SALES Cases

By Dennis Aran T. Abril, JD-2 USC Law

CHAPTER 4: OBLIGATIONS OF THE VENDOR

had legal interest in the subject matter under litigation because on 3 May 1989,
the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold
to it in a Deed of Absolute Sale with Mortgage. 7 It alleged that it was a buyer in
good faith and for value and therefore it had a better right over the property in
litigation.

Kinds of Delivery
San Lorenzo Devt Corp. v. CA
From a coaptation of the records of this case, it appears that respondents Miguel
Lu and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of
land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T39023 both measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen
pesos (P15.00) per square meter. Babasanta made a downpayment of fifty
thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by
Pacita Lu of the same date. Several other payments totaling two hundred
thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the
execution of a final deed of sale in his favor so that he could effect full payment of
the purchase price. In the same letter, Babasanta notified the spouses about
having received information that the spouses sold the same property to another
without his knowledge and consent. He demanded that the second sale be
cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged
having agreed to sell the property to him at fifteen pesos (P15.00) per square
meter. She, however, reminded Babasanta that when the balance of the
purchase price became due, he requested for a reduction of the price and when
she refused, Babasanta backed out of the sale. Pacita added that she returned
the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio
Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional
Trial Court (RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific
Performance and Damages1 against his co-respondents herein, the Spouses Lu.
Babasanta alleged that the lands covered by TCT No. T- 39022 and T-39023 had
been sold to him by the spouses at fifteen pesos (P15.00) per square meter.
Despite his repeated demands for the execution of a final deed of sale in his
favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from
Babasanta and when the total advances of Pacita reached fifty thousand pesos
(P50,000.00), the latter and Babasanta, without the knowledge and consent of
Miguel Lu, had verbally agreed to transform the transaction into a contract to sell
the two parcels of land to Babasanta with the fifty thousand pesos (P50,000.00)
to be considered as the downpayment for the property and the balance to be
paid on or before 31 December 1987. Respondents Lu added that as of
November 1987, total payments made by Babasanta amounted to only two
hundred thousand pesos (P200,000.00) and the latter allegedly failed to pay the
balance of two hundred sixty thousand pesos (P260,000.00) despite repeated
demands. Babasanta had purportedly asked Pacita for a reduction of the price
from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when
the Spouses Lu refused to grant Babasantas request, the latter rescinded the
contract to sell and declared that the original loan transaction just be carried out
in that the spouses would be indebted to him in the amount of two hundred
thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they purchased
Interbank Managers Check No. 05020269 in the amount of two hundred
thousand pesos (P200,000.00) in the name of Babasanta to show that she was
able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he
prayed for the issuance of a writ of preliminary injunction with temporary
restraining order and the inclusion of the Register of Deeds of Calamba, Laguna
as party defendant. He contended that the issuance of a preliminary injunction
was necessary to restrain the transfer or conveyance by the Spouses Lu of the
subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint contending that
it raised new matters which seriously affect their substantive rights under the
original complaint. However, the trial court in its Order dated 17 January
19905 admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation
(SLDC) filed a Motion for Intervention6 before the trial court. SLDC alleged that it

In his Opposition to SLDCs motion for intervention,8 respondent Babasanta

demurred and argued that the latter had no legal interest in the case because the
two parcels of land involved herein had already been conveyed to him by the
Spouses Lu and hence, the vendors were without legal capacity to transfer or
dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to
intervene. SLDC filed its Complaint-in-Intervention on 19 April 1990.9 Respondent
Babasantas motion for the issuance of a preliminary injunction was likewise
granted by the trial court in its Order dated 11 January 199110 conditioned upon
his filing of a bond in the amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the
Spouses Lu executed in its favor anOption to Buy the lots subject of the
complaint. Accordingly, it paid an option money in the amount of three hundred
sixteen thousand one hundred sixty pesos (P316,160.00) out of the total
consideration for the purchase of the two lots of one million two hundred sixtyfour thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu
received a total amount of six hundred thirty-two thousand three hundred twenty
pesos (P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with
Mortgage in its favor. SLDC added that the certificates of title over the property
were delivered to it by the spouses clean and free from any adverse claims
and/or notice of lis pendens. SLDC further alleged that it only learned of the filing
of the complaint sometime in the early part of January 1990 which prompted it to
file the motion to intervene without delay. Claiming that it was a buyer in good
faith, SLDC argued that it had no obligation to look beyond the titles submitted to
it by the Spouses Lu particularly because Babasantas claims were not annotated
on the certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding
the sale of the property to SLDC. It ordered the Spouses Lu to pay Babasanta
the sum of two hundred thousand pesos (P200,000.00) with legal interest plus
the further sum of fifty thousand pesos (P50,000.00) as and for attorneys fees.
On the complaint-in-intervention, the trial court ordered the Register of Deeds of
Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the
original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both
Babasanta and SLDC did not register the respective sales in their favor,
ownership of the property should pertain to the buyer who first acquired
possession of the property. The trial court equated the execution of a public
instrument in favor of SLDC as sufficient delivery of the property to the latter. It
concluded that symbolic possession could be considered to have been first
transferred to SLDC and consequently ownership of the property pertained to
SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals
alleging in the main that the trial court erred in concluding that SLDC is a
purchaser in good faith and in upholding the validity of the sale made by the
Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They
contended that the trial court erred in failing to consider that the contract to sell
between them and Babasanta had been novated when the latter abandoned the
verbal contract of sale and declared that the original loan transaction just be
carried out. The Spouses Lu argued that since the properties involved were
conjugal, the trial court should have declared the verbal contract to sell between
Pacita Lu and Pablo Babasanta null and void ab initio for lack of knowledge and
consent of Miguel Lu. They further averred that the trial court erred in not
dismissing the complaint filed by Babasanta; in awarding damages in his favor
and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside
the judgment of the trial court. It declared that the sale between Babasanta and
the Spouses Lu was valid and subsisting and ordered the spouses to execute the
necessary deed of conveyance in favor of Babasanta, and the latter to pay the
balance of the purchase price in the amount of two hundred sixty thousand pesos
(P260,000.00). The appellate court ruled that the Absolute Deed of Sale with
Mortgage in favor of SLDC was null and void on the ground that SLDC was a
purchaser in bad faith. The Spouses Lu were further ordered to return all
payments made by SLDC with legal interest and to pay attorneys fees to
Babasanta.

SLDC and the Spouses Lu filed separate motions for reconsideration with the
appellate court.12 However, in aManifestation dated 20 December 1995,13 the
Spouses Lu informed the appellate court that they are no longer contesting the
decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as
withdrawn the motion for reconsideration filed by the Spouses Lu in view of their
manifestation of 20 December 1995. The appellate court denied SLDCs motion
for reconsideration on the ground that no new or substantial arguments were
raised therein which would warrant modification or reversal of the courts decision
dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS
NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA
ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN
LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE
PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT
BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY
WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE
PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS
PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT
THAT RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE
SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR
INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING
ITS FULL CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL
COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL
COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST
POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that it had prior
notice of Babasantas claim over the property merely on the basis of its having
advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita
Lu upon the latters representation that she needed the money to pay her
obligation to Babasanta. It argued that it had no reason to suspect that Pacita
was not telling the truth that the money would be used to pay her indebtedness to
Babasanta. At any rate, SLDC averred that the amount of two hundred thousand
pesos (P200,000.00) which it advanced to Pacita Lu would be deducted from the
balance of the purchase price still due from it and should not be construed as
notice of the prior sale of the land to Babasanta. It added that at no instance did
Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it
immediately took possession of the property and asserted its rights as new
owner as opposed to Babasanta who has never exercised acts of ownership.
Since the titles bore no adverse claim, encumbrance, or lien at the time it was
sold to it, SLDC argued that it had every reason to rely on the correctness of the
certificate of title and it was not obliged to go beyond the certificate to determine
the condition of the property. Invoking the presumption of good faith, it added that
the burden rests on Babasanta to prove that it was aware of the prior sale to him
but the latter failed to do so. SLDC pointed out that the notice of lis pendens was
annotated only on 2 June 1989 long after the sale of the property to it was
consummated on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the
Spouses Lu informed the Court that due to financial constraints they have no
more interest to pursue their rights in the instant case and submit themselves to
the decision of the Court of Appeals.16
On the other hand, respondent Babasanta argued that SLDC could not have
acquired ownership of the property because it failed to comply with the
requirement of registration of the sale in good faith. He emphasized that at the
time SLDC registered the sale in its favor on 30 June 1990, there was already a
notice of lis pendens annotated on the titles of the property made as early as 2
June 1989. Hence, petitioners registration of the sale did not confer upon it any
right. Babasanta further asserted that petitioners bad faith in the acquisition of

the property is evident from the fact that it failed to make necessary inquiry
regarding the purpose of the issuance of the two hundred thousand pesos
(P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between
SLDC and Babasanta has a better right over the two parcels of land subject of
the instant case in view of the successive transactions executed by the Spouses
Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a
document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand
pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot situated at
Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna. 17 While the receipt signed by
Pacita did not mention the price for which the property was being sold, this
deficiency was supplied by Pacita Lus letter dated 29 May 1989 18 wherein she
admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen
pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented
by the parties, irresistibly leads to the conclusion that the agreement between
Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,19 which is manifested by
the meeting of the offer and the acceptance upon the thing which are to
constitute the contract. The offer must be certain and the acceptance
absolute.20 Moreover, contracts shall be obligatory in whatever form they may
have been entered into, provided all the essential requisites for their validity are
present.21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares
of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the
seller reserves the ownership of the property until full payment of the price which
is a distinguishing feature of a contract to sell, the subsequent acts of the parties
convince us that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that
despite his repeated requests for the execution of the final deed of sale in his
favor so that he could effect full payment of the price, Pacita Lu allegedly refused
to do so. In effect, Babasanta himself recognized that ownership of the property
would not be transferred to him until such time as he shall have effected full
payment of the price. Moreover, had the sellers intended to transfer title, they
could have easily executed the document of sale in its required form
simultaneously with their acceptance of the partial payment, but they did not.
Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a
perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane.
In a contract of sale, title passes to the vendee upon the delivery of the thing
sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price. 22 In a contract of
sale, the vendor has lost and cannot recover ownership until and unless the
contract is resolved or rescinded; whereas in a contract to sell, title is retained by
the vendor until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective. 23
The perfected contract to sell imposed upon Babasanta the obligation to pay the
balance of the purchase price. There being an obligation to pay the price,
Babasanta should have made the proper tender of payment and consignation of
the price in court as required by law. Mere sending of a letter by the vendee
expressing the intention to pay without the accompanying payment is not
considered a valid tender of payment.24 Consignation of the amounts due in court
is essential in order to extinguish Babasantas obligation to pay the balance of
the purchase price. Glaringly absent from the records is any indication that
Babasanta even attempted to make the proper consignation of the amounts due,
thus, the obligation on the part of the sellers to convey title never acquired
obligatory force.
On the assumption that the transaction between the parties is a contract of sale
and not a contract to sell, Babasantas claim of ownership should nevertheless
fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that
moment, the parties may reciprocally demand performance.26 The essential
elements of a contract of sale, to wit: (1) consent or meeting of the minds, that is,

to transfer ownership in exchange for the price; (2) object certain which is the
subject matter of the contract; (3) cause of the obligation which is established. 27
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should
be noted that sale is not a mode, but merely a title. A mode is the legal means by
which dominion or ownership is created, transferred or destroyed, but title is only
the legal basis by which to affect dominion or ownership. 28 Under Article 712 of
the Civil Code, "ownership and other real rights over property are acquired and
transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition." Contracts only constitute titles or
rights to the transfer or acquisition of ownership, while delivery or tradition is the
mode of accomplishing the same.29 Therefore, sale by itself does not transfer or
affect ownership; the most that sale does is to create the obligation to transfer
ownership. It is tradition or delivery, as a consequence of sale, that actually
transfers ownership.
Explicitly, the law provides 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
Article 1497 to 1501.30 The word "delivered" should not be taken restrictively to
mean transfer of actual physical possession of the property. The law recognizes
two principal modes of delivery, to wit: (1) actual delivery; and (2) legal or
constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of
the vendee.31 Legal or constructive delivery, on the other hand, may be had
through any of the following ways: the execution of a public instrument
evidencing the sale;32 symbolical tradition such as the delivery of the keys of the
place where the movable sold is being kept;33 traditio longa manu or by mere
consent or agreement if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale;34 traditio brevi manu if the buyer
already had possession of the object even before the sale; 35 and traditio
constitutum possessorium, where the seller remains in possession of the
property in a different capacity.36
Following the above disquisition, respondent Babasanta did not acquire
ownership by the mere execution of the receipt by Pacita Lu acknowledging
receipt of partial payment for the property. For one, the agreement between
Babasanta and the Spouses Lu, though valid, was not embodied in a public
instrument. Hence, no constructive delivery of the lands could have been
effected. For another, Babasanta had not taken possession of the property at any
time after the perfection of the sale in his favor or exercised acts of dominion
over it despite his assertions that he was the rightful owner of the lands. Simply
stated, there was no delivery to Babasanta, whether actual or constructive, which
is essential to transfer ownership of the property. Thus, even on the assumption
that the perfected contract between the parties was a sale, ownership could not
have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold. 37
However, it must be stressed that the juridical relationship between the parties in
a double sale is primarily governed by Article 1544 which lays down the rules of
preference between the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains
greater significance in case of double sale of immovable property. When the thing
sold twice is an immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed the
owner.38 Verily, the act of registration must be coupled with good faith that is,
the registrant must have no knowledge of the defect or lack of title of his vendor
or must not have been aware of facts which should have put him upon such
inquiry and investigation as might be necessary to acquaint him with the defects
in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had
acquired knowledge of Babasantas claim. Babasanta, however, strongly argues
that the registration of the sale by SLDC was not sufficient to confer upon the

latter any title to the property since the registration was attended by bad faith.
Specifically, he points out that at the time SLDC registered the sale on 30 June
1990, there was already a notice of lis pendens on the file with the Register of
Deeds, the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis
pendens obliterate the effects of delivery and possession in good faith which
admittedly had occurred prior to SLDCs knowledge of the transaction in favor of
Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed
the Option to Buy in favor of SLDC upon receiving P316,160.00 as option money
from SLDC. After SLDC had paid more than one half of the agreed purchase
price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989
a Deed of Absolute Sale in favor or SLDC. At the time both deeds were executed,
SLDC had no knowledge of the prior transaction of the Spouses Lu with
Babasanta. Simply stated, from the time of execution of the first deed up to the
moment of transfer and delivery of possession of the lands to SLDC, it had acted
in good faith and the subsequent annotation of lis pendens has no effect at all on
the consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that
some other person has a right to, or interest in, such property and pays a full and
fair price for the same at the time of such purchase, or beforehe has notice of the
claim or interest of some other person in the property.40 Following the foregoing
definition, we rule that SLDC qualifies as a buyer in good faith since there is no
evidence extant in the records that it had knowledge of the prior transaction in
favor of Babasanta. At the time of the sale of the property to SLDC, the vendors
were still the registered owners of the property and were in fact in possession of
the lands.l^vvphi1.net Time and again, this Court has ruled that a person dealing
with the owner of registered land is not bound to go beyond the certificate of title
as he is charged with notice of burdens on the property which are noted on the
face of the register or on the certificate of title. 41 In assailing knowledge of the
transaction between him and the Spouses Lu, Babasanta apparently relies on
the principle of constructive notice incorporated in Section 52 of the Property
Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage,
lease, lien, attachment, order, judgment, instrument or entry affecting registered
land shall, if registered, filed, or entered in the office of the Register of Deeds for
the province or city where the land to which it relates lies, be constructive notice
to all persons from the time of such registering, filing, or entering.
However, the constructive notice operates as suchby the express wording of
Section 52from the time of the registration of the notice of lis pendens which in
this case was effected only on 2 June 1989, at which time the sale in favor of
SLDC had long been consummated insofar as the obligation of the Spouses Lu
to transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of
Babasanta the annotation of the notice of lis pendens cannot help Babasantas
position a bit and it is irrelevant to the good or bad faith characterization of SLDC
as a purchaser. A notice of lis pendens, as the Court held in Natao v.
Esteban,42serves as a warning to a prospective purchaser or incumbrancer that
the particular property is in litigation; and that he should keep his hands off the
same, unless he intends to gamble on the results of the litigation." Precisely, in
this case SLDC has intervened in the pending litigation to protect its rights.
Obviously, SLDCs faith in the merit of its cause has been vindicated with the
Courts present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital 43 of SLDCs averment in its Complaint-inIntervention44 that at the instance of Pacita Lu it issued a check for P200,000.00
payable to Babasanta and the confirmatory testimony of Pacita Lu herself on
cross-examination.45 However, there is nothing in the said pleading and the
testimony which explicitly relates the amount to the transaction between the
Spouses Lu and Babasanta for what they attest to is that the amount was
supposed to pay off the advances made by Babasanta to Pacita Lu. In any event,
the incident took place after the Spouses Lu had already executed the Deed of
Absolute Sale with Mortgage in favor of SLDC and therefore, as previously
explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been
tainted by the prior notice of lis pendens and assuming further for the same
nonce that this is a case of double sale, still Babasantas claim could not prevail
over that of SLDCs. In Abarquez v. Court of Appeals,46 this Court had the

occasion to rule that if a vendee in a double sale registers the sale after he has
acquired knowledge of a previous sale, the registration constitutes a registration
in bad faith and does not confer upon him any right. If the registration is done in
bad faith, it is as if there is no registration at all, and the buyer who has taken
possession first of the property in good faith shall be preferred.

Petitioner argued that upon the execution of the deed of sale it had
complied with its obligation to deliver the object of the sale since there was no
stipulation to the contrary. It further argued that being a sale on an as-is-whereis basis, it was the duty of respondent to take possession of the property.
Petitioner claimed that there was already a constructive delivery of the machinery
and equipment.

In Abarquez, the first sale to the spouses Israel was notarized and registered
only after the second vendee, Abarquez, registered their deed of sale with the
Registry of Deeds, but the Israels were first in possession. This Court awarded
the property to the Israels because registration of the property by Abarquez
lacked the element of good faith. While the facts in the instant case substantially
differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the
basis of its prior possession of the property in good faith. Be it noted that delivery
of the property to SLDC was immediately effected after the execution of the deed
in its favor, at which time SLDC had no knowledge at all of the prior transaction
by the Spouses Lu in favor of Babasanta.1a\^/phi1.net

The RTC ruled that the execution of the deed of absolute sale did not
result in constructive delivery of the machinery and equipment. It found that at
the time of the sale, petitioner did not have control over the machinery and
equipment and, thus, could not have transferred ownership by constructive
delivery. The RTC ruled that petitioner is liable for breach of contract and should
pay for the actual damages suffered by respondent.

The law speaks not only of one criterion. The first criterion is priority of entry in
the registry of property; there being no priority of such entry, the second is priority
of possession; and, in the absence of the two priorities, the third priority is of the
date of title, with good faith as the common critical element. Since SLDC
acquired possession of the property in good faith in contrast to Babasanta, who
neither registered nor possessed the property at any time, SLDCs right is
definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely
academic for as earlier stated in this decision, the contract between Babasanta
and the Spouses Lu is not a contract of sale but merely a contract to sell.
In Dichoso v. Roxas,47 we had the occasion to rule that Article 1544 does not
apply to a case where there was a sale to one party of the land itself while the
other contract was a mere promise to sell the land or at most an actual
assignment of the right to repurchase the same land. Accordingly, there was no
double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the
Court of Appeals appealed from is REVERSED and SET ASIDE and the decision
of the Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED.
No costs.
SO ORDERED.

On petitioners appeal, the Court of Appeals affirmed in toto the

decision of the RTC.
Hence this petition.
Before this Court, petitioner raises issues by attributing the following
errors to the Court of Appeals, to wit:
I.
The Court of Appeals erred in not finding that
petitioner had complied with its obligation to
make delivery of the properties subject of the
contract of sale.
II.
The Court of Appeals erred in not considering
that the sale was on an as-is-where-is basis
wherein the properties were sold in the
condition and in the place where they were
located.
III.
The Court of Appeals erred in not considering
that respondents acceptance of petitioners
disclaimer of warranty forecloses respondents
legal basis to enforce any right arising from
the contract.
IV.

When execution of public document not equivalent to delivery

Asset Privatization Trust v. TJ Enterprises
This is a Rule 45 petition [1] which seeks the reversal of the Court of
Appeals decision[2] and resolution[3] affirming the RTCs decision[4] holding
petitioner liable for actual damages for breach of contract.
Petitioner Asset Privatization Trust[5] (petitioner) was a government
entity created for the purpose to conserve, to provisionally manage and to
dispose assets of government institutions. [6] Petitioner had acquired from the
Development Bank of the Philippines (DBP) assets consisting of machinery and
refrigeration
equipment
which
were
then
stored
atGolden City compound, Pasay City. The compound was then leased to and in
the physical possession of Creative Lines, Inc., (Creative Lines). These assets
were being sold on an as-is-where-is basis.
On 7 November 1990, petitioner and respondent entered into an
absolute deed of sale over certain machinery and refrigeration equipment
identified as Lots Nos. 2, 3 and 5. Respondent paid the full amount
of P84,000.00 as evidenced by petitioners Receipt No. 12844. After two (2)
days, respondent demanded the delivery of the machinery it had purchased.
Sometime in March 1991, petitioner issued Gate Pass No. 4955. Respondent
was able to pull out from the compound the properties designated as Lots Nos. 3
and 5. However, during the hauling of Lot No. 2 consisting of sixteen (16) items,
only nine (9) items were pulled out by respondent. The seven (7) items that were
left behind consisted of the following: (1) one (1) Reefer Unit 1; (2) one (1) Reefer
Unit 2; (3) one (1) Reefer Unit 3; (4) one (1) unit blast freezer with all
accessories; (5) one (1) unit chest freezer; (6) one (1) unit room air-conditioner;
and (7) one (1) unit air compressor. Creative Lines employees prevented
respondent from hauling the remaining machinery and equipment.
Respondent filed a complaint for specific performance and damages
against petitioner and Creative Lines. [7] During the pendency of the case,
respondent was able to pull out the remaining machinery and equipment.
However, upon inspection it was discovered that the machinery and equipment
were damaged and had missing parts.

The reason for the failure to make actual

delivery of the properties was not attributable
to the fault and was beyond the control of
petitioner. The claim for damages against
petitioner is therefore bereft of legal basis.[8]

The first issue hinges on the determination of whether there was a

constructive delivery of the machinery and equipment upon the execution of the
deed of absolute sale between petitioner and respondent.
The ownership of a thing sold shall be transferred to the vendee upon
the actual or constructive delivery thereof. [9] The thing sold shall be understood
as delivered when it is placed in the control and possession of the vendee. [10]
As a general rule, 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. And with regard to movable property, its delivery may also be
made by the delivery of the keys of the place or depository where it is stored or
kept.[11] In order for the execution of a public instrument to effect tradition, the
purchaser must be placed in control of the thing sold. [12]
However, the execution of a public instrument only gives rise to
a prima facie presumption of delivery. Such presumption is destroyed when the
delivery is not effected because of a legal impediment. [13] It is necessary that the
vendor shall have control over the thing sold that, at the moment of sale, its
material delivery could have been made.[14]Thus, 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.[15]
In this case, there was no constructive delivery of the machinery and
equipment upon the execution of the deed of absolute sale or upon the issuance
of the gate pass since it was not petitioner but Creative Lines which had actual
possession of the property. The presumption of constructive delivery is not
applicable as it has to yield to the reality that the purchaser was not placed in
possession and control of the property.

On the second issue, petitioner posits that the sale being in an as-iswhere-is basis, respondent agreed to take possession of the things sold in the
condition where they are found and from the place where they are located. The
phrase as-is where-is basis pertains solely to the physical condition of the thing
sold, not to its legal situation. [16] It is merely descriptive of the state of the thing
sold. Thus, the as-is where-is basis merely describes the actual state and
location of the machinery and equipment sold by petitioner to respondent. The
depiction does not alter petitioners responsibility to deliver the property to
respondent.
Anent the third issue, petitioner maintains that the presence of the
disclaimer of warranty in the deed of absolute sale absolves it from all warranties,
implied or otherwise. The position is untenable.
The vendor is bound to transfer the ownership of and deliver, as well
as warrant the thing which is the object of the sale. [17] Ownership of the thing sold
is acquired by the vendee from the moment it its delivered to him in any of the
ways specified in articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee. [18] A
perusal of the deed of absolute sale shows that both the vendor and the vendee
represented and warranted to each other that each had all the requisite power
and authority to enter into the deed of absolute sale and that they shall
perform each of their respective obligations under the deed of absolute in
accordance with the terms thereof.[19] As previously shown, there was no actual
or constructive delivery of the things sold. Thus, petitioner has not performed its
obligation to transfer ownership and possession of the things sold to respondent.
As to the last issue, petitioner claims that its failure to make actual
delivery was beyond its control. It posits that the refusal of Creative Lines to allow
the hauling of the machinery and equipment was unforeseen and constituted a
fortuitous event.
The matter of fortuitous events is governed by Art. 1174 of the Civil
Code which provides that except in cases expressly specified by the law, or when
it is otherwise declared by stipulation, or when the nature of the obligation
requires assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which though foreseen, were inevitable. The
elements of a fortuitous event are: (a) the cause of the unforeseen and
unexpected occurrence, must have been independent of human will; (b) the
event that constituted the caso fortuito must have been impossible to foresee or,
if foreseeable, impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a normal manner,
and; (d) the obligor must have been free from any participation in the aggravation
of the resulting injury to the creditor.[20]
A fortuitous event may either be an act of God, or natural occurrences
such as floods or typhoons, or an act of man such as riots, strikes or wars.
[21]
However, when the loss is found to be partly the result of a persons
participationwhether by active intervention, neglect or failure to actthe whole
occurrence is humanized and removed from the rules applicable to a fortuitous
event.[22]
We quote with approval the following findings of the Court of Appeals,
to wit:
We find that Creative Lines refusal to
surrender the property to the vendee does not
constitute force majeure which exculpates APT from the
payment of damages. This event cannot be considered
unavoidable or unforeseen. APT knew for a fact that the
properties to be sold were housed in the premises leased
by Creative Lines. It should have made arrangements
with Creative Lines beforehand for the smooth and
orderly removal of the equipment. The principle embodied
in the act of God doctrine strictly requires that the act
must be one occasioned exclusively by the violence of
nature and all human agencies are to be excluded from
creating or entering into the cause of the mischief. When
the effect, the cause of which is to be considered, is found
to be in part the result of the participation of man, whether
it be from active intervention or neglect, or failure to act,
the whole occurrence is thereby humanized, as it were,
and removed from the rules applicable to the acts of God.
[23]

Moreover, Art. 1504 of the Civil Code provides that where actual
delivery has been delayed through the fault of either the buyer or seller the goods
are at the risk of the party in fault. The risk of loss or deterioration of the goods
sold does not pass to the buyer until there is actual or constructive delivery
thereof. As previously discussed, there was no actual or constructive delivery of
the machinery and equipment. Thus, the risk of loss or deterioration of property is
borne by petitioner. Thus, it should be liable for the damages that may arise from
the delay.
Assuming arguendo that Creative Lines refusal to allow the hauling
of the machinery and equipment is a fortuitous event, petitioner will still be liable
for damages. This Court agrees with the appellate courts findings on the matter
of damages, thus:

Article 1170 of the Civil Code states: Those

who in the performance of their obligations are guilty of
fraud, negligence, or delay and those who in any manner
contravene the tenor thereof are liable for damages. In
contracts and quasi-contracts, the damages for which the
obligor who acted in good faith is liable shall be those that
are the natural and probable consequences of the breach
of the obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the obligation
was constituted.[24] The trial court correctly awarded actual
damages as pleaded and proven during trial.[25]

WHEREFORE, the Court AFFIRMS in toto the Decision of the Court

of Appeals dated 31 August 2004. Cost against petitioner.
SO ORDERED.
Rule in Sale of Registered Land (Sec. 51, PD 1529)
Heirs of Mascunana v. CA
This is a petition for review on certiorari of the Decision1 of the Court of Appeals
(CA) in CA-G.R. CV No. 53117 affirming the Decision 2 of the Regional Trial Court
(RTC) of San Carlos City, Negros Occidental, which ordered the dismissal of the
petitioners complaint for recovery of possession and damages.
The Antecedents
Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of
land identified as Lot No. 124 of the San Carlos City, Negros Occidental
Cadastre, with an area of 1,729 square meters and covered by Transfer
Certificate of Title (TCT) No. 1453-R (T-29937)-38.3 Over time, Gertrudis and two
other co-owners sold each of their one-seventh (1/7) shares, or a total area of
741 square meters, to Jesus Mascuana. The latter then sold a portion of his
140-square-meter undivided share of the property to Diosdado Sumilhig.
Mascuana later sold an additional 160-square-meter portion to Sumilhig on April
7, 1961. However, the parties agreed to revoke the said deed of sale and, in lieu
thereof, executed a Deed of Absolute Sale on August 12, 1961. In the said deed,
Mascuana, as vendor, sold an undivided 469-square-meter portion of the
property for P4,690.00, with P3,690.00 as down payment, and under the
following terms of payment:
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the
VENDEE unto the VENDOR as soon as the above-portions of Lot 124 shall have
been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the
VENDEE shall have been prepared. 4
On December 31, 1961, Mascuana and Jose G. Estabillo executed a Deed of
Exchange and Absolute Sale of Real Estate,5 in which Estabillo deeded to
Mascuana a portion of his property abutting that of Sumilhig on the southeast.
In the meantime, a survey was conducted for the co-owners of Lot No. 124 on
July 9, 1962. The subdivision plan of the said lot was approved by the Director of
Lands on August 2, 1962. The portion of the property deeded to Sumilhig was
identified in the said plan as Lot No. 124-B. 6
Meanwhile, Mascuana died intestate on April 20, 1965 and was survived by his
heirs, Eva M. Ellisin, Renee Hewlett, Carmen Vda. de Opea, Marilou Dy and
Jose Ma. R. Mascuana.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property 7 on a
portion of Lot No. 124-B with an area of 469 square meters and the
improvements thereon, in favor of Corazon Layumas, the wife of Judge Rodolfo
Layumas, for the price of P11,000.00. The spouses Layumas then had the
property subdivided into two lots: Lot No. 124-B-2 with an area of 71 square
meters under the name of Jesus Mascuana, and Lot No. 124-B-1, with an area
of 469 square meters under their names. 8 The spouses Layumas took
possession of the property and caused the cutting of tall grasses thereon. Upon
the plea of a religious organization, they allowed a chapel to be constructed on a
portion of the property.9 In January 1985, the spouses Layumas allowed Aquilino
Barte to stay on a portion of the property to ward off squatters. 10 Barte and his
kin, Rostom Barte, then had their houses constructed on the property.
On October 1, 1985, the spouses Layumas received a Letter 11 from the counsel
of Renee Tedrew, offering to buy their share of the property for US$1,000.00. For
her part, Corazon Layumas wrote Pepito Mascuana, offering to pay the amount

of P1,000.00, the balance of the purchase price of the property under the deed of
absolute sale executed by Mascuana and Sumilhig on August 12,
1961.12 However, the addressee refused to receive the mail matter.13
Unknown to the spouses Layumas, TCT No. 8986 14 was issued over Lot No. 124B in the name of Jesus Mascuana on March 17, 1986.
On November 17, 1986, the heirs of Mascuana filed a Complaint 15 for recovery
of possession of Lot No. 124-B and damages with a writ of preliminary injunction,
alleging that they owned the subject lot by virtue of successional rights from their
deceased father. They averred that Barte surreptitiously entered the premises,
fenced the area and constructed a house thereon without their consent. Attached
as annexes to the complaint were TCT No. 8986 and a certification 16 from the
Office of the City Treasurer, Land Tax Division, vouching that the property in
question was owned by the petitioners and that they had paid the taxes thereon
until 1992.
In his answer to the complaint, Barte admitted having occupied a portion of Lot
No. 124-B, but claimed that he secured the permission of Rodolfo Layumas, the
owner of the subject property. He added that he did not fence the property, and
that the petitioners did not use the same as a passageway in going to Broce
Street from their house. Barte raised the following special defenses: (a) the
petitioners were estopped from asserting ownership over the lot in question
because they did not object when he occupied the said portion of the lot; (b)
neither did the petitioners protest when a church was built on the property, or
when residential houses were constructed thereon; (c) the petitioners still asked
Barte and the other occupants whether they had notified Rodolfo Layumas of the
constructions on the property; and (d) the heirs of Mascuana, through the
lawyer of Mrs. Renee M. Tedrew, even wrote a letter 17 to Rodolfo Layumas on
October 1, 1985, expressing her willingness to buy the subject property for
US$1,000.00.

happened to be a good friend and political supporter of Rodolfo. Out of goodwill,

Barte was allowed to occupy a portion of the said lot, along with some other fire
victims. Rodolfo clarified that the others were to stay there only on a temporary
basis, but admitted that Bartes children also stayed in the subject property.20
Rodolfo Layumas further narrated that in 1987, Corazon wrote one of the
petitioners-heirs, Pepito Mascuana, requesting that the title of the lot be
transferred in Sumilhigs name so that they could likewise arrange for the
conveyance of the title in their names. Pepito failed to claim the letter, and
thereafter, filed a case of ejectment against Barte and Rodolfo Layumas brotherin-law, Pepito Antonio. The case, the witness added, was dismissed as against
the two parties. Offered in evidence were the following: a Sworn Statement on
the Current and Fair Market Value of the Real Property issued in 1973 as
required by Presidential Decree No. 76, and tax receipts. 21
Rodolfo Layumas admitted on cross-examination that at the time they bought the
property from Sumilhig, the title was still in the possession of the Wuthrich family.
He added that he filed an adverse claim before the Register of Deeds of San
Carlos City, Negros Occidental, on Lot No. 124-B in January 1986, or after the
case had already been filed in court. Lastly, the witness deposed that he did not
fence the property after buying the same, but that his brother-in-law constructed
a coco-lumber yard thereon upon his authority.22
On January 30, 1996, the trial court rendered judgment in favor of Barte and the
spouses Layumas. The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
Intervenors-counterclaimants and defendant and against plaintiffs-counterclaim
defendants ordering as follows:
1. The dismissal of the plaintiffs complaint with costs against them;

On April 8, 1991, the spouses Layumas filed a Motion for Leave to

Intervene,18 alleging therein that they had a legal interest in Lot No. 124-B-1 as its
buyers from Sumilhig, who in turn purchased the same from Mascuana. In their
answer in intervention,19 the spouses Layumas alleged that they were the true
owners of the subject property and that they had wanted to pay the taxes
thereon, but the Land Tax clerk refused to receive their payments on account that
the petitioners had already made such payment. The spouses Layumas further
maintained that the petitioners had no cause of action against Barte, as they had
authorized him to occupy a portion of Lot No. 124-B-1. The spouses Layumas
also averred that the petitioners were estopped from denying their right of
ownership and possession of the subject lot, as one of them had even offered to
repurchase a portion of Lot No. 124-B via letter. The said spouses interposed a
counterclaim for damages, claiming ownership over the property, and prayed,
thus:
WHEREFORE, it is most respectfully prayed that this HONORABLE COURT
render judgment in favor of the Intervenors and the defendant Aquilino Barte,
ordering:
1. That the complaint against Aquilino Barte be dismissed with costs
against the plaintiff;
2. That the Intervenors spouses Judge Rodolfo S. Layumas and
Corazon A. Layumas be declared as the legal and true owners of Lot
124-B;
3. That the plaintiffs should deliver immediately to the Intervenors,
TCT No. 8986 which is in their possession;
4. That the plaintiffs be made to pay to the Intervenors the sum of
THIRTY THOUSAND (P30,000.00) PESOS moral damages; TEN
THOUSAND (P10,000.00) PESOS attorneys fees plus THREE
HUNDRED (P300.00) PESOS as appearance fee per hearing.
Intervenors pray for such other relief and remedies as may be deemed by this
Honorable Court as just and equitable in the premises.
At the trial, intervenor Rodolfo Layumas testified that he and his wife bought the
subject property in 1968, and that nobody objected to their possession of the
land, including the petitioners. In 1970, a religious organization asked his
permission to construct a chapel on the disputed lot; he allowed the construction
since the same would be used for the fiesta. He further declared that part of the
chapel still stood on the property. In 1985, a fire razed the towns public market,
thereby dislocating numerous people. Barte was one of the fire victims, who also

2. The plaintiffs to jointly pay Intervenors-counterclaimants now RTC

Judge Rodolfo S. Layumas and Corazon A. Layumas:
(a) P10,000.00 for attorneys fees; and
(b) P30,000.00 as moral damages;
3. The plaintiffs, as counterclaim defendants, to comply with the
above-stated obligation of their late father, Mr. Jesus Mascuana,
under the Deed of Absolute Sale, Exh. "3", pp. 92-93, Exp., thru
plaintiff Mr. Jose Mascuana, including the desegragation (sic) survey
to desegregate the 469-square-meter portion of said Lot No. 124-B,
San Carlos Cadastre, this province, sold to the late Diosdado
Sumilhig, if the same has not yet been done despite what has been
said herein earlier to said effect, and the execution of the Final Deed
of Sale in their capacity as the heirs and successors-in-interest of the
late Mr. Jesus Mascuana, thru Mr. Jose Mascuana, covering the
469-square-meter desegregated portion of said Lot No. 124-B, within
sixty (60) days counted from the finality of this Decision, in favor of
the Intervenors-spouses, after which the said Intervenors-spouses
shall pay them, thru Mr. Jose Mascuana, the P1,000.00 balance due
to them as successors-in-interest of the late Mr. Jesus Mascuana;
4. In case plaintiffs fail to comply with what are herein ordered for
them to do, the Clerk of Court V of this Court to do all that they were
to do as herein ordered in the text and dispositive portion hereof, at
the expense of Intervenors spouses to be later reimbursed by
plaintiffs, including the desegragation (sic) survey of said 469-squaremeter portion of said Lot [No.] 124-B, San Carlos Cadastre, Negros
Occidental, if the same has not yet been done and the execution of
the Final Deed of Sale on behalf of all the plaintiffs as heirs and
successors-in-interest of the late Mr. Jesus Mascuana covering the
said desegregated portion of 469 square meters of the aforesaid lot,
in favor of Intervenors spouses, to the end that separate title therefor
may be issued in their names, after they shall have paid
the P1,000.00 balance due plaintiffs under said Deed of Absolute
Sale, Exh. "3."
SO ORDERED.23
Forthwith, the petitioners appealed the case to the CA, raising the following
issues of fact and law:

a. Whether or not the contract of alienation of Lot No. 124-B in favor

of Diosdado Sumilhig in 1961 was a contract to sell or a contract of
sale;
b. Whether or not Diosdado Sumilhig had any right to sell Lot No.
124-B in favor of intervenor Corazon Layumas in 1968. 24
On May 5, 2003, the CA affirmed the decision of the trial court. It ruled that the
contract between the petitioners father and Sumilhig was one of sale. Foremost,
the CA explained, the contract was denominated as a "Deed of Absolute Sale."
The stipulations in the contract likewise revealed the clear intention on the part of
the vendor (Mascuana) to alienate the property in favor of the vendee
(Sumilhig). In three various documents, the late Mascuana even made
declarations that Sumilhig was already the owner of the disputed land. The CA
added that the admission may be given in evidence against Mascuana and his
predecessors-in-interest under Section 26, Rule 130 of the Revised Rules on
Evidence. As to the argument that the contract between Mascuana and
Sumilhig was not effective because it was subject to a suspensive condition that
did not occur, the CA ruled that the condition referred to by the petitioners refers
only to the payment of the balance of the purchase price and not to the effectivity
of the contract.1avvphi1.zw+
As to the petitioners contention that even if the contract were one of sale,
ownership cannot be transferred to Sumilhig because Mascuana was not yet
the owner of the lot at the time of the alleged sale, the appellate court ruled that
the registration of the land to be sold is not a prerequisite to a contract of sale.
The Present Petition
Aggrieved, the petitioners filed the instant petition for review on certiorari with this
Court, where the following lone legal issue was raised:
WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUANA IN
FAVOR OF DIOSDADO SUMILHIG A CONTRACT TO SELL OR CONTRACT OF
SALE?25
We note that the original action of the petitioners against Aquilino Barte was one
for recovery of possession of Lot No. 124-B. With the intervention of the
respondents Rodolfo and Corazon Layumas who claimed ownership over the
property, and the acquiescence of the parties, evidence was adduced to prove
who, between the petitioners (as plaintiffs) and the respondents (as defendantsintervenors) were the lawful owners of the subject property and entitled to its
possession.
The petitioners resolutely contend that the Deed of Absolute Sale dated August
12, 1961 between their father and Sumilhig was a mere contract to sell because
at the time of the said sale, the late Mascuana was not yet the registered owner
of Lot No. 124 or any of its portions. They assert that Sumilhig could not have
acquired any rights over the lot due to the fact that a person can only sell what he
owns or is authorized to sell, and the buyer can acquire no more than what the
seller can transfer legally. Finally, the petitioners insist that the document in
controversy was subject to a suspensive condition, not a resolutory condition,
which is a typical attribute of a contract of sale.
The petition is denied for lack of merit.
The issues raised by the petitioners in this case are factual, and under Rule 45 of
the Rules of Court, only questions of law may be raised in this Court, the reason
being that this Court is not a trier of facts. It is not to re-examine the evidence on
record and to calibrate the same. Moreover, the findings and conclusions of the
trial court as affirmed by the CA are conclusive on the Court, absent of any
evidence that the trial court, as well as the CA ignored, misinterpreted and
misconstrued facts and circumstances of substance which, if considered, would
alter or reverse the outcome of the case. 26
We have reviewed the records and find no justification for a reversal or even a
modification of the assailed decision of the CA.
Even on the merits of the petition, the Court finds that the decision of the trial
court as well as the ruling of the CA are based on the evidence on record and the
applicable law.
The petitioners reiterated their pose that the deed of absolute sale over the
property executed by their father, Jesus Mascuana, as vendor, and Diosdado
Sumilhig as vendee, was a contract to sell and not a contract of sale. They assert

that on its face, the contract appears to be a contract to sell, because the
payment of the P1,000.00 balance of the purchase price was subject to a
suspensive condition: the survey of the property, the segregation of the portion
thereof subject of the sale, and the completion of the documents necessary for
the issuance of a Torrens title over the property to and in the name of Sumilhig
who was the vendee. The petitioners assert that Sumilhig never paid the
aforesaid amount to the vendor; hence, the obligation of the latter and his
predecessors-in-interest (herein petitioners) to execute a final deed of sale never
arose. As such, they aver, title to the property remained reserved in the vendor
and his heirs even after his death. There was no need for the vendor to rescind
the deed or collect the said amount of P1,000.00 under Article 1191 of the New
Civil Code because such a remedy applies only to contracts of sale. The
petitioners insist that Sumilhig never acquired title over the property; he could not
have transferred any title to the respondents. Sumilhig could not have transferred
that which he did not own.
The petitioners contention has no factual and legal bases.
The deed of absolute sale executed by Jesus Mascuana and Sumilhig,
provides, thus:
That the VENDOR is the true and absolute owner of a parcel of land known as
Lot No. 124 of the Cadastral Survey of San Carlos, situated at Broce Street and
is free from liens and encumbrances, and covered by O.C.T. No. T-299[3]7 (R1453) of Reg. of Deeds, Negros Occ.
That for and in consideration of the sum of FOUR THOUSAND SIX HUNDRED
NINETY PESOS (P4,690.00), Philippine Currency, to be paid by the VENDEE in
the manner hereinafter stated, the VENDOR does hereby sell, transfer, cede and
convey, a portion of the above-described property containing an area of 469
square meters, the sketch of which can be found at the back of this document
and having a frontage at Broce Street of around 14 meters, and from the Broce
Street to the interior on its Southwest side with a length of 30.9 meters, with a
length of 24.8 meters on its Northeast side where it turned to the right with a
length of 2.8 meters and continuing to Northwest with a length of 6.72 meters,
the backyard dimension is 17.5 meters to the Northwest, unto the VENDEE, his
heirs and assigns, by way of Absolute Sale, upon the receipt of the down
payment of THREE THOUSAND SIX HUNDRED NINETY PESOS (P3,690.00),
which is hereby acknowledged by the VENDOR as received by him.lawphil.net
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the
VENDEE unto the VENDOR as soon as the above-portions of Lot 124 shall have
been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the
VENDEE shall have been prepared.
The evidence on record shows that during the lifetime of vendor Jesus
Mascuana, and even after his death, his heirs, the petitioners herein,
unequivocably declared that Diosdado Sumilhig was the owner of the property
subject of this case, and that the respondents acquired title over the property,
having purchased the same via a deed of absolute sale from Diosdado Sumilhig.
Thus, on December 31, 1961, Jesus Mascuana and Jose Estabillo executed a
Deed of Exchange and Absolute Sale of Real Estate, in which both parties
declared that they were co-owners of portions of Lot No. 124 abutted by the
property owned by Diosdado Sumilhig. 27
In the subdivision plan of Lot No. 124, signed by Ricardo Quilop, Private Land
Surveyor, following his survey of Lot No. 124 on July 9, 1962 for and in behalf of
Jesus Mascuana, et al., it appears that Lot No. 124-B with an area of 540
square meters belonged to Diosdado Sumilhig,28 which is abutted by Lot No. 124C, owned by Jesus Mascuana.
On October 1, 1985, long after the death of Jesus Mascuana, one of his heirs,
petitioner Renee Tedrew, through counsel, wrote respondent Rodolfo Layumas
offering to buy the property occupied by his overseer Aquilino Barte for
US$1,000.00:
ATTY. RODOLFO S. LAYUMAS
San Carlos City
Negros Occidental
Dear Atty. Layumas:
This has reference to the lot located at Broce Street, portions of which are
presently occupied by Mr. Barte.

Mrs. Renee Tedrew (nee Agapuyan), who is now in the United States, would like
to offer the amount of $1,000.00 to buy your share of the said lot.
If you are amenable, kindly inform the undersigned for him to communicate [with]
Mrs. Tedrew in California.
Very truly yours,
(Sgd.)
SAMUEL SM LEZAMA29
It was only after the respondents rejected the proposal of petitioner Renee
Tedrew that the petitioners secured title over the property on March 17, 1986 in
the name of Jesus Mascuana (already deceased at the time), canceling TCT
No. 967 issued on July 6, 1962 under the name of Jesus Mascuana, who
appears to be a co-owner of Lot No. 124 with an undivided two-seventh (2/7)
portion thereof.30
While it is true that Jesus Mascuana executed the deed of absolute sale over
the property on August 12, 1961 in favor of Diosdado Sumilhig for P4,690.00,
and that it was only on July 6, 1962 that TCT No. 967 was issued in his name as
one of the co-owners of Lot No. 124, Diosdado Sumilhig and the respondents
nevertheless acquired ownership over the property. The deed of sale executed
by Jesus Mascuana in favor of Diosdado Sumilhig on August 12, 1961 was a
perfected contract of sale over the property. It is settled that a perfected contract
of sale cannot be challenged on the ground of the non-transfer of ownership of
the property sold at that time of the perfection of the contract, since it is
consummated upon delivery of the property to the vendee. It is through tradition
or delivery that the buyer acquires ownership of the property sold. As provided in
Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing which is
the object of the contract, unless the contrary appears or can be inferred. The
record of the sale with the Register of Deeds and the issuance of the certificate
of title in the name of the buyer over the property merely bind third parties to the
sale. As between the seller and the buyer, the transfer of ownership takes effect
upon the execution of a public instrument covering the real property.31 Long
before the petitioners secured a Torrens title over the property, the respondents
had been in actual possession of the property and had designated Barte as their
overseer.

transferred to the buyer upon actual or constructive delivery (e.g. by the

execution of a public document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure of the condition
would prevent such perfection. If the condition is imposed on the obligation of a
party which is not fulfilled, the other party may either waive the condition or
refuse to proceed with the sale. (Art. 1545, Civil Code)
Thus, in one case, when the sellers declared in a "Receipt of Down Payment"
that they received an amount as purchase price for a house and lot without any
reservation of title until full payment of the entire purchase price, the implication
was that they sold their property. In Peoples Industrial and Commercial
Corporation v. Court of Appeals, it was stated:
A deed of sale is considered absolute in nature where there is neither a
stipulation in the deed that title to the property sold is reserved in the seller until
full payment of the price, nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed period.
Applying these principles to this case, it cannot be gainsaid that the contract of
sale between the parties is absolute, not conditional. There is no reservation of
ownership nor a stipulation providing for a unilateral rescission by either party. In
fact, the sale was consummated upon the delivery of the lot to respondent. Thus,
Art. 1477 provides that the ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof. 33
The condition in the deed that the balance of P1,000.00 shall be paid to the
vendor by the vendee as soon as the property sold shall have been surveyed in
the name of the vendee and all papers pertinent and necessary to the issuance
of a separate certificate of title in the name of the vendee shall have been
prepared is not a condition which prevented the efficacy of the contract of sale. It
merely provides the manner by which the total purchase price of the property is
to be paid. The condition did not prevent the contract from being in full force and
effect:
The stipulation that the "payment of the full consideration based on a survey shall
be due and payable in five (5) years from the execution of a formal deed of sale"
is not a condition which affects the efficacy of the contract of sale. It merely
provides the manner by which the full consideration is to be computed and the
time within which the same is to be paid. But it does not affect in any manner the
effectivity of the contract. 34

Article 1458 of the New Civil Code provides:

By the contract of sale, one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefor
a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Thus, there are three essential elements of sale, 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. 32
In this case, there was a meeting of the minds between the vendor and the
vendee, when the vendor undertook to deliver and transfer ownership over the
property covered by the deed of absolute sale to the vendee for the price
of P4,690.00 of which P3,690.00 was paid by the vendee to the vendor as down
payment. The vendor undertook to have the property sold, surveyed and
segregated and a separate title therefor issued in the name of the vendee, upon
which the latter would be obliged to pay the balance of P1,000.00. There was no
stipulation in the deed that the title to the property remained with the vendor, or
that the right to unilaterally resolve the contract upon the buyers failure to pay
within a fixed period was given to such vendor. Patently, the contract executed by
the parties is a deed of sale and not a contract to sell. As the Court ruled in a
recent case:
In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although
denominated a "Deed of Conditional Sale," a sale is still absolute where the
contract is devoid of any proviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be

In a contract to sell, ownership is retained by a seller and is not to be transferred

to the vendee until full payment of the price. Such payment is a positive
suspensive condition, the failure of which is not a breach of contract but simply
an event that prevented the obligation from acquiring binding force. 35
It bears stressing that in a contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction that, for a time, existed
and discharges the obligation created under the transaction. 36 A seller cannot
unilaterally and extrajudicially rescind a contract of sale unless there is an
express stipulation authorizing it. In such case, the vendor may file an action for
specific performance or judicial rescission.37
Article 1169 of the New Civil Code provides that in reciprocal obligations, neither
party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him; from the moment one of the
parties fulfills his obligation, delay by the other begins. In this case, the vendor
(Jesus Mascuana) failed to comply with his obligation of segregating Lot No.
124-B and the issuance of a Torrens title over the property in favor of the vendee,
or the latters successors-in-interest, the respondents herein. Worse, petitioner
Jose Mascuana was able to secure title over the property under the name of his
deceased father.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
Costs against the petitioners.
SO ORDERED.

Determination of place of consummation of contract for purposes of

imposing sales tax
Butuan Sawmill v. CTA
Appeal from a decision of the Court of Tax Appeals, in its CTA Case No. 965,
ordering petitioner herein, Butuan Sawmill, Inc., to pay respondent Commissioner

of Internal Revenue the sum of P36,107.74 as deficiency sales tax and

surcharge due on its sales of logs to buyers in Japan from January 31, 1951 to
June 8, 1953.
The facts, as found and stated by the lower court in its decision, are in full accord
with the evidences presented therein; hence, we quote them hereunder:
. . . that during the period from January 31, 1951 to June 8, 1953, it
sold logs to Japanese firms at prices FOB Vessel Magallanes,
Agusan (in some cases FOB Vessel, Nasipit, also in Agusan); that the
FOB prices included costs of loading, wharfage stevedoring and other
costs in the Philippines; that the quality, quantity and measurement
specifications of the logs were certified by the Bureau of Forestry;
that the freight was paid by the Japanese buyers; and the payments
of the logs were effected by means of irrevocable letters of credit in
favor of petitioner and payable through the Philippine National Bank
or any other bank named by it.
Upon investigation by the Bureau of Internal Revenue, it was
ascertained that no sales tax return was filed by the petitioner and
neither did it pay the corresponding tax on the sales. On the basis of
agent Antonio Mole's report dated September 17, 1957, respondent,
on August 27, 1958, determined against petitioner the sum of
P40,004.01 representing sales tax, surcharge and compromise
penalty on its sales [tax, surcharge and compromise penalty on its
sales] of logs from January 1951 to June 1953 pursuant to Sections
183, 186 and 209 of the National Internal Revenue Code (Exhibit "E",
p. 14, CTA rec. & p. 14, BIR rec.). And in consequence of a
reinvestigation, respondent, on November 6, 1958, amended the
amount of the previous assessment to P38,917.74 (Exh. "F", p. 52,
BIR rec.). Subsequent requests for reconsideration of the amended
assessment having been denied (Exh. "G", p. 55, BIR rec.; Exh. "H",
pp. 75-76, BIR rec.: Exh. "I", pp. 79-80, BIR rec.; Exh. "J", p. 81, BIR
rec.), petitioner filed the instant petition for review on November 7,
1960.
On the bases of the above-quoted findings and circumstances, the lower court
upheld the legality and correctness of the amended assessment of the sales tax
and surcharge, ruling that the sales in question, in the light of our previous
decisions1, were domestic or "local" sales, and, therefore, subject to sales tax
under the provision of section 186 of the Tax Code, as amended by Republic Acts
Nos. 558 and 594; and that the assessment thereof was made well within the
ten-year period prescribed by Section 332(a) of the same Code, since petitioner
herein omitted to file its sales tax returns for the years 1951, 1952 and 1953, and
this omission was discovered only on September 17, 1957. The imposition of the
compromise penalty was, however, eliminated therefrom for want of agreement
between the taxpayer and the Collector (now Commissioner) of Internal
Revenue. A motion to reconsider said decision having been denied, petitioner
herein interposed the present appeal before this Court.
The issues presented in this appeal are: whether or not petitioner herein is liable
to pay the 5% sales tax as then prescribed by Section 186 of the Tax Code on its
sales of logs to the Japanese buyers; and whether or not the assessment thereof
was made within the prescriptive period provided by law therefor.1wph1.t
On the first issue, petitioner herein insists that the circumstances enumerated in
the above finding, which this Court had, in previous decisions (Cf. footnote [1]),
considered as determinative of the place of transfer of ownership of the logs sold,
for purposes of taxation, are not in themselves evidentiary indications to show
that the parties intended the title of the logs to pass to the Japanese buyers in
Japan. Thus, it points out that the "FOB" feature of the sales contract was made
only to fix its price and not to fix the place of delivery; that the requirement of
certification of quality, quantity, and measurement specifications of the logs by
local authorities was done to comply with local laws, rules, and regulations, and
was not a part of the sales arrangement; that the payment of freight by the
Japanese buyers is not an uncommon feature of "FOB" shipments; and that the
payment of prices by means of irrevocable letters of credit is but a common
established business practice to secure payment of the price to the seller. It also
insists that, even assuming that the "FOB" feature of the disputed sales
determines thesitus of transfer of ownership, the same is merely a prima
facie presumption which yields to contrary proof such as that the logs were made
deliverable to the "order of the shipper" and the logs were shipped at the risk of
the shipper, which circumstances, if considered, would negate the above
implications. Hence, petitioner herein contends that the disputed sales were
consummated in Japan, and, therefore, not subject to the taxing jurisdiction of
our Government.

The above contentions of petitioner are devoid of merit. In a decided case with
practically identical set of facts obtaining in the case at bar, this Court declared:
. . . it is admitted that the agreed price was "F.O.B. Agusan", thus
indicating, although prima facie, that the parties intended the title to
pass to the buyer upon delivery of the logs in Agusan; on board the
vessels that took the goods to Japan. Moreover, said prima
facie proof was bolstered up by the following circumstances, namely:
1. Irrevocable letters of credit were opened by the Japanese buyers
in favor of the petitioners.
2. Payment of freight charges of every shipment by the Japanese
buyers.
3. The Japanese buyers chartered the ships that carried the logs they
purchased from the Philippines to Japan.
4. The Japanese buyers insured the shipment of logs and collected
the insurance coverage in case of loss in transit.
5. The petitioner collected the purchase price of every shipment of
logs by surrendering the covering letter of credit, bill of lading, which
was indorsed in blank, tally sheet, invoice and export entry, to the
corresponding bank in Manila of the Japanese agent bank with whom
the Japanese buyers opened letters of credit.
6. In case of natural defects in logs shipped to the buyers discovered
in Japan, instead of returning such defective logs, accepted them, but
were granted a corresponding credit based on the contract price.
7. The logs purchased by the Japanese buyers were measured by a
representative of the Director of Forestry and such measurement was
final, thereby making the Government of the Philippines a sort of
agent of the Japanese buyers.
Upon the foregoing facts and authority of Bislig (Bay) Lumber Co., Inc. vs.
Collector of Internal Revenue, G.R. No. L-13186 (January 28, 1961), Misamis
Lumber Co., Inc. vs. Collector of Internal Revenue (56 Off. Gaz. 517)
andWestern Mindanao Lumber Development Co., Inc. vs. Court of Tax Appeals,
et al. (G.R. No. L-11710, June 30, 1958), it is clear that said export sales had
been consummated in the Philippines and were, accordingly, subject to sales tax
therein." (Taligaman Lumber Co., Inc. vs. Collector of Internal Revenue, G.R. No.
L-15716, March 31, 1962).
With respect to petitioner's contention that there are proofs to rebut the prima
facie finding and circumstances that the disputed sales were consummated here
in the Philippines, we find that the allegation is not borne out by the law or the
evidence.
That the specification in the bill of lading to the effect that the goods are
deliverable to the order of the seller or his agent does not necessarily negate the
passing of title to the goods upon delivery to the carrier is clear from the second
part of paragraph 2 of Article 1503 of the Civil Code of the Philippines (which
appellant's counsel improperly omits from his citation):
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 sellers'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.
Moreover, it has been "a settled rule that in petitions to review decisions of the
Court of Tax Appeals, only questions of law may be raised and may be passed
upon by this Court" (Gutierrez vs. Court of Tax Appeals & Collector of Internal
Revenue vs. Gutierrez, G.R. Nos. L-7938 & L-9771, May 21, 1957, cited in
Sanchez vs. Commissioner of Customs, G.R. No. L-8556, September 30, 1957);
and it having been found that there is no proof to substantiate the foregoing
contention of petitioner, the same should also be ruled as devoid of merit.

On the second issue, petitioner avers that the filing of its income tax returns,
wherein the proceeds of the disputed sales were declared, is substantial
compliance with the requirement of filing a sales tax return, and, if there should
be deemed a return filed, Section 331, and not Section 332(a), of the Tax Code
providing for a five-year prescriptive period within which to make an assessment
and collection of the tax in question from the time the return was deemed filed,
should be applied to the case at bar. Since petitioner filed its income tax returns
for the years 1951, 1952 and 1953, and the assessment was made in 1957 only,
it further contends that the assessment of the sales tax corresponding to the
years 1951 and 1952 has already prescribed for having been made outside the
five-year period prescribed in Section 331 of the Tax Code and should, therefore,
be deducted from the assessment of the deficiency sales tax made by
respondent.
The above contention has already been raised and rejected as not meritorious in
a previous case decided by this Court. Thus, we held that an income tax return
cannot be considered as a return for compensating tax for purposes of
computing the period of prescription under Section 331 of the Tax Code, and that
the taxpayer must file a return for the particular tax required by law in order to
avail himself of the benefits of Section 331 of the Tax Code; otherwise, if he does
not file a return, an assessment may be made within the time stated in Section
332(a) of the same Code (Bisaya Land Transportation Co., Inc. vs. Collector of
Internal Revenue & Collector of Internal Revenue vs. Bisaya Land Transportation
Co., Inc., G.R. Nos. L-12100 & L-11812, May 29, 1959). The principle enunciated
in this last cited case is applicable by analogy to the case at bar.
It being undisputed that petitioner failed to file a return for the disputed sales
corresponding to the years 1951, 1952 and 1953, and this omission was
discovered only on September 17, 1957, and that under Section 332(a) of the
Tax Code assessment thereof may be made within ten (10) years from and after
the discovery of the omission to file the return, it is evident that the lower court
correctly held that the assessment and collection of the sales tax in question has
not yet prescribed.
Wherefore, the decision appealed from should be, as it is hereby affirmed, with
costs against petitioner.

Timeliness of delivery in light of the stipulations in the contract

Smith, Bell & Co. v. Sotelo Matti
In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo,
entered into contracts whereby the former obligated itself to sell, and the latter to
purchase from it, two steel tanks, for the total price of twenty-one thousand pesos
(P21,000), the same to be shipped from New York and delivered at Manila "within
three or four months;" two expellers at the price of twenty five thousand pesos
(P25,000) each, which were to be shipped from San Francisco in the month of
September, 1918, or as soon as possible; and two electric motors at the price of
two thousand pesos (P2,000) each, as to the delivery of which stipulation was
made, couched in these words: "Approximate delivery within ninety days. This
is not guaranteed."
The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th
of October, 1918; and the motors on the 27th of February, 1919.
The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these
goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated.
The plaintiff brought suit against the defendant, based on four separate causes of
action, alleging, among other facts, that it immediately notified the defendant of
the arrival of the goods, and asked instructions from him as to the delivery
thereof, and that the defendant refused to receive any of them and to pay their
price. The plaintiff, further, alleged that the expellers and the motors were in good
condition. (Amended complaint, pages 16-30, Bill of Exceptions.)
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil
Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the
shipment of these goods and their arrival at Manila, the notification to the
defendant, Mr. Sotelo, the latter's refusal to receive them and pay their price, and
the good condition of the expellers and the motors, alleging as special defense
that Mr. Sotelo had made the contracts in question as manager of the intervenor,
the Manila Oil Refining and By-Products Co., Inc which fact was known to the
plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said
tanks had arrived, the motors and the expellers having arrived incomplete and
long after the date stipulated." As a counterclaim or set-off, they also allege that,
as a consequence of the plaintiff's delay in making delivery of the goods, which

the intervenor intended to use in the manufacture of cocoanut oil, the intervenor
suffered damages in the sums of one hundred sixteen thousand seven hundred
eighty-three pesos and ninety-one centavos (P116,783.91) for the nondelivery of
the tanks, and twenty-one thousand two hundred and fifty pesos (P21,250) on
account of the expellers and the motors not having arrived in due time.
The case having been tried, the court below absolved the defendants from the
complaint insofar as the tanks and the electric motors were concerned, but
rendered judgment against them, ordering them to "receive the aforesaid
expellers and pay the plaintiff the sum of fifty thousand pesos (P50,00), the price
of the said goods, with legal interest thereon from July 26, 1919, and costs."
Both parties appeal from this judgment, each assigning several errors in the
findings of the lower court.
The principal point at issue in this case is whether or not, under the contracts
entered into and the circumstances established in the record, the plaintiff has
fulfilled, in due time, its obligation to bring the goods in question to Manila. If it
has, then it is entitled to the relief prayed for; otherwise, it must be held guilty of
delay and liable for the consequences thereof.
To solve this question, it is necessary to determine what period was fixed for the
delivery of the goods.
As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are
similar, and in both of them we find this clause:
To be delivered within 3 or 4 months The promise or indication of
shipment carries with it absolutely no obligation on our part
Government regulations, railroad embargoes, lack of vessel space,
the exigencies of the requirement of the United States Government,
or a number of causes may act to entirely vitiate the indication of
shipment as stated. In other words, the order is accepted on the basis
of shipment at Mill's convenience, time of shipment being merely an
indication of what we hope to accomplish.
In the contract Exhibit C (page 63 of the record), with reference to the expellers,
the following stipulation appears:
The following articles, hereinbelow more particularly described, to be
shipped at San Francisco within the month of September /18, or as
soon as possible. Two Anderson oil expellers . . . .
And in the contract relative to the motors (Exhibit D, page 64, rec.) the following
appears:
Approximate delivery within ninety days. This is not guaranteed.
This sale is subject to our being able to obtain Priority Certificate,
subject to the United States Government requirements and also
subject to confirmation of manufactures.
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays caused by fires, riots on
land or on the sea, strikes or other causes known as "Force Majeure"
entirely beyond the control of the sellers or their representatives.
Under these stipulations, it cannot be said that any definite date was fixed for the
delivery of the goods. As to the tanks, the agreement was that the delivery was to
be made "within 3 or 4 months," but that period was subject to the contingencies
referred to in a subsequent clause. With regard to the expellers, the contract
says "within the month of September, 1918," but to this is added "or as soon as
possible." And with reference to the motors, the contract contains this expression,
"Approximate delivery within ninety days," but right after this, it is noted that "this
is not guaranteed."
The oral evidence falls short of fixing such period.
From the record it appears that these contracts were executed at the time of the
world war when there existed rigid restrictions on the export from the United
States of articles like the machinery in question, and maritime, as well as
railroad, transportation was difficult, which fact was known to the parties; hence
clauses were inserted in the contracts, regarding "Government regulations,
railroad embargoes, lack of vessel space, the exigencies of the requirements of

the United States Government," in connection with the tanks and "Priority
Certificate, subject to the United State Government requirements," with respect
to the motors. At the time of the execution of the contracts, the parties were not
unmindful of the contingency of the United States Government not allowing the
export of the goods, nor of the fact that the other foreseen circumstances therein
stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but conclude
that the term which the parties attempted to fix is so uncertain that one cannot tell
just whether, as a matter of fact, those articles could be brought to Manila or not.
If that is the case, as we think it is, the obligations must be regarded as
conditional.
Obligations for the performance of which a day certain has been fixed
shall be demandable only when the day arrives.
A day certain is understood to be one which must necessarily arrive,
even though its date be unknown.
If the uncertainty should consist in the arrival or non-arrival of the
day, the obligation is conditional and shall be governed by the rules
of the next preceding section. (referring to pure and conditional
obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery in question was, as stated in the contract,
contingent upon the sellers obtaining certificate of priority and permission of the
United States Government, subject to the rules and regulations, as well as to
railroad embargoes, then the delivery was subject to a condition the fulfillment of
which depended not only upon the effort of the herein plaintiff, but upon the will of
third persons who could in no way be compelled to fulfill the condition. In cases
like this, which are not expressly provided for, but impliedly covered, by the Civil
Code, the obligor will be deemed to have sufficiently performed his part of the
obligation, if he has done all that was in his power, even if the condition has not
been fulfilled in reality.
In such cases, the decisions prior to the Civil Code have held that the
obligee having done all that was in his power, was entitled to enforce
performance of the obligation. This performance, which is fictitious
not real is not expressly authorized by the Code, which limits itself
only to declare valid those conditions and the obligation thereby
affected; but it is neither disallowed, and the Code being thus silent,
the old view can be maintained as a doctrine. (Manresa's
commentaries on the Civil Code [1907], vol. 8, page 132.)

(33) That in the execution and sales thereunder, in which C. H.

McClure appears as the judgment creditor, he was represented by
the opponent Peter W. Addison, who prepared and had charge of
publication of the notices of the various sales and that in none of the
sales was the notice published more than twice in a newspaper.
The claims of the opponent-appellant Addison have been very fully
and ably argued by his counsel but may, we think, be disposed of in
comparatively few words. As will be seen from the foregoing
statement of facts, he rest his title (1) on the sales under the
executions issued in cases Nos. 435, 450, 454, and 499 of the court
of the justice of the peace of Dagupan with the priority of inscription of
the last two sales in the registry of deeds, and (2) on a purchase from
the Director of Lands after the land in question had been forfeited to
the Government for non-payment of taxes under Act No. 1791.
The sheriff's sales under the execution mentioned are fatally
defective for what of sufficient publication of the notice of sale.
Section 454 of the Code of civil Procedure reads in part as follows:
SEC. 454. Before the sale of property on execution, notice thereof
must be given, as follows:
1. In case of perishable property, by posing written notice of the time
and place of the sale in three public places of the municipality or city
where the sale is to take place, for such time as may be reasonable,
considering the character and condition of the property;
2. *

In the former it is held:

First. That when the fulfillment of the conditions does not depend on
the will of the obligor, but on that of a third person who can in no way
be compelled to carry it out, and it is found by the lower court that the
obligor has done all in his power to comply with the obligation, the
judgment of the said court, ordering the other party to comply with his
part of the contract, is not contrary to the law of contracts, or to Law
1, Tit. I, Book 10, of the "Novsima Recopilacin," or Law 12, Tit. 11,
of Partida 5, when in the said finding of the lower court, no law or
precedent is alleged to have been violated. (Jurisprudencia
Civil published by the directors of the Revista General de Legislacion
y Jurisprudencia [1866], vol. 14, page 656.)
In the second decision, the following doctrine is laid down:
Second. That when the fulfillment of the condition does not depend
on the will of the obligor, but on that of a third person, who can in no
way be compelled to carry it out, the obligor's part of the contract is
complied withalf Belisario not having exercised his right of repurchase
reserved in the sale of Basilio Borja mentioned in paragraph (13)
hereof, the affidavit of Basilio Borja for the consolidacion de
dominio was presented for record in the registry of deeds and
recorded in the registry on the same date.
(32) The Maximo Belisario left a widow, the opponent Adelina Ferrer
and three minor children, Vitaliana, Eugenio, and Aureno Belisario as
his only heirs.

3. In cases of real property, by posting a similar notice particularly

describing the property, for twenty days in three public places of the
municipality or city where the property is situated, and also where the
property is to be sold, and publishing a copy thereof once a week, for
the same period, in some newspaper published or having general
circulation in the province, if there be one. If there are newspaper
published in the province in both the Spanish and English languages,
then a like publication for a like period shall be made in one
newspaper published in the Spanish language, and in one published
in the English language:Provided, however, That such publication in a
newspaper will not be required when the assessed valuation of the
property does not exceed four hundred pesos;
4. *

The decisions referred to by Mr. Manresa are those rendered by the supreme
court of Spain on November 19, 1896, and February 23, 1871.

Examining the record, we find that in cases Nos. 435 and 450 the sales took
place on October 14, 1916; the notice first published gave the date of the sale as
October 15th, but upon discovering that October 15th was a Sunday, the date
was changed to October 14th. The correct notice was published twice in a local
newspaper, the first publication was made on October 7th and the second and
last on October 14th, the date of the sale itself. The newspaper is a weekly
periodical published every Saturday afternoon.
In case No. 454 there were only two publications of the notice in a newspaper,
the first publication being made only fourteen days before the date of the sale. In
case No. 499, there were also only two publications, the first of which was made
thirteen days before the sale. In the last case the sale was advertised for the
hours of from 8:30 in the morning until 4:30 in the afternoon, in violation of
section 457 of the Code of Civil Procedure. In cases Nos. 435 and 450 the hours
advertised were from 9:00 in the morning until 4.30 in the afternoon. In all of the
cases the notices of the sale were prepared by the judgment creditor or his
agent, who also took charged of the publication of such notices.
In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808),
this court held that if a sheriff sells without the notice prescribe by the Code of
Civil Procedure induced thereto by the judgment creditor and the purchaser at
the sale is the judgment creditor, the sale is absolutely void and not title passes.
This must now be regarded as the settled doctrine in this jurisdiction whatever
the rule may be elsewhere.
It appears affirmatively from the evidence in the present case that there is a
newspaper published in the province where the sale in question took place and
that the assessed valuation of the property disposed of at each sale exceeded
P400. Comparing the requirements of section 454, supra, with what was actually
done, it is self-evident that notices of the sales mentioned were not given as
prescribed by the statute and taking into consideration that in connection with

these sales the appellant Addison was either the judgment creditor or else
occupied a position analogous to that of a judgment creditor, the sales must be
held invalid.
The conveyance or reconveyance of the land from the Director of Lands is
equally invalid. The provisions of Act No. 1791 pertinent to the purchase or
repurchase of land confiscated for non-payment of taxes are found in section 19
of the Act and read:
. . . In case such redemption be not made within the time above
specified the Government of the Philippine Islands shall have an
absolute, indefeasible title to said real property. Upon the expiration
of the said ninety days, if redemption be not made, the provincial
treasurer shall immediately notify the Director of Lands of the
forfeiture and furnish him with a description of the property, and said
Director of Lands shall have full control and custody thereof to lease
or sell the same or any portion thereof in the same manner as other
public lands are leased or sold: Provided, That the original owner, or
his legal representative, shall have the right to repurchase the entire
Description

Qty.

Unit Price

Total Price

Nozzle Tip

6 pcs.

P 5,520.00

33,120.00

Plunger & Barrel

6 pcs.

27,630.00

165,780.00

Cylinder Head

2 pcs.

1,035,000.00

2,070,000.00

Cylinder Liner

1 set

Upon the other hand, respondent BJ Marthel International, Inc. is a business

entity engaged in trading, marketing, and selling of various industrial
commodities. It is also an importer and distributor of different brands of engines
and spare parts.
From 1987 up to the institution of this case, respondent supplied petitioner with
spare parts for the latter's marine engines. Sometime in 1989, petitioner asked
respondent for a quotation for various machine parts. Acceding to this request,
respondent furnished petitioner with a formal quotation, 2 thus:

May 31, 1989

MINQ-6093
LORENZO SHIPPING LINES
Pier 8, North Harbor
Manila
SUBJECT: PARTS FOR ENGINE MODEL
MITSUBISHI 6UET 52/60
Dear Mr. Go:

TOTAL PRICE FOB

MANILA ___________

477,000.00
P2,745,900.00

We are pleased to submit our offer for your above subject requirements.
DELIVERY: Within 2 months after receipt of firm order.
TERMS: 25% upon delivery, balance payable in 5 bimonthly equal

amount of his said real property, at any time before a sale or contract
of sale has been made by the director of Lands to a third party, by
paying therefore the whole sum due thereon at the time of ejectment
together with a penalty of ten per centum . . . .
The appellant Addison repurchased under the final proviso of the section quoted
and was allowed to do so as the successor in interest of the original owner under
the execution sale above discussed. As we have seen, he acquired no rights
under these sales, was therefore not the successor of the original owner and
could only have obtained a valid conveyance of such titles as the Government
might have by following the procedure prescribed by the Public Land Act for the
sale of public lands. he is entitled to reimbursement for the money paid for the
redemption of the land, with interest, but has acquired no title through the
redemption.
The question of the priority of the record of the sheriff's sales over that of the sale
from Belisario to Borja is extensively argued in the briefs, but from our point of
view is of no importance; void sheriff's or execution sales cannot be validated
through inscription in the Mortgage Law registry.
The opposition of Adelina Ferrer must also be overruled. She maintained that the
land in question was community property of the marriage of Eulalio Belisario and
Paula Ira: that upon the death of Paula Ira inealed from is modified, and the
defendant Mr. Vicente Sotelo Matti, sentenced to accept and receive from the
plaintiff the tanks, the expellers and the motors in question, and to pay the
plaintiff the sum of ninety-six thousand pesos (P96,000), with legal interest
thereon from July 17, 1919, the date of the filing of the complaint, until fully paid,
and the costs of both instances. So ordered.

Installment[s] not to exceed 90 days.

We trust you find our above offer acceptable and look forward to your
most valued order.

Very truly yours,

(SGD) HENRY PAJARILLO
Sales Manager

Petitioner thereafter issued to respondent Purchase Order No. 13839, 3 dated 02

November 1989, for the procurement of one set of cylinder liner, valued at
P477,000, to be used for M/V Dadiangas Express. The purchase order was cosigned by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo. Quoted
hereunder is the pertinent portion of the purchase order:

Name of Description

Qty.

Amount

CYL. LINER M/E

1 SET

P477,000.00

Delivery; when time is of the essence

Lorenzo Shipping Corp. v. BJ Marthel International, Inc.
This is a petition for review seeking to set aside the Decision 1 of the Court of
Appeals in CA-G.R. CV No. 54334 and its Resolution denying petitioner's motion
for reconsideration.
NOTHING FOLLOW
The factual antecedents of this case are as follows:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in
coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express.

INV. #

In an Order dated 25 July 1991,14 the court a quo granted respondent's prayer for
the issuance of a preliminary attachment. On 09 August 1991, petitioner filed an
Urgent Ex-Parte Motion to Discharge Writ of Attachment15attaching thereto a
counter-bond as required by the Rules of Court. On even date, the trial court
issued an Order16 lifting the levy on petitioner's properties and the garnishment of
its bank accounts.

TERM OF PAYMENT: 25% DOWN PAYMENT

5 BI-MONTHLY INSTALLMENT[S]

Instead of paying the 25% down payment for the first cylinder liner, petitioner
issued in favor of respondent ten postdated checks 4 to be drawn against the
former's account with Allied Banking Corporation. The checks were supposed to
represent the full payment of the aforementioned cylinder liner.
Subsequently, petitioner issued Purchase Order No. 14011, 5 dated 15 January
1990, for yet another unit of cylinder liner. This purchase order stated the term of
payment to be "25% upon delivery, balance payable in 5 bi-monthly equal
installment[s]."6 Like the purchase order of 02 November 1989, the second
purchase order did not state the date of the cylinder liner's delivery.
On 26 January 1990, respondent deposited petitioner's check that was postdated
18 January 1990, however, the same was dishonored by the drawee bank due to
insufficiency of funds. The remaining nine postdated checks were eventually
returned by respondent to petitioner.

Petitioner afterwards filed its Answer 17 alleging therein that time was of the
essence in the delivery of the cylinder liners and that the delivery on 20 April
1990 of said items was late as respondent committed to deliver said items "within
two (2) months after receipt of firm order"18 from petitioner. Petitioner likewise
sought counterclaims for moral damages, exemplary damages, attorney's fees
plus appearance fees, and expenses of litigation.
Subsequently, respondent filed a Second Amended Complaint with Preliminary
Attachment dated 25 October 1991. 19 The amendment introduced dealt solely
with the number of postdated checks issued by petitioner as full payment for the
first cylinder liner it ordered from respondent. Whereas in the first amended
complaint, only nine postdated checks were involved, in its second amended
complaint, respondent claimed that petitioner actually issued ten postdated
checks. Despite the opposition by petitioner, the trial court admitted respondent's
Second Amended Complaint with Preliminary Attachment.20
Prior to the commencement of trial, petitioner filed a Motion (For Leave To Sell
Cylinder Liners)21 alleging therein that "[w]ith the passage of time and with no
definite end in sight to the present litigation, the cylinder liners run the risk of
obsolescence and deterioration"22 to the prejudice of the parties to this case.
Thus, petitioner prayed that it be allowed to sell the cylinder liners at the best
possible price and to place the proceeds of said sale in escrow. This motion,
unopposed by respondent, was granted by the trial court through the Order of 17
March 1991.23
After trial, the court a quo dismissed the action, the decretal portion of the
Decision stating:

The parties presented disparate accounts of what happened to the check which
was previously dishonored. Petitioner claimed that it replaced said check with a
good one, the proceeds of which were applied to its other obligation to
respondent. For its part, respondent insisted that it returned said postdated check
to petitioner.

WHEREFORE, the complaint is hereby dismissed, with costs against the plaintiff,
which is ordered to pay P50,000.00 to the defendant as and by way of attorney's
fees.24

Respondent thereafter placed the order for the two cylinder liners with its
principal in Japan, Daiei Sangyo Co. Ltd., by opening a letter of credit on 23
February 1990 under its own name with the First Interstate Bank of Tokyo.

The trial court held respondent bound to the quotation it submitted to petitioner
particularly with respect to the terms of payment and delivery of the cylinder
liners. It also declared that respondent had agreed to the cancellation of the
contract of sale when it returned the postdated checks issued by petitioner.
Respondent's counterclaims for moral, exemplary, and compensatory damages
were dismissed for insufficiency of evidence.

On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's

warehouse in North Harbor, Manila. The sales invoices 7 evidencing the delivery
of the cylinder liners both contain the notation "subject to verification" under
which the signature of Eric Go, petitioner's warehouseman, appeared.
Respondent thereafter sent a Statement of Account dated 15 November 1990 8 to
petitioner. While the other items listed in said statement of account were fully
paid by petitioner, the two cylinder liners delivered to petitioner on 20 April 1990
remained unsettled. Consequently, Mr. Alejandro Kanaan, Jr., respondent's vicepresident, sent a demand letter dated 02 January 1991 9 to petitioner requiring the
latter to pay the value of the cylinder liners subjects of this case. Instead of
heeding the demand of respondent for the full payment of the value of the
cylinder liners, petitioner sent the former a letter dated 12 March 1991 10 offering
to pay only P150,000 for the cylinder liners. In said letter, petitioner claimed that
as the cylinder liners were delivered late and due to the scrapping of the M/V
Dadiangas Express, it (petitioner) would have to sell the cylinder liners in
Singapore and pay the balance from the proceeds of said sale.
Shortly thereafter, another demand letter dated 27 March 1991 11 was furnished
petitioner by respondent's counsel requiring the former to settle its obligation to
respondent together with accrued interest and attorney's fees.
Due to the failure of the parties to settle the matter, respondent filed an action for
sum of money and damages before the Regional Trial Court (RTC) of Makati
City. In its complaint,12 respondent (plaintiff below) alleged that despite its
repeated oral and written demands, petitioner obstinately refused to settle its
obligations. Respondent prayed that petitioner be ordered to pay for the value of
the cylinder liners plus accrued interest of P111,300 as of May 1991 and
additional interest of 14% per annum to be reckoned from June 1991 until the full
payment of the principal; attorney's fees; costs of suits; exemplary damages;
actual damages; and compensatory damages.
On 25 July 1991, and prior to the filing of a responsive pleading, respondent filed
an amended complaint with preliminary attachment pursuant to Sections 2 and 3,
Rule 57 of the then Rules of Court. 13 Aside from the prayer for the issuance of
writ of preliminary attachment, the amendments also pertained to the issuance by
petitioner of the postdated checks and the amounts of damages claimed.

Respondent moved for the reconsideration of the trial court's Decision but the
motion was denied for lack of merit.25
Aggrieved by the findings of the trial court, respondent filed an appeal with the
Court of Appeals26 which reversed and set aside the Decision of the court a quo.
The appellate court brushed aside petitioner's claim that time was of the essence
in the contract of sale between the parties herein considering the fact that a
significant period of time had lapsed between respondent's offer and the
issuance by petitioner of its purchase orders. The dispositive portion of the
Decision of the appellate court states:
WHEREFORE, the decision of the lower court is REVERSED and
SET ASIDE. The appellee is hereby ORDERED to pay the appellant
the amount of P954,000.00, and accrued interest computed at 14%
per annum reckoned from May, 1991.27
The Court of Appeals also held that respondent could not have incurred delay in
the delivery of cylinder liners as no demand, judicial or extrajudicial, was made
by respondent upon petitioner in contravention of the express provision of Article
1169 of the Civil Code which provides:
Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.
Likewise, the appellate court concluded that there was no evidence of the alleged
cancellation of orders by petitioner and that the delivery of the cylinder liners on
20 April 1990 was reasonable under the circumstances.
On 22 May 2000, petitioner filed a motion for reconsideration of the Decision of
the Court of Appeals but this was denied through the resolution of 06 October
2000.28 Hence, this petition for review which basically raises the issues of
whether or not respondent incurred delay in performing its obligation under the

contract of sale and whether or not said contract was validly rescinded by
petitioner.
That a contract of sale was entered into by the parties is not disputed. Petitioner,
however, maintains that its obligation to pay fully the purchase price was
extinguished because the adverted contract was validly terminated due to
respondent's failure to deliver the cylinder liners within the two-month period
stated in the formal quotation dated 31 May 1989.
The threshold question, then, is: Was there late delivery of the subjects of the
contract of sale to justify petitioner to disregard the terms of the contract
considering that time was of the essence thereof?
In determining whether time is of the essence in a contract, the ultimate criterion
is the actual or apparent intention of the parties and before time may be so
regarded by a court, there must be a sufficient manifestation, either in the
contract itself or the surrounding circumstances of that intention. 29 Petitioner
insists that although its purchase orders did not specify the dates when the
cylinder liners were supposed to be delivered, nevertheless, respondent should
abide by the term of delivery appearing on the quotation it submitted to
petitioner.30 Petitioner theorizes that the quotation embodied the offer from
respondent while the purchase order represented its (petitioner's) acceptance of
the proposed terms of the contract of sale.31 Thus, petitioner is of the view that
these two documents "cannot be taken separately as if there were two distinct
contracts."32 We do not agree.
It is a cardinal rule in interpretation of contracts that if the terms thereof are clear
and leave no doubt as to the intention of the contracting parties, the literal
meaning shall control.33 However, in order to ascertain the intention of the parties,
their contemporaneous and subsequent acts should be considered. 34 While this
Court recognizes the principle that contracts are respected as the law between
the contracting parties, this principle is tempered by the rule that the intention of
the parties is primordial35 and "once the intention of the parties has been
ascertained, that element is deemed as an integral part of the contract as though
it has been originally expressed in unequivocal terms." 36
In the present case, we cannot subscribe to the position of petitioner that the
documents, by themselves, embody the terms of the sale of the cylinder liners.
One can easily glean the significant differences in the terms as stated in the
formal quotation and Purchase Order No. 13839 with regard to the due date of
the down payment for the first cylinder liner and the date of its delivery as well as
Purchase Order No. 14011 with respect to the date of delivery of the second
cylinder liner. While the quotation provided by respondent evidently stated that
the cylinder liners were supposed to be delivered within two months from receipt
of the firm order of petitioner and that the 25% down payment was due upon the
cylinder liners' delivery, the purchase orders prepared by petitioner clearly
omitted these significant items. The petitioner's Purchase Order No. 13839 made
no mention at all of the due dates of delivery of the first cylinder liner and of the
payment of 25% down payment. Its Purchase Order No. 14011 likewise did not
indicate the due date of delivery of the second cylinder liner.
In the case of Bugatti v. Court of Appeals, 37 we reiterated the principle that "[a]
contract undergoes three distinct stages preparation or negotiation, its
perfection, and finally, its consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and ends at
the moment of agreement of the parties. The perfection or birth of the contract
takes place when the parties agree upon the essential elements of the contract.
The last stage is the consummation of the contract wherein the parties fulfill or
perform the terms agreed upon in the contract, culminating in the extinguishment
thereof."
In the instant case, the formal quotation provided by respondent represented the
negotiation phase of the subject contract of sale between the parties. As of that
time, the parties had not yet reached an agreement as regards the terms and
conditions of the contract of sale of the cylinder liners. Petitioner could very well
have ignored the offer or tendered a counter-offer to respondent while the latter
could have, under the pertinent provision of the Civil Code, 38 withdrawn or
modified the same. The parties were at liberty to discuss the provisions of the
contract of sale prior to its perfection. In this connection, we turn to the
testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed,
renegotiated prior to the issuance of Purchase Order No. 13839.
During the hearing of the case on 28 January 1993, Pajarillo testified as follows:
Q: You testified Mr. Witness, that you submitted a quotation with
defendant Lorenzo Shipping Corporation dated rather marked as
Exhibit A stating the terms of payment and delivery of the cylinder
liner, did you not?
A: Yes sir.

Q: I am showing to you the quotation which is marked as Exhibit A

there appears in the quotation that the delivery of the cylinder liner
will be made in two months' time from the time you received the
confirmation of the order. Is that correct?
A: Yes sir.
Q: Now, after you made the formal quotation which is Exhibit A how
long a time did the defendant make a confirmation of the order?
A: After six months.
Q: And this is contained in the purchase order given to you by
Lorenzo Shipping Corporation?
A: Yes sir.
Q: Now, in the purchase order dated November 2, 1989 there
appears only the date the terms of payment which you required of
them of 25% down payment, now, it is stated in the purchase order
the date of delivery, will you explain to the court why the date of
delivery of the cylinder liner was not mentioned in the purchase order
which is the contract between you and Lorenzo Shipping
Corporation?
A: When Lorenzo Shipping Corporation inquired from us for that
cylinder liner, we have inquired [with] our supplier in Japan to give us
the price and delivery of that item. When we received that quotation
from our supplier it is stated there that they can deliver within two
months but we have to get our confirmed order within June.
Q: But were you able to confirm the order from your Japanese
supplier on June of that year?
A: No sir.
Q: Why? Will you tell the court why you were not able to confirm your
order with your Japanese supplier?
A: Because Lorenzo Shipping Corporation did not give us the
purchase order for that cylinder liner.
Q: And it was only on November 2, 1989 when they gave you the
purchase order?
A: Yes sir.
Q: So upon receipt of the purchase order from Lorenzo Shipping
Lines in 1989 did you confirm the order with your Japanese supplier
after receiving the purchase order dated November 2, 1989?
A: Only when Lorenzo Shipping Corporation will give us the down
payment of 25%.39
For his part, during the cross-examination conducted by counsel for
petitioner, Kanaan, Jr., testified in the following manner:
WITNESS: This term said 25% upon delivery. Subsequently, in the
final contract, what was agreed upon by both parties was 25% down
payment.
Q: When?
A: Upon confirmation of the order.
...
Q: And when was the down payment supposed to be paid?
A: It was not stated when we were supposed to receive that.
Normally, we expect to receive at the earliest possible time. Again,
that would depend on the customers. Even after receipt of the

purchase order which was what happened here, they re-negotiated

the terms and sometimes we do accept that.
Q: Was there a re-negotiation of this term?
A: This offer, yes. We offered a final requirement of 25% down
payment upon delivery.

cylinder liner supposed to be delivered on 02 January 1990 fail to impress. It is

not an indication of failure to honor a commitment on the part of the respondent.
The earliest maturity date of the checks was 18 January 1990. As delivery of said
checks could produce the effect of payment only when they have been
cashed,45 respondent's obligation to deliver the first cylinder liner could not have
arisen as early as 02 January 1990 as claimed by petitioner since by that time,
petitioner had yet to fulfill its undertaking to fully pay for the value of the first
cylinder liner. As explained by respondent, it proceeded with the placement of the
order for the cylinder liners with its principal in Japan solely on the basis of its
previously harmonious business relationship with petitioner.

Q: What was the re-negotiated term?

A: 25% down payment
Q: To be paid when?
A: Supposed to be paid upon order.40
The above declarations remain unassailed. Other than its bare assertion that the
subject contracts of sale did not undergo further renegotiation, petitioner failed to
proffer sufficient evidence to refute the above testimonies of Pajarillo and
Kanaan, Jr.
Notably, petitioner was the one who caused the preparation of Purchase Orders
No. 13839 and No. 14011 yet it utterly failed to adduce any justification as to why
said documents contained terms which are at variance with those stated in the
quotation provided by respondent. The only plausible reason for such failure on
the part of petitioner is that the parties had, in fact, renegotiated the proposed
terms of the contract of sale. Moreover, as the obscurity in the terms of the
contract between respondent and petitioner was caused by the latter when it
omitted the date of delivery of the cylinder liners in the purchase orders and
varied the term with respect to the due date of the down payment, 41 said
obscurity must be resolved against it. 42
Relative to the above discussion, we find the case of Smith, Bell & Co., Ltd. v.
Matti,43 instructive. There, we held that
When the time of delivery is not fixed or is stated in general and
indefinite terms, time is not of the essence of the contract. . . .
In such cases, the delivery must be made within a reasonable time.
The law implies, however, that if no time is fixed, delivery shall be made within a
reasonable time, in the absence of anything to show that an immediate delivery
intended. . . .
We also find significant the fact that while petitioner alleges that the cylinder
liners were to be used for dry dock repair and maintenance of its M/V Dadiangas
Express between the later part of December 1989 to early January 1990, the
record is bereft of any indication that respondent was aware of such fact. The
failure of petitioner to notify respondent of said date is fatal to its claim that time
was of the essence in the subject contracts of sale.
In addition, we quote, with approval, the keen observation of the Court of
Appeals:
. . . It must be noted that in the purchase orders issued by the
appellee, dated November 2, 1989 and January 15, 1990, no specific
date of delivery was indicated therein. If time was really of the
essence as claimed by the appellee, they should have stated the
same in the said purchase orders, and not merely relied on the
quotation issued by the appellant considering the lapse of time
between the quotation issued by the appellant and the purchase
orders of the appellee.
In the instant case, the appellee should have provided for an
allowance of time and made the purchase order earlier if indeed the
said cylinder liner was necessary for the repair of the vessel
scheduled on the first week of January, 1990. In fact, the appellee
should have cancelled the first purchase order when the cylinder liner
was not delivered on the date it now says was necessary. Instead it
issued another purchase order for the second set of cylinder liner.
This fact negates appellee's claim that time was indeed of the
essence in the consummation of the contract of sale between the
parties.44
Finally, the ten postdated checks issued in November 1989 by petitioner and
received by the respondent as full payment of the purchase price of the first

As an aside, let it be underscored that "[e]ven where time is of the essence, a

breach of the contract in that respect by one of the parties may be waived by the
other party's subsequently treating the contract as still in force." 46 Petitioner's
receipt of the cylinder liners when they were delivered to its warehouse on 20
April 1990 clearly indicates that it considered the contract of sale to be still
subsisting up to that time. Indeed, had the contract of sale been cancelled
already as claimed by petitioner, it no longer had any business receiving the
cylinder liners even if said receipt was "subject to verification." By accepting the
cylinder liners when these were delivered to its warehouse, petitioner
indisputably waived the claimed delay in the delivery of said items.
We, therefore, hold that in the subject contracts, time was not of the essence.
The delivery of the cylinder liners on 20 April 1990 was made within a reasonable
period of time considering that respondent had to place the order for the cylinder
liners with its principal in Japan and that the latter was, at that time, beset by
heavy volume of work.47
There having been no failure on the part of the respondent to perform its
obligation, the power to rescind the contract is unavailing to the petitioner. Article
1191 of the New Civil Code runs as follows:
The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon
him.
The law explicitly gives either party the right to rescind the contract only upon the
failure of the other to perform the obligation assumed thereunder.48 The right,
however, is not an unbridled one. This Court in the case of University of the
Philippines v. De los Angeles,49 speaking through the eminent civilist Justice
J.B.L. Reyes, exhorts:
Of course, it must be understood that the act of a party in treating a contract as
cancelled or resolved on account of infractions by the other contracting party
must be made known to the other and is always provisional, being ever subject to
scrutiny and review by the proper court. If the other party denied that rescission
is justified, it is free to resort to judicial action in its own behalf, and bring the
matter to court. Then, should the court, after due hearing, decide that the
resolution of the contract was not warranted, the responsible party will be
sentenced to damages; in the contrary case, the resolution will be affirmed, and
the consequent indemnity awarded to the party prejudiced. (Emphasis supplied)
In other words, the party who deems the contract violated may consider it
resolved or rescinded, and act accordingly, without previous court action, but it
proceeds at its own risk. For it is only the final judgment of the corresponding
court that will conclusively and finally settle whether the action taken was or was
not correct in law. But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a judgment before
taking extrajudicial steps to protect its interest. Otherwise, the party injured by the
other's breach will have to passively sit and watch its damages accumulate
during the pendency of the suit until the final judgment of rescission is rendered
when the law itself requires that he should exercise due diligence to minimize its
own damages.50
Here, there is no showing that petitioner notified respondent of its intention to
rescind the contract of sale between them. Quite the contrary, respondent's act of
proceeding with the opening of an irrevocable letter of credit on 23 February
1990 belies petitioner's claim that it notified respondent of the cancellation of the
contract of sale. Truly, no prudent businessman would pursue such action
knowing that the contract of sale, for which the letter of credit was opened, was
already rescinded by the other party.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari
is DENIED. The Decision of the Court of Appeals, dated 28 April 2000, and its
Resolution, dated 06 October 2000, are hereby AFFIRMED. No costs.
SO ORDERED.

Delivery to the Carrier: At what point the articles were considered delivered
to the buyer
Behn, Meyer & Co. v. Yangco
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. (Irelandvs. 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.
To answer the inquiry with which we begun this decision, the contract between
the parties was for 80 drums of caustic soda, 76 per cent "Carabao" brand, at the
price of $9.75 per one hundred pounds, cost, insurance, and freight included, to
be shipped during March, 1916, to be delivered to Manila and paid for on delivery
of the documents.
PERFORMANCE.
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 the buyer has not been complied with. The buyer may therefore
rescind the contract of sale because of a breach in substantial particulars going

to the essence of the contract. As contemplated by article 1451 of the Civil Code,
the vendee can demand fulfillment of the contract, and this being shown to be
impossible, is relieved of his obligation. There thus being sufficient ground for
rescission, the defendant is not liable.
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.

On December 6, 1999, the Housing and Land Use Arbiter (the Arbiter)
rendered a Decision[8] dismissing the complaint. The Arbiter found petitioner not
guilty of misrepresentation. Considering further that the subject properties have
been delivered on October 10, 1996 and respondent filed his complaint only on
August 7, 1998, the Arbiter further ruled that respondents action had already
prescribed pursuant to Article 1543, [9] in relation to Articles 1539 and 1542, [10] of
the Civil Code. The dispositive portion of the said decision reads:
WHEREFORE, Premises Considered, judgment is
hereby rendered DISMISSING this Complaint, and
ordering the parties to do the following, to wit:

Completeness of Delivery: Real Estate: Where it is sold per unit or number

1.

For the Complainant to SIGN the two (2) Deed[s] of

Absolute Sale which this Board finds to be in order
within 30 days from finality of this decision; and

2.

For the Respondent to DELIVER the corresponding

condominium certificate of title for the two units
namely units 2405 and 2406 free from all liens and
encumbrances.

Cebu Winland Devt. Corp. v. Ong Siao Hua

Before us is a Petition for Review [1] filed under Rule 45 of the Rules of Court
assailing the Decision[2] dated February 14, 2006 of the Court of Appeals and its
Resolution[3] dated June 2, 2006 denying petitioners motion for reconsideration
of the said decision.

Consequently, the counterclaim is likewise

dismissed for it finds no evidence that Complainant acted
in bad faith in filing this complaint.

The facts are undisputed.

Petitioner, Cebu Winland Development Corporation, is the owner and
developer of a condominium project called the Cebu Winland Tower
Condominium located in Juana Osmea Extension, Cebu City.
Respondent, Ong Siao Hua, is a buyer of two condominium units and four
parking slots from petitioner.
Sometime before January 6, 1995 while the Cebu Winland Tower
Condominium was under construction, petitioner offered to sell to respondent
condominium units at promotional prices. As an added incentive, petitioner
offered a 3% discount provided 30% of the purchase price is paid as down
payment and the balance paid in 24 equal monthly installments.
On January 6, 1995, respondent accepted the offer of petitioner and
bought two condominium units designated as Unit Nos. 2405 and 2406, as well
as four parking slots designated as slots 91, 99, 101 and 103 (subject
properties).
The area per condominium unit as indicated in petitioners price list is 155
square meters and the price per square meter is P22,378.95. The price for the
parking slot isP240,000 each. Respondent, therefore, paid P2,298,655.08 as
down payment and issued 24 postdated checks in the amount of P223,430.70
per check for the balance of the purchase price in the total amount
of P5,362,385.19 computed as follows:[4]
155 sq.m./unit x 2 units x P22,378.95/sq.m.
4 parking slots at P240,000/slot
Sub-total
Less: 3% discount
Net purchase price
30% down payment
Balance at P223,430.70 per month for 24 months

SO ORDERED.[11]
Aggrieved, respondent filed a Petition for Review of said decision with the
Board of Commissioners of the HLURB (the Board). In the course of its
proceedings, the Board ordered that an ocular inspection of Unit Nos. 2405 and
2406 be conducted by an independent engineer. The Board further ordered that
there should be two measurements of the areas in controversy, one based on the
master deed and another based on the internal surface of the perimeter
wall. After the ocular inspection, the independent geodetic engineer found the
following measurements:
Unit 2405- Based on internal face of perimeter
wall
= 109 sq. m.
Based on master
deed
= 115 sq. m.
Unit 2406- Based on internal face of perimeter wall

= 110 sq.

m.
Based on master deed

= 116

sq. m.[12]

Thereafter, the Board rendered its Decision [13] dated June 8, 2004 affirming
the Arbiters finding that respondents action had already prescribed. However,
P6,937,474.50
the Board found that there was a mistake regarding the object of the sale
960,000.00
constituting a ground for rescission based on Articles 1330 and 1331 [14] of the
P 7,897,474.50
Civil Code. Hence, the Board modified the decision of the Arbiter as follows:
( 236,924.23)
P 7,660,550.27
Wherefore[,] the decision of the [O]ffice below is
( 2,298,165.08)
hereby modified with the following additional directive:
P 5,362,385.19

The parties did not execute any written document setting forth the
said transaction.
On October 10, 1996, possession of the subject properties was turned
over to respondent.[5]
After the purchase price was fully paid with the last check dated January
31, 1997, respondent requested petitioner for the condominium certificates of title
evidencing ownership of the units. Petitioner then sent to respondent, for the
latters signature, documents denominated as Deeds of Absolute Sale for the two
condominium units.
Upon examination of the deed of absolute sale of Unit No. 2405 and the
identical document for Unit No. 2406, respondent was distressed to find that the
stated floor area is only 127 square meters contrary to the area indicated in the
price list which was 155 square meters. Respondent caused a verification
survey of the said condominium units and discovered that the actual area is only
110 square meters per unit. Respondent demanded from petitioner to refund the
amount of P2,014,105.50 representing excess payments for the difference in the
area, computed as follows:[6]
155 sq.m.-110 = 45 x 2 units =
= P2,014,105.50

Cost against the parties.

90 sq.m. x P22,378.95

Petitioner refused to refund the said amount to respondent. Consequently,

respondent filed a Complaint [7] on August 7, 1998 in the Regional Office of the
Housing and Land Use Regulatory Board (HLURB) in Cebu City, praying for the
refund of P2,014,105.50 plus interest, moral damages and attorneys fees,
including the suspension of petitioners license to sell. The case was docketed
as HLURB Case No. REM-0220-080798.

In the alternative, and at the option of the

complainant, the contract is rescinded and the respondent
is directed to refund to (sic) P7,660,550[.]27 while
complainant is directed to turn over possession of the
units 2405, 2406 and the four parking lots to the
respondent.
So ordered.[15]
Not satisfied with the decision of the Board, petitioner filed an appeal
to the Office of the President arguing that the Board erred in granting relief to
respondent considering that the latters action had already prescribed. On March
11, 2005, the Office of the President rendered a Decision [16] finding that
respondents action had already prescribed pursuant to Article 1543 of the Civil
Code. The dispositive portion of said decision reads as follows:
WHEREFORE, premises considered, the Decision
dated
June
8,
2004
of
the
HLURB
is
hereby MODIFIED and the Decision dated December 6,
1999 of the Housing and Land Use Arbiter is
hereby REINSTATED.
SO ORDERED.[17]

Respondent filed a Motion for Reconsideration but the same was

denied by the Office of the President in a Resolution [18] dated June 20,
2005. Hence, respondent filed a Petition for Review before the Court of Appeals.
On February 14, 2006, the Court of Appeals rendered the assailed
Decision finding that respondents action has not prescribed. The dispositive
portion of the Decision reads:

WHEREFORE, in view of the foregoing premises,

judgment is hereby rendered by us GRANTING the
petition filed in this case, REVERSING and SETTING
ASIDE the assailed Decision and Resolution of the Office
of the President dated March 11, 2005 and June 20,
2005, respectively, and reinstating the Decision
promulgated by the Board of Commissioners of the
HLURB on June 8, 2004.

accede to the failure to deliver what has been stipulated.

(1471) [Emphasis supplied]
ARTICLE 1543. The actions arising from
Articles 1539 and 1542 shall prescribe in six months,
counted from the day of delivery. (1472a) [Emphasis
supplied]

Petitioner argues that it delivered possession of the subject properties to

respondent on October 10, 1996, hence, respondents action filed on August 7,
1998 has already prescribed.

SO ORDERED.[19]
Petitioners Motion for Reconsideration [20] of the assailed decision
having been denied in the Resolution dated June 2, 2006, petitioner is now
before us, in this petition for review raising the following grounds:
I.
The Court of Appeals Erred in Holding That in A Contract
of Sale Ownership Is Not Transferred by Delivery[.]
II.
The Court of Appeals Erred in Holding That Respondents
Action Has Not Prescribed.
III.
The Court of Appeals Erred And Exceeded Its Jurisdiction
When It Found Petitioner Guilty Of Misrepresentation As
The Decision Of The HLURB Board of Commissioners On
The Same Matter Is Final With Respect To Respondent
Who Did Not Appeal Said Decision That Petitioner Did
Not Commit Misrepresentation.[21]
The issue before us is whether respondents action has prescribed
pursuant to Article 1543, in relation to Articles 1539 and 1542 of the Civil
Code, to wit:
ARTICLE 1539. The obligation to deliver the thing
sold includes that of placing in the control of the vendee
all that is mentioned in the contract, in conformity with the
following rules:
If the sale of real estate should be made with
a statement of its area, at the rate of a certain price
for a unit of measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter should
demand it, all that may have been stated in the contract;
but, should this be not possible, the vendee may choose
between a proportional reduction of the price and the
rescission of the contract, provided that, in the latter case,
the lack in the area be not less than one-tenth of that
stated.
The same shall be done, even when the area
is the same, if any part of the immovable is not of the
quality specified in the contract.
The rescission, in this case, shall only take
place at the will of the vendee, when the inferior value of
the thing sold exceeds one-tenth of the price agreed
upon.
Nevertheless, if the vendee would not have
bought the immovable had he known of its smaller area or
inferior quality, he may rescind the sale. (1469a)
[Emphasis supplied]
ARTICLE 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 lesser 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

Respondent, on the one hand, contends that his action has not prescribed
because the prescriptive period has not begun to run as the same must be
reckoned from the execution of the deeds of sale which has not yet been done.
The resolution of the issue at bar necessitates a scrutiny of the concept of
delivery in the context of the Law on Sales or as used in Article 1543 of the Civil
Code. Under the Civil Code, the vendor is bound to transfer the ownership of
and deliver the thing which is the object of the sale. The pertinent provisions of
the Civil Code on the obligation of the vendor to deliver the object of the sale
provide:
ARTICLE 1495.
The vendor is bound to
transfer the ownership of and deliver, as well as warrant
the thing which is the object of the sale. (1461a)
ARTICLE 1496.
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 signifying an
agreement that the possession is transferred from the
vendor to the vendee. (n)
ARTICLE 1497.
The thing sold shall be
understood as delivered, when it is placed in the control
and possession of the vendee. (1462a)
ARTICLE 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.
xxxx
Under the Civil Code, ownership does not pass by mere stipulation
but only by delivery.[22] Manresa explains, the delivery of the thing . . .
signifies that title has passed from the seller to the buyer."[23] According to
Tolentino, the purpose of delivery is not only for the enjoyment of the thing but
also a mode of acquiring dominion and determines the transmission of
ownership, the birth of the real right. The delivery under any of the forms
provided by Articles 1497 to 1505 of the Civil Code signifies that the
transmission of ownership from vendor to vendee has taken place.[24]
Article 1497 above contemplates what is known as real or actual delivery,
when the thing sold is placed in the control and possession of the
vendee. Article 1498, on the one hand, refers to symbolic delivery by the
execution of a public instrument. It should be noted, however, that Article 1498
does not say that the execution of the deed provides a conclusive presumption of
the delivery of possession. It confines itself to providing that the execution
thereof is equivalent to delivery, which means that the presumption therein can
be rebutted by means of clear and convincing evidence. Thus, the presumptive
delivery by the execution of a public instrument can be negated by the failure of
the vendee to take actual possession of the land sold. [25]
In Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,[26] the
concept of delivery was explained as follows:
Delivery has been described as a composite act, a
thing in which both parties must join and the minds of
both parties concur. It is an act by which one party
parts with the title to and the possession of the
property, and the other acquires the right to and the
possession of the same. In its natural sense, delivery
means something in addition to the delivery of property or
title; it means transfer of possession. In the Law on
Sales, delivery may be either actual or constructive,
but
both
forms
of
delivery
contemplate
"the absolute giving up of the control and custody of
the property on the part of the vendor, and the
assumption of the same by the vendee." (Emphasis
supplied)

In light of the foregoing, delivery as used in the Law on Sales

refers to the concurrent transfer of two things: (1) possession and (2)

ownership. This is the rationale behind the jurisprudential doctrine that

presumptive delivery via execution of a public instrument is negated by the reality
that the vendee actually failed to obtain material possession of the land subject of
the sale.[27] In the same vein, if the vendee is placed in actual possession of
the property, but by agreement of the parties ownership of the same is
retained by the vendor until the vendee has fully paid the price, the mere
transfer of the possession of the property subject of the sale is not the
delivery contemplated in the Law on Sales or as used in Article 1543 of
the Civil Code.
In the case at bar, it appears that respondent was already placed in
possession of the subject properties. However, it is crystal clear that the deeds
of absolute sale were still to be executed by the parties upon payment of the last
installment. This fact shows that ownership of the said properties was withheld
by petitioner. Following case law, it is evident that the parties did not intend to
immediately transfer ownership of the subject properties until full payment and
the execution of the deeds of absolute sale.[28] Consequently, there is no
delivery to speak of in this case since what was transferred was possession
only and not ownership of the subject properties.
We, therefore, hold that the transfer of possession of the subject
properties on October 10, 1996 to respondent cannot be considered as delivery
within the purview of Article 1543 of the Civil Code. It follows that since there has
been no transfer of ownership of the subject properties since the deeds of
absolute sale have not yet been executed by the parties, the action filed by
respondent has not prescribed.
The next issue is whether the sale in the case at bar is one made with
a statement of its area or at the rate of a certain price for a unit of measure and
not for a lump sum. Article 1539 provides that If the sale of real estate should be
made with a statement of its area, at the rate of a certain price for a unit of
measure or number, the vendor shall be obliged to deliver to the vendeeall that
may have been stated in the contract; but, should this be not possible, the
vendee may choose between a proportional reduction of the price and the
rescission of the contract. Article 1542, on the one hand, provides that 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 lesser area or number than that stated in the
contract."
The distinction between Article 1539 and Article 1542 was explained
by Manresa[29] as follows:
. . . If the sale was made for a price per unit of
measure or number, the consideration of the contract with
respect to the vendee, is the number of such units, or, if
you wish, the thing purchased as determined by the
stipulated number of units. But if, on the other hand, the
sale was made for a lump sum, the consideration of the
contract is the object sold, independently of its number or
measure, the thing as determined by the stipulated
boundaries, which has been called in law a determinate
object.
This difference in consideration between the
two cases implies a distinct regulation of the obligation to
deliver the object, because, for an acquittance delivery
must be made in accordance with the agreement of the
parties, and the performance of the agreement must show
the confirmation, in fact, of the consideration which
induces each of the parties to enter into the contract.
In Rudolf Lietz, Inc. v. Court of Appeals,[30] we held:
Article 1539 governs a sale of immovable by
the unit, that is, at a stated rate per unit area. In a unit
price contract, the statement of area of immovable is not
conclusive and the price may be reduced or increased
depending on the area actually delivered. If the vendor
delivers less than the area agreed upon, the vendee may
oblige the vendor to deliver all that may be stated in the
contract or demand for the proportionate reduction of the
purchase price if delivery is not possible. If the vendor
delivers more than the area stated in the contract, the
vendee has the option to accept only the amount agreed
upon or to accept the whole area, provided he pays for
the additional area at the contract rate.
In some instances, a sale of an immovable
may be made for a lump sum and not at a rate per unit.
The parties agree on a stated 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.
In the case where the area of the immovable
is stated in the contract based on an estimate, the actual
area delivered may not measure up exactly with the area
stated in the contract. According to Article 1542 of the

Civil Code, 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 lesser area or
number than that stated in the contract. However, the
discrepancy must not be substantial. A vendee of land,
when 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. The use of "more or less" or
similar words in designating quantity covers only a
reasonable excess or deficiency.
Where both the area and the boundaries of
the immovable are declared, the area covered within the
boundaries of the immovable prevails over the stated
area. In cases of conflict between areas and boundaries,
it is the latter which should prevail. What really defines a
piece of ground is not the area, calculated with more or
less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and
indicating its limits. In a contract of sale of land in a mass,
it is well established that the specific boundaries stated in
the contract must control over any statement with respect
to the area contained within its boundaries. It is not of vital
consequence that a deed or contract of sale of land
should disclose the area with mathematical accuracy. It is
sufficient if its extent is objectively indicated with sufficient
precision to enable one to identify it. An error as to the
superficial area is immaterial. Thus, the obligation of the
vendor is to deliver everything within the boundaries,
inasmuch as it is the entirety thereof that distinguishes the
determinate object.
In the case at bar, it is undisputed by the parties that the purchase
price of the subject properties was computed based on the price list prepared by
petitioner, or P22,378.95 per square meter. Clearly, the parties agreed on a sale
at a rate of a certain price per unit of measure and not one for a lump
sum. Hence, it is Article 1539 and not Article 1542 which is the applicable
law. Accordingly, respondent is entitled to the relief afforded to him under Article
1539, that is, either a proportional reduction of the price or the rescission of the
contract, at his option. Respondent chose the former remedy since he prayed in
his Complaint for the refund of the amount of P2,014,105.50 representing the
proportional reduction of the price paid to petitioner.
In its decision, the Court of Appeals held that the action filed by respondent
has not prescribed and reinstated the decision of the Board. It is an error to
reinstate the decision of the Board. The Board, in its decision, held that there
was a mistake regarding the object of the sale constituting a ground for
rescission based on Articles 1330 and 1331 of the Civil Code. It then granted the
relief of rescission at the option of respondent. Articles 1330 and 1331 of the
Civil Code provide:
ARTICLE 1330. A contract where consent is
given through mistake, violence, intimidation, undue
influence, or fraud is voidable. (1265a)
ARTICLE 1331. In order that mistake may
invalidate consent, it should refer to the substance of the
thing which is the object of the contract, or to those
conditions which have principally moved one or both
parties to enter into the contract.
We find that these articles are inapplicable to the case at bar. In order that
mistake may invalidate consent and constitute a ground for annulment of contract
based on Article 1331, the mistake must be material as to go to the essence of
the contract; that without such mistake, the agreement would not have been
made.[31] The effect of error must be determined largely by its influence upon the
party. If the party would have entered into the contract even if he had knowledge
of the true fact, then the error does not vitiate consent. [32]
In the case at bar, the relief sought by respondent was for a refund and he
continued to occupy the subject properties after he found out that the same were
smaller in area. All these show that respondent did not consider the error in size
significant enough to vitiate the contract. Hence, the Court of Appeals erred in
affirming the Boards decision to grant rescission based on Articles 1330 and
1331 of the Civil Code.
IN VIEW WHEREOF, the petition is DENIED. The decision of the
Court of Appeals is AFFIRMED but with the MODIFICATION that the decision of
the HLURB is not reinstated. Petitioner is ordered to refund the amount of Two
Million Fourteen Thousand One Hundred Five Pesos and Fifty Centavos
(P2,014,105.50) to respondent with legal interest of six percent (6%) per annum
from August 7, 1998, the date of judicial demand. A twelve percent (12%)
interest per annum, in lieu of six percent (6%), shall be imposed on such amount
from the date of promulgation of this decision until the payment thereof. Costs
against petitioner.
SO ORDERED.

as attorneys fees; and (4) P10,000.00 as litigation

expenses.
Distinction between 1539 and 1542
SO ORDERED.[8]
Rudolf Lietz, Inc. v. CA
This is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court, praying for the annulment of the Decision[1] dated April 17, 1995 and
the Resolution[2] dated October 25, 1995 of the Court of Appeals in CA-G.R. CV
No. 38854. The Court of Appeals affirmed the Decision[3] in Civil Case No. 2164
of the Regional Trial Court (RTC), Branch 48, of Palawan and Puerto Princesa
City with the modification that herein respondents Tiziana Turatello and Paola
Sani are entitled to damages, attorneys fees, and litigation expenses.

Petitioner brought to this Court the instant petition after the denial of its
motion for reconsideration of the Court of Appeal Decision. The instant petition
imputes the following errors to the Court of Appeals.
I.

IN DEFENDING AGAPITO BURIOLS

GOOD FAITH AND IN STATING THAT
ASSUMING THAT HE (BURIOL) WAS IN BAD
FAITH
PETITIONER
WAS
SOLELY
RESPONSIBLE FOR ITS INEXCUSABLE
CREDULOUSNESS.

II.

IN ASSERTING THAT ARTICLES 1542 AND

1539 OF THE NEW CIVIL CODE ARE,
RESPECTIVELY,
APPLICABLE
AND
INAPPLICABLE IN THE CASE AT BAR.

III.

IN NOT GRANTING PETITIONERS CLAIM

FOR ACTUAL AND EXEMPLARY DAMAGES.

IV.

IN GRANTING RESPONDENTS TIZIANA

TURATELLO
AND
PAOLA
SANI
EXHORBITANT
[sic]
AMOUNTS
AS
DAMAGES WHICH ARE EVEN BEREFT OF
EVIDENTIARY BASIS.[9]

The dispositive portion of the RTC Decision reads:

WHEREFORE, in view of the foregoing and
as prayed for by the defendants, the instant complaint is
hereby DISMISSED. Defendants counterclaim is likewise
DISMISSED. Plaintiff, however, is ordered to pay
defendant Turatello and Sanis counsel the sum
of P3,010.38 from August 9, 1990 until fully paid
representing the expenses incurred by said counsel when
the trial was cancelled due to the non-appearance of
plaintiffs witnesses. With costs against the plaintiff.
SO ORDERED.[4]
As culled from the records, the following antecedents appear:
Respondent Agapito Buriol previously owned a parcel of unregistered land
situated at Capsalay Island, Port Barton, San Vicente, Palawan. On August 15,
1986, respondent Buriol entered into a lease agreement with Flavia Turatello and
respondents Turatello and Sani, all Italian citizens, involving one (1) hectare of
respondent Buriols property. The lease agreement was for a period of 25 years,
renewable for another 25 years. The lessees took possession of the land after
paying respondent Buriol a down payment of P10,000.00.[5] The lease
agreement, however, was reduced into writing only in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz,
Inc. the same parcel of land for the amount of P30,000.00. TheDeed of Absolute
Sale embodying the agreement described the land as follows:
A parcel of land, consisting of FIVE (5) hectares,
more or less, a portion of that parcel of land declared in
the name of Agapito Buriol, under Tax Declaration No.
0021, revised in the year 1985, together with all
improvements thereon, situated at the Island of Capsalay,
Barangay Port Barton, municipality of San Vicente,
province of Palawan which segregated from the whole
parcel described in said tax declaration, has the following
superficial boundaries: NORTH, Sec. 01-017; and
remaining property of the vendor; EAST, by Seashore;
SOUTH, 01-020; and WEST, by 01-018 (now Elizabeth
Lietz).[6]

Essentially, only two main issues confront this Court, namely: (i)
whether or not petitioner is entitled to the delivery of the entire five hectares or its
equivalent, and (ii) whether or not damages may be awarded to either party.
Petitioner contends that it is entitled to the corresponding reduction of
the purchase price because the agreement was for the sale of five (5) hectares
although respondent Buriol owned only four (4) hectares. As in its appeal to the
Court of Appeals, petitioner anchors its argument on the second paragraph of
Article 1539 of the Civil Code, which provides:
Art. 1539. The obligation to deliver the thing
sold includes that of placing in the control of the vendee
all that is mentioned in the contract, in conformity with the
following rules:
If the sale of real estate should be made with
a statement of its area, at the rate of a certain price for a
unit of measure or number, the vendor shall be obliged to
deliver to the vendee, if the latter should demand it, all
that may have been stated in the contract; but, should this
be not possible, the vendee may choose between a
proportional reduction of the price and the rescission of
the contract, provided that, in the latter case, the lack in
the area be not less than one-tenth of that stated.
. . . .

Petitioner later discovered that respondent Buriol owned only four (4)
hectares, and with one more hectare covered by lease, only three (3) hectares
were actually delivered to petitioner. Thus, petitioner instituted on April 3, 1989 a
complaint for Annulment of Lease with Recovery of Possession with Injunction
and Damages against respondents and Flavia Turatello before the RTC. The
complaint alleged that with evident bad faith and malice, respondent Buriol sold
to petitioner five (5) hectares of land when respondent Buriol knew for a fact that
he owned only four (4) hectares and managed to lease one more hectare to
Flavia Turatello and respondents Tiziana Turatello and Paola Sani. The complaint
sought the issuance of a restraining order and a writ of preliminary injunction to
prevent Flavia Turatello and respondents Turatello and Sani from introducing
improvements on the property, the annulment of the lease agreement between
respondents, and the restoration of the amount paid by petitioner in excess of the
value of the property sold to him. Except for Flavia Turatello, respondents filed
separate answers raising similar defenses of lack of cause of action and lack of
jurisdiction over the action for recovery of possession. Respondents Turatello
and Sani also prayed for the award of damages and attorneys fees. [7]
After trial on the merits, the trial court rendered judgment on May 27, 1992,
dismissing both petitioners complaint and respondents counterclaim for
damages. Petitioner and respondents Turatello and Sani separately appealed
the RTC Decision to the Court of Appeals, which affirmed the dismissal of
petitioners complaint and awarded respondents Turatello and Sani damages and
attorneys fees. The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the decision appealed from is
hereby AFFIRMED, with the following modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby
(1) ordered to pay defendants-appellants Turatello and
Sani, the sum of P100,000.00 as moral damages;
(2) P100,000.00 as exemplary damages; (3) P135,728.73

The Court of Appeals Decision, however, declared as inapplicable the

abovequoted provision and instead ruled that petitioner is no longer entitled to a
reduction in price based on the provisions of Article 1542 of the Civil Code, which
read:
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
lesser 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.
Article 1539 governs a sale of immovable by the unit, that is, at a
stated rate per unit area. In a unit price contract, the statement of area of
immovable is not conclusive and the price may be reduced or increased
depending on the area actually delivered. If the vendor delivers less than the
area agreed upon, the vendee may oblige the vendor to deliver all that may be
stated in the contract or demand for the proportionate reduction of the purchase

price if delivery is not possible. If the vendor delivers more than the area stated in
the contract, the vendee has the option to accept only the amount agreed upon
or to accept the whole area, provided he pays for the additional area at the
contract rate.[10]
In some instances, a sale of an immovable may be made for a lump
sum and not at a rate per unit. The parties agree on a stated 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.
In the case where the area of the immovable is stated in the contract
based on an estimate, the actual area delivered may not measure up exactly with
the area stated in the contract. According to Article 1542 [11] of the Civil Code, 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 lesser area or number than that stated in the
contract. However, the discrepancy must not be substantial. A vendee of land,
when 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. The use of
more or less or similar words in designating quantity covers only a reasonable
excess or deficiency.[12]
Where both the area and the boundaries of the immovable are
declared, the area covered within the boundaries of the immovable prevails over
the stated area. In cases of conflict between areas and boundaries, it is the latter
which should prevail. What really defines a piece of ground is not the area,
calculated with more or less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and indicating its limits. In a
contract of sale of land in a mass, it is well established that the specific
boundaries stated in the contract must control over any statement with respect to
the area contained within its boundaries. It is not of vital consequence that a
deed or contract of sale of land should disclose the area with mathematical
accuracy. It is sufficient if its extent is objectively indicated with sufficient
precision to enable one to identify it. An error as to the superficial area is
immaterial.[13] Thus, the obligation of the vendor is to deliver everything within the
boundaries, inasmuch as it is the entirety thereof that distinguishes the
determinate object.[14]
As correctly noted by the trial court and the Court of Appeals, the sale
between petitioner and respondent Buriol involving the latters property is one
made for a lump sum. The Deed of Absolute Sale shows that the parties agreed
on the purchase price on a predetermined area of five hectares within the
specified boundaries and not based on a particular rate per area. In accordance
with Article 1542, there shall be no reduction in the purchase price even if the
area delivered to petitioner is less than that stated in the contract. In the instant
case, the area within the boundaries as stated in the contract shall control over
the area agreed upon in the contract.
The Court rejects petitioners contention that the propertys
boundaries as stated in the Deed of Absolute Sale are superficial and
unintelligible and, therefore, cannot prevail over the area stated in the contract.
First, as pointed out by the Court of Appeals, at an ocular inspection prior to the
perfection of the contract of sale, respondent Buriol pointed to petitioner the
boundaries of the property. Hence, petitioner gained a fair estimate of the area of
the property sold to him. Second, petitioner cannot now assail the contents of
the Deed of Absolute Sale, particularly the description of the boundaries of the
property, because petitioners subscription to the Deed of Absolute Saleindicates
his assent to the correct description of the boundaries of the property.
Petitioner also asserts that respondent Buriol is guilty of misleading
petitioner into believing that the latter was buying five hectares when he knew
prior to the sale that he owned only four hectares. The review of the
circumstances of the alleged misrepresentation is factual and, therefore, beyond
the province of the Court. Besides, this issue had already been raised before and
passed upon by the trial court and the Court of Appeals. The factual finding of the
courts below that no sufficient evidence supports petitioners allegation of
misrepresentation is binding on the Court.
The Court of Appeals reversed the trial courts dismissal of
respondents Turatello and Sanis counterclaim for moral and exemplary
damages, attorneys fees and litigation expenses. In awarding moral damages in
the amount of P100,000 in favor of Turatello and Sani, the Court of Appeals
justified the award to alleviate the suffering caused by petitioners unfounded civil
action. The filing alone of a civil action should not be a ground for an award of
moral damages in the same way that a clearly unfounded civil action is not
among the grounds for moral damages. [15]
Exemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.[16] With the deletion of the award for moral damages,
there is no basis for the award of exemplary damages.
WHEREFORE, the instant petition for review on certiorari is
GRANTED in PART. The Court of Appeals Decision in CA-G.R. CV No. 38854 is
AFFIRMED with the MODIFICATION that the award of moral and exemplary
damages is DELETED.
SO ORDERED.

Sale indicated by boundaries

Roble v. Arbasa
Petitioners appeal via certiorari from the decision1 of the Court of Appeals which
set aside the decision of the trial court and declared respondents lawful owners
and possessors of the entire parcel of land with a total area of eight hundred
eighty four (884) square meters, situated at Poblacion, Isabel, Leyte, covered by
Tax Declaration No. 67 in the name of respondent Adelaida Arbasa. 2
On January 2, 1976, spouses Dominador Arbasa and Adelaida Roble (hereinafter
referred to as respondents) purchased from Fidela Roble an unregistered parcel
of land located at Poblacion, Isabel, Leyte.3 As reflected on the deed of sale, the
property had a total land area of two hundred forty (240) square meters. Due to
their diligent efforts in reclaiming a portion of the sea, using stones, sand and
gravel, the original size of two hundred forty (240) square meters increased to
eight hundred eighty four (884) square meters, 4 described as follows:
"A parcel of residential land with all the improvements thereon;
bounded on the North, by Lot Nos. 036 and 037; East, by Roxas
Street; South, Seashore and CAD Lot No. 952; and West, by Lot Nos.
024 and 025. It has an area of 884 sq. meters, more or less, and
declared in the name of plaintiff Adelaida Arbasa under Tax
Declaration no. 7068-A and later superseded by Tax Declaration No.
67. It has an assessed value of P31,870.00." 5
Since 1976 and until the present, respondents have been in actual, open,
peaceful and continuous possession of the entire parcel of land in the concept of
owners and had it declared for taxation purposes in the name of respondent
Adelaida Arbasa. Included in the sale were the improvements found on the land,
consisting mainly of the house of Fidela.6
Adelaida tolerated her sister Fidelas continued stay at the house. Living with
Fidela in the same house were their nieces, petitioners Veronica Roble and
Lilibeth Roble as well as the latters spouse Bobby Portugaliza. Veronica and
Lilibeth Roble are the daughters of Gualberto Roble, deceased brother of Fidela
and Adelaida.
Shortly after Fidelas death on June 15, 1989, petitioners Veronica and Lilibeth
Roble claimed ownership of the house and the southern portion of the land with
an area of 644 square meters. Fidela died intestate and without issue.
Meanwhile, Gualberto Roble, petitioners father, died sometime in December
1986.
In January 1990, petitioners had this parcel of land declared for taxation
purposes in the names of Fidela Roble under Tax Declaration No. 8141 and of
Gualberto Roble under Tax Declaration No. 8142.
As efforts to have them vacate the house and desist from claiming the parcel of
land failed, respondent spouses Dominador and Adelaida Roble-Arbasa, referred
the dispute to the barangay authorities for conciliation. Nothing happened at the
barangay level.7 Hence, on February 27, 1990, spouses Arbasa filed with the
Regional Trial Court, Branch 12, Ormoc City an action for quieting of title with
damages.8
On April 4, 1990, petitioner Veronica Roble, Lilibeth Roble and Bobby Portugaliza
filed an answer to the complaint denying its material allegations. 9 They said that
the total area of the lot which respondents bought from Fidela consisted only of
two hundred forty (240) square meters, located at the northern portion of the
property. This property was originally classified as foreshore land, but in 1957,
due to the effort of Ireneo Roble, father of Fidela, Adelaida and Gualberto, a
portion of the sea was reclaimed and filled up. This was the piece of property
where respondents exercised open, public and continuous possession in the
concept of owner, and which had been declared for taxation purposes in the
name of Adelaida Roble in Tax Declaration No. 7068. 10 With the issuance of a
new tax declaration in the name of Adelaida, Tax Declaration No. 5108-R-5
originally registered in the name of Fidela Roble, was cancelled. 11
Petitioners attached as an integral part of their answer a copy of the deed of sale
dated January 2, 1976, executed by Fidela Roble in favor of Adelaida Arbasa.
The property subject of the sale was aptly described as follows:
"This is a whole parcel of residential land, located at Poblacion,
Isabel, Leyte, per Tax Declaration No. 5108-R-5, under the name of
Fidela Roble, being bounded on the North, by Matilde Evangelista;
East, by Harrison now Roxas Street; South, by Seashore; and West,

by Crestito Manipes, having an area of 240 square meters more or

less, with improvements thereon."12
In the late 1960s, Ireneo, with the help of his son Gualberto reclaimed additional
portion of the seashore at the southern portion adjacent to the 240 square meters
land earlier reclaimed and declared in the name of Fidela Roble. Because of this,
the original area of two hundred forty (240) square meters increased by six
hundred forty four (644) square meters and became eight hundred eighty four
(884), including the portion sold to Adelaida. The 644 square meters was then
divided into two (2) lots of equal proportion, evidenced by Tax Declaration Nos.
814113 and 814214 in the names of Fidela and Gualberto, respectively. Payment
of taxes on both tax declarations commenced in the year 1980. 15
Constructed over the eight hundred eighty four (884) square meters lot were
three (3) concrete houses. One of the houses was located over the two hundred
forty (240) square-meter parcel of land that spouses Arbasa bought from Fidela.
The other houses belonged to Fidela, located at the central portion, and
Gualberto, which was constructed over the southernmost portion of the eight
hundred eighty (884) square meters land.
The house at the central portion was first declared in the name of Fidela under
Tax Declaration No. 3548, commencing with the year 1974. 16 This was later
cancelled by Tax Declaration No. 5057, covering the year 1979, and later was
cancelled by Tax Declaration No. 3638, beginning with the year
1985.17 Meanwhile, the house at the southernmost portion of the land was
declared in Gualbertos name under Tax Declaration No. 3549, 18commencing
with the year 1974, later cancelled by Tax Declaration No. 5060, 19 then by Tax
Declaration No. 5662.20 The latest tax declaration on the residential house, Tax
Declaration No. 22621 cancelled the previous ones and commenced in the year
1989.
The two lots located at the southern portion, according to petitioners, were
owned by their predecessors-in-interest Fidela (322 square meters) and
Gualberto Roble (322 square meters) who had open, public and continuous
possession in the concept of owner. Like Fidelas house, the two (2) parcels of
land had been possessed in the concept of owners by their predecessors-ininterest, and were not included in the deed of sale.

The Court of Appeals observed that from the wording of the deed of sale, Fidela
Roble sold to respondents the "whole parcel of residential land" bounded on the
"south by the seashore." The Court of Appeals opined that this technical
description, as contained in the deed of sale, lent credence to the claim of
respondents that they were responsible for reclaiming the 644 square meters
claimed by petitioners. For if at the time of sale the 644 square meters were
already in existence, the deed of sale would have described the metes and
bounds of the property that was sold in a different way. It would have referred to
the boundary at the south as the "remaining portion of the vendors property" or
would have mentioned the names of Fidela or Gualberto Roble as the owners of
the adjoining properties, and not described the seashore as the boundary in the
south. The dispositive portion of the decision reads, thus:
"WHEREFORE, foregoing premises considered, we rule in favor of
plaintiffs-appellants and SET ASIDE the judgment of the lower court.
Another one is hereby entered declaring them as lawful owners and
entitled to the possession of the entire parcel of land containing an
area of 884 square meters, which is covered by Tax Declaration No.
67 in the name of plaintiff-appellant Adelaida Roble Arbasa.
"No pronouncement as to costs.
"SO ORDERED."26
On August 13, 1997, the Court of Appeals denied the petitioners motion for
reconsideration for lack of merit. In so ruling, the court said:
"We have repeatedly ruled that where land is sold for lump sum and
not so much per unit of measure or number, the boundaries of the
land stated in the contract determine the effects and scope of the
sale, not the area thereof. Hence, the vendors are obligated to deliver
all the land included within the boundaries regardless of whether the
real area should be greater or smaller than that recited in the deed.
This is particularly true when the area is described as humigit
kumulang, that is, more or less." 27
Hence, this appeal.28

At the pre-trial conference held on July 4, 1990, the parties defined the issue to
be: whether the deed of sale executed on January 2, 1975 by Fidela Roble in
favor of respondents conveyed the entire eight hundred eighty four (884) square
meters parcel of land, including the house of Fidela, or it covered only two
hundred forty (240) square meters located at the northern portion of the
property.22
On July 16, 1991, the trial court rendered a decision finding that the January 2,
1976 deed of absolute sale executed by Fidela Roble covered only a total area of
two hundred forty (240) square meters in favor of respondents and not the entire
eight hundred eighty four (884) square meters claimed by respondents.
Moreover, the house of Fidela was not found on the 240 square meters parcel
subject of the deed of sale, and such improvement was not included in the sale.
The trial court held that pursuant to Rule 130, Section 9 of the Revised Rules on
Evidence, the deed of sale was the best evidence of the contents of the
agreement. Based on the documentary evidence consisting of the deed of
absolute sale and tax declarations issued over the property, the house of Fidela
Roble was not situated on the part of the property that was sold to respondents.
Hence, respondents claim has no basis. The dispositive portion of the afore-said
decision reads:
WHEREFORE, judgement is hereby rendered finding the plaintiffs
the owners in fee simple of only TWO HUNDRED FORTY Square
Meters (240), more or less, of the parcel of land subject of the
complaint and described in T. D. No. 7068; dismissing the counterclaim and ordering the plaintiffs to pay the costs." 23
On August 8, 1991, respondents appealed the decision to the Court of Appeals. 24
On August 15, 1991, petitioners appealed the decision insofar as it denied their
claim for damages and attorneys fees.25 Petitioners claimed that they were
compelled to hire the services of a lawyer because respondents filed suit against
them, which the latter knew was malicious and without basis in law or in fact.
After due proceedings, on January 15, 1997, the Court of Appeals promulgated
its decision affirming the finding of the trial court that the deed of sale conveyed
only 240 square meters of the parcel of land existing at the time of the sale.

We find the appeal meritorious.

Jurisprudence teaches us that as a rule, jurisdiction of this Court in cases
brought to it from the Court of Appeals is limited to the review and revision of
errors of law committed by the appellate court. 29 As the findings of fact of the
appellate court are deemed conclusive,30 this Court is not duty-bound to analyze
and weigh all over again the evidence considered in the proceedings below.
However, this rule is not absolute.31 There are exceptional circumstances that
would compel the Court to review the findings of fact of the Court of Appeals. 32
Here, the Court of Appeals findings and conclusions are contrary to those of the
trial court.
After an assiduous scrutiny of the evidence, we find reason to reverse the factual
findings of the Court of Appeals and affirm that of the trial court.
The sale that transpired on January 2, 1976 between vendor Fidela and vendee
Adelaida was one of cuerpo cierto or a sale for lump sum. Pursuant to Article
1542, Civil Code of the Philippines, 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
lesser area or number than that stated in the contract. Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is the
entirety thereof that distinguishes the determinate object. 33
However, this rule admits of an exception. A vendee of land, when 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. The use of "more or less" or
similar words in designating quantity covers only a reasonable excess or
deficiency.34 In the case at bar, the parties to the agreement described the land
subject of the sale in this wise:
"This is a whole parcel of residential land, located at Poblacion,
Isabel, Leyte, per Tax Declaration No. 5108-R-5, under the name of
Fidela Roble, being bounded in the North, by Matilde Evangelista;

East, by Harrison now Roxas Street; South, by Seashore; and West,

by Cristito Manipes, having an approximate area of 240 square
meters more or less, with all improvements thereon:"[emphasis
supplied]
An area of "644 square meters more" is not reasonable excess or deficiency, to
be deemed included in the deed of sale of January 2, 1976.
Moreover, at the time of the sale, the only piece of land existing was 240 square
meters, the subject of the deed of sale. This 240 square meters parcel of land
was originally foreshore land, hence, not alienable and disposable. It was only in
1952, that Fidela applied for and was granted a foreshore lease. 35 In 1965, the
provincial assessor issued a tax declaration in her name. 36 Respondent Adelaida
admitted this fact, thus:
"ATTY ESCALON
Q
Is it not a fact that this land of 280 [sic] square meters was
applied by Fidela Roble for foreshore lease way back in 1952? Are
you aware of that?
A

I know, sir.

Q
And at that time in 1952, only these 280 square meters was
yet existing. Do you agree with me on that?
A

Yes, sir.

Q
And these 280 [sic] square meters exist because of the
diligence of Fidela Roble in filling this up with boulders, rocks, sand
and gravel?
A
That is not correct, because that was sold to me under a Deed
of sale.
Q
Is it not a fact that prior to the sale and prior to the existence
of the 280 [sic] square meters, this was yet part of the littoral zone or
part of the sea?
A

Yes, sir.

And you caused the reclamation of the original area?

It was she who did it because it was not yet sold to me." 37

Adela confirmed that when the sale took place in 1976, the houses of Fidela and
Gualberto, constructed earlier in 1971, were situated on foreshore lands adjacent
to the property that Fidela sold to her. The houses, made of concrete materials
and are two-stories high, could be reached by seawater.38 This lent credence to
the claim of petitioners that what was sold to respondents was indeed only 240
square meters parcel of land. This also explained why in the technical description
of the property as embodied in the deed of sale, the property was described as
bounded on the south by the seashore.
As held by the trial court, when the terms of an agreement had been reduced to
writing, it is considered as containing all the terms agreed upon and there can be,
between the parties and their successor-in-interest, no evidence of such terms
other than the contents of the written agreement. 39
We find no ambiguity in the terms and stipulations of the deed of sale. Contracts
are the laws between the contracting parties. It shall be fulfilled according to the
literal sense of their stipulations. If their terms are clear and leave no room for
doubt as to the intention of the contracting parties, the contracts are obligatory no
matter what their forms may be, whenever the essential requisites for their

validity are present.40 Sale, by its very nature, is a consensual contract because it
is perfected by mere consent. The essential elements of a contract of sale are
the following: (a) consent or meeting of the minds, that is consent to transfer
ownership in exchange for the price; (b) determinate subject matter; and (c) price
certain in money or its equivalent.41 All these elements are present in the instant
case.
Moreover, parol evidence rule forbids any addition to or contradiction of the terms
of a written instrument by testimony or other evidence purporting to show that, at
or before the execution of the parties written agreement, other or different terms
were agreed upon by the parties, varying the purport of the written contract.
When an agreement has been reduced to writing, the parties can not be
permitted to adduce evidence to prove alleged practices, which to all purposes
would alter the terms of the written agreement. Whatever is not found in the
writing is understood to have been waived and abandoned. 42
The rule is in fact founded on "long experience that written evidence is so much
more certain and accurate than that which rests in fleeting memory only, that it
would be unsafe, when parties have expressed the terms of their contract in
writing, to admit weaker evidence to control and vary the stronger and to show
that the parties intended a different contract from that expressed in the writing
signed by them.43
The rule is not without exceptions, however, as it is likewise provided that a party
to an action may present evidence to modify, explain, or add to the terms of the
written agreement if he puts in issue in his pleadings: (a) an intrinsic ambiguity,
mistake or imperfection in the written agreement; (b) the failure of the written
agreement to express the true intent and agreement of the parties thereto; (c) the
validity of the written agreement; or (d) the existence of other terms agreed to by
the parties or their successors in interest after the execution of the written
agreement.44
None of the aforecited exceptions finds application to the instant case. Nor did
respondents raise this issue at the proceedings before the trial court.
With regard to the ownership over the 644 square meters of land located at the
southern portion of the original 240 square meters conveyed to Adela, there is a
question regarding the true nature of the land, which has the features of a
foreshore land.
Even though respondents claim that they were responsible for reclaiming the
portion of the foreshore land adjacent to the property they bought from
petitioners predecessor in interest, there is no evidence that respondents
subsequently filed an application for lease with regard to the 644 square meters
of reclaimed land.
Foreshore land is a part of the alienable land of the public domain and may be
disposed of only by lease and not otherwise.45 It is the strip of land that lies
between the high and low water marks and is alternatively wet and dry according
to the flow of tide.46 It is that part of the land adjacent to the sea, which is
alternately covered and left dry by the ordinary flow of tides. 47
There is a need, therefore, to determine whether the lands subject of the action
for quieting of title are foreshore lands. The classification of public lands is a
function of the executive branch of government, specifically the director of lands
(now the director of the Lands Management Bureau). Due to the dearth of
evidence on this particular issue, we cannot arrive at a conclusive classification
of the land involved. The instant case has to be remanded to the trial court for
that determination.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of
Appeals in CA-G. R. CV No. 38738 is hereby SET ASIDE. The case is remanded
to the Regional Trial Court, Branch 12, Leyte for further proceedings.
No costs.
SO ORDERED.