[G.R. No. 120820.
August 1, 2000] On June 16, 1984, the bank sent Rosalinda Santos a
SPS. FORTUNATO SANTOS and ROSALINDA R.
SANTOS, petitioners, vs. COURT OF APPEALS,
SPS. MARIANO R. CASEDA and CARMEN
CASEDA, respondents.
DECISION
QUISUMBING, J .:
For review on certiorari is the decision of the Court of
Appeals, dated March 28, 1995, in CA-G.R. CV No. 30955,
which reversed and set aside the judgment of the Regional Trial
Court of Makati, Branch 133, in Civil Case No. 89-
4759. Petitioners (the Santoses) were the owners of a house
and lot informally sold, with conditions, to herein private
respondents (the Casedas). In the trial court, the Casedas had
complained that the Santoses refused to deliver said house and
lot despite repeated demands. The trial court dismissed the
complaint for specific performance and damages, but in the
Court of Appeals, the dismissal was reversed, as follows:
WHEREFORE, in view of the foregoing, the decision appealed
from is hereby REVERSED and SET ASIDE and a new one
entered:
1. GRANTING plaintiffs-appellants a period of NINETY (90)
DAYS from the date of the finality of judgment within which to
pay the balance of the obligation in accordance with their
agreement;
2. Ordering appellees to restore possession of the subject
house and lot to the appellants upon receipt of the full amount of
the balance due on the purchase price; and
3. No pronouncement as to costs.
SO ORDERED.[1]
The undisputed facts of this case are as follows:
The spouses Fortunato and Rosalinda Santos owned the
house and lot consisting of 350 square meters located at Lot 7,
Block 8, Better Living Subdivision, Paranaque, Metro Manila, as
evidenced by TCT (S-11029) 28005 of the Register of Deeds of
Paranaque. The land together with the house, was mortgaged
with the Rural Bank of Salinas, Inc., to secure a loan of
P150,000.00 maturing on June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen
Caseda, a fellow market vendor of hers in Pasay City and soon
became very good friends with her. The duo even
became kumadres when Carmen stood as a wedding sponsor of
Rosalinda's nephew.
letter demanding payment of P16,915.84 in unpaid interest and
other charges. Since the Santos couple had no funds, Rosalinda
offered to sell the house and lot to Carmen. After inspecting the
real property, Carmen and her husband agreed.
Sometime that month of June, Carmen and Rosalinda
signed a document, which reads:
Received the amount of P54,100.00 as a partial payment of
Mrs. Carmen Caseda to the (total) amount of 350,000.00 (house
and lot) that is own (sic) by Mrs. Rosalinda R. Santos.
(Mrs.) (Sgd.) Carmen Caseda
direct buyer
Mrs. Carmen Caseda
(Sgd.) Rosalinda Del R. Santos
Owner
Mrs. Rosalinda R. Santos
House and Lot
Better Living Subd. Paraaque, Metro Manila
Section V Don Bosco St."[2]
The other terms and conditions that the parties agreed
upon were for the Caseda spouses to pay: (1) the balance of the
mortgage loan with the Rural bank amounting to P135,385.18;
(2) the real estate taxes; (3) the electric and water bills; and (4)
the balance of the cash price to be paid not later than June 16,
1987, which was the maturity date of the loan.[3]
The Casedas gave an initial payment of P54,100.00 and
immediately took possession of the property, which they then
leased out. They also paid in installments, P81,696.84 of the
mortgage loan. The Casedas, however, in
1987. Notwithstanding the state of their finances, Carmen
nonetheless paid in March 1990, the real estate taxes on the
property for 1981-1984. She also settled the electric bills from
December 12, 1988 to July 12, 1989. All these payments were
made in the name of Rosalinda Santos.
In January 1989, the Santoses, seeing that the Casedas
lacked the means to pay the remaining installments and/or
amortization of the loan, repossessed the property. The
Santoses then collected the rentals from the tenants.
In February 1989, Carmen Caseda sold her fishpond in
Batangas. She then approached petitioners and offered to pay
the balance of the purchase price for the house and lot. The
parties, however, could not agree, and the deal could not push
through because the Santoses wanted a higher price. For
understandably, the real estate boom in Metro Manila at this
time, had considerably jacked up realty values.
 On August 11, 1989, the Casedas filed Civil Case No. 89-
4759, with the RTC of Makati, to have the Santoses execute the
final deed of conveyance over the property, or in default thereof,
to reimburse the amount of P180,000.00 paid in cash and
P249,900.00 paid to the rural bank, plus interest; as well as
rentals for eight months amounting to P32,000.00, plus
damages and costs of suit.
After trial on the merits, the lower court disposed of the
case as follows:
WHEREFORE, judgment is hereby ordered:
(a) dismissing plaintiff's (Casedas') complaint; and
(b) declaring the agreement marked as Annex "C" of
the complaint rescinded. Costs against plaintiffs.
SO ORDERED.[4]
Said judgment of dismissal is mainly based on the trial
court's finding that:
Admittedly, the purchase price of the house and lot was
P485,385.18, i.e. P350,000.00 as cash payment and
P135,385.18, assumption of mortgage. Of it plaintiffs [Casedas]
paid the following: (1) P54,100.00 down payment; and (2)
P81,694.64 installment payments to the bank on the loan (Exhs.
E to E-19) or a total of P135,794.64. Thus, plaintiffs were short
of the purchase price. They cannot, therefore, demand specific
performance.[5]
The trial court further held that the Casedas were not
entitled to reimbursement of payments already made, reasoning
that:
As, earlier mentioned, plaintiffs made a total payment of
P135,794.64 out of the purchase price of P485,385.18. The
property was in plaintiffs' possession from June 1984 to January
1989 or a period of fifty-five months. During that time, plaintiffs
leased the property. Carmen said the property was rented for
P25.00 a day or P750.00 a month at the start and in 1987 it was
increased to P2,000.00 and P4,000.00 a month.But the
evidence is not precise when the different amounts of rental took
place. Be that as it may, fairness demands that plaintiffs must
pay defendants for their exercise of dominical rights over the
property by renting it to others. The amount of P2,000.00 a
month would be reasonable based on the average of P750.00,
P2,000.00, P4,000.00 lease-rentals charged. Multiply P2,000.00
by 55 months, the plaintiffs must pay defendants P110,000.00
for the use of the property. Deducting this amount from the
P135,794.64 payment of the plaintiffs on the property, the
difference is P25,794.64. Should the plaintiffs be entitled to a
reimbursement of this amount? The answer is in the
negative. Because of failure of plaintiffs to liquidated the
mortgage loan on time, it had ballooned from its original figure of
P135,384.18 as of June 1984 to P337,280.78 as of December
31, 1988. Defendants [Santoses] had to pay the last amount to
the bank to save the property from foreclosure. Logically,
plaintiffs must share in the burden arising from their failure to
liquidate the loan per their contractual commitment. Hence, the
amount of P25,794.64 as their share in the defendants'
damages in the form of increased loan-amount, is reasonable. [6]
On appeal, the appellate court, as earlier noted, reversed
the lower court. The appellate court held that rescission was not
justified under the circumstances and allowed the Caseda
spouses a period of ninety days within which to pay the balance
of the agreed purchase price.
Hence, this instant petition for review on certiorari filed by
the Santoses.
Petitioners now submit the following issues for our
consideration:
WHETHER OR NOT THE COURT OF APPEALS HAS
JURISDICTION TO DECIDE PRIVATE RESPONDENT'S
APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A
CONTRACT OF ABSOLUTE SALE BUT A MERE ORAL
CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND
FOR RESCISSION (ART. 1592,[7]CIVIL CODE) IS NOT
APPLICABLE.
ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR
RESCISSION IS REQUIRED, WHETHER PETITIONERS'
DEMAND AND PRAYER FOR RESCISSION CONTAINED IN
THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED THE
SAID REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN
HALF OF THE ENTIRE PURCHASE PRICE INCLUDING THE
NON-COMPLIANCE WITH THE STIPULATION TO LIQUIDATE
THE MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE
DAMAGE AND PREJUDICE TO PETITIONERS, CONSTITUTE
SUBSTANTIAL BREACH TO JUSTIFY RESCISSION OF A
CONTRACT TO SELL UNDER ARTICLE 1191[8] (CIVIL CODE).
On the first issue, petitioners argue that, since both the
parties and the appellate court adopted the findings of trial court,
[9]
no questions of fact were raised before the Court of
Appeals. According to petitioners, CA-G.R. CV No. 30955,
involved only pure questions of law. They aver that the court a
quo had no jurisdiction to hear, much less decide, CA-G.R. CV
No. 30955, without running afoul of Supreme Court Circular No.
2-90 (4) [c].[10]
There is a question of law in a given case when the doubt
or difference arises as to what the law is on a certain set of
facts, and there is a question of fact when the doubt or
difference arises as to the truth or falsehood of the alleged facts.
[11]
But we note that the first assignment of error submitted by
respondents for consideration by the appellate court dealt with
the trial court's finding that herein petitioners got back the
property in question because respondents did not have the
means to pay the installments and/or amortization of the loan.
[12]
The resolution of this question involved an evaluation of
proof, and not only a consideration of the applicable statutory
and case laws. Clearly, CA-G.R. CV No. 30955 did not involve
pure questions of law, hence the Court of Appeals had
jurisdiction and there was no violation of our Circular No. 2-90.
Moreover, we find that petitioners took an active part in the
proceedings before the Court of Appeals, yet they did not raise
there the issue of jurisdiction. They should have raised this
issue at the earliest opportunity before the Court of Appeals. A
party taking part in the proceedings before the appellate court
and submitting his case for as decision ought not to later on
attack the court's decision for want of jurisdiction because the
decision turns out to be adverse to him.[13]
The second and third issues deal with the question: Did
the Court of Appeals err in holding that a judicial rescission of
the agreement was necessary? In resolving both issues, we
must first make a preliminary determination of the nature of the
contract in question: Was it a contract of sale, as insisted by
respondents or a mere contract to sell, as contended by
petitioners?
Petitioners argue that the transaction between them and
respondents was a mere contract to sell, and not a contract of
sale, since the sole documentary evidence (Exh. D, receipt)
referring to their agreement clearly showed that they did not
transfer ownership of the property in question simultaneous with
its delivery and hence remained its owners, pending fulfillment
of the other suspensive conditions, i.e., full payment of the
balance of the purchase price and the loan amortizations.
Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.,
43 SCRA 93 (1972), where we held that Article 1592 of the Civil
Code is inapplicable to a contract to sell. They charge the court
a quo with reversible error in holding that petitioners should
have judicially rescinded the agreement with respondents when
the latter failed to pay the amortizations on the bank loan.
Respondents insist that there was a perfected contract of
sale, since upon their partial payment of the purchase price,
they immediately took possession of the property as vendees,
and subsequently leased it, thus exercising all the rights of
ownership over the property. This showed that transfer of
ownership was simultaneous with the delivery of the realty sold,
according to respondents.
It must be emphasized from the outset that a contract is
what the law defines it to be, taking into consideration its
essential elements, and not what the contracting parties call it.
[14]
Article 1458[15] of the Civil Code defines a contract of
sale. Note that the said article expressly obliges the vendor to
transfer ownership of the thing sold as an essential element of a
contract of sale. This is because the transfer of ownership in
exchange for a price paid or promised is the very essence of a
contract of sale.[16] We have carefully examined the contents of
the unofficial receipt, Exh. D, with the terms and conditions
informally agreed upon by the parties, as well as the proofs
submitted to support their respective contentions. We are far
from persuaded that there was a transfer of ownership
simultaneously with the delivery of the property purportedly
sold. The records clearly show that, notwithstanding the fact that
the Casedas first took then lost possession of the disputed
house and lot, the title to the property, TCT No. 28005 (S-11029)
issued by the Register of Deeds of Paraaque, has remained
always in the name of Rosalinda Santos. [17] Note further that
although the parties had agreed that the Casedas would
assume the mortgage, all amortization payments made by
Carmen Caseda to the bank were in the name of Rosalinda
Santos.[18] We likewise find that the bank's cancellation and
discharge of mortgage dated January 20, 1990, was made in
favor of Rosalinda Santos.[19] The foregoing circumstances
categorically and clearly show that no valid transfer of
ownership was made by the Santoses to the Casedas. Absent
this essential element, their agreement cannot be deemed a
contract of sale. We agree with petitioners' averment that the
agreement between Rosalinda Santos and Carmen Caseda is a
contract to sell. In contracts to sell, ownership is reserved by the
vendor and is not to pass until full payment of the purchase
price. This we find fully applicable and understandable in this
case, given that the property involved is a titled realty under
mortgage to a bank and would require notarial and other
formalities of law before transfer thereof could be validly
effected.
In view of our finding in the present case that the
agreement between the parties is a contract to sell, it follows
that the appellate court erred when it decreed that a judicial
rescission of said agreement was necessary. This is because
there was no rescission to speak of in the first place. As we
earlier pointed out, in a contract to sell, title remains with the
vendor and does not pass on to the vendee until the purchase
price is paid in full. Thus, in a contract to sell, the payment of the
purchase price is a positive suspensive condition. Failure to pay
the price agreed upon is not a mere breach, casual or serious,
but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force. [20] This is entirely
different from the situation in a contract of sale, where non-
payment of the price is a negative resolutory condition. The
effects in law are not identical. In a contract of sale, the vendor
has lost ownership of the thing sold and cannot recover it,
unless the contract of sale is rescinded and set aside. [21] In a
contract to sell, however, the vendor remains the owner for as
long as the vendee has not complied fully with the condition of
paying the purchase price. If the vendor should eject the vendee
for failure to meet the condition precedent, he is enforcing the
contract and not rescinding it. When the petitioners in the instant
case repossessed the disputed house and lot for failure of
private respondents to pay the purchase price in full, they were
merely enforcing the contract and not rescinding it. As
petitioners correctly point out, the Court of Appeals erred when it
ruled that petitioners should have judicially rescinded the
contract pursuant to Articles 1592 and 1191 of the Civil
Code. Article 1592 speaks of non-payment of the purchase price
as a resolutory condition. It does not apply to a contract to sell.
[22]
As to Article 1191, it is subordinated to the provisions of
Article 1592 when applied to sales of immovable property.
[23]
Neither provision is applicable in the present case.
As to the last issue, we need not tarry to make a
determination of whether the breach of contract by private
respondents is so substantial as to defeat the purpose of the
parties in entering into the agreement and thus entitle petitioners
to rescission. Having ruled that there is no rescission to speak of
in this case, the question is moot.
WHEREFORE, the instant petition is GRANTED and the
assailed decision of the Court of Appeals in CA-G.R. CV No.
30955 is REVERSED and SET ASIDE. The judgment of the
Regional Trial Court of Makati, Branch 133, with respect to the
DISMISSAL of the complaint in Civil Case No. 89-4759, is
hereby REINSTATED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 133895. October 2, 2001]
ZENAIDA M. SANTOS, petitioner, vs. CALIXTO SANTOS,
ALBERTO SANTOS, ROSA SANTOS-CARREON
and ANTONIO SANTOS, respondents .
DECISION
QUISUMBING , J .:
This petition for review[1] seeks to annul and set aside the
decision dated March 10, 1998 of the Court of Appeals that
affirmed the decision of the Regional Trial Court of Manila,
Branch 48, dated March 17, 1993. Petitioner also seeks to annul
the resolution that denied her motion for reconsideration.
Petitioner Zenaida M. Santos is the widow of Salvador
Santos, a brother of private respondents Calixto, Alberto,
Antonio, all surnamed Santos and Rosa Santos-Carreon.
The spouses Jesus and Rosalia Santos owned a parcel of
land registered under TCT No. 27571 with an area of 154
square meters, located at Sta. Cruz Manila. On it was a four-
door apartment administered by Rosalia who rented them
out. The spouses had five children, Salvador, Calixto, Alberto,
Antonio and Rosa.
On January 19, 1959, Jesus and Rosalia executed a deed
of sale of the properties in favor of their children Salvador and
Rosa. TCT No. 27571 became TCT No. 60819. Rosa in turn
sold her share to Salvador on November 20, 1973 which
resulted in the issuance of a new TCT No. 113221. Despite the
transfer of the property to Salvador, Rosalia continued to lease
and receive rentals from the apartment units.
On November 1, 1979, Jesus died. Six years after or on
January 9, 1985, Salvador died, followed by Rosalia who died
the following month. Shortly after, petitioner Zenaida, claiming to
be Salvadors heir, demanded the rent from Antonio
Hombrebueno,[2] a tenant of Rosalia. When the latter refused to
pay, Zenaida filed an ejectment suit against him with the
Metropolitan Trial Court of Manila, Branch 24, which eventually
decided in Zenaidas favor.
On January 5, 1989, private respondents instituted an
action for reconveyance of property with preliminary injunction
against petitioner in the Regional Trial Court of Manila, where
they alleged that the two deeds of sale executed on January 19,
1959 and November 20, 1973 were simulated for lack of
consideration. They were executed to accommodate Salvador in
generating funds for his business ventures and providing him
with greater business flexibility.
In her Answer, Zenaida denied the material allegations in
the complaint and as special and affirmative defenses, argued
that Salvador was the registered owner of the property, which
could only be subjected to encumbrances or liens annotated on
the title; that the respondents right to reconveyance was already
barred by prescription and laches; and that the complaint stated
no cause of action.
On March 17, 1993, the trial court decided in private
respondents favor, thus:
WHEREFORE, viewed from all the foregoing considerations,
judgment is hereby made in favor of the plaintiffs and against
the defendants:
a) Declaring Exh. B, the deed of sale executed by Rosalia
Santos and Jesus Santos on January 19, 1959, as entirely null
and void for being fictitious or simulated and inexistent and
without any legal force and effect;
b) Declaring Exh. D, the deed of sale executed by Rosa Santos
in favor of Salvador Santos on November 20, 1973, also as
entirely null and void for being likewise fictitious or simulated
and inexistent and without any legal force and effect;
c) Directing the Register of Deeds of Manila to cancel Transfer
Certificate of Title No. T-113221 registered in the name of
Salvador Santos, as well as, Transfer Certificate of Title No.
60819 in the names of Salvador Santos, Rosa Santos, and
consequently thereafter, reinstating with the same legal force
and effect as if the same was not cancelled, and which shall in
all respects be entitled to like faith and credit; Transfer
Certificate of Title No. T-27571 registered in the name of Rosalia
A. Santos, married to Jesus Santos, the same to be partitioned
by the heirs of the said registered owners in accordance with
law; and
d) Making the injunction issued in this case permanent.
Without pronouncement as to costs.
SO ORDERED.[3]
The trial court reasoned that notwithstanding the deeds of
sale transferring the property to Salvador, the spouses Rosalia
and Jesus continued to possess the property and to exercise
rights of ownership not only by receiving the monthly rentals, but
also by paying the realty taxes. Also, Rosalia kept the owners
duplicate copy of the title even after it was already in the name
of Salvador. Further, the spouses had no compelling reason in
1959 to sell the property and Salvador was not financially
capable to purchase it. The deeds of sale were therefore
fictitious. Hence, the action to assail the same does not
prescribe.[4]
Upon appeal, the Court of Appeals affirmed the trial courts
decision dated March 10, 1998. It held that in order for the
execution of a public instrument to effect tradition, as provided in
Article 1498 of the Civil Code,[5] the vendor shall have had
control over the thing sold, at the moment of sale. It was not
enough to confer upon the purchaser the ownership and the
right of possession. The thing sold must be placed in his
control. The subject deeds of sale did not confer upon Salvador
the ownership over the subject property, because even after the
sale, the original vendors remained in dominion, control, and
possession thereof. The appellate court further said that if the
reason for Salvadors failure to control and possess the property
was due to his acquiescence to his mother, in deference to
Filipino custom, petitioner, at least, should have shown evidence
to prove that her husband declared the property for tax
purposes in his name or paid the land taxes, acts which strongly
indicate control and possession. The appellate court disposed:
WHEREFORE, finding no reversible error in the decision
appealed from, the same is hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.[6]
Hence, this petition where petitioner avers that the Court
of Appeals erred in:
I.
...HOLDING THAT THE OWNERSHIP OVER THE LITIGATED
PROPERTY BY THE LATE HUSBAND OF DEFENDANT-
APPELLANT WAS AFFECTED BY HIS FAILURE TO
EXERCISE CERTAIN ATTRIBUTES OF OWNERSHIP.
II
...HOLDING THAT DUE EXECUTION OF A PUBLIC
INSTRUMENT IS NOT EQUIVALENT TO DELIVERY OF THE
LAND IN DISPUTE.
III
...NOT FINDING THAT THE CAUSE OF ACTION OF ROSALIA
SANTOS HAD PRESCRIBED AND/OR BARRED BY LACHES.
IV
...IGNORING PETITIONERS ALLEGATION TO THE EFFECT
THAT PLAINTIFF DR. ROSA [S.] CARREON IS NOT
DISQUALIFIED TO TESTIFY AS TO THE QUESTIONED
DEEDS OF SALE CONSIDERING THAT SALVADOR SANTOS
HAS LONG BEEN DEAD.[7]
In this petition, we are asked to resolve the following:
1. Are payments of realty taxes and retention of
possession indications of continued ownership by the original
owners?
2. Is a sale through a public instrument tantamount to
delivery of the thing sold?
3. Did the cause of action of Rosalia Santos and her heirs
prescribe?
4. Can petitioner invoke the Dead Mans Statute? [8]
On the first issue, petitioner contends that the Court of
Appeals erred in holding that despite the deeds of sale in
Salvadors favor, Jesus and Rosalia still owned the property
because the spouses continued to pay the realty taxes and
possess the property. She argues that tax declarations are not
conclusive evidence of ownership when not supported by
evidence. She avers that Salvador allowed his mother to
possess the property out of respect to her in accordance with
Filipino values.
It is true that neither tax receipts nor declarations of
ownership for taxation purposes constitute sufficient proof of
ownership. They must be supported by other effective proofs.
[9]
These requisite proofs we find present in this case.As
admitted by petitioner, despite the sale, Jesus and Rosalia
continued to possess and administer the property and enjoy its
fruits by leasing it to third persons. [10] Both Rosa and Salvador
did not exercise any right of ownership over it. [11] Before the
second deed of sale to transfer her 1/2 share over the property
was executed by Rosa, Salvador still sought the permission of
his mother.[12] Further, after Salvador registered the property in
his name, he surrendered the title to his mother. [13] These are
clear indications that ownership still remained with the original
owners. In Serrano vs. CA, 139 SCRA 179, 189 (1985), we held
that the continued collection of rentals from the tenants by the
seller of realty after execution of alleged deed of sale is contrary
to the notion of ownership.
Petitioner argues that Salvador, in allowing her mother to
use the property even after the sale, did so out of respect for her
and out of generosity, a factual matter beyond the province of
this Court.[14] Significantly, in Alcos vs. IAC, 162 SCRA 823, 837
(1988), we noted that the buyers immediate possession and
occupation of the property corroborated the truthfulness and
authenticity of the deed of sale. Conversely, the vendors
continued possession of the property makes dubious the
contract of sale between the parties.
On the second issue, is a sale through a public instrument
tantamount to delivery of the thing sold? Petitioner in her
memorandum invokes Article 1477[15] of the Civil Code which
provides that ownership of the thing sold is transferred to the
vendee upon its actual or constructive delivery. Article 1498, in
turn, provides that when the sale is made through a public
instrument, its execution is equivalent to the delivery of the thing
subject of the contract.Petitioner avers that applying said
provisions to the case, Salvador became the owner of the
subject property by virtue of the two deeds of sale executed in
his favor.
Nowhere in the Civil Code, however, does it provide that
execution of a deed of sale is a conclusive presumption of
delivery of possession. The Code merely said that the execution
shall be equivalent to delivery. The presumption can be rebutted
by clear and convincing evidence. [16] Presumptive delivery can
be negated by the failure of the vendee to take actual
possession of the land sold.[17]
In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held
that for the execution of a public instrument to effect tradition,
the purchaser must be placed in control of the thing sold. When
there is no impediment to prevent the thing sold from converting
to tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is
sufficient. But if, notwithstanding the execution of the instrument,
the purchaser cannot have the enjoyment and material tenancy
nor make use of it himself or through another in his name, then
delivery has not been effected.
As found by both the trial and appellate courts and amply
supported by the evidence on record, Salvador was never
placed in control of the property. The original sellers retained
their control and possession. Therefore, there was no real
transfer of ownership.
Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA
694, 698-699 (1991), citing the land case of Abuan vs. Garcia,
14 SCRA 759 (1965), we held that the critical factor in the
different modes of effecting delivery, which gives legal effect to
the act is the actual intention of the vendor to deliver, and its
acceptance by the vendee. Without that intention, there is no
tradition. In the instant case, although the spouses Jesus and
Rosalia executed a deed of sale, they did not deliver the
possession and ownership of the property to Salvador and
Rosa. They agreed to execute a deed of sale merely to
accommodate Salvador to enable him to generate funds for his
business venture.
On the third issue, petitioner argues that from the date of
the sale from Rosa to Salvador on November 20, 1973, up to his
death on January 9, 1985, more or less twelve years had
lapsed, and from his death up to the filing of the case for
reconveyance in the court a quo on January 5, 1989, four years
had lapsed. In other words, it took respondents about sixteen
years to file the case below. Petitioner argues that an action to
annul a contract for lack of consideration prescribes in ten years
and even assuming that the cause of action has not prescribed, for respondents and was cross-examined by petitioners
respondents are guilty of laches for their inaction for a long counsel. By her failure to appeal from the order allowing Rosa to
period of time. testify, she waived her right to invoke the dead mans
statute. Further, her counsel cross-examined Rosa on matters
Has respondents cause of action that occurred during Salvadors lifetime. In Goi vs. CA, 144
prescribed? In Lacsamana vs. CA, 288 SCRA 287, 292 (1998), SCRA 222, 231 (1986), we held that protection under the dead
we held that the right to file an action for reconveyance on the mans statute is effectively waived when a counsel for a
ground that the certificate of title was obtained by means of a petitioner cross-examines a private respondent on matters
fictitious deed of sale is virtually an action for the declaration of occurring during the deceaseds lifetime. The Court of Appeals
its nullity, which does not prescribe. This applies squarely to the cannot be faulted in ignoring petitioner on Rosas
present case. The complaint filed by respondents in the court a disqualification.
quo was for the reconveyance of the subject property to the
estate of Rosalia since the deeds of sale were simulated and WHEREFORE, the instant petition is DENIED. The
fictitious. The complaint amounts to a declaration of nullity of a assailed decision dated March 10, 1998 of the Court of Appeals,
void contract, which is imprescriptible. Hence, respondents which sustained the judgment of the Regional Trial Court dated
cause of action has not prescribed. March 17, 1993, in favor of herein private respondents, is
AFFIRMED. Costs against petitioner.
Neither is their action barred by laches. The elements of
laches are: 1) conduct on the part of the defendant, or of one SO ORDERED.
under whom he claims, giving rise to the situation of which the
complaint seeks a remedy; 2) delay in asserting the
complainants rights, the complainant having had knowledge or
notice of the defendants conduct as having been afforded an
opportunity to institute a suit; 3) lack of knowledge or notice on
the part of the defendant that the complainant would assert the
right in which he bases his suit; and 4) injury or prejudice to the
defendant in the event relief is accorded to the complainant, or
the suit is not held barred.[18] These elements must all be proved
positively.The conduct which caused the complaint in the court a
quo was petitioners assertion of right of ownership as heir of
Salvador. This started in December 1985 when petitioner
demanded payment of the lease rentals from Antonio
Hombrebueno, the tenant of the apartment units. From
December 1985 up to the filing of the complaint for
reconveyance on January 5, 1989, only less than four years had
lapsed which we do not think is unreasonable delay sufficient to
bar respondents cause of action. We likewise find the fourth
element lacking. Neither petitioner nor her husband made
considerable investments on the property from the time it was
allegedly transferred to the latter. They also did not enter into
transactions involving the property since they did not claim
ownership of it until December 1985. Petitioner stood to lose
nothing. As we held in the same case of Lacsamana vs. CA,
cited above, the concept of laches is not concerned with the
lapse of time but only with the effect of unreasonable lapse. In
this case, the alleged 16 years of respondents inaction has no
adverse effect on the petitioner to make respondents guilty of
laches.
Lastly, petitioner in her memorandum seeks to expunge
the testimony of Rosa Santos-Carreon before the trial court in
view of Sec. 23, Rule 130 of the Revised Rules of Court,
otherwise known as the Dead Mans Statute. [19] It is too late for
petitioner, however, to invoke said rule. The trial court in its
order dated February 5, 1990, denied petitioners motion to
disqualify respondent Rosa as a witness. Petitioner did not
appeal therefrom. Trial ensued and Rosa testified as a witness

G.R. No. 92989 July 8, 1991
PERFECTO DY, JR. petitioner,
vs.
COURT OF APPEALS, GELAC TRADING INC., and
ANTONIO V. GONZALES, respondents.
This is a petition for review on certiorari seeking the reversal of
the March 23, 1990 decision of the Court of Appeals which ruled
that the petitioner's purchase of a farm tractor was not validly
consummated and ordered a complaint for its recovery
dismissed.
The facts as established by the records are as follows:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers.
Sometime in 1979, Wilfredo Dy purchased a truck and a farm
tractor through financing extended by Libra Finance and
Investment Corporation (Libra). Both truck and tractor were
mortgaged to Libra as security for the loan.
The petitioner wanted to buy the tractor from his brother so on
August 20, 1979, he wrote a letter to Libra requesting that he be
allowed to purchase from Wilfredo Dy the said tractor and
assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager,
Cipriano Ares approved the petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of
absolute sale in favor of the petitioner over the tractor in
question.
At this time, the subject tractor was in the possession of Libra
Finance due to Wilfredo Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the
tractor, the immediate release could not be effected because
Wilfredo Dy had obtained financing not only for said tractor but
also for a truck and Libra insisted on full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to
purchase the truck so that full payment could be made for both.
On November 22, 1979, a PNB check was issued in the amount
of P22,000.00 in favor of Libra, thus settling in full the
indebtedness of Wilfredo Dy with the financing firm. Payment
having been effected through an out-of-town check, Libra
insisted that it be cleared first before Libra could release the
chattels in question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc.
v. Wilfredo Dy", a collection case to recover the sum of
P12,269.80 was pending in another court in Cebu.
On the strength of an alias writ of execution issued on
December 27, 1979, the provincial sheriff was able to seize and
levy on the tractor which was in the premises of Libra in
Carmen, Cebu. The tractor was subsequently sold at public
auction where Gelac Trading was the lone bidder. Later, Gelac
sold the tractor to one of its stockholders, Antonio Gonzales.
It was only when the check was cleared on January 17, 1980
that the petitioner learned about GELAC having already taken
custody of the subject tractor. Consequently, the petitioner filed
an action to recover the subject tractor against GELAC Trading
with the Regional Trial Court of Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the
petitioner. The dispositive portion of the decision reads as
follows:
WHEREFORE, judgment is hereby rendered in favor
of the plaintiff and against the defendant, pronouncing
that the plaintiff is the owner of the tractor, subject
matter of this case, and directing the defendants
Gelac Trading Corporation and Antonio Gonzales to
return the same to the plaintiff herein; directing the
defendants jointly and severally to pay to the plaintiff
the amount of P1,541.00 as expenses for hiring a
tractor; P50,000 for moral damages; P50,000 for
exemplary damages; and to pay the cost. (Rollo, pp.
35-36)
On appeal, the Court of Appeals reversed the decision of the
RTC and dismissed the complaint with costs against the
petitioner. The Court of Appeals held that the tractor in question
still belonged to Wilfredo Dy when it was seized and levied by
the sheriff by virtue of the alias writ of execution issued in Civil
Case No. R-16646.
The petitioner now comes to the Court raising the following
questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT
AFFIRMING THE TRIAL COURT'S FINDING THAT
OWNERSHIP OF THE FARM TRACTOR HAD ALREADY
PASSED TO HEREIN PETITIONER WHEN SAID TRACTOR
WAS LEVIED ON BY THE SHERIFF PURSUANT TO
AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER CASE
IN FAVOR OF RESPONDENT GELAC TRADING INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
EMBARKED ON MERE CONJECTURE AND SURMISE IN
HOLDING THAT THE SALE OF THE AFORESAID TRACTOR
TO PETITIONER WAS DONE IN FRAUD OF WILFREDO DY'S
CREDITORS, THERE BEING NO EVIDENCE OF SUCH
FRAUD AS FOUND BY THE TRIAL COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT
SUSTAINING THE FINDING OF THE TRIAL COURT THAT THE
SALE OF THE TRACTOR BY RESPONDENT GELAC
TRADING TO ITS CO-RESPONDENT ANTONIO V.
GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH
RESPONDENTS ALREADY KNEW OF THE FILING OF THE
INSTANT CASE WAS VIOLATIVE OF THE HUMAN
RELATIONS PROVISIONS OF THE CIVIL CODE AND
RENDERED THEM LIABLE FOR THE MORAL AND
EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY THE
TRIAL COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the
deed of sale, no constructive delivery was effected since the
consummation of the sale depended upon the clearance and
encashment of the check which was issued in payment of the
subject tractor.
In the case of Servicewide Specialists Inc. v. Intermediate
Appellate Court. (174 SCRA 80 [1989]), we stated that:
xxx xxx xxx
The rule is settled that the chattel mortgagor continues
to be the owner of the property, and therefore, has the
power to alienate the same; however, he is obliged
under pain of penal liability, to secure the written
consent of the mortgagee. (Francisco, Vicente, Jr.,
Revised Rules of Court in the Philippines, (1972),
Volume IV-B Part 1, p. 525). Thus, the instruments of
mortgage are binding, while they subsist, not only
upon the parties executing them but also upon those
who later, by purchase or otherwise, acquire the
properties referred to therein.
The absence of the written consent of the mortgagee
to the sale of the mortgaged property in favor of a third
person, therefore, affects not the validity of the sale
but only the penal liability of the mortgagor under the
Revised Penal Code and the binding effect of such
sale on the mortgagee under the Deed of Chattel
Mortgage.
xxx xxx xxx
The mortgagor who gave the property as security under a
chattel mortgage did not part with the ownership over the same.
He had the right to sell it although he was under the obligation to
secure the written consent of the mortgagee or he lays himself
open to criminal prosecution under the provision of Article 319
par. 2 of the Revised Penal Code. And even if no consent was
obtained from the mortgagee, the validity of the sale would still
not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel
mortgagor can not sell the subject tractor. There is no dispute
that the consent of Libra Finance was obtained in the instant
case. In a letter dated August 27, 1979, Libra allowed the
petitioner to purchase the tractor and assume the mortgage debt
of his brother. The sale between the brothers was therefore valid
and binding as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the ownership of the
thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Articles 1497 to
1501 or in any other manner signing an agreement that the
possession is transferred from the vendor to the vendee. We
agree with the petitioner that Articles 1498 and 1499 are
applicable in the case at bar.
Article 1498 states:
Art. 1498. When the sale is made through a public
instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if
from the deed the contrary does not appear or cannot
clearly be inferred.
xxx xxx xxx
Article 1499 provides:
Article 1499. The delivery of movable property may
likewise be made by the mere consent or agreement
of the contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the
time of the sale, or if the latter already had it in his
possession for any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could
not be made. However, there was constructive delivery already
upon the execution of the public instrument pursuant to Article
1498 and upon the consent or agreement of the parties when
the thing sold cannot be immediately transferred to the
possession of the vendee. (Art. 1499)
The respondent court avers that the vendor must first have
control and possession of the thing before he could transfer
ownership by constructive delivery. Here, it was Libra Finance
which was in possession of the subject tractor due to Wilfredo's
failure to pay the amortization as a preliminary step to
foreclosure. As mortgagee, he has the right of foreclosure upon
default by the mortgagor in the performance of the conditions
mentioned in the contract of mortgage. The law implies that the
mortgagee is entitled to possess the mortgaged property
because possession is necessary in order to enable him to have
the property sold.
While it is true that Wilfredo Dy was not in actual possession
and control of the subject tractor, his right of ownership was not
divested from him upon his default. Neither could it be said that
Libra was the owner of the subject tractor because the
mortgagee can not become the owner of or convert and
appropriate to himself the property mortgaged. (Article 2088,
Civil Code) Said property continues to belong to the mortgagor.
The only remedy given to the mortgagee is to have said
property sold at public auction and the proceeds of the sale
applied to the payment of the obligation secured by the
mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953])
There is no showing that Libra Finance has already foreclosed
the mortgage and that it was the new owner of the subject
tractor. Undeniably, Libra gave its consent to the sale of the
subject tractor to the petitioner. It was aware of the transfer of
rights to the petitioner.
Where a third person purchases the mortgaged property, he
automatically steps into the shoes of the original mortgagor.
(See Industrial Finance Corp. v. Apostol, 177 SCRA 521 [1989]).
His right of ownership shall be subject to the mortgage of the
thing sold to him. In the case at bar, the petitioner was fully
aware of the existing mortgage of the subject tractor to Libra. In
fact, when he was obtaining Libra's consent to the sale, he
volunteered to assume the remaining balance of the mortgage
debt of Wilfredo Dy which Libra undeniably agreed to.
The payment of the check was actually intended to extinguish
the mortgage obligation so that the tractor could be released to
the petitioner. It was never intended nor could it be considered
as payment of the purchase price because the relationship
between Libra and the petitioner is not one of sale but still a
mortgage. The clearing or encashment of the check which
produced the effect of payment determined the full payment of
the money obligation and the release of the chattel mortgage. It
was not determinative of the consummation of the sale. The
transaction between the brothers is distinct and apart from the
transaction between Libra and the petitioner. The contention,
therefore, that the consummation of the sale depended upon the
encashment of the check is untenable.
The sale of the subject tractor was consummated upon the
execution of the public instrument on September 4, 1979. At this
time constructive delivery was already effected. Hence, the
subject tractor was no longer owned by Wilfredo Dy when it was
levied upon by the sheriff in December, 1979. Well settled is the
rule that only properties unquestionably owned by the judgment
debtor and which are not exempt by law from execution should
be levied upon or sought to be levied upon. For the power of the
court in the execution of its judgment extends only over
properties belonging to the judgment debtor. (Consolidated
Bank and Trust Corp. v. Court of Appeals, G.R. No. 78771,
January 23, 1991).
The respondents further claim that at that time the sheriff levied
on the tractor and took legal custody thereof no one ever
protested or filed a third party claim.
It is inconsequential whether a third party claim has been filed or
not by the petitioner during the time the sheriff levied on the
subject tractor. A person other than the judgment debtor who
claims ownership or right over levied properties is not precluded,
however, from taking other legal remedies to prosecute his
claim. (Consolidated Bank and Trust Corp. v. Court of
Appeals, supra) This is precisely what the petitioner did when he
filed the action for replevin with the RTC.
Anent the second and third issues raised, the Court accords
great respect and weight to the findings of fact of the trial
court.1âwphi1 There is no sufficient evidence to show that the
sale of the tractor was in fraud of Wilfredo and creditors. While it
is true that Wilfredo and Perfecto are brothers, this fact alone
does not give rise to the presumption that the sale was
fraudulent. Relationship is not a badge of fraud (Goquiolay v.
Sycip, 9 SCRA 663 [1963]). Moreover, fraud can not be
presumed; it must be established by clear convincing evidence.
We agree with the trial court's findings that the actuations of
GELAC Trading were indeed violative of the provisions on
human relations. As found by the trial court, GELAC knew very
well of the transfer of the property to the petitioners on July 14,
1980 when it received summons based on the complaint for
replevin filed with the RTC by the petitioner. Notwithstanding
said summons, it continued to sell the subject tractor to one of
its stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision
of the Court of Appeals promulgated on March 23, 1990 is SET
ASIDE and the decision of the Regional Trial Court dated April
8, 1988 is REINSTATED.
SO ORDERED.

G.R. No. L-12342 August 3, 1918
A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-
appellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J. :
By a public instrument dated June 11, 1914, the plaintiff sold to
the defendant Marciana Felix, with the consent of her husband,
the defendant Balbino Tioco, four parcels of land, described in
the instrument. The defendant Felix paid, at the time of the
execution of the deed, the sum of P3,000 on account of the
purchase price, and bound herself to pay the remainder in
installments, the first of P2,000 on July 15, 1914, and the
second of P5,000 thirty days after the issuance to her of a
certificate of title under the Land Registration Act, and further,
within ten years from the date of such title P10, for each coconut
tree in bearing and P5 for each such tree not in bearing, that
might be growing on said four parcels of land on the date of the
issuance of title to her, with the condition that the total price
should not exceed P85,000. It was further stipulated that the
purchaser was to deliver to the vendor 25 per centum of the
value of the products that she might obtain from the four parcels
"from the moment she takes possession of them until the
Torrens certificate of title be issued in her favor."
It was also covenanted that "within one year from the date of the
certificate of title in favor of Marciana Felix, this latter may
rescind the present contract of purchase and sale, in which case
Marciana Felix shall be obliged to return to me, A. A. Addison,
the net value of all the products of the four parcels sold, and I
shall obliged to return to her, Marciana Felix, all the sums that
she may have paid me, together with interest at the rate of 10
per cent per annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of
First Instance of Manila to compel Marciana Felix to make
payment of the first installment of P2,000, demandable in
accordance with the terms of the contract of sale
aforementioned, on July 15, 1914, and of the interest in arrears,
at the stipulated rate of 8 per cent per annum. The defendant,
jointly with her husband, answered the complaint and alleged by
way of special defense that the plaintiff had absolutely failed to
deliver to the defendant the lands that were the subject matter of
the sale, notwithstanding the demands made upon him for this
purpose. She therefore asked that she be absolved from the
complaint, and that, after a declaration of the rescission of the
contract of the purchase and sale of said lands, the plaintiff be
ordered to refund the P3,000 that had been paid to him on
account, together with the interest agreed upon, and to pay an
indemnity for the losses and damages which the defendant
alleged she had suffered through the plaintiff's non-fulfillment of
the contract.
The evidence adduced shows that after the execution of the
deed of the sale the plaintiff, at the request of the purchaser,
went to Lucena, accompanied by a representative of the latter,
for the purpose of designating and delivering the lands sold. He
was able to designate only two of the four parcels, and more
than two-thirds of these two were found to be in the possession
of one Juan Villafuerte, who claimed to be the owner of the parts
so occupied by him. The plaintiff admitted that the purchaser
would have to bring suit to obtain possession of the land (sten.
notes, record, p. 5). In August, 1914, the surveyor Santamaria
went to Lucena, at the request of the plaintiff and accompanied
by him, in order to survey the land sold to the defendant; but he
surveyed only two parcels, which are those occupied mainly by
the brothers Leon and Julio Villafuerte. He did not survey the
other parcels, as they were not designated to him by the plaintiff.
In order to make this survey it was necessary to obtain from the
Land Court a writ of injunction against the occupants, and for
the purpose of the issuance of this writ the defendant, in June,
1914, filed an application with the Land Court for the registration
in her name of four parcels of land described in the deed of sale
executed in her favor by the plaintiff. The proceedings in the
matter of this application were subsequently dismissed, for
failure to present the required plans within the period of the time
allowed for the purpose.
The trial court rendered judgment in behalf of the defendant,
holding the contract of sale to be rescinded and ordering the
return to the plaintiff the P3,000 paid on account of the price,
together with interest thereon at the rate of 10 per cent per
annum. From this judgment the plaintiff appealed.
In decreeing the rescission of the contract, the trial judge rested
his conclusion solely on the indisputable fact that up to that time
the lands sold had not been registered in accordance with the
Torrens system, and on the terms of the second paragraph of
clause (h) of the contract, whereby it is stipulated that ". . . within
one year from the date of the certificate of title in favor of
Marciana Felix, this latter may rescind the present contract of
purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is not
founded on the hypothesis of the conventional rescission relied
upon by the court, but on the failure to deliver the land sold. He
argues that the right to rescind the contract by virtue of the
special agreement not only did not exist from the moment of the
execution of the contract up to one year after the registration of
the land, but does not accrue until the land is registered. The
wording of the clause, in fact, substantiates the contention. The
one year's deliberation granted to the purchaser was to be
counted "from the date of the certificate of title ... ." Therefore
the right to elect to rescind the contract was subject to a
condition, namely, the issuance of the title. The record show that
up to the present time that condition has not been fulfilled;
consequently the defendant cannot be heard to invoke a right
which depends on the existence of that condition. If in the cross-
complaint it had been alleged that the fulfillment of the condition
was impossible for reasons imputable to the plaintiff, and if this
allegation had been proven, perhaps the condition would have
been considered as fulfilled (arts. 1117, 1118, and 1119, Civ.
Code); but this issue was not presented in the defendant's
answer.
However, although we are not in agreement with the reasoning
found in the decision appealed from, we consider it to be correct
in its result. The record shows that the plaintiff did not deliver the
thing sold. With respect to two of the parcels of land, he was not
even able to show them to the purchaser; and as regards the
other two, more than two-thirds of their area was in the hostile
and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the
thing sold. The thing is considered to be delivered when it is
placed "in the hands and possession of the vendee." (Civ. Code,
art. 1462.) It is true that the same article declares that the
execution of a public instruments is equivalent to the delivery of
the thing which is the object of the contract, but, in order that
this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the
thing sold that, at the moment of the sale, its material delivery
could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing
sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser
cannot have the enjoyment and material tenancy of the thing
and make use of it himself or through another in his name,
because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality — the
delivery has not been effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his
commentaries on article 1604 of the French Civil code, "the
word "delivery" expresses a complex idea . . . the abandonment
of the thing by the person who makes the delivery and the
taking control of it by the person to whom the delivery is made."
The execution of a public instrument is sufficient for the
purposes of the abandonment made by the vendor; but it is not
always sufficient to permit of the apprehension of the thing by
the purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil
Code, held in its decision of November 10, 1903, (Civ. Rep., vol.
96, p. 560) that this article "merely declares that when the sale
is made through the means of a public instrument, the execution
of this latter is equivalent to the delivery of the thing sold: which
does not and cannot mean that this fictitious tradition
necessarily implies the real tradition of the thing sold, for it is
incontrovertible that, while its ownership still pertains to the
vendor (and with greater reason if it does not), a third person
may be in possession of the same thing; wherefore, though, as
a general rule, he who purchases by means of a public
instrument should be deemed . . . to be the possessor in fact,
yet this presumption gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of
the instrument was not a fulfillment of the vendors' obligation to
deliver the thing sold, and that from such non-fulfillment arises
the purchaser's right to demand, as she has demanded, the
rescission of the sale and the return of the price. (Civ. Code,
arts. 1506 and 1124.)
Of course if the sale had been made under the express
agreement of imposing upon the purchaser the obligation to
take the necessary steps to obtain the material possession of
the thing sold, and it were proven that she knew that the thing
was in the possession of a third person claiming to have
property rights therein, such agreement would be perfectly valid.
But there is nothing in the instrument which would indicate, even
implicitly, that such was the agreement. It is true, as the
appellant argues, that the obligation was incumbent upon the
defendant Marciana Felix to apply for and obtain the registration
of the land in the new registry of property; but from this it cannot
be concluded that she had to await the final decision of the
Court of Land Registration, in order to be able to enjoy the
property sold. On the contrary, it was expressly stipulated in the
contract that the purchaser should deliver to the vendor one-
fourth "of the products ... of the aforesaid four parcels from the
moment when she takes possession of them until the Torrens
certificate of title be issued in her favor." This obviously shows
that it was not forseen that the purchaser might be deprived of
her possession during the course of the registration
proceedings, but that the transaction rested on the assumption
that she was to have, during said period, the material
possession and enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions
of law and not by contractual agreement, it is not the
conventional but the legal interest that is demandable.
It is therefore held that the contract of purchase and sale
entered into by and between the plaintiff and the defendant on
June 11, 1914, is rescinded, and the plaintiff is ordered to make
restitution of the sum of P3,000 received by him on account of
the price of the sale, together with interest thereon at the legal
rate of 6 per annum from the date of the filing of the complaint
until payment, with the costs of both instances against the
appellant. So ordered.
G.R. No. 168499 November 26, 2012
SPOUSES EROSTO SANTIAGO and NELSIE
SANTIAGO, Petitioners,
vs.
MANCER VILLAMOR, CARLOS VILLAMOR, JOHN
VILLAMOR and DOMINGO VILLAMOR, JR., Respondents.
DECISION
BRION, J.:
1 performance case. It found that the San Jacinto Bank acted in
We resolve the petition for review on certiorari tiled by spouses
Eros to Santiago and Nelsie Santiago (petitioners) to challenge
the August 10, 2004 decision2 and the June 8, 2005
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No.
59112. The CA decision set aside the May 28, 1997 decision 4 of
the Regional Trial Court (RTC) of San Jacinto, Masbate, Branch
50, in Civil Case No. 201. The CA resolution denied the
petitioners' subsequent motion for reconsideration.
THE FACTUAL ANTECEDENTS
In January 1982,5 the spouses Domingo Villamor, Sr. and
Trinidad Gutierrez Villamor (spouses Villamor, Sr.), the parents
of Mancer Villamor, Carlos Villamor and Domingo Villamor, Jr.
(respondents) and the grandparents of respondent John
Villamor, mortgaged their 4.5-hectare coconut land in Sta. Rosa,
San Jacinto, Masbate, known as Lot No. 1814, to the Rural
Bank of San Jacinto (Masbate), Inc. (San Jacinto Bank) as
security for a P10,000.00 loan.
For non-payment of the loan, the San Jacinto Bank
extrajudicially foreclosed the mortgage, and, as the highest
bidder at the public auction, bought the land. When the spouses
Villamor, Sr. failed to redeem the property within the prescribed
period, the San Jacinto Bank obtained a final deed of sale in its
favor sometime in 1991. The San Jacinto Bank then offered the
land for sale to any interested buyer.6
a. The Specific Performance Case
Since the respondents had been in possession and cultivation of
the land, they decided, together with their sister Catalina
Villamor Ranchez, to acquire the land from the San Jacinto
Bank. The San Jacinto Bank agreed with the respondents and
Catalina to a P65,000.00 sale, payable in installments. The
respondents and Catalina made four (4) installment payments of
P28,000.00, P5,500.00, P7,000.00 and P24,500.00 on
November 4, 1991, November 23, 1992, April 26, 1993 and
June 8, 1994, respectively.7
When the San Jacinto Bank refused to issue a deed of
conveyance in their favor despite full payment, the respondents
and Catalina filed a complaint against the San Jacinto Bank
(docketed as Civil Case No. 200) with the RTC on October 11,
1994. The complaint was for specific performance with
damages.
The San Jacinto Bank claimed that it already issued a deed of
repurchase in favor of the spouses Villamor, Sr.; the payments
made by the respondents and Catalina were credited to the
account of Domingo, Sr. since the real buyers of the land were
the spouses Villamor, Sr.8
In a February 10, 2004 decision, the RTC dismissed the specific
good faith when it executed a deed of "repurchase" in the
spouses Villamor, Sr.’s names since Domingo, Sr., along with
the respondents and Catalina, was the one who transacted with
the San Jacinto Bank to redeem the land.9
The CA, on appeal, set aside the RTC’s decision.10 The CA
found that the respondents and Catalina made the installment
payments on their own behalf and not as representatives of the
spouses Villamor, Sr. The San Jacinto Bank mistakenly referred
to the transaction as a "repurchase" when the redemption period
had already lapsed and the title had been transferred to its
name; the transaction of the respondents and Catalina was
altogether alien to the spouses Villamor, Sr.’s loan with
mortgage. Thus, it ordered the San Jacinto Bank to execute the
necessary deed of sale in favor of the respondents and
Catalina, and to pay P30,000.00 as attorney’s fees. 11 No appeal
appears to have been taken from this decision.
b. The Present Quieting of Title Case
On July 19, 1994 (or prior to the filing of the respondents and
Catalina’s complaint for specific performance, as narrated
above), the San Jacinto Bank issued a deed of sale in favor of
Domingo, Sr.12 On July 21, 1994, the spouses Villamor, Sr. sold
the land to the petitioners for P150,000.00.13
After the respondents and Catalina refused the petitioners’
demand to vacate the land, the petitioners filed on October 20,
1994 a complaint for quieting of title and recovery of possession
against the respondents.14 This is the case that is now before us.
The respondents and Catalina assailed the San Jacinto Bank’s
execution of the deed of sale in favor of Domingo, Sr., claiming
that the respondents and Catalina made the installment
payments on their own behalf.15
In its May 28, 1997 decision,16 the RTC declared the petitioners
as the legal and absolute owners of the land, finding that the
petitioners were purchasers in good faith; the spouses Villamor,
Sr.’s execution of the July 21, 1994 notarized deed of sale in
favor of the petitioners resulted in the constructive delivery of
the land. Thus, it ordered the respondents to vacate and to
transfer possession of the land to the petitioners, and to pay
P10,000.00 as moral damages.17
On appeal, the CA, in its August 10, 2004 decision, found that
the petitioners’ action to quiet title could not prosper because the
petitioners failed to prove their legal or equitable title to the land.
It noted that there was no real transfer of ownership since
neither the spouses Villamor, Sr. nor the petitioners were placed
in actual possession and control of the land after the execution
of the deeds of sale. It also found that the petitioners failed to
show that the respondents and Catalina’s title or claim to the
land was invalid or inoperative, noting the pendency of the
specific performance case, at that time on appeal with the CA.
Thus, it set aside the RTC decision and ordered the dismissal of
the complaint, without prejudice to the outcome of the specific
performance case.18
19 20
When the CA denied the motion for reconsideration that
followed, the petitioners filed the present Rule 45 petition.
THE PETITION
The petitioners argue that the spouses Villamor, Sr.’s execution
of the July 21, 1994 deed of sale in the petitioners’ favor was
equivalent to delivery of the land under Article 1498 of the Civil
Code; the petitioners are purchasers in good faith since they
had no knowledge of the supposed transaction between the San
Jacinto Bank and the respondents and Catalina; and the
respondents and Catalina’s possession of the land should not
be construed against them (petitioners) since, by tradition and
practice in San Jacinto, Masbate, the children use their parents’
property.
THE CASE FOR THE RESPONDENTS
The respondents and respondent John submit that they hold
legal title to the land since they perfected the sale with the San
Jacinto Bank as early as November 4, 1991, the first installment
payment, and are in actual possession of the land; the
petitioners are not purchasers in good faith since they failed to
ascertain why the respondents were in possession of the land.
THE ISSUE
The case presents to us the issue of whether the CA committed
a reversible error when it set aside the RTC decision and
dismissed the petitioners’ complaint for quieting of title and
recovery of possession.
OUR RULING
The petition lacks merit.
Quieting of title is a common law remedy for the removal of any
cloud, doubt or uncertainty affecting title to real property. The
plaintiffs must show not only that there is a cloud or contrary
interest over the subject real property,21but that they have a valid
title to it.22 Worth stressing, in civil cases, the plaintiff must
establish his cause of action by preponderance of evidence;
otherwise, his suit will not prosper.23
The petitioners anchor their claim over the disputed land on the
July 21, 1994 notarized deed of sale executed in their favor by
the spouses Villamor, Sr. who in turn obtained a July 19, 1994
notarized deed of sale from the San Jacinto Bank. On the other
hand, the respondents and respondent John claim title by virtue
of their installment payments to the San Jacinto Bank from
November 4, 1991 to June 8, 1994 and their actual possession
of the disputed land.
After considering the parties’ evidence and arguments, we agree
with the CA that the petitioners failed to prove that they have
any legal or equitable title over the disputed land.
Execution of the deed of sale only a
prima facie presumption of delivery.
Article 1477 of the Civil Code recognizes that the "ownership of
the thing sold shall be transferred to the vendee upon the actual
or constructive delivery thereof." Related to this article is Article
1497 which provides that "the thing sold shall be understood as
delivered, when it is placed in the control and possession of the
vendee."
With respect to incorporeal property, Article 1498 of the Civil
Code lays down the general rule: the execution of a public
instrument "shall be equivalent to the delivery of the thing which
is the object of the contract, if from the deed the contrary does
not appear or cannot clearly be inferred." However, the
execution of a public instrument gives rise only to a prima facie
presumption of delivery, which is negated by the failure of the
vendee to take actual possession of the land sold. 24 "A person
who does not have actual possession of the thing sold cannot
transfer constructive possession by the execution and delivery
of a public instrument."25
In this case, no constructive delivery of the land transpired upon
the execution of the deed of sale since it was not the spouses
Villamor, Sr. but the respondents who had actual possession of
the land. The presumption of constructive delivery is
inapplicable and must yield to the reality that the petitioners
were not placed in possession and control of the land.
The petitioners are not purchasers in
good faith.
The petitioners can hardly claim to be purchasers in good faith.
"A purchaser in good faith is one who buys property without
notice that some other person has a right to or interest in such
property and pays its fair price before he has notice of the
adverse claims and interest of another person in the same
property."26 However, where the land sold is in the possession of
a person other than the vendor, the purchaser must be wary and
must investigate the rights of the actual possessor; without such
inquiry, the buyer cannot be said to be in good faith and cannot
have any right over the property.27
In this case, the spouses Villamor, Sr. were not in possession of
the land.1âwphi1 The petitioners, as prospective vendees,
carried the burden of investigating the rights of the respondents
and respondent John who were then in actual possession of the
land. The petitioners cannot take refuge behind the allegation
that, by custom and tradition in San Jacinto, Masbate, the
children use their parents' property, since they offered no proof
supporting their bare allegation. The burden of proving the
status of a purchaser in good faith lies upon the party asserting
that status and cannot be discharged by reliance on the legal
presumption of good faith.28 The petitioners failed to discharge
this burden.
Lastly, since the specific performance case already settled the
respondents and respondent John's claim over the disputed
land, the dispositive portion of the CA decision (dismissing the
complaint without prejudice to the outcome of the specific
performance case29 ) is modified to reflect this fact; we thus
dismiss for lack of merit the complaint for quieting of title and
recovery of possession.
WHEREFORE, we hereby DENY the petition and ORDER the
DISMISSAL of Civil Case No. 201 before the Regional Trial
Court of San Jacinto, Masbate, Branch 50.
Costs against the petitioners.
SO ORDERED.
G.R. No. L-24069 June 28, 1968
LA FUERZA, INC., petitioner,
vs.
THE HON. COURT OF APPEALS and ASSOCIATED
ENGINEERING CO., INC., respondents.
Sycip, Salazar, Luna and Associates for respondent Associated
Engineering Co., Inc.
De Santos and Delfino for petitioner.
CONCEPCION, C.J.:
Ordinary action for the recovery of a sum of money. In due
course, the Court of First Instance of Manila rendered judgment
for defendant, La Fuerza, Inc. — hereinafter referred to as La
Fuerza — which was at first affirmed by the Court of Appeals.
On motion for reconsideration, the latter, however, set aside its
original decision and sentenced La Fuerza to pay to the plaintiff,
Associated Engineering Co., — hereinafter referred to as the
Plaintiff — the sum of P8,250.00, with interest at the rate of 1%
per month, from July, 1960 until fully paid, plus P500 as
attorney's fees and the costs. Hence, this Petition for review
on certiorari.
The facts, as found by the Court of First Instance and adopted
by the Court of Appeals, are:
The plaintiff (Associated Engineering, Co., Inc.) is a
corporation engaged in the manufacture and
installation of flat belt conveyors. The defendant (La
Fuerza, Inc.) is also a corporation engaged in the
manufacture of wines. Sometime in the month of
January, 1960, Antonio Co, the manager of the plaintiff
corporation, who is an engineer, called the office of the
defendant located at 399 Muelle de Binondo, Manila
and told Mariano Lim, the President and general
manager of the defendant that he had just visited the
defendant's plant at Pasong Tamo, Makati, Rizal and
was impressed by its size and beauty but he believed
it needed a conveyor system to convey empty bottles
from the storage room in the plant to the bottle
washers in the production room thereof. He therefore
offered his services to manufacture and install a
conveyor system which, according to him, would
increase production and efficiency of his business.
The president of the defendant corporation did not
make up his mind then but suggested to Antonio Co to
put down his offer in writing. Effectively, on February
4, 1960, marked as Exhibit A in this case. Mariano Lim
did not act on the said offer until February 11, 1960,
when Antonio Co returned to inquire about the action
of the defendant on his said offer. The defendants
president and general manager then expressed his
conformity to the offer made in Exhibit A by writing at
the foot thereof under the word "confirmation" his
signature. He caused, however, to be added to this
offer at the foot a note which reads: "All specifications
shall be in strict accordance with the approved plan
made part of this agreement hereof." A few days later,
Antonio Co made the demand for the down payment
of P5,000.00 which was readily delivered by the
defendant in the form of a check for the said amount.
After that agreement, the plaintiff started to prepare
the premises for the installations of the conveyor
system by digging holes in the cement floor of the
plant and on April 18, 1960, they delivered one unit of
110' 26" wide flat belt conveyor, valued at P3,750.00,
and another unit measuring 190' and 4" wide flat
conveyor, valued at P4,500.00, or a total of
P13,250.00. Deducting the down payment of
P5,000.00 from this value, there is a balance, of
P8,250.00 to be paid by the defendant upon the
completion of the installation, Exhibit B.
The work went under way during the months of March
and April, during which time the president and general
manager of the defendant corporation was duly
apprised of the progress of the same because his
plant mechanic, one Mr. Santos, had kept him
informed of the installation for which he gave the go
signal. It seems that the work was completed during
the month of May, 1960. Trial runs were made in the
presence of the president and general manager of the
defendant corporation, Antonio Co, the technical
manager of the plaintiff, and some other people.
Several trial runs were made then totalling about five.
These runs were continued during the month of June
where about three trial runs were made and, lastly,
during the month of July, 1960.
As a result of this trial or experimental runs, it was
discovered, according to the defendant's general
manager, that the conveyor system did not function to
their satisfaction as represented by the technical
manager of the plaintiff Antonio Co for the reason that,
when operated several bottles collided with each
other, some jumping off the conveyor belt and were
broken, causing considerable damage. It was further
observed that the flow of the system was so sluggish
that in the opinion of the said general manager of the
defendant their old system of carrying the bottles from
the storage room to the washers by hand carrying
them was even more efficient and faster.
After the last trial run made in the month of July and
after the plaintiff's technical manager had been
advised several times to make the necessary and
proper adjustments or corrections in order to improve
the efficiency of the conveyor system, it seems that
the defects indicated by the said president and
general manager of the defendant had not been
remedied so that they came to the parting of the ways
with the result that when the plaintiff billed the
defendant for the balance of the contract price, the
latter refused to pay for the reason that according to
the defendant the conveyor system installed by the
plaintiff did not serve the purpose for which the same
was manufactured and installed at such a heavy
expense. The flat belt conveyors installed in the
factory of the defendant are still there....
xxx xxx xxx
On March 22, 1961, the contractor commenced the present
action to recover the sums of P8,250, balance of the stipulated
price of the aforementioned conveyors, and P2,000, as
attorney's fees, in addition to the costs.
In its answer to the complaint, La Fuerza alleged that the
"conveyors furnished and installed by the plaintiff do not meet
the conditions and warrantings" (warranties?) of the latter, and
set up a counterclaim for the P5,000 advanced by La Fuerza,
which prayed that the complaint be dismissed; that its contract
with the plaintiff be rescinded; and that plaintiff be sentenced to
refund said sum of P5,000 to La Fuerza, as well as to pay
thereto P1,000 as attorney's fees, apart from the costs.
After appropriate proceedings, the Court of First Instance of
Manila rendered a decision the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered
rescinding the contract entered into by the parties in
this case, marked as Exhibit A, and ordering the
plaintiff to refund or return to the defendant the
amount of P5,000.00 which they had received as
down payment, and the costs of this action. On the
other hand, defendant is ordered to permit the plaintiff
to remove the flat belt conveyors installed in their
premises.
As above indicated, this decision was affirmed by the Court of
Appeals, which, on motion for reconsideration of the plaintiff,
later set aside its original decision and rendered another in
plaintiff's favor, as stated in the opening paragraph hereof.
The appealed resolution of the Court of Appeals was, in effect,
based upon the theory of prescription of La Fuerza's right of
action for rescission of its contract with the plaintiff, for — in the
language of said resolution — "Article 1571 of the Civil Code
provides that an action to rescind 'shall be barred after six
months from delivery of the thing sold'", and, in the case at bar,
La Fuerza did not avail of the right to demand rescission until
the filing of its answer in the Court of First Instance, on April 17,
1961, or over ten (10) months after the installation of the
conveyors in question had been completed on May 30, 1960.
La Fuerza assails the view taken by the Court of Appeals, upon
the ground: 1) that there has been, in contemplation of law, no
delivery of the conveyors by the plaintiff; and 2) that, assuming
that there has been such delivery, the period of six (6) months
prescribed in said Art. 1571 refers to the "period within which" La
Fuerza may "bring an action to demand compliance of the
warranty against hidden defects", not the action for rescission of
the contract. Both grounds are untenable.
With respect to the first point, La Fuerza maintains that plaintiff
is deemed not to have delivered the conveyors, within the
purview of Art. 1571, until it shall have complied with the
conditions or requirements of the contract between them — that
is to say, until the conveyors shall meet La Fuerza's "need of a
conveyor system that would mechanically transport empty
bottles from the storage room to the bottle workers in the
production room thus increasing the production and efficiency"
of its business-and La Fuerza had accepted said conveyors.
On this point, the Court of Appeals had the following to say:
Article 1571 of the Civil Code provides that an action
to rescind 'shall be barred after six months, from
delivery of the thing sold". This article is made
applicable to the case at bar by Article 1714 which
provides that "the pertinent provisions on warranty of
title against hidden defect in a contract of sale" shall
be applicable to a contract for a piece of work.
Considering that Article 1571 is a provision on sales,
the delivery mentioned therein should be construed in
the light of the provisions on sales. Article 1497
provides that the thing sold shall be understood as
delivered when it is placed in the control and
possession of the vendee. Therefore, when the thing
subject of the sale is placed in the control and
possession of the vendee, delivery is complete.
Delivery is an act of the vendor. Thus, one of the
obligations of the vendor is the delivery of the thing
sold (Art. 1495). The vendee has nothing to do with
the act of delivery by the vendor. On the other hand,
acceptance is an obligation on the part of the vendee
(Art. 1582). Delivery and acceptance are two distinct
and separate acts of different parties. Consequently,
acceptance cannot be regarded as a condition to
complete delivery.
xxx xxx xxx
We find no plausible reason to disagree with this view. Upon the
completion of the installation of the conveyors, in May, 1960,
particularly after the last trial run, in July 1960, La Fuerza was in
a position to decide whether or not it was satisfied with said
conveyors, and, hence, to state whether the same were a
accepted or rejected. The failure of La Fuerza to express
categorically whether they accepted or rejected the conveyors
does not detract from the fact that the same were actually in its
possession and control; that, accordingly, the conveyors had
already been delivered by the plaintiff; and that, the period
prescribed in said Art. 1571 had begun to run.
With respect to the second point raised by La Fuerza, Art. 1571
of the Civil Code provides:
Actions arising from the provisions of the preceding ten articles
shall be barred after six months, from the delivery of the thing
sold.
xxx xxx xxx
Among the "ten articles" referred to in this provision, are Articles
1566 and 1567, reading:
Art. 1566. The vendor is responsible to the vendee for
any hidden faults or defects in the thing sold, even
though he was not aware thereof. ."This provision
shall not apply if the contrary has been stipulated, and
the vendor was not aware of the hidden faults or
defects in the thing sold.
Art. 1567. In the cases of articles 1561, 1562, 1564,
1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a
proportionate reduction of the price, with damages in
either case.
xxx xxx xxx
Pursuant to these two (2) articles, if the thing sold has hidden
faults or defects — as the conveyors are claimed to have — the
vendor — in the case at bar, the plaintiff — shall be responsible
therefor and the vendee — or La Fuerza, in the present case —
"may elect between withdrawing from the contract
and demanding a proportional reduction of the price, with
damages in either case." In the exercise of this right of election,
La Fuerza had chosen to withdraw from the contract, by praying
for its rescission; but the action therefor — in the language of
Art. 1571 — "shall be barred after six months, from the delivery
of the thing sold." The period of four (4) years, provided in Art.
1389 of said Code, for "the action to claim rescission," applies to
contracts, in general, and must yields, in the instant case, to
said Art. 1571, which refers to sales in particular.

Indeed, in contracts of the latter type, especially when goods,

merchandise, machinery or parts or equipment thereof are
involved, it is obviously wise to require the parties to define their
position, in relation thereto, within the shortest possible time.
Public interest demands that the status of the relations between
the vendor and the vendee be not left in a condition of G.R. No. 13203 September 18, 1918
uncertainty for an unreasonable length of time, which would be
the case, if the lifetime of the vendee's right of rescission were
BEHN, MEYER & CO. (LTD.), plaintiff-appellant,
four (4) years.
vs.
TEODORO R. YANCO, defendant-appellee.
WHEREFORE, the appealed resolution of the Court of Appeals
is hereby affirmed, with costs against appellant, La Fuerza, Inc.
Crossfield & O'Brien for appellant.
It is so ordered.
Charles C. Cohn for appellee.

MALCOLM, J.:

The first inquiry to be determined is what was the contract

between the parties.

The memorandum agreement executed by the duly authorized

representatives of the parties to this action reads:

Contract No. 37.

MANILA, 7 de marzo, de 1916.

Confirmanos haber vendido a Bazar Siglo XX, 80

drums Caustic Soda 76 per cent "Carabao" brand al
precio de Dollar Gold Nine and 75/100 per 100-lbs.,
c.i.f. Manila, pagadero against delivery of documents.
Embarque March, 1916.

Comprador Bazar Siglo XX

de Teodoro R. Yangco
J. Siquia

Vendores
BEHN, MEYER & CO. (Ltd.)

O. LOMBECK.
This contract of sale can be analyzed into three component
parts.
1. SUBJECT MATTER AND CONSIDERATION.
Facts. — The contract provided for "80 drums Caustic Soda 76
per cent "Carabao" brand al precio de Dollar Gold Nine and
75/100 1-lbs."
Resorting to the circumstances surrounding the agreement are
we are permitted to do, in pursuance of this provision, the
merchandise was shipped from New York on the
steamship Chinese Prince. The steamship was detained by the
British authorities at Penang, and part of the cargo, including
seventy-one drums of caustic soda, was removed. Defendant
refused to accept delivery of the remaining nine drums of soda
on the ground that the goods were in bad order. Defendant also
refused the optional offer of the plaintiff, of waiting for the
remainder of the shipment until its arrival, or of accepting the
substitution of seventy-one drums of caustic soda of similar
grade from plaintiff's stock. The plaintiff thereupon sold, for the
account of the defendant, eighty drums of caustic soda from
which there was realized the sum of P6,352.89. Deducting this
sum from the selling price of P10,063.86, we have the amount
claimed as damages for alleged breach of the contract.
Law. — It is sufficient to note that the specific merchandise was
never tendered. The soda which the plaintiff offered to
defendant was not of the "Carabao" brand, and the offer of
drums of soda of another kind was not made within the time that
a March shipment, according to another provision the contract,
would normally have been available.
2. PLACE OF DELIVERY.
Facts. — The contract provided for "c.i.f.
Manila, pagadero against delivery of documents."
Law. — Determination of the place of delivery always resolves
itself into a question of act. If the contract be silent as to the
person or mode by which the goods are to be sent, delivery by
the vendor to a common carrier, in the usual and ordinary
course of business, transfers the property to the vendee. A
specification in a contact relative to the payment of freight can
be taken to indicate the intention of the parties in regard to the
place of delivery. If the buyer is to pay the freight, it is
reasonable to suppose that he does so because the goods
become his at the point of shipment. On the other hand, if the
seller is to pay the freight, the inference is equally so strong that
the duty of the seller is to have the goods transported to their
ultimate destination and that title to property does not pass until
the goods have reached their destination. (See Williston on
Sales, PP. 406-408.)
The letters "c.i.f." found in British contracts stand for cost,
insurance, and freight. They signify that the price fixed covers
not only the cost of the goods, but the expense of freight and
insurance to be paid by the seller. (Ireland vs.Livingston, L. R., 5
H. L., 395.) Our instant contract, in addition to the letters "c.i.f.,"
has the word following, "Manila." Under such a contract, an
Australian case is authority for the proposition that no inference
is permissible that a seller was bound to deliver at the point of
destination. (Bowden vs. Little, 4 Comm. [Australia], 1364.)
In mercantile contracts of American origin the letters "F.O.B."
standing for the words "Free on Board," are frequently used.
The meaning is that the seller shall bear all expenses until the
goods are delivered where they are to be "F.O.B." According as
to whether the goods are to be delivered "F.O.B." at the point of
shipment or at the point of destination determines the time when
property passes.
Both the terms "c.i.f." and "F.O.B." merely make rules of
presumption which yield to proof of contrary intention. As
Benjamin, in his work on Sales, well says: "The question, at last,
is one of intent, to be ascertained by a consideration of all the
circumstances." For instance, in a case of Philippine origin,
appealed to the United States Supreme Court, it was held that
the sale was complete on shipment, though the contract was for
goods, "F.O.B. Manila," the place of destination the other terms
of the contract showing the intention to transfer the property.
(United States vs. R. P. Andrews & Co. [1907], 207 U.S., 229.)
With all due deference to the decision of the High Court of
Australia, we believe that the word Manila in conjunction with
the letters "c.i.f." must mean that the contract price, covering
costs, insurance, and freight, signifies that delivery was to made
at Manila. If the plaintiff company has seriously thought that the
place of delivery was New York and Not Manila, it would not
have gone to the trouble of making fruitless attempts to
substitute goods for the merchandise named in the contract, but
would have permitted the entire loss of the shipment to fall upon
the defendant. Under plaintiffs hypothesis, the defendant would
have been the absolute owner of the specific soda confiscated
at Penang and would have been indebted for the contract price
of the same.
This view is corroborated by the facts. The goods were not
shipped nor consigned from New York to plaintiff. The bill of
lading was for goods received from Neuss Hesslein & Co. the
documents evidencing said shipment and symbolizing the
property were sent by Neuss Hesslein & Co. to the Bank of the
Philippine Islands with a draft upon Behn, Meyer & Co. and with
instructions to deliver the same, and thus transfer the property
to Behn, Meyer & Co. when and if Behn, Meyer & Co. should
pay the draft.

The place of delivery was Manila and plaintiff has not legally
excused default in delivery of the specified merchandise at that
place.

3. TIME OF DELIVERY.

Facts. — The contract provided for: "Embarque: March 1916,"

the merchandise was in fact shipped from New York on the
Steamship Chinese Prince on April 12, 1916.

Law. — The previous discussion makes a resolution of this point

unprofitable, although the decision of the United States
Supreme Court in Norrington vs. Wright (([1885], 115 U.S., 188)
can be read with profit. Appellant's second and third
assignments of error could, if necessary, be admitted, and still
could not recover.

THE CONTRACT.
G.R. No. 194785 July 11, 2012
To answer the inquiry with which we begun this decision, the
contract between the parties was for 80 drums of caustic soda,
VIRGILIO S. DAVID, Petitioner,
76 per cent "Carabao" brand, at the price of $9.75 per one
vs.
hundred pounds, cost, insurance, and freight included, to be
MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE,
shipped during March, 1916, to be delivered to Manila and paid
INC., Respondent.
for on delivery of the documents.
DECISION
PERFORMANCE.
MENDOZA, J.:
In resume, we find that the plaintiff has not proved the
performance on its part of the conditions precedent in the
contract. The warranty — the material promise — of the seller to Before this Court is a petition for review under Rule 45 of the
the buyer has not been complied with. The buyer may therefore Rules of Court assailing the July 8, 2010 Decision1 of the Court
rescind the contract of sale because of a breach in substantial of Appeals (CA), in CA-G.R. CR No. 91839, which affirmed the
particulars going to the essence of the contract. As July 17, 2008 Decision2 of the Regional Trial Court, Branch VIII,
contemplated by article 1451 of the Civil Code, the vendee can Manila (RTC) in Civil Case No. 94-69402, an action for specific
demand fulfillment of the contract, and this being shown to be performance and damages.
impossible, is relieved of his obligation. There thus being
sufficient ground for rescission, the defendant is not liable. The Facts:

The judgment of the trial court ordering that the plaintiff take
nothing by its action, without special finding as to costs, is
affirmed, with the costs of this instance. Against the appellant.
So ordered.
Petitioner Virgilio S. David (David) was the owner or proprietor
of VSD Electric Sales, a company engaged in the business of
supplying electrical hardware including transformers for rural
electric cooperatives like respondent Misamis Occidental II
Electric Cooperative, Inc. (MOELCI), with principal office located
in Ozamis City.

To solve its problem of power shortage affecting some areas

within its coverage, MOELCI expressed its intention to purchase
a 10 MVA power transformer from David. For this reason, its
General Manager, Engr. Reynaldo Rada (Engr. Rada), went to
meet David in the latter’s office in Quezon City. David agreed to
supply the power transformer provided that MOELCI would
secure a board resolution because the item would still have to
be imported.
On June 8, 1992, Engr. Rada and Director Jose Jimenez
(Jimenez), who was in-charge of procurement, returned to
Manila and presented to David the requested board resolution
which authorized the purchase of one 10 MVA power
transformer. In turn, David presented his proposal for the
acquisition of said transformer. This proposal was the same
proposal that he would usually give to his clients.
After the reading of the proposal and the discussion of terms,
David instructed his then secretary and bookkeeper, Ellen M.
Wong, to type the names of Engr. Rada and Jimenez at the end
of the proposal. Both signed the document under the word
"conforme." The board resolution was thereafter attached to the
proposal.
As stated in the proposal, the subject transformer, together with
the basic accessories, was valued at P5,200,000.00. It was also
stipulated therein that 50% of the purchase price should be paid
as downpayment and the remaining balance to be paid upon
delivery. Freight handling, insurance, customs duties, and
incidental expenses were for the account of the buyer.
The Board Resolution, on the other hand, stated that the
purchase of the said transformer was to be financed through a
loan from the National Electrification Administration (NEA). As
there was no immediate action on the loan application, Engr.
Rada returned to Manila in early December 1992 and requested
David to deliver the transformer to them even without the
required downpayment. David granted the request provided that
MOELCI would pay interest at 24% per annum. Engr. Rada
acquiesced to the condition. On December 17, 1992, the goods
were shipped to Ozamiz City via William Lines. In the Bill of
Lading, a sales invoice was included which stated the agreed
interest rate of 24% per annum.
When nothing was heard from MOELCI for sometime after the
shipment, Emanuel Medina (Medina), David’s Marketing
Manager, went to Ozamiz City to check on the shipment.
Medina was able to confer with Engr. Rada who told him that the
loan was not yet released and asked if it was possible to
withdraw the shipped items. Medina agreed.
When no payment was made after several months, Medina was
constrained to send a demand letter, dated September 15,
1993, which MOELCI duly received. Engr. Rada replied in
writing that the goods were still in the warehouse of William
Lines again reiterating that the loan had not been approved by
NEA. This prompted Medina to head back to Ozamiz City where
he found out that the goods had already been released to
MOELCI evidenced by the shipping company’s copy of the Bill
of Lading which was stamped "Released," and with the notation
that the arrastre charges in the amount of P5,095.60 had been
paid. This was supported by a receipt of payment with the
corresponding cargo delivery receipt issued by the Integrated
Port Services of Ozamiz, Inc.
Subsequently, demand letters were sent to MOELCI demanding
the payment of the whole amount plus the balance of previous
purchases of other electrical hardware. Aside from the formal
demand letters, David added that several statements of
accounts were regularly sent through the mails by the company
and these were never disputed by MOELCI.
On February 17, 1994, David filed a complaint for specific
performance with damages with the RTC. In response, MOECLI
moved for its dismissal on the ground that there was lack of
cause of action as there was no contract of sale, to begin with,
or in the alternative, the said contract was unenforceable under
the Statute of Frauds. MOELCI argued that the quotation letter
could not be considered a binding contract because there was
nothing in the said document from which consent, on its part, to
the terms and conditions proposed by David could be inferred.
David knew that MOELCI’s assent could only be obtained upon
the issuance of a purchase order in favor of the bidder chosen
by the Canvass and Awards Committee.
Eventually, pursuant to Rule 16, Section 5 of the Rules of Court,
MOELCI filed its Motion for Preliminary Hearing of Affirmative
Defenses and Deferment of the Pre-Trial Conference which was
denied by the RTC to abbreviate proceedings and for the parties
to proceed to trial and avoid piecemeal resolution of issues. The
order denying its motion was raised with the CA, and then with
this Court. Both courts sustained the RTC ruling.
Trial ensued. By reason of MOELCI’s continued failure to
appear despite notice, David was allowed to present his
testimonial and documentary evidence ex parte, pursuant to
Rule 18, Section 5 of the Rules. A Very Urgent Motion to Allow
Defendant to Present Evidence was filed by MOELCI, but was
denied.
In its July 17, 2008 Decision, the RTC dismissed the complaint.
It found that although a contract of sale was perfected, it was
not consummated because David failed to prove that there was
indeed a delivery of the subject item and that MOELCI received
it.3
Aggrieved, David appealed his case to the CA.
On July 8, 2010, the CA affirmed the ruling of the RTC. In the
assailed decision, the CA reasoned out that although David was
correct in saying that MOELCI was deemed to have admitted
the genuineness and due execution of the "quotation letter"
(Exhibit A), wherein the signatures of the Chairman and the
General Manager of MOELCI appeared, he failed to offer any
textual support to his stand that it was a contract of sale instead
of a mere price quotation agreed to by MOELCI representatives.
On this score, the RTC erred in stating that a contract of sale
was perfected between the parties despite the irregularities that
tainted their transaction. Further, the fact that MOELCI’s
representatives agreed to the terms embodied in the agreement
would not preclude the finding that said contract was at best a
mere contract to sell.
A motion for reconsideration was filed by David but it was
denied.4
Hence, this petition.
Before this Court, David presents the following issues for
consideration:
I.
WHETHER OR NOT THERE WAS A PERFECTED
CONTRACT OF SALE.
II.
WHETHER OR NOT THERE WAS A DELIVERY THAT
CONSUMMATED THE CONTRACT.
The Court finds merit in the petition.
I.
On the issue as to whether or not there was a perfected contract
of sale, this Court is required to delve into the evidence of the
case. In a petition for review on certiorari under Rule 45 of the
Rules of Court, the issues to be threshed out are generally
questions of law only, and not of fact.
This was reiterated in the case of Buenaventura v.
Pascual,5 where it was written:
Time and again, this Court has stressed that its jurisdiction in a
petition for review on certiorari under Rule 45 of the Rules of
Court is limited to reviewing only errors of law, not of fact, unless
the findings of fact complained of are devoid of support by the
evidence on record, or the assailed judgment is based on the
misapprehension of facts. The trial court, having heard the
witnesses and observed their demeanor and manner of
testifying, is in a better position to decide the question of their
credibility. Hence, the findings of the trial court must be
accorded the highest respect, even finality, by this Court.
That being said, the Court is not unmindful, however, of the
recognized exceptions well-entrenched in jurisprudence. It has
always been stressed that when supported by substantial
evidence, the findings of fact of the CA are conclusive and
binding on the parties and are not reviewable by this Court,
unless the case falls under any of the following recognized
exceptions:
(1) When the conclusion is a finding grounded entirely
on speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken,
absurd or impossible;
(3) Where there is a grave abuse of discretion:
(4) When the judgment is based on a
misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is
contrary to the admissions of both appellant and
appellee;
(7) When the findings are contrary to those of the trial
court;
(8) When the findings of fact are without citation of
specific evidence on which the conclusions are based;
(9) When the facts set forth in the petition as well as in
the petitioner’s main and reply briefs are not disputed
by the respondents; and
(10) When the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence
and contradicted by the evidence on
record. 6 [Emphasis supplied]
In this case, the CA and the RTC reached different conclusions
on the question of whether or not there was a perfected contract
of sale. The RTC ruled that a contract of sale was perfected
although the same was not consummated because David failed
to show proof of delivery.7
The CA was of the opposite view. The CA wrote:
Be that as it may, it must be emphasized that the appellant failed
to offer any textual support to his insistence that Exhibit "A" is a
contract of sale instead of a mere price quotation conformed to
by MOELCI representatives. To that extent, the trial court erred
in laying down the premise that "indeed a contract of sale is
perfected between the parties despite the irregularities attending
the transaction." x x x
That representatives of MOELCI conformed to the terms
embodied in the agreement does not preclude the finding that
such contract is, at best, a mere contract to sell with stipulated
costs quoted should it ultimately ripen into one of sale. The
conditions upon which that development may occur may even
be obvious from statements in the agreement itself, that go
beyond just "captions." Thus, the appellant opens with, "WE are
pleased to submit our quotation xxx." The purported contract
also ends with. "Thank you for giving us the opportunity to quote
on your requirements and we hope to receive your order soon"
apparently referring to a purchase order which MOELCI
contends to be a formal requirement for the entire transaction. 8
In other words, the CA was of the position that Exhibit A was at
best a contract to sell.
A perusal of the records persuades the Court to hold otherwise.
The elements of a contract of sale are, to wit: 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.9It is the absence of the
first element which distinguishes a contract of sale from that of a
contract to sell.
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, such as, in most cases, 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.10
In a contract of sale, on the other hand, the title to the property
passes to the vendee upon the delivery of the thing sold. Unlike
in a contract to sell, 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. 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. The vendor loses ownership over the
property and cannot recover it until and unless the contract is
resolved or rescinded.11
An examination of the alleged contract to sell, "Exhibit A,"
despite its unconventional form, would show that said
document, with all the stipulations therein and with the attendant
circumstances surrounding it, was actually a Contract of Sale.
The rule is that it is not the title of the contract, but its express
terms or stipulations that determine the kind of contract entered
into by the parties.12 First, there was meeting of minds as to the
transfer of ownership of the subject matter. The letter (Exhibit A),
though appearing to be a mere price quotation/proposal, was
not what it seemed. It contained terms and conditions, so that,
by the fact that Jimenez, Chairman of the Committee on
Management, and Engr. Rada, General Manager of MOELCI,
had signed their names under the word "CONFORME," they, in
effect, agreed with the terms and conditions with respect to the
purchase of the subject 10 MVA Power Transformer. As correctly
argued by David, if their purpose was merely to acknowledge
the receipt of the proposal, they would not have signed their
name under the word "CONFORME."
Besides, the uncontroverted attending circumstances bolster the
fact that there was consent or meeting of minds in the transfer of
ownership. To begin with, a board resolution was issued
authorizing the purchase of the subject power transformer. Next,
armed with the said resolution, top officials of MOELCI visited
David’s office in Quezon City three times to discuss the terms of
the purchase. Then, when the loan that MOELCI was relying
upon to finance the purchase was not forthcoming, MOELCI,
through Engr. Rada, convinced David to do away with the 50%
downpayment and deliver the unit so that it could already
address its acute power shortage predicament, to which David
acceded when it made the delivery, through the carrier William
Lines, as evidenced by a bill of lading.
Second, the document specified a determinate subject matter
which was one (1) Unit of 10 MVA Power Transformer with
corresponding KV Line Accessories. And third, the document
stated categorically the price certain in money which was
P5,200,000.00 for one (1) unit of 10 MVA Power Transformer
and P2,169,500.00 for the KV Line Accessories.
In sum, since there was a meeting of the minds, there was
consent on the part of David to transfer ownership of the power
transformer to MOELCI in exchange for the price, thereby
complying with the first element. Thus, the said document
cannot just be considered a contract to sell but rather a
perfected contract of sale.
II.
Now, the next question is, was there a delivery?
MOELCI, in denying that the power transformer was delivered to
it, argued that the Bill of Lading which David was relying upon
was not conclusive. It argued that although the bill of lading was
stamped "Released," there was nothing in it that indicated that
said power transformer was indeed released to it or delivered to
its possession. For this reason, it is its position that it is not
liable to pay the purchase price of the 10 MVA power
transformer.
This Court is unable to agree with the CA that there was no
delivery of the items. On the contrary, there was delivery and
release.
To begin with, among the terms and conditions of the proposal
to which MOELCI agreed stated:
2. Delivery – Ninety (90) working days upon receipt of your
purchase order and downpayment.
C&F Manila, freight, handling, insurance, custom duties and
incidental expenses shall be for the account of MOELCI
II. 13 (Emphasis supplied)
On this score, it is clear that MOELCI agreed that the power
transformer would be delivered and that the freight, handling,
insurance, custom duties, and incidental expenses shall be
shouldered by it.
On the basis of this express agreement, Article 1523 of the Civil
Code becomes applicable.1âwphi1 It provides:
Where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer delivery of
the goods to a carrier, whether named by the buyer or not, for
the purpose of transmission to the buyer is deemed to be a
delivery of the goods to the buyer, except in the cases provided
for in Article 1503, first, second and third paragraphs, or unless
a contrary intent appears. (Emphasis supplied)
Thus, the delivery made by David to William Lines, Inc., as
evidenced by the Bill of Lading, was deemed to be a delivery to
MOELCI. David was authorized to send the power transformer
to the buyer pursuant to their agreement. When David sent the
item through the carrier, it amounted to a delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v.
Yangco,14 it was pointed out that a specification in a contract
relative to the payment of freight can be taken to indicate the
intention of the parties with regard to the place of delivery. So
that, if the buyer is to pay the freight, as in this case, it is
reasonable to suppose that the subject of the sale is transferred
to the buyer at the point of shipment. In other words, the title to
the goods transfers to the buyer upon shipment or delivery to
the carrier.
Of course, Article 1523 provides a mere presumption and in
order to overcome said presumption, MOELCI should have
presented evidence to the contrary. The burden of proof was
shifted to MOELCI, who had to show that the rule under Article
1523 was not applicable. In this regard, however, MOELCI
failed.
There being delivery and release, said fact constitutes partial
performance which takes the case out of the protection of the
Statute of Frauds. It is elementary that the partial execution of a
contract of sale takes the transaction out of the provisions of the
Statute of Frauds so long as the essential requisites of consent
of the contracting parties, object and cause of the obligation
concur and are clearly established to be present.15
That being said, the Court now comes to David’s prayer that
MOELCI be made to pay the total sum of ₱ 5,472,722.27 plus
the stipulated interest at 24% per annum from the filing of the
complaint. Although the Court agrees that MOELCI should pay
interest, the stipulated rate is, however, unconscionable and
should be equitably reduced. While there is no question that
parties to a loan agreement have wide latitude to stipulate on
any interest rate in view of the Central Bank Circular No. 905 s.
1982 which suspended the Usury Law ceiling on interest
effective January 1, 1983, it is also worth stressing that interest
rates whenever unconscionable may still be reduced to a
reasonable and fair level. There is nothing in the said circular
which grants lenders carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead
to a hemorrhaging of their assets.16Accordingly, the excessive
interest of 24% per annum stipulated in the sales invoice should
be reduced to 12% per annum.
Indeed, David was compelled to file an action against MOELCI
but this reason alone will not warrant an award of attorney’s
fees. It is settled that the award of attorney's fees is the
exception rather than the rule. Counsel's fees are not awarded
every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate. Attorney's
fees, as part of damages, are not necessarily equated to the
amount paid by a litigant to a lawyer. In the ordinary sense,
attorney's fees represent the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the
latter; while in its extraordinary concept, they may be awarded
by the court as indemnity for damages to be paid by the losing
party to the prevailing party. Attorney's fees as part of damages
are awarded only in the instances specified in Article 2208 of the
Civil Code 17 which demands factual, legal, and equitable
justification. Its basis cannot be left to speculation or conjecture.
In this regard, none was proven.
Moreover, in the absence of stipulation, a winning party may be
awarded attorney's fees only in case plaintiffs action or
defendant's stand is so untenable as to amount to gross and
evident bad faith.18 is MOELCI's case cannot be similarly
classified.
Also, David's claim for the balance of P73,059.76 plus the
stipulated interest is denied for being unsubstantiated.
WHEREFORE, the petition Is GRANTED. The July 8, 2010
Decision of the Court of Appeals Is REVERSED and SET
ASIDE. Respondent Misamis Occidental II Electric Cooperative,
Inc. is ordered to pay petitioner Virgilio S. David the total sum of
P5,472,722.27 with interest at the rate of 12o/o per annum
reckoned from the filing of the complaint until fully paid.
SO ORDERED.
G.R. No. 184513, March 09, 2016
DESIGNER BASKETS, INC., Petitioner, v. AIR SEA
TRANSPORT, INC. AND ASIA CARGO CONTAINER
LINES, INC., Respondents.
DECISION
JARDELEZA, J. :
This is a Petition for Review on Certiorari1 of the August 16,
2007 Decision2 and September 2, 2008 Resolution3 of the Court
of Appeals (CA) in CA-G.R. CV No. 79790, absolving
respondents Air Sea Transport, Inc. (ASTI) and Asia Cargo
Container Lines, Inc. (ACCLI) from liability in the complaint for
sum of money and damages filed by petitioner Designer
Baskets, Inc. (DBI).
The Facts
DBI is a domestic corporation engaged in the production of
housewares and handicraft items for export.4Sometime in
October 1995, Ambiente, a foreign-based company, ordered
from DBI5 223 cartons of assorted wooden items (the
shipment).6 The shipment was worth Twelve Thousand Five
Hundred Ninety and Eighty-Seven Dollars (US$12,590.87) and
payable through telegraphic transfer.7 Ambiente designated
ACCLI as the forwarding agent that will ship out its order from
the Philippines to the United States (US). ACCLI is a domestic
corporation acting as agent of ASTI, a US based corporation
engaged in carrier transport business, in the Philippines. 8
On January 7, 1996, DBI delivered the shipment to ACCLI for
sea transport from Manila and delivery to Ambiente at 8306
Wilshire Blvd., Suite 1239, Beverly Hills, California. To
acknowledge receipt and to serve as the contract of sea
carriage, ACCLI issued to DBI triplicate copies of ASTI Bill of
Lading No. AC/MLLA601317.9 DBI retained possession of the
originals of the bills of lading pending the payment of the goods
by Ambiente.10
On January 23, 1996, Ambiente and ASTI entered into an
Indemnity Agreement (Agreement).11 Under the Agreement,
Ambiente obligated ASTI to deliver the shipment to it or to its
order "without the surrender of the relevant bill(s) of lading due
to the non-arrival or loss thereof."12 In exchange, Ambiente
undertook to indemnify and hold ASTI and its agent free from
any liability as a result of the release of the
shipment.13 Thereafter, ASTI released the shipment to Ambiente
without the knowledge of DBI, and without it receiving payment
for the total cost of the shipment.14
DBI then made several demands to Ambiente for the payment of
the shipment, but to no avail. Thus, on October 7, 1996, DBI
filed the Original Complaint against ASTI, ACCLI and ACCLFs
incorporators-stockholders15 for the payment of the value of the
shipment in the amount of US$12,590.87 or Three Hundred
Thirty-Three and Six Flundred Fifty-Eight Pesos (P333,658.00),
plus interest at the legal rate from January 22, 1996, exemplary
damages, attorney's fees and cost of suit.16
In its Original Complaint, DBI claimed that under Bill of Lading
Number AC/MLLA601317, ASTI and/or ACCLI is "to release and
deliver the cargo/shipment to the consignee, x x x, only after the
original copy or copies of [the] Bill of Lading is or are
surrendered to them; otherwise, they become liable to the
shipper for the value of the shipment."17 DBI also averred that
ACCLI should be jointly and severally liable with its co-
defendants because ACCLI failed to register ASTI as a foreign
corporation doing business in the Philippines. In addition, ACCLI
failed to secure a license to act as agent of ASTI.18
On February 20, 1997, ASTI, ACCLI, and ACCLI's incorporators-
stockholders filed a Motion to Dismiss.19They argued that: (a)
they are not the real parties-in-interest in the action because the
cargo was delivered and accepted by Ambiente. The case,
therefore, was a simple case of non�payment of the buyer; (b)
relative to the incorporators-stockholders of ACCLI, piercing the
corporate veil is misplaced; (c) contrary to the allegation of DBI,
the bill of lading covering the shipment does not contain a
proviso exposing ASTI to liability in case the shipment is
released without the surrender of the bill of lading; and (d) the
Original Complaint did not attach a certificate of non-forum
shopping.20
DBI filed an Opposition to the Motion to Dismiss,21 asserting that
ASTI and ACCLI failed to exercise the required extraordinary
diligence when they allowed the cargoes to be withdrawn by the
consignee without the surrender of the original bill of lading.
ASTI, ACCLI, and ACCLI's incorporators-stockholders countered
that it is DBI who failed to exercise extraordinary diligence in
protecting its own interest. They averred that whether or not the
buyer-consignee pays the seller is already outside of their
concern.22
Before the trial court could resolve the motion to dismiss, DBI
filed an Amended Complaint23 impleading Ambiente as a new
defendant and praying that it be held solidarity liable with ASTI,
ACCLI, and ACCLFs incorporators-stockholders for the payment
of the value of the shipment. DBI alleged that it received reliable
information that the shipment was released merely on the basis
of a company guaranty of Ambiente.24 Further, DBI asserted that
ACCLI's incorporators-stockholders have not yet fully paid their
stock subscriptions; thus, "under the circumstance of [the] case,"
they should be held liable to the extent of the balance of their
subscriptions.25cralawred
In their Answer,26 ASTI, ACCLI, and ACCLI's incorporators-
stockholders countered that DBI has no cause of action against
ACCLI and its incorporators-stockholders because the Amended
Complaint, on its face, is for collection of sum of money by an
unpaid seller against a buyer. DBI did not allege any act of the
incorporators-stockholders which would constitute as a ground
for piercing the veil of corporate fiction.27ACCLI also reiterated
that there is no stipulation in the bill of lading restrictively
subjecting the release of the cargo only upon the presentation of
the original bill of lading.28 It regarded the issue of ASTI's lack of
license to do business in the Philippines as "entirely foreign and
irrelevant to the issue of liability for breach of contract" between
DBI and Ambiente. It stated that the purpose of requiring a
license (to do business in the Philippines) is to subject the
foreign corporation to the jurisdiction of Philippine courts. 29
On July 22, 1997, the trial court directed the service of
summons to Ambiente through the Department of Trade and
Industry.30 The summons was served on October 6, 199731 and
December 18, 1997.32Ambiente failed to file an Answer. Hence,
DBI moved to declare Ambiente in default, which the trial court
granted in its Order dated September 15, 1998.33
The Ruling of the Trial Court
34
In a Decision dated July 25, 2003, the trial court found ASTI,
ACCLI, and Ambiente solidarity liable to DBI for the value of the
shipment. It awarded DBI the following:
chanRoblesvirtualLawlibrary
1. US$12,590.87, or the equivalent of [P]333,658.00 at
the time of the shipment, plus 12% interest per annum
from 07 January 1996 until the same is fully paid;
2. [P]50,000.00 in exemplary damages;
3. [P]47,000.00 as and for attorney's fees; and,
4. [P]10,000.00 as cost of suit.35
The trial court declared that the liability of Ambiente is "very
clear." As the buyer, it has an obligation to pay for the value of
the shipment. The trial court noted that "[the case] is a simple
sale transaction which had been perfected especially since
delivery had already been effected and with only the payment
for the shipment remaining left to be done."36
With respect to ASTI, the trial court held that as a common
carrier, ASTI is bound to observe extraordinary diligence in the
vigilance over the goods. However, ASTI was remiss in its duty
when it allowed the unwarranted release of the shipment to
Ambiente.37 The trial court found that the damages suffered by
DBI was due to ASTI's release of the merchandise despite the
non-presentation of the bill of lading. That ASTI entered into an
Agreement with Ambiente to release the shipment without the
surrender of the bill of lading is of no moment. 38 The Agreement
cannot save ASTI from liability because in entering into such, it
violated the law, the terms of the bill of lading and the right of
DBI over the goods.39
The trial court also added that the Agreement only involved
Ambiente and ASTI. Since DBI is not privy to the Agreement, it
is not bound by its terms.40cralawred
The trial court found that ACCLI "has not done enough to
prevent the defendants Ambiente and [ASTI] from agreeing
among themselves the release of the goods in total disregard of
[DBFs] rights and in contravention of the country's civil and
commercial laws."41 As the forwarding agent, ACCLI was "well
aware that the goods cannot be delivered to the defendant
Ambiente since [DBI] retained possession of the originals of the
bill of lading."42 Consequently, the trial court held ACCLI
solidarily liable with ASTI.
As regards ACCLFs incorporators-stockholders, the trial court
absolved them from liability. The trial court ruled that the
participation of ACCLFs incorporators-stockholders in the
release of the cargo is not as direct as that of ACCLI. 43
DBI, ASTI and ACCLI appealed to the CA. On one hand, DBI
took issue with the order of the trial court awarding the value of
the shipment in Philippine Pesos instead of US Dollars. It also
alleged that even assuming that the shipment may be paid in
Philippine Pesos, the trial court erred in pegging its value at the
exchange rate prevailing at the time of the shipment, rather than
at the exchange rate prevailing at the time of payment.44
On the other hand, ASTI and ACCLI questioned the trial court's
decision finding them solidarily liable with DBI for the value of
the shipment. They also assailed the trial court's award of
interest, exemplary damages, attorney's fees and cost of suit in
DBFs favor.45
The Ruling of the Court of Appeals
The CA affirmed the trial court's finding that Ambiente is liable to
DBI, but absolved ASTI and ACCLI from liability. The CA found
that the pivotal issue is whether the law requires that the bill of
lading be surrendered by the buyer/consignee before the carrier
can release the goods to the former. It then answered the
question in the negative, thus:
chanRoblesvirtualLawlibrary
There is nothing in the applicable laws that require the
surrender of bills of lading before the goods may be
released to the buyer/consignee. In fact, Article 353 of the
Code of Commerce suggests a contrary conclusion, viz �
"Art. 353. After the contract has been complied with, the bill of
lading which the carrier has issued shall be returned to him, and
by virtue of the exchange of this title with the thing transported,
the respective obligations shall be considered canceled xxx In
case the consignee, upon receiving the goods, cannot return the
bill of lading subscribed by the carrier because of its loss or of
any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return
of the bill of lading."
The clear import of the above article is that the surrender of the
bill of lading is not an absolute and mandatory requirement for
the release of the goods to the consignee. The fact that the
carrier is given the alternative option to simply require a
receipt for the goods delivered suggests that the
surrender of the bill of lading may be dispensed with
when it cannot be produced by the consignee for
whatever cause. 46 (Emphasis supplied.)
The CA stressed that DBI failed to present evidence to prove its
assertion that the surrender of the bill of lading upon delivery of
the goods is a common mercantile practice.47 Further, even
assuming that such practice exists, it cannot prevail over law
and jurisprudence.48
As for ASTI, the CA explained that its only obligation as a
common carrier was to deliver the shipment in good condition. It
did not include looking beyond the details of the transaction
between the seller and the consignee, or more particularly,
ascertaining the payment of the goods by the buyer Ambiente. 49
Since the agency between ASTI and ACCLI was established
and not disputed by any of the parties, neither can ACCLI, as a
mere agent of ASTI, be held liable. This must be so in the
absence of evidence that the agent exceeded its authority.50
The CA, thus, ruled:
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WHEREFORE, in view of the foregoing, the Decision dated
July 25, 2003 of Branch 255 of the Regional Trial court of Las
[Pi�as] City in Civil Case No. LP-96-0235 is
hereby AFFIRMED with the following MODIFICATIONS:
1. Defendants-appellants Air Sea Transport, Inc. and
Asia Cargo Container Lines, Inc. are
hereby ABSOLVED from all liabilities;
2. The actual damages to be paid by defendant
Ambiente shall be in the amount of US$12,590.87.
Defendant Ambiente's liability may be paid in
Philippine currency, computed at the exchange rate
prevailing at the time of payment;51 and
3. The rate of interest to be imposed on the total amount
of US$12,590.87 shall be 6% per annum computed
from the filing of the complaint on October 7, 1996
until the finality of this decision. After this decision
becomes final and executory, the applicable rate shall
be 12% per annum until its full satisfaction.
SO ORDERED.52ChanRoblesVirtualawlibrary
Hence, this petition for review, which raises the sole issue of
whether ASTI and ACCLI may be held solidarily liable to DBI for
the value of the shipment.
Our Ruling
We deny the petition.
A common carrier may release the goods to the
consignee even without the surrender of the hill of lading.
This case presents an instance where an unpaid seller sues not
only the buyer, but the carrier and the carrier's agent as well, for
the payment of the value of the goods sold. The basis for ASTI
and ACCLI's liability, as pleaded by DBI, is the bill of lading
covering the shipment.
A bill of lading is defined as "a written acknowledgment of the
receipt of goods and an agreement to transport and to deliver
them at a specified place to a person named or on his order." 53 It
may also be defined as an instrument in writing, signed by a
carrier or his agent, describing the freight so as to identify it,
stating the name of the consignor, the terms of the contract of
carriage, and agreeing or directing that the freight be delivered
to bearer, to order or to a specified person at a specified place. 54
Under Article 350 of the Code of Commerce, "the shipper as
well as the carrier of the merchandise or goods may mutually
demand that a bill of lading be made." A bill of lading, when
issued by the carrier to the shipper, is the legal evidence of the
contract of carriage between the former and the latter. It defines
the rights and liabilities of the parties in reference to the contract
of carriage. The stipulations in the bill of lading are valid and
binding unless they are contrary to law, morals, customs, public
order or public policy.55
Here, ACCLI, as agent of ASTI, issued Bill of Lading No.
AC/MLLA601317 to DBI. This bill of lading governs the rights,
obligations and liabilities of DBI and ASTI. DBI claims that Bill of
Lading No. AC/MLLA601317 contains a provision stating that
ASTI and ACCLI are "to release and deliver the cargo/shipment
to the consignee, x x x, only after the original copy or copies of
the said Bill of Lading is or are surrendered to them; otherwise
they become liable to [DBI] for the value of the shipment." 56Quite
tellingly, however, DBI does not point or refer to any specific
clause or provision on the bill of lading supporting this claim.
The language of the bill of lading shows no such requirement.
What the bill of lading provides on its face is:
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Received by the Carrier in apparent good order and condition
unless otherwise indicated hereon, the Container(s) and/or
goods hereinafter mentioned to be transported and/or otherwise
forwarded from the Place of Receipt to the intended Place of
Delivery upon and [subject] to all the terms and conditions
appearing on the face and back of this Bill of Lading. If
required by the Carrier this Bill of Lading duly endorsed
must be surrendered in exchange for the Goods of
delivery order. 57 (Emphasis supplied.)
There is no obligation, therefore, on the part of ASTI and ACCLI
to release the goods only upon the surrender of the original bill
of lading.
Further, a carrier is allowed by law to release the goods to the
consignee even without the latter's surrender of the bill of lading.
The third paragraph of Article 353 of the Code of Commerce is
enlightening:
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Article 353. The legal evidence of the contract between the
shipper and the carrier shall be the bills of lading, by the
contents of which the disputes which may arise regarding their
execution and performance shall be decided, no exceptions
being admissible other than those of falsity and material error in
the drafting.
After the contract has been complied with, the bill of lading
which the carrier has issued shall be returned to him, and by
virtue of the exchange of this title with the thing transported, the
respective obligations and actions shall be considered
cancelled, unless in the same act the claim which the parties
may wish to reserve be reduced to writing, with the exception of
that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot
return the bill of lading subscribed by the carrier, because
of its loss or any other cause, he must give the latter a
receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading. (Emphasis
supplied.)
The general rule is that upon receipt of the goods, the
consignee surrenders the bill of lading to the carrier and their
respective obligations are considered canceled. The law,
however, provides two exceptions where the goods may be
released without the surrender of the bill of lading because the
consignee can no longer return it. These exceptions are when
the bill of lading gets lost or for other cause. In either case, the
consignee must issue a receipt to the carrier upon the release of
the goods. Such receipt shall produce the same effect as the
surrender of the bill of lading.
We have already ruled that the non-surrender of the original bill
of lading does not violate the carrier's duty of extraordinary
diligence over the goods.58 In Republic v. Lorenzo Shipping
Corporation,59 we found that the carrier exercised extraordinary
diligence when it released the shipment to the consignee, not
upon the surrender of the original bill of lading, but upon signing
the delivery receipts and surrender of the certified true copies of
the bills of lading. Thus, we held that the surrender of the
original bill of lading is not a condition precedent for a common
carrier to be discharged of its contractual obligation.
Under special circumstances, we did not even require
presentation of any form of receipt by the consignee, in lieu of
the original bill of lading, for the release of the goods. In Macam
v. Court of Appeals,60 we absolved the carrier from liability for
releasing the goods to the consignee without the bills of lading
despite this provision on the bills of lading:
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"One of the Bills of Lading must be surrendered duly endorsed
in exchange for the goods or delivery order."61 (Citations
omitted.)
In clearing the carrier from liability, we took into consideration
that the shipper sent a telex to the carrier after the goods were
shipped. The telex instructed the carrier to deliver the goods
without need of presenting the bill of lading and bank guarantee
per the shipper's request since "for prepaid shipt ofrt charges
already fully paid our end x x x."62 We also noted the usual
practice of the shipper to request the shipping lines to
immediately release perishable cargoes through telephone calls.
Also, in Eastern Shipping Lines v. Court of Appeals,63 we
absolved the carrier from liability for releasing the goods to the
supposed consignee, Consolidated Mines, Inc. (CMI), on the
basis of an Undertaking for Delivery of Cargo but without the
surrender of the original bill of lading presented by CMI. Similar
to the factual circumstance in this case, the Undertaking
in Eastern Shipping Lines guaranteed to hold the carrier
"harmless from all demands, claiming liabilities, actions and
expenses."64 Though the central issue in that case was who the
consignee was in the bill of lading, it is noteworthy how we gave
weight to the Undertaking in ruling in favor of the carrier:
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But assuming that CMI may not be considered consignee, the
petitioner cannot be faulted for releasing the goods to CMI
under the circumstances, due to its lack of knowledge as to who
was the real consignee in view of CMI's strong representations
and letter of undertaking wherein it stated that the bill of lading
would be presented later. This is precisely the situation covered
by the last paragraph of Art. 353 of the [Code of Commerce] to
wit:
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"If in case of loss or for any other reason whatsoever, the
consignee cannot return upon receiving the merchandise the bill
of lading subscribed by the carrier, he shall give said carrier a
receipt of the goods delivered this receipt producing the same
effects as the return of the bill of
lading."65ChanRoblesVirtualawlibrary
Clearly, law and jurisprudence is settled that the surrender of the
original bill of lading is not absolute; that in case of loss or any
other cause, a common carrier may release the goods to the
consignee even without it.
Here, Ambiente could not produce the bill of lading covering the
shipment not because it was lost, but for another cause: the bill
of lading was retained by DBI pending Ambiente's full payment
of the shipment. Ambiente and ASTI then entered into an
Indemnity Agreement, wherein the former asked the latter to
release the shipment even without the surrender of the bill of
lading. The execution of this Agreement, and the undisputed fact
that the shipment was released to Ambiente pursuant to it, to
our mind, operates as a receipt in substantial compliance with
the last paragraph of Article 353 of the Code of Commerce.
Articles 1733, 1734, and 1735 of the Civil Code are not
applicable.
DBI, however, challenges the Agreement, arguing that the
carrier released the goods pursuant to it, notwithstanding the
carrier's knowledge that the bill of lading should first be
surrendered. As such, DBI claims that ASTI and ACCLI are
liable for damages because they failed to exercise extraordinary
diligence in the vigilance over the goods pursuant to Articles
1733, 1734, and 1735 of the Civil Code.66
DBI is mistaken.
Articles 1733, 1734, and 1735 of the Civil Code are not
applicable in this case. The Articles state:
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Article 1733. Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to
all the circumstances of each case.
Such extraordinary diligence in vigilance over the goods is
further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in Articles 1755 and 1756.
Article 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
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(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
Article 1735. In all cases other than those mentioned in Nos. 1,
2, 3, 4, and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required in
Article 1733.
Articles 1733, 1734, and 1735 speak of the common carrier's
responsibility over the goods. They refer to the general liability
of common carriers in case of loss,
destruction or deterioration of goods and the presumption of
negligence against them. This responsibility or duty of the
common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the
carrier for transportation, until the same are delivered, actually
or constructively, by the carrier to the consignee, or to the
person who has a right to receive them.67 It is, in fact,
undisputed that the goods were timely delivered to the proper
consignee or to the one who was authorized to receive them.
DBFs only cause of action against ASTI and ACCLI is the
release of the goods to Ambiente without the surrender of the
bill of lading, purportedly in violation of the terms of the bill of
lading. We have already found that Bill of Lading No.
AC/MLLA601317 does not contain such express prohibition.
Without any prohibition, therefore, the carrier had no obligation
to withhold release of the goods. Articles 1733, 1734, and 1735
do not give ASTI any such obligation.
The applicable provision instead is Article 353 of the Code of
Commerce, which we have previously discussed. To reiterate,
the Article allows the release of the goods to the consignee even
without his surrender of the original bill of lading. In such case,
the duty of the carrier to exercise extraordinary diligence is not
violated. Nothing, therefore, prevented the consignee and the
carrier to enter into an indemnity agreement of the same nature
as the one they entered here. No law or public policy is
contravened upon its execution.
Article 1503 of the Civil Code does not apply to contracts
for carriage of goods.
In its petition, DBI continues to assert the wrong application of
Article 353 of the Code of Commerce to its Amended Complaint.
It alleges that the third paragraph of Article 1503 of the Civil
Code is the applicable provision because: (a) Article 1503 is a
special provision that deals particularly with the situation of the
seller retaining the bill of lading; and (b) Article 1503 is a law
which is later in point of time to Article 353 of the Code of
Commerce.68 DBI posits that being a special provision, Article
1503 of the Civil Code should prevail over Article 353 of the
Code of Commerce, a general provision that makes no
reference to the seller retaining the bill of lading. 69
DBFs assertion is untenable. Article 1503 is an exception to the
general presumption provided in the first paragraph of Article
1523, which reads:
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Article 1523. Where, in pursuance of a contract of sale, the
seller is authorized or required to send the goods to the
buyer, delivery of the goods to a carrier, whether named
by the buyer or not, for the purpose of transmission to the
buyer is deemed to be a delivery of the goods to the
buyer, except in the cases provided for in Articles 1503,
first, second and third paragraphs, or unless a contrary
intent appears.
Unless otherwise authorized by the buyer, the seller must make
such contract with the carrier on behalf of the buyer as may be
reasonable, having regard to the nature of the goods and the
other circumstances of the case. If the seller omit so to do, and
the goods are lost or damaged in the course of transit, the buyer
may decline to treat the delivery to the carrier as a delivery to
himself, or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to
the buyer under circumstances in which the seller knows or
ought to know that it is usual to insure, the seller must give such
notice to the buyer as may enable him to insure them during
their transit, and, if the seller fails to do so, the goods shall be
deemed to be at his risk during such transit. (Emphasis
supplied.)
Article 1503, on the other hand, provides:
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Article 1503. When there is a contract of sale of specific
goods, the seller may, by the terms of the contract, reserve the
right of possession or ownership in the goods until certain
conditions have been fulfilled. The right of possession or
ownership may be thus reserved notwithstanding the delivery of
the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of the
seller or of his agent, the seller thereby reserves the ownership
in the goods. But, if except for the form of the bill of lading, the
ownership would have passed to the buyer on shipment of the
goods, the seller's property in the goods shall be deemed to be
only for the purpose of securing performance by the buyer of his
obligations under the contract.
Where goods are shipped, and by the bill of lading the
goods are deliverable to order of the buyer or of his
agent, but possession of the bill of lading is retained by
the seller or his agent, the seller thereby reserves a right
to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and
transmits the bill of exchange and bill of lading together to the
buyer to secure acceptance or payment of the bill of exchange,
the buyer is bound to return the bill of lading if he does not
honor the bill of exchange, and if he wrongfully retains the bill of
lading he acquires no added right thereby. If, however, the bill of
lading provides that the goods are deliverable to the buyer or to
the order of the buyer, or is indorsed in blank, or to the buyer by
the consignee named therein, one who purchases in good faith,
for value, the bill of lading, or goods from the buyer will obtain
the ownership in the goods, although the bill of exchange has
not been honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the
transfer wrongful. (Emphasis supplied.)
Articles 1523 and 1503, therefore, refer to a contract of sale
between a seller and a buyer. In particular, they refer to who
between the seller and the buyer has the right of possession or
ownership over the goods subject of the sale. Articles 1523 and
1503 do not apply to a contract of carriage between the shipper
and the common carrier. The third paragraph of Article 1503,
upon which DBI relies, does not oblige the common carrier to
withhold delivery of the goods in the event that the bill of lading
is retained by the seller. Rather, it only gives the seller a better
right to the possession of the goods as against the mere
inchoate right of the buyer. Thus, Articles 1523 and 1503 find no
application here. The case before us does not involve an action
where the seller asserts ownership over the goods as against
the buyer. Instead, we are confronted with a complaint for sum
of money and damages filed by the seller against the buyer and
the common carrier due to the non-payment of the goods by the
buyer, and the release of the goods by the carrier despite non-
surrender of the bill of lading. A contract of sale is separate and
distinct from a contract of carriage. They involve different
parties, different rights, different obligations and liabilities. Thus,
we quote with approval the ruling of the CA, to wit:
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On the third assigned error, [w]e rule for the defendants-
appellants [ASTI and ACCLI]. They are correct in arguing
that the nature of their obligation with plaintiff [DBI] is
separate and distinct from the transaction of the latter
with defendant Ambiente. As carrier of the goods
transported by plaintiff, its obligation is simply to ensure
that such goods are delivered on time and in good
condition. In the case [Macam v. Court of Appeals], the
Supreme Court emphasized that "the extraordinary
responsibility of the common carriers lasts until actual or
constructive delivery of the cargoes to the consignee or to the
person who has the right to receive them." x x x
It is therefore clear that the moment the carrier has
delivered the subject goods, its responsibility ceases to
exist and it is thereby freed from all the liabilities arising
from the transaction. Any question regarding the payment
of the buyer to the seller is no longer the concern of the
carrier. This easily debunks plaintiffs theory of joint liability.70 x x
x (Emphasis supplied; citations omitted.)
The contract between DBI and ASTI is a contract of carriage of
goods; hence, ASTI's liability should be pursuant to that contract
and the law on transportation of goods. Not being a party to the
contract of sale between DBI and Ambiente, ASTI cannot be
held liable for the payment of the value of the goods sold. In this
regard, we cite Loadstar Shipping Company, Incorporated v.
Malayan Insurance Company, Incorporated,71 thus:
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Malayan opposed the petitioners' invocation of the Philex-
PASAR purchase agreement, stating that the contract involved
in this case is a contract of affreightment between the petitioners
and PASAR, not the agreement between Philex and PASAR,
which was a contract for the sale of copper concentrates.

On this score, the Court agrees with Malayan that contrary to

the trial court's disquisition, the petitioners cannot validly invoke
the penalty clause under the Philex-PASAR purchase
agreement, where penalties are to be imposed by the buyer
PASAR against the seller Philex if some elements exceeding the
agreed limitations are found on the copper concentrates upon
delivery. The petitioners are not privy to the contract of
sale of the copper concentrates. The contract between
PASAR and the petitioners is a contract of carriage of
goods and not a contract of sale. Therefore, the
petitioners and PASAR are bound by the laws on
transportation of goods and their contract of
affreightment. Since the Contract of Affreightment between the
petitioners and PASAR is silent as regards the computation of
damages, whereas the bill of lading presented before the trial
court is undecipherable, the New Civil Code and the Code of
Commerce shall govern the contract between the
parties.72 (Emphasis supplied; citations omitted.)
In view of the foregoing, we hold that under Bill of Lading No.
AC/MLLA601317 and the pertinent law and jurisprudence, ASTI
and ACCLI are not liable to DBI. We sustain the finding of the
CA that only Ambiente, as the buyer of the goods, has the
obligation to pay for the value of the shipment. However, in view
of our ruling in Nacar v. Gallery Frames,73 we modify the legal
rate of interest imposed by the CA. Instead of 12% per annum
from the finality of this judgment until its full satisfaction, the rate
of interest shall only be 6% per annum.chanrobleslaw
WHEREFORE, the petition is DENIED for lack of merit. The
August 16, 2007 Decision and the September 2, 2008
Resolution of the Court of Appeals in CA-G.R. CV No. 79790
are hereby AFFIRMEDwith the MODIFICATION that from the
finality of this decision until its full satisfaction, the applicable
rate of interest shall be 6% per annum.
G.R. No. 196444
DASMARIÑAS T. ARCAINA and MAGNANI T.
BANTA, Petitioners
vs.
NOEMI L. INGRAM, represented by MA. NENETTE L.
ARCHINUE, Respondent
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 assailing the October
26, 2010 Decision2 and March 1 7, 2011 Resolution3 of the Court
of Appeals (CA) in CA-G.R. SP No. 107997, which affirmed with
modification the March 11, 2009 Decision4 of the Regional Trial
Court-Branch 7 of Legazpi City (RTC). The RTC reversed the
July 31, 2008 Order5 of the 3rd Municipal Circuit Trial Court of
Sto. Domingo-Manito in Albay (MCTC). The MCTC dismissed
for insufficiency of evidence Civil Case No. S-241-a case for
recovery of ownership and title to real property, possession and
damages with preliminary injunction (recovery case)-filed by
respondent Noemi L. Ingram (Ingram) against petitioners
Dasmariñas T. Arcaina (Arcaina) and Magnani T. Banta (Banta)
[collectively, petitioners].
I

SO ORDERED. Arcaina is the owner of Lot No. 3230 (property) located at

Salvacion, Sto. Domingo, Albay. Sometime in 2004, her
attorney-in-fact, Banta, entered into a contract with Ingram for
the sale of the property. Banta showed Ingram and the latter’s
attorney-in-fact, respondent Ma. Nenette L. Archinue (Archinue),
the metes and bounds of the property and represented that Lot
No. 3230 has an area of more or less 6,200 aquare meters
(sq.m.) per the tax declaration covering it. The contract price
was ₱1,860,000.00, with Ingram making installment payments
for the property from May 5, 2004 to February 10, 2005 totaling
₱1,715,000.00.6 Banta and Ingram thereafter executed a
Memorandum of Agreement acknowledging the previous
payments and that Ingram still had an obligation to pay the
remaining balance in the amount of ₱145,000.00.7 They also
separately executed deeds of absolute sale over the property in
Ingram’s favor. Both deeds described the property to wit:
DESCRIPTION
A parcel of land Lot No. 3230, situated at Salvacion, Sto.
Domingo, Albay, Bounded on the NE-by Lot 3184 on the SE-by
Seashore on the SW-Lot No. 3914 and on the NW-by Road with
an area of SIX THOUSAND TWO HUNDRED (6,200) sq.
meters more or less.8
Subsequently, Ingram caused the property to be surveyed and
discovered that Lot No. 3230 has an area of 12,000 sq. m. Upon
learning of the actual area of the property, Banta allegedly
insisted that the difference of 5,800 sq. m. remains unsold. This
was opposed by Ingram who claims that she owns the whole lot
by virtue of the sale.9 Thus, Archinue, on behalf of Ingram,
instituted the recovery case, docketed as Civil Case No. S-241,
against petitioners before the MCTC.
In her Complaint, Ingram alleged that upon discovery of the
actual area of the property, Banta insisted on fencing the portion
which she claimed to be unsold. Ingram further maintained that
she is ready to pay the balance of ₱145,000.00 as soon as
petitioners recognize her ownership of the whole property. After
all, the sale contemplated the entire property as in fact the
boundaries of the lot were clearly stated in the deeds of
sale.10 Accordingly, Ingram prayed that the MCTC declare her
owner of the whole property and order petitioners to pay moral
damages, attorney's fees and litigation expenses. She also
asked the court to issue a writ of preliminary injunction to enjoin
the petitioners from undertaking acts of ownership over the
alleged unsold portion.11
In their Answer with Counterclaim, petitioners denied that the
sale contemplates the entire property and contended that the
parties agreed that only 6,200 sq. m. shall be sold at the rate of
₱300.00 per sq. m.12 This, according to petitioners, is consistent
with the contemporaneous acts of the parties: Ingram declared
only 6,200 sq. m. of the property for tax purposes, while Arcaina
declared the remaining portion under her name with no
objection from Ingram. Petitioners averred that since Ingram
failed to show that that she has a right over the unsold portion of
the property, the complaint for recovery of possession should be
dismissed.13 By way of counterclaim, petitioners asked for the
payment of the balance of ₱145,000.00, as well as attorney's
fees, litigation expenses, and costs of suit.14
Trial ensued. After Ingram presented her evidence, petitioners
filed a demurrer on the grounds that (1) Ingram failed to
sufficiently establish her claim and (2) her claim lacks basis in
fact and in law.15
In its Order dated July 31, 2008, the MCTC granted petitioners'
demurrer and counterclaim against Ingram, thus:
WHEREFORE, in view of the foregoing this instant case is
hereby ordered DISMISSED for insufficiency of evidence.
Plaintiffs are further ordered to pay to the Defendants the
remaining amount of ONE HUNDRED FORTY FIVE
THOUSAND (PhP 145,000.00) PESOS as counterclaim for
the remaining balance of the contract as admitted by the
Plaintiffs during the Pre-Trial.
SO ORDERED. 16
The MCTC held that the testimonies of Ingram and her
witnesses suffer from several inconsistencies and
improbabilities. For instance, while Archinue claimed that what
was sold was the entire property, she also admitted in her cross-
examination that she was not present when the sale was
consummated between Banta, Ingram and Ingram's husband
Jeffrey. Further, Archinue stated that she was made aware
before their ocular visit to the property that the lot being sold is
only 6,200 sq. m. based on the tax declaration covering
it.17 Ingram also had knowledge of the area of the property as
confirmed by her husband Jeffrey's testimony. Jeffrey also
testified that Banta gave them a copy of the tax declaration of
the property.18
The MCTC declared that the survey showed that the property
was 12,000 sq. m. or more than what was stated in the deeds of
sale.19 For Ingram to be awarded the excess 5,800 sq. m.
portion of the property, she should have presented evidence that
she paid for the surplus area consistent with Article 1540 of the
Civil Code which reads:
Art. 1540. If, in the case of the preceding article, there is a
greater area or number in the immovable than that stated in the
contract, the vendee may accept the area included in the
contract and reject the rest. If he accepts the whole area, he
must pay for the same at the contract rate.
Accordingly, since Ingram failed to show that she paid for the
value of the excess land area, the MCTC held that she cannot
claim ownership and possession of the whole property.
On appeal, the RTC reversed and set aside the Order of the
MCTC, to wit:
WHEREFORE, premises considered, the assailed Decision
dated July 31, 2008 by the Municipal [Circuit] Trial Court of Sto.
Domingo, Al bay is hereby REVERSED and SET ASIDE and a
new judgment is hereby rendered as follows:
1. Ordering plaintiff-appellant [referring to Ingram] to pay the
defendant-appellee [referring to Arcaina] the amount of
₱145,000.00 representing the remaining balance of the
purchase price of Lot 3230;
2. Declaring Noemi L. Ingram the owner of the whole Lot 3230;
3. Ordering defendants-appellees Dasmariñas T. Arcaina and
Magnani Banta or their agents to remove the fence constructed
by them on the said lot and to respect the peaceful possession
of Noemi Ingram over the same;
4. Ordering defendants-appellees Dasmariñas Arcaina and
Magnani Banta to pay jointly and severally the plaintiff-appellent
Noemi Ingram the amount of ₱5,000.00 as reasonable
attorney's fees; and
5. To pay the cost of suit.
SO ORDERED.20
The RTC found that neither of the parties presented competent
evidence to prove the property's actual area. Except for a
photocopy of the cadastral map purportedly showing the
graphical presentation of the property, no plan duly prepared
and approved by the proper government agency showing the
area of the lot was presented. Hence, the RTC concluded that
the area of Lot No. 3230 as shown by the boundaries indicated
in the deeds of sale is only 6,200 sq. m. more or less. Having
sold Lot No. 3230 to Ingram, Arcaina must vacate it. 21
In addition, the RTC held that Article 1542, which covers sale of
real estate in lump sum, applies in this case.
Having apparently sold the entire Lot No. 3230 for a lump sum,
Arcaina, as the vendor, is obligated to deliver all the land
included in the boundaries of the property, regardless of whether
the real area should be greater or smaller than what is recited in
the deeds of sale.22
In its Decision dated October 26, 2010, the CA affirmed the
RTC's ruling with modification. It deleted paragraphs 4 and 5 of
the dispositive portion of the RTC's Decision, which ordered
petitioners to pay ₱5,000.00 as attorney's fees and costs of suit,
respectively.23
The CA agreed with the RTC that other than the uniform
statements of the parties, no evidence was presented to show
that the property was found to have an actual area of more or
less 12,000 sq. m. It held that the parties' statements cannot be
simply admitted as true and correct because the area of the land
is a matter of public record and presumed to have been
recorded in the Registry of Deeds. The CA noted that the best
evidence should have been a certified true copy of the survey
plan duly approved by the proper government agency.24
The CA also agreed with the RTC that the sale was made for
a lump sum and not on a per-square-meter basis. The parties
merely agreed on the purchase price of ₱l,860,000.00 for the
6,200 sq. m. lot, with the deed of sale providing for the specific
boundaries of the property.25 Citing Rudolf Lietz, Inc. v. Court of
Appeals,26 the CA explained that in case of conflict between the
area and the boundaries of a land subject of the sale, the
vendor is obliged to deliver to the vendee everything within the
boundaries. This is in consonance with Article 1542 of the Civil
Code. Further, the CA found the area in excess "substantial"
which, to its mind, "should have not escaped the discerning eye
of an ordinary vendor of a piece of land."27 Thus, it held that the
RTC correctly ordered petitioners to deliver the entire property to
Ingram.
The CA, however, deleted the award of attorney's fees and the
costs of suit, stating that there was no basis in awarding them.
First, the RTC did not discuss the grounds for granting
attorney's fees in the body of its decision. Second, Arcaina
cannot be faulted for claiming and then fencing the excess area
of the land after the survey on her honest belief that the
ownership remained with her.28
Petitioners moved for reconsideration, raising for the first time
the issue of prescription. They pleaded that under Article
154329 of the Civil Code, Ingram should have filed the action
within six months from the delivery of the property. Counting
from Arcaina's execution of the notarized deed of absolute sale
on April 13, 2005, petitioners concluded that the filing of the
case only on January 25, 2006 is already time-barred. 30 The CA
denied petitioners' motion for reconsideration and ruled that
Article 1543 does not apply because Ingram had no intention of
rescinding the sale. In fact, she instituted the action to recover
the excess portion of the land that petitioners claimed to be
unsold. Thus, insofar as Ingram is concerned, that portion
remained undelivered.31
Petitioners now assail the CA' s declaration that the sale of the
property was made for a lump sum. They insist that they sold
the property on a per-square-meter basis, at the rate of ₱300.00
per sq. m. They further claim that they were aware that the
property contains more than 6,200 sq. m. According to
petitioners, this is the reason why the area sold is specifically
stated in the deeds of sale. Unfortunately, in the drafting of the
deeds, the word "portion" was omitted. They allege that
contemporaneously with the execution of the formal contract of
sale, they delivered the area sold and constructed a fence
delineating the unsold portion of the property.32 Ingram allegedly
recognized the demarcation because she introduced
improvements confined to the area delivered.33 Since the sale
was on a per-square-meter basis, petitioners argue that it is
Article 1539,34 and not Article 1542 of the Civil Code, which
governs.35
In her Comment, Ingram accuses petitioners of raising new and
irrelevant issues based on factual allegations which they cannot
in any case prove, as a consequence of their filing a demurrer to
evidence.36 She maintains that the only issue for resolution is
whether the sale was made on a lump sum or per-square-meter
basis. On this score, Ingram asserts that the parties intended
the sale of the entire lot, the boundaries of which were stated in
the deeds of sale. These deeds of sale, as observed by the CA,
did not contain any qualification.37
II
At the outset, we find that contrary to the findings of the RTC
and the CA, the result of the survey conducted on the property
is not a disputed fact. In their Answer to the Complaint,
petitioners admitted that when the property was surveyed, it
yielded an area of more or less 12,000 sq. m.38 Nevertheless,
petitioners now proffer that they agree with the CA that the final
survey of the property is not yet approved; hence, there can be
no valid verdict for the final adjudication of the parties' rights
under the contract of sale.39
We reject petitioners' contention on this point.
Judicial admissions made by the parties in the pleadings, or in
the course of the trial or other proceedings in the same case,
are conclusive and do not require further evidence to prove
them. These admissions cannot be contradicted unless
previously shown to have been made through palpable mistake
or that no such admission was made.40 Petitioners do not deny
their previous admission, much less allege that they had made a
palpable mistake. Thus, they are bound by it.
We now resolve the main issue in this case and hold that Lot
No. 3230 was sold for a lump sum. In sales involving real
estate, the parties may choose between two types of pricing
agreement: a unit price contract wherein the purchase price is
determined by way of reference to a stated rate per unit
area (e.g, ₱1,000.00 per sq. m.) or a lump sum contract which
states a full purchase price for an immovable the area of which
may be declared based on an estimate or where both the area
and boundaries are stated (e.g., ₱1 million for 1,000 sq.
m., etc.).41 Here, the Deed of Sale executed by Banta on March
21, 200542 and the Deed of Sale executed by Arcaina on April
13, 200543both show that the property was conveyed to Ingram
at the predetermined price of ₱1,860,000.00. There was no
indication that it was bought on a per-square-meter basis. Thus,
Article 1542 of the Civil Code governs the sale, viz.:
Art. 1542. In the sale of real estate, made for a lump sum and
not at the rate of a certain sum for a unit of measure or number,
there shall be no increase or decrease of the price, although
there be a greater or less area or number than that stated in the
contract.
The same rule shall be applied when two or more immovables
are sold for a single price; but if, besides mentioning the
boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract,
the vendor shall be bound to deliver all that is included within
said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he
shall suffer a reduction in the price, in proportion to what is
lacking in the area or number, unless the contract is rescinded
because the vendee does not accede to the failure to deliver
what has been stipulated.
The provision teaches that where both the area and the
boundaries of the immovable are declared in a sale of real
estate for a lump sum, the area covered within the boundaries of
the immovable prevails over the stated area.44 The vendor is
obliged to deliver all that is included within the boundaries
regardless of whether the actual area is more than what was
specified in the contract of sale; and he/she shall do so without
a corresponding increase in the contract price. This is
particularly true when the stated area is qualified to be
approximate only, such as when the words "more or less" were
used.45
The deeds of sale in this case provide both the boundaries and
the estimated area of the property. The land is bounded on the
North East by Lot No. 3184, on the South East by seashore, on
the South West by Lot No. 3914 and on the North West by a
road.46 It has an area of more or less 6,200 sq. m. The uniform
allegations of petitioners and Ingram, however, reveal that the
actual area within the boundaries of the property amounts to
more or less 12,000 sq. m., with a difference of 5,800 sq. m.
from what was stated in the deeds of sale. With Article 1542 in
mind, the RTC and the CA ordered petitioners to deliver the
excess area to Ingram.
They are mistaken.
In Del Prado v. Spouses Caballero,47 we were confronted with
facts analogous to the present petition. Pending the issuance of
the Original Certificate of Title (OCT) in their name, Spouses
Caballero sold a parcel of land to Del Prado. The contract of
sale stated both the property's boundaries and estimated area of
more or less 4,000 sq. m. Later, when the OCT was issued, the
technical description of the property appeared to be 14,457 sq.
m., more or less. Del Prado alleged that Spouses Caballero
were bound to deliver all that was included in the boundaries of
the land since the sale was made for a lump sum. Although, we
agreed with Del Prado that the sale partakes of the nature of a
lump sum contract, we did not apply Article 1542. In holding that
Del Prado is entitled only to the area stated in the contract of
sale, we explained:
The Court, however, clarified that the rule laid down in
Article 1542 is not hard and fast and admits of an
exception. It held:
"A caveat is in order, however. The use of "more or less" or
similar words in designating quantity covers only a
reasonable excess or deficiency. A vendee of land sold in
gross or with the description "more or less" with reference to its
area does not thereby ipso facto take all risk of quantity in the
land.
xxx
In the instant case, the deed of sale is not one of a unit price
contract. The parties agreed on the purchase price of
₱40,000.00 for a predetermined area of 4,000 sq m, more or
less, bounded on the North by Lot No. 11903, on the East by Lot
No. 11908, on the South by Lot Nos. 11858 & 11912, and on the
West by Lot No. 11910. In a contract of sale of land in a mass,
the specific boundaries stated in the contract must control over
any other statement, with respect to the area contained within its
boundaries.
Black's Law Dictionary defines the phrase "more or less"
to mean:
"About; substantially; or approximately; implying that both
parties assume the risk of any ordinary discrepancy. The words
are intended to cover slight or unimportant
inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57
S.W.2d 408; and are ordinarily to be interpreted as taking
care of unsubstantial differences or differences of small
importance compared to the whole number of items
transferred."
Clearly, the discrepancy of 10,475 sq m cannot be
considered a slight difference in quantity. The difference
in the area is obviously sizeable and too substantial to be
overlooked. It is not a reasonable excess or deficiency
that should be deemed included in the deed of
sale. 48(Emphasis supplied; citations omitted.)
In a lump sum contract, a vendor is generally obligated to
deliver all the land covered within the boundaries, regardless of
whether the real area should be greater or smaller than that
recited in the deed.49 However, in case there is conflict between
the area actually covered by the boundaries and the estimated
area stated in the contract of sale, he/she shall do so only when
the excess or deficiency between the former and the latter
is reasonable. 50
Applying Del Prado to the case before us, we find that the
difference of 5,800 sq. m. is too substantial to be considered
reasonable. We note that only 6,200 sq. m. was agreed upon
between petitioners and Ingram. Declaring Ingram as the owner
of the whole 12,000 sq. m. on the premise that this is the actual
area included in the boundaries would be ordering the delivery
of almost twice the area stated in the deeds of sale. Surely,
Article 1542 does not contemplate such an unfair situation to
befall a vendor-that he/she would be compelled to deliver
double the amount that he/she originally sold without a
corresponding increase in price. In Asiain v. Jalandoni,51 we
explained that "[a] vendee of a land when it is sold in gross or
with the description 'more or less' does not thereby ipso
facto take all risk of quantity in the land. The use of 'more or
less' or similar words in designating quantity covers only a
reasonable excess or deficiency."52 Therefore, we rule that
Ingram is entitled only to 6,200 sq. m. of the property. An area of
5,800 sq. m. more than the area intended to be sold is not a
reasonable excess that can be deemed included in the sale. 53
Further, at the time of the sale, Ingram and petitioners did not
have knowledge of the actual area of the land within the
boundaries of the property. It is undisputed that before the
survey, the parties relied on the tax declaration covering the lot,
which merely stated that it measures more or less 6,200 sq. m.
Thus, when petitioners offered the property for sale and when
Ingram accepted the offer, the object of their consent or meeting
of the minds is only a 6,200 sq. m. property. The deeds of sale
merely put into writing what was agreed upon by the parties. In
this regard, we quote with approval the ruling of the MCTC:
In this case, the Deed of Absolute Sale (Exhibit "M") dated April
13, 2005 is clear and unequivocal as to the area sold being up
to only 6,200 square meters.1âwphi1 The agreement of the
parties were clear and unambiguous, hence, the inconsistent
and impossible testimonies of N[e]nette [Archinue] and the
Spouses Ingram. No amount of extrinsic aids are required and
no further extraneous sources are necessary in order to
ascertain the parties' intent, determinable as it is, from the
document itself. The court is thus convinced that the deed
expresses truly the parties' intent as against the oral testimonies
of Nenette, and the Spouses Ingram.54
The contract of sale is the law between Ingram and petitioners;
it must be complied with in good faith. Petitioners have already
performed their obligation by delivering the 6,200 sq. m.
property. Since Ingram has yet to fulfill her end of the
bargain,55 she must pay petitioners the remaining balance of the
contract price amounting to ₱145,000.00.
WHEREFORE, premises considered, the petition
is GRANTED. The October 26, 2010 Decision and March 1 7,
2011 Resolution of the Court of Appeals in CA-G.R. SP No.
107997 are hereby REVERSED and SET ASIDE. The July
31, 2008 Order of the 3rd Municipal Circuit Trial Court of Sto.
Domingo-Manito, dismissing Civil Case No. S-241 for
insufficiency of evidence, and ordering Ingram to pay
₱145,000.00 to petitioners, is
hereby REINSTATED with MODIFICATION.

Ingram is ordered to pay petitioners the amount of ₱145,000.00

to earn interest at the rate of six percent (6%) per annum from
July 31, 200856 until the finality of this Decision. Thereafter, the
total amount due shall earn legal interest at the rate of 6% per
annum57 until fully paid.

SO ORDERED.