Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-5295 December 16, 1909
KUENZLE & STREIFF, plaintiff-appellant,
vs.
MACKE & CHANDLER, ET AL., defendants-appellees.
Hartigan and Rohde for appellant.
O'Brien and De Witt for appellees.

MORELAND, J.:
This is an action brought by the plaintiff to recover of the defendants the
sum of 1,000 pesos, the value of certain personal property, constituting a
saloon bar, furniture, furnishings, and fixtures. The plaintiff alleges that on
or about the month of January, 1907, it was the owner of the Oregon
Saloon in Cavite, Province of Cavite, consisting of bar, furniture,
furnishings, and fixtures, of the value of 1,000 pesos; that during the said
month of January, 1907, the defendant Jose Desiderio, as sheriff, levied
upon such property by virtue of an execution issued upon a judgment
secured by the defendant Macke & Chandler, against Stanley &
Krippendorf; that said plaintiff notified the sheriff, in the manner provided by
law, that it was the owner of said goods and forbade the sale thereof under
said execution; that, notwithstanding such claim upon the part of the
plaintiff, the said sheriff sold said goods under said execution; that said firm
of Macke & Chandler was the purchaser of said goods and the same were
delivered to it; that the defendants Bachrach, Elser, and Gale, were the
sureties upon the bond given to the sheriff by Macke & Chandler before
said goods were sold. The defendants in this case allege that the property
described by the plaintiff and sold at the execution sale referred to was not
the property of the plaintiff at the time of said levy and sale, but was the
property of Stanley & Krippendorf, who were in possession of the same at
the time of such levy. They further allege that during the month of January,

1907, the said Stanley & Krippendorf, being indebted in a considerable sum
to the plaintiff in this case, attempted to sell to the said plaintiff by an
instrument in writing the property in question; that said instrument was
never recorded; that said instrument was a private document; that the said
property was not delivered to the plaintiff under said sale but that said
property remained from the time of said sale forward in the exclusive
possession and control of said Stanley & Krippendorf, and that they
conducted the business subsequent to the execution of said instrument
exactly as they had prior thereto in their own name purchasing goods
and paying therefor without reference to the plaintiff in this case.
The facts in relation to the manner and method in an by which the plaintiff
obtained its alleged title to the goods in question and the fact of continued
possession by Stanley & Krippendorf, as set forth by the defendants, are
substantially admitted in this case.
The question to be determined is the effect which the said instrument of
sale had, if any, in transferring the property in question from Stanley &
Krippendorf to the plaintiff.itc_alf
The case of the Fidelity and Deposit Company against Wilson (8 Phil. Rep.,
51) lays down a doctrine which we think is decisive of this case. In that
case it was held that the ownership of personal property can not be
transferred to the prejudice of third persons except by delivery of the
property itself; and that a sale without delivery gives the would-be
purchaser no rights in said property except those of a creditor. The bill of
sale in the case at bar, under the circumstances of this case, could have no
effect against a person dealing with the property upon the faith of
appearances. The case of Kuenzle & Streiff against A. S. Watson & Co. (7
Off Gaz., 425), 1 cited by the appellant in its brief, does not sustain its
contention. That was a case of the sale of property upon the condition that
the title thereto should remain in the vendor until the purchase price thereof
should be fully paid, and that, in case of nonpayment of the debt or of any
installment thereof when due, the vendor would have a right to take
possession of the property and deal with it as provided for in the contract.
In that case the court held that such a contract for the conditional sale of
goods was valid in these Islands between the parties thereto, and was valid
also as to third persons, provided possession of the property therein
described was taken by the vendor before the rights of third persons
intervened against the same. In the case at bar it is evident that the bill of

sale, so called, was in no sense a conditional sale of property, such as is

described in the case of Kuenzle & Streiff against A. S. Watson, & Co., and
the principles applicable thereto are entirely inapplicable in the case at bar.
Moreover, possession of the property in suit was not taken at any time by
the plaintiff.
The defendant Macke & Chandlre, having purchased the property at an
execution sale, property conducted, obtained a good title to the property in
question as against the plaintiff in this case.
The judgment of the court below is, therefore, affirmed, with costs against
the appellant. So ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-6565

October 24, 1911

JOSE FLORENDO, plaintiff-appellee,

vs.
EUSTAQUIO P. FOZ, defendant-appellant.
Vicente Foz, for appellant.
Jose Ma. de Valle, for appellee.

ARELLANO, C.J.:
On May 11, 1909, Eustaquio P. Foz executed in Manila a contract, ratified
before a notary, and substantially of the following purport:
I, D. Eustaquio Foz . . ., in consideration of the sum of six thousand
pesos (P6,000) Philippine currency, hereby sell, cede, and convey
forever and perpetually to Sr. Jose Florendo, my house
and camarin of strong materials, together with the lots on which they

are elected, the boundaries of which as follows: (and the boundaries

are expressed).
Of the six thousand pesos, I have already received from the said Sr.
Jose Florendo, two thousand pesos (P2,000), and the said [party
shall pay me the remaining four thousand in Vigan when I go there at
any time during month or next month.
In case of my beingunable go to Vigan, I authorize the said Jose
Florendo to pay my debt to the church at that place, as well also (that
is, I authorize him) to obtain the title papers of the house tat is the
subject matter of this sale, and the said Florendo shall send the
remainder to me here in Manila.
Record is also made in this instrument that the rents of the said
properties may be collected by me only up to and including the month
of June; after such period, I shall have no further right to said rents
and Seor Florendo may then begin to collect them.
This contract was signed by the party who executed it, by his wife and two
witnesses, and was, by the first mentioned, ratified before a notary.
Eustaquio Foz went to Vigan, and on June 23 of the same year, Jose
Florendo, accompanied by a notary, tendered to the former the P4,000, the
rest of the price of the sale; but Foz refused to receive them, saying that
the true price of the sale, recorded in another instrument held by Florendo,
was P10,000, and that on the second or third day after the first instrument
the contract. These facts were recorded by the notary in a notarial
certificate. (Exhibit C, of the plaintiff.)
For the foregoing reasons, Florendo instituted the present suit against Foz,
wherein he asked that the defendant be sentenced: (a) To comply with the
contract of absolute purchase and sale, by delivering to the plaintiff the
property sold; (b) to pay to the plaintiff the rents of the entire realty from
July 1, 1909, until the judgment should be fulfilled, together with the legal
interest on the amount of such rents, and that the court fix sum which the
defendant must pay for his use of a part of the property; (c) that, out of the
P4,000 deposited by the plaintiff in the municipal treasury of Vigan, Ilocos
Sur, payment be made to The Roman Catholic Apostolic Church, in the
said pueblo of Vigan, "Obispado de Nueva Segovia," of the mortgage credit
due that it holds against the defendants, and that the remainder left paying

all the debts found to be owing by the judgment to be rendered, be

delivered, to the said defendant; and, (d) to pay the costs of the trial.
The defendant, in his answer to the complaint, alleged that it was false that
he had sold his property for the price of P6,000; that, if he signed the deed
of sale, he was deceived in so doing, as he had heard, or believed that he
had heard, when it was previously read to him, that the amount stated
therein was P10,000, which was the true sum agreed upon between
himself and the plaintiff as the price of the property. The defendant
therefore asked that the deed of sale be declared to be false, null and void,
and, in counter complaint, prayed that the plaintiff be compelled to return to
him the ownership title of the property, which was in the plaintiff's
possession.
The Court of First Instance of Ilocos Sur, after hearing the evidence
adduced by both sides, rendered judgment in conformity with the plaintiff's
petition, except with regard to fixing the amount which the defendant should
pay as rent for the personal use of a part of the house, and disallowed the
defendant's counter-complaint.
The latter appealed from that judgment, and the hearing on the appeal
discloses the following facts:
1. That the evidence presented by the defendant was rather intended to
prove that the year before he had been offered the price of P8,000 for his
property and that the latter was worth more than P6,000, in rebuttal of
which the plaintiff showed the price for which the property had been
acquired and its assessed valuation, neither of which exceeded P6,000.
2. That, as regards the defendant's special defense to the effect that the
deed of sale was read to him before he signed it and that he heard or
believed that he heard that the price stipulated in the deed was P10,000,
not only was no evidence whatever presented, but also no offer nor attempt
was made to introduce any.
3. That the court ordered the deposit of the P4,000, as the remainder of the
payment of the price and which in the complaint was said to be deposited
in the municipal treasury of Vigan, to be made in the provincial treasury,
from which ruling the defendant took an exception, alleging that it was
another defense of his, in support of his refusal to deliver the property sold,

that the rest of the price thereof had not been properly deposited, either in
May or in June, 1909.
4. That the defendant ratified at the trial his answer in the notarial certificate
of June 23, 1909 (Exhibit C of the plaintiff), that is, his avernment that
another instrument had been executed in which the true price of P10,000
was stipulated; but this averment was not repeat nor proved during the
whole trial.
5. That in the appellant's brief in this instance, on page 14 thereof, the
following statements appear:
The plaintiff, on his reading this instrument to the defendant, made
the latter believe that the amount stipulated therein as the price of the
contract was P10,000, and in this belief the defendant signed that
notarial document. That fact having proved by the defendant's
testimony, which was neither contradicted nor rebutted, is that
document to prevail over all the proofs adduced?
None of these statements can be accepted as correct. It was not proved,
nor was it attempted to be proved, that the instrument, before being signed
by the appellant, was read to him by another person; nor that such other
person was the appellee himself; nor that any person read one thing for
another, as being what was stipulated in the instrument. For the se reasons
it was the conclusion of the trial court that neither the deceit alleged by the
defendant to have been employed by the plaintiff in the execution of the
contract, nor the falsity of the instrument executed, was proved. (B. of e., p.
12.)
Consequently, the instrument of contract is valid and effective. From the
validity and force of the contract is derived the obligation of the part of the
vendor to deliver the thing sold.
Pursuant to article 1466 of the Civil Code, the vendor shall not be bound to
deliver the thing sold, if the vendee should not have paid the price, or if a
period for the payment has not been fixed in the contract. If in the contract
a period has been fixed for the payment, the vendor must deliver the thing
sold. In the contract in question, a period was fixed for the
payment:1awphil.net

The said party (the vendee) says the vendor shall pay me the
remaining four thousand in Vigan when I go there at any time during this
month or next month. In case of my being unable to go to Vigan, . . . the
said Florendo shall send the remainder (after paying the vendor's debt to
the Church of Vigan) to mere here in Manila.
In accordance with the first of the said quoted clauses, the period for
payment is when the vendor shall have arrived at Vigan; and if he does not
arrive at Vigan, such period is, according to the second clause, indefinite,
the vendee merely taking it upon himself to send the rest to Manila, after
the month of June, 1909, should the vendor not arrive at Vigan.
The provisions of the said article 1466, contain a rule and an exception: the
rule is that the thing shall not be delivered, unless the price be paid; and
the exception is that the thing must be delivered, though the price be not
first paid, if a time for such payment has been fixed in the contract.
Hence, all the discussions between the contending parties, with respect to
whether the deposit of the P4,000, a part of the price, was or was not
made, or was duly or unduly made, is entirely impertinent: the conveyance
of the thing sold does not depend on the payment of the price, in this case
of exception contained in article 1466 of the Civil Code.
If this period was fixed, the vendor, notwithstanding that such period
has not terminated, nor, consequently, that he has not collected the
price, is obliged to deliver the thing sold. (10 Manresa, Commentaries
on the Civil Code, 130.)
There was no need, therefore, of assent on the part of the plaintiff to pay
the P4,000, the remainder of the price, in order to oblige the defendant
unconditionally to deliver the property sold. With still more reason should
the defendant be compelled to effect the material delivery of the property,
since, after the lapse of the period for the delivery of the price, the plaintiff
hastened to pay it and, on account of the defendant's refusal to receive it,
duly deposited it, in order to avoid the consequences that might issue from
delinquency in the payment of a sum entrusted to him for a fixed period.
It is the material delivery of the property sold which the defendant must
make in compliance with the contract, inasmuch as the formal delivery de
jure was made, according to the provisions of article 1462, 2nd paragraph,
of the same code:

When the sale should be made by means of a public instrument, the

execution thereof shall be equivalent to the delivery of the thing which
is the object of the contract, if in said instrument the contrary does not
appear or may be clearly inferred.
As the contrary does not appear nor is to be inferred from the public
instrument executed by the defendant, its execution was really a formal or
symbolical delivery of the property sold and authorized the plaintiff to use
the tile of ownership as proof that he was thenceforth the owner of the
property.
The judgment appealed from is affirmed in all its parts, with the costs of this
instance against the appellant.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12342

August 3, 1918

A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J.:
By a public instrument dated June 11, 1914, the plaintiff sold to the
defendant Marciana Felix, with the consent of her husband, the defendant
Balbino Tioco, four parcels of land, described in the instrument. The
defendant Felix paid, at the time of the execution of the deed, the sum of
P3,000 on account of the purchase price, and bound herself to pay the
remainder in installments, the first of P2,000 on July 15, 1914, and the
second of P5,000 thirty days after the issuance to her of a certificate of title
under the Land Registration Act, and further, within ten years from the date
of such title P10, for each coconut tree in bearing and P5 for each such

tree not in bearing, that might be growing on said four parcels of land on
the date of the issuance of title to her, with the condition that the total price
should not exceed P85,000. It was further stipulated that the purchaser was
to deliver to the vendor 25 per centum of the value of the products that she
might obtain from the four parcels "from the moment she takes possession
of them until the Torrens certificate of title be issued in her favor."
It was also covenanted that "within one year from the date of the certificate
of title in favor of Marciana Felix, this latter may rescind the present
contract of purchase and sale, in which case Marciana Felix shall be
obliged to return to me, A. A. Addison, the net value of all the products of
the four parcels sold, and I shall obliged to return to her, Marciana Felix, all
the sums that she may have paid me, together with interest at the rate of
10 per cent per annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First
Instance of Manila to compel Marciana Felix to make payment of the first
installment of P2,000, demandable in accordance with the terms of the
contract of sale aforementioned, on July 15, 1914, and of the interest in
arrears, at the stipulated rate of 8 per cent per annum. The defendant,
jointly with her husband, answered the complaint and alleged by way of
special defense that the plaintiff had absolutely failed to deliver to the
defendant the lands that were the subject matter of the sale,
notwithstanding the demands made upon him for this purpose. She
therefore asked that she be absolved from the complaint, and that, after a
declaration of the rescission of the contract of the purchase and sale of
said lands, the plaintiff be ordered to refund the P3,000 that had been paid
to him on account, together with the interest agreed upon, and to pay an
indemnity for the losses and damages which the defendant alleged she had
suffered through the plaintiff's non-fulfillment of the contract.
The evidence adduced shows that after the execution of the deed of the
sale the plaintiff, at the request of the purchaser, went to Lucena,
accompanied by a representative of the latter, for the purpose of
designating and delivering the lands sold. He was able to designate only
two of the four parcels, and more than two-thirds of these two were found
to be in the possession of one Juan Villafuerte, who claimed to be the
owner of the parts so occupied by him. The plaintiff admitted that the
purchaser would have to bring suit to obtain possession of the land (sten.
notes, record, p. 5). In August, 1914, the surveyor Santamaria went to

Lucena, at the request of the plaintiff and accompanied by him, in order to

survey the land sold to the defendant; but he surveyed only two parcels,
which are those occupied mainly by the brothers Leon and Julio Villafuerte.
He did not survey the other parcels, as they were not designated to him by
the plaintiff. In order to make this survey it was necessary to obtain from
the Land Court a writ of injunction against the occupants, and for the
purpose of the issuance of this writ the defendant, in June, 1914, filed an
application with the Land Court for the registration in her name of four
parcels of land described in the deed of sale executed in her favor by the
plaintiff. The proceedings in the matter of this application were
subsequently dismissed, for failure to present the required plans within the
period of the time allowed for the purpose.
The trial court rendered judgment in behalf of the defendant, holding the
contract of sale to be rescinded and ordering the return to the plaintiff the
P3,000 paid on account of the price, together with interest thereon at the
rate of 10 per cent per annum. From this judgment the plaintiff appealed.
In decreeing the rescission of the contract, the trial judge rested his
conclusion solely on the indisputable fact that up to that time the lands sold
had not been registered in accordance with the Torrens system, and on the
terms of the second paragraph of clause (h) of the contract, whereby it is
stipulated that ". . . within one year from the date of the certificate of title in
favor of Marciana Felix, this latter may rescind the present contract of
purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is not founded
on the hypothesis of the conventional rescission relied upon by the court,
but on the failure to deliver the land sold. He argues that the right to rescind
the contract by virtue of the special agreement not only did not exist from
the moment of the execution of the contract up to one year after the
registration of the land, but does not accrue until the land is registered. The
wording of the clause, in fact, substantiates the contention. The one year's
deliberation granted to the purchaser was to be counted "from the date of
the certificate of title ... ." Therefore the right to elect to rescind the contract
was subject to a condition, namely, the issuance of the title. The record
show that up to the present time that condition has not been fulfilled;
consequently the defendant cannot be heard to invoke a right which
depends on the existence of that condition. If in the cross-complaint it had
been alleged that the fulfillment of the condition was impossible for reasons

imputable to the plaintiff, and if this allegation had been proven, perhaps
the condition would have been considered as fulfilled (arts. 1117, 1118, and
1119, Civ. Code); but this issue was not presented in the defendant's
answer.
However, although we are not in agreement with the reasoning found in the
decision appealed from, we consider it to be correct in its result. The record
shows that the plaintiff did not deliver the thing sold. With respect to two of
the parcels of land, he was not even able to show them to the purchaser;
and as regards the other two, more than two-thirds of their area was in the
hostile and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing sold.
The thing is considered to be delivered when it is placed "in the hands and
possession of the vendee." (Civ. Code, art. 1462.) It is true that the same
article declares that the execution of a public instruments is equivalent to
the delivery of the thing which is the object of the contract, but, in order that
this symbolic delivery may produce the effect of tradition, it is necessary
that the vendor shall have had such control over the thing sold that, at the
moment of the sale, its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another
in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality the delivery has
not been effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on
article 1604 of the French Civil code, "the word "delivery" expresses a
complex idea . . . the abandonment of the thing by the person who makes
the delivery and the taking control of it by the person to whom the delivery
is made."
The execution of a public instrument is sufficient for the purposes of the
abandonment made by the vendor; but it is not always sufficient to permit
of the apprehension of the thing by the purchaser.

The supreme court of Spain, interpreting article 1462 of the Civil Code, held
in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this
article "merely declares that when the sale is made through the means of a
public instrument, the execution of this latter is equivalent to the delivery of
the thing sold: which does not and cannot mean that this fictitious tradition
necessarily implies the real tradition of the thing sold, for it is
incontrovertible that, while its ownership still pertains to the vendor (and
with greater reason if it does not), a third person may be in possession of
the same thing; wherefore, though, as a general rule, he who purchases by
means of a public instrument should be deemed . . . to be the possessor in
fact, yet this presumption gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the
instrument was not a fulfillment of the vendors' obligation to deliver the
thing sold, and that from such non-fulfillment arises the purchaser's right to
demand, as she has demanded, the rescission of the sale and the return of
the price. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of
imposing upon the purchaser the obligation to take the necessary steps to
obtain the material possession of the thing sold, and it were proven that
she knew that the thing was in the possession of a third person claiming to
have property rights therein, such agreement would be perfectly valid. But
there is nothing in the instrument which would indicate, even implicitly, that
such was the agreement. It is true, as the appellant argues, that the
obligation was incumbent upon the defendant Marciana Felix to apply for
and obtain the registration of the land in the new registry of property; but
from this it cannot be concluded that she had to await the final decision of
the Court of Land Registration, in order to be able to enjoy the property
sold. On the contrary, it was expressly stipulated in the contract that the
purchaser should deliver to the vendor one-fourth "of the products ... of the
aforesaid four parcels from the moment when she takes possession of
them until the Torrens certificate of title be issued in her favor." This
obviously shows that it was not forseen that the purchaser might be
deprived of her possession during the course of the registration
proceedings, but that the transaction rested on the assumption that she
was to have, during said period, the material possession and enjoyment of
the four parcels of land.

Inasmuch as the rescission is made by virtue of the provisions of law and

not by contractual agreement, it is not the conventional but the legal
interest that is demandable.
It is therefore held that the contract of purchase and sale entered into by
and between the plaintiff and the defendant on June 11, 1914, is rescinded,
and the plaintiff is ordered to make restitution of the sum of P3,000
received by him on account of the price of the sale, together with interest
thereon at the legal rate of 6 per annum from the date of the filing of the
complaint until payment, with the costs of both instances against the
appellant. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-69970 November 28, 1988
FELIX DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by
her husband, JOSE TAGACAY,respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.

CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo Melad which
is claimed by both the petitioner and the respondent. The trial court
believed the petitioner but the respondent court, on appeal, upheld the
respondent. The case is now before us for a resolution of the issues once
and for all.
On January 29, 1962, the respondent filed a complaint against the
petitioner in the then Court of First Instance of Cagayan for recovery of a

farm lot and a residential lot which she claimed she had purchased from
Domingo Melad in 1943 and were now being unlawfully withheld by the
defendant. 1 In his answer, the petitioner denied the allegation and averred
that he was the owner of the said lots of which he had been in open,
continuous and adverse possession, having acquired them from Domingo
Melad in 1941 and 1943. 2 The case was dismissed for failure to prosecute
but was refiled in 1967. 3
At the trial, the plaintiff presented a deed of sale dated December 4, 1943,
purportedly signed by Domingo Melad and duly notarized, which conveyed
the said properties to her for the sum of P80.00. 4 She said the amount was
earned by her mother as a worker at the Tabacalera factory. She claimed to
be the illegitimate daughter of Domingo Melad, with whom she and her
mother were living when he died in 1945. She moved out of the farm only
when in 1946 Felix Danguilan approached her and asked permission to
cultivate the land and to stay therein. She had agreed on condition that he
would deliver part of the harvest from the farm to her, which he did from
that year to 1958. The deliveries having stopped, she then consulted the
municipal judge who advised her to file the complaint against Danguilan.
The plaintiff 's mother, her only other witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of Isidra
Melad, Domingo's niece, whom he and his wife Juana Malupang had taken
into their home as their ward as they had no children of their own. He and
his wife lived with the couple in their house on the residential lot and helped
Domingo with the cultivation of the farm. Domingo Melad signed in 1941 a
private instrument in which he gave the defendant the farm and in 1943
another private instrument in which he also gave him the residential lot, on
the understanding that the latter would take care of the grantor and would
bury him upon his death. 6 Danguilan presented three other witnesses 7 to
corroborate his statements and to prove that he had been living in the land
since his marriage to Isidra and had remained in possession thereof after
Domingo Melad's death in 1945. Two of said witnesses declared that
neither the plaintiff nor her mother lived in the land with Domingo Melad. 8
The decision of the trial court was based mainly on the issue of possession.
Weighing the evidence presented by the parties, the judge 9 held that the
defendant was more believable and that the plaintiff's evidence was
"unpersuasive and unconvincing." It was held that the plaintiff's own
declaration that she moved out of the property in 1946 and left it in the

possession of the defendant was contradictory to her claim of ownership.

She was also inconsistent when she testified first that the defendant was
her tenant and later in rebuttal that he was her administrator. The decision
concluded that where there was doubt as to the ownership of the property,
the presumption was in favor of the one actually occupying the same,
which in this case was the defendant. 10
The review by the respondent court 11 of this decision was manifestly less
than thorough. For the most part it merely affirmed the factual findings of
the trial court except for an irrelevant modification, and it was only toward
the end that it went to and resolved what it considered the lone decisive
issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which
Domingo Melad had conveyed the two parcels of land to the petitioner,
were null and void. The reason was that they were donations of real
property and as such should have been effected through a public
instrument. It then set aside the appealed decision and declared the
respondents the true and lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows: 12
I, DOMINGO MELAD, of legal age, married, do hereby declare
in this receipt the truth of my giving to Felix Danguilan, my
agricultural land located at Barrio Fugu-Macusi, Penablanca,
Province of Cagayan, Philippine Islands; that this land is
registered under my name; that I hereby declare and bind
myself that there is no one to whom I will deliver this land
except to him as he will be the one responsible for me in the
event that I will die and also for all other things needed and
necessary for me, he will be responsible because of this land I
am giving to him; that it is true that I have nieces and nephews
but they are not living with us and there is no one to whom I will
give my land except to Felix Danguilan for he lives with me and
this is the length175 m. and the width is 150 m.
IN WITNESS WHEREOF, I hereby sign my name below and
also those present in the execution of this receipt this 14th day
of September 1941.

Penablanca Cagayan, September 14, 1941.

(SGD.) DOMINGO MELAD
WITNESSES:
1. (T.M.) ISIDRO MELAD
2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows: 13
I, DOMINGO MELAD, a resident of Centro, Penablanca,
Province of Cagayan, do hereby swear and declare the truth
that I have delivered my residential lot at Centro, Penablanca,
Cagayan, to Felix Danguilan, my son-in-law because I have no
child; that I have thought of giving him my land because he will
be the one to take care of SHELTERING me or bury me when I
die and this is why I have thought of executing this document;
that the boundaries of this lot ison the east, Cresencio
Danguilan; on the north, Arellano Street; on the south by Pastor
Lagundi and on the west, Pablo Pelagio and the area of this lot
is 35 meters going south; width and length beginning west to
east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th day
of December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO
It is our view, considering the language of the two instruments, that
Domingo Melad did intend to donate the properties to the petitioner, as the
private respondent contends. We do not think, however, that the donee was
moved by pure liberality. While truly donations, the conveyances
were onerous donations as the properties were given to the petitioner in
exchange for his obligation to take care of the donee for the rest of his life
and provide for his burial. Hence, it was not covered by the rule in Article

749 of the Civil Code requiring donations of real properties to be effected

through a public instrument. The case at bar comes squarely under the
doctrine laid down in Manalo v. De Mesa, 14 where the Court held:
There can be no doubt that the donation in question was made
for a valuable consideration, since the donors made it
conditional upon the donees' bearing the expenses that might
be occasioned by the death and burial of the donor Placida
Manalo, a condition and obligation which the donee Gregorio
de Mesa carried out in his own behalf and for his wife Leoncia
Manalo; therefore, in order to determine whether or not said
donation is valid and effective it should be sufficient to
demonstrate that, as a contract, it embraces the conditions the
law requires and is valid and effective, although not recorded in
a public instrument.
The private respondent argues that as there was no equivalence between
the value of the lands donated and the services for which they were being
exchanged, the two transactions should be considered pure or gratuitous
donations of real rights, hence, they should have been effected through a
public instrument and not mere private writings. However, no evidence has
been adduced to support her contention that the values exchanged were
disproportionate or unequal.
On the other hand, both the trial court and the respondent court have
affirmed the factual allegation that the petitioner did take care of Domingo
Melad and later arranged for his burial in accordance with the condition
imposed by the donor. It is alleged and not denied that he died when he
was almost one hundred years old, 15 which would mean that the petitioner
farmed the land practically by himself and so provided for the donee (and
his wife) during the latter part of Domingo Melad's life. We may assume
that there was a fair exchange between the donor and the donee that made
the transaction an onerous donation.
Regarding the private respondent's claim that she had purchased the
properties by virtue of a deed of sale, the respondent court had only the
following to say: "Exhibit 'E' taken together with the documentary and oral
evidence shows that the preponderance of evidence is in favor of the
appellants." This was, we think, a rather superficial way of resolving such a
basic and important issue.

The deed of sale was allegedly executed when the respondent was only
three years old and the consideration was supposedly paid by her mother,
Maria Yedan from her earnings as a wage worker in a factory. 16 This was
itself a suspicious circumstance, one may well wonder why the transfer was
not made to the mother herself, who was after all the one paying for the
lands. The sale was made out in favor of Apolonia Melad although she had
been using the surname Yedan her mother's surname, before that
instrument was signed and in fact even after she got married. 17 The
averment was also made that the contract was simulated and prepared
after Domingo Melad's death in 1945. 18 It was also alleged that even after
the supposed execution of the said contract, the respondent considered
Domingo Melad the owner of the properties and that she had never
occupied the same. 19
Considering these serious challenges, the appellate court could have
devoted a little more time to examining Exhibit "E" and the circumstances
surrounding its execution before pronouncing its validity in the manner
described above. While it is true that the due execution of a public
instrument is presumed, the presumption is disputable and will yield to
contradictory evidence, which in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the record
shows that the private respondent did not take possession of the disputed
properties and indeed waited until 1962 to file this action for recovery of the
lands from the petitioner. If she did have possession, she transferred the
same to the petitioner in 1946, by her own sworn admission, and moved
out to another lot belonging to her step-brother. 20 Her claim that the
petitioner was her tenant (later changed to administrator) was disbelieved
by the trial court, and properly so, for its inconsistency. In short, she failed
to show that she consummated the contract of sale by actual delivery of the
properties to her and her actual possession thereof in concept of
purchaser-owner.
As was held in Garchitorena v. Almeda: 21
Since in this jurisdiction it is a fundamental and elementary
principle that ownership does not pass by mere stipulation but
only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v.
Wilson, 8 Phil. 51), and the execution of a public document
does not constitute sufficient delivery where the property

involved is in the actual and adverse possession of third

persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39
Phil. 134), it becomes incontestable that even if included in the
contract, the ownership of the property in dispute did not pass
thereby to Mariano Garchitorena. Not having become the owner
for lack of delivery, Mariano Garchitorena cannot presume to
recover the property from its present possessors. His action,
therefore, is not one of revindicacion, but one against his
vendor for specific performance of the sale to him.
In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa
declared for the Court:
Therefore, in our Civil Code it is a fundamental principle in all
matters of contracts and a well- known doctrine of law that "non
mudis pactis sed traditione dominia rerum transferuntur". In
conformity with said doctrine as established in paragraph 2 of
article 609 of said code, that "the ownership and other property
rights are acquired and transmitted by law, by gift, by testate or
intestate succession, and, in consequence of certain
contracts, by tradition". And as the logical application of this
disposition article 1095 prescribes the following: "A creditor has
the rights to the fruits of a thing from the time the obligation to
deliver it arises. However, he shall not acquire a real right" (and
the ownership is surely such) "until the property has been
delivered to him."
In accordance with such disposition and provisions the delivery
of a thing constitutes a necessary and indispensable requisite
for the purpose of acquiring the ownership of the same by virtue
of a contract. As Manresa states in his Commentaries on the
Civil Code, volume 10, pages 339 and 340: "Our law does not
admit the doctrine of the transfer of property by mere consent
but limits the effect of the agreement to the due execution of the
contract. ... The ownership, the property right, is only derived
from the delivery of a thing ... "
As for the argument that symbolic delivery was effected through the deed
of sale, which was a public instrument, the Court has held:

The Code imposes upon the vendor the obligation to deliver the
thing sold. The thing is considered to be delivered when it is
placed "in the hands and possession of the vendee." (Civil
Code, art. 1462). It is true that the same article declares that
the execution of a public instrument is equivalent to the delivery
of the thing which is the object of the contract, but, in order that
this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the
thing sold that, at the moment of the sale, its material delivery
could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing
sold must be placed in his control.When there is no impediment
whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser
cannot have the enjoyment and material tenancy of the thing
and make use of it himself or through another in his name,
because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to realitythe
delivery has not been effected. 23
There is no dispute that it is the petitioner and not the private respondent
who is in actual possession of the litigated properties. Even if the
respective claims of the parties were both to be discarded as being
inherently weak, the decision should still incline in favor of the petitioner
pursuant to the doctrine announced in Santos & Espinosa v.
Estejada 24 where the Court announced:
If the claim of both the plaintiff and the defendant are weak,
judgment must be for the defendant, for the latter being in
possession is presumed to be the owner, and cannot be obliged
to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that
of the trial court REINSTATED, with costs against the private respondent. It
is so ordered.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-21998 November 10, 1975
CALIXTO PASAGUI and FAUSTA MOSAR, plaintiffs-appellants,
vs.
ESTER T. VILLABLANCA, ZOSIMO VILLABLANCA, EUSTAQUIA
BOCAR and CATALINA BOCAR defendants-appellees.
Julio Siayngco for plaintiffs-appellants.
Filomeno Arteche, Jr. for defendants-appellees. .

ANTONIO, J.:
The only issue posed by this appeal is whether or not, from the nature of
the action pleaded as appears in the allegations of the complaint, the
aforesaid action is one of forcible entry, within the exclusive jurisdiction of
the municipal court. .
On February 4, 1963, appellants Calixto Pasagui and Fausta Mosar filed a
complaint with the Court of First Instance at Tacloban City, alleging that
onNovember 15, 1962, for and in consideration of Two Thousand Eight
Hundred Pesos (P2,800.00), they bought from appellees Eustaquia Bocar
and Catalina Bocar a parcel of agricultural land with an area of 2.6814
hectares, situated in Hamindangon, Pastrana, Leyte; that the
corresponding document of sale was executed, notarized on the same
date, and recorded in the Registry of Deeds of Tacloban, Leyte on
November 16, 1962; that during the first week of February, 1963, defendant
spouses Ester T. Villablanca and Zosimo Villablanca, "illegally and without
any right, whatsoever, took possession of the above property harvesting
coconuts from the coconut plantation thereon, thus depriving plaintiffs" of
its possession; that despite demands made by the plaintiffs upon the
above-mentioned defendants "to surrender to them the above-described
property and its possession" the latter failed or refused to return said parcel

of land to the former, causing them damage; and that Eustaquia and
Catalina Bocar, vendors of the property, are included defendants in the
complaint by virtue of the warranty clause contained in the document of
sale. Plaintiffs prayed for a decision ordering defendants to surrender the
possession of the parcel of land above-described to them and to pay
damages in the amounts specified. .
On February 21, 1963, appellees moved to dismiss the complaint on the
ground that the Court of First Instance had no jurisdiction over the subject
matter, the action being one of forcible entry. Appellants opposed the
Motion to Dismiss asserting that the action is not one for forcible entry
inasmuch as in the complaint, there is no allegation that the deprivation of
possession was effected through "force, intimidation, threat, strategy or
stealth." .
On May 13, 1963, the trial court issued an order dismissing the complaint
for lack of jurisdiction, it appearing from the allegations in the complaint that
the case is one for forcible entry which belongs to the exclusive jurisdiction
of the Justice of the Peace (now Municipal Court) of Pastrana, Leyte. The
first Motion for Reconsideration was denied on May 27, 1963 and the
second was likewise denied on July 5, 1963. From the aforementioned
orders, appeal on a pure question of law was interposed to this Court. .
It is well-settled that what determines the jurisdiction of the municipal court
in a forcible entry case is the nature of the action pleaded as appears from
the allegations in the complaint. In ascertaining whether or not the action is
one of forcible entry within the original exclusive jurisdiction of the
municipal court, the averments of the complaint and the character of the
relief sought are the ones to be consulted.. 1 .
In the case at bar, the complaint does not allege that the plaintiffs were in
physical possession of the land and have been deprived of that possession
through force, intimidation, threat, strategy, or stealth. It simply avers that
plaintiffs-appellants bought on November 12, 1962 from defendantsappellees Eustaquia Bocar and Catalina Bocar the parcel of land in
question for the amount of P2,800.00; that a deed of sale was executed,
notarized and registered;that "during this first week of February, 1963,
defendants Ester T. Villablanca and her husband, Zosimo Villablanca,
illegally and without any right whatsoever, took possession of the above
described property, harvesting coconuts from the coconut plantation

therein, thus depriving of its possession herein plaintiffs, and causing them
damages for the amount of EIGHT HUNDRED PESOS (P800.00)"; that for
the purpose of enforcing the vendors' warranty in case of eviction,
Eustaquia Bocar and Catalina Bocar were also included as defendants;
and, therefore, plaintiffs-appellants pray that a decision be rendered,
ordering (a) defendants Ester T. Villablanca and her husband, Zosimo
Villablanca, "to surrender the possession of the above described property
to said plaintiffs"; (b) defendants Ester T. Villablanca and her husband,
Zosimo Villablanca, "to pay to said plaintiffs the amount of EIGHT
HUNDRED PESOS (P800.00) as damages for the usurpation by them of
said property"; and (c) defendants Eustaquia Bocar and Catalina Bocar "to
pay the plaintiffs the amount of P2,800.00, plus incidental expenses, as
provided for by Art. 1555 of the Civil Code, in case of eviction or loss of
ownership to said above described property on the part of plaintiffs." .
It is true that the execution of the deed of absolute sale in a public
instrument is equivalent to delivery of the land subject of the sale. 2 This
presumptive delivery only holds true when there is no impediment that may
prevent the passing of the property from the hands of the vendor into those
of the vendee. It can be negated by the reality that the vendees actually
failed to obtain material possession of the land subject of the sale.. 3 It
appears from the records of the case at bar that plaintiffs-appellants had
not acquired physical possession of the land since its purchase on
November 12, 1962. As a matter of fact, their purpose in filing the complaint
in Civil Case No. 3285 is precisely to "get the possession of the
property." 4 In order that an action may be considered as one for forcible
entry, it is not only necessary that the plaintiff should allege his prior
physical possession of the property but also that he was deprived of his
possession by any of the means provided in section 1, Rule 70 of the
Revised Rules of Court, namely: force, intimidation, threats, strategy and
stealth. For, if the dispossession did not take place by any of these means,
the courts of first instance, not the municipal courts, have jurisdictions..
5 The bare allegation in the complaint that the plaintiff has been "deprived"
of the land of which he is and has been the legal owner for a long period
has been held to be insufficient. 6 It is true that the mere act of a trespasser
in unlawfully entering the land, planting himself on the ground and
excluding therefrom the prior possessor would imply the use of force. In the
case at bar, no such inference could be made as plaintiffs-appellants had
not claimed that they were in actual physical possession of the property
prior to the entry of the Villablancas. Moreover, it is evident that plaintiffs-

appellants are not only seeking to get the possession of the property, but
as an alternative cause of action, they seek the return of the price and
payment of damages by the vendors "in case of eviction or loss of
ownership" of the said property. It is, therefore, not the summary action of
forcible entry within the context of the Rules. .
WHEREFORE, the order of dismissal is hereby set aside, and the case
remanded to the court a quo for further proceedings. Costs against
defendants-appellees. .
Barredo, Actg. (Chairman), Aquino, Concepcion, Jr. and Martin. JJ.,
concur. .
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 92989 July 8, 1991
PERFECTO DY, JR. petitioner,
vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V.
GONZALES, respondents.
Zosa & Quijano Law Offices for petitioner.
Expedito P. Bugarin for respondent GELAC Trading, Inc.

GUTIERREZ, JR., J.:p

This is a petition for review on certiorari seeking the reversal of the March
23, 1990 decision of the Court of Appeals which ruled that the petitioner's
purchase of a farm tractor was not validly consummated and ordered a
complaint for its recovery dismissed.
The facts as established by the records are as follows:

The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in

1979, Wilfredo Dy purchased a truck and a farm tractor through financing
extended by Libra Finance and Investment Corporation (Libra). Both truck
and tractor were mortgaged to Libra as security for the loan.
The petitioner wanted to buy the tractor from his brother so on August 20,
1979, he wrote a letter to Libra requesting that he be allowed to purchase
from Wilfredo Dy the said tractor and assume the mortgage debt of the
latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares
approved the petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale
in favor of the petitioner over the tractor in question.
At this time, the subject tractor was in the possession of Libra Finance due
to Wilfredo Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the
immediate release could not be effected because Wilfredo Dy had obtained
financing not only for said tractor but also for a truck and Libra insisted on
full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase
the truck so that full payment could be made for both. On November 22,
1979, a PNB check was issued in the amount of P22,000.00 in favor of
Libra, thus settling in full the indebtedness of Wilfredo Dy with the financing
firm. Payment having been effected through an out-of-town check, Libra
insisted that it be cleared first before Libra could release the chattels in
question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo
Dy", a collection case to recover the sum of P12,269.80 was pending in
another court in Cebu.
On the strength of an alias writ of execution issued on December 27, 1979,
the provincial sheriff was able to seize and levy on the tractor which was in
the premises of Libra in Carmen, Cebu. The tractor was subsequently sold
at public auction where Gelac Trading was the lone bidder. Later, Gelac
sold the tractor to one of its stockholders, Antonio Gonzales.

It was only when the check was cleared on January 17, 1980 that the
petitioner learned about GELAC having already taken custody of the
subject tractor. Consequently, the petitioner filed an action to recover the
subject tractor against GELAC Trading with the Regional Trial Court of
Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The
dispositive portion of the decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant, pronouncing that the plaintiff
is the owner of the tractor, subject matter of this case, and
directing the defendants Gelac Trading Corporation and Antonio
Gonzales to return the same to the plaintiff herein; directing the
defendants jointly and severally to pay to the plaintiff the
amount of P1,541.00 as expenses for hiring a tractor; P50,000
for moral damages; P50,000 for exemplary damages; and to
pay the cost. (Rollo, pp. 35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and
dismissed the complaint with costs against the petitioner. The Court of
Appeals held that the tractor in question still belonged to Wilfredo Dy when
it was seized and levied by the sheriff by virtue of the alias writ of execution
issued in Civil Case No. R-16646.
The petitioner now comes to the Court raising the following questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT
AFFIRMING THE TRIAL COURT'S FINDING THAT
OWNERSHIP OF THE FARM TRACTOR HAD ALREADY
PASSED TO HEREIN PETITIONER WHEN SAID TRACTOR
WAS LEVIED ON BY THE SHERIFF PURSUANT TO
AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER
CASE IN FAVOR OF RESPONDENT GELAC TRADING INC.
B.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS

EMBARKED ON MERE CONJECTURE AND SURMISE IN
HOLDING THAT THE SALE OF THE AFORESAID TRACTOR
TO PETITIONER WAS DONE IN FRAUD OF WILFREDO DY'S
CREDITORS, THERE BEING NO EVIDENCE OF SUCH
FRAUD AS FOUND BY THE TRIAL COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT
SUSTAINING THE FINDING OF THE TRIAL COURT THAT
THE SALE OF THE TRACTOR BY RESPONDENT GELAC
TRADING TO ITS CO-RESPONDENT ANTONIO V.
GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH
RESPONDENTS ALREADY KNEW OF THE FILING OF THE
INSTANT CASE WAS VIOLATIVE OF THE HUMAN
RELATIONS PROVISIONS OF THE CIVIL CODE AND
RENDERED THEM LIABLE FOR THE MORAL AND
EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY THE
TRIAL COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale,
no constructive delivery was effected since the consummation of the sale
depended upon the clearance and encashment of the check which was
issued in payment of the subject tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court.
(174 SCRA 80 [1989]), we stated that:
xxx xxx xxx
The rule is settled that the chattel mortgagor continues to be
the owner of the property, and therefore, has the power to
alienate the same; however, he is obliged under pain of penal
liability, to secure the written consent of the mortgagee.
(Francisco, Vicente, Jr., Revised Rules of Court in the
Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the
instruments of mortgage are binding, while they subsist, not
only upon the parties executing them but also upon those who

later, by purchase or otherwise, acquire the properties referred

to therein.
The absence of the written consent of the mortgagee to the
sale of the mortgaged property in favor of a third person,
therefore, affects not the validity of the sale but only the penal
liability of the mortgagor under the Revised Penal Code and the
binding effect of such sale on the mortgagee under the Deed of
Chattel Mortgage.
xxx xxx xxx
The mortgagor who gave the property as security under a chattel mortgage
did not part with the ownership over the same. He had the right to sell it
although he was under the obligation to secure the written consent of the
mortgagee or he lays himself open to criminal prosecution under the
provision of Article 319 par. 2 of the Revised Penal Code. And even if no
consent was obtained from the mortgagee, the validity of the sale would
still not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not
sell the subject tractor. There is no dispute that the consent of Libra
Finance was obtained in the instant case. In a letter dated August 27, 1979,
Libra allowed the petitioner to purchase the tractor and assume the
mortgage debt of his brother. The sale between the brothers was therefore
valid and binding as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the
ways specified in Articles 1497 to 1501 or in any other manner signing an
agreement that the possession is transferred from the vendor to the
vendee. We agree with the petitioner that Articles 1498 and 1499 are
applicable in the case at bar.
Article 1498 states:
Art. 1498. When the sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.

xxx xxx xxx

Article 1499 provides:
Article 1499. The delivery of movable property may likewise be
made by the mere consent or agreement of the contracting
parties, if the thing sold cannot be transferred to the possession
of the vendee at the time of the sale, or if the latter already had
it in his possession for any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could not be made.
However, there was constructive delivery already upon the execution of the
public instrument pursuant to Article 1498 and upon the consent or
agreement of the parties when the thing sold cannot be immediately
transferred to the possession of the vendee. (Art. 1499)
The respondent court avers that the vendor must first have control and
possession of the thing before he could transfer ownership by constructive
delivery. Here, it was Libra Finance which was in possession of the subject
tractor due to Wilfredo's failure to pay the amortization as a preliminary step
to foreclosure. As mortgagee, he has the right of foreclosure upon default
by the mortgagor in the performance of the conditions mentioned in the
contract of mortgage. The law implies that the mortgagee is entitled to
possess the mortgaged property because possession is necessary in order
to enable him to have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of
the subject tractor, his right of ownership was not divested from him upon
his default. Neither could it be said that Libra was the owner of the subject
tractor because the mortgagee can not become the owner of or convert
and appropriate to himself the property mortgaged. (Article 2088, Civil
Code) Said property continues to belong to the mortgagor. The only
remedy given to the mortgagee is to have said property sold at public
auction and the proceeds of the sale applied to the payment of the
obligation secured by the mortgagee. (See Martinez v. PNB, 93 Phil. 765,
767 [1953]) There is no showing that Libra Finance has already foreclosed
the mortgage and that it was the new owner of the subject tractor.
Undeniably, Libra gave its consent to the sale of the subject tractor to the
petitioner. It was aware of the transfer of rights to the petitioner.

Where a third person purchases the mortgaged property, he automatically

steps into the shoes of the original mortgagor. (See Industrial Finance
Corp. v. Apostol, 177 SCRA 521 [1989]). His right of ownership shall be
subject to the mortgage of the thing sold to him. In the case at bar, the
petitioner was fully aware of the existing mortgage of the subject tractor to
Libra. In fact, when he was obtaining Libra's consent to the sale, he
volunteered to assume the remaining balance of the mortgage debt of
Wilfredo Dy which Libra undeniably agreed to.
The payment of the check was actually intended to extinguish the mortgage
obligation so that the tractor could be released to the petitioner. It was
never intended nor could it be considered as payment of the purchase price
because the relationship between Libra and the petitioner is not one of sale
but still a mortgage. The clearing or encashment of the check which
produced the effect of payment determined the full payment of the money
obligation and the release of the chattel mortgage. It was not determinative
of the consummation of the sale. The transaction between the brothers is
distinct and apart from the transaction between Libra and the petitioner.
The contention, therefore, that the consummation of the sale depended
upon the encashment of the check is untenable.
The sale of the subject tractor was consummated upon the execution of the
public instrument on September 4, 1979. At this time constructive delivery
was already effected. Hence, the subject tractor was no longer owned by
Wilfredo Dy when it was levied upon by the sheriff in December, 1979. Well
settled is the rule that only properties unquestionably owned by the
judgment debtor and which are not exempt by law from execution should
be levied upon or sought to be levied upon. For the power of the court in
the execution of its judgment extends only over properties belonging to the
judgment debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals,
G.R. No. 78771, January 23, 1991).
The respondents further claim that at that time the sheriff levied on the
tractor and took legal custody thereof no one ever protested or filed a third
party claim.
It is inconsequential whether a third party claim has been filed or not by the
petitioner during the time the sheriff levied on the subject tractor. A person
other than the judgment debtor who claims ownership or right over levied
properties is not precluded, however, from taking other legal remedies to

prosecute his claim. (Consolidated Bank and Trust Corp. v. Court of

Appeals, supra) This is precisely what the petitioner did when he filed the
action for replevin with the RTC.
Anent the second and third issues raised, the Court accords great respect
and weight to the findings of fact of the trial court. There is no sufficient
evidence to show that the sale of the tractor was in fraud of Wilfredo and
creditors. While it is true that Wilfredo and Perfecto are brothers, this fact
alone does not give rise to the presumption that the sale was fraudulent.
Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663
[1963]). Moreover, fraud can not be presumed; it must be established by
clear convincing evidence.
We agree with the trial court's findings that the actuations of GELAC
Trading were indeed violative of the provisions on human relations. As
found by the trial court, GELAC knew very well of the transfer of the
property to the petitioners on July 14, 1980 when it received summons
based on the complaint for replevin filed with the RTC by the petitioner.
Notwithstanding said summons, it continued to sell the subject tractor to
one of its stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court
of Appeals promulgated on March 23, 1990 is SET ASIDE and the decision
of the Regional Trial Court dated April 8, 1988 is REINSTATED.
SO ORDERED.
THIRD DIVISION
[G.R. No. 119745. June 20, 1997]
POWER
COMMERCIAL
AND
INDUSTRIAL
CORPORATION, petitioner, vs. COURT OF APPEALS, SPOUSES
REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE
NATIONAL BANK, respondents.
DECISION
PANGANIBAN, J.:

Is the sellers failure to eject the lessees from a lot that is the subject of
a contract of sale with assumption of mortgage a ground (1) for rescission
of such contract and (2) for a return by the mortgagee of the amortization
payments made by the buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition
for review on certiorari of the March 27, 1995 Decision[1] of the Court of
Appeals, Eighth Division, in CA-G.R. CV Case No. 32298 upholding the
validity of the contract of sale with assumption of mortgage and absolving
the mortgagee from the liability of returning the mortgage payments already
made.[2]
The Facts
Petitioner Power Commercial & Industrial Development Corporation, an
industrial asbestos manufacturer, needed a bigger office space and
warehouse for its products. For this purpose, on January 31, 1979, it
entered into a contract of sale with the spouses Reynaldo and Angelita R.
Quiambao, herein private respondents. The contract involved a 612-sq. m.
parcel of land covered by Transfer Certificate of Title No. S-6686 located at
the corner of Bagtican and St. Paul Streets, San Antonio Village, Makati
City. The parties agreed that petitioner would pay private
respondents P108,000.00 as down payment, and the balance
of P295,000.00 upon the execution of the deed of transfer of the title over
the property. Further, petitioner assumed, as part of the purchase price, the
existing mortgage on the land. In full satisfaction thereof, he
paid P79,145.77 to Respondent Philippine National Bank (PNB for brevity).
On June 1, 1979, respondent spouses mortgaged again said land to
PNB to guarantee a loan of P145,000.00, P80,000.00 of which was paid to
respondent spouses.Petitioner agreed to assume payment of the loan.
On June 26, 1979, the parties executed a Deed of Absolute Sale With
Assumption of Mortgage which contained the following terms and
conditions:[3]
That for and in consideration of the sum of Two Hundred Ninety-Five
Thousand Pesos (P295,000.00) Philippine Currency, to us in hand paid in
cash, and which we hereby acknowledge to be payment in full and received
to our entire satisfaction, by POWER COMMERCIAL AND INDUSTRIAL
DEVELOPMENT CORPORATION, a 100% Filipino Corporation, organized

and existing under and by virtue of Philippine Laws with offices located at
252-C Vito Cruz Extension, we hereby by these presents SELL,
TRANSFER and CONVEY by way of absolute sale the above described
property with all the improvements existing thereon unto the said Power
Commercial and Industrial Development Corporation, its successors and
assigns, free from all liens and encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered
by the provisions of the Land Reform Code -- the same having no
agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession
thereof in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of
any and all third persons; subject, however, to the provisions hereunder
provided to wit:
That the above described property is mortgaged to the Philippine National
Bank, Cubao, Branch, Quezon City for the amount of one hundred forty-five
thousand pesos, Philippine, evidenced by document No. 163, found on
page No. 34 of Book No. XV, Series of 1979 of Notary Public Herita L.
Altamirano registered with the Register of Deeds of Pasig (Makati),
Rizal xxx;
That the said Power Commercial and Industrial Development Corporation
assumes to pay in full the entire amount of the said mortgage above
described plus interest and bank charges, to the said mortgagee bank, thus
holding the herein vendor free from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and
approval of the said Philippine National Bank to the herein sale of this
property, hereby agreeing to abide by any and all requirements of the said
bank, agreeing that failure to do so shall give to the bank first lieu (sic) over
the herein described property.
On the same date, Mrs. C.D. Constantino, then General Manager of
petitioner-corporation, submitted to PNB said deed with a formal application
for assumption of mortgage.[4]

On February 15, 1980, PNB informed respondent spouses that, for

petitioners failure to submit the papers necessary for approval pursuant to
the formers letter dated January 15, 1980, the application for assumption of
mortgage was considered withdrawn; that the outstanding balance
of P145,000.00 was deemed fully due and demandable; and that said loan
was to be paid in full within fifteen (15) days from notice. [5]
Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on
December 23, 1980, payments which were to be applied to the outstanding
loan. On December 23, 1980, PNB received a letter from petitioner which
reads:[6]
With regard to the presence of the people who are currently in physical
occupancy of the (l)ot xxx it is our desire as buyers and new owners of this
lot to make use of this lot for our own purpose, which is why it is our desire
and intention that all the people who are currently physically present and in
occupation of said lot should be removed immediately.
For this purpose we respectfully request that xxx our assumption of
mortgage be given favorable consideration, and that the mortgage and title
be transferred to our name so that we may undertake the necessary
procedures to make use of this lot ourselves.
It was our understanding that this lot was free and clear of problems of this
nature, and that the previous owner would be responsible for the removal
of the people who were there. Inasmuch as the previous owner has not
been able to keep his commitment, it will be necessary for us to take legal
possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as follows: [7]
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was
assumed by you on June 4, 1979 for P101,500.00. It was last renewed on
December 24, 1980 to mature on June 4, 1981.
A review of our records show that it has been past due from last maturity
with interest arrearages amounting to P25,826.08 as of February 19,
1982. The last payment received by us was on December 24, 1980
for P20,283.14. In order to place your account in current form, we request
you to remit payments to cover interest, charges, and at least part of the
principal.

On March 17, 1982, petitioner filed Civil Case No. 45217 against
respondent spouses for rescission and damages before the Regional Trial
Court of Pasig, Branch 159. Then, in its reply to PNBs letter of February 19,
1982, petitioner demanded the return of the payments it made on the
ground that its assumption of mortgage was never approved. On May 31,
1983,[8] while this case was pending, the mortgage was foreclosed. The
property was subsequently bought by PNB during the public auction. Thus,
an amended complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court [9] ruled that the failure of respondent
spouses to deliver actual possession to petitioner entitled the latter to
rescind the sale, and in view of such failure and of the denial of the latters
assumption of mortgage, PNB was obliged to return the payments made by
the latter. The dispositive portion of said decision states: [10]
IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in
favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of
Mortgage executed between plaintiff and defendants Spouses Quiambao,
dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the
amount of P187,144.77 (P108,000.00 plus P79,145.77) with legal interest
of 12% per annum from date of filing of herein complaint, that is, March 17,
1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59
(P41,880.45 and P20,283.14) with 12% interest thereon from date of herein
judgment until the same is fully paid.
No award of other damages and attorneys fees, the same not being
warranted under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are
dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.

On appeal by respondent-spouses and PNB, Respondent Court of

Appeals reversed the trial court. In the assailed Decision, it held that the
deed of sale between respondent spouses and petitioner did not obligate
the former to eject the lessees from the land in question as a condition of
the sale, nor was the occupation thereof by said lessees a violation of the
warranty against eviction. Hence, there was no substantial breach to justify
the rescission of said contract or the return of the payments made. The
dispositive portion of said Decision reads:[11]
WHEREFORE, the Decision appealed from is hereby REVERSED and the
complaint filed by Power Commercial and Industrial Development
Corporation against the spouses Reynaldo and Angelita Quiambao and the
Philippine National Bank is DISMISSED. No costs.
Hence, the recourse to this Court .
Issues
Petitioner contends that: (1) there was a substantial breach of the
contract between the parties warranting rescission; and (2) there was a
mistake in payment made by petitioner, obligating PNB to return such
payments. In its Memorandum, it specifically assigns the following errors of
law on the part of Respondent Court:[12]
A. Respondent Court of Appeals gravely erred in failing to consider in its
decision that a breach of implied warranty under Article 1547 in
relation to Article 1545 of the Civil Code applies in the case-atbar.
B. Respondent Court of Appeals gravely erred in failing to consider in its
decision that a mistake in payment giving rise to a situation
where the principle of solutio indebiti applies is obtaining in the
case-at-bar.
The Courts Ruling
The petition is devoid of merit. It fails to appreciate the difference
between a condition and a warranty and the consequences of such
distinction.
Conspicuous Absence of an Imposed Condition

The alleged failure of respondent spouses to eject the lessees from the
lot in question and to deliver actual and physical possession thereof cannot
be considered a substantial breach of a condition for two reasons: first,
such failure was not stipulated as a condition -- whether resolutory or
suspensive -- in the contract; and second, its effects and consequences
were not specified either.[13]
The provision adverted to by petitioner does not impose a condition or
an obligation to eject the lessees from the lot. The deed of sale provides in
part:[14]
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession
thereof in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of
any and all third persons; subject, however, to the provisions hereunder
provided to wit:
By his own admission, Anthony Powers, General Manager of petitionercorporation, did not ask the corporations lawyers to stipulate in the contract
that Respondent Reynaldo was guaranteeing the ejectment of the
occupants, because there was already a proviso in said deed of sale that
the sellers were guaranteeing the peaceful possession by the buyer of the
land in question.[15] Any obscurity in a contract, if the above-quoted
provision can be so described, must be construed against the party who
caused it.[16] Petitioner itself caused the obscurity because it omitted this
alleged condition when its lawyer drafted said contract.
If the parties intended to impose on respondent spouses the obligation
to eject the tenants from the lot sold, it should have included in the contract
a provision similar to that referred to in Romero vs. Court of Appeals,
[17]
where the ejectment of the occupants of the lot sold by private
respondent was the operative act which set into motion the period of
petitioners compliance with his own obligation, i.e., to pay the balance of
the purchase price. Failure to remove the squatters within the stipulated
period gave the other party the right to either refuse to proceed with the
agreement or to waive that condition of ejectment in consonance with
Article 1545 of the Civil Code. In the case cited, the contract specifically
stipulated that the ejectment was a condition to be fulfilled; otherwise, the

obligation to pay the balance would not arise. This is not so in the case at
bar.
Absent a stipulation therefor, we cannot say that the parties intended to
make its nonfulfillment a ground for rescission. If they did intend this, their
contract should have expressly stipulated so. In Ang vs. C.A.,[18] rescission
was sought on the ground that the petitioners had failed to fulfill their
obligation to remove and clear the lot sold, the performance of which would
have given rise to the payment of the consideration by private
respondent. Rescission was not allowed, however, because the breach
was not substantial and fundamental to the fulfillment by the petitioners of
the obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual
warranty against eviction, and not to a condition that was not met. The
terms of the contract are so clear as to leave no room for any other
interpretation.[19]
Futhermore, petitioner was well aware of the presence of the tenants at
the time it entered into the sales transaction. As testified to by Reynaldo,
[20]
petitioners counsel during the sales negotiation even undertook the job
of ejecting the squatters. In fact, petitioner actually filed suit to eject the
occupants. Finally, petitioner in its letter to PNB of December 23, 1980
admitted that it was the buyer(s) and new owner(s) of this lot.
Effective Symbolic Delivery
The Court disagrees with petitioners allegation that the respondent
spouses failed to deliver the lot sold. Petitioner asserts that the legal fiction
of symbolic delivery yielded to the truth that, at the execution of the deed of
sale, transfer of possession of said lot was impossible due to the presence
of occupants on the lot sold. We find this misleading.
Although most authorities consider transfer of ownership as the primary
purpose of sale, delivery remains an indispensable requisite as our law
does not admit the doctrine of transfer of property by mere consent. [21] The
Civil Code provides that delivery can either be (1) actual (Article 1497) or
(2) constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a
species of constructive delivery, effects the transfer of ownership through
the execution of a public document. Its efficacy can, however, be prevented

if the vendor does not possess control over the thing sold, [22] in which case
this legal fiction must yield to reality.
The key word is control, not possession, of the land as petitioner would
like us to believe. The Court has consistently held that:[23]
x x x (I)n order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control over
the thing sold that xxx its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another
in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality -- the delivery has
not been effected.
Considering that the deed of sale between the parties did not stipulate
or infer otherwise, delivery was effected through the execution of said
deed. The lot sold had been placed under the control of petitioner; thus, the
filing of the ejectment suit was subsequently done. It signified that its new
owner intended to obtain for itself and to terminate said occupants actual
possession thereof. Prior physical delivery or possession is not legally
required and the execution of the deed of sale is deemed equivalent to
delivery.[24] This deed operates as a formal or symbolic delivery of the
property sold and authorizes the buyer to use the document as proof of
ownership. Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to
establish any breach of the warranty against eviction. Despite its
protestation that its acquisition of the lot was to enable it to set up a
warehouse for its asbestos products and that failure to deliver actual
possession thereof defeated this purpose, still no breach of warranty
against eviction can be appreciated because the facts of the case do not

show that the requisites for such breach have been satisfied. A breach of
this warranty requires the concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the
thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by
the vendor; and
(4) The vendor has been summoned and made co-defendant in the
suit for eviction at the instance of the vendee. [25]
In the absence of these requisites, a breach of the warranty against
eviction under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the
occupants of said lot, and not that it has been evicted therefrom. As
correctly pointed out by Respondent Court, the presence of lessees does
not constitute an encumbrance of the land, [26] nor does it deprive petitioner
of its control thereof.
We note, however, that petitioners deprivation of ownership and control
finally occurred when it failed and/or discontinued paying the amortizations
on the mortgage, causing the lot to be foreclosed and sold at public
auction. But this deprivation is due to petitioners fault, and not to any act
attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is
presumed, under the law, to be valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the payments it
made to PNB is warranted under Article 2154 of the Code, solutio
indebiti does not apply in this case.This doctrine applies where: (1) a
payment is made when there exists no binding relation between the payor,
who has no duty to pay, and the person who received the payment, and (2)
the payment is made through mistake, and not through liberality or some
other cause.[27]

In this case, petitioner was under obligation to pay the amortizations on

the mortgage under the contract of sale and the deed of real estate
mortgage. Under the deed of sale (Exh. 2),[28] both parties agreed to abide
by any and all the requirements of PNB in connection with the real estate
mortgage. Petitioner was aware that the deed of mortgage (Exh. C) made it
solidarily and, therefore, primarily[29] liable for the mortgage obligation:[30]
(e) The Mortgagor shall neither lease the mortgaged property xxx nor sell
or dispose of the same in any manner, without the written consent of the
Mortgagee. However, if not withstanding this stipulation and during the
existence of this mortgage, the property herein mortgaged, or any portion
thereof, is xxx sold, it shall be the obligation of the Mortgagor to impose as
a condition of the sale, alienation or encumbrance that the vendee, or the
party in whose favor the alienation or encumbrance is to be made, should
take the property subject to the obligation of this mortgage in the same
terms and condition under which it is constituted, it being understood that
the Mortgagor is not in any manner relieved of his obligation to the
Mortgagee under this mortgage by such sale, alienation or encumbrance;
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. xxx.
Therefore, it cannot be said that it did not have a duty to pay to PNB the
amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a
mistake because PNB disapproved its assumption of mortgage after it
failed to submit the necessary papers for the approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the
land purchased, the payment of the loan by petitioner was a condition
clearly imposed by the contract of sale. This fact alone disproves
petitioners insistence that there was a mistake in payment. On the contrary,
such payments were necessary to protect its interest as a the buyer(s) and
new owner(s) of the lot.
The quasi-contract of solutio indebiti is one of the concrete
manifestations of the ancient principle that no one shall enrich himself
unjustly at the expense of another.[31] But as shown earlier, the payment of
the mortgage was an obligation petitioner assumed under the contract of

sale. There is no unjust enrichment where the transaction, as in this case,

is quid pro quo, value for value.
All told, respondent Court did not commit any reversible error which
would warrant the reversal of the assailed Decision.
WHEREFORE, the petition is hereby DENIED, and the assailed
Decision is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15155

December 29, 1960

BOARD OF LIQUIDATORS, petitioner-appellant,

vs.
EXEQUIEL FLORO, ET AL., oppositors-appellees.
Godofredo Zandueta for appellant.
Isidero A. Vera for appellee.

REYES, J.B.L., J.:

From the order of the Court of First Instance of Manila, dated August 10,
1955, denying its petition to exclude certain pieces of steel matting from the
assets of the insolvent M. P. Malabanan, the Board of Liquidators appealed
to the Court of Appeals. The latter certified the case to this Court on the
ground that only questions of law are involved.
The Board of Liquidators (hereinafter referred to as the Board) is an agency
of the Government created under Executive Order No. 372 (November 24,
1950), and, pursuant to Executive Order No. 377 (December 1, 1950), took
over the functions of the defunct Surplus Property Liquidating Committee.

On June 14, 1952 Melecio Malabanan entered into an agreement with the
Board for the salvage of surplus properties sunk in territorial waters off the
provinces of Mindoro, La Union, and Batangas (Exhibit "A"). By its terms,
Malabanan was to commence operations within 30 days from execution of
said contract, which was to be effective for a period of one (1) year from the
start of operations, extendible for a total period of not more than six (6)
months. On June 10, 1953, Malabanan requested for an extension of one
(1) year for the salvage in waters of Mindoro and Batangas; and the Board
extended the contract up to November 30, 1953. On November 18, 1953,
Malabanan requested a second extension of one more year for the waters
of Occidental Mindoro, and Board again extended the contract up to August
31, 1954. Malabanan submitted a recovery report dated July 26, 1954,
wherein it is stated that he had recovered a total of 13,107 pieces of steel
mattings, as follows:
1. December, 1953-April 30, 1954
2. May 1, 1954-June 30, 1954

2,5552
10,552
13,107 (pieces)

Four months previously, Malabanan had entered into an agreement with

Exequiel Floro, dated March 31, 1954 (Exhibit 1, Floro), in which, among
other things, it was agreed that Floro would advance to Malabanan certain
sums of money, not to exceed P25,000.00, repayment, thereof being
secured by quantities of steel mattings which Malabanan would consign to
Floro; that said advances were to paid within a certain period, and upon
default at the expiration thereof, Floro was, authorized to sell whatever
steel mattings were in his possession under said contract, in amount
sufficient to satisfy the advances. Pursuant thereto, Floro claims to have
made total advances to the sum of P24,224.50.
It appears that as Malabanan was not able to repay Floro's advances, the
latter, by a document dated August 4, 1954, sold 11,047 pieces of steel
mattings to Eulalio Legaspi for the sum of P24,803.40.
Seventeen days later, on August 21, 1954, Malabanan filed in the Court of
First Instance of Manila a petition for voluntary insolvency, attaching thereto
a Schedule of Accounts, in which the Board was listed as one of the
creditors for P10,874.46, and Exequiel Floro for P24,220.50, the origin of
the obligations being described as "Manila Royalty" and "Salvaging

Operations", respectively. Also attached was an Inventory of Properties,

listing certain items of personal property allegedly aggregating P33,707.00
in value. In this list were included 11,167 pieces of steel mattings with an
alleged estimated value of P33,501.00.
Soon after, the Board, claiming to be the owner of the listed steel matting,
filed a petition to exclude them from the inventory; and to make the
insolvent account for a further 1,940 pieces of steel matting, the difference
between the number stated in the insolvent's recovery report of July 26,
1954 and that stated in the inventory. Exequiel Floro opposed the Board's
petition and claimed that the steel matting listed had become the property
of Eulalio Legaspi by virtue of a deed of sale in his favor, executed by Floro
pursuant to the latter's contract with Malabanan on March 31, 1954. The
court below, after reception of evidence as to the genuineness and due
execution of the deed of sale to Legaspi, as well as of the contract between
Malabanan and Floro, denied the Board's petition, declaring that
Malabanan had acquired ownership over the steel mattings under his
contract with the Board; that Exequiel Floro was properly authorized to
dispose of the steel mattings under Floro's contract with Malabanan; and
that the sale to Eulalio Legaspi was valid and not contrary to the Insolvency
Law.
In this appeal, the Board contends that Malabanan did not acquire
ownership over the steel mattings due to his failure to comply with the
terms of the contract, allegedly constituting conditions precedent for the
transfer of title, namely: payment of the price; audit and check as to the
nature, quantity and value of properties salvaged; weighing of the salvaged
properties to be conducted jointly by representatives of the Board and of
Malabanan; determination of the site for storage; audit and verification of
the recovery reports by government auditors; and firing of performance
bond.
We are of the opinion, and so hold, that the contract (Exhibit "A") between
Malabanan and the Board had effect of vesting Malabanan with title to, or
ownership of the steel mattings in question as soon as they were brought
up from the bottom of the sea. This is shown by pertinent provisions of the
contract as follows:
10. For and in consideration of the assignment by the BOARD OF
LIQUIDATORS to the CONTRACTOR (Malabanan) of all right, title

and interest in and to all surplus properties salvaged by the

CONTRACTOR under this contract, the CONTRACTOR shall pay to
the Government Ninety Pesos (P90.00) per long ton(2,240 lbs.) of
surplus properties recovered.
11. Payment of the agreed price shall be made monthly during the
first ten (10) days of every month on the basis of recovery reports of
sunken surplus properties salvaged during the preceding month, duly
verified and audited by the authorized representative of the BOARD
OF LIQUIDATORS.
That Malabanan was required under the contract to post a bond of
P10,000.00 to guarantee compliance with the terms and conditions of the
contract; that the operation for salvage were entirely at Malabanan's
expense and risks; that gold, silver, copper, coins, currency, jewelry,
precious stones, etc. were excepted from the contract, and were instead
required to be turned over to the Board for disposition; that the expenses
for storage, including guard service, were for Malabanan's account all
these circumstances indicated that ownership of the goods passed to
Malabanan as soon as they were recovered or salvaged (i.e., as soon as
the salvor had gained effective possession of the goods), and not only after
payment of the stipulated price. .
While there can be reservation of title in the seller until full payment of the
price (Article 1478, N.C.C.), or, until fulfillment of a condition (Article 1505,
N.C.C.); and while execution of a public instrument amounts to delivery
only when from the deed the contrary does not appear or cannot clearly be
inferred (Article 1498, supra), there is nothing in the said contract which
may be deemed a reservation of title, or from which it may clearly be
inferred that delivery was not intended.
The contention that there was no delivery is incorrect. While there was no
physical tradition, there was one by agreement (traditio longa manu) in
conformity with Article 1499 of the Civil Code.lawphil.net
Art. 1499 The delivery of movable property may likewise be made
by the mere consent or agreement of the contracting parties, if the
thing sold cannot be transferred to the possession of the vendee at
the time of the sale. . . .

As observed earlier, there is nothing in the terms of the public instrument in

question from which an intent to withhold delivery or transfer of title may be
inferred.
The Board also contends that as no renewal of the bond required was filed
for the extension of the contract, it ceased to have any force and effect;
and, as the steel mattings were recovered during the extended period of
the contract, Malabanan did not acquire any rights thereto. The pertinent
portion of the contract provides:
12. Jointly with the execution of this contract, the CONTRACTOR
shall file a bond in the amount of TEN THOUSAND (P10,000.00)
PESOS to guarantee his faithful compliance with the terms and
conditions herein; Provided, that this contract shall not be considered
to have been executed notwithstanding the signing hereof by the
parties until said bond shall have been properly filed.
Malabanan filed a bond dated June 10, 1952, effective for one (1) year, or
up to June 10, 1953. The principal contract, executed on June 14, 1952,
was first extended to November 30, 1953, and finally, to August 31, 1954.
As can be seen, there was no longer any bond from June 11, 1953 to
August 31, 1954.
The lapse of the bond did not extinguish the contract between Malabanan
and the Board. The requirement that a bond be posted was already
complied with when Malabanan filed the bond dated June 10, 1952. A bond
merely stands as guaranty for a principal obligation which exist
independently of said bond, the latter being an accessory contract
(Valencia vs. RFC & C.A., 103 Phil., 444). Significantly, its purpose, as per
the terms of the contract, was "to guarantee his (Malabanan's) faithful
compliance with the terms and conditions herein" and, for violation of the
contract, the Board may declare "the bond forfeited" (par. 13). Being for its
benefit, the Board could legally waive the bond requirement (Valencia vs.
RFC, et al., supra.), and it did so when, the bond already having expired, it
extended the contract not only once, but twice. In none of the resolutions
extending contract (Annexes "C" & "E", pp. 108-112, Record on Appeal)
was there a requirement that the bond be renewed, in the face of the first
indorsement by the Executive Officer recommending that Malabanan's
request for a second extension be granted "provided the bond be originally
posted should continue."

There is no merit to the suggestion that there being a novation, Article 1299
of the Civil Code should govern. Novation is never presumed, it being
required that the intent to novate be expressed clearly and unequivocally,
or that the terms of the new agreement be incompatible with the old
contract (Article 1292, N.C.C.; Martinez vs. Cavives, 25 Phil. 581; Tiu
Siuce vs. Habaa, 45 Phil. 707; Pablo vs. Sapungan, 71 Phil. 145;
Young vs. Villa, 93 Phil., 21; 49 Off. Gaz., [5] 1818.) Here there was neither
express novation nor incompatibility from which it could be implied.
Moreover, a mere extension of the term (period) for payment or
performance is not novation (Inchausti vs. Yulo, 34 Phil. 978; Zapanta vs.
De Rotaeche, 21 Phil. 154; Pablo vs. Sapungan, Supra); and, while the
extension covered only some of the areas originally agreed upon, this
change did not alter the essence of the contract (cf. Ramos vs. Gibbon, 67
Phil., 371; Bank of P.I. vs. Herridge, 47 Phil., 57).
It is next contended that the sale by Floro to Legaspi on August 4, 1954
(within 30 days prior to petition for insolvency) was void as a fraudulent
transfer under Section 70 of the Insolvency Law. The court below held that
the sale to Legaspi was valid and not violative of Section 70; but there
having been no proceedings to determine whether the sale was fraudulent,
we think it was premature for the court below to decide this point, especially
because under section 36, No. 8. of the Insolvency Act, all proceedings to
set aside fraudulent transfers should be brought and prosecuted by the
assignee, who can legally represent all the creditors of the insolvent
(Maceda, et al.,vs. Hernandez, et al., 70 Phil., 261). To allow a single
creditor to bring such a proceeding would invite a multiplicity of suits, since
the resolution of his case would not bind the other creditors, who may refile
the same claim independently, with diverse proofs, and possibly give rise to
contradictory rulings by the courts.
The order appealed from is hereby affirmed in so far as it declares the
disputed goods to be the property of the insolvent; but without prejudice to
the right of the assignee in insolvency to take whatever action may be
proper to attack the alleged fraudulent transfer of the steel matting to
Eulalio Legaspi, and to make the proper parties account for the difference
between the number of pieces of steel matting stated in the insolvent's
recovery report, Annex "B" (13,107), and that stated in his inventory
(11,167). Costs against appellant.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-10658

February 14, 1918

OCEJO, PEREZ & CO., plaintiffs-appellees,

vs.
THE INTERNATIONAL BANKING CORPORATION, defendant-appellant.
FRANCISCO CHUA SECO, as assignee, intervener-appellant.
Lawrence, Ross and Block for defendant and appellant.
Wolfson and Wolfson for intervener and appellant.
William A. Kincaid and Thomas L. Hartigan for plaintiff and appellee.
FISHER, J.:
On the 7th day of March, 1914, Chua Teng Chong of Manila, executed and
delivered to the International Banking Corporation, hereinafter referred to
as "the bank," a promissory note, payable one month after date, for the
sum of P20,000. Attached to this note was another private document,
signed by Chua Teng Chong, in which it was stated that he had deposited
with the bank, as security for the said note, 5,000 piculs of sugar, which in
said document were said to be stored in a warehouse situated at No 1008,
Calle Toneleros, Binondo, Manila. It appears from the evidence, assuming
that the sugar was in the warehouse on that date, that the bank did not take
possession of it when the document was executed and delivered, and that
Chua Teng Chong continued to retain the sugar in his possession and
control. The bank made no effort to exercise any active ownership over
said merchandise until the 16th of April, when it discovered that the amount
of sugar stored in the said warehouse was much less than the 5,000 piculs
mentioned in the contract. The agreement between the bank and Chua
Teng Chong with respect to the alleged pledge of the sugar was never
recorded in a public instrument. It does not appear from the evidence that
the promissory note represents money delivered by the bank on the date of
its execution, although it is stated therein that it was executed for value
received.

On the 24th day of March, 1914, the plaintiff partnership Ocejo, Perez and
Co., entered into contract with Chua Teng Chong for the sale to him of a lot
of sugar. It was agreed that delivery should be made in the month of April,
the sugar to be weighed in the buyer's warehouse. It appears that this
sugar was brought to Manila by a steamer in the month of April, and 5,000
piculs were delivered by plaintiff to Chua Teng Chong. The delivery was
completed April 16, 1914, and the sugar was stored in the buyer's
warehouse situated at No. 119, Muelle de la Industria. On April 17, 1914,
plaintiff partnership presented, for collection, its account for the purchase
price of the sugar, but the buyer refused to make payment, and put up to
the present time the sellers have been unable to collect the purchase price
of the merchandise in question.
On the same date as that on which the 5,000 piculs of sugar were delivered
into the warehouse on Muelle de la Industria, the bank sent an employee to
inspect the sugar described in the pledge agreement, and which, as therein
stated, should have been stored in the Calle Toneleros warehouse. The
bank's representative then discovered that the amount of sugar in that
warehouse did not exceed 1,800 piculs, whereas the amount which should
have been there, according to the contract, was 5,000 piculs. Upon making
this discovery, the bank's representative, accompanied by a lawyer, went
immediately to see Chua Teng Chong, and the latter informed him that the
rest of the sugar covered by the pledge agreement was stored in the
warehouse at No. 119, Muelle de la Industria. The bank's representative
immediately went to this warehouse and upon arrival there found some
3,200 piculs of sugar, of which he took immediate possession, closing the
warehouse with the bank's padlocks. It is admitted that the sugar seized by
the bank in the Muelle de la Industria warehouse is the same sugar which
the plaintiff firm delivered to Chua Teng Chong. On the date on which the
bank took possession of the sugar the promissory note executed March 17,
1914, had fallen due and was unpaid.
In the written contract by which the plaintiff firm undertook to sell the sugar
in question to Chua Teng Chong nothing was said concerning the time and
place for payment. The court below found that the delivery of the sugar by
plaintiff to Chua Teng Chong was made upon the mutual understanding that
the price was to be paid in cash "upon the completion of delivery." The
plaintiff firm proved that in sales of this kind it is the custom among
merchants in Manila for the seller to deliver the merchandise into the
warehouse of the buyer, for inspection and verification of weights, and that

as soon as this operation is completed, the price is payable on demand.

After Chua Teng Chong had refused to pay the bill for the price of the sugar
which the plaintiff firm presented to him, the day after its delivery, an
attempt was made by the plaintiff to recover possession of the sugar, and
to that end, on April 24, 1914, the plaintiff made a demand on the bank for
the delivery of the sugar, to which demand the bank refused to accede. On
April 24, 1914, the buyer Chua Teng Chong was judicially declared to be
insolvent, and Francisco Chua Seco was appointed as assignee of the
insolvency. On the same date, and a few minutes after the insolvency
proceedings were commenced, the plaintiff partnership filed a complaint,
upon which this action was commenced, naming the bank as defendant,
alleging that said defendant was unlawfully holding some 4,711 piloness of
sugar, the property of the plaintiff firm, which the bank had received from
Chua Teng Chong, and prayed for the judgment for the possession of said
sugar. A few days after, the plaintiff firm took advantage of those provisions
of the procedural law which permit a plaintiff to replevin personal property.
Subsequently, by agreement of the parties, the sugar was sold and the
proceeds of the sale deposited in the bank, subject to the order of the court
upon the final disposition of the case. After the answer of the defendant
bank was filed, a complaint in intervention was filed by Chua Seco, in which
he asserts a preferential right to the sugar, or to the proceeds of its sale,
upon the ground that the delivery of the sugar by plaintiff, by virtue of which
it passed into the possession and control of Chua Teng Chong, had the
effect of transmitting the title of the pledge asserted by the bank was null
and void. Upon these allegations the interveners contends that the sugar is
the property of the insolvent estate represented by him. The lower court
rendered judgment in favor of the plaintiff and from this decision appeals
have been taken by the bank and by the intervener.
Upon these facts the following questions arise:
(a) Did title to the sugar pass to the buyer upon its delivery to him?
(b) Assuming to pay that the title passed to the buyer, did his failure to pay
the purchase price authorize the seller to rescind the sale?
(c) Was the commencement of a replevin suit by the seller equivalent to the
rescission of the sale?

(d) Can the pledge of the sugar to the bank be sustained upon the
evidence as to the circumstances under which it obtained physical
possession thereof?
Clearly, there can be no doubt that from March 24, 1914, on which date the
parties agreed in regard to the quantity of the sugar which the seller was to
deliver and the price which the buyer was to pay, the contract was
perfected. (Civil Code, art. 1450.) It is also clear that the obligation of the
seller to make delivery of the thing sold was not subject to the condition
that the buyer was to pay the price before delivery. The witness Pomar,
called on behalf of the seller, testified that the price was to be paid after the
completion of delivery. (Stenographic notes, p. 4.)
The sugar was delivered to the buyer March 16, 1914. The seller delivered
it into the buyer's warehouse, leaving it entirely subject to his control. Article
1462 of the Civil Code provides that the thing sold is deemed to be
delivered "when it passes into the possession and control of the buyer." It is
difficult to see how the seller could have divested himself more completely
of the possession of the sugar, or how he could have placed it more
completely under the control of the buyer.
On the day following the delivery of the sugar the seller presented his bill to
the buyer, but the latter failed and refused to make payment. We agree with
the seller's contention that he was entitled to demand payment of the sugar
at any time after the delivery. No term having been stipulated within which
the payment should be made, payment was demandable at the time and
place of the delivery of the thing sold. (Civil Code, art. 1500.) The seller did
not avail himself of his right to demand payment as soon as the right to
such payment arose, but as no term for payment was stipulated, he was
entitled, to require payment to be made at any time after delivery, and it
was the duty of the buyer to pay the price immediately upon demand. But
the seller not only argues that he was entitled to demand payment at any
time after delivery, but contends further that until such payment was in fact
made, title to the sugar did not pass to the buyer. We cannot agree with this
contention.
As Manresa says (vol. 10 p. 120), tradition is a true mode of acquiring
ownership "which effects the passage of title and the birth of the right
in rem. Therefore, the delivery of the thing . . . signifies that title has passed
from the seller to the buyer."

If we were to sustain the seller's contention, the consequences to the

business community would, in our judgment, be most deplorable. If the
seller may make delivery of the thing sold and clothe the buyer with all the
appearances of ownership but without the passage of title until the
purchase price is actually paid, it occurs to us to inquire how long this
anomalous state of affairs may be permitted to continue? It is the buyer's
duty, upon the assumed facts to pay the price on demand, but the seller is
not bound to present his account immediately. In the present case the
buyer was not called upon to make payment until the following day. If the
seller had allowed three, four, or five days to go by before presenting his
account for payment, would it be permitted him still to contend that title had
passed? If the title did not pass, any sale which might in the meantime be
made by the buyer, would be void, ass it is evident that no one can transfer
a greater interest than that which he possesses. With even greater reason,
the destruction of the thing in the possession of the buyer, before demand
upon him for payment, would relieve him from the obligation to pay the
thing perishes for its owner. (Tan Leonco vs. Go Inqui, 8 Phil. Rep., 531.)
The seller calls this transaction a cash sale, but, strictly speaking, it is not
cash sale. It is not like a sale made in a retail store, in which delivery and
payment are to be made simultaneously. Of course, when no term for
payment is stipulated the seller is not bound to deliver the thing sold until
the buyer has paid him the price; but if, notwithstanding this right, delivery
is consummated without requiring payment to be made in advance or
simultaneously, in fact he grants a term of credit to the buyer, however
short and indeterminate it my be, and waives his right to insist upon
payment in advance or simultaneously with delivery, but in lieu thereof he
becomes entitled to payment upon demand therefor made upon the buyer.
As is correctly stated in Williston on Sales:
Confusion especially may be caused by use of the words 'cash sale'
or 'terms cash' by business men. In business dealings these words
are frequently used when in reality a short period of credit is
contemplated. In such a case it is clear there is no cash sale in the
legal sense; for, under the circumstances suggested, it is not
contemplated that the buyer shall refrain from dealing with the goods
or even from reselling them, and if such is the contemplation of the
parties, it is impossible to say that the property was not to pass until
the price was paid. (Williston, Sales par. 343.)

It is contended that there was an express agreement in this case that the
passage of the title should be subject to the payment of the price, as a
condition precedent. As was stated by Justice Mapa, the author of the
decision in the case of De la Rama vs. Sanchez, (10 Phil. Rep., 432):
The fact that the price of the property has not yet been paid in full is
not, nor can it be, an obstacle to the acquisition of the ownership
thereof by the plaintiff, because as such a condition was not
stipulated in the contract, the latter immediately produced its natural
effects in law, the principal and most important of which being the
conveyance of the ownership by means of the delivery of the thing
old to the purchaser, without prejudice, of the course, to the right of
the vendor to claim payment of any sum still due.
The same fundamental doctrine was stated by Chief Justice Arellano in the
case of Gonzalez vs. Rojas (16 Phil. Rep., 51):
. . . ownership of things is not transferred by contract merely but by
delivery. Contracts only constitute titles orrights to the transfer or
acquisition of ownership, while delivery or tradition is the method of
accomplishing the same, the title and the method of acquiring it being
different in our law."
In the case of Kuenzle and Sheriff vs. Watson and Co. (13 Phil. Rep., 26),
the court sustained the validity of a sale of personal property subject to the
stipulation that title should not pass until the payment of the purchase price.
On the other hand, when there has been no such express agreement and
the thing sold has been delivered, title passes from the moment the thing
sold is placed in the "possession and control of the buyer."
Having concluded that the effect of the delivery was to transmit the title of
the sugar to the buyer, we will now consider the legal effect of the failure on
the part of the buyer to pay the price on demand.
Article 1506 of the Civil Code provides that the contract of sale may be
rescinded for the same causes as all other obligations, in addition to the
special causes enumerated in the preceding articles. It is also observed
that the article does not distinguish the consummated sale from the
merely perfected sale, and we do not believe that there is any reason for
making this distinction. Article 1124 of the Civil Code establishes the
principle that all reciprocal obligations are rescindible in the event that one

of the parties bound should fail to perform that which is incumbent upon
him. In the contract of the sale the obligation to pay the price is correlative
to the obligation to deliver the thing sold. Nonperformance by one of the
parties authorizes the other to exercise the right, conferred upon him by the
law, to elect to demand the performance of the obligation or its rescission
(Mateos vs. Lopez, 6 Phil. Rep., 206), together with damages in either
event. But the right to rescind the sale for nonperformance on the part of
the buyer is not absolute. The law subordinates it to the rights of third
persons to whom bad faith is not imputable (Civil Code, arts. 1124 and
1295), and the defendant bank seeks to invoke in its defense this principle,
alleging that the sugar in question was pledge to it, after its delivery to the
buyer and before the latter was placed in default with respect to the
payment of the price.
We believe that this connection of the defendant bank cannot be sustained.
In the first place, even giving all possible effect to the contract evidenced by
the private document exhibited by the bank (Exhibit No. 1), it is evident that
the sugar therein mentioned is not the same as that here in dispute. By this
document, which bears date March 4, 1919, an attempt was made to
pledge the lot of sugar deposited in warehouse No. 1008, Calle Toneleros,
Manila. The sugar in dispute has never been in that warehouse, as the
seller delivered it into the bodega at No. 119, Muelle de la Industria. The
sugar here in question could not be possibly have been the subject matter
of the contract of pledge which the parties undertook to create by the
private document dated March 7, 1914, inasmuch as it was not at the time
the property of the defendant, and this constitutes an indispensable
requisite for the creation of a pledge. (Civil Code, art. 1857.) It does not
appear from the record that any effort was made to pledge the sugar which
is the subject matter of this case. It is true that it appears that in the
afternoon of the day the sugar was delivered, the buyer gave the bank's
representative the keys of the warehouse on the Muelle de la Industria in
which the sugar was stored, but it also appears from the testimony of the
bank's witness, Grey, to whom the keys of the warehouse were delivered,
that this was not done because of an agreement concerning the pledge of
the sugar now in dispute. Grey testified that on the afternoon of April 16,
1914, he ascertained, after an inspection of the warehouse on Calle
Toneleros, that the sugar therein stored was not stated in the document of
pledge; that upon observing this storage he asked the debtor to account for
it, whereupon at No. 119, Muelle de la Industria;" that upon receiving this
reply the witness went to the warehouse at No. 119, Muelle de la Industria,

demanded the keys from the person in charge, and then closed the
warehouse with the bank's own padlocks. From these statements it
appears that no attempt was made to enter into any agreement for the
pledge of the sugar here in question. The bank took possession of that
sugar under the erroneous belief, based upon the false statement of Chua
Teng Chong, that it was a part of the lot mentioned in the private document
dated March 7, 1914. But even if it were assumed that on the afternoon of
April 16, 1914, an attempt was made to pledge the sugar and that delivery
was made in accordance with the agreement, the pledge so established
would be void as against third persons. Article 1865 of the Civil Code
provides that a pledge is without effect as against third persons "if the
certainty of the date does not appear by public instrument." In the case
of Tec Bi and Co. vs. Chartered Bank of India, Australia and China, 16 Off.
Gaz., 908 decided February 5, 1916, this court held that when the contract
of pledge is not recorded in a public instrument, it is void as against third
persons; that the seller of the thing pledged, seeking to recover the
purchase price thereof, is a third person within the meaning of the article
cited; and that the fact that the person claiming as pledgee has taken
actual physical possession of the thing sold will not prevent the pledge form
being declared void as against the seller. The court held that the principle
established by article 1865 of the Civil Code is not adjective in its character,
but that "It prescribes a condition without which the contract of pledge
cannot adversely affect third persons." Applying the doctrine of the decision
cited, it is evident that the pledge aserted by the International Bank is
inefficacious.
In the brief filed on behalf of the bank it is argued that in no case may a
revindicatory action be maintained when the plaintiff attempts to exercise
the right to rescind the sale for nonpayment of the purchase price and that
therefore a replevin suit will not lie. But as it is held that the bank has no
interest in this matter, as its alleged contract of pledge is utterly unavailing,
it is evident that the question of procedure does not affect it. It appears that
by reason of the insolvency of the buyer Chua Teng Chong an insolvency
proceeding was commenced in a court of competent jurisdiction and in that
proceeding Francisco Chua Seco was appointed assignee of the property
of the insolvent. As such assignee Chua Seco filed a complaint in
intervention in this suit, in which he contends that by reason of its sale and
delivery by plaintiff to the insolvent, title to the sugar passed to the latter
and that the pledge set up by the bank is void as to third persons. Standing
in the place of the insolvent buyer, the assignee asks that he be recognized

in his representative capacity as the owner of the sugar in question. The

voluntary intervention of the assignee of the insolvent buyer cures the
defect of nonjoiner of the latter as a party defendant, and all parties in
interest have been heard in this proceeding.
The judgment of the court below awards the plaintiff the product of the sale
of the sugar, it having been so disposed of by agreement by the parties
during the pendency of the suit. The intervener excepted to the decision
and joined in the bank's appeal. In his brief in this court the intervener
raises a question as to the sufficiency of the complaint to support the
decision of the court below, adopting the argument of the bank upon this
point. That is, assuming that by reason of the nonpayment of the purchase
price, the seller is entitled to elect to rescind the sale, is the rescission
effected ipso facto by such election, or is it necessary for him to bring an
action of rescission? The action of replevin, the intervener contends, is
based (Code of Civil Procedure, sec. 263) upon the assumption that the
plaintiff at the time of bringing the action is either the owner of the thing
which is the subject matter of the suit or entitled to its possession. But the
question presented is whether, in cases in which title has passed by
delivery and in which the buyer has failed to pay the purchased price on
demand, title is revested in the seller by the mere fact that he has mentally
determined to elect to rescind? In its brief the plaintiff partnership contends
for the affirmative, saying that the acts of the seller the filing of its
complaint imply that it has made the election. But the intervener,
adopting the argument of the bank, contends that the party to whom article
1124 of the Civil Code grants the right to rescind "must apply to the court
for a decree for the rescission of the contract. . . ." (Scaevola, vol. 19, p.
673); and this conclusion is supported by the last paragraph of the article
cited. Of course, if the action of the court is necessary in order to effectuate
the rescission of the sale, such rescission does not follow ipso jure by
reason of nonpayment and the determination of the seller to elect to
rescind. Consequently, the action of replevin cannot be maintained. The
right to rescind a sale, established by article 1506, in no wise differs from
that which is established, in general terms, with respect to reciprocal
obligations, by article 1124 in "true event that one of the obligors fails to
perform the obligation incumbent upon him." But the right so conferred is
not an absolute one. The same article provides that "the court shall decree
the rescission demanded, unless there are causes which justify him in
allowing a term."

Therefore, it is the judgment of the court and not the mere will of the
plaintiff which produces the rescission of the sale. This being so, the action
of replevin will no lie upon the theory that the rescission has already taken
place and that the seller has recovered title to the thing sold.
If the buyer himself had intervened, instead of the assignee in the
bankruptcy suit, we might perhaps have said that all the parties in interest
having been heard, we would overlook the matter of procedure and
proceed to adjudicate the rights of the parties upon the evidence submitted.
But as the buyer has been declared insolvent, it is clear that his creditors
have an interest in this question, and that if this interest is discussed in the
bankruptcy proceedings, they will have an opportunity to be heard. In the
present condition of the case, the only thing we can do is to decide that the
title to the sugar having been commenced against him before the
declaration of insolvency, the assignee, standing in the shoes of the buyer,
has a better right to its possession or to the product of its sale during the
pendency of this action. We cannot apply section 126 of the Civil Code
Procedure, because one of the material averments of the complaint is that
Chua Teng Chong unlawfully took possession of the sugar. The evidence
shows, on the contrary, that it was delivered to him by plaintiff. Strictly
speaking the mission of the court ends at this point, but following the
practice adopted in other cases, for the purposes of avoiding an
unnecessary multiplicity of suits, and bearing in mind the fact that the
assignee of the bankruptcy is a party to this proceedings, we deem it
advisable to indicate that we are of the opinion that the rights of the seller
are protected by section 48 of Act No. 1956, inasmuch as the sugar in
question had not passed by an "irrevocable title" when the buyer was
declared insolvent. Attention is also invited to the decision of the court
overruling the motion for a rehearing in the case of Tec Bi & Co. vs.
Chartered Bank of India, Australia & China, cited above. 1
The decision of the court below is therefore reversed, and it is decided that
the assignee of the bankruptcy of Chua Teng Chong is entitled to the
product of the sale of the sugar here in question, to wit, P10,826.76,
together with the interest accruing thereon, reserving proceedings. So
ordered.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC
G.R. No. 18341

September 18, 1922

GENEROSA AVILES and her husband RUFINO

VILLAFUERTE, plaintiffs-appellants,
vs.
SEGUNDA ARCEGA and FORTUNATO DE LEON, defendants-appellees.
The appellants in their own behalf.
The appellees in their own behalf.
ROMUALDEZ, J.:
The plaintiffs bring this action to recover title to a house of mixed materials
erected on a leasehold land of theNagtahan estate, more particularly
described in the complaint. While the plaintiffs claim the ownership of said
house, the defendants assert title in themselves.
At the trial of the case, the parties entered into the following stipulation of
facts:
1. That the house in dispute in this case was on October 10, 1917,
sold by the spouses Venancio Alcantara and Vicenta Capulong to the
plaintiff Generosa Aviles, as evidenced by the document marked with
the letter A, and acknowledged on the 8th day of November of the
same year, 1917, before the notary public Jose Galang Serano, for
the sum of P497, it having been stipulated that during four months
from the 10th of October, 1917, the vendors would continue in
possession of the house, the expenses for repairs, land and other tax
to be for their account, as well as the payment of the rent for the lot
on which it is erected.
2. That in a document dated March 13, 1918, and acknowledged on
the following day before Ariston Rivera, notary public, the same
property was sold by the same spouses Venancio Alcantara and
Vicente Capulong for P500 to the spouses Fortunato de Leon and
Segunda Arcega, who took possession of the property, as the stated
in the third paragraph of the complaint, the plaintiff Generosa Aviles
never having taken possession thereof.

Under the foregoing facts the case is submitted to the consideration

of the court for the determination of the question law as to which of
the two purchasers acquired title to the property.
In view of these stipulated facts the trial court rendered judgement
declaring the defendants to be the owner of the house and absolving them
from the complaint with costs. From this judgement the plaintiffs appeal,
alleging that the trial court erred (a) in not rendering judgement in their
favor; (b) in not giving preference to the sale made to them of the house in
question; (c) in not declaring them owners of said house; (d) in not
sentencing the defendants to deliver the same plaintiffs; (e) in not
sentencing the defendants to pay damages; ( f ) in declaring the latter
owners of the house when they did not make a prayer to that effect; (g) in
drawing from the facts stipulated a conclusion inconsistent therewith; and
(h) in not granting a new trial.
These assignments of error raise but two questions: First, in which of the
two sales was title to the house in dispute transferred? And second,
whether or not it was an error to declare the defendants owners of said
house, the latter not having expressly prayed in their answer for such
declaration. The other errors assigned are but a consequence of these two
points.
As to the first question, we have, by virtue of the stipulation and the
documents presented, the following facts, which must be considered
proven:
The house in question belonged originally to the spouses Venancio
Alcantara and Vicenta Capulong. On the 10th of October, 1917, these
spouses sold this house in a public document to Generosa Aviles, the
herein plaintiff, it having been stipulated, in the document executed for the
purpose, that "during four months from the 10th of October, 1917, the
vendors would continue in possession of the house" (to use the language
of the stipulation of facts). We italicize the words would continue, which
show that the vendors were in possession of the house before, and that at
time of, its conveyance, and continued thereafter in said possession. It is,
further, to be noted that the plaintiff never had possession of the house, as
stated at the end of the second paragraph of the stipulation of facts, which
says "the plaintiff Generosa Aviles never having taken possession thereof."
From this it appears that the purchaser never took possession of the house

either at the execution of the deed of sale, or at any other time. It thus
being admitted by the appellants that the purchaser Generosa Aviles, one
of the plaintiff, never had possession of this house, it cannot be presumed
that she took possession thereof at the expiration of the four months
following the sale, as stipulated by the parties. Such positive fact having
been expressly admitted, there can be no presumption to the contrary.
On the 13th of March, 1918, the same spouses Venancio Alcantara and
Vicenta Capulong (who are presumed to have been in possession of the
house until then, inasmuch as it is positively know that they were
uninterruptedly prior to the first sale, during the time the sale was in force
and until at least four months thereafter, and it is a fact that the purchaser
Aviles never had possession of the house), in a public document sold the
same house to the spouses Fortunato de Leon and Segunda Arcega, the
herein defendants, who then and there took possession of said house.
None of the two sales appears to have been registered; therefore the
question at issue is, which of these purchasers was the first to take
possession (art. 1473, Civil Code).
We have already seen that the first purchaser, the plaintiff, never took
possession of the house, while the second purchasers, the defendant
spouses, did. Under the Civil Code, the conclusion is inevitable that the
titles to the house was transmitted not to the plaintiff but to the defendants.
We are of the opinion that the plaintiff cannot invoked symbolic delivery by
the execution of the public document of sale, inasmuch as there was not,
nor could there have been, such delivery, the same being prevented by the
express stipulation contained in the deed of sale, to the effect that the
vendors did not part with the possession of the house but would continue
therein for four months. Article 1462 of the Civil Code says:
If the sale should be made by means of a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which
is the subject-matter of the contract unless the contrary appears or
may be clearly inferred from such instrument.
At the time, therefore, of the execution of the deed in favor of the plaintiff,
the first purchaser, there was no symbolic delivery because there was an
express stipulation to the contrary. It cannot be said that after the lapse of
the four months following, during which the vendors were to continue in

possession of the house, according to the stipulation, any symbolic delivery

subsisted. Nothing can subsist that did not exist before.
It cannot be said that symbolic delivery spontaneously took place after the
lapse of the four months stipulated, for there is no law providing that it
should take place after the execution of the document where there is a
stipulation to the contrary.
The law does not say that such a symbolic delivery is suspended when at
the execution of the document a stipulation to the contrary is made. What
the law simply says is that no such symbolic tradition can take place,
can exist when there is a stipulation to the contrary.
As we understand the law, there is symbolic delivery when the sale is made
in a public document, and nothing appears therein to the contrary either
expressly or impliedly; and no such symbolic delivery can be held to take
place when, as in the instant case, there is in the document a stipulation to
the contrary.
We do not hesitate to term symbolic such delivery of the thing as is
supposed to be made by the execution of the document, as provided
in article 1462, although in that case it must be considered to take
place partly by operation of law. This kind of tradition finds its
precedent in law 8, title and Partida aforecited, which provides that
"when one grants another any property or thing, the latter acquires
possession thereof, if the grantor delivers to him the letters whereby
the same is made, or makes a new one and hands it to him, although
he is not given physical possession of the thing."
It must be noted that this manner of delivering the thing through the
execution of a public document is common to personal as well as real
property, for the Code does not distinguish, and besides, taking this
rule in connection with the following article, 1463, a conclusion to this
effect seems to be clearly justifiable.
This kind of tradition, however, is, as to its efficaciousness, subject to
the terms of the document, for if it appears therein, or can be inferred
therefrom, that it was not the intention of the parties to make delivery,
no tradition can be deemed to have taken place. Such would be the
case, for instance, where a certain date is fixed when the purchaser
should take possession of the thing, or where in the case of a sale by

installments, it is stipulated that until payment of the last installment is

made, the title to the property should not be deemed to have been
transmitted, or where the vendor reserves the right to use and enjoy
the property until the gathering of the pending crops. (10
Manresa, Codigo Civil, p. 129.)
The instant case is one of those above mentioned by the eminent
commentator Mr. Manresa. To use the phraseology of the above quoted
passage, a certain date was fixed (namely, at the end of four months,
because id certum est quod certum reddi potest), when the purchaser
should take possession of the thing.
Neither can it be said that the house must be presumed to have been
delivered to the first purchaser after the lapse of the four months aforesaid,
for such a presumption is overthrown by the fact stipulated by the parties
that this first purchaser never took possession of the house.
We entertain no doubt, either under the facts or under the law of the case,
as to the right of the defendants to the house in question, with absolute
exclusion of the plaintiffs.
Turning to the second point which is of a procedural nature, we hold that
the trial court did not commit any error in declaring the defendants owners
of the house in question. It is true that the answer does not expressly pray
for such as affirmative relief. But both parties expressly and solemnly
stipulated that they submitted the case to the trial court for the
determination of the question as to which of the two purchasers acquired
title to the house, when in the stipulation of facts, they said the following to
the court:
Under the foregoing facts, the case is submitted to the consideration
of the court for the determination of the question of law as to which of
the two purchasers acquired title to the property.
This statement made to the court below by both parties is tantamount to an
amendment of the prayer of the answer, and to a waiver by the party
plaintiff of the right to question such a defect, if it is at all, of the prayer of
the answer.
The question having thus been raised, and both parties having requested
the lower court to determine which of the two litigating parties acquired the

house in question, the lower court did but fulfill its duty in determining the
question presented and declaring upon the facts and the law of the case,
that the defendants, and not the plaintiffs, are the owners of the house in
dispute.
As above stated, the other assignments of error are but a corollary of the
two points already decided.
The judgment appealed from is affirmed, with the costs against the
appellants. So ordered.
Johnson, Street, Ostrand, and Johns, JJ., concur.

Separate Opinions
ARAULLO, C.J., dissenting:
Under the facts stated in the majority opinion, this case presents a double
sale of a house of mixed materials. The first was made to the plaintiffs on
October 10, 1917, with a stipulation that during the four months following
said date the vendors should continue in possession of the house for the
reasons therein stated. The second was made on March 13, 1918, to the
defendants who took possession of the property, which is one month after
the expiration of the term stipulated in the first one. Both sales appear in a
public document. None of the documents was registered in the registry of
property.
To which of the two purchasers was the title to the property in question
transferred?
Article 1473 of the Civil Code provides:
If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith if it should be personal property.
Should it be real property, it shall belong to the purchaser who first
recorded it in the registry of deeds.

Should it not be recorded, the property shall belong to the person

who first took possession of it in good faith, or, in default of
possession, to the person who present the oldest title, provided there
is good faith.
Applying this provision to the instant case, there is no doubt that the
ownership was transferred to the purchaser who first gained possession in
good faith. But who was the first to gain possession? The defendants,
according to the opinion of the majority. But with all the respect due to the
authoritative opinion of the majority, the undersigned think that it was the
plaintiffs.
Article 1462 of the Civil Code provides:
The thing sold shall be deemed delivered when the vendee is placed
in the control and possession thereof.
If the sale should be made by means of a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which
is the subject-matter of the contract unless the contrary appears or
may be clearly inferred from such instrument.
The majority opinion says: "At the time, therefore, of the execution of the
deed in favor of the plaintiff, the first purchaser, there was no symbolic
delivery because there was an express stipulation to the contrary. It cannot
be said that after the lapse of the four months following, during which the
vendors were to continue in possession of the house, according to the
stipulation, any symbolic delivery subsisted. Nothing can subsist that did
not exist before."
This reasoning, in our opinion, is applicable only where the stipulation
inserted in the public documents involves a resolutory condition. But to our
mind the stipulation under consideration constitutes a suspensive condition.
The essential difference in law between these two kinds of condition is that
the fulfillment of the suspensive condition makes the obligation effective,
whereas that of the resolutory resolves the obligation makes it entirely
ineffective.
The symbolic tradition, which is effected by the execution of the public
document, was suspended for four months by virtue of the stipulation. It
cannot be said that it did not exist because suspension presupposes the

existence of that which is suspended. The four months elapsed, the

condition was fulfilled. It seems clear to us that symbolic tradition, which
was temporarily suspended, recovered its efficaciousness, as a necessary
consequence of the execution of the public document. To hold otherwise is
to give the stipulation a meaning contrary to the evident intention of the
contracting parties.
The doctrine we maintain finds support in the very opinion of the
authoritative commentator of the Civil Code, Mr. Manresa.
This kind of tradition, however, is, as to its efficaciousness, subject to
the terms of the document, for if it appears therein, or can be inferred
therefrom that it was not the intention of the parties to make delivery,
no tradition can be deemed to have taken place. Such would be the
case, for instance, where a certain date is fixed when the purchaser
should take possession of the thing, or where in the case of a sale by
installments, it is stipulated that until payment of the last installment is
made, the title to the property should not be deemed to have been
transmitted, or where the vendor reserves the right to use and enjoy
the property until the gathering of the pending crops. (10
Manresa, Codigo Civil, p. 129.)
Manresa does not say that, at the expiration of the term fixed, or upon the
payment of the last installment, in the examples given by him, the public
document ceases to produce legal effect the symbolic tradition. Neither
can it be said in the case at bar that the lapse of the term stipulated renders
the document ineffective in so far as the effecting of tradition by its
execution is concerned, because this would amount to annulling an
obligation by the fulfillment of a suspensive condition.
For the foregoing the undersigned dissent from the opinion of the majority.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-19545 April 18, 1975

PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner,

vs.
THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent.
Magno L. Dajao for petitioner.
First Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V.
Bernardo for respondent.

ANTONIO, J.:+.wph!1
Appeal by certiorari from the decision dated December 11, 1961, of then
Auditor General Pedro M. Gimenez, disallowing the request of petitioner for
the refund of real estate tax in the amount of P30,460.90 paid to the
Provincial Treasurer of Bulacan.
The facts of the case are as follows:
On June 8, 1960, at a meeting with the Cabinet, the President of the
Philippines, acting on the reports of the Committee created to survey
suitable lots for relocating squatters in Manila and suburbs, and of the
Social Welfare Administrator together with the recommendation of the
Manager of the Government Service Insurance System, approved in
principle the acquisition by the People's Homesite and Housing Corporation
of the unoccupied portion of the Sapang Palay Estate in Sta. Maria,
Bulacan for relocating the squatters who desire to settle north of Manila,
and of another area either in Las Pias or Paraaque, Rizal, or Bacoor,
Cavite for those who desire to settle south of Manila. The project was to be
financed through the flotation of bonds under the charter of the PHHC in
the amount of P4.5 million, the same to be absorbed by the Government
Service Insurance System. The President, through the Executive Secretary,
informed the PHHC of such approval by letter bearing the same date
(Annex "B").
On June 10, 1960, the Board of Directors of the PHHC passed Resolution
No. 700 (Annex "C") authorizing the purchase of the unoccupied portion of
the Sapang Palay Estate at P0.45 per square meter "subject to the
following conditions precedent: t.hqw

1. That the confirmation by the OEC and the President of the

purchase price of P0.45 per sq. m. shall first be secured,
pursuant to OEC Memorandum Circular No. 114, dated May 6,
1957.
2. That the portion of the estate to be acquired shall first be
defined and delineated.
3. That the President of the Philippines shall first provide the
PHHC with the necessary funds to effect the purchase and
development of this property from the proposed P4.5 million
bond issue to be absorbed by the GSIS.
4. That the contract of sale shall first be approved by the Auditor
General pursuant to Executive Order dated February 3, 1959.
5. The vendor shall agree to the dismissal with prejudice of Civil
Case No. Q-3332 C.F.I. Quezon City, entitled "Phil. Suburban
Dev. Corp. V. Ortiz, et al."
On July 13, 1960, the President authorized the floating of bonds under
Republic Act Nos. 1000 and 1322 in the amount of P7,500,000.00 to be
absorbed by the GSIS, in order to finance the acquisition by the PHHC of
the entire Sapang Palay Estate at a price not to exceed P0.45 per sq.
meter.
On December 29,1960, after an exchange of communications, Petitioner
Philippine Suburban Development Corporation, as owner of the unoccupied
portion of the Sapang Palay Estate (specifically two parcels covered by
TCT Nos. T-23807 and T-23808), and the People's Homesite and Housing
Corporation, entered into a contract embodied in a public instrument
entitled "Deed of Absolute Sale" (Annex "F") whereby the former conveyed
unto the latter the two parcels of land abovementioned, under the following
terms and conditions, among others: t.hqw
1. That for and in consideration of the sum of THREE MILLION
THREE HUNDRED EIGHTY-SIX THOUSAND TWO HUNDRED
TWENTY THREE (P3,386,223.00) PESOS, Philippine currency,
to be paid by the VENDEE to the herein VENDOR in the
manner outlined hereinbelow, the VENDOR by these presents
does hereby sell, transfer and convey by way of absolute sale

unto the VENDEE, its successors, administrators or assigns,

the above described two (2) parcels of land, together with all
the improvements existing thereon;
2. That the payment of the consideration mentioned in
paragraph 1 above shall be made as follows:
(a) The vendee is presently negotiating or securing from the
GOVERNMENT SERVICE INSURANCE SYSTEM, by virtue of
a directive of the President of the Philippines, a loan for the
purchase of the above described two (2) parcels of land in
anticipation of the purchase by the said GOVERNMENT
SERVICE INSURANCE SYSTEM of the bonds to be floated by
the National Government to enable the VENDEE to make this
purchase, and from whatever amount may be granted as loan
by the GOVERNMENT SERVICE INSURANCE SYSTEM to the
VENDEE, ONE MILLION SEVEN HUNDRED TEN THOUSAND
(P1,710,000.00) PESOS shall be retained by the said VENDEE
for the purpose of paying and clearing the existing lien
annotated at the back of the aforesaid Transfer Certificates of
Title Nos. T-23807 and T-23808, said payment to be made
directly to the MORTGAGEES and the difference shall be paid
to the VENDOR, provided that this first payment shall not be
less than ONE MILLION SEVEN HUNDRED TEN THOUSAND
(P1,710,000.00) PESOS and the VENDOR is hereby
constituted as Attorney-in-fact and authorized to receive from,
and the GOVERNMENT SERVICE INSURANCE SYSTEM is
directed to pay the balance of the loan direct to the herein
VENDOR chargeable against VENDEE's loan from the
GOVERNMENT SERVICE INSURANCE SYSTEM; provided,
however, That should this amount be more than sufficient to
cover the said mortgage lien, the VENDEE shall pay the
difference to the VENDOR; and provided, further, That the
VENDOR shall take charge of the preparation and registration
of the documents necessary in clearing the above referred to
mortgage lien, with the understanding that the expenses for
preparation, notarization, registration, including documentary
stamps, and other expenses for the cancellation of said
mortgage lien shall be for the account of the VENDOR and
shall be advanced by the VENDEE to the VENDOR;

(b) That out of the sum of P1,710,000.00 to be retained by the

VENDEE mentioned in the immediately preceding paragraph
2(a) for the purpose of discharging the said mortgage lien, the
VENDEE shall deduct and further retain or keep as a trust fund
the amount of FORTY THOUSAND (P40,000) PESOS,
Philippine Currency, to answer for the remaining Notice of Lis
Pendens annotated at the back of Transfer Certificate of Title
Nos. T-23807 and T-23808 until such lien shall have been
discharged or cancelled, the VENDEE binding itself to deliver
forthwith the said amount of P40,000.00 unto the successful
party involved in said Notice of Lis Pendens;
(c) The remaining balance of the total consideration in the
amount of ONE MILLION SIX HUNDRED SEVENTY-SIX
THOUSAND TWO HUNDRED TWENTY-THREE PESOS
(P1,676,223.00), Philippine Currency, or whatever amount is
not paid by virtue of the first payment mentioned in paragraph
(a) above, shall be paid by the VENDEE unto the VENDOR
immediately upon the VENDEE's obtaining sufficient funds from
proceeds of bonds floated by the VENDEE or the Government
for the purchase of the properties subject of this transaction;
provided, however, That full and complete payment of the
balance mentioned in this particular paragraph 2(c) shall be
made or paid by the VENDEE within a period of sixty (60) days
from date of delivery of title by the VENDOR in the name of the
VENDEE; and provided, further, That this sixty (60) days period
may be extended for another period of sixty (60) days upon
written request by the VENDEE at least five (5) days prior to the
expiration of the said sixty (60) days period. Should there be
instituted any legal action, however, for the collection of any
amounts due from the VENDEE in favor of the VENDOR, the
VENDEE binds itself to pay unto the VENDOR a sum
equivalent to twenty-five (25%) per centum of the total balance
due from the, VENDEE in favor of the VENDOR as and by way
of attorney's fees, and the costs of suit;
3. That the VENDOR hereby warrants to defend the title and
ownership of the VENDEE to the two (2) parcels of land above
described from any claim or claims of third parties whomsoever;

(4.) That all expenses for the preparation and notarization of

this document shall be for the account of the VENDOR;
provided, however, That registration and issuance of certificates
of title in the name of the VENDEE shall be for the account of
the VENDEE." (Annex "F")
The above document was not registered in the Office of the Register of
Deeds until March 14, 1961, due to the fact, petitioner claims, that the
PHHC could not at once advance the money needed for registration
expenses. In the meantime, the Auditor General, to whom a copy of the
contract had been submitted for approval in conformity with Executive
Order No. 290, expressed objections thereto and requested a reexamination of the contract, in view of the fact that from 1948 to December
20, 1960, the entire hacienda was assessed at P131,590.00, and
reassessed beginning December 21, 1960 in the greatly increased amount
of P4,898,110.00. Said objections were embodied in a letter to the
President, dated January 9, 1961, but this notwithstanding, the President,
through the Executive Secretary, approved the Deed of Absolute Sale on
February 1, 1961.
It appears that as early as the first week of June, 1960, prior to the signing
of the deed by the parties, the PHHC acquired possession of the property,
with the consent of petitioner, to enable the said PHHC to proceed
immediately with the construction of roads in the new settlement and to
resettle the squatters and flood victims in Manila who were rendered
homeless by the floods or ejected from the lots which they were then
occupying (Annexes "D" and "D-1").
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC
to withhold the amount of P30,099.79 from the purchase price to be paid by
it to the Philippine Suburban Development Corporation. Said amount
represented the realty tax due on the property involved for the calendar
year 1961 (Annex "G").
Petitioner, through the PHHC, paid under protest the abovementioned
amount to the Provincial Treasurer of Bulacan and thereafter, or on June
13, 1961, by letter, requested then Secretary of Finance Dominador Aytona
to order a refund of the amount so paid. Petitioner claimed that it ceased to
be the owner of the land in question upon the execution of the Deed of
Absolute Sale on December 29, 1960. Upon recommendation of the

Provincial Treasurer of Bulacan, said request was denied by the Secretary

of Finance in a letter-decision dated August 22, 1961. Pertinent portions of
this decision are quoted hereunder: t.hqw
.... the records show that the deed of sale executed on
December 29, 1960 ... was approved by the President upon
favorable recommendation of the Cabinet and the Committee
created for the purpose of surveying suitable lots which may be
acquired for relocating squatters in Manila on February 1, 1961
only and that said instrument of sale was registered with the
Register of Deeds on March 14, 1961.
That Corporation, as vendor, maintains that in view of the
execution of the deed of sale on December 29, 1960 it ceased
to be the owner of the property involved and that consequently
it was under no obligation to pay the real property tax thereon
effective January 1, 1961. In support of its stand, that
Corporation cites Article 1498 of the New Civil Code of the
Philippines which provides that "when the sale is made through
a public instrument, the execution thereof shall be equivalent to
the delivery of the thing which is the object of the contract, if
from the deed the contrary does not appear or cannot clearly be
inferred" and Article 1496 of the same Code which states that
"the ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him in any of the ways specified in
Articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to
the vendee." On the other hand, the Provincial Treasurer
contends that, as under the Land Registration Act (Act No. 496)
the Philippine Suburban Development Corporation is still the
owner of the property until the deed of sale covering the same
has been actually registered, the vendor is still liable to the
payment of real property tax for the calendar year 1961.
It is now claimed in this appeal that the Auditor General erred in disallowing
the refund of the real estate tax in the amount of P30,460.90 because aside
from the presumptive delivery of the property by the execution of the deed
of sale on December 29, 1960, the possession of the property was actually
delivered to the vendee prior to the sale, and, therefore, by the
transmission of ownership to the vendee, petitioner has ceased to be the

owner of the property involved, and, consequently, under no obligation to

pay the real property tax for the year 1961.
Respondent, however, argues that the presumptive delivery of the property
under Article 1498 of the Civil Code does not apply because of the
requirement in the contract that the sale shall first be approved by the
Auditor General, pursuant to the Executive Order dated February 3, 1959
and later by the President, and that the petitioner should register the deed
and secure a new title in the name of the vendee before the government
can be compelled to pay the balance of P1,676,223.00 of the purchase
price. Respondent further contends that since the property involved is a
land registered under the Land Registration Act (Act No. 496), until the
deed of sale has been actually registered, the vendor remains as the owner
of the said property, and, therefore, liable for the payment of real property
tax.
We find the petition meritorious.
I.
It cannot be denied that the President of the Philippines, on June 8, 1960,
at his Cabinet meeting, approved and authorized the purchase by the
national government, through the PHHC, of the unoccupied portion of the
property of petitioner; that on June 10, 1960, the PHHC, acting pursuant to
the aforecited approval of the President, passed its Resolution No. 700
approving and authorizing the purchase of the unoccupied portion of said
property; and that after the PHHC took possession of the aforementioned
property on the first week of June, 1960 to use it as a resettlement area for
squatters and flood victims from Manila and suburbs, the President of the
Philippines at his Cabinet meeting on June 13, 1960, approved and
authorized the purchase by the PHHC of the entire property consisting of
752.4940 hectares, instead of only the unoccupied portion thereof as was
previously authorized.
Considering the aforementioned approval and authorization by the
President of the Philippines of the specific transaction in question, and the
fact that the contract here involved which is for a special purpose to
meet a special situation was entered into precisely to implement the
Presidential directive, the prior approval by the Auditor General envisioned

by Administrative Order No. 290, dated February 3, 1959, would therefore,

not be necessary.
As We held in Federation of the United NAMARCO Distributors v. National
Marketing Corporation, 1 the approval by the Auditor General contemplated
by Administrative Order No. 290 dated February 3, 1959, refers to contracts
in general, ordinarily entered into by government offices and governmentowned or controlled corporations, and not to a contract for a special
purpose, to meet a special situation and entered into in implementation of a
Presidential directive to solve and emergency. In other words, where the
contract already bears the approval of the President, the action of the
Auditor General would no longer be necessary because under the said
Administrative Order, the President has, at any rate, the final say.
II
Under the civil law, delivery (tradition) as a mode of transmission of
ownership maybe actual (real tradition) or constructive (constructive
tradition). 2 When the sale of real property is made in a public instrument,
the execution thereof is equivalent to the delivery of the thing object of the
contract, if from the deed the contrary does not appear or cannot clearly be
inferred. 3
In other words, there is symbolic delivery of the property subject of the sale
by the execution of the public instrument, unless from the express terms of
the instrument, or by clear inference therefrom, this was not the intention of
the parties. Such would be the case, for instance, when a certain date is
fixed for the purchaser to take possession of the property subject of the
conveyance, or where, in case of sale by installments, it is stipulated that
until the last installment is made, the title to the property should remain with
the vendor, or when the vendor reserves the right to use and enjoy the
properties until the gathering of the pending crops, 4 or where the vendor
has no control over the thing sold at the moment of the sale, and, therefore,
its material delivery could not have been made. 5
In the case at bar, there is no question that the vendor had actually placed
the vendee in possession and control over the thing sold, even before the
date of the sale. The condition that petitioner should first register the deed
of sale and secure a new title in the name of the vendee before the latter
shall pay the balance of the purchase price, did not preclude the

transmission of ownership. In the absence of an express stipulation to the

contrary, the payment of the purchase price of the good is not a condition,
precedent to the transfer of title to the buyer, but title passes by the delivery
of the goods. 6
III .
We fail to see the merit in respondent's insistence that, although
possession was transferred to the vendee and the deed of sale was
executed in a public instrument on December 29, l960, the vendor still
remains as owner of the property until the deed of sale is actually
registered with the Office of the Register of Deeds, because the land sold is
registered under the Torrens System. In a long line of cases already
decided by this Court, the constant doctrine has been that, as between the
parties to a contract of sale, registration is not necessary to make it valid
and effective, for actual notice is equivalent to registration. 7 Indeed, Section
50 of the Land Registration Act provides that, even without the act of
registration, a deed purporting to convey or affect registered land shall
operate as a contract between the parties. The registration is intended to
protect the buyer against claims of third persons arising from subsequent
alienations by the vendor, and is certainly not necessary to give effect to
the deed of sale, as between the parties to the contract. 8
The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case
involving conflicting rights over registered property and those of innocent
transferees who relied on the clean titles of the properties in question. It is,
therefore, not relevant to the case at bar.
In the case at bar, no rights of third persons are involved, much less is
there any subsequent alienation of the same property. It is undisputed that
the property is in the possession of the vendee, even as early as the first
week of June, 1960, or six (6) months prior to the execution of the Deed of
Absolute Sale on December 29, 1960. Since the delivery of possession,
coupled with the execution of the Deed of Absolute Sale, had
consummated the sale and transferred the title to the purchaser, 10 We,
therefore, hold that the payment of the real estate tax after such transfer is
the responsibility of the purchaser. However, in the case at bar, the
purchaser PHHC is a government entity not subject to real property tax. 11

WHEREFORE, the appealed decision is hereby reversed, and the real

property tax paid under protest to the Provincial Treasurer of Bulacan by
petitioner Philippine Suburban Development Corporation, in the amount of
P30,460,90, is hereby ordered refunded. Without any pronouncement as to
costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15385

June 30, 1960

ALEJANDRA BUGARIN VDA. DE SARMIENTO, plaintiff-appellee,

vs.
JOSEFA R. LESACA, defendant-appellant.
Juan R. Arbizo for appellee.
Pastor de Castro for appellant.
BAUTISTA ANGELO, J.:
On December 31, 1949, plaintiff filed a complaint in the Court of First
Instance of Zambales praying for the rescission of the contract of sale
executed between her and defendant for failure of the latter to place the
former in the actual physical possession of the lands she bought.
After issues were joined, the parties submitted the case for decision upon
the following stipulation of facts: that on January 18, 1949, plaintiff bought
from defendant two parcels of land for P5,000; that after the sale, plaintiff
tried to take actual physical possession of the lands but was prevented
from doing so by one Martin Deloso who claims to be the owner thereof;
that on February 1, 1949, plaintiff instituted an action before the Tenancy
Enforcement Division of the Department of Justice to oust said Martin
Deloso from the possession of the lands, which action she later abandoned
for reasons known only to her; that on December 12, 1949, plaintiff wrote
defendant asking the latter either to change the lands sold with another of
the same kind and class or to return the purchase price together with the
expenses she had incurred in the execution of the sale, plus 6 per cent
interest; and that since defendant did not agree to this proposition as

evidenced by her letter dated December 21,1949, plaintiff filed the present
action.
On April 11, 1957, the trial court rendered judgment declaring the deed of
sale entered into between plaintiff and defendant rescinded, and ordering
the latter to pay the former the sum of P5,000, representing the purchase
price of the lands, plus the amount of P50.25 which plaintiff spent for the
execution and registration of the deed of sale, with legal interest on both
sums from January 18, 1949. Defendant, in due time, appealed to the
Court of Appeals, but the case was certified to us on the ground that the
questions involved are purely legal.
The issue posed by appellant is whether the execution of the deed of sale
in a public document (Exhibit A) is equivalent to delivery of possession of
the lands sold to appellee thus relieving her of the obligation to place
appellee in actual possession thereof.
Articles 1461 and 1462 of the old Civil Code provide:
ART. 1461. The vendor is bound to deliver and warrant the thing
which is the subject-matter of the sale.
ART. 1462. The thing sold shall be deemed delivered when the
vendee is placed in the control and possession thereof.
If the sale should be made by means of a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which
is the subject-matter of the contract unless the contrary appears or is
clearly to be inferred from such instrument.
From the above it is clear that when a contract of sale is executed the
vendor is bound to deliver to the vendee the thing sold by placing the
vendee in the control and possession of the subject-matter of the contract.
However, if the sale is executed by means of a public instrument, the mere
execution of the instrument is equivalent to deliveryunless the contrary
appears or is clearly to be inferred from such instrument.
The question that now arises is: Is there any stipulation in the sale in
question from which we can infer that the vendor did not intend to deliver
outright the possession of the lands to the vendee? We find none. On the
contrary, it can be clearly seen therein that the vendor intended to place the

vendee in actual possession of the lands immediately as can be inferred

from the stipulation that the vendee "takes actual possession thereof ... with
full rights to dispose, enjoy and make use thereof in such manner and form
as would be most advantageous to herself." The possession referred to in
the contract evidently refers to actual possession and not merely
symbolical inferable from the mere execution of the document.
Has the vendor complied with this express commitment? she did not. As
provided in Article 1462, the thing sold shall be deemed delivered when the
vendee is placed in the control and possession thereof, which situation
does not here obtain because from the execution of the sale up to the
present the vendee was never able to take possession of the lands due to
the insistent refusal of Martin Deloso to surrender them claiming ownership
thereof. And although it is postulated in the same article that the execution
of a public document is equivalent to delivery, this legal fiction only holds
true when there is no impediment that may prevent the passing of the
property from the hands of the vendor into those of the vendee. This is
what we said in a similar case:
The Code imposes upon the vendor the obligation to deliver the thing
sold. The thing is considered to be delivered when it is placed "in the
hands and possession of the vendee." (Civ. Code, art. 1462.) It is true
that the same article declares that the execution of a public
instrument is equivalent to the delivery of the thing which is the object
of the contract, but in order that this symbolic delivery may produce
the effect of tradition, it is necessary that the vendor shall have
such control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to confer
upon the purchaser the ownership andright of possession. The thing
sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the
purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding
the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then
fiction yields to reality the delivery has not been effected.
(Addison vs. Felix and Tioco, 38 Phil., 404; See also Garchitorena vs.
Almeda, 48 Off. Gaz., No., 8, 3432; 3437)

The next question to resolve is: Can plaintiff rescind the contract of sale in
view of defendant's failure to deliver the possession of the lands?
We are inclined to uphold the affirmative. While defendant contends that
rescission can be availed of only in the cases enumerated in Articles 1291
and 1292 of the old civil Code and being a subsidiary remedy (Article 1294)
it can only be resorted to when no other remedy is available, yet we agree
with plaintiff's contention that this action is based on Article 1124 of the
same Code, which provides:
Art 1124. The right to resolve reciprocal obligations, in case one of
the obligors should fail to comply with that which is incumbent upon
him, is deemed to be implied.
The person prejudiced may choose between exacting the fulfillment
of the obligation or its resolution with indemnity for losses and
payment of interest in either case. He may also demand the
resolution of the obligation even after having elected its fulfillment,
should the latter be found impossible.
Undoubtedly in a contract of purchase and sale the obligation of the parties
is reciprocal, and, as provided by the law, in case one of the parties fails to
comply with what is incumbent upon him to do , the person prejudiced may
either exact the fulfillment of the obligation or rescind the sale. Since
plaintiff chose the latter alternative, it cannot be disputed that her action is
in accordance with law.
We agree with the trial court that there was no fraud in the transaction
in question but rather a non-fulfillment by the plaintiff-appellee C.N.
Hodges of his obligation, as vendor, to deliver the things, which were
the subject-matter of the contract, to the defendant-appellant Alberto
Granada, as purchaser thereof (article 1461, Civil Code), and place
them in the latter's control and possession (article 1462, Civil Code)
which was not done. Inasmuch as the obligations arising from the
contract of purchase and sale, Exhibit A, which was entered into by
the plaintiff-appellee and the defendant-appellant, are reciprocal and
the former had failed to comply with that which was incumbent upon
him, the latter has the implied right to resolve them, and he may
choose between exacting from the vendor the fulfillment of the
obligation or its resolution with indemnity for damages and payment

of interest in either case (article 1124, Civil Code). Inasmuch as the

defendant-appellant had chosen to rescind the aforesaid contract of
purchase and sale in his cross-complaint, there arose the necessity
on the part of the plaintiff-appellee, to return the purchase price with
interest thereon, and on the part of the defendant-appellant, to
restore the things which were the subject-matter thereof, in case he
had received them (article 1295, Civil Code). (Hodges vs. Granada,
59 Phil., 429, 432; See also Pabalan vs. Velez, 22 Phil., 29;
Addison vs. Felix and Tioco, supra; Rodriguez vs. Flores, 43 Off.
Gaz., No. 6, 2247.)
Wherefore the decision appealed from is affirmed, with costs against
defendant-appellant.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-20091

July 30, 1965

PERPETUA ABUAN, ET AL., plaintiffs-appellants,

vs.
EUSTAQUIO S. GARCIA, ET AL., defendants-appellees.
Emilio R. Gombio for plaintiffs-appellants.
Ruperto G. Martin and Associates for defendants-appellees.
BENGZON, C.J.:
This is an action for legal redemption under Section 119 of the Public Land
Law 1 which provides that:
Every conveyance of land acquired under the free patient or
homestead provisions, when proper, shall be subject to re-purchase
by the applicant, his widow, or legal heirs, for a period of five years
from the date of conveyance.

Acquired by Laureano Abuan the homestead passed after his death to his
legal heirs, the plaintiffs herein. Consequently, the Original Certificate of
Title in his name was cancelled, and in lieu thereof, Transfer Certificate of
Title No. T-5486 was issued in their names.
On August 7, 1953, plaintiffs sold the parcel of land to defendants, the sale
being evidenced by a public instrument entitled "Deed of Absolute Sale";
and by virtue thereof, Transfer Certificate of Title No. T-5906 was issued to
defendants.
Later, plaintiffs filed an action to recover the land, alleging that the deed of
absolute sale had been executed through fraud, without consideration.
However, the case was subsequently settled amicably, when the parties
entered into an "Agreement" dated February 28, 1955, under the terms of
which defendants paid P500.00 on that day as partial payment of the
purchase price of the land, and promised to pay the balance of P1,500.00
on or before April 30, 1955, with a grace period of thirty days. The parties
also stipulated in said Agreement that it "shall supersede all previous
agreements or contracts heretofore entered into and executed by and
between plaintiff and defendants, involving the same parcel of riceland ... .
Claiming that full payment had been effected only sometime in May, 1955,
plaintiffs instituted the present action on March 4, 1960.
Defendants moved to dismiss, on the ground that plaintiffs' right of action
was already barred, because the five-year redemption period had already
expired.
Sustaining the motion, the Nueva Vizcaya court dismissed the complaint.
Plaintiffs appealed to the Court of Appeals, which certified the case to this
Court because only a legal issue remains to be determined.
The sole question is: When did the five-year period (within which plaintiffs
may exercise their right of repurchase) begin to run? Should it be August 7,
1953, when the Deed of Absolute Sale was executed, or February 28,
1955, when the compromise "Agreement" was entered into; or should it be
in May, 1955, upon full payment of the purchase price? It is obvious that
counted from either of the first two dates more than five years had elapsed
when this action for redemption was brought (March 1960); whereas the

action would be well within the period, if computed from the date of full
payment of the purchase price.
The lower court, in dismissing plaintiffs' complaint, fixed the starting date as
February 28, 1955, when the Agreement (Annex "B") was entered into. It is
plaintiffs' contention, on the other hand, that the prescriptive period should
be counted from the full payment of the purchase price, that is, from May,
1955, since it was on this date that the contract was consummated.
Plaintiffs' contention is untenable. The law speaks of "five years from date
of conveyance." Conveyance means transfer of ownership; it means the
date when the title to the land is transferred from one person to
another. 2 The five-year period should, therefore, be reckoned with from the
date that defendants acquired ownership of the land. Now, when did
defendants legally acquire ownership over the land?
Art. 1477 of the New Civil Code provides that ownership of the thing sold
shall be transferred to the vendee upon the actual or constructive delivery
thereof; and Art. 1496 points out that ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the
ways specified in articles 1497 to 1501. Under Art. 1498, When the sale is
made through a public instrument as in this case the execution
thereof shall be equivalent to the delivery of the thing which is the object of
the contract, if from the deed the contrary does not appear or cannot be
clearly inferred. 3 This manner of delivery of the thing through the execution
of a public document is common to personal as well as real property. 4
It is clear, therefore, that defendants acquired ownership to the land in
question upon the execution of the deed of sale. The deed of sale was
executed on August 7, 1953, which was "superseded" by the Agreement of
February 28, 1955, as to the terms and conditions of payment of the
purchase price. The latter agreement did not operate torevest the
ownership of the land in the plaintiffs. 5
It is apparent that five years had elapsed since the execution of the deed of
sale at the time plaintiffs filed this action for redemption. Our view finds
support in a long line of decisions holding, that the five-year period starts
from the date of the execution of the instrument of conveyance. 6
But assuming arguendo that Annex "A" is null and void, as plaintiffs aver,
and did not serve to effectuate delivery of the property, we can consider the

date of the Agreement (Annex "B"), at the latest, as the time within which
ownership is vested in the defendants. True, Annex "B" is a private
instrument the execution of which could not be construed as constructive
delivery under Art. 1498 of the New Civil Code. But Art. 1496 explicitly
provides that ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him "in any other manner signifying an
agreement that the possession is transferred from the vendor to the
vendee." The intention to give possession (and ownership) is manifest in
the agreement (Annex "B") entered into by the parties, specially
considering the following circumstances: (1) the payment of part of the
purchase price, there being no stipulation in the agreement that ownership
will not vest in the vendees until full payment of the price; and (2) the fact
that the agreement was entered into in consideration of plaintiffs'
desistance, as in fact they did desist, in prosecuting their reivindicatory
action, thereby leaving the property in the hands of the then and now
defendants as owners thereof, necessarily. This was delivery brevi
manu permissible under Articles 1499 and 1501 of the New Civil Code.
The circumstance that full payment was made only, as plaintiffs allege, in
May, 1955, does not alter the fact that ownership of the land passed to
defendants upon the execution of the agreement with the intention of letting
them hold it as owners. In the absence of an express stipulation to the
contrary, the payment of the price is not a condition precedent to the
transfer of ownership, which passes by delivery of the thing to the buyer. 7
IN VIEW OF THE FOREGOING, the order of the court a quo dismissing the
complaint is hereby affirmed, with costs against plaintiffs-appellants.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-13125

February 11, 1919

ROSALIO BAUTISTA, plaintiff-appellee,

vs.
FRANCISCO SIOSON, ET AL., defendants.
RAYMUNDO DE LA CRUZ, appellant.

Agapito Ignacio for appellant.

A. Cruz Herrera for appellee.
TORRES, J.:
This appeal through bill of exceptions was filed by counsel for the
defendant Raymundo de la Cruz from the judgment of December 29, 1916,
whereby the judge of the Court of First Instance of Rizal held (1) that
Rosalio Bautista, the plaintiff, was by merger the owner of the properties
described in subparagraphs (a) and (b) of paragraph 2 of the complaint; (2)
ordered Raymundo de la Cruz to deliver to the plaintiff Bautista
the camarin or warehouse, built of strong materials, described in the
subparagraph (a) above mentioned; (3) ordered Francisco Sioson to pay to
said plaintiff Bautista the sum of P200, the amount of the rent due; (4)
absolved Francisco Santos Paulino from the compliant, as the evidence did
not show that he had taken possession of the house described in said
subparagraph (b); and, finally (5) ordered each of the defendants Francisco
Sioson and Raymundo de la Cruz to pay one-half of the costs. The
appellant moved for a new trial, which motion being denied, he entered an
exception, and, upon filing the proper bill of exceptions, the same was
approved and forwarded, together with a transcript of all the evidence to
the office of the clerk of this court.
On June 30, 1916, counsel for the plaintiff filed complaint in the Court of
First Instance of Rizal, in which he alleged that on September 4, 1912, by
virtue of a contract of sale executed on September 4, 1912, between the
plaintiff Rosalio Bautista and the spouses Francisco Sioson and Lorenza
de la Cruz, for the sale of a camarin or warehouse of strong materials with
an iron roof and a house of mixed materials with a nipa roof both
buildings constructed on lots situated in the town of Malabon, Rizal, and
belonging to the chaplaincy known by the name of Concepcion said
buildings were delivered to him on the date of the contract, which was
drawn up before a notary, under the condition that the vendors might
repurchase them within the term of two years, counted from the date of the
contract; that immediately after the sale of the plaintiff leased the
purchased buildings to said vendor spouses, who had not paid the price of
the lease, nor repurchased said buildings, notwithstanding that the term of
the contract had elapsed with the result that the other defendant Raymundo
de la Cruz was then (at the time of the filing of the complaint) in material
possession of said camarin under title of owner, and Francisco Santos

Paulino was in possession of the house, also under a like title. Therefore
he prayed the court to hold that the plaintiff's ownership in said buildings
was consolidated, to order the defendants to deliver them to the plaintiff,
and to order Francisco Sioson to pay to the plaintiff the price of the lease
and to pay the costs.
The defendants Francisco Sioson and Francisco Santos Paulino did not put
in an appearance to answer the complaint, notwithstanding that they were
duly summoned. They were therefore declared in default.
Counsel for the defendant Raymundo de la Cruz admitted paragraphs 1
and 6 of the complaint, and denied generally and specifically the other
paragraphs thereof. In special defense he alleged that
the camarin described in subparagraph (a) , paragraph 2 of the complaint,
was of the exclusive ownership of the defendant Raymundo de la Cruz. He
therefore asked that his client be absolved from the complaint, with the
costs against the plaintiff.
Upon the hearing of the case and the introduction of the evidence by the
parties, the court decided the suit in the manner aforesaid.
It now behooves us to determine who is the owner of the camarin of strong
materials with an iron roof, to which reference is made in subparagraph (a)
of paragraph 2 of the complaint: Whether it belongs to Rosalio Bautista, in
whose favor its ownership became consolidated by the lapse of the term of
two years without its having been repurchased by the vendors; or to
Raymundo de la Cruz, to whom Francisco Sioson likewise sold the
said camarinon August 5, 1914, one year and eleven months after the sale
of this building to the plaintiff Bautista, effected on September 4, 1912.
In order that the issue raised in this suit may be properly decided we shall
herein make a statement of the contracts executed by and between the
litigants.
On September 4, 1912, the defendant Francisco Sioson and his wife
Lorenza de la Cruz, through a notarial instrument, sold to the plaintiff
Rosalio Bautista the camarin in question, besides some other property,
under the right of repurchase. It was stipulated that if within two years from
the date of the contract the vendors or their successors in interest should
not repurchase said properties for the sum of P400, the price of the sale,
such sale should become absolute and thenceforth the ownership in the

properties sold should be consolidated, the execution of another instrument

being unnecessary. (Exhibit A, p. 10.)
On the same date, September 4, 1912, Rosalio Bautista, through a notarial
instrument, leased the properties sold to him to the vendors Francisco
Sioson and Lorenza de la Cruz, for the price of P100 per annum, for the
period of two years counted from the date of the instrument. (Exhibit D, p.
15.)
On June 12, 1913, Lorenza de la Cruz died (Sten. notes, p. 29) and on
August 5, 1914, Francisco Sioson executed before a notary a document by
which he sold under right of repurchase to the defendant Raymundo de la
Cruz, thecamarin in question. It was stipulated in this instrument that if
within six months, counted from the 1st of August, 1914, the vendor
Francisco Sioson should return to the purchase Raymundo de la Cruz the
sum of P422, the price of the purchase, then the purchaser Raymundo de
la Cruz would be obliged to execute in favor of said vendor Francisco
Sioson an instrument of resale, but that if within the period mentioned he
should not make the redemption stipulated, said sale should become
absolute, the execution of another instrument being unnecessary. (Exhibit
1, p. 17.)
From the instrument referred to in the preceding paragraphs it is concluded
that the original owner of the buildings in dispute, Francisco Sioson, and his
wife, Lorenza de la Cruz, sold, on September 4, 1912, the house and
thecamarin to the plaintiff Rosalio Bautista for P400, under agreement of
their resale within the term of two years counted from said date; and that,
on the same date, by means of a constitutum possessorium agreement,
and in another new notarial instrument, the purchaser Bautista leased the
properties sold to the vendors Francisco Sioson and Lorenza de la Cruz at
an annual rent of P100, for a period of two years counted from the date
above mentioned.
After the lessee, Francisco Sioson, had been in possession of the
properties leased for one year and eleven months, he sold the camarin,
one of them, by virtue of a notarial instrument to Raymundo de la Cruz,
under the agreement that if he did not redeem the camarin so sold within
six months from the 1st of August, 1914, and return the sum of P422, such
sale under right of repurchase should become absolute, the execution of
another instrument being unnecessary.

As a result of the two said alienation, both set forth in notarial instruments
though not recorded in the registry of property the issue raised and to be
decided is, which of the two purchasers, the plaintiff Bautista and the
defendant Cruz, is the lawful owner of the camarin successively sold to the
former and to the latter by the other defendant Francisco Sioson, its original
owner, in accordance with the provisions contained in article 1473 of the
Civil Code, the last paragraph of which, among other things, prescribed:
Should there be no entry, the property shall belong to the person who
first took possession of its in good faith . . .
In view of the fact that the deed of sale executed by Francisco Sioson, the
owner of the camarin, and his wife, Lorenza de la Cruz, on September 4,
1912, in favor of Rosalio Bautista, was not entered in the registry of
property, and of the further fact that, upon the execution of the second sale
of the same camarin by the said Sioson, which sale was made after the
death of his wife Lorenza by virtue of an instrument dated August 5, 1914,
in favor of Raymundo de la Cruz, under agreement of repurchase for the
price of P422 the term of two years fixed for the redemption of
the camarin so sold had not yet expired, it may be presumed, in the
absence of proof to the contrary, that the second purchaser Raymundo de
la Cruz, on acquiring the camarin of its original owner Francisco Sioson,
who, according to the written contract, became a tenant or lessee of
the camarin, was not aware of said first sale to Bautista, and believed that
Sioson, who was in possession of the camarin, was still the owner thereof.
Therefore, Cruz acted in good faith in acquiring it, inasmuch as, through
failure to enter the property in the registry, there was no reason why the
previous alienation of the camarin should have been known. But be all this
as it may, nevertheless, the actual and material possession of
the camarin by Cruz does not constitute a sufficient legal reason for holding
the he has a better right to the building than the first purchaser Rosalio
Bautista, although the latter was not in actual, physical, and material of
the camarin that he had purchased. This conclusion is derived from a strict
application of the provisions of said article 1473 of the Civil Code.
Both alienations, effected successively by Francisco Sioson in favor of
Bautista and Cruz, are recorded in notarial instruments, though they were
not entered in the registry of property. To determine who is the lawful owner
of thecamarin sold, if the provisions of said article of the Code are to be
observed, we have first to determine the contention in regard to which of

the two purchasers is in possession thereof, and if, on the execution of the
contract of lease by the first purchaser in favor of the vendor himself, the
constitutum possessorium agreement is to be considered to have been
stipulated, the conclusion must necessarily be reached as to which of the
two purchasers first took possession of the camarin sold, and also whether
the material possession of the tenant is of a precarious nature, enjoyed in
the same and representation of the owner Bautista.
Article 1462 of the Civil Code reads:
A thing sold shall be considered as delivered, when it is placed in the
hands and possession of the vendee.
When the sale should be made by means of a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which
is the object of the contract, if in said instrument the contrary does not
appear or may be clearly inferred.
From the contest of this article it is deduced that the delivery or tradition of
the thing sold may be real or actual, and feigned. The execution of a public
instrument constitutes one of the kinds of symbolic tradition, but, in all the
different manners by which the thing sold may be delivered, it is necessary
that the record bear proof and that it may be held that such delivery or
tradition was determined by the will of the parties to deliver and receive,
respectively, the thing that is the subject of the contract.
In the contract of lease (Exhibit D, record, p. 15) the lessor, Rosalio
Bautista, states that in his capacity as owner he leased to the spouses
Francisco Sioson and Lorenza de la Cruz, among other properties,
a camarin of strong material with an iron roof, at an annual rent of P100,
the lessees binding themselves to report to the lessor any act of
disturbance committed by any other person, and all defects that might be
occasioned to the building. The execution of this instrument of lease shows
that the camarin would be continued to be occupied by its previous owner
and vendor after it had been delivered, symbolically, by means of the
instrument executed for the purpose in favor of the purchaser, in order that
he might hold it in the capacity of lessee, it being supposed, by a legal
fiction, that the purchaser entered into possession of the camarin sold, a
form of possession utilized by the purchaser by virtue of the clause known

in law as constitutum possessorium, stipulated between the contracting

parties.
So that by the execution of the deed of sale of September 4, 1912, Rosalio
Bautista entered into the material possession under title of owner, of
the camarin sold to him by Francisco Sioson, and, by virtue of another
instrument of lease, of the same date, the purchaser and owner of
the camarin conveyed and delivered this building to the lessee in view of
said contract. Under these perfectly legal suppositions it is unquestionable
that the purchaser Rosalio Bautista was the first person who entered into
the possession of the camarin as soon as soon as he acquired it by virtue
of said sale.
The material possession which the other defendant, Raymundo de la Cruz,
now enjoys, not only was subsequent by one year and eleven months, but
also, on the other hand, is an unlawful possession which was transmitted to
him by Francisco Sioson, who held the camarin precariously and in the
capacity of tenant, and, consequently, without any right whatever to convey
to Raymundo de la Cruz the possession under title of owner referred to in
article 1473, aforementioned of the Civil Code.
This article says: "If the same thing should have been sold to different
vendees. . .;" but it must be understood that said sale was made by its
original owner. In the instant case Francisco Sioson, on affecting the
second sale in favor of Raymundo de la Cruz, was in possession of
the camarin and occupied it, not in the capacity of owner, but in that of
lessee or tenant, and therefore absolutely had no right to dispose of the
building in the capacity of owner thereof; consequently Sioson could not
convey to the second purchaser the lawful possession of the
disputed camarin.
After the foregoing elucidation of the main issue submitted to this court for
decision, we deem it unnecessary to pass upon the other issues relative to
whether Francisco Sioson could have sold, only after the death of his wife,
the saidcamarin to Raymundo de la Cruz, and whether the price of the
second sale was part of a larger sum that pertained to the second
purchaser, as proceeds derived from the game of jueteng, inasmuch as, for
the reasons above stated, it has been shown that Raymundo de la Cruz
could not have acquired any right in the camarin involved in this suit; for
Francisco Sioson, who sold to Cruz, occupied it as a mere tenant and not

as owner, and, consequently, was unable to transmit to the purchaser any

property right whatever or lawful possession under title of owner.
For all the foregoing reasons, whereby the errors assigned to the judgment
appealed from have been duly refuted, said judgment, being in conformity
with the evidence of record, should be, as it hereby is, affirmed, with the
costs against the appellant Raymundo de la Cruz. So ordered.
Arellano, C.J., Johnson, Araullo, Street and Avancea, JJ., concur.

Separate Opinions
CARSON, J., dissenting:
I dissent. Manresa, in his commentaries, on article 1473 of the Civil Code,
clearly indicates that the possession referred to in that article is the real, the
physical possession of the property; and certain it is that to hold that the
possession contemplated in this article may be secured without the
performance of some act which will give notice to innocent subsequent
purchasers, or of which subsequent purchasers may inform themselves by
due diligence tends to defeats the just and equitable provisions of the law.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 13203

September 18, 1918

BEHN, MEYER & CO. (LTD.), plaintiff-appellant,

vs.
TEODORO R. YANCO, defendant-appellee.
Crossfield & O'Brien for appellant.
Charles C. Cohn for appellee.
MALCOLM, J.:

The first inquiry to be determined is what was the contract between the
parties.
The memorandum agreement executed by the duly authorized
representatives of the parties to this action reads:
Contract No. 37.

MANILA,

7 de marzo, de 1916.

Confirmanos haber vendido a Bazar Siglo XX, 80 drums Caustic

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

Comprador Bazar Siglo XX

de Teodoro R. Yangco
J. Siquia

Vendores
BEHN, MEYER & CO. (Ltd.)
O. LOMBECK.

This contract of sale can be analyzed into three component parts.

1. SUBJECT MATTER AND CONSIDERATION.
Facts. The contract provided for "80 drums Caustic Soda 76 per cent
"Carabao" brand al precio de Dollar Gold Nine and 75/100 1-lbs."
Resorting to the circumstances surrounding the agreement are we are
permitted to do, in pursuance of this provision, the merchandise was
shipped from New York on the steamship Chinese Prince. The steamship
was detained by the British authorities at Penang, and part of the cargo,

including seventy-one drums of caustic soda, was removed. Defendant

refused to accept delivery of the remaining nine drums of soda on the
ground that the goods were in bad order. Defendant also refused the
optional offer of the plaintiff, of waiting for the remainder of the shipment
until its arrival, or of accepting the substitution of seventy-one drums of
caustic soda of similar grade from plaintiff's stock. The plaintiff thereupon
sold, for the account of the defendant, eighty drums of caustic soda from
which there was realized the sum of P6,352.89. Deducting this sum from
the selling price of P10,063.86, we have the amount claimed as damages
for alleged breach of the contract.
Law. It is sufficient to note that the specific merchandise was never
tendered. The soda which the plaintiff offered to defendant was not of the
"Carabao" brand, and the offer of drums of soda of another kind was not
made within the time that a March shipment, according to another provision
the contract, would normally have been available.
2. PLACE OF DELIVERY.
Facts. The contract provided for "c.i.f. Manila, pagadero against delivery
of documents."
Law. Determination of the place of delivery always resolves itself into a
question of act. If the contract be silent as to the person or mode by which
the goods are to be sent, delivery by the vendor to a common carrier, in the
usual and ordinary course of business, transfers the property to the
vendee. A specification in a contact relative to the payment of freight can be
taken to indicate the intention of the parties in regard to the place of
delivery. If the buyer is to pay the freight, it is reasonable to suppose that
he does so because the goods become his at the point of shipment. On the
other hand, if the seller is to pay the freight, the inference is equally so
strong that the duty of the seller is to have the goods transported to their
ultimate destination and that title to property does not pass until the goods
have reached their destination. (See Williston on Sales, PP. 406-408.)
The letters "c.i.f." found in British contracts stand for cost, insurance, and
freight. They signify that the price fixed covers not only the cost of the
goods, but the expense of freight and insurance to be paid by the seller.
(Ireland vs.Livingston, L. R., 5 H. L., 395.) Our instant contract, in addition
to the letters "c.i.f.," has the word following, "Manila." Under such a

contract, an Australian case is authority for the proposition that no inference

is permissible that a seller was bound to deliver at the point of destination.
(Bowden vs. Little, 4 Comm. [Australia], 1364.)
In mercantile contracts of American origin the letters "F.O.B." standing for
the words "Free on Board," are frequently used. The meaning is that the
seller shall bear all expenses until the goods are delivered where they are
to be "F.O.B." According as to whether the goods are to be delivered
"F.O.B." at the point of shipment or at the point of destination determines
the time when property passes.
Both the terms "c.i.f." and "F.O.B." merely make rules of presumption which
yield to proof of contrary intention. As Benjamin, in his work on Sales, well
says: "The question, at last, is one of intent, to be ascertained by a
consideration of all the circumstances." For instance, in a case of Philippine
origin, appealed to the United States Supreme Court, it was held that the
sale was complete on shipment, though the contract was for goods, "F.O.B.
Manila," the place of destination the other terms of the contract showing the
intention to transfer the property. (United States vs. R. P. Andrews & Co.
[1907], 207 U.S., 229.)
With all due deference to the decision of the High Court of Australia, we
believe that the word Manila in conjunction with the letters "c.i.f." must
mean that the contract price, covering costs, insurance, and freight,
signifies that delivery was to made at Manila. If the plaintiff company has
seriously thought that the place of delivery was New York and Not Manila, it
would not have gone to the trouble of making fruitless attempts to
substitute goods for the merchandise named in the contract, but would
have permitted the entire loss of the shipment to fall upon the defendant.
Under plaintiffs hypothesis, the defendant would have been the absolute
owner of the specific soda confiscated at Penang and would have been
indebted for the contract price of the same.
This view is corroborated by the facts. The goods were not shipped nor
consigned from New York to plaintiff. The bill of lading was for goods
received from Neuss Hesslein & Co. the documents evidencing said
shipment and symbolizing the property were sent by Neuss Hesslein & Co.
to the Bank of the Philippine Islands with a draft upon Behn, Meyer & Co.
and with instructions to deliver the same, and thus transfer the property to
Behn, Meyer & Co. when and if Behn, Meyer & Co. should pay the draft.

The place of delivery was Manila and plaintiff has not legally excused
default in delivery of the specified merchandise at that place.
3. TIME OF DELIVERY.
Facts. The contract provided for: "Embarque: March 1916," the
merchandise was in fact shipped from New York on the Steamship Chinese
Prince on April 12, 1916.
Law. The previous discussion makes a resolution of this point
unprofitable, although the decision of the United States Supreme Court in
Norrington vs. Wright (([1885], 115 U.S., 188) can be read with profit.
Appellant's second and third assignments of error could, if necessary, be
admitted, and still could not recover.
THE CONTRACT.
To answer the inquiry with which we begun this decision, the contract
between the parties was for 80 drums of caustic soda, 76 per cent
"Carabao" brand, at the price of $9.75 per one hundred pounds, cost,
insurance, and freight included, to be shipped during March, 1916, to be
delivered to Manila and paid for on delivery of the documents.
PERFORMANCE.
In resume, we find that the plaintiff has not proved the performance on its
part of the conditions precedent in the contract. The warranty the
material promise of the seller to the buyer has not been complied with.
The buyer may therefore rescind the contract of sale because of a breach
in substantial particulars going to the essence of the contract. As
contemplated by article 1451 of the Civil Code, the vendee can demand
fulfillment of the contract, and this being shown to be impossible, is relieved
of his obligation. There thus being sufficient ground for rescission, the
defendant is not liable.
The judgment of the trial court ordering that the plaintiff take nothing by its
action, without special finding as to costs, is affirmed, with the costs of this
instance. Against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Avancea, JJ., concur.

EN BANC
[G.R. No. L-8717. November 20, 1956.]
GENERAL FOODS CORPORATION, Plaintiff-Appellant, vs. NATIONAL
COCONUT CORPORATION, Defendant-Appellee.
DECISION
REYES, J. B. L., J.:
Appellant General Foods Corporation is a foreign corporation organized
under the laws of the State of Delaware, U. S. A., and licensed to do
business
in
the
Philippines; chan
roblesvirtualawlibrarywhile Appellee National
Coconut
Corporation
(otherwise called NACOCO), was, on the date of the transaction in
question, a corporation created by Commonwealth Act No. 518, but later
abolished and place in liquidation by Executive Order No. 3727 dated
November 24, 1950.
On September 23, 1947, Appellee sold to Appellant 1,500 (later reduced to
1,000) long tons of copra, at $164 (later reduced to $163) per ton of 2,000
pounds,
under
the
following
terms
and
conditions:chanroblesvirtuallawlibrary
CONTRACT NO. RH-3551
FRANKLIN BAKER DIVISION OF GENERAL FOODS CORPORATION
15th & Bloomfield Streets
Hoboken, New Jersey
WE CONFIRM HAVING PURCHASED FOR YOU TODAY from Messrs.
National Coconut Corporation, Manila, Philippine Islands, through
Mercantile, Inc., Manila, P. I.
COMMODITY:chanroblesvirtuallawlibrary COPRA Fair Merchantable
Quality, Basis
6% F. F. A.
QUALITY:chanroblesvirtuallawlibrary As per rule 100 of National Institute
of
Oilseeds Products.

QUANTITY:chanroblesvirtuallawlibrary Fifteen Hundred (1500) tons of

2,240 pounds each. Seller has the option of delivering 5 per cent more or
less of the contracted quantity, such surplus or deficiency to be settled
as follows:chanroblesvirtuallawlibrary On the basis of the delivered
weight up to 3 per cent at the contract price and any excess or deficiency
beyond this 3 per cent at the market price of the day of arrival at port
of discharge, this market price to be fixed by the Executive Committee of
the National Institute of Oilseeds Products. Each shipment to be treated
as a separate contract.
PACKING:chanroblesvirtuallawlibrary In
SHIPMENT:chanroblesvirtuallawlibrary November,
possible, from Philippine Islands.

1947,

bulk.
earlier if

PRICE:chanroblesvirtuallawlibrary One hundred and sixty-four dollars

($164) per ton of 2,000 pounds, CIF New York.
PAYMENT:chanroblesvirtuallawlibrary Buyers to open immediately by
cable in favor of Sellers Irrevocable Letter of Credit through the
Philippine National Bank for 95 per cent of invoice value based on
shipping
weight
in exchange
for
the
following
documents:chanroblesvirtuallawlibrary
1. Provisional Invoice.
2. Full set of negotiable ocean bills of lading, freight charges fully prepaid
and showing the material on board.
3. Weight Certificate confirming quantity shown on invoice and bill of
lading.
4. Consular invoice or certificate of origin in duplicate.
5. Loading survey report and weight certificate of Superintendence
Corporation.
6. Consular form No. 197 (Pure Food & Drug Certificate).
Balance due to be paid promptly upon ascertainment and based upon
outturn weights and quality at port of discharge.
WEIGHTS:chanroblesvirtuallawlibrary Net landed weights.
SAMPLING:chanroblesvirtuallawlibrary As per Rule 101 of National
Institute of Oilseeds Products.
INSURANCE:chanroblesvirtuallawlibrary Buyer to provide valid insurance
for Marine and War risks for 110 per cent of CIF contract value. Seller

to allow buyer from the CIF price an amount equivalent to the current
rate of insurance prevailing on the date of shipment, in lieu of sellers
covering usual marine insurance themselves.
CLAUSE PARAMOUNT:chanroblesvirtuallawlibrary This contract is subject
to published rules of the National Institute of Oilseeds Products adopted
and now in force, which are hereby made a part hereof. Any dispute
arising under this contract shall be settled by a Board of Arbitrators
selected by the Chairman of the Foreign Commerce Association of the
San Francisco Chamber of Commerce and to be judged according to the
rules of the National Institute of Oilseeds Products and the findings of
said Board will be final and binding upon all the signatories hereto,
providing such rules are not in conflict with existing Government
regulations.
The above shipment to be made under Franklin Bakers license No. 26429.
This contract covers the sale made by the Nacoco thru the Mercantile, Inc.
dated September 9, 1947 in the Philippines. (Exhibit A).
From November 14 to December 3, 1947, Appellee shipped 1054.6278
short tons of copra toAppellant on board the S. S. Mindoro. The weighing
of the cargo was done by the Luzon Brokerage Co., in its capacity as agent
of the General Superintendence Co., Ltd., of Geneva, Switzerland, by
taking the individual weight of each bag of copra and summing up the total
gross weight of the shipment, then weighing a certain number of empty
bags to determine the average tare of the empty bags, which was
subtracted from the gross weight of the shipment to determine the net
weight of the cargo. On the strength of the net weigh thus
found, Appellee prepared and remitted to Appellant the corresponding bills
of lading and other documents, and withdrew from the latters letter of credit
95 per cent of the invoice value of the shipment, or a total of $136,686.95.
Upon arrival in New York, the net cargo was reweighed by Appellant and
was found to weigh only 898.792 short tons. Deducting from the value of
the shortage the sum of $8,092.02 received byAppellant from the insurer
for 58.25 long tons lost or destroyed even before the copra was loaded on
board the vessel, Appellant demanded from Appellee the refund of the
amount of $24,154.59. Sometime after the receipt of Appellants demand,
the Appellee, through its officers-in-charge Jose Nieva, Sr., acknowledged
in a letter liability for the deficiency in the outturn weights of the copra and
promised payment thereof as soon as funds were available (Exhibit B).
Then Appellee was, as already stated, abolished and went into

liquidation. Appellant submitted its claim to the Board of Liquidators, which

refused to pay the same; chan roblesvirtualawlibrarywherefore, it filed the
present action in the Court of First Instance of Manila to recover
from Defendant-Appellee the amount of $24,154.49 and the 17 per cent
exchange tax thereon which, under the provisions of Republic Act 529, had
to be paid in order to remit said amount to the United States, plus
attorneys fees and costs. The Court a quo found for the Defendant and
dismissed the complaint; chan roblesvirtualawlibraryhence, this appeal
by Plaintiff.
Plaintiff-Appellants theory is that although the sale between the parties
quoted a CIF New York price, the agreement contemplated the payment of
the price according to the weight and quality of the cargo upon arrival in
New York, the port of destination, and that therefore, the risk of the
shipment was upon the seller. Defendant-Appellee, on the other hand,
insists that the contract in question was an ordinary C. I. F. agreement
wherein delivery to the carrier is delivery to the buyer, and that the
shipment having been delivered to the buyer and the latter having paid its
price, the sale was consummated.
There is no question that under an ordinary C.I.F. agreement, delivery to
the buyer is complete upon delivery of the goods to the carrier and tender
of the shipping and other documents required by the contract and the
insurance policy taken in the buyers behalf (77 C.J. S. 983; chan
roblesvirtualawlibrary46 Am. Jur. 313; chan roblesvirtualawlibraryII Williston
on Sales, 103 107). There is equally no question that the parties may, by
express stipulation or impliedly (by making the buyers obligation depend
on arrival and inspection of the goods), modify a CIF contract and throw the
risk upon the seller until arrival in the port of destination (77 CJS 983984; chan
roblesvirtualawlibraryWilliston,
supra,
116; chan
roblesvirtualawlibraryalso Willits vs. Abekobei, 189 NYS 525; chan
roblesvirtualawlibraryNational Wholesale Grocery Co. vs. Mann. 146 NE
791, Klipstein vs. Dilsizian, 273 F 473).
In the transaction now in question, despite the quoted price of CIF New
York, and the right of the seller to withdraw 95 per cent of the invoice price
from the buyers letter of credit upon tender of the shipping and other
documents required by the contract, the express agreement that the Net
Landed Weights were to govern, and the provision that the balance of the
price was to be ascertained on the basis of outturn weights and quality of
the cargo at the port of discharge, indicate an intention that the precise
amount to be paid by the buyer depended upon the ascertainment of the

exact net weight of the cargo at the port of destination. That is furthermore
shown by the provision that the seller could deliver 5 per cent more or less
than the contracted quantity, such surplus or deficiency to be paid on the
basis of the delivered weight.
In our opinion, the governing rule may be found in the decision of the
Supreme Court of New York in the case of Warner, Barnes & Co. vs.
Warner Sugar R. Co., 192 NYS 151, cited in Appellees brief (pp. 16-19.) In
said case, the parties had expressly agreed that the payment of the price
was to be according to landed weights, and that delivery of the goods
shipped from the Philippine Islands to New York was to be in New York ex
vessel at wharf; chan roblesvirtualawlibrarybut it was also agreed that the
seller had the right, upon presentation of full shipping documents, including
full insurance, to draw upon the Defendants for 90 per cent of the invoice
price, evidencing an intent to give the buyers dominion over the goods and
to place the risk of loss upon them. The reasonable construction given by
the Court to this contract was that:chanroblesvirtuallawlibrary
though the seller was required to deliver the goods at a customary wharf in
New York, and the price could not be finally determined until the goods
were landed, yet the property in the goods and the risk of loss was
intended to pass when the full shipping documents were presented,
including an insurance policy. If the goods were totally lost, then by the
express terms of the contract the buyers were to pay the full amount of
invoice and if the goods were partially lost, then it is fairly inferable that,
while payment was to be made according to landed weights, the seller
should not be deprived of the right to show that these landed weights were
diminished by loss or damage due to the risk of the voyage. Any other
construction of the contract would require the seller to provide insurance for
the buyer for a loss which falls not on the buyer, but on the seller.
(Emphasis supplied.)
The same could be said in the instant case. While the risk of loss was
apparently placed on theAppellant after delivery of the cargo to the carrier,
it was nevertheless agreed that the payment of the price was to be
according to the net landed weight. The net landed or outturn weight of
the cargo, upon arrival in New York, was 898.692 short tons. Although the
evidence shows that the estimated weight of the shipment when it left
Manila was 1,054.6278 tons, the Appellee had the burden of proof to show
that the shortage in weight upon arrival in New York was due to risks of the
voyage and not the natural drying up of the copra while in transit, or to
reasonable allowances for errors in the weighing of the gross cargo and the

empty bags in Manila. In the absence of such proof on the part of the
shipper-Appellee, we are constrained to hold that the net landed weight of
the shipment in New York should control, as stipulated in the agreement,
and that therefore, theAppellee should be held liable for the amount of
$24,154.59 which it had overdrawn fromAppellants letter of credit.
Appellee contends that as it was only the balance due to be paid that was
to be ascertained and based upon outturn weights and quality at port of
discharge, as provided in the contract, there was no more balance due to
be ascertained at the port of discharge because it had already received full
payment of the copra it sent to the Appellant when it withdrew $136,686.95
from the latters letter of credit. The argument is untenable. The provision
regarding the ascertainment of the balance due based upon outturn weight
and quality of the shipment at the port of discharge, should not be
construed separately from the stipulation that the net landed weight was
to control. The manifest intention of the parties was for the total price to be
finally ascertained only upon determining the net weight and quality of the
goods upon arrival in New York, most likely because the cargo in question,
being copra, by nature dries up and diminishes in weight during the
voyage; chan roblesvirtualawlibrarythat no bulk weigher was available in
Manila so that the best that could be done was to get the gross weight of
the shipment and deduct the average tare of the empty bags; chan
roblesvirtualawlibraryand that the buyer in New York had no agent in Manila
to represent it and protect its interest during the weighing of the cargo. The
intention of the parties to be bound by the outturn or net landed weight in
New York is clearly shown in the letter of Appellees then officer-in-charge
Jose Nieva, Sr., acknowledging liability for the deficiency in the outturn
weight of the copra (Exhibit B). Although this letter may not be considered
an admission of liability on the part of Appellee in the absence of a showing
that Nieva was authorized to admit liability for the corporation, it is
nevertheless competent evidence of the intention of the parties, particularly
the NACOCO, to be bound by the net landed weight or outturn weight of
the copra at the port of discharge.
With respect to Appellants claim for damages equivalent to the 17 per cent
excise tax which it has to pay in order to remit the sum of $24,154.59 to the
United States, such excise tax is no longer imposed in view of the trade
(Laurel-Langley) agreement, so that it need not be taken into account.
Wherefore,
the
judgment
appealed
from
is
reversed
and
the Appellee National Coconut Corporation is ordered to pay
the Appellant General Foods Corporation the equivalent in Philippine

currency of the amount of $24,154.59, with legal interest from the time of
the filing of the complaint. No pronouncement as to costs. SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16570

March 9, 1922

SMITH, BELL & CO., LTD., plaintiff-appellant,

vs.
VICENTE SOTELO MATTI, defendant-appellant.
Ross and Lawrence and Ewald E. Selph for plaintiff-appellant.
Ramon Sotelo for defendant-appellant.
ROMUALDEZ, J.:
In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente
Sotelo, entered into contracts whereby the former obligated itself to sell,
and the latter to purchase from it, two steel tanks, for the total price of
twenty-one thousand pesos (P21,000), the same to be shipped from New
York and delivered at Manila "within three or four months;" two expellers at
the price of twenty five thousand pesos (P25,000) each, which were to be
shipped from San Francisco in the month of September, 1918, or as soon
as possible; and two electric motors at the price of two thousand pesos
(P2,000) each, as to the delivery of which stipulation was made, couched in
these words: "Approximate delivery within ninety days. This is not
guaranteed."
The tanks arrived at Manila on the 27th of April, 1919: the expellers on the
26th of October, 1918; and the motors on the 27th of February, 1919.
The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of
these goods, but Mr. Sotelo refused to receive them and to pay the prices
stipulated.
The plaintiff brought suit against the defendant, based on four separate
causes of action, alleging, among other facts, that it immediately notified

the defendant of the arrival of the goods, and asked instructions from him
as to the delivery thereof, and that the defendant refused to receive any of
them and to pay their price. The plaintiff, further, alleged that the expellers
and the motors were in good condition. (Amended complaint, pages 16-30,
Bill of Exceptions.)
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila
Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations as
to the shipment of these goods and their arrival at Manila, the notification to
the defendant, Mr. Sotelo, the latter's refusal to receive them and pay their
price, and the good condition of the expellers and the motors, alleging as
special defense that Mr. Sotelo had made the contracts in question as
manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc
which fact was known to the plaintiff, and that "it was only in May, 1919,
that it notified the intervenor that said tanks had arrived, the motors and the
expellers having arrived incomplete and long after the date stipulated." As a
counterclaim or set-off, they also allege that, as a consequence of the
plaintiff's delay in making delivery of the goods, which the intervenor
intended to use in the manufacture of cocoanut oil, the intervenor suffered
damages in the sums of one hundred sixteen thousand seven hundred
eighty-three pesos and ninety-one centavos (P116,783.91) for the
nondelivery of the tanks, and twenty-one thousand two hundred and fifty
pesos (P21,250) on account of the expellers and the motors not having
arrived in due time.
The case having been tried, the court below absolved the defendants from
the complaint insofar as the tanks and the electric motors were concerned,
but rendered judgment against them, ordering them to "receive the
aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos
(P50,00), the price of the said goods, with legal interest thereon from July
26, 1919, and costs."
Both parties appeal from this judgment, each assigning several errors in
the findings of the lower court.
The principal point at issue in this case is whether or not, under the
contracts entered into and the circumstances established in the record, the
plaintiff has fulfilled, in due time, its obligation to bring the goods in question
to Manila. If it has, then it is entitled to the relief prayed for; otherwise, it
must be held guilty of delay and liable for the consequences thereof.

To solve this question, it is necessary to determine what period was fixed

for the delivery of the goods.
As regards the tanks, the contracts A and B (pages 61 and 62 of the
record) are similar, and in both of them we find this clause:
To be delivered within 3 or 4 months The promise or indication of
shipment carries with it absolutely no obligation on our part
Government regulations, railroad embargoes, lack of vessel space,
the exigencies of the requirement of the United States Government,
or a number of causes may act to entirely vitiate the indication of
shipment as stated. In other words, the order is accepted on the basis
of shipment at Mill's convenience, time of shipment being merely an
indication of what we hope to accomplish.
In the contract Exhibit C (page 63 of the record), with reference to the
expellers, the following stipulation appears:
The following articles, hereinbelow more particularly described, to be
shipped at San Francisco within the month of September /18, or as
soon as possible. Two Anderson oil expellers . . . .
And in the contract relative to the motors (Exhibit D, page 64, rec.) the
following appears:
Approximate delivery within ninety days. This is not guaranteed.
This sale is subject to our being able to obtain Priority Certificate,
subject to the United States Government requirements and also
subject to confirmation of manufactures.
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays caused by fires, riots on
land or on the sea, strikes or other causes known as "Force Majeure"
entirely beyond the control of the sellers or their representatives.
Under these stipulations, it cannot be said that any definite date was fixed
for the delivery of the goods. As to the tanks, the agreement was that the
delivery was to be made "within 3 or 4 months," but that period was subject
to the contingencies referred to in a subsequent clause. With regard to the
expellers, the contract says "within the month of September, 1918," but to

this is added "or as soon as possible." And with reference to the motors,
the contract contains this expression, "Approximate delivery within ninety
days," but right after this, it is noted that "this is not guaranteed."
The oral evidence falls short of fixing such period.
From the record it appears that these contracts were executed at the time
of the world war when there existed rigid restrictions on the export from the
United States of articles like the machinery in question, and maritime, as
well as railroad, transportation was difficult, which fact was known to the
parties; hence clauses were inserted in the contracts, regarding
"Government regulations, railroad embargoes, lack of vessel space, the
exigencies of the requirements of the United States Government," in
connection with the tanks and "Priority Certificate, subject to the United
State Government requirements," with respect to the motors. At the time of
the execution of the contracts, the parties were not unmindful of the
contingency of the United States Government not allowing the export of the
goods, nor of the fact that the other foreseen circumstances therein stated
might prevent it.
Considering these contracts in the light of the civil law, we cannot but
conclude that the term which the parties attempted to fix is so uncertain
that one cannot tell just whether, as a matter of fact, those articles could be
brought to Manila or not. If that is the case, as we think it is, the obligations
must be regarded as conditional.
Obligations for the performance of which a day certain has been fixed
shall be demandable only when the day arrives.
A day certain is understood to be one which must necessarily arrive,
even though its date be unknown.
If the uncertainty should consist in the arrival or non-arrival of the
day, the obligation is conditional and shall be governed by the rules
of the next preceding section. (referring to pure and conditional
obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery in question was, as stated in the
contract, contingent upon the sellers obtaining certificate of priority and
permission of the United States Government, subject to the rules and
regulations, as well as to railroad embargoes, then the delivery was subject

to a condition the fulfillment of which depended not only upon the effort of
the herein plaintiff, but upon the will of third persons who could in no way
be compelled to fulfill the condition. In cases like this, which are not
expressly provided for, but impliedly covered, by the Civil Code, the obligor
will be deemed to have sufficiently performed his part of the obligation, if he
has done all that was in his power, even if the condition has not been
fulfilled in reality.
In such cases, the decisions prior to the Civil Code have held that the
obligee having done all that was in his power, was entitled to enforce
performance of the obligation. This performance, which is fictitious
not real is not expressly authorized by the Code, which limits itself
only to declare valid those conditions and the obligation thereby
affected; but it is neither disallowed, and the Code being thus silent,
the old view can be maintained as a doctrine. (Manresa's
commentaries on the Civil Code [1907], vol. 8, page 132.)
The decisions referred to by Mr. Manresa are those rendered by the
supreme court of Spain on November 19, 1896, and February 23, 1871.
In the former it is held:
First. That when the fulfillment of the conditions does not depend on
the will of the obligor, but on that of a third person who can in no way
be compelled to carry it out, and it is found by the lower court that the
obligor has done all in his power to comply with the obligation, the
judgment of the said court, ordering the other party to comply with his
part of the contract, is not contrary to the law of contracts, or to Law
1, Tit. I, Book 10, of the "Novsima Recopilacin," or Law 12, Tit. 11,
of Partida 5, when in the said finding of the lower court, no law or
precedent is alleged to have been violated. (Jurisprudencia
Civil published by the directors of theRevista General de Legislacion
y Jurisprudencia [1866], vol. 14, page 656.)
In the second decision, the following doctrine is laid down:
Second. That when the fulfillment of the condition does not depend
on the will of the obligor, but on that of a third person, who can in no
way be compelled to carry it out, the obligor's part of the contract is
complied withalf Belisario not having exercised his right of repurchase
reserved in the sale of Basilio Borja mentioned in paragraph (13)

hereof, the affidavit of Basilio Borja for the consolidacion de

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

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

describing the property, for twenty days in three public places of the
municipality or city where the property is situated, and also where the

property is to be sold, and publishing a copy thereof once a week, for

the same period, in some newspaper published or having general
circulation in the province, if there be one. If there are newspaper
published in the province in both the Spanish and English languages,
then a like publication for a like period shall be made in one
newspaper published in the Spanish language, and in one published
in the English language: Provided, however, That such publication in
a newspaper will not be required when the assessed valuation of the
property does not exceed four hundred pesos;
4. *

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

It appears affirmatively from the evidence in the present case that there is a
newspaper published in the province where the sale in question took place
and that the assessed valuation of the property disposed of at each sale
exceeded P400. Comparing the requirements of section 454, supra, with
what was actually done, it is self-evident that notices of the sales
mentioned were not given as prescribed by the statute and taking into
consideration that in connection with these sales the appellant Addison was
either the judgment creditor or else occupied a position analogous to that of
a judgment creditor, the sales must be held invalid.
The conveyance or reconveyance of the land from the Director of Lands is
equally invalid. The provisions of Act No. 1791 pertinent to the purchase or
repurchase of land confiscated for non-payment of taxes are found in
section 19 of the Act and read:
. . . In case such redemption be not made within the time above
specified the Government of the Philippine Islands shall have an
absolute, indefeasible title to said real property. Upon the expiration
of the said ninety days, if redemption be not made, the provincial
treasurer shall immediately notify the Director of Lands of the
forfeiture and furnish him with a description of the property, and said
Director of Lands shall have full control and custody thereof to lease
or sell the same or any portion thereof in the same manner as other
public lands are leased or sold: Provided, That the original owner, or
his legal representative, shall have the right to repurchase the entire
amount of his said real property, at any time before a sale or contract
of sale has been made by the director of Lands to a third party, by
paying therefore the whole sum due thereon at the time of ejectment
together with a penalty of ten per centum . . . .
The appellant Addison repurchased under the final proviso of the section
quoted and was allowed to do so as the successor in interest of the original
owner under the execution sale above discussed. As we have seen, he
acquired no rights under these sales, was therefore not the successor of
the original owner and could only have obtained a valid conveyance of
such titles as the Government might have by following the procedure
prescribed by the Public Land Act for the sale of public lands. he is entitled
to reimbursement for the money paid for the redemption of the land, with
interest, but has acquired no title through the redemption.

The question of the priority of the record of the sheriff's sales over that of
the sale from Belisario to Borja is extensively argued in the briefs, but from
our point of view is of no importance; void sheriff's or execution sales
cannot be validated through inscription in the Mortgage Law registry.
The opposition of Adelina Ferrer must also be overruled. She maintained
that the land in question was community property of the marriage of Eulalio
Belisario and Paula Ira: that upon the death of Paula Ira inealed from is
modified, and the defendant Mr. Vicente Sotelo Matti, sentenced to accept
and receive from the plaintiff the tanks, the expellers and the motors in
question, and to pay the plaintiff the sum of ninety-six thousand pesos
(P96,000), with legal interest thereon from July 17, 1919, the date of the
filing of the complaint, until fully paid, and the costs of both instances. So
ordered.

EN BANC
G.R. No. L-5018

November 28, 1953

REPUBLIC OF THE PHILIPPINES, Plaintiff-Appellee, vs. LITTON & CO.,

ET AL., Defendants-Appellants.
Claro M. Recto for appellants.
Office of the Solicitor General Pompeyo Diaz and Solicitor Meliton G.
Soliman for appellee.
PARAS, C.J.: chanrobles virtual law library
This is an appeal by the Defendants Litton & Co., G. Litton and Central
Surety Co., from a decision of the Court of First Instance of Manila the
dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the Defendants for the sum of One Hundred sixty-seven thousand
and one hundred ninety-nine pesos and sixty-five centavos (P167,199.65),
ordering the Defendants to pay to the plaintiff said amount, out of which the
sum of Forty thousand six hundred four pesos (P40,604) shall be paid
jointly and severally by Litton & Co., or George Litton and the Central
Surety Co., Inc. and the rest by Litton & Co., or George Litton, and against

its co-defendant Litton & CO. and/or George Litton for any amount which
said Central Surety Co., Inc., shall have paid to the plaintiff as a result of
this judgment. With costs against the Defendants.
The allegations of the parties in their respective pleadings are corectly
recited in the following passages of the appealed decision:
The complaint alleges in the first cause of action that on December 22,
1945, the Defendants Litton & Co. and George Litton, managing partner or
agent of the defendant partnership, entered into a contract with the plaintiff
to supply and deliver to the latter on or before March 1, 1946, 96,000
padlocks at P1.87 each, in accordance with the specifications and under
the terms and conditions set forth in the said contract; that to guarantee
and secure the faithful performance of their obligation, the co-defendant
Central Surety Co., Inc. executed on January 3, 1946, a surety bond in
favor of the plaintiff for P35,904; that the defendant Litton & Co. delivered
on or about April 8, 1946, 34,200 padlocks only, which is much less than
the quantity called for in the contract, and failed to deliver the balance of
61,800 padlocks which were to be used during the elections of April 23,
1946.chanroblesvirtualawlibrary chanrobles virtual law library
The complaint further alleges that for such failure of the defendant Litton &
Co., the plaintiff was compelled to make open market purchases of 25,613
padlocks, thereby incurring losses and damages in the amount of
P176,243.41, representing the difference between the price actually paid
for said open market purchases and the price which the government would
have paid to Litton & Co. in accordance with the contracts; that due notice
was served on the co-defendant Central Surety Co., Inc., of said failure on
the part of Litton & Co. and of the co-defendant's liability on its bond, and
that notwithstanding repeated demands made by the plaintiff upon the
defendant's they failed and refused to pay the aforesaid
amount.chanroblesvirtualawlibrary chanrobles virtual law library
In its second cause of action the plaintiff alleges that on December 26,
1945, a contract was entered into between the plaintiff and the Defendants
Litton & Co. and George Litton, its managing agent or partner, whereby
said Defendants undertook to deliver to the plaintiff on or before March 1,
1946, quantities of indelible pencils, lead pencils, bottles of ink, pen points,
chalks, clips, etc., with a total value of P25,979.55, subject to the terms and
conditions of said contract; that to guarantee and secure the faithful

performance of that contract by Litton & Co., the Central Surety Co., inc.,
executed on January 3, 1946, a surety bond in favor of the plaintiff in the
sum of P4,700; and that the defendant Litton & Co., in violation of the terms
and conditions of said contract failed to deliver the articles called for on or
before the stipulated date, said articles to be used during the elections of
April 23, 1945.chanroblesvirtualawlibrary chanrobles virtual law library
The plaintiff further alleges that for such default and failure of the
Defendants, the plaintiff was compelled to make open market purchases of
said articles, thereby having suffered damages and losses in the sum of
P20,164.17, representing the difference between the price of said articles
purchased in the open market and the price stipulated in the contract; that
the co-defendant Central Surety Co., Inc., was duly notified of the failure of
LItton & Co. to deliver said articles, and its liability under its bond; and that
notwithstanding demands made by the plaintiffs upon said Defendants,
they refused to pay the aforesaid amount of P20,164.17.
The plaintiff prays under the first cause of action that judgment be rendered
in its favor and against the defendant Litton & Co. ordering the latter to pay
the sum of P176,243.41 with legal interest thereon from the filing of the
complaint until fully paid, and that out of said amount the Central Surety
Co., Inc., be ordered to pay jointly and severally with Litton & Co. the sum
of P35,904; and with respect to the second cause of action, the plaintiff
prays that Litton & Co. be ordered to pay to the plaintiff the sum of
P20,164.17 with legal interest thereon from the filing of the complaint and
that out of said amount the sum of P4,700 be paid jointly and severally by
Litton & Co. and the Central Surety Co., Inc. The plaintiff further prays that
in default of Litton & Co. to pay the aforesaid amounts, George Litton
personally be ordered to pay the same as managing partner and/or agent
of Litton & Co.chanroblesvirtualawlibrary chanrobles virtual law library
In their joint answer, Defendants Litton & Co., and George Litton allege that
the contracts mentioned in the complaint are not the real contracts between
the parties and do not express the real agreement between them; that it
was agreed by and between the parties that the defendats Litton & Co.
and/or George Litton, would deliver the padlocks and the supplies called for
in the two contracts provided the plaintiff should obtain shipping priority and
the necessary export license to bring said articles from the United States to
the Philippines, which terms and conditions were not embodied in the
alleged contracts; that the defendant Central Surety Co., Inc., executed the

two surety bonds under the same terms and conditions; and that the failure
of said Defendants to deliver the balance of the 96,000 padlocks and the
stationery and office supplies called for in the contracts was due to
plaintiff's failure to secure on time shipping priority and export license and
also to fortuitous events and force majeure, beyond the control of said
Defendants.chanroblesvirtualawlibrary chanrobles virtual law library
The Defendants further allege that the purchases of padlocks by the
plaintiff in the open market were made at exorbitant prices, much in excess
of their ceiling prices which should not be more than 70 per cent over the
landed costs; that the Defendants are not liable for the alleged losses and
damages resulting from said purchases, as their delay or failure to deliver
the padlocks was due to plaintiff's fault and to circumstances beyond their
control.chanroblesvirtualawlibrary chanrobles virtual law library
By way of counterclaim the Defendants Litton & Co. and/or George Litton
allege that after the elections of April 23, 1946, more specifically on May 11,
14, and 16, the Defendants delivered to the plaintiff 9,096 padlocks at
P1.87 each, or with a total price of P17,009.52 and that the plaintiff,
notwithstanding repeated demands by said Defendants, failed and refused
to pay said amount; and as additional counterclaim the said Defendants
allege that on various dates in April and May, 1946, stationery and office
supplies were delivered to the plaintiff at the agreed price of P9,806.94,
and that notwithstanding repeated demands upon the plaintiff, it refused
and failed to pay said amounts.chanroblesvirtualawlibrary chanrobles
virtual law library
The Defendants Litton & Co. and George Litton pray that the complaint be
dismissed and that the plaintiff be ordered to pay to said Defendants the
sum of P17,009.52 under the first counterclaim and the sum of P9,806.94
under the second counterclaim.chanroblesvirtualawlibrary chanrobles
virtual law library
The plaintiff, in its answer to the counterclaims, admits their existence and
its liability under the same, but alleges that the total amount of the
counterclaims should be credited to plaintiff's claim against the
Defendants.chanroblesvirtualawlibrary chanrobles virtual law library
In its answer the Defendants Central Surety Co., Inc., admits the execution
of the two surety bonds above stated, but denies its liability under the

same. It also alleges, as an affirmative defense, that plaintiff's cause of

action is barred by the expiration of the period stipulated in the bond. This
defense wasd first urged in a motion to dismiss, which was denied upon the
grounds stated in the orders of August 30 and September 8, 1948. The
answer of the Central Surety Co., Inc., includes a cross-claim against the
defendant George Litton for whatever amount the plaintiff may collect from
the Central Surety Co., Inc., in this
case.chanroblesvirtualawlibrary chanrobles virtual law library
The first delivery made by Litton was on April 18, 1946, consisting of
34,200 padlocks which were fully paid by the plaintiff. The latter, however,
imposed upon Litton for his delayed delivery a penalty equal to 1/10 of one
per cent per day of the total value of said padlocks in accordance with
paragraph 4 of the "Important Conditions" appearing at the back of the
contract, which reads as follows: .
4. Contractor's failure to make delivery, when due, will authorize the
Purchasing Agent to, in his discretion, impose a penalty. If he decides to do
so, either of the following penalties shall be imposed: (a) to deduct for each
day of delay in delivery after the period granted, a liquidated damage in the
amount of 1/10 of 1 per cent per day of the total value of the contract, or, if
the contract has been partially filled within the stipulated time, the total
value of the unfilled portion thereof; or (b) to make an open market
purchase of the supplies that the contractor failed to deliver and to charge
to him the excess in price, if any. In either case, the Government reserves
the right to rescind the contract. The contractor hereby authorizes the
purchasing agent to deduct the value of the penalty imposed from any
money due, or which may become due, the contractor, or to recover from
the contractor's bond filed under this contract, if there is any. On April 20 and 22, 1946, Litton further delivered 2,000 boxes of paper
clips costing P180. As no other deliveries were made, and under the
authority contained in the abovequoted paragraph 4, the plaintiff purchased
in the open market within a few days before the elections the following:

Articles

Quantity

Amount
Paid

Padlocks ..................................
........

25,613

P224,216.72

Pencils,
indelible ................................

90,286

16,892.68

Pencils,
lead ....................................

47,800

2,390.00

Pen points,
Esterbrook ........................

5,552

4,557.01

Ink, stamp
pad ....................................

16,000

11,200.00

TOTAL ..................................

P259,366.41

The sum of P176,243.41, sought to be recovered under the first cause of

action and the sum of P20,164.17 claimed under the second cause of
action respectively represent the difference between the prices of the
foregoing articles stipulated in Litton's contract and the prices paid by the
plaintiff in the open market.chanroblesvirtualawlibrary chanrobles virtual
law library
The trial court allowed the plaintiff's claim as to both causes of action, but
granted Litton's counterclaims in the total sum of P26,816.45 representing
the unpaid price of padlocks and stationery delivered to the plaintiff after
the elections, and deducted also the sum of P2,391.47 which the plaintiff

collected from Litton as penalty for delayed delivery (before the elections)
of 34,200 padlocks.chanroblesvirtualawlibrary chanrobles virtual law library
The principal issue, reduced in its simplest form, is whether, as contended
by the plaintiff-appellee, the defendant George Litton (whose busines name
is Litton & Co.) unconditionally bound himself to supply and deliver to the
plaintiff 96,000 padlocks and a quantity of stationery and office supplies on
or before March 1, 1946, or whether, as claimed by the Defendants, the
contract was for George Litton to deliver the said articles subject to the
condition that the plaintiff would timely obtain the corresponding export
license and shipping priority.chanroblesvirtualawlibrary chanrobles virtual
law library
The theory of the plaintiff is that Litton's contract is evidenced by purchase
order No. 1896, dated December 22, 1945, for 96,000 padlocks at P1.87
each "Delivery: not later than March 1, 1946," and by purchase order No.
3826 for stationery and office supplies dated December 26, 1945, "Delivery
- On or before March 1, 1946." Upon the other hand, Litton claims that
these two purchase orders do not represent the true agreement and that
his bid (previouslly accepted by the plaintiff) was conditioned by his letter
dated December 12, 1945, and worded as follows: "Reference to Circular
Proposal No. 13 to be opened at 10:00 a..m., December 13, 1945, we
enclose herewith two copies of our bid on the above proposal. For all items
in which we gave you a quotation, shipment will be made from the United
States during the month of January, 1946, provided we are able to obtain
export license and shipping space and provided further we are given the
award within three (3) days from today. This will enable goods to arrive in
Manila for delivery during March." Litton's defense is therefore that he is
excused by the plaintiff's failure to obtain in due time the export license and
shipping priority.chanroblesvirtualawlibrary chanrobles virtual law library
The trial court held that although the conditions specified in the letter of
December 12 were considered by the plaintiff in connection with its orders,
it was still Litton's sole obligation to obtain the necessary export license and
shipping space; and that although the plaintiff made certain efforts to
expedite the issuance of the necessary license, the same "were in the
nature of a friendly assistance to the Defendants and can in no way be
interpreted or construed as if the plaintiff were the party bound to secure for
itself the export license or shipping
space." .chanroblesvirtualawlibrary chanrobles virtual law library

We are convinced that George Litton undertook to deliver the padlocks and
stationery in question not later than March 1, 1946. It is significant that in
the Circular Proposal No. 13 issued on November 27, 1945, to local
dealers, calling for bids, it was expressly stated that the articles were for
election purposes, and the bidder was therefore required to "state the
shortest time of delivery, which should not be later than March 1, 1946.
Deliveries made before March 1 will be preferred." It is then preposterous
to suppose that delivery after the elections would ever be contemplated or
accepted. More significant is the fact that on December 15, 1945, or
subsequent to the letter of December 12, relied upon by Litton, and after he
was informed by the committee on award that his bid would be accepted if
the condition mentioned in said letter was eliminated, Litton wrote a note to
the purchasing agent, stating as follows: .
Sir: chanrobles virtual law library
We have the honor to inform you that the Padlocks, 1 5/8 x 1 5/8", rustless,
Eagle brand, are manufactured in the United
States.chanroblesvirtualawlibrary chanrobles virtual law library
For immediate shipment our principals have 30,000 pieces for the first
delivery arriving in Manila about the middle of February, and the balance of
66,000 not later than March 1, 1946.chanroblesvirtualawlibrary chanrobles
virtual law library
It is, however, understood that your Office will give us a letter certifying that
the padlocks are urgently needed by the Philippine Government so that the
export license can be secured without delay, thus making the first shipment
of 30,000 arriving in Manila about the middle of February,
1946.chanroblesvirtualawlibrary chanrobles virtual law library
Please let us know immediately so we can notify our principals for
immediate shipment as above stated.chanroblesvirtualawlibrary chanrobles
virtual law library
Very truly yours, chanrobles virtual law library
LITTON & COMPANY chanrobles virtual law library
(Sgd.) JUAN S. CANLAS

The foregoing letter shows that Litton merely expected the plaintiff to give a
certification that the padlocks were urgently needed by the Philippine
Government so as to warrant the early issuance of the license. Moreover,
Litton subsequently filed two performance bonds, executed by him as
principal and the Central Surety Co. as surety. With reference to the
padlocks, the bond recited in part as follows: .
WHEREAS, the above bounden principal, on 22nd day of December, 1945,
entered into a Contract with the Division of Purchase and Supply,
Department of Finance, Manila, to fully and faithfully guarantee the delivery
of 96,000 padlocks, . . . No. 13, Order No. 1896, said delivery to be made
not later than March 1, 1946.chanroblesvirtualawlibrary chanrobles virtual
law library
WHEREAS, said Division of Purchase and Supply requires said principal to
give a good and sufficient bond in the above stated sum to secure the full
and fruitful performance on his part of said LITTON &
COMPANY; .chanroblesvirtualawlibrary chanrobles virtual law library
NOW, THEREFORE, if the principal shall well and truly perform and fulfill
the undertakings, covenants, terms and conditions, and agreements
stipulated in said contract, then this obligation shall be null and void;
otherwise it shall remain in full force and effect.With reference to the
stationery, the bond provided as follow:
-- "WHEREAS, the above bounden principal, on 26th day of December,
1945, entered into a contract with the Division of Purchase and Supply,
Department of Finance, Manila, to fully and faithfully guarantee the delivery
of the following: .chanroblesvirtualawlibrary chanrobles virtual law library
192,000 Pcs. Pencils, indelible, hard, U.S. make. 64,000 Pcs. Pencils, lead,
medium No. 2 w/erasers, U.S. make. 16,000 Bots. Ink, stamp pad, violet, 2oz. bottle U.S. make 16,000 Bots. Ink, stamp pad, violet 2-oz. bottle U.S.
make. 128,000 Pcs. Chalks, white enameled 1-gross to box, U.S. make.
128,000 Pcs. Pen points, Esterbook No. 14, or equal, 1-gross to box, U.S.
make. 8,000 Boxes Clips, paper Gem No. 1, 100 clips to box, U.S. make.
8,000 Cones Pins, office, No. 4, U.S. make strictly in accordance with
Circular Proposal No. 13; Order No. 3826. Said delivery to be made on or
before March 1, 1946.

WHEREAS, said Division of Purchase and Supply requires said principal to

give a good and sufficient bond in the above stated sum to secure the full
and faithful performance on his part of said LITTON &
COMPANY: .chanroblesvirtualawlibrary chanrobles virtual law library
NOW, THEREFORE, if the principal shall well and truly perform and fulfill
all the undertakings, covenants, terms and conditions, and agreements
stipulated in said contract then, this obligation shall be null and void;
otherwise, it shall remain in full force and effect.
These bonds, prepared by the surety company on the basis of data
furnished by Litton, made express reference to and guaranteed the
fulfillment of the contracts entered into on December 22 and 26, 1945, the
very purchase orders Nos. 1896 and 3826; and under said bonds delivery
was to be made on or before March 1, 1946. This negatives the contention
that the delivery of the padlocks and stationery was subject to any
contingency, much less to plaintiff's ability to secure export license and
shipping priority.chanroblesvirtualawlibrary chanrobles virtual law library
Moreover, undoubtedly foreseeing his inability to meet the deadline, Litton
wrote a letter to the purchasing agent dated February 28, 1946, asking for
an extension of time; and referring to said letter he testified that "I asked for
an extension becuase I could not deliver the goods on March 1, 1946."
Said extension, which was ignored by the purchasing agent, 1 was sought
under paragraph 2 of "Important Conditions" of the
contracts.chanroblesvirtualawlibrary chanrobles virtual law library
It is true that the Philippine Government exerted some efforts 2 with a view
to the granting by the United States authorities of the necessary export
license and shipping space, but the same do not prove that it was plaintiff's
obligation to do so or that Litton's duty to deliver the articles on or before
March 11, 1946 was conditional. Said efforts were merely in furtherance of
Litton's letter of December 15, 1945 in which he asked th e plaintiff to
certify that the padlocks were urgently needed by the Philippine
Government so that the export license might be secured speedily. Neither
does the fact that the license was issued in the name of the plaintiff show
that the latter assumed the obligation of obtaining the same, the detail
being undoubtedly formal. As a matter of fact, it was the U.S. exporter
Gindoff & Co., after failing to get a license directly, that caused its issuance
in the name of the Philippine Government. At any rate, according to Litton's

letter of December 12, 1945, shipment would be made from the United
States during the month of January, 1946, provided he would obtain export
license and shipping space; and it is admitted in the brief for the appellants
that all the padlocks and stationery were placed in the New York docks in
said month in spite of the delay in the issuance of the license, with the
result that Litton's complaint about any delay on the part of the plaintiff is
immaterial. Again, even in said letter of December 12, Litton announced
that, when shipment was made in January, the goods would "arrive in
Manila for delivery during March, 1946." We may also add that, as regards
the stationery, no export license was
required.chanroblesvirtualawlibrary chanrobles virtual law library
Upon the whole, we are of the opinion that Litton's contract with the plaintiff
was unconditional. Indeed, in paragraph 2 of the "Important conditions"
appearing at the back of the purchase orders, the following provision is
made: "2. The stipulated delivery period shall not be exceeded. However,
should there be delay in delivery, due to an act of the Government to force
majeure, or to a condition clearly beyond contracotr's control, the
Purchasing Agent may grant a reasonable time for extension, if applied
before default is incurred. Deliveries made within the extended period of
time shall not be subject to any of the penalties herein below provided."
This makes Litton liable in all eventualities; and said clause is authorized by
article 1105 of the Old Civil Code which provides that "outside of the cases
mentioned in the law and of those in which the obligation so declares, no
one shall be responsible for events which could not be foreseen, or which
having been foreseen were unavoidable." The result is that the appellants
cannot invoke the delay in the issuance of the export license by the proper
authorities, the fact that the ships carrying the supplies were not allowed to
berth at the piers, or that one of the ships had to pass by Shanghai upon
orders of the War Shipping Commission, and another vessel was stranded
on Bonin Islands.chanroblesvirtualawlibrary chanrobles virtual law library
The contention that paragraph 2 of the "conditions" contained at the back of
the contracts is contrary to law and public morals, because it makes Litton
liable for any delay due even to an act of the Government, is of no moment,
since it is not pretended in this case that Litton's default was caused by
such an act.chanroblesvirtualawlibrary chanrobles virtual law library
It is also argued that the election of the plaintiff to impose the penalty
equivalent to 1/10 of one per cent of the total value of the padlocks

delivered on April 8, 1946, precluded the plaintiff from imposing the other
form of penalty, namely, to make open market purchases and to charge to
the contractor the corresponding difference in price. This argument is
without merit, because the first penalty is applicable to mere delay in
delivery, and not to total failure to deliver, whereas the second penalty may
be imposed in either case. To adopt Litton's theory would deprive the
plaintiff of its right to purchase in the open market the supplies which Litton
had failed to deliver.chanroblesvirtualawlibrary chanrobles virtual law library
Neither can we sustain the claim of Litton that there was mutual mistake on
the part of the parties, in that both did not foresee the impossibility of
compliance for causes beyond their control. Litton, an experienced
businessman and aware of the difficulties and restrictions in bringing U.S.
goods to the Philippines at the time he entered into his contract with the
plaintiff, close to bindhimself to deliver the articles in question, undoubtedly
in the expectation of and in return for the profits that would accrue under
the contract.chanroblesvirtualawlibrary chanrobles virtual law library
A faint attempt has been made to show that Litton was merely an agent or
broker of the U.S. exporter Gindoff & Co. There is absolutely no point in this
aspect of the case, since in his bid, contracts, and performance bonds,
Litton appears to be the sole contracting
party.chanroblesvirtualawlibrarychanrobles virtual law library
According to the records, four of the vessels carrying the stationery and
padlocks arrived in Manila on or before April 1, 1946, one vessel arrived in
Manila on May 29, after deviating to Shanghai upon order of the War
Shipping Commission, and the last vessel, carrying a cargo of padlocks,
was stranded on Bonin Islands and its cargo was transferred to another
vessel which arrived in Manila five months later. At the time the plaintiff
made purchases in the open market two vessels, the SS Tarn, carrying
stationery, and the SS Adrastus, loaded with padlocks, were inside the
breakwater ready for unloading, but due to lack of berthing space at the
piers, their cargo was unloaded and delivered to the plaintiff only after the
elections. The total price of the padlocks delivered to the plaintiff computed
at P1.87 each, is P17,009.52, and the total price of the stationery delivered
to the plaintiff after the elections, is P9,806.94, and these amounts have not
been paid by the plaintiff which claims that they should be deducted from
the damages due from Litton. While Litton was not excused from
performing his obligation, on purely equitable considerations we hereby

reduce the damagesawarded by the trial court by the sum of P90,000. This
roughly represents the difference between the stipulated unit price of P1.87
under Litton's contract and the price paid in the open market by the plaintiff
for the quantity of padlocks delivered by Litton to and accepted by the
plaintiff after the elections, which articles were loaded in the SS. Adrastus
which arrived in Manila on April 1, butwas able to berth only on May 5. We
are influenced by the fact that the purchases made by the plaintiff, at the
time when a quantity of padlocks and stationery were inside the breakwater
ready for unloading, were at black market prices, or over the ceiling rates
fixed by the Government, in addition to the circumstance that the
performance bonds required from Litton were only in the sums of P35,904,
and P4,700. Of course, under the contract, the plaintiff was authorized to
make open market purchases as a result of Litton's default, and in view of
the attending urgency the plaintiff was compelled to pay higher prices; and
Litton's criticisms against said purchases is therefore not well taken. At any
rate, Litton had not taken any steps to protect himself or minimize his
damages by buying in the open market at lower prices than those paid by
the plaintiff for the articles needed in the elections which Litton failed to
deliver on time.chanroblesvirtualawlibrary chanrobles virtual law library
The position of the surety company is dependent upon that of Litton. As a
matter of fact, said company had adopted Litton's brief. What we have
stated as to Litton is therefore decisive as against the liability of the
surety.chanroblesvirtualawlibrary chanrobles virtual law library
Wherefore, with the modification that Litton's liability for damages is
reduced by P90,000, the appealed judgment is in all other respects
affirmed. So ordered with costs against the
appellants.chanroblesvirtualawlibrary
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-29449

December 29, 1928

LEODEGARIO AZARRAGA, plaintiff-appellee,

vs.
MARIA GAY, defendant-appellant.

Araneta and Zaragoza for appellant.

Azarraga and Panis for appellee.

VILLAMOR, J.:
By a public document Exhibit A, dated January 17, 1921, the plaintiff sold
two parcels of lands to the defendant for the lump sum of P47,000, payable
in installments.
The conditions of the payment were: P5,000 at the time of signing the
contract Exhibit A; P20,000 upon delivery by the vendor to the purchaser of
the Torrens title to the first parcel described in the deed of sale, P10,000
upon delivery by the vendor to the purchaser of Torrens title to the second
parcel; and lastly the sum of P12,000 one year after the delivery of the
Torrens title to the second parcel.
The vendee paid P5,000 to the vendor when the contract was signed. The
vendor delivered the Torrens title to the first parcel to the vendee who,
pursuant to the agreement, paid him P20,000. In the month of March 1921,
Torrens title to the second parcel was issued and forthwith delivered by the
vendor to the vendee who, however, failed to pay the P10,000 as agreed,
neither did she pay the remaining P12,000 one year after having received
the Torrens title to the second parcel.
The plaintiff here claims the sum of P22,000, with legal interest from the
month of April 1921 on the sum of P10,000, and from April 1922 on the sum
of P12,000, until full payment of the amounts claimed.
The defendant admits that she purchased the two parcels of land referred
to by plaintiff, by virtue of the deed of sale Exhibit A, but alleges in defense:
(a) That the plaintiff knowing that the second parcels of land he sold had an
area of 60 hectares, by misrepresentation lead the defendant to believe
that said second parcel contained 98 hectares, and thus made it appear in
the deed of sale and induced the vendee to bind herself to pay the price of
P47,000 for the two parcels of land, which he represented contained an
area of no less than 200 hectares, to which price the defendant would not
have bound herself had she known that the real area of the second parcel
was 60 hectares, and, consequently, she is entitled to a reduction in the
price of the two parcels in proportion to the area lacking, that is, that the

price be reduced to P38,000; (b) that the defendant, in addition to the

amounts acknowledged by the plaintiff, had paid other sums amounting to
P4,000; and (c) that the defendants never refused to pay the justly reduced
price, but the plaintiff refused to receive the just amount of the debt.
And by way of cross-complaint, the defendant prays that she be
indemnified in the sum of P15,000 for damages sustained by her by reason
of the malicious filing of the instant complaint.
The plaintiff, replying to the amended answer, alleges that the contract of
sale in question was made only for the lump sum of P47,000, and not at the
rate of so much per hectare, and that the defendant's claim for alleged
damages has prescribed.
The lower court, having minutely analyzed the evidence adduced by the
parties held that neither the plaintiff nor the defendant gave any importance
to the area of the land in consenting to the contract in question, and that
there having been no fraud when the parties agreed to the lump sum for
the two parcels of land described in the deed Exhibit A, following article
1471 of the Civil Code, ordered the defendant to pay the plaintiff the sum of
P19,300 with legal interest at 8 per cent per annum from April 30, 1921 on
the sum of P7,300, and from April 30, 1922, on the sum of P12,000. And
finally dismissed the defendant's cross-complaint, without special
pronuncement as to costs.
A motion for a new trial having been denied, this case was brought up to
this court through the proper bill of exceptions.
The appellant alleges that the trial court erred in not considering that the
plaintiff induced the defendant by deceit, to pay him the stipulated price for
the two parcels he sold, stating falsely in the deed of sale that the second
of said parcels had an area of 98 hectares when he knew that in reality it
only had about 60 hectares more or less, or at least, if such deceit was not
practised that mre that there was a mistake on the part of Maria Gay in
believing that said second parcel contained 98 hectares.
As a question of fact the trial court found from the evidence adduced by the
parties, that the plaintiff had not practised any deception in agreeing with
the defendant upon the sale of the two parcels of land described in Exhibit
A. We concur with the trial court in this conclusion. It appears of record that
before the execution of the contract Exhibit A, the defendant went over the

plaintiff's land and made her wn calculations as to the area of said two
parcels. But this not all. The plaintiff delivered to the defendant the
documents covering the land he was trying to sell. As to the first parcel
there is no question whatever and the defendant's contention is limited
solely to the actual area of the second parcel. The defendant had
document Exhibit 4 in her possession which is the deed by which the
plaintiff acquired the land from the original owner, Crispulo Beramo, in
which document it appears that the area of the second parcel is about 70
hectares. It was the defendant who intrusted the drawing of the deed of
sale Exhibit A to her attorney and notary, Hontiveros, and it is to be
presumed that both she and the lawyer who drew the document Exhibit A,
had read the contents of the document Exhibit 4. The plaintiff declares that
he signed the document between 5 and 7 in the afternoon of that day and
he did not pay any attention to the area of the second parcel, probably in
the belief that in the drawing of the document the data concerning the area
of the land had been taken from the said Exhibit 4. The defendant testified
that she received from the plaintiff a note or piece of paper containing the
data to be inserted in the contract Exhibit A. The plaintiff denies this and
said note or piece of paper was not presented at the trial. We are of opinion
that this testimony of the defendant's is unimportant, because, in reality, if
the plaintiff had delivered Exhibit 4 to the defendant, there was no need to
deliver to her another note to indicate the area of the second which already
appeared in the said Exhibit 4.
If, notwithstanding the fact that it appeared in Exhibit 4 that the area of the
second parcel was, approximately, 70 hectares, the defendant, however,
stated in said document Exhibit A that said second parcel contained 98
hectares as was admitted by him in his interviews with the plaintiff in the
months of April and June, 1924, then she has no right to claim from the
plaintiff the shortage in area of the second parcel. Furthermore, there is no
evidence of record that the plaintiff made representatin to the defendant as
to the area of said second parcel, and even if he did make such false
representations as are now imputed to him by the defendant, the latter
accepted such representations at her own risk and she is the only one
responsible for the consqunces of her inexcusable credulousness. In the
case of Songco vs. Sellner (37 Phil., 254), the court said:
The law allows considerable latitude to seller's statements, or dealer's
talk; and experience teaches that it as exceedingly risky to accept it
at its face value.

Assertions concerning the property which is the subject of a contract

of sale, or in regard to its qualities and characteristics, are the usual
and ordinary means used by sellers to obtain a high price and are
always understood as affording to buyers no grund from omitting to
make inquires. A man who relies upon such an affirmation made by a
person whose interest might so readily prompt him to exaggerate the
value of his property does so at his peril, and must take the
consequences of his own imprudence.
The defendant had ample opportunity to appraise herself of the condition of
the land which she purchased, and the plaintiff did nothing to prevent her
from making such investigation as she deemed fit, and as was said in
Songco vs. Sellner, supra, when the purchaser proceeds to make
investigations by himself, and the vendor does nothing to prevent such
investigation from being as complete as the former might wish, the
purchaser cannot later allege that the vendor made false representations to
him. (National Cash Register Co. vs. Townsend, 137 N. C., 652; 70 L. R.
A., 349; Williamson vs. Holt, 147 N. C., 515.) The same doctrine has been
sustained by the courts of the United States in the following cases, among
others: Misrepresentation by a vendor of real property with reference to its
area are not actionable, where a correct description of the property was
given in the deed and recorded chain of title, which the purchaser's agent
undertook to investigate and report upon, and the vendor made on effort to
prevent a full investigation." (Shappirio vs. Goldberg, 48 Law. ed., 419.)
"One who contracts for the purchase of real estate in reliance on the
representations and statements of the vendor as to its character and value,
but after he has visited and examined it for himself, and has had the means
and opportunity of verifying such statements, cannot avoid the contract on
the ground that they were false or exaggerated." (Brown vs. Smith, 109
Fed., 26.)
That the defendant knew that the area of the second parcel was only about
70 hectares is shown by the fact that she received the document Exhibit 4
before the execution of the contract Exhibit A, as also Exhibit E-3 on
September 30, 1920; which is the notification of the day for the trial of the
application for registratin of said parcel, wherein it appears that it had an
area of 60 hectares more or less, and by the fact that she received from the
plaintiff in the month of June 1924 the copy of the plans of the two parcels,
wherein appear their respective areas; and yet, in spite of all this, she did
not complain of the difference in the area of said second parcel until the

year 1926. Moreover, the record contains several of the defendant's letters
to the plaintiff in the years 1921 to 1925, in which said defendant
acknowledges her debt, and confining herself to petitioning for extentions of
time within which to make payment for the reasons given therein. But in
none of these letters is there any allusion to such lack of area, nor did she
complain to the plaintiff of the supposed deceit of which she believes she is
a victim. All of which, in our opinion, shows that no such deceit was
practised, as the trial court rightly found.
As to the alleged error to the effect that the trial court failed to order the
reduction from the price due on the second parcel as stated in the contract
of sale Exhibit A, the proportional price of the area lacking, we are of the
opinion that said error has no legal ground.
It appears that by the contract Exhibit A, the parties agreed to the sale of
two parcels of land, the first one containing 102 hectares, 67 ares and 32
centares, and the second one containing about 98 hectares, for the lump
sum of P47,000 payable partly in cash and partly in installments. Said two
parcels are defind by means of the boundaries given in the instrument.
Therefore, the case falls within the provision of article 1471 of the Civil
Code, which reads as follows:
ART. 1471. In case of the sale of real estate for a lump sum and not
at the rate of a specified price for each unit of measure, there shall be
no increase or decrease of the price even if the area be found to be
more or less than that stated in the contract.
The same rule shall apply when two or more estates are sold for a
single price; but, if in addition to a statement of the boundaries, which
is indispensable in every conveyance of real estate, the area of the
estate should be designated in the contract, the vendor shall be
obliged to deliver all that is included with such boundaries, even
should it exceed the area specified in the contract; and, should he not
be able to do so, he shall suffer a reduction of the price in proportion
to what is lacking of the area, unless the contract be annulled by
reason of the vendee's refusal to accept anything other than that
which was stipulated.
The plaintiff contends that, in accrdance with the first paragraph of this
article, the defendant has no right to ask for the reduction of price,

whatever may be the area of the two parcels of land sold her. On the ther
hand, the defendant contends that, according to paragraph 2 of the same
article of the Civil Code, she has a right to ask for a reduction of the price
due on the second parcel, in proportion to the area lacking.
In his comments on the article cited, Manresa says, among other things:
. . . if the sale was made for a price per unit of measure or number,
the consideration of the contract with respect to the vendee, is the
number of such units, or, if you wish, the thing purchased as
determined by the stipulated number of units. But if, on the other
hand, the sale was made for a lump sum, the consideration of the
contract is the object sold, independently of its number or measure,
the thing as determined by the stipulated boundaries, which has been
called in law a determinate object.
This difference in consideration between the two cases implies a
distinct regulation of the obligation to deliver the object, because, for
an acquittance delivery must be made in accordance with the
agreement of the parties, and the performance of the agreement
must show the confirmation in fact, of the consideratin which induces
each of the parties to enter into the contract.
From all this, it follows that the provisions of article 1471 concerning
the delivery of determinate objects had to be materially different from
those governing the delivery of things sold a price per unit of measure
or number. Let us examine it, and for the sake of greater clearness,
let us expound it as we understand it.
With respect to the delivery of determinate objects two cases may
arise, either the determinate object is delivered as stipulated, that is,
delivering everything included within the boundaries, inasmuch as it is
the entirety thereof that distinguishes the determinate object; or that
such entirety is impaired in the delivery by failing to deliver to the
purchaser something included within the boundaries. These are the
two cases for which the Code has provided although, in our opinion, it
has not been sufficiently explicit in expressing the distinction; hence,
at first sight, the article seems somewhat difficult to understand.
The first paragraph and the first clause of the second paragraph of
article 1471 deal with the first of said cases; that is where everything

included within the boundaries as set forth in the contract has been
delivered. The Code goes on to consider the case where a definite
area or number has been expressed in the contract, and enunciates
the rule to be followed when, after delivery, the area included within
said bundaries is found not to coincide with the aforesaid content or
number. Said rule may be thus stated: Whether or not the object of
sale be one realty for a lump sum, or two or more for a single price
also a lump sum, and, consequently, not for so much per unit of
measure or number, there shall be no increase or decrease in the
price even if the area be found to be more or less than that stated in
the contract.
Thus understood the reason for the regulation is clear and no doubts
can arise from its application. It is concerned with determinate
objects. The consideration of the contract, and the thing to be
delivered is adeterminate object, and not the number of units it
contains. The price is determined with relation to it; hence, its greater
or lesser area cannot influence the increase or decrease of the price
agreed upon. We have just learned the reason for the regulation,
bearing in mind that the Code has rightly considered an object as
determinate for the purposes now treated, when it is a single realty as
when it is two or more, so long as they are solds for a single price
constituting a lump sum and not for a specified amount per unit of
measure or number.
We have stated that the second possible case in the delivery of
determinate objects is that in which, on account or circumstances of
diverse possible origins, everything included within the boundaries is
not delivered.
We have indicated about that where everything included within the
boundaries is delivered there can be no increase or decrease in
price, no matter whether the area be more or less than that given in
the contract. From this a very important consequence follows, to wit:
That if the vendor is bound to deliver a determinate object, he is
bound to deliver all of it, that is, everything within its boundaries, in
the contract, and that from the moment he fails to do so, either
because he cannot, or because, ignoring the meaning of the contract,
he alleges that it contains a greater area than that stipulated, the

contract is partially unfulfilled and it is but just the certain actions be

available to the vendee for the protection of his right.
The rule in the latter case is found in the second paragraph of article
1471, with the exception of the first clause which refers of the former
hypothesis. This rule may be stated as follows: Whether or not the
object of the sale be one realty for a lump sum, or two or more for a
single price also a lump sum, and, consequently not at the rate of a
specified price for each unit of measuring or number, the vendor shall
be bound to deliver everything that is included within the boundaries
stated, although it may exceed the area or number expressed in the
contract; in case he cannot deliver it, the purchaser shall have the
right either to reduce the price proportionately to what is lacking of the
area or number, or to rescind the contract at his option.
Comprehending the meaning of a sale of a determinate object, it is
easily understod how, in cases wherein by virtue of the rule
enunciated, the vendor has to deliver a greater area than that
expressed in the contract, there is, strictly speaking, no excess of
area, inasmuch as one may always properly ask, excess with respect
to what? With respect to the area appearing in the deed, it will be
answered. But as this area was not taken into account in entering into
the contract inasmuch as the parties made neither the amount of the
price, nor the efficacy of the contract to depend on the number of its
units; since area was written in to fulfill a formal requisite demanded
by the present rules upon the drawing of public instruments, but as a
condition essential to the contract, which, if it were not true, would not
be consummated, it results in the long run, that this detail of the
written recital, with respect to which the excess is to be estimated, is
so negligible, so inconsistent, so haphazard, and in the vast majority
of cases so wide of the mark, that it is impossible to calculate the
excess; and considering the nature of a contract of sale of a definite
object, it cannot be strictly held that there is any excess at all.
If everything within the stipulated boundaries is not delivered, then
the determination object which was the consideration of the contract
for the vendee, is not delivered; hence his power to nullify it.
However, it might be (and this he alone can say), that although he
has not received the object, according to the stipulated terms, it suits

him; hence his power to carry the contract into effect with the just
decrease in price referred to in the article under comment.
The manner in which the matter covered by this article was
distributed in its two paragraphs constributes to making it difficult to
understand. The rule might have been clearly stated had the first
clause of the second paragraph been included in the first paragraph,
the latter to end with the words: "The same rule shall apply when two
or more estates are sold fos a single price." And if by constituting an
independent paragraph, with the rest of the second paragraph, it
were made to appear more expressly that the rule of the second
paragraph thus drawn referred to all the cases of paragraph one, as
we have expounded, namely, to the case of a sale of one single
estate and that of two or more for one single price, the rule would
have been clearer.
In our opinion, this would have better answered what we deem to be
the indubitable intention of the legislator.
Some eminent commentators construe the last part of article 1471 in
a different way. To them the phrase "and should he not be able to do
so" as applied to the vendor, does not mean as apparently it does
"should he not be able to deliver all that is included within the
boundaries stated," but this other thing namely, that if by reason of
the fact that a less area is included within the boundaries than that
expressed in the contract, it is not possible for the vendor to comply
therewith according to its literal sense, he must suffer the effects of
the nullity of the contract or a reduction of the price proportionately
what may be lacking of the area or number. It is added as a ground
for this solution that if the vendor fulfills the obligations, as stated in
the article, by delivering what is not included with in the boundaries,
there can never be any case of proportionate reduction of the price
on account of shortage of area, because he does not give less who
delivers all that he bound himself to.1awphi1.net
According to this opinion, which we believe erroneous, if within the
boundaries of the property sold, there is included more area than that
expressed in the title deeds, nothing can be claimed by the vendor
who losses the value of that excess, but if there is less area, then he
loses also because either the price is reduced or the contract is

annulled. This theory would be anomalous in case of sale of

properties in bulk, but, especially, would work a gross injustice which
the legislator never intended.
There is no such thing. So long as the vendor can deliver, and for that
reason, delivers all the land included within the boundaries assigned
to the property, there can be no claim whatsoever either on his part,
although the area may be found to be much greater than what was
expressed, nor on the part of the puchaser although that area may be
in reality much smaller. But as he sold everything within the
boundaries and this is all the purchaser has paid, or must pay for
whether much or little, if afterwards it is found that he cannot deliver
all, because, for instance, a part, a building, a valley, various pieces
of land, a glen, etc., are not his, there is no sale of a determinate
object, there is no longer a sale of the object agreed upon, and the
solution given by the article is then just and logical: Either the contract
is annulled or the price reduced proportionately.
We have quoted from Manresa's Commentaries at length for a better
understanding of the doctrine on the matter, inasmuch as the contending
counsel have inserted in their respective briefs only such portions of said
commentaries as relate to their respective contentions.
It may be seen from a careful reading of the commentaries on said article
1471, that the great author distinguishes between the two cases dealt with
in article 1471, and formulates the proper rules for each. In the delivery of a
determinate object, says the author, two cases may arise; either the
determinate object is delivered as stipulated, that is, delivering everything
included within the boundaries, inasmuch as it is the entirety thereof that
distinguishes the determinate object; or that such entirely is impaired in the
delivery by failing to deliver to the purchaser something included within the
boundaries. For the first case, Manresa gives the following rule: "Whether
or not the object of the sale be one realty for a lump sum, or two or more
for a single price also a lump sum, and, consequently, not for so much per
unit of measure or number, there shall be no increase or decrease in the
price ecven if the area be found to be more or less than that stated in the
contract." And for the second case, this other: "Whether or not the object of
the sale one realty for a lump sum, or two or more for a single price also a
lump sum, and, consequently, not at the rate a specified price for each unit
of measure or number, the vendor shall be bnound to deliver everything

that is included within the boundaries stated, although it may exceed the
area or number expressed in the contract; in case he cannot deliver it, the
purchaser shall have the right either to reduce the price proportionately to
what is lacking of the area or number, or to rescind the contract, at his
option."
Considering the facts of the present controversy, it seems clear to us that
the rule formulated for the second paragraph or article 1471 is inapplicable
in the instant case inasmuch as all the land included within the boundaries
of the two parcels sold has been delivered inits entirety to the vendee.
There is no division of the land enclosed within the boundaries of the
properties sold; the determinate object which is the subject matter of the
contract has been delivered by the vendor in its entirety as he obligate
himself to do. Therefore, there is no right to complain either on the part of
the vendor, even if there be a greater area than that stated in the deed, or
on the part of the vendee, though the area of the second parcel be really
much smaller. (Irureta Goyena vs. Tambunting, 1 Phil., 490.)
With regard to the damages prayed for by the defendant, the lower court
finally dismissed the cross-complaint without special pronouncement as to
costs. And according to the decision of the Supreme Court od Spain of
1897, a judgment absolving a party from a claim of damages against him,
who has not contravened his obligations, does not violate articles 1101 and
1108 of the Civil Code.
With respect to the question of interest, the lower court likewise held that,
as the defendant had not paid the sum of P7,300 on April 30, 1921, when
the plaintiff had delivered the certificate of title, she was in default from that
date and also from the date of one year thereafter, with respect to the sum
of P12,000, contituting the last period of the obligation. We are of the
opinion that the lower court has committed no error which should be
corrected by this court.
The judgment appealed from being in accordance with the law, it should be
as it is hereby, affirmed with costs against the appellant. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 148225

March 3, 2010

CARMEN DEL PRADO, Petitioner,

vs.
SPOUSES ANTONIO L. CABALLERO and LEONARDA
CABALLERO, Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the decision 1 of the Court of
Appeals (CA) dated September 26, 2000 and its resolution denying the
motion for reconsideration thereof.
The facts are as follows:
In a judgment rendered on February 1, 1985 in Cadastral Case No. N-6
(LRC Rec. No. N-611), Judge Juan Y. Reyes of the Regional Trial Court
(RTC) of Cebu City, Branch 14, adjudicated in favor of Spouses Antonio L.
Caballero and Leonarda B. Caballero several parcels of land situated in
Guba, Cebu City, one of which was Cadastral Lot No. 11909, the subject of
this controversy.2 On May 21, 1987, Antonio Caballero moved for the
issuance of the final decree of registration for their lots. 3 Consequently, on
May 25, 1987, the same court, through then Presiding Judge Renato C.
Dacudao, ordered the National Land Titles and Deeds Registration
Administration to issue the decree of registration and the corresponding
titles of the lots in favor of the Caballeros. 4
On June 11, 1990, respondents sold to petitioner, Carmen del Prado, Lot
No. 11909 on the basis of the tax declaration covering the property. The
pertinent portion of the deed of sale reads as follows:
That we, Spouses ANTONIO L. CABALLERO and LEONARDA B.
CABALLERO, Filipinos, both of legal age and residents of Talamban, Cebu
City, Philippines, for and in consideration of the sum of FORTY
THOUSAND PESOS (P40,000.00), Philippine Currency, paid by CARMEN
DEL PRADO, Filipino, of legal age, single and a resident of Sikatuna St.,
Cebu City, Philippines, the receipt of which is full is hereby acknowledged,
do by these presents SELL, CEDE, TRANSFER, ASSIGN & CONVEY unto
the said CARMEN DEL PRADO, her heirs, assigns and/or successors-in-

interest, one (1) unregistered parcel of land, situated at Guba, Cebu City,
Philippines, and more particularly described and bounded, as follows:
"A parcel of land known as Cad. Lot No. 11909, bounded as follows:
North : Lot 11903
East : Lot 11908
West : Lot 11910
South : Lot 11858 & 11912
containing an area of 4,000 square meters, more or less, covered by Tax
Dec. No. 00787 of the Cebu City Assessors Office, Cebu City." of which
parcel of land we are the absolute and lawful owners.
Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909, was
issued only on November 15, 1990, and entered in the "Registration Book"
of the City of Cebu on December 19, 1990. 5 Therein, the technical
description of Lot No. 11909 states that said lot measures about 14,457
square meters, more or less.6
On March 20, 1991, petitioner filed in the same cadastral proceedings a
"Petition for Registration of Document Under Presidential Decree (P.D.)
1529"7 in order that a certificate of title be issued in her name, covering the
whole Lot No. 11909. In the petition, petitioner alleged that the tenor of the
instrument of sale indicated that the sale was for a lump sum or cuerpo
cierto, in which case, the vendor was bound to deliver all that was included
within said boundaries even when it exceeded the area specified in the
contract. Respondents opposed, on the main ground that only 4,000 sq m
of Lot No. 11909 was sold to petitioner. They claimed that the sale was not
for a cuerpo cierto. They moved for the outright dismissal of the petition on
grounds of prescription and lack of jurisdiction.
After trial on the merits, the court found that petitioner had established a
clear and positive right to Lot No. 11909. The intended sale between the
parties was for a lump sum, since there was no evidence presented that
the property was sold for a price per unit. It was apparent that the subject
matter of the sale was the parcel of land, known as Cadastral Lot No.
11909, and not only a portion thereof.8

Thus, on August 2, 1993, the court a quo rendered its decision with the
following dispositive portion:
WHEREFORE, premises considered, the petition is hereby granted and
judgment is hereby rendered in favor of herein petitioner. The Register of
Deeds of the City of Cebu is hereby ordered and directed to effect the
registration in his office of the Deed of Absolute Sale between Spouses
Antonio Caballero and Leonarda Caballero and Petitioner, Carmen del
Prado dated June 11, 1990 covering Lot No. 11909 after payment of all
fees prescribed by law. Additionally, the Register of Deeds of the City of
Cebu is hereby ordered to cancel Original Certificate No. 1305 in the name
of Antonio Caballero and Leonarda Caballero and the Transfer Certificate
of Title be issued in the name of Petitioner Carmen del Prado covering the
entire parcel of land known as Cadastral Lot No. 11909. 9
An appeal was duly filed. On September 26, 2000, the CA promulgated the
assailed decision, reversing and setting aside the decision of the RTC.
The CA no longer touched on the character of the sale, because it found
that petitioner availed herself of an improper remedy. The "petition for
registration of document" is not one of the remedies provided under P.D.
No. 1529, after the original registration has been effected. Thus, the CA
ruled that the lower court committed an error when it assumed jurisdiction
over the petition, which prayed for a remedy not sanctioned under the
Property Registration Decree. Accordingly, the CA disposed, as follows:
IN VIEW OF ALL THE FOREGOING, the appealed decision
is REVERSED and SET ASIDE and a new one entered dismissing the
petition for lack of jurisdiction. No pronouncement as to costs. 10
Aggrieved, petitioner filed the instant petition, raising the following issues:
I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE
ERROR IN MAKING FINDINGS OF FACT CONTRARY TO THAT OF THE
TRIAL COURT[;]
II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE
ERROR IN FAILING TO RULE THAT THE SALE OF THE LOT IS FOR A
LUMP SUM OR CUERPO CIERTO[;]

III. WHETHER OR NOT THE COURT A QUO HAS JURISDICTION OVER

THE PETITION FOR REGISTRATION OF THE DEED OF ABSOLUTE
SALE DATED 11 JUNE 1990 EXECUTED BETWEEN HEREIN
PETITIONER AND RESPONDENTS[.]11
The core issue in this case is whether or not the sale of the land was for a
lump sum or not.
Petitioner asserts that the plain language of the Deed of Sale shows that it
is a sale of a real estate for a lump sum, governed under Article 1542 of the
Civil Code.12 In the contract, it was stated that the land contains an area of
4,000 sq m more or less, bounded on the North by Lot No. 11903, on the
East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on
the West by Lot No. 11910. When the OCT was issued, the area of Lot No.
11909 was declared to be 14,475 sq m, with an excess of 10,475 sq m. In
accordance with Article 1542, respondents are, therefore, duty-bound to
deliver the whole area within the boundaries stated, without any
corresponding increase in the price. Thus, petitioner concludes that she is
entitled to have the certificate of title, covering the whole Lot No. 11909,
which was originally issued in the names of respondents, transferred to her
name.
We do not agree.
In Esguerra v. Trinidad,13 the Court had occasion to discuss the matter of
sales involving real estates. The Courts pronouncement is quite instructive:
In sales involving real estate, the parties may choose between two types of
pricing agreement: a unit price contract wherein the purchase price is
determined by way of reference to a stated rate per unit area (e.g., P1,000
per square meter), or a lump sum contract which states a full purchase
price for an immovable the area of which may be declared based on the
estimate or where both the area and boundaries are stated (e.g., P1 million
for 1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals (478
SCRA 451), the Court discussed the distinction:
"In a unit price contract, the statement of area of immovable is not
conclusive and the price may be reduced or increased depending on the
area actually delivered. If the vendor delivers less than the area agreed
upon, the vendee may oblige the vendor to deliver all that may be stated in
the contract or demand for the proportionate reduction of the purchase

price if delivery is not possible. If the vendor delivers more than the area
stated in the contract, the vendee has the option to accept only the amount
agreed upon or to accept the whole area, provided he pays for the
additional area at the contract rate.
xxxx
In the case where the area of an immovable is stated in the contract based
on an estimate, the actual area delivered may not measure up exactly with
the area stated in the contract. According to Article 1542 of the Civil Code,
in the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or
decrease of the price, although there be a greater or less areas or number
than that stated in the contract. . . .
xxxx
Where both the area and the boundaries of the immovable are declared,
the area covered within the boundaries of the immovable prevails over the
stated area. In cases of conflict between areas and boundaries, it is the
latter which should prevail. What really defines a piece of ground is not the
area, calculated with more or less certainty, mentioned in its description,
but the boundaries therein laid down, as enclosing the land and indicating
its limits. In a contract of sale of land in a mass, it is well established that
the specific boundaries stated in the contract must control over any
statement with respect to the area contained within its boundaries. It is not
of vital consequence that a deed or contract of sale of land should disclose
the area with mathematical accuracy. It is sufficient if its extent is
objectively indicated with sufficient precision to enable one to identify it. An
error as to the superficial area is immaterial. Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is the
entirety thereof that distinguishes the determinate object. 14
The Court, however, clarified that the rule laid down in Article 1542 is not
hard and fast and admits of an exception. It held:
A caveat is in order, however. The use of "more or less" or similar words in
designating quantity covers only a reasonable excess or deficiency. A
vendee of land sold in gross or with the description "more or less" with
reference to its area does not thereby ipso facto take all risk of quantity in
the land..

Numerical data are not of course the sole gauge of unreasonableness of

the excess or deficiency in area. Courts must consider a host of other
factors. In one case (see Roble v. Arbasa, 414 Phil. 343 [2001]), the Court
found substantial discrepancy in area due to contemporaneous
circumstances. Citing change in the physical nature of the property, it was
therein established that the excess area at the southern portion was a
product of reclamation, which explained why the lands technical
description in the deed of sale indicated the seashore as its southern
boundary, hence, the inclusion of the reclaimed area was declared
unreasonable.15
In the instant case, the deed of sale is not one of a unit price contract. The
parties agreed on the purchase price ofP40,000.00 for a predetermined
area of 4,000 sq m, more or less, bounded on the North by Lot No. 11903,
on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912,
and on the West by Lot No. 11910. In a contract of sale of land in a mass,
the specific boundaries stated in the contract must control over any other
statement, with respect to the area contained within its
boundaries.161avvphi1
Blacks Law Dictionary17 defines the phrase "more or less" to mean:
About; substantially; or approximately; implying that both parties assume
the risk of any ordinary discrepancy. The words are intended to cover slight
or unimportant inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57
S.W.2d 408; and are ordinarily to be interpreted as taking care of
unsubstantial differences or differences of small importance compared to
the whole number of items transferred.
Clearly, the discrepancy of 10,475 sq m cannot be considered a slight
difference in quantity. The difference in the area is obviously sizeable and
too substantial to be overlooked. It is not a reasonable excess or deficiency
that should be deemed included in the deed of sale.
We take exception to the avowed rule that this Court is not a trier of facts.
After an assiduous scrutiny of the records, we lend credence to
respondents claim that they intended to sell only 4,000 sq m of the whole
Lot No. 11909, contrary to the findings of the lower court. The records
reveal that when the parties made an ocular inspection, petitioner
specifically pointed to that portion of the lot, which she preferred to

purchase, since there were mango trees planted and a deep well thereon.
After the sale, respondents delivered and segregated the area of 4,000 sq
m in favor of petitioner by fencing off the area of 10,475 sq m belonging to
them.18
Contracts are the law between the contracting parties. Sale, by its very
nature, is a consensual contract, because it is perfected by mere consent.
The essential elements of a contract of sale are the following: (a) consent
or meeting of the minds, that is, consent to transfer ownership in exchange
for the price; (b) determinate subject matter; and (c) price certain in money
or its equivalent. All these elements are present in the instant case. 19
More importantly, we find no reversible error in the decision of the CA.
Petitioners recourse, by filing the petition for registration in the same
cadastral case, was improper. It is a fundamental principle in land
registration that a certificate of title serves as evidence of an indefeasible
and incontrovertible title to the property in favor of the person whose name
appears therein. Such indefeasibility commences after one year from the
date of entry of the decree of registration.20 Inasmuch as the petition for
registration of document did not interrupt the running of the period to file the
appropriate petition for review and considering that the prescribed one-year
period had long since expired, the decree of registration, as well as the
certificate of title issued in favor of respondents, had become
incontrovertible.21
WHEREFORE, the petition is DENIED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24069

June 28, 1968

LA FUERZA, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and ASSOCIATED ENGINEERING
CO., INC., respondents.

Sycip, Salazar, Luna and Associates for respondent Associated

Engineering Co., Inc.
De Santos and Delfino for petitioner.
CONCEPCION, C.J.:
Ordinary action for the recovery of a sum of money. In due course, the
Court of First Instance of Manila rendered judgment for defendant, La
Fuerza, Inc. hereinafter referred to as La Fuerza which was at first
affirmed by the Court of Appeals. On motion for reconsideration, the latter,
however, set aside its original decision and sentenced La Fuerza to pay to
the plaintiff, Associated Engineering Co., hereinafter referred to as the
Plaintiff the sum of P8,250.00, with interest at the rate of 1% per month,
from July, 1960 until fully paid, plus P500 as attorney's fees and the costs.
Hence, this Petition for review on certiorari.
The facts, as found by the Court of First Instance and adopted by the Court
of Appeals, are:
The plaintiff (Associated Engineering, Co., Inc.) is a corporation
engaged in the manufacture and installation of flat belt conveyors.
The defendant (La Fuerza, Inc.) is also a corporation engaged in the
manufacture of wines. Sometime in the month of January, 1960,
Antonio Co, the manager of the plaintiff corporation, who is an
engineer, called the office of the defendant located at 399 Muelle de
Binondo, Manila and told Mariano Lim, the President and general
manager of the defendant that he had just visited the defendant's
plant at Pasong Tamo, Makati, Rizal and was impressed by its size
and beauty but he believed it needed a conveyor system to convey
empty bottles from the storage room in the plant to the bottle washers
in the production room thereof. He therefore offered his services to
manufacture and install a conveyor system which, according to him,
would increase production and efficiency of his business. The
president of the defendant corporation did not make up his mind then
but suggested to Antonio Co to put down his offer in writing.
Effectively, on February 4, 1960, marked as Exhibit A in this case.
Mariano Lim did not act on the said offer until February 11, 1960,
when Antonio Co returned to inquire about the action of the defendant
on his said offer. The defendants president and general manager
then expressed his conformity to the offer made in Exhibit A by writing

at the foot thereof under the word "confirmation" his signature. He

caused, however, to be added to this offer at the foot a note which
reads: "All specifications shall be in strict accordance with the
approved plan made part of this agreement hereof." A few days later,
Antonio Co made the demand for the down payment of P5,000.00
which was readily delivered by the defendant in the form of a check
for the said amount. After that agreement, the plaintiff started to
prepare the premises for the installations of the conveyor system by
digging holes in the cement floor of the plant and on April 18, 1960,
they delivered one unit of 110' 26" wide flat belt conveyor, valued at
P3,750.00, and another unit measuring 190' and 4" wide flat
conveyor, valued at P4,500.00, or a total of P13,250.00. Deducting
the down payment of P5,000.00 from this value, there is a balance, of
P8,250.00 to be paid by the defendant upon the completion of the
installation, Exhibit B.
The work went under way during the months of March and April,
during which time the president and general manager of the
defendant corporation was duly apprised of the progress of the same
because his plant mechanic, one Mr. Santos, had kept him informed
of the installation for which he gave the go signal. It seems that the
work was completed during the month of May, 1960. Trial runs were
made in the presence of the president and general manager of the
defendant corporation, Antonio Co, the technical manager of the
plaintiff, and some other people. Several trial runs were made then
totalling about five. These runs were continued during the month of
June where about three trial runs were made and, lastly, during the
month of July, 1960.
As a result of this trial or experimental runs, it was discovered,
according to the defendant's general manager, that the conveyor
system did not function to their satisfaction as represented by the
technical manager of the plaintiff Antonio Co for the reason that,
when operated several bottles collided with each other, some jumping
off the conveyor belt and were broken, causing considerable damage.
It was further observed that the flow of the system was so sluggish
that in the opinion of the said general manager of the defendant their
old system of carrying the bottles from the storage room to the
washers by hand carrying them was even more efficient and faster.

After the last trial run made in the month of July and after the
plaintiff's technical manager had been advised several times to make
the necessary and proper adjustments or corrections in order to
improve the efficiency of the conveyor system, it seems that the
defects indicated by the said president and general manager of the
defendant had not been remedied so that they came to the parting of
the ways with the result that when the plaintiff billed the defendant for
the balance of the contract price, the latter refused to pay for the
reason that according to the defendant the conveyor system installed
by the plaintiff did not serve the purpose for which the same was
manufactured and installed at such a heavy expense. The flat belt
conveyors installed in the factory of the defendant are still there....
xxx

xxx

xxx

On March 22, 1961, the contractor commenced the present action to

recover the sums of P8,250, balance of the stipulated price of the
aforementioned conveyors, and P2,000, as attorney's fees, in addition to
the costs.
In its answer to the complaint, La Fuerza alleged that the "conveyors
furnished and installed by the plaintiff do not meet the conditions and
warrantings" (warranties?) of the latter, and set up a counterclaim for the
P5,000 advanced by La Fuerza, which prayed that the complaint be
dismissed; that its contract with the plaintiff be rescinded; and that plaintiff
be sentenced to refund said sum of P5,000 to La Fuerza, as well as to pay
thereto P1,000 as attorney's fees, apart from the costs.
After appropriate proceedings, the Court of First Instance of Manila
rendered a decision the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered rescinding the contract
entered into by the parties in this case, marked as Exhibit A, and
ordering the plaintiff to refund or return to the defendant the amount
of P5,000.00 which they had received as down payment, and the
costs of this action. On the other hand, defendant is ordered to permit
the plaintiff to remove the flat belt conveyors installed in their
premises.
As above indicated, this decision was affirmed by the Court of Appeals,
which, on motion for reconsideration of the plaintiff, later set aside its

original decision and rendered another in plaintiff's favor, as stated in the

opening paragraph hereof.
The appealed resolution of the Court of Appeals was, in effect, based upon
the theory of prescription of La Fuerza's right of action for rescission of its
contract with the plaintiff, for in the language of said resolution "Article
1571 of the Civil Code provides that an action to rescind 'shall be barred
after six months from delivery of the thing sold'", and, in the case at bar, La
Fuerza did not avail of the right to demand rescission until the filing of its
answer in the Court of First Instance, on April 17, 1961, or over ten (10)
months after the installation of the conveyors in question had been
completed on May 30, 1960.
La Fuerza assails the view taken by the Court of Appeals, upon the ground:
1) that there has been, in contemplation of law, no delivery of the
conveyors by the plaintiff; and 2) that, assuming that there has been such
delivery, the period of six (6) months prescribed in said Art. 1571 refers to
the "period within which" La Fuerza may "bring an action to demand
compliance of the warranty against hidden defects", not the action for
rescission of the contract. Both grounds are untenable.
With respect to the first point, La Fuerza maintains that plaintiff is deemed
not to have delivered the conveyors, within the purview of Art. 1571, until it
shall have complied with the conditions or requirements of the contract
between them that is to say, until the conveyors shall meet La Fuerza's
"need of a conveyor system that would mechanically transport empty
bottles from the storage room to the bottle workers in the production room
thus increasing the production and efficiency" of its business-and La
Fuerza had accepted said conveyors.
On this point, the Court of Appeals had the following to say:
Article 1571 of the Civil Code provides that an action to rescind 'shall
be barred after six months, from delivery of the thing sold". This
article is made applicable to the case at bar by Article 1714 which
provides that "the pertinent provisions on warranty of title against
hidden defect in a contract of sale" shall be applicable to a contract
for a piece of work. Considering that Article 1571 is a provision on
sales, the delivery mentioned therein should be construed in the light
of the provisions on sales. Article 1497 provides that the thing sold

shall be understood as delivered when it is placed in the control and

possession of the vendee. Therefore, when the thing subject of the
sale is placed in the control and possession of the vendee, delivery is
complete. Delivery is an act of the vendor. Thus, one of the
obligations of the vendor is the delivery of the thing sold (Art. 1495).
The vendee has nothing to do with the act of delivery by the vendor.
On the other hand, acceptance is an obligation on the part of the
vendee (Art. 1582). Delivery and acceptance are two distinct and
separate acts of different parties. Consequently, acceptance cannot
be regarded as a condition to complete delivery.
xxx

xxx

xxx

We find no plausible reason to disagree with this view. Upon the completion
of the installation of the conveyors, in May, 1960, particularly after the last
trial run, in July 1960, La Fuerza was in a position to decide whether or not
it was satisfied with said conveyors, and, hence, to state whether the same
were a accepted or rejected. The failure of La Fuerza to express
categorically whether they accepted or rejected the conveyors does not
detract from the fact that the same were actually in its possession and
control; that, accordingly, the conveyors had already been delivered by the
plaintiff; and that, the period prescribed in said Art. 1571 had begun to run.
With respect to the second point raised by La Fuerza, Art. 1571 of the Civil
Code provides:
Actions arising from the provisions of the preceding ten articles shall be
barred after six months, from the delivery of the thing sold.
xxx

xxx

xxx

Among the "ten articles" referred to in this provision, are Articles 1566 and
1567, reading:
Art. 1566. The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware
thereof. ."This provision shall not apply if the contrary has been
stipulated, and the vendor was not aware of the hidden faults or
defects in the thing sold.

Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566,
the vendee may elect between withdrawing from the contract and
demanding a proportionate reduction of the price, with damages in
either case.
xxx

xxx

xxx

Pursuant to these two (2) articles, if the thing sold has hidden faults or
defects as the conveyors are claimed to have the vendor in the
case at bar, the plaintiff shall be responsible therefor and the vendee
or La Fuerza, in the present case "may elect between withdrawing from
the contract and demanding a proportional reduction of the price, with
damages in either case." In the exercise of this right of election, La Fuerza
had chosen to withdraw from the contract, by praying for its rescission; but
the action therefor in the language of Art. 1571 "shall be barred after
six months, from the delivery of the thing sold." The period of four (4) years,
provided in Art. 1389 of said Code, for "the action to claim rescission,"
applies to contracts, in general, and must yields, in the instant case, to said
Art. 1571, which refers to sales in particular.
Indeed, in contracts of the latter type, especially when goods, merchandise,
machinery or parts or equipment thereof are involved, it is obviously wise to
require the parties to define their position, in relation thereto, within the
shortest possible time. Public interest demands that the status of the
relations between the vendor and the vendee be not left in a condition of
uncertainty for an unreasonable length of time, which would be the case, if
the lifetime of the vendee's right of rescission were four (4) years.
WHEREFORE, the appealed resolution of the Court of Appeals is hereby
affirmed, with costs against appellant, La Fuerza, Inc. It is so ordered.
SECOND DIVISION
RUDOLF LIETZ, INC., G.R. No. 122463
Petitioner,
Present:
- versus- PUNO, J.,
Chairman, AUSTRIA-MARTINEZ,
CALLEJO, SR.,

THE COURT OF APPEALS, TINGA, and

AGAPITO BURIOL, TIZIANA CHICO-NAZARIO, JJ.
TURATELLO & PAOLA SANI,
Respondents. Promulgated:
December 19, 2005
x --------------------------------------------------------------------x
DECISION
TINGA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised
Rules of Court, praying for the annulment of the Decision[1] dated April 17,
1995 and theResolution[2] dated October 25, 1995 of the Court of Appeals
in CA-G.R. CV No. 38854. The Court of Appeals affirmed the Decision[3] in
Civil Case No. 2164 of the Regional Trial Court (RTC), Branch 48, of
Palawan and Puerto Princesa City with the modification that herein
respondents Tiziana Turatello and Paola Sani are entitled to damages,
attorneys fees, and litigation expenses.
The dispositive portion of the RTC Decision reads:
WHEREFORE, in view of the foregoing and as prayed for
by the defendants, the instant complaint is hereby DISMISSED.
Defendants counterclaim is likewise DISMISSED. Plaintiff,
however, is ordered to pay defendant Turatello and Sanis
counsel the sum of P3,010.38 from August 9, 1990 until fully
paid representing the expenses incurred by said counsel when
the trial was cancelled due to the non-appearance of plaintiffs
witnesses. With costs against the plaintiff.
SO ORDERED.[4]
As culled from the records, the following antecedents appear:

Respondent Agapito Buriol previously owned a parcel of unregistered land

situated at Capsalay Island, Port Barton, San Vicente, Palawan. On August
15, 1986, respondent Buriol entered into a lease agreement with Flavia
Turatello and respondents Turatello and Sani, all Italian citizens, involving
one (1) hectare of respondent Buriols property. The lease agreement was
for a period of 25 years, renewable for another 25 years. The lessees took
possession of the land after paying respondent Buriol a down payment
of P10,000.00.[5] The lease agreement, however, was reduced into writing
only in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz,
Inc. the same parcel of land for the amount of P30,000.00. The Deed of
Absolute Saleembodying the agreement described the land as follows:
A parcel of land, consisting of FIVE (5) hectares, more or less,
a portion of that parcel of land declared in the name of Agapito
Buriol, under Tax Declaration No. 0021, revised in the year
1985, together with all improvements thereon, situated at the
Island of Capsalay, Barangay Port Barton, municipality of San
Vicente, province of Palawan which segregated from the whole
parcel described in said tax declaration, has the following
superficial boundaries: NORTH, Sec. 01-017; and remaining
property of the vendor; EAST, by Seashore; SOUTH, 01-020;
and WEST, by 01-018 (now Elizabeth Lietz).[6]

Petitioner later discovered that respondent Buriol owned only four (4)
hectares, and with one more hectare covered by lease, only three (3)
hectares were actually delivered to petitioner. Thus, petitioner instituted on
April 3, 1989 a complaint for Annulment of Lease with Recovery of
Possession with Injunction and Damagesagainst respondents and Flavia
Turatello before the RTC. The complaint alleged that with evident bad faith
and malice, respondent Buriol sold to petitioner five (5) hectares of land
when respondent Buriol knew for a fact that he owned only four (4)
hectares and managed to lease one more hectare to Flavia Turatello and

respondents Tiziana Turatello and Paola Sani. The complaint sought the
issuance of a restraining order and a writ of preliminary injunction to
prevent Flavia Turatello and respondents Turatello and Sani from
introducing improvements on the property, the annulment of the lease
agreement between respondents, and the restoration of the amount paid by
petitioner in excess of the value of the property sold to him. Except for
Flavia Turatello, respondents filed separate answers raising similar
defenses of lack of cause of action and lack of jurisdiction over the action
for recovery of possession. Respondents Turatello and Sani also prayed for
the award of damages and attorneys fees. [7]
After trial on the merits, the trial court rendered judgment on May 27, 1992,
dismissing both petitioners complaint and respondents counterclaim for
damages. Petitioner and respondents Turatello and Sani separately
appealed the RTC Decision to the Court of Appeals, which affirmed the
dismissal of petitioners complaint and awarded respondents Turatello and
Sani damages and attorneys fees. The dispositive portion of the Court of
Appeals Decision reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED, with the following modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered
to pay defendants-appellants Turatello and Sani, the sum
of P100,000.00 as moral damages; (2) P100,000.00 as
exemplary damages; (3) P135,728.73 as attorneys fees; and
(4) P10,000.00 as litigation expenses.
SO ORDERED.[8]
Petitioner brought to this Court the instant petition after the denial of its
motion for reconsideration of the Court of Appeal Decision. The instant
petition imputes the following errors to the Court of Appeals.
I.
IN DEFENDING AGAPITO BURIOLS GOOD
FAITH AND IN STATING THAT ASSUMING THAT HE
(BURIOL) WAS IN BAD FAITH PETITIONER WAS

SOLELY RESPONSIBLE
CREDULOUSNESS.

FOR

ITS

INEXCUSABLE

II.

IN ASSERTING THAT ARTICLES 1542 AND 1539

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

III.

IN
NOT
GRANTING
PETITIONERS CLAIM
FOR ACTUAL AND EXEMPLARY DAMAGES.

IV.

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

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

rescission of the contract, provided that, in the latter case, the

lack in the area be not less than one-tenth of that stated.
....

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

abovequoted provision and instead ruled that petitioner is no longer entitled
to a reduction in price based on the provisions of Article 1542 of the Civil
Code, which read:
Art. 1542. In the sale of real estate, made for a lump sum
and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price,
although there be a greater or lesser area or number than that
stated in the contract.
The same rule shall be applied when two or more
immovables are sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in every
conveyance of real estate, its area or number should be
designated in the contract, the vendor shall be bound to deliver
all that is included within said boundaries, even when it
exceeds the area or number specified in the contract; and,
should he not be able to do so, he shall suffer a reduction in the
price, in proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated.

Article 1539 governs a sale of immovable by the unit, that is, at a

stated rate per unit area. In a unit price contract, the statement of area of
immovable is not conclusive and the price may be reduced or increased
depending on the area actually delivered. If the vendor delivers less than
the area agreed upon, the vendee may oblige the vendor to deliver all that
may be stated in the contract or demand for the proportionate reduction of
the purchase price if delivery is not possible. If the vendor delivers more

than the area stated in the contract, the vendee has the option to accept
only the amount agreed upon or to accept the whole area, provided he
pays for the additional area at the contract rate. [10]
In some instances, a sale of an immovable may be made for a lump
sum and not at a rate per unit. The parties agree on a stated purchase
price for an immovable the area of which may be declared based on an
estimate or where both the area and boundaries are stated.
In the case where the area of the immovable is stated in the contract
based on an estimate, the actual area delivered may not measure up
exactly with the area stated in the contract. According to Article 1542 [11] of
the Civil Code, in the sale of real estate, made for a lump sum and not at
the rate of a certain sum for a unit of measure or number, there shall be no
increase or decrease of the price although there be a greater or lesser area
or number than that stated in the contract. However, the discrepancy must
not be substantial. A vendee of land, when sold in gross or with the
description more or less with reference to its area, does not thereby ipso
facto take all risk of quantity in the land. The use of more or less or similar
words in designating quantity covers only a reasonable excess or
deficiency.[12]
Where both the area and the boundaries of the immovable are
declared, the area covered within the boundaries of the immovable prevails
over the stated area. In cases of conflict between areas and boundaries, it
is the latter which should prevail. What really defines a piece of ground is
not the area, calculated with more or less certainty, mentioned in its
description, but the boundaries therein laid down, as enclosing the land and
indicating its limits. In a contract of sale of land in a mass, it is well
established that the specific boundaries stated in the contract must control
over any statement with respect to the area contained within its boundaries.
It is not of vital consequence that a deed or contract of sale of land should
disclose the area with mathematical accuracy. It is sufficient if its extent is

objectively indicated with sufficient precision to enable one to identify it. An

error as to the superficial area is immaterial. [13] Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is the
entirety thereof that distinguishes the determinate object. [14]
As correctly noted by the trial court and the Court of Appeals, the sale
between petitioner and respondent Buriol involving the latters property is
one made for a lump sum. The Deed of Absolute Sale shows that the
parties agreed on the purchase price on a predetermined area of five
hectares within the specified boundaries and not based on a particular rate
per area. In accordance with Article 1542, there shall be no reduction in the
purchase price even if the area delivered to petitioner is less than that
stated in the contract. In the instant case, the area within the boundaries as
stated in the contract shall control over the area agreed upon in the
contract.
The Court rejects petitioners contention that the propertys boundaries
as stated in the Deed of Absolute Sale are superficial and unintelligible and,
therefore, cannot prevail over the area stated in the contract. First, as
pointed out by the Court of Appeals, at an ocular inspection prior to the
perfection of the contract of sale, respondent Buriol pointed to petitioner the
boundaries of the property. Hence, petitioner gained a fair estimate of the
area of the property sold to him. Second, petitioner cannot now assail the
contents of the Deed of Absolute Sale, particularly the description of the
boundaries of the property, because petitioners subscription to the Deed of
Absolute Sale indicates his assent to the correct description of the
boundaries of the property.
Petitioner also asserts that respondent Buriol is guilty of misleading
petitioner into believing that the latter was buying five hectares when he
knew prior to the sale that he owned only four hectares. The review of the
circumstances of the alleged misrepresentation is factual and, therefore,
beyond the province of the Court. Besides, this issue had already been

raised before and passed upon by the trial court and the Court of Appeals.
The factual finding of the courts below that no sufficient evidence supports
petitioners allegation of misrepresentation is binding on the Court.
The Court of Appeals reversed the trial courts dismissal of
respondents Turatello and Sanis counterclaim for moral and exemplary
damages, attorneys fees and litigation expenses. In awarding moral
damages in the amount of P100,000 in favor of Turatello and Sani, the
Court of Appeals justified the award to alleviate the suffering caused by
petitioners unfounded civil action. The filing alone of a civil action should
not be a ground for an award of moral damages in the same way that a
clearly unfounded civil action is not among the grounds for moral damages.
[15]

Exemplary or corrective damages are imposed, by way of example or

correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.[16] With the deletion of the award for
moral damages, there is no basis for the award of exemplary damages.
WHEREFORE, the instant petition for review on certiorari is
GRANTED in PART. The Court of Appeals Decision in CA-G.R. CV No.
38854 is AFFIRMED with the MODIFICATION that the award of moral and
exemplary damages is DELETED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16394

December 17, 1966

JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners,

vs.
ROSA HERNANDEZ, respondent.
Manuel J. Serapio for petitioners..
J. T. de los Santos for respondent.
REYES, J.B.L., J.:
Appeal from the decision of the Court of Appeals in its Case CA-G.R. No.
20582-R, in effect reversing the decision of the Court of First Instance of
Bulacan in its Civil Case No. 1036.
The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto.
Domingo, owned a 115,850-square meter parcel of land situated in barrio
Balasing, Sta. Maria, Bulacan, and covered by Transfer Certificate of Title
No. T-3598. On 28 May 1954, they sold two (2) separate portions of the
land for P11,000.00 to the herein respondent Rosa Hernandez. These
portions were described in the deed of sale as follows:
Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria
Perez, at Aurelio Perez; sa Timugan, sa lupang kasanib; sa
Silanganan, kay Mariano Flores at Emilio Ignacio; sa Kanluran, kay
Cornelio Ignacio; Mayroong (12,500), m.c. humigit kumulang.
Bahaguing nasa gawing Silanganan Humahanga sa Hilagaan, sa kay
Rosa Hernandez; sa Silanganan, kay Domingo Hernandez at Antonio
Hernandez; sa Timugan, sa Sta. Maria-Tigbi Road; at sa Kanluran, sa
lupang kasanib (Jose Sta. Ana, Jr.), mayroong (26,500) metros
cuadrados, humigit kumulang.
After the sale (there were two other previous sales to different vendees of
other portions of the land), the petitioners-spouses caused the preparation
of a subdivision plan, Psd-43187, was approved on 13 January 1955 by the
Director of Lands. Rosa Hernandez, however, unlike the previous vendees,
did not conform to the plan and refused to execute an agreement of
subdivision and partition for registration with the Register of Deeds of
Bulacan; and she, likewise, refused to vacate the areas that she had
occupied. Instead, she caused the preparation of a different subdivision
plan, which was approved by the Director of Lands on 24 February 1955.

This plan, Psd-42844, tallied with the areas that the defendant, Rosa
Hernandez, had actually occupied.
On 28 February 1955, herein petitioners-spouses filed suit against
respondent Rosa Hernandez in the Court of First Instance of Bulacan,
claiming that said defendant was occupying an excess of 17,000 square
meters in area of what she had bought from them. Defendant Rosa
Hernandez, on the other hand, claimed that the alleged excess, was part of
the areas that she bought.
The trial court observed:
The only question, therefore, to be determined by the Court is
whether or not the plaintiffs had sold two portions without clear
boundaries but with exact areas (12,500 sq. m. and 26,000 sq. m.) at
the rate of P.29 per square meter or, as defendant Rosa Hernandez
claimed, two portions, the areas of which were not definite but which
were well defined on the land and with definite boundaries and sold
for the lump sum of P11,000.00.
Finding for the plaintiffs, the said court ordered the defendant, among other
things, to vacate "the excess portions actually occupied by her and to
confine her occupation only to Lots 4-a and 4-b as shown in the plan,
Exhibit E, of the plaintiffs . . .," referring to Psd-43187.
Not satisfied with the judgment, defendant Hernandez appealed to the
Court of Appeals.
The Court of Appeals dismissed the complaint and declared Rosa
Hernandez the owner of lots 4-a and 4-b in her plan, Psd-42844, upon the
following findings:
The contract between appellees and appellant (Exhibit D) provided
for the sale of two separate portions of the same land for the single
consideration of P11,000.00. Appellee Jose Santa Ana, Jr. said the
transaction was by a unit of measure or per square meter, and that
although the actual total purchase price of the two parcels of land
was P11,300.00 at P0.29 per square meter the parties agreed to the
sale at the reduced price of P11,000.00. The appellant denied this
claim of appellees. Gonzalo V. Ignacio, the notarial officer before the
contract of sale was executed, failed to corroborate Sta. Ana upon

this point. Upon the contrary, Ignacio testified that appellant

complained to him and the appellees to the effect that the areas
stated in the contract were less than the actual areas of the parcels of
land being sold and here we quote the notarial officer's own words:
"That the area stated in the document will not be the one to
prevail but the one to prevail is the boundary of the land which
you already know." (p. 74, Innocencio).
Sta. Ana is the nephew of the appellant, and the former's assurance
probably appeased the latter against insisting in the correction of the
areas stated in the contract of sale.
Two witnesses testified for the appellant. Jesus Policarpio divulged
that the same parcels of land involved in this case were previously
offered to him by the appellees for the single purchase price of
P12,000.00. Julio Hernandez stated that his sister, the herein
appellant, had offered P10,000.00 as against the appellees' price of
P12,000.00, and that he was able to persuade the parties to meet
halfway on the price. Furthermore the previous conveyances made
by the appellees for other portions of the same property (Exhibits B
and C) are also for lump sums.
The difference in area of 17,000 square meters is about one-half of
the total area of the two parcels of land stated in the document, but
not for this alone may we infer gross mistake on the part of appellees.
The appellees admit the lands in question were separated from the
rest of their property by a long and continuous "pilapil" or dike, and
there is convincing proof to show that the bigger lot (Lot 4-a) was
wholly tenanted for appellees by Ciriaco Nicolas and Santiago
Castillo and the smaller lot (Lot 4-b) was wholly tenanted for said
appellees by Gregorio Gatchalian. These facts support the theory that
the two parcels of land sold to the appellant were identified by the
conspicuous boundaries and the extent or area each tenant used to
till for the vendors. Again, appellees should not be heard to complain
about the deficiency in the area because as registered owners and
possessors of the entire land since 1949 they can rightly be
presumed to have acquired a good estimate of the value and areas of
the portions they subsequently sold.

The Court of Appeals concluded by applying to the case Article 1542 of the
new Civil Code:
In the sale of real estate, made for a lump sum and not at the rate of
a certain sum for a unit of measure or number, there shall be no
increase or decrease of the price, although there be greater or less
area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are
sold for a single price; but if, besides mentioning the boundaries,
which is indispensable in every conveyance of real estate, its area or
number should be designated in the contract, the vendor shall be
bound to deliver all that is included within said boundaries, even
when it exceeds the area or number specified in the contract; and,
should he not be able to do so, he shall suffer a reduction in the price,
in proportion to what is lacking in the area or number, unless the
contract is rescinded because the vendee does not accede to the
failure to deliver what has been stipulated.
and declared Rosa Hernandez the owner of the whole of lots 4-a and 4-b of
her own subdivision Plan Psd-42844, notwithstanding their increased area
as compared to that specified in the deed of sale.
In turn, the Sta. Ana spouses appealed to this Court, assigning the
following errors:
The Court of Appeals committed a grave error of law when it departed
from the accepted and usual course of judicial proceedings, by
disturbing the findings of fact of the trial court, made upon conflicting
testimonies of the witnesses for the plaintiffs, now in the petitioners,
and the defendant, now the respondent, Rosa Hernandez.
The Court of Appeals committed a grave error of law when it held that
the deed of sale, Exhibit D, was for a lump sum, despite the fact that
the boundaries given therein were not sufficiently certain and the
boundaries indicated did not clearly identify the land, thereby
erroneously deciding a question of substance in a way not in accord
with law and the applicable decisions of this Honorable Court.
On the face of the foregoing assignments of error and the petitioners'
discussions thereabout, their position can be summarized as follows: that

the Court of Appeals erred in substituting its own findings of fact for that of
the trial court's, without strong and cogent reasons for the substitution,
contrary to the rule that appellate courts shall not disturb the findings of fact
of trial courts in the absence of such strong and cogent reasons; and that
Article 1542 of the Civil Code of the Philippines does not apply, allegedly
because the boundaries, as shown in the deed of sale, are not definite.
In the first assignment of error, the petitioner spouses complain against the
failure of the Court of Appeals to accept the findings of fact made by the
Court of First Instance. The credibility of witnesses and the weighing of
conflicting evidence are matters within the exclusive authority of the Court
of Appeals, and it is not necessarily bound by the conclusions of the trial
court. Both the Judiciary Act (R.A. 296, section 29) and the Rules of Court
(Rule 45, section 2) only allow a review of decisions of the Court of Appeals
on questions of law; and numerous decisions of this Court have invariably
and repeatedly held that findings of fact by the Court of Appeals are
conclusive and not reviewable by the Supreme Court (Galang vs. Court of
Appeals, L-17248, 29 January 1962; Fonacier vs. Court of Appeals, 96 Phil.
418, 421; and cases therein cited; Onglengco vs. Ozaeta, 70 Phil. 43;
Nazareno vs. Magwagi, 71 Phil. 101). Barring, therefore, a showing that the
findings complained of are totally devoid of support in the record, or that
they are so glaringly erroneous as to constitute serious abuse of discretion,
such findings must stand, for this Court is not expected or required to
examine and contrast the oral and documentary evidence submitted by the
parties. As pointed out by former Chief Justice Moran in his Comments on
the Rules of Court (1963 Ed., Vol. 2, p. 412), the law creating the Court of
Appeals was intended mainly to take away from the Supreme Court the
work of examining the evidence, and confine its task for the determination
of questions which do not call for the reading and study of transcripts
containing the testimony of witnesses.
The first assignment of error must, therefore, be overruled. We now turn to
the second.
Despite the incontestable fact that the deed of sale in favor of Rosa
Hernandez recites a price in a lump sum (P11,000.00) for both lots (Annex
"C", Complaint, Rec. on App., p. 21), appellants insist that the recited area
should be taken as controlling. They combat the application of Article 1542
of the Civil Code, on the ground that the boundaries given in the deed are
indefinite. They point out that the southern boundary of the small parcel is

merely given as "lupang kasanib" and that the same occurs with the
western boundary of the bigger lot, which is recited as "lupang kasanib
(Jose Sta. Ana, Jr.)". The Court of Appeals, however, found as a fact that
the two parcels of land sold to appellant (i.e., appellee herein, Rosa
Hernandez) were identified by the conspicuous boundaries.
(Emphasis supplied)
consisting in a long and continuous pilapil or dike that separated the lands
in question from the rest of the property. On the basis of such findings, that
can not be questioned at this stage, for reasons already shown, it is
unquestionable that the sale made was of a definite and identified tract,
a corpus certum, that obligated the vendors to deliver to the buyer all the
land within the boundaries, irrespective of whether its real area should be
greater or smaller than what is recited in the deed (Goyena vs. Tambunting,
1 Phil. 490; Teran vs. Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil.
599; Mondragon vs. Santos, 87 Phil. 471). And this is particularly true
where, as in the case now before this Court, the area given is qualified to
be approximate only ("humigit kumulang", i.e., more or less Rec. on App.,
p. 22).
To hold the buyer to no more than the area recited on the deed, it must be
made clear therein that the sale was made by unit of measure at a definite
price for each unit.
If the defendant intended to buy by the meter be should have so
stated in the contract (Goyena vs. Tambunting, supra).
The ruling of the Supreme Court of Spain, in construing Article 1471 of the
Spanish Civil Code (copied verbatim in our Article 1542) is highly
persuasive that as between the absence of a recital of a given price per
unit of measurement, and the specification of the total area sold, the former
must prevail and determines the applicability of the norms concerning sales
for a lump sum.
La venta a cuerpo cierto indudablemente se verifica cuando en el
contrato no solo no es precisado el precio singular por unidad de
medida, sino que tampoco son indicadas los dimensiones globales
bales del inmueble, pero tambien se verifica cuando aun ng habiendo
sido indicado un precio singular por unidad de medida, sin embargo
es especificada la dimension total del inmueble, en cuyo ultimo

caso entre los dos indices en contraste, constituido uno por la falta
de un precio singular por unidad de medida, y otro por la concrecion
de las dimensiones globales del unmueble, la Ley da prevalencia al
mero y presume que aquella individualizacion no habia tenido para
las partes valor esencial, que solo constituia una superabundancia, y
no significa que las partes hayan convenido aquel precio global solo
en cuanto el inmueble tuviese efectivamente aquellas dimensiones
totales, siendo de estimar que esta es una presuncion absoluta,
contra la cual ni el comprador ni el vendedor pueden articular prueba
contraria.
Por tanto, ni el comprador ni el vendedor pueden pretender una
disminucicion o, respectivamente un suplemento de precio, cuando
las dimensiones globales del unmueble resulten despues mayores o
menores de las indicadas en el contrato, aunque aduzcan que solo
en tanto han convenido el aquel precio en cuanto creian que las
dimensiones de la cosa fueran las precisadas en el contrato.
(Tribunal Supreme de Espaa, Sent. de 26 Junio 1956; Rep. Jurisp.
Aranzadi, 2.729) (Emphasis supplied)
The Civil Code's rule as to sales "a cuerpo cierto" was not modified by Act
496, section 58, prohibiting the issuance of a certificate of title to a grantee
of part of a registered tract until a subdivision plan and technical description
are duly approved by the Director of Lands, and authorizing only the entry
of a memorandum on the grantor's certificate of title in default of such plan.
The latter provision is purely a procedural directive to Registers of Deeds
that does not attempt to govern the rights of vendor and vendee inter se,
that remain controlled by the Civil Code of the Philippines. It does not even
bar the registration of the contract itself to bind the land.
WHEREFORE, the decision of the Court of Appeals, in its case No. 20582R, is hereby affirmed. Costs against the appellants, Jose Santa Ana, Jr.
and Lourdes Sto. Domingo.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-20435

October 23, 1923

LUIS ASIAIN, plaintiff-appellant,

vs.
BENJAMIN JALANDONI, defendant-appellee.
Arroyo and Gurrea for appellant.
Francisco Soriano for appellee.

MALCOLM, J.:
Luis Asiain, the plaintiff-appellant in this case, is the owner of
the hacienda known as "Maria" situated in the municipality of La Carlota,
Province of Occidental Negros, containing about 106 hectares. Benjamin
Jalandoni, the defendant-appellee, is the owner of
another hacienda adjoining of Asiain.
Asiain and Jalandoni happening to meet no one of the days of May, 1920,
Asiain said to Jalandoni that he was willing to sell a portion of
his hacienda for the sum of P55,000. With a wave of his hand, Asiain
indicated the tract of land in question, affirming that it contained between
25 and 30 hectares, and that the crop of sugar cane then planted would
produce not less than 2,000 piculs of sugar. But Jalandoni, remaining
doubtful as to the extent of the land and as to the amount of crop on it,
Asiain wrote Jalandoni the letter which follows:
HDA. MARIA

May, 26, 1920.

MR. BENJAMIN JALANDONI.

DEAR BENJAMIN: I am in receipt of your letter and with regard to your
statement that parcel does not contain 21 hectares I do not believe. I bet
anything that part only which is planted with cane contains more than 20
hectares, I bet 2 against 1.
If you agree, I would be that you pay only one-half. I am not a surveyor, but
these days I had the pleasure to survey the land and I know more or less
its area. 1awph!l.net

Here we are not to deceive each other. If you like that parcel and if you
want to buy it I will give you good propositions. I don't know where and how
they learned that I was selling the hacienda and they made me a good
offer, but as we do not want to part but with that parcel, hence my
propositions are the following, in view of the time that has elapsed and the
progress of the cane.
I assure (aseguro) that there are 2,000 piculs and sell on that basis,
provided that the cane is milled in due time. In case the sugar does not
amount to 2,000 piculs, I will pay in sugar all such amount as will be
necessary to complete the 2,000, but if after milling the cane, as I say,
there is an excess over 2,000 piculs, all the excess shall be mine. So that if
you like, I make the sale for the same price that we talked about and the
same conditions, not a dime more or less.
Since you left it did rain, so the "alociman" (Philippine herb) of Guimib must
die on the field, whether of the hacienda or of the "lagatio." You have a
contract for a lump sum. Now they have begun to plow the old plantations
within the boundary some days ago and you may rest and throw one
(unintelligible), answer yes or no, so that I may decide.
Your friend LUIS ASIAIN
Sometime later, in July of the same year, Asiain and Jalandoni having met
at Iloilo, they prepared and signed the memorandum-agreement which
follows:
Purchase of land of Mr. Luis Asiain and his wife Maria Cadenas, by B.
Jalandoni, containing 25 hectares more or less of land bounded by
property of the purchaser, with its corresponding crop, estimated at
2,000 piculs, the total value of which is 55 thousand. The price is to
be paid by paying 30 thousand at the signing of the document, and
25 thousand within one year, with interest at the rate of 10 per cent.
Mr. Asiain is under obligation to take care of all the plantation until the
planting is finished and in case the crop exceeds 2,000 piculs, all the
excess will belong to Mr. Asiain.
The adjacent landowner on the north and the west is the vendor
himself, on the east, B. Jalandoni, and on the south, B. Jalandoni and
the widow of Abdon Ferrer.

The purchaser is under obligation to answer for all the rights and
obligations of the land with the central of Inchausti.
After the planting of the cane is completely finished, Mr. Asiain shall
vacate the parcel sold to the purchaser.
The expenses for taking care of said plantation until the planting is
completely finished will be for the account of the vendor Mr. Asiain.
(Sgd.) "LUIS ASIAIN
"BENJAMIN JALANDONI"
During all of the period of negotiations, Jalandoni remained a doubting
Thomas and was continually suggesting that, in his opinion, the amount of
the land and of the crop was overestimated. Asiain on his part always gave
assurances in conformity with the letter which he had written intended to
convince Jalandoni that the latter was in error in his opinion. As a result, the
parties executed the agreement which follows:
This document, executed in the city of Iloilo, Province of Iloilo,
Philippine Islands, by and between Messrs. Luis Asiain and Benjamin
Jalandoni, of age and residents of the municipality of La Carlota,
Province of Occidental Negros, Philippine Islands.
Witnesseth:
(1) That Luis Asiain does hereby promise and bind himself
to sell to Benjamin Jalandoni a parcel of land
the hacienda "Maria" of the aforesaid Luis Asiain, situated
in the municipality of La Carlota, Province of Occidental
Negros, P.I.
(2) That Benjamin Jalandoni does hereby promise and
bind himself to purchase the aforesaid parcel of land in
the sum P55,000 upon certain conditions specified in a
memorandum signed by the parties which is in the hands
of Attorneys Padilla & Treas.
(3) That upon the signing of this agreement, the vendor
shall have the right to collect from the purchaser part of
the price giving receipts thereof signed by said vendor.

(4) That in case the vendor should withdraw from the

contract and desist from signing the document of final
sale, the purchaser shall have the right to collect from
said vendor all such amount as may have been advanced
on account of this sale, with an indemnity of P15,000 as
penalty.
(5) In case it is the purchaser who should withdraw from
the contract of sale, then he will lose all such amount as
may have been paid in advance on account of this
transaction.
In witness whereof, we have hereunto affixed our signatures, at
Iloilo, Iloilo, this 12th day of July, 1920.
(Sgd) "LUIS ASIAIN
"BENJAMIN JALANDONI
Signed in the presence of:
(Sgd.) "ENGRACIO PADILLA
"P.T. TREAS"
Once in possession of the land, Jalandoni did two things. He had the sugar
cane ground in La Carlota Sugar Central with the result that it gave and
output of P800 piculs and 23 cates of centrifugal sugar. When opportunity
offered, he secured the certificate of title of Asiain and produced a surveyor
to survey the land. According to his survey, the parcel in question contained
an area of 118 hectares, 54 ares, and 22 centiares.
Of the purchase price of P55,000, Jalandoni had paid P30,000, leaving a
balance unpaid of P25,000. To recover the sum of P25,000 from Jalandoni
or to obtain the certificate of title and the rent from him, action was begun
by Asiain in the Court of First Instance of Occidental Negros. To the
complaint, an answer and a counter-complaint were interposed by the
defendant, by which it was asked that he be absolved from the complaint,
that the contract be annulled, both parties to return whatever they had
received, and that he recover from the plaintiff the sum of P3,600 annually
as damages. In a well-reasoned decision, the Honorable Eduardo Gutierrez
David, Judge of First Instance, declared null the document of purchase and
its related memorandum; absolved the defendant from the payment of

P25,000; ordered the plaintiff to return to the defendant the sum of P30,000
with legal interest from July 12, 1920; ordered the defendant to turn over to
the plaintiff the tract of land and the certificate of title No. 468, and absolved
the plaintiff from the counter-complaint, all without special finding as to
the costs. It is from said judgment that the plaintiff has appealed.
The true facts need not give us pause. They are as found by the trial judge
and as pratically agreed to by the parties. It is only necessary to keep in
mind that apparently there was always a difference of opinion between
Asiain and Jalandoni as to the area of the tract and as to the crop of sugar
cane; that the agreement between them mentions land containing 25
hectares more or less, giving the boundaries, and a crop estimated and in
one sense warranted at 2,000 piculs, and that in reality the land contained
only a little more than 18 hectares and produced a crop of only about 800
piculs. The legal consequences arising from these facts are more difficult of
determination.
Our Civil Code contains provisions which must be taken into consideration.
Codal articles 1265, 1266, and 1269 relate to consent given by reason of
error and deceit. They provide the rules which shall avoid contracts for
these and other reasons. But the provisions of the Civil Code most directly
pertinent are found in articles 1469, 1470, and 1471.
The first two mentioned articles, 1469 and 1470, are not applicable
because of the proviso relating to the sale being made at a certain price for
each unit of measure or number which is not our case. The facts seem
to fall within article 1471. It first paragraph provides that in case of the sale
of real estate for a lump sum and not at the rate of specified price of each
unit or measure, there shall be no increase or decrease of the price even if
the area be found to be more or less than that stated in the contract. The
next paragraph provides that the same rule is applicable when two or more
estates are sold for a single price. Then comes the following: ". . . but, if in
addition to a statement of the boundaries, which is indispensable in every
conveyance of real estate, the area estate should be designated in the
contract, the vendor shall be obliged to deliver all that is included within
such boundaries, even should it exceed the area specified in the contract;
and, should he not be able to do so, he shall suffer a reduction of the price
in proportion to what is lacking of the area, unless the contract be annulled
by reason of the vendee's refusal to accept anything other than that which
was stipulated."

A study of the Spanish commentators discloses that the meaning of article

1471 is not clear as it might be, and that they are not unanimous in their
views. Manresa gives emphasis to the intention of the parties and the
option on the part of the purchaser to rescind the contract. To quote from
Manresa:
The rule in the latter case is found in the second paragraph of article
1471, with the exception of the first clause which refers to the former
hypothesis. This rule may be formulated as follows: Whether the case
is one of sale of realty for a lump sum or of two or more for a single
price which is also a lump sum and, consequently, not at the rate of
specified price for each unit of measure or number, the vendor shall
be bound to deliver all that is within the boundaries stated although it
may exceed the area or number expressed in the contract; in case he
cannot deliver it, the purchaser shall have the right to reduce the
price proportionately to what is lacking of the area or number, or
rescind the contract at his option.
xxx

xxx

xxx

The manner in which the matter covered by this article was

distributed in its two paragraphs contributes to making it difficult to
understand. The rule might have been clearly stated had the first
clause of the second paragraph been included in the first paragraph,
the latter to end with the words, "The same rule shall apply when two
or more estates are sold for a single price." And if by constituting an
independent paragraph, with the rest of the second paragraph, it
were made to appear more expressly that the rule of the second
paragraph thus drawn referred to all the cases of paragraph one, as
we have expounded, namely, to the case of a sale of one single
estate and that of two or more for one single price, the precept would
have been clearer.
In our opinion, this would have better answered what we deem to be
indubitable intention of the legislator.
Some eminent commentators construe the last part of article 1471 in
a different way. To them the phrase "and should he not be able to do
so" as applied to the vendor, does not mean as apparently it does
"should he not be able to deliver all that is included within the

boundaries stated," but this other thing, namely, that if by reason of

the fact that a less area is included within the boundaries than that
expressed in the contract, it is not possible for the vendor to comply
therewith according to its literal sense, he must suffer either the
effects of the nullity of the contract or a reduction of the price
proportionately to what may be lacking of the area or number. It is
added as a ground for this solution that if the vendor fulfills the
obligation, as stated in the article, by delivering what is not included
within the boundaries, there can never by any case of proportionate
reduction of the price on account of shortage of an area, because he
does not give less who delivers all that he bound himself to.
According to this opinion, which we believe erroneous, if within the
boundaries of the property sold, there is included more than area
than that expressed in the title deeds, nothing can be claimed by the
vendor who losses the value of that excess, but if there is less area,
then he loses also, because either the price is reduced or the contract
is annulled. This theory would be anomalous in case of sale of
properties in bulk, but, above all, would do gross injustice which the
legislator never intended.
There is no such thing. So long as the vendor can deliver, and for that
reason, delivers all the land included within the boundaries assigned
to the property, there can be no claim whatsoever either on his part,
although the area may be found to be much greater than what was
expressed, nor on the part of the purchaser although what area may
be in reality much smaller. But as he sold everything within the
boundaries and this is all the purchaser has paid, or must pay, for
whether much or little, if afterwards, it is found that he cannot deliver
all, because, for instance, a part, a building, a valley, various pieces
of land, a glen etc., are not his, there is no sale of a specified thing,
there is longer a sale of the object agreed upon, and the solution
given by the article is then just and logical: Either the contract is
annulled or the price is reduced proportionately." (10Comentarious al
Codigo Civil, p. 157.)
The principle is deduced from the Code, that if land shall be sold within
boundaries with an expression of the area and if the area is grossly
deficient, the vendee has an option, either to have the price reduced
proportionately or to ask for the rescission of the contract. The rule of the

civil law is more favorable to the purchaser than is the common law. It gives
the excess to the purchaser without compensation to the vendor, where the
property is sold by a specific description followed by the mention of the
quantity or measure, but allows the purchaser either to secure a deduction
from the price in case a deficiency or to annul the contract.
The decision of this court which gave most direct consideration to article
1471 of the Civil Code, now chiefly relied upon by the appellant, is found in
Irureta Goyena vs. Tambunting ([1902], 1 Phil., 490). The rule announced
in the syllabus is this: "An agreement to purchase a certain specified lot of
land at a certain price is obligatory and enforceable regardless of the fact
that its area is less than that mentioned in the contract." Taken literally, this
rule would lead to the result desired by the appellant. But the syllabus
naturally must be understood in relation what is found in the decision itself;
and the fact was that the tract of land was mentioned as being located at
No. 20 Calle San Jose, Ermita, Manila. The private contract expressed a
specific thing as the object of the contract and specified a certain price.
There was no statement in the document of the superficial area and no hint
in the record that either or both parties were misled. The facts, therefore,
are different than those before us and the doctrine in the Irureta
Goyena vs. Tambunting case, can well be followed and distinguished.
A comparative study of the American Authorities throws considerable light
on the situation. In volume 39 Cyc., page 1250, under the subject "Vendor
and Purchaser," is found the following:
If, in a contract of sale the quantity of the realty to be conveyed is
indicated by a unit of area, as by the acre, a marked excess or
deficiency in the quantity stipulated for is a ground for avoiding the
contract. Since it is very difficult, if not impossible, to ascertain the
quality of a tract with perfect accuracy, a slight excess or deficiency
does not affect the validity of the contract.
Where, however, the contract is not for the sale of a specific quantity
of land, but for the sale of particular tract, or designated lot or parcel,
by name or description, for a sum in gross, and the transaction
is bona fide, a mutual mistake as to quantity, but not as to
boundaries, will not generally entitle the purchaser to compensation,
and is not ground for rescission. But it is well settled that a purchaser
of land, when it is sold in gross, or with the description, "more or less"

or "about," does not thereby ipso facto take all risk of quantity in the
tract. If the difference between the real and the represented quantity
is very great, both parties act obviously under a mistake which it is
the duty of a court of equity to correct. And relief will be granted when
the mistake is so material if the truth had been known to the parties
the sale would not have been made.
Volume 27 of the Ruling Case Law, pages 354, 434, 436, states what
follows:
A mutual mistake as to the quantity of the land sold may afford
ground for equitable relief. As has been said, if, through gross and
palpable mistake, more or less land should be conveyed than was in
the contemplation of the seller to part with or the purchaser to
receive, the injured party would be entitled to relief in like manner as
he would be for an injury produced by a similar cause in a contract of
any other species. And when it is evident that there has been a gross
mistake s to quantity, and the complaining party has not been guilty of
any fraud or culpable negligence, nor has he otherwise impaired the
equity resulting from the mistake, he may be entitled to relief from the
technical or legal effect of his contract, whether it be executed or only
executory. It has also been held that where there is a very great
diference between the actual and the estimated quantity of acres of
land sold in gross, relief may be granted on the ground of gross
mistake. Relief, however, will not be granted as general rule where it
appears that the parties intended a contract of hazard, as where the
sale is a sale in gross and not by acreage or quantity as a basis for
the price; and it has been held that a mistake on the part of the
vendor of a town lot sold by description as to number on the plat, as
to its area or dimensions, inducing a sale thereof at smaller price than
he would have asked had he been cognizant of its size, not in any
way occasioned or concealed by conduct of the purchaser,
constitutes no ground for the rescission of the contract. The apparent
conflict and discrepancies in the adjudicated cases involving mistakes
as to quantity arise not from a denial of or a failure to recognize the
general principle, but from the difficulty of its practical application in
particular cases in determining the questions whether the contract
was done of hazard as to quantity or not and whether the variance is
unreasonable. The relative extent of the surplus or deficit cannot
furnish, per se, an infallible criterion in each case for its

determination, but each case must be considered with reference not

only to that but its other peculiar circumstances. The conduct of the
parties, the value, extent, and locality of the land, the date of the
contract, the price, and other nameless circumstances, are always
important, and generally decisive. In other words, each case must
depend on its own peculiar circumstances and surroundings.
The rule denying relief in case of a deficit or an excess is frequently
applied in equity as well as at law, but a court of equity will not
interfere on account of either a surplus or a deficiency where it is
clear that the parties intend a contract of hazard, and it is said that
although this general rule may not carry into effect the real intention
of the parties it is calculated to prevent litigation. From an early date,
courts of equity under their general jurisdiction to grant relief on the
ground of mistake have in case of mistake in the estimation of the
acreage in tract sold and conveyed interposed their aid to grant relief
to the vendor where there was a large surplus over the estimated
acreage, and to the purchaser where there was large deficit. For the
purpose of determining whether relief shall be granted the courts
have divided the cases into two general classes: (1) Where the sale
is of a specific quantity which is usually denominated a sale by the
acre; (2) where the sale is usually called a sale in gross. . . .
Sales in gross for the purpose of equitable relief may be divided into
various subordinate classifications: (1) Sales strictly and essentially
by the tract, without reference in the negotiation or in the
consideration to any designated or estimated quantity of acres; (2)
sales of the like kind, in which, though a supposed quantity by
estimation is mentioned or referred to in the contract, the reference
was made only for the purpose of description, and under such
circumstances or in such a manner as to show that the parties
intended to risk the contingency of quantity, whatever it might be, or
how much so ever it might exceed or fall short of that which was
mentioned in the contract; (3) sales in which it is evident, from
extraneous circumstances of locality, value, price, time, and the
conduct and conversations of the parties, that they did not
contemplate or intend to risk more than the usual rates of excess or
deficit in similar cases, or than such as might reasonably be
calculated on as within the range of ordinary contingency; (4) sales
which, though technically deemed and denominated sales in gross,

are in fact sales by the acre, and so understood by the parties.

Contracts belonging to either of the two first mentioned classes,
whether executed or executory, should not be modified by the
chancellor when there has been no fraud. But in sales of either the
third of fourth kind, an unreasonable surplus or deficit may entitle the
injured party to equitable relief, unless he has, by his conduct, waived
or forfeited his equity. . . .
The memorandum-agreement between Asiain and Jalandoni contains the
phrase or "more or less." It is the general view that this phrase or others of
like import, added to a statement of quantity, can only be considered as
covering inconsiderable or small differences one way or the other, and do
not in themselves determine the character of the sale as one in gross or by
the acre. The use of this phrase in designating quantity covers only a
reasonable excess or deficiency. Such words may indeed relieve from
exactness but not from gross deficiency.
The apparent conflict and discrepancies in the adjudicated cases arise not
from a denial of or a failure to recognize the general principles. These
principles, as commonly agreed to, may be summarized as follows: A
vendee of land when it is sold in gross or with the description "more or less"
does not thereby ipso facto take all risk of quantity in the land. The use of
"more or less" or similar words in designating quantity covers only a
reasonable excess or deficiency. Mutual mistake of the contracting parties
to sale in regard to the subject-matter of the sale which is so material as to
go to the essence of the contract, is a ground for relief and rescission. It
has even been held that when the parties saw the premises and knew the
boundaries it cannot prevent relief when there was mutual gross mistake as
to quantity. Innocent and mutual mistake alone are sufficient grounds for
rescission. (Bigham vs.Madison [1899], 47 L. R. A., 267) The difficulty
comes from the application of the principles in particular cases.
A practical demonstration of what has just been said is disclosed by the
notes in volume 27 of Ruling Case Law, page 439. In the following cases,
relief was denied: Lawson vs. Floyd, 124 U. S., 108; 8 S. Ct., 409; 31 U. S.
(L. ed.), 347 (estimated acreage about 1,000 acres; shortage 368 acres);
Frederick vs. Youngblood, 19 Ala., 680; 54 Am. Dec., 209 (estimated
acreage 500 acres more or less; shortage 39 acres); Jones vs. Plater, 2 Gill
(Md.), 125; 41 Am. Dec., 408 (stated acreage 998 acres; shortage 55
acres); Frenche vs. State, 51 N. J. Eq., 624; 27 Atl., 140; 40 A. S. R., 548

(stated acreage 195-98/100 be the same more or less; shortage 1-37/100);

Faure vs. Martin, 7 N. Y., 210; 57 Am. Dec., 515 (stated acreage 96 acres
more or less; deficit 10 acres); Smith vs. Evans, 6 Bin. (Pa.), 102; 6 Am.
Dec., 436 (shortage of 88 acres in tract conveyed as containing 991 1/4
acres more or less); Jollife vs.Hite, 1 Call (Va.), 301; 1 Am. Dec., 519
(stated acreage 578 acres more or less; shortage 66 acres);
Pendleton vs.Stewart, 5 Call (Va.), 1;2 Am. Dec., 583 (stated acreage
1,100 acres more or less; shortage 160 acres); Nelson vs.Matthews, 2
Hen. & M. (Va.), 164; 3 Am. Dec., 620 (stated acreage 852 acres more or
less; shortage of 8 acres). In the following cases relief was granted:
Harrel vs. Hill, 19 Ark., 102; 68 Am. Dec., 202 (stated acreage 180 acres
more or less; deficit 84 acres); Solinger vs. Jewett, 25 Ind., 479; 87 Am.
Dec., 372 (stated acreage 121 acres more or less; deficit 36 acres);
Hays vs. Hays, 126 Ind., 92; 25 N.E., 600; 11 L. R. A., 376 (stated acreage
28.4 acres more or less; deficit 5 acres); Baltimore, etc., Land
Soc. vs. Smith, 54 Md., 187; 39 Am. Rep., 374 (stated acreage about 65
acres; deficit 30 to 35 acres); Newton vs. Tolles, 66 N. H., 136; 19 Atl.,
1092; 49 A. S. R., 593; 9 L. R. A., 50 (stated acreage about 200 acres;
deficit 65 acres); Couse vs. Boyles, 4 N. J. Eq., 212; 38 Am. Dec., 212
(stated acreage 135 acres more or less; deficit 30 acres)
Belknap vs. Sealey, 14 N. Y., 143; 67 Am. Dec., 120 (stated acreage 8
acres more or less; deficit 4 acres); Paine vs. Upton, 87 N.Y., 327; 41 Am.
Rep., 371 (stated acreage "about 222 acres be the same more or less;"
shortage 18 acres); Bigham vs. Madison, 103 Tenn., 358; 52 S. W., 1074;
47 L. R. A., 267 (stated acreage 25 acres more or less; deficit 12 acres);
Smith vs. Fly, 24 Tex., 345; 76 Am. Dec., 109 (stated acreage 500 acres
more or less; deficit 115 acres); Triplett vs. Allen, 26 Grat. (Va.), 721; 21
Am. Dec., 320 (stated acreage 166 acres more or less; deficit 10 acres);
Epes vs. Saunders, 109 Va., 99; 63 S. E., 428; 132 A. S. R., 904 (stated
acreage 75 acres more or less; deficit 22 acres); McComb vs. Gilkeson,
110 Va., 406; 66 S. E., 77; 135 A. S. R., 944 (stated acreage 245 acres
more or less; deficit 10 acres).
A case often cited and which on examination is found to contain a most
exhaustive review of the decisions, is that of Belknap vs. Sealey ([1856], 14
N.Y. 143; 67 Am. Dec.,, 120) The facts were: "Upon the merits of the
controversy the case is quite simple in its facts. The land in question is
situated in the city of Brooklyn; and being valuable only for division and
sale as city lots, its valuable only for division and sale as city lots, its value
is precisely in proportion to the quantity. In consideration of the gross sum

of fourteen thousand dollars, of which one thousand dollars was paid down,
the defendant agreed to convey the land to the plaintiff, describing it as "the
premises conveyed to him by Samuel T. Roberts," by deed dated about
nine months previous. The deed of Roberts contained a definite description
by meters and bounds, and stated the quantity to be "about nine acres,
more or less," excepting a certain parcel of one acre and six perches. The
quantity in fact is only about half as much as the deed asserted. The
plaintiff, in agreeing to purchase the tract at the sum named, acted under a
mistake which affected the price nearly one half, and the judge has found
that the seller was mistaken also. . . . The Judge has found that the actual
quantity was substantially and essentially less than the plaintiff supposed
he was purchasing; and although the finding does not so state in terms,
there can be no difficulty, I think, in affirming that if the true quantity had
been known, the contract would not have been made. The agreement has
never been consummated by a conveyance. These are the only essential
facts in the case." The learned Judge remarked: "The counsel for the
defendant is obliged to contend, and he does not contend, that mere
mistake as to the quantity of land affords no ground of relief against a
contract in the terms of the present one, however serious such mistake
may be, and although we can readily see the contract would never have
been made if the quantity had been made known. The convenience of such
a rule has been insisted on, and in the denial of justice it certainly has the
merit of simplicity. If the doctrine is true as broadly as stated, then there is
one class of contracts to which the settled maxim that equity will relieve
against mistake can have no application. Upon a careful examination of the
cases cited, as well as upon principle, my conclusion is, that agreements of
this description are not necessarily proof against the maxims which apply to
all others." Then follows a review of the cases not alone of the state of New
York and other states in the America Union but of England as well. The rule
was announced that equity will rescind a contract for the sale of land for
mutual mistake as to the quantity of land which the boundaries given in the
contract contained, where the deficiency is material. "More or less," used in
the contract in connection with the statement of the quantity, will not
prevent the granting of such relief.
Coordinating more closely the law and the facts in the instant case, we
reach the following conclusions: This was not a contract of hazard. It was a
sale in gross in which there was a mutual mistake as to the quantity of land
sold and as to the amount of the standing crop. The mistake of fact as
disclosed not alone by the terms of the contract but by the attendant

circumstances, which it is proper to consider in order to throw light upon the

intention of the parties, is, as it is sometimes expressed, the efficient cause
of the concoction. The mistake with reference to the subject-matter of the
contract is such that, at the option of the purchaser, it is rescindable.
Without such mistake the agreement would not have been made and since
this is true, the agreement is inoperative and void. It is not exactly a case of
over reaching on the plaintiff's part, or of misrepresentation and deception,
or of fraud, but is more nearly akin to a bilateral mistake for which relief
should be granted. Specific performance of the contract can therefore not
be allowed at the instance of the vendor.
The ultimate result is to put the parties back in exactly their respective
positions before they became involved in the negotiations and before
accomplishment of the agreement. This was the decision of the trial judge
and we think that decision conforms to the facts, the law, and the principles
of equity.
Judgment is affirmed, without prejudice to the right of the plaintiff to
establish in this action in the lower court the amount of the rent of the land
pursuant to the terms of the complaint during the time the land was in the
possession of the defendant, and to obtain judgment against the defendant
for that amount, with costs against the appellant. So ordered.