domain
except by lease.
xxx

xxx
xxx

Implementing the aforesaid Opinion No. 64 of the Secretary of Justice, the then Secretary of Agriculture
and Natural Resources issued a memorandum, dated February 18, 1974, which pertinently reads as
follows:
In the implementation of the foregoing opinion, sales application of private individuals covering areas in
excess of 24 hectares and those of corporations, associations, or partnership which fall under any of the
following categories shall be given due course and issued patents, to wit:
1. Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to
January 17, 1973;
a.

the land covered thereby was awarded;

b. cultivation requirements of law were complied with as shown by investigation reports submitted prior
to January 17, 1973;

purchase price was fully paid.

From the records, it is evident that the aforestated requisites have been complied with by appellee long
before January 17, 1973, the effectivity of the New Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the
cultivation requirements were complied with as per investigation report dated December 31, 1949, and
the land was surveyed under Pls-97.
On July 6, 1978, petitioner filed a complaint [16] in the trial court for Declaration of Nullity of
Contract (Deed of Relinquishment of Rights), Recovery of Possession (of two parcels of land subject of the
contract), and Damages at about the same time that he appealed the decision of the Minister of Natural
Resources to the Office of the President.
On January 28, 1983, petitioner died. The trial court ordered his widow, Lourdes D. Villaflor, to be
substituted as petitioner. After trial in due course, the then Court of First Instance of Agusan del Norte
and Butuan City, Branch III, [17] dismissed the complaint on the grounds that: (1) petitioner admitted the
due execution and genuineness of the contract and was estopped from proving its nullity, (2) the verbal
lease agreements were unenforceable under Article 1403 (2)(e) of the Civil Code, and (3) his causes of
action were barred by extinctive prescription and/or laches. It ruled that there was prescription and/or
laches because the alleged verbal lease ended in 1966, but the action was filed only on January 6,
1978. The six-year period within which to file an action on an oral contract per Article 1145 (1) of the
Civil Code expired in 1972. The decretal portion[18] of the trial courts decision reads:
WHEREFORE, the foregoing premises duly considered, judgment is hereby rendered in favor of the
defendant and against the plaintiff. Consequently, this case is hereby ordered DISMISSED. The defendant
is hereby declared the lawful actual physical possessor-occupant and having a better right of possession
over the two (2) parcels of land in litigation described in par. 1.2 of the complaint as Parcel I and Parcel
II, containing a total area of One Hundred Sixty (160) hectares, and was then the subject of the Sales
Application No. V-807 of the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to 421-A, Record), and now of the
Sales Application No. 807, Entry No. V-407 of the defendant Nasipit Lumber Company (Exhibit Y, pp. 357358, Record). The Agreements to Sell Real Rights, Exhibits 2 to 2-C, 3 to 3-B, and the Deed of
Relinquishment of Rights, Exhibits N to N-1, over the two parcels of land in litigation are hereby declared
binding between the plaintiff and the defendant, their successors and assigns.
Double the costs against the plaintiff.
The heirs of petitioner appealed to Respondent Court of Appeals [19] which, however, rendered
judgment against petitioner via the assailed Decision dated September 27, 1990 finding petitioners
prayers -- (1) for the declaration of nullity of the deed of relinquishment, (2) for the eviction of private
respondent from the property and (3) for the declaration of petitioners heirs as owners to be without
basis. The decretal portion[20] of the assailed 49-page, single-spaced Decision curtly reads:
WHEREFORE, the Decision appealed from, is hereby AFFIRMED, with costs against plaintiff-appellants.
Not satisfied, petitioners heirs filed the instant 57-page petition for review dated December 7,
1990. In a Resolution dated June 23, 1991, the Court denied this petition for being late. On
reconsideration -- upon plea of counsel that petitioners were poor and that a full decision on the merits
should be rendered -- the Court reinstated the petition and required comment from private
respondent. Eventually, the petition was granted due course and the parties thus filed their respective
memoranda.

The Issues
Petitioner, through his heirs, attributes the following errors to the Court of Appeals:
I. Are the findings of the Court of Appeals conclusive and binding upon the Supreme Court?
II. Are the findings of the Court of Appeals fortified by the similar findings made by the Director of Lands
and the Minister of Natural Resources (as well as by the Office of the President)?

III. Was there forum shopping?

IV. Are the findings of facts of the Court of Appeals and the trial court supported by the evidence and the
law?
V. Are the findings of the Court of Appeals supported by the very terms of the contracts which were
under consideration by the said court?
VI. Did the Court of Appeals, in construing the subject contracts, consider the contemporaneous and
subsequent act of the parties pursuant to article 1371 of the Civil Code?
VII. Did the Court of Appeals consider the fact and the unrefuted claim of Villaflor that he never knew of
the award in favor of Nasipit?
VIII. Did the Court of Appeals correctly apply the rules on evidence in its findings that Villaflor was paid
the P5,000.00 consideration because Villaflor did not adduce any proof that he was not paid?
IX. Is the Court of Appeals conclusion that the contract is not simulated or fictitious simply because it is
genuine and duly executed by the parties, supported by logic or the law?
X. May the prestations in a contract agreeing to transfer certain rights constitute estoppel when this very
contract is the subject of an action for annulment on the ground that it is fictitious?
XI. Is the Court of Appeals conclusion that the lease agreement between Villaflor is verbal and therefore,
unenforceable supported by the evidence and the law?
After a review of the various submissions of the parties, particularly those of petitioner, this Court
believes and holds that the issues can be condensed into three as follows:
(1)
Did the Court of Appeals err in adopting or relying on the factual findings of the Bureau of Lands,
especially those affirmed by the Minister (now Secretary) of Natural Resources and the trial court?
(2)
Did the Court of Appeals err in upholding the validity of the contracts to sell and the deed of
relinquishment? Otherwise stated, did the Court of Appeals err in finding the deed of relinquishment of
rights and the contracts to sell valid, and not simulated or fictitious?
(3)

Is the private respondent qualified to acquire title over the disputed property?

In recent years, it has been the jurisprudential trend to apply this doctrine to cases involving
matters that demand the special competence of administrative agencies even if the question involved is
also judicial in character. It applies where a claim is originally cognizable in the courts, and comes into
play whenever enforcement of the claim requires the resolution of issues which, under a regulatory
scheme, have been placed within the special competence of an administrative body; in such case, the
judicial process is suspended pending referral of such issues to the administrative body for its view.[22]
In cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot arrogate
unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an
administrative body of special competence. [23] In Machete vs. Court of Appeals, the Court upheld the
primary jurisdiction of the Department of Agrarian Reform Adjudicatory Board (DARAB) in an agrarian
dispute over the payment of back rentals under a leasehold contract. [24] In Concerned Officials of the
Metropolitan Waterworks and Sewerage System vs. Vasquez, [25] the Court recognized that the MWSS was
in the best position to evaluate and to decide which bid for a waterworks project was compatible with its
development plan.
The rationale underlying the doctrine of primary jurisdiction finds application in this case, since the
questions on the identity of the land in dispute and the factual qualification of private respondent as an
awardee of a sales application require a technical determination by the Bureau of Lands as the
administrative agency with the expertise to determine such matters. Because these issues preclude prior
judicial determination, it behooves the courts to stand aside even when they apparently have statutory
power to proceed, in recognition of the primary jurisdiction of the administrative agency.[26]
One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the
determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by
our regular courts[27]
Petitioner initiated his action with a protest before the Bureau of Lands and followed it through in
the Ministry of Natural Resources and thereafter in the Office of the President. Consistent with the
doctrine of primary jurisdiction, the trial and the appellate courts had reason to rely on the findings of
these specialized administrative bodies.
The primary jurisdiction of the director of lands and the minister of natural resources over the
issues regarding the identity of the disputed land and the qualification of an awardee of a sales patent is
established by Sections 3 and 4 of Commonwealth Act No. 141, also known as the Public Land Act:
Section 3. The Secretary of Agriculture and Commerce (now Secretary of Natural Resources) shall be the
executive officer charged with carrying out the provisions of this Act through the Director of Lands, who
shall act under his immediate control.
Section 4. Subject to said control, the Director of Lands shall have direct executive control of the survey,
classification, lease, sale or any other form of concession or disposition and management of the lands of
the public domain, and his decision as to questions of fact shall be conclusive when approved by the
Secretary of Agriculture and Commerce.
Thus, the Director of Lands, in his decision, said:[28]

The Courts Ruling

The petition is bereft of merit. It basically questions the sufficiency of the evidence relied upon by
the Court of Appeals, alleging that public respondents factual findings were based on speculations,
surmises and conjectures. Petitioner insists that a review of those findings is in order because they were
allegedly (1) rooted, not on specific evidence, but on conclusions and inferences of the Director of Lands
which were, in turn, based on misapprehension of the applicable law on simulated contracts; (2) arrived
at whimsically -- totally ignoring the substantial and admitted fact that petitioner was not notified of the
award in favor of private respondent; and (3) grounded on errors and misapprehensions, particularly
those relating to the identity of the disputed area.

First Issue: Primary Jurisdiction of the Director of Lands and Finality of Factual Findings of the
Court of Appeals
Underlying the rulings of the trial and appellate courts is the doctrine of primary
jurisdiction; i.e., courts cannot and will not resolve a controversy involving a question which is within the
jurisdiction of an administrative tribunal, especially where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and services of the administrative
tribunal to determine technical and intricate matters of fact. [21]

x x x It is merely whether or not Villaflor has been paid the Five Thousand (P5,000.00) Pesos stipulated
consideration of the deed of relinquishment made by him without touching on the nature of the deed of
relinquishment. The administration and disposition of public lands is primarily vested in the Director of
Lands and ultimately with the Secretary of Agriculture and Natural Resources (now Secretary of Natural
Resources), and to this end-Our Supreme Court has recognized that the Director of Lands is a quasi-judicial officer who passes on
issues of mixed facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440). Sections 3 and 4 of the
Public Land Law thus mean that the Secretary of Agriculture and Natural Resources shall be the final
arbiter on questions of fact in public land conflicts (Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs.
Apostol, 52 Phil 442).
The ruling of this Office in its order dated September 10, 1975, is worth reiterating, thus:
x x x it is our opinion that in the exercise of his power of executive control, administrative disposition and
allegation of public land, the Director of Lands should entertain the protest of Villaflor and conduct formal
investigation xxx to determine the following points: (a) whether or not the Nasipit Lumber Company, Inc.
paid or reimbursed to Villaflor the consideration of the rights in the amount of P5,000.00 and what

evidence the company has to prove payment, the relinquishment of rights being part of the administrative
process in the disposition of the land in question xxx.
xxxx Besides, the authority of the Director of Lands to pass upon and determine questions considered
inherent in or essential to the efficient exercise of his powers like the incident at issue, i.e. , whether
Villaflor had been paid or not, is conceded by law.
Reliance by the trial and the appellate courts on the factual findings of the Director of Lands and the
Minister of Natural Resources is not misplaced. By reason of the special knowledge and expertise of said
administrative agencies over matters falling under their jurisdiction, they are in a better position to pass
judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not
finality,[29] by the courts. [30] The findings of fact of an administrative agency must be respected as long as
they are supported by substantial evidence, even if such evidence might not be overwhelming or even
preponderant. It is not the task of an appellate court to weigh once more the evidence submitted before
the administrative body and to substitute its own judgment for that of the administrative agency in
respect of sufficiency of evidence.[31]
However, the rule that factual findings of an administrative agency are accorded respect and even
finality by courts admits of exceptions. This is true also in assessing factual findings of lower courts. [32] It
is incumbent on the petitioner to show that the resolution of the factual issues by the administrative
agency and/or by the trial court falls under any of the exceptions. Otherwise, this Court will not disturb
such findings.[33]
We mention and quote extensively from the rulings of the Bureau of Lands and the Minister of
Natural Resources because the points, questions and issues raised by petitioner before the trial court, the
appellate court and now before this Court are basically the same as those brought up before the aforesaid
specialized administrative agencies. As held by the Court of Appeals: [34]
We find that the contentious points raised by appellant in this action, are substantially the same matters
he raised in BL Claim No. 873 (N). In both actions, he claimed private ownership over the land in
question, assailed the validity and effectiveness of the Deed of Relinquishment of Rights he executed in
August 16, 1950, that he had not been paid the P5,000.00 consideration, the value of the improvements
he introduced on the land and other expenses incurred by him.
In this instance, both the principle of primary jurisdiction of administrative agencies and the
doctrine of finality of factual findings of the trial courts, particularly when affirmed by the Court of Appeals
as in this case, militate against petitioners cause. Indeed, petitioner has not given us sufficient reason to
deviate from them.

Land in Dispute Is Public Land

Petitioner argues that even if the technical description in the deeds of sale and those in the sales
application were not identical, the area in dispute remains his private property. He alleges that the deeds
did not contain any technical description, as they were executed prior to the survey conducted by the
Bureau of Lands; thus, the properties sold were merely described by reference to natural boundaries. His
private ownership thereof was also allegedly attested to by private respondents former field manager in
the latters February 22, 1950 letter, which contained an admission that the land leased by private
respondent was covered by the sales application.
This contention is specious. The lack of technical description did not prove that the finding of the
Director of Lands lacked substantial evidence. Here, the issue is not so much whether the subject land is
identical with the property purchased by petitioner. The issue, rather, is whether the land covered by the
sales application is private or public land. In his sales application, petitioner expressly admitted that said
property was public land. This is formidable evidence as it amounts to an admission against interest.
In the exercise of his primary jurisdiction over the issue, Director of Lands Casanova ruled that the
land was public:[35]
x x x Even (o)n the assumption that the lands mentioned in the deeds of transfer are the same as the
140-hectare area awarded to Nasipit, their purchase by Villaflor (or) the latters occupation of the same
did not change the character of the land from that of public land to a private property. The provision of
the law is specific that public lands can only be acquired in the manner provided for therein and not
otherwise (Sec. 11, C.A. No. 141, as amended). The records show that Villaflor had applied for the
purchase of lands in question with this Office (Sales Application No. V-807) on December 2, 1948. xxx
There is a condition in the sales application xxx to the effect that he recognizes that the land covered by

the same is of public domain and any and all rights he may have with respect thereto by virtue of
continuous occupation and cultivation are relinquished to the Government (paragraph 6, Sales Application
No. V-807 of Vicente J. Villaflor, p. 21, carpeta) of which Villaflor is very much aware. It also appears that
Villaflor had paid for the publication fees appurtenant to the sale of the land. He participated in the public
auction where he was declared the successful bidder. He had fully paid the purchase prive (sic) thereor
(sic). It would be a (sic) height of absurdity for Villaflor to be buying that which is owned by him if his
claim of private ownership thereof is to be believed. xxx.
This finding was affirmed by the Minister of Natural Resources: [36]
Firstly, the area in dispute is not the private property of appellant (herein petitioner).
The evidence adduced by (petitioner) to establish his claim of ownership over the subject area consists of
deeds of absolute sale executed in his favor xxx.
However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will
disclose that said parcels are not identical to, and do not tally with, the area in controversy.
It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless
alienated in accordance with law, it retains its rights over the same as dominus. (Santiago vs. de los
Santos, L-20241, November 22, 1974, 61 SCRA 152).
For it is well-settled that no public land can be acquired by private persons without any grant, express or
implied from the government. It is indispensable then that there be showing of title from the state or any
other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389, December
27, 1972, 48 SCRA 379).
xxx

xxx
xxx

xxx

We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to
establish that the contested area is of private ownership. Hence, the property must be held to be public
domain.
There being no evidence whatever that the property in question was ever acquired by the applicants or
their ancestors either by composition title from the Spanish Government or by possessory information
title or by any other means for the acquisition of public lands, the property must be held to be public
domain.
Be that as it may, [petitioner], by filing a sales application over the controverted land, acknowledged
unequivocably [sic] that the same is not his private property.
As such sales applicant manifestly acknowledged that he does not own the land and that the same is a
public land under the administration of the Bureau of Lands, to which the application was submitted, xxx
All of its acts prior thereof, including its real estate tax declarations, characterized its possessions of the
land as that of a sales applicant. And consequently, as one who expects to buy it, but has not as yet
done so, and is not, therefore, its owner.(Palawan Agricultural and Industrial Co., Inc. vs. Director of
Lands, L-25914, March 21, 1972, 44 SCRA 15).
Clearly, this issue falls under the primary jurisdiction of the Director of Lands because its resolution
requires survey, classification, xxx disposition and management of the lands of the public domain. It
follows that his rulings deserve great respect. As petitioner failed to show that this factual finding of the
Director of Lands was unsupported by substantial evidence, it assumes finality. Thus, both the trial and
the appellate courts correctly relied on such finding. [37] We can do no less.

Second Issue: No Simulation of Contracts Proven

Petitioner insists that contrary to Article 1371[38] of the Civil Code, Respondent Court erroneously
ignored the contemporaneous and subsequent acts of the parties; hence, it failed to ascertain their true
intentions. However, the rule on the interpretation of contracts that was alluded to by petitioner is used
in affirming, not negating, their validity. Thus, Article 1373, [39] which is a conjunct of Article 1371,

provides that, if the instrument is susceptible of two or more interpretations, the interpretation which will
make it valid and effectual should be adopted. In this light, it is not difficult to understand that the legal
basis urged by petitioner does not support his allegation that the contracts to sell and the deed of
relinquishment are simulated and fictitious. Properly understood, such rules on interpretation even
negate petitioners thesis.
But
let
us
indulge
the
petitioner
awhile
and
determine
whether
the
cited
contemporaneous and subsequent acts of the parties support his allegation of simulation. Petitioner
asserts that the relinquishment of rights and the agreements to sell were simulated because, first, the
language and terms of said contracts negated private respondents acquisition of ownership of the land in
issue; and second, contemporaneous and subsequent communications between him and private
respondent allegedly showed that the latter admitted that petitioner owned and occupied the two
parcels; i.e., that private respondent was not applying for said parcels but was interested only in the two
hectares it had leased, and that private respondent supported petitioners application for a patent.
Petitioner explains that the Agreement to Sell dated December 7, 1948 did not and could not
transfer ownership because paragraph 8 (c) thereof stipulates that the balance of twelve thousand pesos
(P12,000.00) shall be paid upon the execution by the First Party [petitioner] of the Absolute Deed of Sale
of the two parcels of land in question in favor of the Second Party, and upon delivery to the Second Party
[private respondent] of the Certificate of Ownership of the said two parcels of land. The mortgage
provisions in paragraphs 6 and 7 of the agreement state that the P7,000.00 and P5,000.00 were earnest
money or a loan with antichresis by the free occupancy and use given to Nasipit of the 140 hectares of
land not anymore as a lessee. If the agreement to sell transferred ownership to Nasipit, then why was it
necessary to require petitioner, in a second agreement, to mortgage his property in the event of
nonfulfillment of the prestations in the first agreement?
True, the agreement to sell did not absolutely transfer ownership of the land to private
respondent. This fact, however, does not show that the agreement was simulated. Petitioners delivery of
the Certificate of Ownership and execution of the deed of absolute sale were suspensive conditions, which
gave rise to a corresponding obligation on the part of the private respondent, i.e., the payment of the last
installment of the consideration mentioned in the December 7, 1948 Agreement. Such conditions did not
affect the perfection of the contract or prove simulation. Neither did the mortgage.
Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made
by agreement of the parties, in order to produce, for the purpose of deception, the appearance of a
juridical act which does not exist or is different from that which was really executed. [40] Such an intention
is not apparent in the agreements. The intent to sell, on the other hand, is as clear as daylight.
Petitioner alleges further that the deed of relinquishment of right did not give full effect to the two
agreements to sell, because the preliminary clauses of the deed allegedly served only to give private
respondent an interest in the property as a future owner thereof and to enable respondent to follow up
petitioners sales application.
We disagree. Such an intention is not indicated in the deed. On the contrary, a real and factual
sale is evident in paragraph 6 thereof, which states: That the Nasipit Lumber Co., Inc., xxx is very much
interested in acquiring the land covered by the aforecited application to be used for purposes of
mechanized farming and the penultimate paragraph stating: xxx VICENTE J. VILLAFLOR, hereby
voluntarily renounce and relinquish whatever rights to, and interests I have in the land covered by my
above-mentioned application in favor of the Nasipit Lumber Co., Inc.
We also hold that no simulation is shown either in the letter, dated December 3, 1973, of the former
field manager of private respondent, George Mear. A pertinent portion of the letter reads:
(a)s regards your property at Acacia, San Mateo, I recall that we made some sort of agreement for the
occupancy, but I no longer recall the details and I had forgotten whether or not we actually did occupy
your land. But if, as you say, we did occupy it, then I am sure that the Company is obligated to pay a
rental.
The letter did not contain any express admission that private respondent was still leasing the land
from petitioner as of that date. According to Mear, he could no longer recall the details of his agreement
with petitioner. This cannot be read as evidence of the simulation of either the deed of relinquishment or
the agreements to sell. It is evidence merely of an honest lack of recollection.
Petitioner also alleges that he continued to pay realty taxes on the land even after the execution of
said contracts. This is immaterial because payment of realty taxes does not necessarily prove ownership,
much less simulation of said contracts. [41]

Nonpayment of the Consideration

Did Not Prove Simulation
Petitioner insists that nonpayment of the consideration in the contracts proves their simulation. We
disagree. Nonpayment, at most, gives him only the right to sue for collection. Generally, in a contract of
sale, payment of the price is a resolutory condition and the remedy of the seller is to exact fulfillment or,
in case of a substantial breach, to rescind the contract under Article 1191 of the Civil Code. [42] However,
failure to pay is not even a breach, but merely an event which prevents the vendors obligation to convey
title from acquiring binding force.[43]
Petitioner also argues that Respondent Court violated evidentiary rules in upholding the ruling of
the Director of Lands that petitioner did not present evidence to show private respondents failure to pay
him. We disagree. Prior to the amendment of the rules on evidence on March 14, 1989, Section 1, Rule
131, states that each party must prove his or her own affirmative allegations. [44] Thus, the burden of
proof in any cause rested upon the party who, as determined by the pleadings or the nature of the case,
asserts the affirmative of an issue and remains there until the termination of the action. [45] Although
nonpayment is a negative fact which need not be proved, the party seeking payment is still required to
prove the existence of the debt and the fact that it is already due.[46]
Petitioner showed the existence of the obligation with the presentation of the contracts, but did not
present any evidence that he demanded payment from private respondent. The demand letters dated
January 2 and 5, 1974 (Exhs. J and U), adduced in evidence by petitioner, were for the payment of
back rentals, damages to improvements and reimbursement of acquisition costs and realty taxes, not
payment arising from the contract to sell.
Thus, we cannot fault Respondent Court for adopting the finding of the Director of Lands that
petitioner offered no evidence to support his claim of nonpayment beyond his own self-serving
assertions, as he did not even demand payment, orally or in writing, of the five thousand (P5,000.00)
pesos which was supposed to be due him since August 17, 1950, the date when the order of award was
issued to Nasipit, and when his cause of action to recover payment had accrued. Nonpayment of the
consideration in the contracts to sell or the deed of relinquishment was raised for the first time in the
protest filed with the Bureau of Lands on January 31, 1974. But this protest letter was not the demand
letter required by law.
Petitioner alleges that the assignment of credit and the letter of the former field manager of private
respondent are contemporaneous and subsequent acts revealing the nonpayment of the
consideration. He maintains that the P12,000.00 credit assigned pertains to the P5,000.00
and P7,000.00 initial payments in the December 7, 1948 Agreement, because the balance of P12,000.00
was not yet due and accruing. This is consistent, he argues, with the representation that private
respondent was not interested in filing a sales application over the land in issue and that Nasipit was
instead supporting petitioners application thereto in Mears letter to the Director of Lands dated February
22, 1950 (Exh. X).[47]
This argument is too strained to be acceptable. The assignment of credit did not establish the
nondelivery of these initial payments of the total consideration. First, the assignment of credit happened
on January 19, 1949, or a month after the signing of the December 7, 1948 Agreement and almost six
months after the July 7, 1948 Agreement to Sell. Second, it does not overcome the recitation in the
Agreement of December 7, 1948: xxx a) The amount of SEVEN THOUSAND (P7,000.00) PESOS has
already been paid by the Second Party to the First Party upon the execution of the Agreement to Sell, on
July 7, 1948; b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this
present agreement; xxx.
Aside from these facts, the Director of Lands found evidence of greater weight showing that
payment was actually made:[48]
x x x (T)here is strong evidence to show that said xxx (P12,000.00) had been paid by NASIPIT to
Edward J. Nell Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. 41
NALCO) for the credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT xxx declared that it was he who notarized the
Agreement to Sell (Exh. F); xxxx that subsequently, in January 1949, Villaflor executed a Deed of
Assignment of credit in favor of Edward J. Nell Company (Exh. 41 NALCO) whereby Villaflor ceded to the
latter his receivable for NASIPIT corresponding to the remaining balance in the amount of xxx
(P12,000.00) xxx of the total consideration xxxx; He further testified that the said assignment xxx was
communicated to NASIPIT under cover letter dated January 24, 1949 (Exh. 41-A) and not long
thereafter, by virtue of the said assignment of credit, NASIPIT paid the balance xxx to Edward J. Nell
Company (p. 58, bid). Atty. Banaags aforesaid testimony stand unrebutted; hence, must be given full
weight and credit.

xxx

xxx
xxx.

the amendments to the later contracts. These circumstances explain the mistaken representations, not
misrepresentations, in said letter.

The Director of Lands also found that there had been payment of the consideration in the
relinquishment of rights:[49]
Lack of Notice of the Award
On the other hand, there are strong and compelling reasons to presume that Villaflor had already been
paid the amount of Five Thousand (P5,000.00) Pesos.
First, x x x What is surprising, however, is not so much his claims consisting of gigantic amounts as his
having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand ( P5,000.00)
Pesos during the investigation proceedings when he had all the time and opportunity to do so. xxxx The
fact that he did not adduce or even attempt to adduce evidence in support thereof shows either that he
had no evidence to offer of that NASIPIT had already paid him in fact. What is worse is that Villaflor did
not even bother to command payment, orally or in writing, of the Five Thousand ( P5,000.00) Pesos which
was supposed to be due him since August 17, 1950, the date when the order of award was issued to
Nasipit, and when his cause of action to recover payment had accrued. The fact that he only made a
command for payment on January 31, 1974, when he filed his protest or twenty-four (24) years later is
immediately nugatory of his claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that the order of award had already been
issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all
those twenty-four (24) years. This of course taxes credulity.xxxx
x x x It is more in keeping with the ordinary course of things that he should have acquired information
as to what was transpiring in his affairs in Manila x x x.
Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of
Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was
issued to NASIPIT on August 17, 1950. The said deed of relinquishment was prepared and notarized in
Manila with Villaflor and NASIPIT signing the instrument also in Manila. Now, considering that Villaflor is
presumed to be more assiduous in following up with the Bureau of Lands the expeditious issuance of the
order of award as the (consideration) would depend on the issuance of said order to award NASIPIT,
would it not be reasonable to believe that Villaflor was at hand when the award was issued to NASIPIT on
August 17, 1950, or barely a day which he executed the deed of relinquishment on August 16, 1950, in
Manila? xxxx.
Third, on the other hand, NASIPIT has in his possession a sort of order upon itself -- (the deed of
relinquishment wherein he(sic) obligated itself to reimburse or pay Villaflor the xxx consideration of the
relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the
moment the order of award is issued to it. It is reasonable to presume that NASIPIT has paid the
(consideration) to Villaflor.
xxx

xxx
xxx

x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to
cope up with all the records necessary to show that the consideration for the deed of relinquishment had
been fully paid. To expect NASIPIT to keep intact all records pertinent to the transaction for the whole
quarter of a century would be to require what even the law does not. Indeed, even the applicable law
itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be preserved
for only a maximum of five years.
NASIPIT may well have added that at any rate while there are transactions where the proper evidence is
impossible or extremely difficult to produce after the lapse of time xxx the law creates presumptions of
regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in an
action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules of
Evidence; 9 Wigmore, Sec. 2491).
The Court also notes that Mears letter of February 22, 1950 was sent six months prior to the
execution of the deed of relinquishment of right. At the time of its writing, private respondent had not
perfected its ownership of the land to be able to qualify as a sales applicant. Besides, although he was a
party to the July 7, 1948 Agreement to Sell, Mear was not a signatory to the Deed of Relinquishment or
to the December 7, 1948 Agreement to Sell. Thus, he cannot be expected to know the existence of and

Petitioner insists that private respondent suppressed evidence, pointing to his not having been
notified of the Order of Award dated August 17, 1950. [50] At the bottom of page 2 of the order, petitioner
was not listed as one of the parties who were to be furnished a copy by Director of Lands Jose P.
Dans. Petitioner also posits that Public Land Inspector Sulpicio A. Taeza irregularly received the copies for
both private respondent and the city treasurer of Butuan City. The lack of notice for petitioner can be
easily explained. Plainly, petitioner was not entitled to said notice of award from the Director of Lands,
because by then, he had already relinquished his rights to the disputed land in favor of private
respondent. In the heading of the order, he was referred to as sales applicant-assignor. In paragraph
number 4, the order stated that, on August 16, 1950, he relinquished his rights to the land subject of the
award to private respondent. From such date, the sales application was considered to be a matter
between the Bureau of Lands and private respondent only. Considering these facts, the failure to give
petitioner a copy of the notice of the award cannot be considered as suppression of evidence.
[51]
Furthermore, this order was in fact available to petitioner and had been referred to by him since
January 31, 1974 when he filed his protest with the Bureau of Lands. [52]

Third Issue: Private Respondent Qualified

for an Award of Public Land
Petitioner asserts that private respondent was legally disqualified from acquiring the parcels of land
in question because it was not authorized by its charter to acquire disposable public agricultural lands
under Sections 121, 122 and 123 of the Public Land Act, prior to its amendment by P.D. No. 763. We
disagree. The requirements for a sales application under the Public Land Act are: (1) the possession of
the qualifications required by said Act (under Section 29) and (2) the lack of the disqualifications
mentioned therein (under Sections 121, 122, and 123). However, the transfer of ownership via the two
agreements dated July 7 and December 7, 1948 and the relinquishment of rights, being private contracts,
were binding only between petitioner and private respondent. The Public Land Act finds no relevance
because the disputed land was covered by said Act only after the issuance of the order of award in favor
of private respondent. Thus, the possession of any disqualification by private respondent under said Act
is immaterial to the private contracts between the parties thereto. (We are not, however, suggesting a
departure from the rule that laws are deemed written in contracts.) Consideration of said provisions of
the Act will further show their inapplicability to these contracts. Section 121 of the Act pertains to
acquisitions of public land by a corporation from a grantee, but petitioner never became a grantee of the
disputed land. On the other hand, private respondent itself was the direct grantee. Sections 122 and
123 disqualify corporations, which are not authorized by their charter, from acquiring public land; the
records do not show that private respondent was not so authorized under its charter.
Also, the determination by the Director of Lands and the Minister of Natural Resources of the
qualification of private respondent to become an awardee or grantee under the Act is persuasive on
Respondent Court. In Espinosa vs. Makalintal,[53] the Court ruled that, by law, the powers of the
Secretary of Agriculture and Natural Resources regarding the disposition of public lands -- including the
approval, rejection, and reinstatement of applications are of executive and administrative
nature. (Such powers, however, do not include the judicial power to decide controversies arising from
disagreements in civil or contractual relations between the litigants.) Consequently, the determination of
whether private respondent is qualified to become an awardee of public land under C.A. 141 by sales
application is included therein.
All told, the only disqualification that can be imputed to private respondent is the prohibition in the
1973 Constitution against the holding of alienable lands of the public domain by corporations. [54] However,
this Court earlier settled the matter, ruling that said constitutional prohibition had no retroactive effect
and could not prevail over a vested right to the land. In Ayog vs. Cusi, Jr.,[55] this Court declared:
We hold that the said constitutional prohibition has no retroactive application to the sales application of
Bian Development Co., Inc. because it had already acquired a vested right to the land applied for at the
time the 1973 Constitution took effect.
That vested right has to be respected. It could not be abrogated by the new Constitution. Section 2,
Article XIII of the 1935 Constitution allows private corporations to purchase public agricultural lands not

exceeding one thousand and twenty-four hectares. Petitioners prohibition action is barred by the
doctrine of vested rights in constitutional law.

Implementing the aforesaid Opinion No. 64 xxx, the then Secretary of Agriculture and Natural Resources
issued a memorandum, dated February 18, 1974, which pertinently reads as follows:

A right is vested when the right to enjoyment has become the property of some particular person or
persons as a present interest. (16 C.J.S. 1173). It is the privilege to enjoy property legally vested, to
enforce contracts, and enjoy the rights of property conferred by existing law (12 C.J. 955, Note 46, No.
6) or some right or interest in property which has become fixed and established and is no longer open to
doubt or controversy (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil. 498, 502).

In the implementation of the foregoing opinion, sales application of private individuals covering areas in
excess of 24 hectares and those of corporations, associations, or partnership which fall under any of the
following categories shall be given due course and issued patents, to wit:

The due process clause prohibits the annihilation of vested rights. A state may not impair vested rights
by legislative enactment, by the enactment or by the subsequent repeal of a municipal ordinance, or by a
change in the constitution of the State, except in a legitimate exercise of the police power (16 C.J.S.
1177-78).
It has been observed that, generally, the term vested right expresses the concept of present fixed
interest, which in right reason and natural justice should be protected against arbitrary State action, or an
innately just an imperative right which an enlightened free society, sensitive to inherent and irrefragable
individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania Greyhound Lines, Inc.
vs. Rosenthal, 192 Atl. 2nd 587).
Secretary of Justice Abad Santos in his 1973 opinion ruled that where the applicant, before the
Constitution took effect, had fully complied with all his obligations under the Public Land Act in order to
entitle him to a sales patent, there would seem to be no legal or equitable justification for refusing to
issue or release the sales patent (p. 254, Rollo).
In Opinion No. 140, series of 1974, he held that as soon as the applicant had fulfilled the construction or
cultivation requirements and has fully paid the purchase price, he should be deemed to have acquired by
purchase the particular tract of land and to him the area limitation in the new Constitution would not
apply.
In Opinion No. 185, series of 1976, Secretary Abad Santos held that where the cultivation requirements
were fulfilled before the new Constitution took effect but the full payment of the price was completed
after January 17, 1973, the applicant was, nevertheless, entitled to a sales patent (p. 256, Rollo).
Such a contemporaneous construction of the constitutional prohibition by a high executive official carries
great weight and should be accorded much respect. It is a correct interpretation of section 11 of Article
XIV.
In the instant case, it is incontestable that prior to the effectivity of the 1973 Constitution the right of the
corporation to purchase the land in question had become fixed and established and was no longer open to
doubt or controversy.
Its compliance with the requirements of the Public Land Law for the issuance of a patent had the effect of
segregating the said land from the public domain. The corporations right to obtain a patent for that land
is protected by law. It cannot be deprived of that right without due process (Director of Lands vs. CA,
123 Phil. 919).
The Minister of Natural Resources ruled, and we agree, that private respondent was similarly
qualified to become an awardee of the disputed land because its rights to it vested prior to the effectivity
of the 1973 Constitution:[56]
Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by
the new constitutional provision that no private corporation may hold alienable land of the public domain
except by lease.
It may be recalled that the Secretary of Justice in his Opinion No. 64, series of 1973, had declared, to wit:
On the other hand, with respect to sales application ready for issuance of sales patent, it is my opinion
that where the applicant had, before, the constitution took effect, fully complied with all his obligations
under the Public Land act in order to entitle him to sales patent, there would seem to be not legal or
equitable justification for refusing to issue or release the sales patent.

Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to
January 17, 1973,
a.

the land covered thereby was awarded;

b. cultivation requirements of law were complied with as shown by investigation reports submitted prior
to January 17, 1973;
c. land was surveyed and survey returns already submitted to the Director of Lands for verification and
approval; and
d.

purchase price was fully paid.

From the records, it is evident that the aforestated requisites have been complied with by appellee long
before January 17, 1973, the effectivity of the New Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the
cultivation requirements were complied with as per investigation report dated December 31, 1949, and
the land was surveyed under Pls-97.
The same finding was earlier made by the Director of Lands:[57]
It is further contended by Villaflor that Nasipit has no juridical personality to apply for the purchase of
public lands for agricultural purposes. The records clearly show, however, that since the execution of the
deed of relinquishment of August 16, 1950, in favor of Nasipit, Villaflor has always considered and
recognized Nasipit as having the juridical personality to acquire public lands for agricultural purposes. In
the deed of relinquishment xxx, it is stated:
6. That the Nasipit Lumber Co., Inc., a corporation duly organized in accordance with the laws of the
Philippines, x x x.
Even this Office had not failed to recognize the juridical personality of Nasipit to apply for the purchase of
public lands xxx when it awarded to it the land so relinquished by Villaflor (Order of Award dated August
17, 1950) and accepted its application therefor. At any rate, the question whether an applicant is
qualified to apply for the acquisition of public lands is a matter between the applicant and this Office to
decide and which a third party like Villaflor has no personality to question beyond merely calling the
attention of this Office thereto.
Needless to say, we also agree that the November 8, 1946 Lease Agreement between petitioner
and private respondent had been terminated by the agreements to sell and the relinquishment of
rights. By the time the verbal leases were allegedly made in 1951 and 1955, [58] the disputed land had
already been acquired and awarded to private respondent. In any event, petitioners cause of action on
these alleged lease agreements prescribed long before he filed Civil Case No. 2072-III, as correctly found
by the trial and appellate courts. [59] Thus, it is no longer important, in this case, to pass upon the issue of
whether or not amendments to a lease contract can be proven by parol evidence. The same holds true as
regards the issue of forum-shopping.
All in all, petitioner has not provided us sufficient reason to disturb the cogent findings of the
Director of Lands, the Minister of Natural Resources, the trial court and the Court of Appeals.
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
Narvasa, C.J., (Chairman), Romero, and Francisco, JJ., concur.
Melo, J., no part.

The plaintiffs claim under the second cause of action is hereby dismissed on the
ground of prescription.
SECOND DIVISION
Likewise, the defendants counterclaim is hereby dismissed for lack of merit.
[G.R. No. 115734. February 23, 2000]
"SO ORDERED."[2]
RUBEN LOYOLA, CANDELARIA LOYOLA, LORENZO LOYOLA, FLORA LOYOLA, NICANDRO
LOYOLA, ROSARIO LOYOLA, TERESITA LOYOLA and VICENTE LOYOLA,petitioners, vs. THE
HONORABLE COURT OF APPEALS, NIEVES, ROMANA, ROMUALDO, GUILLERMO, LUCIA,
PURIFICACION, ANGELES, ROBERTO, ESTRELLA, all surnamed ZARRAGA and THE HEIRS OF
JOSE ZARRAGA, namely AURORA, MARITA, JOSE, RONALDO, VICTOR, LAURIANO, and ARIEL,
all surnamed ZARRAGA, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the decision of the Court of Appeals in CA-G.R. No. CV 36090, promulgated on
August 31, 1993, reversing the judgment of the Regional Trial Court of Bian, Laguna, Branch 24, in Civil
Case No. B-2194. In said decision, the appellate court decreed:
"PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and a
new judgment rendered as follows:
1.

Dismissing the plaintiffs Complaint;

2.
Declaring the "Bilihang Tuluyan ng Kalahati (1/2) ng
Isang (1) Lagay na Lupa" dated August 24, 1980 (Exhibit 1) as
well as Transfer Certificate of Title No. T-116067 of the Registry
of Deeds for the Calamba Branch to be lawful, valid, and
effective.
"SO ORDERED."[1]
The RTC decision reversed by the Court of Appeals had disposed of the complaint as follows:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants as follows:
1.
Declaring the simulated deed of absolute sale purportedly executed by the late
Gaudencia Zarraga on August 24, 1980 as well as the issuance of the corresponding
certificate of title in favor of the defendants null and void from the beginning;
2.
Ordering the Register of Deeds of Laguna, Calamba Branch to cancel Transfer
Certificate of Title No. T-116087 issued in favor of the defendants and to issue
another one, if feasible, in favor of the plaintiffs and the defendants as co-owners and
legal heirs of the late Gaudencia Zarraga;
3.
Order(ing) the defendants to reconvey and deliver the possession of the
shares of the plaintiff on (sic) the subject property;
4.
Ordering the defendants to pay the amount of P20,000 as and for attorneys
fees and the costs of this suit.
5.
As there is no preponderance of evidence showing that the plaintiffs suffered
moral and exemplary damages, their claim for such damages is hereby dismissed.

We shall now examine the factual antecedents of this petition.

In dispute here is a parcel of land in Bian, Laguna, particularly described as follows:
"A PARCEL OF LAND (Lot 115-A-1) of the subdivision plan (LRC) Psd-32117), being a
portion of Lot 115-A, described on Plan Psd-55228, LRC (GLRO) Record No. 8374),
situated in the Poblacion, Municipality of Bian, Province of Laguna, Island of Luzon.
Bounded on the NE., points 3 to 4 by the Bian River; on the SE., points 4 to 1 by Lot
115-A-2 of the subd. Plan; on the SW., points 1 to 2 by the Road and on points 2 to 3
by Lot 115-B, Psd-55228 x x x containing an area of SEVEN HUNDRED FIFTY THREE
(753) SQ. METERS, more or less x x x." [3]
Originally owned in common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their
father, the parcel is covered by Transfer Certificate of Title (TCT) No. T-32007. Mariano predeceased his
sister who died single, without offspring on August 5, 1983, at the age of 97.
Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano. Victorina died
on October 18, 1989, while Civil Case No. B-2194 was pending with the trial court. Cecilia died on August
4, 1990, unmarried and childless. Victorina and Cecilia were substituted by petitioners as plaintiffs.
Private respondents, children of Mariano excepting those denominated as the "Heirs of Jose Zarraga," are
first cousins of petitioners. Respondents designated as the "Heirs of Jose Zarraga" are first cousins once
removed of the petitioners.
Private respondents allege that they are the lawful owners of Lot 115-A-1, the one-half share inherited by
their father, Mariano and the other half purchased from their deceased aunt, Gaudencia. Transfer
Certificate of Title No. 116067 was issued in their names covering Lot 115-A-1.
The records show that the property was earlier the subject of Civil Case No. B-1094 before the then Court
of First Instance of Laguna, Branch 1, entitled "Spouses Romualdo Zarraga, et al. v. Gaudencia Zarraga,
et al." Romualdo Zarraga, one of the private respondents now, was the plaintiff in Civil Case No. B-1094.
The defendants were his siblings: Nieves, Romana, Guillermo, Purificacion, Angeles, Roberto, Estrella, and
Jose, all surnamed Zarraga, as well as his aunt, the late Gaudencia. The trial court decided Civil Case No.
B-1094 in favor of the defendants. Gaudencia was adjudged owner of the one-half portion of Lot 115-A-1.
Romualdo elevated the decision to the Court of Appeals and later the Supreme Court. The petition,
docketed as G.R. No. 59529, was denied by this Court on March 17, 1982.
The present controversy began on August 24, 1980, nearly three years before the death of Gaudencia
while G.R. No. 59529 was still pending before this Court. On said date, Gaudencia allegedly sold to
private respondents her share in Lot 115-A-1 for P34,000.00. The sale was evidenced by a notarized
document denominated as "Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa." [4] Romualdo, the
petitioner in G.R. No. 59529, was among the vendees.
Meanwhile, the decision in Civil Case No. B-1094 became final. Private respondents filed a motion for
execution. On February 16, 1984, the sheriff executed the corresponding deed of reconveyance to
Gaudencia. On July 23, 1984, however, the Register of Deeds of Laguna, Calamba Branch, issued in favor
of private respondents, TCT No. T-116067, on the basis of the sale on August 24, 1980 by Gaudencia to
them.
On January 31, 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case No. B-2194, with the
RTC of Bian, Laguna, for the purpose of annulling the sale and the TCT. The trial court rendered
judgment in favor of complainants.

On appeal, the appellate court REVERSED the trial court. On September 15, 1993, herein petitioners (as
substitute parties for Victorina and Cecilia, the original plaintiffs) filed a motion for reconsideration, which
was denied on June 6, 1994.
Hence, the instant petition.
Petitioners submit the following issues for resolution by this Court:

Simulation is "the declaration of a fictitious will, deliberately made by agreement of the parties, in order
to produce, for the purposes of deception, the appearances of a juridical act which does not exist or is
different what that which was really executed." [11] Characteristic of simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical situation
of the parties. Perusal of the questioned deed will show that the sale of the property would convert the
co-owners to vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the
requisite of simulation that the apparent contract was not really meant to produce any legal effect. Also in
a simulated contract, the parties have no intention to be bound by the contract. But in this case, the
parties clearly intended to be bound by the contract of sale, an intention they did not deny.

1. WHETHER OR NOT THERE ARE STRONG AND COGENT REASON(S) TO DISTURB

THE FINDINGS AND CONCLUSIONS OF THE TRIAL COURT THAT THE CONTRACT
DENOMINATED AS DEED OF ABSOLUTE SALE IS SIMULATED AND THEREFORE NULL
AND VOID.

The requisites for simulation are: (a) an outward declaration of will different from the will of the parties;
(b) the false appearance must have been intended by mutual agreement; and (c) the purpose is to
deceive third persons. [12] None of these are present in the assailed transaction.

2. WHETHER THE ACTS OF PRIVATE RESPONDENTS IS (SIC) CONSISTENT WITH THE

ACTS OF VENDEES WHEN THEY DEFIED LOGIC AS FOUND BY THE TRIAL COURT...

Anent Romualdos lack of knowledge and participation in the sale, the rule is that contracts are binding
only upon the parties who execute them.[13] Romualdo had no knowledge of the sale. He was a stranger
and not a party to it. Article 1311 of the Civil Code[14] clearly covers this situation.

3. WHETHER THE ALLEGED VENDORS (SIC) GAUDENCIA ZARRAGA WHO WAS THEN
94 YEARS OLD, ALREADY WEAK AND WHO WAS UNDER THE CARE OF ONE OF THE
VENDEES PRIVATE RESPONDENT ROMANA ZARRAGA, SINGLE AND WITHOUT ANY
CHILD BUT HAS SISTERS AND OTHER NEPHEWS AND NIECES WILL SELL HER
PROPERTY THEN WORTH P188,250.00 IN 1980 FOR ONLY P34,000, AND WHETHER A
CONTRACT OF SALE OF REALTY IS PERFECTED, VALID AND GENUINE WHEN ONE OF
THE VENDEES ROMUALDO ZARRAGA DOES NOT KNOW OF THE TRANSACTION, THE
OTHER VENDEE JOSE ZARRAGA WAS ALREADY LONG DEAD BEFORE THE EXECUTION
OF THE BILIHAN IN QUESTION AND YET WAS INCLUDED AS ONE OF THE VENDEES,
LIKEWISE, OTHER SUPPOSED VENDEES NIEVES ZARRAGA AND GUILLERMO
ZARRAGA ASIDE FROM ROMUALDO WERE NOT PRESENT WHEN THE TRANSACTION
TOOK PLACE.
4. THE LEGAL MEANING AND IMPORT OF SIMULATED CONTRACT OF SALE WHICH
INVALIDATES A TRANSACTION IS ALSO A LEGAL ISSUE TO BE THRESHED OUT IN
THIS CASE AT BAR.
5. WHETHER PETITIONERS HAVE THE LEGAL PERSONALITY TO SUE.[5]
Notwithstanding petitioners formulation of the issues, we find the only issue for resolution in this case is
whether or not the deed of absolute sale is valid.
Petitioners vigorously assail the validity of the execution of the deed of absolute sale suggesting that
since the notary public who prepared and acknowledged the questioned Bilihan did not personally know
Gaudencia, the execution of the deed was suspect. However, the notary public testified that he
interviewed Gaudencia prior to preparing the deed of sale. [6] Petitioners failed to rebut this testimony. The
rule is that a notarized document carries the evidentiary weight conferred upon it with respect to its due
execution,[7] and documents acknowledged before a notary public have in their favor the presumption of
regularity.[8] By their failure to overcome this presumption, with clear and convincing evidence, petitioners
are estopped from questioning the regularity of the execution of the deed. [9]
Petitioners also charge that one of the vendees, Jose Zarraga, was already dead at the time of the sale.
However, the records reveal that Jose died on July 29, 1981. [10] He was still alive on August 24, 1980,
when the sale took place.
Petitioners then contend that three of the vendees included in the deed, namely, Romualdo, Guillermo,
and Nieves, were not aware of the transaction, which casts doubt on the validity of the execution of the
deed. Curiously, Romualdo who questioned Gaudencias ownership in Civil Case No. B-1094, was one of
those included as buyer in the deed of sale. Romana, however, testified that Romualdo really had no
knowledge of the transaction and he was included as a buyer of the land only because he was a brother.
Petitioners suggest that all the aforecited circumstances lead to the conclusion that the deed of sale was
simulated.

Petitioners fault the Court of Appeals for not considering that at the time of the sale in 1980, Gaudencia
was already 94 years old; that she was already weak; that she was living with private respondent
Romana; and was dependent upon the latter for her daily needs, such that under these circumstances,
fraud or undue influence was exercised by Romana to obtain Gaudencias consent to the sale.
The rule on fraud is that it is never presumed, but must be both alleged and proved. [15] For a contract to
be annulled on the ground of fraud, it must be shown that the vendor never gave consent to its
execution. If a competent person has assented to a contract freely and fairly, said person is bound. There
also is a disputable presumption, that private transactions have been fair and regular.[16] Applied to
contracts, the presumption is in favor of validity and regularity. In this case, the allegations of fraud was
unsupported, and the presumption stands that the contract Gaudencia entered into was fair and regular.
Petitioners also claim that since Gaudencia was old and senile, she was incapable of independent and
clear judgment. However, a person is not incapacitated to contract merely because of advanced years or
by reason of physical infirmities. [17] Only when such age or infirmities impair his mental faculties to such
extent as to prevent him from properly, intelligently, and fairly protecting his property rights, [18] is he
considered incapacitated. Petitioners show no proof that Gaudencia had lost control of her mental
faculties at the time of the sale. The notary public who interviewed her, testified that when he talked to
Gaudencia before preparing the deed of sale, she answered correctly and he was convinced that
Gaudencia was mentally fit and knew what she was doing.
On whether or not Gaudencia was under the undue influence of the private respondents, Article 1337 of
the Civil Code states:
"There is undue influence when a person takes improper advantage of his power over
the will of another, depriving the latter of a reasonable freedom of choice. The
following circumstances shall be considered: confidential, family, spiritual, and other
relations between the parties, or the fact that the person alleged to have been unduly
influenced was suffering from mental weakness, or was ignorant or in financial
distress."
Undue influence depends upon the circumstances of each case [19] and not on bare academic rules. [20] For
undue influence to be established to justify the cancellation of an instrument, three elements must be
present: (a) a person who can be influenced; (b) the fact that improper influence was exerted; (c)
submission to the overwhelming effect of such unlawful conduct. [21] In the absence of a confidential or
fiduciary relationship between the parties, the law does not presume that one person exercised undue
influence upon the other.[22] A confidential or fiduciary relationship may include any relation between
persons, which allows one to dominate the other, with the opportunity to use that superiority to the
others disadvantage.[23] Included are those of attorney and client,[24] physician and patient,[25] nurse and
invalid,[26] parent and child,[27] guardian and ward,[28] member of a church or sect and spiritual adviser,
[29]
a person and his confidential adviser,[30] or whenever a confidential relationship exists as a fact. [31] That
Gaudencia looked after Romana in her old age is not sufficient to show that the relationship was
confidential. To prove a confidential relationship from which undue influence may arise, the relationship
must reflect a dominant, overmastering influence which controls over the dependent person. [32] In the
present case, petitioners failed to show that Romana used her aunts reliance upon her to take advantage

or dominate her and dictate that she sell her land. Undue influence is not to be inferred from age,
sickness, or debility of body, if sufficient intelligence remains. [33] Petitioners never rebutted the testimony
of the notary public that he observed Gaudencia still alert and sharp.
In Baez v. Court of Appeals, 59 SCRA 15 (1974), we had occasion to say that solicitation, importunity,
argument, and persuasion are not undue influence. A contract is not to be set aside merely because one
party used these means to obtain the consent of the other. We have likewise held in Martinez v.
Hongkong and Shanghai Bank, 15 Phil. 252 (1910), that influence obtained by persuasion, argument, or
by appeal to the affections is not prohibited either in law or morals, and is not obnoxious even in courts of
equity. Absent any proof that Romana exerted undue influence, the presumption is that she did not.
Petitioners also seek the annulment of the sale due to gross inadequacy of price. They contend that
Gaudencia, in her right senses, would never have sold her property worth P188,250.00 in 1980 for only
P34,000.00. The records show that much of petitioners evidence was meant to prove the market value of
the lot at the time of the sale. [34] A review of the records will show that lesion was not an issue raised
before the lower courts. An issue which was neither averred in the complaint nor raised in the court
below, cannot be raised for the first time on appeal. To do so would be offensive to the basic rules of fair
play.
Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for being absolutely
simulated or for inadequacy of the price. These two grounds are irreconcilable. If there exists an actual
consideration for transfer evidenced by the alleged act of sale, no matter how inadequate it be, the
transaction could not be a "simulated sale." [35] No reversible error was thus committed by the Court of
Appeals in refusing to annul the questioned sale for alleged inadequacy of the price.
WHEREFORE, the petition is DENIED, and the assailed decision of the Court of Appeals AFFIRMED. Costs
against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.
Buena, J., on leave.
FIRST DIVISION

[G.R. No. 120465. September 9, 1999]

WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON. ROBERT BALAO and
NATIONAL HOUSING AUTHORITY, respondents.
DECISION
KAPUNAN, J.:
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the
owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba,
Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a
housing project.
On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of said
lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties
executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of land,
however, only five were paid for by the NHA because of the report [1] it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the remaining
area is located at an active landslide area and therefore, not suitable for development into a housing
project.
On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three
parcels of land. The NHA, through Resolution No. 2394, subsequently offered the amount of P1.225
million to the landowners asdaos perjuicios.

On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint
for Damages against NHA and its General Manager Robert Balao.
After trial, the RTC rendered a decision declaring the cancellation of the contract to be
justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the
same amount initially offered by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered
a new one dismissing the complaint. It held that since there was sufficient justifiable basis in cancelling
the sale, it saw no reason for the award of damages. The Court of Appeals also noted that petitioners
were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial
court.
xxx In paragraph 4 of the complaint, plaintiffs alleged themselves to be sellers agents for several
owners of the 8 lots subject matter of the case. Obviously, William Uy and Rodel Roxas in filing this case
acted as attorneys-in-fact of the lot owners who are the real parties in interest but who were omitted to
be pleaded as party-plaintiffs in the case. This omission is fatal. Where the action is brought by an
attorney-in-fact of a land owner in his name, (as in our present action) and not in the name of his
principal, the action was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de
Leon, 105 Phil. 1175) because the rule is that every action must be prosecuted in the name of the real
parties-in-interest (Section 2, Rule 3, Rules of Court).
When plaintiffs Uy and Roxas sought payment of damages in their favor in view of the partial rescission of
Resolution No. 1632 and the Deed of Absolute Sale covering TCT Nos. 10998, 10999 and 11292 (Prayer
complaint, page 5, RTC records), it becomes obviously indispensable that the lot owners be included,
mentioned and named as party-plaintiffs, being the real party-in-interest. Uy and Roxas, as attorneys-infact or apoderados, cannot by themselves lawfully commence this action, more so, when the supposed
special power of attorney, in their favor, was never presented as an evidence in this case. Besides, even
if herein plaintiffs Uy and Roxas were authorized by the lot owners to commence this action, the same
must still be filed in the name of the pricipal, (Filipino Industrial Corporation vs. San Diego, 23 SCRA 706
[1968]). As such indispensable party, their joinder in the action is mandatory and the complaint may be
dismissed if not so impleaded (NDC vs. CA, 211 SCRA 422 [1992]).[2]
Their motion for reconsideration having been denied, petitioners seek relief from this Court
contending that:
I. COMPLAINT FINDING THE RESPONDENT CA ERRED IN DECLARING THAT RESPONDENT NHA HAD ANY
LEGAL BASIS FOR RESCINDING THE SALE INVOLVING THE LAST THREE (3) PARCELS COVERED BY NHA
RESOLUTION NO. 1632.
II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HAD LEGAL BASIS TO RESCIND THE SUBJECT
SALE, THE RESPONDENT CA NONETHELESS ERRED IN DENYING HEREIN PETITIONERS CLAIM TO
DAMAGES, CONTRARY TO THE PROVISIONS OF ART. 1191 OF THE CIVIL CODE.
III.
THE RESPONDENT CA ERRED IN DISMISSING THE SUBJECT COMPLAINT FINDING THAT THE
PETITIONERS FAILED TO JOIN AS INDISPENSABLE PARTY PLAINTIFF THE SELLING LOT-OWNERS. [3]
We first resolve the issue raised in the third assignment of error.
Petitioners claim that they lodged the complaint not in behalf of their principles but in their own
name as agents directly damaged by the termination of the contract. The damages prayed for were
intended not for the benefit of their principals but to indemnify petitioners for the losses they themselves
allegedly incurred as a result of such termination. These damages consist mainly of unearned income
and advances.[4] Petitioners, thus, attempt to distinguish the case at bar from those involving agents
or apoderados instituting actions in their own name but in behalf of their principals.[5] Petitioners in this
case purportedly brought the action for damages in their own name and in their own behalf.
We find this contention unmeritorious.
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended
in the name of the real party-in-interest. The real party-in-interest is the party who stands to be
benefited or injured by the judgment or the party entitled to the avails of the suit. Interest, within the
meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as
distinguished from mere interest in the question involved, or a mere incidental interest. [6] Cases
construing the real party-in-interest provision can be more easily understood if it is borne in mind that the

true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in
the name of the party who, by the substantive law, has the right sought to be enforced. [7]
Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the
negative.
The applicable substantive law in this case is Article 1311 of the Civil Code, which states:
Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights
and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by
provision of law. x x x.
If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person. (Underscoring supplied.)
Petitioners are not parties to the contract of sale between their principals and NHA. They are
mere agents of the owners of the land subject of the sale. As agents, they only render some service or
do something in representationor on behalf of their principals. [8] The rendering of such service did not
make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be
violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or
defendant, in an action upon that contract must, generally, either be parties to said contract. [9]
Neither has there been any allegation, much less proof, that petitioners are the heirs of their
principals.
Are petitioners assignees to the rights under the contracts of sale? In McMicking vs. Banco
Espaol-Filipino,[10] we held that the rule requiring every action to be prosecuted in the name of the real
party-in-interest
x x x recognizes the assignments of rights of action and also recognizes that when one has a right of
action assigned to him he is then the real party in interest and may maintain an action upon such claim or
right. The purpose of [this rule] is to require the plaintiff to be the real party in interest, or, in other
words, he must be the person to whom the proceeds of the action shall belong, and to prevent actions by
persons who have no interest in the result of the same. xxx
Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal,
as an assignee of such contract. We find the following declaration in Section 372 (1) of the Restatement
of the Law on Agency (Second): [11]
Section 372. Agent as Owner of Contract Right

Petitioners, however, have not shown that they are assignees of their principals to the subject
contracts. While they alleged that they made advances and that they suffered loss of commissions, they
have not established any agreement granting them the right to receive payment and out of the proceeds
to reimburse [themselves] for advances and commissions before turning the balance over to the
principal[s].
Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under
the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds
of Absolute Sale clearly and deliberately conferring a favor to any third person.
That petitioners did not obtain their commissions or recoup their advances because of the nonperformance of the contract did not entitle them to file the action below against respondent NHA. Section
372 (2) of the Restatement of the Law on Agency (Second) states:
(2) An agent does not have such an interest in a contract as to entitle him to maintain an action at law
upon it in his own name merely because he is entilted to a portion of the proceeds as compensation for
making it or because he is liable for its breach.
The following Comment on the above subsection is illuminating:
The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance
or nonperformance of the contract by the principal or by the other party thereto does not entitle him to
maintain an action on his own behalf against the other party for its breach. An agent entitled to receive a
commission from his principal upon the performance of a contract which he has made on his principals
account does not, from this fact alone, have any claim against the other party for breach of the contract,
either in an action on the contract or otherwise. An agent who is not a promisee cannot maintain an
action at law against a purchaser merely because he is entitled to have his compensation or advances
paid out of the purchase price before payment to the principal. x x x.
Thus, in Hopkins vs. Ives,[12] the Supreme Court of Arkansas, citing Section 372 (2) above, denied
the claim of a real estate broker to recover his alleged commission against the purchaser in an agreement
to purchase property.
In Goduco vs. Court of Appeals,[13] this Court held that:
x x x granting that appellant had the authority to sell the property, the same did not make the buyer
liable for the commission she claimed. At most, the owner of the property and the one who promised to
give her a commission should be the one liable to pay the same and to whom the claim should have been
directed. xxx
As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under
the contracts of sale, they do not, under substantive law, possess the right they seek to
enforce. Therefore, they are not the real parties-in-interest in this case.

(1) Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes
on behalf of his principal can, although not a promisee, maintain such action thereon as might a
transferee having a similar interest.

Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless
since the same would not bind the real parties-in-interest.[14]

The Comment on subsection (1) states:

Nevertheless, to forestall further litigation on the substantive aspects of this case, we shall proceed
to rule on the merits.[15]

a. Agent a transferee. One who has made a contract on behalf of another may become an assignee of
the contract and bring suit against the other party to it, as any other transferee. The customs of business
or the course of conduct between the principal and the agent may indicate that an agent who ordinarily
has merely a security interest is a transferee of the principals rights under the contract and as such is
permitted to bring suit. If the agent has settled with his principal with the understanding that he is to
collect the claim against the obligor by way of reimbursing himself for his advances and commissions, the
agent is in the position of an assignee who is the beneficial owner of the chose in action. He has an
irrevocable power to sue in his principals name. x x x. And, under the statutes which permit the real
party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by
a settlement between the principal and the obligor if the latter has notice of the agents interest. x x
x. Even though the agent has not settled with his principal, he may, by agreement with the principal,
have a right to receive payment and out of the proceeds to reimburse himself for advances and
commissions before turning the balance over to the principal. In such a case, although there is no formal
assignment, the agent is in the position of a transferee of the whole claim for security; he has an
irrevocable power to sue in his principals name and, under statutes which permit the real party in
interest to sue, he can maintain an action in his own name.

Petitioners submit that respondent NHA had no legal basis to rescind the sale of the subject three
parcels of land. The existence of such legal basis, notwithstanding, petitioners argue that they are still
entitled to an award of damages.
Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under
Article 1191 of the Civil Code. The right of rescission or, more accurately, resolution, of a party to an
obligation under Article 1191 is predicated on a breach of faith by the other party that violates the
reciprocity between them.[16] The power to rescind, therefore, is given to the injured party.[17] Article 1191
states:
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The 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.

In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the
other parties to the contract, the vendors, did not commit any breach, much less a substantial breach,
[18]
of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation
that they fulfilled. The NHA did not suffer any injury by the performance thereof.
The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was
based on the negation of the cause arising from the realization that the lands, which were the object of
the sale, were not suitable for housing.
Cause is the essential reason which moves the contracting parties to enter into it. [19] In other
words, the cause is the immediate, direct and proximate reason which justifies the creation of an
obligation through the will of the contracting parties. [20] Cause, which is the essential reason for the
contract, should be distinguished from motive, which is the particular reason of a contracting party which
does not affect the other party.[21]
For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor
(petitioners principals) in entering into the contract is to obtain the price. For the vendee, NHA, it is the
acquisition of the land.[22]The motive of the NHA, on the other hand, is to use said lands for housing. This
is apparent from the portion of the Deeds of Absolute Sale [23] stating:
WHEREAS, under the Executive Order No. 90 dated December 17, 1986, the VENDEE is mandated to
focus and concentrate its efforts and resources in providing housing assistance to the lowest thirty
percent (30%) of urban income earners, thru slum upgrading and development of sites and services
projects;

In Tadiangan, Tuba, the housing site is situated in an area of moderate topography. There [are] more
areas of less sloping ground apparently habitable. The site is underlain by x x x thick slide deposits (445m) consisting of huge conglomerate boulders (see Photo No. 2) mix[ed] with silty clay
materials. These clay particles when saturated have some swelling characteristics which is dangerous for
any civil structures especially mass housing development.[25]
Petitioners content that the report was merely preliminary, and not conclusive, as indicated in its
title:
MEMORANDUM
TO:

EDWIN G. DOMINGO
Chief, Lands Geology Division

FROM:

ARISTOTLE A. RILLON
Geologist II

SUBJECT:

Preliminary Assessment of Tadiangan Housing Project in Tuba, Benguet[26]

Thus, page 2 of the report states in part:

WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by Letter of Instruction No. 630,
prescribed slum improvement and upgrading, as well as the development of sites and services as the
principal housing strategy for dealing with slum, squatter and other blighted communities;
xxx
WHEREAS, the VENDEE, in pursuit of and in compliance with the above-stated purposes offers to buy and
the VENDORS, in a gesture of their willing to cooperate with the above policy and commitments, agree to
sell the aforesaid property together with all the existing improvements there or belonging to the
VENDORS;
NOW, THEREFORE, for and in consideration of the foregoing premises and the terms and conditions
hereinbelow stipulated, the VENDORS hereby, sell, transfer, cede and convey unto the VENDEE, its
assigns, or successors-in-interest, a parcel of land located at Bo. Tadiangan, Tuba, Benguet containing a
total area of FIFTY SIX THOUSAND EIGHT HUNDRED NINETEEN (56,819) SQUARE METERS, more or less
x x x.
Ordinarily, a partys motives for entering into the contract do not affect the contract. However,
when the motive predetermines the cause, the motive may be regarded as the cause. In Liguez vs.
Court of Appeals,[24] this Court, speaking through Justice J.B.L. Reyes, held:
xxx It is well to note, however, that Manresa himself (Vol. 8, pp. 641-642) while maintaining the
distinction and upholding the inoperativeness of the motives of the parties to determine the validity of the
contract, expressly excepts from the rule those contracts that are conditioned upon the attainment of the
motives of either party.

xxx
Actually there is a need to conduct further geottechnical [sic] studies in the NHA property. Standard
Penetration Test (SPT) must be carried out to give an estimate of the degree of compaction (the relative
density) of the slide deposit and also the bearing capacity of the soil materials. Another thing to consider
is the vulnerability of the area to landslides and other mass movements due to thick soil
cover. Preventive physical mitigation methods such as surface and subsurface drainage and regrading of
the slope must be done in the area.[27]
We read the quoted portion, however, to mean only that further tests are required to determine the
degree of compaction, the bearing capacity of the soil materials, and vulnerability of the area to
landslides, since the tests already conducted were inadequate to ascertain such geological attributes. It
is only in this sense that the assessment was preliminary.
Accordingly, we hold that the NHA was justified in cancelling the contract. The realization of the
mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the
contract inexistent.[28]Article 1318 of the Civil Code states that:
Art. 1318. 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. (Underscoring supplied.)

The same view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and December
4, 1946, holding that the motive may be regarded as causa when it predetermines the purpose of the
contract.
In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the
contract were the lands not suitable for housing. In other words, the quality of the land was an implied
condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the
cause for its being a party to the sale.
Were the lands indeed unsuitable for the housing as NHA claimed?
We deem the findings contained in the report of the Land Geosciences Bureau dated 15 July 1991
sufficient basis for the cancellation of the sale, thus:

Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale,
they would not be entitled to any award of damages.
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.
Davide, C.J., (Chairman), on leave.
Puno, Pardo, and Ynares-Santiago, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

Judge Amado Santiago of the Court of First Instance of Pangasinan located in the municipality of Urdaneta
tried the two cases jointly. Said court rendered judgment on January 18, 1961, as follows:
WHEREFORE, judgment is hereby rendered as follows, to wit:

EN BANC
(a) dismissing the complaint in Civil Case No. 11991;
G.R. No. L-21489 and L-21628

May 19, 1966

MIGUEL MAPALO, ET AL., petitioners,

vs.
MAXIMO MAPALO, ET AL., respondents.
Pedro P. Tuason for petitioners.
Primicias and Del Castillo for respondents.
BENGZON, J.P., J.:
The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners, with
Torrens title certificate O.C.T. No. 46503, of a 1,635-square-meter residential land in Manaoag,
Pangasinan. Said spouses-owners, out of love and affection for Maximo Mapalo a brother of Miguel who
was about to get married decided to donate the eastern half of the land to him. O.C.T. No. 46503 was
delivered. As a result, however, they were deceived into signing, on October 15, 1936, a deed of absolute
sale over the entire land in his favor. Their signatures thereto were procured by fraud, that is, they were
made to believe by Maximo Mapalo and by the attorney who acted as notary public who "translated" the
document, that the same was a deed of donation in Maximo's favor covering one-half (the eastern half) of
their land. Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the
aforesaid spouses did not receive anything of value for the land. The attorney's misbehaviour was the
subject of an investigation but its result does not appear on record. However we took note of the fact that
during the hearing of these cases said notary public was present but did not take the witness stand to
rebut the plaintiffs' testimony supporting the allegation of fraud in the preparation of the document.

(b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1, defendants in Case No. U133 as a donation only over the eastern half portion of the above-described land, and as null
and void with respect to the western half portion thereof;
(c) declaring as null and void and without legal force and effect Transfer Certificate of Title No.
12829 issued in favor of Maximo Mapalo as regards the western half portion of the land covered
therein;
(d) declaring as null and void Transfer Certificate of Title No. 11350 in the names of the
Narcisos insofar as the western half portion of the land covered therein is concerned;
(e) ordering the spouses Mapalo and Quiba and the Narcisos to have the above-described land
be subdivided by a competent land surveyor and that the expenses incident thereto be borne
out by said parties pro rata;
(f) ordering the Register of Deeds of Pangasinan to issue in lieu of Transfer Certificate of Title
No. 11350 two new titles upon completion of the subdivision plan, one in favor of the spouses
Miguel Mapalo and Candida Quiba covering the western half portion and another for the
Narcisos covering the eastern half portion of the said land, upon payment of the legal fees;
meanwhile the right of the spouses Mapalo and Quiba is hereby ordered to be annotated on the
back of Transfer Certificate of Title No. 11350; and
(g) sentencing Maximo Mapalo and the Narcisos to pay the costs.

Following the execution of the afore-stated document, the spouses Miguel Mapalo and Candida Quiba
immediately built a fence of permanent structure in the middle of their land segregating the eastern
portion from its western portion. Said fence still exists. The spouses have always been in continued
possession over the western half of the land up to the present.
Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938, registered the deed of sale in his
favor and obtained in his name Transfer Certificate of Title No. 12829 over the entire land. Thirteen years
later on October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo, Petronila Pacifico
and Miguel all surnamed Narciso. The sale to the Narcisos was in turn registered on November 5, 1951
and Transfer Certificate of Title No. 11350 was issued for the whole land in their names.
The Narcisos took possession only of the eastern portion of the land in 1951, after the sale in their favor
was made. On February 7, 1952 they filed suit in the Court of First Instance of Pangasinan (Civil Case No.
1191) to be declared owners of the entire land, for possession of its western portion; for damages; and
for rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo
Guieb who had a house on the western part of the land with the consent of the spouses Mapalo and
Quiba.
The Mapalo spouses filed their answer with a counterclaim on March 17, 1965, seeking cancellation of the
Transfer Certificate of Title of the Narcisos as to the western half of the land, on the grounds that their
(Mapalo spouses) signatures to the deed of sale of 1936 was procured by fraud and that the Narcisos
were buyers in bad faith. They asked for reconveyance to them of the western portion of the land and
issuance of a Transfer Certificate of Title in their names as to said portion.
In addition, the Mapalo spouses filed on December 16, 1957 their own complaint in the Court of First
Instance of Pangasinan (Civil Case No. U-133) against the aforestated Narcisos and Maximo Mapalo. They
asked that the deeds of sale of 1936 and of 1951 over the land in question be declared null and void as to
the western half of said land.

IT IS SO ORDERED.
The Narcisos appealed to the Court of Appeals. In its decision on May 28, 1963, the Court of Appeals
reversed the judgment of the Court of First Instance, solely on the ground that the consent of the Mapalo
spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab
initio, and, therefore, the action to annul the same, within four years from notice of the fraud, had long
prescribed. It reckoned said notice of the fraud from the date of registration of the sale on March 15,
1938. The Court of First Instance and the Court of Appeals are therefore unanimous that the spouses
Mapalo and Quiba were definitely the victims of fraud. It was only on prescription that they lost in the
Court of Appeals.
From said decision of the Court of Appeals, the Mapalo spouses appealed to this Court.
And here appellants press the contention that the document dated October 15, 1936, purporting to sell
the entire land in favor of Maximo Mapalo, is void, not merely voidable, as to the western portion of the
land for being absolutely simulated or fictitious.
Starting with fundamentals, under the Civil Code, either the old or the new, for a contract to exist at all,
three essential requisites must concur: (1) consent, (2) object, and (3) cause or consideration. 1 The Court
of Appeals is right in that the element of consent is present as to the deed of sale of October 15, 1936.
For consent was admittedly given, albeit obtained by fraud. Accordingly, said consent, although defective,
did exist. In such case, the defect in the consent would provide a ground for annulment of a voidable
contract, not a reason for nullity ab initio.
The parties are agreed that the second element of object is likewise present in the deed of October 15,
1936, namely, the parcel of land subject matter of the same.

Not so, however, as to the third element of cause or consideration. And on this point the decision of the
Court of Appeals is silent.
As regards the eastern portion of the land, the Mapalo spouses are not claiming the same, it being their
stand that they have donated and freely given said half of their land to Maximo Mapalo. And since they
did not appeal from the decision of the trial court finding that there was a valid and effective donation of
the eastern portion of their land in favor of Maximo Mapalo, the same pronouncement has become final as
to them, rendering it no longer proper herein to examine the existence, validity efficacy of said donation
as to said eastern portion.1wph1.t
Now, as to the western portion, however, the fact not disputed herein is that no donation by the Mapalo
spouses obtained as to said portion. Accordingly, we start with the fact that liberality as a cause or
consideration does not exist as regards the western portion of the land in relation to the deed of 1936;
that there was no donation with respect to the same.
It is reduced, then, to the question whether there was an onerous conveyance of ownership, that is, a
sale, by virtue of said deed of October 15, 1936, with respect to said western portion. Specifically, was
there a cause or consideration to support the existence of a contrary of sale?

posible validez del negocio disimulado que contiene, en tanto este ultimo sea licito y reuna no
solo los requisitos generales, sino tambien los que corresponden a su naturaleza especial,
doctrina, en obligada aplicacion de los preceptos de nuestra Ley civil, especialmente en su art.
1.276, que, al establecer el principio de nulidad de los contratos en los que se hace expresion
de una causa falsa, deja a salvo el caso de que esten fundados en otra verdadera y licita .
(Manresa, Codigo Civil, Tomo VIII, Vol. II pp. 357-358)
Sanchez Roman says:
Ya hemos dicho que la intervencion de causa en los contratos es necesaria, y que sin ellos son
nulos; solo se concibe que un hombre perturbado en su razon pueda contratar sin causa. ...
Por la misma razon de la necesidad de la intervencion de causa en el contrato, es preciso que
esta seaverdadera y no supuesta, aparente o figurada. Que la falsedad de la causa vicia el
consentimiento y anula el contrato, es, no solo doctrina indudable de Derecho Cientifico sino
tambien de antiguo Derecho de Castilla, que en multitud de leyes asi lo declararon. (Sanchez
Roman, Derecho Civil, Tomo IV, p. 206.).
In a clearer exposition of the above distinction, Castan states:

The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or
consideration produce no effect whatsoever.2 Nonetheless, under the Old Civil Code, the statement of a
false consideration renders the contract voidable, unless it is proven that it is supported by
another real and licit consideration.3 And it is further provided by the Old Civil Code that the action for
annulment of a contract on the ground of falsity of consideration shall last four years, the term to run
from the date of the consummation of the contract. 4
Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should be asked whether
its case is one wherein there is no consideration, or one with a statement of a false consideration. If the
former, it is void and inexistent; if the latter, only voidable, under the Old Civil Code. As observed earlier,
the deed of sale of 1936 stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact,
however, said consideration was totally absent. The problem, therefore, is whether a deed which states a
consideration that in fact did not exist, is a contract without consideration, and therefore void ab initio, or
a contract with a false consideration, and therefore, at least under the Old Civil Code, voidable.
According to Manresa, what is meant by a contract that states a false consideration is one that has in fact
a real consideration but the same is not the one stated in the document. Thus he says:
En primer lugar, nor interesa recordar la diferencia entre simulacion y el contrato con proposito
fraudulento. Este aunque ilicito es real; mas el primero es falso en realidad, aunque se le
presente como verdadero. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 354.)
And citing a decision of the Supreme Court of Spain on the matter, Manresa further clarifies the difference
of false cause and no cause, thus:
Insiste en el distingo con mas detenida descripcion la sentencia de 25 de mayo de 1944, en la
que se argumenta:
Si bien es elemento fundamental de todo negocio, la declaracion de voluntad substracto de una
voluntad efectiva, y la existencia de una causa que leconfiera significado juridico sealando la
finalidad que con este se persigue, no ha de deducirse de esta doctrina, fundamentalmente
recogida en el articulo 1.261 y concordantes del Codigo civil, que cualquier falta de adecuacion
entre cualquier incongruencia entre la causa expresada y la verdadera, y, en general, entre la
estructuracion y la finalidad economica; hayan de producir la ineficacia del negocio, pues por el
contrario, puede este ser valido y producir sus efectos tanto en el caso de la mera disonancia
entre el medio juridico adoptado y el fin practico perseguido, por utilizacion de una via oblicua o
combinacion de formas juridicas entrelazadas que permita la obtencion de un resultado no
previsto en los cuadros de la ley negocios indirectos y negocios fiduciarlos, validos cuando no
envuelven fraude de ley, como en el caso de la verdadera disconformidad entre la apariencia
del acto y su real contenido, preparada deliberadamente por las partes negocio simulado ,
ya que, cuando esta divergencia implica no una ausencia total de voluntad y de acto real, sino
mera ocultacion de un negocio verdadero bajo la falsa apariencia de un negocio
fingido "sirulacion relativa", la ineficacia de la forma externa simulada, no es obstaculo para la

2.. La causa ha de ser verdadera. La causa falsa puede ser erronea o simulada. Es erronea
como dice Giorgi, la causa que tiene por base la credulidad en un hecho no existente; y
simulada la que tiene lugar cuando se hace aparecer artificiosamente una distinta de la
verdadera. La erronea produce siempre la inexistencia del contrato; la simulada no siempre
produce este efecto, porque puede suceder que la causa oculta, pero verdadera, baste para
sostener el contrato. De acuerdo con esta doctrina, dice el art. 1.276 de nuestro Codigo que "la
expresion de una causa falsa en los contratos dara lugar a la nulidad, si no se probase que
estaban fundados en otra verdadera y licita". (Castan Derecho Civil Espaol, Tomo II, pp. 618619)
From the foregoing it can be seen that where, as in this case, there was in fact no consideration, the
statement of one in the deed will not suffice to bring it under the rule of Article 1276 of the Old Civil Code
as stating a false consideration. Returning to Manresa:
Figurando en nuestro Derecho positivo la causa, como un elemento esential del contrato, es
consecuencia ineludible, se reputar simulada la entrega del precio en la compraventa de autos,
el que haya que declararla nula por inexistente haciendose aplicacion indebida de art. 1.276 por
el Tribunal sentenciador al cohonestar la falta de precio admitiendo se pueda tratar de una
donacion, ya que la recta aplicacion del citado precepto exige que los negocios simulados, o sea
con causa falsa, se justifique la verdadera y licita en que se funda el acto que las partes han
querido ocultar y el cumplimiento de las formalidades impuestas por la Ley y, cual dice la
sentencia de 3 de marzo de 1932, esta rigurosa doctrina ha de ser especialmente impuesta en
la donaciones puras y simples; de los que deduce que la sentencia recurrida al no decretar la
nulidad instada por falta de causa, incide en la infraccion de los articulos 1.261, 1.274, 1.275 y
1.276 del Codigo Civil. (Sentencia de 22 de febrero de 1940). (Manresa, Codigo Civil, Tomo
VIII, Vol. II, p. 356)
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is squarely
applicable herein. In that case we ruled that a contract of purchase and sale is null and void and produces
no effect whatsoever where the same is without cause or consideration in that the purchase price which
appears thereon as paid has in fact never been paid by the purchaser to the vendor.
Needless to add, the inexistence of a contract is permanent and incurable and cannot be the subject of
prescription. In the words of Castan: "La inexistencia es perpetua e insubsanable no pudiendo ser objecto
de confirmacion ni prescripcion (Op. cit., p. 644.) In Eugenio v. Perdido, 97 Phil. 41, 42-43, involving a
sale dated 1932, this Court, speaking through Justice Cesar Bengzon, now Chief Justice, stated:
Under the existing classification, such contract would be "inexisting" and "the action or defense
for declaration" of such inexistence "does not prescribe". (Art. 1410, New Civil Code). While it is
true that this is a new provision of the New Civil Code, it is nevertheless a principle recognized
since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of time cannot give efficacy to contracts
that are null and void".

Anent the matter of whether the Narcisos were purchasers in good faith, the trial court in its decision
resolved this issue, thus:
With regard to the second issue, the Narcisos contend that they are the owners of the abovedescribed property by virtue of the deed of sale (Exh. B, plaintiffs in 11991 and Exh. 2,
defendants in U-133) executed in their favor by Maximo Mapalo, and further claim that they are
purchasers for value and in good faith. This court, however, cannot also give weight and credit
on this theory of the Narcisos on the following reasons: Firstly, it has been positively shown by
the undisputed testimony of Candida Quiba that Pacifico Narciso and Evaristo Narciso stayed for
some days on the western side (the portion in question) of the above-described land until their
house was removed in 1940 by the spouses Mapalo and Quiba; secondly, Pacifica Narciso
admitted in his testimony in chief that when they bought the property, Miguel Mapalo was still
in the premises in question (western part) which he is occupying and his house is still standing
thereon; and thirdly, said Pacifico Narciso when presented as a rebuttal and sub-rebuttal
witness categorically declared that before buying the land in question he went to the house of
Miguel Mapalo and Candida Quiba and asked them if they will permit their elder brother Maximo
to sell the property.
Aside from the fact that all the parties in these cases are neighbors, except Maximo Mapalo the
foregoing facts are explicit enough and sufficiently reveal that the Narcisos were aware of the
nature and extent of the interest of Maximo Mapalo their vendor, over the above-described land
before and at the time the deed of sale in their favor was executed.
Upon the aforestated declaration of Pacifico Narciso the following question arises: What was the
necessity, purpose and reason of Pacifico Narciso in still going to the spouses Mapalo and asked
them to permit their brother Maximo to dispose of the above-described land? To this question it
is safe to state that this act of Pacifico Narciso is a conclusive manifestation that they (the
Narcisos) did not only have prior knowledge of the ownership of said spouses over the western
half portion in question but that they also have recognized said ownership. It also conclusively
shows their prior knowledge of the want of dominion on the part of their vendor Maximo Mapalo
over the whole land and also of the flaw of his title thereto. Under this situation, the Narcisos
may be considered purchasers in value but certainly not as purchasers in good faith. ... (pp.
97-98, Record on Appeal.)
And said finding which is one of fact is found by us not a bit disturbed by the Court of Appeals. Said
the Court of Appeals:
In view of the conclusion thus reached, it becomes unnecessary to pass on the other errors
assigned.Suffice it to say that, on the merits the appealed decision could have been
upheld under Article 1332 of the new Civil Code and the following authorities: Ayola vs.
Valderrama Lumber Manufacturers Co., Inc., 49 O.G. 980, 982; Trasporte vs. Beltran, 51 O.G.
1434, 1435; Cortez vs. Cortez, CA-G.R. No. 18451-R, August 8, 1961; Castillo vs.
Laberinto, CA-G.R. No. 18118-R, December 20, 1961; and 13 C.J. 372-373, as well as the
several facts and circumstances appreciated by the trial court as supporting appellees' case.
thereby in effect sustaining barring only its ruling on prescription the judgment and findings of the
trial court, including that of bad faith on the part of the Narcisos in purchasing the land in question. We
therefore see no need to further remand this case to the Court of Appeals for a ruling on this point, as
appellees request in their brief in the event we hold the contract of 1936 to be inexistent as regards the
western portion of the land.
In view of defendants' bad faith under the circumstances we deem it just and equitable to award, in
plaintiffs' favor, attorneys' fees on appeal, in the amount of P1,000.00 as prayed for in the counterclaim.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 153206

October 23, 2006

ONG ENG KIAM a.k.a. WILLIAM ONG, petitioner,

vs.
LUCITA G. ONG, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a Petition for Review seeking the reversal of the Decision 1 of the Court of Appeals
(CA) in CA G.R. CV No. 59400 which affirmed in toto the Decision of the Regional Trial Court (RTC) Branch
41, Dagupan City granting the petition for legal separation filed by herein respondent, as well as the
Resolution2 of the CA dated April 26, 2002 which denied petitioners motion for reconsideration.
Ong Eng Kiam, also known as William Ong (William) and Lucita G. Ong (Lucita) were married on July 13,
1975 at the San Agustin Church in Manila. They have three children: Kingston, Charleston, and Princeton
who are now all of the age of majority.3
On March 21, 1996, Lucita filed a Complaint for Legal Separation under Article 55 par. (1) of the Family
Code4before the Regional Trial Court (RTC) of Dagupan City, Branch 41 alleging that her life with William
was marked by physical violence, threats, intimidation and grossly abusive conduct. 5
Lucita claimed that: soon after three years of marriage, she and William quarreled almost every day, with
physical violence being inflicted upon her; William would shout invectives at her like "putang ina mo",
"gago", "tanga", and he would slap her, kick her, pull her hair, bang her head against concrete wall and
throw at her whatever he could reach with his hand; the causes of these fights were petty things
regarding their children or their business; William would also scold and beat the children at different parts
of their bodies using the buckle of his belt; whenever she tried to stop William from hitting the children,
he would turn his ire on her and box her; on December 9, 1995, after she protested with Williams
decision to allow their eldest son Kingston to go to Bacolod, William slapped her and said, "it is none of
your business"; on December 14, 1995, she asked William to bring Kingston back from Bacolod; a violent
quarrel ensued and William hit her on her head, left cheek, eye, stomach, and arms; when William hit her
on the stomach and she bent down because of the pain, he hit her on the head then pointed a gun at her
and asked her to leave the house; she then went to her sisters house in Binondo where she was fetched
by her other siblings and brought to their parents house in Dagupan; the following day, she went to her
parents doctor, Dr. Vicente Elinzano for treatment of her injuries. 6
William for his part denied that he ever inflicted physical harm on his wife, used insulting language
against her, or whipped the children with the buckle of his belt. While he admits that he and Lucita
quarreled on December 9, 1995, at their house in Jose Abad Santos Avenue, Tondo, Manila, he claimed
that he left the same, stayed in their Greenhills condominium and only went back to their Tondo house to
work in their office below. In the afternoon of December 14, 1995, their laundrywoman told him that
Lucita left the house.7
On January 5, 1998, the RTC rendered its Decision decreeing legal separation, thus:

Wherefore, the decision of the Court of Appeals is hereby reversed and set aside, and another one is
hereby rendered affirming in toto the judgment of the Court of First Instance a quo, with attorney's fees
on appeal in favor of appellants in the amount of P1,000.00, plus the costs, both against the private
appellees. So ordered.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar
and Sanchez, JJ., concur.

WHEREFORE, premises considered, judgment is hereby rendered decreeing the legal separation
of plaintiff and defendant, with all the legal effects attendant thereto, particularly the
dissolution and liquidation of the conjugal partnership properties, for which purpose the parties
are hereby ordered to submit a complete inventory of said properties so that the Court can
make a just and proper division, such division to be embodied in a supplemental decision.
SO ORDERED.8

The RTC found that:

It is indubitable that plaintiff (Lucita) and defendant (William) had their frequent quarrels and
misunderstanding which made both of their lives miserable and hellish. This is even admitted
by the defendant when he said that there was no day that he did not quarrel with his wife.
Defendant had regarded the plaintiff negligent in the performance of her wifely duties and had
blamed her for not reporting to him about the wrongdoings of their children. (citations omitted)
These quarrels were always punctuated by acts of physical violence, threats and intimidation by
the defendant against the plaintiff and on the children. In the process, insulting words and
language were heaped upon her. The plaintiff suffered and endured the mental and physical
anguish of these marital fights until December 14, 1995 when she had reached the limits of her
endurance. The more than twenty years of her marriage could not have been put to waste by
the plaintiff if the same had been lived in an atmosphere of love, harmony and peace. Worst,
their children are also suffering. As very well stated in plaintiffs memorandum, "it would be
unthinkable for her to throw away this twenty years of relationship, abandon the comforts of
her home and be separated from her children, whom she loves, if there exists no cause, which
is already beyond her endurance. 9
William appealed to the CA which affirmed in toto the RTC decision. In its Decision dated October 8, 2001,
the CA found that the testimonies for Lucita were straightforward and credible and the ground for legal
separation under Art. 55, par. 1 of the Family Code, i.e., physical violence and grossly abusive conduct
directed against Lucita, were adequately proven. 10
As the CA explained:
The straightforward and candid testimonies of the witnesses were uncontroverted and credible.
Dr. Elinzanos testimony was able to show that the [Lucita] suffered several injuries inflicted by
[William]. It is clear that on December 14, 1995, she sustained redness in her cheek, black eye
on her left eye, fist blow on the stomach, blood clot and a blackish discoloration on both
shoulders and a "bump" or "bukol" on her head. The presence of these injuries was established
by the testimonies of [Lucita] herself and her sister, Linda Lim. The Memorandum/Medical
Certificate also confirmed the evidence presented and does not deviate from the doctors main
testimony --- that [Lucita] suffered physical violence on [sic] the hands of her husband, caused
by physical trauma, slapping of the cheek, boxing and fist blows. The effect of the so-called
alterations in the Memorandum/Medical Certificate questioned by [William] does not depart
from the main thrust of the testimony of the said doctor.
Also, the testimony of [Lucita] herself consistently and constantly established that [William]
inflicted repeated physical violence upon her during their marriage and that she had been
subjected to grossly abusive conduct when he constantly hurled invectives at her even in front
of their customers and employees, shouting words like, "gaga", "putang ina mo," tanga," and
"you dont know anything."
These were further corroborated by several incidents narrated by Linda Lim who lived in their
conjugal home from 1989 to 1991. She saw her sister after the December 14, 1995 incident
when she (Lucita) was fetched by the latter on the same date. She was a witness to the kind of
relationship her sister and [William] had during the three years she lived with them. She
observed that [William] has an "explosive temper, easily gets angry and becomes very violent."
She cited several instances which proved that William Ong indeed treated her wife shabbily and
despicably, in words and deeds.
xxx
That the physical violence and grossly abusive conduct were brought to bear upon [Lucita] by
[William] have been duly established by [Lucita] and her witnesses. These incidents were not
explained nor controverted by [William], except by making a general denial thereof.
Consequently, as between an affirmative assertion and a general denial, weight must be
accorded to the affirmative assertion.
The grossly abusive conduct is also apparent in the instances testified to by [Lucita] and her
sister. The injurious invectives hurled at [Lucita] and his treatment of her, in its entirety, in front

of their employees and friends, are enough to constitute grossly abusive conduct. The
aggregate behavior of [William] warrants legal separation under grossly abusive conduct. x x
x11
William filed a motion for reconsideration which was denied by the CA on April 26, 2002. 12
Hence the present petition where William claims that:
I
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN DISREGARDING CLEAR EVIDENCE
THAT THE PETITION FOR LEGAL SEPARATION WAS INSTITUTED BY THE PRIVATE RESPONDENT
FOR THE SOLE PURPOSE OF REMOVING FROM PETITIONER THE CONTROL AND OWNERSHIP OF
THEIR CONJUGAL PROPERTIES AND TO TRANSFER THE SAME TO PRIVATE RESPONDENTS
FAMILY.
II
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN DISREGARDING CLEAR EVIDENCE
REPUDIATING PRIVATE RESPONDENTS CLAIM OF REPEATED PHYSICAL VIOLENCE AND
GROSSLY ABUSIVE CONDUCT ON THE PART OF PETITIONER.13
William argues that: the real motive of Lucita and her family in filing the case is to wrest control and
ownership of properties belonging to the conjugal partnership; these properties, which include real
properties in Hong Kong, Metro Manila, Baguio and Dagupan, were acquired during the marriage through
his (Williams) sole efforts; the only parties who will benefit from a decree of legal separation are Lucitas
parents and siblings while such decree would condemn him as a violent and cruel person, a wife-beater
and child abuser, and will taint his reputation, especially among the Filipino-Chinese community;
substantial facts and circumstances have been overlooked which warrant an exception to the general rule
that factual findings of the trial court will not be disturbed on appeal; the findings of the trial court that he
committed acts of repeated physical violence against Lucita and their children were not sufficiently
established; what took place were disagreements regarding the manner of raising and disciplining the
children particularly Charleston, Lucitas favorite son; marriage being a social contract cannot be impaired
by mere verbal disagreements and the complaining party must adduce clear and convincing evidence to
justify legal separation; the CA erred in relying on the testimonies of Lucita and her witnesses, her sister
Linda Lim, and their parents doctor, Dr. Vicente Elinzanzo, whose testimonies are tainted with relationship
and fraud; in the 20 years of their marriage, Lucita has not complained of any cruel behavior on the part
of William in relation to their marital and family life; William expressed his willingness to receive
respondent unconditionally however, it is Lucita who abandoned the conjugal dwelling on December 14,
1995 and instituted the complaint below in order to appropriate for herself and her relatives the conjugal
properties; the Constitution provides that marriage is an inviolable social institution and shall be protected
by the State, thus the rule is the preservation of the marital union and not its infringement; only for
grounds enumerated in Art. 55 of the Family Code, which grounds should be clearly and convincingly
proven, can the courts decree a legal separation among the spouses. 14
Respondent Lucita in her Comment, meanwhile, asserts that: the issues raised in the present petition are
factual; the findings of both lower courts rest on strong and clear evidence borne by the records; this
Court is not a trier of facts and factual findings of the RTC when confirmed by the CA are final and
conclusive and may not be reviewed on appeal; the contention of William that Lucita filed the case for
legal separation in order to remove from William the control and ownership of their conjugal properties
and to transfer the same to Lucitas family is absurd; Lucita will not just throw her marriage of 20 years
and forego the companionship of William and her children just to serve the interest of her family; Lucita
left the conjugal home because of the repeated physical violence and grossly abusive conduct of
petitioner.15
Petitioner filed a Reply, reasserting his claims in his petition, 16 as well as a Memorandum where he
averred for the first time that since respondent is guilty of abandonment, the petition for legal separation
should be denied following Art. 56, par. (4) of the Family Code. 17 Petitioner argues that since respondent
herself has given ground for legal separation by abandoning the family simply because of a quarrel and
refusing to return thereto unless the conjugal properties were placed in the administration of petitioners
in-laws, no decree of legal separation should be issued in her favor.18

Respondent likewise filed a Memorandum reiterating her earlier assertions. 19

We resolve to deny the petition.
It is settled that questions of fact cannot be the subject of a petition for review under Rule 45 of the Rules
of Court. The rule finds more stringent application where the CA upholds the findings of fact of the trial
court. In such instance, this Court is generally bound to adopt the facts as determined by the lower
courts.20
The only instances when this Court reviews findings of fact are:
(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when
the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse
of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the
findings of facts are conflicting; (6) when in making its findings the Court of Appeals went
beyond the issues of the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to that of the trial court; (8)
when the findings are conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record; and (11) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion. 21

As between the detailed accounts given for Lucita and the general denial for William, the Court gives
more weight to those of the former. The Court also gives a great amount of consideration to the
assessment of the trial court regarding the credibility of witnesses as trial court judges enjoy the unique
opportunity of observing the deportment of witnesses on the stand, a vantage point denied appellate
tribunals.34 Indeed, it is settled that the assessment of the trial court of the credibility of witnesses is
entitled to great respect and weight having had the opportunity to observe the conduct and demeanor of
the witnesses while testifying.35
In this case, the RTC noted that:
Williams denial and that of his witnesses of the imputation of physical violence committed by
him could not be given much credence by the Court. Since the office secretary Ofelia Rosal and
the family laundrywoman Rosalino Morco are dependent upon defendant for their livelihood,
their testimonies may be tainted with bias and they could not be considered as impartial and
credible witnesses. So with Kingston Ong who lives with defendant and depends upon him for
support.36
Parenthetically, William claims that that the witnesses of Lucita are not credible because of their
relationship with her. We do not agree. Relationship alone is not reason enough to discredit and label a
witnesss testimony as biased and unworthy of credence 37 and a witness relationship to one of the parties
does not automatically affect the veracity of his or her testimony. 38 Considering the detailed and
straightforward testimonies given by Linda Lim and Dr. Vicente Elinzano, bolstered by the credence
accorded them by the trial court, the Court finds that their testimonies are not tainted with bias.

Indeed, this Court cannot review factual findings on appeal, especially when they are borne out by the
records or are based on substantial evidence. 22 In this case, the findings of the RTC were affirmed by the
CA and are adequately supported by the records.

William also posits that the real motive of Lucita in filing the case for legal separation is in order for her
side of the family to gain control of the conjugal properties; that Lucita was willing to destroy his
reputation by filing the legal separation case just so her parents and her siblings could control the
properties he worked hard for. The Court finds such reasoning hard to believe. What benefit would Lucita
personally gain by pushing for her parents and siblings financial interests at the expense of her
marriage? What is more probable is that there truly exists a ground for legal separation, a cause so
strong, that Lucita had to seek redress from the courts. As aptly stated by the RTC,

As correctly observed by the trial court, William himself admitted that there was no day that he did not
quarrel with his wife, which made his life miserable, and he blames her for being negligent of her wifely
duties and for not reporting to him the wrongdoings of their children. 23

...it would be unthinkable for her to throw away this twenty years of relationship, abandon the
comforts of her home and be separated from her children whom she loves, if there exists no
cause, which is already beyond her endurance.39

Lucita and her sister, Linda Lim, also gave numerous accounts of the instances when William displayed
violent temper against Lucita and their children; such as: when William threw a steel chair at
Lucita;24 threw chairs at their children; 25 slapped Lucita and utter insulting words at her; 26 use the buckle
of the belt in whipping the children; 27pinned Lucita against the wall with his strong arms almost strangling
her, and smashed the flower vase and brick rocks and moldings leaving the bedroom in
disarray; 28 shouted at Lucita and threw a directory at her, in front of Linda and the employees of their
business, because he could not find a draft letter on his table; 29 got mad at Charleston for cooking steak
with vetchin prompting William to smash the plate with steak and hit Charleston, then slapped Lucita and
shouted at her "putang ina mo, gago, wala kang pakialam, tarantado" when she sided with
Charleston;30 and the December 9 and December 14, 1995 incidents which forced Lucita to leave the
conjugal dwelling.31

The claim of William that a decree of legal separation would taint his reputation and label him as a wifebeater and child-abuser also does not elicit sympathy from this Court. If there would be such a smear on
his reputation then it would not be because of Lucitas decision to seek relief from the courts, but because
he gave Lucita reason to go to court in the first place.

Lucita also explained that the injuries she received on December 14, 1995, were not the first. As she
related before the trial court:

As a final note, we reiterate that our Constitution is committed to the policy of strengthening the family
as a basic social institution. 41 The Constitution itself however does not establish the parameters of state
protection to marriage and the family, as it remains the province of the legislature to define all legal
aspects of marriage and prescribe the strategy and the modalities to protect it and put into operation the
constitutional provisions that protect the same. 42 With the enactment of the Family Code, this has been
accomplished as it defines marriage and the family, spells out the corresponding legal effects, imposes
the limitations that affect married and family life, as well as prescribes the grounds for declaration of
nullity and those for legal separation. 43 As Lucita has adequately proven the presence of a ground for legal
separation, the Court has no reason but to affirm the findings of the RTC and the CA, and grant her the
relief she is entitled to under the law.

As petitioner failed to show that the instant case falls under any of the exceptional circumstances, the
general rule applies.

q. You stated on cross examination that the injuries you sustained on December 14, 1995 were
the most serious?
a. Unlike before I considered December 14, 1995 the very serious because before it is only on
the arm and black eye, but on this December 14, I suffered bruises in all parts of my body, sir.32
To these, all William and his witnesses, could offer are denials and attempts to downplay the said
incidents.33

Also without merit is the argument of William that since Lucita has abandoned the family, a decree of
legal separation should not be granted, following Art. 56, par. (4) of the Family Code which provides that
legal separation shall be denied when both parties have given ground for legal separation. The
abandonment referred to by the Family Code is abandonment without justifiable cause for more than one
year.40 As it was established that Lucita left William due to his abusive conduct, such does not constitute
abandonment contemplated by the said provision.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.
Panganiban, C.J. (Chairperson), Ynares-Santiago, Callejo, Sr., and Chico-Nazario, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-38498 August 10, 1989
ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS MAXIMINA BAGNAS, SIXTO
BAGNAS and AGATONA ENCARNACION, petitioners,
vs.
HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO ENCARNACION, and JOSE B.
NAMBAYANrespondents.
Beltran, Beltran & Beltran for petitioners.
Jose M. Legaspi for private respondents.
NARVASA, J.:
The facts underlying this appeal by certiorari are not in dispute. Hilario Mateum of Kawit, Cavite, died on
March 11, 1964, single, without ascendants or descendants, and survived only by collateral relatives, of
whom petitioners herein, his first cousins, were the nearest. Mateum left no will, no debts, and an estate
consisting of twenty-nine parcels of land in Kawit and Imus, Cavite, ten of which are involved in this
appeal. 1
On April 3, 1964, the private respondents, themselves collateral relatives of Mateum though more remote
in degree than the petitioners, 2 registered with the Registry of Deeds for the Province of Cavite two
deeds of sale purportedly executed by Mateum in their (respondents') favor covering ten parcels of land.
Both deeds were in Tagalog, save for the English descriptions of the lands conveyed under one of them;
and each recited the reconsideration of the sale to be" ... halagang ISANG PISO (Pl.00), salaping Pilipino,
at mga naipaglingkod, ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO Pl.00), Philippine
Currency, and services rendered, being rendered and to be rendered for my benefit"). One deed was
dated February 6,1963 and covered five parcels of land, and the other was dated March 4, 1963, covering
five other parcels, both, therefore, antedating Mateum's death by more than a year. 3 It is asserted by the
petitioners, but denied by the respondents, that said sales notwithstanding, Mateum continued in the
possession of the lands purportedly conveyed until his death, that he remained the declared owner
thereof and that the tax payments thereon continued to be paid in his name. 4 Whatever the truth,
however, is not crucial. What is not disputed is that on the strength of the deeds of sale, the respondents
were able to secure title in their favor over three of the ten parcels of land conveyed thereby. 5
On May 22,1964 the petitioners commenced suit against the respondents in the Court of First Instance of
Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as
donations void for want of acceptance embodied in a public instrument. Claiming ownership pro
indiviso of the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum, the
petitioners prayed for recovery of ownership and possession of said lands, accounting of the fruits thereof
and damages. Although the complaint originally sought recovery of all the twenty-nine parcels of land left
by Mateum, at the pre-trial the parties agreed that the controversy be limited to the ten parcels subject
of the questioned sales, and the Trial Court ordered the exclusion of the nineteen other parcels from the
action. 6 Of the ten parcels which remained in litigation, nine were assessed for purposes of taxation at
values aggregating P10,500 00. The record does not disclose the assessed value of the tenth parcel,
which has an area of 1,443 square meters. 7
In answer to the complaint, the defendants (respondents here) denied the alleged fictitious or fraudulent
character of the sales in their favor, asserting that said sales were made for good and valuable
consideration; that while "... they may have the effect of donations, yet the formalities and solemnities of
donation are not required for their validity and effectivity, ... that defendants were collateral relatives of

Hilario Mateum and had done many good things for him, nursing him in his last illness, which services
constituted the bulk of the consideration of the sales; and (by way of affirmative defense) that the
plaintiffs could not question or seek annulment of the sales because they were mere collateral relatives of
the deceased vendor and were not bound, principally or subsidiarily, thereby. 8
After the plaintiffs had presented their evidence, the defendants filed a motion for dismissal in effect, a
demurrer to the evidence reasserting the defense set up in their answer that the plaintiffs, as mere
collateral relatives of Hilario Mateum, had no light to impugn the latter's disposition of his properties by
means of the questioned conveyances and submitting, additionally, that no evidence of fraud maintaining
said transfers had been presented. 9
The Trial Court granted the motion to dismiss, holding (a) on the authority of Armentia vs.
Patriarca, 10 that the plaintiffs, as mere collateral relatives, not forced heirs, of Hilario Mateum, could not
legally question the disposition made by said deceased during his lifetime, regardless of whether, as a
matter of objective reality, said dispositions were valid or not; and (b) that the plaintiffs evidence of
alleged fraud was insufficient, the fact that the deeds of sale each stated a consideration of only Pl.00 not
being in itself evidence of fraud or simulation. 11
On appeal by the plaintiffs to the Court of Appeals, that court affirmed, adverting with approval to the
Trial Court's reliance on the Armentia ruling which, it would appear, both courts saw as denying, without
exception, to collaterals, of a decedent, not forced heirs, the right to impugn the latter's dispositions inter
vivos of his property. The Appellate Court also analyzed the testimony of the plaintiffs' witnesses,
declared that it failed to establish fraud of any kind or that Mateum had continued paying taxes on the
lands in question even after executing the deeds conveying them to the defendants, and closed with the
statement that "... since in duly notarized and registered deeds of sale consideration is presumed, we do
not and it necessary to rule on the alternative allegations of the appellants that the said deed of sale were
(sic) in reality donations. 12
One issue clearly predominates here. It is whether, in view of the fact that, for properties assuredly worth
in actual value many times over their total assessed valuation of more than P10,000.00, the questioned
deeds of sale each state a price of only one peso (P1.00) plus unspecified past, present and future
services to which no value is assigned, said deeds were void or inexistent from the beginning ("nulo") or
merely voidable, that is, valid until annulled. If they were only voidable, then it is a correct proposition
that since the vendor Mateum had no forced heirs whose legitimes may have been impaired, and the
petitioners, his collateral relatives, not being bound either principally or subsidiarily to the terms of said
deeds, the latter had and have no actionable right to question those transfers.
On the other hand, if said deeds were void ab initio because to all intents and purposes without
consideration, then a different legal situation arises, and quite another result obtains, as pointed out by
the eminent civil law authority, Mr. Justice J.B.L. Reyes who, in his concurring opinion in Armentia, said:
I ... cannot bring myself to agree to the proposition that the heirs intestate would
have no legal standing to contest the conveyance made by the deceased if the same
were made without any consideration, or for a false and fictitious consideration. For
under the Civil Code of the Philippines, Art. 1409, par. 3, contracts with a cause that
did not exist at the time of the transaction are inexistent and void from the
beginning. The same is true of contracts stating a false cause (consideration) unless
the persons interested in upholding the contract should prove that there is another
true and lawful consideration therefor. (lbid., Art. 1353).
If therefore the contract has no causa or consideration, or the causa is false and
fictitious (and no true hidden causa is proved) the property allegedly conveyed never
really leaves the patrimony of the transferor, and upon the latter's death without a
testament, such property would pass to the transferor's heirs intestate and be
recoverable by them or by the Administrator of the transferor's estate. In this
particular regard, I think Concepcion vs. Sta. Ana, 87 Phil. 787 and Sobs vs. Chua
Pua Hermanos, 50 Phil. 536, do not correctly state the present law, and must be
clarified.
To be sure the quoted passage does not reject and is not to be construed as rejecting
the Concepcion and Solisrulings 13 as outrightly erroneous, far from it. On the contrary, those rulings
undoubtedly read and applied correctly the law extant in their time: Art. 1276 of the Civil Code of 1889
under which the statement of a false cause in a contract rendered it voidable only, not void ab initio. In

observing that they "... do not correctly state the present law and must be clarified," Justice Reyes clearly
had in mind the fact that the law as it is now (and already was in the time Armentia) no longer deems
contracts with a false cause, or which are absolutely simulated or fictitious, merely voidable, but declares
them void, i.e., inexistent ("nulo") unless it is shown that they are supported by another true and lawful
cause or consideration. 14 A logical consequence of that change is the juridical status of contracts without,
or with a false, cause is that conveyances of property affected with such a vice cannot operate to divest
and transfer ownership, even if unimpugned. If afterwards the transferor dies the property descends to
his heirs, and without regard to the manner in which they are called to the succession, said heirs may
bring an action to recover the property from the purported transferee. As pointed out, such an action is
not founded on fraud, but on the premise that the property never leaves the estate of the transferor and
is transmitted upon his death to heirs, who would labor under no incapacity to maintain the action from
the mere fact that they may be only collateral relatives and bound neither principally or subsidiarily under
the deed or contract of conveyance.
In Armentia the Court determined that the conveyance questioned was merely annullable not void ab
initio, and that the plaintiff s action was based on fraud vitiating said conveyance. The Court said:
Hypothetically admitting the truth of these allegations (of plaintiffs complaint), the
conclusion is irresistible that the sale is merely voidable. Because Marta Armentia
executed the document, and this is not controverted by plaintiff. Besides, the fact
that the vendees were minors, makes the contract, at worst, annullable by them,
Then again, inadequacy of consideration does not imply total want of consideration.
Without more, the parted acts of Marta Armentia after the sale did not indicate that
the said sale was void from the being.
The sum total of all these is that, in essence, plaintiffs case is bottomed on fraud,
which renders the contract voidable.
It therefore seems clear that insofar as it may be considered as setting or reaffirming
precedent, Armentia only ruled that transfers made by a decedent in his lifetime, which are voidable for
having been fraudulently made or obtained, cannot be posthumously impugned by collateral relatives
succeeding to his estate who are not principally or subsidiarily bound by such transfers. For the reasons
already stated, that ruling is not extendible to transfers which, though made under closely similar
circumstances, are void ab initio for lack or falsity of consideration.
The petitioners here argue on a broad front that the very recitals of the questioned deeds of sale reveal
such want or spuriousness of consideration and therefore the void character of said sales. They:
1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59 O.G. No. 47, pp, 8101, 8118)
holding that a price of P l.00 for the sale of things worth at least P20,000.00 is so insignificant as to
amount to no price at all, and does not satisfy the law which, while not requiring for the validity of a sale
that the price be adequate, prescribes that it must be real, not fictitious, stressing the obvious parallel
between that case and the present one in stated price and actual value of the property sold;
2. cite Manresa to the same effect: that true price, which is essential to the validity of a sale, means
existent, real and effective price, that which does not consist in an insignificant amount as, say, P.20 for a
house; that it is not the same as the concept of a just price which entails weighing and measuring, for
economic equivalence, the amount of price against all the factors that determine the value of the thing
sold; but that there is no need of such a close examination when the immense disproportion between
such economic values is patent a case of insignificant or ridiculous price, the unbelievable amount of
which at once points out its inexistence; 15

Without necessarily according all these assertions its full concurrence, but upon the consideration alone
that the apparent gross, not to say enormous, disproportion between the stipulated price (in each deed)
of P l.00 plus unspecified and unquantified services and the undisputably valuable real estate allegedly
sold worth at least P10,500.00 going only by assessments for tax purposes which, it is well-known, are
notoriously low indicators of actual value plainly and unquestionably demonstrates that they state a false
and fictitious consideration, and no other true and lawful cause having been shown, the Court finds both
said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.
Neither can the validity of said conveyances be defended on the theory that their true causa is the
liberality of the transferor and they may be considered in reality donations 18 because the law 19 also
prescribes that donations of immovable property, to be valid, must be made and accepted in a public
instrument, and it is not denied by the respondents that there has been no such acceptance which they
claim is not required. 20
The transfers in question being void, it follows as a necessary consequence and conformably to the
concurring opinion in Armentia, with which the Court fully agrees, that the properties purportedly
conveyed remained part of the estate of Hilario Mateum, said transfers notwithstanding, recoverable by
his intestate heirs, the petitioners herein, whose status as such is not challenged.
The private respondents have only themselves to blame for the lack of proof that might have saved the
questioned transfers from the taint of invalidity as being fictitious and without ilicit cause; proof, to be
brief, of the character and value of the services, past, present, and future, constituting according to the
very terms of said transfers the principal consideration therefor. The petitioners' complaint (par.
6) 21 averred that the transfers were "... fraudulent, fictitious and/or falsified and (were) ... in reality
donations of immovables ...," an averment that the private respondents not only specifically denied,
alleging that the transfers had been made "... for good and valuable consideration ...," but to which they
also interposed the affirmative defenses that said transfers were "... valid, binding and effective ...," and,
in an obvious reference to the services mentioned in the deeds, that they "... had done many good things
to (the transferor) during his lifetime, nursed him during his ripe years and took care of him during his
previous and last illness ...," (pars. 4, 6, 16 and 17, their answer).lwph1.t 22 The onus, therefore, of
showing the existence of valid and illicit consideration for the questioned conveyances rested on the
private respondents. But even on a contrary assumption, and positing that the petitioners initially had the
burden of showing that the transfers lacked such consideration as they alleged in their complaint, that
burden was shifted to the private respondents when the petitioners presented the deeds which they
claimed showed that defect on their face and it became the duty of said respondents to offer evidence of
existent lawful consideration.
As the record clearly demonstrates, the respondents not only failed to offer any proof whatsoever, opting
to rely on a demurrer to the petitioner's evidence and upon the thesis, which they have maintained all the
way to this Court, that petitioners, being mere collateral relatives of the deceased transferor, were
without right to the conveyances in question. In effect, they gambled their right to adduce evidence on a
dismissal in the Trial Court and lost, it being the rule that when a dismissal thus obtained is reversed on
appeal, the movant loses the right to present evidence in his behalf. 23
WHEREFORE, the appealed Decision of the Court of Appeals is reversed. The questioned transfers are
declared void and of no force or effect. Such certificates of title as the private respondents may have
obtained over the properties subject of said transfers are hereby annulled, and said respondents are
ordered to return to the petitioners possession of an the properties involved in tills action, to account to
the petitioners for the fruits thereof during the period of their possession, and to pay the costs. No
damages, attorney's fees or litigation expenses are awarded, there being no evidence thereof before the
Court.
SO ORDERED.

3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for a ... price certain in money or
its equivalent ... requires that "equivalent" be something representative of money, e.g., a check or draft,
again citing Manresa 16 to the effect that services are not the equivalent of money insofar as said
requirement is concerned and that a contract is not a true sale where the price consists of services or
prestations;
4. once more citing Manresa 17 also point out that the "services" mentioned in the questioned deeds of
sale are not only vague and uncertain, but are unknown and not susceptible of determination without the
necessity of a new agreement between the parties to said deeds.

Cruz, Gancayco, Gri;o-Aquino and Medialdea, JJ., concur.

Footnotes
SECOND DIVISION
[G.R. No. 120724-25. May 21, 1998]

FERNANDO T. MATE, petitioner, vs. THE HONORABLE COURT OF APPEALS and INOCENCIO
TAN, respondents.
DECISION
MARTINEZ, J.:
In this petition for review, petitioner assails the Decision [1] of the Court of Appeals dated August 29,
1994 in CA-G.R. CV No. 28225-26, which affirmed with modification the decision of the trial court, the
dispositive portion of which reads, to wit:
WHEREFORE, this Court finds the Deed of Sale with Right of Repurchase executed October 6, 1986 valid
and binding between plaintiff and defendant (as vendor and vendee-a-retro respectively); that as the
period to redeem has expired, ownership thereof was consolidated by operation of law, and the Register
of Deeds is hereby ordered to REGISTER this decision consolidating the defendants ownership over the
properties covered by Transfer Certificate of Title No. T-90-71, covering Lot 8; Original Certificate of Title
No. N-311 covering Lot 5370, all of the Tacloban Cadastre, and issuing to defendant Inocencio Tan his
titles after cancellation of the titles presently registered in plaintiff Fernando T. Mates name and that of
his wife.
The plaintiff Fernando Mate is further ordered to pay defendant the sum of ONE HUNDRED FORTY
THOUSAND (P140,000.00) PESOS, for and as attorneys fees.
With costs against the plaintiff Fernando Mate.
SO ORDERED.[2]
The facts of this case, as summarized in the petition, are reproduced hereunder:
On October 6, 1986 Josefina R. Rey (hereafter referred to as Josie for short) and private respondent
went to the residence of petitioner at Tacloban City. Josie who is a cousin of petitioners wife solicited his
help to stave off her and her familys prosecution by private respondent for violation of B.P. 22 on account
of the rubber checks that she, her mother, sister and brother issued to private respondent amounting
toP4,432,067.00. She requested petitioner to cede to private respondent his three (3) lots in Tacloban
City in order to placate him. On hearing Josies proposal, he immediately rejected it as he owed private
respondent nothing and he was under no obligation to convey to him his properties. Furthermore, his lots
were not for sale. Josie explained to him that he was in no danger of losing his properties as he will
merely execute a simulated document transferring them to private respondent but they will be redeemed
by her with her own funds. After a long discussion, he agreed to execute a fictitious deed of sale with
right to repurchase covering his three (3) lots mentioned above subject to the following conditions:
1.

The amount to be stated in the document is P1,400,000.00 with interest thereon at

5% a month;

2.

The properties will be repurchased within six (6) months or on or before April 4, 1987;

3.

Although it would appear in the document that petitioner is the vendor, it is Josie who
will provide the money for the redemption of the properties with her own funds;

4.

Titles to the properties will be delivered to private respondent but the sale will not be
registered in the Register of Deeds and annotated on the titles.

To assure petitioner that Josie will redeem the aforesaid properties, she issued to him two (2) BPI checks
both postdated December 15, 1986. One check was for P1,400,000.00 supposedly for the selling price
and the other was for P420,000.00 corresponding to the interests for 6 months. Immediately thereafter
petitioner prepared the Deed of Sale with Right to Repurchase (Exh. A) and after it has been signed and
notarized, it was given to private respondent together with the titles of the properties and the latter did
not register the transaction in the Register of Deeds as agreed upon.
On January 14, 1987, petitioner deposited the check for P1,400,000.00 (Exh. B) in his account at the
United Coconut Planters Bank and the other check for P420,000.00 (Exh. D) in his account at

METROBANK preparatory to the redemption of his properties. However, both of them were dishonored by
the drawee bank for having been drawn against a closed account. Realizing that he was swindled, he
sent Josie a telegram about her checks and when she failed to respond, he went to Manila to look for her
but she could not be found. So he returned to Tacloban City and filed Criminal Cases Nos. 8310 and 8312
against her for violation of B.P. 22 but the cases were later archived as the accused (Josie) could not be
found as she went into hiding. To protect his interest, he filed Civil Case No. 7396 of the Regional Trial
Court of Leyte, Branch VII, entitled `Fernando T. Mate vs. Josefina R. Rey and Inocencio Tan for
Annulment of Contract with Damages. Defendant Josefina R. Rey (Josie) was declared in default and the
case proceeded against private respondent. But during the trial the RTC court asked private respondent
to file an action for consolidation of ownership of the properties subject of the sale and pursuant thereto
he filed Civil Case No. 7587 that was consolidated with the case he filed earlier which were later decided
jointly by the trial court in favor of private respondent and was subsequently appealed to respondent
Court that affirmed it with modification. Thereupon, petitioner filed a motion to reconsider the decision
but it was denied. Hence, the instant petition for review.[3]
In this petition for review, the petitioner presents as the sole issue the validity of the Deed of Sale
with Right to Repurchase. He contends that it is null and void for lack of consideration because allegedly
no money changed hands when he signed it and the checks that were issued for redemption of the
properties involved in the sale have been dishonored by the drawee bank for having been drawn against a
closed account.[4]
The contention is without merit.
There was a consideration. The respondent court aptly observed that In preparing and executing the deed of sale with right of repurchase and in delivering to Tan the land
titles, appellant actually accommodated Josefina so she would not be charged criminally by Tan. To
ensure that he could repurchase his lots, appellant got a check of P1,400,000.00 from her. Also, by
allowing his titles to be in possession of Tan for a period of six months, appellant secured from her
another check forP420,000.00. With this arrangement, appellant was convinced he had a good
bargain. Unfortunately his expectation crumbled. For this tragic incident, not only Josefina, but also Tan,
according to appellant must be answerable.
xxx

xxx

xxx

It is plain that consideration existed at the time of the execution of the deed of sale with right of
repurchase. It is not only appellants kindness to Josefina, being his cousin, but also his receipt
of P420,000.00 from her which impelled him to execute such contract.[5]
Furthermore, while petitioner did not receive the P1.4 Million purchase price from respondent Tan,
he had in his possession a postdated check of Josie Rey in an equivalent amount precisely to repurchase
the two lots on or before the sixth month.
As admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey gave him, as vendora-retro, a postdated check in the amount of P1.4 Million, which represented the repurchase price of the
two (2) lots. Aside from the P1.4 Million check, Josie gave another postdated check to petitioner in the
amount of P420,000.00, ostensibly as interest for six (6) months but which apparently was his fee for
having executed the pacto de retro document. Josie thus assumed the responsibility of paying the
repurchase price on behalf of petitioner to private respondent.
Unfortunately, the two checks issued by Josie Rey were worthless. Both were dishonored upon
presentment by petitioner with the drawee banks. However, there is absolutely no basis for petitioner to
file a complaint against private respondent Tan and Josie Rey to annul the pacto de retro sale on the
ground of lack of consideration, invoking his failure to encash the two checks. Petitioners cause of action
was to file criminal actions against Josie Rey under B.P. 22, which he did. The filing of the criminal cases
was a tacit admission by petitioner that there was a consideration of the pacto de retro sale.
Petitioner further claims that the pacto de retro sale was subject to the condition that in the event
the checks given by Josie Reyes to him for the repurchase of the property were dishonored, then the
document shall be declared null and void for lack of consideration.
We are not persuaded.
Private respondent Tan was already poised to file criminal cases against Josie Rey and her family. It
would not be logical for respondent Tan to agree to the conditions allegedly imposed by petitioner.
Petitioner knew that he was bound by the deed of sale with right to repurchase, as evidenced by his
filing criminal cases against Josie Rey when the two checks bounced.
The respondent court further made the candid but true observation that:

If there is anybody to blame for his predicament, it is appellant himself. He is a lawyer. He was the one
who prepared the contract. He knew what he was entering into. Surely, he must have been aware of the
risk involved. When Josefinas checks bounced, he should have repurchased his lots with his own
money. Instead, he sued not only Josefina but also Tan for annulment of contract on the ground of lack
of consideration and false pretenses on their part.
Petitioner then postulates that it is not only illegal but immoral to require him to repurchase his
own properties with his own money when he did not derive any benefit from the transaction. Thus, he
invokes the case of Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said that where
one or two innocent persons must suffer, that person who gave occasion for the damages to be caused
must bear consequences. Petitioners reliance on this doctrine is misplaced. He is not an innocent
person. As a matter of fact, he gave occasion for the damage caused by virtue of the deed of sale with
right to repurchase which he prepared and signed. Thus, there is the equitable maxim that between two
innocent parties, the one who made it possible for the wrong to be done should be the one to bear the
resulting loss.[6]
Petitioner further insinuates that private respondent deceived him into signing the deed of sale with
right to repurchase. This is not borne out by the evidence nor by petitioners own statement of
facts which we heretofore reproduced. As aptly observed by the respondent court We are at a loss why
herein appellant ascribes false pretenses to Tan who merely signed the contract.[7] Contrary to
petitioners pretension, respondent Tan did not employ any devious scheme to make the former sign the
deed of sale. It is to be noted that Tan waived his right to collect from Josefina Rey by virtue of the pacto
de retrosale. In turn, Josefina gave petitioner a postdated check in the amount of P1.4 Million to ensure
that the latter would not lose his two lots. Petitioner, a lawyer, should have known that the transaction
was fraught with risks since Josefina Rey and family had a checkered history of issuing worthless
checks. But had petitioner not agreed to the arrangement, respondent Tan would not have agreed to
waive prosecution of Josefina Rey.
Apparently, it was petitioners greed for a huge profit that impelled him to accede to the scheme of
Josefina Rey even if he knew it was a dangerous undertaking. When he drafted the pacto de
retrodocument, he threw caution to the winds forgetting that prudence might have been the better course
of action. We can only sympathize with petitioners predicament. However, a contract is a
contract. Once agreed upon, and provided all the essential elements are present, it is valid and binding
between the parties.
Petitioner has no one to blame but himself for his misfortune.
WHEREFORE, the Decision of the Court of Appeals dated August 29, 1994 is hereby
AFFIRMED. The petition for review is hereby DENIED DUE COURSE for lack of merit.
SO ORDERED.
Regalado (Chairman), Melo, Puno, and Mendoza, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-55999 August 24, 1984
SPOUSES SALVACION SERRANO LADANGA and AGUSTIN S. LADANGA, petitioners,
vs.
COURT OF APPEALS and BERNARDO S. ASENETA, as Guardian of the Incompetent CLEMENCIA
A. ASENETA, respondents.
Venusto P. France and Ambrosia Padilla, Mempia, Reyes & Equidez Law Office for petitioners.
Agrava, Lucero & Gineta for private respondents.

AQUINO, J.:

The spouses Salvacion Serrano and Doctor Agustin S. Ladanga appealed from the decision of the Court of
Appeals (affirming the decision of the Manila Court of First Instance), declaring void the sale to Salvacion
by her aunt, Clemencia A. Aseneta, of the 166-square-meter lot with a house located at 1238 Sison
Street, Paco, Manila for non-payment of the price of P26,000. It ordered the register of deeds of Manila to
issue a new title to Clemencia.
The said spouses were further ordered to pay to Clemencia's estate P21,000 as moral and exemplary
damages and attorney's fees and to render to Bernardo an accounting of the rentals of the property from
April 6, 1974.
The Appellate Court and Judge Jose C. Colayco found that Clemencia, a spinster who retired as division
superintendent of public schools at 65 in 1961, had a nephew named Bernardo S. Aseneta, the child of
her sister Gloria, and a niece named Salvacion, the daughter of her sister Flora. She legally adopted
Bernardo in 1961 (Exh. B).
On a single date, April 6, 1974 (when Clemencia was about 78 years old), she signed nine deeds of sale
in favor of Salvacion for various real properties. One deed of sale concerned the said Paco property
(administered by the Ladanga spouses) which purportedly was sold to Salvacion for P26,000 (Exh. C).
The total price involved in the nine deeds of sale and in the tenth sale executed on November 8, 1974
was P92,200.
On the witness stand, Clemencia denied having "received even one centavo" of the price of P26,000 (15,
16, 32 tsn August 16, 1976), much less the P92,000. She considered the allegation that she received the
price as a he, exclaiming on the witness stand: "Susmaryosep! P92,000!" (15, 28-30 tsn August 16,
1976). This testimony was corroborated by Soledad L. Maninang, 69, a dentist with whom Clemencia had
lived for more than thirty years in Kamuning, Quezon City.
The notary testified that the deed of sale for the Paco property was signed in the office of the Quezon City
registry of deeds. He did not see Salvacion giving any money to Clemencia.
In May, 1975, Bernardo as guardian of Clemencia, filed an action for reconveyance of the Paco property,
accounting of the rentals and damages. Clemencia was not mentally incompetent but she was placed
under guardianship because she was an easy prey for exploitation and deceit.
Parenthetically, it should be stated that she died on May 21, 1977 at the age of 80. She allegedly
bequeathed her properties in a holographic will dated November 23, 1973 to Doctor Maninang. In that will
she disinherited Bernardo. The will was presented for probate (Exh. 22-A and 22-C).
The testate case was consolidated with the intestate proceeding filed by Bernardo in the sala of Judge
Ricardo L. Pronove at Pasig, Rizal. He dismissed the testate case. He appointed Bernardo as administrator
in the intestate case (p. 23, Bernardo's brief).
As already stated, in the instant case, the trial court and the Appellate Court declared void the sale of the
Paco property. The Ladanga spouses contend that the Appellate Court disregarded the rule on burden of
proof. This contention is devoid of merit because Clemencia herself testified that the price of P26,000 was
not paid to her. The burden of the evidence shifted to the Ladanga spouses. They were not able to prove
the payment of that amount. The sale was fictitious.
The Ladanga spouses argue that the Appellate Court erred in not considering that inadequacy of price
may indicate a donation or some other contract; in disregarding the presumption that the sale was fair
and regular and for a sufficient consideration; in overlooking important facts and in not holding that
Bernardo had no right to file a complaint to annul the sale.
As a rule, only important legal issues, as contemplated in section 4, Rule 45 of the Rules of Court, may be
raised in a review of the Appellate Court's decision. This case does not fall within any of the exceptions to
that rule (2 Moran's Comments on the Rules of Court, 1979 Ed. p. 475; Ramos vs. Pepsi-Cola Bottling
Co., 125 Phil. 701).
The questions ventilated by the Ladangas in their briefs and in their comment of April 3, 1984 may be
reduced to the issue of the validity of the sale which the vendor Clemencia herself assailed in her

testimony on August 16 and December 3, 1976 when she was eighty years old. Her testimony and that of
the notary leave no doubt that the price of P26,000 was never paid.
A contract of sale is void and produces no effect whatsoever where the price, which appears therein as
paid, has in fact never been paid by the purchaser to the vendor (Meneses Vda. de Catindig vs. Heirs of
Catalina Roque, L-25777, November 26, 1976, 74 SCRA 83, 88; Mapalo vs. Mapalo, 123 Phil. 979, 987;
Syllabus, Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921).
Such a sale is inexistent and cannot be considered consummated (Borromeo' vs. Borromeo, 98 Phil. 432;
Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA
229).
It was not shown that Clemencia intended to donate the Paco property to the Ladangas. Her testimony
and the notary's testimony destroyed any presumption that the sale was fair and regular and for a true
consideration.
Judge Colayco concluded that the Ladangas abused Clemencia's confidence and defrauded her of
properties with a market value of P393,559.25 when she was already 78 years old.
The contention that Bernardo had no right to institute the instant action because he was not a compulsory
heir of Clemencia cannot be sustained. Bernardo was Clemencia's adopted son. Moreover, Clemencia, by
testifying in this case, tacitly approved the action brought in her behalf.
But the moral damages awarded by the trial court is not sanctioned by articles 2217 to 2220 of the Civil
Code. Clemencia's own signature in the deed brought about the mess within which she was entangled.
WHEREFORE, the judgment of the Appellate Court is affirmed with the modification that the adjudication
for moral and exemplary damages is discarded. No costs.

The records show the following factual antecedents:

It appears that on June 15, 1977, Aurelio A. Roque filed a complaint for partition docketed as Civil
Case No. 109032 against Corazon Roque, Alberto de los Santos, Feliciano Roque, Severa Roque and
Osmundo Roque before the then Court of First Instance of Manila, Branch IX. [2] Defendants therein were
declared in default and plaintiff presented evidence ex-parte. On March 29, 1979, the trial court rendered
a decision in favor of plaintiff Aurelio A. Roque, the pertinent portion of which reads: [3]
From the evidence, it has been clearly established that the lot in question covered by Transfer Certificate
of Title No. 51330 was acquired by plaintiff Aurelio Roque and Maria Mesina during their conjugal union
and the house constructed thereon was likewise built during their marital union. Out of their union,
plaintiff and Maria Mesina had four children, who are the defendants in this case. When Maria Mesina
died on August 28, 1966, the only conjugal properties left are the house and lot above stated of which
plaintiff herein, as the legal spouse, is entitled to one-half share pro-indiviso thereof. With respect to the
one-half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four children, the
defendants here, are each entitled to one-fifth (1/5) share pro-indiviso. The deceased wife left no debt.
Wherefore, judgment is hereby rendered ordering the partition of the properties, subject matter of this
case consisting of the house and lot, in the following manner:
1. Of the house and lot forming the conjugal properties, plaintiff is entitled to one-half share proindiviso thereof while the other half forms the estate of the deceased Maria Mesina;
2. Of the Estate of deceased Maria Mesina, the same is to be divided into five (5) shares and plaintiff and
his four children are entitled each to one-fifth share thereof pro-indiviso.
Plaintiff claim for moral, exemplary and actual damages and attorneys fees not having been established
to the satisfaction of the Court, the same is hereby denied.
Without pronouncement as to costs.

SO ORDERED.
SO ORDERED.
Concepcion, Jr., Guerrero, Escolin and Cuevas, JJ., concur.
Makasiar, J., (Chairman) and Abad Santos, JJ., took no part.
SECOND DIVISION

On June 2, 1979, the decision became final and executory. The corresponding entry of judgment
was made on March 29, 1979.[4]
On October 5, 1979, the Register of Deeds of Manila issued a Transfer Certificate of Title No.
135671 in the name of the following persons in the following proportions: [5]
Aurelio A. Roque

6/10 share

[G.R. No. 109410. August 28, 1996]

Severina M. Roque

1/10 share

CLARA M. BALATBAT, petitioner, vs. COURT OF APPEALS and Spouses JOSE REPUYAN and
AURORA REPUYAN, respondents.

Osmundo M. Roque

1/10 share

Feliciano M. Roque

1/10 share

TORRES, JR., J.:

Corazon M. Roque

1/10 share

Petitioner Clara M. Balatbat instituted this petition for review pursuant to Rule 45 of the Revised
Rules of Court seeking to set aside the decision dated August 12, 1992 of the respondent Court of
Appeals in CA-G.R. CV No. 29994 entitled Alejandro Balatbat and Clara Balatbat, plaintiffsappellants, versus Jose Repuyan and Aurora Repuyan, defendants-appellees, the dispositive portion of
which reads:[1]

On April 1, 1980, Aurelio A. Roque sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora
Tuazon-Repuyan and Jose Repuyan as evidenced by a Deed of Absolute Sale.[6]

WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of
P10,000.00 for attorneys fees and P5,000.00 as costs of litigation are deleted.

Entry No. 5627/T-135671 - NOTICE OF ADVERSE CLAIM - Filed by Aurora Tuazon Repuyan, married,
claiming among others that she bought 6/10 portion of the property herein described from Aurelio Roque
for the amount of P50,000.00 with a down payment of P5,000.00 and the balance of P45,000.00 to be
paid after the partition and subdivision of the property herein described, other claims set forth in Doc. No.
954, page 18, Book 94 of _____________________ 64 ________PEDRO DE CASTRO, Notary Public of
Manila.

DECISION

SO ORDERED.

On July 21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse
claim[7] on the Transfer Certificate of Title No. 135671,[8] to wit:

Date of instrument - July 21, 1980

Date of inscription- July 21, 1980 at 3:35 p.m.
TERESITA H. NOBLEJAS

has the effect of being the law between the parties and should be complied with. The obligation of the
plaintiff under the contract being to have the land covered by TCT No. 135671 partitioned and subdivided,
and title issued in the name of the defendant buyer (see page 2 par. C of Exh. 7-A) plaintiff had to comply
thereto to give effect to the contract.

RAMON D. MACARICAN

WHEREFORE, judgment is rendered against the plaintiff, Aurelio A. Roque, and the plaintiff in
intervention, Clara Balatbat, and in favor of the defendants, dismissing the complaint for lack of merit,
and declaring the Deed of Absolute Sale dated April 1, 1980 as valid and enforceable and the plaintiff is,
as he is hereby ordered, to partition and subdivide the land covered by T.C.T. No. 135671, and to
aggregate therefrom a portion equivalent to 6/10 thereof, and cause the same to be titled in the name of
the defendants, and after which, the defendants to pay the plaintiff the sum of P45,000.00. Considering
further that the defendants suffered damages since they were forced to litigate unnecessarily, by way of
their counterclaim, plaintiff is hereby ordered to pay defendants the sum of P15,000.00 as moral
damages, attorneys fees in the amount of P5,000.00.

Acting Second Deputy

Costs against plaintiff.

Acting Register of Deeds

By:

On August 20, 1980, Aurelio A. Roque filed a complaint for Rescission of Contract docketed as
Civil Case No. 134131 against spouses Aurora Tuazon-Repuyan and Jose Repuyan before Branch IV of the
then Court of First Instance of Manila. The complaint is grounded on spouses Repuyans failure to pay the
balance of P45,000.00 of the purchase price.[9] On September 5, 1980, spouses Repuyan filed their
answer with counterclaim.[10]
In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case) dated
February 2, 1982, to wit:[11]
In view of all the foregoing and finding that the amount of P100,000.00 as purchase price for the sale of
the parcel of land covered by TCT No. 51330 of the Registry of Deeds of Manila consisting of 84 square
meters situated in Callejon Sulu, District of Santa Cruz, Manila, to be reasonable and fair, and considering
the opportunities given defendants to sign the deed of absolute sale voluntarily, the Court has no
alternative but to order, as it hereby orders, the Deputy Clerk of this Court to sign the deed of absolute
sale for and in behalf of defendants pursuant to Sec. 10, Rule 39 of the Rules of Court, in order to effect
the partition of the property involved in this case.
SO ORDERED.
A deed of absolute sale was executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque,
Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat.
[12]
On April 14, 1982, Clara Balatbat filed a motion for the issuance of a writ of possession which was
granted by the trial court on September 14, 1982 subject, however, to valid rights and interest of third
persons over the same portion thereof, other than vendor or any other person or persons privy to or
claiming any rights or interest under it. The corresponding writ of possession was issued on September
20, 1982.[13]
On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No.
134131[14] which was granted as per courts resolution of October 21, 1982. [15] However, Clara Balatbat
failed to file her complaint in intervention. [16] On April 15, 1986, the trial court rendered a decision
dismissing the complaint, the pertinent portion of which reads:[17]
The rescission of contracts are provided for in the laws and nowhere in the provision of the Civil Code
under the title Rescissible Contracts does the circumstances in the case at bar appear to have occurred,
hence, the prayer for rescission is outside the ambit for which rescissible [sic] could be granted.
The Intervenor - Plaintiff, Clara Balatbat, although allowed to intervene, did not file her complaint in
intervention.

SO ORDERED.
On March 3, 1987, petitioner Balatbat filed a notice of lis pendens in Civil Case No. 109032 before
the Register of Deeds of Manila.[18]
On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the
instant complaint for delivery of the owner's duplicate copy of T.C.T. No. 135671 docketed as Civil Case
No. 88-47176 before Branch 24 of the Regional Trial Court of Manila against private respondents Jose
Repuyan and Aurora Repuyan.[19]
On January 27, 1989, private respondents filed their answer with affirmative defenses and
compulsory counterclaim. [20]
On November 13, 1989, private respondents filed their memorandum [21] while petitioners filed their
memorandum on November 23, 1989.[22]
On August 2, 1990, the Regional Trial Court of Manila, Branch 24, rendered a decision dismissing
the complaint, the dispositive portion of which reads: [23]
Considering all the foregoing, this Court finds that the plaintiffs have not been able to establish their
cause of action against the defendants and have no right to the reliefs demanded in the complaint and
the complaint of the plaintiff against the defendants is hereby DISMISSED. On the counterclaim, the
plaintiff are ordered to pay defendants the amount of Ten Thousand Pesos by way of attorneys fees, Five
Thousand Pesos as costs of litigation and further to pay the costs of the suit.
SO ORDERED.
Dissatisfied, petitioner Balatbat filed on appeal before the respondent Court of Appeals which
rendered the assailed decision on August 12, 1992, to wit: [24]
WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of
P10,000.00 for attorneys fees and P5,000.00 as costs of litigation are deleted.
SO ORDERED.
On March 22, 1993, the respondent Court of Appeals denied petitioners motion for reconsideration.
[25]

Hence, this petition for review.

Consequently, the plaintiff having failed to prove with sufficient preponderance his action, the relief
prayed for had to be denied. The contract of sale denominated as Deed of Absolute Sale (Exh. 7 and
sub-markings) being valid and enforceable, the same pursuant to the provisions of Art. 1159 of the Civil
Code which says:
Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.

Petitioner raised the following issues for this Courts resolution:

I
WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE RESPONDENTS WAS MERELY EXECUTORY AND
NOT A CONSUMMATED TRANSACTION?
II

WHETHER OR NOT THERE WAS A DOUBLE SALE AS CONTEMPLATED UNDER ART. 1544 OF THE CIVIL
CODE?
III
WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD FAITH AND FOR VALUE?
IV
WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING WEIGHT AND CONSIDERATION TO THE
EVIDENCE OF THE PRIVATE RESPONDENTS WHICH WERE NOT OFFERED?
Petitioner asseverates that the respondent Court of Appeals committed grave abuse of discretion
tantamount to lack or excess of jurisdiction in affirming the appealed judgment considering (1) that the
alleged sale in favor of the private respondents Repuyan was merely executory; (2) that there is no
double sale; (3) that petitioner is a buyer in good faith and for value; and (4) that private respondents
did not offer their evidence during the trial.
Contrary to petitioners contention that the sale dated April 1, 1980 in favor of private respondents
Repuyan was merely executory for the reason that there was no delivery of the subject property and that
consideration/price was not fully paid, we find the sale as consummated, hence, valid and enforceable. In
a decision dated April 15, 1986 of the Regional Trial Court of Manila, Branch IV in Civil Case No. 134131,
the Court dismissed vendors Aurelio Roque complaint for rescission of the deed of sale and declared that
the sale dated April 1, 1980, as valid and enforceable. No appeal having been made, the decision became
final and executory. It must be noted that herein petitioner Balatbat filed a motion for intervention in that
case but did not file her complaint in intervention. In that case wherein Aurelio Roque sought to rescind
the April 1, 1980 deed of sale in favor of the private respondents for non-payment of the P45,000.00
balance, the trial court dismissed the complaint for rescision. Examining the terms and conditions of the
Deed of Sale dated April 1, 1980, the P45,000.00 balance is payable only after the property covered by
T.C.T. No. 135671 has been partitioned and subdivided, and title issued in the name of the BUYER hence,
vendor Roque cannot demand payment of the balance unless and until the property has been subdivided
and titled in the name of the private respondents. Devoid of any stipulation that ownership in the thing
shall not pass to the purchaser until he has fully paid the price, [26] ownership in the thing shall pass from
the vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price
has not yet been fully paid. The failure of the buyer to make good the price does not, in law, cause the
ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved
pursuant to Article 1191 of the New Civil Code. [27] Non-payment only creates a right to demand the
fulfillment of the obligation or to rescind the contract.
With respect to the non-delivery of the possession of the subject property to the private
respondent, suffice it to say that ownership of the thing sold is acquired only from the time of delivery
thereof, either actual or constructive. [28] Article 1498 of the Civil Code provides that - when the sale is
made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing
which is the object of the contract, if from the deed the contrary does not appear or cannot be inferred.
[29]
The execution of the public instrument, without actual delivery of the thing, transfers the ownership
from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. [30] In
the instant case, vendor Roque delivered the owners certificate of title to herein private respondent. It is
not necessary that vendee be physically present at every square inch of the land bought by him,
possession of the public instrument of the land is sufficient to accord him the rights of ownership. Thus,
delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real)
or by embodying the sale in a public instrument (constructive). The provision of Article 1358 on the
necessity of a public document is only for convenience, not for validity or enforceability. It is not a
requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public
instrument.[31]
A contract of sale being consensual, it is perfected by the mere consent of the parties. [32] Delivery of
the thing brought or payment of the price is not necessary for the perfection of the contract; and failure
of the vendee to pay the price after the execution of the contract does not make the sale null and void for
lack of consideration but results at most in default on the part of the vendee, for which the vendor may
exercise his legal remedies.[33]
Article 1544 of the New Civil Code provides:
If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be movable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
the possession and in the absence thereof, to the person who present the oldest title, provided there is
good faith.
Article 1544 of the Civil Code provides that in case of double sale of an immovable property,
ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the
Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and
(3) in default thereof, to the person who presents the oldest title, provided there is good faith. [34]
In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private
respondents Repuyan on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio
Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39
of the Rules of Court, on February 4, 1982. Undoubtedly, this is a case of double sale contemplated
under Article 1544 of the New Civil Code.
This is an instance of a double sale of an immovable property hence, the ownership shall vests in
the person acquiring it who in good faith first recorded it in the Registry of Property. Evidently, private
respondents Repuyans caused the annotation of an adverse claim on the title of the subject property
denominated as Entry No. 5627/T-135671 on July 21, 1980.[35] The annotation of the adverse claim on
TCT No. 135671 in the Registry of Property is sufficient compliance as mandated by law and serves notice
to the whole world.
On the other hand, petitioner filed a notice of lis pendens only on February 2, 1982. Accordingly,
private respondents who first caused the annotation of the adverse claim in good faith shall have a better
right over herein petitioner. Moreover, the physical possession of herein petitioners by virtue of a writ of
possession issued by the trial court on September 20, 1982 is subject to the valid rights and interest of
third persons over the same portion thereof, other than vendor or any other person or persons privy to or
claiming any rights to interest under it.[36] As between two purchasers, the one who has registered the
sale in his favor, has a preferred right over the other who has not registered his title even if the latter is in
actual possession of the immovable property.[37] Further, even in default of the first registrant or first in
possession, private respondents have presented the oldest title. [38] Thus, private respondents who
acquired the subject property in good faith and for valuable consideration established a superior right as
against the petitioner.
Evidently, petitioner cannot be considered as a buyer in good faith. In the complaint for rescission
filed by vendor Aurelio Roque on August 20, 1980, herein petitioner filed a motion for intervention on May
20, 1982 but did not file her complaint in intervention, hence, the decision was rendered adversely
against her. If petitioner did investigate before buying the land on February 4, 1982, she should have
known that there was a pending case and an annotation of adverse claim was made in the title of the
property before the Register of Deeds and she could have discovered that the subject property was
already sold to the private respondents. It is incumbent upon the vendee of the property to ask for the
delivery of the owners duplicate copy of the title from the vendor. A purchaser of a valued piece of
property cannot just close his eyes to facts which should put a reasonable man upon his guard and then
claim that he acted in good faith and under the belief that there were no defect in the title of the vendor.
[39]
One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim
that he has acquired title thereto in good faith as against the true owner of the land or of an interest
therein; and the same rule must be applied to one who has knowledge of facts which should have put him
upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of
his vendor. Good faith, or the want of it is not a visible, tangible fact that can be seen or touched, but
rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs. [40]
In fine, petitioner had nobody to blame but herself in dealing with the disputed property for failure
to inquire or discover a flaw in the title to the property, thus, it is axiomatic that - culpa lata dolo
aequiparatur - gross negligence is equivalent to intentional wrong.
IN VIEW OF THE FOREGOING PREMISES, this petition for review is hereby DISMISSED for lack
of merit. No pronouncement as to costs.
IT IS SO ORDERED.
Regalado (Chairman), Romero, Puno, and Mendoza, JJ., concur.
THIRD DIVISION
[G.R. No. 119777. October 23, 1997]

THE HEIRS OF PEDRO ESCANLAR, FRANCISCO HOLGADO and the SPOUSES DR. EDWIN A.
JAYME and ELISA TAN-JAYME, petitioners, vs. THE HON. COURT OF APPEALS,
GENEROSA MARTINEZ, CARMEN CARI-AN, RODOLFO CARI-AN, NELLY CHUA CARI-AN,
for herself and as guardian ad litem of her minor son, LEONELL C. CARI-AN,
FREDISMINDA CARI-AN, the SPOUSES PAQUITO CHUA and NEY SARROSA-CHUA and
THE REGISTER OF DEEDS OF NEGROS OCCIDENTAL,respondents.

WHEREAS, the Vendors and one of the Vendees by the name of Pedro Escanlar are relatives, and absolute
faith and trust exist between them, wherein during economic crisis, has not failed to give monetary
succor to the Vendors;
WHEREAS, Vendors herein understood the present scarcity of securing available each (sic) in the amount
stated in the contract;

[G.R. No. 120690. October 23, 1997]

FRANCISCO HOLGADO and HRS. OF PEDRO ESCANLAR, namely BERNARDO, FELY, SONIA, LILY,
DYESEBEL and NOEMI all surnamed ESCANLAR, petitioners, vs. HON. COURT OF
APPEALS, GENEROSA MARTINEZ, CARMEN CARI-AN, RODOLFO CARI-AN, NELLY CHUA
CARI-AN, for herself and as guardian ad litem of her minor son, LEONELL C. CARI-AN
and FREDISMINDA CARI-AN, and SP. PAQUITO CHUA and NEY SARROSA CHUA and
REGISTER OF DEEDS OF NEGROS OCCIDENTAL,respondents.

NOW THEREFORE, for and in consideration of the sum of FIFTY THOUSAND (P50,000.00) Pesos, Philippine
Currency, the balance of TWO HUNDRED TWENTY FIVE THOUSAND ( P225,000.00) Pesos to be paid by the
Vendees on or before May, 1979, the Vendors herein, by these Presents, do hereby CONFIRM and AFFIRM
the Deed of Sale of the Rights, Interests and Participation dated September 15, 1978, over Lots Nos.
1616 and 1617 (fishpond) of the Kabankalan Cadastre in favor of the VENDEES, their heirs and assigns.
That pending the complete payment thereof, Vendees shall not assign, sell, lease, nor mortgage the
rights, interests and participation thereof;

D E C I S I ON
ROMERO, J.:
Before us are consolidated petitions for review of the decision of the Court of Appeals in CA-G.R. CV
No. 39975 which affirmed the trial courts pronouncement that the deed of sale of rights, interests and
participation in favor of petitioners is null and void.
The case arose from the following facts:
Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924 and 1938,
respectively. Nombres heirs include his nephews and grandnephews. Victoriana Cari-an was succeeded
by her late brothers son, Gregorio Cari-an. The latter was declared as Victorianas heir in the estate
proceedings for Nombre and his wife (Special Proceeding No 7-7279). [1] After Gregorio died in 1971, his
wife, Generosa Martinez, and children, Rodolfo, Carmen, Leonardo and Fredisminda, all surnamed Carian, were also adjudged as heirs by representation to Victorianas estate. [2] Leonardo Cari-an passed away,
leaving his widow, Nelly Chua vda. de Cari-an and minor son Leonell, as his heirs.
Two parcels of land, denominated as Lot No. 1616 and 1617 of the Kabankalan Cadastre with an area of
29,350 square meters and 460,948 square meters, respectively, formed part of the estate of Nombre
and Cari-an.
On September 15, 1978, Gregorio Cari-ans heirs, herein collectively referred to as private
respondents Cari-an, executed the Deed of Sale of Rights, Interests and Participation worded as follows:
NOW, THEREFORE, for and in consideration of the sum of TWO HUNDRED SEVENTY-FIVE THOUSAND
(P275,000.00) Pesos, Philippine Currency, to be paid by the VENDEES to the VENDORS, except the share
of the minor child of Leonardo Cari-an, which should be deposited with the Municipal Treasurer of
Himamaylan, Province of Negros Occidental, by the order of the Court of First Instance of Negros
Occidental, Branch VI, Himamaylan, by those presents, do hereby SELL, CEDE, TRANSFER and CONVEY
by way of ABSOLUTE SALE, all the RIGHTS, INTERESTS and PARTICIPATION of the Vendors as to the onehalf (1/2) portion pro-indiviso of Lots Nos. 1616 and 1617 (Fishpond), of the Kabankalan Cadastre,
pertaining to the one-half (1/2) portion pro-indiviso of the late Victoriana Cari-an unto and in favor of the
Vendees, their heirs, successors and assigns;
xxx

WHEREAS, at the time of the signing of the Contract, VENDEES has (sic) only FIFTY THOUSAND
(P50,000.00) Pesos available thereof, and was not able to secure the entire amount;

xxx

xxx

That this Contract of Sale of rights, interests and participations shall become effective only upon the
approval by the Honorable Court of First Instance of Negros Occidental, Branch VI- Himamaylan.
(Underscoring supplied.)
Pedro Escanlar and Francisco Holgado, the vendees, were concurrently the lessees of the lots
referred to above. [3] They stipulated that the balance of the purchase price (P225,000.00) shall be paid on
or before May 1979 in a Deed of Agreement executed by the parties on the same day:

That in the event the Vendees fail and/ or omit to pay the balance of said purchase price on May 31, 1979
and the cancellation of said Contract of Sale is made thereby, the sum of FIFTY THOUSAND (P50,000.00)
Pesos shall be deemed as damages thereof to Vendors. (Underscoring supplied) [4]
Petitioners were unable to pay the Cari-an heirs individual shares, amounting to P55,000.00
each, by the due date. However, said heirs received at least 12 installments from petitioners after May
1979.[5]Rodolfo Cari-an was fully paid by June 21, 1979. Generosa Martinez, Carmen Cari-an and
Fredisminda Cari-an were likewise fully compensated for their individual shares, per receipts given in
evidence.[6] The minor Leonells share was deposited with the Regional Trial Court on September 7, 1982.
[7]

Being former lessees, petitioners continued in possession of Lot Nos. 1616 and 1617. Interestingly,
they continued to pay rent based on their lease contract. On September 10, 1981, petitioners moved to
intervene in the probate proceedings of Nombre and Cari-an as the buyers of private respondent Cari-ans
share in Lot Nos. 1616 and 1617. Petitioners motion for approval of the September 15, 1978 sale before
the same court, filed on November 10, 1981, was opposed by private respondents Cari-an on January 5,
1982.[8]
On September 16, 1982, the probate court approved a motion filed by the heirs of Cari-an and
Nombre to sell their respective shares in the estate. On September 21, 1982, private respondents Carian, in addition to some heirs of Guillermo Nombre, [9] sold their shares in eight parcels of land including
Lot Nos. 1616 and 1617 to the spouses Ney Sarrosa Chua and Paquito Chua for P1,850,000.00. One
week later, the vendor-heirs, including private respondents Cari-an, filed a motion for approval of sale of
hereditary rights, i.e. the sale made on September 21, 1982 to the Chuas.
Private respondents Cari-an instituted this case for cancellation of sale against petitioners (Escanlar
and Holgado) on November 3, 1982. [10] They complained of petitioners failure to pay the balance of the
purchase price by May 31, 1979 and alleged that they only received a total of P132,551.00 in cash and
goods. Petitioners replied that the Cari-ans, having been paid, had no right to resell the subject lots; that
the Chuas were purchasers in bad faith; and that the court approval of the sale to the Chuas was subject
to their existing claim over said properties.
On April 20, 1983, petitioners also sold their rights and interests in the subject parcels of land (Lot
Nos. 1616 and 1617) to Edwin Jayme for P735,000.00[11] and turned over possession of both lots to the
latter. The Jaymes in turn, were included in the civil case as fourth-party defendants.
On December 3, 1984, the probate court approved the September 21, 1982 sale without prejudice
to whatever rights, claims and interests over any of those properties of the estate which cannot be
properly and legally ventilated and resolved by the court in the same intestate proceedings. [12] The
certificates of title over the eight lots sold by the heirs of Nombre and Cari-an were later issued in the
name of respondents Ney Sarrosa Chua and Paquito Chua.
The trial court allowed a third-party complaint against the third-party defendants Paquito and Ney
Chua on January 7, 1986 where Escanlar and Holgado alleged that the Cari-ans conspired with the Chuas
when they executed the second sale on September 21, 1982 and that the latter sale is illegal and of no
effect. Respondents Chua countered that they did not know of the earlier sale of one-half portion of the
subject lots to Escanlar and Holgado. Both parties claimed damages.[13]

On April 28, 1988, the trial court approved the Chuas motion to file a fourth-party complaint
against the spouses Jayme. Respondents Chua alleged that the Jaymes refused to vacate said lots
despite repeated demands; and that by reason of the illegal occupation of Lot Nos. 1616 and 1617 by the
Jaymes, they suffered materially from uncollected rentals.
Meanwhile, the Regional Trial Court of Himamaylan which took cognizance of Special Proceeding No.
7-7279 (Intestate Estate of Guillermo Nombre and Victoriana Cari-an) had rendered its decision on
October 30, 1987.[14] The probate court concluded that since all the properties of the estate were disposed
of or sold by the declared heirs of both spouses, the case is considered terminated and the intestate
estate of Guillermo Nombre and Victoriana Cari-an is closed. The court held:
As regards the various incidents of this case, the Court finds no cogent reason to resolve them since the
very object of the various incidents in this case is no longer in existence, that is to say, the properties of
the estate of Guillermo Nombre and Victoriana Cari-an had long been disposed of by the rightful heirs of
Guillermo Nombre and Victoriana Cari-an. In this respect, there is no need to resolve the Motion for
Subrogation of Movants Pedro Escanlar and Francisco Holgado to be subrogated to the rights of the heirs
of Victoriana Cari-an since all the properties of the estate had been transferred and titled to in the name
of spouses Ney S. Chua and Dr. Paquito Chua. Since the nature of the proceedings in this case is
summary, this Court, being a Probate Court, has no jurisdiction to pass upon the validity or invalidity
of the sale of rights of the declared heirs of Guillermo Nombre and Victoriana Cari-an to third
parties. This issue must be raised in another action where it can be properly ventilated and resolved . x x
x Having determined, after exhausted (sic) and lengthy hearings, the rightful heirs of Guillermo Nombre
and Victoriana Cari-an, the Court found out that the second issue has become moot and academic
considering that there are no more properties left to be partitioned among the declared heirs as that had
long ago been disposed of by the declared heirs x x x. (Underscoring supplied)
The seminal case at bar was resolved by the trial court on December 18, 1991 in favor of
cancellation of the September 15, 1978 sale. Said transaction was nullified because it was not approved
by the probate court as required by the contested deed of sale of rights, interests and participation and
because the Cari-ans were not fully paid. Consequently, the Deed of Sale executed by the heirs of
Nombre and Cari-an in favor of Paquito and Ney Chua, which was approved by the probate court, was
upheld. The dispositive portion of the lower courts decision reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1)

Declaring the following contracts null and void and of no effect:

a)
The Deed of Sale, dated Sept. 15, 1978, executed by the plaintiffs in favor of the
defendants Pedro Escanlar and Francisco Holgado (Exh. A, Plaintiffs)
b)
The Deed of Agreement, dated Sept. 15, 1978, executed by the plaintiffs in favor of
the defendants, Pedro Escanlar and Francisco Holgado (Exh. B, Plaintiffs)
c)
The Deed of Sale, dated April 20, 1983, executed by the defendants in favor of the
fourth-party defendants, Dr. Edwin Jayme and Elisa Tan Jayme
d)
The sale of leasehold rights executed by the defendants in favor of the fourth-party
defendants

2)
Declaring the amount of Fifty Thousand Pesos (P50,000.00) paid by the defendants to the
plaintiffs in connection with the Sept. 15, 1978 deed of sale, as forfeited in favor of the plaintiffs, but
ordering the plaintiffs to return to the defendants whatever amounts they have received from the latter
after May 31, 1979 and the amount of Thirty Five Thousand Two Hundred Eighteen & 75/100
(P35,218.75)[15] deposited with the Treasurer of Himamaylan, Negros Occidental, for the minor Leonell C.
Cari-an 3)
Declaring the deed of sale, dated September 23, 1982, executed by Lasaro Nombre, Victorio
Madalag, Domingo Campillanos, Sofronio Campillanos, Generosa Vda. de Martinez, Carmen Cari-an,
Rodolfo Cari-an, Nelly Chua Vda. de Cari-an, for herself and as guardian ad litem of the minor Leonell C.
Cari-an, and Fredisminda Cari-an in favor of the third-party defendants and fourth-party plaintiffs,
spouses Dr. Paquito Chua and Ney Sarrosa Chua (Exh. 2-Chua) as legal, valid and enforceable provided
that the properties covered by the said deed of sale are subject of the burdens of the estate, if the same
have not been paid yet.

4)
Ordering the defendants Francisco Holgado and Pedro Escanlar and the fourth-party
defendants, spouses Dr. Edwin Jayme and Elisa Tan Jayme, to pay jointly and severally the amount of One
Hundred Thousand Pesos (P100,000.00 as moral damages and the further sum of Thirty Thousand Pesos
(P30,000.00) as attorneys fees to the third-party defendant spouses, Dr. Paquito Chua and Ney SarrosaChua.
5)
Ordering the fourth-party defendant spouses, Dr. Edwin Jayme and Elisa Tan Jayme, to pay to
the third-party defendants and fourth-party plaintiffs, spouses Dr. Paquito Chua and Ney Sarrosa-Chua,
the sum of One Hundred Fifty Seven Thousand Pesos (P157,000.00) as rentals for the riceland and Three
Million Two Hundred Thousand Pesos (P3,200,000.00) as rentals for the fishpond from October, 1985 to
July 24, 1989 plus the rentals from the latter date until the property shall have been delivered to the
spouses Dr. Paquito Chua and Ney Sarrosa-Chua;
6)
Ordering the defendants and the fourth-party defendants to immediately vacate Lots Nos.
1616 and 1617, Kabankalan Cadastre;
7)

Ordering the defendants and the fourth-party defendants to pay costs.

SO ORDERED.[16]
Petitioners raised the case to the Court of Appeals. [17] Respondent court affirmed the decision of the
trial court on February 17, 1995 and held that the questioned deed of sale of rights, interests and
participation is a contract to sell because it shall become effective only upon approval by the probate
court and upon full payment of the purchase price.[18]
Petitioners motion for reconsideration was denied by respondent court on April 3, 1995. [19] Hence,
these petitions.[20]
1. We disagree with the Court of Appeals conclusion that the September 15, 1978 Deed of Sale of
Rights, Interests and Participation is a contract to sell and not one of sale.
The distinction between contracts of sale and contracts to sell with reserved title has been
recognized by this Court in repeated decisions, according to Justice J.B.L. Reyes in Luzon Brokerage Co.
Inc. v. Maritime Building Co., Inc.,[21] upholding the power of promisors under contracts to sell in case of
failure of the other party to complete payment, to extrajudicially terminate the operation of the contract,
refuse the conveyance, and retain the sums of installments already received where such rights are
expressly provided for.
In contracts to sell, ownership is retained by the seller and is not to pass until the full payment of
the price. Such payment is a positive suspensive condition, the failure of which is not a breach of
contract but simply an event that prevented the obligation of the vendor to convey title from acquiring
binding force.[22] To illustrate, although a deed of conditional sale is denominated as such, absent
a proviso that title to the property sold is reserved in the vendor until full payment of the purchase price
nor a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee
fails to pay within a fixed period, by its nature, it shall be declared a deed of absolute sale. [23]
The September 15, 1978 sale of rights, interests and participation as to 1/2 portion pro indiviso of
the two subject lots is a contract of sale for the following reasons: First, private respondents as sellers
did not reserve unto themselves the ownership of the property until full payment of the unpaid balance
of P225,000.00. Second, there is no stipulation giving the sellers the right to unilaterally rescind the
contract the moment the buyer fails to pay within the fixed period. [24] Prior to the sale, petitioners were in
possession of the subject property as lessees. Upon sale to them of the rights, interests and participation
as to the 1/2 portion pro indiviso, they remained in possession, not in concept of lessees anymore but as
owners now through symbolic delivery known as traditio brevi manu.[25] Under Article 1477 of the Civil
Code, the ownership of the thing sold is acquired by the vendee upon actual or constructive delivery
thereof.[26]
In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the
transaction that, for a time, existed and discharges the obligations created thereunder. The remedy of an
unpaid seller in a contract of sale is to seek either specific performance or rescission. [27]
2. Next to be discussed is the stipulation in the disputed September 15, 1978 Deed of Sale of
Rights, Interests and Participation which reads: (t)his Contract of Sale of rights, interests and
participations shall become effective only upon the approval by the Honorable Court of First Instance of
Negros Occidental, Branch VI-Himamaylan. Notably, the trial court and the Court of Appeals both held
that the deed of sale is null and void for not having been approved by the probate court.

There has arisen here a confusion in the concepts of validity and the efficacy of a contract. Under
Art. 1318 of the Civil Code, the essential requisites of a contract are: consent of the contracting parties;
object certain which is the subject matter of the contract and cause of the obligation which is
established. Absent one of the above, no contract can arise. Conversely, where all are present, the result
is a valid contract. However, some parties introduce various kinds of restrictions or modalities, the lack of
which will not, however, affect the validity of the contract.
In the instant case, the Deed of Sale, complying as it does with the essential requisites, is a valid
one. However, it did not bear the stamp of approval of the court. This notwithstanding, the contracts
validity was not affected for in the words of the stipulation, . . . this Contract of Sale of rights, interests
and participations shall become effective only upon the approval by the Honorable Court . . . In other
words, only the effectivity and not the validity of the contract is affected.
Then, too, petitioners are correct in saying that the need for approval by the probate court exists
only where specific properties of the estate are sold and not when only ideal and indivisible shares of an
heir are disposed of.
In the case of Dillena v. Court of Appeals, [28] the Court declared that it is within the jurisdiction of
the probate court to approve the sale of properties of a deceased person by his prospective heirs before
final adjudication.[29] It is settled that court approval is necessary for the validity of any disposition of the
decedents estate. However, reference to judicial approval cannot adversely affect the substantive rights
of the heirs to dispose of their ideal share in the co-heirship and/or co-ownership among the heirs. [30] It
must be recalled that during the period of indivision of a decedents estate, each heir, being a co-owner,
has full ownership of his part and may therefore alienate it. [31] But the effect of the alienation with respect
to the co-owners shall be limited to the portion which may be allotted to him in the division upon the
termination of the co-ownership. [32]
From the foregoing, it is clear that hereditary rights in an estate can be validly sold without need of
court approval and that when private respondents Cari-an sold their rights, interests and participation in
Lot Nos. 1616 and 1617, they could legally sell the same without the approval of the probate court.
As a general rule, the pertinent contractual stipulation (requiring court approval) should be
considered as the law between the parties. However, the presence of two factors militate against this
conclusion. First, the evident intention of the parties appears to be contrary to the mandatory character of
said stipulation.[33] Whoever crafted the document of conveyance, must have been of the belief that the
controversial stipulation was a legal requirement for the validity of the sale. But the contemporaneous
and subsequent acts of the parties reveal that the original objective of the parties was to give effect to
the deed of sale even without court approval. [34] Receipt and acceptance of the numerous installments on
the balance of the purchase price by the Cari-ans and leaving petitioners in possession of Lot Nos. 1616
and 1617 reveal their intention to effect the mutual transmission of rights and obligations. It was only
after private respondents Cari-an sold their shares in the subject lots again to the spouses Chua, in
September 1982, that these same heirs filed the case at bar for the cancellation of the September 1978
conveyance. Worth considering too is the fact that although the period to pay the balance of the
purchase price expired in May 1979, the heirs continued to accept payments until late 1979 and did not
seek judicial relief until late 1982 or three years later.
Second, we hold that the requisite approval was virtually rendered impossible by the Cari-ans
because they opposed the motion for approval of the sale filed by petitioners [35] and sued the latter for the
cancellation of that sale. The probate court explained:
(e)
While it is true that Escanlar and Holgado filed a similar motion for the approval of Deed of Sale
executed by some of the heirs in their favor concerning the one-half (1/2) portions of Lots 1616 and 1617
as early as November 10, 1981, yet the Court could not have favorably acted upon it, because there
exists a pending case for the rescission of that contract, instituted by the vendors therein against Pedro
Escanlar and Francisco Holgado and filed before another branch of this Court. Until now, this case, which
attacks the very source of whatever rights or interests Holgado and Escanlar may have acquired over
one-half (1/2) portions of Lots Nos. 1616 and 1617, is pending resolution by another court. Otherwise, if
this Court meddles on these issues raised in that ordinary civil action seeking for the rescission of an
existing contract, then, the act of this Court would be totally ineffective, as the same would be in excess
of its jurisdiction.[36]
Having provided the obstacle and the justification for the stipulated approval not to be granted,
private respondents Cari-an should not be allowed to cancel their first transaction with petitioners
because of lack of approval by the probate court, which lack is of their own making.
3. With respect to rescission of a sale of real property, Article 1592 of the Civil Code governs:

In the sale of immovable property, even though it may have been stipulated that upon failure to pay the
price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay,
even after the expiration of the period, as long as no demand for rescission of the contract has been
made upon him either judicially or by a notarial act. After the demand, the court may not grant him a
new term. (Underscoring added)
In the instant case, the sellers gave the buyers until May 1979 to pay the balance of the purchase
price. After the latter failed to pay installments due, the former made no judicial demand for rescission of
the contract nor did they execute any notarial act demanding the same, as required under Article
1592. Consequently, the buyers could lawfully make payments even after the May 1979 deadline, as in
fact they paid several installments to the sellers which the latter accepted. Thus, upon the expiration of
the period to pay, the sellers made no move to rescind but continued accepting late payments, an act
which cannot but be construed as a waiver of the right to rescind. When the sellers, instead of availing of
their right to rescind, accepted and received delayed payments of installments beyond the period
stipulated, and the buyers were in arrears, the sellers in effect waived and are now estopped from
exercising said right to rescind. [37]
4. The matter of full payment is another issue taken up by petitioners. An exhaustive review of
the records of this case impels us to arrive at a conclusion at variance with that of both the trial and the
appellate courts.
The sole witness in the cancellation of sale case was private respondent herein Fredisminda Cari-an
Bustamante. She initially testified that after several installments, she signed a receipt for the full
payment of her share in December 1979 but denied having actually received the P5,000.00 intended to
complete her share. She claims that Escanlar and Holgado made her sign the receipt late in the
afternoon and promised to give the money to her the following morning when the banks opened. She
also claimed that while her brother Rodolfo Cari-ans share had already been fully paid, her mother
Generosa Martinez only received P28,334.00 and her sister-in-law Nelly Chua vda. de Cari-an received
only P11,334.00. Fredisminda also summed up all the installments and came up with the total
of P132,551.00 from the long list on a sheet of a calendar which was transferred from a small brown
notebook. She later admitted that her list may not have been complete for she gave the receipts for
installments to petitioners Escanlar and Holgado. She thus claimed that they were defrauded because
petitioners are wealthy and private respondents are poor.
However, despite all her claims, Fredismindas testimony fails to convince this Court that they were
not fully compensated by petitioners. Fredisminda admits that her mother and her sister signed their
individual receipts of full payment on their own and not in her presence. [38] The receipts presented in
evidence show that Generosa Martinez was paid P45,625.00; Carmen Cari-an, P45,625.00; Rodolfo Carian,P47,500.00 on June 21, 1979; Nelly Chua vda. de Cari-an, P11,334.00 and the sum of P34,218.00
was consigned in court for the minor Leonell Cari-an. [39] Fredisminda insists that she signed a receipt for
full payment without receiving the money therefor and admits that she did not object to the
computation. We find it incredible that a mature woman like Fredisminda Cari-an, would sign a receipt
for money she did not receive. Furthermore, her claims regarding the actual amount of the installments
paid to her and her kin are quite vague and unsupported by competent evidence. She even admits that
all the receipts were taken by petitioner Escanlar.[40] Worth noting too is the absence of supporting
testimony from her co-heirs and siblings Carmen Cari-an, Rodolfo Cari-an and Nelly Chua vda. de Cari-an.
The trial court reasoned out that petitioners, in continuing to pay the rent for the parcels of land
they allegedly bought, admit not having fully paid the Cari-ans. Petitioners response, that they paid rent
until 1986 in compliance with their lease contract, only proves that they respected this contract and did
not take undue advantage of the heirs of Nombre and Cari-an who benefited from the lease. Moreover, it
is to be stressed that petitioners purchased the hereditary shares solely of the Cari-ans and not the entire
lot.
The foregoing discussion ineluctably leads us to conclude that the Cari-ans were indeed paid the
balance of the purchase price, despite having accepted installments therefor belatedly. There is thus no
ground to rescind the contract of sale because of non-payment.
5. Recapitulating, we have held that the September 15, 1978 deed of sale of rights, interests and
participations is valid and that the sellers-private respondents Cari-an were fully paid the contract
price. However, it must be emphasized that what was sold was only the Cari-ans hereditary shares in Lot
Nos. 1616 and 1617 being held pro indiviso by them and is thus a valid conveyance only of said ideal
shares. Specific or designated portions of land were not involved.
Consequently, the subsequent sale of 8 parcels of land, including Lot Nos. 1616 and 1617, to the
spouses Chua is valid except to the extent of what was sold to petitioners in the September 15, 1978
conveyance. It must be noted however, that the probate court in Special Proceeding No. 7-7279 desisted
from awarding the individual shares of each heir because all the properties belonging to the estate had
already been sold.[41] Thus it is not certain how much private respondents Cari-an were entitled to with
respect to the two lots, or if they were even going to be awarded shares in said lots.

The proceedings surrounding the estate of Nombre and Cari-an having attained finality for nearly a
decade now, the same cannot be re-opened. The protracted proceedings which have undoubtedly left the
property under a cloud and the parties involved in a state of uncertainty compels us to resolve it
definitively.
The decision of the probate court declares private respondents Cari-an as the sole heirs by
representation of Victoriana Cari-an who was indisputably entitled to half of the estate. [42] There being no
exact apportionment of the shares of each heir and no competent proof that the heirs received unequal
shares in the disposition of the estate, it can be assumed that the heirs of Victoriana Cari-an collectively
are entitled to half of each property in the estate. More particularly, private respondents Cari-an are
entitled to half of Lot Nos. 1616 and 1617, i.e. 14,675 square meters of Lot No. 1616 and 230,474 square
meters of Lot No. 1617. Consequently, petitioners, as their successors-in-interest, own said half of the
subject lots and ought to deliver the possession of the other half, as well as pay rents thereon, to the
private respondents Ney Sarrosa Chua and Paquito Chua but only if the former (petitioners) remained in
possession thereof.
The rate of rental payments to be made were given in evidence by Ney Sarrosa Chua in her
unrebutted testimony on July 24, 1989: For the fishpond (Lot No. 1617) - From 1982 up to 1986, rental
payment ofP3,000.00 per hectare; from 1986-1989 (and succeeding years), rental payment
of P10,000.00 per hectare. For the riceland (Lot No. 1616) - 15 cavans per hectare per year; from 1982
to 1986, P125.00 per cavan; 1987-1988, P175.00 per cavan; and 1989 and succeeding years, P200.00
per cavan.[43]
WHEREFORE, the petitions are hereby GRANTED. The decision of the Court of Appeals under
review is hereby REVERSED AND SET ASIDE. The case is REMANDED to the Regional Trial Court of
Negros Occidental, Branch 61 for petitioners and private respondents Cari-an or their successors-ininterest to determine exactly which 1/2 portion of Lot Nos. 1616 and 1617 will be owned by each party, at
the option of petitioners. The trial court is DIRECTED to order the issuance of the corresponding
certificates of title in the name of the respective parties and to resolve the matter of rental payments of
the land not delivered to the Chua spouses subject to the rates specified above with legal interest from
date of demand.
SO ORDERED.
Melo, Francisco, and Panganiban, JJ., concur.
Narvasa, C.J., (Chairman), on leave.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau of Prisons;
that a contract therefor was drawn and by virtue of which, Apostol obtained goods from the
Bureau of Prisons valued P15,878.59; that of said account, Apostol paid only P691.10 leaving a
balane obligation of P15,187.49. The complaint further averes, as second cause of action, that
Apostol submitted the best bid with the Bureau of Prisons for the purchase of three million
board feet of logs at P88.00 per 1,000 board feet; that a contract was executed between the
Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs
valued at P65.830.00, and that Apostol failed to pay a balance account Of P18,827.57. All told,
for the total demand set forth in complaint against Apostol is for P34,015.06 with legal interests
thereon from January 8, 1952. The Empire lnsurance Company was included in the complaint
having executed a performance bond of P10,000.00 in favor of Apostol.
In his answer, Apostol interposed payment as a defense and sought the dismissal of the
complaint.
On July 19, 1955, the Philippine Resources Development Corporation moved to intervene,
appending to its motion, the complaint in the intervention of even date. The complaint recites
that for sometime prior to Apostol's transactions the corporate had some goods deposited in a
warehouse at 1201 Herran, Manila; that Apostol, then the president of the corporation but
without the knowledge or consent of the stockholders thereof, disposed of said goods by
delivering the same to the Bureau of Prisons of in an attempt to settle his personal debts with
the latter entity; that upon discovery of Apodol's act, the corporation took steps to recover said
goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal
of the Bureau to return said goods, the corporation sought leave to intervene in Civil Case No.
26166.
As aforestated, His Honor denied the motion for intervention and thereby issued an order to
this effect on July 23, 1955. A motion for the reconsideration of said order was filed by the
movant corporation and the same was likewise denied by His Honor on August 18, 1955 . . .
(Annex L.).
On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals, the herein
respondent corporation prayed for the setting aside of the order of the Court of First Instance that had
denied the admission of its complaint-in-intervention and for an order directing the latter Court to allow
the herein respondent corporation to intervene in the action (Annex G). On 12 December 1955 the Court
of Appeals set aside the order denying the motion to intervene and ordered the respondent court to admit
the herein respondent corporation's complaint-in-intervention with costs against Macario Apostol.
On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the purpose stated at
the beginning of this opinion.

G.R. No. L-10141

January 31, 1958

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the COURT OF
APPEALS, respondents.
Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C. Zaballero for petitioner.
Vicente L. Santiago for respondent Corporation.
PADILLA, J.:
This is a petition under Rule 46 to review a judgment rendered by the Court of Appeals,in CA-GR No.
15767-R, Philippine Resources Development Corporation vs. The Hon. Judge Magno Gatmaitan et al.
The findings of the Court of Appeals are, as follows.
It appears that on May 6, 1955, the Republic of the Philippines in representation of the Bureau
of Prisons instituted against Macario Apostol and the Empire Insurance Co. a complaint
docketed as Civil Case No. 26166 of the Court of First instance of Manila. The complaint alleges
as the first cause of action, that defendant Apostol submitted the highest bid the amount

The Goverment contends that the intervenor has no legal interest in the matter in litigation, because the
action brought in the Court of First Instance of Manila against Macario Apostol and the Empire Insurance
Company (Civil Case No. 26166, Annex A) is just for the collection from the defendant Apostol of a sum of
money, the unpaid balance of the purchase price of logs and almaciga bought by him from the Bureau of
Prisons, whereas the intervenor seeks to recover ownership and possession of G. I. sheets, black sheets,
M. S. plates, round bars and G. I. pipes that it claims its owns-an intervention which would change a
personal action into one ad rem and would unduly delay the disposition of the case.
The Court of Appeals held that:
Petitioner ardently claims that the reason behind its motion to intervene is the desire to protect
its rights and interests over some materials purportedly belonging to it; that said material were
unauthorizedly and illegally assigned and delivered to the Bureau of Prisons by petitioning
corporation's president Macario Apostol in payment of the latter's personal accounts with the
said entity; and that the Bureau of Prisons refused to return said materials despite petitioner's
demands to do so.
Petitioner refers to the particulars recited in Apostol's answer dated July 12, 1955 to the effect
that Apostol had paid unto the Bureau of Prisons his accounts covered, among others, by BPPO
1077 for the sum of P4,638.40 and BPPO 1549 for the amount of P4,398.54. Petitioner
moreover, points to the State of Paid and Unpaid accounts of Apostol dated January 16, 1954
prepared by the accounting of officer of the Bureau of Prisons (Annex B. Complaint in

Intervention), wherein it appears that the aforementioned accounts covered respectively by

BPPO Nos. 1077 for 892 pieces of GI sheets and 1549 for 399 pieces of GI pipes in the total
sum of P9,036.94 have not been credited to Apostol's account in view of lack of supporting
papers; and that according to the reply letter of the Undersecretary of Justice, said GI sheets
and pipes were delivered by Macario Apostol to the Bureau of Prisons allegedly in Apostol's
capacity as owner and that the black iron sheets were delivered by Apostol as President of the
petitioner corporation.
Respondents, on the other hand, assert that the subject matter of the original litigation is a
sum of money allegedly due to the Bureau of Prisons from Macario Apostol and not the goods
or the materials reportedly turned over by Apostol as payment of his private debts to the
Bureau of Prisons and the recovery of which is sought by the petitioner; and that for this
reason, petitioner has no legal interest in the very subject matter in litigation as to entitle it to
intervene.
We find no merit in respondents' contention. It is true that the very subject matter of the
original case is a sum of money. But it is likewise true as borne out by the records, that the
materials purportedly belonging to the petitioner corporation have been assessed and evaluated
and their price equivalent in terms of money have been determined; and that said materials for
whatever price they have been assigned by defendant now respondent Apostol as tokens of
payment of his private debts with the Bureau of Prisons. In view of these considerations, it
becomes enormously plain in the event the respondent judge decides to credit Macario Apostol
with the value of the goods delivered by the latter to the Bureau of Prisons, the petitioner
corporation stands to be adversely affected by such judgment. The conclusion, therefore, is
inescapable that the petitioner possesses a legal interest in the matter in litigation and that
such interest is of an actual, material, direct and immediate nature as to entitle petitioner to
intervene.
xxx

xxx

xxx

Section 3 of Rule 13 of the Rules of Court endows the lower Court with discretion to allow or
disapprove the motion for intrvention (Santarromana et al. vs. Barrios, 63 Phil. 456); and that
in the exercise of such discretion, the court shall consider whether or not the intervention will
unduly delay or prejudice the adjudicatio of the rights of the original parties and whether or not
the intervenors the rights may be fully protected in a separate proceeding. The petitioner in the
instant case positively authorized to a separate action against any of all the respondents. But
considering that the resolution of the issues raised in and enjoined by the pleadings in the main
case, would virtally affect the rights not only the original parties but also of the berein
petitioner: that far from unduly delaying or prejudicing the adjudication of the rights of the
original parties or bringing about confusion in the original case, the adnission of the complaint
in intervention would help clarify the vital issue of the true and real ownership of the materials
involved, besides preventing an abhorrent munltiplicity of suit, we believe that the motion to
intervene should be given due to cause.
We find no reason for disturbing the foregoing pronouncements. The Government argues that "Price . . .
is always paid in terms of money and the supposed payment beeing in kind, it is no payment at all, "citing
Article 1458 of the new Civil Code. However, the same Article provides that the purschaser may pay "a
price certain in money or its equivalent," which means that they meant of the price need not be in money.
Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes claimed by the respondent
corporation to belong to it and delivered to the Bureau of Prison by Macario Apostol in payment of his
account is sufficient payment therefore, is for the court to pass upon and decide after hearing all the
parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the
materials delivered by him, certainly the herein respondent corporation would be affected adversely if its
claim of ownership of such sheets, plates, bars and pipes is true.

resolution to proceed against Apostol, had been unanonimously adopted by the stockholders of
the corporation, has not been refuted.
Evidently, petitioner is a duly organized corporation with offices at the Samanillo Building and
that as such, it is endowed with a personality distinct and separate from that of its president or
stockholders. It has the right to bring suit to safeguard its interests and ordinarily, such right is
exercised at the instance of the president. However, under the circumstance now obtaining,
such right properly devolves upon the other officers of the corporations as said right is sought
to be exercised against the president himself who is the very object of the intended suit.
The power of a corporation to sue and be sued in any court 1 is lodged in the board of directors which
exercises it corporater powers, 2 and not in the president, as contended by the Government. The "motion
for admission of complaint in intervention" (Annex C) and the "complaint in intervention" attached
thereto, signed by counsel and filed in the Court of First Instance begin with the following statement:
"COMES NOW the above-name Intervenor, by its undersigned counsel, . . . , "and underneath his
typewritten name is affixed the description" Counsel for the Intervenor." As counsels authority to appeal
for the respondent corporation was newer questioned in the Court of First Instance, it is to be pressumed
that he was properly authorized to file the complaint in intervention and appeal for his client. 1 It was only
in the Court of Appeals where his authority to appear was questioned. As the Court of Appeals was
satisfied that counsel was duly authorized by his client to file the complaint does in intervention and to
appear in its behalf, hte resolution of the Court of Appeals on this point should not be disturbed.
Granting that counsel has not been actually authorized by the board of directors to appear for and in
behalf of the respondent corporation, the fact that counsel is the secretary treasurer of the respondent
corporation and member of the board of directors; and that the other members of the board, namely,
Macario Apostol, the president, and his wife Pacita R. Apostol, who shuold normally initiate the action to
protect the corporate properties and in interest are the ones to be adversely affected thereby, a single
stockholder under such circumstances may sue in behalf of the corporation. 2 Counsel as a stockholder and
director of the respondent corporation may sue in its behalf and file the complaint in intervention in the
proper court.
The judgment under review is affirmed, without pronouncements as to costs.
Bengzon, Paras, C.J., Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,
Endencia, and Felix, JJ., concur.
THIRD DIVISION

[G.R. No. 134559. December 9, 1999]

ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA
BARING, petitioners, vs. COURT OF APPEALS and MANUEL TORRES, respondents.
DECISION
PANGANIBAN, J.:
Courts may not extricate parties from the necessary consequences of their acts. That the terms of
a contract turn out to be financially disadvantageous to them will not relieve them of their obligations
therein. The lack of an inventory of real property will not ipso facto release the contracting partners from
their respective obligations to each other arising from acts executed in accordance with their agreement.

The Government reiterates in its original stand that counsel appearing for the respondent corporation has
no authority to represent it or/and sue in its behalf, the Court of Appeals held that:
The Case

Respondents aver also that petitioner lacks legal capacity to sue and that its counsel is acting
merely in an individual capacity without the benefit of the corporate act authorizing him to
bring sue. In this connection, respondents invoked among others section 20 of Rule 127 which
provision, in our opinion, squarely disproves their claim as by virtue thereof, the authority of
petitioner's counsel is pressumed. Withal, the claim of the counsel for the petitioner that a

The Petition for Review on Certiorari before us assails the March 5, 1998 Decision [1] Second
Division of the Court of Appeals [2] (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution denying
reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of Cebu City
in Civil Case No. R-21208, which disposed as follows:

WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and against the
plaintiffs, orders the dismissal of the plaintiffs complaint. The counterclaims of the defendant are
likewise ordered dismissed. No pronouncement as to costs.[3]

Petitioners impute to the Court of Appeals the following error:

x x x [The] Court of Appeals erred in concluding that the transaction x x x between the petitioners and
respondent was that of a joint venture/partnership, ignoring outright the provision of Article 1769, and
other related provisions of the Civil Code of the Philippines.[8]

The Facts

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in
favor of respondent, who then had it registered in his name. By mortgaging the property, respondent
obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be
used for the development of the subdivision. [4] All three of them also agreed to share the proceeds from
the sale of the subdivided lots.

The Courts Ruling

The Petition is bereft of merit.

Main Issue: Existence of a Partnership

The project did not push through, and the land was subsequently foreclosed by the bank.
According to petitioners, the project failed because of respondents lack of funds or means and
skills. They add that respondent used the loan not for the development of the subdivision, but in
furtherance of his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement the Agreement. With
the said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu
Lapu City Councils approval of the subdivision project which he advertised in a local newspaper. He also
caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with an
engineering firm for the building of sixty low-cost housing units and actually even set up a model house
on one of the subdivision lots. He did all of these for a total expense of P85,000.
Respondent claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project. [5]
Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were
however acquitted. Thereafter, they filed the present civil case which, upon respondent's motion, was
later dismissed by the trial court in an Order dated September 6, 1982. On appeal, however, the
appellate court remanded the case for further proceedings. Thereafter, the RTC issued its assailed
Decision, which, as earlier stated, was affirmed by the CA.
Hence, this Petition.[6]

Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed a
partnership for the development of the subdivision. Thus, they must bear the loss suffered by the
partnership in the same proportion as their share in the profits stipulated in the contract. Disagreeing
with the trial courts pronouncement that losses as well as profits in a joint venture should be distributed
equally,[7] the CA invoked Article 1797 of the Civil Code which provides:
Article 1797 - The losses and profits shall be distributed in conformity with the agreement. If only the
share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the
same proportion.
The CA elucidated further:
In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to
what he may have contributed, but the industrial partner shall not be liable for the losses. As for the
profits, the industrial partner shall receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed capital, he shall also receive a share in the
profits in proportion to his capital.

The Issue

Petitioners deny having formed a partnership with respondent. They contend that the Joint Venture
Agreement and the earlier Deed of Sale, both of which were the bases of the appellate courts finding of a
partnership, were void.
In the same breath, however, they assert that under those very same contracts, respondent is
liable for his failure to implement the project. Because the agreement entitled them to receive 60 percent
of the proceeds from the sale of the subdivision lots, they pray that respondent pay them damages
equivalent to 60 percent of the value of the property.[9]
The pertinent portions of the Joint Venture Agreement read as follows:
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March, 1969, by and
between MR. MANUEL R. TORRES, x x x the FIRST PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS
EMETERIA BARING, x x x the SECOND PARTY:
W I T N E S S E T H:
That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property located at LapuLapu City, Island of Mactan, under Lot No. 1368 covering TCT No. T-0184 with a total area of 17,009
square meters, to be sub-divided by the FIRST PARTY;
Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, upon the execution of this contract for the property entrusted by
the SECOND PARTY, for sub-division projects and development purposes;
NOW THEREFORE, for and in consideration of the above covenants and promises herein contained the
respective parties hereto do hereby stipulate and agree as follows:
ONE: That the SECOND PARTY signed an absolute Deed of Sale x x x dated March 5, 1969, in the
amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50) Philippine
Currency, for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine Currency, in favor of
the FIRST PARTY, but the SECOND PARTY did not actually receive the payment.
SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary amount of
TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, for their personal obligations and this
particular amount will serve as an advance payment from the FIRST PARTY for the property mentioned to
be sub-divided and to be deducted from the sales.
THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the principal
amount involving the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, until the
sub-division project is terminated and ready for sale to any interested parties, and the amount of
TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, will be deducted accordingly.

FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should be paid
by the FIRST PARTY, exclusively and all the expenses will not be deducted from the sales after the
development of the sub-division project.
FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for the
SECOND PARTY and FORTY PERCENTUM 40% for the FIRST PARTY, and additional profits or whatever
income deriving from the sales will be divided equally according to the x x x percentage [agreed upon] by
both parties.
SIXTH: That the intended sub-division project of the property involved will start the work and all
improvements upon the adjacent lots will be negotiated in both parties['] favor and all sales shall [be]
decided by both parties.
SEVENTH: That the SECOND PARTIES, should be given an option to get back the property mentioned
provided the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, borrowed by the
SECOND PARTY, will be paid in full to the FIRST PARTY, including all necessary improvements spent by the
FIRST PARTY, and the FIRST PARTY will be given a grace period to turnover the property mentioned
above.
That this AGREEMENT shall be binding and obligatory to the parties who executed same freely and
voluntarily for the uses and purposes therein stated.[10]
A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership
pursuant to Article 1767 of the Civil Code, which provides:
ART. 1767. By the contract of partnership two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves.
Under the above-quoted Agreement, petitioners would contribute property to the partnership in the
form of land which was to be developed into a subdivision; while respondent would give, in addition to his
industry, the amount needed for general expenses and other costs. Furthermore, the income from the
said project would be divided according to the stipulated percentage. Clearly, the contract manifested the
intention of the parties to form a partnership.[11]
It should be stressed that the parties implemented the contract. Thus, petitioners transferred the
title to the land to facilitate its use in the name of the respondent. On the other hand, respondent caused
the subject land to be mortgaged, the proceeds of which were used for the survey and the subdivision of
the land. As noted earlier, he developed the roads, the curbs and the gutters of the subdivision and
entered into a contract to construct low-cost housing units on the property.
Respondents actions clearly belie petitioners contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or property,
but also industry.

Alleged Nullity of the Partnership Agreement

Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code,
which provides:
ART. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an
inventory of said property is not made, signed by the parties, and attached to the public instrument.
They contend that since the parties did not make, sign or attach to the public instrument an
inventory of the real property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article 1771,
[12]
the execution of a public instrument would be useless if there is no inventory of the property
contributed, because without its designation and description, they cannot be subject to inscription in the
Registry of Property, and their contribution cannot prejudice third persons. This will result in fraud to
those who contract with the partnership in the belief [in] the efficacy of the guaranty in which the
immovables may consist. Thus, the contract is declared void by the law when no such inventory is
made. The case at bar does not involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property.[13] They cannot in one breath deny
the contract and in another recognize it, depending on what momentarily suits their purpose. Parties
cannot adopt inconsistent positions in regard to a contract and courts will not tolerate, much less
approve, such practice.
In short, the alleged nullity of the partnership will not prevent courts from considering the Joint
Venture Agreement an ordinary contract from which the parties rights and obligations to each other may
be inferred and enforced.

Partnership Agreement Not the Result of an Earlier Illegal Contract

Petitioners also contend that the Joint Venture Agreement is void under Article 1422 [14] of the Civil
Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land
without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for the
sale was the expectation of profits from the subdivision project. Its first stipulation states that petitioners
did not actually receive payment for the parcel of land sold to respondent. Consideration, more properly
denominated as cause, can take different forms, such as the prestation or promise of a thing or service
by another.[15]
In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but
in the expectation of profits from the subdivision project, for which the land was intended to be used. As
explained by the trial court, the land was in effect given to the partnership as [petitioners] participation
therein. x x x There was therefore a consideration for the sale, the [petitioners] acting in the
expectation that, should the venture come into fruition, they [would] get sixty percent of the net profits.

Petitioners Bound by Terms of Contract

Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly
stipulated, but also to all necessary consequences thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law.
It is undisputed that petitioners are educated and are thus presumed to have understood the terms
of the contract they voluntarily signed. If it was not in consonance with their expectations, they should
have objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and
the fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve
parties thereto of their obligations. They cannot now disavow the relationship formed from such
agreement due to their supposed misunderstanding of its terms.

Liability of the Parties

Claiming that respondent was solely responsible for the failure of the subdivision project, petitioners
maintain that he should be made to pay damages equivalent to 60 percent of the value of the property,
which was their share in the profits under the Joint Venture Agreement.
We are not persuaded. True, the Court of Appeals held that petitioners acts were not the cause of
the failure of the project.[16] But it also ruled that neither was respondent responsible therefor.[17] In
imputing the blame solely to him, petitioners failed to give any reason why we should disregard the
factual findings of the appellate court relieving him of fault. Verily, factual issues cannot be resolved in a
petition for review under Rule 45, as in this case. Petitioners have not alleged, not to say shown, that
their Petition constitutes one of the exceptions to this doctrine. [18] Accordingly, we find no reversible error
in the CA's ruling that petitioners are not entitled to damages.
WHEREFORE, the Petition is hereby DENIED and the challenged Decision AFFIRMED. Costs against
petitioners.

SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of
P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No.
928, 2 on which Gilbert signed under the subheading CONFORME. This document shows that the
customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo Street, United Paraaque II;
that the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that payment is by
"installment," to be financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down as
follows:
a)
downpayment

P 53,148.00

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

b)

insurance

P 13,970.00

c)

BLT registration fee

P 1,067.00

CHMO fee

P 2,715.00

service fee

P 500.00

accessories

P 29,000.00

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

TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.
DAVIDE, JR., J.:
At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent,
which was signed by a sales representative of Toyota Shaw, Inc. named Popong Bernardo. The document
reads as follows:4 June 1989
AGREEMENTS
&
POPONG
SHAW, INC.

BETWEEN
BERNARDO

MR.
OF

SOSA
TOYOTA

1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG

BERNARDO) a week after, upon arrival of Mr. Sosa from the Province (Marinduque)
where the unit will be used on the 19th of June.

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms"
were not filled-up. It also contains the following pertinent provisions:
CONDITIONS OF SALES
1. This sale is subject to availability of unit.
2. Stated Price is subject to change without prior notice, Price prevailing and in effect
at time of selling will apply. . . .
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.

2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by
TOYOTA SHAW, INC. on the 17th of June at 10 a.m. Very truly yours, (Sgd.) POPONG
BERNARDO.
Was this document, executed and signed by the petitioner's sales representative, a perfected contract of
sale, binding upon the petitioner, breach of which would entitle the private respondent to damages and
attorney's fees? The trial court and the Court of Appeals took the affirmative view. The petitioner
disagrees. Hence, this petition for review oncertiorari.
The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as
in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa
(hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota
Lite Ace. It was then a seller's market and Sosa had difficulty finding a dealer with an available unit for
sale. But upon contacting Toyota Shaw, Inc., he was told that there was an available unit. So on 14 June
1989, Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro Manila. There
they met Popong Bernardo, a sales representative of Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his
family, and abalikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province,
where he would celebrate his birthday on the 19th of June. He added that if he does not arrive in his
hometown with the new car, he would become a "laughing stock." Bernardo assured Sosa that a unit
would be ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted
"Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the
parties that the balance of the purchase price would be paid by credit financing through B.A. Finance, and
for this Gilbert, on behalf of his father, signed the documents of Toyota and B.A. Finance pertaining to the
application for financing.

On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle would not
be ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that same day. At 2:00
p.m., Sosa and Gilbert met Bernardo at the latter's office. According to Sosa, Bernardo informed them
that the Lite Ace was being readied for delivery. After waiting for about an hour, Bernardo told them that
the car could not be delivered because "nasulot ang unit ng ibang malakas."
Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A.
Finance of the credit financing application of Sosa. It further alleged that a particular unit had already
been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of
the balance of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the
full purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment
be refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of
P100,000.00, 4 the receipt of which was shown by a check voucher of Toyota, 5 which Sosa signed with
the reservation, "without prejudice to our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, he
demanded the refund, within five days from receipt, of the downpayment of P100,000.00 plus interest
from the time he paid it and the payment of damages with a warning that in case of Toyota's failure to do
so he would be constrained to take legal action. 6 The second, dated 4 November 1989 and signed by M.
O. Caballes, Sosa's counsel, demanded one million pesos representing interest and damages, again, with
a warning that legal action would be taken if payment was not made within three days. 7 Toyota's counsel
answered through a letter dated 27 November 1989 8 refusing to accede to the demands of Sosa. But
even before this answer was made and received by Sosa, the latter filed on 20 November 1989 with
Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages under
Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. 9 He alleges, inter alia, that:

9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff,

plaintiff suffered embarrassment, humiliation, ridicule, mental anguish and sleepless
nights because: (i) he and his family were constrained to take the public
transportation from Manila to Lucena City on their way to Marinduque; (ii) his
balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid
the inconvenience of taking public transportation; and (iii) his relatives, friends,
neighbors and other provincemates, continuously irked him about "his Brand-New
Toyota Lite Ace that never was." Under the circumstances, defendant should be
made liable to the plaintiff for moral damages in the amount of One Million Pesos
(P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that
Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A" in
his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of
delivery; Sosa had not completed the documents required by the financing company, and as a matter of
policy, the vehicle could not and would not be released prior to full compliance with financing
requirements, submission of all documents, and execution of the sales agreement/invoice; the
P100,000.00 was returned to and received by Sosa; the venue was improperly laid; and Sosa did not
have a sufficient cause of action against it. It also interposed compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial session,
the trial court rendered on 18
February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR.
SOSA AND POPONG BERNARDO," was a valid perfected contract of sale between Sosa and Toyota which
bound Toyota to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in
selling to another the unit already reserved for him.

Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was
docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994, 17 the Court of Appeals
affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of
the ponenciaand also the following related issues: (a) whether or not the standard VSP was the true and
documented understanding of the parties which would have led to the ultimate contract of sale, (b)
whether or not Sosa has any legal and demandable right to the delivery of the vehicle despite the nonpayment of the consideration and the non-approval of his credit application by B.A. Finance, (c) whether
or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) whether or not
Toyota may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected
contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:

11

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

As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held
that the extent of Bernardo's authority "was not made known to plaintiff," for as testified to by Quirante,
"they do not volunteer any information as to the company's sales policy and guidelines because they are
internal matters." 13 Moreover, "[f]rom the beginning of the transaction up to its consummation when the
downpayment was made by the plaintiff, the defendants had made known to the plaintiff the impression
that Popong Bernardo is an authorized sales executive as it permitted the latter to do acts within the
scope of an apparent authority holding him out to the public as possessing power to do these
acts." 14 Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and hence bound the
defendants." 15
The court further declared that "Luna Sosa proved his social standing in the community and suffered
besmirched reputation, wounded feelings and sleepless nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor
of the plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff the sum of
P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the sum of
P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00
attorney's fees plus P2,000.00 lawyer's transportation fare per
trip in attending to the hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of
P2,000.00 transportation fare per trip of the plaintiff in attending
the hearing of this case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.

and Article 1475 specifically provides when it is deemed perfected:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It is not
a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to
Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein.
The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it
was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed
the following day confirmed. But nothing was mentioned about the full purchase price and the manner the
installments were to be paid.
This Court had already ruled that a definite agreement on the manner of payment of the price is an
essential element in the formation of a binding and enforceable contract of sale. 18 This is so because the
agreement as to the manner of payment goes into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential
element of a binding agreement to sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing,
Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF
TOYOTA SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent
that he had the authority to sell any Toyota vehicle. He knew that Bernardo was only a sales
representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with
ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an
agent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent. 21

At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation
stage of a contract of sale. There are three stages in the contract of sale, namely:
(a) preparation, conception, or generation, which is the period of negotiation and
bargaining, ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come to
agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the terms
agreed upon in the contract. 22
The second phase of the generation or negotiation stage in this case was the execution of the VSP. It
must be emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while the
balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be
assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A.
Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D.
No. 1793, as "corporations or partnerships, except those regulated by the Central Bank of the Philippines,
the Insurance Commission and the Cooperatives Administration Office, which are primarily organized for
the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural
enterprises, either by discounting or factoring commercial papers or accounts receivables, or by buying
and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of
motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment,
appliances and other movable property." 23

but misplaced pride and ego. He should not have announced his plan to buy a Toyota Lite Ace knowing
that he might not be able to pay the full purchase price. It was he who brought embarrassment upon
himself by bragging about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or
compensatory damages, he is likewise not entitled to exemplary damages. Under Article 2229 of the Civil
Code, exemplary or corrective damages are imposed by way of example or correction for the public good,
in addition to moral, temperate, liquidated, or compensatory damages.
Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body of the
decision, and not only in the dispositive portion thereof, the legal reason for the award of attorney's
fees. 26 No such explicit determination thereon was made in the body of the decision of the trial court. No
reason thus exists for such an award.
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R.
CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case No. 8914 are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The
counterclaim therein is likewise DISMISSED.
No pronouncement as to costs.
SO ORDERED.
Padilla, Bellosillo and Kapunan, JJ., concur.
Quiason, J., is on leave.

Accordingly, in a sale on installment basis which is financed by a financing company, three parties are
thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing
purchased on installment, the seller who assigns the notes or discounts them with a financing company,
and the financing company which is subrogated in the place of the seller, as the creditor of the installment
buyer. 24 Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on
the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which
reason it suggested to Sosa that he pay the full purchase price. When the latter refused, Toyota cancelled
the VSP and returned to him his P100,000.00. Sosa's version that the VSP was cancelled because,
according to Bernardo, the vehicle was delivered to another who was "mas malakas" does not inspire
belief and was obviously a delayed afterthought. It is claimed that Bernardo said, " Pasensiya kayo,
nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an hour for the delivery
of the vehicle in the afternoon of 17 June 1989. However, in paragraph 7 of his complaint, Sosa solemnly
states:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales
representative, Mr. Popong Bernardo, called plaintiff's house and informed the
plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m. of June 17,
1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to defendant's
office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant
for reasons known only to its representatives, refused and/or failed to release the
vehicle to the plaintiff. Plaintiff demanded for an explanation, but nothing was
given; . . . (Emphasis supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP
created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery
did not cause any legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal
basis. Besides, the only ground upon which Sosa claimed moral damages is that since it was known to his
friends, townmates, and relatives that he was buying a Toyota Lite Ace which they expected to see on his
birthday, he suffered humiliation, shame, and sleepless nights when the van was not delivered. The van
became the subject matter of talks during his celebration that he may not have paid for it, and this
created an impression against his business standing and reputation. At the bottom of this claim is nothing