G.R. No.

103577 October 7, 1996

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

ANNABELLE C. GONZALES (for herself and on behalf of Florida 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.

MELO, J.:p

The petition before us has its roots in a complaint for specific performance to compel herein
petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a
parcel of land with its improvements located along Roosevelt Avenue in Quezon City
entered into by the parties sometime in January 1985 for the price of P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et al.

(hereinafter referred to as Coronels) executed a document entitled "Receipt of
Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz
(hereinafter referred to as Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 — Total amount

50,000 — Down payment

———————————
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 the P1,190,000.00.

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").

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 specific

performance against the Coronels and caused the annotation of a notice
of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim

covering the same property with the Registry of Deeds of Quezon City (Exh.
"F"; Exh. "6").

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

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

(Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the
parties agreed to submit the case for decision solely on the basis of documentary exhibits.
Thus, plaintiffs therein (now private respondents) proffered their documentary evidence
accordingly marked as Exhibits "A" through "J", inclusive of their corresponding
submarkings. Adopting these same exhibits as their own, then defendants (now petitioners)
accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their
corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30)
days within which to simultaneously submit their respective memoranda, and an additional
15 days within which to submit their corresponding comment or reply thereof, 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.
On March 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 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 to P1,190,000.00 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 attorney's 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.

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner 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 such 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.

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 court's decision, we definitely find the instant
petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other
issues in the case at bar is the precise determination of the legal significance of the
document entitled "Receipt of Down Payment" which was offered in evidence by both
parties. There is no dispute as to the fact that 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 absolute sale.

Plainly, such variance in the contending parties' contentions 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.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties

obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money
or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere

consent. The essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer

ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective
seller explicity 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 is 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 seller's obligation to sell the subject
property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for

a price certain is binding upon the promissor if 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-
seller's title per se, but the latter, of course, may be used for damages by the intending
buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition,
the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if
there had been previous delivery of the subject property, the seller's 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 seller's 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 buyer's title. In case
a title is issued to the second buyer, the first buyer may seek reconveyance of the property
subject of the sale.

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

It is a canon in the interpretation of contracts that the words used therein should be given
their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court
of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of
Down Payment" that they —

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 petitioner's 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 properly to private respondent upon the fulfillment of the suspensive condition. On
the contrary, having already agreed to sell the subject property, they undertook to have the
certificate of title changed 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 full ownership of the
subject house and lot to the buyer if the documents were then in order. It just
happened, however, that the transfer certificate of title was then still in the name of
their father. It was more expedient to first effect the change in the certificate of title
so as to bear their names. That is why they undertook to cause the issuance of a new
transfer of the certificate of title in their names upon receipt of the down payment in
the amount of P50,000.00. As soon as the new certificate of title is issued in their
names, petitioners were committed to immediately execute the deed of absolute sale.
Only then will the obligation of the buyer to pay the remainder of the purchase price
arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as
to protect the seller against a buyer who intends to buy the property in installment by
withholding ownership over the property until the buyer effects full payment therefor, in the
contract entered into in the case at bar, the sellers were the one who were unable to
enter into a contract of absolute sale by reason of the fact that the certificate of title
to the property was still in the name of their father. It was the sellers in this case who,
as it were, had the impediment which prevented, so to speak, the execution of an
contract of absolute sale.
What is clearly established by the plain language of the subject document is that when the
said "Receipt of Down Payment" was prepared and signed by petitioners Romeo A.
Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title from the name of
petitioners' father, Constancio P. Coronel, to their names.

The Court significantly notes 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 the 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.)

(Rollo, p. 16)

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

(Ibid.)

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

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

Besides, it should be stressed and emphasized that what is more controlling than these
mere hypothetical arguments is the fact that the condition herein referred to was actually
and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of
petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document
denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a
contract of sale subject only to the suspensive condition that the sellers shall effect the
issuance of new certificate title from that of their father's 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 obligation 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.

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

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

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

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

conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.

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

Petitioners also contend that although there was in fact a perfected contract of sale between
them and Ramona P. Alcaraz, the latter breached 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
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 petitioner-sellers' act of unilaterally and extradicially
rescinding the contract of sale, there being no express stipulation authorizing the sellers to
extarjudicially 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,
Ramona's 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 Concepcion's authority to represent
Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any
objection as regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to
rescind the contract of sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her

obligation to pay the full purchase price is concerned. Petitioners who are precluded from
setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained
offered no proof whatsoever to show that they actually presented the new transfer certificate
of title in their names and signified their willingness and readiness to execute the deed of
absolute sale in accordance with their agreement. Ramona's corresponding obligation to
pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never
became due and demandable and, therefore, she cannot be deemed to have been in
default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
obligations may be considered in default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment
of their obligation.

xxx xxx 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 if be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in 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 first
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
buyer's 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 has held that
it is essential, to merit the protection of Art. 1544, second paragraph, that the
second realty buyer must act in good faith in registering his deed of sale
(citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R.
No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted 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 buyer in good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the
second buyer was a 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 that 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 pervious 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. L-116650 May 23, 1995

TOYOTA SHAW, INC., petitioner, 

vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.

DAVIDE, JR., J.:
At the heart of the present controversy is the document marked Exhibit "A" 1 for the private
respondent, which was signed by a sales representative of Toyota Shaw, Inc. named
Popong Bernardo. The document reads as follows:

4 June 1989

AGREEMENTS BETWEEN MR. SOSA

& POPONG BERNARDO OF TOYOTA
SHAW, INC.

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

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

2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15,

1989.

3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and
released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m.

Very truly your

(Sgd.)
POPO
NG
BERN
ARDO
.

Was this document, executed and signed by the petitioner's sales representative, a
perfected contract of sale, binding upon the petitioner, breach of which would entitle the
private respondent to damages and attorney's fees? The trial court and the Court of
Appeals took the affirmative view. The petitioner disagrees. Hence, this petition for review
oncertiorari.

The antecedents as disclosed in the decisions of both the trial court and the Court of
Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and
respondent Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of 1989,
Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's market and
Sosa had difficulty finding a dealer with an available unit for sale. But upon contacting
Toyota Shaw, Inc., he was told that there was an available unit. So on 14 June 1989, Sosa
and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro Manila.
There they met Popong Bernardo, a sales representative of Toyota.

Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989
because he, his family, and a balikbayan guest would use it on 18 June 1989 to go to
Marinduque, his home province, where he would celebrate his birthday on the 19th of June.
He added that if he does not arrive in his hometown with the new car, he would become a
"laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10:00
a.m. on 17 June 1989. Bernardo then signed the aforequoted "Agreements Between Mr.
Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties
that the balance of the purchase price would be paid by credit financing through B.A.
Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota
and B.A. Finance pertaining to the application for financing.

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

a) downpayment — P 53,148.00
b) insurance — P 13,970.00
c) BLT registration fee — P 1,067.00
CHMO fee — P 2,715.00
service fee — P 500.00
accessories — P 29,000.00

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for
"Delivery Terms" were not filled-up. It also contains the following pertinent provisions:

CONDITIONS OF SALES

1. This sale is subject to availability of unit.

2. Stated Price is subject to change without prior notice, Price prevailing and
in effect at time of selling will apply. . . .

Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.

On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the
vehicle would not be ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00
p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office.
According to Sosa, Bernardo informed them that the Lite Ace was being readied for
delivery. After waiting for about an hour, Bernardo told them that the car could not be
delivered because "nasulot ang unit ng ibang malakas."

Toyota contends, however, that the Lite Ace was not delivered to Sosa because of
the disapproval by B.A. Finance of the credit financing application of Sosa. It further
alleged that a particular unit had already been reserved and earmarked for Sosa but
could not be released due to the uncertainty of payment of the balance of the
purchase price. Toyota then gave Sosa the option to purchase the unit by paying the
full purchase price in cash but Sosa refused.

After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his
downpayment be refunded. Toyota did so on the very same day by issuing a Far East Bank
check for the full amount of P100,000.00, 4 the receipt of which was shown by a check
voucher of Toyota, 5 which Sosa signed with the reservation, "without prejudice to our
future claims for damages."

Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and
signed by him, he demanded the refund, within five days from receipt, of the downpayment
of P100,000.00 plus interest from the time he paid it and the payment of damages with a
warning that in case of Toyota's failure to do so he would be constrained to take legal
action. 6 The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's
counsel, demanded one million pesos representing interest and damages, again, with a
warning that legal action would be taken if payment was not made within three
days. 7 Toyota's counsel answered through a letter dated 27 November 1989 8 refusing to
accede to the demands of Sosa. But even before this answer was made and received by
Sosa, the latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court
(RTC) of Marinduque a complaint against Toyota for damages under Articles 19 and 21 of
the Civil Code in the total amount of P1,230,000.00. 9 He alleges, inter alia, that:

9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff
suffered embarrassment, humiliation, ridicule, mental anguish and sleepless nights
because: (i) he and his family were constrained to take the public transportation from
Manila to Lucena City on their way to Marinduque; (ii) his balikbayan-guest canceled his
scheduled first visit to Marinduque in order to avoid the inconvenience of taking public
transportation; and (iii) his relatives, friends, neighbors and other provincemates,
continuously irked him about "his Brand-New Toyota Lite Ace — that never was." Under
the circumstances, defendant should be made liable to the plaintiff for moral damages in
the amount of One Million Pesos (P1,000,000.00). 10

In its answer to the complaint, Toyota alleged that no sale was entered into between it
and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that
Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative defenses, it
alleged that: the VSP did not state date of delivery; Sosa had not completed the
documents required by the financing company, and as a matter of policy, the vehicle
could not and would not be released prior to full compliance with financing
requirements, submission of all documents, and execution of the sales
agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue
was improperly laid; and Sosa did not have a sufficient cause of action against it. It
also interposed compulsory counterclaims.

After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered
on 18 February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the
"AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid
perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the
vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to
another the unit already reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the
trial court held that the extent of Bernardo's authority "was not made known to plaintiff," for
as testified to by Quirante, "they do not volunteer any information as to the company's sales
policy and guidelines because they are internal matters." 13 Moreover, "[f]rom the beginning
of the transaction up to its consummation when the downpayment was made by the plaintiff,
the defendants had made known to the plaintiff the impression that Popong Bernardo is an
authorized sales executive as it permitted the latter to do acts within the scope of an
apparent authority holding him out to the public as possessing power to do these
acts." 14 Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and hence bound
the defendants." 15

The court further declared that "Luna Sosa proved his social standing in the community and
suffered besmirched reputation, wounded feelings and sleepless nights for which he ought
to be compensated." 16 Accordingly, it disposed as follows:

WHEREFORE, viewed from the above findings, judgment is hereby rendered

in favor of the plaintiff and against the defendant:

1. ordering the defendant to pay to the plaintiff the sum of

P75,000.00 for moral damages;

2. ordering the defendant to pay the plaintiff the sum of

P10,000.00 for exemplary damages;

3. ordering the defendant to pay the sum of P30,000.00

attorney's fees plus P2,000.00 lawyer's transportation fare per
trip in attending to the hearing of this case;

4. ordering the defendant to pay the plaintiff the sum of

P2,000.00 transportation fare per trip of the plaintiff in attending
the hearing of this case; and

5. ordering the defendant to pay the cost of suit.

SO ORDERED.

Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The
case was docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July
1994, 17 the Court of Appeals affirmed in toto the appealed decision.

Toyota now comes before this Court via this petition and raises the core issue stated at the
beginning of the ponenciaand also the following related issues: (a) whether or not the
standard VSP was the true and documented understanding of the parties which would have
led to the ultimate contract of sale, (b) whether or not Sosa has any legal and demandable
right to the delivery of the vehicle despite the non-payment of the consideration and the
non-approval of his credit application by B.A. Finance, (c) whether or not Toyota acted in
good faith when it did not release the vehicle to Sosa, and (d) whether or not Toyota may be
held liable for damages.
We find merit in the petition.

Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is
a perfected contract of sale.

Article 1458 of the Civil Code defines a contract of sale as follows:

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

A contract of sale may be absolute or conditional.

and Article 1475 specifically provides when it is deemed perfected:

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

From that moment, the parties may reciprocally demand performance, subject
to the provisions of the law governing the form of contracts.

What is clear from Exhibit "A" is not what the trial court and the Court of Appeals
appear to see. It is not a contract of sale. No obligation on the part of Toyota to
transfer ownership of a determinate thing to Sosa and no correlative obligation on
the part of the latter to pay therefor a price certain appears therein. The provision on
the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If
it was intended for a contract of sale, it could only refer to a sale on installment
basis, as the VSP executed the following day confirmed. But nothing was mentioned
about the full purchase price and the manner the installments were to be paid.

This Court had already ruled that a definite agreement on the manner of payment of the
price is an essential element in the formation of a binding and enforceable contract
of sale. 18 This is so because the agreement as to the manner of payment goes into
the price such that a disagreement on the manner of payment is tantamount to a
failure to agree on the price. Definiteness as to the price is an essential element of a
binding agreement to sell personal property. 19

Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and
Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from
its title, written in bold letters, viz.,

AGREEMENTS BETWEEN MR. SOSA & POPONG

BERNARDO OF TOYOTA SHAW, INC.

that he was not dealing with Toyota but with Popong Bernardo and that the latter did not
misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo
was only a sales representative of Toyota and hence a mere agent of the latter. It was
incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the
extent of Bernardo's authority as an
agent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is
put upon inquiry and must discover upon his peril the authority of the agent. 21

At the most, Exhibit "A" may be considered as part of the initial phase of the
generation or negotiation stage of a contract of sale. There are three stages in the
contract of sale, namely:

(a) preparation, conception, or generation, which is the period of

negotiation and bargaining, ending at the moment of agreement of the
parties;

(b) perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and

(c) consummation or death, which is the fulfillment or performance of the terms

agreed upon in the contract. 22

The second phase of the generation or negotiation stage in this case was the execution of
the VSP. It must be emphasized that thereunder, the downpayment of the purchase price
was P53,148.00 while the balance to be paid on installment should be financed by B.A.
Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was
acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP.

Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No.
1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by the
Central Bank of the Philippines, the Insurance Commission and the Cooperatives
Administration Office, which are primarily organized for the purpose of extending credit
facilities to consumers and to industrial, commercial, or agricultural enterprises, either by
discounting or factoring commercial papers or accounts receivables, or by buying and
selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by
leasing of motor vehicles, heavy equipment and industrial machinery, business and office
machines and equipment, appliances and other movable property." 23

Accordingly, in a sale on installment basis which is financed by a financing company, three

parties are thus involved: the buyer who executes a note or notes for the unpaid balance of
the price of the thing purchased on installment, the seller who assigns the notes or
discounts them with a financing company, and the financing company which is subrogated
in the place of the seller, as the creditor of the installment buyer. 24 Since B.A. Finance did
not approve Sosa's application, there was then no meeting of minds on the sale on
installment basis.

We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's
application for which reason it suggested to Sosa that he pay the full purchase price. When
the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00. Sosa's
version that the VSP was cancelled because, according to Bernardo, the vehicle was
delivered to another who was "mas malakas" does not inspire belief and was obviously a
delayed afterthought. It is claimed that Bernardo said, "Pasensiya kayo, nasulot ang unit ng
ibang malakas," while the Sosas had already been waiting for an hour for the delivery of the
vehicle in the afternoon of 17 June 1989. However, in paragraph 7 of his complaint, Sosa
solemnly states:

On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales
representative, Mr. Popong Bernardo, called plaintiff's house and informed the plaintiff's
son that the vehicle will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at
2:00 p.m. of that day instead. Plaintiff and his son went to defendant's office on June 17
1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant for reasons known
only to its representatives, refused and/or failed to release the vehicle to the plaintiff.
Plaintiff demanded for an explanation, but nothing was given; . . . (Emphasis supplied). 25

The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows
that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to
him, and its non-delivery did not cause any legally indemnifiable injury.

The award then of moral and exemplary damages and attorney's fees and costs of
suit is without legal basis. Besides, the only ground upon which Sosa claimed moral
damages is that since it was known to his friends, townmates, and relatives that he
was buying a Toyota Lite Ace which they expected to see on his birthday, he suffered
humiliation, shame, and sleepless nights when the van was not delivered. The van
became the subject matter of talks during his celebration that he may not have paid
for it, and this created an impression against his business standing and reputation.
At the bottom of this claim is nothing but misplaced pride and ego. He should not
have announced his plan to buy a Toyota Lite Ace knowing that he might not be able
to pay the full purchase price. It was he who brought embarrassment upon himself by
bragging about a thing which he did not own yet.

Since Sosa is not entitled to moral damages and there being no award for temperate,
liquidated, or compensatory damages, he is likewise not entitled to exemplary damages.
Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by way
of example or correction for the public good, in addition to moral, temperate, liquidated, or
compensatory damages.

Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the
body of the decision, and not only in the dispositive portion thereof, the legal reason for the
award of attorney's fees. 26 No such explicit determination thereon was made in the body of
the decision of the trial court. No reason thus exists for such an award.

WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court
of Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint
in Civil Case No. 89-14 is DISMISSED. The counterclaim therein is likewise DISMISSED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. L-54070 February 28, 1983

HEIRS OF ENRIQUE ZAMBALES and JOAQUINA ZAMBALES, petitioners, 
vs.
COURT OF APPEALS, NIN BAY MINING CORPORATION, ANGELA C. PREYSLER and
JOAQUIN B. PREYSLER, respondents.

MELENCIO-HERRERA, J.:

The Decision of respondent Court of Appeals in the case entitled "Enrique Zambales and
Joaquina Zambales, Plaintiffs-appellees vs. Atty. Perfecto de los Reyes, Nin Bay Mining
Corporation and Joaquin B. Preysler, Defendants-appellants" (CA-G.R. No. 59386-R),
setting aside the judgment of the Court of First Instance of Palawan in Civil Case No. 678
for Annulment of a Deed of Sale with Recovery of Possession and Ownership with
Damages", is the subject of this Petition for Review on Certiorari.

Joaquin B. Preysler is now deceased and was substituted by Angela C. Preysler, his widow.

Atty. Perfecto de los Reyes was originally a defendant in Civil Case No. 678 but he did not
appeal from the Decision of the lower Court.

The Zambales spouses (Zambaleses, for brevity) were the homestead patentees of a parcel
of land with an area of 17,8474 hectares situated in the Municipality of Del Pilar, Roxas,
Palawan, covered by Original Certificate of Title No. G 1193 of the Registry of Deeds for the
Province of Palawan, issued pursuant to Homestead Patent No. V-59502 dated September
6, 1955.

Claiming that the Nin Bay Mining Corporation (Corporation, for short) had removed silica
sand from their land and destroyed the plants and others improvements thereon, the
Zambaleses instituted, on November 10, 1958, Civil Case No. 316 before the Court of First
Instance of Palawan claiming damages in the total sum of P48,000.00.

The Corporation denied having caused any damages and claimed that it had excavated and
extracted silica sand only from its own mining claims and on which it had mining lease
contracts with the Philippine Government.

On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. Perfecto de los
Reyes, and the Corporation, entered into a Compromise Agreement, the portions of which,
pertinent to this case, read:

1. DEFENDANT shall pay the PLAINTIFFS a rental of TWENTY (P20.00)

PESOS per hectare per year from September 9, 1955 to September 30,
1960, or a total rental price of ONE THOUSAND SEVEN HUNDRED
EIGHTY-FOUR PESOS AND SEVENTY- FOUR CENTAVOS (P1,784.74),
Philippine currency, in lieu of all damages...

2. The payment to the PLAINTIFFS of the above-mentioned rental price shall

be considered full, absolute and final payment and indemnity for all the
 alleged damages to PLAINTIFFS' property and its improvements, or any
other actual, moral, exemplary or other damages that PLAINTIFFS may have
suffered or will suffer in connection with the mining operations of
DEFENDANT on the property in question, which property, by virtue of the
terms of this Agreement shall be used by DEFENDANT as occupant thereof
until September 30, 1960.

3. PLAINTIFFS hereby agree and bind themselves to sell, transfer and

convey, and DEFENDANT or its assigns, qualified to acquire or hold lands of
the public domain, hereby agrees to purchase and pay for, the aforesaid
property of the PLAINTIFFS, containing an area of 17.8474 hectares, situated
in the Municipality of Del Pilar, Roxas, Palawan, and covered by Original
Certificate of Title No. G1193 of the Registry of Deeds of Palawan, at the
fixed selling price of FIVE HUNDRED (P500.00) PESOS per hectare or a
total purchase price of EIGHT THOUSAND NINE HUNDRED TWENTY
THREE PESOS and SEVENTY CENTAVOS (P8,923.70), Philippine
currency. The contract to purchase and sell herein provided for, shall be
reciprocally demandable and enforceable by the parties hereto on September
10, 1960. PLAINTIFFS hereby irrevocably constitute and appoint
DEFENDANT, its successors and/or assigns their true and lawful attorney-in-
fact with full power and authority to sell, transfer and convey on September
10, 1960 or at any time thereafter the whole or any part of PLAINTIFFS'
property hereinabove mentioned to the DEFENDANT, its successors and/or
assigns, or to any third party, and to execute and deliver all instruments and
documents whatsoever necessary for the purpose, and all acts done and to
be done by DEFENDANT, its successors and/or assigns in conformity with
the powers herein granted are hereby ratified and confirmed by the
PLAINTIFFS. ...

4. In consideration of the payment of the amount of P1,784.74 by DEFENDANT, and of

other good and valuable consideration, PLAINTIFFS, jointly and severally, hereby forever
release, fully and completely, said DEFENDANT, its successors and/or assigns in
interest, from any and all liabilities, whether arising from past, present or future
excavation or removal of silica sand from the property in question or otherwise, and from
all the other claims against the DEFENDANT contained in their Complaint in Civil Case
No. 316 of the Court of First Instance of Palawan. 1

The Trial Court rendered judgment on October 29, 1959 based on the Compromise
Agreement. The document was duly annotated an OCT No. G - 1193 (Exhibit " A ") the day
after, or on October 30, 1959 (Exhibit " 10 A ").

On September 10, 1960, the Corporation, as attorney-in-fact for the Zambaleses, as

Vendors, sold the disputed property to Joaquin B. Preysler for the sum of P8,923.70 fixed in
the Compromise Agreement (Exhibit " 11 "). Transfer Certificate of Title No. T-970 was
issued in the vendee's name on December 19, 1960 (Exhibit " 2 ").

The Deed of Sale to Preysler contained the following proviso:

 The VENDORS hereby represent and warrant that the five-year restrictive
period on alienation of lands acquired under the homestead provisions of
Commonwealth Act No. 141, as amended, otherwise known as the Public
Land Act, has already expired, the date of issuance of the herein homestead
patent to the VENDORS as aforesaid being September 6, 1955 as shown in
Original Certificate of Title No. G-1193.

On October 18, 1960, the Secretary of Agriculture and Natural Resources approved the
sale to Preysler of the subject property (Exhibit "13 ").

On. December 6, 1969, or ten (10) years after the Trial Court's Decision based on the
Compromise Agreement, and nine (9) years after the sale to Preysler, the Zambaleses filed
Civil Case No. 678 before the Court of First Instance of Palawan for "Annulment of a Deed
of Sale with Recovery of Possession and Ownership with Damages". They contended that it
was their lawyer who prevailed upon them to sign the Compromise Agreement; that they
are unschooled and did not understand the contents thereof; that they were made to
understand that they would receive the sum of P10,700.00, only as payment for damages
sustained by the land from 1955 to 1960; that through fraud, deceit and manipulation by
their lawyer and the Corporation, they were made to agree to appoint the Corporation as
their attorney-in-fact with full power and authority to sell; that it was never their intention to
sell the land; that in September 1969, they were surprised to learn that the land was already
titled in the name of Joaquin B. Preysler; that the land was acquired and registered in the
latter's name through fraud and deceit. The Zambaleses then prayed that the deed of sale
and the title in Preysler's name be annulled on the ground of fraud and that the property be
reconveyed to them.

In their Answer, the Corporation denied all allegations that the Zambaleses had signed the
Compromise Agreement without understanding the contents thereof, the truth being that it
was read to them by their counsel, Atty. Perfecto de los Reyes, who explained thoroughly
the full implication and legal consequence of each and every provision, which was then
submitted and approved by then Presiding Judge Juan L. Bocar; and that the Corporation
had sold the property to Preysler as a duly constituted attorney-in-fact pursuant to the
Compromise Agreement.

After trial, the lower Court rendered judgment in favor of the Zambaleses, the dispositive
part of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and

against the defendants as follows:

1) That the deed of sale executed by Nin Bay Mining Corporation through its
president, to Joaquin B. Preysler is hereby declared null and void;

2) That the defendant Joaquin B. Preysler is hereby ordered to reconvey the

land subject matter of this litigation to the plaintiffs;

3) That the defendants Nin Bay Mining Corporation and Joaquin B. Preysler
shall pay the plaintiffs the sum of P85,000.00 as actual damages plus the
 legal rate of interest from September 30, 1960 up to the time the amount is
fully paid;

4) That the defendants to pay the sum of FIVE THOUSAND (P5,000.00)

PESOS as attorneys fees; and

5) The defendants to pay the costs.

On appeal by the Corporation, the Court of Appeals reversed the Trial Court, after finding
that the alleged fraud or misrepresentation in the execution of the Compromise Agreement
had not been substantiated by evidence.

The case is now before us on review.

The controversy revolves around the issue of due execution and validity of the Compromise
Agreement (Exhibit "8") dated October 29; 1959, and of the subsequent Deed of Sale
(Exhibit "11 "), dated 10 September 1960.

The general rule is that whoever alleges fraud or mistake must substantiate his allegation,
since the presumption is that a person takes ordinary care of his concerns and that private
transactions have been fair and regular. The rule admits of an exception in Article 1332 of
the Civil Code which provides:

When one of the parties is unable to read, or if the contract is in a language

not understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained to the
former.

For the proper application of said provision, it has first to be established convincingly that
the illiterate or the party at a disadvantage could not read or understand the language in
which the contract was written. 2 The evidence discloses that the spouses Zambales are
unschooled. They cannot read, speak, much less understand English or write, except to
sign their names. 3 The Zambaleses alleged in their Complaint that the Compromise
Agreement (Exhibit "8") was executed through fraud by the Corporation and by their
counsel Atty. Perfecto de los Reyes, whom they included as a defendant. The burden of
proof, therefore, shifted to the Corporation to show that the compromise agreement had
been fully explained to the plaintiffs.

In refuting the allegation that plaintiffs were misled into signing the compromise agreement,
their former counsel, Atty. Perfecto de los Reyes, and the notary, Atty. Salomon Reyes, a
lawyer for Nin Bay Mining Corporation, established that the terms and conditions of the
Compromise Agreement were thoroughly explained and fully understood by the spouses
Zambales in accordance with their proposal to sell the land at P500.00 a hectare; that
before the signing of the Compromise Agreement, the notary requested Atty. de los Reyes
to read and explain each and every provision to the spouses, and with the help of Ricardo
Nunala, Atty. de los Reyes did so in their dialect (Cuyuno). Thereafter, the parties went to
Judge Juan Bocar, who was assured that the spouses Zambales understood and signed
the Compromise Agreement. 4

We sustain the finding of the Court of Appeals that fraud and misrepresentation did not
vitiate petitioners' consent to the Agreement when it observed:

Taking into account the foregoing observations, this Court is not convinced
that indeed appellees were victims of a fraudulent scheme employed upon
them by their former counsel by reason of their alleged illiteracy and
ignorance. The evidence discloses that appellees, although unschooled, are
intelligent, well-informed and intelligent people. They are not the kind of
persons who could easily be fooled of their rights and interests. Even as
commented by the court a quo, which had a chance to observe the demeanor
of the witness, it had no observation that the witness, Joaquina Zambales, is
ignorant. As correctly observed by appellants, appellees 'are political leaders
and chief campaigners; they speak in the platform during political rallies; and
they are widely travelled' (p. 28, Appellants' Brief). As a matter of fact they are
knowledgeable of the right connections in the government. They had
approached former Sen. Rogelio de la Rosa, no less, the congressman and
the governor. Even the lawyers they have retained previous to their present
counsel are the Padilla Law Office and the Diokno Law Office, It is common
knowledge that these law offices are among the established law offices in
Manila. It is far convincing that an ignorant couple would have knowledge of
these law firms. All these are obvious manifestations of their being well-
informed and the way they have conducted their way of living apparently is
inconsistent with the plea of being illiterate and/or ignorant. They cannot
capitalize on the fact that they are uneducated only because they had no
formal schooling inasmuch as one's knowledge of the facts of life is not
dependent on whether one had formal schooling or not and it does not
necessarily follow always that if one is unschooled he is ignorant.

Furthermore, when plaintiffs-appellees signed the questioned compromise

agreement they were duly assisted and represented by their counsel, Atty. de
los Reyes. When Atty. de los Reyes testified in court he categorically
declared that it was to the best interest of his clients that they compromise
Civil Case No. 316. This declaration finds support in Joaquina Zambales'
testimony wherein she stated thus:

ATTY. SEMBRANO:

Q. Except for this present case, would you say to the Court that
Atty. de los Reyes extended to you legal assistance to your
satisfaction?

A. Yes, sir, he is good to us.

xxx xxx xxx

 Q. So these people never gave their services to you?

A. Nobody was able to help us except Atty. de los Reyes. (Tsn.,

pp. 29, 31 & 32, June 19, 1974)

... Thus, it having been established that appellees could not have been misled by their
former counsel into signing the compromise agreement and taking into account the acts
of the appellees and their children subsequent to the execution of the compromise
agreement perforce the court a quo  erred in not giving credence to the clear and
convincing testimonies of Atty. Perfecto de los Reyes and Atty. Salomon Reyes anent the
execution of the compromise agreement. 5

However, although we find that the Zambaleses were not misled into signing the
Compromise Agreement, we hold that there has been violation of the Public Land Act. The
evidence on record shows that the land in question was awarded t the Zambaleses as a
homestead on September 6, 1955 (Exhibit "A"). Before us, the Zambaleses now argue that
the Compromise Agreement executed on October 29, 1959 is in violation of the Public Land
Act, which prohibits alienation and encumbrance of a homestead lot within five years from
the issuance of the patent. 6

We sustain that contention. The fact that the issue was not raised in the Courts below is not
a deterrent factor considering that the question affects the validity of the agreement
between the parties. The Supreme Court has the authority to review matters even if they
are not assigned as errors in the appeal, if it is found that their consideration is necessary in
arriving at a just decision of the case. 7 Moreover, a party may change his legal theory on
appeal only when the factual bases thereof would not require presentation of any further
evidence by the adverse party in order to enable it to properly meet the issue raised in the
new theory. 8 In the case at bar it is indisputable that Homestead Patent No. V-59502 was
issued on September 6, 1955 as shown in Original Certificate of Title No. 1193 (Exhibit "A
").

The sale of a homestead lot within the five-year prohibitory period is illegal and void. The
law does not distinguish between executory and consummated sales.

The law prohibiting any transfer or alienation of homestead land within five years from the
issuance of the patent does not distinguish between executory and consummated sales;
and it would hardly be in keeping with the primordial aim of this prohibition to preserve
and keep in the family of the homesteader the piece of land that the state had
gratuitously given to them, to hold valid a homestead sale actually perfected during the
period of prohibition but with the execution of the formal deed of conveyance and the
delivery of possession of the land sold to the buyer deferred until after the expiration of
the prohibitory period, purposely to circumvent the very law that prohibits and declares
invalid such transaction to protect the homesteader and his family. 9

In the compromise agreement executed between the parties, (1) the Zambaleses promised
to sell and the Corporation agreed to buy the disputed lot at P500.00 per hectare, the
contract to be reciprocally demandable and enforceable on September 10, 1960; and as a
substitute procedure, (2) an irrevocable agency was constituted in favor of the Corporation
as attorney- in-fact to sell the land to any third person on September 10, 1960 or any time
thereafter.
Clearly, the bilateral promise to buy and sell the homestead lot at a price certain, which was
reciprocally demandable 10, was entered into within the five-year prohibitory period and is
therefore, illegal and void. Further, the agency to sell the homestead lot to a third party was
coupled with an interest inasmuch as a bilateral contract was dependent on it and was not
revocable at will by any of the parties. 11 To all intents and purposes, therefore, there was an
actual executory sale perfected during the period of prohibition except that it was
reciprocally demandable thereafter and the agency to sell to any third party was deferred
until after the expiration of the prohibitory period. That "rentals" were ostensibly to be paid
during the five-year prohibitory period, and the agency to sell made effective only after the
lapse of the said period, was merely a devise to circumvent the prohibition.

To hold valid such an arrangement would be to throw the door wide open to all possible
subterfuges that persons interested in homesteads may devise to defeat the legal
prohibition against alienation within five years from the issuance of the patent.

We hold, therefore, that the bilateral promise to buy and sell, and the agency to sell, entered
into within five years from the date of the homestead patent, was in violation of section 118
of the Public Land Law, although the executed sale was deferred until after the expiration of
the five-year- prohibitory period.

As the contract is void from the beginning, for being expressly prohibited by law 12 the action
for the declaration of its inexistence does not prescribe. 13 Being absolutely void, it is entitled
to no authority or respect, the sale may be impeached in a collateral proceeding by any one
with whose rights and interest it conflicts. There is no presumption of its validity. 14 The
approval of the sale by the Secretary of Agriculture and Natural Resources after the lapse of
five years from the date of the patent would neither legalize the sale. 15

The homestead in question should be returned to the Zambaleses, petitioners herein, who
are, in turn, bound to restore to the Corporation the sum of P8,923.70 as the price thereof.
The actual damages awarded by the Trial Court of P85,000.00 have not been adequately
substantiated. Moreover, under the agreement, the total rental price of P1,784.74 was
intended to be "in lieu of all damages, or any other actual, moral, exemplary or other
damages.

This is without prejudice to the corresponding action on the part of the State for reversion of
the property and its improvements, if any, under Section 124 of the Public Land Act. 16

WHEREFORE, the judgment under review is hereby REVERSED, and another one entered
(1) declaring null and void a) the bilateral promise to buy and sell entered into between
Enrique Zambales and Joaquina Zambales, on the one hand, and the Nin Bay Mining
Corporation on the other, and b) the sale executed by Nin Bay Mining Corporation in favor
of Joaquin B. Preysler; (2) ordering Angela C. Preysler to reconvey the land subject matter
of this litigation to petitioners upon refund by the latter to the Nin Bay Mining Corporation of
the sum of P8,923.70, all expenses for the reconveyance to be borne by private
respondents; (3) ordering Nin Bay Mining Corporation to pay rentals to petitioners at the
price of P20.00 per hectare per year from December 6, 1969, the date of the institution of
the Complaint, till the date that possession is turned over to petitioners; and (4) ordering the
Register of Deeds for the Province of Palawan to cancel Transfer Certificate of Title No. T-
970 of his Registry, and reissue to the Heirs of Enrique Zambales and Joaquina Zambales
the title to the homestead in question.

Let a copy of this Decision be served on the Solicitor General.

No costs.

SO ORDERED.

G.R. No. L-11491            August 23, 1918

ANDRES QUIROGA, plaintiff-appellant, 
vs.
PARSONS HARDWARE CO., defendant-appellee.

Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. 

Crossfield & O'Brien for appellee.

AVANCEÑA, J.:

On January 24, 1911, in this city of manila, a contract in the following tenor was entered into
by and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and
obligations the present defendant later subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.

PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.

ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the
Visayan Islands to J. Parsons under the following conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's
establishment in Iloilo, and shall invoice them at the same price he has fixed for
sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25
per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shall
order the beds by the dozen, whether of the same or of different styles.

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a
period of sixty days from the date of their shipment.

(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and
the freight, insurance, and cost of unloading from the vessel at the point where the
beds are received, shall be paid by Mr. Parsons.

(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said
payment when made shall be considered as a prompt payment, and as such a
deduction of 2 per cent shall be made from the amount of the invoice.
 The same discount shall be made on the amount of any invoice which Mr. Parsons
may deem convenient to pay in cash.

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any
alteration in price which he may plan to make in respect to his beds, and agrees that
if on the date when such alteration takes effect he should have any order pending to
be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if
the price thereby be lowered, but shall not be affected by said alteration if the price
thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to
invoice the beds at the price at which the order was given.

(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.

ART. 2. In compensation for the expenses of advertisement which, for the benefit of
both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga
assumes the obligation to offer and give the preference to Mr. Parsons in case
anyone should apply for the exclusive agency for any island not comprised with the
Visayan group.

ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of
"Quiroga" beds in all the towns of the Archipelago where there are no exclusive
agents, and shall immediately report such action to Mr. Quiroga for his approval.

ART. 4. This contract is made for an unlimited period, and may be terminated by
either of the contracting parties on a previous notice of ninety days to the other party.

Of the three causes of action alleged by the plaintiff in his complaint, only two of them
constitute the subject matter of this appeal and both substantially amount to the averment
that the defendant violated the following obligations: not to sell the beds at higher prices
than those of the invoices; to have an open establishment in Iloilo; itself to conduct the
agency; to keep the beds on public exhibition, and to pay for the advertisement expenses
for the same; and to order the beds by the dozen and in no other manner. As may be seen,
with the exception of the obligation on the part of the defendant to order the beds by the
dozen and in no other manner, none of the obligations imputed to the defendant in the two
causes of action are expressly set forth in the contract. But the plaintiff alleged that the
defendant was his agent for the sale of his beds in Iloilo, and that said obligations are
implied in a contract of commercial agency. The whole question, therefore, reduced itself to
a determination as to whether the defendant, by reason of the contract hereinbefore
transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is that
the plaintiff was to furnish the defendant with the beds which the latter might order, at the
price stipulated, and that the defendant was to pay the price in the manner stipulated. The
price agreed upon was the one determined by the plaintiff for the sale of these beds in
Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to
be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the
defendant so preferred, and in these last two cases an additional discount was to be
allowed for prompt payment. These are precisely the essential features of a contract of
purchase and sale. There was the obligation on the part of the plaintiff to supply the beds,
and, on the part of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent received the thing
to sell it, and does not pay its price, but delivers to the principal the price he obtains from
the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.
By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the
beds, was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.

It would be enough to hold, as we do, that the contract by and between the defendant and
the plaintiff is one of purchase and sale, in order to show that it was not one made on the
basis of a commission on sales, as the plaintiff claims it was, for these contracts are
incompatible with each other. But, besides, examining the clauses of this contract, none of
them is found that substantially supports the plaintiff's contention. Not a single one of these
clauses necessarily conveys the idea of an agency. The words commission on sales used
in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere
discount on the invoice price. The word agency, also used in articles 2 and 3, only
expresses that the defendant was the only one that could sell the plaintiff's beds in the
Visayan Islands. With regard to the remaining clauses, the least that can be said is that they
are not incompatible with the contract of purchase and sale.

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the
defendant corporation and who established and managed the latter's business in Iloilo. It
appears that this witness, prior to the time of his testimony, had serious trouble with the
defendant, had maintained a civil suit against it, and had even accused one of its partners,
Guillermo Parsons, of falsification. He testified that it was he who drafted the contract
Exhibit A, and, when questioned as to what was his purpose in contracting with the plaintiff,
replied that it was to be an agent for his beds and to collect a commission on sales.
However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of
the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated
the truth, his statement as to what was his idea in contracting with the plaintiff is of no
importance, inasmuch as the agreements contained in Exhibit A which he claims to have
drafted, constitute, as we have said, a contract of purchase and sale, and not one of
commercial agency. This only means that Ernesto Vidal was mistaken in his classification of
the contract. But it must be understood that a contract is what the law defines it to be, and
not what it is called by the contracting parties.

The plaintiff also endeavored to prove that the defendant had returned beds that it could not
sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and
that the defendant received its commission for the beds sold by the plaintiff directly to
persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there
was mutual tolerance in the performance of the contract in disregard of its terms; and it
gives no right to have the contract considered, not as the parties stipulated it, but as they
performed it. Only the acts of the contracting parties, subsequent to, and in connection with,
the execution of the contract, must be considered for the purpose of interpreting the
contract, when such interpretation is necessary, but not when, as in the instant case, its
essential agreements are clearly set forth and plainly show that the contract belongs to a
certain kind and not to another. Furthermore, the return made was of certain brass beds,
and was not effected in exchange for the price paid for them, but was for other beds of
another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with
respect to said beds, which shows that it was not considered that the defendant had a right,
by virtue of the contract, to make this return. As regards the shipment of beds without
previous notice, it is insinuated in the record that these brass beds were precisely the ones
so shipped, and that, for this very reason, the plaintiff agreed to their return. And with
respect to the so-called commissions, we have said that they merely constituted a discount
on the invoice price, and the reason for applying this benefit to the beds sold directly by the
plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to
incur the expenses of advertisement of the plaintiff's beds, such sales were to be
considered as a result of that advertisement.

In respect to the defendant's obligation to order by the dozen, the only one expressly
imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard
the orders which the defendant might place under other conditions; but if the plaintiff
consents to fill them, he waives his right and cannot complain for having acted thus at his
own free will.

For the foregoing reasons, we are of opinion that the contract by and between the plaintiff
and the defendant was one of purchase and sale, and that the obligations the breach of
which is alleged as a cause of action are not imposed upon the defendant, either by
agreement or by law.

The judgment appealed from is affirmed, with costs against the appellant. So ordered.

[G.R. No. 126376.  November 20, 2003]

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION

JOAQUIN, SPOUSES JUANITO EDRA and NORA JOAQUIN,
SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and
NATIVIDAD JOAQUIN,petitioners, vs. COURT OF APPEALS,
SPOUSES LEONARDO JOAQUIN and FELICIANA LANDRITO,
SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO,
SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN,
SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES,
SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN,
SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN,
SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES
GAVINO JOAQUIN and LEA ASIS,respondents.

DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari  to annul the Decision  dated 26 June
[1] [2]

1996 of the Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed
the Decision  dated 18 February 1993 rendered by Branch 65 of the Regional Trial
[3]

Court of Makati (“trial court”) in Civil Case No. 89-5174.  The trial court dismissed the
case after it found that the parties executed the Deeds of Sale for valid consideration
and that the plaintiffs did not have a cause of action against the defendants.

The Facts

The Court of Appeals summarized the facts of the case as follows:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of
plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel,
Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN.  The
married Joaquin children are joined in this action by their respective spouses.

Sought to be declared null and void ab initio are certain deeds of sale of real property
executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of
their co-defendant children and the corresponding certificates of title issued in their
names, to wit:

1.  Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395
executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a
consideration of P6,000.00 (Exh. “C”), pursuant to which TCT No. [36113/T-172]
was issued in her name (Exh. “C-1”);
2.  Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394
executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration
of P1[2],000.00 (Exh. “D”), pursuant to which TCT No. S-109772 was issued in her
name (Exh. “D-1”);
3   Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and
Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh. “E”), pursuant to which
TCT No. 155329 was issued to them (Exh. “E-1”);
4.  Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and
Socorro Angeles, for a consideration of P[54,3]00.00 (Exh. “F”), pursuant to which
TCT No. 155330 was issued to them (Exh. “F-1”); and
 5.  Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-
256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a
consideration of P20,000.00 (Exh. “G”), pursuant to which TCT No. 157203 was
issued in her name (Exh. “G-1”).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395
executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration
of P25,000.00 (Exh. “K”), pursuant to which TCT No. 157779 was issued in his
name (Exh. “K-1”).]

In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of
title, plaintiffs, in their complaint, aver:

- XX-

The deeds of sale, Annexes “C,” “D,” “E,” “F,” and “G,” [and “K”] are simulated as
they are, are NULL AND VOID AB INITIO because –

a)      Firstly, there was no actual valid consideration for the deeds of sale xxx
over the properties in litis;

b)      Secondly, assuming that there was consideration in the sums reflected in

the questioned deeds, the properties are more than three-fold times more
valuable than the measly sums appearing therein;

c)      Thirdly, the deeds of sale do not reflect and express the true intent of the
parties (vendors and vendees); and

d)      Fourthly, the purported sale of the properties in litis was the result of a

deliberate conspiracy designed to unjustly deprive the rest of the
compulsory heirs (plaintiffs herein) of their legitime.

- XXI -

Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos.

36113/T-172, S-109772, 155329, 155330, 157203 [and 157779] issued by the
Registrar of Deeds over the properties in litis xxx are NULL AND VOID AB INITIO.

Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action
against them as well as the requisite standing and interest to assail their titles over the
properties in litis; (2) that the sales were with sufficient considerations and made by
defendants parents voluntarily, in good faith, and with full knowledge of the
consequences of their deeds of sale; and (3) that the certificates of title were issued
with sufficient factual and legal basis.  (Emphasis in the original)
[4]
 The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant
spouses Gavino Joaquin and Lea Asis.  Instead of filing an Answer with their co-
[5]

defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss.  In granting the
[6]

dismissal to Gavino Joaquin and Lea Asis, the trial court noted that “compulsory heirs
have the right to a legitime but such right is contingent since said right commences only
from the moment of death of the decedent pursuant to Article 777 of the Civil Code of
the Philippines.”
[7]

After trial, the trial court ruled in favor of the defendants and dismissed the
complaint.  The trial court stated:

In the first place, the testimony of the defendants, particularly that of the xxx father
will show that the Deeds of Sale were all executed for valuable consideration.  This
assertion must prevail over the negative allegation of plaintiffs.

And then there is the argument that plaintiffs do not have a valid cause of action
against defendants since there can be no legitime to speak of prior to the death of their
parents.  The court finds this contention tenable.  In determining the legitime, the
value of the property left at the death of the testator shall be considered (Art. 908 of
the New Civil Code).  Hence, the legitime of a compulsory heir is computed as of the
time of the death of the decedent.  Plaintiffs therefore cannot claim an impairment of
their legitime while their parents live.

All the foregoing considered, this case is DISMISSED.

In order to preserve whatever is left of the ties that should bind families together, the
counterclaim is likewise DISMISSED.

No costs.

SO ORDERED. [8]

The Ruling of the Court of Appeals

The Court of Appeals affirmed the decision of the trial court.  The appellate court
ruled:

To the mind of the Court, appellants are skirting the real and decisive issue in this
case, which is, whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant
brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and
Feliciana Landrito, who are their parents.  However, their right to the properties of
their defendant parents, as compulsory heirs, is merely inchoate and vests only upon
the latter’s death.  While still alive, defendant parents are free to dispose of their
properties, provided that such dispositions are not made in fraud of creditors.

Plaintiffs-appellants are definitely not parties to the deeds of sale in question.  Neither

do they claim to be creditors of their defendant parents.  Consequently, they cannot be
considered as real parties in interest to assail the validity of said deeds either for gross
inadequacy or lack of consideration or for failure to express the true intent of the
parties.  In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al.,
101 SCRA 376, thus:

The plaintiffs are not parties to the alleged deed of sale and are not principally or
subsidiarily bound thereby; hence, they have no legal capacity to challenge their
validity.

Plaintiffs-appellants anchor their action on the supposed impairment of their legitime

by the dispositions made by their defendant parents in favor of their defendant
brothers and sisters.  But, as correctly held by the court a quo, “the legitime of a
compulsory heir is computed as of the time of the death of the decedent.  Plaintiffs
therefore cannot claim an impairment of their legitime while their parents live.”

With this posture taken by the Court, consideration of the errors assigned by
plaintiffs-appellants is inconsequential.

WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against
plaintiffs-appellants.

SO ORDERED. [9]

Hence, the instant petition.

Issues

Petitioners assign the following as errors of the Court of Appeals:

1.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE
IN QUESTION HAD NO VALID CONSIDERATION.
 2.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING
THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY
INADEQUATE.
3.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS
OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
4.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE
WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY
DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO
JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE
SUBJECT PROPERTIES.
5.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS
HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE
PRIVATE RESPONDENTS.[10]

The Ruling of the Court

We find the petition without merit.

We will discuss petitioners’ legal interest over the properties subject of the Deeds of
Sale before discussing the issues on the purported lack of consideration and gross
inadequacy of the prices of the Deeds of Sale.

Whether Petitioners have a legal interest

over the properties subject of the Deeds of Sale

Petitioners’ Complaint betrays their motive for filing this case.  In their Complaint,
petitioners asserted that the “purported sale of the properties in litis was the result of a
deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs
(plaintiffs herein) of their legitime.” Petitioners’ strategy was to have the Deeds of Sale
declared void so that ownership of the lots would eventually revert to their respondent
parents.  If their parents die still owning the lots, petitioners and their respondent
siblings will then co-own their parents’ estate by hereditary succession. [11]

It is evident from the records that petitioners are interested in the properties subject
of the Deeds of Sale, but they have failed to show any legal right to the properties.  The
trial and appellate courts should have dismissed the action for this reason alone.  An
action must be prosecuted in the name of the real party-in-interest. [12]

[T]he question as to “real party-in-interest” is whether he is “the party who would be

benefitted or injured by the judgment, or the ‘party entitled to the avails of the suit.’”

x x x
In actions for the annulment of contracts, such as this action, the real parties are those
who are parties to the agreement or are bound either principally or subsidiarily or are
prejudiced in their rights with respect to one of the contracting parties and can show
the detriment which would positively result to them from the contract even though
they did not intervene in it (Ibañez v. Hongkong & Shanghai Bank, 22 Phil. 572
[1912]) xxx.

These are parties with “a present substantial interest, as distinguished from a mere
expectancy or future, contingent, subordinate, or consequential interest…. The phrase
‘present substantial interest’ more concretely is meant such interest of a party in the
subject matter of the action as will entitle him, under the substantive law, to recover if
the evidence is sufficient, or that he has the legal title to demand and the defendant
will be protected in a payment to or recovery by him.” [13]

Petitioners do not have any legal interest over the properties subject of the Deeds of
Sale.  As the appellate court stated, petitioners’ right to their parents’ properties is
merely inchoate and vests only upon their parents’ death.  While still living, the parents
of petitioners are free to dispose of their properties.  In their overzealousness to
safeguard their future legitime, petitioners forget that theoretically, the sale of the lots to
their siblings does not affect the value of their parents’ estate.  While the sale of the lots
reduced the estate, cash of equivalent value replaced the lots taken from the estate.

Whether the Deeds of Sale are void

for lack of consideration

Petitioners assert that their respondent siblings did not actually pay the prices
stated in the Deeds of Sale to their respondent father.  Thus, petitioners ask the court to
declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract.  As a consensual
contract, a contract of sale becomes a binding and valid contract upon the meeting of
the minds as to price.  If there is a meeting of the minds of the parties as to the price,
the contract of sale is valid, despite the manner of payment, or even the breach of that
manner of payment.  If the real price is not stated in the contract, then the contract of
sale is valid but subject to reformation. If there is no meeting of the minds of the parties
as to the price, because the price stipulated in the contract is simulated, then the
contract is void.  Article 1471 of the Civil Code states that if the price in a contract of
[14]

sale is simulated, the sale is void.

It is not the act of payment of price that determines the validity of a contract of
sale.  Payment of the price has nothing to do with the perfection of the
contract.  Payment of the price goes into the performance of the contract.  Failure to pay
the consideration is different from lack of consideration.  The former results in a right to
demand the fulfillment or cancellation of the obligation under an existing valid contract
while the latter prevents the existence of a valid contract.
[15]

Petitioners failed to show that the prices in the Deeds of Sale were absolutely
simulated.  To prove simulation, petitioners presented Emma Joaquin Valdoz’s
testimony stating that their father, respondent Leonardo Joaquin, told her that he would
transfer a lot to her through a deed of sale without need for her payment of the
purchase price.  The trial court did not find the allegation of absolute simulation of price
[16]

credible. Petitioners’ failure to prove absolute simulation of price is magnified by their

lack of knowledge of their respondent siblings’ financial capacity to buy the questioned
lots.  On the other hand, the Deeds of Sale which petitioners presented as evidence
[17]

plainly showed the cost of each lot sold.  Not only did respondents’ minds meet as to
the purchase price, but the real price was also stated in the Deeds of Sale.  As of the
filing of the complaint, respondent siblings have also fully paid the price to their
respondent father. [18]

Whether the Deeds of Sale are void

for gross inadequacy of price

Petitioners ask that assuming that there is consideration, the same is grossly
inadequate as to invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:

Art. 1355.  Except in cases specified by law, lesion or inadequacy of cause shall not

invalidate a contract, unless there has been fraud, mistake or undue
influence.  (Emphasis supplied)

Article 1470 of the Civil Code further provides:

Art. 1470.  Gross inadequacy of price does not affect a contract of sale, except as

may indicate a defect in the consent, or that the parties really intended a donation or
some other act or contract.  (Emphasis supplied)

Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470
of the Civil Code which would invalidate, or even affect, the Deeds of Sale.  Indeed,
there is no requirement that the price be equal to the exact value of the subject matter
of sale.  All the respondents believed that they received the commutative value of what
they gave.  As we stated in Vales v. Villa: [19]

Courts cannot follow one every step of his life and extricate him from bad bargains,
protect him from unwise investments, relieve him from one-sided contracts, or annul
the effects of foolish acts.  Courts cannot constitute themselves guardians of persons
who are not legally incompetent.  Courts operate not because one person has been
defeated or overcome by another, but because he has been defeated or
overcome illegally.  Men may do foolish things, make ridiculous contracts, use
miserable judgment, and lose money by them – indeed, all they have in the world; but
not for that alone can the law intervene and restore.  There must be, in addition,
a violation of the law, the commission of what the law knows as an actionable wrong,
before the courts are authorized to lay hold of the situation and remedy it. (Emphasis
in the original)

Moreover, the factual findings of the appellate court are conclusive on the parties
and carry greater weight when they coincide with the factual findings of the trial
court.  This Court will not weigh the evidence all over again unless there has been a
showing that the findings of the lower court are totally devoid of support or are clearly
erroneous so as to constitute serious abuse of discretion.   In the instant case, the trial
[20]

court found that the lots were sold for a valid consideration, and that the defendant
children actually paid the purchase price stipulated in their respective Deeds of
Sale.  Actual payment of the purchase price by the buyer to the seller is a factual finding
that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.

G.R. No. 137552 June 16, 2000

ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z. LAFORTEZA,

DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA, petitioners,
vs.
ALONZO MACHUCA, respondent.

GONZAGA-REYES, J.:

This Petition for Review on Certiorari seeks the reversal of the Decision of the Court of
Appeals 1 in CA G.R. CV No. 147457 entitled "ALONZO MACHUCA versus ROBERTO Z.
LAFORTEZA, GONZALO Z. LAFORTEZA, LEA ZULUETA-LAFORTEZA, MICHAEL Z.
LAFORTEZA, and DENNIS Z. LAFORTEZA".

The following facts as found by the Court of Appeals are undisputed:

The property involved consists of a house and lot located at No. 7757
Sherwood Street, Marcelo Green Village, Parañaque, Metro Manila, covered
by Transfer Certificate of Title (TCT) No. (220656) 8941 of the Registered of
Deeds of Parañaque (Exhibit "D", Plaintiff, record, pp. 331-332). The subject
property is registered in the name of the late Francisco Q. Laforteza, although
it is conjugal in nature (Exhibit "8", Defendants, record pp. 331-386).
On August 2, 1988, defendant Lea Zulueta-Laforteza executed a Special
Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Z.
Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly
to sell the subject property and sign any document for the settlement of the
estate of the late Francisco Q. Laforteza (Exh. "A", Plaintiff, record, pp. 323-
325).

Likewise on the same day, defendant Michael Z. Laforteza executed a

Special Power of Attorney in favor of defendants Roberto Z. Laforteza and
Gonzalo Laforteza, Jr., likewise, granting the same authority (Exh. "B",
record, pp. 326-328) Both agency instruments contained a provision that in
any document or paper to exercise authority granted, the signature of both
attorneys- in-fact must be affixed.

On October 27, 1988, defendant Dennis Z. Laforteza executed a Special

Power of Attorney in favor of defendant Roberto Z. Laforteza for the purpose
of selling the subject property (Exh. "C", Plaintiff, record, pp. 329-330). A year
later, on October 30, 1989, Dennis Z. Laforteza executed another Special
Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo
Laforteza, Jr. naming both attorneys-in-fact for the purpose of selling the
subject property and signing any document for the settlement of the estate of
the late Francisco Q. Laforteza. The subsequent agency instrument (Exh, "2",
record, pp. 371-373) contained similar provisions that both attorneys-in-fact
should sign any document or paper executed in the exercise of their
authority.1âwphi1.nêt

In the exercise of the above authority, on January 20, 1989, the heirs of the late
Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza,
Jr. entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff 2 over
the subject property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS
(P630,000.00) payable as follows:

(a) P30,000.00 as earnest money, to be forfeited

in favor of the defendants if the sale is not
effected due to the fault of the plaintiff;

(b) P600,000.00 upon issuance of the new

certificate of title in the name of the late
Francisco Q. Laforteza and upon execution of an
extra-judicial settlement of the decedent's estate
with sale in favor of the plaintiff (Par. 2, Exh. "E",
record, pp. 335-336).

Significantly, the fourth paragraph of the Memorandum of Agreement

(Contract to Sell) dated January 20, 1989 (Exh. "E", supra.) contained a
provision as follows:

. . . . Upon issuance by the proper Court of the

new title, the BUYER-LESSEE shall be notified in
 writing and said BUYER-LESSEE shall have
thirty (30) days to produce the balance of
P600,000.00 which shall be paid to the SELLER-
LESSORS upon the execution of the Extrajudicial
Settlement with sale.

On January 20, 1989, plaintiff paid the earnest money of THIRTY

THOUSAND PESOS (P30,000.00), plus rentals for the subject property (Exh.
"F", Plaintiff, record, p. 339).

On September 18, 1998 3, defendant heirs, through their counsel wrote a letter (Exh. 1,
Defendants, record, p. 370) to the plaintiff furnishing the latter a copy of the reconstituted
title to the subject property, advising him that he had thirty (3) days to produce the
balance of SIX HUNDRED PESOS (sic) (P600,000.00) under the Memorandum of
Agreement which plaintiff received on the same date.

On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for
an extension of the THIRTY (30) DAYS deadline up to November 15, 1989
within which to produce the balance of SIX HUNDRED THOUSAND PESOS
(P600,000.00) (Exh. "G", Plaintiff, record, pp. 341-342). Defendant Roberto Z.
Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his
conformity to the plaintiff's letter request (Exh. "G-1 and "G-2", Plaintiff,
record, p. 342). The extension, however, does not appear to have been
approved by Gonzalo Z. Laforteza, the second attorney-in-fact as his
conformity does not appear to have been secured.

On November 15, 1989, plaintiff informed the defendant heirs, through

defendant Roberto Z. Laforteza, that he already had the balance of SIX
HUNDRED THOUSAND PESOS (P600,000.00) covered by United Coconut
Planters Bank Manager's Check No. 000814 dated November 15, 1989 (TSN,
August 25, 1992, p. 11; Exhs. "H", record, pp. 343-344; "M", records p. 350;
and "N", record, p. 351). However, the defendants, refused to accept the
balance (TSN, August 24, 1992, p. 14; Exhs. "M-1", Plaintiff, record, p. 350;
and "N-1", Plaintiff, record, p. 351). Defendant Roberto Z. Laforteza had told
him that the subject property was no longer for sale (TSN, October 20, 1992,
p. 19; Exh. "J", record, p. 347).

On November 20, 1998 4, defendants informed plaintiff that they were canceling the
Memorandum of Agreement (Contract to Sell) in view of the plaintiff's failure to comply
with his contractual obligations (Exh. "3").

Thereafter, plaintiff reiterated his request to tender payment of the balance of

SIX HUNDRED THOUSAND PESOS (P600,000.00). Defendants, however,
insisted on the rescission of the Memorandum of Agreement. Thereafter,
plaintiff filed the instant action for specific performance. The lower court
rendered judgment on July 6, 1994 in favor of the plaintiff, the dispositive
portion of which reads:
 WHEREFORE, judgment is hereby rendered in favor of plaintiff
Alonzo Machuca and against the defendant heirs of the late
Francisco Q. Laforteza, ordering the said defendants.

(a) To accept the balance of P600,000.00 as full

payment of the consideration for the purchase of
the house and lot located at No. 7757 Sherwood
Street, Marcelo Green Village, Parañaque, Metro
Manila, covered by Transfer Certificate of Title
No. (220656) 8941 of the Registry of Deeds of
Rizal Parañaque, Branch;

(b) To execute a registrable deed of absolute

sale over the subject property in favor of the
plaintiff;

(c) Jointly and severally to pay the plaintiff the

sum of P20,000.00 as attorney's fees plus cost of
suit.

SO ORDERED. (Rollo, pp. 74-75). 5

Petitioners appealed to the Court of Appeals, which affirmed with modification the decision
of the lower court; the dispositive portion of the Decision reads:

WHEREFORE, the questioned decision of the lower court is hereby

AFFIRMED with the MODIFICATION that defendant heirs Lea Zulueta-
Laforteza, Michael Z. Laforteza, Dennis Z. Laforteza and Roberto Z.
Laforteza including Gonzalo Z. Laforteza, Jr. are hereby ordered to pay jointly
and severally the sum of FIFTY THOUSAND PESOS (P50,000.00) as moral
damages.

SO ORDERED. 6

Motion for Reconsideration was denied but the Decision was modified so as to absolve
Gonzalo Z. Laforteza, Jr. from liability for the payment of moral damages. 7 Hence this
petition wherein the petitioners raise the following issues:

I. WHETHER THE TRIAL AND APPELLATE COURTS CORRECTLY

CONSTRUED THE MEMORANDUM OF AGREEMENT AS IMPOSING
RECIPROCAL OBLIGATIONS.

II. WHETHER THE COURTS A QUO CORRECTLY RULED THAT

RESCISSION WILL NOT LIE IN THE INSTANT CASE.

III. WHETHER THE RESPONDENT IS UNDER ESTOPPEL FROM RAISING

THE ALLEGED DEFECT IN THE SPECIAL POWER OF ATTORNEY DATED
30 OCTOBER 1989 EXECUTED BY DENNIS LAFORTEZA.
 IV. SUPPOSING EX GRATIA ARGUMENTI THE MEMORANDUM OF
AGREEMENT IMPOSES RECIPROCAL OBLIGATIONS, WHETHER THE
PETITIONERS MAY BE COMPELLED TO SELL THE SUBJECT
PROPERTY WHEN THE RESPONDENT FAILED TO MAKE A JUDICIAL
CONSIGNATION OF THE PURCHASE PRICE?

V. WHETHER THE PETITIONERS ARE IN BAD FAITH SO TO AS MAKE THEM LIABLE

FOR MORAL DAMAGES? 8

The petitioners contend that the Memorandum of Agreement is merely a lease agreement
with "option to purchase". As it was merely an option, it only gave the respondent a right to
purchase the subject property within a limited period without imposing upon them any
obligation to purchase it. Since the respondent's tender of payment was made after the
lapse of the option agreement, his tender did not give rise to the perfection of a contract of
sale.

It is further maintained by the petitioners that the Court of Appeals erred in ruling that
rescission of the contract was already out of the question. Rescission implies that a contract
of sale was perfected unlike the Memorandum of Agreement in question which as
previously stated is allegedly only an option contract.

Petitioner adds that at most, the Memorandum of Agreement (Contract to Sell) is a mere
contract to sell, as indicated in its title. The obligation of the petitioners to sell the property to
the respondent was conditioned upon the issuance of a new certificate of title and the
execution of the extrajudicial partition with sale and payment of the P600,000.00. This is
why possession of the subject property was not delivered to the respondent as the owner of
the property but only as the lessee thereof. And the failure of the respondent to pay the
purchase price in full prevented the petitioners' obligation to convey title from acquiring
obligatory force.

Petitioners also allege that assuming for the sake of argument that a contract of sale was
indeed perfected, the Court of Appeals still erred in holding that respondent's failure to pay
the purchase price of P600,000.00 was only a "slight or casual breach".

The petitioners also claim that the Court of Appeals erred in ruling that they were not ready
to comply with their obligation to execute the extrajudicial settlement. The Power of Attorney
to execute a Deed of Sale made by Dennis Z. Laforteza was sufficient and necessarily
included the power to execute an extrajudicial settlement. At any rate, the respondent is
estopped from claiming that the petitioners were not ready to comply with their obligation for
he acknowledged the petitioners' ability to do so when he requested for an extension of time
within which to pay the purchase price. Had he truly believed that the petitioners were not
ready, he would not have needed to ask for said extension.

Finally, the petitioners allege that the respondent's uncorroborated testimony that third
persons offered a higher price for the property is hearsay and should not be given any
evidentiary weight. Thus, the order of the lower court awarding moral damages was without
any legal basis.
The appeal is bereft of merit.

A perusal of the Memorandum Agreement shows that the transaction between the
petitioners and the respondent was one of sale and lease. The terms of the agreement
read:

1. For and in consideration of the sum of PESOS: SIX HUNDRED THIRTY

THOUSAND (P630,000.00) payable in a manner herein below indicated,
SELLER-LESSOR hereby agree to sell unto BUYER-LESSEE the property
described in the first WHEREAS of this Agreement within six (6) months from
the execution date hereof, or upon issuance by the Court of a new owner's
certificate of title and the execution of extrajudicial partition with sale of the
estate of Francisco Laforteza, whichever is earlier;

2. The above-mentioned sum of PESOS: SIX HUNDRED THIRTY

THOUSAND (P630,000.00) shall be paid in the following manner:

P30,000.00 — as earnest money and as consideration for this

Agreement, which amount shall be forfeited in favor of
SELLER-LESSORS if the sale is not effected because of the
fault or option of BUYER-LESSEE;

P600,000.00 — upon the issuance of the new certificate of title

in the name of the late Francisco Laforteza and upon the
execution of an Extrajudicial Settlement of his estate with sale
in favor of BUYER-LESSEE free from lien or any
encumbrances.

3. Parties reasonably estimate that the issuance of a new title in place of the
lost one, as well as the execution of extrajudicial settlement of estate with
sale to herein BUYER-LESSEE will be completed within six (6) months from
the execution of this Agreement. It is therefore agreed that during the six
months period, BUYER-LESSEE will be leasing the subject property for six
months period at the monthly rate of PESOS: THREE THOUSAND FIVE
HUNDRED (P3,500.00). Provided however, that if the issuance of new title
and the execution of Extrajudicial Partition is completed prior to the expiration
of the six months period, BUYER-LESSEE shall only be liable for rentals for
the corresponding period commencing from his occupancy of the premises to
the execution and completion of the Extrajudicial Settlement of the estate,
provided further that if after the expiration of six (6) months, the lost title is not
yet replaced and the extra judicial partition is not executed, BUYER-LESSEE
shall no longer be required to pay rentals and shall continue to occupy, and
use the premises until subject condition is complied by SELLER-LESSOR;

4. It is hereby agreed that within reasonable time from the execution of this Agreement
and the payment by BUYER-LESSEE of the amount of P30,000.00 as herein above
provided, SELLER-LESSORS shall immediately file the corresponding petition for the
issuance of a new title in lieu of the lost one in the proper Courts. Upon issuance by the
proper Courts of the new title, the BUYER-LESSEE shall have thirty (30) days to produce
 the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the
execution of the Extrajudicial Settlement with sale. 9

A contract of sale is a consensual contract and is perfected at the moment there is a

meeting of the minds upon the thing which is the object of the contract and upon the
price. 10 From that moment the parties may reciprocally demand performance subject to the
provisions of the law governing the form of 
contracts. 11 The elements of a valid contract of sale under Article 1458 of the Civil Code are
(1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain
money or its equivalent. 12

In the case at bench, there was a perfected agreement between the petitioners and the
respondent whereby the petitioners obligated themselves to transfer the ownership of and
deliver the house and lot located at 7757 Sherwood St., Marcelo Green Village, Parañaque
and the respondent to pay the price amounting to six hundred thousand pesos
(P600,000.00). All the elements of a contract of sale were thus present. However, the
balance of the purchase price was to be paid only upon the issuance of the new certificate
of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution
of an extrajudicial settlement of his estate. Prior to the issuance of the "reconstituted" title,
the respondent was already placed in possession of the house and lot as lessee thereof for
six months at a monthly rate of three thousand five hundred pesos (P3,500.00). It was
stipulated that should the issuance of the new title and the execution of the extrajudicial
settlement be completed prior to expiration of the six-month period, the respondent would
be liable only for the rentals pertaining to the period commencing from the date of the
execution of the agreement up to the execution of the extrajudicial settlement. It was also
expressly stipulated that if after the expiration of the six month period, the lost title was not
yet replaced and the extrajudicial partition was not yet executed, the respondent would no
longer be required to pay rentals and would continue to occupy and use the premises until
the subject condition was complied with the petitioners.

The six-month period during which the respondent would be in possession of the property
as lessee, was clearly not a period within which to exercise an option. An option is a
contract granting a privilege to buy or sell within an agreed time and at a determined price.
An option contract is a separate and distinct contract from that which the parties may enter
into upon the consummation of the option. 1 An option must be supported by
consideration. 14An option contract is governed by the second paragraph of Article 1479 of
the Civil Code 15, which reads:

Art. 1479. . . .

An accepted unilateral promise to buy or to sell a determinate thing for a price

certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.

In the present case, the six-month period merely delayed the demandability of the
contract of sale and did not determine its perfection for after the expiration of the six-
month period, there was an absolute obligation on the part of the petitioners and the
respondent to comply with the terms of the sale. The parties made a "reasonable
 estimate" that the reconstitution the lost title of the house and lot would take
approximately six months and thus presumed that after six months, both parties
would be able to comply with what was reciprocally incumbent upon them. The fact
that after the expiration of the six-month period, the respondent would retain
possession of the house and lot without need of paying rentals for the use therefor,
clearly indicated that the parties contemplated that ownership over the property
would already be transferred by that time.

The issuance of the new certificate of title in the name of the late Francisco Laforteza and
the execution of an extrajudicial settlement of his estate was not a condition which
determined the perfection of the contract of sale. Petitioners' contention that since the
condition was not met, they no longer had an obligation to proceed with the sale of the
house and lot is unconvincing. The petitioners fail to distinguish between a condition
imposed upon the perfection of the contract and a condition imposed on the performance of
an obligation. Failure to comply with the first condition results in the failure of a contract,
while the failure to comply with the second condition only gives the other party the option
either to refuse to proceed with the sale or to waive the condition. Thus, Art. 1545 of the
Civil Code states:

Art. 1545. Where the obligation of either party to a contract of sale is subject
to any condition which is not performed, such party may refuse to proceed
with the contract or he may waive performance of the condition. If the other
party has promised that the condition should happen or be performed, such
first mentioned party may also treat the nonperformance of the condition as a
breach of warranty.

Where the ownership in the things has not passed, the buyer may treat the fulfillment by
the seller of his obligation to deliver the same as described and as warranted expressly
or by implication in the contract of sale as a condition of the obligation of the buyer to
perform his promise to accept and pay for the thing. 16

In the case at bar, there was already a perfected contract. The condition was
imposed only on the performance of the obligations contained therein. Considering
however that the title was eventually "reconstituted" and that the petitioners admit
their ability to execute the extrajudicial settlement of their father's estate, the
respondent had a right to demand fulfillment of the petitioners' obligation to deliver
and transfer ownership of the house and lot.

What further militates against petitioners' argument that they did not enter into a contract or
sale is the fact that the respondent paid thirty thousand pesos (P30,000.00) as earnest
money. Earnest money is something of value to show that the buyer was really in earnest,
and given to the seller to bind the bargain. 17 Whenever earnest money is given in a contract
of sale, it is considered as part of the purchase price and proof of the perfection of the
contract. 18

We do not subscribe to the petitioners' view that the Memorandum Agreement was a
contract to sell. There is nothing contained in the Memorandum Agreement from which it
can reasonably be deduced that the parties intended to enter into a contract to sell, i.e. one
whereby the prospective seller would explicitly reserve 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 full payment of the price,
such payment being a positive suspensive condition, the failure of which is not considered a
breach, casual or serious, but simply an event which prevented the obligation from
acquiring any obligatory force. 19 There is clearly no express reservation of title made by the
petitioners over the property, or any provision which would impose non-payment of the price
as a condition for the contract's entering into force. Although the memorandum agreement
was also denominated as a "Contract to Sell", we hold that the parties contemplated a
contract of sale. A deed of sale is absolute in nature although denominated a conditional
sale in the absence of a stipulation reserving title in the petitioners until full payment of the
purchase price. 20 In such cases, ownership of the thing sold passes to the vendee upon
actual or constructive delivery thereof. 21 The mere fact that the obligation of the respondent
to pay the balance of the purchase price was made subject to the condition that the
petitioners first deliver the reconstituted title of the house and lot does not make the contract
a contract to sell for such condition is not inconsistent with a contract of sale. 22

The next issue to be addressed is whether the failure of the respondent to pay the balance
of the purchase price within the period allowed is fatal to his right to enforce the agreement.

We rule in the negative.

Admittedly, the failure of the respondent to pay the balance of the purchase price was a
breach of the contract and was a ground for rescission thereof. The extension of thirty (30)
days allegedly granted to the respondent by Roberto Z. Laforteza (assisted by his counsel
Attorney Romeo Gutierrez) was correctly found by the Court of Appeals to be ineffective
inasmuch as the signature of Gonzalo Z. Laforteza did not appear thereon as required by
the Special Powers of Attorney. 2 However, the evidence reveals that after the expiration of
the six-month period provided for in the contract, the petitioners were not ready to comply
with what was incumbent upon them, i.e. the delivery of the reconstituted title of the house
and lot. It was only on September 18, 1989 or nearly eight months after the execution of the
Memorandum of Agreement when the petitioners informed the respondent that they already
had a copy of the reconstituted title and demanded the payment of the balance of the
purchase price. The respondent could not therefore be considered in delay for in reciprocal
obligations, neither party incurs in delay if the other party does not comply or is not ready to
comply in a proper manner with what was incumbent upon him.24

Even assuming for the sake of argument that the petitioners were ready to comply with their
obligation, we find that rescission of the contract will still not prosper. The rescission of a
sale of an immovable property is specifically governed by Article 1592 of the New Civil
Code, which reads:

In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either judicially or by a
notarial act. After the demand, the court may not grant him a new term. 25

It is not disputed that the petitioners did not make a judicial or notarial demand for
rescission. The November 20, 1989 letter of the petitioners informing the respondent of the
automatic rescission of the agreement did not amount to a demand for rescission, as it was
not notarized. 26 It was also made five days after the respondent's attempt to make the
payment of the purchase price. This offer to pay prior to the demand for rescission is
sufficient to defeat the petitioners' right under article 1592 of the Civil Code. 27 Besides, the
Memorandum Agreement between the parties did not contain a clause expressly
authorizing the automatic cancellation of the contract without court intervention in the event
that the terms thereof were violated. A seller cannot unilaterally and extrajudicially rescind a
contract or sale where there is no express stipulation authorizing him to extrajudicially
rescind. 28 Neither was there a judicial demand for the rescission thereof. Thus, when the
respondent filed his complaint for specific performance, the agreement was still in force
inasmuch as the contract was not yet rescinded. At any rate, considering that the six-month
period was merely an approximation of the time if would take to reconstitute the lost title and
was not a condition imposed on the perfection of the contract and considering further that
the delay in payment was only thirty days which was caused by the respondents justified
but mistaken belief that an extension to pay was granted to him, we agree with the Court of
Appeals that the delay of one month in payment was a mere casual breach that would not
entitle the respondents to rescind the contract. Rescission of a contract will not be permitted
for a slight or casual breach, but only such substantial and fundamental breach as would
defeat the very object of the parties in making the agreemant. 29

Petitioners' insistence that the respondent should have consignated the amount is not
determinative of whether respondent's action for specific performance will lie. Petitioners
themselves point out that the effect of cansignation is to extinguish the obligation. It
releases the debtor from responsibility therefor. 30 The failure of the respondent to
consignate the P600,000.00 is not tantamount to a breach of the contract for by the fact of
tendering payment, he was willing and able to comply with his obligation.

The Court of Appeals correctly found the petitioners guilty of bad faith and awarded
moral damages to the respondent. As found by the said Court, the petitioners
refused to comply with, their obligation for the reason that they were offered a higher
price therefor and the respondent was even offered P100,000.00 by the petitioners'
lawyer, Attorney Gutierrez, to relinquish his rights over the property. The award of
moral damages is in accordance with Article 1191 31 of the Civil Code pursuant to
Article 2220 which provides that moral damages may be awarded in case of breach
of contract where the defendant acted in bad faith. The amount awarded depends on
the discretion of the court based on the circumstances of each
case. 32 Under the circumstances, the award given by the Court of Appeals
amounting to P50,000.00 appears to us to be fair and reasonable.

ACCORDINGLY, the decision of the Court of Appeals in CA G.R. CV No. 47457 is

AFFIRMED and the instant petition is hereby DENIED.

No pronouncement as to costs.

SO ORDERED. 1âwphi1.nêt

G.R. No. 118509 March 29, 1996

LIMKETKAI SONS MILLING INC., petitioner, 
vs.
COURT OF APPEALS, ET AL., respondents.

RESOLUTION

FRANCISCO, J.:p

In this motion for reconsideration, the Court * is called upon to take a second hard look on
its December 1, 1995 decision reversing and setting aside respondent Court of Appeals'
judgment of August 12, 1994 that dismissed petitioner Limketkai Sons Milling Inc.'s
complaint for specific performance and damages against private respondents Bank of
Philippine Island (BPI) and National Book Store (NBS). Petitioner Limketkai Sons Milling,
Inc., opposed the motion and filed its Consolidated Comment, to which private respondent
NBS filed a Reply. Thereafter, petitioner filed its Manifestation and Motion for the voluntary
inhibition of Chief Justice Andres R. Narvasa from taking part in any "subsequent
deliberations in this case". The Honorable Chief Justice declined. 1

The Court is swayed to reconsider.

The bottom line issue is whether or not a contract of sale of the subject parcel of land
existed between the petitioner and respondent BPI. A re-evaluation of the attendant facts
and the evidence on record, specifically petitioner's Exhibits "A" to "I", yields the negative.
To elaborate:

Exhibit "A" 2 is a Deed of Trust dated May 14, 1976, entered into between Philippine
Remnants Co., Inc., as grantor, and respondent BPI, as trustee, stating that subject
property covered by TCT 493122 (formerly TCT No. 27324) 3 "has [been] assigned,
transferred, conveyed and set over unto the Trustee" 4 expressly authorizing and
empowering the same "in its own name to sell and dispose of said trust property or any lot
or parcel thereof 5 and "to facilitate [the] sale of the trust property, the Trustee may engage
the services of real estate broker or brokers, under such terms and conditions which the
Trustee may deem proper, to sell the Trust property or any lot or parcel thereof." 6

Exhibit "B" is a Letter of Authority for the petitioner issued by respondent BPI to Pedro A.
Revilla, Jr., a real estate broker, to sell the property pursuant to the Deed of Trust. The full
text of Exhibit "B" is hereby quoted:

Trust Account No. 75-09

23 June 1988

ASSETRADE CO.
70 San Francisco St.
Capitol Subdivision
Pasig, Metro Manila
Attention: Mr. Pedro P. Revilla, Jr.

Managing Partner

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

Gentlemen:

This will serve as your authority to sell on an "as is" "where is" basis the
property located at Pasig Blvd., Bagong Ilog, Pasig, Metro Manila, under the
following details and basic terms and conditions:

TCT No. : 493122 in the name of BPI as trustee of

Philippine Remnants Co., Inc.

Area : 33,056.0 square meters (net of 890

sq. m. sold to the Republic of the 
Philippines due to the widening of 
Pasig Blvd.)

Price : P1,100.00 per sq. m. or P36,361,600.00

Terms : Cash

Broker's Commission : 2%

Others : a) Documentary (sic) stamps to be

affixed to Deed of Absolute Sale,
transfer tax, registration expenses,
and other titling expenses for account
of the Buyer.

b) Capital gains tax, if payable, and

real estate taxes up to 30 June 1988
shall be for the account of the Seller.

This authority which is good for thirty (30) days only from date hereof is non-
exclusive and on a "first-come" "first-serve" basis.

Very truly yours,

BANK OF THE PHILIPPINE ISLANDS

as trustee of
Philippine Remnants Co., Inc.

(Sgd.) (Sgd.)

FERNANDO J. SISON, III ALFONSO R. ZAMORA

 Assistant Vice-President Vice President

[Note: Emphasis supplied]

security guard on duty at subject property to allow him (Revilla, Jr.) and his
companion to conduct an ocular inspection of the premises. 7

Exhibit "D" is a letter addressed by Pedro Revilla, Jr. to respondent BPI informing the latter
that he has procured a prospective buyer. 8

Exhibit "E" is the written proposal submitted by Alfonso Y. Lim in behalf of petitioner
Limketkai Sons Milling, Inc., offering to buy the subject property at P1,000.00/sq. m. 9

Exhibit "F" is respondent BPI's letter addressed to petitioner pointing out that petitioner's
proposal embodied in its Letter (Exhibit "E") has been rejected by the respondent BPI's
Trust Committee. 10

Exhibit "G" is petitioner's letter dated July 22, 1988 reiterating its offer to buy the subject
property at P1,000/sq. m. but now on cash basis. 11

Exhibit "H" refers to respondent BPI's another rejection of petitioner's offer to buy the
property at P1,000/sq. m. 12

And finally, Exhibit "I" is a letter by petitioner addressed to respondent BPI claiming the
existence of a perfected contract of sale of the subject property between them. 13

These exhibits, either scrutinized singly or collectively, do not reveal a perfection of the
purported contract of sale. Article 1458 of the Civil Code defines a contract of sale as
follows:

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

A contract of sale may be absolute or conditional.

Article 1475 of the same code specifically provides when a contract of sale is
deemed perfected, to wit:

Art. 1475. The contract of sale is perfected at the moment there is 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.
 The Court in Toyota Shaw, Inc. v. Court of Appeals 14 had already ruled that a definite
agreement on the manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale. Petitioner's exhibits did not
establish any definitive agreement or meeting of the minds between the concerned
parties as regards the price or term of payment. Instead, what merely appears
therefrom is respondent BPI's repeated rejection of the petitioner's proposal to buy
the property at P1,000/sq. m. 15 In addition, even on the assumption that Exhibit "E"
reflects that respondent BPI offered to sell the disputed property for P1,000/sq. m.,
petitioner's acceptance of the offer is conditioned upon or qualified by its proposed
terms 16 to which respondent BPI must first agree with.

On the subject of consent as an essential element of contracts, Article 1319 of the Civil
Code has this to say:

Art. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract.
The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.

xxx xxx xxx

The acceptance of an offer must therefor be unqualified and absolute. In other

words, it must be identical in all respects with that of the offer so as to produce
consent or meeting of the minds. This was not the case herein considering that
petitioner's acceptance of the offer was qualified, which amounts to a rejection of the
original offer. 17 And contrary to petitioner's assertion that its offer was accepted by
respondent BPI, there was no showing that petitioner complied with the terms and
conditions explicitly laid down by respondent BPI for prospective buyers. 18 Neither
was the petitioner able to prove that its offer to buy the subject property was formally
approved by the beneficial owner of the property and the Trust Committee of the
Bank; an essential requirement for the acceptance of the offer which was clearly
specified in Exhibits F and H. Even more telling is petitioner's unexplained failure to
reduce in writing the alleged acceptance of its offer to buy the property at P1,000/sq.
m.

The Court also finds as unconvincing petitioner's representation under Exhibits "E", "G", and
"I" that its proposal to buy the subject property for P1,000/sq. m. has been accepted by
respondent BPI, considering that none of the said Exhibits contained the signature of any
responsible official of respondent bank.

It is therefore evident from the foregoing that petitioner's documentary evidence floundered
in establishing its claim of a perfected contract of sale.

Moreover, petitioner's case failed to hurdle the strict requirements of the Statute of Frauds.
Article 1403 of the Civil Code states:

Art. 1403. — The following contracts are unenforceable, unless they are
ratified:
 xxx xxx xxx

(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement thereafter made shall be
unenforceable by action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:

xxx xxx xxx

(e) An agreement for the leasing for a long period than one year, or for the
sale of real property or of an interest therein.

xxx xxx xxx

In this case there is a patent absence of any deed of sale categorically conveying the
subject property from respondent BPI to petitioner. Exhibits "E", "G", "I" which
petitioner claims as proof of perfected contract of sale between it and respondent
BPI were not subscribed by the party charged, i.e., BPI and did not constitute the
memoranda or notes that the law speaks of. 19 To consider them sufficient
compliance with the Statute of Frauds is to betray the avowed purpose of the law to
prevent fraud and perjury in the enforcement of obligations. We share, in this
connection, respondent Court of Appeals' observation when it said:

. . . The requirement that the notes or memoranda be subscribed by BPI or its

agents, as the party charged, is very vital for the strict compliance with the
avowed purpose of the Statute of Frauds which is to prevent fraud and
perjury in the enforcement of obligations depending for their evidence on the
unassisted memory of witnesses by requiring certain enumerated contracts
and transactions to be evidenced by a writing signed by the party to be
charged (Asia Production Co., Inc. vs. Pano, 205 SCRA 458). It cannot be
gainsaid that a shrewd person could easily concoct a story in his letters
addressed to the other party and present the letters to the court as notes to
prove the existence of a perfected oral contract of sale when in truth there is
none.

In adherence to the provisions of the Statute of Frauds, the examination and evaluation
of the notes or memoranda adduced by the appellee was confined and limited to within
the four corners of the documents. To go beyond what appears on the face of the
documents constituting the notes or memoranda, stretching their import beyond what is
written in black and white, would certainly be uncalled for, if not violative of the Statute of
Frauds and opening the doors to fraud, the very evil sought to be avoided by the
statute.  In fine, considering that the documents adduced by the appellee do not embody
the essentials of the contract of sale aside from not having been subscribed by the party
charged or its agent, the transaction involved definitely falls within the ambit of the
Statute of Frauds. 20

[Note: Emphasis added]

Corrolarily, as the petitioner's exhibits failed to establish the perfection of the contract of
sale, oral testimony cannot take their place without violating the parol evidence rule. 21 It was
therefore irregular for the trial court to have admitted in evidence testimony to prove the
existence of a contract of sale of a real property between the parties despite the persistent
objection made by private respondents' counsels as early as the first scheduled hearing.
While said counsels cross-examined the witnesses, this, to our view, did not constitute a
waiver of the parol evidence rule. The Talosig v. Vda. de Nieba, 22 and Abrenica v. Gonda
and de Gracia 23 cases cited by the Court in its initial decision, which ruled to the effect that
an objection against the admission of any evidence must be made at the proper time, i.e.,
". . . at the time question is asked", 24 and that if not so made it will be understood to have
been waived, do not apply as these two cases involved facts 25 different from the case at
bench. More importantly, here, the direct testimonies of the witnesses were presented in
"affidavit-form" where prompt objection to inadmissible evidence is hardly possible, whereas
the direct testimonies in these cited cases were delivered orally in open court. The best that
counsels could have done, and which they did, under the circumstances was to preface the
cross-examination with objection. Thus:

ATTY. VARGAS:

Before I proceed with the cross-examination of the witness,

your Honor, may we object to the particular portion of the
affidavit which attempt to prove the existence of a verbal
contract to sell more specifically the answers contained in page
3. Par. 1, the whole of the answer.

xxx xxx xxx

COURT:

Objection overruled.

ATTY. VARGAS:

Your Honor, what has been denied by the Court was the motion
for preliminary hearing on affirmative defenses. The statement
made by the witness to prove that there was a verbal contract
to sell is inadmissible in evidence in this case because an
agreement must be in writing.

COURT:

Go ahead, that has been already overruled.

ATTY. VARGAS:

So may we reiterate our objection with regards to all other portions of the
affidavit which deal on the verbal contract. (TSN, Feb. 28, 1989, pp. 3-5:
Emphasis supplied.) 26
 xxx xxx xxx

ATTY. CORNAGO:

Before we proceed, we would like to make of record our

continuing objection in so far as questions and answers
propounded to Pedro Revilla dated February 27, 1989, in so far
as questions would illicit (sic) answers which would be violative
of the best evidence rule in relation to Art. 1403. I refer to
questions nos. 8, 13, 16 and 19 of the affidavit of this witness
which is considered as his direct testimony. (T.S.N., June 29,
1990, p. 2)

ATTY. CORNAGO:

May we make of record our continued objection on the testimony which

is violative of the best evidence rule in relation to Art. 1403 as contained
in the affidavit particularly questions Nos. 12, 14 19 and 20 of the
affidavit of Alfonso Lim executed on February 24, 1989. . . . (T.S.N., June
28, 1990, p. 8). 27

Counsels should not be blamed and, worst, penalized for taking the path of prudence
by choosing to cross-examine the witnesses instead of keeping mum and letting the
inadmissible testimony in "affidavit form" pass without challenge. We thus quote with
approval the observation of public respondent Court of Appeals on this point:

As a logical consequence of the above findings, it follows that the court a quo erred in
allowing the appellee to introduce parol evidence to prove the existence of a perfected
contract of sale over and above the objection of the counsel for the defendant-
appellant.  The records show that the court a quo allowed the direct testimony of the
witnesses to be in affidavit form subject to cross-examination by the opposing counsel.  If
the purpose thereof was to prevent the opposing counsel from objecting timely to the
direct testimony, the scheme failed for as early as the first hearing of the case on
February 28, 1989 during the presentation of the testimony in affidavit form of Pedro
Revilla, Jr., plaintiff-appellee's first witness, the presentation of such testimony was
already objected to as inadmissible. 28

[Emphasis supplied.]

WHEREFORE, in view of the foregoing premises, the Court hereby GRANTS the motion for
reconsideration, and SETS ASIDE its December 1, 1995 decision. Accordingly, the petition
is DENIED and the Court of Appeals' decision dated August 12, 1994, appealed from is
AFFIRMED in toto.

SO ORDERED.

--------------------------------may separate opinion pa…. di ko na sinama-------------------------------------------

G.R. No. 80298 April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, 

vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name
and style of "SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents.

Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.

Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J.:

The case before us calls for the interpretation of Article 559 of the Civil Code and raises the
particular question of when a person may be deemed to have been "unlawfully deprived" of
movable property in the hands of another. The article runs in full as follows:

Art. 559. The possession of movable property acquired in good faith is

equivalent to a title. Nevertheless, one who has lost any movable or has been
unlawfully deprived thereof, may recover it from the person in possession of
the same.

If the possessor of a movable lost or of which the owner has been unlawfully
deprived has acquired it in good faith at a public sale, the owner cannot
obtain its return without reimbursing the price paid therefor.

The movable property in this case consists of books, which were bought from the petitioner
by an impostor who sold it to the private respondents. Ownership of the books was
recognized in the private respondents by the Municipal Trial Court, 1 which was sustained
by the Regional Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The
petitioner asks us to declare that all these courts have erred and should be reversed.

This case arose when on October 5, 1981, a person identifying himself as Professor Jose
Cruz placed an order by telephone with the petitioner company for 406 books, payable on
delivery. 4 EDCA prepared the corresponding invoice and delivered the books as ordered,
for which Cruz issued a personal check covering the purchase price of P8,995.65. 5 On
October 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who,
after verifying the seller's ownership from the invoice he showed her, paid him P1,700.00. 6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even
before clearing of his first check, made inquiries with the De la Salle College where he had
claimed to be a dean and was informed that there was no such person in its employ.
Further verification revealed that Cruz had no more account or deposit with the Philippine
Amanah Bank, against which he had drawn the payment check. 7 EDCA then went to the
police, which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed his
real name as Tomas de la Peña and his sale of 120 of the books he had ordered from
EDCA to the private 
respondents. 8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the
UN Avenue, which forced their way into the store of the private respondents and threatened
Leonor Santos with prosecution for buying stolen property. They seized the 120 books
without warrant, loading them in a van belonging to EDCA, and thereafter turned them over
to the petitioner. 9

Protesting this high-handed action, the private respondents sued for recovery of the books
after demand for their return was rejected by EDCA. A writ of preliminary attachment was
issued and the petitioner, after initial refusal, finally surrendered the books to the private
respondents. 10 As previously stated, the petitioner was successively rebuffed in the three
courts below and now hopes to secure relief from us.

To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in
taking the law into its own hands and forcibly recovering the disputed books from the private
respondents. The circumstance that it did so with the assistance of the police, which should
have been the first to uphold legal and peaceful processes, has compounded the wrong
even more deplorably. Questions like the one at bar are decided not by policemen but by
judges and with the use not of brute force but of lawful writs.

Now to the merits

It is the contention of the petitioner that the private respondents have not established their
ownership of the disputed books because they have not even produced a receipt to prove
they had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559
provides that "the possession of movable property acquired in good faith is equivalent to a
title," thus dispensing with further proof.

The argument that the private respondents did not acquire the books in good faith has been
dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership
of the books from the EDCA invoice showing that they had been sold to Cruz, who said he
was selling them for a discount because he was in financial need. Private respondents are
in the business of buying and selling books and often deal with hard-up sellers who urgently
have to part with their books at reduced prices. To Leonor Santos, Cruz must have been
only one of the many such sellers she was accustomed to dealing with. It is hardly bad faith
for any one in the business of buying and selling books to buy them at a discount and resell
them for a profit.

But the real issue here is whether the petitioner has been unlawfully deprived of the books
because the check issued by the impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the owner who has
been unlawfully deprived of personal property is entitled to its recovery except only where
the property was purchased at a public sale, in which event its return is subject to
reimbursement of the purchase price. The petitioner is begging the question. It is putting the
cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at
bar that EDCA has been unlawfully deprived of the books.

The petitioner argues that it was, because the impostor acquired no title to the books that
he could have validly transferred to the private respondents. Its reason is that as the
payment check bounced for lack of funds, there was a failure of consideration that nullified
the contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the
parties on the subject matter and the consideration. According to the Civil Code:

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.

xxx xxx xxx

Art. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.

Art. 1478. The parties may stipulate that ownership in the thing shall not pass
to the purchaser until he has fully paid the price.

It is clear from the above provisions, particularly the last one quoted, that ownership in the
thing sold shall not pass to the buyer until full payment of the purchase only if there is a
stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the
vendor to the vendee upon the actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to

criminal prosecution in the case of bouncing checks. But absent the stipulation above noted,
delivery of the thing sold will effectively transfer ownership to the buyer who can in turn
transfer it to another.

In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some cosmetics to Francisco

Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for
the recovery of the articles from Tan, who claimed he had validly bought them from Ang,
paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to
deceive Asiatic the Court of Appeals declared:

Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things
that "one who has been unlawfully deprived of personal property may recover it from any
 person possessing it." We do not believe that the plaintiff has been unlawfully deprived of
the cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily
parted with them pursuant to a contract of purchase and sale. The circumstance that the
price was not subsequently paid did not render illegal a transaction which was valid and
legal at the beginning.

In Tagatac v. Jimenez, 13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold
it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the
plaintiff sued to recover the vehicle from Jimenez on the ground that she had been
unlawfully deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of
Appeals held:

The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has

been unlawfully deprived of her car. At first blush, it would seem that she was
unlawfully deprived thereof, considering that she was induced to part with it
by reason of the chicanery practiced on her by Warner L. Feist. Certainly,
swindling, like robbery, is an illegal method of deprivation of property. In a
manner of speaking, plaintiff-appellant was "illegally deprived" of her car, for
the way by which Warner L. Feist induced her to part with it is illegal and is
punished by law. But does this "unlawful deprivation" come within the scope
of Article 559 of the New Civil Code?

xxx xxx xxx

. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a
voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is
susceptible of either ratification or annulment. If the contract is ratified, the
action to annul it is extinguished (Article 1392, N.C.C.) and the contract is
cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled,
the contracting parties are restored to their respective situations before the
contract and mutual restitution follows as a consequence (Article 1398,
N.C.C.).

However, as long as no action is taken by the party entitled, either that of

annulment or of ratification, the contract of sale remains valid and binding.
When plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by
virtue of said voidable contract of sale, the title to the car passed to Feist. Of
course, the title that Feist acquired was defective and voidable. Nevertheless,
at the time he sold the car to Felix Sanchez, his title thereto had not been
avoided and he therefore conferred a good title on the latter, provided he
bought the car in good faith, for value and without notice of the defect in
Feist's title (Article 1506, N.C.C.). There being no proof on record that Felix
Sanchez acted in bad faith, it is safe to assume that he acted in good faith.

The above rulings are sound doctrine and reflect our own interpretation of Article 559 as
applied to the case before us.

Actual delivery of the books having been made, Cruz acquired ownership over the books
which he could then validly transfer to the private respondents. The fact that he had not yet
paid for them to EDCA was a matter between him and EDCA and did not impair the title
acquired by the private respondents to the books.

One may well imagine the adverse consequences if the phrase "unlawfully deprived" were
to be interpreted in the manner suggested by the petitioner. A person relying on the seller's
title who buys a movable property from him would have to surrender it to another person
claiming to be the original owner who had not yet been paid the purchase price therefor.
The buyer in the second sale would be left holding the bag, so to speak, and would be
compelled to return the thing bought by him in good faith without even the right to
reimbursement of the amount he had paid for it.

It bears repeating that in the case before us, Leonor Santos took care to ascertain first that
the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz
showed her assured her that the books had been paid for on delivery. By contrast, EDCA
was less than cautious — in fact, too trusting in dealing with the impostor. Although it had
never transacted with him before, it readily delivered the books he had ordered (by
telephone) and as readily accepted his personal check in payment. It did not verify his
identity although it was easy enough to do this. It did not wait to clear the check of this
unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms
thereon, that the books had been paid for on delivery, thereby vesting ownership in the
buyer.

Surely, the private respondent did not have to go beyond that invoice to satisfy herself that
the books being offered for sale by Cruz belonged to him; yet she did. Although the title of
Cruz was presumed under Article 559 by his mere possession of the books, these being
movable property, Leonor Santos nevertheless demanded more proof before deciding to
buy them.

It would certainly be unfair now to make the private respondents bear the prejudice
sustained by EDCA as a result of its own negligence. We cannot see the justice in
transferring EDCA's loss to the Santoses who had acted in good faith, and with proper care,
when they bought the books from Cruz.

While we sympathize with the petitioner for its plight, it is clear that its remedy is not against
the private respondents but against Tomas de la Peña, who has apparently caused all this
trouble. The private respondents have themselves been unduly inconvenienced, and for
merely transacting a customary deal not really unusual in their kind of business. It is they
and not EDCA who have a right to complain.

WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with
costs against the petitioner.
--------------------LEDESMA VS. CA GR86051, SEPT 1, 1992; DI KO MAHANAP---------------

G.R. No. L-25494 June 14, 1972

NICOLAS SANCHEZ, plaintiff-appellee, 
vs.
SEVERINA RIGOS, defendant-appellant.

CONCEPCION, C.J.:p

Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals,
which certified the case to Us, upon the ground that it involves a question purely of law.

The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina
Rigos executed an instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed,
promised and committed ... to sell" to Sanchez the sum of P1,510.00, a parcel of land
situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija,
and more particularly described in Transfer Certificate of Title No. NT-12528 of said
province, within two (2) years from said date with the understanding that said option shall be
deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the
property" within the stipulated period. Inasmuch as several tenders of payment of the sum
of Pl,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on March
12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija
and commenced against the latter the present action, for specific performance and
damages.

After the filing of defendant's answer — admitting some allegations of the complaint,
denying other allegations thereof, and alleging, as special defense, that the contract
between the parties "is a unilateral promise to sell, and the same being unsupported by any
valuable consideration, by force of the New Civil Code, is null and void" — on February 11,
1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the
pleadings. Accordingly, on February 28, 1964, the lower court rendered judgment for
Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute,
in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay
P200.00, as attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos.

This case admittedly hinges on the proper application of Article 1479 of our Civil Code,
which provides:

ART. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price

certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.

In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant
agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land
described in the option, copy of which was annexed to said pleading as Annex A thereof
and is quoted on the margin. 1 Hence, plaintiff maintains that the promise contained in the
contract is "reciprocally demandable," pursuant to the first paragraph of said Article 1479.
Although defendant had really "agreed, promised and committed" herself to sell the land to
the plaintiff, it is not true that the latter had, in turn, "agreed and committed himself " to buy
said property. Said Annex A does not bear out plaintiff's allegation to this effect. What is
more, since Annex A has been made "an integral part" of his complaint, the provisions of
said instrument form part "and parcel" 2 of said pleading.

The option did not impose upon plaintiff the obligation to purchase defendant's property.
Annex A is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And
both parties so understood it, as indicated by the caption, "Option to Purchase," given by
them to said instrument. Under the provisions thereof, the defendant "agreed, promised and
committed" herself to sell the land therein described to the plaintiff for P1,510.00, but there
is nothing in the contract to indicate that her aforementioned agreement, promise and
undertaking is supported by a consideration "distinct from the price" stipulated for the sale
of the land.

Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said
consideration, and this would seem to be the main factor that influenced its decision in
plaintiff's favor. It should be noted, however, that:

(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article
1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral
promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar.

(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479
requires the concurrence of a condition, namely, that the promise be "supported by a
consideration distinct from the price." Accordingly, the promisee can not compel the
promisor to comply with the promise, unless the former establishes the existence of said
distinct consideration. In other words, the promisee has the burden of proving such
consideration. Plaintiff herein has not even alleged the existence thereof in his complaint.
(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a
special defense, the absence of said consideration for her promise to sell and, by joining in
the petition for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said
averment in defendant's answer. Indeed as early as March 14, 1908, it had been held,
in Bauermann v. Casas, 3 that:

One who prays for judgment on the pleadings without offering proof as to the
truth of his own allegations, and without giving the opposing party an
opportunity to introduce evidence, must be understood to admit the truth of all
the material and relevant allegations of the opposing party, and to rest his
motion for judgment on those allegations taken together with such of his own
as are admitted in the pleadings. (La Yebana Company vs. Sevilla, 9 Phil.
210). (Emphasis supplied.)

This view was reiterated in Evangelista v. De la Rosa 4 and Mercy's Incorporated v.

Herminia Verde. 5

Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific
Co., 6 from which We quote:

The main contention of appellant is that the option granted to appellee to sell
to it barge No. 10 for the sum of P30,000 under the terms stated above has
no legal effect because it is not supported by any consideration and in
support thereof it invokes article 1479 of the new Civil Code. The article
provides:

"ART. 1479. A promise to buy and sell a determinate thing for a

price certain is reciprocally demandable.

An accepted unilateral promise to buy or sell a determinate

thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price."

On the other hand, Appellee contends that, even granting that the "offer of
option" is not supported by any consideration, that option became binding on
appellant when the appellee gave notice to it of its acceptance, and that
having accepted it within the period of option, the offer can no longer be
withdrawn and in any event such withdrawal is ineffective. In support this
contention, appellee invokes article 1324 of the Civil Code which provides:

"ART. 1324. When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn any time before
acceptance by communicating such withdrawal, except when
the option is founded upon consideration as something paid or
promised."

There is no question that under article 1479 of the new Civil Code "an option
to sell," or "a promise to buy or to sell," as used in said article, to be valid
 must be "supported by a consideration distinct from the price." This is clearly
inferred from the context of said article that a unilateral promise to buy or to
sell, even if accepted, is only binding if supported by consideration. In other
words, "an accepted unilateral promise can only have a binding effect if
supported by a consideration which means that the option can still be
withdrawn, even if accepted, if the same is not supported by any
consideration. It is not disputed that the option is without consideration. It can
therefore be withdrawn notwithstanding the acceptance of it by appellee.

It is true that under article 1324 of the new Civil Code, the general rule
regarding offer and acceptance is that, when the offerer gives to the offeree a
certain period to accept, "the offer may be withdrawn at any time before
acceptance" except when the option is founded upon consideration, but this
general rule must be interpreted as modified by the provision of article 1479
above referred to, which applies to "a promise to buy and sell" specifically. As
already stated, this rule requires that a promise to sell to be valid must be
supported by a consideration distinct from the price.

We are not oblivious of the existence of American authorities which hold that
an offer, once accepted, cannot be withdrawn, regardless of whether it is
supported or not by a consideration (12 Am. Jur. 528). These authorities, we
note, uphold the general rule applicable to offer and acceptance as contained
in our new Civil Code. But we are prevented from applying them in view of the
specific provision embodied in article 1479. While under the "offer of option"
in question appellant has assumed a clear obligation to sell its barge to
appellee and the option has been exercised in accordance with its terms, and
there appears to be no valid or justifiable reason for appellant to withdraw its
offer, this Court cannot adopt a different attitude because the law on the
matter is clear. Our imperative duty is to apply it unless modified by
Congress.

However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian
Tek, 8 decided later thatSouthwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific
Co., 9 saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the
former where a unilateral promise to sell similar to the one sued upon here was involved,
treating such promise as an option which, although not binding as a contract in itself for lack
of a separate consideration, nevertheless generated a bilateral contract of purchase and
sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar
Bengzon, this Court said:

Furthermore, an option is unilateral: a promise to sell at the price fixed

whenever the offeree should decide to exercise his option within the specified
time. After accepting the promise and before he exercises his option, the
holder of the option is not bound to buy. He is free either to buy or not to buy
later. In this case, however, upon accepting herein petitioner's offer a bilateral
promise to sell and to buy ensued, and the respondent ipso facto assumed
the obligation of a purchaser. He did not just get the right subsequently to buy
or not to buy. It was not a mere option then; it was a bilateral contract of sale.
 Lastly, even supposing that Exh. A granted an option which is not binding for
lack of consideration, the authorities hold that:

"If the option is given without a consideration, it is a mere offer

of a contract of sale, which is not binding until accepted. If,
however, acceptance is made before a withdrawal, it
constitutes a binding contract of sale, even though the option
was not supported by a sufficient consideration. ... . (77 Corpus
Juris Secundum, p. 652. See also 27 Ruling Case Law 339 and
cases cited.)

"It can be taken for granted, as contended by the defendant,

that the option contract was not valid for lack of consideration.
But it was, at least, an offer to sell, which was accepted by
letter, and of the acceptance the offerer had knowledge before
said offer was withdrawn. The concurrence of both acts — the
offer and the acceptance — could at all events have generated
a contract, if none there was before (arts. 1254 and 1262 of the
Civil Code)." (Zayco vs. Serra, 44 Phil. 331.)

In other words, since there may be no valid contract without a cause or consideration, the
promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of
its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell
which, if accepted, results in a perfected contract of sale.

This view has the advantage of avoiding a conflict between Articles 1324 — on the general
principles on contracts — and 1479 — on sales — of the Civil Code, in line with the cardinal
rule of statutory construction that, in construing different provisions of one and the same law
or code, such interpretation should be favored as will reconcile or harmonize said provisions
and avoid a conflict between the same. Indeed, the presumption is that, in the process of
drafting the Code, its author has maintained a consistent philosophy or position. Moreover,
the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 10 holding
that Art. 1324 is modifiedby Art. 1479 of the Civil Code, in effect, considers the latter as
an exception to the former, and exceptions are not favored, unless the intention to the
contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is
more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option
or promise supported by or founded upon a consideration, strongly suggests that the two (2)
provisions intended to enforce or implement the same principle.

Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby
reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as
inconsistent therewith, the view adhered to in theSouthwestern Sugar & Molasses Co. case
should be deemed abandoned or modified.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against
defendant-appellant Severina Rigos. It is so ordered.

---------------------------separate opinions, di ko na din sinama----------------------- 

G.R. No. 103338 January 4, 1994

FEDERICO SERRA, petitioner, 
vs.
THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL BANKING
CORPORATION, respondents.

Andres R. Amante, Jr. for petitioner.

R.C. Domingo, Jr. & Associates for private respondent.

NOCON, J.:

A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy and sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct from the
price. (Article 1479, New Civil Code) The first is the mutual promise and each has the right
to demand from the other the fulfillment of the obligation. While the second is merely an
offer of one to another, which if accepted, would create an obligation to the offeror to make
good his promise, provided the acceptance is supported by a consideration distinct from the
price.

Disputed in the present case is the efficacy of a "Contract of Lease with Option to Buy",
entered into between petitioner Federico Serra and private respondent Rizal Commercial
Banking Corporation. (RCBC).

Petitioner is the owner of a 374 square meter parcel of land located at Quezon St.,
Masbate, Masbate. Sometime in 1975, respondent bank, in its desire to put up a branch in
Masbate, Masbate, negotiated with petitioner for the purchase of the then unregistered
property. On May 20, 1975, a contract of LEASE WITH OPTION TO BUY was instead
forged by the parties, the pertinent portion of which reads:

1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in
lease, the parcel of land described in the first WHEREAS clause, to have and
to hold the same for a period of twenty-five (25) years commencing from June
1, 1975 to June 1, 2000. The LESSEE, however, shall have the option to
purchase said parcel of land within a period of ten (10) years from the date of
the signing of this Contract at a price not greater than TWO HUNDRED TEN
PESOS (P210.00) per square meter. For this purpose, the LESSOR
undertakes, within such ten-year period, to register said parcel of land under
the TORRENS SYSTEM and all expenses appurtenant thereto shall be for
his sole account.
 If, for any reason, said parcel of land is not registered under the TORRENS
SYSTEM within the aforementioned ten-year period, the LESSEE shall have
the right, upon termination of the lease to be paid by the LESSOR the market
value of the building and improvements constructed on said parcel of land.

The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register

said parcel of land under the TORRENS SYSTEM in case the LESSOR, for
any reason, fails to comply with his obligation to effect said registration within
reasonable time after the signing of this Agreement, and all expenses
appurtenant to such registration shall be charged by the LESSEE against the
rentals due to the LESSOR.

2. During the period of the lease, the LESSEE covenants to pay the
LESSOR, at the latter's residence, a monthly rental of SEVEN HUNDRED
PESOS (P700.00), Philippine Currency, payable in advance on or before the
fifth (5th) day of every calendar month, provided that the rentals for the first
four (4) months shall be paid by the LESSEE in advance upon the signing of
this Contract.

3. The LESSEE is hereby authorized to construct as its sole expense a building and such
other improvements on said parcel of land, which it may need in pursuance of its
business and/or operations; provided, that if for any reason the LESSEE shall fail to
exercise its option mentioned in paragraph (1) above in case the parcel of land is
registered under the TORRENS SYSTEM within the ten-year period mentioned therein,
said building and/or improvements, shall become the property of the LESSOR after the
expiration of the 25-year lease period without the right of reimbursement on the part of
the LESSEE. The authority herein granted does not, however, extend to the making or
allowing any unlawful, improper or offensive used of the leased premises, or any use
thereof, other than banking and office purposes. The maintenance and upkeep of such
building, structure and improvements shall likewise be for the sole account of the
LESSEE. 1

The foregoing agreement was subscribed before Notary Public Romeo F. Natividad.

Pursuant to said contract, a building and other improvements were constructed on the land
which housed the branch office of RCBC in Masbate, Masbate. Within three years from the
signing of the contract, petitioner complied with his part of the agreement by having the
property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232 was
issued by the Register of Deeds of the Province of Masbate.

Petitioner alleges that as soon as he had the property registered, he kept on pursuing the
manager of the branch to effect the sale of the lot as per their agreement. It was not until
September 4, 1984, however, when the respondent bank decided to exercise its option and
informed petitioner, through a letter, 2 of its intention to buy the property at the agreed price
of not greater than P210.00 per square meter or a total of P78,430.00. But much to the
surprise of the respondent, petitioner replied that he is no longer selling the property. 3

Hence, on March 14, 1985, a complaint for specific performance and damages were filed by
respondent against petitioner. In the complaint, respondent alleged that during the
negotiations it made clear to petitioner that it intends to stay permanently on property once
its branch office is opened unless the exigencies of the business requires otherwise. Aside
from its prayer for specific performance, it likewise asked for an award of P50,000.00 for
attorney's fees P100,000.00 as exemplary damages and the cost of the suit. 4

A special and affirmative defenses, petitioner contended:

1. That the contract having been prepared and drawn by RCBC, it took undue
advantage on him when it set in lopsided terms.

2. That the option was not supported by any consideration distinct from the
price and hence not binding upon him.

3. That as a condition for the validity and/or efficacy of the option, it should
have been exercised within the reasonable time after the registration of the
land under the Torrens System; that its delayed action on the option have
forfeited whatever its claim to the same.

4. That extraordinary inflation supervened resulting in the unusual decrease in the

purchasing power of the currency that could not reasonably be forseen or was manifestly
beyond the contemplation of the parties at the time of the establishment of the obligation,
thus, rendering the terms of the contract unenforceable, inequitable and to the undue
enrichment of RCBC. 5

and as counterclaim petitioner alleged that:

1. The rental of P700.00 has become unrealistic and unreasonable, that

justice and equity will require its adjustment.

2. By the institution of the complaint he suffered moral damages which may be assessed
at P100,000.00 and award of attorney's fee of P25,000.00 and exemplary damages at
P100,000.00. 6

Initially, after trial on the merits, the court dismissed the complaint. Although it found the
contract to be valid, the court nonetheless ruled that the option to buy in unenforceable
because it lacked a consideration distinct from the price and RCBC did not exercise its
option within reasonable time. The prayer for readjustment of rental was denied, as well as
that for moral and exemplary damages. 7

Nevertheless, upon motion for reconsideration of respondent, the court in the order of
January 9, 1989, reversed itself, the dispositive portion reads:

WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and
hereby renders judgment as follows:

1. The defendant is hereby ordered to execute and deliver the proper deed of
sale in favor of plaintiff selling, transferring and
conveying the property covered by and described in the Original Certificate of
 Title 0-232 of the Registry of Deeds of Masbate for the sum of Seventy Eight
Thousand Five Hundred Forty Pesos (P78,540,00), Philippine Currency;

2. Defendant is ordered to pay plaintiff the sum of Five Thousand (P5,000.00)

Pesos as attorney's fees;

3. The counter claim of defendant is hereby dismissed; and

4. Defendants shall pay the costs of suit. 8

In a decision promulgated on September 19, 1991, 9 the Court of Appeals affirmed the

findings of the trial court that:

1. The contract is valid and that the parties perfectly understood the contents
thereof;

2. The option is supported by a distinct and separate consideration as

embodied in the agreement;

3. There is no basis in granting an adjustment in rental.

Assailing the judgment of the appellate court, petitioner would like us to consider mainly the
following:

1. The disputed contract is a contract of adhesion.

2. There was no consideration to support the option, distinct from the price,
hence the option cannot be exercised.

3. Respondent court gravely abused its discretion in not granting currency

adjustment on the already eroded value of the stipulated rentals for twenty-
five years.

The petition is devoid of merit.

There is no dispute that the contract is valid and existing between the parties, as found by
both the trial court and the appellate court. Neither do we find the terms of the contract
unfairly lopsided to have it ignored.

A contract of adhesion is one wherein a party, usually a corporation, prepares the

stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. These types of contracts are as binding as ordinary contracts. Because
in reality, the party who adheres to the contract is free to reject it entirely. Although, this
Court will not hesitate to rule out blind adherence to terms where facts and circumstances
will show that it is basically one-sided. 10

We do not find the situation in the present case to be inequitable. Petitioner is a highly
educated man, who, at the time of the trial was already a CPA-Lawyer, and when he
entered into the contract, was already a CPA, holding a respectable position with the
Metropolitan Manila Commission. It is evident that a man of his stature should have been
more cautious in transactions he enters into, particularly where it concerns valuable
properties. He is amply equipped to drive a hard bargain if he would be so minded to.

Petitioner contends that the doctrines laid down in the cases of

Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca  13 were
misapplied in the present case, because 1) the option given to the respondent bank was not
supported by a consideration distinct from the price; and 2) that the stipulated price of "not
greater than P210.00 per square meter" is not certain or definite.

Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a
certain period to accept, the offer maybe withdrawn at anytime before acceptance by
communicating such withdrawal, except when the option is founded upon consideration, as
something paid or promised. On the other hand, Article 1479 of the Code provides that an
accepted unilateral promise to buy and sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the price.

In a unilateral promise to sell, where the debtor fails to withdraw the promise before the
acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy,
because upon acceptance by the creditor of the offer to sell by the debtor, there is already a
meeting of the minds of the parties as to the thing which is determinate and the price which
is certain. 14 In which case, the parties may then reciprocally demand performance.

Jurisprudence has taught us that an optional contract is a privilege existing only in one party
— the buyer. For a separate consideration paid, he is given the right to decide to purchase
or not, a certain merchandise or property, at any time within the agreed period, at a fixed
price. This being his prerogative, he may not be compelled to exercise the option to buy
before the time
expires. 15

On the other hand, what may be regarded as a consideration separate from the price is
discussed in the case ofVda. de Quirino v. Palarca  16 wherein the facts are almost on all
fours with the case at bar. The said case also involved a lease contract with option to buy
where we had occasion to say that "the consideration for the lessor's obligation to sell the
leased premises to the lessee, should he choose to exercise his option to purchase the
same, is the obligation of the lessee to sell to the lessor the building and/or improvements
constructed and/or made by the former, if he fails to exercise his option to buy leased
premises." 17

In the present case, the consideration is even more onerous on the part of the lessee since
it entails transferring of the building and/or improvements on the property to petitioner,
should respondent bank fail to exercise its option within the period stipulated. 18

The bugging question then is whether the price "not greater than TWO HUNDRED PESOS"
is certain or definite. A price is considered certain if it is so with reference to another thing
certain or when the determination thereof is left to the judgment of a specified person or
persons. 19 And generally, gross inadequacy of price does not affect a contract of sale. 20
Contracts are to be construed according to the sense and meaning of the terms which the
parties themselves have used. In the present dispute, there is evidence to show that the
intention of the parties is to peg the price at P210 per square meter. This was confirmed by
petitioner himself in his testimony, as follows:

Q. Will you please tell this Court what was the offer?

A. It was an offer to buy the property that I have in Quezon City

(sic).

Q. And did they give you a specific amount?

xxx xxx xxx

A. Well, there was an offer to buy the property at P210 per

square meters (sic).

Q. And that was in what year?

A . 1975, sir.

Q. And did you accept the offer?

A. Yes, sir. 21

Moreover, by his subsequent acts of having the land titled under the Torrens System, and in
pursuing the bank manager to effect the sale immediately, means that he understood
perfectly the terms of the contract. He even had the same property mortgaged to the
respondent bank sometime in 1979, without the slightest hint of wanting to abandon his
offer to sell the property at the agreed price of P210 per square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or factual, in adjusting
the amount of the rent. The contract is the law between the parties and if there is indeed
reason to adjust the rent, the parties could by themselves negotiate for the amendment of
the contract. Neither could we consider the decline of the purchasing power of the
Philippine peso from 1983 to the time of the commencement of the present case in 1985, to
be so great as to result in an extraordinary inflation. Extraordinary inflation exists when
there in an unimaginable increase or decrease of the purchasing power of the Philippine
currency, or fluctuation in the value of pesos manifestly beyond the contemplation of the
parties at the time of the establishment of the obligation. 23

Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY"
between petitioner and respondent bank is valid, effective and enforceable, the price being
certain and that there was consideration distinct from the price to support the option given to
the lessee.

WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate court is
hereby AFFIRMED.
SO ORDERED.