G.R. No.

166714

February 9, 2007

AMELIA S. ROBERTS, Petitioner,

vs.
MARTIN B. PAPIO, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this petition for review on certiorari is the Decision 1 of the Court of Appeals (CA), in CA-G.R. CV
No. 69034 which reversed and set aside the Decision 2 of the Regional Trial Court (RTC), Branch 150, Makati
City, in Civil Case No. 01-431. The RTC ruling had affirmed with modification the Decision 3 of the Metropolitan
Trial Court (MeTC), Branch 64, Makati City in Civil Case No. 66847. The petition likewise assails the
Resolution of the CA denying the motion for reconsideration of its decision.
The Antecedents
The spouses Martin and Lucina Papio were the owners of a 274-square-meter residential lot located in Makati
(now Makati City) and covered by Transfer Certificate of Title (TCT) No. S-44980. 4 In order to secure
aP59,000.00 loan from the Amparo Investments Corporation, they executed a real estate mortgage on the
property. Upon Papios failure to pay the loan, the corporation filed a petition for the extrajudicial foreclosure of
the mortgage.
Since the couple needed money to redeem the property and to prevent the foreclosure of the real estate
mortgage, they executed a Deed of Absolute Sale over the property on April 13, 1982 in favor of Martin
Papios cousin, Amelia Roberts. Of the P85,000.00 purchase price, P59,000.00 was paid to the Amparo
Investments Corporation, while the P26,000.00 difference was retained by the spouses. 5 As soon as the
spouses had settled their obligation, the corporation returned the owners duplicate of TCT No. S-44980,
which was then delivered to Amelia Roberts.
Thereafter, the parties (Amelia Roberts as lessor and Martin Papio as lessee) executed a two-year contract of
lease dated April 15, 1982, effective May 1, 1982. The contract was subject to renewal or extension for a like
period at the option of the lessor, the lessee waiving thereby the benefits of an implied new lease. The lessee
was obliged to pay monthly rentals of P800.00 to be deposited in the lessors account at the Bank of America,
Makati City branch.6
On July 6, 1982, TCT No. S-44980 was cancelled, and TCT No. 114478 was issued in the name of Amelia
Roberts as owner.7
Martin Papio paid the rentals from May 1, 1982 to May 1, 1984, and thereafter, for another year. 8 He then
failed to pay rentals, but he and his family nevertheless remained in possession of the property for a period of
almost thirteen (13) years.
In a letter dated June 3, 1998, Amelia Roberts, through counsel, reminded Papio that he failed to pay the
monthly rental of P2,500.00 from January 1, 1986 to December 31, 1997, and P10,000.00 from January 1,
1998 to May 31, 1998; thus, his total liability was P410,000.00. She demanded that Papio vacate the property
within 15 days from receipt of the letter in case he failed to settle the amount. 9 Because he refused to pay,
Papio received another letter from Roberts on April 22, 1999, demanding, for the last time, that he and his
family vacate the property.10 Again, Papio refused to leave the premises.
On June 28, 1999, Amelia Roberts, through her attorney-in-fact, Matilde Aguilar, filed a Complaint 11 for
unlawful detainer and damages against Martin Papio before the MeTC, Branch 64, Makati City. She alleged
the following in her complaint:

Sometime in 1982 she purchased from defendant a 274-sq-m residential house and lot situated at No. 1046
Teresa St., Brgy. Valenzuela, Makati City.12 Upon Papios pleas to continue staying in the property, they
executed a two-year lease contract13 which commenced on May 1, 1982. The monthly rental was P800.00.
Thereafter, TCT No. 11447814 was issued in her favor and she paid all the realty taxes due on the property.
When the term of the lease expired, she still allowed Papio and his family to continue leasing the property.
However, he took advantage of her absence and stopped payment beginning January 1986, and refused to
pay despite repeated demands. In June 1998, she sent a demand letter 15 through counsel requiring Papio to
pay rentals from January 1986 up to May 1998 and to vacate the leased property. The accumulated arrears in
rental are as follows: (a)P360,000.00 from January 1, 1986 to December 31, 1997 at P2,500.00 per month;
and (b) P50,000.00, from January 1, 1998 to May 31, 1998 at P10,000.00 per month.16 She came to the
Philippines but all efforts at an amicable settlement proved futile. Thus, in April 1999, she sent the final
demand letter to defendant directing him and his family to pay and immediately vacate the leased premises. 17
Roberts appended to her complaint copies of the April 13, 1982 Deed of Absolute Sale, the April 15, 1982
Contract of Lease, and TCT No. 114478.
In his Answer with counterclaim, Papio alleged the following:
He executed the April 13, 1982 deed of absolute sale and the contract of lease. Roberts, his cousin who is a
resident of California, United States of America (USA), arrived in the Philippines and offered to redeem the
property. Believing that she had made the offer for the purpose of retaining his ownership over the property, he
accepted. She then remitted P59,000.00 to the mortgagor for his account, after which the mortgagee
cancelled the real estate mortgage. However, he was alarmed when the plaintiff had a deed of absolute sale
over the property prepared (for P83,000.00 as consideration) and asked him to sign the same. She also
demanded that the defendant turn over the owners duplicate of TCT No. S-44980. The defendant was in a
quandary. He then believed that if he signed the deed of absolute sale, Roberts would acquire ownership over
the property. He asked her to allow him to redeem or reacquire the property at any time for a reasonable
amount.18 When Roberts agreed, Papio signed the deed of absolute sale.
Pursuant to the right to redeem/repurchase given him by Roberts, Papio purchased the property
for P250,000.00. In July 1985, since Roberts was by then already in the USA, he remitted to her authorized
representative, Perlita Ventura, the amount of P150,000.00 as partial payment for the property.19 On June 16,
1986, she again remittedP100,000.00, through Ventura. Both payments were evidenced by receipts signed by
Ventura.20 Roberts then declared that she would execute a deed of absolute sale and surrender the title to the
property. However, Ventura had apparently misappropriated P39,000.00 out of the P250,000.00 that she had
received; Roberts then demanded that she pay the amount misappropriated before executing the deed of
absolute sale. Thus, the sole reason why Roberts refused to abide by her promise was the failure of her
authorized representative to remit the full amount of P250,000.00. Despite Papios demands, Roberts refused
to execute a deed of absolute sale. Accordingly, defendant posited that plaintiff had no cause of action to
demand payment of rental and eject him from the property.
Papio appended to his Answer the following: (1) the letter dated July 18, 1986 of Perlita Ventura to the plaintiff
wherein the former admitted having used the money of the plaintiff to defray the plane fares of Perlitas
parents to the USA, and pleaded that she be allowed to repay the amount within one year; (b) the letter of
Eugene Roberts (plaintiffs husband) to Perlita Ventura dated July 25, 1986 where he accused Ventura of
stealing the money of plaintiff Amelia (thus preventing the latter from paying her loan on her house and effect
the cancellation of the mortgage), and demanded that she deposit the balance; 21 and (c) plaintiffs letter to
defendant Papio dated July 25, 1986 requesting the latter to convince Ventura to remit the balance
of P39,000.00 so that the plaintiff could transfer the title of the property to the defendant. 22
Papio asserted that the letters of Roberts and her husband are in themselves admissions or declarations
against interest, hence, admissible to prove that he had reacquired the property although the title was still in
her possession.
In her Affidavit and Position Paper,23 Roberts averred that she had paid the real estate taxes on the property
after she had purchased it; Papios initial right to occupy the property was terminated when the original lease
period expired; and his continued possession was only by mere tolerance. She further alleged that the Deed of
Sale states on its face that the conveyance of the property was absolute and unconditional. She also claimed

that any right to repurchase the property must appear in a public document pursuant to Article 1358,
Paragraph 1, of the Civil Code of the Phililppines.24 Since no such document exists, defendants supposed real
interest over the property could not be enforced without violating the Statute of Frauds. 25 She stressed that her
Torrens title to the property was an "absolute and indefeasible evidence of her ownership of the property which
is binding and conclusive upon the whole world."
Roberts admitted that she demanded P39,000.00 from the defendant in her letter dated July 25, 1986.
However, she averred that the amount represented his back rentals on the property.26 She declared that she
neither authorized Ventura to sell the property nor to receive the purchase price therefor. She merely
authorized her to receive the rentals from defendant and to deposit them in her account. She did not know that
Ventura had received P250,000.00 from Papio in July 1985 and on June 16, 1986, and had signed receipts
therefor. It was only on February 11, 1998 that she became aware of the receipts when she received
defendant Papios letter to which were appended the said receipts. She and her husband offered to sell the
property to the defendant in 1984 for US$15,000.00 on a "take it or leave it" basis when they arrived in the
Philippines in May 1984.27However, defendant refused to accept the offer. The spouses then offered to sell the
property anew on December 20, 1997, for P670,000.00 inclusive of back rentals. 28 However, defendant offered
to settle his account with the spouses. 29 Again, the offer came on January 11, 1998, but it was rejected. The
defendant insisted that he had already purchased the property in July 1985 for P250,000.00.
Roberts insisted that Papios claim of the right to repurchase the property, as well as his claim of payment
therefor, is belied by his own letter in which he offered to settle plaintiffs claim for back rentals. Even assuming
that the purchase price of the property had been paid through Ventura, Papio did not adduce any proof to
show that Ventura had been authorized to sell the property or to accept any payment thereon. Any payment to
Ventura could have no binding effect on her since she was not privy to the transaction; if at all, such
agreement would be binding only on Papio and Ventura.
She further alleged that defendants own inaction belies his claim of ownership over the property: first, he
failed to cause any notice or annotation to be made on the Register of Deeds copy of TCT No. 114478 in
order to protect his supposed adverse claim; second, he did not institute any action against Roberts to compel
the execution of the necessary deed of transfer of title in his favor; and third, the defense of ownership over
the property was raised only after Roberts demanded him to vacate the property.

evidence of ownership can be admitted only for the purpose of determining the character and extent of
possession, and the amount of damages arising from the detention.
The court further ruled that Papio made no denials as to the existence and authenticity of Roberts title to the
property. It declared that "the certificate of title is indefeasible in favor of the person whose name appears
therein and incontrovertible upon the expiration of the one-year period from the date of issue," and that a
Torrens title, "which enjoys a strong presumption of regularity and validity, is generally a conclusive evidence
of ownership of the land referred to therein."
As to Papios claim that the transfer of the property was one with right of repurchase, the MeTC held it to be
bereft of merit since the Deed of Sale is termed as "absolute and unconditional." The court ruled that the right
to repurchase is not a right granted to the seller by the buyer in a subsequent instrument but rather, a right
reserved in the same contract of sale. Once the deed of absolute sale is executed, the seller can no longer
reserve the right to repurchase; any right thereafter granted in a separate document cannot be a right of
repurchase but some other right.
As to the receipts of payment signed by Ventura, the court gave credence to Robertss declaration in her
Affidavit that she authorized Ventura only to collect rentals from Papio, and not to receive the repurchase
price. Papios letter of January 31, 1998, which called her attention to the fact that she had been sending
people without written authority to collect money since 1985, bolstered the courts finding that the payment, if
at all intended for the supposed repurchase, never redounded to the benefit of the spouses Roberts.
Papio appealed the decision to the RTC, alleging the following:
I.
THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT
ON THE GROUND OF LACK OF CAUSE OF ACTION.
II.

Based solely on the parties pleadings, the MeTC rendered its January 18, 2001 Decision 30 in favor of Roberts.
The fallo of the decision reads:
WHEREFORE, premises considered, finding this case for the plaintiff, the defendant is hereby ordered to:
1. Vacate the leased premises known as 1046 Teresa St., Valenzuela, Makati City;
2. Pay plaintiff the reasonable rentals accrual for the period January 1, 1996 to December 13,
1997 at the rate equivalent to Php2,500.00 per month and thereafter, Php10,000.00 from January
1998 until he actually vacates the premises;
3. Pay the plaintiff attorneys fees as Php20,000.00; and
4. Pay the costs
SO ORDERED.31
The MeTC held that Roberts merely tolerated the stay of Papio in the property after the expiration of the
contract of lease on May 1, 1984; hence, she had a cause of action against him since the only elements in an
unlawful detainer action are the fact of lease and the expiration of its term. The defendant as tenant cannot
controvert the title of the plaintiff or assert any right adverse thereto or set up any inconsistent right to change
the existing relation between them. The plaintiff need not prove her ownership over the property inasmuch as

THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THE DOCUMENTARY EVIDENCE
ADDUCED BY DEFENDANT-APPELLANT WHICH ESTABLISHED THAT A REPURCHASE TRANSACTION
EXISTED BETWEEN THE PARTIES ONLY THAT PLAINTIFF-APPELLEE WITHHELD THE EXECUTION OF
THE ABSOLUTE DEED OF SALE AND THE TRANSFER OF TITLE OF THE SAME IN DEFENDANTAPPELLANTS NAME.
III.
THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THAT THE LETTERS OF PLAINTIFF[APPELLEE] AND OF HER HUSBAND ADDRESSED TO DEFENDANT-APPELLANT AND HIS WIFE ARE IN
THEMSELVES ADMISSION AND/OR DECLARATION OF THE FACT THAT DEFENDANT-APPELLANT HAD
DULY PAID PLAINTIFF-APPELLEE OF THE PURCHASE AMOUNT COVERING THE SUBJECT PROPERTY.
IV.
THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT
CONSIDERING THAT PLAINTIFF-APPELLEE WHO IS [AN] AMERICAN CITIZEN AND RESIDENT THEREIN
HAD NOT APPEARED IN COURT ONCE, NEITHER WAS HER ALLEGED ATTORNEY-IN-FACT, MATILDE
AGUILAR NOR [DID] THE LATTER EVER [FURNISH] THE LOWER COURT A SPECIAL POWER OF
ATTORNEY AUTHORIZING HER TO APPEAR IN COURT IN BEHALF OF HER PRINCIPAL. 32
Papio maintained that Roberts had no cause of action for eviction because she had already ceded her right
thereto when she allowed him to redeem and reacquire the property upon payment of P250,000.00 to Ventura,

her duly authorized representative. He also contended that Robertss claim that the authority of Ventura is
limited only to the collection of the rentals and not of the purchase price was a mere afterthought, since her
appended Affidavit was executed sometime in October 1999 when the proceedings in the MeTC had already
started.
On March 26, 2001, Roberts filed a Motion for Issuance of Writ of Execution. 33 The court granted the motion in
an Order34 dated June 19, 2001. Subsequently, a Writ of Execution 35 pending appeal was issued on
September 28, 2001. On October 29, 2001, Sheriff Melvin M. Alidon enforced the writ and placed Roberts in
possession of the property.
Meanwhile, Papio filed a complaint with the RTC of Makati City, for specific performance with damages
against Roberts. Papio, as plaintiff, claimed that he entered into a contract of sale with pacto de retro with
Roberts, and prayed that the latter be ordered to execute a Deed of Sale over `the property in his favor and
transfer the title over the property to and in his name. The case was docketed as Civil Case No. 01-851.
On October 24, 2001, the RTC rendered judgment affirming the appealed decision of the MeTC. The fallo of
the decision reads:36

in the case between the same parties upon a different cause of action not involving possession. All other
counterclaims for damages are hereby dismissed. Cost against the respondent.
SO ORDERED.43
According to the appellate court, although the MeTC and RTC were correct in holding that the MeTC had
jurisdiction over the complaint for unlawful detainer, they erred in ignoring Papios defense of equitable
mortgage, and in not finding that the transaction covered by the deed of absolute sale by and between the
parties was one of equitable mortgage under Article 1602 of the New Civil Code. The appellate court ruled that
Papio retained the ownership of the property and its peaceful possession; hence, the MeTC should have
dismissed the complaint without prejudice to the outcome of Civil Case No. 01-851 relative to his claim of
ownership over the property.
Roberts filed a motion for reconsideration of the decision on the following grounds:
I. Petitioner did not allege in his Answer the defense of equitable mortgage; hence, the lower
courts [should] not have discussed the same;

Being in accordance with law and the circumstances attendant to the instant case, the court finds merit in
plaintiff-appellees claim. Wherefore, the challenged decision dated January 18, 2001 is hereby affirmed in
toto.

II. Even assuming that Petitioner alleged the defense of equitable mortgage, the MeTC could not
have ruled upon the said defense,

SO ORDERED.37

III. The M[e]TC and the RTC were not remiss in the exercise of their jurisdiction. 44

Both parties filed their respective motions for reconsideration. 38 In an Order39 dated February 26, 2002, the
court denied the motion of Papio but modified its decision declaring that the computation of the accrued
rentals should commence from January 1986, not January 1996. The decretal portion of the decision reads:

The CA denied the motion.

In this petition for review, Amelia Salvador-Roberts, as petitioner, avers that:

Wherefore, the challenged decision dated January 18, 2001 is hereby affirmed with modification that
defendant pay plaintiff the reasonable rentals accrued for the period January 1, 1986 to December [31,
1997] per month and thereafter and P10,000.00 [per month] from January 1998 to October 28, 2001 when
defendant-appellant actually vacated the subject leased premises.

I. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN DECLARING THAT

THE M[e]TC AN(D) THE RTC WERE REMISS IN THE EXERCISE OF THAT JURISDICTION
ACQUIRED BECAUSE IT DID NOT CONSIDER ALL PETITIONERS DEFENSE OF EQUITABLE
MORTGAGE.

SO ORDERED.40

II. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN REQUIRING THE
M[e]TC AND RTC TO RULE ON A DEFENSE WHICH WAS NEVER AVAILED OF BY
RESPONDENT.45

On February 28, 2002, Papio filed a petition for review 41 in the CA, alleging that the RTC erred in not finding
that he had reacquired the property from Roberts for P250,000.00, but the latter refused to execute a deed of
absolute sale and transfer the title in his favor. He insisted that the MeTC and the RTC erred in giving
credence to petitioners claim that she did not authorize Ventura to receive his payments for the purchase
price of the property, citing Roberts letter dated July 25, 1986 and the letter of Eugene Roberts to Ventura of
even date. He also averred that the MeTC and the RTC erred in not considering his documentary evidence in
deciding the case.
On August 31, 2004, the CA rendered judgment granting the petition. The appellate court set aside the
decision of the RTC and ordered the RTC to dismiss the complaint. The decretal portion of the
Decision42 reads:
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered:
(1) rendering an initial determination that the "Deed of Absolute Sale" dated April 13, 1982 is in fact an
equitable mortgage under Article 1603 of the New Civil Code; and (2) resolving therefore that petitioner Martin
B. Papio is entitled to possession of the property subject of this action; (3) But such determination of
ownership and equitable mortgage are not clothed with finality and will not constitute a binding and conclusive
adjudication on the merits with respect to the issue of ownership and such judgment shall not bar an action
between the same parties respecting title to the land, nor shall it be held conclusive of the facts therein found

Petitioner argues that respondent is barred from raising the issue of equitable mortgage because his defense
in the MeTC and RTC was that he had repurchased the property from the petitioner; by such representation,
he had impliedly admitted the existence and validity of the deed of absolute sale whereby ownership of the
property was transferred to petitioner but reverted to him upon the exercise of said right. The respondent even
filed a complaint for specific performance with damages, which is now pending in the RTC of Makati City,
docketed as Civil Case No. 01-851 entitled "Martin B. Papio vs. Amelia Salvador-Roberts." In that case,
respondent claimed that his transaction with the petitioner was a sale with pacto de retro. Petitioner posits that
Article 1602 of the Civil Code applies only when the defendant specifically alleges this defense. Consequently,
the appellate court was proscribed from finding that petitioner and respondent had entered into an equitable
mortgage under the deed of absolute sale.
Petitioner further avers that respondent was ably represented by counsel and was aware of the difference
between a pacto de retro sale and an equitable mortgage; thus, he could not have been mistaken in declaring
that he repurchased the property from her.
As to whether a sale is in fact an equitable mortgage, petitioner claims that the issue should be properly
addressed and resolved by the RTC in an action to enforce ownership, not in an ejectment case before the
MeTC where the main issue involved is possession de facto. According to her, the obvious import of the CA

Decision is that, in resolving an ejectment case, the lower court must pass upon the issue of ownership (in this
case, by applying the presumptions under Art. 1602) which, in effect, would use the same yardstick as though
it is the main action. The procedure will not only promote multiplicity of suits but also place the new owner in
the absurd position of having to first seek the declaration of ownership before filing an ejectment suit.
Respondent counters that the defense of equitable mortgage need not be particularly stated to apprise
petitioner of the nature and character of the repurchase agreement. He contends that he had amply discussed
in his pleadings before the trial and appellate courts all the surrounding circumstances of the case, such as the
relative situation of the parties at the time; their attitude, acts, conduct, and declarations; and the negotiations
between them that led to the repurchase agreement. Thus, he argues that the CA correctly ruled that the
contract was one of equitable mortgage. He insists that petitioner allowed him to redeem and reacquire the
property, and accepted his full payment of the property through Ventura, the authorized representative, as
shown by the signed receipts.
The threshold issues are the following: (1) whether the MeTC had jurisdiction in an action for unlawful detainer
to resolve the issue of who between petitioner and respondent is the owner of the property and entitled to the
de facto possession thereof; (2) whether the transaction entered into between the parties under the Deed of
Absolute Sale and the Contract of Lease is an equitable mortgage over the property; and (3) whether the
petitioner is entitled to the material or de facto possession of the property.
The Ruling of the Court
On the first issue, the CA ruling (which upheld the jurisdiction of the MeTC to resolve the issue of who between
petitioner or respondent is the lawful owner of the property, and is thus entitled to the material or de facto
possession thereof) is correct. Section 18, Rule 70 of the Rules of Court provides that when the defendant
raises the defense of ownership in his pleadings and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of
possession. The judgment rendered in an action for unlawful detainer shall be conclusive with respect to the
possession only and shall in no wise bind the title or affect the ownership of the land or building. Such
judgment would not bar an action between the same parties respecting title to the land or building. 46
The summary nature of the action is not changed by the claim of ownership of the property of the
defendant.47The MeTC is not divested of its jurisdiction over the unlawful detainer action simply because the
defendant asserts ownership over the property.
The sole issue for resolution in an action for unlawful detainer is material or de facto possession of the
property. Even if the defendant claims juridical possession or ownership over the property based on a claim
that his transaction with the plaintiff relative to the property is merely an equitable mortgage, or that he had
repurchased the property from the plaintiff, the MeTC may still delve into and take cognizance of the case and
make an initial or provisional determination of who between the plaintiff and the defendant is the owner and, in
the process, resolve the issue of who is entitled to the possession. The MeTC, in unlawful detainer case,
decides the question of ownership only if it is intertwined with and necessary to resolve the issue of
possession.48 The resolution of the MeTC on the ownership of the property is merely provisional or
interlocutory. Any question involving the issue of ownership should be raised and resolved in a separate action
brought specifically to settle the question with finality, in this case, Civil Case No. 01-851 which respondent
filed before the RTC.
The ruling of the CA, that the contract between petitioner and respondent was an equitable mortgage, is
incorrect. The fact of the matter is that the respondent intransigently alleged in his answer, and even in his
affidavit and position paper, that petitioner had granted him the right to redeem or repurchase the property at
any time and for a reasonable amount; and that, he had, in fact, repurchased the property in July 1985
for P250,000.00 which he remitted to petitioner through an authorized representative who signed receipts
therefor; he had reacquired ownership and juridical possession of the property after his repurchase thereof in
1985; and consequently, petitioner was obliged to execute a deed of absolute sale over the property in his
favor.

Notably, respondent alleged that, as stated in his letter to petitioner, he was given the right to reacquire the
property in 1982 within two years upon the payment of P53,000.00, plus petitioners airfare for her trip to the
Philippines from the USA and back; petitioner promised to sign the deed
of absolute sale. He even filed a complaint against the petitioner in the RTC, docketed as Civil Case No. 01851, for specific performance with damages to compel petitioner to execute the said deed of absolute sale
over the property presumably on the strength of Articles 1357 and 1358 of the New Civil Code. Certainly then,
his claim that petitioner had given him the right to repurchase the property is antithetical to an equitable
mortgage.
An equitable mortgage is one that, although lacking in some formality, form or words, or other requisites
demanded by a statute, nevertheless reveals the intention of the parties to change a real property as security
for a debt and contain nothing impossible or contrary to law.49 A contract between the parties is an equitable
mortgage if the following requisites are present: (a) the parties entered into a contract denominated as a
contract of sale; and (b) the intention was to secure an existing debt by way of mortgage. 50 The decisive factor
is the intention of the parties.
In an equitable mortgage, the mortgagor retains ownership over the property but subject to foreclosure and
sale at public auction upon failure of the mortgagor to pay his obligation. 51 In contrast, in a pacto de retro sale,
ownership of the property sold is immediately transferred to the vendee a retro subject only to the right of the
vendor a retro to repurchase the property upon compliance with legal requirements for the repurchase. The
failure of the vendor a retro to exercise the right to repurchase within the agreed time vests upon the vendee a
retro, by operation of law, absolute title over the property.52
One repurchases only what one has previously sold. The right to repurchase presupposes a valid contract of
sale between the same parties.53 By insisting that he had repurchased the property, respondent thereby
admitted that the deed of absolute sale executed by him and petitioner on April 13, 1982 was, in fact and in
law, a deed of absolute sale and not an equitable mortgage; hence, he had acquired ownership over the
property based on said deed. Respondent is, thus, estopped from asserting that the contract under the deed
of absolute sale is an equitable mortgage unless there is allegation and evidence of palpable mistake on the
part of respondent;54 or a fraud on the part of petitioner. Respondent made no such allegation in his pleadings
and affidavit. On the contrary, he maintained that petitioner had sold the property to him in July 1985 and
acknowledged receipt of the purchase price thereof except the amount of P39,000.00 retained by Perlita
Ventura. Respondent is thus bound by his admission of petitioners ownership of the property and is barred
from claiming otherwise.55
Respondents admission that petitioner acquired ownership over the property under the April 13, 1982 deed of
absolute sale is buttressed by his admission in the Contract of Lease dated April 15, 1982 that petitioner was
the owner of the property, and that he had paid the rentals for the duration of the contract of lease and even
until 1985 upon its extension. Respondent was obliged to prove his defense that petitioner had given him the
right to repurchase, and that petitioner obliged herself to resell the property for P250,000.00 when they
executed the April 13, 1982 deed of absolute sale.
We have carefully reviewed the case and find that respondent failed to adduce competent and credible
evidence to prove his claim.
As gleaned from the April 13, 1982 deed, the right of respondent to repurchase the property is not
incorporated therein. The contract is one of absolute sale and not one with right to repurchase. The law states
that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control. 56 When the language of the contract is explicit, leaving no doubt
as to the intention of the drafters, the courts may not read into it any other intention that would contradict its
plain import.57 The clear terms of the contract should never be the subject matter of interpretation. Neither
abstract justice nor the rule of liberal interpretation justifies the creation of a contract for the parties which they
did not make themselves, or the imposition upon one party to a contract or obligation to assume simply or
merely to avoid seeming hardships.58Their true meaning must be enforced, as it is to be presumed that the
contracting parties know their scope and effects. 59 As the Court held in Villarica, et al. v. Court of Appeals: 60
The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a
right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the

instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any
right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but
some other right like the option to buy in the instant case. 61
In Ramos v. Icasiano,62 we also held that an agreement to repurchase becomes a promise to sell when made
after the sale because when the sale is made without such agreement the purchaser acquires the thing sold
absolutely; and, if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by
the purchaser as absolute owner. An option to buy or a promise to sell is different and distinct from the right of
repurchase that must be reserved by means of stipulations to that effect in the contract of sale. 63
There is no evidence on record that, on or before July 1985, petitioner agreed to sell her property to the
respondent for P250,000.00. Neither is there any documentary evidence showing that Ventura was authorized
to offer for sale or sell the property for and in behalf of petitioner for P250,000.00, or to receive the said
amount from respondent as purchase price of the property. The rule is that when a sale of a piece of land or
any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall
be void64 and cannot produce any legal effect as to transfer the property from its lawful owner. 65 Being
inexistent and void from the very beginning, said contract cannot be ratified. 66 Any contract entered into by
Ventura for and in behalf of petitioner relative to the sale of the property is void and cannot be ratified by the
latter. A void contract produces no effect either against or in favor of anyone. 67
Respondent also failed to prove that the negotiations between him and petitioner has culminated in his offer to
buy the property for P250,000.00, and that they later on agreed to the sale of the property for the same
amount. He likewise failed to prove that he purchased and reacquired the property in July 1985. The evidence
on record shows that petitioner had offered to sell the property for US$15,000 on a "take it or leave it" basis in
May 1984 upon the expiration of the Contract of Lease 68 an offer that was rejected by respondentwhich is
why on December 30, 1997, petitioner and her husband offered again to sell the property to respondent
for P670,000.00 inclusive of back rentals and the purchase price of the property under the April 13, 1982 Deed
of absolute Sale.69The offer was again rejected by respondent. The final offer appears to have been made on
January 11, 199870but again, like the previous negotiations, no contract was perfected between the parties.
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to
give something or to render some service. 71 Under Article 1318 of the New Civil Code, there is no contract
unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Contracts are perfected by mere consent manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. 72 Once perfected, they bind the contracting parties
and the obligations arising therefrom have the form of law between the parties which must be complied with in
good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to
the consequences which, according to their nature, may be in keeping with good faith, usage and law. 73
There was no contract of sale entered into by the parties based on the Receipts dated July 1985 and June 16,
1986, signed by Perlita Ventura and the letter of petitioner to respondent dated July 25, 1986.
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver
a determinate thing and the other, to pay therefor a price certain in money or its equivalent. 74 The absence of
any of the essential elements will negate the existence of a perfected contract of sale. As the Court ruled in
Boston Bank of the Philippines v. Manalo: 75

A definite agreement as to the price is an essential element of a binding agreement to sell personal or real
property because it seriously affects the rights and obligations of the parties. Price is an essential element in
the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the
other, gives rise to a perfected sale.76
A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is
merely an offer by one party without acceptance of the other, there is no contract. 77 When the contract of sale
is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between
the parties.78
Respondents reliance on petitioners letter to him dated July 25, 1986 is misplaced. The letter reads in full:
7-25-86
Dear Martin & Ising,
Enclosed for your information is the letter written by my husband to Perlita. I hope that you will be able to
convince your cousin that its to her best interest to deposit the balance of your payment to me of P39,000.00
in my bank acct. per our agreement and send me my bank book right away so that we can transfer the title of
the property.
Regards,
Amie 79
We have carefully considered the letter of Perlita Ventura, dated July 18, 1986, and the letter of Eugene
Roberts, dated July 25, 1986, where Ventura admitted having used the money of petitioner amounting
to P39,000.00 without the latters knowledge for the plane fare of Venturas parents. Ventura promised to
refund the amount ofP39,000.00, inclusive of interests, within one year.80 Eugene Roberts berated Ventura
and called her a thief for stealing his and petitioners money and that of respondents wife, Ising, who allegedly
told petitioner that she, Ising, loaned the money to her parents for their plane fare to the USA. Neither Ventura
nor Eugene Roberts declared in their letters that Ventura had used the P250,000.00 which respondent gave to
her.
Petitioner in her letter to respondent did not admit, either expressly or impliedly, having received P211,000.00
from Ventura. Moreover, in her letter to petitioner, only a week earlier, or on July 18, 1986, Ventura admitted
having spent the P39,000.00 and pleaded that she be allowed to refund the amount within one (1) year,
including interests.
Naririto ang total ng pera mo sa bankbook mo, P55,000.00 pati na yong deposit na sarili mo at bale ang
nagalaw ko diyan ay P39,000.00. Huwag kang mag-alala ibabalik ko rin sa iyo sa loob ng isang taon pati
interest.
Ate Per81 1awphi1.net
It is incredible that Ventura was able to remit to petitioner P211,000.00 before July 25, 1986 when only a week
earlier, she was pleading to petitioner for a period of one year within which to refund the P39,000.00 to
petitioner.
It would have bolstered his cause if respondent had submitted an affidavit of Ventura stating that she had
remittedP211,000.00 out of the P250,000.00 she received from respondent in July 1985 and June 20, 1986.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the Court of
Appeals in CA-G.R. CV No. 69034 is REVERSED and SET ASIDE. The Decision of the Metropolitan Trial
Court, affirmed with modification by the Regional Trial Court, is AFFIRMED.
SO ORDERED.
G. R. No. 158149

February 9, 2006

BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF COMMERCE), Petitioner,

vs.
PERLA P. MANALO and CARLOS MANALO, JR., Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. CV
No. 47458 affirming, on appeal, the Decision 2 of the Regional Trial Court (RTC) of Quezon City, Branch 98, in
Civil Case No. Q-89-3905.
The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the Xavierville
Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the property into residential
lots, which was then offered for sale to individual lot buyers. 3
On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The Overseas
Bank of Manila (OBM), as vendee, executed a "Deed of Sale of Real Estate" over some residential lots in the
subdivision, including Lot 1, Block 2, with an area of 907.5 square meters, and Lot 2, Block 2, with an area of
832.80 square meters. The transaction was subject to the approval of the Board of Directors of OBM, and was
covered by real estate mortgages in favor of the Philippine National Bank as security for its account amounting
to P5,187,000.00, and the Central Bank of the Philippines as security for advances amounting
to P22,185,193.74.4 Nevertheless, XEI continued selling the residential lots in the subdivision as agent of
OBM.5
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos Manalo, Jr.
who was in business of drilling deep water wells and installing pumps under the business name Hurricane
Commercial, Inc. For P34,887.66, Manalo, Jr. installed a water pump at Ramos residence at the corner of
Aurora Boulevard and Katipunan Avenue, Quezon City. Manalo, Jr. then proposed to XEI, through Ramos, to
purchase a lot in the Xavierville subdivision, and offered as part of the downpayment the P34,887.66 Ramos
owed him. XEI, through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested Manalo, Jr. to
choose which lots he wanted to buy so that the price of the lots and the terms of payment could be fixed and
incorporated in the conditional sale.6 Manalo, Jr. met with Ramos and informed him that he and his wife Perla
had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square meters.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. He also
pegged the price of the lots at P200.00 per square meter, or a total of P348,060.00, with a 20% down payment
of the purchase price amounting to P69,612.00 less the P34,887.66 owing from Ramos, payable on or before
December 31, 1972; the corresponding Contract of Conditional Sale would then be signed on or before the
same date, but if the selling operations of XEI resumed after December 31, 1972, the balance of the
downpayment would fall due then, and the spouses would sign the aforesaid contract within five (5) days from
receipt of the notice of resumption of such selling operations. It was also stated in the letter that, in the
meantime, the spouses may introduce improvements thereon subject to the rules and regulations imposed by
XEI in the subdivision. Perla Manalo conformed to the letter agreement. 7
The spouses Manalo took possession of the property on September 2, 1972, constructed a house thereon,
and installed a fence around the perimeter of the lots.

In the meantime, many of the lot buyers refused to pay their monthly installments until they were assured that
they would be issued Torrens titles over the lots they had purchased. 8 The spouses Manalo were notified of
the resumption of the selling operations of XEI.9 However, they did not pay the balance of the downpayment
on the lots because Ramos failed to prepare a contract of conditional sale and transmit the same to Manalo for
their signature. On August 14, 1973, Perla Manalo went to the XEI office and requested that the payment of
the amount representing the balance of the downpayment be deferred, which, however, XEI rejected. On
August 10, 1973, XEI furnished her with a statement of their account as of July 31, 1973, showing that they
had a balance ofP34,724.34 on the downpayment of the two lots after deducting the account of Ramos,
plus P3,819.6810 interest thereon from September 1, 1972 to July 31, 1973, and that the interests on the
unpaid balance of the purchase price of P278,448.00 from September 1, 1972 to July 31, 1973 amounted
to P30,629.28.11 The spouses were informed that they were being billed for said unpaid interests. 12
On January 25, 1974, the spouses Manalo received another statement of account from XEI, inclusive of
interests on the purchase price of the lots.13 In a letter dated April 6, 1974 to XEI, Manalo, Jr. stated they had
not yet received the notice of resumption of Leis selling operations, and that there had been no arrangement
on the payment of interests; hence, they should not be charged with interest on the balance of the
downpayment on the property.14 Further, they demanded that a deed of conditional sale over the two lots be
transmitted to them for their signatures. However, XEI ignored the demands. Consequently, the spouses
refused to pay the balance of the downpayment of the purchase price. 15
Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house. In a letter
dated June 17, 1976, XEI informed Manalo, Jr. that business signs were not allowed along the sidewalk. It
demanded that he remove the same, on the ground, among others, that the sidewalk was not part of the land
which he had purchased on installment basis from XEI. 16 Manalo, Jr. did not respond. XEI reiterated its
demand on September 15, 1977. 17
Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots already
contracted and those yet to be sold. 18 On December 8, 1977, OBM warned Manalo, Jr., that "putting up of a
business sign is specifically prohibited by their contract of conditional sale" and that his failure to comply with
its demand would impel it to avail of the remedies as provided in their contract of conditional sale. 19
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title (TCT) No. T265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor of the OBM. 20 The lien in favor
of the Central Bank of the Philippines was annotated at the dorsal portion of said title, which was later
cancelled on August 4, 1980.21
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM. CBM wrote
Edilberto Ng, the president of Xavierville Homeowners Association that, as of January 31, 1983, Manalo, Jr.
was one of the lot buyers in the subdivision.22 CBM reiterated in its letter to Ng that, as of January 24, 1984,
Manalo was a homeowner in the subdivision.23
In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going construction on the
property since it (CBM) was the owner of the lot and she had no permission for such construction. 24 She
agreed to have a conference meeting with CBM officers where she informed them that her husband had a
contract with OBM, through XEI, to purchase the property. When asked to prove her claim, she promised to
send the documents to CBM. However, she failed to do so. 25 On September 5, 1986, CBM reiterated its
demand that it be furnished with the documents promised, 26 but Perla Manalo did not respond.
On July 27, 1987, CBM filed a complaint27 for unlawful detainer against the spouses with the Metropolitan Trial
Court of Quezon City. The case was docketed as Civil Case No. 51618. CBM claimed that the spouses had
been unlawfully occupying the property without its consent and that despite its demands, they refused to
vacate the property. The latter alleged that they, as vendors, and XEI, as vendee, had a contract of sale over
the lots which had not yet been rescinded.28
While the case was pending, the spouses Manalo wrote CBM to offer an amicable settlement, promising to
abide by the purchase price of the property (P313,172.34), per agreement with XEI, through Ramos. However,
on July 28, 1988, CBM wrote the spouses, through counsel, proposing that the price of P1,500.00 per square
meter of the property was a reasonable starting point for negotiation of the settlement. 29 The spouses rejected
the counter proposal,30 emphasizing that they would abide by their original agreement with XEI. CBM moved
to withdraw its complaint31 because of the issues raised.32

In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its complaint
against the spouses Manalo, the latter filed a complaint for specific performance and damages against the
bank before the Regional Trial Court (RTC) of Quezon City on October 31, 1989.

On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the defendant. The fallo of
the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant

The plaintiffs alleged therein that they had always been ready, able and willing to pay the installments on the
lots sold to them by the defendants remote predecessor-in-interest, as might be or stipulated in the contract of
sale, but no contract was forthcoming; they constructed their house worth P2,000,000.00 on the property in
good faith; Manalo, Jr., informed the defendant, through its counsel, on October 15, 1988 that he would abide
by the terms and conditions of his original agreement with the defendants predecessor-in-interest; during the
hearing of the ejectment case on October 16, 1988, they offered to pay P313,172.34 representing the balance
on the purchase price of said lots; such tender of payment was rejected, so that the subject lots could be sold
at considerably higher prices to third parties.

(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and 2, Block 2 of
the Xavierville Estate Subdivision after payment of the sum of P942,978.70 sufficient in form and
substance to transfer to them titles thereto free from any and all liens and encumbrances of
whatever kind and nature.

Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the execution and
delivery of a Deed of Absolute Sale covering the subject lots, sufficient in form and substance to transfer title
thereto free and clear of any and all liens and encumbrances of whatever kind and nature. 33 The plaintiffs
prayed that, after due hearing, judgment be rendered in their favor, to wit:

(c) To pay attorneys fees in the sum of P50,000.00 and to pay the costs.

(b) Ordering the defendant to pay moral and exemplary damages in the amount of P150,000.00;
and

SO ORDERED.43
WHEREFORE, it is respectfully prayed that after due hearing:
(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over subject
lots in favor of the plaintiffs after payment of the sum of P313,172.34, sufficient in form and
substance to transfer to them titles thereto free and clear of any and all liens and encumbrances of
whatever kind or nature;

The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs, the parties had a
"complete contract to sell" over the lots, and that they had already partially consummated the same. It
declared that the failure of the defendant to notify the plaintiffs of the resumption of its selling operations and to
execute a deed of conditional sale did not prevent the defendants obligation to convey titles to the lots from
acquiring binding effect. Consequently, the plaintiffs had a cause of action to compel the defendant to execute
a deed of sale over the lots in their favor.

(b) The defendant should be held liable for moral and exemplary damages in the amounts
of P300,000.00 and P30,000.00, respectively, for not promptly executing and delivering to plaintiff
the necessary Contract of Sale, notwithstanding repeated demands therefor and for having been
constrained to engage the services of undersigned counsel for which they agreed to pay attorneys
fees in the sum of P50,000.00 to enforce their rights in the premises and appearance fee
of P500.00;

Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a) not concluding that the
letter of XEI to the spouses Manalo, was at most a mere contract to sell subject to suspensive conditions, i.e.,
the payment of the balance of the downpayment on the property and the execution of a deed of conditional
sale (which were not complied with); and (b) in awarding moral and exemplary damages to the spouses
Manalo despite the absence of testimony providing facts to justify such awards. 44

(c) And for such other and further relief as may be just and equitable in the premises. 34

On September 30, 2002, the CA rendered a decision affirming that of the RTC with modification. The fallo
reads:

In its Answer to the complaint, the defendant interposed the following affirmative defenses: (a) plaintiffs had no
cause of action against it because the August 22, 1972 letter agreement between XEI and the plaintiffs was
not binding on it; and (b) "it had no record of any contract to sell executed by it or its predecessor, or of any
statement of accounts from its predecessors, or records of payments of the plaintiffs or of any documents
which entitled them to the possession of the lots." 35 The defendant, likewise, interposed counterclaims for
damages and attorneys fees and prayed for the eviction of the plaintiffs from the property. 36

WHEREFORE, the appealed decision is AFFIRMED with MODIFICATIONS that (a) the figure "P942,978.70"
appearing [in] par. (a) of the dispositive portion thereof is changed to "P313,172.34 plus interest thereon at the
rate of 12% per annum from September 1, 1972 until fully paid" and (b) the award of moral and exemplary
damages and attorneys fees in favor of plaintiffs-appellees is DELETED.
SO ORDERED.45

Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an amicable settlement of
the case by paying P942,648.70, representing the balance of the purchase price of the two lots based on the
current market value.37 However, the defendant rejected the same and insisted that for the smaller lot, they
payP4,500,000.00, the current market value of the property.38 The defendant insisted that it owned the
property since there was no contract or agreement between it and the plaintiffs relative thereto.
During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional Sale executed
between XEI and Alberto Soller;39 Alfredo Aguila,40 and Dra. Elena Santos-Roque41 to prove that XEI continued
selling residential lots in the subdivision as agent of OBM after the latter had acquired the said lots.
For its part, defendant presented in evidence the letter dated August 22, 1972, where XEI proposed to sell the
two lots subject to two suspensive conditions: the payment of the balance of the downpayment of the property,
and the execution of the corresponding contract of conditional sale. Since plaintiffs failed to pay, OBM
consequently refused to execute the corresponding contract of conditional sale and forfeited the P34,877.66
downpayment for the two lots, but did not notify them of said forfeiture. 42 It alleged that OBM considered the
lots unsold because the titles thereto bore no annotation that they had been sold under a contract of
conditional sale, and the plaintiffs were not notified of XEIs resumption of its selling operations.

The appellate court sustained the ruling of the RTC that the appellant and the appellees had executed a
Contract to Sell over the two lots but declared that the balance of the purchase price of the property amounting
toP278,448.00 was payable in fixed amounts, inclusive of pre-computed interests, from delivery of the
possession of the property to the appellees on a monthly basis for 120 months, based on the deeds of
conditional sale executed by XEI in favor of other lot buyers. 46 The CA also declared that, while XEI must have
resumed its selling operations before the end of 1972 and the downpayment on the property remained unpaid
as of December 31, 1972, absent a written notice of cancellation of the contract to sell from the bank or
notarial demand therefor as required by Republic Act No. 6552, the spouses had, at the very least, a 60-day
grace period from January 1, 1973 within which to pay the same.
Boston Bank filed a motion for the reconsideration of the decision alleging that there was no perfected contract
to sell the two lots, as there was no agreement between XEI and the respondents on the manner of payment
as well as the other terms and conditions of the sale. It further averred that its claim for recovery of possession
of the aforesaid lots in its Memorandum dated February 28, 1994 filed before the trial court constituted a
judicial demand for rescission that satisfied the requirements of the New Civil Code. However, the appellate
court denied the motion.

Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA rulings. It
maintains that, as held by the CA, the records do not reflect any schedule of payment of the 80% balance of
the purchase price, or P278,448.00. Petitioner insists that unless the parties had agreed on the manner of
payment of the principal amount, including the other terms and conditions of the contract, there would be no
existing contract of sale or contract to sell.47 Petitioner avers that the letter agreement to respondent spouses
dated August 22, 1972 merely confirmed their reservation for the purchase of Lot Nos. 1 and 2, consisting of
1,740.3 square meters, more or less, at the price of P200.00 per square meter (or P348,060.00), the amount
of the downpayment thereon and the application of the P34,887.00 due from Ramos as part of such
downpayment.
Petitioner asserts that there is no factual basis for the CA ruling that the terms and conditions relating to the
payment of the balance of the purchase price of the property (as agreed upon by XEI and other lot buyers in
the same subdivision) were also applicable to the contract entered into between the petitioner and the
Respondents. It insists that such a ruling is contrary to law, as it is tantamount to compelling the parties to
agree to something that was not even discussed, thus, violating their freedom to contract. Besides, the
situation of the respondents cannot be equated with those of the other lot buyers, as, for one thing, the
respondents made a partial payment on the downpayment for the two lots even before the execution of any
contract of conditional sale.
Petitioner posits that, even on the assumption that there was a perfected contract to sell between the parties,
nevertheless, it cannot be compelled to convey the property to the respondents because the latter failed to pay
the balance of the downpayment of the property, as well as the balance of 80% of the purchase price, thus
resulting in the extinction of its obligation to convey title to the lots to the Respondents.
Another egregious error of the CA, petitioner avers, is the application of Republic Act No. 6552. It insists that
such law applies only to a perfected agreement or perfected contract to sell, not in this case where the
downpayment on the purchase price of the property was not completely paid, and no installment payments
were made by the buyers.
Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the respondents of
cancellation or rescission of the contract to sell, or notarial demand therefor. Petitioner insists that its August 5,
1986 letter requiring respondents to vacate the property and its complaint for ejectment in Civil Case No.
51618 filed in the Metropolitan Trial Court amounted to the requisite demand for a rescission of the contract to
sell. Moreover, the action of the respondents below was barred by laches because despite demands, they
failed to pay the balance of the purchase price of the lots (let alone the downpayment) for a considerable
number of years.
For their part, respondents assert that as long as there is a meeting of the minds of the parties to a contract of
sale as to the price, the contract is valid despite the parties failure to agree on the manner of payment. In such
a situation, the balance of the purchase price would be payable on demand, conformably to Article 1169 of the
New Civil Code. They insist that the law does not require a party to agree on the manner of payment of the
purchase price as a prerequisite to a valid contract to sell. The respondents cite the ruling of this Court in
Buenaventura v. Court of Appeals48 to support their submission.
They argue that even if the manner and timeline for the payment of the balance of the purchase price of the
property is an essential requisite of a contract to sell, nevertheless, as shown by their letter agreement of
August 22, 1972 with the OBM, through XEI and the other letters to them, an agreement was reached as to
the manner of payment of the balance of the purchase price. They point out that such letters referred to the
terms of the terms of the deeds of conditional sale executed by XEI in favor of the other lot buyers in the
subdivision, which contained uniform terms of 120 equal monthly installments (excluding the downpayment,
but inclusive of pre-computed interests). The respondents assert that XEI was a real estate broker and knew
that the contracts involving residential lots in the subdivision contained uniform terms as to the manner and
timeline of the payment of the purchase price of said lots.
Respondents further posit that the terms and conditions to be incorporated in the "corresponding contract of
conditional sale" to be executed by the parties would be the same as those contained in the contracts of
conditional sale executed by lot buyers in the subdivision. After all, they maintain, the contents of the
corresponding contract of conditional sale referred to in the August 22, 1972 letter agreement envisaged those
contained in the contracts of conditional sale that XEI and other lot buyers executed. Respondents cite the
ruling of this Court in Mitsui Bussan Kaisha v. Manila E.R.R. & L. Co. 49

The respondents aver that the issues raised by the petitioner are factual, inappropriate in a petition for review
on certiorari under Rule 45 of the Rules of Court. They assert that petitioner adopted a theory in litigating the
case in the trial court, but changed the same on appeal before the CA, and again in this Court. They argue
that the petitioner is estopped from adopting a new theory contrary to those it had adopted in the trial and
appellate courts. Moreover, the existence of a contract of conditional sale was admitted in the letters of XEI
and OBM. They aver that they became owners of the lots upon delivery to them by XEI.
The issues for resolution are the following: (1) whether the factual issues raised by the petitioner are proper;
(2) whether petitioner or its predecessors-in-interest, the XEI or the OBM, as seller, and the respondents, as
buyers, forged a perfect contract to sell over the property; (3) whether petitioner is estopped from contending
that no such contract was forged by the parties; and (4) whether respondents has a cause of action against
the petitioner for specific performance.
The rule is that before this Court, only legal issues may be raised in a petition for review on certiorari. The
reason is that this Court is not a trier of facts, and is not to review and calibrate the evidence on record.
Moreover, the findings of facts of the trial court, as affirmed on appeal by the Court of Appeals, are conclusive
on this Court unless the case falls under any of the following exceptions:
(1) when the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its findings went beyond the issues of the case and the same is contrary
to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court;
(8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9)
when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by
the respondents; and (10) when the findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence on record. 50
We have reviewed the records and we find that, indeed, the ruling of the appellate court dismissing petitioners
appeal is contrary to law and is not supported by evidence. A careful examination of the factual backdrop of
the case, as well as the antecedental proceedings constrains us to hold that petitioner is not barred from
asserting that XEI or OBM, on one hand, and the respondents, on the other, failed to forge a perfected
contract to sell the subject lots.
It must be stressed that the Court may consider an issue not raised during the trial when there is plain
error.51Although a factual issue was not raised in the trial court, such issue may still be considered and
resolved by the Court in the interest of substantial justice, if it finds that to do so is necessary to arrive at a just
decision,52 or when an issue is closely related to an issue raised in the trial court and the Court of Appeals and
is necessary for a just and complete resolution of the case. 53 When the trial court decides a case in favor of a
party on certain grounds, the Court may base its decision upon some other points, which the trial court or
appellate court ignored or erroneously decided in favor of a party.54
In this case, the issue of whether XEI had agreed to allow the respondents to pay the purchase price of the
property was raised by the parties. The trial court ruled that the parties had perfected a contract to sell, as
against petitioners claim that no such contract existed. However, in resolving the issue of whether the
petitioner was obliged to sell the property to the respondents, while the CA declared that XEI or OBM and the
respondents failed to agree on the schedule of payment of the balance of the purchase price of the property, it
ruled that XEI and the respondents had forged a contract to sell; hence, petitioner is entitled to ventilate the
issue before this Court.
We agree with petitioners contention that, for a perfected contract of sale or contract to sell to exist in law,
there must be an agreement of the parties, not only on the price of the property sold, but also on the manner
the price is to be paid by the vendee.

Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the
contracting parties obliges himself to transfer the ownership of and deliver a determinate thing, and the other
to pay therefor a price certain in money or its equivalent. A contract of sale is perfected at the moment there is
a meeting of the minds upon the thing which is the object of the contract and the price. From the averment of
perfection, the parties are bound, not only to the fulfillment of what has been expressly stipulated, but also to
all the consequences which, according to their nature, may be in keeping with good faith, usage and law. 55 On
the other hand, when the contract of sale or to sell is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties. 56
A definite agreement as to the price is an essential element of a binding agreement to sell personal or real
property because it seriously affects the rights and obligations of the parties. Price is an essential element in
the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the
other, gives rise to a perfected sale.57
It is not enough for the parties to agree on the price of the property. The parties must also agree on the
manner of payment of the price of the property to give rise to a binding and enforceable contract of sale or
contract to sell. This is so because the agreement as to the manner of payment goes into the price, such that
a disagreement on the manner of payment is tantamount to a failure to agree on the price. 58
In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the
amount of downpayment. The parties must, likewise, agree on the manner of payment of the balance of the
purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a
downpayment or portion thereof, such payment cannot be considered as sufficient proof of the perfection of
any purchase and sale between the parties. Indeed, this Court ruled in Velasco v. Court of Appeals 59 that:
It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and
the respondent still had to meet and agree on how and when the down-payment and the installment payments
were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement
between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before
that a definite agreement on the manner of payment of the purchase price is an essential element in the
formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the
respondent the sum ofP10,000.00 as part of the downpayment that they had to pay cannot be considered as
sufficient proof of the perfection of any purchase and sale agreement between the parties herein under article
1482 of the New Civil Code, as the petitioners themselves admit that some essential matter the terms of
payment still had to be mutually covenanted. 60

Please let us know your choice lot so that we can fix the price and terms of payment in ourconditional sale.
Sincerely yours,
XAVIERVILLE ESTATE, INC.
(Signed)
EMERITO B. RAMOS, JR.
President
CONFORME:
(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling62
The August 22, 1972 letter agreement of XEI and the respondents reads:
Mrs. Perla P. Manalo
1548 Rizal Avenue Extensionbr>Caloocan City
Dear Mrs. Manalo:
This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-subdivision plan as
amended, consisting of 1,740.3 square meters more or less, at the price of P200.00 per square meter or a
total price of P348,060.00.
It is agreed that as soon as we resume selling operations, you must pay a down payment of 20% of the
purchase price of the said lots and sign the corresponding Contract of Conditional Sale, on or before
December 31, 1972, provided, however, that if we resume selling after December 31, 1972, then you must pay
the aforementioned down payment and sign the aforesaid contract within five (5) days from your receipt of our
notice of resumption of selling operations.

We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the records, of
the schedule of payment of the balance of the purchase price on the property amounting to P278,448.00. We
have meticulously reviewed the records, including Ramos February 8, 1972 and August 22, 1972 letters to
respondents,61 and find that said parties confined themselves to agreeing on the price of the property
(P348,060.00), the 20% downpayment of the purchase price (P69,612.00), and credited respondents for
theP34,887.00 owing from Ramos as part of the 20% downpayment. The timeline for the payment of the
balance of the downpayment (P34,724.34) was also agreed upon, that is, on or before XEI resumed its selling
operations, on or before December 31, 1972, or within five (5) days from written notice of such resumption of
selling operations. The parties had also agreed to incorporate all the terms and conditions relating to the sale,
inclusive of the terms of payment of the balance of the purchase price and the other substantial terms and
conditions in the "corresponding contract of conditional sale," to be later signed by the parties, simultaneously
with respondents settlement of the balance of the downpayment.

In the meanwhile, you may introduce such improvements on the said lots as you may desire, subject to the
rules and regulations of the subdivision.

The February 8, 1972 letter of XEI reads:

XAVIERVILLE ESTATE, INC. CONFORME:

Mr. Carlos T. Manalo, Jr.

Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City

By:

If the above terms and conditions are acceptable to you, please signify your conformity by signing on the
space herein below provided.
Thank you.
Very truly yours,

(Signed)
EMERITO B. RAMOS, JR.

Dear Mr. Manalo:

President Buyer63
We agree with your verbal offer to exchange the proceeds of your contract with us to form as a down payment
for a lot in our Xavierville Estate Subdivision.

(Signed)
PERLA P. MANALO

Based on these two letters, the determination of the terms of payment of the P278,448.00 had yet to be
agreed upon on or before December 31, 1972, or even afterwards, when the parties sign the corresponding
contract of conditional sale.
Jurisprudence is that if a material element of a contemplated contract is left for future negotiations, the same is
too indefinite to be enforceable. 64 And when an essential element of a contract is reserved for future
agreement of the parties, no legal obligation arises until such future agreement is concluded. 65
So long as an essential element entering into the proposed obligation of either of the parties remains to be
determined by an agreement which they are to make, the contract is incomplete and unenforceable. 66 The
reason is that such a contract is lacking in the necessary qualities of definiteness, certainty and mutuality. 67
There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after December
31, 1972, on the terms of payment of the balance of the purchase price of the property and the other
substantial terms and conditions relative to the sale. Indeed, the parties are in agreement that there had been
no contract of conditional sale ever executed by XEI, OBM or petitioner, as vendor, and the respondents, as
vendees.68
The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because the issue of
the manner of payment of the purchase price of the property was not raised therein.
We reject the submission of respondents that they and Ramos had intended to incorporate the terms of
payment contained in the three contracts of conditional sale executed by XEI and other lot buyers in the
"corresponding contract of conditional sale," which would later be signed by them. 69 We have meticulously
reviewed the respondents complaint and find no such allegation therein. 70 Indeed, respondents merely alleged
in their complaint that they were bound to pay the balance of the purchase price of the property "in
installments." When respondent Manalo, Jr. testified, he was never asked, on direct examination or even on
cross-examination, whether the terms of payment of the balance of the purchase price of the lots under the
contracts of conditional sale executed by XEI and other lot buyers would form part of the "corresponding
contract of conditional sale" to be signed by them simultaneously with the payment of the balance of the
downpayment on the purchase price.
We note that, in its letter to the respondents dated June 17, 1976, or almost three years from the execution by
the parties of their August 22, 1972 letter agreement, XEI stated, in part, that respondents had purchased the
property "on installment basis."71 However, in the said letter, XEI failed to state a specific amount for each
installment, and whether such payments were to be made monthly, semi-annually, or annually. Also,
respondents, as plaintiffs below, failed to adduce a shred of evidence to prove that they were obliged to pay
the P278,448.00 monthly, semi-annually or annually. The allegation that the payment of the P278,448.00 was
to be paid in installments is, thus, vague and indefinite. Case law is that, for a contract to be enforceable, its
terms must be certain and explicit, not vague or indefinite. 72
There is no factual and legal basis for the CA ruling that, based on the terms of payment of the balance of the
purchase price of the lots under the contracts of conditional sale executed by XEI and the other lot buyers,
respondents were obliged to pay the P278,448.00 with pre-computed interest of 12% per annum in 120-month
installments. As gleaned from the ruling of the appellate court, it failed to justify its use of the terms of payment
under the three "contracts of conditional sale" as basis for such ruling, to wit:
On the other hand, the records do not disclose the schedule of payment of the purchase price, net of the
downpayment. Considering, however, the Contracts of Conditional Sale (Exhs. "N," "O" and "P") entered into
by XEI with other lot buyers, it would appear that the subdivision lots sold by XEI, under contracts to sell, were
payable in 120 equal monthly installments (exclusive of the downpayment but including pre-computed
interests) commencing on delivery of the lot to the buyer.73
By its ruling, the CA unilaterally supplied an essential element to the letter agreement of XEI and the
Respondents. Courts should not undertake to make a contract for the parties, nor can it enforce one, the terms
of which are in doubt.74 Indeed, the Court emphasized in Chua v. Court of Appeals 75 that it is not the province
of a court to alter a contract by construction or to make a new contract for the parties; its duty is confined to
the interpretation of the one which they have made for themselves, without regard to its wisdom or folly, as the
court cannot supply material stipulations or read into contract words which it does not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the terms of payment of
the P278,448.00 to be incorporated in the "corresponding contract of conditional sale" were those contained in
the contracts of conditional sale executed by XEI and Soller, Aguila and Roque. 76 They likewise failed to prove
such allegation in this Court.
The bare fact that other lot buyers were allowed to pay the balance of the purchase price of lots purchased by
them in 120 or 180 monthly installments does not constitute evidence that XEI also agreed to give the
respondents the same mode and timeline of payment of the P278,448.00.
Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain thing at one time is
not admissible to prove that he did the same or similar thing at another time, although such evidence may be
received to prove habit, usage, pattern of conduct or the intent of the parties.
Similar acts as evidence. Evidence that one did or did not do a certain thing at one time is not admissible to
prove that he did or did not do the same or a similar thing at another time; but it may be received to prove a
specific intent or knowledge, identity, plan, system, scheme, habit, custom or usage, and the like.
However, respondents failed to allege and prove, in the trial court, that, as a matter of business usage, habit or
pattern of conduct, XEI granted all lot buyers the right to pay the balance of the purchase price in installments
of 120 months of fixed amounts with pre-computed interests, and that XEI and the respondents had intended
to adopt such terms of payment relative to the sale of the two lots in question. Indeed, respondents adduced in
evidence the three contracts of conditional sale executed by XEI and other lot buyers merely to prove that XEI
continued to sell lots in the subdivision as sales agent of OBM after it acquired said lots, not to prove usage,
habit or pattern of conduct on the part of XEI to require all lot buyers in the subdivision to pay the balance of
the purchase price of said lots in 120 months. It further failed to prive that the trial court admitted the said
deeds77 as part of the testimony of respondent Manalo, Jr.78
Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must contend with the
caveat that, before they admit evidence of usage, of habit or pattern of conduct, the offering party must
establish the degree of specificity and frequency of uniform response that ensures more than a mere tendency
to act in a given manner but rather, conduct that is semi-automatic in nature. The offering party must allege
and prove specific, repetitive conduct that might constitute evidence of habit. The examples offered in
evidence to prove habit, or pattern of evidence must be numerous enough to base on inference of systematic
conduct. Mere similarity of contracts does not present the kind of sufficiently similar circumstances to outweigh
the danger of prejudice and confusion.
In determining whether the examples are numerous enough, and sufficiently regular, the key criteria are
adequacy of sampling and uniformity of response. After all, habit means a course of behavior of a person
regularly represented in like circumstances.79 It is only when examples offered to establish pattern of conduct
or habit are numerous enough to lose an inference of systematic conduct that examples are admissible. The
key criteria are adequacy of sampling and uniformity of response or ratio of reaction to situations. 80
There are cases where the course of dealings to be followed is defined by the usage of a particular trade or
market or profession. As expostulated by Justice Benjamin Cardozo of the United States Supreme Court: "Life
casts the moulds of conduct, which will someday become fixed as law. Law preserves the moulds which have
taken form and shape from life."81 Usage furnishes a standard for the measurement of many of the rights and
acts of men.82 It is also well-settled that parties who contract on a subject matter concerning which known
usage prevail, incorporate such usage by implication into their agreement, if nothing is said to be contrary. 83
However, the respondents inexplicably failed to adduce sufficient competent evidence to prove usage, habit or
pattern of conduct of XEI to justify the use of the terms of payment in the contracts of the other lot buyers, and
thus grant respondents the right to pay the P278,448.00 in 120 months, presumably because of respondents
belief that the manner of payment of the said amount is not an essential element of a contract to sell. There is
no evidence that XEI or OBM and all the lot buyers in the subdivision, including lot buyers who pay part of the
downpayment of the property purchased by them in the form of service, had executed contracts of conditional
sale containing uniform terms and conditions. Moreover, under the terms of the contracts of conditional sale
executed by XEI and three lot buyers in the subdivision, XEI agreed to grant 120 months within which to pay
the balance of the purchase price to two of them, but granted one 180 months to do so. 84 There is no evidence
on record that XEI granted the same right to buyers of two or more lots.

Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be considered certain
if it be so with reference to another thing certain. It is sufficient if it can be determined by the stipulations of the
contract made by the parties thereto 85 or by reference to an agreement incorporated in the contract of sale or
contract to sell or if it is capable of being ascertained with certainty in said contract; 86 or if the contract contains
express or implied provisions by which it may be rendered certain; 87 or if it provides some method or criterion
by which it can be definitely ascertained.88 As this Court held in Villaraza v. Court of Appeals,89 the price is
considered certain if, by its terms, the contract furnishes a basis or measure for ascertaining the amount
agreed upon.
We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no direct or implied
reference to the manner and schedule of payment of the balance of the purchase price of the lots covered by
the deeds of conditional sale executed by XEI and that of the other lot buyers 90 as basis for or mode of
determination of the schedule of the payment by the respondents of the P278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light Company 91 is not
applicable in this case because the basic price fixed in the contract was P9.45 per long ton, but it was
stipulated that the price was subject to modification "in proportion to variations in calories and ash content, and
not otherwise." In this case, the parties did not fix in their letters-agreement, any method or mode of
determining the terms of payment of the balance of the purchase price of the property amounting
to P278,448.00.
It bears stressing that the respondents failed and refused to pay the balance of the downpayment and of the
purchase price of the property amounting to P278,448.00 despite notice to them of the resumption by XEI of
its selling operations. The respondents enjoyed possession of the property without paying a centavo. On the
other hand, XEI and OBM failed and refused to transmit a contract of conditional sale to the Respondents. The
respondents could have at least consigned the balance of the downpayment after notice of the resumption of
the selling operations of XEI and filed an action to compel XEI or OBM to transmit to them the said contract;
however, they failed to do so.
As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected contract to sell
the two lots; hence, respondents have no cause of action for specific performance against petitioner. Republic
Act No. 6552 applies only to a perfected contract to sell and not to a contract with no binding and enforceable
effect.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CAG.R. CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City, Branch 98 is
ordered to dismiss the complaint. Costs against the Respondents.

For resolution is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing
the Decision[1] dated October 3, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 61247, dismissing
petitioners appeal and affirming the decision of the Regional Trial Court (RTC) of Malolos, Bulacan, Branch
79, in Civil Case No. 877-M-94.
The antecedent facts are as follows:
Luis V. Cruz and Aida Cruz (petitioners) are occupants of the front portion of a 710-square meter property
located in Sto. Cristo, Baliuag, Bulacan. On October 21, 1994, spouses Alejandro Fernando, Sr. and Rita
Fernando (respondents) filed before the RTC a complaint for accion publiciana against petitioners, demanding
the latter to vacate the premises and to pay the amount of P500.00 a month as reasonable rental for the use
thereof. Respondents alleged in their complaint that: (1) they are owners of the property, having bought the
same from the spouses Clodualdo and Teresita Glorioso (Gloriosos) per Deed of Sale dated March 9, 1987;
(2) prior to their acquisition of the property, the Gloriosos offered to sell to petitioners the rear portion of the
property but the transaction did not materialize due to petitioners failure to exercise their option; (3) the offer to
sell is embodied in aKasunduan dated August 6, 1983 executed before the Barangay Captain; (4) due to
petitioners failure to buy the allotted portion, respondents bought the whole property from the Gloriosos; and
(5) despite repeated demands, petitioners refused to vacate the property.[2]
Petitioners filed a Motion to Dismiss but the RTC dismissed it for lack of merit in its Order dated March 6,
1995.[3] Petitioners then filed their Answer setting forth the affirmative defenses that: (1) the Kasunduan is a
perfected contract of sale; (2) the agreement has already been partially consummated as they already
relocated their house from the rear portion of the lot to the front portion that was sold to them; (3) Mrs.
Glorioso prevented the complete consummation of the sale when she refused to have the exact boundaries of
the lot bought by petitioners surveyed, and the existing survey was made without their knowledge and
participation; and (4) respondents are buyers in bad faith having bought that portion of the lot occupied by
them (petitioners) with full knowledge of the prior sale to them by the Gloriosos. [4]
After due proceedings, the RTC rendered a Decision on April 3, 1998 in favor of respondents. The decretal
portion of the decision provides:
PREMISES CONSIDERED, the herein plaintiffs was able to prove by
preponderance of evidence the case of accion publiciana, against the defendants and
judgment is hereby rendered as follows:
1. Ordering defendants and all persons claiming under them to vacate
placefully (sic) the premises in question and to remove their house therefore (sic);
2. Ordering defendants to pay plaintiff the sum of P500.00 as reasonable
rental per month beginning October 21, 1994 when the case was filed before this Court
and every month thereafter until they vacate the subject premises and to pay the costs
of suit.
The counter claim is hereby DISMISSED for lack of merit.

SO ORDERED.

SO ORDERED.[5]
SPS. LUIS V. CRUZ and G.R. NO. 145470
AIDA CRUZ,
Petitioners, Present:

Petitioners appealed the RTC decision but it was affirmed by the CA per its Decision dated October 3, 2000.
Hence, the present petition raising the following issues:

PUNO, Chairman,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.
SPS. ALEJANDRO FERNANDO,
SR., and RITA FERNANDO, Promulgated:
Respondents. December 9, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
AUSTRIA-MARTINEZ, J.:

1. Whether the Honorable Court of Appeals committed an error of law in

holding that the Agreement (Kasunduan) between the parties was a mere offer to sell,
and not a perfected Contract of Purchase and Sale?
2. Whether the Honorable Court of Appeals committed an error of law in not
holding that where the parties clearly gave the petitioners a period of time within which
to pay the price, but did not fix said period, the remedy of the vendors is to ask the
Court to fix the period for the payment of the price, and not an accion publiciana?
3. Whether the Honorable Court of Appeals committed an error of law in not
ordering respondents to at least deliver the back portion of the lot in question upon
payment of the agreed price thereof by petitioners, assuming that the Regional Trial
Court was correct in finding that the subject matter of the sale was said back portion,
and not the front portion of the property?

4. Whether the Honorable Court of Appeals committed an error of law in

affirming the decision of the trial court ordering the petitioners, who are possessors in
good faith, to pay rentals for the portion of the lot possessed by them? [6]
The RTC dwelt on the issue of which portion was being sold by the Gloriosos to petitioners, finding
that it was the rear portion and not the front portion that was being sold; while the CA construed
the Kasunduan as a mere contract to sell and due to petitioners failure to pay the purchase price, the
Gloriosos were not obliged to deliver to them (petitioners) the portion being sold.
Petitioners, however, insist that the agreement was a perfected contract of sale, and their failure to
pay the purchase price is immaterial. They also contend that respondents have no cause of action against
them, as the obligation set in the Kasunduan did not set a period, consequently, there is no breach of any
obligation by petitioners.

Code does not expressly state that the minds of the parties must also meet on the terms or manner of
payment of the price, the same is needed, otherwise there is no sale. [10] As held in Toyota Shaw, Inc. vs. Court
of Appeals,[11] a definite agreement on the manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale.
The Kasunduan does not establish any definite agreement between the parties concerning the
terms of payment. What it merely provides is the purchase price for the 213-square meter property at P40.00
per square meter.
For another, the telltale provision in the Kasunduan that: Na pumayag ang mga maysumbong
na pagbilhan ang mga ipinagsumbong na bahagi ng lupa at ang ipagbibili ay may sukat na 213 metrong
parisukat humigit kumulang sa halagang P40.00 bawat metrong parisukat, simply means that the Gloriosos
only agreed to sell a portion of the property and that the portion to be sold measures 213 square meters.

The resolution of the issues in this case principally is dependent on the interpretation of the Kasunduan dated
August 6, 1983 executed by petitioners and the Gloriosos. TheKasunduan provided the following pertinent
stipulations:

Another significant provision is that which reads: Na ang ipinagsusumbong ay tiyakang ililipat ang
bahay sa bahaging kanilang nabili o mabibili sa buwan ng Enero 31, 1984. The foregoing indicates that a
contract of sale is yet to be consummated and ownership of the property remained in the Gloriosos.
Otherwise, why would the alternative term mabibili be used if indeed the property had already been sold to
petitioners.

a. Na pumayag ang mga maysumbong (referring to the Gloriosos) na pagbilhan ang

mga ipinagsumbong (referring to petitioners) na bahagi ng lupa at ang
ipagbibili ay may sukat na 213 metrong parisukat humigit kumulang sa
halagang P40.00 bawat metrong parisukat;

In addition, the absence of any formal deed of conveyance is a strong indication that the parties
did not intend immediate transfer of ownership.[12]

b. Na sa titulong papapanaugin ang magiging kabuuang sukat na mauukol sa mga

ipinagsusumbong ay 223 metrong parisukat at ang 10 metro nito ay bilang
kaloob ng mga maysumbong sa mga Ipinagsusumbong na bahagi ng right
of way;
c. Na ang right of way ay may luwang na 1.75 meters magmula sa daang Lopez
Jaena patungo sa likuran ng lote na pagtatayuan ng bahay ng mga
Ipinagsusumbong na kanyang bibilhin;
d. Na ang gugol sa pagpapasukat at pagpapanaog ng titulo ay paghahatian ng
magkabilang panig na ang panig ay magbibigay ng halagang hindi
kukulanging sa halagang tig-AAPAT NA DAANG PISO (P400.00);
e. Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa bahaging kanilang nabili
o mabibili sa buwan ng Enero 31, 1984; [7] (Emphasis supplied)
Under Article 1458 of the Civil Code, a contract of sale is a contract by which one of the contracting parties
obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent. Article 1475 of the Code further provides that the contract of sale is
perfected at the moment there is meeting of the minds upon the thing which is the object of the contract and
upon the price. From that moment the parties may reciprocally demand performance subject to the provisions
of the law governing the form of contracts.
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing
sold, as distinguished from a contract to sell where ownership is, by agreement, reserved in the vendor and is
not to pass to the vendee until full payment of the purchase price. [8] Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the
latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from becoming effective.
The Kasunduan provides for the following terms and conditions: (a) that the Gloriosos agreed to
sell to petitioners a portion of the property with an area of 213 meters at the price of P40.00 per square meter;
(b) that in the title that will be caused to be issued, the aggregate area is 223 square meters with 10 meters
thereof serving as right of way; (c) that the right of way shall have a width of 1.75 meters from Lopez Jaena
road going towards the back of the lot where petitioners will build their house on the portion of the lot that they
will buy; (d) that the expenses for the survey and for the issuance of the title will be divided between the
parties with each party giving an amount of no less thanP400.00; and (e) that petitioners will definitely relocate
their house to the portion they bought or will buy by January 31, 1984.
The foregoing terms and conditions show that it is a contract to sell and not a contract of sale. For
one, the conspicuous absence of a definite manner of payment of the purchase price in the agreement
confirms the conclusion that it is a contract to sell. This is because the manner of payment of the purchase
price is an essential element before a valid and binding contract of sale can exist .[9] Although the Civil

Normally, in a contract to sell, the payment of the purchase price is the positive suspensive
condition upon which the transfer of ownership depends. [13] The parties, however, are not prohibited from
stipulating other lawful conditions that must be fulfilled in order for the contract to be converted from a contract
to sell or at the most an executory sale into an executed one. [14]
In the present case, aside from the payment of the purchase price, there existed another
suspensive condition, i.e.: that petitioners will relocate their house to the portion they bought or will buy by
January 31, 1984.
Petitioners failed to abide by the express condition that they should relocate to the rear portion of
the property being bought by January 31, 1984. Indeed, the Kasunduandiscloses that it is the rear portion that
was being sold by the Gloriosos, and not the front portion as petitioners stubbornly claim. This is evident from
the provisions establishing a right of way from Lopez Jaena road going towards the back of the lot, and
requiring them to relocate their house to the portion being sold by January 31, 1984. Petitioners are presently
occupying the front portion of the property. Why the need for a right of way and for petitioners to relocate if the
front portion on which their house stands is the portion being sold?
This condition is a suspensive condition noncompliance of which prevented the Gloriosos from
proceeding with the sale and ultimately transferring title to petitioners; and the Kasunduan from having
obligatory force.[15] It is established by evidence that the petitioners did not transfer their house located in the
front portion of the subject property to the rear portion which, under the Kasunduan, they intended to buy.
Thus, no obligation arose on the part of the Gloriosos to consider the subject property as having been sold to
petitioners because the latters non-fulfillment of the suspensive condition rendered the contract to sell
ineffective and unperfected.
Petitioners admit that they have not paid a single centavo to the Gloriosos. However, petitioners
argue that their nonpayment of the purchase price was due to the fact that there is yet to be a survey made of
the property. But evidence shows, and petitioners do not dispute, that as early as August 12, 1983, or six days
after the execution of theKasunduan, a survey has already been made and the property was subdivided into
Lot Nos. 565-B-1 (front portion) and 565-B-2 (rear portion), with Lot No. 565-B-2 measuring 223 square
meters as the portion to be bought by petitioners.
Petitioners question the survey made, asserting that it is a table survey made without their
knowledge and participation. It should be pointed out that the Kasunduan merely provides that the expenses
for the survey will be divided between them and that each party should give an amount of no less
than P400.00. Nowhere is it stated that the survey is a condition precedent for the payment of the purchase
price.
Petitioners further claim that respondents have no cause of action against them because their
obligation to pay the purchase price did not yet arise, as the agreement did not provide for a period within
which to pay the purchase price. They argue that respondents should have filed an action for specific
performance or judicial rescission before they can avail of accion publiciana.
Notably, petitioners never raised these arguments during the proceedings before the RTC. Suffice
it to say that issues raised for the first time on appeal and not raised timely in the proceedings in the lower

court are barred by estoppel. [16] Matters, theories or arguments not brought out in the original proceedings
cannot be considered on review or appeal where they are raised for the first time. To consider the alleged facts
and arguments raised belatedly would amount to trampling on the basic principles of fair play, justice and due
process.[17]
Moreover, it would be inutile for respondents to first petition the court to fix a period for the
performance of the contract. In the first place, respondents are not parties to the Kasunduan between
petitioners and the Gloriosos, and they have no standing whatsoever to seek such recourse. In the second
place, such recourse properly pertains to petitioners. It was they who should have sought the courts
intercession. If petitioners believed that they have an actionable contract for the sale of the property, prudence
and common sense dictate that they should have sought its enforcement forthwith. Instead, petitioners whiled
away their time.
Furthermore, there is no need for a judicial rescission of the Kasunduan for the simple reason that
the obligation of the Gloriosos to transfer the property to petitioners has not yet arisen. There can be no
rescission of an obligation that is nonexistent, considering that the suspensive conditions therefor have not yet
happened.[18]
Hence, petitioners have no superior right of ownership or possession to speak of. Their occupation
of the property was merely through the tolerance of the owners. Evidence on record shows that petitioners and
their predecessors were able to live and build their house on the property through the permission and
kindness of the previous owner, Pedro Hipolito, who was their relative, [19] and subsequently, Teresita Glorioso,
who is also their relative. They have no title or, at the very least, a contract of lease over the property. Based
as it was on mere tolerance, petitioners possession could neither ripen into ownership nor operate to bar any
action by respondents to recover absolute possession thereof. [20]
There is also no merit to petitioners contention that respondents are buyers in bad faith. As
explained in Coronel vs. Court of Appeals:
In a contract to sell, there being no previous sale of the property, a third
person buying such property despite the fulfillment of the suspensive condition
such as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance
of the property. There is no double sale in such case. Title to the property will
transfer to the buyer after registration because there is no defect in the owner-sellers
title per se, but the latter, of course, may be sued for damages by the intending buyer.
[21]
(Emphasis supplied)
A person who occupies the land of another at the latter's forbearance or permission without any
contract between them is necessarily bound by an implied promise that he will vacate upon demand. [22]
Considering that petitioners continued possession of the property has already been rendered
unlawful, they are bound to pay reasonable rental for the use and occupation thereof, which in this case was
appropriately pegged by the RTC at P500.00 per month beginning October 21, 1994 when respondents filed
the case against them until they vacate the premises.
Finally, petitioners seek compensation for the value of the improvements introduced on the
property. Again, this is the first time that they are raising this point. As such, petitioners are now barred from
seeking such relief.[23]

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated October 3,
2000 in CA-G.R. CV No. 61247 is AFFIRMED.
SO ORDERED.
[G.R. No. 146997. April 26, 2005]
SPOUSES GODOFREDO & DOMINICA FLANCIA, petitioners, vs. COURT OF APPEALS & WILLIAM ONG
GENATO, respondents.
DECISION

CORONA, J.:
Before us is a petition for review under Rule 45 of the Rules of Court, seeking to set aside the October
6, 2000 decision[1] of the Court of Appeals in CA-G.R. CV No. 56035.
The facts as outlined by the trial court[2] follow.
This is an action to declare null and void the mortgage executed by defendant Oakland Development
Resources Corp. xxx in favor of defendant William Ong Genato over the house and lot plaintiffs spouses
Godofredo and Dominica Flancia purchased from defendant corporation.
In the complaint, plaintiffs allege that they purchased from defendant corporation a parcel of land known as Lot
12, Blk. 3, Phase III-A containing an area of 128.75 square meters situated in Prater Village Subd. II located at
Brgy. Old Balara, Quezon City; that by virtue of the contract of sale, defendant corporation authorized plaintiffs
to transport all their personal belongings to their house at the aforesaid lot; that on December 24, 1992,
plaintiffs received a copy of the execution foreclosing [the] mortgage issued by the RTC, Branch 98 ordering
defendant Sheriff Sula to sell at public auction several lots formerly owned by defendant corporation including
subject lot of plaintiffs; that the alleged mortgage of subject lot is null and void as it is not authorized by
plaintiffs pursuant to Art. 2085 of the Civil Code which requires that the mortgagor must be the absolute owner
of the mortgaged property; that as a consequence of the nullity of said mortgage, the execution foreclosing
[the] mortgage is likewise null and void; that plaintiffs advised defendants to exclude subject lot from the
auction sale but the latter refused. Plaintiffs likewise prayed for damages in the sum of P50,000.00.
Defendant William Ong Genato filed a motion to dismiss the complaint which was opposed by the plaintiffs
and denied by the Court in its Order dated February 16, 1993.
Defendant Genato, then filed his answer averring that on May 19, 1989 co-defendant Oakland Development
Resources Corporation mortgaged to Genato two (2) parcels of land covered by TCT Nos. 356315 and
366380 as security and guaranty for the payment of a loan in the sum of P2,000,000.00; that it appears in the
complaint that the subject parcel of land is an unsubdivided portion of the aforesaid TCT No. 366380 which
covers an area of 4,334 square meters more or less; that said real estate mortgage has been duly annotated
at the back of TCT No. 366380 on May 22, 1989; that for non-payment of the loan ofP2,000,000.00 defendant
Genato filed an action for foreclosure of real estate mortgage against co-defendant corporation; that after
[trial], a decision was rendered by the Regional Trial Court of Quezon City, Branch 98 against defendant
corporation which decision was affirmed by the Honorable Court of Appeals; that the decision of the Court of
Appeals has long become final and thus, the Regional Trial Court, Brach 98 of Quezon City issued an Order
dated December 7, 1992 ordering defendant Sheriff Ernesto Sula to cause the sale at public auction of the
properties covered by TCT No. 366380 for failure of defendant corporation to deposit in Court the money
judgment within ninety (90) days from receipt of the decision of the Court of Appeals; that plaintiffs have no
cause of action against defendant Genato; that the alleged plaintiffs Contract to Sell does not appear to have
been registered with the Register of Deeds of Quezon City to affect defendant Genato and the latter is thus
not bound by the plaintiffs Contract to Sell; that the registered mortgage is superior to plaintiffs alleged
Contract to Sell and it is sufficient for defendant Genato as mortgagee to know that the subject TCT No.
366380 was clean at the time of the execution of the mortgage contract with defendant corporation and
defendant Genato is not bound to go beyond the title to look for flaws in the mortgagors title; that plaintiffs
alleged Contract to Sell is neither a mutual promise to buy and sell nor a Contract of Sale. Ownership is
retained by the seller, regardless of delivery and is not to pass until full payment of the price; that defendant
Genato has not received any advice from plaintiffs to exclude the subject lot from the auction sale, and by way
of counterclaim, defendant Genato prays for P150,000.00 moral damages and P20,000.00 for attorneys fees.
On the other hand, defendant Oakland Development Resources Corporation likewise filed its answer and
alleged that the complaint states no cause of action; xxx Defendant corporation also prays for attorneys fees
of P20,000.00 in its counterclaim.[3]
After trial, the assisting judge[4] of the trial court rendered a decision dated August 16, 1996, the decretal
portion of which provided:

Wherefore, premises considered, judgment is hereby rendered.

1) Ordering defendant Oakland Devt. Resources Corporation to pay plaintiffs:

For resolution before us now are the following issues:

(1) whether or not the registered mortgage constituted over the property was valid;

a) the amount of P10,000.00 representing payment for the option to purchase lot;

(2) whether or not the registered mortgage was superior to the contract to sell; and

b) the amount of P140,000.00 representing the first downpayment of the contract price;

(3) whether or not the mortgagee was in good faith.

c) the amount of P20,520.80 representing five monthly amortizations for February, March,
April, May and June 1990;
d) the amount of P3,000.00 representing amortization for November 1990; all plus legal
interest from the constitution of the mortgage up to the time the instant case was filed.

Under the Art. 2085 of the Civil Code, the essential requisites of a contract of mortgage are: (a) that it
be constituted to secure the fulfillment of a principal obligation; (b) that the mortgagor be the absolute owner of
the thing mortgaged; and (c) that the persons constituting the mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.
All these requirements are present in this case.

2) Ordering said defendant corporation to pay further to plaintiffs the sum of P30,000.00 for
moral damages, P10,000.00 for exemplary damages and P20,000.00 for and as reasonable
attorneys fees plus cost;
3) Dismissing defendant corporations counterclaim;
4) Dismissing defendant Genatos counterclaim.[5]
On motion for reconsideration, the regular presiding judge set aside the judgment of the assisting judge
and rendered a new one on November 27, 1996, the decretal portion of which read:
WHEREFORE, premises considered, the Motion for Reconsideration is hereby GRANTED. The decision
dated August 16, 1996 is hereby set aside and a new one entered in favor of the plaintiffs, declaring the
subject mortgage and the foreclosure proceedings held thereunder as null and void insofar as they affect the
superior right of the plaintiffs over the subject lot, and ordering as follows:
1. Defendant Oakland Development Resources to pay to plaintiffs the amount
of P20,000.00 for litigation-related expenses;
2. Ordering defendant Sheriff Ernesto L. Sula to desist from conducting further
proceedings in the extra-judicial foreclosure insofar as they affect the plaintiffs, or,
in the event that title has been consolidated in the name of defendant William O.
Genato, ordering said defendant to reconvey to plaintiffs the title corresponding to
Lot 12, Blk. 3, Phase III-A of Prater Village [Subd. II], located in Old Balara,
Quezon City, containing an area of 128.75 square meters; and
3. Dismissing the counterclaims of defendants Oakland and Genato and with costs
against them.[6]
On appeal, the Court of Appeals issued the assailed order:
Wherefore, foregoing premises considered, the appeal having merit in fact and in law is hereby GRANTED
and the decision of the Trial Court dated 27 November 1996 hereby SET ASIDE andREVERSED, and its
judgment dated August 16, 1996 REINSTATED and AFFIRMED IN TOTO. No Costs.
SO ORDERED.[7]
Hence, this petition.

FIRST ISSUE: WAS THE REGISTERED MORTGAGE VALID?

As to the first essential requisite of a mortgage, it is undisputed that the mortgage was executed on
May 15, 1989 as security for a loan obtained by Oakland from Genato.
As to the second and third requisites, we need to discuss the difference between a contract of sale and
a contract to sell.
In a contract of sale, title to the property passes to the vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved by the vendor and is not to pass to the vendee until full
payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot
recover it unless and until the contract is resolved or rescinded; in a contract to sell, title is retained by the
vendor until full payment of the price.[8]
In the contract between petitioners and Oakland, aside from the fact that it was denominated as
a contract to sell, the intention of Oakland not to transfer ownership to petitioners until full payment of the
purchase price was very clear. Acts of ownership over the property were expressly withheld by Oakland from
petitioner. All that was granted to them by the occupancy permit was the right to possess it.
Specifically, the contract between Oakland and petitioners stated:
xxx xxx xxx
7. That the BUYER/S may be allowed to enter into and take possession of the property upon
issuance of Occupancy Permit by the OWNER/DEVELOPER exclusively, although
title has not yet passed to the BUYER/S, in which case his possession shall be that of
a possessor by mere tolerance Lessee, subject to certain restrictions contained in this
deed.
xxx xxx xxx
13. That the BUYER/S cannot sell, mortgage, cede, transfer, assign or in any manner
alienate or dispose of, in whole or in part, the rights acquired by and the obligations
imposed on the BUYER/S by virtue of this contract, without the express written consent
of the OWNER/DEVELOPER.

xxx xxx xxx

24. That this Contract to Sell shall not in any way [authorize] the BUYER/S to occupy the
assigned house and lot to them.[9]
xxx xxx xxx

The third issue involves a factual matter which should not be raised in this petition. Only questions of
law may be raised in a Rule 45 petition. This Court is not a trier of facts. The resolution of factual issues is the
function of the lower courts. We therefore adopt the factual findings of the Court of Appeals and uphold the
good faith of the mortgagee Genato.
RELIANCE ON WHAT APPEARS IN THE TITLE

Clearly, when the property was mortgaged to Genato in May 1989, what was in effect between Oakland
and petitioners was a contract to sell, not a contract of sale. Oakland retained absolute ownership over the
property.

Just as an innocent purchaser for value may rightfully rely on what appears in the certificate of title, a
mortgagee has the right to rely on what appears in the title presented to him. In the absence of anything to
arouse suspicion, he is under no obligation to look beyond the certificate and investigate the title of the
mortgagor appearing on the face of the said certificate. [14]

Ownership is the independent and general power of a person over a thing for purposes recognized by
law and within the limits established thereby.[10] According to Art. 428 of the Civil Code, this means that:

We agree with the findings and conclusions of the trial court regarding the liabilities of Oakland in its
August 16, 1996 decision, as affirmed by the Court of Appeals:

The owner has the right to enjoy and dispose of a thing, without other limitations than those established by
law.

Anent [plaintiffs] prayer for damages, the Court finds that defendant corporation is liable to return to plaintiffs
all the installments/payments made by plaintiffs consisting of the amount of P10,000.00 representing payment
for the option to purchase lot; the amount of P140,000.00 which was the first downpayment; the sum
of P20,520.80 representing five monthly amortizations for February, March, April, May and June 1990 and the
amount of P3,000.00 representing amortization for November 1990 plus legal interest from the time of the
mortgage up to the time this instant case was filed. Further, considering that defendant corporation wantonly
and fraudulently mortgaged the subject property without regard to [plaintiffs] rights over the same, said
defendant should pay plaintiffs moral damages in the reasonable amount of P30,000.00. xxx Furthermore,
since defendant [corporations] acts have compelled the plaintiffs to litigate and incur expenses to protect their
interest, it should likewise be adjudged to pay plaintiffs attorneys fees of P20,000.00 under Article 2208
paragraph two (2) of the Civil Code.[15]

xxx xxx xxx

Aside from the jus utendi and the jus abutendi [11] inherent in the right to enjoy the thing, the right to
dispose, or the jus disponendi, is the power of the owner to alienate, encumber, transform and even destroy
the thing owned.[12]
Because Oakland retained all the foregoing rights as owner of the property, it was entitled absolutely to
mortgage it to Genato. Hence, the mortgage was valid.
SECOND ISSUE: WAS THE REGISTERED MORTGAGE SUPERIOR TO THE CONTRACT TO SELL?
In their memorandum, petitioners cite our ruling in State

WHEREFORE, the petition for review is hereby DENIED. The decision of the Court of Appeals
reinstating the August 16, 1996 decision of the trial court is hereby AFFIRMED.
SO ORDERED.
[G.R. No. 103577. October 7, 1996]

Investment House, Inc. v. Court of Appeals [13] to the effect that an unregistered sale is preferred over
a registered mortgage over the same property. The citation is misplaced.
This Court in that case explained the rationale behind the rule:
The unrecorded sale between respondents-spouses and SOLID is preferred for the reason that if the original
owner xxx had parted with his ownership of the thing sold then he no longer had ownership and free disposal
of that thing as to be able to mortgage it again.
State Investment House is completely inapplicable to the case at bar. A contract of sale and a contract
to sell are worlds apart. State Investment House clearly pertained to a contract of sale, not to a contract to sell
which was what Oakland and petitioners had. In State Investment House, ownership had passed completely
to the buyers and therefore, the former owner no longer had any legal right to mortgage the property,
notwithstanding the fact that the new owner-buyers had not registered the sale. In the case before us, Oakland
retained absolute ownership over the property under the contract to sell and therefore had every right to
mortgage it.
In sum, we rule that Genatos registered mortgage was superior to petitioners contract to sell, subject to
any liabilities Oakland may have incurred in favor of petitioners by irresponsibly mortgaging the property to
Genato despite its commitments to petitioners under their contract to sell.
THIRD ISSUE: WAS THE MORTGAGE IN GOOD FAITH?

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES

(for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL,
FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE COURT
OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel herein petitioners
(except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its
improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in
January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels)
executed a document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz
(hereinafter referred to as Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of
Catalina (Exh. G; Exh. 7).

P1,240,000.00 - Total amount

50,000.00 - Down payment

On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No.
351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)

-----------------------------------------P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos
purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the
transfer certificate of title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of
said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of theP1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document
aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their
deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale
in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety
Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as
Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh.
2).

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties
agreed to submit the case for decision solely on the basis of documentary exhibits.Thus, plaintiffs therein (now
private respondents) proffered their documentary evidence accordingly marked as Exhibits A through J,
inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants
(now petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise inclusive of their
corresponding submarkings.Upon motion of the parties, the trial court gave them thirty (30) days within which
to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then
temporarily detailed to preside over Branch 82 of the RTC of Quezon City. OnMarch 1, 1989, judgment was
handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch,
disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor
of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with
all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to
pay defendants the whole balance of the purchase price amounting toP1,190,000.00 in cash. Transfer
Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby
canceled and declared to be without force and effect. Defendants and intervenor and all other persons
claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to
plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the counterclaims of defendants and
intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.

On February 6, 1985, the property originally registered in the name of the Coronels father was transferred in
their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant
Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3;
Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down
payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels
and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with
the Registry of Deeds of Quezon City (Exh. F; Exh. 6).

(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City
RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the
undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became
submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective
documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that
they were allowed to file memoranda at some future date did not change the fact that the hearing of the case
was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When
the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior
to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the
hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have
acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they

received the decision in question which happens to be adverse to them; (3) While it is true that Judge
Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding
Judge with full authority to act on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to
decide or resolve cases submitted to him for decision or resolution because he continued as Judge of the
Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and
supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to
decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135,
Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant
case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of
the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is
supported by evidence and, therefore, should not be disturbed.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.

IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew
Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena,
Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents
Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case
was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in
the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first
essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to
the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership
of the property subject of the contract to sell until the happening of an event, which for present purposes we
shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill
his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In
other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had
occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the
ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment
being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an
event that prevented the obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale
with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at
bar is the precise determination of the legal significance of the document entitled Receipt of Down Payment
which was offered in evidence by both parties. There is no dispute as to the fact that the said document
embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of
Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as
defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some service.
While, it is the position of private respondents that the Receipt of Down Payment embodied a perfected
contract of sale, which perforce, they seek to enforce by means of an action for specific performance,
petitioners on their part insist that what the document signified was a mere executory contract to sell, subject
to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United
States of America, said contract could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is brought about by the way each interprets
the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and
admissible evidence may be available on record, this Court, as were the courts below, is now called upon to
adjudge what the real intent of the parties was at the time the said document was executed.

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

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering
into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third
person buying such property despite the fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek
the relief of reconveyance of the property. There is no double sale in such case. Title to the property will
transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter,
of course, may be sued for damages by the intending buyer.

agreed to sell the subject property, they undertook to have the certificate of title change to their names and
immediately thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the
buyer with certain terms and conditions, promised to sell the property to the latter.What may be perceived from
the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the
house and lot they inherited from their father, completely willing to transfer ownership of the subject house and
lot to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate
of title was then still in the name of their father. It was more expedient to first effect the change in the certificate
of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the
certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as
the new certificate of title is issued in their names, petitioners were committed to immediately execute the
deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price
arise.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous
delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the
buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of
the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such
defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a
registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property subject of the sale.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect
the seller against a buyer who intends to buy the property in installment by withholding ownership over the
property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers
were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the
certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it
were, had the impediment which prevented, so to speak, the execution of an contract of absolute sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of
the contract entered into by petitioners and private respondents.

What is clearly established by the plain language of the subject document is that when the said Receipt
of Down Payment was prepared and signed by petitioners Romulo A. Coronel, et. al., the parties had agreed to
a conditional contract of sale, consummation of which is subject only to the successful transfer of the
certificate of title from the name of petitioners father, Constancio P. Coronel, to their names.

It is a canon in the interpretation of contracts that the words used therein should be given their natural
and ordinary meaning unless a technical meaning was intended ( Tan vs. Court of Appeals, 212 SCRA 586
[1992]). Thus, when petitioners declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea
conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there
was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title
was still in the name of petitioners father, they could not fully effect such transfer although the buyer was then
willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of
the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of
title in their names from that of their father, after which, they promised to present said title, now in their names,
to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no express
reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented
the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of
title was not in their names) and not the full payment of the purchase price. Under the established facts and
circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of
petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not
have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the
property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already

The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985
(Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being
the delivery of the property by means of the execution of the deed of absolute sale in a public instrument,
which petitioners unequivocally committed themselves to do as evidenced by the Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at
bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract
of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer
certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the
balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively
admitted that:

3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our
deceased father Constancio P. Coronel, the transfer certificate of title immediately upon
receipt of the downpayment above-stated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)

Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P.
Coronel are compulsory heirs who were called to succession by operation of law.Thus, at the point their father
drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that
any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly
provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777,
Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).

(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive
condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under
their names, there could be no perfected contract of sale. (Emphasis supplied.)

Be it also noted that petitioners claim that succession may not be declared unless the creditors have
been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from
the decedents name to their names on February 6, 1985.

(Ibid.)

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an
agreement at that time and they cannot be allowed to now take a posture contrary to that which they took
when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly
states that:

not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly
provides that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon.

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Having represented themselves as the true owners of the subject property at the time of sale, petitioners
cannot claim now that they were not yet the absolute owners thereof at that time.

Besides, it should be stressed and emphasized that what is more controlling than these mere
hypothetical arguments is the fact that the condition herein referred to was actually and indisputably
fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT
No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as
Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the
suspensive condition that the sellers shall effect the issuance of new certificate title from that of their fathers
name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to
the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition
that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of
that point in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they were
then not yet the absolute owners of the inherited property.
We cannot sustain this argument.

Petitioners also contend that although there was in fact a perfected contract of sale between them and
Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without leaving her address, telephone
number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in
unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant
case. We note that these supposed grounds for petitioners rescission, are mere allegations found only in their
responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is
filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any
supporting evidence to substantiate petitioners allegations. We have stressed time and again that allegations
must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2
SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6,
1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale,
there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of
sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because
although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the
sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of her
daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with
her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no evidence
showing that petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz when they
accepted her personal check. Neither did they raise any objection as regards payment being effected by a
third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is
not a ground to rescind the contract of sale.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the
extent and value of the inheritance of a person are transmitted through his death to another or others by his
will or by operation of law.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay
the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical
absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually
presented the new transfer certificate of title in their names and signified their willingness and readiness to
execute the deed of absolute sale in accordance with their agreement. Ramonas corresponding obligation to

pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and
demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be
considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.

(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the
subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and
petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is
that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was
unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.

xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill
his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a
case of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof to the person who presents the oldest title, provided there is good
faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of
a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of
Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b)
should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires
possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title
or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished
member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first
buyer of the second sale cannot defeat the first buyers rights except when the second buyer first registers in
good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his
registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December
1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to
merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992).

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer in
good faith but whether or not said second buyer registers such second sale in good faith, that is, without
knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis
pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner
Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been previously sold to private respondents, or, at least,
she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner
Mabanag cannot close her eyes to the defect in petitioners title to the property at the time of the registration of
the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale
of the same property to a third party or that another person claims said property in a previous sale, the
registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs.
Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil.
554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on
February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was
correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as
principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue
of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the
instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this
issue and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
judgment AFFIRMED.
SO ORDERED.
G.R. No. 125531 February 12, 1997
JOVAN LAND, petitioner,
vs.
COURT OF APPEALS and EUGENIO QUESADA INC., respondents.

HERMOSISIMA, JR., J.:

This is a petition for review on certiorari to reverse and set aside the decision of the Court of Appeals in C.A.G.R. CV No. 47515.
Petitioner Jovan Land, Inc. is a corporation engaged in the real estate business. Its President and Chairman of
the Board of Directors is one Joseph Sy.
Private respondent Eugenio Quesada is the owner of the Q Building located on an 801 sq. m. lot at the corner
of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. The property is covered by TCT No. 77796 of the
Registry of Deeds of Manila.
Petitioner learned from co-petitioner Consolacion P. Mendoza that private respondent was selling the
aforesaid Mayhaligue property. Thus, petitioner through Joseph Sy made a written offer, dated July 27, 1987
for P10.25 million. This first offer was not accepted by Conrado Quesada, the General Manager of private
respondent. Joseph Sy sent a second written offer dated July 31, 1989 for the same price but inclusive of an
undertaking to pay the documentary stamp tax, transfer tax, registration fees and notarial charges. Check No.
247048, dated July 31, 1989, for one million pesos drawn against the Philippine Commercial and Industrial
Bank (PCIB) was enclosed therewith as earnest money. This second offer, with earnest money, was again
rejected by Conrado Quesada. Undaunted, Joseph Sy, on August 10, 1989, sent a third written offer for twelve
million pesos with a similar check for one million pesos as earnest money. Annotated on this third letter-offer
was the phrase "Received original, 9-4-89" beside which appears the signature of Conrado Quesada.
On the basis of this annotation which petitioner insists is the proof that there already exists a valid, perfected
agreement to sell the Mayhaligue property, petitioner filed with the trial court, a complaint for specific
performance and collection of sum of money with damages. However, the trial court held that:
. . . the business encounters between Joseph Sy and Conrado Quesada had not
passed the negotiation stage relating to the intended sale by the defendant corporation
of the property in question. . . . As the court finds, there is nothing in the record to point
that a contract was ever perfected. In fact, there is nothing in writing which is
indispensably necessary in order that the perfected contract could be enforced under
the Statute of Frauds. 1
Since the trial court dismissed petitioner's complaint for lack of cause of action, petitioner appealed 2 to
respondent Court of Appeals before which it assigned the following errors:
1. The Court a quo failed to appreciate that there was already a perfected contract of
sale between Jovan Land, Inc. and the private respondent];
2. The Court a quo erred in its conclusion that there was no implied acceptance of the
offer by appellants to appellee [private respondent];
3. The Court a quo was in error where it concluded that the contract of sale was
unenforceable;
4. The Court a quo failed to rule that appellant [petitioner] Mendoza is entitled to her
broker's commission. 3
Respondent court placed petitioner to task on their assignment of errors and concluded that not any of them
justifies a reversal of the trial court decision.
We agree.

In the case of Ang Yu Asuncion v. Court of Appeals, 4 we held that:

. . . [A] contract (Art. 1157, Civil Code), . . . is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to render
some service. . . . A contract undergoes various stages that include its negotiation or
preparation, its perfection and, finally, its consummation. Negotiation covers the period
from the time the prospective contracting parties indicate interest in the contract to the
time the contract is concluded . . . . The perfection of the contract takes place upon the
concurrence of the essential elements thereof.
Moreover, it is a fundamental principle that before contract of sale can be valid, the following elements must be
present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or
its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve
as a binding juridical relation between the parties.
In the case at bench, petitioner, anchors its main argument on the annotation on its third letter-offer of the
phrase "Received original, 9-4-89," beside which appears the signature of Conrado Quesada. It also contends
that the said annotation is evidence to show that there was already a perfected agreement to sell as
respondent can be said to have accepted petitioner's payment in the form of a check which was enclosed in
the third letter.
However, as correctly elucidated by the Court of Appeals:
Sy insisted in his testimony that this offer of P12M was accepted by Conrado Quesada
but there is nothing written or documentary to show that such offer was accepted by
Conrado Quesada. While Sy claimed that the acceptance could be gleaned from the
notation in the third written offer, the court is not impressed thereon however because
the notation merely states as follows: "Received Original, (S) Conrado Quesada"
and below this signature is "9-4-89". As explained by Conrado Quesada in his
testimony what was received by him was the original of the written offer.
The court cannot believe that this notation marked as Exhibit D-2 would signify the
acceptance of the offer. Neither does it signify, as Sy had testified that the check was
duly received on said date. If this were true Sy, who appears to be an intelligent
businessman could have easily asked Conrado Quesada to indicate on Exhibit D the
alleged fact of acceptance of said check. And better still, Sy could have asked
Quesada the acceptance in writing separate of the written offer if indeed there was an
agreement as to the price of the proposed sale of the property in question. 5
Clearly then, a punctilious examination of the receipt reveals that the same can neither be regarded as a
contract of sale nor a promise to sell. Such an annotation by Conrado Quesada amounts to neither a written
nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of
the latter's offer. The requisites of a valid contract of sale are lacking in said receipt and therefore the "sale" is
neither valid nor enforceable.
Although there was a series of communications through letter-offers and rejections as evident from the facts of
this case, still it is undeniable that no written agreement was reached between petitioner and private
respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the
requirements under the Statute of Frauds have not been complied with. Under the said provision, an
agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and
subscribed by the party charged or by an agent thereof.
Petitioner also asseverates that the failure of Conrado Quesada to return the check for one million pesos,
translates to implied acceptance of its third letter-offer. It, however, does not rebut the finding of the trial court
that private respondent was returning the check but petitioner refused to accept the same and that when
Conrado Quesada subsequently sent it back to petitioner through registered mail, the latter failed to claim its
mail from the post office.

Finally, we fittingly apply here the oft-repeated doctrine that the factual findings of the trial court, especially as
regards the credibility of witnesses, are conclusive upon this court, unless the case falls under the
jurisprudentially established exceptions. But this is a case that tenders no exceptional circumstance; rather, we
find the observations of the trial court to be legally sound and valid:
. . . Joseph Sy's testimony is not impressive because of several inconsistencies herein
pointed out. On the matter of earnest money, the same appears to be the idea solely of
the [petitioner], assuming that he had intended to bind the [petitioner] corporation. In
the written second offer . . . he had stated that the check of P1M had been enclosed
(attached) therewith. The same check . . . was again mentioned to be enclosed
(attached) in the third written offer under date August 10, 1989 . . . . Sy testified in his
direct examination that he had personally given this check to Conrado Quesada. But
on cross examination, he reversed himself by saying that the check was given thru his
[co-petitioner] Mendoza. Examining the third written offer, it appears that when it was
first typewritten, this P11M was noted to have been corrected, and that as per his
testimony, Sy had increased it to P12M. This is the reason according to Sy why there
was a superimposition of the number "12" over the number "11" to mean P12M as the
revised consideration for the sale of the property in question. 6
Respondent court thus concluded that:
. . . [since] the matter of evaluation of the credibility of witness[es] is addressed to the
trial court and unless clearly contrary to the records before Us, the findings of the said
court are entitled to great respondent on appeal, . . . it was Joseph Sy's idea to offer
the earnest money, and the evidence to show that Joseph Sy accepted the same, is
wanting. . . . 7
and accordingly affirmed the trial court judgment appealed from.
As shown elucidated above, we agree with the findings and conclusions of the trial court and the respondent
court. Neither has petitioner posited any new issues in the instant petition that warrant the further exercise by
this court of its review powers.
WHEREFORE, premises considered, this petition is DENIED.
Costs against petitioner
[G. R. No. 136773. June 25, 2003]
MILAGROS MANONGSONG, joined by her husband, CARLITO MANONGSONG, petitioners,
vs. FELOMENA JUMAQUIO ESTIMO, EMILIANA JUMAQUIO, NARCISO ORTIZ, CELESTINO
ORTIZ, RODOLFO ORTIZ, ERLINDA O. OCAMPO, PASTOR ORTIZ, JR., ROMEO ORTIZ
BENJAMIN DELA CRUZ, SR., BENJAMIN DELA CRUZ, JR., AURORA NICOLAS, GLORIA
RACADIO, ROBERTO DELA CRUZ, JOSELITO DELA CRUZ and LEONCIA S.
LOPEZ, respondents.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review [1] assailing the Decision[2] of 26 June 1998 and the Resolution
of 21 December 1998 of the Court of Appeals in CA-G.R. CV No. 51643. The Court of Appeals reversed the

Decision dated 10 April 1995 of the Regional Trial Court of Makati City, Branch 135, in Civil Case No. 92-1685,
partitioning the property in controversy and awarding to petitioners a portion of the property.
Antecedent Facts
Spouses Agatona Guevarra (Guevarra) and Ciriaco Lopez had six (6) children, namely: (1) Dominador
Lopez; (2) Enriqueta Lopez-Jumaquio, the mother of respondents Emiliana Jumaquio Rodriguez and
Felomena Jumaquio Estimo (Jumaquio sisters); (3) Victor Lopez, married to respondent Leoncia Lopez; (4)
Benigna Lopez-Ortiz, the mother of respondents Narciso, Celestino, Rodolfo, Pastor Jr. and Romeo Ortiz, and
Erlinda Ortiz Ocampo; (5) Rosario Lopez-dela Cruz, married to respondent Benjamin dela Cruz, Sr. and the
mother of respondents Benjamin Jr., Roberto, and Joselito, all surnamed dela Cruz, and of Gloria dela Cruz
Racadio and Aurora dela Cruz Nicolas; and (6) Vicente Lopez, the father of petitioner Milagros Lopez
Manongsong (Manongsong).
The contested property is a parcel of land on San Jose Street, Manuyo Uno, Las Pias, Metro Manila
with an area of approximately 152 square meters (Property). The records do not show that the Property is
registered under the Torrens system. The Property is particularly described in Tax Declaration No. B-00100390[3] as bounded in the north by Juan Gallardo, south by Calle Velay, east by Domingo Lavana and west by
San Jose Street. Tax Declaration No. B-001-00390 was registered with the Office of the Municipal Assessor of
Las Pias on 30 September 1984 in the name of Benigna Lopez, et al. [4] However, the improvements on the
portion of the Property denominated as No. 831 San Jose St., Manuyo Uno, Las Pias were separately
declared in the name of Filomena J. Estimo under Tax Declaration No. 90-001-02145 dated 14 October 1991.
[5]

Milagros and Carlito Manongsong (petitioners) filed a Complaint [6] on 19 June 1992, alleging that
Manongsong and respondents are the owners pro indiviso of the Property. Invoking Article 494 of the Civil
Code,[7] petitioners prayed for the partition and award to them of an area equivalent to one-fifth (1/5) of the
Property or its prevailing market value, and for damages.
Petitioners alleged that Guevarra was the original owner of the Property. Upon Guevarras death, her
children inherited the Property. Since Dominador Lopez died without offspring, there were only five children left
as heirs of Guevarra. Each of the five children, including Vicente Lopez, the father of Manongsong, was
entitled to a fifth of the Property. As Vicente Lopez sole surviving heir, Manongsong claims her fathers 1/5
share in the Property by right of representation.
There is no dispute that respondents, who are the surviving spouses of Guevarras children and their
offspring, have been in possession of the Property for as long as they can remember. The area actually
occupied by each respondent family differs, ranging in size from approximately 25 to 50 square
meters. Petitioners are the only descendants not occupying any portion of the Property.
Most respondents, specifically Narciso, Rodolfo, Pastor Jr., and Celestino Ortiz, and Erlinda Ortiz
Ocampo (Ortiz family), as well as Benjamin Sr., Benjamin Jr., and Roberto dela Cruz, Aurora dela Cruz
Nicolas and Gloria Dela Cruz Racadio (Dela Cruz family), entered into a compromise agreement with
petitioners. Under the Stipulation of Facts and Compromise Agreement [8] dated 12 September 1992
(Agreement), petitioners and the Ortiz and Dela Cruz families agreed that each group of heirs would receive
an equal share in the Property. The signatories to the Agreement asked the trial court to issue an order of
partition to this effect and prayed further that those who have exceeded said one-fifth (1/5) must be reduced
so that those who have less and those who have none shall get the correct and proper portion. [9]
Among the respondents, the Jumaquio sisters and Leoncia Lopez who each occupy 50 square meter
portions of the Property and Joselito dela Cruz, did not sign the Agreement. [10]However, only the Jumaquio
sisters actively opposed petitioners claim. The Jumaquio sisters contended that Justina Navarro (Navarro),
supposedly the mother of Guevarra, sold the Property to Guevarras daughter Enriqueta Lopez Jumaquio.
The Jumaquio sisters presented provincial Tax Declaration No. 911[11] for the year 1949 in the sole
name of Navarro. Tax Declaration No. 911 described a residential parcel of land with an area of 172.51 square
meters, located on San Jose St., Manuyo, Las Pias, Rizal with the following boundaries: Juan Gallardo to the

north, I. Guevarra Street to the south, Rizal Street to the east and San Jose Street to the west. In addition, Tax
Declaration No. 911 stated that the houses of "Agatona Lopez" and "Enriquita Lopez" stood on the Property as
improvements.
The Jumaquio sisters also presented a notarized KASULATAN SA BILIHAN NG LUPA[12] (Kasulatan)
dated 11 October 1957, the relevant portion of which states:
AKO SI JUSTINA NAVARRO, sapat ang gulang, may asawa, Pilipino at naninirahan sa LAS PIAS, ay siyang
nagma-may-ari at nagtatangkilik ng isang lagay na lupa na matatagpuan sa Manuyo, Las Pias, Rizal, lihis sa
anomang pagkakautang lalong napagkikilala sa pamamagitan ng mga sumusunod na palatandaan:

xxx The conveyance made by Justina Navarro is subject to nullity because the property conveyed had a
conjugal character. No positive evidence had been introduced that it was solely a paraphernal property.The
name of Justina Navarros spouse/husband was not mentioned and/or whether the husband was still alive at
the time the conveyance was made to Justina Navarro. Agatona Guevarra as her compulsory heir should have
the legal right to participate with the distribution of the estate under question to the exclusion of others. She is
entitled to her legitime. The Deed of Sale [Exhs 4 & 4-1(sic)] did not at all provide for the reserved legitime or
the heirs, and, therefore it has no force and effect against Agatona Guevarra and her six (6) legitimate children
including the grandchildren, by right of representation, as described in the order of intestate succession. The
same Deed of Sale should be declared a nullity ab initio. The law on the matter is clear. The compulsory heirs
cannot be deprived of their legitime, except on (sic) cases expressly specified by law like for instance
disinheritance for cause. xxx (Emphasis supplied)
Since the other respondents had entered into a compromise agreement with petitioners, the dispositive
portion of the trial courts decision was directed against the Jumaquio sisters only, as follows:

BOUNDARIES:
NORTH: JUAN GALLARDO SOUTH: I. GUEVARRA ST. EAST: RIZAL ST., WEST: SAN
JOSE ST.,
na may sukat na 172.51 metros cuadrados na may TAX DECLARATION BILANG 911.
NA DAHIL AT ALANG ALANG sa halagang DALAWANG DAAN LIMANGPUNG PISO (P250.00), SALAPING
PILIPINO, na sa akin ay kaliwang iniabot at ibinayad ni ENRIQUETA LOPEZ, may sapat na gulang, Pilipino,
may asawa at naninirahan sa Las Pias, Rizal, at sa karapatang ito ay aking pinatutunayan ng pagkakatanggap
ng nasabing halaga na buong kasiyahan ng aking kalooban ay aking IPINAGBILI, ISINALIN AT INILIPAT sa
nasabing, ENRIQUETA LOPEZ, sa kanyang mga tagapagmana at kahalili, ang kabuuang sukat ng lupang
nabanggit sa itaas nito sa pamamagitan ng bilihang walang anomang pasubali. Ang lupang ito ay walang
kasama at hindi taniman ng palay o mais.

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against the
remaining active defendants, Emiliana Jumaquio and Felomena J. Estimo, jointly and severally,
ordering:
1. That the property consisting of 152 square meters referred to above be immediately partitioned giving
plaintiff Milagros Lopez-Manongsong her lawful share of 1/5 of the area in square meters, or the prevailing
market value on the date of the decision;
2. Defendants to pay plaintiffs the sum of P10,000.00 as compensatory damages for having deprived the latter
the use and enjoyment of the fruits of her 1/5 share;
3. Defendants to pay plaintiffs litigation expenses and attorneys fee in the sum of P10,000.00; and

Simula sa araw na ito ay aking ililipat ang pagmamay-ari at pagtatangkilik ng nasabing lupa kay ENRIQUETA
LOPEZ sa kanilang/kanyang tagapagmana at kahalili x x x.
The Clerk of Court of the Regional Trial Court of Manila certified on 1 June 1994 that the KASULATAN
SA BILIHAN NG LUPA, between Justina Navarro (Nagbili) and Enriqueta Lopez (Bumili), was notarized by
Atty. Ruperto Q. Andrada on 11 October 1957 and entered in his Notarial Register xxx. [13] The certification
further stated that Atty. Andrada was a duly appointed notary public for the City of Manila in 1957.
Because the Jumaquio sisters were in peaceful possession of their portion of the Property for more
than thirty years, they also invoked the defense of acquisitive prescription against petitioners, and charged that
petitioners were guilty of laches. The Jumaquio sisters argued that the present action should have been filed
years earlier, either by Vicente Lopez when he was alive or by Manongsong when the latter reached legal
age. Instead, petitioners filed this action for partition only in 1992 when Manongsong was already 33 years old.
The Ruling of the Trial Court
After trial on the merits, the trial court in its Decision [14] of 10 April 1995 ruled in favor of petitioners. The
trial court held that the Kasulatan was void, even absent evidence attacking its validity. The trial court
declared:
It appears that the ownership of the estate in question is controverted. According to defendants Jumaquios, it
pertains to them through conveyance by means of a Deed of Sale executed by their common ancestor Justina
Navarro to their mother Enriqueta, which deed was presented in evidence as Exhs. 4 to 4-A. Plaintiff Milagros
Manongsong debunks the evidence as fake. The document of sale, in the observance of the Court, is however
duly authenticated by means of a certificate issued by the RTC of the Manila Clerk of Court as duly notarized
public document (Exh. 5). No countervailing proof was adduced by plaintiffs to overcome or impugn the
documents legality or its validity.

4. Defendants to pay the costs of suit.

SO ORDERED.[15] (Emphasis supplied)
When the trial court denied their motion for reconsideration, the Jumaquio sisters appealed to the Court
of Appeals.
The Ruling of the Court of Appeals
Petitioners, in their appellees brief before the Court of Appeals, presented for the first time a supposed
photocopy of the death certificate[16] of Guevarra, which stated that Guevarras mother was a certain Juliana
Gallardo. Petitioner also attached an affidavit [17] from Benjamin dela Cruz, Sr. attesting that he knew Justina
Navarro only by name and had never met her personally, although he had lived for some years with Agatona
Guevarra after his marriage with Rosario Lopez. On the basis of these documents, petitioners assailed the
genuineness and authenticity of the Kasulatan.
The Court of Appeals refused to take cognizance of the death certificate and affidavit presented by
petitioners on the ground that petitioners never formally offered these documents in evidence.
The appellate court further held that the petitioners were bound by their admission that Navarro was the
original owner of the Property, as follows:
Moreover, plaintiffs-appellees themselves admitted before the trial court that Justina Navarro and not Juliana
Gallardo was the original owner of the subject property and was the mother of Agatona Navarro
(sic). Plaintiffs-appellees in their Reply-Memorandum averred:

As regards the existence of common ownership, the defendants clearly admit as follows:
xxx xxx xxx

On 28 January 1999, petitioners appealed the appellate courts decision and resolution to this
Court. The Court initially denied the petition for review due to certain procedural defects.The Court, however,
gave due course to the petition in its Resolution of 31 January 2000. [20]
The Issues

History of this case tells us that originally the property was owned by JUSTINA NAVARRO who has a daughter
by the name of AGATONA GUEVARRA who on the other hand has six children namely:xxx xxx xxx.

Petitioners raise the following issues before this Court:

which point-out that co-ownership exists on the property between the parties. Since this is the admitted history,
facts of the case, it follows that there should have been proper document to extinguish this status of coownership between the common owners either by (1) Court action or proper deed of tradition, xxx xxx xxx.

1. WHETHER PETITIONER HAS NO COUNTERVAILING EVIDENCE ON THE ALLEGED

SALE BY ONE JUSTINA NAVARRO;

The trial court confirms these admissions of plaintiffs-appellees. The trial court held:

2. WHETHER THERE IS PRETERITION AND THE ISSUES RAISED ARE REVIEWABLE;

xxx xxx xxx

With the parties admissions and their conformity to a factual common line of relationship of the heirs with one
another, it has been elicited ascendant Justina Navarro is the common ancestor of the heirs herein mentioned,
however, it must be noted that the parties failed to amplify who was the husband and the number of
compulsory heirs of Justina Navarro. xxx xxx xxx
Therefore, plaintiffs-appellees cannot now be heard contesting the fact that Justina Navarro was their common
ancestor and was the original owner of the subject property.
The Court of Appeals further held that the trial court erred in assuming that the Property was conjugal in
nature when Navarro sold it. The appellate court reasoned as follows:
However, it is a settled rule that the party who invokes the presumption that all property of marriage belongs to
the conjugal partnership, must first prove that the property was acquired during the marriage.Proof of
acquisition during the coveture is a condition sine qua non for the operation of the presumption in favor of
conjugal ownership.
In this case, not a single iota of evidence was submitted to prove that the subject property was acquired by
Justina Navarro during her marriage. xxx

3. WHETHER THERE IS CO-OWNERSHIP PRO INDIVISO;

4. WHETHER THE RULE OF THE MAJORITY CO-OWNERS ON THE LAND SHOULD
PREVAIL;
5. WHETHER THE ALLEGED SALE IS VALID AND BINDS THE OTHER CO-HEIRS;
6. WHETHER PRESCRIPTION APPLIES AGAINST THE SHARE OF PETITIONERS. [21]
The fundamental question for resolution is whether petitioners were able to prove, by the requisite
quantum of evidence, that Manongsong is a co-owner of the Property and therefore entitled to demand for its
partition.
The Ruling of the Court
The petition lacks merit.

The findings of the trial court that the subject property is conjugal in nature is not supported by any evidence.

The issues raised by petitioners are mainly factual in nature. In general, only questions of law are
appealable to this Court under Rule 45. However, where the factual findings of the trial court and Court of
Appeals conflict, this Court has the authority to review and, if necessary, reverse the findings of fact of the
lower courts.[22] This is precisely the situation in this case.

To the contrary, records show that in 1949 the subject property was declared, for taxation purposes under the
name of Justina Navarro alone. This indicates that the land is the paraphernal property of Justina Navarro.

We review the factual and legal issues of this case in light of the general rules of evidence and the
burden of proof in civil cases, as explained by this Court in Jison v. Court of Appeals :[23]

For these reasons, the Court of Appeals reversed the decision of the trial court, thus:
WHEREFORE, foregoing considered, the appealed decision is hereby REVERSED and SET ASIDE. A new
one is hereby rendered DISMISSING plaintiffs-appellees complaint in so far as defendants-appellants are
concerned.
Costs against plaintiffs-appellees.
SO ORDERED.[18]
Petitioners filed a motion for reconsideration, but the Court of Appeals denied the same in its
Resolution of 21 December 1998.[19]

xxx Simply put, he who alleges the affirmative of the issue has the burden of proof, and upon the plaintiff in a
civil case, the burden of proof never parts. However, in the course of trial in a civil case, once plaintiff makes
out a prima facie case in his favor, the duty or the burden of evidence shifts to defendant to controvert
plaintiff's prima facie case, otherwise, a verdict must be returned in favor of plaintiff. Moreover, in civil cases,
the party having the burden of proof must produce a preponderance of evidence thereon, with plaintiff having
to rely on the strength of his own evidence and not upon the weakness of the defendants. The concept of
preponderance of evidence refers to evidence which is of greater weight, or more convincing, that which is
offered in opposition to it; at bottom, it means probability of truth.
Whether the Court of Appeals erred in affirming the validity of the
Kasulatan sa Bilihan ng Lupa

Petitioners anchor their action for partition on the claim that Manongsong is a co-owner or co-heir of the
Property by inheritance, more specifically, as the heir of her father, Vicente Lopez. Petitioners likewise allege
that the Property originally belonged to Guevarra, and that Vicente Lopez inherited from Guevarra a 1/5
interest in the Property. As the parties claiming the affirmative of these issues, petitioners had the burden of
proof to establish their case by preponderance of evidence.
To trace the ownership of the Property, both contending parties presented tax declarations and the
testimonies of witnesses. However, the Jumaquio sisters also presented a notarizedKASULATAN SA BILIHAN
NG LUPA which controverted petitioners claim of co-ownership.
The Kasulatan, being a document acknowledged before a notary public, is a public document
and prima facie evidence of its authenticity and due execution. To assail the authenticity and due execution of
a notarized document, the evidence must be clear, convincing and more than merely preponderant.
[24]
Otherwise the authenticity and due execution of the document should be upheld. [25] The trial court itself held
that (n)o countervailing proof was adduced by plaintiffs to overcome or impugn the documents legality or its
validity.[26]
Even if the Kasulatan was not notarized, it would be deemed an ancient document and thus still
presumed to be authentic. The Kasulatan is: (1) more than 30 years old, (2) found in the proper custody, and
(3) unblemished by any alteration or by any circumstance of suspicion. It appears, on its face, to be genuine.

We find no error in the Court of Appeals refusal to give any probative value to the alleged birth
certificate of Guevarra and the affidavit of Benjamin dela Cruz, Sr. Petitioners belatedly attached these
documents to their appellees brief. Petitioners could easily have offered these documents during the
proceedings before the trial court. Instead, petitioners presented these documents for the first time on appeal
without any explanation. For reasons of their own, petitioners did not formally offer in evidence these
documents before the trial court as required by Section 34, Rule 132 of the Rules of Court. [33] To admit these
documents now is contrary to due process, as it deprives respondents of the opportunity to examine and
controvert them.
Moreover, even if these documents were admitted, they would not controvert Navarros ownership of
the Property. Benjamin dela Cruz, Sr.s affidavit stated merely that, although he knew Navarro by name, he
was not personally acquainted with her.[34] Guevarras alleged birth certificate casts doubt only as to whether
Navarro was indeed the mother of Guevarra. These documents do not prove that Guevarra owned the
Property or that Navarro did not own the Property.
Petitioners admitted before the trial court that Navarro was the mother of Guevarra. However,
petitioners denied before the Court of Appeals that Navarro was the mother of Guevarra.We agree with the
appellate court that this constitutes an impermissible change of theory. When a party adopts a certain theory in
the court below, he cannot change his theory on appeal.To allow him to do so is not only unfair to the other
party, it is also offensive to the basic rules of fair play, justice and due process. [35]

[27]

Nevertheless, the trial court held that the Kasulatan was void because the Property was conjugal at the
time Navarro sold it to Enriqueta Lopez Jumaquio. We do not agree. The trial courts conclusion that the
Property was conjugal was not based on evidence, but rather on a misapprehension of Article 160 of the Civil
Code, which provides:
All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife.
As the Court of Appeals correctly pointed out, the presumption under Article 160 of the Civil Code
applies only when there is proof that the property was acquired during the marriage.Proof of acquisition during
the marriage is an essential condition for the operation of the presumption in favor of the conjugal partnership.
[28]

There was no evidence presented to establish that Navarro acquired the Property during her
marriage. There is no basis for applying the presumption under Article 160 of the Civil Code to the present
case. On the contrary, Tax Declaration No. 911 showed that, as far back as in 1949, the Property was declared
solely in Navarros name.[29] This tends to support the argument that the Property was not conjugal.

If Navarro were not the mother of Guevarra, it would only further undermine petitioners case. Absent
any hereditary relationship between Guevarra and Navarro, the Property would not have passed from Navarro
to Guevarra, and then to the latters children, including petitioners, by succession. There would then be no
basis for petitioners claim of co-ownership by virtue of inheritance from Guevarra. On the other hand, this
would not undermine respondents position since they anchor their claim on the sale under the Kasulatan and
not on inheritance from Guevarra.
Since the notarized Kasulatan is evidence of greater weight which petitioners failed to refute by clear
and convincing evidence, this Court holds that petitioners were not able to prove by preponderance of
evidence that the Property belonged to Guevarras estate. There is therefore no legal basis for petitioners
complaint for partition of the Property.
WHEREFORE, the Decision of 26 June 1998 of the Court of Appeals in CA-G.R. CV No. 51643,
dismissing the complaint of petitioners against Felomena Jumaquio Estimo and Emiliana Jumaquio, is
AFFIRMED.
SO ORDERED.
G.R. No. 124242

We likewise find no basis for the trial courts declaration that the sale embodied in
the Kasulatan deprived the compulsory heirs of Guevarra of their legitimes. As opposed to a disposition inter
vivos by lucrative or gratuitous title, a valid sale for valuable consideration does not diminish the estate of the
seller. When the disposition is for valuable consideration, there is no diminution of the estate but merely a
substitution of values,[30] that is, the property sold is replaced by the equivalent monetary consideration.
Under Article 1458 of the Civil Code, the elements of a valid contract of sale are: (1) consent or meeting
of the minds; (2) determinate subject matter and (3) price certain in money or its equivalent. [31] The presence
of these elements is apparent on the face of the Kasulatan itself. The Property was sold in 1957 for P250.00.
[32]

Whether the Court of Appeals erred in not admitting the documents presented by petitioners for the
first time on appeal

January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA
LU, respondents.
DECISION
TINGA, J.:
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. T-39023 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 Damages 1 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 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.
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 sixty-four 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 (T7219).
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.

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 198918 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 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

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.

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.

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.

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

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.
31

Actual delivery consists in placing the thing sold in the control and possession of the vendee. 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-in-Intervention44 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.
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 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.
[G.R. No. 137290. July 31, 2000]
SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner, vs. SPOUSES ALFREDO HUANG and
GRACE HUANG, respondents.

DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated April 8, 1997, of the Court of Appeals which reversed the
decision of the Regional Trial Court, Branch 153, Pasig City dismissing the complaint brought by respondents
against petitioner for enforcement of a contract of sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale
of real properties. Part of its inventory are two parcels of land totalling 1, 738 square meters at the corner of
Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT82395 and PT-82396 of the Register of Deeds of Pasig City.
On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to
Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter [2] dated
March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which
they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest
money and the balance would be paid in eight equal monthly installments from May to December, 1994.
However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the following terms for the purchase of the
properties, viz:
This is to express our interest to buy your-above-mentioned property with an area of 1,
738 sq. meters. For this purpose, we are enclosing herewith the sum of P1,000,000.00
representing earnest-deposit money, subject to the following conditions.
1. We will be given the exclusive option to purchase the property within the 30 days
from date of your acceptance of this offer.
2. During said period, we will negotiate on the terms and conditions of the purchase;
SMPPI will secure the necessary Management and Board approvals; and we initiate
the documentation if there is mutual agreement between us.
3. In the event that we do not come to an agreement on this transaction, the said
amount of P1,000,000.00 shall be refundable to us in full upon demand. . . .
Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real estate, indicated his
conformity to the offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million.
Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the
properties.
Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April 8, 1994, Sobrecarey
informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz
countered with an offer of six months within which to pay.
On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had not
yet acted on her counter-offer. This prompted Atty. Dauz to propose a four-month period of amortization.
On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within
which to exercise her option to purchase the property, adding that within that period, "[we] hope to finalize [our]
agreement on the matter."[4] Her request was granted.

On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty.
Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the
extension granted by petitioner, the latter was returning the amount of P1 million given as "earnest-deposit."[5]
On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five
days of a deed of sale covering the properties. Respondents attempted to return the "earnest-deposit" but
petitioner refused on the ground that respondents option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before
the Regional Trial Court, Branch 133, Pasig City where it was docketed as Civil Case No. 64660.

. . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is
nothing to show that the same was in the concept of the earnest money contemplated
in Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the
sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are
more inclined to believe that the said P5,000.00 were paid in the concept of earnest
money as the term was understood under the Old Civil Code, that is, as a guarantee
that the buyer would not back out, considering that it is not clear that there was already
a definite agreement as to the price then and that petitioners were decided to buy 6/7
only of the property should respondent Javellana refuse to agree to part with her 1/7
share.[10]

Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the complaint alleging that
(1) the alleged "exclusive option" of respondent spouses lacked a consideration separate and distinct from the
purchase price and was thus unenforceable and (2) the complaint did not allege a cause of action because
there was no "meeting of the minds" between the parties and, therefore, no perfected contract of sale. The
motion was opposed by respondents.

In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as
contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents offer of
March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions
attached by respondents to their letter, to wit: (1) that they be given the exclusive option to purchase the
property within 30 days from acceptance of the offer; (2) that during the option period, the parties would
negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals
while respondents would handle the documentation.

On December 12, 1994, the trial court granted petitioners motion and dismissed the action. Respondents filed
a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals
which, on April 8, 1997, rendered a decision [6] reversing the judgment of the trial court. The appellate court
held that all the requisites of a perfected contract of sale had been complied with as the offer made on March
29, 1994, in connection with which the earnest money in the amount of P1 million was tendered by
respondents, had already been accepted by petitioner. The court cited Art. 1482 of the Civil Code which
provides that "[w]henever earnest money is given in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract." The fact the parties had not agreed on the mode of
payment did not affect the contract as such is not an essential element for its validity. In addition, the court
found that Sobrecarey had authority to act in behalf of petitioner for the sale of the properties. [7]

The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As
petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to
an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30
days from the date of acceptance of the offer. Such option giving respondents the exclusive right to buy the
properties within the period agreed upon is separate and distinct from the contract of sale which the parties
may enter.[11] All that respondents had was just the option to buy the properties which privilege was not,
however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale
may thus be enforced by respondents.

Petitioner moved for reconsideration of the trial courts decision, but its motion was denied. Hence, this petition.
Petitioner contends that the Court of Appeals erred in finding that there was a perfected contract of sale
between the parties because the March 29, 1994 letter of respondents, which petitioner accepted, merely
resulted in an option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner argues
that the absence of agreement as to the mode of payment was fatal to the perfection of the contract of sale.
Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority to sell the subject
real properties.[8]
Respondents were required to comment within ten (10) days from notice. However, despite 13 extensions
totalling 142 days which the Court had given to them, respondents failed to file their comment. They were thus
considered to have waived the filing of a comment.
The petition is meritorious.
In holding that there is a perfected contract of sale, the Court of Appeals relied on the following findings: (1)
earnest money was allegedly given by respondents and accepted by petitioner through its vice-president and
operations manager, Isidro A. Sobrecarey; and (2) the documentary evidence in the records show that there
was a perfected contract of sale.
With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did
not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented the
amount merely as a deposit of what would eventually become the earnest money or downpayment should a
contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof
of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the
sale. Respondents in fact described the amount as an "earnest-deposit." In Spouses Doromal, Sr. v. Court of
Appeals,[9] it was held:

Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second
paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is
binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an
option contract may be anything of value, unlike in sale where it must be the price certain in money or its
equivalent. There is no showing here of any consideration for the option. Lacking any proof of such
consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option
period, the parties would negotiate the terms and conditions of the purchase. The stages of a contract of sale
are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate
interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the
object of the contract and upon the price; and (3) consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating in the extinguishment thereof. [12] In the present
case, the parties never got past the negotiation stage. The alleged "indubitable evidence" [13] of a perfected sale
cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final
arrangement containing the essential elements of a contract of sale. While the parties already agreed on the
real properties which were the objects of the sale and on the purchase price, the fact remains that they failed
to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner.
The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection of the
sale because Art. 1475 only requires agreement by the parties as to the price of the object. This is error.
In Navarro v. Sugar Producers Cooperative Marketing Association, Inc.,[14] we laid down the rule that the
manner of payment of the purchase price is an essential element before a valid and binding contract of sale
can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the
terms or manner of payment of the price, the same is needed, otherwise there is no sale. As held in Toyota
Shaw, Inc. v. Court of Appeals,[15] agreement on the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree on the price. [16] In Velasco v. Court
of Appeals,[17] the parties to a proposed sale had already agreed on the object of sale and on the purchase
price. By the buyers own admission, however, the parties still had to agree on how and when the
downpayment and the installments were to be paid. It was held:

. . . Such being the situation, it can not, therefore, be said that a definite and firm sales
agreement between the parties had been perfected over the lot in question. Indeed,
this Court has already ruled before that a definite agreement on the manner of
payment of the purchase price is an essential element in the formation of a binding and
enforceable contract of sale. The fact, therefore, that the petitioners delivered to the
respondent the sum of P10,000 as part of the down-payment that they had to pay
cannot be considered as sufficient proof of the perfection of any purchase and sale
agreement between the parties herein under Art. 1482 of the new Civil Code, as the
petitioners themselves admit that some essential matter - the terms of the payment still had to be mutually covenanted.[18]
Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the
contract of sale which establishes the existence of a perfected sale.
In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority
to enter into a contract of sale in behalf of petitioner. This issue, therefore, needs no further discussion.
WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents complaint is
DISMISSED.
SO ORDERED.
[G.R. No. 115307. July 8, 1997]
MANUEL LAO, petitioner, vs. COURT OF APPEALS and BETTER HOMES REALTY & HOUSING
CORPORATION, respondents.
DECISION

Manuel Lao) occupied the property without rent, but on (private respondents) pure liberality with the
understanding that he would vacate the property upon demand, but despite demand to vacate made by letter
received by (herein petitioner) on February 5, 1992, the (herein petitioner) refused to vacate the premises.
In his answer to the complaint, (herein petitioner) claimed that he is the true owner of the house and lot
located at Unit I, No. 21 N. Domingo Street, Quezon City; that the (herein private respondent) purchased the
same from N. Domingo Realty and Development Corporation but the agreement was actually a loan secured
by mortgage; and that plaintiffs cause of action is for accion publiciana, outside the jurisdiction of an inferior
court.
On October 9, 1992, the Metropolitan Trial Court of Quezon City rendered judgment ordering the (petitioner) to
vacate the premises located at Unit I, No. 21 N. Domingo Street, Quezon City; to pay (private respondent) the
sum of P300.00 a day starting on January 31, 1992, as reasonable rent for the use and occupation of the
premises; to pay plaintiff P5,000.00, as attorneys fees, and costs.
On appeal to the Regional Trial Court of Quezon City,[4] on March 30, 1993, the latter court rendered a
decision reversing that of the Metropolitan Trial Court, and ordering the dismissal of the (private respondents)
complaint for lack of merit, with costs taxed against (private respondent).
In its decision, the Regional Trial Court held that the subject property was acquired by (private respondent)
from N. Domingo Realty and Development Corporation, by a deed of sale, and (private respondent) is now the
registered owner under Transfer Certificate of Title No. 316634 of the Registry of Deeds of Quezon City, but in
truth the (petitioner) is the beneficial owner of the property because the real transaction over the subject
property was not a sale but a loan secured by a mortgage thereon.
The dispositive portion of the Regional Trial Courts decision is quoted below: [5]
WHEREFORE, judgment is hereby rendered reversing the appealed decision and ordering the dismissal of
plaintiffs complaint for lack of merit, with the costs taxed against it.

PANGANIBAN, J.:

IT IS SO ORDERED.

As a general rule, the main issue in an ejectment suit is possession de facto, not possession de jure. In
the event the issue of ownership is raised in the pleadings, such issue shall be taken up only for the limited
purpose of determining who between the contending parties has the better right to possession. However,
where neither of the parties objects to the allegation of the question of ownership -- which may be initially
improvident or improper -- in an ejectment suit and, instead, both present evidence thereon, argue the
question in their various submissions and participate in all aspects of the trial without objecting to the
Metropolitan (or Municipal) Trial Courts jurisdiction to decide the question of ownership, the Regional Trial
Court -- in the exercise of its original jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court -may rule on the issue and the corollary question of whether the subject deed is one of sale or of equitable
mortgage.

On April 28, 1993, private respondent filed an appeal with the Court of Appeals which reversed the
decision of the Regional Trial Court. The Respondent Court ruled:

These postulates are discussed by the Court as it resolves this petition under Rule 45 seeking a
reversal of the December 21, 1993 Decision [1] and April 28, 1994 Resolution [2] of the Court of Appeals in CAG.R. SP No. 92-14293.
The Antecedent Facts
The facts of this case are narrated by Respondent Court of Appeals as follows: [3]
On June 24, 1992, (herein Private Respondent Better Homes Realty and Housing Corporation) filed with the
Metropolitan Trial Court of Quezon City, a complaint for unlawful detainer, on the ground that (said private
respondent) is the owner of the premises situated at Unit I, No. 21 N. Domingo Street, Quezon City, evidenced
by Transfer Certificate of Title No. 22184 of the Registry of Deeds of Quezon City; that (herein Petitioner

The Metropolitan Trial Court has no jurisdiction to resolve the issue of ownership in an action for unlawful
detainer (B.P. 129, Sec. 33 [2]; Cf. Alvir vs. Vera, 130 SCRA 357). The jurisdiction of a court is determined by
the nature of the action alleged in the complaint (Ching vs. Malaya, 153 SCRA 412). In its complaint in the
inferior court, the plaintiff alleged that it is the owner of the premises located at Unit I, No. 21 N. Domingo
Street, Quezon City, and that defendants occupation is rent free and based on plaintiffs pure liberality coupled
with defendants undertaking to vacate the premises upon demand, but despite demands, defendant has
refused to vacate. The foregoing allegations suffice to constitute a cause of action for ejectment (Banco de
Oro vs. Court of Appeals, 182 SCRA 464).
The Metropolitan Trial Court is not ousted of jurisdiction simply because the defendant raised the question of
ownership (Bolus vs. Court of Appeals, 218 SCRA 798). The inferior court shall resolve the issue of ownership
only to determine who is entitled to the possession of the premises (B.P. 129, Sec. 33[2]; Bolus vs. Court of
Appeals, supra).
Here, the Metropolitan Trial Court ruled that as owner, plaintiff (herein private respondent Better Homes Realty
and Housing Corporation) is entitled to the possession of the premises because the defendants stay is by
mere tolerance of the plaintiff (herein private respondent).
On the other hand, the Regional Trial Court ruled that the subject property is owned by the defendant, (herein
petitioner Manuel Lao) and, consequently, dismissed the complaint for unlawful detainer. Thus, the Regional

Trial Court resolved the issue of ownership, as if the case were originally before it as an action for recovery of
possession, or accion publiciana, within its original jurisdiction. In an appeal from a decision of the Municipal
Trial Court, or Metropolitan Trial Court, in an unlawful detainer case, the Regional Trial Court is simply to
determine whether the inferior court correctly resolved the issue of possession; it shall not delve into the issue
of ownership (Manuel vs. Court of Appeals, 199 SCRA 603). What the Regional Trial Court did was to rule that
the real agreement between the plaintiff and the previous owner of the property was not a sale, but an
equitable mortgage. Defendant was only a director of the seller corporation, and his claim of ownership could
not be true. This question could not be determined summarily. It was not properly in issue before the inferior
court because, as aforesaid, the only issue was possession de facto (Manlapaz vs. Court of Appeals, 191
SCRA 795), or who has a better right to physical possession (Dalida vs. Court of Appeals, 117 SCRA
480). Consequently, the Regional Trial Court erred in reversing the decision of the Metropolitan Trial Court.
WHEREFORE, the Court hereby REVERSES the decision of the Regional Trial Court. In lieu thereof, We
affirm the decision of the Metropolitan Trial Court of Quezon City sentencing the defendant and all persons
claiming right under him to vacate the premises situated at Unit I, No. 21 N. Domingo Street, Quezon City, and
to surrender possession to the plaintiff; to pay plaintiff the sum of P300.00, a day starting on January 31, 1992,
until defendant shall have vacated the premises; to pay plaintiff P5,000.00 as attorneys fees, and costs.
SO ORDERED.[6]
Manuel Laos motion for reconsideration dated January 24, 1994 was denied by the Court of Appeals in
its Resolution promulgated on April 28, 1994. Hence, this petition for review before this Court.[7]
The Issues
Petitioner Manuel Lao raises three issues:
3.1 Whether or not the lower court can decide on the issue of ownership in the present ejectment case
3.2 Whether or not private respondent had acquired ownership over the property in question
3.3 Whether or not petitioner should be ejected from the premises in question [8]

the issue of possession was inseparable from the issue of transfer of ownership, and the latter was
determinable only after an examination of a contract of sale involving the property in question. The Court ruled
that where a case was tried and heard by the lower court in the exercise of its original jurisdiction by common
assent of the parties by virtue of the issues raised x x x and the proofs presented by them, any dismissal on
the ground of lack of jurisdiction would only lead to needless delays and multiplicity of suits. The Court held:
In actions of forcible entry and detainer, the main issue is possession de facto, independently of any claim of
ownership or possession de jure that either party may set forth in his pleading. x x x Defendants claim of
ownership of the property from which plaintiff seeks to eject him is not sufficient to divest the inferior court of
its jurisdiction over the action of forcible entry and detainer. However, if it appears during the trial that the
principal issue relates to the ownership of the property in dispute and any question of possession which may
be involved necessarily depends upon the result of the inquiry into the title, previous rulings of this Court are
that the jurisdiction of the municipal or city court is lost and the action should be dismissed.
We have at bar a case where, in effect, the question of physical possession could not properly be determined
without settling that of lawful or de jure possession and of ownership and hence, following early doctrine, the
jurisdiction of the municipal court over the ejectment case was lost and the action should have been
dismissed. As a consequence, respondent court would have no jurisdiction over the case on appeal and it
should have dismissed the case on appeal from the municipal trial court. However, in line with Section 11,
Rule 40 of the Revised Rules of Court, which reads -SEC. 11. Lack of Jurisdiction. -- A case tried by an inferior court without jurisdiction over the subject matter
shall be dismissed on appeal by the Court of First Instance. But instead of dismissing the case, the Court of
First Instance in the exercise of its original jurisdiction, may try the case on the merits if the parties therein file
their pleadings and go to trial without objection to such jurisdiction.
this Court held in Saliwan vs. Amores, 51 SCRA 329, 337, that dismissal on the said ground of lack of
appellate jurisdiction on the part of the lower court flowing from the municipal courts loss of jurisdiction would
lead only to needless delay and multiplicity of suits in the attainment of the same result and ignores, as above
stated, that the case was tried and heard by the lower court in the exercise of its original jurisdiction by
common assent of the parties by virtue of the issues raised by the parties and the proof presented by them
thereon. [9]
This pronouncement was reiterated by this Court through Mr. Justice Teodoro R. Padilla in Consignado
vs. Court of Appeals[10] as follows:

The Courts Ruling

The petition for review is meritorious.
First Issue: Jurisdiction to Decide the Issue of Ownership
The Court of Appeals held that as a general rule, the issue in an ejectment suit is possession de facto,
not possession de jure, and that in the event the issue of ownership is raised as a defense, the issue is taken
up for the limited purpose of determining who between the contending parties has the better right to
possession. Beyond this, the MTC acts in excess of its jurisdiction. However, we hold that this is not a hard
and fast rule that can be applied automatically to all unlawful detainer cases.
Section 11, Rule 40 of the Rules of Court provides that [a] case tried by an inferior court without
jurisdiction over the subject matter shall be dismissed on appeal by the Court of First Instance. But instead of
dismissing the case, the Court of First Instance, in the exercise of its original jurisdiction, may try the case on
the merits if the parties therein file their pleadings and go to the trial without any objection to such
jurisdiction. After a thorough review of the records of this case, the Court finds that the respondent appellate
court failed to apply this Rule and erroneously reversed the RTC Decision.
Respondent Court cites Alvir vs. Vera to support its Decision. On the contrary, we believe such case
buttresses instead the Regional Trial Courts decision. The cited case involves an unlawful detainer suit where

As the MTC of Laguna had no jurisdiction over the unlawful detainer case in view of the raised question of title
or ownership over the property in dispute, the RTC of Laguna also had no appellatejurisdiction to decide the
case on the merits. It should have dismissed the appeal. However, it had original jurisdiction to pass upon the
controversy. It is to be noted, in this connection, that in their respective memoranda filed with the RTC of
Laguna, the petitioners and private respondents did not object to the said court exercising its original
jurisdiction pursuant to the aforequoted provisions of Section 11, Rule 40 of the Rules of Court.
xxxxxxxxx
Petitioners now contend, among others, that the Court of Appeals erred in resolving the question of ownership
as if actual title, not mere possession of subject premises, is involved in the instant case.
The petitioners contention is untenable. Since the MTC and RTC of Laguna decided the question of ownership
over the property in dispute, on appeal the Court of Appeals had to review and resolve also the issue of
ownership. x x x
It is clear, therefore, that although an action for unlawful detainer is inadequate for the ventilation of
issues involving title or ownership of controverted real property, [i]t is more in keeping with procedural due
process that where issues of title or ownership are raised in the summary proceedings for unlawful detainer,
said proceeding should be dismissed for lack of jurisdiction, unless, in the case of an appeal from the inferior

court to the Court of First Instance, the parties agree to the latter Court hearing the case in its original
jurisdiction in accordance with Section 11, Rule 40 x x x. [11]
In the case at bar, a determination of the issue of ownership is indispensable to resolving the rights of
both parties over the property in controversy, and is inseparable from a determination of who between them
has the right to possess the same. Indeed, the very complaint for unlawful detainer filed in the Metropolitan
Trial Court of Quezon City is anchored on the alleged ownership of private respondent over the subject
premises.[12] The parties did not object to the incongruity of a question of ownership being brought in an
ejectment suit. Instead they both submitted evidence on such question, and the Metropolitan Trial Court
decided on the issue. These facts are evident in the Metropolitan Trial Courts decision:
From the records of the case, the evidence presented and the various arguments advanced by the parties, the
Court finds that the property subject matter of this case is in the name of (herein private respondent) Better
Homes and Realty Housing Corporation; that the Deed of Absolute Sale which was the basis for the issuance
of said TCT No. 22184 is between N. Domingo Realty and Development Corporation and Better Homes Realty
and Housing Corporation which was signed by Artemio S. Lao representing the seller N. Domingo and Realty
Development Corporation; that a Board Resolution of N. Domingo and Realty and Development Corporation
(Exhibit D position paper) shows that the Directors of the Board of the N. Domingo Realty and Development
Corporation passed a resolution selling apartment units I and F located at No. 21 N. Domingo St., Quezon City
and designating the (herein petitioner) with his brother Artemio S. Lao as signatories to the Deed of Sale. The
claim therefore of the (herein petitioner) that he owns the property is not true. x x x[13]
When the MTC decision was appealed to the Regional Trial Court, not one of the parties questioned
the Metropolitan Trial Courts jurisdiction to decide the issue of ownership. In fact, the records show that both
petitioner and private respondent discussed the issue in their respective pleadings before the Regional Trial
Court.[14] They participated in all aspects of the trial without objection to its jurisdiction to decide the issue of
ownership. Consequently, the Regional Trial Court aptly decided the issue based on the exercise of its original
jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court.

x x x This conclusion is fully supported by the decision in Cuyugan vs. Santos (34 Phil., 100), where this court
held that a conveyance in the form of a contract of sale with pacto de retro will be treated as a mere mortgage,
if really executed as security for a debt, and that this fact can be shown by oral evidence apart from the
instrument of conveyance, a doctrine which has been followed in the later cases of Villa vs. Santiago (38 Phil.,
157), and Cuyugan vs. Santos (39 Phil., 970).
xxxxxxxxx
In the first place, it must be borne in mind that the equitable doctrine which has been so fully stated above, to
the effect that any conveyance intended as security for a debt will be held in effect to be a mortgage, whether
so actually expressed in the instrument or not, operates regardless of the form of the agreement chosen by
the contracting parties as the repository of their will. Equity looks through the form and considers the
substance; and no kind of engagement can be adopted which will enable the parties to escape from the
equitable doctrine to which reference is made. In other words, a conveyance of land, accompanied by
registration in the name of the transferee and the issuance of a new certificate, is no more secured from the
operation of this equitable doctrine than the most informal conveyance that could be devised. [17]
The law enumerates when a contract may be presumed to be an equitable mortgage:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period
of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;

This Court further notes that in both of the contending parties pleadings filed on appeal before the
Court of Appeals, the issue of ownership was likewise amply discussed. [15] The totality of evidence presented
was sufficient to decide categorically the issue of ownership.
These considerations, taken together with the fact that both the Metropolitan Trial Court and the
Regional Trial Court decided the issue of ownership, justify the review of the lower courts findings of fact and
decision on the issue of ownership. This we now do, as we dispose of the second issue and decide the case
with finality to spare the parties the time, trouble and expense of undergoing the rigors of another suit where
they will have to present the same evidence all over again and where, in all probability, the same ultimate
issue of ownership will be brought up on appeal.
Second Issue: Absolute Sale or Equitable Mortgage?
Private Respondent Better Homes Realty and Housing Corporation anchored its right in the ejectment
suit on a contract of sale in which petitioner (through their family corporation) transferred the title of the
property in question. Petitioner contends, however, that their transaction was not an absolute sale, but an
equitable mortgage.
In determining the nature of a contract, the Court looks at the intent of the parties and not at the
nomenclature used to describe it. Pivotal to deciding this issue is the true aim and purpose of the contracting
parties as shown by the terminology used in the covenant, as well as by their conduct, words, actions and
deeds prior to, during and immediately after executing the agreement. [16] In this regard, parol evidence
becomes admissible to prove the true intent and agreement of the parties which the Court will enforce even if
the title of the property in question has already been registered and a new transfer certificate of title issued in
the name of the transferee. In Macapinlac vs. Gutierrez Repide, which involved an identical question, the
Court succintly stated:

(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
x x x x x x x x x[18]
The foregoing presumption applies also to a contract purporting to be an absolute sale. [19]
Applying the preceding principles to the factual milieu of this case, we find the agreement between the
private respondent and N. Domingo Realty & Housing Corporation, as represented by petitioner, manifestly
one of equitable mortgage. First, possession of the property in the controversy remained with Petitioner
Manuel Lao who was the beneficial owner of the property, before, during and after the alleged sale. [20] It is
settled that a pacto de retro sale should be treated as a mortgage where the (property) sold never left the
possession of the vendors.[21] Second, the option given to Manuel Lao to purchase the property in controversy
had been extended twice [22] through documents executed by Mr. Tan Bun Uy, President and Chairman of the
Board of Better Homes Realty & Housing Corporation. The wording of the first extension is a refreshing
revelation that indeed the parties really intended to be bound by a loan with mortgage, not by a pacto de
retro. It reads, On June 10, 88, this option is extended for another sixty days to expired (sic) on Aug. 11,
1988. The purchase price is increased toP137,000.00. Since Mr. Lao borrow (sic) P20,000.00 from me.
[23]
These extensions clearly represent the extension of time to pay the loan given to Manuel Lao upon his
failure to pay said loan on its maturity. Mr. Lao was even granted an additional loan of P20,000.00 as
evidenced by the above-quoted document. Third, unquestionably, Manuel Lao and his brother were in such
dire need of money that they mortgaged their townhouse units registered under the name of N. Domingo
Realty Corporation, the family corporation put up by their parents, to Private Respondent Better Homes Realty
& Housing Corporation. In retrospect, it is easy to blame Petitioner Manuel Lao for not demanding a
reformation of the contract to reflect the true intent of the parties. But this seeming inaction is sufficiently

explained by the Lao brothers desperate need for money, compelling them to sign the document purporting to
be a sale after they were told that the same was just for formality. [24] In fact, this Court, in various cases
involving the same situation, had occasion to state:
x x x In Jayme, et al. v. Salvador, et al., this Court upheld a judgment of the Court of First Instance of Iloilo
which found the transaction between the parties to be a loan instead of a sale of real propertynotwithstanding
the terminology used in the document, after taking into account the surrounding circumstances of the
transaction. The Court through Justice Norberto Romualdez stated that while it was true that plaintiffs were
aware of the contents of the contracts, the preponderance of the evidence showed however that they signed
knowing that said contracts did not express their real intention, and if they did so notwithstanding this, it
was due to the urgent necessity of obtaining funds . Necessitous men are not, truly speaking, free men; but to
answer a present emergency, will submit to any terms that the crafty may impose upon them.[25]

express or implied, or the legal representatives or assigns of any such landlord, vendor, vendee, or other
person, may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring
an action in the proper inferior court against the person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them, for the restitution of such possession, together
with damages and costs. x x x.
Based on the previous discussion, there was no sale of the disputed property. Hence, it still belongs to
petitioners family corporation, N. Domingo Realty & Development Corporation.Private respondent, being a
mere mortgagee, has no right to eject petitioner. Private respondent, as a creditor and mortgagee, x x x cannot
appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary
is null and void.[28]
Other Matters

Moreover, since the borrowers urgent need for money places the latter at a disadvantage vis-a-vis the
lender who can thus dictate the terms of their contract, the Court, in case of an ambiguity, deems the contract
to be one which involves the lesser transmission of rights and interest over the property in controversy. [26]
As aptly found and concluded by the regional trial court:
The evidence of record indicates that while as of April 4, 1988 (the date of execution of the Deed of Absolute
Sale whereby the N. Domingo and Realty & Development Corporation purportedly sold the townhouse and lot
subject of this suit to [herein private respondent Better Homes Realty & Housing Corporation] for P100,000.00)
said N. Domingo Realty & Development Corporation (NDRDC, for short) was the registered owner of the
subject property under Transfer Certificate of Title (TCT) No. 316634 of the Registry of Deeds for Quezon City,
(herein petitioner Manuel Lao) in fact was and has been since 1975 the beneficial owner of the subject
property and, thus, the same was assigned to him by the NDRDC, the family corporation set up by his parents
and of which (herein petitioner) and his siblings are directors. That the parties real transaction or contract over
the subject property was not one of sale but, rather, one of loan secured by a mortgage thereon is unavoidably
inferrable from the following facts of record, to (herein petitioners) possession of the subject property, which
started in 1975 yet, continued and remained even after the alleged sale of April 4, 1988; (herein private
respondent) executed an option to purchase in favor (herein petitioner) as early as April 2, 1988 or two days
before (herein private respondent) supposedly acquired ownership of the property; the said option was
renewed several times and the price was increased with each renewal (thus, the original period for the
exercise of the option was up to June 11, 1988 and the price was P109,000.00; then, on June 10, 1988, the
option was extended for 60 days or until August 11, 1988 and the price was increased to P137,000.00; and
then on August 11, 1988, the option was again extended until November 11, 1988 and the price was increased
to P158, 840.00); and, the Deed of Absolute Sale of April 4, 1988 was registered and the property transferred
in the name of (private respondent) only on May 10, 1989, per TCT No. 22184 of the Registry of Deeds for
Quezon City (Arts. 1602, nos. 2, 3, & 6, & 1604, Civil Code). Indeed, if it were true, as it would have the Court
believe, that (private respondent) was so appreciative of (petitioners) alleged facilitation of the subject
propertys sale to it, it is quite strange why (private respondent) some two days before such supposed sale
would have been minded and inclined to execute an option to purchase allowing (petitioner) to acquire the
property -- the very same property it was still hoping to acquire at the time. Certainly, what is more likely and
thus credible is that, if (private respondent) was indeed thankful that it was able to purchase the property, it
would not given (petitioner) any option to purchase at all x x x. [27]
Based on the conduct of the petitioner and private respondent and even the terminology of the second
option to purchase, we rule that the intent and agreement between them was undoubtedly one of equitable
mortgage and not of sale.
Third Issue: Should Petitioner Be Ejected?
We answer in the negative. An action for unlawful detainer is grounded on Section 1, Rule 70 of the
Rules of Court which provides that:
x x x a landlord, vendor, vendee, or other person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract,

Private respondent in his memorandum also contends that (1) petitioner is not the real party in interest
and (2) the petition should be dismissed for raising/stating facts not so found by the Court of Appeals. These
deserve scant consideration. Petitioner was impleaded as party defendant in the ejectment suit by private
respondent itself. Thus, private respondent cannot question his standing as a party. As such party, petitioner
should be allowed to raise defenses which negate private respondents right to the property in question. The
second point is really academic. This ponencia relies on the factual narration of the Court of Appeals and not
on the facts supplied by petitioner.
WHEREFORE, the petition is hereby GRANTED. The challenged Decision of the Court of Appeals
is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Quezon City ordering the
dismissal of the complaint for ejectment is REINSTATED and AFFIRMED. No pronouncement as to costs.
SO ORDERED
[G.R. No. 112212. March 2, 1998]
GREGORIO FULE, petitioner, vs. COURT
BELARMINO, respondents.

OF

APPEALS,

NINEVETCH CRUZ

and

JUAN

DECISION
ROMERO, J.:
This petition for review on certiorari questions the affirmance by the Court of Appeals of the
decision[1] of the Regional Trial Court of San Pablo City, Branch 30, dismissing the complaint that prayed for
the nullification of a contract of sale of a 10-hectare property in Tanay, Rizal in consideration of the amount
of P40,000.00 and a 2.5 carat emerald-cut diamond (Civil Case No. SP-2455). The lower courts decision
disposed of the case as follows:
WHEREFORE, premises considered, the Court hereby renders judgment dismissing the complaint for lack of
merit and ordering plaintiff to pay:
1. Defendant Dra. Ninevetch M. Cruz the sum of P300,000.00 as and for moral damages and the sum
of P100,000.00 as and for exemplary damages;
2. Defendant Atty. Juan Belarmino the sum of P250,000.00 as and for moral damages and the sum
of P150,000.00 as and for exemplary damages;
3. Defendant Dra. Cruz and Atty. Belarmino the sum of P25,000.00 each as and for attorneys fees and
litigation expenses; and

4. The costs of suit.

fifteen minutes. After a while, Dr. Cruz asked, Okay na ba iyan? Petitioner expressed his satisfaction by
nodding his head.

SO ORDERED.
As found by the Court of Appeals and the lower court, the antecedent facts of this case are as follows:
Petitioner Gregorio Fule, a banker by profession and a jeweler at the same time, acquired a 10-hectare
property in Tanay, Rizal (hereinafter Tanay property), covered by Transfer Certificate of Title No. 320725 which
used to be under the name of Fr. Antonio Jacobe. The latter had mortgaged it earlier to the Rural Bank of
Alaminos (the Bank), Laguna, Inc. to secure a loan in the amount of P10,000.00, but the mortgage was later
foreclosed and the property offered for public auction upon his default.
In July 1984, petitioner, as corporate secretary of the bank, asked Remelia Dichoso and Oliva Mendoza
to look for a buyer who might be interested in the Tanay property. The two found one in the person of herein
private respondent Dr. Ninevetch Cruz. It so happened that at the time, petitioner had shown interest in buying
a pair of emerald-cut diamond earrings owned by Dr. Cruz which he had seen in January of the same year
when his mother examined and appraised them as genuine. Dr. Cruz, however, declined petitioners offer to
buy the jewelry for P100,000.00. Petitioner then made another bid to buy them for US$6,000.00 at the
exchange rate of $1.00 to P25.00. At this point, petitioner inspected said jewelry at the lobby of the Prudential
Bank branch in San Pablo City and then made a sketch thereof. Having sketched the jewelry for twenty to
thirty minutes, petitioner gave them back to Dr. Cruz who again refused to sell them since the exchange rate of
the peso at the time appreciated to P19.00 to a dollar.
Subsequently, however, negotiations for the barter of the jewelry and the Tanay property ensued. Dr.
Cruz requested herein private respondent Atty. Juan Belarmino to check the property who, in turn, found out
that no sale or barter was feasible because the one-year period for redemption of the said property had not yet
expired at the time.
In an effort to cut through any legal impediment, petitioner executed on October 19, 1984, a deed of
redemption on behalf of Fr. Jacobe purportedly in the amount of P15,987.78, and on even date, Fr. Jacobe
sold the property to petitioner for P75,000.00. The haste with which the two deeds were executed is shown by
the fact that the deed of sale was notarized ahead of the deed of redemption. As Dr. Cruz had already agreed
to the proposed barter, petitioner went to Prudential Bank once again to take a look at the jewelry.
In the afternoon of October 23, 1984, petitioner met Atty. Belarmino at the latters residence to prepare
the documents of sale.[2] Dr. Cruz herself was not around but Atty. Belarmino was aware that she and
petitioner had previously agreed to exchange a pair of emerald-cut diamond earrings for the Tanay
property. Atty. Belarmino accordingly caused the preparation of a deed of absolute sale while petitioner and
Dr. Cruz attended to the safekeeping of the jewelry.
The following day, petitioner, together with Dichoso and Mendoza, arrived at the residence of Atty.
Belarmino to finally execute a deed of absolute sale. Petitioner signed the deed and gave Atty. Belarmino the
amount of P13,700.00 for necessary expenses in the transfer of title over the Tanay property. Petitioner also
issued a certification to the effect that the actual consideration of the sale was P200,000.00 and
not P80,000.00 as indicated in the deed of absolute sale. The disparity between the actual contract price and
the one indicated on the deed of absolute sale was purportedly aimed at minimizing the amount of the capital
gains tax that petitioner would have to shoulder. Since the jewelry was appraised only at P160,000.00, the
parties agreed that the balance of P40,000.00 would just be paid later in cash.
As pre-arranged, petitioner left Atty. Belarminos residence with Dichoso and Mendoza and headed for
the bank, arriving there at past 5:00 p.m. Dr. Cruz also arrived shortly thereafter, but the cashier who kept the
other key to the deposit box had already left the bank. Dr. Cruz and Dichoso, therefore, looked for said cashier
and found him having a haircut. As soon as his haircut was finished, the cashier returned to the bank and
arrived there at 5:48 p.m., ahead of Dr. Cruz and Dichoso who arrived at 5:55 p.m. Dr. Cruz and the cashier
then opened the safety deposit box, the former retrieving a transparent plastic or cellophane bag with the
jewelry inside and handing over the same to petitioner. The latter took the jewelry from the bag, went near the
electric light at the banks lobby, held the jewelry against the light and examined it for ten to

For services rendered, petitioner paid the agents, Dichoso and Mendoza, the amount of US$300.00
and some pieces of jewelry. He did not, however, give them half of the pair of earrings in question which he
had earlier promised.
Later, at about 8:00 oclock in the evening of the same day, petitioner arrived at the residence of Atty.
Belarmino complaining that the jewelry given to him was fake. He then used a tester to prove the alleged
fakery. Meanwhile, at 8:30 p.m., Dichoso and Mendoza went to the residence of Dr. Cruz to borrow her car so
that, with Atty. Belarmino, they could register the Tanay property. After Dr. Cruz had agreed to lend her car,
Dichoso called up Atty. Belarmino. The latter, however, instructed Dichoso to proceed immediately to his
residence because petitioner was there. Believing that petitioner had finally agreed to give them half of the pair
of earrings, Dichoso went posthaste to the residence of Atty. Belarmino only to find petitioner already
demonstrating with a tester that the earrings were fake. Petitioner then accused Dichoso and Mendoza of
deceiving him which they, however, denied. They countered that petitioner could not have been fooled
because he had vast experience regarding jewelry. Petitioner nonetheless took back the US$300.00 and
jewelry he had given them.
Thereafter, the group decided to go to the house of a certain Macario Dimayuga, a jeweler, to have the
earrings tested. Dimayuga, after taking one look at the earrings, immediately declared them counterfeit. At
around 9:30 p.m., petitioner went to one Atty. Reynaldo Alcantara residing at Lakeside Subdivision in San
Pablo City, complaining about the fake jewelry.Upon being advised by the latter, petitioner reported the matter
to the police station where Dichoso and Mendoza likewise executed sworn statements.
On October 26, 1984, petitioner filed a complaint before the Regional Trial Court of San Pablo City
against private respondents praying, among other things, that the contract of sale over the Tanay property be
declared null and void on the ground of fraud and deceit.
On October 30, 1984, the lower court issued a temporary restraining order directing the Register of
Deeds of Rizal to refrain from acting on the pertinent documents involved in the transaction. On November 20,
1984, however, the same court lifted its previous order and denied the prayer for a writ of preliminary
injunction.
After trial, the lower court rendered its decision on March 7, 1989. Confronting the issue of whether or
not the genuine pair of earrings used as consideration for the sale was delivered by Dr. Cruz to petitioner, the
lower court said:
The Court finds that the answer is definitely in the affirmative. Indeed, Dra. Cruz delivered (the) subject
jewelries (sic) into the hands of plaintiff who even raised the same nearer to the lights of the lobby of the bank
near the door. When asked by Dra. Cruz if everything was in order, plaintiff even nodded his satisfaction
(Hearing of Feb. 24, 1988). At that instance, plaintiff did not protest, complain or beg for additional time to
examine further the jewelries (sic). Being a professional banker and engaged in the jewelry business plaintiff is
conversant and competent to detect a fake diamond from the real thing. Plaintiff was accorded the reasonable
time and opportunity to ascertain and inspect the jewelries (sic) in accordance with Article 1584 of the Civil
Code. Plaintiff took delivery of the subject jewelries (sic) before 6:00 p.m. of October 24, 1984. When he went
at 8:00 p.m. that same day to the residence of Atty. Belarmino already with a tester complaining about some
fake jewelries (sic), there was already undue delay because of the lapse of a considerable length of time since
he got hold of subject jewelries (sic). The lapse of two (2) hours more or less before plaintiff complained is
considered by the Court as unreasonable delay.[3]
The lower court further ruled that all the elements of a valid contract under Article 1458 of the Civil
Code were present, namely: (a) consent or meeting of the minds; (b) determinate subject matter, and (c) price
certain in money or its equivalent. The same elements, according to the lower court, were present despite the
fact that the agreement between petitioner and Dr. Cruz was principally a barter contract. The lower court
explained thus:

x x x. Plaintiffs ownership over the Tanay property passed unto Dra. Cruz upon the constructive delivery
thereof by virtue of the Deed of Absolute Sale (Exh. D). On the other hand, the ownership of Dra. Cruz over
the subject jewelries (sic) transferred to the plaintiff upon her actual personal delivery to him at the lobby of the
Prudential Bank. It is expressly provided by law that the thing sold shall be understood as delivered, when it is
placed in the control and possession of the vendee (Art. 1497, Civil Code; Kuenzle & Straff vs. Watson & Co.
13 Phil. 26). The ownership and/or title over the jewelries (sic) was transmitted immediately before 6:00 p.m.
of October 24, 1984. Plaintiff signified his approval by nodding his head. Delivery or tradition, is one of the
modes of acquiring ownership (Art. 712, Civil Code).

defendants were compelled to litigate. Hence, the award of attorneys fees is warranted under the
circumstances (Art. 2208, New Civil Code). [6]

Similarly, when Exhibit D was executed, it was equivalent to the delivery of the Tanay property in favor
of Dra. Cruz. The execution of the public instrument (Exh. D) operates as a formal or symbolic delivery of the
Tanay property and authorizes the buyer, Dra. Cruz to use the document as proof of ownership (Florendo v.
Foz, 20 Phil. 399). More so, since Exhibit D does not contain any proviso or stipulation to the effect that title to
the property is reserved with the vendor until full payment of the purchase price, nor is there a stipulation
giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed
period (Taguba v. Vda. De Leon, 132 SCRA 722; Luzon Brokerage Co. Inc. vs. Maritime Building Co. Inc. 86
SCRA 305; Froilan v. Pan Oriental Shipping Co. et al. 12 SCRA 276). [4]

I. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS COMPLAINT AND IN HOLDING

THAT THE PLAINTIFF ACTUALLY RECEIVED A GENUINE PAIR OF EMERALD CUT
DIAMOND EARRING(S) FROM DEFENDANT CRUZ x x x;

Aside from concluding that the contract of barter or sale had in fact been consummated when petitioner
and Dr. Cruz parted ways at the bank, the trial court likewise dwelt on the unexplained delay with which
petitioner complained about the alleged fakery. Thus:
x x x. Verily, plaintiff is already estopped to come back after the lapse of considerable length of time to
claim that what he got was fake. He is a Business Management graduate of La Salle University, Class 197879, a professional banker as well as a jeweler in his own right. Two hours is more than enough time to make a
switch of a Russian diamond with the real diamond. It must be remembered that in July 1984 plaintiff made a
sketch of the subject jewelries (sic) at the Prudential Bank. Plaintiff had a tester at 8:00 p.m. at the residence
of Atty. Belarmino. Why then did he not bring it out when he was examining the subject jewelries (sic) at about
6:00 p.m. in the banks lobby? Obviously, he had no need for it after being satisfied of the genuineness of the
subject jewelries (sic). When Dra. Cruz and plaintiff left the bank both of them had fully performed their
respective prestations. Once a contract is shown to have been consummated or fully performed by the parties
thereto, its existence and binding effect can no longer be disputed. It is irrelevant and immaterial to dispute the
due execution of a contract if both of them have in fact performed their obligations thereunder and their
respective signatures and those of their witnesses appear upon the face of the document (Weldon
Construction v. CA G.R. No. L-35721, Oct. 12, 1987).[5]
Finally, in awarding damages to the defendants, the lower court remarked:
The Court finds that plaintiff acted in wanton bad faith. Exhibit 2-Belarmino purports to show that the Tanay
property is worth P25,000.00. However, also on that same day it was executed, the propertys worth was
magnified at P75,000.00 (Exh. 3-Belarmino). How could in less than a day (Oct. 19, 1984) the value would
(sic) triple under normal circumstances? Plaintiff, with the assistance of his agents, was able to exchange the
Tanay property which his bank valued only at P25,000.00 in exchange for a genuine pair of emerald cut
diamond worth P200,000.00 belonging to Dra. Cruz. He also retrieved the US$300.00 and jewelries (sic) from
his agents. But he was not satisfied in being able to get subject jewelries for a song. He had to file a malicious
and unfounded case against Dra. Cruz and Atty. Belarmino who are well known, respected and held in high
esteem in San Pablo City where everybody practically knows everybody. Plaintiff came to Court with unclean
hands dragging the defendants and soiling their clean and good name in the process. Both of them are near
the twilight of their lives after maintaining and nurturing their good reputation in the community only to be
stunned with a court case. Since the filing of this case on October 26, 1984 up to the present they were living
under a pall of doubt. Surely, this affected not only their earning capacity in their practice of their respective
professions, but also they suffered besmirched reputations. Dra. Cruz runs her own hospital and defendant
Belarmino is a well respected legal practitioner.
The length of time this case dragged on during which period their reputation were (sic) tarnished and
their names maligned by the pendency of the case, the Court is of the belief that some of the damages they
prayed for in their answers to the complaint are reasonably proportionate to the sufferings they underwent (Art.
2219, New Civil Code). Moreover, because of the falsity, malice and baseless nature of the complaint

From the trial courts adverse decision, petitioner elevated the matter to the Court of Appeals. On
October 20, 1992, the Court of Appeals, however, rendered a decision [7]affirming in toto the lower courts
decision. His motion for reconsideration having been denied on October 19, 1993, petitioner now files the
instant petition alleging that:

II. THE TRIAL COURT ERRED IN AWARDING MORAL AND EXEMPLARY DAMAGES AND
ATTORNEYS FEES IN FAVOR OF DEFENDANTS AND AGAINST THE PLAINTIFF IN
THIS CASE; and
III.THE TRIAL COURT ERRED IN NOT DECLARING THE DEED OF SALE OF THE TANAY
PROPERTY (EXH. `D) AS NULL AND VOID OR IN NOT ANNULLING THE SAME, AND IN
FAILING TO GRANT REASONABLE DAMAGES IN FAVOR OF THE PLAINTIFF.[8]
As to the first allegation, the Court observes that petitioner is essentially raising a factual issue as it
invites us to examine and weigh anew the facts regarding the genuineness of the earrings bartered in
exchange for the Tanay property. This, of course, we cannot do without unduly transcending the limits of our
review power in petitions of this nature which are confined merely to pure questions of law. We accord, as a
general rule, conclusiveness to a lower courts findings of fact unless it is shown, inter alia, that:
(1) the conclusion is a finding grounded on speculations, surmises or conjectures; (2) the inference
is manifestly mistaken, absurd and impossible; (3) when there is a grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; and (6) when
the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to
the admission of both parties.[9] We find nothing, however, that warrants the application of any of these
exceptions.
Consequently, this Court upholds the appellate courts findings of fact especially because these concur
with those of the trial court which, upon a thorough scrutiny of the records, are firmly grounded on evidence
presented at the trial.[10] To reiterate, this Courts jurisdiction is only limited to reviewing errors of law in the
absence of any showing that the findings complained of are totally devoid of support in the record or that they
are glaringly erroneous as to constitute serious abuse of discretion. [11]
Nonetheless, this Court has to closely delve into petitioners allegation that the lower courts decision of
March 7, 1989 is a ready-made one because it was handed down a day after the last date of the trial of the
case.[12] Petitioner, in this regard, finds it incredible that Judge J. Ausberto Jaramillo was able to write a 12page single-spaced decision, type it and release it on March 7, 1989, less than a day after the last hearing on
March 6, 1989. He stressed that Judge Jaramillo replaced Judge Salvador de Guzman and heard only his
rebuttal testimony.
This allegation is obviously no more than a desperate effort on the part of petitioner to disparage the
lower courts findings of fact in order to convince this Court to review the same. It is noteworthy that Atty.
Belarmino clarified that Judge Jaramillo had issued the first order in the case as early as March 9, 1987 or two
years before the rendition of the decision. In fact, Atty. Belarmino terminated presentation of evidence on
October 13, 1987, while Dr. Cruz finished hers on February 4, 1989, or more than a month prior to the
rendition of the judgment. The March 6, 1989 hearing was conducted solely for the presentation of petitioner's
rebuttal testimony.[13] In other words, Judge Jaramillo had ample time to study the case and write the decision
because the rebuttal evidence would only serve to confirm or verify the facts already presented by the parties.
The Court finds nothing anomalous in the said situation. No proof has been adduced that Judge
Jaramillo was motivated by a malicious or sinister intent in disposing of the case with dispatch. Neither is there
proof that someone else wrote the decision for him. The immediate rendition of the decision was no more than

Judge Jaramillos compliance with his duty as a judge to dispose of the courts business promptly and decide
cases within the required periods.[14] The two-year period within which Judge Jaramillo handled the case
provided him with all the time to study it and even write down its facts as soon as these were presented to
court. In fact, this Court does not see anything wrong in the practice of writing a decision days before the
scheduled promulgation of judgment and leaving the dispositive portion for typing at a time close to the date of
promulgation, provided that no malice or any wrongful conduct attends its adoption. [15] The practice serves the
dual purposes of safeguarding the confidentiality of draft decisions and rendering decisions with
promptness. Neither can Judge Jaramillo be made administratively answerable for the immediate rendition of
the decision. The acts of a judge which pertain to his judicial functions are not subject to disciplinary power
unless they are committed with fraud, dishonesty, corruption or bad faith. [16] Hence, in the absence of sufficient
proof to the contrary, Judge Jaramillo is presumed to have performed his job in accordance with law and
should instead be commended for his close attention to duty.
Having disposed of petitioners first contention, we now come to the core issue of this petition which is
whether the Court of Appeals erred in upholding the validity of the contract of barter or sale under the
circumstances of this case.
The Civil Code provides that contracts are perfected by mere consent. From this moment, the parties
are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law. [17] A contract of sale is
perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and
upon the price.[18] Being consensual, a contract of sale has the force of law between the contracting parties
and they are expected to abide in good faith by their respective contractual commitments. Article 1358 of the
Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience,
[19]
and registration of the instrument only adversely affects third parties. [20] Formal requirements are, therefore,
for the benefit of third parties. Non-compliance therewith does not adversely affect the validity of the contract
nor the contractual rights and obligations of the parties thereunder.
It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr.
Cruz. As such, they are bound by the contract unless there are reasons or circumstances that warrant its
nullification. Hence, the problem that should be addressed in this case is whether or not under the facts duly
established herein, the contract can be voided in accordance with law so as to compel the parties to restore to
each other the things that have been the subject of the contract with their fruits, and the price with interest. [21]
Contracts that are voidable or annullable, even though there may have been no damage to the
contracting parties are: (1) those where one of the parties is incapable of giving consent to a contract; and (2)
those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
[22]
Accordingly, petitioner now stresses before this Court that he entered into the contract in the belief that the
pair of emerald-cut diamond earrings was genuine. On the pretext that those pieces of jewelry turned out to be
counterfeit, however, petitioner subsequently sought the nullification of said contract on the ground that it was,
in fact, tainted with fraud[23] such that his consent was vitiated.
There is fraud when, through the insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which, without them, he would not have agreed to. [24] The records,
however, are bare of any evidence manifesting that private respondents employed such insidious words or
machinations to entice petitioner into entering the contract of barter. Neither is there any evidence showing
that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the earrings in
exchange for said property.On the contrary, Dr. Cruz did not initially accede to petitioners proposal to buy the
said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz to believe that the
Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 or
more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioners property was
truly worth that much, it was certainly contrary to the nature of a businessman-banker like him to have parted
with his real estate for half its price. In short, it was in fact petitioner who resorted to machinations to convince
Dr. Cruz to exchange her jewelry for the Tanay property.
Moreover, petitioner did not clearly allege mistake as a ground for nullification of the contract of
sale. Even assuming that he did, petitioner cannot successfully invoke the same. To invalidate a contract,
mistake must refer to the substance of the thing that is the object of the contract, or to those conditions which
have principally moved one or both parties to enter into the contract. [25] An example of mistake as to the object

of the contract is the substitution of a specific thing contemplated by the parties with another. [26] In his
allegations in the complaint, petitioner insinuated that an inferior one or one that had only Russian diamonds
was substituted for the jewelry he wanted to exchange with his 10-hectare land. He, however, failed to prove
the fact that prior to the delivery of the jewelry to him, private respondents endeavored to make such
substitution.
Likewise, the facts as proven do not support the allegation that petitioner himself could be excused for
the mistake. On account of his work as a banker-jeweler, it can be rightfully assumed that he was an expert on
matters regarding gems. He had the intellectual capacity and the business acumen as a banker to take
precautionary measures to avert such a mistake, considering the value of both the jewelry and his land. The
fact that he had seen the jewelry before October 24, 1984 should not have precluded him from having its
genuineness tested in the presence of Dr. Cruz. Had he done so, he could have avoided the present situation
that he himself brought about. Indeed, the finger of suspicion of switching the genuine jewelry for a fake
inevitably points to him. Such a mistake caused by manifest negligence cannot invalidate a juridical act. [27] As
the Civil Code provides, (t)here is no mistake if the party alleging it knew the doubt, contingency or risk
affecting the object of the contract.[28]
Furthermore, petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil
Code within which to examine the jewelry as he in fact accepted them when asked by Dr. Cruz if he was
satisfied with the same. [29] By taking the jewelry outside the bank, petitioner executed an act which was more
consistent with his exercise of ownership over it. This gains credence when it is borne in mind that he himself
had earlier delivered the Tanay property to Dr. Cruz by affixing his signature to the contract of sale. That after
two hours he later claimed that the jewelry was not the one he intended in exchange for his Tanay property,
could not sever the juridical tie that now bound him and Dr. Cruz. The nature and value of the thing he had
taken preclude its return after that supervening period within which anything could have happened, not
excluding the alteration of the jewelry or its being switched with an inferior kind.
Both the trial and appellate courts, therefore, correctly ruled that there were no legal bases for the
nullification of the contract of sale. Ownership over the parcel of land and the pair of emerald-cut diamond
earrings had been transferred to Dr. Cruz and petitioner, respectively, upon the actual and constructive
delivery thereof.[30] Said contract of sale being absolute in nature, title passed to the vendee upon delivery of
the thing sold since there was no stipulation in the contract that title to the property sold has been reserved in
the seller until full payment of the price or that the vendor has the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed period. [31] Such stipulations are not manifest in the contract of sale.
While it is true that the amount of P40,000.00 forming part of the consideration was still payable to
petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar the transfer of
ownership and possession of the things exchanged considering the fact that their contract is silent as to when
it becomes due and demandable.[32]
Neither may such failure to pay the balance of the purchase price result in the payment of interest
thereon. Article 1589 of the Civil Code prescribes the payment of interest by the vendee for the period
between the delivery of the thing and the payment of the price in the following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of
the price.
Not one of these cases obtains here. This case should, of course, be distinguished from De la Cruz v. Legaspi,
[33]
where the court held that failure to pay the consideration after the notarization of the contract as previously
promised resulted in the vendees liability for payment of interest. In the case at bar, there is no stipulation for
the payment of interest in the contract of sale nor proof that the Tanay property produced fruits or
income. Neither did petitioner demand payment of the price as in fact he filed an action to nullify the contract
of sale.

All told, petitioner appears to have elevated this case to this Court for the principal reason of mitigating
the amount of damages awarded to both private respondents which petitioner considers as exorbitant. He
contends that private respondents do not deserve at all the award of damages. In fact, he pleads for the total
deletion of the award as regards private respondent Belarmino whom he considers a mere nominal party
because no specific claim for damages against him was alleged in the complaint. When he filed the case, all
that petitioner wanted was that Atty. Belarmino should return to him the owners duplicate copy of TCT No.
320725, the deed of sale executed by Fr. Antonio Jacobe, the deed of redemption and the check alloted for
expenses. Petitioner alleges further that Atty. Belarmino should not have delivered all those documents to Dr.
Cruz because as the lawyer for both the seller and the buyer in the sale contract, he should have protected the
rights of both parties. Moreover, petitioner asserts that there was no firm basis for damages except for Atty.
Belarminos uncorroborated testimony.[34]
Moral and exemplary damages may be awarded without proof of pecuniary loss. In awarding such
damages, the court shall take into account the circumstances obtaining in the case and assess damages
according to its discretion. [35] To warrant the award of damages, it must be shown that the person to whom
these are awarded has sustained injury. He must likewise establish sufficient data upon which the court can
properly base its estimate of the amount of damages. [36] Statements of facts should establish such data rather
than mere conclusions or opinions of witnesses.[37] Thus:
x x x. For moral damages to be awarded, it is essential that the claimant must have satisfactorily
proved during the trial the existence of the factual basis of the damages and its causal
connection with the adverse partys acts. If the court has no proof or evidence upon which the
claim for moral damages could be based, such indemnity could not be outrightly awarded. The
same holds true with respect to the award of exemplary damages where it must be shown that
the party acted in a wanton, oppressive or malevolent manner.[38]
In this regard, the lower court appeared to have awarded damages on a ground analogous to malicious
prosecution under Article 2219(8) of the Civil Code [39] as shown by (1) petitioners wanton bad faith in bloating
the value of the Tanay property which he exchanged for a genuine pair of emerald-cut diamond
worth P200,000.00; and (2) his filing of a malicious and unfounded case against private respondents who were
well known, respected and held in high esteem in San Pablo City where everybody practically knows
everybody and whose good names in the twilight of their lives were soiled by petitioners coming to court with
unclean hands, thereby affecting their earning capacity in the exercise of their respective professions and
besmirching their reputation.
For its part, the Court of Appeals affirmed the award of damages to private respondents for these
reasons:

speculating at the possible favorable outcome of his complaint when he should have realized that his
supposed predicament was his own making. We, therefore, see here no semblance of an honest and sincere
belief on his part that he was swindled by respondents which would entitle him to redress in court. It must be
noted that before petitioner was able to convince Dr. Cruz to exchange her jewelry for the Tanay property,
petitioner took pains to thoroughly examine said jewelry, even going to the extent of sketching their
appearance. Why at the precise moment when he was about to take physical possession thereof he failed to
exert extra efforts to check their genuineness despite the large consideration involved has never been
explained at all by petitioner. His acts thus failed to accord with what an ordinary prudent man would have
done in the same situation. Being an experienced banker and a businessman himself who deliberately skirted
a legal impediment in the sale of the Tanay property and to minimize the capital gains tax for its exchange, it
was actually gross recklessness for him to have merely conducted a cursory examination of the jewelry when
every opportunity for doing so was not denied him. Apparently, he carried on his person a tester which he later
used to prove the alleged fakery but which he did not use at the time when it was most needed. Furthermore,
it took him two more hours of unexplained delay before he complained that the jewelry he received were
counterfeit. Hence, we stated earlier that anything could have happened during all the time that petitioner was
in complete possession and control of the jewelry, including the possibility of substituting them with fake ones,
against which respondents would have a great deal of difficulty defending themselves. The truth is that
petitioner even failed to successfully prove during trial that the jewelry he received from Dr. Cruz were not
genuine. Add to that the fact that he had been shrewd enough to bloat the Tanay propertys price only a few
days after he purchased it at a much lower value. Thus, it is our considered view that if this slew of
circumstances were connected, like pieces of fabric sewn into a quilt, they would sufficiently demonstrate that
his acts were not merely negligent but rather studied and deliberate.
We do not have here, therefore, a situation where petitioners complaint was simply found later to be
based on an erroneous ground which, under settled jurisprudence, would not have been a reason for awarding
moral and exemplary damages. [42] Instead, the cause of action of the instant case appears to have been
contrived by petitioner himself. In other words, he was placed in a situation where he could not honestly
evaluate whether his cause of action has a semblance of merit, such that it would require the expertise of the
courts to put it to a test. His insistent pursuit of such case then coupled with circumstances showing that he
himself was guilty in bringing about the supposed wrongdoing on which he anchored his cause of action
would render him answerable for all damages the defendant may suffer because of it. This is precisely what
took place in the petition at bar and we find no cogent reason to disturb the findings of the courts below that
respondents in this case suffered considerable damages due to petitioners unwarranted action.
WHEREFORE, the decision of the Court of Appeals dated October 20, 1992 is hereby AFFIRMED in
toto. Dr. Cruz, however, is ordered to pay petitioner the balance of the purchase price of P40,000.00 within ten
(10) days from the finality of this decision. Costs against petitioner.
SO ORDERED.

The malice with which Fule filed this case is apparent. Having taken possession of the genuine
jewelry of Dra. Cruz, Fule now wishes to return a fake jewelry to Dra. Cruz and, more than that,
get back the real property, which his bank owns. Fule has obtained a genuine jewelry which he
could sell anytime, anywhere and to anybody, without the same being traced to the original
owner for practically nothing. This is plain and simple, unjust enrichment.[40]
While, as a rule, moral damages cannot be recovered from a person who has filed a complaint against
another in good faith because it is not sound policy to place a penalty on the right to litigate, [41] the same,
however, cannot apply in the case at bar. The factual findings of the courts a quo to the effect that petitioner
filed this case because he was the victim of fraud; that he could not have been such a victim because he
should have examined the jewelry in question before accepting delivery thereof, considering his exposure to
the banking and jewelry businesses; and that he filed the action for the nullification of the contract of sale with
unclean hands, all deserve full faith and credit to support the conclusion that petitioner was motivated more by
ill will than a sincere attempt to protect his rights in commencing suit against respondents.
As pointed out earlier, a closer scrutiny of the chain of events immediately prior to and on October 24,
1984 itself would amply demonstrate that petitioner was not simply negligent in failing to exercise due
diligence to assure himself that what he was taking in exchange for his property were genuine diamonds. He
had rather placed himself in a situation from which it preponderantly appears that his seeming ignorance was
actually just a ruse. Indeed, he had unnecessarily dragged respondents to face the travails of litigation in

G.R. No. L-11827

July 31, 1961

FERNANDO A. GAITE, plaintiff-appellee,

vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO., INC., SEGUNDINA
VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR and FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance because the claims involved aggregate more
than P200,000.00.

Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself or in a representative
capacity, of 11 iron lode mineral claims, known as the Dawahan Group, situated in the municipality of Jose
Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier constituted and appointed
plaintiff-appellee Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any
individual or juridical person for the exploration and development of the mining claims aforementioned on a
royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom. On March 19, 1954, Gaite
in turn executed a general assignment (Record on Appeal, pp. 17-19) conveying the development and
exploitation of said mining claims into the Larap Iron Mines, a single proprietorship owned solely by and
belonging to him, on the same royalty basis provided for in Exhibit "3". Thereafter, Gaite embarked upon the
development and exploitation of the mining claims in question, opening and paving roads within and outside
their boundaries, making other improvements and installing facilities therein for use in the development of the
mines, and in time extracted therefrom what he claim and estimated to be approximately 24,000 metric tons of
iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to
exploit and develop the mining claims in question, and Gaite assented thereto subject to certain conditions. As
a result, a document entitled "Revocation of Power of Attorney and Contract" was executed on December 8,
1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the consideration of P20,000.00, plus 10% of the
royalties that Fonacier would receive from the mining claims, all his rights and interests on all the roads,
improvements, and facilities in or outside said claims, the right to use the business name "Larap Iron Mines"
and its goodwill, and all the records and documents relative to the mines. In the same document, Gaite
transferred to Fonacier all his rights and interests over the "24,000 tons of iron ore, more or less" that the
former had already extracted from the mineral claims, in consideration of the sum of P75,000.00, P10,000.00
of which was paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from and out of the
first letter of credit covering the first shipment of iron ores and of the first amount derived from the
local sale of iron ore made by the Larap Mines & Smelting Co. Inc., its assigns, administrators, or
successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite a
surety bond, and pursuant to the promise, Fonacier delivered to Gaite a surety bond dated December 8, 1954
with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties (Exhibit "A-1").
Gaite testified, however, that when this bond was presented to him by Fonacier together with the "Revocation
of Power of Attorney and Contract", Exhibit "A", on December 8, 1954, he refused to sign said Exhibit "A"
unless another bond under written by a bonding company was put up by defendants to secure the payment of
the P65,000.00 balance of their price of the iron ore in the stockpiles in the mining claims. Hence, a second
bond, also dated December 8, 1954 (Exhibit "B"),was executed by the same parties to the first bond Exhibit
"A-1", with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the
surety company would attach only when there had been an actual sale of iron ore by the Larap Mines &
Smelting Co. for an amount of not less then P65,000.00, and that, furthermore, the liability of said surety
company would automatically expire on December 8, 1955. Both bonds were attached to the "Revocation of
Power of Attorney and Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two executed and
signed the "Revocation of Power of Attorney and Contract", Exhibit "A", Fonacier entered into a "Contract of
Mining Operation", ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the right
to develop, exploit, and explore the mining claims in question, together with the improvements therein and the
use of the name "Larap Iron Mines" and its good will, in consideration of certain royalties. Fonacier likewise
transferred, in the same document, the complete title to the approximately 24,000 tons of iron ore which he
acquired from Gaite, to the Larap & Smelting Co., in consideration for the signing by the company and its
stockholders of the surety bonds delivered by Fonacier to Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far Eastern Surety and
Insurance Company, no sale of the approximately 24,000 tons of iron ore had been made by the Larap Mines
& Smelting Co., Inc., nor had the P65,000.00 balance of the price of said ore been paid to Gaite by Fonacier

and his sureties payment of said amount, on the theory that they had lost right to make use of the period given
them when their bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24"). And when Fonacier and his
sureties failed to pay as demanded by Gaite, the latter filed the present complaint against them in the Court of
First Instance of Manila (Civil Case No. 29310) for the payment of the P65,000.00 balance of the price of the
ore, consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by Gaite
was subject to a condition that the amount of P65,000.00 would be payable out of the first letter of credit
covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron ore by the
Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the complaint, no sale of the iron ore had
been made, hence the condition had not yet been fulfilled; and that consequently, the obligation was not yet
due and demandable. Defendant Fonacier also contended that only 7,573 tons of the estimated 24,000 tons of
iron ore sold to him by Gaite was actually delivered, and counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00 become due and
demandable when the defendants failed to renew the surety bond underwritten by the Far Eastern Surety and
Insurance Co., Inc. (Exhibit "B"), which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were actually in
existence in the mining claims when these parties executed the "Revocation of Power of Attorney and
Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to pay plaintiff the P65,000.00
balance of the price of the approximately 24,000 tons of iron ore was one with a term: i.e., that it would be paid
upon the sale of sufficient iron ore by defendants, such sale to be effected within one year or before December
8, 1955; that the giving of security was a condition precedent to Gait's giving of credit to defendants; and that
as the latter failed to put up a good and sufficient security in lieu of the Far Eastern Surety bond (Exhibit "B")
which expired on December 8, 1955, the obligation became due and demandable under Article 1198 of the
New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have approximately 24,000 tons of iron
ore at the mining claims in question at the time of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and
severally, P65,000.00 with interest at 6% per annum from December 9, 1955 until payment, plus costs. From
this judgment, defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were presented for resolution: a motion to
declare the appellants Larap Mines & Smelting Co., Inc. and George Krakower in contempt, filed by appellant
Fonacier, and two motions to dismiss the appeal as having become academic and a motion for new trial
and/or to take judicial notice of certain documents, filed by appellee Gaite. The motion for contempt is
unmeritorious because the main allegation therein that the appellants Larap Mines & Smelting Co., Inc. and
Krakower had sold the iron ore here in question, which allegedly is "property in litigation", has not been
substantiated; and even if true, does not make these appellants guilty of contempt, because what is under
litigation in this appeal is appellee Gaite's right to the payment of the balance of the price of the ore, and not
the iron ore itself. As for the several motions presented by appellee Gaite, it is unnecessary to resolve these
motions in view of the results that we have reached in this case, which we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite the
P65,000.00 (balance of the price of the iron ore in question)is one with a period or term and not one with a
suspensive condition, and that the term expired on December 8, 1955; and

(2) that the lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of iron ore sold
by appellee Gaite to appellant Fonacier.

and there can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be actually
existing, with only its maturity (due date) postponed or deferred, that if such obligation were viewed as nonexistent or not binding until the ore was sold.

The first issue involves an interpretation of the following provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his rights
and interests over the 24,000 tons of iron ore, more or less, above-referred to together with all his
rights and interests to operate the mine in consideration of the sum of SEVENTY-FIVE
THOUSAND PESOS (P75,000.00) which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from and out of the
first letter of credit covering the first shipment of iron ore made by the Larap Mines & Smelting Co.,
Inc., its assigns, administrators, or successors in interest.
We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is not a
condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a suspensive
period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as
distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that
if the suspensive condition does not take place, the parties would stand as if the conditional obligation had
never existed. That the parties to the contract Exhibit "A" did not intend any such state of things to prevail is
supported by several circumstances:
1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of SixtyFive Thousand Pesos (P65,000.00) will be paid out of the first letter of credit covering the first shipment of iron
ores . . ." etc. There is no uncertainty that the payment will have to be made sooner or later; what is
undetermined is merely the exact date at which it will be made. By the very terms of the contract, therefore,
the existence of the obligation to pay is recognized; only its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not only does each one of the parties assume a
correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the
price),but each party anticipates performance by the other from the very start. While in a sale the obligation of
one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes
the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei),
it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly
appear. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his
right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk.
This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an not only
upon a bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one
by a surety company; and the fact that appellants did put up such bonds indicates that they admitted the
definite existence of their obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or shipment of the ore as a
condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the sale or
shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus be able to
postpone payment indefinitely. The desireability of avoiding such a construction of the contract Exhibit "A"
needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the parties indented a
suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules of
interpretation would incline the scales in favor of "the greater reciprocity of interests", since sale is essentially
onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.

The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an
aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the
previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his sureties, still have the right
to insist that Gaite should wait for the sale or shipment of the ore before receiving payment; or, in other words,
whether or not they are entitled to take full advantage of the period granted them for making the payment.
We agree with the court below that the appellant have forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of
P65,000.00, because of their failure to renew the bond of the Far Eastern Surety Company or else replace it
with an equivalent guarantee. The expiration of the bonding company's undertaking on December 8, 1955
substantially reduced the security of the vendor's rights as creditor for the unpaid P65,000.00, a security that
Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to
Fonacier (Exhibit "A"). The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of
the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has promised.
(3) When by his own acts he has impaired said guaranties or securities after their establishment,
and when through fortuitous event they disappear, unless he immediately gives new ones equally
satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the
securities given to the creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full
knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the
expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to gain
barely; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore
and pay Gaite before the surety company's bond expired on December 8, 1955. But in the latter case the
defendants-appellants' obligation to pay became absolute after one year from the transfer of the ore to
Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding payment
and instituting this action one year from and after the contract (Exhibit "A") was executed, either because the
appellant debtors had impaired the securities originally given and thereby forfeited any further time within
which to pay; or because the term of payment was originally of no more than one year, and the balance of
P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really 24,000 tons of iron ore in
the stockpiles sold by appellee Gaite to appellant Fonacier, and whether, if there had been a short-delivery as
claimed by appellants, they are entitled to the payment of damages, we must, at the outset, stress two
things:first, that this is a case of a sale of a specific mass of fungible goods for a single price or a lump sum,
the quantity of "24,000 tons of iron ore, more or less," stated in the contract Exhibit "A," being a mere estimate
by the parties of the total tonnage weight of the mass; and second, that the evidence shows that neither of the

parties had actually measured of weighed the mass, so that they both tried to arrive at the total quantity by
making an estimate of the volume thereof in cubic meters and then multiplying it by the estimated weight per
ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore because no provision was made in their
contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor was the
price of P75,000,00 agreed upon by the parties based upon any such measurement.(see Art. 1480, second
par., New Civil Code). The subject matter of the sale is, therefore, a determinate object, the mass, and not the
actual number of units or tons contained therein, so that all that was required of the seller Gaite was to deliver
in good faith to his buyer all of the ore found in the mass, notwithstanding that the quantity delivered is less
than the amount estimated by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc.
171 So. 872, applying art. 2459 of the Louisiana Civil Code). There is no charge in this case that Gaite did not
deliver to appellants all the ore found in the stockpiles in the mining claims in questions; Gaite had, therefore,
complied with his promise to deliver, and appellants in turn are bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy, not a definite mass, but
approximately 24,000 tons of ore, so that any substantial difference in this quantity delivered would entitle the
buyers to recover damages for the short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or weighed the whole mass of
ore cubic meter by cubic meter, or ton by ton. Both parties predicate their respective claims only upon an
estimated number of cubic meters of ore multiplied by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the stockpiles of ore that he sold to
Fonacier, while appellants contend that by actual measurement, their witness Cirpriano Manlagit found the
total volume of ore in the stockpiles to be only 6.609 cubic meters. As to the average weight in tons per cubic
meter, the parties are again in disagreement, with appellants claiming the correct tonnage factor to be 2.18
tons to a cubic meter, while appellee Gaite claims that the correct tonnage factor is about 3.7.

In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor of iron ore in
this case to be that made by Leopoldo F. Abad, chief of the Mines and Metallurgical Division of the Bureau of
Mines, a government pensionado to the States and a mining engineering graduate of the Universities of
Nevada and California, with almost 22 years of experience in the Bureau of Mines. This witness placed the
tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to 5 metric tons as
maximum. This estimate, in turn, closely corresponds to the average tonnage factor of 3.3 adopted in his
corrected report (Exhibits "FF" and FF-1") by engineer Nemesio Gamatero, who was sent by the Bureau of
Mines to the mining claims involved at the request of appellant Krakower, precisely to make an official
estimate of the amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles made by appellant's
witness Cipriano Manlagit is correct, if we multiply it by the average tonnage factor of 3.3 tons to a cubic
meter, the product is 21,809.7 tons, which is not very far from the estimate of 24,000 tons made by appellee
Gaite, considering that actual weighing of each unit of the mass was practically impossible, so that a
reasonable percentage of error should be allowed anyone making an estimate of the exact quantity in tons
found in the mass. It must not be forgotten that the contract Exhibit "A" expressly stated the amount to be
24,000 tons, more or less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would entitle appellants to the payment of
damages, nor could Gaite have been guilty of any fraud in making any misrepresentation to appellants as to
the total quantity of ore in the stockpiles of the mining claims in question, as charged by appellants, since
Gaite's estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we hereby affirm the same, with costs against
appellants.