Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 118114 December 7, 1995

TEODORO ACAP, petitioner,
vs.
COURT OF APPEALS and EDY DE LOS REYES, respondents.

PADILLA, J.:
This is a petition for review on certiorari of the decision 1 of the Court of
Appeals, 2nd Division, in CA-G.R. No. 36177, which affirmed the
decision 2 of the Regional Trial Court of Himamaylan, Negros Occidental
holding that private respondent Edy de los Reyes had acquired
ownership of Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros
Occidental based on a document entitled "Declaration of Heirship and
Waiver of Rights", and ordering the dispossession of petitioner as
leasehold tenant of the land for failure to pay rentals.
The facts of the case are as follows:
The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros
Occidental was evidenced by OCT No. R-12179. The lot has an area of
13,720 sq. meters. The title was issued and is registered in the name of
spouses Santiago Vasquez and Lorenza Oruma. After both spouses died,
their only son Felixberto inherited the lot. In 1975, Felixberto executed a
duly notarized document entitled "Declaration of Heirship and Deed of
Absolute Sale" in favor of Cosme Pido.
The evidence before the court a quo established that since 1960,
petitioner Teodoro Acap had been the tenant of a portion of the said

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land, covering an area of nine thousand five hundred (9,500) meters.

When ownership was transferred in 1975 by Felixberto to Cosme Pido,
Acap continued to be the registered tenant thereof and religiously paid
his leasehold rentals to Pido and thereafter, upon Pido's death, to his
widow Laurenciana.
The controversy began when Pido died intestate and on 27 November
1981, his surviving heirs executed a notarized document denominated
as "Declaration of Heirship and Waiver of Rights of Lot No. 1130
Hinigaran Cadastre," wherein they declared; to quote its pertinent
portions, that:
. . . Cosme Pido died in the Municipality of Hinigaran,
Negros Occidental, he died intestate and without any
known debts and obligations which the said parcel of land
is (sic) held liable.
That Cosme Pido was survived by his/her legitimate heirs,
namely: LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and
ELECHOR all surnamed PIDO; children;
That invoking the provision of Section 1, Rule 74 of the
Rules of Court, the above-mentioned heirs do hereby
declare unto [sic] ourselves the only heirs of the late
Cosme Pido and that we hereby adjudicate unto ourselves
the above-mentioned parcel of land in equal shares.
Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN
and ELECHOR all surnamed PIDO, do hereby waive,
quitclaim all our rights, interests and participation over
the said parcel of land in favor of EDY DE LOS REYES, of
legal age, (f)ilipino, married to VIRGINIA DE LOS REYES,
and resident of Hinigaran, Negros Occidental,
Philippines. . . . 4 (Emphasis supplied)
The document was signed by all of Pido's heirs. Private respondent Edy
de los Reyes did not sign said document.
It will be noted that at the time of Cosme Pido's death, title to the
property continued to be registered in the name of the Vasquez spouses.

Upon obtaining the Declaration of Heirship with Waiver of Rights in his

favor, private respondent Edy de los Reyes filed the same with the
Registry of Deeds as part of a notice of an adverse claimagainst the
original certificate of title.
Thereafter, private respondent sought for petitioner (Acap) to personally
inform him that he (Edy) had become the new owner of the land and
that the lease rentals thereon should be paid to him. Private respondent
further alleged that he and petitioner entered into an oral lease
agreement wherein petitioner agreed to pay ten (10) cavans of
palay per annum as lease rental. In 1982, petitioner allegedly complied
with said obligation. In 1983, however, petitioner refused to pay any
further lease rentals on the land, prompting private respondent to seek
the assistance of the then Ministry of Agrarian Reform (MAR) in
Hinigaran, Negros Occidental. The MAR invited petitioner to a
conference scheduled on 13 October 1983. Petitioner did not attend the
conference but sent his wife instead to the conference. During the
meeting, an officer of the Ministry informed Acap's wife about private
respondent's ownership of the said land but she stated that she and her
husband (Teodoro) did not recognize private respondent's claim of
ownership over the land.
On 28 April 1988, after the lapse of four (4) years, private respondent
filed a complaint for recovery of possession and damages against
petitioner, alleging in the main that as his leasehold tenant, petitioner
refused and failed to pay the agreed annual rental of ten (10) cavans of
palay despite repeated demands.
During the trial before the court a quo, petitioner reiterated his refusal
to recognize private respondent's ownership over the subject land. He
averred that he continues to recognize Cosme Pido as the owner of the
said land, and having been a registered tenant therein since 1960, he
never reneged on his rental obligations. When Pido died, he continued to
pay rentals to Pido's widow. When the latter left for abroad, she
instructed him to stay in the landholding and to pay the accumulated
rentals upon her demand or return from abroad.
Petitioner further claimed before the trial court that he had no
knowledge about any transfer or sale of the lot to private respondent in
1981 and even the following year after Laurenciana's departure for
abroad. He denied having entered into a verbal lease tenancy contract

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with private respondent and that assuming that the said lot was indeed
sold to private respondent without his knowledge, R.A. 3844, as
amended, grants him the right to redeem the same at a reasonable
price. Petitioner also bewailed private respondent's ejectment action as
a violation of his right to security of tenure under P.D. 27.
On 20 August 1991, the lower court rendered a decision in favor of
private respondent, the dispositive part of which reads:
WHEREFORE, premises considered, the Court renders
judgment in favor of the plaintiff, Edy de los Reyes, and
against the defendant, Teodoro Acap, ordering the
following, to wit:
1. Declaring forfeiture of defendant's preferred right to
issuance of a Certificate of Land Transfer under
Presidential Decree No. 27 and his farmholdings;
2. Ordering the defendant Teodoro Acap to deliver
possession of said farm to plaintiff, and;
3. Ordering the defendant to pay P5,000.00 as attorney's
fees, the sum of P1,000.00 as expenses of litigation and
the amount of P10,000.00 as actual damages. 5
In arriving at the above-mentioned judgment, the trial court stated that
the evidence had established that the subject land was "sold" by the
heirs of Cosme Pido to private respondent. This is clear from the
following disquisitions contained in the trial court's six (6) page decision:
There is no doubt that defendant is a registered tenant of
Cosme Pido. However, when the latter died their tenancy
relations changed since ownership of said land was
passed on to his heirs who, by executing a Deed of Sale,
which defendant admitted in his affidavit, likewise passed
on their ownership of Lot 1130 to herein plaintiff (private
respondent). As owner hereof, plaintiff has the right to
demand payment of rental and the tenant is obligated to
pay rentals due from the time demand is made. . . . 6
xxx xxx xxx

Certainly, the sale of the Pido family of Lot 1130 to herein

plaintiff does not of itself extinguish the relationship.
There was only a change of the personality of the lessor in
the person of herein plaintiff Edy de los Reyes who being
the purchaser or transferee, assumes the rights and
obligations of the former landowner to the tenant Teodoro
Acap, herein defendant. 7
Aggrieved, petitioner appealed to the Court of Appeals, imputing error to
the lower court when it ruled that private respondent acquired
ownership of Lot No. 1130 and that he, as tenant, should pay rentals to
private respondent and that failing to pay the same from 1983 to 1987,
his right to a certificate of land transfer under P.D. 27 was deemed
forfeited.
The Court of Appeals brushed aside petitioner's argument that the
Declaration of Heirship and Waiver of Rights (Exhibit "D"), the document
relied upon by private respondent to prove his ownership to the lot, was
excluded by the lower court in its order dated 27 August 1990. The order
indeed noted that the document was not identified by Cosme Pido's
heirs and was not registered with the Registry of Deeds of Negros
Occidental. According to respondent court, however, since the
Declaration of Heirship and Waiver of Rights appears to have been duly
notarized, no further proof of its due execution was necessary. Like the
trial court, respondent court was also convinced that the said document
stands as prima facie proof of appellee's (private
respondent's) ownership of the land in dispute.
With respect to its non-registration, respondent court noted that
petitioner had actual knowledge of the subjectsale of the land in dispute
to private respondent because as early as 1983, he (petitioner) already
knew of private respondent's claim over the said land but which he
thereafter denied, and that in 1982, he (petitioner) actually paid rent to
private respondent. Otherwise stated, respondent court considered this
fact of rental payment in 1982 as estoppel on petitioner's part to
thereafter refute private respondent's claim of ownership over the said
land. Under these circumstances, respondent court ruled that indeed
there was deliberate refusal by petitioner to pay rent for a continued
period of five years that merited forfeiture of his otherwise preferred
right to the issuance of a certificate of land transfer.

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In the present petition, petitioner impugns the decision of the Court of

Appeals as not in accord with the law and evidence when it rules that
private respondent acquired ownership of Lot No. 1130 through the
aforementioned Declaration of Heirship and Waiver of Rights.
Hence, the issues to be resolved presently are the following:
1. WHETHER OR NOT THE SUBJECT DECLARATION OF
HEIRSHIP AND WAIVER OF RIGHTS IS A RECOGNIZED
MODE OF ACQUIRING OWNERSHIP BY PRIVATE
RESPONDENT OVER THE LOT IN QUESTION.
2. WHETHER OR NOT THE SAID DOCUMENT CAN BE
CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE
RESPONDENT OF THE LOT IN QUESTION.
Petitioner argues that the Regional Trial Court, in its order dated 7
August 1990, explicitly excluded the document marked as Exhibit "D"
(Declaration of Heirship, etc.) as private respondent's evidence because
it was not registered with the Registry of Deeds and was not identified
by anyone of the heirs of Cosme Pido. The Court of Appeals, however,
held the same to be admissible, it being a notarized document, hence,
a prima facie proof of private respondents' ownership of the lot to which
it refers.
Petitioner points out that the Declaration of Heirship and Waiver of
Rights is not one of the recognized modes of acquiring ownership under
Article 712 of the Civil Code. Neither can the same be considered a deed
of sale so as to transfer ownership of the land to private respondent
because no consideration is stated in the contract (assuming it is a
contract or deed of sale).
Private respondent defends the decision of respondent Court of Appeals
as in accord with the evidence and the law. He posits that while it may
indeed be true that the trial court excluded his Exhibit "D" which is the
Declaration of Heirship and Waiver of Rights as part of his evidence, the
trial court declared him nonetheless owner of the subject lot based on
other evidence adduced during the trial, namely, the notice of adverse
claim (Exhibit "E") duly registered by him with the Registry of Deeds,
which contains the questioned Declaration of Heirship and Waiver of
Rights as an integral part thereof.

We find the petition impressed with merit.

In the first place, an asserted right or claim to ownership or a real right
over a thing arising from a juridical act, however justified, is not per
se sufficient to give rise to ownership over the res. That right or title
must be completed by fulfilling certain conditions imposed by law.
Hence, ownership and real rights are acquired only pursuant to a legal
mode or process. While title is the juridical justification, mode is the
actual process of acquisition or transfer of ownership over a thing in
question. 8
Under Article 712 of the Civil Code, the modes of acquiring ownership
are generally classified into two (2) classes, namely, the original
mode (i.e., through occupation, acquisitive prescription, law or
intellectual creation) and thederivative mode (i.e., through
succession mortis causa or tradition as a result of certain contracts, such
as sale, barter, donation, assignment or mutuum).
In the case at bench, the trial court was obviously confused as to the
nature and effect of the Declaration of Heirship and Waiver of Rights,
equating the same with a contract (deed) of sale. They are not the
same.
In a Contract of Sale, one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the
other party to pay a price certain in money or its equivalent. 9
Upon the other hand, a declaration of heirship and waiver of rights
operates as a public instrument when filed with the Registry of Deeds
whereby the intestate heirs adjudicate and divide the estate left by the
decedent among themselves as they see fit. It is in effect an
extrajudicial settlement between the heirs under Rule 74 of the Rules of
Court. 10
Hence, there is a marked difference between a sale of hereditary rights
and a waiver of hereditary rights. The first presumes the existence of a
contract or deed of sale between the parties. 11 The second is,
technically speaking, a mode of extinction of ownership where there is
an abdication or intentional relinquishment of a known right with
knowledge of its existence and intention to relinquish it, in favor of other
persons who are co-heirs in the succession. 12Private respondent, being

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then a stranger to the succession of Cosme Pido, cannot conclusively

claim ownership over the subject lot on the sole basis of the waiver
document which neither recites the elements of either a sale, 13 or a
donation, 14 or any other derivative mode of acquiring ownership.
Quite surprisingly, both the trial court and public respondent Court of
Appeals concluded that a "sale" transpired between Cosme Pido's heirs
and private respondent and that petitioner acquired actual knowledge of
said sale when he was summoned by the Ministry of Agrarian Reform to
discuss private respondent's claim over the lot in question. This
conclusion has no basis both in fact and in law.
On record, Exhibit "D", which is the "Declaration of Heirship and Waiver
of Rights" was excluded by the trial court in its order dated 27 August
1990 because the document was neither registered with the Registry of
Deeds nor identified by the heirs of Cosme Pido. There is no showing
that private respondent had the same document attached to or made
part of the record. What the trial court admitted was Annex "E", a notice
of adverse claim filed with the Registry of Deeds which contained the
Declaration of Heirship with Waiver of rights and was annotated at the
back of the Original Certificate of Title to the land in question.
A notice of adverse claim, by its nature, does not however prove private
respondent's ownership over the tenanted lot. "A notice of adverse claim
is nothing but a notice of a claim adverse to the registered owner, the
validity of which is yet to be established in court at some future date,
and is no better than a notice of lis pendens which is a notice of a case
already pending in court." 15
It is to be noted that while the existence of said adverse claim was duly
proven, there is no evidence whatsoever that a deed of sale was
executed between Cosme Pido's heirs and private respondent
transferring the rights of Pido's heirs to the land in favor of private
respondent. Private respondent's right or interest therefore in the
tenanted lot remains an adverse claim which cannot by itself be
sufficient to cancel the OCT to the land and title the same in private
respondent's name.
Consequently, while the transaction between Pido's heirs and
private respondent may be binding on both parties, the right of
petitioner as a registered tenant to the land cannot be

perfunctorily forfeited on a mere allegation of private

respondent's ownership without the corresponding proof thereof.
Petitioner had been a registered tenant in the subject land since 1960
and religiously paid lease rentals thereon. In his mind, he continued to
be the registered tenant of Cosme Pido and his family (after Pido's
death), even if in 1982, private respondent allegedly informed petitioner
that he had become the new owner of the land.
Under the circumstances, petitioner may have, in good faith, assumed
such statement of private respondent to be true and may have in fact
delivered 10 cavans of palay as annual rental for 1982 to private
respondent. But in 1983, it is clear that petitioner had misgivings over
private respondent's claim of ownership over the said land because in
the October 1983 MAR conference, his wife Laurenciana categorically
denied all of private respondent's allegations. In fact, petitioner even
secured a certificate from the MAR dated 9 May 1988 to the effect that
he continued to be the registered tenant of Cosme Pido and not of
private respondent. The reason is that private respondent never
registered the Declaration of Heirship with Waiver of Rights with the
Registry of Deeds or with the MAR. Instead, he (private respondent)
sought to do indirectly what could not be done directly,i.e., file a notice
of adverse claim on the said lot to establish ownership thereover.

petitioner Acap is hereby DISMISSED for failure to properly state a cause

of action, without prejudice to private respondent taking the proper legal
steps to establish the legal mode by which he claims to have acquired
ownership of the land in question.
SO ORDERED.
Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.
Footnotes
1 Penned by Purisima, J., Chairman, with Isnani, J. and
Ibay-Somera, J. concurring.
2 Penned by Executive Judge Jose Aguirre, Jr.
3 The RTC decision used the name Luzviminda. The CA
used the name Laudenciana.
4 Annex A, Petition; Rollo, p. 14.
5 Annex "D", Petition Rollo, p. 29.

It stands to reason, therefore, to hold that there was no unjustified or

deliberate refusal by petitioner to pay the lease rentals or amortizations
to the landowner/agricultural lessor which, in this case, private
respondent failed to establish in his favor by clear and convincing
evidence. 16

6 Ibid., p. 27.

Consequently, the sanction of forfeiture of his preferred right to be

issued a Certificate of Land Transfer under P.D. 27 and to the possession
of his farmholdings should not be applied against petitioners, since
private respondent has not established a cause of action for recovery of
possession against petitioner.

9 Article 1458, Civil Code.

WHEREFORE, premises considered, the Court hereby GRANTS the

petition and the decision of the Court of Appeals dated 1 May 1994
which affirmed the decision of the RTC of Himamaylan, Negros
Occidental dated 20 August 1991 is hereby SET ASIDE. The private
respondent's complaint for recovery of possession and damages against

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7 Ibid., p. 28.
8 Reyes, An Outline of Philippine Civil Law, Vol. II p. 20.

10 Paulmitos v. CA, G.R. No. 61584, Nov. 25, 1992, 215

SCRA 867, 868; Uberas v. CFI of Negros, G.R. No. 4248,
October 30, 1978, 86 SCRA 145, 147; Abrasia v. Carian,
G.R. No. 9510, October 31, 1957.
11 See Aguirre v. Atienza, G.R. No. L-10665, Aug. 30,
1958; Mari v. Bonilla, G.R. No. 852, March 19, 1949;
Robles v. CA, 647494 83 SCRA 181, 182, May 15, 1978.

12 See Borromeo Herrera v. Borromeo, G.R. No. L-41171,

July 23, 1987, 152 SCRA 171.
13 See note 10 - supra.
14 Osorio v. Osorio and Ynchausti Steamship Co. No.
16544, March 20, 1921.
15 Somes v. Government of the Philippines, No. 42754,
October 30, 1935.62 Phil. 432.
16 See Laureto v. CA, G.R. No. 95838, August 7, 1992, 212
SCRA 397. Cuno v. CA, G.R. L-62985, April 2, 1984, 128
SCRA 567.

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THIRD DIVISION

------------------------------------------

[G.R. No. 103577. October 7, 1996]

P1,190,000.00 - Balance

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.

CORONEL, ANNABELLE C. GONZALES (for herself and on
behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO
A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA
BALAIS
MABANAG, petitioners, vs.
THE
COURT
OF
APPEALS, CONCEPCION D. ALCARAZ and RAMONA
PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited house
and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.

DECISION

On our presentation of the TCT already in or name, We will immediately

execute the deed of absolute sale of said property and Miss Ramona
Patricia Alcaraz shall immediately pay the balance of theP1,190,000.00.

MELO, J.:
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last named,
Catalina Balais Mabanag) to consummate the sale of a parcel of land
with its improvements located along Roosevelt Avenue in Quezon City
entered into by the parties sometime in January 1985 for the price
of P1,240,000.00.
The undisputed facts of the case were summarized by respondent
court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al.
(hereinafter referred to as Coronels) executed a document entitled
Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia
Alcaraz (hereinafter referred to as Ramona) which is reproduced
hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment

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We bind ourselves to effect the transfer in our names from our

deceased father, Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the down payment above-stated.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00)
pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt of
the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels
will execute the deed of absolute sale in favor of Ramona and the latter
will pay the former the whole balance of One Million One Hundred Ninety
Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D.
Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid
the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of
the Coronels father was transferred in their names under TCT No.
327043 (Exh. D; Exh 4)

On February 18, 1985, the Coronels sold the property covered by TCT
No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter
referred to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand
(P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)

On April 14, 1988, the case was submitted for resolution before
Judge Reynaldo Roura, who was then temporarily detailed to preside
over Branch 82 of the RTC of Quezon City. OnMarch 1, 1989, judgment
was handed down by Judge Roura from his regular bench at Macabebe,
Pampanga for the Quezon City branch, disposing as follows:

For this reason, Coronels canceled and rescinded the contract (Exh. A)
with Ramona by depositing the down payment paid by Concepcion in
the bank in trust for Ramona Patricia Alcaraz.

WHEREFORE, judgment for specific performance is hereby rendered

ordering defendant to execute in favor of plaintiffs a deed of absolute
sale covering that parcel of land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of
Deeds for Quezon City, together with all the improvements existing
thereon free from all liens and encumbrances, and once accomplished,
to immediately deliver the said document of sale to plaintiffs and upon
receipt thereof, the plaintiffs are ordered to pay defendants the whole
balance of the purchase price amounting toP1,190,000.00 in
cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds
for Quezon City in the name of intervenor is hereby canceled and
declared to be without force and effect. Defendants and intervenor and
all other persons claiming under them are hereby ordered to vacate the
subject property and deliver possession thereof to plaintiffs. Plaintiffs
claim for damages and attorneys fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.

On February 22, 1985, Concepcion, et. al., filed a complaint for a specific
performance against the Coronels and caused the annotation of a notice
of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse
claim covering the same property with the Registry of Deeds of Quezon
City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over
the subject property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the
name of Catalina under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83,
RTC, Quezon City) the parties agreed to submit the case for decision
solely on the basis of documentary exhibits.Thus, plaintiffs therein (now
private respondents) proffered their documentary evidence accordingly
marked as Exhibits A through J, inclusive of their corresponding
submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked them as
Exhibits 1 through 10, likewise inclusive of their corresponding
submarkings.Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective
memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereto, after which, the case would be
deemed submitted for resolution.

8 | Page

No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new
presiding judge of the Quezon City RTC but the same was denied by
Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision
and to render anew decision by the undersigned Presiding Judge should
be denied for the following reasons: (1) The instant case became
submitted for decision as of April 14, 1988 when the parties terminated
the presentation of their respective documentary evidence and when
the Presiding Judge at that time was Judge Reynaldo Roura. The fact that

they were allowed to file memoranda at some future date did not
change the fact that the hearing of the case was terminated before
Judge Roura and therefore the same should be submitted to him for
decision; (2) When the defendants and intervenor did not object to the
authority of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time before the
undersigned Presiding Judge at the hearing of a pending incident in Civil
Case No. Q-46145 on November 11, 1988, they were deemed to have
acquiesced thereto and they are now estopped from questioning said
authority of Judge Roura after they received the decision in question
which happens to be adverse to them; (3) While it is true that Judge
Reynaldo Roura was merely a Judge-on-detail at this Branch of the
Court, he was in all respects the Presiding Judge with full authority to act
on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe,
Pampanga, he did not lose his authority to decide or resolve cases
submitted to him for decision or resolution because he continued as
Judge of the Regional Trial Court and is of co-equal rank with the
undersigned Presiding Judge. The standing rule and supported by
jurisprudence is that a Judge to whom a case is submitted for decision
has the authority to decide the case notwithstanding his transfer to
another branch or region of the same court (Sec. 9, Rule 135, Rule of
Court).

Petitioners thereupon interposed an appeal, but on December 16,

1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.)
rendered its decision fully agreeing with the trial court.

Coming now to the twin prayer for reconsideration of the Decision dated
March 1, 1989 rendered in the instant case, resolution of which now
pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she
is convinced that the Decision of March 1, 1989 is supported by
evidence and, therefore, should not be disturbed.

Art. 1305. A contract is a meeting of minds between two persons

whereby one binds himself, with respect to the other, to give something
or to render some service.

IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to

Annul Decision and Render Anew Decision by the Incumbent Presiding
Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)

9 | Page

Hence, the instant petition which was filed on March 5, 1992. The
last pleading, private respondents Reply Memorandum, was filed
on September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary
inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the
disquisition of respondent court in the affirmance of the trial courts
decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the
resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled Receipt
of Down Payment which was offered in evidence by both parties. There
is no dispute as to the fact that the said document embodied the
binding contract between Ramona Patricia Alcaraz on the one hand, and
the heirs of Constancio P. Coronel on the other, pertaining to a particular
house and lot covered by TCT No. 119627, as defined in Article 1305 of
the Civil Code of the Philippines which reads as follows:

While, it is the position of private respondents that the Receipt of

Down Payment embodied a perfected contract of sale, which perforce,
they seek to enforce by means of an action for specific performance,
petitioners on their part insist that what the document signified was a
mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who left
for the United States of America, said contract could not possibly ripen
into a contract of absolute sale.
Plainly, such variance in the contending parties contention is
brought about by the way each interprets the terms and/or conditions
set forth in said private instrument. Withal, based on whatever relevant
and admissible evidence may be available on record, this Court, as were

the courts below, is now called upon to adjudge what the real intent of
the parties was at the time the said document was executed.

which is not a breach, casual or serious, but simply an event that

prevented the obligation of the vendor to convey title from acquiring
binding force.

The Civil Code defines a contract of sale, thus:

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.
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract of sale
are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a
contract to sell, the prospective seller explicitly reserves the transfer of
title to the prospective buyer, meaning, the prospective seller does not
as yet agree or consent to transfer ownership of the property subject of
the contract to sell until the happening of an event, which for present
purposes we shall take as the full payment of the purchase price. What
the seller agrees or obliges himself to do is to fulfill his promise to sell
the subject property when the entire amount of the purchase price is
delivered to him. In other words the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of which prevents
the obligation to sell from arising and thus, ownership is retained by the
prospective seller without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion
to rule:
Hence, We hold that the contract between the petitioner and the
respondent was a contract to sell where the ownership or title is
retained by the seller and is not to pass until the full payment of the
price, such payment being a positive suspensive condition and failure of

10 | P a g e

Stated positively, upon the fulfillment of the suspensive condition

which is the full payment of the purchase price, the prospective sellers
obligation to sell the subject property by entering into a contract of sale
with the prospective buyer becomes demandable as provided in Article
1479 of the Civil Code which states:
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 of the promise is supported
by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the ownership
of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full payment
of the purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract of
sale, the first element of consent is present, although it is conditioned
upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated (cf. Homesite and Housing Corp.
vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected, such that
if there had already been previous delivery of the property subject of the
sale to the buyer, ownership thereto automatically transfers to the buyer
by operation of law without any further act having to be performed by
the seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not

automatically transfer to the buyer although the property may have

been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of
absolute sale.

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited
house and lot, covered by TCT No. 1199627 of the Registry of Deeds of
Quezon City, in the total amount of P1,240,000.00.

It is essential to distinguish between a contract to sell and a

conditional contract of sale specially in cases where the subject property
is sold by the owner not to the party the seller contracted with, but to a
third person, as in the case at bench. In a contract to sell, there being no
previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer
in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such case. Title
to the property will transfer to the buyer after registration because there
is no defect in the owner-sellers title per se, but the latter, of course,
may be sued for damages by the intending buyer.

without any reservation of title until full payment of the entire purchase
price, the natural and ordinary idea conveyed is that they sold their
property.

In a conditional contract of sale, however, upon the fulfillment of the

suspensive condition, the sale becomes absolute and this will definitely
affect the sellers title thereto. In fact, if there had been previous delivery
of the subject property, the sellers ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person. Applying Article 1544 of
the Civil Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the sellers title, or at
least was charged with the obligation to discover such defect, cannot be
a registrant in good faith. Such second buyer cannot defeat the first
buyers title. In case a title is issued to the second buyer, the first buyer
may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the
task of deciphering the real nature of the contract entered into by
petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used
therein should be given their natural and ordinary meaning unless a
technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA
586 [1992]). Thus, when petitioners declared in the said Receipt of
Down Payment that they --

11 | P a g e

When the Receipt of Down payment is considered in its entirety, it

becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate
of title was still in the name of petitioners father, they could not fully
effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in
their names from that of their father, after which, they promised to
present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the
sellers herein made no express reservation of ownership or title to the
subject parcel of land. Furthermore, the circumstance which prevented
the parties from entering into an absolute contract of sale pertained to
the sellers themselves (the certificate of title was not in their names)
and not the full payment of the purchase price. Under the established
facts and circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-sellers at that
time, there would have been no reason why an absolute contract of sale
could not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar
did not merely promise to sell the property to private respondent upon
the fulfillment of the suspensive condition. On the contrary, having
already agreed to sell the subject property, they undertook to have the
certificate of title change to their names and immediately thereafter, to
execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where
the sellers, after compliance by the buyer with certain terms and
conditions, promised to sell the property to the latter.What may be
perceived from the respective undertakings of the parties to the
contract is that petitioners had already agreed to sell the house and lot
they inherited from their father, completely willing to transfer ownership
of the subject house and lot to the buyer if the documents were then in
order. It just so happened, however, that the transfer certificate of title
was then still in the name of their father. It was more expedient to first
effect the change in the certificate of title so as to bear their
names. That is why they undertook to cause the issuance of a new
transfer of the certificate of title in their names upon receipt of the down
payment in the amount of P50,000.00. As soon as the new certificate of
title is issued in their names, petitioners were committed to immediately
execute the deed of absolute sale. Only then will the obligation of the
buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installment by withholding ownership over
the property until the buyer effects full payment therefor, in the contract
entered into in the case at bar, the sellers were the ones who were
unable to enter into a contract of absolute sale by reason of the fact that
the certificate of title to the property was still in the name of their
father. It was the sellers in this case who, as it were, had the
impediment which prevented, so to speak, the execution of an contract
of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said Receipt of Down Payment was prepared
and signed by petitioners Romulo A. Coronel,et. al., the parties had
agreed to a conditional contract of sale, consummation of which is
subject only to the successful transfer of the certificate of title from the
name of petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in
fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus, on said date,
the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act required
for the consummation thereof being the delivery of the property by
means of the execution of the deed of absolute sale in a public

12 | P a g e

instrument, which petitioners unequivocally committed themselves to do

as evidenced by the Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code,
plainly applies to the case at bench. Thus,
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.
Art. 1181. In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioners names was fulfilled on
February 6, 1985, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as
sellers, were obliged to present the transfer certificate of title already in
their names to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her
part, was obliged to forthwith pay the balance of the purchase price
amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of
their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect
the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the downpayment abovestated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)
(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract

of sale subject to a suspensive condition. Only, they contend, continuing
in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first
transferring the title to the property under their names, there could be
no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article
1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more
controlling than these mere hypothetical arguments is the fact that
the condition herein referred to was actually and indisputably
fulfilled on February 6, 1985, when a new title was issued in the
names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced
by the document denominated as Receipt of Down Payment (Exh. A;
Exh. 1), the parties entered into a contract of sale subject to the
suspensive condition that the sellers shall effect the issuance of new
certificate title from that of their fathers name to their names and that,
on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides Art. 1187. The effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the constitution
of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each
case, the retroactive effect of the condition that has been complied with.

13 | P a g e

the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time of
fulfillment or occurrence of the suspensive condition on February 6,
1985. As of that point in time, reciprocal obligations of both seller and
buyer arose.
Petitioners also argue there could been no perfected contract on
January 19, 1985 because they were then not yet the absolute owners of
the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the
property, rights and obligations to the extent and value of the
inheritance of a person are transmitted through his death to another or
others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters
of the decedent Constancio P. Coronel are compulsory heirs who were
called to succession by operation of law.Thus, at the point their father
drew his last breath, petitioners stepped into his shoes insofar as the
subject property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon them. It is
expressly provided that rights to the succession are transmitted from
the moment of death of the decedent (Article 777, Civil Code; Cuison vs.
Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be
declared unless the creditors have been paid is rendered moot by the
fact that they were able to effect the transfer of the title to the property
from the decedents name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their
supposed lack of capacity to enter into an agreement at that time and
they cannot be allowed to now take a posture contrary to that which
they took when they entered into the agreement with private
respondent Ramona P. Alcaraz. The Civil Code expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered

conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject
property at the time of sale, petitioners cannot claim now that they were
not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected
contract of sale between them and Ramona P. Alcaraz, the latter breach
her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without
leaving her address, telephone number, and Special Power of Attorney
(Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners
conclude, they were correct in unilaterally rescinding the contract of
sale.
We do not agree with petitioners that there was a valid rescission of
the contract of sale in the instant case. We note that these supposed
grounds for petitioners rescission, are mere allegations found only in
their responsive pleadings, which by express provision of the rules, are
deemed controverted even if no reply is filed by the plaintiffs (Sec. 11,
Rule 6, Revised Rules of Court). The records are absolutely bereft of any
supporting evidence to substantiate petitioners allegations. We have
stressed time and again that allegations must be proven by sufficient
evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs.
Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence
(Lagasca vs. De Vera, 79 Phil. 376 [1947]).

who had acted for and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion D. Alcaraz
with her own personal Check (Exh. B; Exh. 2) for and in behalf of
Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcions authority to represent Ramona P. Alcaraz when
they accepted her personal check. Neither did they raise any objection
as regards payment being effected by a third person. Accordingly, as far
as petitioners are concerned, the physical absence of Ramona P. Alcaraz
is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in
default, insofar as her obligation to pay the full purchase price is
concerned. Petitioners who are precluded from setting up the defense of
the physical absence of Ramona P. Alcaraz as above-explained offered
no proof whatsoever to show that they actually presented the new
transfer certificate of title in their names and signified their willingness
and readiness to execute the deed of absolute sale in accordance with
their agreement. Ramonas corresponding obligation to pay the balance
of the purchase price in the amount of P1,190,000.00 (as buyer) never
became due and demandable and, therefore, she cannot be deemed to
have been in default.
Article 1169 of the Civil Code defines when a party in a contract
involving reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay
from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation.
xxx

Even assuming arguendo that Ramona P. Alcaraz was in the United

States of America on February 6, 1985, we cannot justify petitionerssellers act of unilaterally and extrajudicially rescinding the contract of
sale, there being no express stipulation authorizing the sellers to
extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA
375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence
of Ramona P. Alcaraz because although the evidence on record shows
that the sale was in the name of Ramona P. Alcaraz as the buyer, the
sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother,

14 | P a g e

In reciprocal obligations, neither party incurs in delay if the other does

not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfill his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract
of sale between petitioners and respondents.

With the foregoing conclusions, the sale to the other petitioner,

Catalina B. Mabanag, gave rise to a case of double sale where Article
1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be movable
property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence thereof
to the person who presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated
April 25, 1985 as proof of the second contract of sale was registered
with the Registry of Deeds of Quezon City giving rise to the issuance of a
new certificate of title in the name of Catalina B. Mabanag on June 5,
1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or
ownership to pass to the buyer, the exceptions being: (a) when the
second buyer, in good faith, registers the sale ahead of the first buyer,
and (b) should there be no inscription by either of the two buyers, when
the second buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice
of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the
subject, now a distinguished member of the Court, Justice Jose C. Vitug,
explains:
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second sale
cannot defeat the first buyers rights except when the second buyer first
registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA
33). Conversely, knowledge gained by the second buyer of the first sale

15 | P a g e

defeats his rights even if he is first to register, since knowledge taints

his registration with bad faith (see also Astorga vs. Court of Appeals,
G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No.
56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to
merit the protection of Art. 1544, second paragraph, that the second
realty buyer must act in good faith in registering his deed of sale
(citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA,
G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition,
p. 604).
Petitioners point out that the notice of lis pendens in the case at bar
was annotated on the title of the subject property only on February 22,
1985, whereas, the second sale between petitioners Coronels and
petitioner Mabanag was supposedly perfected prior thereto or on
February 18, 1985. The idea conveyed is that at the time petitioner
Mabanag, the second buyer, bought the property under a clean title, she
was unaware of any adverse claim or previous sale, for which reason she
is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not
whether or not the second buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without
knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner
Mabanag could not have in good faith, registered the sale entered into
on February 18, 1985 because as early as February 22, 1985, a notice
of lis pendens had been annotated on the transfer certificate of title in
the names of petitioners, whereas petitioner Mabanag registered the
said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged
with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners title to the property at the time of the registration of the
property.

This Court had occasions to rule that:

If a vendee in a double sale registers the sale after he has acquired
knowledge that there was a previous sale of the same property to a third
party or that another person claims said property in a previous sale, the
registration will constitute a registration in bad faith and will not confer
upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil.
554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and
Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between
petitioners and Catalina B. Mabanag on February 18, 1985, was correctly
upheld by both the courts below.
Although there may be ample indications that there was in fact an
agency between Ramona as principal and Concepcion, her mother, as
agent insofar as the subject contract of sale is concerned, the issue of
whether or not Concepcion was also acting in her own behalf as a cobuyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not
touch this issue and no longer disturb the lower courts ruling on this
point.
WHEREFORE, premises considered, the instant petition is hereby
DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., and Francisco, JJ., concur.
Panganiban, J., no part.

16 | P a g e

CO

v.

COURT OF APPEALS
312 SCRA 528

Facts:
Plaintiff Adoracion Custodio entered into a verbal contract with
defendants spouses Co for the purchase of the latters house and lot
located at Alabang, Metro Manila at the agreed purchase price of
$100,000.00 payable in two payments $40,000.00 in Dec. 4, 1984 and
the balance of $60,000.00 on January 5, 1985. A week thereafter,
plaintiff paid defendants the amount of $1,000.00 and Php40,000.00 as
earnest money. On January 25, 1985, although the period of payment
had already expired, plaintiff paid to defendants the sum of $30,000.00
as partial payment. On March 15, 1985, defendants demanded from
plaintiff payment of the balance of purchase price but to no avail. On
Aug. 8, 1986, defendants informed plaintiff that she lost her option to
purchase the property and that her other rights to the property including
payments already made are forfeited. On Sept. 5, 1986, plaintiff
informed defendants that she is now ready to pay the remaining balance
but was ignored by the latter. Plaintiff then filed an action for rescission.
The lower court ruled that the earnest money is forfeited. It also
ordered defendants to remit to plaintiff the peso equivalent of
$30,000.00 representing the partial payment of purchase price.
Defendants appealed arguing that plaintiff had already lost her right on
option to purchase and that her failure to exercise said option resulted in
forfeiture of any amounts paid.
Issue:

Whether or not there is a perfected contract of sale and whether

defendants can unilaterally and extra-judicially rescind said contract of
sale.
Held:
A contract of sale is a consensual contract and is perfected at
the moment there is a meeting of the minds upon the thing which is the
object of the contract and upon the price. Earnest money given in sale
transaction is considered part of the purchase price and proof of the
perfection of the sale.
In the absence of an express stipulation authorizing the sellers to
extra-judicially rescind the contract of sale, the defendants cannot
unilaterally and extra-judicially rescind the contract of sale. Despite the
fact that plaintiffs failure to pay the amounts of $40,000.00 and
$60,000.00 on or before Dec. 4, 1984 and January 5, 1985, respectively,
was a breach of her obligation under Article 1191 of the Civil Code, the

17 | P a g e

defendants did not sue for either specific performance or rescission of

the contract. The defendants were of the mistaken belief that plaintiff
had lost her option over the property when she failed to pay the
remaining balance.

SUFFICIENCY OF CONSIDERATION IN CONTRACT OF SALE

.R. No. , Aguinaldo v. Esteban and Sarmiento, 135 SCRA 645

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
DECISION
April 15, 1985
G.R. No. L-27289
JUAN AGUINALDO, Substituted by MARINA and PRIMITIVO
AGUINALDO, plaintiffs-appellants,
vs.
JOSE ESTEBAN and FRANCISCA SARMIENTO, defendants-appellees.
Crisostomo M. Diokno for plaintiff-appellants. Andres Franco for
defendants-appellees.
RELOVA, J.:
In Civil Case No. 6977, the Court of First Instance of Rizal declared the
contract, entitled: "Sanglaan ng Isang Lupa na Patuluyan Ipaaari," valid
and binding contract of sale and dismissed the complaint as well as the
counterclaim with costs against the plaintiff. From said judgment of the
lower court, appeal was taken to this Court, "the same involving, as it
does, a question of law." (p. 25, Rollo)
Plaintiff Juan Aguinaldo in his complaint alleged, among others, that on
June 23, 1958, defendants, through fraud, deceit and misrepresentations
and exercising undue pressure, influence and advantage, procured the
thumbmark of Jose Aguinaldo, father of plaintiff, to be affixed on subject
contract; that defendants caused the cancellation of Tax Declaration No.
4004, Rizal (1948) in the name of Jose Aguinaldo and the issuance in
lieu thereof of Tax Declaration No. 10725-Rizal in the names of
defendant spouses; that the document in question on which Jose
Aguinaldo affixed his thumbmark is not true and genuine, as the
thumbmark appearing thereon is a forgery; that it contains terms and
conditions which partake the nature of "pacto comisario" which render
same null and void; that it does not fix a period for the payment of the
loan nor does it state the duration of the mortgage; that plaintiff is the
sole successor-in-interest and legal heir of Jose Aguinaldo who died
intestate in October 1960; that defendants having no right to win and
possess the property in question are withholding the possession thereof
from plaintiff and consequently deprived plaintiff of the fruits of said
property; and that by reason of the willfull and malevolent acts of
defendants, plaintiff suffered moral and actual damages in the amount
of P4,000.00.
In their answer, defendants claim absolute ownership of subject
property upon the death of Jose Aguinaldo in October 1960 on the

18 | P a g e

theory that the document in controversy is one of sale and not one of
mortgage.
The parties, through their respective counsels, agreed to submit the
case for decision solely on whether the contract in question, Annex "A"
of the complaint, is one of mortgage or of sale.
When plaintiff Juan Aguinaldo died intestate on August 6, 1965, his
heirs, namely: Marina and Primitivo, both surnamed Aguinaldo,
petitioned the trial court that they be substituted as party plaintiffs in
lieu of their deceased father.
It is the position of plaintiffs-appellants that the document in question,
Annex "A" of the complaint, is null and void because it contains
stipulations which partake of the nature of "pacto comisario." On the
other hand, the defendants contend that the contract is a valid sale and,
as such, it passed the title to them.
Hereunder is the contract in question:
SANGLAAN NG ISANG LUPA-CANAVERAL NA PATULOYAN IPAAARI
HAYAG SA SINO MAN MAKAKABASA:
Na, ako JOSE AGUINALDO, Pilipino, balo, may karampatan gulang, tubo
at naninirahan sa Bo. Bambang, Tagig, Rizal, Kapuluan Pilipinas, sa
pamamagitan nito ay
ISINASAYSAY KO AT PINAGTITIBAY:
1. Na, sarili at tunay kong pagaari dahil sa ipinagkaloob sa akin ng aking
amain Martin Concepcion (patay) ang isang parcelang lupa-canaveral, at
ang lupang ito ay napagkikilala at nauligiran ng mga pagaaring lupa ng
mga kahangganan kagaya ng mga sumusunod:
Isang parcelang lupa-canaveral na nasa pook ng Bo. Bambang, Tagig,
Rizal, at siyang lupang nakatala sa Tax Declaration No. 4004-Rizal
(1948), sa Tanggapan ng Tasador ng lupa sa lalawigan ng RizaL Pasig,
RizaL at valor ameliarado ng P70.00 at napaloob sa mga pagaaring lupa
ng mga kahangganan kagaya ng mga sumusunod: Sa Norte, Antonio
Silvestre at Pedro Sarmiento; sa Este, Don-lingo Luga; sa Sur, Dionisio
Dionisio at Pedro Sarmiento, at sa Weste, Tomas Cruz
2. Na, alang-alang sa halagang LIMANG DAAN AT APATNAPUNG PISO
(P540.00), salaping Pilipino na sa kasalukuyan ay ating ginagamit, ay
natanggap ko na, sa hindi biglaan kung hindi LIMANGPUNG SENTIMOS
(P0.50) lamang araw-araw magbuhat pa nuong Marzo 26, 1955, at ang
kabuuang halaga ng halagang nabanggit sa itaas nito, sa oras na ito, ay
kusang loob kong tinanggap sa magasawang JOSE ESTEBAN at
FRANCISCA SARMIENTO, mga Pilipino, may karampatan gulang,
naninirahan at may padalahan sulat sa Bo. Bambang, Tagig, Rizal, ay
ISINASANGLA AT PATULOYAN IPAARI KO sa nasabing magasawa ang
lupang nobanggit ko sa itaas, sa aming mga kasunduan kagaya ng mga
sumusunod:

NA AKO, JOSE AGUINALDO AY PAKAKANIN HABANG NABUBUHAY NG

MAGASAWANG JOSE ESTEBAN AT FRANCISCA SARMIENTO, 0 NG
KANILANG KAHALILI AT TAGAPAGMANA, AT BILANG KABAYARAN NAMAN
SA HALAGANG LIMANG DAAN AT APATNAPUNG PISO (P540.00) AT
PAGPAPAKAIN SA AKIN NG MAGASAWANG JOSE ESTEBAN AT FRANCISCA
SARMIENTO, ORAS NA AKO AY MAMATAY SILA (JOSE ESTEBAN AT
FRANCISCA SARMIENTO) NA ANG LUBOSAN MAGMAMAYARI NG AKING
LUPANG ISINANGLANG ITO SA KANILA, SAPAGKAT ANG LAHAT NG AKING
KARAPATAN SA LUPA, NGAYON PA AY IPINAGKAKALOOB KO SA KANILA SA
ILALIM NG KASUNDUAN.
3. Na, ang lupa-canaveral na isinasangla ko sa pamamagitan ng
kasulatan ito na ipaaring patuluyan ay pinamomosiyonan ng magasawang Jose Esteban at Francisco Sarmiento, nuong pang Marzo 26,
1955.
4. Na, ang lupang akin binabanggit sa kasulatan ito, ay hindi ko
ipinagkakautang sa kanino man tao, na maliban sa magasawang Jose
Esteban at Francisca Samiento.
5. Na, ang lupa kong ito na siyang nakatala sa Tax Declaration No. 4004Rizal (1948), ay hindi nakatala sa bisa ng Batas Blg. 496 o maging sa
Hipotecaria Espanola, at napagkasunduan ang kasulatan ito, ay nais
ipatala sa bisa ng Batas Blg. 3344, at sinusugan.
SA KATUNAYAN NG LAHAT KONG IPINAHAYAG SA DOKUMENTONG ITO, ay
inilagda ko ang aking pangalan at apelyedo dito sa Lunsod ng Maynila,
Pilipinas, ngayong ika ______ ng Hunyo 1958, sa harap ng dalawang
saksi.
(Thumbmark)
JOSE AGUINALDO
Nagsangla
SUMASANGAYON SA MGA ALITUNTUNIN:
(Sgd.) JOSE ESTEBAN
Pinagsanglaan
(Sgd.) FRANCISCA SARMIENTO
Pinagsanglaan
MGA SAKSI:
(Sgd.) Illegible
(Sgd.) Eugenia S. Relon
ACKNOWLEDGMENT
(pp. 7-1 0, Record on Appeal)
There is merit in the appeal.
On the issue as to whether or not the subject contract is one of sale or of
mortgage, an inquiry into the surrounding facts would disclose the
intention of the parties and thereby determine the truth of plaintiffappellant's allegation that his father, Jose Aguinaldo, was misled into
affixing his thumbmark on the said contract.

19 | P a g e

Plaintiff-appellant, Juan Aguinaldo, is the son of Jose and it is indeed

intriguing why defendants-appellees, who are not related at all to the old
man, would give him fifty centavos (P0.50) everyday beginning May 26,
1955. The contract in question was executed in June 1958, or after three
(3) years from the time the daffy amount of half-a-peso was given the
old man. Thereafter, the defendants-appellees' saw to it that the
recipient of the money would execute the contract, entitled: "Sanglaan
ng isang lupang-canaveral na Patuluyang Ipaaari."
It is significant to note that herein plaintiff-appellant was not even a
witness in the document when his father who is of low intelligence,
illiterate and could not even sign his name, affixed his thumbmark in the
document in question. It would appear that the execution of the contract
was made behind his back and/or without giving notice to him. Stated
differently, if the transaction was on the level, why was not plaintiffappellant asked to sign as a witness to the document. It may be true
that the contract was read to the old man but it is doubtful if he
understood the meaning of its contents. The contract was so written
that anyone could believe he was only giving his property by way of
mortgage, not as a sale. For instance, in paragraph 2 thereof, it reads
"... ay isinasangla at patuloyan ipaaari ko sa nasabing magasawa ang
lupang nabanggit ko sa itaas, ... ." In some Tagalog provinces the word
"Sangla" means "Bilihan Mabibiling Muli" or "Pacto de Retro." By this
contract, the vendee-a-retro takes possession of the property as owner
until the same is repurchased or redeemed. On the other hand,
mortgage is understood as "Prenda."
In the case at bar, defendants-appellees took possession of the property
on March 26, 1955 when they started giving Jose Aguinaldo the fifty
centavos (P0.50) a day. It would appear then that the money which he
has been receiving from the Estebans come from his own property. In
effect, there was no consideration for the transfer of the property-be it
sale, mortgage or Pacto Comisario.
WHEREFORE, the decision of the trial court, dated August 16, 1966, is
REVERSED and the contract "Sanglaan ng Isang Lupa-Canaveral na
Patuluyan Ipaaari" is declared null and void, and the deceased plaintiff
Juan Aguinaldo is declared as the true and lawful owner of subject
property.
Further, defendants-appellees are hereby ordered to transfer and deliver
the possession of subject property to the said deceased plaintiff Juan
Aguinaldo's heirs, Marina Aguinaldo and Primitive Aguinaldo, who
substituted him as plaintiffs in this case and/or their respective heirs and
successors; and the Provincial Assessor of Rizal is directed to cancel Tax
Declaration No. 10725 (Rizal) in the name of defendants-appellees, Jose
Esteban and Francisco Sarmiento, and in lieu thereof issue another in

the name of the deceased plaintiff Juan Aguinaldo's heirs, Marina

Aguinaldo and Primitivo Aguinaldo.
SO ORDERED.
Teehankee (Chairman), Plana, Gutierrez, Jr., De la Fuente and Alampay,
JJ., concur.

20 | P a g e

Republic of the Philippines

SUPREME COURT
Manila
SPECIAL FIRST DIVISION
G.R. No. 122544
January 28, 2003
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA,
ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A.
DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES,
INC., respondents.
x---------------------------------------------------------x
G.R. No. 124741 January 28, 2003
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA,
ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A.
DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS HON. MAXIMIANO C. ASUNCION and
OVERLAND EXPRESS LINES, INC., respondents.
RESOLUTION
YNARES-SANTIAGO, J.:
On January 28, 1999, this Court rendered judgment in these
consolidated cases as follows:
WHEREFORE, in view of the foregoing, both petitions
are GRANTED. The decision dated March 29, 1994 and the
resolution dated October 19, 1995 in CA-G.R. CV Nos. 25153-54,
as well as the decision dated December 11, 1995 and the
resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the
Court of Appeals are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for
immediate execution of the judgment dated November 22, 1982
in Civil Case No. VIII-29155 of the then City Court (now
Metropolitan Trial Court) of Quezon City, Branch III as affirmed in
the decision dated September 26, 1984 of the then Intermediate
Appellate Court (now Court of Appeals) and in the resolution
dated June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private
respondent the amount of P300,000.00 which they received
through Alice A. Dizon on June 20, 1975.
SO ORDERED.
Private respondent filed a Motion for Reconsideration, Second Motion for
Reconsideration, and Motion to Suspend Procedural Rules in the Higher
Interest of Substantial Justice, all of which have been denied by this

21 | P a g e

Court. This notwithstanding, the cases were set for oral argument on
March 21, 2001, on the following issues:
1. WHETHER THERE ARE CIRCUMSTANCES THAT WOULD JUSTIFY
SUSPENSION OF THE RULES OF COURT;
2. WHETHER THE SUM OF P300,000.00 RECEIVED BY ALICE
DIZON FROM PRIVATE RESPONDENT WAS INTENDED AS PARTIAL
PAYMENT OF THE PURCHASE PRICE OF THE PROPERTY, OR AS
PAYMENT OF BACK RENTALS ON THE PROPERTY;
3. WHETHER ALICE DIZON WAS AUTHORIZED TO RECEIVE THE
SUM OF P300,000.00 ON BEHALF OF PETITIONERS;
4. (A) IF SO, WHETHER PETITIONERS ARE ESTOPPED FROM
QUESTIONING THE BELATED EXERCISE BY PRIVATE RESPONDENT
OF ITS OPTION TO BUY WHEN THEY ACCEPTED THE SAID PARTIAL
PAYMENT;
(B) IF SO, WHETHER ALICE DIZON CAN VALIDLY BIND
PETITIONERS IN THE ABSENCE OF A WRITTEN POWER OF
ATTORNEY;
5. (A) WHETHER THERE WAS A PERFECTED CONTRACT OF SALE
BETWEEN THE PARTIES;
(B) WHETHER THERE WAS A CONTRACT OF SALE AT LEAST WITH
RESPECT TO THE SHARES OF FIDELA AND ALICE DIZON; AND
6. WHETHER PRIVATE RESPONDENT'S ACTION FOR SPECIFIC
PERFORMANCE HAS PRESCRIBED.
In order to resolve the first issue, it is necessary to pass upon the other
questions which relate to the merits of the case. It is only where there
exist strong compelling reasons, such as serving the ends of justice and
preventing a miscarriage thereof, that this Court can suspend the rules. 1
After reviewing the records, we find that, despite all of private
respondent's protestations, there is absolutely no written proof of Alice
Dizon's authority to bind petitioners. First of all, she was not even a coowner of the property. Neither was she empowered by the co-owners to
act on their behalf.
The acceptance of the amount of P300,000.00, purportedly as partial
payment of the purchase price of the land, was an act integral to the
sale of the land. As a matter of fact, private respondent invokes such
receipt of payment as giving rise to a perfected contract of sale. In this
connection, Article 1874 of the Civil Code is explicit that: "When a sale of
a piece of land or any interest therein is through an agent, the authority
of the latter shall be in writing; otherwise, the sale shall be void."
When the sale of a piece of land or any interest thereon is
through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void. Thus the authority of an agent
to execute a contract for the sale of real estate must be
conferred in writing and must give him specific authority, either

to conduct the general business of the principal or to execute a

binding contract containing terms and conditions which are in the
contract he did execute. A special power of attorney is necessary
to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration. The express mandate required by law to
enable an appointee of an agency (couched) in general terms to
sell must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the act mentioned. For the
principal to confer the right upon an agent to sell real estate, a
power of attorney must so express the powers of the agent in
clear and unmistakable language. When there is any reasonable
doubt that the language so used conveys such power, no such
construction shall be given the document.2
It necessarily follows, therefore, that petitioners cannot be deemed to
have received partial payment of the supposed purchase price for the
land through Alice Dizon. It cannot even be said that Alice Dizon's
acceptance of the money bound at least the share of Fidela Dizon, in the
absence of a written power of attorney from the latter. It should be
borne in mind that the Receipt dated June 20, 1975, while made out in
the name of Fidela Dizon, was signed by Alice Dizon alone.
Moreover, there could not have been a perfected contract of sale. As we
held in our Decision dated January 28, 1999, the implied renewal of the
contract of lease between the parties affected only those terms and
conditions which are germane to the lessee's right of continued
enjoyment of the property. The option to purchase afforded private
respondent expired after the one-year period granted in the contract.
Otherwise stated, the implied renewal of the lease did not include the
option to purchase. We see no reason to disturb our ruling on this
point, viz:
In this case, there was a contract of lease for one (1) year with
option to purchase. The contract of lease expired without the
private respondent, as lessee, purchasing the property but
remained in possession thereof. Hence, there was an implicit
renewal of the contract of lease on a monthly basis. The other
terms of the original contract of lease which are revived in the
implied new lease under Article 1670 of the New Civil Code are
only those terms which are germane to the lessee's right of
continued enjoyment of the property leased. Therefore, an
implied new lease does not ipso facto carry with it any implied
revival of private respondent's option to purchase (as lessee
thereof) the leased premises. The provision entitling the lessee
the option to purchase the leased premises is not deemed
incorporated in the impliedly renewed contract because it is alien

22 | P a g e

to the possession of the lessee. Private respondent's right to

exercise the option to purchase expired with the termination of
the original contract of lease for one year. The rationale of this
Court is that:
"This is a reasonable construction of the provision, which
is based on the presumption that when the lessor allows
the lessee to continue enjoying possession of the property
for fifteen days after the expiration of the contract he is
willing that such enjoyment shall be for the entire period
corresponding to the rent which is customarily paid in
this case up to the end of the month because the rent was
paid monthly. Necessarily, if the presumed will of the
parties refers to the enjoyment of possession the
presumption covers the other terms of the contract
related to such possession, such as the amount of rental,
the date when it must be paid, the care of the property,
the responsibility for repairs, etc. But no such presumption
may be indulged in with respect to special agreements
which by nature are foreign to the right of occupancy or
enjoyment inherent in a contract of lease."3
There being no merit in the arguments advanced by private respondent,
there is no need to suspend the Rules of Court and to admit the motion
for reconsideration. While it is within the power of the Court to suspend
its own rules, or to except a particular case from its operation, whenever
the interest of justice require it, however, the movant must show strong
compelling reasons such as serving the ends of justice and preventing a
grave miscarriage thereof,4 none of which obtains in this case.
Litigation must end sometime and somewhere. An effective and efficient
administration of justice requires that, once a judgment has become
final, the winning party be not, through a mere subterfuge, deprived of
the fruits of the verdict. Courts must, therefore, guard against any
scheme calculated to bring about that result. Constituted as they are to
put an end to controversies, courts should frown upon any attempt to
prolong them.5
ACCORDINGLY, the Motion to Suspend Procedural Rules in the Higher
Interest of Substantial Justice filed by private respondent is DENIED
WITH FINALITY. No further pleadings will be entertained in these cases.
SO ORDERED.
Davide, Jr., C .J ., see separate opinion.
Puno, J., concur.
Separate Opinions
DAVIDE, JR., C.J., concurring:

After a meticulous evaluation of the antecedent facts in these cases I

respectfully submit that private respondent's submission that the sum of
P3,000 was intended as partial payment of the purchase price; it was
received by Alice Dizon for and in behalf of Fidela Dizon, mother of
petitioners; and that Fidela Dizon ratified the at of Alice by accepting the
cashier's check representing that consideration drawn in favor of Fidela
Dizon, and in encashing it. Neither Alice nor Fidela returned the money.
Therefore, there was indeed, a perfected sale in favor of private
respondent of, at the very least, the rights, shares and participation in
the property in question to private respondent. Hence, private
respondent became a co-owner of the property as regards Fidela's coowner.
That private respondent exercised its option to buy beyond the term of
the original terms of the lease contract is then rendered academic. For,
by accepting the P300,000 as partial payment of the land in question
and using it for her own benefit and advantages Fidela effectively
estopped herself from insisting or a technicality.
I therefore vote to grant, pro hac vice, the second motion for
reconsideration and to modify the decision by now declaring that Fidela
Dizon is bound by the perfected sale to private respondent of, at least,
her rights, participation, or share in the property in question.
Footnotes
1
Public Estates Authority v. Yujuico, et al., G.R. No. 140486,
February 6, 2001.
2
Cosmic Lumber Corp. v. Court of Appeals, 265 SCRA 168, 176
(1996].
3
Dizon, et al. v. Court of Appeals, et al., 302 SCRA 288, 300-301
[1999], citing Dizon v. Magsaysay, 57 SCRA 250, 254 [1974].
4
Equitable-PCI Bank v. Ku, G.R. No. 142950 March 26, 2001.
5
Vda. de Cochingyan, et al. v. Court of Appeals, et al., G.R. No.
116092, June 29, 2001.

23 | P a g e

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41847 December 12, 1986
CATALINO LEABRES, petitioner,
vs.
COURT OF APPEALS and MANOTOK REALTY, INC., respondents.
Magtanggol C. Gunigundo for petitioner.
Marcelo de Guzman for respondents.
PARAS, J.:
Before Us is a Petition for certiorari to review the decision of the Court of
Appeals which is quoted hereunder:
In Civil Case No. 64434, the Court of First Instance of Manila made the
following quoted decision:
(1) Upon defendant's counterclaim, ordering plaintiff Catalino
Leabres to vacate and/or surrender possession to defendant
Manotok Realty, Inc. the parcel of land subject matter of the
complaint described in paragraph 3 thereof and described in the
Bill of Particulars dated March 4, 1966;
(2) To pay defendant the sum of P81.00 per month from March
20, 1959, up to the time he actually vacates and/or surrenders
possession of the said parcel of land to the defendant Manotok
Realty, Inc., and
(3) To pay attorney's fees to the defendant in the amount of
P700.00 and pay the costs. (Decision, R.A., pp. 54-55).
The facts of this case may be briefly stated as follows:
Clara Tambunting de Legarda died testate on April 22, 1950. Among the
properties left by the deceased is the "Legarda Tambunting Subdivision"
located on Rizal Avenue Extension, City of Manila, containing an area of
80,238.90 sq. m., covered by Transfer Certificates of Title No. 62042;
45142; 45149; 49578; 40957 and 59585. Shortly after the death of said
deceased, plaintiff Catalino Leabres bought, on a partial payment of
Pl,000.00 a portion (No. VIII, Lot No. 1) of the Subdivision from surviving
husband Vicente J. Legarda who acted as special administrator, the deed
or receipt of said sale appearing to be dated May 2, 1950 (Annex "A").
Upon petition of Vicente L. Legarda, who later was appointed a regular
administrator together with Pacifica Price and Augusto Tambunting on
August 28, 1950, the Probate Court of Manila in the Special Proceedings
No. 10808) over the testate estate of said Clara Tambunting, authorized
through its order of November 21, 1951 the sale of the property.
In the meantime, Vicente L. Legarda was relieved as a regular
Administrator and the Philippine Trust Co. which took over as such

24 | P a g e

administrator advertised the sale of the subdivision which includes the

lot subject matter herein, in the issues of August 26 and 27, September
2 and 3, and 15 and 17, 1956 of the Manila Times and Daily Mirror. In
the aforesaid Special Proceedings No. 10808, no adverse claim or
interest over the subdivision or any portion thereof was ever presented
by any person, and in the sale that followed, the Manotok Realty, Inc.
emerged the successful bidder at the price of P840,000.00. By order of
the Probate Court, the Philippine Trust Co. executed the Deed of
Absolute Sale of the subdivision dated January 7, 1959 in favor of the
Manotok Realty, Inc. which deed was judicially approved on March 20,
1959, and recorded immediately in the proper Register of Deeds which
issued the corresponding Certificates of Title to the Manotok Realty, Inc.,
the defendant appellee herein.
A complaint dated February 8, 1966, was filed by herein plaintiff, which
seeks, among other things, for the quieting of title over the lot subject
matter herein, for continuing possession thereof, and for damages. In
the scheduled hearing of the case, plaintiff Catalino Leabres failed to
appear although he was duly notified, and so the trial Court, in its order
dated September 14, 1967, dismissed the complaint (Annex "E").<re||
an1w> In another order of dismissal was amended as to make the
same refer only to plaintiff's complaint and the counter claim of the
defendant was reinstated and as the evidence thereof was already
adduced when defendant presented its evidence in three other cases
pending in the same Court, said counterclaim was also considered
submitted for resolution. The motion for reconsideration dated January
22, 1968 (Annex " I "), was filed by plaintiff, and an opposition thereto
dated January 25, 1968, was likewise filed by defendant but the Court a
quo dismissed said motion in its order dated January 12, 1970 (Annex
"K"), "for lack of merits" (pp. 71-72, Record on Appeal).
Appealing the decision of the lower Court, plaintiff-appellant advances
the following assignment of errors:
I
THE LOWER COURT ERRED IN DENYING THE MOTION FOR
RECONSIDERATION, DATED OCTOBER 9, 1967, THUS DEPRIVING
THE PLAINTIFF-APPELLANT HIS DAY IN COURT.
II
THE LOWER COURT ERRED IN ORDERING THE PLAINTIFFAPPELLANT CATALINO LEABRES TO VACATE AND/OR SURRENDER
THE POSSESSION OF THE LOT SUBJECT MATTER OF THE
COMPLAINT TO DEFENDANT-APPELLEE.
III
THE LOWER COURT ERRED IN ORDERING THE PLAINTIFFAPPELLANT TO PAY DEFENDANT-APPELLEE THE SUM OF P 81.00

PER MONTH FROM MARCH 20, 1969, UP TO THE TIME HE

ACTUALLY VACATE THE PARCEL OF LAND. (Appellant's Brief, p. 7)
In the First Assigned Error, it is contended that the denial of his Motion
for Reconsideration dated October 9, 1967, the plaintiff-appellant was
not accorded his day in Court.
The rule governing dismissal of actions for failure to prosecute is
provided for in Section 3, Rule 17 of the Rules of Court, as follows:
If the plaintiff fails to appear at the time of the trial, or to prosecute his
action for an unreasonable length of time, or to comply with these rules
or any order of the Court, the action may be dismissed upon motion of
the defendant or upon the Court's own motion. This dismissal shall have
the effect of an adjudication upon the merits, unless otherwise provided
by the Court.
Under the afore-cited section, it is discretionary on the part of the Court
to dismiss an action for failure to prosecute, and its action will not be
reversed upon appeal in the absence of abuse. The burden of showing
abuse of this discretion is upon the appellant since every presumption is
toward the correctness of the Court's action (Smith, Bell & Co., et al vs.
American Pres. Lines, Ltd., and Manila Terminal Co., No. L-5304, April 30,
1954; Adorable vs. Bonifacio, G. R. No. L-0698, April 22, 1959); Flores vs.
Phil. Alien Property Administration, G.R. No. L-12741, April 27, 1960). By
the doctrine laid down in these cases, and by the provisions of Section 5,
Rules 131 of the Rules of Court, particularly paragraphs (m) and (o)
which respectively presume the regularity of official performance and
the passing upon by the Court over all issues within a case, it matters
not if the Court dismissing the action for failure to prosecute assigns any
special reason for its action or not. We take note of the fact that the
Order declaring appellant in default was handed down on September 14,
1967. Appellant took no steps to have this Order set aside. It was only
on January 22, 1968, after he was furnished a copy of the Court's
decision dated December 9, 1967 or about four months later that he
attached this Order and the decision of the Court. Appellant slept on his
rights-if he had any. He had a chance to have his day in Court but he
passed it off. Four months later he alleges that sudden illness had
prevented him. We feel appellant took a long time too-long in fact-to
inform the Court of his sudden illness. This sudden illness that according
to him prevented him from coming to Court, and the time it took him to
tell the Court about it, is familiar to the forum as an oft repeated excuse
to justify indifference on the part of litigants or outright negligence of
those who represent them which subserves the interests of justice. In
the instant case, not only did the appellant wantonly pass off his chance
to have a day in Court but he has also failed to give a convincing, just
and valid reason for the new hearing he seeks. The trial court found it
so; We find it so. The trial Court in refusing to give appellant a new trial

25 | P a g e

does not appear to have abused his discretion as to justify our

intervention.
The Second and Third Assignments of Error are hereby jointly treated in
our discussion since the third is but a consequence of the second.
It is argued that had the trial Court reconsidered its order dated
September 14, 1967 dismissing the complaint for failure to prosecute,
plaintiff-appellant might have proved that he owns the lot subjectmatter
of the case, citing the receipt (Annex A) in his favor; that he has
introduced improvements and erected a house thereon made of strong
materials; that appellee's adverse interest over the property was
secured in bad faith since he had prior knowledge and notice of
appellant's physical possession or acquisition of the same; that due to
said bad faith appellant has suffered damages, and that for all the
foregoing, the judgment should be reversed and equitable relief be
given in his favor.
As above stated, the Legarda-Tambunting Subdivision which includes the
lot subject matter of the instant case, is covered by Torrens Certificates
of Title. Appellant anchors his claim on the receipt (Annex "A") dated
May 2, 1950, which he claims as evidence of the sale of said lot in his
favor. Admittedly, however, Catalino Leabres has not registered his
supposed interest over the lot in the records of the Register of Deeds,
nor did he present his claim for probate in the testate proceedings over
the estate of the owner of said subdivision, in spite of the notices
advertised in the papers. (Saldana vs. Phil. Trust Co., et al.; Manotok
Realty, Inc., supra).
On the other hand, defendant-appellee, Manotok Realty, Inc., bought the
whole subdivision which includes the subject matter herein by order and
with approval of the Probate Court and upon said approval, the Deed of
Absolute Sale in favor of appellee was immediately registered with the
proper Register of Deeds. Manotok Realty, Inc. has therefore the better
right over the lot in question because in cases of lands registered under
the Torrens Law, adverse interests not therein annotated which are
without the previous knowledge by third parties do not bind the latter.
As to the improvement which appellant claims to have introduced on the
lot, purchase of registered lands for value and in good faith hold the
same free from all liens and encumbrances except those noted on the
titles of said land and those burdens imposed by law. (Sec. 39, Act.
496).<re||an1w> An occupant of a land, or a purchaser thereof
from a person other than the registered owner, cannot claim good faith
so as to be entitled to retention of the parcels occupied by him until
reimbursement of the value of the improvements he introduced thereon,
because he is charged with notice of the existence of the owner's
certificate of title (J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No.

25477-R, July 24, 1962; J.M. Tuason & Co., Inc. vs. Manuel Abundo, CAG.R. No. 29701-R, November 18, 1968).
Appellant has not convinced the trial Court that appellee acted in bad
faith in the acquisition of the property due to the latter's knowledge of a
previous acquisition by the former, and neither are we impressed by the
claim. The purchaser of a registered land has to rely on the certificate of
title thereof. The good faith of appellee coming from the knowledge that
the certificate of title covering the entire subdivision contain no notation
as to appellant's interest, and the fact that the records of these eases
like Probate Proceedings Case No. 10808, do not show the existence of
appellant's claim, strongly support the correctness of the lower Court's
decision
WHEREFORE, in view of the foregoing, we find no reason to amend or
set aside the decision appealed from, as regards to plaintiff-appellant
Catalino Leabres. We therefore affirm the same, with costs against
appellant. (pp. 33-38, Rollo)
Petitioner now comes to us with the following issues:
(1) Whether or not the petitioner was denied his day in court and
deprived of due process of law.
(2) Whether or not the petitioner had to submit his receipt to the
probate court in order that his right over the parcel of land in
dispute could be recognized valid and binding and conclusive
against the Manotok Realty, Inc.
(3) Whether or not the petitioner could be considered as a
possessor in good faith and in the concept of owner. (p. 11, Rollo)
Petitioner's contention that he was denied his day in court holds no
water. Petitioner does not deny the fact that he failed to appear on the
date set for hearing on September 14, 1967 and as a consequence of his
non-appearance, the order of dismissal was issued, as provided for by
Section 3, Rule 17 of the Revised Rules of Court.
Moreover, as pointed out by private respondent in its brief, the hearing
on June 11, 1967 was not ex parte. Petitioner was represented by his
counsel on said date, and therefore, petitioner was given his day in
Court.
The main objection of the petition in the lower court's proceeding is the
reception of respondent's evidence without declaring petitioner in
default. We find that there was no necessity to declare petitioner in
default since he had filed his answer to the counterclaim of respondent.
Petitioner anchors his main arguments on the receipt (Exh. 1) dated May
2, 1950, as a basis of a valid sale. An examination of the receipt reveals
that the same can neither be regarded as a contract of sale or a promise
to sell. There was merely an acknowledgment of the sum of One
Thousand Pesos (P1,000.00). There was no agreement as to the total
purchase price of the land nor to the monthly installment to be paid by

26 | P a g e

the petitioner. The requisites of a valid Contract of Sale namely 1)

consent or meeting of the minds of the parties; 2) determinate subject
matter; 3) price certain in money or its equivalent-are lacking in said
receipt and therefore the "sale" is not valid nor enforceable.
Furthermore, it is a fact that Dona Clara Tambunting died on April 22,
1950. Her estate was thereafter under custodia legis of the Probate
Court which appointed Don Vicente Legarda as Special Administrator on
August 28, 1950. Don Vicente Legarda entered into said sale in his own
personal-capacity and without court approval, consequently, said sale
cannot bind the estate of Clara Tambunting. Petitioner should have
submitted the receipt of alleged sale to the Probate Court for its
approval of the transactions. Thus, the respondent Court did not err in
holding that the petitioner should have submitted his receipt to the
probate court in order that his right over the subject land could be
recognized-assuming of course that the receipt could be regarded as
sufficient proof.
Anent his possession of the land, petitioner cannot be deemed a
possessor in good faith in view of the registration of the ownership of
the land. To consider petitioner in good faith would be to put a premium
on his own gross negligence. The Court resolved to DENY the petition for
lack of merit and to AFFIRM the assailed judgment.

THIRD DIVISION
[G.R. No. 109355. October 29, 1999]
SERAFIN MODINA, petitioner vs. COURT OF APPEALS AND
ERNESTO HONTARCIEGO, PAUL FIGUEROA, TEODORO
HIPALLA
AND
RAMON
CHIANG,
MERLINDA CHIANG, respondents.
DECISION
PURISIMA, J.:
At bar is a Petition for Review on Certiorari assailing the decision of
the Court of Appeals in CA - G.R. CV No. 26051 affirming the decision of
the trial court in the case, entitled Serafin Modina vs Ernesto
Hontarciego, Paulino Figueroa and Ramon Chiang vs Merlinda Plana
Chiang, intervenors, which declared as void and inexistent the deed of
definite sale dated December 17, 1975 as well as the Certificates of Title
Nos. T-86912, T-86913, T-86914 in the name of Ramon Chiang.
The facts that matter are as follows:
The parcels of land in question are those under the name of Ramon
Chiang (hereinafter referred to as CHIANG ) covered by TCT Nos. T86912, T-86913, and T-86914. He theorized that subject properties were
sold to him by his wife, Merlinda Plana Chiang (hereinafter referred to as
MERLINDA), as evidenced by a Deed of Absolute Sale dated December
17, 1975,[1] and were subsequently sold by CHIANG to the petitioner
Serafin Modina (MODINA), as shown by the Deeds of Sale, dated August
3, 1979 and August 24, 1979, respectively.
MODINA brought a Complaint for Recovery of Possession with
Damages against the private respondents, Ernesto Hontarciego, Paul
Figueroa and Teodoro Hipalla, docketed as Civil Case No. 13935 before
the Regional Trial Court of Iloilo City.
Upon learning the institution of the said case, MERLINDA presented
a Complaint-in-intervention, seeking the declaration of nullity of the
Deed of Sale between her husband and MODINA on the ground that the
titles of the parcels of land in dispute were never legally transferred to
her husband. Fraudulent acts were allegedly employed by him to obtain
a Torrens Title in his favor. However, she confirmed the validity of the
lease contracts with the other private respondents.
MERLINDA also admitted that the said parcels of land were those
ordered sold by Branch 2 of the then Court of First Instance of Iloilo in
Special Proceeding No. 2469 in Intestate Estate of Nelson Plana where
she was appointed as the administratix, being the widow of the
deceased, her first husband. An Authority to Sell was issued by the said
Probate Court for the sale of the same properties.[2]
After due hearing, the Trial Court decided in favor of MERLINDA,
disposing thus:

27 | P a g e

WHEREFORE, judgment is hereby rendered (1) declaring as void and

inexistent the sale of Lots 10063, 10088, 10085 and 10089 of the
Cadastral Survey of Sta. Barbara by Merlinda Plana in favor of Ramon
Chiang as evidenced by the deed of definite sale dated December 17,
1975 (Exhibits H; 3-Chiang; 9 Intervenor) as well as the Certificates of
Title Nos. T-86912, T-86913, T-86914 and T-86915 in the name of Ramon
Chiang; (2) declaring as void and inexistent the sale of the same
properties by Ramon Chiang in favor of Serafin Modina as evidenced by
the deeds of sale (Exhibits A, B, 6 Chiang and 7 Chiang) dated August 3,
and 24, 1979, as well as. Certificates of Title Nos. T-102631, 102630,
102632 and 102890 in the name of Serafin Modina; (3) ordering the
Register of Deeds of Iloilo to cancel said certificates of title in the names
of Ramon Chiang and Serafin Modina and to reinstate the Certificates of
Title Nos. T-57960, T-57962, T-57963 and T-57864 in the name of Nelson
Plana; (4) ordering Serafin Modina to vacate and restore possession of
the lots in question to Merlinda Plana Chiang; (5) ordering Ramon Chiang
to restitute and pay to Serafin Modina the sum of P145,800.00 and; (6)
ordering Serafin Modina to pay Ernesto Hontarciego the sum of
P44,500.00 as actual and compensatory damages plus the sum of
P5,000.00, for and as attorneys fees, with costs in favor of said
defendants against the plaintiff.
On appeal, the Court of Appeals affirmed the aforesaid decision in
toto.
Dissatisfied therewith, petitioner found his way to this Court via the
present Petition for Review under Rule 45 seeking to set aside the
assailed decision of the Court of Appeals.
Raised for resolution here are: (1) whether the sale of subject lots
should be nullified, (2) whether petitioner was not a purchaser in good
faith, (3) whether the decision of the trial court was tainted with excess
of jurisdiction; and (4) whether or not only three-fourths of subject lots
should be returned to the private respondent.
Anent the first issue, petitioner theorizes that the sale in question is
null and void for being violative of Article 1490 [3] of the New Civil Code
prohibiting sales between spouses. Consequently, what is applicable is
Article 1412[4] supra on the principle of in pari delicto, which leaves both
guilty parties where they are, and keeps undisturbed the rights of third
persons to whom the lots involved were sold; petitioner stressed.
Petitioner anchors his submission on the following statements of the
Trial Court which the Court of Appeals upheld, to wit:
Furthermore, under Art. 1490, husband and wife are prohibited
to sell properties to each other. And where, as in this case, the
sale is inexistent for lack of consideration, the principle of
in pari delicto non oritur actio does not apply. (Vasquez vs
Porta, 98 Phil 490). (Emphasis ours) Thus, Art. 1490 provides:

Art. 1490. The husband and the wife cannot sell property to each other,
except:
(1) when a separation of property was agreed upon in the marriage
settlements; or
(2) when there has been a judicial separation of property under Art. 191.
The exception to the rule laid down in Art. 1490 of the New Civil Code
not having existed with respect to the property relations of Ramon
Chiang and Merlinda Plana Chiang, the sale by the latter in favor of the
former of the properties in question is invalid for being prohibited by
law. Not being the owner of subject properties, Ramon Chiang could not
have validly sold the same to plaintiff Serafin Modina. The sale by
Ramon Chiang in favor of Serafin Modina is, likewise, void and
inexistent.
xxx xxx xxx[5]
The Court of Appeals, on the other hand, adopted the following
findings a quo: that there is no sufficient evidence establishing fault on
the part of MERLINDA, and therefore, the principle of in pari delicto is
inapplicable and the sale was void for want of consideration. In effect,
MERLINDA can recover the lots sold by her husband to petitioner
MODINA. However, the Court of Appeals ruled that the sale was void for
violating Article 1490 of the Civil Code, which prohibits sales between
spouses.
The principle of in pari delicto non oritur actio[6] denies all recovery
to the guilty parties inter se. It applies to cases where the nullity arises
from the illegality of the consideration or the purpose of the contract.
[7]
When two persons are equally at fault, the law does not relieve
them. The exception to this general rule is when the principle is invoked
with respect to inexistent contracts.[8]
In the petition under consideration, the Trial Court found that
subject Deed of Sale was a nullity for lack of any consideration. [9] This
finding duly supported by evidence was affirmed by the Court of
Appeals. Well-settled is the rule that this Court will not disturb such
finding absent any evidence to the contrary. [10]
Under Article 1409[11] of the New Civil Code, enumerating void
contracts, a contract without consideration is one such void
contract. One of the characteristics of a void or inexistent contract is
that it produces no effect. So also, inexistent contracts can be invoked
by any person whenever juridical effects founded thereon are asserted
against him. A transferor can recover the object of such contract
byaccion reivindicatoria and any possessor may refuse to deliver it to
the transferee, who cannot enforce the transfer.[12]
Thus, petitioners insistence that MERLINDA cannot attack subject
contract of sale as she was a guilty party thereto is equally unavailing.

28 | P a g e

But the pivot of inquiry here is whether MERLINDA is barred by the

principle of in pari delicto from questioning subject Deed of Sale.
It bears emphasizing that as the contracts under controversy are
inexistent contracts within legal contemplation, Articles 1411 and 1412
of the New Civil Code are inapplicable. In pari delicto doctrine applies
only to contracts with illegal consideration or subject matter, whether
the attendant facts constitute an offense or misdemeanor or whether
the consideration involved is merely rendered illegal.[13]
The statement below that it is likewise null and void for being
violative of Article 1490 should just be treated as a surplusage or an
obiter dictum on the part of the Trial Court as the issue of whether the
parcels of land in dispute are conjugal in nature or they fall under the
exceptions provided for by law, was neither raised nor litigated upon
before the lower Court. Whether the said lots were ganancial properties
was never brought to the fore by the parties and it is too late to do so
now.
Futhermore, if this line of argument be followed, the Trial Court
could not have declared subject contract as null and void because only
the heirs and the creditors can question its nullity and not the spouses
themselves who executed the contract with full knowledge of the
prohibition.[14]
Records show that in the complaint-in-intervention of MERLINDA,
she did not aver the same as a ground to nullify subject Deed of Sale. In
fact, she denied the existence of the Deed of Sale in favor of her
husband. In the said Complaint, her allegations referred to the want of
consideration of such Deed of Sale. She did not put up the defense
under Article 1490, to nullify her sale to her husband CHIANG because
such a defense would be inconsistent with her claim that the same sale
was inexistent.
The Trial Court debunked petitioners theory that MERLINDA
intentionally gave away the bulk of her and her late husbands estate to
defendant CHIANG as his exclusive property, for want of evidentiary
anchor. They insist on the Deed of Sale wherein MERLINDA made the
misrepresentation that she was a widow and CHIANG was single, when
at the time of execution thereof, they were in fact already
married. Petitioner insists that this document conclusively established
bad faith on the part of MERLINDA and therefore, the principle of in pari
delicto should have been applied.
These issues are factual in nature and it is not for this Court to
appreciate and evaluate the pieces of evidence introduced below. An
appellate court defers to the factual findings of the Trial Court, unless
petitioner can show a glaring mistake in the appreciation of relevant
evidence.

Since one of the characteristics of a void or inexistent contract is

that it does not produce any effect, MERLINDA can recover the property
from petitioner who never acquired title thereover.
As to the second issue, petitioner stresses that his title should have
been respected since he is a purchaser in good faith and for value. The
Court of Appeals, however, opined that he (petitioner) is not a purchaser
in good faith. It found that there were circumstances known to MODINA
which rendered their transaction fraudulent under the attendant
circumstances.
As a general rule, in a sale under the Torrens system, a void title
cannot give rise to a valid title. The exception is when the sale of a
person with a void title is to a third person who purchased it for value
and in good faith.
A purchaser in good faith is one who buys the property of another
without notice that some other person has a right to or interest in such
property and pays a full and fair price at the time of the purchase or
before he has notice of the claim or interest of some other person in the
property.
In the case under scrutiny, petitioner cannot claim that he was a
purchaser in good faith. There are circumstances which are indicia of
bad faith on his part, to wit: (1) He asked his nephew, Placido Matta, to
investigate the origin of the property and the latter learned that the
same formed part of the properties of MERLINDAs first husband; (2) that
the said sale was between the spouses; (3) that when the property was
inspected, MODINA met all the lessees who informed that subject lands
belong to MERLINDA and they had no knowledge that the same lots
were sold to the husband.
It is a well-settled rule that a purchaser cannot close his eyes to
facts which would put a reasonable man upon his guard to make the
necessary inquiries, and then claim that he acted in good faith. His mere
refusal to believe that such defect exists, or his wilful closing of his eyes
to the possibility of the existence of a defect in his vendors title, will not
make him an innocent purchaser for value, if it afterwards develops that
the title was in fact defective, and it appears that he had such notice of
the defect as would have led to its discovery had he acted with that
measure of precaution which may reasonably be required of a prudent
man in a like situation.[15]
Thus, petitioner cannot claim that the sale between him and
MODINA falls under the exception provided for by law.
With regard to the third issue posed by petitioner - whether the Trial
Courts decision allowing recovery on the part of Merlinda Chiang of
subject properties was void - petitioners contention is untennable. It is
theorized that as the sale by MERLINDA was by virtue of an Order to Sell
issued in the Intestate Estate Proceedings of her late husband, Nelson

29 | P a g e

Plana - to allow recovery will defeat the said order of the Probate
Court. Petitioner equated the aforesaid Order to Sell as a judgment,
which another court in a regular proceeding has no jurisdiction to
reverse.
Petitioner is under the mistaken impression that as the Order to Sell
had become a judgment in itself as to the validity of the sale of the
properties involved, any question as to its nullity should have been
brought before the Court of Appeals on appeal when the said Order was
issued.
It is a well-settled rule that a Court of First Instance (now Regional
Trial Court) has jurisdiction over a case brought to rescind a sale made
upon prior authority of a Probate Court. This does not constitute an
interference or review of the order of a co-equal Court since the Probate
Court has no jurisdiction over the question of title to subject
properties. Consequently, a separate action may be brought to
determine the question of ownership.[16]
Lastly, on the issue of whether only three-fourths of the property in
question should have been returned to MERLINDA, petitioners stance is
equally unsustainable. It is a settled doctrine that an issue which was
neither averred in the Complaint nor raised during the trial before the
lower court cannot be raised for the first time on appeal, as such a
recourse would be offensive to the basic rules of fair play, justice, and
due process.[17]
The issue of whether only three-fourths of subject property will be
returned was never an issue before the lower court and therefore, the
petitioner cannot do it now. A final word. In a Petition for Review, only
questions of law may be raised. It is perceived by the Court that what
petitioner is trying to, albeit subtly, is for the Court to examine the
probative value or evidentiary weight of the evidence presented
below[18] The Court cannot do that unless the appreciation of the pieces
of evidence on hand is glaringly erroneous. But this is where petitioner
utterly failed.
WHEREFORE, the Petition is DENIED and the decision of the Court
of Appeals, dated September 30, 1992, in CA-G.R. CV No. 26051
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Melo, (Chairman), and Gonzaga Reyes, JJ., concur.
Vitug, and Panganiban, JJ., in the result.

[1]
[2]

Rollo, p. 17
Rollo, p. 143

[3]

Art. 1490. The husband and the wife cannot sell property to each
other, except:
(1) when a separation of property was agreed upon in the marriage
settlements; or
(2) when there has been a judicial separation of property under Art. 191.
[4]
Art. 1412. If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall be
observed:
(1) When the fault is on the part of the both contracting parties, neither
may recover what he has given by virtue of the contract, or demand the
performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for the
fulfillment of what has been promised him. The other, who is not at fault,
may demand the return of what he has given without any obligation to
comply with his promise.
[5]
Rollo, pp. 33-34.
[6]
Art. 1411. When the nullity proceeds from the illegality of the cause
or object of the contract, and the act constitutes a criminal offense, both
parties being in pari delicto, they shall have no action against each
other, and both shall be prosecuted. Moreover, the provisions of the
Penal Code relative to the disposal of the effects or instruments of a
crime shall be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but
the innocent one may claim what he has given, and shall not be bound
to comply with his promise.
[7]
Gustilo vs. Maravilla, 48 Phil 442, 449-450.
[8]
Gonzales vs. Trinidad , 67 Phil 682 (1939).
[9]
Rollo, p. 33.
[10]
Cayabyab vs. Intermediate Appellate Court, 232 SCRA 1.
[11]
Art. 1409. The following contracts are inexistent and void from the
beginning:
(1) Those whose cause, object or purpose is contrary to law, morals,
good customs, public order or public policy;
(2) Those which are absolutely simulated and fictitious;
(3) Those whose cause or object did not exist at the time of the
transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.

30 | P a g e

[12]

Ibid, p. 632.
ibid, p. 683.
[14]
Tolentino, Arturo M. Civil Code of the Philippines, Vol. V., page 39,
1997 Edition.
[15]
Leung Yee vs. Frank L. Strong Machinery Co., 37 Phil 644;
RFC vs. Javillanar, 107 Phil. 664; Manacop, Jr. vs. Cansino, 111 Phil 166;
Egao vs. Court of Appeals, 174 SCRA 484.
[13]

Phases/Stages in a contract of sale1.

Limketkai Sons vs. CA, 250 SCRA 523Facts
: Respondent BPI engaged the services of a real estate broker Mr. Pedro
Revilla, Jr. granting the latter authority todispose or contract a sale for
the formers property with Philippine Remnants Co. Inc. as a grantor.
Pedro Padilla Jr. sent aletter to the respondent that the former had found
a prospective buyer herein Petitioner. Petitioner showed interest
topurchase the property of the respondent by writing them a proposal
letter. The proposal was rejected by therespondent for it did not conform
to their terms. Further negotiations through a letter were contracted by
the petitionerbut still respondent did not agree with the former.
Thereafter petitioner filed a case alleging that the contract of salewas
already perfected but the court ruled in favor of the respondents. Hence,
this motion of appeal for specificperformance.
Issue
: Whether or not a contract of sale of the subject parcel of land existed
between the petitioner and respondent?
Ruling
: The court ruled that the contention of the petitioner is untenable. The
exhibits presented did not in any wayreveal a perfection of a contract of
sale between the parties. Article 1475 of the New Civil Code specifically
provideswhen a contract of sale is perfected.
ART. 1475. The contract of sale is perfecte
d at the moment there is meeting of minds upon the thing which is the
objectof the contract and upon the price.
Petitioners exhibits did not establish any definitive agreement or
meeting of the minds between the concerned parties
as regards the price or
term of payment. Instead, what merely appears therefrom is respondent
BPIs repeated rejectionof the petitioners proposal to buy the property
at P1,000/ sq.m.
Also, Art. 1319 did not show in the exhibits presented. The article
provides that for a contract of sale to be valid, theoffer must be certain
and acceptance absolute.Further, there can be no valid contract
because it was not in accordance with the provisions of the statute of

frauds.Paragraph 2 (e) of Art. 1403 of the statute of frauds provides that

for a contract of lease for a period more than oneyear, or for the sale of
real property or of an interest therein to be valid, it should be ratified
and in a written document.

31 | P a g e

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 125531 February 12, 1997

JOVAN LAND, petitioner,
vs.
COURT OF APPEALS and EUGENIO QUESADA INC., respondents.

HERMOSISIMA, JR., J.:

This is a petition for review on certiorari to reverse and set aside the
decision of the Court of Appeals in C.A.-G.R. CV No. 47515.
Petitioner Jovan Land, Inc. is a corporation engaged in the real estate
business. Its President and Chairman of the Board of Directors is one
Joseph Sy.
Private respondent Eugenio Quesada is the owner of the Q Building
located on an 801 sq. m. lot at the corner of Mayhaligue Street and Rizal
Avenue, Sta. Cruz, Manila. The property is covered by TCT No. 77796 of
the Registry of Deeds of Manila.
Petitioner learned from co-petitioner Consolacion P. Mendoza that
private respondent was selling the aforesaid Mayhaligue property. Thus,
petitioner through Joseph Sy made a written offer, dated July 27, 1987
for P10.25 million. This first offer was not accepted by Conrado Quesada,
the General Manager of private respondent. Joseph Sy sent a second
written offer dated July 31, 1989 for the same price but inclusive of an
undertaking to pay the documentary stamp tax, transfer tax,
registration fees and notarial charges. Check No. 247048, dated July 31,
1989, for one million pesos drawn against the Philippine Commercial and

32 | P a g e

Industrial Bank (PCIB) was enclosed therewith as earnest money. This

second offer, with earnest money, was again rejected by Conrado
Quesada. Undaunted, Joseph Sy, on August 10, 1989, sent a third
written offer for twelve million pesos with a similar check for one million
pesos as earnest money. Annotated on this third letter-offer was the
phrase "Received original, 9-4-89" beside which appears the signature of
Conrado Quesada.
On the basis of this annotation which petitioner insists is the proof that
there already exists a valid, perfected agreement to sell the Mayhaligue
property, petitioner filed with the trial court, a complaint for specific
performance and collection of sum of money with damages. However,
the trial court held that:
. . . the business encounters between Joseph Sy and
Conrado Quesada had not passed the negotiation stage
relating to the intended sale by the defendant corporation
of the property in question. . . . As the court finds, there is
nothing in the record to point that a contract was ever
perfected. In fact, there is nothing in writing which is
indispensably necessary in order that the perfected
contract could be enforced under the Statute of Frauds. 1
Since the trial court dismissed petitioner's complaint for lack of cause of
action, petitioner appealed 2 to respondent Court of Appeals before
which it assigned the following errors:
1. The Court a quo failed to appreciate that there was
already a perfected contract of sale between Jovan Land,
Inc. and the private respondent];
2. The Court a quo erred in its conclusion that there was
no implied acceptance of the offer by appellants to
appellee [private respondent];
3. The Court a quo was in error where it concluded that
the contract of sale was unenforceable;
4. The Court a quo failed to rule that appellant [petitioner]
Mendoza is entitled to her broker's commission. 3

Respondent court placed petitioner to task on their assignment of errors

and concluded that not any of them justifies a reversal of the trial court
decision.
We agree.
In the case of Ang Yu Asuncion v. Court of Appeals, 4 we held that:
. . . [A] contract (Art. 1157, Civil Code), . . . is a meeting of
minds between two persons whereby one binds himself,
with respect to the other, to give something or to render
some service. . . . A contract undergoes various stages
that include its negotiation or preparation, its perfection
and, finally, its consummation. Negotiation covers the
period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is
concluded . . . . The perfection of the contract takes place
upon the concurrence of the essential elements thereof.
Moreover, it is a fundamental principle that before contract of sale can
be valid, the following elements must be present, viz: (a) consent or
meeting of the minds; (b) determinate subject matter; (3) price certain
in money or its equivalent. Until the contract of sale is perfected, it
cannot, as an independent source of obligation, serve as a binding
juridical relation between the parties.
In the case at bench, petitioner, anchors its main argument on the
annotation on its third letter-offer of the phrase "Received original, 9-489," beside which appears the signature of Conrado Quesada. It also
contends that the said annotation is evidence to show that there was
already a perfected agreement to sell as respondent can be said to have
accepted petitioner's payment in the form of a check which was
enclosed in the third letter.
However, as correctly elucidated by the Court of Appeals:
Sy insisted in his testimony that this offer of P12M was
accepted by Conrado Quesada but there is nothing written
or documentary to show that such offer was accepted by
Conrado Quesada. While Sy claimed that the acceptance
could be gleaned from the notation in the third written

33 | P a g e

offer, the court is not impressed thereon however because

the notation merely states as follows: "Received Original,
(S) Conrado Quesada" and below this signature is "9-489". As explained by Conrado Quesada in his testimony
what was received by him was the original of the written
offer.
The court cannot believe that this notation marked as
Exhibit D-2 would signify the acceptance of the offer.
Neither does it signify, as Sy had testified that the check
was duly received on said date. If this were true Sy, who
appears to be an intelligent businessman could have
easily asked Conrado Quesada to indicate on Exhibit D the
alleged fact of acceptance of said check. And better still,
Sy could have asked Quesada the acceptance in writing
separate of the written offer if indeed there was an
agreement as to the price of the proposed sale of the
property in question. 5
Clearly then, a punctilious examination of the receipt reveals that the
same can neither be regarded as a contract of sale nor a promise to sell.
Such an annotation by Conrado Quesada amounts to neither a written
nor an implied acceptance of the offer of Joseph Sy. It is merely a
memorandum of the receipt by the former of the latter's offer. The
requisites of a valid contract of sale are lacking in said receipt and
therefore the "sale" is neither valid nor enforceable.
Although there was a series of communications through letter-offers and
rejections as evident from the facts of this case, still it is undeniable that
no written agreement was reached between petitioner and private
respondent with regard to the sale of the realty. Hence, the alleged
transaction is unenforceable as the requirements under the Statute of
Frauds have not been complied with. Under the said provision, an
agreement for the sale of real property or of an interest therein, to be
enforceable, must be in writing and subscribed by the party charged or
by an agent thereof.
Petitioner also asseverates that the failure of Conrado Quesada to return
the check for one million pesos, translates to implied acceptance of its
third letter-offer. It, however, does not rebut the finding of the trial court
that private respondent was returning the check but petitioner refused

to accept the same and that when Conrado Quesada subsequently sent
it back to petitioner through registered mail, the latter failed to claim its
mail from the post office.
Finally, we fittingly apply here the oft-repeated doctrine that the factual
findings of the trial court, especially as regards the credibility of
witnesses, are conclusive upon this court, unless the case falls under the
jurisprudentially established exceptions. But this is a case that tenders
no exceptional circumstance; rather, we find the observations of the trial
court to be legally sound and valid:
. . . Joseph Sy's testimony is not impressive because of
several inconsistencies herein pointed out. On the matter
of earnest money, the same appears to be the idea solely
of the [petitioner], assuming that he had intended to bind
the [petitioner] corporation. In the written second offer . . .
he had stated that the check of P1M had been enclosed
(attached) therewith. The same check . . . was again
mentioned to be enclosed (attached) in the third written
offer under date August 10, 1989 . . . . Sy testified in his
direct examination that he had personally given this check
to Conrado Quesada. But on cross examination, he
reversed himself by saying that the check was given thru
his [co-petitioner] Mendoza. Examining the third written
offer, it appears that when it was first typewritten, this
P11M was noted to have been corrected, and that as per
his testimony, Sy had increased it to P12M. This is the
reason according to Sy why there was a superimposition
of the number "12" over the number "11" to mean P12M
as the revised consideration for the sale of the property in
question. 6

and accordingly affirmed the trial court judgment appealed from.

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

Respondent court thus concluded that:

7 Id., p. 9, Rollo, p. 15.
. . . [since] the matter of evaluation of the credibility of
witness[es] is addressed to the trial court and unless
clearly contrary to the records before Us, the findings of
the said court are entitled to great respondent on
appeal, . . . it was Joseph Sy's idea to offer the earnest
money, and the evidence to show that Joseph Sy accepted
the same, is wanting. . . . 7

34 | P a g e

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
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 BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
SHAW, INC.
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.
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.
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.

35 | P a g e

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.
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
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
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.
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

36 | P a g e

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, 11 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.
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." 14Bernardo 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.
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 non-payment
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:
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.
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.

37 | P a g e

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
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

38 | P a g e

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 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. 8914 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.
Footnotes

1 Annex "A" of Complaint in Civil Case No. 89-14 of Branch

38 of the Regional Trial Court of Marinduque;Rollo, 70.
2 Annex of Answer in Civil Case No. 89-14; Rollo, 82;
Annex "E" of Petition; Rollo, 85.
3 Referring to B.A. Finance.
4 Exhibit "3," Annex "G" of Petition; Rollo, 86.
5 Exhibit "4," Annex "H" of Petition; Rollo, 87.
6 Annex "C" of Complaint in Civil Case No. 89-14; Id., 7172. This downpayment had already been refunded and
received by Sosa himself as shown by the Check Voucher,
Exhibit "4."
7 Annex "C-1," Id.; Id., 73-74.
8 Annex "I" of Petition; Id., 88-89.
9 Annex "B," Id.; Id., 64-69.
10 Rollo 67.
11 Id., 83-84.
12 Id., 90-108. Per Judge Romulo A. Lopez.
13 Rollo, 104.
14 Id.
15 Id.
16 Id., 107.
17 Annex "A" of Petition; Rollo, 45-62. Per Tayao-Jaguros,
L., J., with Elbinias, J. and Salas, B., JJ., concurring.
18 Velasco vs. Court of Appeals, 51 SCRA 439
[1973], citing Navarro vs. Sugar Producers Cooperative
Marketing Association, 1 SCRA 1180 [1961].
19 67 Am Jur 2d Sales 105 [1973].
20 See Harry Keeler Electric Co. vs. Rodriguez, 44 Phil. 19
[1922]; B.A. Finance Corp. vs. Court of Appeals, 211 SCRA
112 [1992].
21 Cruz vs. Court of Appeals, 201 SCRA 495 [1991];
Pineda vs. Court of Appeals, 226 SCRA 754 [1993].
22 ARTURO M. TOLENTINO, Commentaries and
Jurisprudence on the Civil Code of the Philippines, vol. 4,
1985 ed., 411; EDGARDO L. PARAS, Civil Code of the
Philippines Annotated, vol. 4, 1989 ed., 490.
23 See Beltran vs. PAIC Finance Corp., 209 SCRA 105
[1992].
24 International Harvester MacLeod, Inc. vs Medina, 183
SCRA 485 [1990].
25 Rollo, 66.
26 See Central Azucarera de Bais vs. Court of Appeals,
188 SCRA 328 [1990]; Koa vs. Court of Appeals, 219 SCRA
541 [1993]; Scott Consultants & Resource Development

39 | P a g e

Corp. vs. Court of Appeals, G.R. No. 112916, 16 March

1995.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.

VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of
Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting
aside and declaring without force and effect the orders of execution of
the trial court, dated 30 August 1991 and 27 September 1991, in Civil
Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for
Specific Performance was filed by Ang Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058, alleging,
among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants
described as Nos. 630-638 Ongpin Street, Binondo,

40 | P a g e

Manila; that they have occupied said spaces since 1935

and have been religiously paying the rental and
complying with all the conditions of the lease contract;
that on several occasions before October 9, 1986,
defendants informed plaintiffs that they are offering to sell
the premises and are giving them priority to acquire the
same; that during the negotiations, Bobby Cu Unjieng
offered a price of P6-million while plaintiffs made a
counter offer of P5-million; that plaintiffs thereafter asked
the defendants to put their offer in writing to which
request defendants acceded; that in reply to defendant's
letter, plaintiffs wrote them on October 24, 1986 asking
that they specify the terms and conditions of the offer to
sell; that when plaintiffs did not receive any reply, they
sent another letter dated January 28, 1987 with the same
request; that since defendants failed to specify the terms
and conditions of the offer to sell and because of
information received that defendants were about to sell
the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to
them.
Defendants filed their answer denying the material
allegations of the complaint and interposing a special
defense of lack of cause of action.
After the issues were joined, defendants filed a motion for
summary judgment which was granted by the lower court.
The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the
parties did not agree upon the terms and conditions of the
proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the
defendants subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will have the right
of first refusal. Thus the dispositive portion of the decision
states:
WHEREFORE, judgment is hereby rendered
in favor of the defendants and against the

plaintiffs summarily dismissing the

complaint subject to the aforementioned
condition that if the defendants
subsequently decide to offer their property
for sale for a purchase price of Eleven
Million Pesos or lower, then the plaintiffs
has the option to purchase the property or
of first refusal, otherwise, defendants need
not offer the property to the plaintiffs if the
purchase price is higher than Eleven Million
Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court
in
CA-G.R. CV No. 21123. In a decision promulgated on
September 21, 1990 (penned by Justice Segundino G.
Chua and concurred in by Justices Vicente V. Mendoza and
Fernando A. Santiago), this Court affirmed with
modification the lower court's judgment, holding:
In resume, there was no meeting of the
minds between the parties concerning the
sale of the property. Absent such
requirement, the claim for specific
performance will not lie. Appellants'
demand for actual, moral and exemplary
damages will likewise fail as there exists no
justifiable ground for its award. Summary
judgment for defendants was properly
granted. Courts may render summary
judgment when there is no genuine issue as
to any material fact and the moving party is
entitled to a judgment as a matter of law
(Garcia vs. Court of Appeals, 176 SCRA
815). All requisites obtaining, the decision
of the court a quo is legally justifiable.
WHEREFORE, finding the appeal
unmeritorious, the judgment appealed from

41 | P a g e

is hereby AFFIRMED, but subject to the

following modification: The court a quo in
the aforestated decision gave the plaintiffsappellants the right of first refusal only if
the property is sold for a purchase price of
Eleven Million pesos or lower; however,
considering the mercurial and uncertain
forces in our market economy today. We
find no reason not to grant the same right
of first refusal to herein appellants in the
event that the subject property is sold for a
price in excess of Eleven Million pesos. No
pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme
Court by petition for review on certiorari. The Supreme
Court denied the appeal on May 6, 1991 "for insufficiency
in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was
pending consideration by this Court, the Cu Unjieng
spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner
Buen Realty and Development Corporation, subject to the
following terms and conditions:
1. That for and in consideration of the sum
of FIFTEEN MILLION PESOS
(P15,000,000.00), receipt of which in full is
hereby acknowledged, the VENDORS
hereby sells, transfers and conveys for and
in favor of the VENDEE, his heirs, executors,
administrators or assigns, the abovedescribed property with all the
improvements found therein including all
the rights and interest in the said property
free from all liens and encumbrances of
whatever nature, except the pending
ejectment proceeding;

2. That the VENDEE shall pay the

Documentary Stamp Tax, registration fees
for the transfer of title in his favor and other
expenses incidental to the sale of abovedescribed property including capital gains
tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in
the name of the Cu Unjieng spouses was cancelled and, in
lieu thereof, TCT No. 195816 was issued in the name of
petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the
subject property wrote a letter to the lessees demanding
that the latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner
stating that petitioner brought the property subject to the
notice of lis pendens regarding Civil Case No. 87-41058
annotated on TCT No. 105254/T-881 in the name of the Cu
Unjiengs.
The lessees filed a Motion for Execution dated August 27,
1991 of the Decision in Civil Case No. 87-41058 as
modified by the Court of Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order
(Annex A, Petition) quoted as follows:
Presented before the Court is a Motion for
Execution filed by plaintiff represented by
Atty. Antonio Albano. Both defendants
Bobby Cu Unjieng and Rose Cu Unjieng
represented by Atty. Vicente Sison and Atty.
Anacleto Magno respectively were duly
notified in today's consideration of the
motion as evidenced by the rubber stamp
and signatures upon the copy of the Motion
for Execution.

42 | P a g e

The gist of the motion is that the Decision

of the Court dated September 21, 1990 as
modified by the Court of Appeals in its
decision in CA G.R. CV-21123, and elevated
to the Supreme Court upon the petition for
review and that the same was denied by
the highest tribunal in its resolution dated
May 6, 1991 in G.R. No.
L-97276, had now become final and
executory. As a consequence, there was an
Entry of Judgment by the Supreme Court as
of June 6, 1991, stating that the aforesaid
modified decision had already become final
and executory.
It is the observation of the Court that this
property in dispute was the subject of
theNotice of Lis Pendens and that the
modified decision of this Court promulgated
by the Court of Appeals which had become
final to the effect that should the
defendants decide to offer the property for
sale for a price of P11 Million or lower, and
considering the mercurial and uncertain
forces in our market economy today, the
same right of first refusal to herein
plaintiffs/appellants in the event that the
subject property is sold for a price in excess
of Eleven Million pesos or more.
WHEREFORE, defendants are hereby
ordered to execute the necessary Deed of
Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and
Arthur Go for the consideration of P15
Million pesos in recognition of plaintiffs'
right of first refusal and that a new Transfer
Certificate of Title be issued in favor of the
buyer.

All previous transactions involving the same

property notwithstanding the issuance of
another title to Buen Realty Corporation, is
hereby set aside as having been executed
in bad faith.

In this petition for review on certiorari, petitioners contend that Buen

Realty can be held bound by the writ of execution by virtue of the notice
of lis pendens, carried over on TCT No. 195816 issued in the name of
Buen Realty, at the time of the latter's purchase of the property on 15
November 1991 from the Cu Unjiengs.

SO ORDERED.

We affirm the decision of the appellate court.

On September 22, 1991 respondent Judge issued another

order, the dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution
issue in the above-entitled case directing
the Deputy Sheriff Ramon Enriquez of this
Court to implement said Writ of Execution
ordering the defendants among others to
comply with the aforesaid Order of this
Court within a period of one (1) week from
receipt of this Order and for defendants to
execute the necessary Deed of Sale of the
property in litigation in favor of the plaintiffs
Ang Yu Asuncion, Keh Tiong and Arthur Go
for the consideration of P15,000,000.00 and
ordering the Register of Deeds of the City of
Manila, to cancel and set aside the title
already issued in favor of Buen Realty
Corporation which was previously executed
between the latter and defendants and to
register the new title in favor of the
aforesaid plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding
writ of execution (Annex C, Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal to it by private
respondent, set aside and declared without force and effect the above
questioned orders of the court a quo.

43 | P a g e

A not too recent development in real estate transactions is the adoption

of such arrangements as the right of first refusal, a purchase option and
a contract to sell. For ready reference, we might point out some
fundamental precepts that may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art.
1156, Civil Code). The obligation is constituted upon the concurrence of
the essential elements thereof, viz: (a) The vinculum juris or juridical
tie which is the efficient cause established by the various sources of
obligations (law, contracts, quasi-contracts, delicts and quasi-delicts);
(b) the object which is the prestation or conduct; required to be
observed (to give, to do or not to do); and (c) the subject-persons who,
viewed from the demandability of the obligation, are the active (obligee)
and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code),
which is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some
service (Art. 1305, Civil Code). A contract undergoes various stages that
include its negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the
prospective contracting parties indicate interest in the contract to the
time the contract is concluded (perfected). The perfection of the
contract takes place upon the concurrence of the essential elements
thereof. A contract which is consensual as to perfection is so established
upon a mere meeting of minds, i.e., the concurrence of offer and
acceptance, on the object and on the cause thereof. A contract which
requires, in addition to the above, the delivery of the object of the
agreement, as in a pledge or commodatum, is commonly referred to as
a real contract. In a solemn contract, compliance with certain formalities
prescribed by law, such as in a donation of real property, is essential in
order to make the act valid, the prescribed form being thereby an
essential element thereof. The stage of consummationbegins when the

parties perform their respective undertakings under the contract

culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation. In sales, particularly, to
which the topic for discussion about the case at bench belongs, the
contract is perfected when a person, called the seller, obligates himself,
for a price certain, to deliver and to transfer ownership of a thing or right
to another, called the buyer, over which the latter agrees. Article 1458
of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to
Sell" where invariably the ownership of the thing sold is retained until
the fulfillment of a positive suspensive condition (normally, the full
payment of the purchase price), the breach of the condition will prevent
the obligation to convey title from acquiring an obligatory
force. 2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said
that, although denominated a "Deed of Conditional Sale," a sale is still
absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g., until or
unless the price is paid. Ownership will then be transferred to the buyer
upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon
the perfection of the contract itself, the failure of the condition would
prevent such perfection.3 If the condition is imposed on the obligation of
a party which is not fulfilled, the other party may either waive the
condition or refuse to proceed with the sale (Art. 1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as long as the object is
made determinate and the price is fixed, can be obligatory on the
parties, and compliance therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the thing to be sold and
the price to be paid, when coupled with a valuable consideration

44 | P a g e

distinct and separate from the price, is what may properly be termed a
perfected contract ofoption. This contract is legally binding, and in sales,
it conforms with the second paragraph of Article 1479 of the Civil Code,
viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The
optionee has the right, but not the obligation, to buy. Once the option is
exercised timely, i.e., the offer is accepted before a breach of the option,
a bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by an offer. An
imperfect promise (policitacion) is merely an offer. Public
advertisements or solicitations and the like are ordinarily construed as
mere invitations to make offers or only as proposals. These relations,
until a contract is perfected, are not considered binding commitments.
Thus, at any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer, at this stage, may
be withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when the
offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where
a period is given to the offeree within which to accept the offer, the
following rules generally govern:
(1) If the period is not itself founded upon or supported by a
consideration, the offeror is still free and has the right to withdraw the
offer before its acceptance, or, if an acceptance has been made, before
the offeror's coming to know of such fact, by communicating that
withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins,
Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a
unilateral promise to sell under Art. 1479, modifying the previous
decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see
also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado,
135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw,

however, must not be exercised whimsically or arbitrarily; otherwise, it

could give rise to a damage claim under Article 19 of the Civil Code
which ordains that "every person must, in the exercise of his rights and
in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is
deemed perfected, and it would be a breach of that contract to withdraw
the offer during the agreed period. The option, however, is an
independent contract by itself, and it is to be distinguished from the
projected main agreement (subject matter of the option) which is
obviously yet to be concluded. If, in fact, the optioner-offeror withdraws
the offer before its acceptance (exercise of the option) by the optioneeofferee, the latter may not sue for specific performance on the proposed
contract ("object" of the option) since it has failed to reach its own stage
of perfection. The optioner-offeror, however, renders himself liable for
damages for breach of the option. In these cases, care should be taken
of the real nature of the consideration given, for if, in fact, it has been
intended to be part of the consideration for the main contract with a
right of withdrawal on the part of the optionee, the main contract could
be deemed perfected; a similar instance would be an "earnest money"
in a contract of sale that can evidence its perfection (Art. 1482, Civil
Code).

In the law on sales, the so-called "right of first refusal" is an innovative

juridical relation. Needless to point out, it cannot be deemed a perfected
contract of sale under Article 1458 of the Civil Code. Neither can the
right of first refusal, understood in its normal concept, per se be brought
within the purview of an option under the second paragraph of Article
1479, aforequoted, or possibly of an offer under Article 1319 9 of the
same Code. An option or an offer would require, among other things, 10 a
clear certainty on both the object and the cause or consideration of the
envisioned contract. In a right of first refusal, while the object might be
made determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to enter into a
binding juridical relation with another but also on terms, including the
price, that obviously are yet to be later firmed up. Prior thereto, it can at
best be so described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the essential
elements to establish the vinculum juris would still be indefinite and
inconclusive) but by, among other laws of general application, the
pertinent scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed
under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment
that merely recognizes its existence, nor would it sanction an action for
specific performance without thereby negating the indispensable
element of consensuality in the perfection of contracts. 11 It is not to say,
however, that the right of first refusal would be inconsequential for, such
as already intimated above, an unjustified disregard thereof, given, for
instance, the circumstances expressed in Article 19 12 of the Civil Code,
can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has
merely accorded a "right of first refusal" in favor of petitioners. The
consequence of such a declaration entails no more than what has
heretofore been said. In fine, if, as it is here so conveyed to us,
petitioners are aggrieved by the failure of private respondents to honor
the right of first refusal, the remedy is not a writ of execution on the
judgment, since there is none to execute, but an action for damages in a
proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development
Corporation, the alleged purchaser of the property, has acted in good

45 | P a g e

faith or bad faith and whether or not it should, in any case, be

considered bound to respect the registration of the lis pendens in Civil
Case No. 87-41058 are matters that must be independently addressed
in appropriate proceedings. Buen Realty, not having been impleaded in
Civil Case No. 87-41058, cannot be held subject to the writ of execution
issued by respondent Judge, let alone ousted from the ownership and
possession of the property, without first being duly afforded its day in
court.
We are also unable to agree with petitioners that the Court of Appeals
has erred in holding that the writ of execution varies the terms of the
judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123.
The Court of Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with
the decision of the trial court as modified by this Court. As
already stated, there was nothing in said decision 13 that
decreed the execution of a deed of sale between the Cu
Unjiengs and respondent lessees, or the fixing of the price
of the sale, or the cancellation of title in the name of
petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng
Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman
vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).

#Footnotes
1 Rollo, pp. 32-38.
2 Roque vs. Lapuz, 96 SCRA 741; Agustin vs. CA, 186
SCRA 375.
3 See People's Homesite and Housing Corp. vs. Court of
Appeals, 133 SCRA 777.
4 Delta Motor Corporation vs. Genuino, 170 SCRA 29.
5 See Art. 1459; Atkins, Kroll and Co., Inc. vs. Cua Hian
Tek, 102 Phil. 948.
6 It is well to note that when the consideration given, for
what otherwise would have been an option, partakes the
nature in reality of a part payment of the purchase price
(termed as "earnest money" and considered as an initial
payment thereof), an actual contract of sale is deemed
entered into and enforceable as such.

It is likewise quite obvious to us that the decision in Civil Case No. 8741058 could not have decreed at the time the execution of any deed of
sale between the Cu Unjiengs and petitioners.

7 Enriquez de la Cavada vs. Diaz, 37 Phil. 982.

WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting

aside the questioned Orders, dated 30 August 1991 and 27 September
1991, of the court a quo. Costs against petitioners.

9 Article 1319, Civil Code, provides:

SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo,
Melo, Quiason, Puno and Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.

46 | P a g e

8 Atkins, Kroll & Co., Inc., vs. Cua Hian Tek, 102 Phil. 948.

Art. 1319. Consent is manifested by the meeting of the

offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer. (Emphasis
supplied.)
10 It is also essential for an option to be binding that
valuable consideration distinct from the price should be
given (see Montilla vs. Court of Appeals, 161 SCRA 167;

Sps. Natino vs. IAC, 197 SCRA 323; Cronico vs. J.M. Tuason
& Co., Inc., 78 SCRA 331).
11 See Article 1315 and 1318, Civil Code; Madrigal & Co.
vs. Stevenson & Co., 15 Phil. 38; Salonga vs. Ferrales, 105
SCRA 359).
12 Art. 19. Every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.
13 The decision referred to reads:
In resume, there was no meeting of the minds between
the parties concerning the sale of the property. Absent
such requirement, the claim for specific performance will
not lie. Appellants' demand for actual, moral and
exemplary damages will likewise fail as there exists no
justifiable ground for its award. Summary judgment for
defendants was properly granted. Courts may render
summary judgment when there is no genuine issue as to
any material fact and the moving party is entitled to a
judgment as a matter of law (Garcia vs. Court of Appeals,
176 SCRA 815). All requisites obtaining, the decision of
the court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the
judgment appealed from is hereby AFFIRMED, but subject
to the following modification: The court a quo in the
aforestated decision, gave the plaintiffs considering the
mercurial and uncertain forces in our market economy
today. We find no reason not to grant the same right of
first refusal to herein appellants in the event that the
subject property is sold for a price in excess of Eleven
Million pesos. No pronouncement as to costs.

47 | P a g e

SECOND DIVISION
[G.R. No. 137290. July 31, 2000]
SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner,
vs. SPOUSES ALFREDO HUANG and GRACE HUANG, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision, [1] dated April 8, 1997, of the
Court of Appeals which reversed the decision of the Regional Trial Court,
Branch 153, Pasig City dismissing the complaint brought by respondents
against petitioner for enforcement of a contract of sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a domestic
corporation engaged in the purchase and sale of real properties. Part of
its inventory are two parcels of land totalling 1, 738 square meters at
the corner of Meralco Avenue and General Capinpin Street, Barrio
Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT82396 of the Register of Deeds of Pasig City.
On February 21, 1994, the properties were offered for sale
for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz
who was acting for respondent spouses as undisclosed principals. In a
letter[2] dated March 24, 1994, Atty. Dauz signified her clients interest in
purchasing the properties for the amount for which they were offered by
petitioner, under the following terms: the sum of P500,000.00 would be
given as earnest money and the balance would be paid in eight equal
monthly installments from May to December, 1994. However, petitioner
refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the
following terms for the purchase of the properties, viz:
This is to express our interest to buy your-abovementioned property with an area of 1, 738 sq. meters. For
this purpose, we are enclosing herewith the sum
of P1,000,000.00 representing earnest-deposit money,
subject to the following conditions.
1. We will be given the exclusive option to purchase the
property within the 30 days from date of your acceptance
of this offer.
2. During said period, we will negotiate on the terms and
conditions of the purchase; SMPPI will secure the
necessary Management and Board approvals; and we
initiate the documentation if there is mutual agreement
between us.
3. In the event that we do not come to an agreement on
this transaction, the said amount of P1,000,000.00 shall
be refundable to us in full upon demand. . . .

48 | P a g e

Isidro A. Sobrecarey, petitioners vice-president and operations manager

for corporate real estate, indicated his conformity to the offer by affixing
his signature to the letter and accepted the "earnest-deposit" of P1
million. Upon request of respondent spouses, Sobrecarey ordered the
removal of the "FOR SALE" sign from the properties.
Atty. Dauz and Sobrecarey then commenced negotiations. During their
meeting on April 8, 1994, Sobrecarey informed Atty. Dauz that petitioner
was willing to sell the subject properties on a 90-day term. Atty. Dauz
countered with an offer of six months within which to pay.
On April 14, 1994, the parties again met during which Sobrecarey
informed Atty. Dauz that petitioner had not yet acted on her counteroffer. This prompted Atty. Dauz to propose a four-month period of
amortization.
On April 25, 1994, Atty. Dauz asked for an extension of 45 days from
April 29, 1994 to June 13, 1994 within which to exercise her option to
purchase the property, adding that within that period, "[we] hope to
finalize [our] agreement on the matter."[4] Her request was granted.
On July 7, 1994, petitioner, through its president and chief executive
officer, Federico Gonzales, wrote Atty. Dauz informing her that because
the parties failed to agree on the terms and conditions of the sale
despite the extension granted by petitioner, the latter was returning the
amount of P1 million given as "earnest-deposit."[5]
On July 20, 1994, respondent spouses, through counsel, wrote petitioner
demanding the execution within five days of a deed of sale covering the
properties. Respondents attempted to return the "earnest-deposit" but
petitioner refused on the ground that respondents option to purchase
had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific
performance against petitioner before the Regional Trial Court, Branch
133, Pasig City where it was docketed as Civil Case No. 64660.
Within the period for filing a responsive pleading, petitioner filed a
motion to dismiss the complaint alleging that (1) the alleged "exclusive
option" of respondent spouses lacked a consideration separate and
distinct from the purchase price and was thus unenforceable and (2) the
complaint did not allege a cause of action because there was no
"meeting of the minds" between the parties and, therefore, no perfected
contract of sale. The motion was opposed by respondents.
On December 12, 1994, the trial court granted petitioners motion and
dismissed the action. Respondents filed a motion for reconsideration,
but it was denied by the trial court. They then appealed to the Court of
Appeals which, on April 8, 1997, rendered a decision[6] reversing the
judgment of the trial court. The appellate court held that all the
requisites of a perfected contract of sale had been complied with as the
offer made on March 29, 1994, in connection with which the earnest

money in the amount of P1 million was tendered by respondents, had

already been accepted by petitioner. The court cited Art. 1482 of the
Civil Code which provides that "[w]henever earnest money is given in a
contract of sale, it shall be considered as part of the price and as proof
of the perfection of the contract." The fact the parties had not agreed on
the mode of payment did not affect the contract as such is not an
essential element for its validity. In addition, the court found that
Sobrecarey had authority to act in behalf of petitioner for the sale of the
properties.[7]
Petitioner moved for reconsideration of the trial courts decision, but its
motion was denied. Hence, this petition.
Petitioner contends that the Court of Appeals erred in finding that there
was a perfected contract of sale between the parties because the March
29, 1994 letter of respondents, which petitioner accepted, merely
resulted in an option contract, albeit it was unenforceable for lack of a
distinct consideration. Petitioner argues that the absence of agreement
as to the mode of payment was fatal to the perfection of the contract of
sale. Petitioner also disputes the appellate courts ruling that Isidro A.
Sobrecarey had authority to sell the subject real properties. [8]
Respondents were required to comment within ten (10) days from
notice. However, despite 13 extensions totalling 142 days which the
Court had given to them, respondents failed to file their comment. They
were thus considered to have waived the filing of a comment.
The petition is meritorious.
In holding that there is a perfected contract of sale, the Court of Appeals
relied on the following findings: (1) earnest money was allegedly given
by respondents and accepted by petitioner through its vice-president
and operations manager, Isidro A. Sobrecarey; and (2) the documentary
evidence in the records show that there was a perfected contract of
sale.
With regard to the alleged payment and acceptance of earnest money,
the Court holds that respondents did not give the P1 million as "earnest
money" as provided by Art. 1482 of the Civil Code. They presented the
amount merely as a deposit of what would eventually become the
earnest money or downpayment should a contract of sale be made by
them. The amount was thus given not as a part of the purchase price
and as proof of the perfection of the contract of sale but only as a
guarantee that respondents would not back out of the sale. Respondents
in fact described the amount as an "earnest-deposit." In Spouses
Doromal, Sr. v. Court of Appeals,[9] it was held:
. . . While the P5,000 might have indeed been paid to
Carlos in October, 1967, there is nothing to show that the
same was in the concept of the earnest money
contemplated in Art. 1482 of the Civil Code, invoked by

49 | P a g e

petitioner, as signifying perfection of the sale. Viewed in

the backdrop of the factual milieu thereof extant in the
record, We are more inclined to believe that the
said P5,000.00 were paid in the concept of earnest money
as the term was understood under the Old Civil Code, that
is, as a guarantee that the buyer would not back out,
considering that it is not clear that there was already a
definite agreement as to the price then and that
petitioners were decided to buy 6/7 only of the property
should respondent Javellana refuse to agree to part with
her 1/7 share.[10]
In the present case, the P1 million "earnest-deposit" could not have
been given as earnest money as contemplated in Art. 1482 because, at
the time when petitioner accepted the terms of respondents offer of
March 29, 1994, their contract had not yet been perfected. This is
evident from the following conditions attached by respondents to their
letter, to wit: (1) that they be given the exclusive option to purchase the
property within 30 days from acceptance of the offer; (2) that during the
option period, the parties would negotiate the terms and conditions of
the purchase; and (3) petitioner would secure the necessary approvals
while respondents would handle the documentation.
The first condition for an option period of 30 days sufficiently shows that
a sale was never perfected. As petitioner correctly points out,
acceptance of this condition did not give rise to a perfected sale but
merely to an option or an accepted unilateral promise on the part of
respondents to buy the subject properties within 30 days from the date
of acceptance of the offer. Such option giving respondents the exclusive
right to buy the properties within the period agreed upon is separate
and distinct from the contract of sale which the parties may enter. [11] All
that respondents had was just the option to buy the properties which
privilege was not, however, exercised by them because there was a
failure to agree on the terms of payment. No contract of sale may thus
be enforced by respondents.
Furthermore, even the option secured by respondents from petitioner
was fatally defective. Under the second paragraph of Art. 1479, an
accepted unilateral promise to buy or sell a determinate thing for a price
certain is binding upon the promisor only if the promise is supported by
a distinct consideration. Consideration in an option contract may be
anything of value, unlike in sale where it must be the price certain in
money or its equivalent. There is no showing here of any consideration
for the option. Lacking any proof of such consideration, the option is
unenforceable.
Equally compelling as proof of the absence of a perfected sale is the
second condition that, during the option period, the parties would

negotiate the terms and conditions of the purchase. The stages of a

contract of sale are as follows: (1) negotiation, covering the period from
the time the prospective contracting parties indicate interest in the
contract to the time the contract is perfected; (2) perfection, which
takes place upon the concurrence of the essential elements of the sale
which are the meeting of the minds of the parties as to the object of the
contract and upon the price; and (3) consummation, which begins when
the parties perform their respective undertakings under the contract of
sale, culminating in the extinguishment thereof.[12] In the present case,
the parties never got past the negotiation stage. The alleged
"indubitable evidence"[13] of a perfected sale cited by the appellate court
was nothing more than offers and counter-offers which did not amount
to any final arrangement containing the essential elements of a contract
of sale. While the parties already agreed on the real properties which
were the objects of the sale and on the purchase price, the fact remains
that they failed to arrive at mutually acceptable terms of payment,
despite the 45-day extension given by petitioner.
The appellate court opined that the failure to agree on the terms of
payment was no bar to the perfection of the sale because Art. 1475 only
requires agreement by the parties as to the price of the object. This is
error. In Navarro v. Sugar Producers Cooperative Marketing Association,
Inc.,[14] we laid down the rule that the manner of payment of the
purchase price is an essential element before a valid and binding
contract of sale can exist. Although the Civil Code does not expressly
state that the minds of the parties must also meet on the terms or
manner of payment of the price, the same is needed, otherwise there is
no sale. As held in Toyota Shaw, Inc. v. Court of Appeals,[15] agreement
on 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.[16] In Velasco v. Court of Appeals,[17] the parties to a proposed sale
had already agreed on the object of sale and on the purchase price. By
the buyers own admission, however, the parties still had to agree on
how and when the downpayment and the installments were to be paid.
It was held:
. . . Such being the situation, it can not, therefore, be said
that a definite and firm sales agreement between the
parties had been perfected over the lot in
question. Indeed, this Court has already ruled before that
a definite agreement on the manner of payment of the
purchase price is an essential element in the formation of
a binding and enforceable contract of sale. The fact,
therefore, that the petitioners delivered to the respondent
the sum of P10,000 as part of the down-payment that
they had to pay cannot be considered as sufficient proof

50 | P a g e

of the perfection of any purchase and sale agreement

between the parties herein under Art. 1482 of the new
Civil Code, as the petitioners themselves admit that some
essential matter - the terms of the payment - still had to
be mutually covenanted.[18]
Thus, it is not the giving of earnest money, but the proof of the
concurrence of all the essential elements of the contract of sale which
establishes the existence of a perfected sale.
In the absence of a perfected contract of sale, it is immaterial whether
Isidro A. Sobrecarey had the authority to enter into a contract of sale in
behalf of petitioner. This issue, therefore, needs no further discussion.
WHEREFORE, the decision of the Court of Appeals is REVERSED and
respondents complaint is DISMISSED.
SO ORDERED.
Quisumbing, Buena, and De Leon, Jr., JJ., concur.
Bellosillo, (Chairman), J., on leave.

[1]

Per Associate Justice Corona Ibay-Somera and concurred in by Justices

Emeterio C. Cui and Salvador J. Valdez, Jr.
[2]
Annex D; Rollo, p. 99.
[3]
Annex E; Id., p. 100.
[4]
Annex F; Id., p. 102.
[5]
Annex I; Rollo, p. 107.
[6]
Rollo, pp. 38-61.
[7]
Id., pp. 48-60.
[8]
Petition, pp. 12-13; Rollo, pp. 14-15.
[9]
66 SCRA 575 (1975)
[10]
Id., at 582. (Emphasis added)
[11]
Carceler v. Court of Appeals, 302 SCRA 718 (1999); Cavite
Development Bank and Far East Bank and Trust Company v. Court of
Appeals, G.R. No. 131679, Feb. 1, 2000.
[12]
Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994)
[13]
The Court of Appeals enumerated these as follows: (1) Annex "A"
which contains petitioners offer to sell the subject properties;
(2) Annex "D," a letter dated March 24, 1994 through which respondent
spouses, through Atty. Helena M. Dauz, signified their interest to buy the
subject properties; and (3) Annex "E," another letter from respondent
spouses dated March 29, 1994 through which respondents again
expressed their interest to buy the subject properties subject to certain
conditions.
[14]
1 SCRA 1181 (1961)
[15]
244 SCRA 320 (1995)

[16]
[17]

Id., p. 328.
51 SCRA 439 (1973)

51 | P a g e

[18]

Id., p. 453. (Emphasis added)