SECONDDIVISION [G.R.No.L41847.December12,1986.] CATALINOLEABRES,petitioner,vs.COURTOFAPPEALSandMANOTOKREALTY, INC.,respondents. MagtanggolC.Gunigundoforpetitioner. MarcelodeGuzmanforrespondents. DECISION PARAS,Jp: BeforeUsisaPetitionforCertioraritoreviewthedecisionoftheCourtofAppeals whichisquotedhereunder: InCivilCaseNo.64434,theCourtofFirstInstanceofManilamadethefollowing quoteddecision: "(1) Upondefendant'scounterclaim,orderingplaintiffCatalinoLeabresto vacateand/orsurrenderpossessiontodefendantManotokRealty,Inc.

theparcel oflandsubjectmatterofthecomplaintdescribedinparagraph3thereofand describedintheBillofParticularsdatedMarch4,1966; (2) TopaydefendantthesumofP81.00permonthfromMarch20,1959,upto thetimeheactuallyvacatesand/orsurrenderspossessionofthesaidparcelof landtothedefendantManotokRealty,Inc.,and (3) Topayattorney'sfeestothedefendantintheamountofP700.00andpay thecosts."(Decision,R.A.,pp.5455). Thefactsofthiscasemaybebrieflystatedasfollows: "ClaraTambuntingdeLegardadiedtestateonApril22,1950.Amongthe propertiesleftbythedeceasedisthe"LegardaTambuntingSubdivision"located onRizalAvenueExtension,CityofManila,containinganareaof80,238.90sq.m., coveredbyTransferCertificatesofTitleNo.62042;45142;45149;49578;40957

and59585.Shortlyafterthedeathofsaiddeceased,plaintiffCatalinoLeabres bought,onapartialpaymentofP1,000.00aportion(No.VIII,LotNo.1)ofthe SubdivisionfromsurvivinghusbandVicenteJ,Legardawhoactedasspecial administrator,thedeedorreceiptofsaidsaleappearingtobedatedMay2,1950 (Annex"A").UponpetitionofVicenteL.Legarda,wholaterwasappointeda regularadministratortogetherwithPacificaPriceandAugustoTambuntingon August28,1950,theProbateCourtofManilaintheSpecialProceedingsNo. 10808)overthetestateestateofsaidClaraTambunting,authorizedthroughits orderofNovember21,1951thesaleoftheproperty. Inthemeantime,VicenteL.LegardawasrelievedasaregularAdministratorand thePhilippineTrustCo.whichtookoverassuchadministratoradvertisedthesale ofthesubdivisionwhichincludesthelotsubjectmatterherein,intheissuesof August26and27,September2and3,and15and17,1956oftheManilaTimes andDailyMirror.IntheaforesaidSpecialProceedingsNo.10808,noadverse claimorinterestoverthesubdivisionoranyportionthereofwaseverpresented byanyperson,andinthesalethatfollowed,theManotokRealty,Inc.emerged thesuccessfulbidderatthepriceofP840,000.00.ByorderoftheProbateCourt, thePhilippineTrustCo.executedtheDeedofAbsoluteSaleofthesubdivision datedJanuary7,1959infavoroftheManotokRealty,Inc.whichdeedwas judiciallyapprovedonMarch20,1959,andrecordedimmediatelyintheproper RegisterofDeedswhichissuedthecorrespondingCertificatesofTitletothe ManotokRealty,Inc.,thedefendantappelleeherein. AcomplaintdatedFebruary8,1966,wasfiledbyhereinplaintiff,whichseeks, amongotherthings,forthequietingoftitleoverthelotsubjectmatterherein,for continuingpossessionthereof,andfordamages.Inthescheduledhearingofthe case,plaintiffCatalinoLeabresfailedtoappearalthoughhewasdulynotified,and sothetrialCourt,initsorderdatedSeptember14,1967,dismissedthecomplaint (Annex"E").Inanotherorderofdismissalwasamendedastomakethesame referonlytoplaintiff'scomplaintandthecounterclaimofthedefendantwas reinstatedandastheevidencethereofwasalreadyadducedwhendefendant presenteditsevidenceinthreeothercasespendinginthesameCourt,said counterclaimwasalsoconsideredsubmittedforresolution.Themotionfor

reconsiderationdatedJanuary22,1968(Annex"I"),wasfiledbyplaintiff,andan oppositiontheretodatedJanuary25,1968,waslikewisefiledbydefendantbut theCourtaquodismissedsaidmotioninitsorderdatedJanuary12,1970(Annex "K"),"forlackofmerits"(pp.7172,RecordonAppeal). AppealingthedecisionofthelowerCourt,plaintiffappellantadvancesthe followingassignmentoferrors: I THELOWERCOURTERREDINDENYINGTHEMOTIONFORRECONSIDERATION, DATEDOCTOBER9,1967,THUSDEPRIVINGTHEPLAINTIFFAPPELLANTHISDAYIN COURT. II THELOWERCOURTERREDINORDERINGTHEPLAINTIFFAPPELLANTCATALINO LEABRESTOVACATEAND/ORSURRENDERTHEPOSSESSIONOFTHELOTSUBJECT MATTEROFTHECOMPLAINTTODEFENDANTAPPELLEE. III THELOWERCOURTERREDINORDERINGTHEPLAINTIFFAPPELLANTTOPAY DEFENDANTAPPELLEETHESUMOFP81.00PERMONTHFROMMARCH20,1969, UPTOTHETIMEHEACTUALLYVACATETHEPARCELOFLAND.(Appellant'sBrief, p.7) IntheFirstAssignedError,itiscontendedthatthedenialofhisMotionfor ReconsiderationdatedOctober9,1967,theplaintiffappellantwasnotaccorded hisdayinCourt. Therulegoverningdismissalofactionsforfailuretoprosecuteisprovidedforin Section3,Rule17oftheRulesofCourt,asfollows: Iftheplaintifffailstoappearatthetimeofthetrialortoprosecutehisactionfor anunreasonablelengthoftime,ortocomplywiththeserulesoranyorderofthe Court,theactionmaybedismisseduponmotionofthedefendantoruponthe

Court'sownmotion.Thisdismissalshallhavetheeffectofanadjudicationupon themerits,unlessotherwiseprovidedbytheCourt." Undertheaforecitedsection,itisdiscretionaryonthepartoftheCourtto dismissanactionforfailuretoprosecute,anditsactionwillnotbereversedupon appealintheabsenceofabuse.Theburdenofshowingabuseofthisdiscretionis upontheappellantsinceeverypresumptionistowardthecorrectnessofthe Court'saction(Smith,Bell&Co.,etalvs.AmericanPres.Lines,Ltd.,andManila TerminalCo.,No.L5304,April30,1954;Adorablevs.Bonifacio,G.R.No.L10698, April22,1959);Floresvs.Phil.AlienPropertyAdministration,G.R.No.L12741, April27,1960).Bythedoctrinelaiddowninthesecases,andbytheprovisionsof Section5,Rules131oftheRulesofCourt,particularlyparagraphs(m)and(o) whichrespectivelypresumetheregularityofofficialperformanceandthepassing uponbytheCourtoverallissueswithinacase,itmattersnotiftheCourt dismissingtheactionforfailuretoprosecuteassignsanyspecialreasonforits actionornot.WetakenoteofthefactthattheOrderdeclaringappellantin defaultwashandeddownonSeptember14,1967.Appellanttooknostepsto havethisOrdersetaside.ItwasonlyonJanuary22,1968,afterhewasfurnished acopyoftheCourt'sdecisiondatedDecember9,1967oraboutfourmonthslater thatheattachedthisOrderandthedecisionoftheCourt.Appellantsleptonhis rightsifhehadany.HehadachancetohavehisdayinCourtbuthepassedit off.Fourmonthslaterheallegesthatsuddenillnesshadpreventedhim.Wefeel appellanttookalongtimetoolonginfacttoinformtheCourtofhissudden illness.Thissuddenillnessthataccordingtohimpreventedhimfromcomingto Court,andthetimeittookhimtotelltheCourtaboutit,isfamiliartotheforum asanoftrepeatedexcusetojustifyindifferenceonthepartoflitigantsoroutright negligenceofthosewhorepresentthemwhichsubservestheinterestsofjustice. Intheinstantcase,notonlydidtheappellantwantonlypassoffhischanceto haveadayinCourtbuthehasalsofailedtogiveaconvincing,justandvalid reasonforthenewhearingheseeks.Thetrialcourtfounditso;Wefinditso.The trialCourtinrefusingtogiveappellantanewtrialdoesnotappeartohave abusedhisdiscretionastojustifyourintervention.

TheSecondandThirdAssignmentsofErrorareherebyjointlytreatedinour discussionsincethethirdisbutaconsequenceofthesecond. ItisarguedthathadthetrialCourtreconsidereditsorderdatedSeptember14, 1967dismissingthecomplaintforfailuretoprosecute,plaintiffappellantmight haveprovedthatheownsthelotsubjectmatterofthecase,citingthereceipt (Annex"A")issuedinhisfavor;thathehasintroducedimprovementsanderected ahousethereonmadeofstrongmaterials;thatappellee'sadverseinterestover thepropertywassecuredinbadfaithsincehehadpriorknowledgeandnoticeof appellant'sphysicalpossessionoracquisitionofthesame;thatduetosaidbad faithappellanthassuffereddamages,andthatforalltheforegoing,thejudgment shouldbereversedandequitablereliefbegiveninhisfavor. Asabovestated,theLegardaTambuntingSubdivisionwhichincludesthelot subjectmatteroftheinstantcase,iscoveredbyTorrensCertificatesofTitle. Appellantanchorshisclaimonthereceipt(Annex"A")datedMay2,1950,which heclaimsasevidenceofthesaleofsaidlotinhisfavor.Admittedly,however, CatalinoLeabreshasnotregisteredhissupposedinterestoverthelotinthe recordsoftheRegisterofDeeds,nordidhepresenthisclaimforprobateinthe testateproceedingsovertheestateoftheownerofsaidsubdivision,inspiteof thenoticesadvertisedinthepapers.(Saldaavs.Phil.TrustCo.,etal.;Manotok Realty,Inc.,supra). Ontheotherhand,defendantappellee,ManotokRealty,Inc.,boughtthewhole subdivisionwhichincludesthesubjectmatterhereinbyorderandwithapproval oftheProbateCourtanduponsaidapproval,theDeedofAbsoluteSaleinfavor ofappelleewasimmediatelyregisteredwiththeproperRegisterofDeeds. ManotokRealty,Inc.hasthereforethebetterrightoverthelotinquestion becauseincasesoflandsregisteredundertheTorrensLaw,adverseinterestsnot thereinannotatedwhicharewithoutthepreviousknowledgebythirdpartiesdo notbindthelatter.Astotheimprovementwhichappellantclaimstohave introducedonthelot,purchaseofregisteredlandsforvalueandingoodfaith holdthesamefreefromallliensandencumbrancesexceptthosenotedonthe titlesofsaidhandandthoseburdensimposedbylaw.(Sec.39,Act.496).An

occupantofaland,orapurchaserthereoffromapersonotherthanthe registeredowner,cannotclaimgoodfaithsoastobeentitledtoretentionofthe parcelsoccupiedbyhimuntilreimbursementofthevalueoftheimprovements heintroducedthereon,becauseheischargedwithnoticeoftheexistenceofthe owner'scertificateoftitle(J.M.Tuason&Co.vs.Lecardo,etal.,CAG.R.No. 25477R,July24,1962;J.M.Tuason&Co.,Inc.vs.ManuelAbundo,CAG.R.No. 29701R,November18,1968). AppellanthasnotconvincedthetrialCourtthatappelleeactedinbadfaithinthe acquisitionofthepropertyduetothelatter'sknowledgeofapreviousacquisition bytheformer,andneitherareweimpressedbytheclaim.Thepurchaserofa registeredlandhastorelyonthecertificateoftitlethereof.Thegoodfaithof appelleecomingfromtheknowledgethatthecertificateoftitlecoveringthe entiresubdivisioncontainnonotationastoappellant'sinterest,andthefactthat therecordsofthesecaseslikeProbateProceedingsCaseNo.10808,donotshow theexistenceofappellant'sclaim,stronglysupportthecorrectnessofthelower Court'sdecision. WHEREFORE,inviewoftheforegoing,wefindnoreasontoamendorsetaside thedecisionappealedfrom,asregardstoplaintiffappellantCatalinoLeabres.We thereforeaffirmthesame,withcostsagainstappellant.(pp.3338,Rollo) Petitionernowcomestouswiththefollowingissues: (1) Whetherornotthepetitionerwasdeniedhisdayincourtanddeprivedof dueprocessoflaw. (2) Whetherornotthepetitionerhadtosubmithisreceipttotheprobate courtinorderthathisrightovertheparceloflandindisputecouldberecognized validandbindingandconclusiveagainsttheManotokRealty,Inc. (3) Whetherornotthepetitionercouldbeconsideredasapossessoringood faithandintheconceptofowner.(p.11,Rollo) Petitioner'scontentionthathewasdeniedhisdayincourtholdsnowater. Petitionerdoesnotdenythefactthathefailedtoappearonthedatesetfor

hearingonSeptember14,1967andasaconsequenceofhisnonappearance,the orderofdismissalwasissued,asprovidedforbySection3,Rule17oftheRevised RulesofCourt. Moreover,aspointedoutbyprivaterespondentinitsbrief,thehearingonJune 11,1967wasnotexparte.Petitionerwasrepresentedbyhiscounselonsaiddate, andtherefore,petitionerwasgivenhisdayinCourt. Themainobjectionofthepetitioninthelowercourt'sproceedingisthereception ofrespondent'sevidencewithoutdeclaringpetitionerindefault.Wefindthat therewasnonecessitytodeclarepetitionerindefaultsincehehadfiledhis answertothecounterclaimofrespondent. Petitioneranchorshismainargumentsonthereceipt(Exh.1)datedMay2,1950, asabasisofavalidsale.Anexaminationofthereceiptrevealsthatthesamecan neitherberegardedasacontractofsaleorapromisetosell.Therewasmerelyan acknowledgmentofthesumofOneThousandPesos(P1,000.00).Therewasno agreementastothetotalpurchasepriceofthelandnortothemonthly installmenttobepaidbythepetitioner.TherequisitesofavalidContractofSale namely1)consentormeetingofthemindsoftheparties;2)determinatesubject matter;3)pricecertaininmoneyoritsequivalentarelackinginsaidreceipt andthereforethe"sale"isnotvalidnorenforceable.Furthermore,itisafactthat DoaClaraTambuntingdiedonApril22,1950.Herestatewasthereafterunder custodialegisoftheProbateCourtwhichappointedDonVicenteLegardaas SpecialAdministratoronAugust28,1950.DonVicenteLegardaenteredintosaid saleinhisownpersonalcapacityandwithoutcourtapproval,consequently,said salecannotbindtheestateofClaraTambunting.Petitionershouldhave submittedthereceiptofallegedsaletotheProbateCourtforitsapprovalofthe transactions.Thus,therespondentCourtdidnoterrinholdingthatthepetitioner shouldhavesubmittedhisreceipttotheprobatecourtinorderthathisrightover thesubjectlandcouldberecognizedassumingofcoursethatthereceiptcould beregardedassufficientproof.

Anenthispossessionoftheland,petitionercannotbedeemedapossessorin goodfaithinviewoftheregistrationoftheownershipoftheland.Toconsider petitioneringoodfaithwouldbetoputapremiumonhisowngrossnegligence. TheCourtresolvedtoDENYthepetitionforlackofmeritandtoAFFIRMthe assailedjudgment. Feria,Fernan,AlampayandGutierrez,Jr.,JJ.,concur. FIRSTDIVISION [G.R.No.L8506.August31,1956.] CELESTINOCO&COMPANY,petitioner,vs.COLLECTOROFINTERNALREVENUE, respondent. SolicitorGeneralAmbrosioPadilla,FirstAssistantSolicitorGeneralGuillermoE. TorresandSolicitorFedericoV.Sianforrespondent. SYLLABUS 1. MANUFACTURER;FILINGORDERSACCORDINGTOSPECIFICATIONSDOES NOTALTERCHARACTEROFESTABLISHMENT.Afactorywhichhabituallymakes sash,windowsanddoors,andsellsthegoodstothepublicisamanufacturer.The factthatthewindowsanddoorsaremadebyitonlywhencustomersplacetheir ordersandaccordingtosuchformorcombinationassuitthefancyofthe purchasersdoesnotalterthenatureoftheestablishment. DECISION BENGZON,Jp:

AppealfromadecisionoftheCourtofTaxAppeals. CelestinoCo&Companyisadulyregisteredgeneralcopartnershipdoingbusiness underthetradenameof"OrientalSashFactory".From1946to1951itpaid percentagetaxesof7percentonthegrossreceiptsofitssash,doorandwindow factory,inaccordancewithsectiononehundredeightysixoftheNational RevenueCodeimposingtaxesonsalesofmanufacturedarticles.Howeverin1952 itbegantoclaimliabilityonlytothecontractor's3percenttax(insteadof7per cent)undersection191ofthesameCode;andhavingfailedtoconvincethe BureauofInternalRevenue,itbroughtthemattertotheCourtofTaxAppeals, whereitalsofailed.SaidtheCourt: "Tosupporthiscontentionthathisclientisanordinarycontractor...counsel presented...duplicatecopiesofletters,sketchesofdoorsandwindowsand pricequotationssupposedlysentbythemanageroftheOrientalSashFactoryto fourcustomerswhoallegedlymadespecialordersfordoorsandwindowsfrom thesaidfactory.Theconclusionthatcounselwouldlikeustodeducefromthese fewexhibitsisthattheOrientalSashFactorydoesnotmanufacturereadymade doors,sashandwindowsforthepublicbutonlyuponspecialorderofitsselect customers....Icannotbelievethatpetitionercompanywouldtake,asinfactit hastaken,allthetroubleandexpenseofregisteringaspecialtradenameforits sashbusinessandthenorderscompanystationerycarryingtheboldprint 'OrientalSashFactory(CelestinoCo&Company,Prop.)926RaonSt.Quiapo, Manila,Tel.No.33076,Manufacturersofallkindsofdoors,windows,sashes, furnitures,etc.usedseasondriedandkilndriedlumber,ofthebestquality workmanship'solelyforthepurposeofsupplyingtheneedsfordoors,windows andsashofitsspecialandlimitedcustomers.Onewillnotethatpetitionerhas chosenforitstradenameandhasoffereditselftothepublicasa'Factory',which meansitisouttodobusiness,initschosenlinesonabigscale.Asageneralrule, sashfactoriesreceiveordersfordoorsandwindowsofspecialdesignonlyin particularcasesbutthebulkoftheirsalesisderivedfromreadymadedoorsand windowsofstandardsizesfortheaveragehome.Moreover,asshownfromthe investigationofpetitioner'sbooksofaccounts,duringtheperiodfromJanuary1, 1952toSeptember30,1952,itsoldsash,doorsandwindowsworthP188,754.69.

Ifinditdifficulttobelievethatthisamountwhichrunstosixfigureswasderived bypetitionerentirelyfromitsfewcustomerswhomadespecialordersforthese items. "Evenifweweretobelievepetitioner'sclaimthatitdoesnotmanufactureready madesash,doorsandwindowsforthepublicandthatitmakesthesearticlesonly uponspecialorderofitscustomers,thatdoesnotmakeitacontractorwithinthe purviewofsection191oftheNationalInternalRevenueCode.Therearenoless thanfiftyoccupationsenumeratedintheaforesaidsectionoftheNational InternalRevenueCodesubjecttopercentagetaxandafterreadingcarefullyeach andeveryoneofthem,wecannotfindoneunderwhichthebusinessenterprise ofpetitionercouldappropriatelyfall.Itwouldrequireastretchofthelawand muchefforttomakethebusinessofmanufacturingsash,doorsandwindows uponspecialorderofcustomersfallunderthecategoryof'road,building, navigation,artesianwell,waterworksandotherconstructionworkcontractors; fillingcontractors'asenumeratedinthesectionbeinginvokedbypetitioner's counsel.Constructionworkcontractorsarethosewhoalterorrepairbuildings, structures,streets,highways,sewers,streetrailways,railroads,loggingroads, electric,steamorwaterplantstelegraphandtelephoneplantsandlines,electric linesorpowerlines,andincludesanyotherworkfortheconstruction,alteringor repairingforwhichmachinerydrivenbymechanicalpowerisused.(Paytonvs. CityofAnadardo64P.2d878,880,179Okl.68). "Havingthuseliminatedthefeasibilityoftaxingpetitionerasacontractorunder section191oftheNationalInternalRevenueCode,thisleavesustodecidethe remainingissuewhetherornotpetitionercouldbetaxedwithlesserstrainand moreaccuracyassellerofitsmanufacturedarticlesundersection186ofthe samecode,astherespondentCollectorofInternalRevenuehasinfactbeen doingsincetheOrientalSashFactorywasestablishedin1946. "Thepercentagetaximposedinsection191ofourTaxCodeisgenerallyataxon thesalesofservices,incontradictionwiththetaximposedinsection186ofthe sameCodewhichisataxontheoriginalsalesofarticlesbythemanufacturer, producerorimporter.(Formilleza'sCommentariesandJurisprudenceonthe

NationalInternalRevenueCode,VolII,p.744).Thefactthatthearticlessoldare manufacturedbythesellerdoesnotexchangethecontractfromthepurviewof section186oftheNationalInternalRevenueCodeasasaleofarticles." Therewasastrongdissent;butuponcarefulconsiderationofthewholematter weareinclinedtoaccepttheabovestatementofthefactsandthelaw.The importantthingtorememberisthatCelestinoCo&Companyhabituallymakes sash,windowsanddoors,asithasrepresentedinitsstationeryand advertisementstothepublic.Thatit"manufactures"thesameispractically admittedbyappellantitself.Thefactthatwindowsanddoorsaremadebyitonly whencustomersplacetheirorders,doesnotalterthenatureofthe establishment,foritisobviousthatitonlyacceptedsuchordersascalledforthe employmentofsuchmaterialsmoulding,frames,panelsasitordinarily manufacturedorwasinapositionhabituallytomanufacture. Perhapsthefollowingparagraphrepresentsinbrieftheappellant'spositioninthis Court: "Sincethepetitioner,byclearproofoffactsnotdisputedbytherespondent, manufacturessash,windowsanddoorsonlyforspecialcustomersandupontheir specialordersandinaccordancewiththedesiredspecificationsofthepersons orderingthesameandnotforthegeneralmarket:sincethedoorsorderedby DonToribioTeodoro&Sons,Inc.,forinstance,arenotinexistenceandwhich neverwouldhaveexistedbutfortheorderofthepartydesiringit;andsince petitioner'scontractualrelationwithhiscustomersisthatofacontractforapiece ofworkorsincepetitionerisengagedinthesaleofservices,itfollowsthatthe petitionershouldbetaxedundersection191oftheTaxCodeandNOTunder section185ofthesameCode."(Appellant'sbrief,p.1112). Buttheargumentrestsonafalsefoundation.Anybuilderorhomeowner,with sufficientmoney,mayorderwindowsordoorsofthekindmanufacturedbythis appellant.Thereforeitisnottruethatitservesspecialcustomersonlyconfinesits servicestothemalone.Andanyonewhosees,andlikes,thedoorsorderedby DonToribioTeodoro&SonsInc.maypurchasefromappellantdoorsofthesame kind,providedhepaystheprice.Surely,theappellantwillnotrefuse,foritcan

easilyduplicateorevenmassproducethesamedoorsitismechanically equippedtodoso. Thatthedoorsandwindowsmustmeetdesiredspecificationsisneitherherenor there.Ifthesespecificationsdonothappentobeofthekindhabitually manufacturedbyappellantspecialformsofsash,mouldingsorpanelsit wouldnotaccepttheorderandnosaleismade.Iftheydo,thetransaction wouldbenodifferentfromapurchasersofmanufacturedgoodsheldisstockfor sale;theyareboughtbecausetheymeetthespecificationsdesiredbythe purchaser. Nobodywillsaythatwhenasawmillcutslumberinaccordancewiththepeculiar specificationsofacustomersizesnotpreviouslyheldinstockforsaletothe publicittherebybecomesanemployeeorservantofthecustomer,1notthe selleroflumber.Thesameconsiderationappliestothissashmanufacturer. TheOrientalSashFactorydoesnothingmorethansellthegoodsthatitmass producesorhabituallymakes;sash,panels,mouldings,frames,cuttingthemto suchsizesandcombiningtheminsuchformsasitscustomersmaydesire. Ontheotherhand,petitioner'sideaofbeingacontractordoingconstructionjobs isuntenable.Nobodywouldregardthedoingoftwowindowpanelsas constructionworkincommonparlance.2 AppellantinvokesArticle1467oftheNewCivilCodetobolsteritscontentionthat infilingordersforwindowsanddoorsaccordingtospecifications,itdidnotsell, butmerelycontractedforparticularpiecesofworkor"merelysolditsservices". Saidarticlereadsasfollows: "Acontractforthedeliveryatacertainpriceofanarticlewhichthevendorinthe ordinarycourseofhisbusinessmanufacturesorprocuresforthegeneralmarket, whetherthesameisonhandatthetimeornot,isacontractofsale,butifthe goodsaretobemanufacturedspeciallyforthecustomeranduponhisspecial order,andnotforthegeneralmarket,itiscontractforapieceofwork."

ItisatonceapparentthattheOrientalSashFactorydidnotmerelysellitsservices toDonToribioTeodoro&Co.(Totakeoneinstance)becauseitalsosoldthe materials.Thetruthofthematteristhatitsoldmaterialsordinarilymanufactured byitsash,panels,mouldingstoTeodoro&Co.,althoughinsuchformor combinationassuitedthefancyofthepurchaser.Suchnewformdoesnotdivest theOrientalSashFactoryofitscharacterasmanufacturer.Neitherdoesittake thetransactionoutofthecategoryofsalesunderArticle1467abovequoted, becausealthoughtheFactorydoesnot,intheordinarycourseofitsbusiness, manufactureandkeeponstockdoorsofthekindsoldtoTeodoro,itcouldstock and/orprobablyhadinstockthesash,mouldingsandpanelsitusedtherefor (someofthematleast). InouropinionwhenthisFactoryacceptsajobthatrequirestheuseof extraordinaryoradditionalequipment,orinvolvesservicesnotgenerally performedbyitittherebycontractsforapieceofworkfillingspecialorders withinthemeaningofArticle1467.Theordershereinexhibitedwerenotshown tobespecial.Theyweremerelyordersforworknothingisshowntocallthem specialrequiringextraordinaryserviceofthefactory. Thethoughtoccurstousthatif,asallegedalltheworkofappellantisonlyto fillorderspreviouslymade,suchordersshouldnotbecalledspecialwork,but regularwork.Wouldafactorydobusinessperformingonlyspecial,extraordinary orpeculiarmerchandise? Anyway,supposingforthemomentthatthetransactionswerenotsales,they wereneitherleaseofservicesnorcontractjobsbyacontractor.Butasthedoors andwindowshadbeenadmittedly"manufactured"bytheOrientalSashFactory, suchtransactionscouldbe,andshouldbetaxedas"transfers"thereofunder section186oftheNationalRevenueCode. Theappealeddecisionisconsequentlyaffirmed.Soordered. Paras,C.J.,Padilla,Montemayor,BautistaAngelo,Concepcion,Reyes,J.B.L.,and Felix,JJ.,concur. Footnote

12. WithalltheconsequencesinArticle1729NewCivilCodeandActNo.3959 (bondofcontractor). Copyright19941999CDTechnologiesAsia,Inc. [G.R.No.71122.March25,1988.] COMMISSIONEROFINTERNALREVENUE,petitioner,vs.ARNOLDUSCARPENTRY SHOP,INC.andCOURTOFTAXAPPEALS,respondents. TheSolicitorGeneralforpetitioner. GenerosoJacintoforrespondents. DECISION CORTES,Jp: AssailedinthispetitionisthedecisionoftheCourtofTaxAppealsinCTAcaseNo. 3357entitled"ARNOLDUSCARPENTRYSHOP,INC.v.COMMISSIONEROF INTERNALREVENUE". Thefactsaresimple. ArnoldusCarpentryShop,Inc.(privaterespondentherein)isadomestic corporationwhichhasbeeninexistencesince1960.Ithasforitssecondary purposethe"preparing,processing,buying,selling,exporting,importing, manufacturing,tradinganddealingincabinetshopproducts,woodandmetal homeandofficefurniture,cabinets,doors,windows,etc.,includingtheir componentpartsandmaterials,ofanyandallnatureanddescription"(Rollo,pp.

160161).Thesefurniture,cabinetsandotherwoodworkweresoldlocallyand exportedabroad. Forthisbusinessventure,privaterespondentkeptsamplesormodelsofits woodworkondisplayfromwhereitscustomersmayrefertowhenplacingtheir orders. SometimeinMarch1979,theexaminersofthepetitionerCommissionerof InternalRevenueconductedaninvestigationofthebusinesstaxliabilitiesof privaterespondentpursuanttoLetterofAuthorityNo.08307NAdated November23,1978.Aspertheexamination,thetotalgrosssalesofprivate respondentfortheyear1977frombothitslocalandforeigndealingsamounted toP5,162,787.59(Rollo.p.60).Fromthisamount,privaterespondentreportedin itsquarterlypercentagetaxreturnsP2,471,981.62foritsgrosslocalsales.The balanceofP2,690,805.97,whichis52%ofthetotalgrosssales,wasconsideredas itsgrossexportsales(CTADecision,p.12). Basedonsuchanexamination,BIRexaminersHonestoA.VergeldeDiosand VoltaireTrinidadmadeareporttotheCommissionerclassifyingprivate respondentasan"otherindependentcontractor"underSec.205(16)[nowSec. 169(q)]oftheTaxCode.Therelevantportionofthereportreads: Examinationoftherecordsshowthatperpurchaseorders,whicharehereby attached,ofthetaxpayer'scustomersduringtheperiodunderreview,subject corporationshouldbeconsideredacontractorandnotamanufacturer.The corporationrendersserviceinthecourseofanindependentoccupation representingthewillofhisemployeronlyastotheresultofhiswork,andnotas tothemeansbywhichitisaccomplished,(LuzonStevedoringCo.v.Trinidad,43 Phil.803).Hence,inthecomputationofthepercentagetax,the3%contractor's taxshouldbeimposedinsteadofthe7%manufacturer'stax.[Rollo,p.59] (Emphasissupplied.) xxxxxxxxx Asaresultthereof,theexaminersassessedprivaterespondentfordeficiencytax intheamountofEIGHTYEIGHTTHOUSANDNINEHUNDREDSEVENTYTWOPESOS

ANDTWENTYTHREECENTAVOS(P88,972.23).Later,onJanuary31,1981,private respondentreceivedaletter/noticeoftaxdeficiencyassessmentinclusiveof chargesandinterestfortheyear1977intheamountofONEHUNDREDEIGHT THOUSANDSEVENHUNDREDTWENTYPESOSANDNINETYTWOCENTAVOS (P108,720.92).Thistaxdeficiencywasaconsequenceofthe3%taximposedon privaterespondent'sgrossexportsaleswhich,inturn,resultedfromthe examiners'findingthatcategorizedprivaterespondentasacontractor(CTA decision,p.2).cdrep Againstthisassessment,privaterespondentfiledonFebruary19,1981aprotest withthepetitionerCommissionerofInternalRevenue.Intheprotestletter, privaterespondent'smanagermaintainedthatthecarpentryshopisa manufacturerandthereforeentitledtotaxexemptiononitsgrossexportsales underSection202(e)oftheNationalInternalRevenueCode.Heexplainedthatit wasthe7%taxexemptiononexportsaleswhichpromptedprivaterespondentto exploittheforeignmarketwhichresultedintheincreaseofitsforeignsalestoat least52%ofitstotalgrosssalesin1977(CTAdecision,pp.1213). OnJune23,1981,privaterespondentreceivedthefinaldecisionofthepetitioner stating: ItisthestandofthisOfficethatyouareconsideredacontractorandnota manufacturer.Recordsshowthatyoumanufacturewoodworksonlyupon previousorderfromsupposedmanufacturersandonlyinaccordancewiththe latter'sowndesign,modelnumber,color,etc.[Rollo,p.64](Emphasissupplied.) OnJuly22,1981,privaterespondentappealedtotheCourtofTaxAppeals allegingthatthedecisionoftheCommissionerwascontrarytolawandthefacts ofthecase. OnApril22,1985,respondentCourtofTaxAppealsrenderedthequestioned decisionholdingthatprivaterespondentwasamanufacturertherebyreversing thedecisionofthepetitioner. Hence,thispetitionforreviewwhereinpetitionerraisesthesoleissueof: WhetherornottheCourtofTaxAppealserredinholdingthatprivaterespondent

isamanufacturerandnotacontractorandthereforenotliablefortheamountof P108,720.92,asdeficiencycontractor'stax,inclusiveofsurchargeandinterest,for theyear1977. Thepetitioniswithoutmerit. 1. Privaterespondentisa"manufacturer"asdefinedintheTaxCodeandnot a"contractor"underSection205(e)oftheTaxCodeaspetitionerwouldhavethis Courtdecide. (a) Section205(16)[nowSec.170(q)]oftheTaxCodedefines"independent contractorsas: ...persons(juridicalandnatural)notenumeratedabove(butnotincluding individualssubjecttotheoccupationtaxunderSection12oftheLocalTaxCode) whoseactivityconsistsessentiallyofthesaleofallkindsofservicesforafee regardlessofwhetherornottheperformanceoftheservicecallsfortheexercise oruseofthephysicalormentalfacultiesofsuchcontractorsortheiremployees. (Emphasissupplied.) Privaterespondent'sbusinessdoesnotfallunderthisdefinition. Petitionercontendsthatthefactthatprivaterespondent"designsandmakes samplesormodelsthatare'displayed'orpresentedor'submitted'toprospective buyerswho'mightchoose'therefrom"signifiesthatwhatprivaterespondentis sellingisakindofserviceitsshopiscapableofrenderingintermsofwoodwork skillsandcraftsmanship(BriefforPetitioner,p.6).Hefurtherstressesthepoint thatiftherearenoordersplacedforgoodsasrepresentedbythesampleor model,theshopdoesnotproduceanything;ontheotherhand,ifthereare ordersplaced,theshopgoesintofullproductiontofillupthequantityordered (Petitioner'sBrief,p.7).LexLib Thefactsofthecasedonotsupportpetitioner'sclaim.Petitionerisignoringthe factthatprivaterespondentsellsgoodswhichitkeepsinstockandnotservices. AstherespondentTaxCourthadfound: xxxxxxxxx

Petitioner[privaterespondentherein]claims,andtherecordsbearpetitionerout, thatithadareadystockofitsshopproductsforsaletoitsforeignandlocal buyers.Asamatteroffact,thepurchaseordersfromitsforeignbuyersshowed thattheyareorderedbyreferringtothemodelsdesignatedbypetitioner.Even purchasesbylocalbuyersfortelevisioncabinets(Exhs."2"to"13",pp.113,BIR records)werebyordersforexistingmodels,exceptonlyforsomeadjustmentsin sizesandaccessoriesutilized. Withregardtothetelevisioncabinets,petitionerpresentedthreewitnessesits bookkeeper,productionmanagerandmanagerwhotestifiedthatsamplesof televisioncabinetsweredesignedandmadebypetitioner,fromwhichmodelsthe televisioncompaniessuchasHitachi,Nationalandothersmightchoose,then specifiedwhateverinnovationstheydesired.Iffoundtobesaleable,some televisioncabinetsweremanufacturedfordisplayandsoldtothegeneralpublic. Thesecabinetswerenotexportedbutonlysoldlocally.(t.s.n.,pp2235,February 18,1982;t.s.n.,pp.710,March25,1982;t.s.n.,pp.36,August10,1983.) xxxxxxxxx Inthecaseofpetitioner'sotherwoodworkproductssuchasbarometercases, kniferacks,churchfurniture,schoolfurniture,knockdownchairs,etc., petitioner'sabovementionedwitnessestestifiedthattheseweremanufactured withoutpreviousorders.Samplesweredisplayed,andifinstock,wereavailable forimmediatesaletolocalandforeigncustomers.Suchtestimonywasnot contradictedbyrespondent(petitionerherein).Andinallthepurchaseorders presentedasexhibits,whetherfromforeignorlocalbuyers,referencewasmade tothemodelnumberoftheproductbeingorderedortothesamplesubmittedby petitioner. Respondent'sexaminers,intheirmemorandumtotheCommissionerofInternal Revenue,statedthatpetitionermanufacturedonlyuponpreviousordersfrom customersand"onlyinaccordancewiththelatter'sowndesign,modelnumber, color,etc."(Exh."1",p.27,BIRrecords.)Theirbarestatementthatthemodel numbersanddesignswerethecustomer'sown,unaccompaniedbyadequate evidence,isdifficulttobelieve.Itignorescommonlyacceptedandrecognized

businesspracticesthatitisnotthecustomerbutthemanufacturerwhofurnishes thesamplesormodelsfromwhichthecustomersselectwhenplacingtheir orders.Theevidenceadducedbypetitionertoprovethatthemodelnumbersand designswereitsownismoreconvincing.[CTAdecision,pp.68.](Emphasis supplied.) xxxxxxxxx ThisCourtfindsnoreasontodisagreewiththeTaxCourt'sfindingsoffact.Ithas beenconsistentlyheldthatwhilethedecisionsoftheCourtofTaxAppealsare appealabletotheSupremeCourt,theformer'sfindingsoffactareentitledtothe highestrespect.Thefactualfindingscanonlybedisturbedonappealifnot supportedbysubstantialevidenceoriftherehasbeenashowingofgrosserroror abuseonthepartofthetaxcourt[CollectorofInternalRevenuev.Henderson,L 12954,February28,1961,1SCRA649;Aznarv.CourtofTaxAppeals,L20569, Aug.23,1974,58SCRA519;Raymundov.deJoya,L27733,Dec.3,1980,101 SCRA495;IndustrialTextilesManufacturingCo.ofthePhils.,Inc.v.Commissioner ofInternalRevenue,L27718andL27768,May27,1985,136SCRA549.]prLL (b) NeithercanArticle1467oftheNewCivilCodehelppetitioner'scause. Article1467states: Acontractforthedeliveryatacertainpriceofanarticlewhichthevendorinthe ordinarycourseofhisbusinessmanufacturesorprocuresforthegeneralmarket, whetherthesameisonhandatthetimeornot,isacontractofsale,butifthe goodsaretobemanufacturedspeciallyforthecustomeranduponhisspecial order,andnotforthegeneralmarket,itisacontractforapieceofwork. Petitionerallegedthatwhatexistspriortoanyorderisbutthesamplemodel only,nothingmore,nothinglessandtheorderedquantitywouldneverhave comeintoexistencebutfortheparticularorderasrepresentedbythesampleor model[BriefforPetitioner,pp.910]. PetitionerwantstoimpressuponthisCourtthatunderArticle1467,thetruetest ofwhetherornotthecontractisapieceofwork(andthusclassifyingprivate respondentasacontractor)oracontractofsale(whichwouldclassifyprivate

respondentasamanufacturer)isthemereexistenceoftheproductatthetimeof theperfectionofthecontractsuchthatifthethingalreadyexists,thecontractis ofsale,ifnot,itiswork. Thisisnotthetestfollowedinthisjurisdiction.Ascanbeclearlyseenfromthe wordingsofArt.1467,whatdetermineswhetherthecontractisoneofworkorof saleiswhetherthethinghasbeen"manufacturedspeciallyforthecustomerand uponhisspecialorder."Thus,ifthethingisspeciallydoneattheorderofanother, thisisacontractforapieceofwork.If,ontheotherhand,thethingis manufacturedorprocuredforthegeneralmarketintheordinarycourseofone's business,itisacontractofsale.cdrep Jurisprudencehasfollowedthiscriterion.AsheldinCommissionerofInternal Revenuev.EngineeringEquipmentandSupplyCo.(L27044andL27452,June30, 1975,64SCRA590,597),thedistinctionbetweenacontractofsaleandonefor work,laborandmaterialsistestedbytheinquirywhetherthethingtransferredis onenotinexistenceandwhichneverwouldhaveexistedbutfortheorderofthe partydesiringtoacquireit,orathingwhichwouldhaveexistedandhasbeenthe subjectofsaletosomeotherpersonseveniftheorderhadnotbeengiven. (Emphasissupplied.)AndinaBIRruling,whichasperSec.326(nowSec.277)of theTaxCourttheCommissionerhasthepowertomakeandwhich,aspersettled jurisprudenceisentitledtothegreatestweightasanadministrativeview [NationalFederationofSugarWorkers(NFSW)v.Ovejera,G.R.No.59743,May 31,1982,114SCRA354,391;SierraMadreTrustv.Hon.Sec.ofAgricultureand NaturalResources,Nos.L32370andL32767,April20,1983,121SCRA384; Espanolv.ChairmanandMembersoftheBoardofAdministrators,Phil.Veterans Administration,L44616,June29,1985,137SCRA314],"onewhohasreadyfor thesaletothegeneralpublicfinishedfurnitureisamanufacturer,andthemere factthathedidnothaveonhandaparticularpieceorpiecesoffurnitureordered doesnotmakehimacontractoronly"(BIRRulingNo.537,seriesof1960). Likewise, xxxxxxxxx

Whenthevendorentersintoacontractforthedeliveryofanarticlewhichinthe ordinarycourseofhisbusinesshemanufacturesorprocuresforthegeneral marketatapricecertain(Art.1458)suchcontractisoneofsaleevenifatthe timeofcontractinghemaynothavesucharticleonhand.Sucharticlesfallwithin themeaningof"futuregoods"mentionedinArt.1462,par.1.[5Padilla,CivilLaw: CivilCodeAnnotated139(1974)]. xxxxxxxxx TheseconsiderationswerewhatpreciselymovedtherespondentCourtofTax Appealstorulethat"thefactthat[privaterespondent]keptmodelsofits products...indicatethattheseproductswereforsaletothegeneralpublicand notforspecialorders,"citingCelestinoCoandCo.v.CollectorofInternalRevenue [99Phil.841(1956)].(CTA,Decision,pp.89.) PetitionerallegesthattheerroroftherespondentTaxCourtwasduetothe "heavyalbeitmisplacedandindiscriminaterelianceonthecaseofCelestinoCo andCo.v.CollectorofInternalRevenue[99Phil.841,842(1956)]whichisnota caseinpoint"(BriefforPetitioner,pp.1415).TheCommissionerofInternal Revenuemadecapitalofthedifferencebetweenthekindsofbusiness establishmentsinvolvedaFACTORYintheCelestinoCocaseandaCARPENTRY SHOPinthiscase(BriefforPetitioner,pp.1418).Petitionerseemstohavemissed thewholepointintheformercase. True,theformercasedidmentionthefactofthebusinessconcernbeinga FACTORY.Thus: xxxxxxxxx ...Icannotbelievethatpetitionercompanywouldtake,asinfactithastaken,all thetroubleandexpenseofregisteringaspecialtradenameforitssashbusiness andthenorderscompanystationerycarryingtheboldprint'OrientalSashFactory (CelestinoCoandCompany,Prop.)926RaonSt.,Quiapo,Manila,Tel.No.33076, Manufacturersofallkindsofdoors,windows,sashes,furniture,etc.usedseason driedandkilndriedlumber,ofthebestqualityworkmanship'solelyforthe purposeofsupplyingtheneedfordoors,windowsandsashofitsspecialand

limitedcustomers.Onewillnotethatpetitionerhaschosenforitstradenameand hasoffereditselftothepublicasaFACTORY,whichmeansitisouttodobusiness initschosenlinesonabigscale.Asageneralrule,sashfactoriesreceiveorders fordoorsandwindowsofspecialdesignonlyinparticularcasesbutthebulkof theirsalesisderivedfromreadymadedoorsandwindowsofstandardsizesfor theaveragehome.[Emphasissupplied.] xxxxxxxxx However,thesefindingsweremerelyattendantfactstoshowwhattheCourtwas reallydrivingatthehabitualityoftheproductionofthegoodsinvolvedforthe generalpublic. Intheinstantcase,itmaybethatwhatisinvolvedisaCARPENTRYSHOP.But,in thesamevein,therearealsoattendantfactshereintoshowhabitualityofthe productionforthegeneralpublic. Inthiswise,itisnoteworthytoagaincitethefindingsoffactoftherespondent TaxCourt: xxxxxxxxx Petitioner[privaterespondentherein]claims,andtherecordsbearpetitionerout, thatithadareadystockofitsshopproductsforsaletoitsforeignandlocal buyers.Asamatteroffact,thepurchaseordersfromitsforeignbuyersshowed thattheyorderedbyreferringtothemodelsdesignedbypetitioner.Even purchasesbylocalbuyersfortelevisioncabinets...werebyordersforexisting models... Withregardtothetelevisioncabinets,petitionerpresentedthreewitnesses... whotestifiedthatsamplesoftelevisioncabinetsweredesignedandmadeby petitioner,fromwhichmodelsthetelevisioncompanies...mightchoose,then specifiedwhateverinnovationstheydesired.Iffoundtobesaleable,some televisioncabinetsweremanufacturedfordisplayandsoldtothegeneralpublic. xxxxxxxxx

Inthecaseofpetitioner'sotherwoodworkproducts...theseweremanufactured withoutpreviousorders.Samplesweredisplayed,andifinstock,wereavailable forimmediatesaletolocalandforeigncustomers.[CTAdecision,pp.68.] [Emphasissupplied.] (c) Theprivaterespondentnotbeinga"contractor"asdefinedbytheTaxCode oroftheNewCivilCode,isita"manufacturer"ascounteredbythecarpentry shop? Sec.187(x)[nowSec.157(x)]oftheTaxCodedefinesa"manufacturer"as follows: "Manufacturer"includeseverypersonwhobyphysicalorchemicalprocessalters theexteriortextureorformorinnersubstanceofanyrawmaterialor manufacturedorpartiallymanufacturedproductinsuchmannerastoprepareit foraspecialuseorusestowhichitcouldnothavebeeninitsoriginalcondition, orwhobyanysuchprocessaltersthequalityoranysuchrawmaterialor manufacturedorpartiallymanufacturedproductsoastoreduceittomarketable shapeorprepareitforanyoftheusesofindustry,orwhobyanysuchprocess combinesanysuchrawmaterialormanufacturedorpartiallymanufactured productswithothermaterialsorproductsofthesameordifferentkindsandin suchmannerthatthefinishedproductofsuchprocessormanufacturecanbeput toaspecialuseorusestowhichsuchrawmaterialormanufacturedorpartially manufacturedproductsintheiroriginalconditionwouldnothavebeenput,and whoinadditionalterssuchrawmaterialormanufacturedorpartially manufacturedproducts,orcombinesthesametoproducesuchfinishedproducts forthepurposeoftheirsaleordistributiontoothersandnotforhisownuseor consumption.LLphil Itisabasicruleinstatutoryconstructionthatwhenthelanguageofthelawis clearandunequivocal,thelawmustbetakentomeanexactlywhatitsays [Banawaetal.v.Miranoetal.,L24750,May16,1980,97SCRA517,533]. Theterm"manufacturer"hadbeenconsideredinitsordinaryandgeneralusage. Thetermhasbeenconstruedbroadlytoincludesuchprocessesasbuyingand

convertingduckeggstosaltedeggs("balut")[NgoShiekv.CollectorofInternal Revenue,100Phil.60(1956)];theprocessingofunhuskedkapokintocleankapok fiber[OrientalKapokIndustriesv.CommissionerofInternalRevenue,L17837, Jan.31,1963,7SCRA132];ormakingcharcoaloutoffirewood[Bermejov. CollectorofInternalRevenue,87Phil.96(1950)]. 2. AstheCourtofTaxAppealsdidnoterrinholdingthatprivaterespondentis a"manufacturer,"thenprivaterespondentisentitledtothetaxexemptionunder Sec.202(d)and(e)[nowSec.167(d)and(e)]oftheTaxCodewhichstates: Sec.202. Articlesnotsubjecttopercentagetaxonsales.Thefollowingshall beexemptfromthepercentagetaxesimposedinSections194,195,196,197, 198,199,and201: xxxxxxxxx (d) Articlesshippedorexportedbythemanufacturerorproducer,irrespective ofanyshippingarrangementthatmaybeagreeduponwhichmayinfluenceor determinethetransferofownershipofthearticlessoexported. (e) Articlessoldby'registeredexportproducers'to(1)other'registeredexport producers'(2)'registeredexporttraders'or(3)foreigntouristsortravelers,which areconsideredas'exportsales.' Thelawisclearonthispoint.Itisconcededthatasarule,asarguedbypetitioner, anyclaimfortaxexemptionfromtaxstatutesisstrictlyconstruedagainstthe taxpayeranditiscontingentuponprivaterespondentastaxpayertoestablisha clearrighttotaxexemption[BriefforPetitioners,p.18].Taxexemptionsare strictlyconstruedagainstthegranteeandliberallyinfavorofthetaxingauthority [CityofBaguiov.Busuego,L29772,Sept.18,1980,100SCRA116];theyare lookeduponwithdisfavor[WesternMinolcoCorp.v.CommissionerofInternal Revenue,G.R.No.61632,Aug.16,1983,124SCRA121].Theyareheldstrictly againstthetaxpayerandifnotexpresslymentionedinthelaw,mustatleastbe withinitspurviewbyclearlegislativeintent[CommissionerofCustomsv.Phil. AcetyleneCo.,L22443,May29,1971,39SCRA70;DavaoLightandPowerCo.v.

CommissionerofCustoms,G.R.Nos.L28739andL28902,March29,1972,44 SCRA122]. Conversely,therefore,ifthereisanexpressmentionorifthetaxpayerfallswithin thepurviewoftheexemptionbyclearlegislativeintent,thentheruleonstrict constructionwillnotapply.InthepresentcasetherespondentTaxCourtdidnot errinclassifyingprivaterespondentasa"manufacturer".Clearly,thelatterfalls withtheterm"manufacturer"mentionedinArt.202(d)and(e)oftheTaxCode. Astheonlyquestionraisedbypetitionerinrelationtothistaxexemptionclaimby privaterespondentistheclassificationofthelatterasamanufacturer,thisCourt affirmstheholdingofrespondentTaxCourtthatprivaterespondentisentitledto thepercentagetaxexemptiononitsexportsales. Thereisnothingillegalintakingadvantageoftaxexemptions.Whentheprivate respondentwasstillexportinglessandproducinglocallymore,thepetitionerdid notquestionitsclassificationasamanufacturer.Butwhenin1977theprivate respondentproducedlocallylessandexportedmore,petitionerdidaturnabout andimposedthecontractor'stax.Byclassifyingtheprivaterespondentasa contractor,petitionerwouldlikewisetakeawaythetaxexemptionsgranted underSec.202formanufacturers.Petitioner'sactionfindsnosupportinthe applicablelaw.prcd WHEREFORE,theCourtherebyDENIESthePetitionforlackofmeritandAFFIRMS theCourtofTaxAppealsdecisioninCTACaseNo.3357. SOORDERED. Fernan,Gutierrez,Jr.,FelicianoandBidin,JJ.,concur. Copyright19941999CDTechnologiesAsia,Inc.

 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-47538 June 20, 1941 GONZALO PUYAT & SONS, INC., petitioner, vs. ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco), respondent. Feria & Lao for petitioner. J. W. Ferrier and Daniel Me. Gomez for respondent. LAUREL, J.: This is a petition for the issuance of a writ of certiorari to the Court of Appeals for the purpose of reviewing its Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat and Sons. Inc., defendant-appellee." It appears that the respondent herein brought an action against the herein petitioner in the Court of First Instance of Manila to secure a reimbursement of certain amounts allegedly overpaid by it on account of the purchase price of sound reproducing equipment and machinery ordered by the petitioner from the Starr Piano Company of Richmond, Indiana, U.S.A. The facts of the case as found by the trial court and confirmed by the appellate court, which are admitted

by the respondent, are as follows: In the year 1929, the "Teatro Arco", a corporation duly organized under the laws of the Philippine Islands, with its office in Manila, was engaged in the business of operating cinematographs. In 1930, its name was changed to Arco Amusement Company. C. S. Salmon was the president, while A. B. Coulette was the business manager. About the same time, Gonzalo Puyat & Sons, Inc., another corporation doing business in the Philippine Islands, with office in Manila, in addition to its other business, was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, U.S. A. It would seem that this last company dealt in cinematographer equipment and machinery, and the Arco Amusement Company desiring to equipt its cinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc., thru its then president and acting manager, Gil Puyat, and an employee named Santos. After some negotiations, it was agreed between the parties, that is to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on the other, representing the defendant, that the latter would, on behalf of the plaintiff, order sound reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as, freight, insurance, banking charges, cables, etc. At the expense of the plaintiff, the defendant sent a cable, Exhibit "3", to the Starr Piano Company, inquiring about the equipment desired and making the said company to quote its price without discount. A reply was received by Gonzalo Puyat & Sons, Inc., with the price, evidently the list price of $1,700 f.o.b. factory Richmond, Indiana. The defendant did not show the plaintiff the cable of inquiry nor the reply but merely informed the plaintiff of the price of $1,700. Being agreeable to this price, the plaintiff, by means of Exhibit "1", which is a letter signed by C. S. Salmon dated November 19, 1929, formally authorized the order. The equipment arrived about the end of the year 1929, and upon delivery of the same to the plaintiff and the presentation of necessary papers, the price of $1.700, plus the 10 per cent commission agreed upon and plus all the expenses and charges, was duly paid by the plaintiff to the defendant. Sometime the following year, and after some negotiations between the same parties, plaintiff and defendants, another order for sound

reproducing equipment was placed by the plaintiff with the defendant, on the same terms as the first order. This agreement or order was confirmed by the plaintiff by its letter Exhibit "2", without date, that is to say, that the plaintiff would pay for the equipment the amount of $1,600, which was supposed to be the price quoted by the Starr Piano Company, plus 10 per cent commission, plus all expenses incurred. The equipment under the second order arrived in due time, and the defendant was duly paid the price of $1,600 with its 10 per cent commission, and $160, for all expenses and charges. This amount of $160 does not represent actual out-ofpocket expenses paid by the defendant, but a mere flat charge and rough estimate made by the defendant equivalent to 10 per cent of the price of $1,600 of the equipment. About three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against the defendant herein Gonzalo Puyat & Sons, Inc., the officials of the Arco Amusement Company discovered that the price quoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the list price, and that the defendants had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant were much too high including the charges for out-ofpocket expense. For these reasons, they sought to obtain a reduction from the defendant or rather a reimbursement, and failing in this they brought the present action. The trial court held that the contract between the petitioner and the respondent was one of outright purchase and sale, and absolved that petitioner from the complaint. The appellate court, however, by a division of four, with one justice dissenting held that the relation between petitioner and respondent was that of agent and principal, the petitioner acting as agent of the respondent in the purchase of the equipment in question, and sentenced the petitioner to pay the respondent alleged overpayments in the total sum of $1,335.52 or P2,671.04, together with legal interest thereon from the date of the filing of the complaint until said amount is fully paid, as well as to pay the costs of the suit in both instances. The appellate court further argued that even if the contract between the petitioner and the respondent was one of purchase and sale, the

petitioner was guilty of fraud in concealing the true price and hence would still be liable to reimburse the respondent for the overpayments made by the latter. The petitioner now claims that the following errors have been incurred by the appellate court: I. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, segun hechos, entre la recurrente y la recurrida existia una relacion implicita de mandataria a mandante en la transaccion de que se trata, en vez de la de vendedora a compradora como ha declarado el Juzgado de Primera Instncia de Manila, presidido entonces por el hoy Magistrado Honorable Marcelino Montemayor. II. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, suponiendo que dicha relacion fuerra de vendedora a compradora, la recurrente obtuvo, mediante dolo, el consentimiento de la recurrida en cuanto al precio de $1,700 y $1,600 de las maquinarias y equipos en cuestion, y condenar a la recurrente ha obtenido de la Starr Piano Company of Richmond, Indiana. We sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchase and sale, and not one of agency, for the reasons now to be stated. In the first place, the contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk", which can not bind either party. (Nolbrook v. Conner, 56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 III., 161; Bank v. Palmer, 47 III., 92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters, Exhibits 1 and 2, by which the respondent accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with the Court of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. The third paragraph of the respondent's cause of action states: 3. That on or about November 19, 1929, the herein plaintiff (respondent) and defendant (petitioner) entered into an agreement, under and by virtue of which the herein defendant was to secure

from the United States, and sell and deliver to the herein plaintiff, certain sound reproducing equipment and machinery, for which the said defendant, under and by virtue of said agreement, was to receive the actual cost price plus ten per cent (10%), and was also to be reimbursed for all out of pocket expenses in connection with the purchase and delivery of such equipment, such as costs of telegrams, freight, and similar expenses. (Emphasis ours.) We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to the defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, the plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed of $1,700 and $1,600." This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil Code). While the latters, Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%) commission, this does not necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. (See Quiroga vs. Parsons Hardware Co., 38 Phil., 501.) In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States.

It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middleman would not exist. The respondents contends that it merely agreed to pay the cost price as distinguished from the list price, plus ten per cent (10%) commission and all out-of-pocket expenses incurred by the petitioner. The distinction which the respondents seeks to draw between the cost price and the list price we consider to be spacious. It is to be observed that the twenty-five per cent (25%) discount granted by the Starr piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. The respondent could not have secured this discount from the Starr Piano Company and neither was the petitioner willing to waive that discount in favor of the respondent. As a matter of fact, no reason is advanced by the respondent why the petitioner should waive the 25 per cent discount granted it by the Starr Piano Company in exchange for the 10 percent commission offered by the respondent. Moreover, the petitioner was not duty bound to reveal the private arrangement it had with the Starr Piano Company relative to such discount to its prospective customers, and the respondent was not even aware of such an arrangement. The respondent, therefore, could not have offered to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent discount enjoyed by the petitioner. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. It was apparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and the respondent is estopped from questioning that additional price. If the respondent later on discovers itself at the short end of a bad bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess price, on that ground alone. The respondent could not secure equipment and machinery manufactured by the Starr Piano Company except from the petitioner alone; it willingly paid the price quoted; it received the equipment and machinery as represented; and that was the end of

the matter as far as the respondent was concerned. The fact that the petitioner obtained more or less profit than the respondent calculated before entering into the contract or reducing the price agreed upon between the petitioner and the respondent. Not every concealment is fraud; and short of fraud, it were better that, within certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world. The writ of certiorari should be, as it is hereby, granted. The decision of the appellate court is accordingly reversed and the petitioner is absolved from the respondent's complaint in G. R. No. 1023, entitled "Arco Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat & Sons, Inc., defendants-appellee," without pronouncement regarding costs. So ordered. Avancea, C.J., Diaz, Moran and Horrilleno, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-59266 February 29, 1988 SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, vs. HON. COURT OF APPEALS and ATILANO G. JABIL, respondents. BIDIN, J.:

This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9th Division, Court of Appeals dated July 31,1981, affirming with modification the Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16, 1981, denying defendant-appellant's (Petitioner's) motion for reconsideration, for lack of merit. The undisputed facts as found by the Court of Appeals are as follows: The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold the said parcel of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of P28,000.00, payable in two installments, with an assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the next installment in the sum of P4,000.00 to be paid on or before September 15, 1965. On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of absolute sale (Exh. J, also marked Exh. 3) was executed by the Dignos spouses in favor of the Cabigas spouses, and which was registered in the Office of the Register of Deeds pursuant to the provisions of Act No. 3344. As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price of the land, and as plaintiffappellant discovered the second sale made by defendantsappellants to the Cabigas spouses, plaintiff-appellant brought the present suit. (Rollo, pp. 27-28) After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the decretal portion of which reads: WHEREFORE, the Court hereby declares the deed of sale executed on

November 25, 1965 by defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States of America, null and void ab initio, and the deed of sale executed by defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen Thousand Pesos (P16,000.00) to the defendants-spouses upon the execution of the Deed of absolute Sale of Lot No. 3453, Opon Cadastre and when the decision of this case becomes final and executory. The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and Jovita L. de Cabigas, through their attorney-infact, Panfilo Jabalde, reasonable amount corresponding to the expenses or costs of the hollow block fence, so far constructed. It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos should return to defendantsspouses Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as equity demands that nobody shall enrich himself at the expense of another. The writ of preliminary injunction issued on September 23, 1966, automatically becomes permanent in virtue of this decision. With costs against the defendants. From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners herein) appealed to the Court of Appeals, which appeal was docketed therein as CA-G.R. No. 54393R, "Atilano G. Jabil v. Silvestre T. Dignos, et al." On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a fence upon the land in question. The disposive portion of said decision of the Court of Appeals reads: IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the judgment as pertains to plaintiff-appellant above indicated, the judgment appealed from is hereby AFFIRMED in all other respects. With costs against defendants-appellants. SO ORDERED. Judgment MODIFIED. A motion for reconsideration of said decision was filed by the defendants- appellants (petitioners) Dignos spouses, but on

December 16, 1981, a resolution was issued by the Court of Appeals denying the motion for lack of merit. Hence, this petition. In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack of merit. A motion for reconsideration of said resolution was filed on March 16, 1982. In the resolution dated April 26,1982, respondents were required to comment thereon, which comment was filed on May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August 9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed, this Court resolved to reconsider its resolution of February 10, 1982 and to give due course to the instant petition. On September 6, 1982, respondents filed a rejoinder to reply of petitioners which was noted on the resolution of September 20, 1982. Petitioners raised the following assignment of errors: I THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL. II THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT. III THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES AND ATTORNEY'S FEES TO

PETITIONERS. IV PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN HANDS. V BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT AND THE LAW APPLICABLE THERETO. The foregoing assignment of errors may be synthesized into two main issues, to wit: I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell. II. Whether or not there was a valid rescission thereof. There is no merit in this petition. It is significant to note that this petition was denied by the Second Division of this Court in its Resolution dated February 1 0, 1 982 for lack of merit, but on motion for reconsideration and on the basis of all subsequent pleadings filed, the petition was given due course. I. The contract in question (Exhibit C) is a Deed of Sale, with the following conditions: 1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil. Philippine Currency as advance payment; 2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan from the First Insular Bank of Cebu; 3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos (P4,000.00) on or before September 15,1965; 4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on the said property; 5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the above-mentioned property upon the payment of the balance of Four Thousand Pesos. (Original Record, pp. 10-11) In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is subject to two (2)

positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or before September 15,1965 and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that in said contract, title or ownership over the property was expressly reserved in the vendor, the Dignos spouses until the suspensive condition of full and punctual payment of the balance of the purchase price shall have been met. So that there is no actual sale until full payment is made (Rollo, pp. 51-52). In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of conveyance is a very strong indication that the parties did not intend "transfer of ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very terms and conditions of the contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the herein mentioned property to Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned property upon the payment of the balance of four thousand pesos." Such contention is untenable. By and large, the issues in this case have already been settled by this Court in analogous cases. Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). A careful examination of the contract shows that there is no such stipulation reserving the title of the property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that "The ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. While it may be conceded that there was no constructive delivery of the land sold in the case at bar, as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108). Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of petitioners, contemporaneous with the contract, clearly show that an absolute deed of sale was intended by the parties and not a contract to sell. Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void. II. Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was already rescinded. Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the case at bar, the contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. It is undisputed that petitioners never notified private respondents Jabil by notarial act that they were rescinding the contract, and neither did they file a suit in court to rescind the sale. The most that they were able to show is a letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter had no money and further

advised petitioners to sell the land in litigation to another party (Record on Appeal, p. 23). As correctly found by the Court of Appeals, there is no showing that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the latter who, on the contrary, vigorously denied having sent Amistad to tell petitioners that he was already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is required that acts and contracts which have for their object the extinguishment of real rights over immovable property must appear in a public document. Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on the stipulated date of payment on September 15,1965 and was able to raise the necessary amount only by mid-October 1965. It has been ruled, however, that "where time is not of the essence of the agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering that private respondent has only a balance of P4,000.00 and was delayed in payment only for one month, equity and justice mandate as in the aforecited case that Jabil be given an additional period within which to complete payment of the purchase price. WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed decision of the Court of Appeals is Affirmed in toto. SO ORDERED. Fernan (Chairman), Gutierrez, Jr., Feliciano and Cortes, JJ., concur. Footnotes * Penned by Justice Elias B. Asuncion and concurred by Justices Porfirio V. Sison and Vicente V. Mendoza. ** Penned by Judge Ramon E. Nazareno.

SECOND DIVISION G.R. No. 135528. July 14, 2004 SPOUSES ORLANDO A. RAYOS and MERCEDES T. RAYOS, Petitioners, v. THE COURT OF APPEALS and SPOUSES ROGELIO and VENUS MIRANDA, Respondents. DECISION CALLEJO, SR., J.: This is a petition for review on certiorari of the Decision[1] of the Court of Appeals[2] in CA-G.R. CV No. 46727 which affirmed the Decision[3] of the Regional Trial Court of Makati, Branch 62, in Civil Case No. 15639 for specific performance and damages, and Civil Case No. 15984 for sum of money and damages. The two (2) cases stemmed from the following antecedent facts: On December 24, 1985, petitioner Orlando A. Rayos, a practicing lawyer, and his wife, petitioner Mercedes T. Rayos, secured a shortterm loan from the Philippine Savings Bank (PSB) payable within a period of one (1) year in quarterly installments of P29,190.28, the first quarterly payment to start on March 24, 1986. The loan was evidenced by a promissory note which the petitioners executed on December 24, 1985.[4] To secure the payment of the loan, the petitioners-spouses executed, on the same date, a Real Estate Mortgage over their property covered by Transfer Certificate of Title (TCT) No. 100156 located in Las Pias, Metro Manila.[5] On December 26, 1985, the Petitioners, as vendors, and the respondents, Spouses Miranda, as vendees, executed a Deed of Sale with Assumption of Mortgage over the subject property for the price of P214,000.00. However, on January 29, 1986, the petitionersspouses, likewise, executed a Contract to Sell the said property in favor of the respondents for P250,000.00 with the following condition: 3. That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of

this Contract and subsequent documents if any are to be executed, real estate taxes from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[6] The petitioners obliged themselves to execute a deed of absolute sale over the property in favor of the respondents upon the full payment of the purchase price thereof. Respondent Rogelio Miranda filed an application dated May 4, 1986 with the PSB to secure the approval of his assumption of the petitioners obligation on the loan, and appended thereto a General Information sheet.[7] Respondent Rogelio Miranda stated therein that he was the Acting Municipal Treasurer of Las Pias and had an unpaid account with the Manila Banking Corporation in the amount of P18,777.31.The PSB disapproved his application.Nevertheless, respondent Rogelio Miranda paid the first quarterly installment on the petitioners loan on March 21, 1986 in the amount of P29,190.28. The said amount was paid for the account of the petitioners. Respondent Rogelio Miranda, likewise, paid the second quarterly installment in the amount of P29,459.00 on June 23, 1986, also for the account of the petitioners.[8] In the meantime, respondent Rogelio Miranda secured the services of petitioner Orlando Rayos as his counsel in a suit he filed against the Manila Banking Corporation, relative to a loan from the bank in the amount of P100,000.00. Both parties agreed to the payment of attorneys fees, as follows: Our agreement is as follows: 1. You will pay me P700.00 as filing fee and other miscellaneous expenses which I personally received from you this morning; 2. Award to you of any amount in terms of moral, exemplary or actual and other forms of damages shall accrue to you in the amount of 70% thereof; 3. 30% of the award to you in the concept of No. 2 hereof shall pertain to me as my contingent fee; 4. All attorneys fees that the court shall award to me or by the management of TMBC if they agree to extrajudicially settle shall pertain exclusively to me; 5. Execution of judgment expenses shall be for your account;

6. Should the case be appealed, my contingent fee shall increase by 10% if the appeal is to the Intermediate Appellate Court on questions of facts and law, and if appealed from there to the Supreme Court, then another 10% shall accrue to me.[9] On May 14, 1986, petitioner Orlando Rayos filed respondent Rogelio Mirandas complaint against the bank with the Regional Trial Court of Makati, docketed as Civil Case No. 13670.[10] In the meantime, the latter paid the third quarterly installment on the PSB loan account amounting to P29,215.66, for which the bank issued a receipt for the account of the petitioners. The parties executed a Compromise Agreement in Civil Case No. 13670 in which they agreed that each party shall pay for the respective fees of their respective counsels.[11] The trial court rendered judgment on October 23, 1986 based on the said compromise agreement.[12] Petitioner Orlando Rayos demanded the payment of attorneys fees in the amount of P5,631.93, but respondent Rogelio Miranda refused to pay. On November 12, 1986, petitioner Orlando Rayos wrote to respondent Rogelio Miranda and enclosed a copy of his motion in Civil Case No. 13670 for the annotation of his attorneys lien at the dorsal portion of the latters title used as security for the loan with the Manila Banking Corporation.[13] The respondent opposed the motion, claiming that the petitioner agreed to render professional services on a contingent basis.[14] Petitioner Orlando Rayos again wrote respondent Rogelio Miranda on November 30, 1986, reminding the latter of the last quarterly payment of his loan with the PSB. He also advised the respondent to thereafter request the bank for the cancellation of the mortgage on his property and to receive the owners duplicate of his title over the same. Petitioner Orlando Rayos also wrote that their dispute over his attorneys fees in Civil Case No. 13670 should be treated differently.[15] Petitioner Orlando Rayos then received a Letter dated November 27, 1986 from the PSB, reminding him that his loan with the bank would mature on December 24, 1986, and that it expected him to pay his loan on or before the said date.[16] Fearing that the respondents would not be able to pay the amount due, petitioner Orlando Rayos paid P27,981.41[17] to the bank on December 12, 1986, leaving the balance of P1,048.04. In a Letter dated December 18, 1986, the

petitioner advised the PSB not to turn over to the respondents the owners duplicate of the title over the subject property, even if the latter paid the last quarterly installment on the loan, as they had not assumed the payment of the same.[18] On December 24, 1986, respondent Rogelio Miranda arrived at the PSB to pay the last installment on the petitioners loan in the amount of P29,223.67. He informed the bank that the petitioners had executed a deed of sale with assumption of mortgage in their favor, and that he was paying the balance of the loan, conformably to said deed. On the other hand, the bank informed the respondent that it was not bound by said deed, and showed petitioner Orlando Rayos Letter dated December 18, 1986. The respondent was also informed that the petitioners had earlier paid the amount of P27,981.41 on the loan. The bank refused respondent Rogelio Mirandas offer to pay the loan, and confirmed its refusal in a Letter dated December 24, 1986.[19] On even date, respondent Rogelio Miranda wrote the PSB, tendering the amount of P29,223.67 and enclosed Interbank Check No. 01193344 payable to PSB.[20] Thereafter, on December 29, 1986, the petitioners paid the balance of their loan with the bank in the amount of P1,081.39 and were issued a receipt therefor.[21] On January 2, 1987, the PSB wrote respondent Rogelio Miranda that it was returning his check.[22] On January 2, 1987, respondent Rogelio Miranda filed a complaint against the petitioners and the PSB for damages with a prayer for a writ of preliminary attachment with the RTC of Makati. The case was docketed as Civil Case No. 15639 and raffled to Branch 61 of the court. The respondent alleged inter alia that the petitioners and the PSB conspired to prevent him from paying the last quarterly payment of the petitioners loan with the bank, despite the existence of the deed of sale with assumption of mortgage executed by him and the Petitioners, and in refusing to turn over the owners duplicate of TCT No. 100156, thereby preventing the transfer of the title to the property in his name.Respondent Rogelio Miranda prayed that: WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, ordering the latter, jointly and severally, as follows: (a)To pay to plaintiff the sum of P267,197.33, with legal interest

from date of demand, as actual or compensatory damages representing the unreturned price of the land; (b)To pay to plaintiff the sum of P500,000.00 as consequential damages; (c)To pay to plaintiff the sum of P1,000,000.00 as moral damages; (d)To pay to plaintiff the sum of P100,000.00 as exemplary damages by way of example or correction for the public good; (e)To pay to plaintiff the sum of P100,000.00 for and as attorneys fees; (f)To pay for the costs of suit; and (g)That a Writ of Attachment be issued against the properties of defendant Rayos spouses as security for the satisfaction of any judgment that may be recovered. PLAINTIFF FURTHER PRAYS for such other remedies and relief as are just or equitable in the premises.[23] The trial court granted the respondents plea for a writ of preliminary attachment on a bond of P260,000.00. After posting the requisite bond, the respondent also filed a criminal complaint against petitioner Orlando Rayos for estafa with the Office of the Provincial Prosecutor of Makati, docketed as I.S. No. 87-150. He, likewise, filed a complaint for disbarment in this Court against petitioner Orlando Rayos, docketed as Administrative Case No. 2974. Unaware of the said complaint, the petitioner wrote the respondent on January 3, 1986 that as soon as his payment to the PSB of P29,223.67 was refunded, the owners duplicate of the title would be released to him.[24] On January 5, 1986, petitioner Orlando Rayos wrote respondent Rogelio Miranda, reiterating that he would release the title in exchange for his cash settlement of P29,421.41.[25] The respondent failed to respond. In the meantime, the PSB executed on January 8, 1987 a Release of Real Estate Mortgage in favor of the Petitioners, [26] and released the owners duplicate of title of TCT No. 100156.[27] On January 17, 1987, petitioner Orlando Rayos wrote respondent Rogelio Miranda, reiterating his stance in his Letters of January 3 and 5, 1987. In the meantime, the petitioners received the complaint in Civil Case No. 15639 and filed their Answer with Counterclaim in which they alleged that: 14. That plaintiff has no cause of action against defendants Rayos, the latter are willing to deliver the title sought by plaintiff under the

terms set out in their letters dated January 3, 5, 17, and 20, hereto marked as Annexes 1, 1-A, 1-B and 1-C;[28] Petitioner Orlando Rayos filed a complaint on February 1, 1987 against respondent Rogelio Miranda with the Regional Trial Court of Makati, docketed as Civil Case No. 15984 for Specific Performance with Damages for the collection of the amount of P29,223.67 which he had paid to the PSB on December 12 and 19, 1986, and his attorneys fees in Civil Case No. 13670. The trial court consolidated the cases in Branch 62 of the RTC. Respondent Rogelio Miranda filed an Amended Complaint in Civil Case No. 15639 for specific performance with damages, impleading the officers of the PSB as parties-defendants. He alleged that of the purchase price of the property of P214,000.00, he had paid the entirety thereof to the Petitioners, and that petitioner Orlando Rayos acted unethically in trying to collect P5,631.93 from him as his attorneys fees in Civil Case No. 13670, and in having such claim annotated at the dorsal portion of his title over the property he mortgaged to the Manila Banking Corporation. Respondent Rogelio Miranda prayed that, after due proceedings, judgment be rendered in his favor, thus: WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, as follows: (a) Ordering defendants spouses Orlando A. Rayos and Mercedes T. Rayos to deliver forthwith to plaintiff the Owners Duplicate of Transfer Certificate of Title No. 100156, Registry of Deeds for Pasay City; (b) Ordering defendants, jointly and severally, to pay to plaintiff the sum of P1,000,000.00 as moral damages; (c) Ordering defendants, jointly and severally, to pay to plaintiff the sum of P867,197.33 as exemplary damages by way of example or correction for the public good; (d) Ordering defendants, jointly and severally, to pay to plaintiff the sum of P100,000.00 for and as attorneys fees; (e) Ordering defendants, jointly, to pay the costs of suit; and (f) Ordering the issuance of a Writ of Attachment against the properties of defendants Rayos spouses as security for the satisfaction of any judgment that may be recovered. PLAINTIFF further prays for such other remedies and relief as are just or equitable in the premises.[29]

In the meantime, petitioner Orlando Rayos filed an Amended Complaint in Civil Case No. 15984 impleading his wife and that of respondent Rogelio Miranda as parties to the case. On March 4, 1987, the trial court issued an Order granting the petitioners motion in Civil Case No. 15639 for the discharge of the attachment on their property.[30] The court also denied the respondents motion for reconsideration of the Order of the court. The respondents, thereafter, filed a petition for review with the Court of Appeals for the nullification of the said Order. On July 9, 1987, the public prosecutor dismissed the charge of estafa against petitioner Orlando Rayos.[31] The respondents appealed the resolution to the Department of Justice. On May 26, 1987, the PSB and its officers filed their Answer in Civil Case No. 15639, and alleged the following by way of special and/or affirmative defenses, thus: 27. The application for the plaintiff to assume the mortgage loan of the defendants Spouses Rayos was not approved, and it was NOT even recommended by the Marketing Group of defendant PSBank for approval by its Top Management, because the credit standing of the plaintiff was found out to be not good; 28. The acceptance of the payments made by the plaintiff for three (3) amortizations on the loan of defendants Spouses Rayos was merely allowed upon the insistence of the plaintiff, which payments were duly and accordingly receipted, and said acceptance was in accordance with the terms of the Real Estate Mortgage executed by the defendants Spouses Rayos in favor of the defendant PSBank and is also allowed by law;[32] The parties in Civil Case No. 15639 agreed to submit the case for the trial courts decision on the basis of their pleadings and their respective affidavits. In a Resolution dated July 26, 1988, then Undersecretary of Justice Silvestre Bello III affirmed the Public Prosecutors resolution in I.S. No. 87-150.[33] On January 30, 1989, the petitioners sold the property to Spouses Mario and Enriqueta Ercia for P144,000.00.The said spouses were not impleaded as parties-defendants in Civil Case No. 15639. On May 18, 1989, the petitioners filed an amended complaint in Civil Case No. 15984, appending thereto a copy of the Contract to Sell in favor of the respondents. The trial court admitted the said complaint.

On November 15, 1989, this Court rendered its Decision dismissing the complaint for disbarment against Rayos.[34] On January 29, 1993, the trial court rendered judgment, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered, as follows: I. (a) In Civil Case No. 15639, this Court orders plaintiff Rogelio Miranda to refund to spouses Orlando and Mercedes T. Rayos the total sum of P29,069.45, Rayos paid to PS Bank as the last amortization and as release of mortgage fee, without any interest; and upon receipt of the sum of P29,069.45 from Rogelio Miranda, Spouses Orlando and Mercedes T. Rayos shall deliver to Rogelio Miranda Transfer Certificate of Title No. 100156 of the Registry of Deeds of Pasay City; and, deliver to Rogelio Miranda the possession of the parcel of land described in the said title; (b) Dismissing the complaint for damages of Plaintiff Rogelio Miranda against Spouses Orlando and Remedios (sic) T. Rayos, Philippine Savings Bank, Jose Araullo, Cesar I. Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul T. Totanes, and Belinda Lim, for insufficiency of evidence; while the counterclaims of PS Bank, Jose Araullo, Cesar Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul Totanes, and Belinda Lim, are likewise dismissed for insufficiency of evidence. (c) The counterclaims of Spouses Orlando and Mercedes T. Rayos will be treated in Civil Case No. 15984; II. In Civil Case No. 15984, this Court orders Defendant Rogelio Miranda to pay to Plaintiff Orlando Rayos the sum of P4,133.19 at 12% interest per annum, from the date of the filing of the complaint on Feb. 11, 1987 until fully paid. No costs in both cases. SO ORDERED.[35] The petitioners appealed the decision to the Court of Appeals contending that: I.THE COURT A QUO COMMITTED A GRAVE ERROR IN NOT FINDING THAT ROGELIO A. MIRANDA COMMITTED A BREACH OF CONTRACT IN NOT PAYING THE FULL CONTINGENT FEE OF 30% IN WRITING IN THE MANILABANK CASE AND BECAUSE OF THAT BREACH, HE CANNOT NOW DEMAND SPECIFIC PERFORMANCE AND THE COURT A QUO SHOULD HAVE LEFT THE PARTIES AS THEY ARE;

II.THE COURT A QUO SIMILARLY COMMITTED AN ERROR IN NOT FINDING THAT THE DECISION IN SEVA VS. ALFREDO BERWIN & CO. & MEDEL IS APPLICABLE FOUR SQUARE WHEREBY HE WHO BREACHES HIS CONTRACT IS NOT ENTITLED TO SPECIFIC PERFORMANCE;[36] On July 27, 1998, the Court of Appeals rendered judgment affirming with modification the decision of the RTC, thus: WHEREFORE, premises considered, the appealed decision of the Regional Trial Court of Makati City, is hereby AFFIRMED, with the modification abovestated.[37] The petitioners filed the instant petition, and ascribed the following errors on the appellate court: I.THE COURT OF APPEALS (CA) COMMITTED AN ERROR IN NOT FINDING THAT THE PRIVATE RESPONDENT MIRANDA COMMITTED THE FIRST BREACH FOR FAILURE TO ASSUME THE LOAN THUS HE FAILED TO SURROGATE (sic) HIMSELF TO PSB. II.THE CA COMMITTED AN ERROR IN FINDING THAT PETITIONERS PRE-EMPTED PRIVATE RESPONDENT MIRANDA IN DEPOSITING THE LAST AMORTIZATION WHEN MIRANDA HAD NO LEGAL STANDING WITH PSB DUE TO THE LATTERS NON-APPROVAL OF THE ASSUMPTION OF THE LOAN. III.THE CA COMMITTED AN ERROR IN FINDING BOTH PARTIES GUILTY OF FIRST VIOLATING THE OBLIGATIONS INCUMBENT UPON THEM EVEN INFERRING THAT PETITIONERS COMMITTED THE BREACH FIRST BUT LATER CONCLUDING THAT THE BREACH WAS COMMITTED BY BOTH PARTIES. IT DID NOT MAKE A CORRECT ASSESSMENT OF WHO ACTUALLY COMMITTED THE FIRST BREACH. IV.THE CA COMMITTED AN ERROR IN NOT ALLOWING THE OFFSET IF ITS DECISION STOOD OF THE AMOUNT OF P4,133.19 PLUS 12% INT. P.A. FROM THE FILING OF THE COMPLAINT (CV 15984), THUS, ENTIRELY DISREGARDING THE DECISION OF THE TRIAL COURT IN SAID CASE ALLOWING ONLY THE DECISION IN CV 15639. V.THE CA COMMITTED AN ERROR IN NOT APPLYING THE DECSION (sic) LAID DOWN IN SEVA VS. ALFRED BERWIN & CO. AND MEDEL THAT A PERSON HIMSELF AT FAULT CANNOT ENFORCE SPECIFIC PERFORMANCE.[38] The petitioners assert that the Court of Appeals erred in not finding that the respondents first committed a breach of their contract to sell upon their failure to pay the amount due for the last quarterly installment of their loan from the PSB. The petitioners fault the

Court of Appeals for not relying on the resolution of Undersecretary Silvestre Bello III affirming the dismissal of the criminal complaint for estafa in I.S. No. 87-150, as cited by this Court in its decision in Miranda v. Rayos,[39] where it was also held that petitioner Orlando Rayos paid the last quarterly installment because he thought that the respondents would not be able to pay the same. The petitioners argue that they had no other alternative but to pay the last quarterly installment due on their loan with the PSB, considering that they received a demand letter from the bank on November 28, 1986, coupled by its denial of the respondents request to assume the payment of the loan. They insist that they did not block the respondents payment of the balance of the loan with the bank. The petitioners contend that even if the parties committed a breach of their respective obligations under the contract to sell, it behooved the Court of Appeals to apply Article 1192 of the Civil Code in the instant case, which reads: The power to rescind obligation is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law. The petition has no merit. The assailed ruling of the Court of Appeals reads: After due study, the Court finds that there was no basis in fact and law for the appellants to usurp the payment of the last amortization on the mortgage upon the parcel of land it had conveyed to the Mirandas. Even if the appellants wanted to keep their good credit standing, they should not have preempted Miranda in paying the final amortization. There is no sufficient showing that Miranda was in danger of defaulting on the said payment. In fact, it appears that he approached the bank to tender payment, but he was refused by the bank, because he was beaten to the draw, so to speak, by the

Appellants. Appellants were able to do so because, for some reasons, the Mirandas assumption of the mortgage has not been approved by the bank. In doing so, the appellants had unilaterally cancelled the deed of sale with assumption of mortgage, without the consent of the Mirandas. This conduct by the appellants is, to say the least, injudicious as under Article 1308 of the Civil Code, contracts must bind both contracting parties and their validity or compliance cannot be left to the will of one of them. Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. In a regime of law and order, repudiation of an agreement validly entered into cannot be made without any ground or reason in law or in fact for such repudiation. In the same way that the Rayos spouses must respect their contract with the Mirandas for the sale of real property and assumption of mortgage, Rogelio Miranda has to recognize his obligations under his agreement to pay contingent attorneys fees to Orlando Rayos.[40] The Court of Appeals erred in so ruling. The findings and disquisitions of the Court of Appeals cannot prevail over our findings in Miranda v. Rayos,[41] a case which involves the same parties, and where we held that the petitioners cannot be faulted for paying the amortization due for the last quarterly installment on their loan with the PSB: It is difficult to imagine that complainant would be so nave as to be totally unaware of the provisions of the original contract between the PSB and the spouses Rayos. He is a degree holder (A.B. Pre-Law and B.S.C.) and Acting Municipal Treasurer of Las Pias. In short, he is not an ordinary layman. As a buyer with a knowledge of law, it was unnatural for him to read the provisions of the real estate mortgage wherein it is provided, among others, that the sale of the property covered by the mortgage does not in any manner relieve the mortgagor of his obligation but that on the contrary, both the vendor and the vendee, or the party in whose favor the alienation or encumbrance is made shall be, jointly and severally, liable for said

mortgage obligations. There is every reason to believe that it was pursuant to the said provision in the real estate mortgage that complainant tried to assume the loan obligation of the Rayoses by filling up and submitted the loan application (page 30, records) sent by Orland Rayos. By signing the loan application and the general information sheet (page 31, records) in connection with said application, complainant showed that he knew that there was a need to formally apply to the bank in order for him to assume the mortgage. We find respondent spouses version that when complainants application to assume the mortgage loan was disapproved he begged that he be allowed to pay the quarterly amortization credible, owing to the fact that complainant made the payments for the account of the Rayoses. Hence, complainant knew that since his application to the PSB was not approved, there was no substitution of parties and so he had to pay for the account of respondent spouses as shown by the receipts issued by the PSB. As for the charge that Rayos paid the last installment to block complainant from getting the title and transferring the same to his name, respondents version is more satisfactory and convincing. Respondent Orland Rayos paid the last amortization when it became apparent that complainant would not be able to give the payment on the due date as he was still trying to sell his Lancer car. Even if complainant was able to pay the last installment of the mortgage loan, the title would not be released to him as he knew very well that his application to assume the mortgage was disapproved and he had no personality as far as PSB was concerned.[42] Contrary to the ruling of the Court of Appeals, the petitioners did not unilaterally cancel their contract to sell with the respondents when they paid the total amount of P29,062.80 to the PSB in December 1986.[43] In fact, the petitioners wrote the respondents on January 3, 5 and 17, 1987, that they were ready to execute the deed of absolute sale and turn over the owners duplicate of TCT No. 100156 upon the respondents remittance of the amount of P29,223.67. The petitioners reiterated the same stance in their Answer with Counterclaim in Civil Case No. 15639. The petitioners cannot, likewise, be faulted for refusing to execute a deed of absolute sale over the property in favor of the respondents, and in refusing to turn over the owners duplicate of TCT No. 100156

unless the respondents refunded the said amount. The respondents were obliged under the contract to sell to pay the said amount to the PSB as part of the purchase price of the property. On the other hand, it cannot be argued by the petitioners that the respondents committed a breach of their obligation when they refused to refund the said amount. It bears stressing that the petitioners and the respondents executed two interrelated contracts, viz: the Deed of Sale with Assumption of Mortgage dated December 26, 1985, and the Contract to Sell dated January 29, 1986. To determine the intention of the parties, the two contracts must be read and interpreted together.[44] Under the two contracts, the petitioners bound and obliged themselves to execute a deed of absolute sale over the property and transfer title thereon to the respondents after the payment of the full purchase price of the property, inclusive of the quarterly installments due on the petitioners loan with the PSB: 3. That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of this Contract and subsequent documents if any are to be executed, real estate taxes from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[45] Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. The petitioners retained ownership without further remedies by the respondents[46] until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligation of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code.[47] In Lacanilao v. Court of Appeals,[48] we held that: It is well established that where the seller promised to execute a deed of absolute sale upon completion of payment of the purchase price by the buyer, the agreement is a contract to sell. In contracts

to sell, where ownership is retained by the seller until payment of the price in full, such payment is a positive suspensive condition, failure of which is not really a breach but an event that prevents the obligation of the vendor to convey title in accordance with Article 1184 of the Civil Code. The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect.[49] The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant.[50] There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.[51] However, the respondents may reinstate the contract to sell by paying the P29,223.67, and the petitioners may agree thereto and accept the respondents late payment.[52] In this case, the petitioners had decided before and after the respondents filed this complaint in Civil Case No. 15639 to accept the payment of P29,223.67, to execute the deed of absolute sale over the property and cause the transfer of the title of the subject property to the respondents. The petitioners even filed its amended complaint in Civil Case No. 15984 for the collection of the said amount. The Court of Appeals cannot, thus, be faulted for affirming the decision of the trial court and ordering the petitioners to convey the property to the respondents upon the latters payment of the amount of P29,223.67, provided that the property has not been sold to a third-party who acted in good faith. IN VIEW OF ALL THE FOREGOING, the petition is DENIED DUE COURSE.The Decision of the Court of Appeals in CA-G.R. CV No. 46727 is AFFIRMED, except as to the factual finding that the petitioners usurped the payment of the last amortization on the mortgage upon the parcel of land. Costs against the petitioners. SO ORDERED. Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur. Endnotes:

 SECOND DIVISION [G.R. No. 137845. September 9, 2004] ANGEL CLEMENO, JR., MALYN CLEMENO, and NILUS SACRAMENTO, petitioners, vs. ROMEO R. LOBREGAT, respondent. DECISION CALLEJO, SR., J.: This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. CV No. 53655 reversing the decision of the Regional Trial Court of Quezon City, Branch 224, in Civil Case Nos. 92-12620 and 93-17268. The Antecedents The Spouses Nilus and Teresita Sacramento were the owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. 158728 and the house constructed thereon located at No. 68 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City. The Spouses Sacramento mortgaged the property with the Social Security System (SSS) as security for their housing loan and, likewise, surrendered the owners and duplicate copies of the certificate of title. On September 2, 1980, the spouses executed a Deed of Sale with Assumption of Mortgage in favor of Maria Linda Clemeno and her husband Angel C. Clemeno, Jr., with the conformity of the SSS.[2] On March 6, 1981, the Register of Deeds issued TCT No. 277244 over the property in the name of the vendees,[3] who, in turn, executed a Real Estate Mortgage Contract over the property in favor of the SSS to secure the payment of the amount of P22,900.00, the balance of the loan.[4]The Spouses Clemeno also surrendered the owners duplicate copy of the said title to the SSS. However, per the records of the SSS Loans Department, the vendors (the Spouses Sacramento) remained to be the debtors.

On July 1, 1992, respondent Romeo R. Lobregat, a lawyer and an Election Registrar in the Commission on Elections, filed a Complaint against the petitioners, the Spouses Clemeno, and Nilus Sacramento for breach of contract, specific performance with damages with the RTC of Quezon City. The case was docketed as Civil Case No. 9212620 and raffled to Branch 100. On May 7, 1993, the trial court dismissed the case without prejudice for lack of interest on the part of the plaintiff to prosecute.[5] The petitioners, for their part, filed a Complaint against the respondent for recovery of possession of property with damages, docketed as Civil Case No. 93-17268 and raffled to Branch 93 of the court. In the meantime, the RTC, Branch 100 set aside its Order in Civil Case No. 92-12620 and reinstated the case. The two (2) cases were then consolidated in the RTC, Branch 100. The Evidence of The Respondent On June 4, 1987, the respondent and petitioner Angel Clemeno, Jr., relatives by consanguinity, entered into a verbal contract of sale over the property covered by TCT No. 277244 under the following terms and conditions: (a) the respondent would pay the purchase price of the property in the amount of P270,000.00, inclusive of the balance of the loan of the petitioners, the Spouses Clemeno with the SSS[6] within two years from June 4, 1987;[7] (b) the respondent would pay the monthly amortizations of the vendors loan with the SSS; and (c) upon the payment of the purchase price of the property, the Spouses Clemeno would execute a deed of sale in favor of the respondent.[8] The respondent made a down payment of P25,000.00 for which petitioner Clemeno, Jr. issued a receipt dated June 4, 1987.[9] He then made a partial payment of P5,000.00 to petitioner Clemeno, Jr. on July 8, 1987,[10] and another partial payment of P50,000.00 on February 9, 1988.[11] The respondent paid the realty taxes due on the property for 1987 and 1988.[12] In the meantime, petitioner Clemeno, Jr. read a press release from the SSS in the newspapers allowing delinquent borrowers to restructure the balance of their loans as of March 31, 1988 with no arrearages on the balance of their account under certain terms and conditions.[13] On February 26, 1988, he paid the amount of P6,692.63 to the SSS, in partial payment of his loan account.[14] He also made a written request to the SSS for a

restructuring of his loan.[15] Thereafter, the SSS Loans Collection Department issued on March 15, 1988, addressed to the borrower on record, that effective March 15, 1988, the monthly amortization on the loan was P841.84.[16] Petitioner Clemeno, Jr., as mortgagor, affixed his conformity thereto.[17] He then wrote a letter authorizing the respondent to pay the balance of his restructured loan with the SSS, which payments would be considered as partial payment of the house and lot.[18] Conformably, the respondent remitted to the SSS the monthly amortization payments for the account of petitioner Clemeno, Jr. However, the receipts issued by the SSS were in the name of petitioners Nilus Sacramento or Clemeno, Jr.[19] The respondent made additional partial payments for the sale of the property to petitioner Clemeno, Jr. on January 17, 1989, and, March 20, 1989, in the total amount of P10,000.00.[20] He also continued remitting to the SSS the monthly amortizations due for the account of petitioner Clemeno, Jr.[21] The respondent was able to secure a loan of P160,000.00 on April 1, 1989, which was more than sufficient to cover his balance of the purchase of the property. He then offered to pay the said balance to petitioner Clemeno, Jr.,[22] but the latter told him to keep the money because the owners duplicate copy of the title was still with the SSS and to instead continue paying the monthly amortizations due. The respondent did so and made payments until March 1990.[23] He no longer paid after this date because the SSS informed him that petitioner Clemeno, Jr. had already paid the balance of his account in full on March 23, 1990. Indeed, on May 9, 1990, the SSS had executed a Release of Real Estate Mortgage in favor of petitioner Clemeno, Jr. and released the owners duplicate of TCT No. 277244.[24] The respondent offered to pay the balance of the purchase price of the property to petitioner Clemeno, Jr. and asked the latter to execute the deed of sale over the property and deliver the title over the property under his name, but petitioner Clemeno, Jr. refused to do so unless the respondent agreed to buy the property at the price prevailing in 1992. The respondent refused. On June 12, 1992, the respondents counsel wrote petitioner Clemeno, Jr., informing the latter that he (the respondent) had already paidP113,049.96 of the purchase price of the property and

that he was ready to pay the balance thereof in the amount of P156,970.04. He demanded that petitioner Clemeno, Jr. execute a deed of absolute sale over the property and deliver the title thereto in his name upon his receipt of the amount of P156,970.04.[25] In his reply-letter, petitioner Clemeno, Jr. stated that he never sold the property to the respondent; that he merely tolerated the respondents possession of the property for one year or until 1987, after which the latter offered to buy the property, which offer was rejected; and that he instead consented to lease the property to the respondent. The petitioner also declared in the said letter that even if the respondent wanted to buy the property, the same was unenforceable as there was no document executed by them to evince the sale.[26] In their Answer to the complaint, the petitioners alleged that they entered into a verbal lease-purchase agreement over the house and lot with the respondent under the following terms and conditions: (a) The purchase price will be P270,000.00 to be paid in full not later than June 1, 1988; (b) The rental is P1,500.00 a month, for the whole period from June 1987 to June 1, 1988; (c) If the whole purchase price is not paid on the agreed date, the total amount equivalent to one-year rental shall be deducted from the amount already paid by the plaintiff, who shall peacefully vacate the premises and surrender possession of the house and lot to the defendants. (d) The purchase price of P270,000.00 shall be payable: P90,000.00 upon taking possession of the property, P90,000.00 payable within six (6) months thereafter, and P90,000.00 not later than June 1, 1988.[27] The petitioners further alleged that despite the respondents failure to comply with the conditions of their agreement, the latter was still granted an extension of until September 1989 to pay the purchase price of the property, but managed to pay only P113,049.96, including the monthly amortizations of their loan account with the SSS and realty tax payments. The petitioners further alleged that the respondent even failed to pay any rental for the property from June 1987 to June 1, 1988. They posited that the contract between the parties was unenforceable under Article 1403(2) of the New Civil

Code, and prayed that judgment be rendered in their favor as prayed for by them in their complaint in Civil Case No. 93-17268, thus: WHEREFORE, it is most respectfully prayed that after due hearing, a decision in favor of plaintiff be rendered, ordering Defendant (a) And all other persons claiming under him to vacate the premises located at 86 Madaling Araw St., Teresa Heights Subdivision, Novaliches, Quezon City; (b) To pay plaintiff a balance of P64,349.14 for the use and occupancy of the premises until May 31, 1993, and at the rate of P3,628.80 a month from June 1, 1993 until the premises shall have been finally vacated; (c) To pay P50,000.00 plus P2,000.00 per appearance as and for attorneys fees; and (d) To pay the costs of suit. Plaintiff further prays for such other relief reasonable and conscionable in the premises.[28] The Evidence for the Petitioners Petitioner Clemeno, Jr. and the respondent were townmates. Sometime in June 1987, petitioner Clemeno, Jr. agreed to sell the property for P270,000.00 payable in three (3) installments: (a) P90,000.00 upon the respondents taking possession of the property; (b) P90,000.00 payable within six (6) months thereafter; and (c) P90,000.00 not later than June 1, 1988. The respondent assured petitioner Clemeno, Jr. that there would be nothing to worry about the documentation of the sale; being a lawyer, he would take care of everything. However, the respondent failed to pay the balance of the purchase price of the property in the amount of P156,970.04 despite promises to do so. On September 16, 1989, petitioner Clemeno, Jr. went to the respondents house to talk to him anew, but the latter was nowhere to be found. He made a typewritten letter to the respondent, stating that the latter had been given more than enough time to exercise the option to buy the property but failed to do so; hence, the offer was deemed cancelled. The petitioner left the letter with the respondents daughter, Michelle Lobregat. The trial court rendered judgment in favor of the petitioners, as follows:

Accordingly, therefore, the Court hereby renders judgment in favor of Angel Clemeno, [Jr.] as against Romeo Lobregat and orders the latter and other persons claiming under him to: 1. Vacate the premises located at No. 86 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City; 2. Pay Angel Clemeno, Jr. the amount of P64,349.14 for the use and occupancy of the premises until May 31, 1993 and at the rate of P3,628.80 a month from June 1, 1993 until the premises have been finally vacated; 3. Pay the amount of P50,000.00 as attorneys fees and other legal expenses, and 4. To pay the costs of suit. IT IS SO ORDERED.[29] The trial court ruled that since both the sale and lease agreements were not reduced to writing, both contracts were unenforceable under Article 1403(2) of the New Civil Code, and had decided the case based on justice and equity. The respondent appealed the decision to the Court of Appeals and raised the following assignment of errors: 1. THE LOWER COURT, AFTER THE COMPLETE, MERITORIOUS AND WRITTEN PIECES OF EVIDENCE SUBMITTED BY PLAINTIFF-APPELLANT LOBREGAT, FAILED/REFUSED TO CONSIDER THE SAME. INSTEAD, DECIDED ONLY THE CASE OF ACCION PUBLICIANA FILED BY DEFENDANT-APPELLEE A. CLEMENO, JR. 2. THE LOWER COURT FAILED TO CONSIDER THAT RECEIPTS ARE NOT CONTRACT OF SALE BUT EVIDENCE FOR CONTRACT OF SALE AS EVEN NOTED BY THE LOWER COURT. 3. THAT THE LOWER COURT FAILED TO CONSIDER THAT THE PIECES OF EVIDENCE OF LOBREGAT CLEARLY SHOW THAT [THE] SALE WAS THE TRANSACTION BETWEEN HEREIN PARTIES AS ADMITTED BY DEFENDANT-APPELLEE A. CLEMENO, JR. (T.S.N., p. 16, Nov. 20, 1995) (T.S.N., pp. 26 & 27, April 19, 1996) 3. THAT THE HONORABLE LOWER COURT DISREGARDED ITS OWN RULING AS TO THE APPELLEES INTENTIONAL FAILURE TO FOLLOW/COMPLY WITH ITS ORDER DATED MAY 31, 1996. 4. THAT THE LOWER COURT FAILED TO CONSIDER THE DELIBERATE OMISSION OF DEFENDANTS-APPELLEES TO OBSERVE THE NONFORUM SHOPPING REQUIREMENT. 5. THAT THE LOWER COURT MISAPPLIED THE PRINCIPLE OF

STATUTE OF FRAUDS.[30] On February 23, 1999, the Court of Appeals rendered judgment reversing the decision of the trial court. The fallo of the decision reads: WHEREFORE, the decision appealed from is REVERSED, and judgment is hereby rendered: 1. In Civil Case No. Q-92-12620 (a) Ordering defendants-appellees to accept the remaining balance of the purchase price of the house and lot subject of sale in the amount ofP156,109.00 and, thereafter, execute in favor of plaintiffappellant the corresponding deed of sale or proper mode of conveyance; and (b) Ordering defendants-appellees to pay, jointly and severally, plaintiff-appellant P50,000.00 by way of moral damages, P25,000.00 by way of exemplary damages, and P15,000.00 as attorneys fees. 2. In Civil Case No. Q-93-17268 dismissing the complaint therein. Costs against defendants-appellees. SO ORDERED.[31] The Court of Appeals ruled that the contract entered into between the parties was a contract of sale, not a contract to sell. The appellate court also ruled that Article 1403(2) was not applicable because the contract was already partly performed, since partial payments had been made by the respondent as evidenced by receipts signed by the petitioners. The petitioners now come to this Court, contending that: I The Honorable Court of Appeals grossly erred in holding that the contract entered by the parties is a contract of sale and not a contract to sell.[32] II The Court of Appeals erred seriously when it held that Under Article 1356 of the Civil Code, contract shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present and that the contract of sale of a piece of land may be proved orally, totally ignoring the positive mandate of Article 1358 of the Civil Code, [33] III

The Honorable Court of Appeals erred in holding that the Statute of Frauds cannot be raised as a defense against specific performance, there being partial performance of the down-payment and subsequent installments, even if short of the full price and after the expiry of the agreed dates of payment.[34] The Court shall resolve these issues simultaneously as they are interrelated. The petitioners posit that the respondent failed to prove the essential elements of a contract of sale over the subject property. They contend that the receipts wherein they acknowledged the receipt of the amounts therein specified do not conform to the legal requirements of a contract of sale, and cited the ruling of this Court in Manotok Realty, Inc. vs. Court of Appeal.[35] They also posit that even by his own admission, the respondent defaulted in the payment of the purchase price of the property; hence, they are not obliged to execute a deed of absolute sale over the property and deliver the title to him. The petitioners assert that even if they had entered into an agreement with the respondent, such agreement was a mere contract to sell, not a contract of sale. They further assert that even if, indeed, the parties had entered into a contract of sale, the same is unenforceable under paragraph 2, Article 1403 of the New Civil Code, which provides that such contract must be in writing; and Article 1358 of the New Civil Code which requires that such contract must appear in a public document. On the other hand, the appellate court held that the petitioners and the respondent entered into a verbal contract of sale and not a contract to sell over the subject property, thus: In the case at bench, Clemeno had agreed to sell his house and lot to Lobregat for a total consideration of P270,000.00 payable in installments within a period of two (2) years. The receipt, Exhibit A, is self-explanatory: it speaks of the receipt by Clemeno of the sum of P25,000.00 from Lobregat as advance payment of the subject house and lot, the total purchase price of which is P270,000.00. Significantly, upon his receipt of the advance payment, Clemeno delivered the possession of the premises to Lobregat who is now the present possessor thereof. Subsequent payments were made by Lobregat on the purchase price, all of which were duly receipted for by Clemeno. The receipts Exhibits A-1, A-2 and A-3, for example, speak uniformly of additional part

payment for the house and lot subject of this case. Moreover, as suggested by Clemeno himself, Lobregat had been religiously remitting the monthly payments on Clemenos loan obligation with the SSS. Note, for instance, Exhibit A-4 one of the many receipts of payment to SSS where it is indicated that the real estate loan is in the name of Angel C. Clemeno, Jr., as borrower, but bears the name of Romeo Lobregat, as payor, on behalf of Clemeno. It is as clear as sunlight that the parties had entered into a contract of sale and not merely a contract to sell.[36] The petition has no merit. We find and so hold that the contract between the parties was a perfected verbal contract of sale, not a contract to sell over the subject property, with the petitioner as vendor and the respondent as vendee. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on three elements: subject matter, price and terms of payment of the price.[37] The petitioners sold their property to the respondent for P270,000.00, payable on installments, and upon the payment of the purchase price thereof, the petitioners were bound to execute a deed of sale in favor of the respondent and deliver to him the certificate of title over the property in his name. The parties later agreed for the respondent to assume the payment of the petitioners loan amortization to the SSS, which payments formed part of the purchase price of the property. The evidence shows that upon the payment made by the respondent of the amount of P27,000.00 on June 4, 1987, the petitioners vacated their house and delivered possession thereof to the respondent. Conformably to Article 1477 of the New Civil Code, the ownership of the property was transferred to the respondent upon such delivery. The petitioners cannot re-acquire ownership and recover possession thereof unless the contract is rescinded in accordance with law.[38] The failure of the respondent to complete the payment of the purchase price of the property within the stipulated period merely accorded the petitioners the option to rescind the contract of sale as provided for in Article 1592 of the New Civil Code.[39] The contract entered into by the parties was not a contract to sell because there was no agreement for the petitioners to retain ownership over the property until after the respondent shall have

paid the purchase price in full, nor an agreement reserving to the petitioners the right to unilaterally resolve the contract upon the buyers failure to pay within a fixed period.[40] Unlike in a contract of sale, the payment of the price is a positive suspensive condition in a contract to sell, failure of which is not a breach but an event that prevents the obligation of the vendor to convey the title from becoming effective.[41] The fact that the receipts issued by the SSS evidencing the respondents remittances of the monthly amortization payments of the petitioners loan, and that the receipts issued to the respondent for the payment of realty taxes for 1987 and 1988 were in the name of Nilus Sacramento and/or the petitioner Clemeno, Jr., does not negate the fact of the transfer of the ownership over the property to the respondent on June 4, 1987. Moreover, the deed of sale over the property in favor of the respondent had not yet been executed by the petitioners. The Spouses Sacramento and later, the petitioners, were the borrowers, as per the records of the SSS. The contract of sale of the parties is enforceable notwithstanding the fact that it was an oral agreement and not reduced in writing as required by Article 1403(2) of the New Civil Code, which reads: Art. 1403. The following contracts are unenforceable, unless they are ratified: (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the parties charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accepts and receives part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money: but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is

made, it is a sufficient memorandum; This is so because the provision applies only to executory, and not to completed, executed or partially executed contracts.[42] In this case, the contract of sale had been partially executed by the parties, with the transfer of the possession of the property to the respondent and the partial payments made by the latter of the purchase price thereof. We agree with the petitioners contention that the respondent did not pay the total purchase price of the property within the stipulated period. Moreover, the respondent did not pay the balance of the purchase price of the property. However, such failure to pay on the part of the respondent was not because he could not pay, but because petitioner Angel Clemeno, Jr. told him not to do so. The latter instructed the respondent to continue paying the monthly amortizations due to the SSS on the loan. Unknown to the respondent, petitioner Angel Clemeno, Jr. wanted to increase the purchase price of the property at the prevailing market value in 1992, and not its value in 1987 when the contract of sale was perfected. The petitioners failed to prove their claim that a lease purchase agreement over the property was entered into. Except for their bare claim, they failed to adduce a morsel of documentary evidence to prove the same. On the other hand, all the receipts issued by them on the partial payments made by the respondent were for the purchase price of the property, and not as rentals thereof. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners. SO ORDERED. Puno, (Chairman), Tinga, and Chico-Nazario, JJ., concur. Austria-Martinez, J., on official leave. [