Republic of the Philippines After the
SUPREME COURT defendants filed a motion for summary
Manila
EN BANC
G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH
TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN
REALTY DEVELOPMENT CORPORATION,
respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of
the Court of Appeals, dated 04 December 1991, in
CA-G.R. SP No. 26345 setting aside and declaring
without force and effect the orders of execution of the
trial court, dated 30 August 1991 and 27 September
1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the
appellate court thusly:
On July 29, 1987 a Second Amended Complaint for
Specific Performance was filed by Ang Yu Asuncion
and Keh Tiong, et al., against Bobby Cu Unjieng,
Rose Cu Unjieng and Jose Tan before the Regional
Trial Court, Branch 31, Manila in Civil Case No. 87-
41058, alleging, among others, that plaintiffs are
tenants or lessees of residential and commercial
spaces owned by defendants described as Nos. 630-
638 Ongpin Street, Binondo, Manila; that they have
occupied said spaces since 1935 and have been
religiously paying the rental and complying with all the
conditions of the lease contract; that on several
occasions before October 9, 1986, defendants
informed plaintiffs that they are offering to sell the
premises and are giving them priority to acquire the
same; that during the negotiations, Bobby Cu Unjieng
offered a price of P6-million while plaintiffs made a
counter offer of P5-million; that plaintiffs thereafter
asked the defendants to put their offer in writing to
which request defendants acceded; that in reply to
defendant's letter, plaintiffs wrote them on October 24,
1986 asking that they specify the terms and conditions
of the offer to sell; that when plaintiffs did not receive
any reply, they sent another letter dated January 28,
1987 with the same request; that since defendants
failed to specify the terms and conditions of the offer
to sell and because of information received that
defendants were about to sell the property, plaintiffs
were compelled to file the complaint to compel
defendants to sell the property to them.
Defendants filed their answer denying the material
allegations of the complaint and interposing a special
defense of lack of cause of action.
issues were joined,
judgment which was granted by the
lower court. The trial court found that
defendants' offer to sell was never
accepted by the plaintiffs for the reason
that the parties did not agree upon the
terms and conditions of the proposed
sale, hence, there was no contract of
sale at all. Nonetheless, the lower court
ruled that should the defendants
subsequently offer their property for
sale at a price of P11-million or below,
plaintiffs will have the right of first
refusal. Thus the dispositive portion of
the decision states:
WHEREFORE, judgment is hereby
rendered in favor of the defendants and
against the plaintiffs summarily
dismissing the complaint subject to the
aforementioned condition that if the
defendants subsequently decide to
offer their property for sale for a
purchase price of Eleven Million Pesos
or lower, then the plaintiffs has the
option to purchase the property or of
first refusal, otherwise, defendants
need not offer the property to the
plaintiffs if the purchase price is higher
than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs
appealed to this Court in
CA-G.R. CV No. 21123. In a decision
promulgated on September 21, 1990
(penned by Justice Segundino G. Chua
and concurred in by Justices Vicente V.
Mendoza and Fernando A. Santiago),
this Court affirmed with modification the
lower court's judgment, holding:
In resume, there was no meeting of the
minds between the parties concerning
the sale of the property. Absent such
requirement, the claim for specific
performance will not lie. Appellants'
demand for actual, moral and
exemplary damages will likewise fail as
there exists no justifiable ground for its
award. Summary judgment for
defendants was properly granted.
Courts may render summary judgment
when there is no genuine issue as to
any material fact and the moving party
is entitled to a judgment as a matter of
law (Garcia vs. Court of Appeals, 176
SCRA 815). All requisites obtaining, the
decision of the court a quo is legally
justifiable.
WHEREFORE, finding the appeal
unmeritorious, the judgment appealed
from is hereby AFFIRMED, but subject
to the following modification: The court
a quo in the aforestated decision gave
the plaintiffs-appellants the right of first
refusal only if the property is sold for a
purchase price of Eleven Million pesos
or lower; however, considering the
mercurial and uncertain forces in our
market economy today. We find no
reason not to grant the same right of
first refusal to herein appellants in the
event that the subject property is sold
for a price in excess of Eleven Million
pesos. No pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought
to the Supreme Court by petition for
review on certiorari. The Supreme
Court denied the appeal on May 6,
1991 "for insufficiency in form and
substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R.
CV No. 21123 was pending
consideration by this Court, the Cu
Unjieng spouses executed a Deed of
Sale (Annex D, Petition) transferring
the property in question to herein
petitioner Buen Realty and
Development Corporation, subject to
the following terms and conditions:
1. That for and in consideration of the
sum of FIFTEEN MILLION PESOS
(P15,000,000.00), receipt of which in
full is hereby acknowledged, the
VENDORS hereby sells, transfers and
conveys for and in favor of the
VENDEE, his heirs, executors,
administrators or assigns, the above-
described property with all the
improvements found therein including
all the rights and interest in the said
property free from all liens and
encumbrances of whatever nature,
except the pending ejectment
proceeding;
2. That the VENDEE shall pay the
Documentary Stamp Tax, registration
fees for the transfer of title in his favor
and other expenses incidental to the
sale of above-described property
including capital gains tax and accrued
real estate taxes.
As a consequence of the sale, TCT No.
105254/T-881 in the name of the Cu
Unjieng spouses was cancelled and, in
lieu thereof, TCT No. 195816 was
issued in the name of petitioner on
December 3, 1990.
On July 1, 1991, petitioner as the new
owner of the subject property wrote a
letter to the lessees demanding that the
latter vacate the premises.
On July 16, 1991, the lessees wrote a
reply to petitioner stating that petitioner
brought the property subject to the
notice of lis pendens regarding Civil
Case No. 87-41058 annotated on TCT
No. 105254/T-881 in the name of the
Cu Unjiengs.
The lessees filed a Motion for
Execution dated August 27, 1991 of the
Decision in Civil Case No. 87-41058 as
modified by the Court of Appeals in CA-
G.R. CV No. 21123.
On August 30, 1991, respondent Judge
issued an order (Annex A, Petition)
quoted as follows:
Presented before the Court is a Motion
for Execution filed by plaintiff
represented by Atty. Antonio Albano.
Both defendants Bobby Cu Unjieng and
Rose Cu Unjieng represented by Atty.
Vicente Sison and Atty. Anacleto
Magno respectively were duly notified
in today's consideration of the motion
as evidenced by the rubber stamp and
signatures upon the copy of the Motion
for Execution.
The gist of the motion is that the
Decision of the Court dated September
21, 1990 as modified by the Court of
Appeals in its decision in CA G.R. CV-
21123, and elevated to the Supreme
Court upon the petition for review and
that the same was denied by the
highest tribunal in its resolution dated
May 6, 1991 in G.R. No.
L-97276, had now become final and
executory. As a consequence, there
was an Entry of Judgment by the
Supreme Court as of June 6, 1991,
stating that the aforesaid modified
decision had already become final and
executory.
It is the observation of the Court that
this property in dispute was the subject
of the Notice of Lis Pendens and that
the modified decision of this Court
promulgated by the Court of Appeals
which had become final to the effect
that should the defendants decide to
offer the property for sale for a price of
P11 Million or lower, and considering
the mercurial and uncertain forces in
our market economy today, the same
right of first refusal to herein
plaintiffs/appellants in the event that the
subject property is sold for a price in
excess of Eleven Million pesos or more.
WHEREFORE, defendants are hereby
ordered to execute the necessary Deed
of Sale of the property in litigation in
favor of plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go for the
consideration of P15 Million pesos in
recognition of plaintiffs' right of first
refusal and that a new Transfer
Certificate of Title be issued in favor of
the buyer.
All previous transactions involving the
same property notwithstanding the
issuance of another title to Buen Realty
Corporation, is hereby set aside as
having been executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent
Judge issued another order, the
dispositive portion of which reads:
WHEREFORE, let there be Writ of
Execution issue in the above-entitled
case directing the Deputy Sheriff
Ramon Enriquez of this Court to
implement said Writ of Execution
ordering the defendants among others
to comply with the aforesaid Order of
this Court within a period of one (1)
week from receipt of this Order and for
defendants to execute the necessary
Deed of Sale of the property in litigation
in favor of the plaintiffs Ang Yu
Asuncion, Keh Tiong and Arthur Go for
the consideration of P15,000,000.00
and ordering the Register of Deeds of
the City of Manila, to cancel and set
aside the title already issued in favor of
Buen Realty Corporation which was
previously executed between the latter
and defendants and to register the new
title in favor of the aforesaid plaintiffs
Ang Yu Asuncion, Keh Tiong and
Arthur Go.
SO ORDERED.
On the same day, September 27, 1991
the corresponding writ of execution
(Annex C, Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal
to it by private respondent, set aside and declared
without force and effect the above questioned orders
of the court a quo.
In this petition for review on certiorari, petitioners
contend that Buen Realty can be held bound by the
writ of execution by virtue of the notice of lis pendens,
carried over on TCT No. 195816 issued in the name of
Buen Realty, at the time of the latter's purchase of the
property on 15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate
transactions is the adoption of such arrangements as
the right of first refusal, a purchase option and a
contract to sell. For ready reference, we might point
out some fundamental precepts that may find some
relevance to this discussion.
An obligation is a juridical necessity to give, to do or
not to do (Art. 1156, Civil Code). The obligation is
constituted upon the concurrence of the essential
elements thereof, viz: (a) The vinculum juris or juridical
tie which is the efficient cause established by the
various sources of obligations (law, contracts, quasi-
contracts, delicts and quasi-delicts); (b) the object
which is the prestation or conduct; required to be
observed (to give, to do or not to do); and (c) the
subject-persons who, viewed from the demandability
of the obligation, are the active (obligee) and the
passive (obligor) subjects.
Among the sources of an obligation is a contract (Art.
1157, Civil Code), which is a meeting of minds
between two persons whereby one binds himself, with
respect to the other, to give something or to render
some service (Art. 1305, Civil Code). A contract
undergoes various stages that include its negotiation
or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the
time the prospective contracting parties indicate
interest in the contract to the time the contract is
concluded (perfected). The perfection of the contract
takes place upon the concurrence of the essential
elements thereof. A contract which is consensual as to
perfection is so established upon a mere meeting of
minds, i.e., the concurrence of offer and acceptance,
on the object and on the cause thereof. A contract
which requires, in addition to the above, the delivery of
the object of the agreement, as in a pledge or
commodatum, is commonly referred to as a real
contract. In a solemn contract, compliance with certain
formalities prescribed by law, such as in a donation of
real property, is essential in order to make the act
valid, the prescribed form being thereby an essential
element thereof. The stage of consummation begins
when the parties perform their respective undertakings
under the contract culminating in the extinguishment
thereof.
Until the contract is perfected, it cannot, as an
independent source of obligation, serve as a binding
juridical relation. In sales, particularly, to which the
topic for discussion about the case at bench belongs,
the contract is perfected when a person, called the
seller, obligates himself, for a price certain, to deliver
and to transfer ownership of a thing or right to another,
called the buyer, over which the latter agrees. Article
1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of
the contracting parties obligates himself
to transfer the ownership of and to
deliver a determinate thing, and the
other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or
conditional.
When the sale is not absolute but conditional, such as
in a "Contract to Sell" where invariably the ownership
of the thing sold is retained until the fulfillment of a
positive suspensive condition (normally, the full
payment of the purchase price), the breach of the
condition will prevent the obligation to convey title from
acquiring an obligatory force. 2 In Dignos vs. Court of
Appeals (158 SCRA 375), we have said that, although
denominated a "Deed of Conditional Sale," a sale is
still absolute where the contract is devoid of any
proviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is
paid. Ownership will then be transferred to the buyer
upon actual or constructive delivery (e.g., by the
execution of a public document) of the property sold.
Where the condition is imposed upon the perfection of
the contract itself, the failure of the condition would
prevent such perfection. 3 If the condition is imposed
on the obligation of a party which is not fulfilled, the
other party may either waive the condition or refuse to
proceed with the sale (Art. 1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as
long as the object is made determinate and the price
is fixed, can be obligatory on the parties, and
compliance therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the
thing to be sold and the price to be paid, when
coupled with a valuable consideration distinct and
separate from the price, is what may properly be
termed a perfected contract of option. This contract is
legally binding, and in sales, it conforms with the
second paragraph of Article 1479 of the Civil Code,
viz:
Art. 1479. . . .
An accepted unilateral promise to buy
or to sell a determinate thing for a price
certain is binding upon the promissor if
the promise is supported by a
consideration distinct from the price.
(1451a) 6
Observe, however, that the option is not the contract
of sale itself. 7 The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely,
i.e., the offer is accepted before a breach of the
option, a bilateral promise to sell and to buy ensues
and both parties are then reciprocally bound to comply
with their respective undertakings. 8
Let us elucidate a little. A negotiation is formally
initiated by an offer. An imperfect promise
(policitacion) is merely an offer. Public advertisements
or solicitations and the like are ordinarily construed as
mere invitations to make offers or only as proposals.
These relations, until a contract is perfected, are not
considered binding commitments. Thus, at any time
prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer,
at this stage, may be withdrawn; the withdrawal is
effective immediately after its manifestation, such as
by its mailing and not necessarily when the offeree
learns of the withdrawal (Laudico vs. Arias, 43 Phil.
270). Where a period is given to the offeree within
which to accept the offer, the following rules generally
govern:
(1) If the period is not itself founded upon or supported
by a consideration, the offeror is still free and has the
right to withdraw the offer before its acceptance, or, if
an acceptance has been made, before the offeror's
coming to know of such fact, by communicating that
withdrawal to the offeree (see Art. 1324, Civil Code;
see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948,
holding that this rule is applicable to a unilateral
promise to sell under Art. 1479, modifying the previous
decision in South Western Sugar vs. Atlantic Gulf, 97
Phil. 249; see also Art. 1319, Civil Code; Rural Bank
of Parañaque, Inc., vs. Remolado, 135 SCRA 409;
Sanchez vs. Rigos, 45 SCRA 368). The right to
withdraw, however, must not be exercised whimsically
or arbitrarily; otherwise, it could give rise to a damage
claim under Article 19 of the Civil Code which ordains
that "every person must, in the exercise of his rights
and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good
faith."
(2) If the period has a separate consideration, a
contract of "option" is deemed perfected, and it would
be a breach of that contract to withdraw the offer
during the agreed period. The option, however, is an
independent contract by itself, and it is to be
distinguished from the projected main agreement
(subject matter of the option) which is obviously yet to
be concluded. If, in fact, the optioner-offeror withdraws
the offer before its acceptance (exercise of the option)
by the optionee-offeree, the latter may not sue for
specific performance on the proposed contract
("object" of the option) since it has failed to reach its
own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for
breach of the option. In these cases, care should be
taken of the real nature of the consideration given, for
if, in fact, it has been intended to be part of the
consideration for the main contract with a right of
withdrawal on the part of the optionee, the main
contract could be deemed perfected; a similar
instance would be an "earnest money" in a contract of
sale that can evidence its perfection (Art. 1482, Civil
Code).
In the law on sales, the so-called "right of first refusal"
is an innovative juridical relation. Needless to point
out, it cannot be deemed a perfected contract of sale
under Article 1458 of the Civil Code. Neither can the
right of first refusal, understood in its normal concept,
per se be brought within the purview of an option
under the second paragraph of Article 1479,
aforequoted, or possibly of an offer under Article 1319
9
of the same Code. An option or an offer would
require, among other things, 10 a clear certainty on
both the object and the cause or consideration of the
envisioned contract. In a right of first refusal, while the
object might be made determinate, the exercise of the
right, however, would be dependent not only on the
grantor's eventual intention to enter into a binding
juridical relation with another but also on terms,
including the price, that obviously are yet to be later
firmed up. Prior thereto, it can at best be so described
as merely belonging to a class of preparatory juridical
relations governed not by contracts (since the
essential elements to establish the vinculum juris
would still be indefinite and inconclusive) but by,
among other laws of general application, the pertinent
scattered provisions of the Civil Code on human
conduct.
Even on the premise that such right of first refusal has
been decreed under a final judgment, like here, its
breach cannot justify correspondingly an issuance of a
writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an
action for specific performance without thereby
negating the indispensable element of consensuality
in the perfection of contracts. 11 It is not to say,
however, that the right of first refusal would be
inconsequential for, such as already intimated above,
an unjustified disregard thereof, given, for instance,
the circumstances expressed in Article 19 12 of the
Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must
be stressed, has merely accorded a "right of first
refusal" in favor of petitioners. The consequence of
such a declaration entails no more than what has
heretofore been said. In fine, if, as it is here so
conveyed to us, petitioners are aggrieved by the
failure of private respondents to honor the right of first
refusal, the remedy is not a writ of execution on the
judgment, since there is none to execute, but an
action for damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty
Development Corporation, the alleged purchaser of
the property, has acted in good faith or bad faith and
whether or not it should, in any case, be considered
bound to respect the registration of the lis pendens in
Civil Case No. 87-41058 are matters that must be
independently addressed in appropriate proceedings.
Buen Realty, not having been impleaded in Civil Case
No. 87-41058, cannot be held subject to the writ of
execution issued by respondent Judge, let alone
ousted from the ownership and possession of the
property, without first being duly afforded its day in
court.
We are also unable to agree with petitioners that the
Court of Appeals has erred in holding that the writ of
execution varies the terms of the judgment in Civil
Case No. 87-41058, later affirmed in CA-G.R. CV-
21123. The Court of Appeals, in this regard, has
observed:
Finally, the questioned writ of execution
is in variance with the decision of the
trial court as modified by this Court. As
already stated, there was nothing in
said decision 13 that decreed the
execution of a deed of sale between
the Cu Unjiengs and respondent
lessees, or the fixing of the price of the
sale, or the cancellation of title in the
name of petitioner (Limpin vs. IAC, 147
SCRA 516; Pamantasan ng Lungsod
ng Maynila vs. IAC, 143 SCRA 311; De
Guzman vs. CA, 137 SCRA 730;
Pastor vs. CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in
Civil Case No. 87-41058 could not have decreed at
the time the execution of any deed of sale between
the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in
ultimately setting aside the questioned Orders, dated
30 August 1991 and 27 September 1991, of the court
a quo. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno and
Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
 Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 205879 April 23, 2014
SKUNAC CORPORATION and ALFONSO F.
ENRIQUEZ, Petitioners,
vs.
ROBERTO S. SYLIANTENG and CAESAR S.
SYLIANTENG, Respondents.
DECISION
PERALTA, J.:
This treats of the petition for review on certiorari
assailing the Decision1 and Resolution2 of the Court
of Appeals (CA), dated August 10, 2012 and February
18, 2013, respectively, in CA-G.R. CV No. 92022.
The factual and procedural antecedents of the case,
as narrated by the CA, are as follows:
The civil cases before the [Regional Trial Court of
Pasig City) involved two (2) parcels of land identified
as Lot 1, with an area of 1,250 square meters (Civil
Case No. 63987) and Lot 2, with an area of 990
square meters (Civil Case No. 63988), both found in
Block 2 of the Pujalte Subdivision situated along
Wilson Street, Greenhills, San Juan City which are
portions of a parcel of land previously registered in the
name of Luis A. Pujalte on October 29, 1945 and
covered by Transfer Certificate of Title ("TCT") No. (-
78865) (-2668) -93165 ("Mother Title") of the Register
of Deeds for the City of Manila.
Plaintiffs-appellants Roberto S. Sylianteng and Caesar
S. Sylianteng ("appellants") base their claim of
ownership over the subject lots a Deed of Absolute
Sale executed in their favor by their mother,
Emerenciana Sylianteng ("Emerenciana"), on June 27,
1983. Appellants further allege that Emerenciana
acquired the lots from the late Luis Pujalte [Luis]
through a Deed of Sale dated June 20, 1958 as
reflected in Entry No. P.E. 4023, annotated on the
covering TCT, by virtue of which she was issued TCT
No. 42369. Then, when she sold the lots to appellants,
TCT No. 39488, covering the same, was issued in
their names.
[Herein petitioners] Skunac Corporation ("Skunac")
and Alfonso F. Enriquez ("Enriquez"), on the other
hand, claim that a certain Romeo Pujalte who was
declared by the RTC of Pasig City, Branch 151 in
Special Proceedings No. 3366 as the sole heir of Luis
Pujalte, caused the reconstitution of the Mother Title
resulting to its cancellation and the issuance of TCT
No. 5760-R in his favor. Romeo Pujalte then allegedly
sold the lots to Skunac and Enriquez in 1992. Thus,
from TCT No. 5760-R, TCT No. 5888-R, for Lot 1 was
issued in the name of Skunac, while TCT No. 5889-R
for Lot 2 was issued in the name of Enriquez.
[Respondents] contend that they have a better right to
the lots in question because the transactions
conveying the same to them preceded those claimed
by [petitioners] as source of the latter's titles.
[Respondents] further assert that [petitioners] could
not be considered as innocent purchasers in good
faith and for value because they had prior notice of the
previous transactions as stated in the memorandum of
encumbrances annotated on the titles covering the
subject lots. [Petitioners], for their part, maintain that
[respondents] acquired the lots under questionable
circumstances it appearing that there was no copy of
the Deed of Sale, between Emerenciana and Luis
Pujalte, on file with the Office of the Register of
Deeds.3
On November 16, 2007, the Regional Trial Court of
Pasig (RTC) rendered judgment in favor of herein
petitioners. The dispositive portion of the RTC
Decision reads as follows:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the defendants and
against the plaintiffs:
1. Declaring as null and void TCT No. 42369 in
the name of Emerciana (sic) Sylianteng and
TCT No. 39488 in the name of plaintiffs herein
and ordering the cancellation thereof;
2. Declaring the herein defendants as buyers
in good faith and for value; and
3. Declaring TCT No. 5888-R in the name of
SKUNAC Corporation and TCT No. 5889-R in
the name of Alfonso Enriquez as valid.
The complaint-in-intervention is ordered dismissed.
With costs against the plaintiffs.
SO ORDERED.4
Herein respondents then filed an appeal with the CA.
On August 10, 2012, the CA promulgated its assailed
Decision, disposing as follows:
WHEREFORE, in light of all the foregoing, the appeal
is GRANTED. The decision dated November 16, 2007
of Branch 160, Regional Trial Court of Pasig City in
Civil Case No. 63987 is hereby REVERSED and SET
ASIDE.
Judgment is hereby rendered in favor of plaintiffs-
appellants Roberto S. Sylianteng and Caesar S.
Sylianteng and against defendants-appellees Skunac
Corporation and Alfonso F. Enriquez, and intervenor-
appellee Romeo N. Pujalte:
1. Declaring as null and void Transfer
Certificate of Title No. 5760-R in the name of
Romeo N. Pujalte, Transfer Certificate of Title
No. 5888-R in the name of Skunac
Corporation, and Transfer Certificate of Title
No. 5889-R in the name of Alfonso F.
Enriquez;
2. Upholding the validity of Transfer Certificate
of Title No. 42369 in the name of Emerenciana
Sylianteng, and Transfer Certificate of Title No.
39488 in the names of Roberto S. Sylianteng
and Caesar S. Sylianteng; and
3. Ordering defendants-appellees Skunac
Corporation and Alfonso F. Enriquez, and
intervenor-appellee Romeo N. Pujalte, jointly
and severally, to pay plaintiffs-appellants
 Roberto S. Sylianteng and Caesar S.
Sylianteng:
a. Moral damages in the amount of
P500,000.00,
b. Exemplary damages in the amount
of P500,000.00,
c. Attorney's fees in the amount of
P250,000.00, and
d. The costs of suit.
SO ORDERED.5
Petitioners filed a Motion for Reconsideration, but the
CA denied it in its Resolution dated February 18,
2013.
Hence, the instant petition with the following
assignment of errors:
I. THE HONORABLE COURT OF APPEALS
ERRED IN APPLYING IN THE CASE THE
PROVISION OF THE CIVIL CODE ON
DOUBLE SALE OF A REGISTERED LAND.
II. THE HONORABLE COURT OF APPEALS
ERRED IN NOT FINDING THAT
RESPONDENTS FAILED TO PROVE THE
EXISTENCE OF SALE BETWEEN LUIS
PUJALTE AND THEIR PREDECESSOR-IN-
INTEREST, EMERENCIANA SYLIANTENG.
III. THE HONORABLE COURT OF APPEALS
ERRED IN NOT DECLARING NULL AND
VOID TCT NO. 42369 PURPORTED TO
HAVE BEEN ISSUED TO EMERENCIANA
SYLIANTENG BY THE REGISTER OF
DEEDS OF QUEZON CITY.
IV. THE HONORABLE COURT OF APPEALS
ERRED IN NOT FINDING THAT
PETITIONERS ARE THE LAWFUL OWNERS
OF THE SUBJECT LOTS SINCE THEY HAVE
VALIDLY ACQUIRED THE SAME FROM
ROMEO PUJALTE, THE SOLE HEIR OF LUIS
PUJALTE.
V. THE HONORABLE COURT OF APPEALS
ERRED IN AWARDING MORAL AND
EXEMPLARY DAMAGES AS WELL AS
ATTORNEY'S FEES AND COST OF SUIT TO
RESPONDENTS CONSIDERING THAT
PETITIONERS WERE NOT IN BAD FAITH IN
PURCHASING THE SUBJECT LOTS.6
The petition lacks merit.
At the outset, the Court observes that the main issues
raised in the instant petition are essentially questions
of fact. It is settled that, as a rule, in petitions for
review on certiorari under Rule 45 of the Rules of
Court, only questions of law may be put in issue.7
Questions of fact cannot be entertained. There are,
however, recognized exceptions to this rule, to wit:
(a) When the findings are grounded entirely on
speculation, surmises, or conjectures;
(b) When the inference made is manifestly
mistaken, absurd, or impossible;
(c) When there is grave abuse of discretion;
(d) When the judgment is based on a
misapprehension of facts;
(e) When the findings of facts are conflicting;
(f) When in making its findings the CA went
beyond the issues of the case, or its findings
are contrary to the admissions of both the
appellant and the appellee;
(g) When the CA’s findings are contrary to
those by the trial court;
(h) When the findings are conclusions without
citation of specific evidence on which they are
based;
(i) When the facts set forth in the petition as
well as in the petitioner’s main and reply briefs
are not disputed by the respondent;
(j) When the findings of fact are premised on
the supposed absence of evidence and
contradicted by the evidence on record; or
(k) When the CA manifestly overlooked certain
relevant facts not disputed by the parties,
which, if properly considered, would justify a
different conclusion.8
In the instant case, the findings of the CA and the RTC
are conflicting. It, thus, behooves this Court to
entertain the questions of fact raised by petitioners
and review the records of this case to resolve these
conflicting findings. Thus, this Court held in the case of
Manongsong v. Estimo9 that:
We review the factual and legal issues of this case in
light of the general rules of evidence and the burden of
proof in civil cases, as explained by this Court in Jison
v. Court of Appeals:
x x x Simply put, he who alleges the affirmative of the
issue has the burden of proof, and upon the plaintiff in
a civil case, the burden of proof never parts. However,
in the course of trial in a civil case, once plaintiff
makes out a prima facie case in his favor, the duty or
the burden of evidence shifts to defendant to
controvert plaintiff's prima facie case, otherwise, a
verdict must be returned in favor of plaintiff. Moreover,
in civil cases, the party having the burden of proof
must produce a preponderance of evidence thereon,
with plaintiff having to rely on the strength of his own
evidence and not upon the weakness of the
defendant’s. The concept of "preponderance of
evidence" refers to evidence which is of greater
weight, or more convincing, that which is offered in
opposition to it; at bottom, it means probability of
truth.10
Coming to the merits of the case, the abovementioned
assignment of errors boils down to two basic
questions: (1) whether or not respondents'
predecessor-in-interest, Emerenciana, validly acquired
the subject lots from Luis, and (2) whether or not
respondents, in turn, validly acquired the same lots
from Emerenciana.
The Court rules in the affirmative, but takes exception
to the CA's and RTC's application of Article 1544 of
the Civil Code.
Reliance by the trial and appellate courts on Article
1544 of the Civil Code is misplaced. The requisites
that must concur for Article 1544 to apply are:
(a) The two (or more sales) transactions must
constitute valid sales;
(b) The two (or more) sales transactions must
pertain to exactly the same subject matter;
(c) The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each represent conflicting interests; and
(d) The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each have bought from the very same seller.11
Obviously, said provision has no application in cases
where the sales involved were initiated not by just one
but two vendors.12 In the present case, the subject
lots were sold to petitioners and respondents by two
different vendors – Emerenciana and Romeo Pujalte
(Romeo). Hence, Article 1544 of the Civil Code is not
applicable.
Nonetheless, the Court agrees with the findings and
conclusion of the CA that Emerenciana's acquisition of
the subject lots from Luis and her subsequent sale of
the same to respondents are valid and lawful.
Petitioners dispute such finding. To prove their
contention, they assail the authenticity and due
execution of the deed of sale between Luis and
Emerenciana.
Petitioners contend that respondents' presentation of
the "duplicate/carbon" original of the Deed of Sale13
dated June 20, 1958 is in violation of the best
evidence rule under Section 3, Rule 130 of the Rules
of Court.14 The Court does not agree.
The best evidence rule is inapplicable to the present
case. The said rule applies only when the content of
such document is the subject of the inquiry.15 Where
the issue is only as to whether such document was
actually executed, or exists, or on the circumstances
relevant to or surrounding its execution, the best
evidence rule does not apply and testimonial evidence
is admissible.16 Any other substitutionary evidence is
likewise admissible without need to account for the
original.17 In the instant case, what is being
questioned is the authenticity and due execution of the
subject deed of sale. There is no real issue as to its
contents.
In any case, going to the matter of authenticity and
due execution of the assailed document, petitioners do
not dispute that the copy of the deed of sale that
respondents submitted as part of their evidence is a
duplicate of the original deed of sale dated June 20,
1958. It is settled that a signed carbon copy or
duplicate of a document executed at the same time as
the original is known as a duplicate original and
maybe introduced in evidence without accounting for
the non-production of the original.18
Moreover, Section 4 (b), Rule 130 of the Rules of
Court provides that "[w]hen a document is in two or
more copies executed at or about the same time, with
identical contents, all such copies are equally
regarded as originals."
In addition, evidence of the authenticity and due
execution of the subject deed is the fact that it was
notarized. The notarization of a private document
converts it into a public document.19 Moreover, a
notarized instrument is admissible in evidence without
further proof of its due execution, is conclusive as to
the truthfulness of its contents, and has in its favor the
presumption of regularity.20 This presumption is
affirmed if it is beyond dispute that the notarization
was regular.21 To assail the authenticity and due
execution of a notarized document, the evidence must
be clear, convincing and more than merely
preponderant.22
In the present case, petitioners failed to present
convincing evidence to prove that the notarization of
the subject deed was irregular as to strip it of its public
character. On the contrary, a certified copy of page 26
of the notarial register of the notary public who
notarized the subject deed of sale, which was issued
by the Records Management and Archives Office of
Manila, shows that the sale of the subject lots by Luis
to Emerenciana was indeed regularly notarized.23
Petitioners further argue that the deed of sale between
Emerenciana and Luis was not registered with the
Register of Deeds of Quezon City. The Court,
however, agrees with the CA that the said deed was,
in fact, registered as evidenced by official receipts24
issued to this effect. Petitioners, again, did not present
any evidence to assail the authenticity of these
documents.
Petitioners also question the authenticity of the subject
deed of sale (Exhibit "B-1-C") by arguing that only one
copy of such deed was prepared as only one
document number was assigned by the notary to the
said deed. Petitioners claim that this is contrary to the
claim of respondents that the said deed of sale was
prepared, executed and notarized in several copies.
The Court is not persuaded.
It is true that Section 246, Article V, Title IV, Chapter II
of the Revised Administrative Code provides that "[t]he
notary shall give to each instrument executed, sworn
to, or acknowledged before him a number
corresponding to the one in his register, and shall also
state on the instrument the page or pages of his
register on which the same is recorded." In this regard,
the Court agrees with respondents' contention that the
"instrument" being referred to in the abovequoted
provision is the deed or contract which is notarized. It
does not pertain to the number of copies of such deed
or contract. Hence, one number is assigned to a deed
or contract regardless of the number of copies
prepared and notarized. Each and every copy of such
contract is given the same document number. It is,
thus, wrong for petitioners to argue that only one copy
of the June 20, 1958 deed of sale was prepared and
notarized, because only one document number
appears on the notarial book of the notary public who
notarized the said deed. On the contrary, evidence
shows that at least two copies of the subject deed of
sale was prepared and notarized – one was submitted
for registration with the Register of Deeds of Quezon
City and the other was retained by Emerenciana,
which is the copy presented in evidence by
respondents.
As to petitioners' contention that the copy of the deed
of sale presented by respondents in evidence is of
dubious origin because it does not bear the stamp
"RECEIVED" by the Register of Deeds of Quezon
City, suffice it to state that the Court finds no cogent
reason to disagree with respondents' contention that
the duplicate original of the subject deed of sale which
they presented as evidence in court could not have
been received by the Register of Deeds of Quezon
City because only the original copy, and not the
duplicate original, was submitted to the Register of
Deeds for registration.
Petitioners also question the authenticity of and the
entries appearing on the copy of the title covering the
subject properties in the name of Luis. However, the
Court finds no cogent reason to doubt the authenticity
of the document as well as the entries appearing
therein, considering that the parties (herein petitioners
and respondents) stipulated25 that the machine copy
of TCT No. 78865 in the name of Luis, marked as
Exhibit "DDD" for respondents, is a faithful
reproduction of the original copy of the said title,
including the memorandum of encumbrances
annotated therein. Included in the memorandum of
encumbrances is Entry No. P.E. 4023, which states,
thus:
This certificate of title is hereby cancelled (sic) partially
with respect to Lots 1 and 2, Blk. 2 by virtue of a Deed
of Sale ratified on June 20, 1958 before Armenio P.
Engracia of Notary for the City of Manila and Transfer
Certificate of Title No. 42369 is issued in the name of
Vendee, Emerenciana A.S. de Sylianteng, filing the
aforesaid Deed under T-No. 42369.26
The same entry appears in Exhibit "11" for
petitioners.27
P.E. No. 4023 has been entered on TCT No. 78865 by
the then Acting Register of Deeds of San
Juan.1âwphi1 Petitioners assail the regularity of such
entry. However, one of the disputable presumptions
provided under Section 3 (m), Rule 131 of the Rules of
Court is that official duty has been regularly
performed. Under the said Rule, this presumption shall
be considered satisfactory unless contradicted and
overcome by other evidence. In the present case,
petitioners failed to present sufficient evidence to
contradict the presumption of regularity in the
performance of the duties of then Acting Register of
Deeds of San Juan.
Petitioners, nonetheless, insist that they have valid
title over the subject properties. They trace their
respective titles from that of Romeo. Romeo, in turn,
derives his supposed ownership of and title over the
subject lots from his claim that he is the sole heir of
the estate of his alleged predecessor-in-interest, Luis.
Evidence, however, shows that Romeo never became
the owner of the subject properties for two reasons.
First, as shown above, the disputed lots were already
sold by Luis during his lifetime. Thus, these parcels of
land no longer formed part of his estate when he died.
As a consequence, Romeo's sale of the disputed lots
to petitioners was not affirmed by the estate court,
because the subject parcels of land were not among
those included in the said estate at the time that
Romeo was appointed as the administrator thereof. As
shown in its October 11, 1993 Order,28 the RTC of
Pasig, acting as an estate court, denied Romeo's
motion for approval of the sale of the subject lots,
because these properties were already sold to
respondents per report submitted by the Register of
Deeds of San Juan.
In fact, as early as July 14, 1960, prior to Romeo's
appointment as administrator of the estate of Luis, Paz
L. Vda. de Pujalte (Paz), the mother of Luis, who was
then appointed administratrix of the estate of the latter,
in her Inventory and Appraisal29 which was submitted
to the estate court, already excluded the subject
properties among those which comprise the estate of
Luis. Subsequently, in the Project of Partition30 of the
residual estate of Luis, dated March 22, 1963, Paz
again did not include the disputed lots as part of such
residual estate. Hence, Romeo's sale of the subject
lots to petitioners is invalid as it is settled that any
unauthorized disposition of property under
administration is null and void and title does not pass
to the purchasers.31
Second, even granting that the subject lots formed
part of the estate of Luis, it was subsequently proven
in a separate case that Romeo is not his heir. In a
criminal case for use of falsified documents filed
against Romeo, it was proven that his claim of heirship
is spurious. In the said criminal case, his birth
certificate and the marriage certificate of his supposed
parents, which he presented before the estate court,
to prove his claim that he is the sole heir of Luis, were
found by the criminal court to be falsified.32 In this
regard, it bears to note the disquisition of the CA as to
the legitimacy of Romeo's claim, and its subsequent
effect on petitioners' rights to the disputed properties,
to wit:
Appellees' [herein petitioners'] predicament is further
compounded by Romeo Pujalte's conviction on
November 18, 2005 of the offense of Use of Falsified
Documents, for falsifying the documents that enabled
him to deceive the estate court and have himself
named as Luis Pujalte's sole heir. He did not appeal
his conviction and, instead, applied for probation. It
goes without saying that the documents purportedly
conveying the lots in question to appellees and which
are founded on Romeo Pujalte's alleged rights over
the estate of the late Luis Pujalte do not deserve any
consideration at all. x x x33
Indeed, not being an heir of Luis, Romeo never
acquired any right whatsoever over the subject lots,
even if he was able to subsequently obtain a title in his
name. It is a well-settled principle that no one can give
what one does not have, nemo dat quod non habet.34
One can sell only what one owns or is authorized to
sell, and the buyer can acquire no more right than
what the seller can transfer legally.35 Since Romeo
has no right to the subject lots, petitioners, who simply
stepped into the shoes of Romeo, in turn, acquired no
rights to the same.
In addition, and as correctly pointed out by the CA,
petitioners' position is neither helped by the fact that,
in the present case, Romeo filed a Verified Complaint-
in-Intervention36 with the RTC, denying that he sold
the subject lots to petitioners and claiming that the
same properties still form part of the estate of Luis.
Stretching petitioners' contention a bit further, granting
that both petitioners and respondents bought the
disputed lots in good faith by simply relying on the
certificates of the sellers, and subsequently, acquiring
titles in their own names, respondents' title shall still
prevail. It is a settled rule that when two certificates of
title are issued to different persons covering the same
land in whole or in part, the earlier in date must
prevail, and, in case of successive registrations where
more than one certificate is issued over the land, the
person holding a prior certificate is entitled to the land
as against a person who relies on a subsequent
certificate.37 The titles of respondents, having
emanated from an older title, should thus be upheld.
Anent petitioners' bad faith, this Court finds no
persuasive reason to depart from the findings of the
CA that petitioners had prior knowledge of the estate
proceedings involving the subject lots and that they
have notice of the defect in the title of Romeo.
It is true that a person dealing with registered land
need not go beyond the title. However, it is equally
true that such person is charged with notice of the
burdens and claims which are annotated on the
title.38 In the instant case, The Torrens Certificate of
Title (TCT No. 5760-R) in the name of Romeo, which
was the title relied upon by petitioners, also contained
Entry No. P.E. 4023, quoted above, which essentially
informs petitioners that the lots which they were about
to buy and which they in fact bought, were already
sold to Emerenciana.39 This entry should have alerted
petitioners and should have prodded them to conduct
further investigation. Simple prudence would have
impelled them as honest persons to make deeper
inquiries to clear the suspiciousness haunting
Romeo's title. On the contrary, rather than taking
caution in dealing with Romeo, petitioners, instead,
subsequently executed deeds of sale40 over the same
properties but all of which were, nonetheless,
disallowed by the estate court in its Order41 dated
October 11, 1993 on the ground that the said lots were
already sold, this time, by Emerenciana to
respondents. In this regard, petitioners acted in bad
faith.
Thus, as correctly held by the CA, respondents are
entitled to moral damages. Moral damages are treated
as compensation to alleviate physical suffering, mental
anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social
humiliation, and similar injury resulting from a
wrong.42 In the instant case, respondents
satisfactorily established their claim for moral
damages. They endured suffering brought about by
Romeo's bad faith in using falsified documents to
enable himself to acquire title to and sell the subject
lots to petitioners to the prejudice of respondents.
Respondents also suffered by reason of petitioners'
stubborn insistence in buying the said properties
despite their knowledge of the defect in the title of
Romeo.43 Though moral damages are not capable of
pecuniary estimation, the amount should be
proportional to and in approximation of the suffering
inflicted.44 Respondents sought the award of
P1,000,000.00 as moral damages from each of the
petitioners, but the Court agrees with the CA that the
total amount of P500,000.00 is sufficient for both
respondents.
As to exemplary damages, these are imposed by way
of example or correction for the public good, in
addition to moral, temperate, liquidated or
compensatory damages.45 They are imposed not to
enrich one party or impoverish another, but to serve
as a deterrent against or as a negative incentive to
curb socially deleterious actions.46 While respondents
were again seeking the amount of P1,000,000.00 as
exemplary damages from each of the petitioners, the
CA correctly reduced it to a total of P500,000.00.
Respondents are also entitled to attorney's fees, as
awarded by the CA, on the strength of the provisions
of Article 2208 of the Civil Code which provides,
among others, that such fees may be recovered when
exemplary damages are awarded, when the
defendant's act or omission has compelled the plaintiff
to litigate with third persons, or in any other case
where the court deems it just and equitable that
attorney's fees and expenses of litigation should be
recovered.
WHEREFORE, the petition is DENIED. The Decision
and Resolution of the Court of Appeals, dated August
10, 2012 and February 18, 2013, respectively, in CA-
G.R. CV No. 92022, are AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 179205 July 30, 2014
HEIRS OR REYNALDO DELA ROSA, Namely:
TEOFISTA DELA ROSA, JOSEPHINE SANTIAGO
AND JOSEPH DELA ROSA, Petitioners,
vs.
MARIO A. BA TONGBACAL, IRENEO
BATONGBACAL, JOCELYN BA TONGBACAL,
NESTOR BATONGBACAL AND LOURDES BA
TONGBACAL, Respondents.
DECISION
PEREZ, J.:
This is a Petition for Review on Certiorari1 pursuant to
Rule 45 of the Revised Rules of Court, assailing the 7
December 2006 Decision2 and 8 August 2007
Resolution3 of the Fourth Division of the Court of
Appeals in CA-G.R. CV No. 64172. In its assailed
Resolution, the appellate court modified its earlier
ruling and proceeded to direct petitioners to execute
the requisite Deed of Sale over the subject property.
The Facts
The subject prope1iy consists of a 3, 750 square
meter-portion of the 15,00 l square meters parcel of
land situated in Barrio Saog, Marilao, Bulacan
denominated as Lot No. 1, and registered under
Transfer Certificate of Title (TCT) No. T-1074494
under the names of Reynaldo Dela Rosa (Reynaldo),
Eduardo Dela Rosa (Eduardo), Araceli Dela Rosa
(Araceli) and Zenaida Dela Rosa (Zenaida).
Sometime in 1984, Reynaldo offered to sell the
subject property to Guillermo Batongbacal (Guillermo)
and Mario Batongbacal (Mario) for P50.00 per square
meter or for a total of P187,500.00. Pursuant to the
agreement, Reynaldo received an advance payment
of P31,500.00 leaving a balance of P156,000.00. As
shown in the document denominated as Resibo and
signed by Reynaldo on 18 February 1987, the parties
agreed that the amount of P20,000.00 as part of the
advance payment shall be paid upon the delivery of
the Special Power-of-Attorney (SPA), which would
authorize Reynaldo to alienate the subject property on
behalf of his co-owners and siblings namely, Eduardo,
Araceli and Zenaida. The balance thereon shall be
paid in P10,000.00 monthly installments until the
purchase price is fully settled, to wit:
RESlBO
Tinaggap ko ngayong araw na ilo kay Engr. Guillermo
A. Batongbacal, ng Poblacion II, Marilao, Bulacan, ang
halagang sampung libong piso (P10,000.00) salaping
Pilipino, hilang bahaging hayad sa bahagi ng lupang
may sukal na 3,750 sq.m. na aking kabahagi sa isang
(1) lagay na lupang nasasaog, Marilao, Bulakan,
sinasaklcrw ng T.C.T. No. T-107449, ng Bulakan, na
ipinagkasundo kong ipaghili sa naulil na Engr.
Guillermo A. Batongbacal sa halagang Limampung
Piso (P50.00) salaping Filipino, bawat isang (1)
melrong parisukal. Ang paunang bayad na aking
tinanggap ukol sa lupang nabanggil sa ilaas ay
P21,500.00, nuong Abril 14-18, 1984. Ang halagang
dapal pa niyang bayaran sa akin ay P 156,000.00, na
ang halagang dalawampung Ii bong piso (P20,000.00)
ay babayaran niya sa akin sa arcrw na nag power-of-
attorney nina Zenaida dcla Rosa, at Enrique Magsaloc
ay aking nabigay sa nasabing Engr. Guillermo A.
Batongbacal; na ang nalalabing hahaging bayad ay
kanyang habayaran sa akin ng Sampung libong piso
(P 10,000.00) salaping Filipino, bawat buwan
hanggang sa matapusan ang pagbabayad ng
kabuuang halaga na Isang Daang at Walumpu’t
Pitong libo Limang Daang Piso (P187,500.00). An,g-
bahaging aking ipinagbibili ay ang Lote No. I, may
sukat na 3,750 sq.m. na makikita sa nakalakip na
sketch plan na aking ding nilagdaan sa ikaliliwanag ng
kasulutang ito.5
Subsequent to the execution of the said agreement,
Mario and Guillermo, on their own instance, initiated a
survey to segregate the area of 3,750 square meters
from the whole area covered by TCT No. T-107449,
delineating the boundaries of the subdivided parts. As
a result, they came up with a subdivision plan
specifically designating the subject property signed by
a Geodetic Engineer.6 Mario and Guillermo thereafter
made several demands from Reynaldo to deliver the
SP A as agreed upon, but such demands all went
unheeded.
Consequently, Guillermo and Mario initiated an action
for Specific Performance or Rescission and Damages
before the Regional Trial Court (RTC) of Malolos,
Bulacan, seeking to enforce their Contract to Sell
dated 18 February 1987. In their Complaint docketed
as Civil Case No. 215-M· 90,7 Mario and Guillermo
asserted that they have a better right over the subject
property and alleged that the subsequent sale thereof
effected by Reynaldo to third persons is void as it was
done in bad faith. It was prayed in the Complaint that
Reynaldo be directed to deliver the SPA and, in case
of its impossibility, to return the amount of P31,500.00
with legal interest and with damages in either case.
To protect their rights on the subject property, Mario
and Guillermo, after initiating Civil Case No. 215-M-90,
filed a Notice of Lis Pendens registering their claim on
the certificate of title covering the entire property.
In refuting the allegations of Mario and Guillermo in
their Complaint. Reynaldo in his Answer8 countered
that the purported Contract to Sell is void, because he
never gave his consent thereto. Reynaldo insisted that
he was made to understand that the contract between
him and the Batongbacals was merely an equitable
mortgage whereby it was agreed that the latter will
loan to him the amount of P3 l ,500.00 payable once
he receives his share in the proceeds of the sale of
the land registered under TCT No. T-107449.
Following the pre-trial conference without the parties
reaching an amicable settlement, trial on the merits
ensued.9 Both parties proceeded to present, in open
court, documentary and testimonial evidence to
substantiate their claims.
For failure of Mario and Guillermo as plaintiffs therein
to adduce sufficient evidence to support their
complaint, the RTC, in a Decision10 dated 24 March
1999, dismissed Civil Case No. 215-M-90 and ordered
Reynaldo to return to the former the sum of
P28,000.00 with 12% annual interest. Reynaldo failed
to convince the court a quo that the contract he
entered into with Mario was an equitable mortgage. It
was held by the trial court, however, that the supposed
Contract to Sell denominated as Resibo is
unenforceable under Article 1403 of the New Civil
Code because Reynaldo cannot bind his co-owners
into such contract without an SPA authorizing him to
do so. As such, Reynaldo cannot be compelled to
deliver the subject property but he was nonetheless
ordered by the court to return the amount he received
as pmi of the contract price since no one should be
allowed to unjustly enrich himself at the expense of
another. The RTC disposed in this wise:
WHEREFORE, premises considered, the instant
complaint is hereby DISMISSED.
However, [Reynaldo is] hereby ordered to return to
[Mario and Guillermoj the sum of P28,000.00 plus
12% interest per annum from the date of this decision
until fully paid.11
On appeal, the Comi of Appeals, in its Decision12
dated 7 December 2006, brushed aside the claim of
equitable mortgage and held that the sale effected by
Reynaldo of his undivided share in the property is
valid and enforceable. According to the appellate
court, no SPA is necessary for Reynaldo's disposition
of his undivided share as it is limited to the portion that
may be allotted to him upon the termination of the co-
ownership. The Batongbacals could have validly
demanded from Reynaldo to deliver the subject
property pursuant to the Contract to Sell but such
option is no longer feasible because the entire
property has already been sold to third persons to
whom a new title was issued. The appellate court thus
proceeded to rescind the contract and ordered
Reynaldo to return the amount he received as
consideration thereby restoring the parties to their
situation before entering into the agreement. The
decretal portion of the decision reads:
WHEREFORE, the decision dated March 24, 1999 is
AFFIRMED with modification that appellee is ordered
to return to appellants the amount of P31,500.00 plus
12% interest per annum from the date of decision of
the trial court until full payment thereof.
In addition, the appellee is ordered:
1. To pay appellants P50,000.00 as
compensatory damages; P50,000.00 as moral
damages; and P30,000.00 as exemplary
damages.
2. To pay attorney's fees and litigation
expenses of P50,000.00; and
3. Double costs.13
In seeking modification of the appellate court's
decision, Mario and Guillermo pointed out that the title
of the subject property has not yet been transferred to
third persons, and thus, Reynaldo can still be
compelled to execute a deed of conveyance over his
undivided share of the entire property.
In a Resolution14 dated 8 August 2007, the Court of
Appeals granted the Motion for Reconsideration of
Mario and Guillermo and directed Reynaldo to convey
the subject property to them, viz:
WHEREFORE, [Reynaldo's] Motion for
Reconsideration is DENIED for lack of merit.
Upon the other hand, [Mario and Guillermo] Motion for
Reconsideration is GRANTED. Accordingly, the
decision dated December 7, 2006 is PARTIALLY
RECONSIDERED ordering defendant-appellee
Reynaldo dela Rosa or his successor-in-interest to
execute the requisite Deed of Sale over his Y-i
undivided share in the subject property covered by
TCT T-107449 and to accept the consideration of
P156,000.00 within thirty (30) days from the finality of
the decision.
In case of failure of [Reynaldo] to execute the deed of
sale, the Branch Clerk of Court of RTC Br. 16 of
Malolos, Bulacan is directed to execute the same and
receive the P156,000.00 balance on the purchase
price on behalf of Reynaldo de la Rosa.15
On 9 September 2007, the appellate court was notified
of the death or Reynaldo, and his heirs sought to be
substituted as party in this case.16
Petitioners Heirs of Reynaldo are now before this
Court via this instant Petition for Review on Certiorari
praying that the Court of Appeals Decision and
Resolution be reversed on the ground that it was
rendered not in accordance with the applicable law
and jurisprudence.
Issues
I.
WHETHER OR NOT THERE IS A CONTRACT
OF SALE BETWEEN REYNALDO DELA
ROSA AND GUILLERMO BATONGBACAL;
II.
ASSUMING THAT THERE IS A CONTRACT
OF SALE, WHETHER OR NOT GUILLERMO
BATONGBACAL COMPLIED WITII I IIS
OBLIGATION [UNDER THE CONTRACTl;
III.
WHETHER OR NOT RESPONDENTS ARE
GUILTY OF LACHES;
IV.
WHETHER OR NOT MARIO BATONGBACAL
IS A PARTY TO THE TRANSACTION
BETWEEN REYNALDO DELA ROSA AND
GUILLERMO BATONGBACAL;
V.
WHETHER OR NOT RESPONDEN'qS] ARE
ENTITLED TO AN A WARD OF DAMAGES;
VI.
 ASSUMING ARGUENDO THAT
RESPONDENTS ARE ENTITLED TO AW
ARD OF DAMAGES. WHETHER OR NOT
THE COURT OF APPEALS" A WARD OF
DAMAGES WAS EXCESSIVE.17
The various contentions revolve on the sole issue of
whether the contract entered into by parties was a
Contract to Sell or an equitable mortgage. The Court
will not delve into questions which arc factual in
nature, consistent with the rule that this Court is not a
trier of facts.
The Court's Ruling
In assailing the Court of Appeals' Decision and
Resolution, petitioners are unflinching in their stand
that the disputed contract purporting to be an absolute
deed of sale was an equitable mortgage with the
subject p roperty as security for a loan obligation. To
prove their point, petitioners asserted that the
consideration in the amount of P187,500.00 for a
property consisting of 15,001 square meters is grossly
inadequate because the land valuation in Barrio Saog,
Marilao, Bulacan, at the time the transaction was
entered into by the parties in 1984, was already
P80.00 to P100.00 per square meter. The gross
inadequacy of the price, the Heirs of Reynaldo argued,
is telling of the intention of the parties to mortgage and
not to sell the property with the end view of affording
the mortgagor an easy opportunity to redeem the
property should his means permit him to do so.
An equitable mortgage is defined as one although
lacking in some formality, or form or words, or other
requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real
property as security for a debt, and contains nothing
impossible or contrary to law. For the presumption of
an equitable mortgage to arise, two requisites must
concur: (1) that the parties entered into a contract
denominated as a sale; and (2) the intention was to
secure an existing debt by way of mortgage.
Consequently, the non-payment of the debt when due
gives the mortgagee the right to foreclose the
mortgage, sell the property and apply the proceeds of
the sale for the satisfaction of the loan obligation.18
While there is no single test to determine whether the
deed of absolute sale on its face is really a simple loan
accommodation secured by a mortgage, the Civil
Code, however, enumerates several instances when a
contract is presumed to be an equitable mortgage, to
wit:
Article 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
1) When the price of a sale with right to
repurchase is unusually inadequate;
(2) When the vendor remains in possession as
lessee or otherwise;
(3) When upon or after the expiration of the
right to repurchase another instrument
extending the period of redemption or granting
a new period is executed;
(4) When the purchaser retains for himself a
part of the purchase price;
(5) When the vendor binds himself to pay the
taxes on the thing sold;
(6) In any other case where it may be fairly
inferred that the real intention of the parties is
that the transaction shall secure the payment
of a debt or the performance of any other
obligation.
In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall
be subject to the usury laws.
A perusal of the contract denominated as Resibo
reveals the utter frailty of petitioners' position because
nothing therein suggests, even remotely, that the
subject property was given to secure a monetary
obligation. The terms of the contract set forth in no
uncertain terms that the instrument was executed with
the intention of transferring the ownership of the
subject prope1iy to the buyer in exchange for the
price. Nowhere in the deed is it indicated that the
transfer was merely intended to secure a debt
obligation. On the contrary, the document clearly
indicates the intent of Reynaldo to sell his share in the
property. The primary consideration in determining the
true nature of a contract is the intention of the
parties.19 If the words of a contract appear to
contravene the evident intention of the paiiies, the
latter shall prevail.20 Such intention is determined not
only from the express terms of their agreement, but
also from the contemporaneous and subsequent acts
of the parties.21 That the parties intended some other
acts or contracts apart from the express terms of the
agreement, was not proven by Reynaldo during the
trial or by his heirs herein.22 Beyond their bare and
uncorroborated asseverations that the contract failed
to express the true intention of the parties, the record
is bereft of any evidence indicative that there was an
equitable mortgage.
Neither could the allegation of gross inadequacy of the
price carry the day for the petitioners.1âwphi1 It must
be underscored at this point that the subject of the
Contract to Sell was limited only to '14 pro-indiviso
share of Reynaldo consisting an area of 3,750 square
meter and not the entire 15,001-square meter parcel
of land. As a co-owner of the subject property,
Reynaldo's right to sell, assign or mortgage his ideal
share in the property held in common is sanctioned by
law. The applicable law is Article 493 of the New Civil
Code, which spells out the rights of co-owners over a
co-owned property, to wit:
Art. 493. Each co-owner shall have the foll ownership
of his part and of the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or
mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved.
But the effect of the alienation or the mortgage, with
respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division
upon the termination of the co-ownership.
Pursuant to this law, a co-owner has the right to
alienate his proindiviso share in the co-owned property
even without the consent of his coowners.23 This right
is absolute and in accordance with the well-settled
doctrine that a co-owner has a full ownership of his
pro-indiviso share and has the right to alienate, assign
or mortgage it, and substitute another person for its
enjoyment.24 In other words, the law does not prohibit
a co-owner from selling, alienating, mortgaging his
ideal share in the property held in common.25
In Vaglidad v. Vaglidad, Jr., a case nearly on all fours
to the present petition, the Court upheld the right of
the co-owner to alienate his proindiviso share in the
co-owned property as part of his right of dominion. It
was even pointed out that since the previous sale is
valid, the subsequent conveyance effected by the co-
owner is null and void pursuant to the principle that
"no one can give what he does not have," nemo dat
quod non habet, thus:
LORETO sold the subject property to GABINO, JR. on
May 12, 1986 as a co-owner. LORETO had a right,
even before the partition of the property on January
19, 1987, to transfer in whole or in part his undivided
interest in the lot even without the consent of his co-
heirs. This right is absolute in accordance with the
well-settled doctrine that a co-owner has full
ownership of his pro-indiviso share and has the right
to alienate, assign or mortgage it, and substitute
another person for its enjoyment. Thus, what
GABINO, JR. obtained by virtue of the sale on May
12, 1986 were the same rights as the vendor LORETO
had as co-owner, in an ideal share equivalent to the
consideration given under their transaction.
LORETO sold some 1,604 square meters of Lot No.
1253 to GABINO, JR. Consequently, when LORETO
purportedly sold to WILFREDO on December 7, 1989
the same portion of the lot, he was no longer the
owner of Lot No. 1253-B. Based on the principle that
"no one can give what he does not have," LORETO
could not have validly sold to WILFREDO on
December 7, 1989 what he no longer had. As correctly
pointed out by the appellate court, the sale made by
LORETO in favor of WILFREDO is void as LORETO
did not have the right to transfer the ownership of the
subject property at the time of sale.26 (Emphasis
supplied).
In the same breadth, a co-owner cannot be compelled
by the court to give their consent to the sale of his
share in a co-owned property. In Arambulo v. Nolasco,
the Court intimated:
The ultimate authorities in civil law, recognized as
such by the Court, agree that co-owners such as
respondents have over their part, the right of full and
absolute ownership. Such right is the same as that or
individual owners which is not diminished by the fact
that the entire property is co-owned with others. That
part which ideally belongs to them, or their mental
portion, may be disposed of as they please,
independent of the decision of their co-owners. So we
rule in this case. The respondents cannot be ordered
to sell their portion of the co-owned properties. In the
language of Rodriguez v. Court of first Instance of
Rizal, "each party is the sole judge of what is good for
him."27 (Underscoring ours).
Thus, even if the impression of the Court of Appeals
were true, i.e., that the entire property has been sold
to thirds persons, such sale could not have affected
the right of Mario and Guillermo to recover the
property from Reynaldo. In view of the nature of co-
ownership, the Comi of Appeals correctly ruled that
the terms in the Contract to Sell, which limited the
subject to Reynaldo's ideal share in the property held
in common is perfectly valid and binding. In fact, no
authority from the other co-owners is necessary for
such disposition to be valid as he is afforded by the
law fullownership of his paii and of the fruits and
benefits pertaining thereto. J\ condition set forth in a
sale contract requiring a co-owner to secure an
authority from his co-owners for the alienation of his
share, as seemingly indicated in this case, should be
considered mere surplusage and docs not, in any way,
affect the validity or the enforceability of the contract.
Nor should such a condition indicate an intention to
sell the whole because the contrary intention has been
clearly written:
x x x Ang bahaging aking ipinagbibili ay ang f,ote No.
1, may sukat na 3,750 sq.m. na makikita sa nakalakip
na sketch plan na aking ding nilagdaan sa ikaliliwanag
ng kasulatang ito.28 Indeed, the intention clearly
written, settles the issue regarding the purchase price.
A contract of sale is a consensual contract, which
becomes valid and binding upon the meeting of minds
of the parties on the price and the object of the sale.29
The mere inadequacy of the price docs not affect its
validity when both parties are in a position to form an
independent judgment concerning the transaction,
unless fraud, mistake or undue influence indicative of
a defect in consent is present.30 A contract may
consequently be annulled on the ground of vitiated
consent and not due to the inadequacy of the price.31
In the case at bar, however, no evidence to prove
fraud, mistake or undue influence indicative of vitiated
consent is attendant.
As the parties invoking equitable mortgage, the Heirs
of Reynaldo did not even come close to proving that
the parties intended to charge the property as security
for a debt, leaving us with no other choice but to
uphold the stipulations in the contract. Basic is the rule
that if the terms of the contract are clear and leave no
doubt upon the intention of the parties, the literal
meaning of its stipulations shall control,32 we find that
the Court of Appeals cannot be faulted for ruling, in
modification of its original judgment, that the sale
effected by Reynaldo of his undivided share in the
property is valid and enforceable.
WHEREFORE, premises considered, the petition is
DENIED. The assailed Decision and Resolution of the
Court of Appeals are hereby AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice
G.R. No. 166790, November 19, 2014 - JUAN P.
CABRERA, Petitioner, v. HENRY YSAAC,
Respondent.

SECOND DIVISION
G.R. No. 166790, November 19, 2014
JUAN P. CABRERA, Petitioner, v. HENRY YSAAC,
Respondent.
DECISION
LEONEN, J.:
Unless all the co-owners have agreed to partition their
property, none of them may sell a definite portion of
the land. The co-owner may only sell his or her
proportionate interest in the co-ownership. A
contract of sale which purports to sell a specific or
definite portion of unpartitioned land is null and void ab
initio.
In this petition for review on certiorari,1 Juan P.
Cabrera assails the Court of Appeals' decision dated
June 19, 20032 and resolution dated January 3,
2005.3 These decisions ruled that a specific
performance to execute a deed of sale over a parcel
of land is not available as a relief for Juan Cabrera.
It appears that the heirs of Luis and Matilde Ysaac co-
owned a 5,517-square-meter parcel of land located in
Sabang, Naga City, covered by Original Certificate of
Title (OCT) No. 506.4 One of the co-owners is
respondent, Henry Ysaac.
Henry Ysaac leased out portions of the property to
several lessees. Juan Cabrera, one of the lessees,
leased a 95-square-meter portion of the land
beginning in 1986.5chanRoblesvirtualLawlibrary
On May 6, 1990, Henry Ysaac needed money and
offered to sell the 95-square-meter piece of land to
Juan Cabrera.6 He told Henry Ysaac that the land was
too small for his needs because there was no parking
space for his vehicle.7chanRoblesvirtualLawlibrary
In order to address Juan Cabrera's concerns, Henry
Ysaac expanded his offer to include the two adjoining
lands that Henry Ysaac was then leasing to the Borbe
family and the Espiritu family. Those three parcels of
land have a combined area of 439-square-meters.
However, Henry Ysaac warned Juan Cabrera that the
sale for those two parcels could only proceed if the
two families agree to it.
Juan Cabrera accepted the new offer. Henry Ysaac
and Juan Cabrera settled on the price of P250.00 per
square meter, but Juan Cabrera stated that he could
only pay in full after his retirement on June 15, 1992.8
Henry Ysaac agreed but demanded for an initial
payment of P1,500.00, which Juan Cabrera
paid.9chanRoblesvirtualLawlibrary
According to Juan Cabrera, Henry Ysaac informed
him that the Borbe family and the Espiritu family were
no longer interested in purchasing the properties they
were leasing. Since Mamerta Espiritu of the Espiritu
family initially considered purchasing the property and
had made an initial deposit for it, Juan Cabrera agreed
to reimburse this earlier payment. On June 9, 1990,
Juan Cabrera paid the amount of P6,100.00.10 Henry
Ysaac issued a receipt for this amount. P3,100.00 of
the'amount paid was reimbursed to Mamerta Espiritu
and, in turn, she gave Juan Cabrera the receipts
issued to her by Henry
11
Ysaac. chanRoblesvirtualLawlibrary
On June 15, 1992, Juan Cabrera tried to pay the
balance of the purchase price to Henry Ysaac.
However, at that time, Henry Ysaac was in the United
States. The only person in Henry Ysaac's residence
was his wife. The wife refused to accept Juan
Cabrera's payment.12chanRoblesvirtualLawlibrary
Sometime in September 1993, Juan Cabrera alleged
that Henry Ysaac approached him, requesting to
reduce the area of the land subject of their transaction.
Part of the 439-square-meter land was going to be
made into a barangay walkway, and another part was
being occupied by a family that was difficult to eject.13
Juan Cabrera agreed to the proposal. The land was
surveyed again. According to Juan Cabrera, Henry
Ysaac agreed to shoulder the costs of the resurvey,
which Juan Cabrera advanced in the amount of
P3,000.00.
The resurvey shows that the area now covered by the
transaction was 321 square meters.14 Juan Cabrera
intended to show the sketch plan and pay the amount
due for the payment of the lot. However, on that day,
Henry Ysaac was in Manila. Once more, Henry
Ysaac's wife refused to receive the payment because
of lack of authority from her
husband.15chanRoblesvirtualLawlibrary
On September 21, 1994, Henry Ysaac's counsel, Atty.
Luis Ruben General, wrote a letter addressed to Atty.
Leoncio Clemente, Juan Cabrera's counsel.16 Atty.
General informed Atty. Clemente that his client is
formally rescinding the contract of sale because Juan
Cabrera failed to pay the balance of the purchase
price of the land between May 1990 and May 1992.
The letter also stated that Juan Cabrera's initial
payment of P1,500.00 and the subsequent payment of
P6,100.00 were going to be applied as payment for
overdue rent of the parcel of land Juan Cabrera was
leasing from Henry Ysaac.17 The letter also denied the
allegation of Juan Cabrera that Henry Ysaac agreed to
shoulder the costs of the resurveying of the
property.18chanRoblesvirtualLawlibrary
Juan Cabrera, together with his uncle, Delfin Cabrera,
went to Henry Ysaac's house on September 16, 1995
to settle the matter.19 Henry Ysaac told Juan Cabrera
that he could no longer sell the property because the
new administrator of the property was his brother,
Franklin Ysaac.20chanRoblesvirtualLawlibrary
Due to Juan Cabrera's inability to enforce the contract
of sale between him and Henry Ysaac, he decided to
file a civil case for specific performance on September
20, 1995.21 Juan Cabrera prayed for the execution of a
formal deed of sale and for the transfer of the title of
the property in his name.22 He tendered the sum of
P69,650.00 to the clerk of court as payment of the
remaining balance of the original sale price.23 On
September 22, 1995, a notice of lis pendens was
annotated on OCT No.
560.24chanRoblesvirtualLawlibrary
In his answer with counterclaim,25 Henry Ysaac prayed
for the dismissal of Juan Cabrera's complaint.26 He
also prayed for compensation in the form of moral
damages, attorney's fees, and incidental litigation
expenses.27chanRoblesvirtualLawlibrary
Before the Regional Trial Court decided the case, the
heirs of Luis and Matilde Ysaac, under the
administration of Franklin Ysaac, sold their property to
the local government of Naga City on February 12,
1997.28 The property was turned into a project for the
urban poor of the city.29chanRoblesvirtualLawlibrary
During the trial, Corazon Borbe Combe of the Borbe
family testified that contrary to what Juan Cabrera
claimed, her family never agreed to sell the land they
were formerly leasing from Henry Ysaac in favor of
Juan Cabrera.30 The Borbe family bought the property
from Naga City's urban poor program after the sale
between the Ysaacs and the local government of
Naga City.31chanRoblesvirtualLawlibrary
On September 22, 1999, the Regional Trial Court of
Naga City ruled that the contract of sale between Juan
Cabrera and Henry Ysaac was duly rescinded when
the former failed to pay the balance of the purchase
price in the period agreed upon.32 The Regional Trial
Court found that there was an agreement between
Juan Cabrera and Henry Ysaac as to the sale of land
and the corresponding unit price.33 However, aside
from the receipts turned over by Mamerta Espiritu of
the Espiritu family to Juan Cabrera, there was no
"evidence that the other adjoining lot occupants
agreed to sell their respective landholdings" to Juan
Cabrera.34 The Regional Trial Court also doubted that
Juan Cabrera was willing and able to pay Henry
Ysaac on June 15, 1992. According to the trial
court:chanroblesvirtuallawlibrary
[A]fter the said refusal of Henry Ysaac's wife, plaintiff
[Juan Cabrera] did not bother to write to the defendant
[Henry Ysaac] or to any of the co-owners his intention
to pay for the land or he could have consigned the
amount in court at the same time notifying [Henry
Ysaac] of the consignation in accordance with Article
1256 of the Civil Code. Furthermore, in September,
1993 [Juan Cabrera] was able to meet [Henry Ysaac]
when the latter allegedly talked to him about the
reduction of the area he was going to buy. There is no
showing that [Juan Cabrera] again tendered his
payment to Henry Ysaac. Instead, he allegedly made
his offer after he had the land resurveyed but
defendant was then in Manila. There is no evidence as
to what date this offer was made. . .
. . . [T]he court does not see any serious demand
made for performance of the contract on the part of
[Juan Cabrera] in 1992 when he allegedly promised to
pay the balance of the purchase price. Neither could
he demand for the sale of the adjoining lots because.
the occupants thereof did not manifest their consent
thereto. At the most, he could have demanded the
sale of the lot which he was occupying. If his payment
was refused in 1995, he cannot demand for damages
because the rescission of the contract was relayed to
him in writing in Exhibit "4".35
The Regional Trial Court dismissed Juan Cabrera's
complaint and Henry Ysaac's counterclaim.36 Juan
Cabrera appealed the Regional Trial Court's
decision.37chanRoblesvirtualLawlibrary
The Court of Appeals agreed with the Regional Trial
Court that there was a perfected contract of sale
between Juan Cabrera and Henry Ysaac.38 According
to the Court of Appeals, even if the subject of the sale
is part of Henry Ysaac's undivided property, a co-
owner may sell a definite portion of the
property.39chanRoblesvirtualLawlibrary
The Court of Appeals also ruled that the contract of
sale between Juan Cabrera and Henry Ysaac was not
validly rescinded.40 For the rescission to be valid
under Article 1592 of the Civil Code, it should have
been done through a judicial or notarial act and not
merely through a letter.41chanRoblesvirtualLawlibrary
However, due to the sale of the entire property of the
Ysaac family in favor of the local government of Naga
City, the Court of Appeals ruled that the verbal
contract between Juan Cabrera and Henry Ysaac
cannot be subject to the remedy of specific
performance.42 The local government of Naga City
was an innocent purchaser for value, and following the
rules on double sales, it had a preferential right since
the sale, it entered into was in a public instrument,
while the one with Juan Cabrera was only made
orally.43 The only recourse the Court of Appeals could
do is to order Henry Ysaac to return the initial payment
of the purchase price of P10,600.00 (P1,500.00 and
P6,100.00 as evidenced by the receipts issued by
Henry Ysaac to Juan Cabrera, and P3,000.00 for the
surveying expenses) as payment of actual damages.
The Court of Appeals likewise awarded attorney's fees
and litigation costs. To wit:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the assailed
decision of the lower court is hereby SET ASIDE and
a new one is entered as
follows:ChanRoblesVirtualawlibrary
1. Declaring that there is no valid rescission of the
contract of sale of the subject lot between plaintiff-
appellant [Juan P. Cabrera] and defendant-appellee
[Henry Ysaac]; however, specific performance is not
an available relief to plaintiff because of the
supervening sale of the property to the City of Naga,
an innocent purchaser and for value;
2. Ordering [Henry Ysaac] to pay [Juan P. Cabrera]
actual damages in the amount of P10,600.00, with
legal interest of 12% per annum from September 20,
1995 until paid;
3. Ordering [Henry Ysaac] to pay [Juan P. Cabrera],
the amount of thirty thousand pesos (P30,000.00) by
way of attorney's fees and litigation expenses.
Henry Ysaac filed his motion for reconsideration dated
July 14, 2003 of the decision of the Court of Appeals.44
On the other hand, Juan Cabrera immediately filed a
petition for review on certiorari with this court.45 In the
resolution dated October 15, 2003, this court denied
the petition "for being premature since respondent's
motion for reconsideration of the questioned decision
of the Court of Appeals is still pending
resolution."46chanRoblesvirtualLawlibrary
In the resolution dated January 3, 2005, the Court of
Appeals denied Henry Ysaac's motion for
reconsideration. On February 24, 2005, Juan Cabrera
filed another petition with this court, questioning the
propriety of the Court of Appeals' decision and
resolution.
This court initially noted that the petition was filed out
of time. The stamp on the petition states that it was
received by this court on March 24, 2005,47 while the
reglementary period to file the petition expired on
February 28, 2005. Thus, the petition was dismissed
in this court's resolution dated April 27, 2005.48
Petitioner filed a motion for reconsideration.49
However, the same was denied with finality in this
court's resolution dated August 17,
2005.50chanRoblesvirtualLawlibrary
In a letter addressed to the Chief Justice, petitioner
argued that it would be unfair to him if a clerical error
would deprive his petition from being judged on the
merits. Petitioner emphasized that the registry receipts
show that he filed the petition on February 24, 2005,
not March 24, 2005, as noted by this court in his
pleading.51 This court treated the letter as a second
motion for reconsideration. In the resolution dated
March 31, 2006, this court found merit in petitioner's
letter.52 The petition was reinstated, and respondent
was ordered to file his comment.53 Respondent filed
his comment on September 18, 2006.54 This court
required petitioner to file a reply,55 which petitioner
complied with on January 15,
2007.56chanRoblesvirtualLawlibrary
The issues raised by petitioner and respondent are
summarized as follows:
1. Whether this court could take cognizance of
issues not raised by petitioner but by
respondent in his comment to the petition for
review;
2. Whether there was a valid contract of sale
between petitioner and respondent;
3. Whether the contract of sale still subsisted;
a. Whether the contract was terminated
through rescission;
b. Whether the contract was no longer
enforceable due to the supervening
sale of the property to the local
government of Naga City;
4. Whether petitioner is entitled to the execution
of a deed of sale in his favor; and
5. Whether petitioner is entitled to actual
damages, attorney's fees, and costs of
litigation.
The petition should be denied.cralawred
I
This court can resolve issues
raised by both parties
Petitioner stated that the errors in this case are: (1)
"the [Court of Appeals] erred in holding that the relief
of specific performance is not available to [petitioner]
supposedly because of the supervening sale of [the]
property to the City Government of Naga";57 and (2)
"consequently, the [Court of Appeals] erred in not
ordering the execution of the necessary deed of sale
in favor of [petitioner]."58 Petitioner argues that this
court should limit its adjudication to these two
errors.59chanRoblesvirtualLawlibrary
On the other hand, respondent raised issues on the
validity of the contract of sale in favor of petitioner, and
the propriety of the award of actual damages with
interest, attorney's fees, and litigation
expenses.60chanRoblesvirtualLawlibrary
For petitioner, if respondent wanted to raise issues
regarding the Court of Appeals' decision, respondent
should have interposed a separate
appeal.61chanRoblesvirtualLawlibrary
Petitioner's position is erroneous. This court can
resolve issues and assignments of error argued by
petitioner and respondent.
This court "is clothed with ample authority to review
matters, even if they are not assigned as errors in their
appeal, if it finds that their consideration is necessary
to arrive at a just decision of the case."62 We can
consider errors not raised by the parties, more so if
these errors were raised by respondent.
Respondent raised different issues compared with
those raised by petitioner. However, the assignment of
error of respondent was still responsive to the main
argument of petitioner. Petitioner's argument works on
the premise that there was a valid contract. By
attacking the validity of the contract, respondent was
merely responding to the premise of petitioner's main
argument. The issue is relevant to the final disposition
of this case; hence, it should be considered by this
court in arriving at a decision.cralawred
II
There was no valid contract of sale
between petitioner and respondent
Petitioner agrees with the decision of the Court of
Appeals that there was a perfected contract of sale
between him and
63
respondent. chanRoblesvirtualLawlibrary
Respondent, however, argues that there was no
contract between him and petitioner because under
Article 1475 of the Civil Code, there has to be a
meeting of the minds as to the price and the object of
the contract.64 Respondent argues that there was no
meeting of the minds as to the final price65 and size66
of the property subject of the sale.
In addition, while respondent admits that he was
willing to sell the property being leased from him by
the Borbe family and the Espiritu family, petitioner
presented no evidence to show that these families
agreed to the sale in favor of petitioner. During trial,
Corazon Borbe Combe of the Borbe family testified
that her family never agreed to allow the sale of the
property in favor of petitioner.67 Respondent likewise
alleged that Mamerta Espiritu of the Espiritu family
eventually bought the property occupied by her family,
which is contrary to the claim that petitioner obtained
the consent of Mamerta Espiritu to have the land sold
in his favor.68chanRoblesvirtualLawlibrary
Petitioner replied that respondent sold 113 square
meters of the 321-square-meter property to the
Espiritu family on January 17,
1996.69chanRoblesvirtualLawlibrary
Petitioner argued that Mamerta Espiritu was not a
buyer in good faith because in 1990, she voluntarily
agreed to surrender the lot for sale in favor of
petitioner because she did not have the money to pay
for the lot. Hence, the sale in favor of Mamerta Espiritu
should not supersede the sale in favor of
petitioner.70chanRoblesvirtualLawlibrary
The Regional Trial Court ruled that there was a valid
contract of sale, although it found that there was no
evidence to support petitioner's claim that he was able
to secure the consent of the Espiritu family and the
Borbe family to the sale of the land.71 There was a
valid contract of sale subject to a suspensive
condition, but the suspensive condition was not
complied with.
For the Court of Appeals, there was a valid contract of
sale.72 The Court of Appeals' ruling was based on the
idea that a co-owner could sell a definite portion of the
land owned in common, and not because the
suspensive conditions of the contract were complied
with. In ruling this way, the Court of Appeals relied on
Pamplona v. Morato,73 which stated
that:chanroblesvirtuallawlibrary
. . . [A] "co-owner may validly sell his undivided share
of the property owned in common. (If the part sold
happens to be his allotted share after partition, the
transaction is entirely valid). Now then if there has
been no express partition as yet, but the co-owner
who sells points out to his buyers the boundaries of
the part he was selling, and the other co-owners make
no objection, there is in effect already a partial
partition, and the sale of the definite portion can no
longer be assailed."74
We find that there was no contract of sale. It was null
ab initio.
As defined by the Civil Code, "[a] contract is a meeting
of minds between two persons whereby one binds
himself, with respect to the other, to give something or
to render some service."75 For there to be a valid
contract, there must be consent of the contracting
parties, an object certain which is the subject matter of
the contract, and cause of the obligation which is
established.76chanRoblesvirtualLawlibrary
Sale is a special contract. The seller obligates himself
to deliver a determinate thing and to transfer its
ownership to the buyer. In turn, the buyer pays for a
price certain in money or its equivalent.77 A "contract
of sale is perfected at the moment there is a -meeting
of minds upon the thing which is the object of the
contract and upon the price.'"78 The seller and buyer
must agree as to the certain thing that will be subject
of the sale as well as the price in which the thing will
be sold. The thing to be sold is the object of the
contract, while the price is the cause or consideration.
The object of a valid sales contract must be owned by
the seller. If the seller is not the owner, the seller must
be authorized by the owner to sell the
object.79chanRoblesvirtualLawlibrary
Specific rules attach when the seller co-owns the
object of the contract. Sale of a portion of the property
is considered an alteration of the thing owned in
common. Under the Civil Code, such disposition
requires the unanimous consent of the other co-
owners.80 However, the rules also allow a co-owner to
alienate his or her part in the co-ownership. These two
rules are reconciled through
jurisprudence.81chanRoblesvirtualLawlibrary
If the alienation precedes the partition, the co-owner
cannot sell a definite portion of the land without
consent from his or her co-owners. He or she could
only sell the undivided interest of the co-owned
property.82 As summarized in Lopez v. Ilustre,83 "[i]f he
is the owner of an undivided half of a tract of land, he
has a right to sell and convey an undivided half, but he
has no right to divide the lot into two parts, and convey
the whole of one part by metes and
bounds."84chanRoblesvirtualLawlibrary
The undivided interest of a co-owner is also referred to
as the "ideal or abstract quota" or "proportionate
share." On the other hand, the definite portion of the
land refers to specific metes and bounds of a co-
owned property.
To illustrate, if a ten-hectare property is owned equally
by ten co-owners, the undivided interest of a co-owner
is one hectare. The definite portion of that interest is
usually determined during judicial or extrajudicial
partition. After partition, a definite portion of the
property held in common is allocated to a specific co-
owner. The co-ownership is dissolved and, in effect,
each of the former co-owners is free to exercise
autonomously the rights attached to his or her
ownership over the definite portion of the land.
It is crucial that the co-owners agree to which portion
of the land goes to whom.
Hence, prior to partition, a sale of a definite portion of
common property requires the consent of all co-
owners because it operates to partition the land with
respect to the co-owner selling his or her share. The
co-owner or seller is already marking which portion
should redound to his or her autonomous ownership
upon future partition.
The object of the sales contract between petitioner
and respondent was a definite portion of a co-owned
parcel of land. At the time of the alleged sale between
petitioner and respondent, the entire property was still
held in common. This is evidenced by the original
certificate of title, which was under the names of
Matilde Ysaac, Priscilla Ysaac, Walter Ysaac,
respondent Henry Ysaac, Elizabeth Ysaac, Norma
Ysaac, Luis Ysaac, Jr., George Ysaac, Franklin
Ysaac, Marison Ysaac, Helen Ysaac, Erlinda Ysaac,
and Maridel Ysaac.85chanRoblesvirtualLawlibrary
The rules allow respondent to sell his undivided
interest in the co-ownership. However, this was not
the object of the sale between him and petitioner. The
object of the sale was a definite portion. Even if it was
respondent who was benefiting from the fruits of the
lease contract to petitioner, respondent has "no right
to sell or alienate a concrete, specific or determinate
part of the thing owned in common, because his right
over the thing is represented by quota or ideal portion
without any physical
86
adjudication." chanRoblesvirtualLawlibrary
There was no showing that respondent was
authorized by his co-owners to sell the portion of land
occupied by Juan Cabrera, the Espiritu family, or the
Borbe family. Without the consent of his co-owners,
respondent could not sell a definite portion of the co-
owned property.
Respondent had no right to define a 95-square-meter
parcel of land, a 439-square-meter parcel of land, or a
321-square-meter parcel of land for purposes of
selling to petitioner. The determination of those metes
and bounds are not binding to the co-ownership and,
hence, cannot be subject to sale, unless consented to
by all the co-owners.
In finding that there was a valid contract of sale
between petitioner and respondent, the Court of
Appeals erred in the application of Pamplona v.
Moreto.87 The ruling in Pamplona should be read and
applied only in situations similar to the context of that
case.
Pamplona involved the Spouses Moreto who owned
three (3) parcels of land with a total, area of 2,346
square meters. The spouses had six (6) children. After
the wife had died, the husband sold one of the parcels
to the Pamplona family, even if the conjugal
partnership had not yet been liquidated. The parcel
sold measured 781 square meters, which was less
than the ideal share of the husband in the estate. This
court allowed the sale to prosper because of the
tolerance from the husband's co-heirs. This court
ruled:chanroblesvirtuallawlibrary
The title may be pro-indiviso or inchoate but the
moment the co-owner as vendor pointed out its
location and even indicated the boundaries over which
the fences were to be erected without objection,
protest or complaint by the other co-owners, on the
contrary they acquiesced and tolerated such
alienation, occupation and possession, We rule that a
factual partition or termination of the co-ownership,
although partial, was created, and barred not only the
vendor, Flaviano Moreto, but also his heirs, the private
respondents herein from asserting as against the
vendees-petitioners any right or title in derogation of
the deed of sale executed by said vendor Flaviano
Moreto.88(Emphasis supplied)
In Pamplona, the co-heirs of Flaviano Moreto only
questioned the sale to the Pamplona family nine (9)
years after the sale. By then, the Pamplona family had
exercised several acts of ownership over the land.
That is why this court considered it acquiescence or
tolerance on the part of the co-heirs when they
allowed the Pamplonas to take possession and build
upon the land sold, and only questioned these acts
several years later.
The ruling in Pamplona does not apply to petitioner.
There was no evidence adduced during the trial that
respondent's co-owners acquiesced or tolerated the
sale to petitioner. The co-owners tolerated petitioner's
possession of a portion of their land because
petitioner was a lessee over a 95-square-meter
portion of the property, not the buyer of the 321-
square-meter portion.
There was also no evidence of consent to sell from the
co-owners. When petitioner approached respondent in
1995 to enforce the contract of sale, respondent
referred him to Franklin Ysaac, the administrator over
the entire property. Respondent's act suggests the
absence of consent from the co-owners. Petitioner did
not show that he sought Franklin Ysaac's consent as
administrator and the consent of the other co-owners.
Without the consent of the co-owners, no partial
partition operated in favor of the sale to petitioner.
At best, the agreement between petitioner and
respondent is a contract to sell, not a contract of sale.
A contract to sell is a promise to sell an object, subject
to suspensive conditions.89 Without the fulfillment of
these suspensive conditions, the sale does not
operate to determine the obligation of the seller to
deliver the object.
A co-owner could enter into a contract to sell a definite
portion of the property. However, such contract is still
subject to the suspensive condition of the partition of
the property, and that the other co-owners agree that
the part subject of the contract to sell vests in favor of
the co-owner's buyer. Hence, the co-owners' consent
is an important factor for the sale to ripen.
A non-existent contract cannot be a rescission:chanroblesvirtuallawlibrary
source of obligations, and it cannot be
enforced by the courts
Since petitioner believes that there was a perfected
contract of sale between him and respondent, he
argues that a deed of sale should be formally
executed. Petitioner agrees with the Court of Appeals'
finding that there was no valid rescission of the
contract in accordance with Article 1592 of the Civil
Code.90 However, petitioner disagrees with the Court
of Appeals when it ruled that the contract was no
longer enforceable due to the supervening sale with
the local government of Naga City. Petitioner argues
that the sale in favor of the local government of Naga
City was not made in good faith. Before the sale was
finalized between the local government and the heirs
of Luis and Matilde Ysaac, petitioner had a notice of lis
pendens annotated to OCT No. 506.91 It was
presumed that the local government had due notice of
petitioner's adverse claim, thus, it cannot be
considered an innocent purchaser.
For respondent, due to the inexistence of a valid
contract of sale, petitioner cannot demand specific
performance from respondent.92 Respondent
disagrees with the Court of Appeals when it stated that
Article 1592 of the rescission of contract of sale
applies. There is no need to apply Article 1592
because there was no contract to begin with.93 The
contract between respondent and petitioner was
terminated by virtue of the letter dated September 21,
1994.94chanRoblesvirtualLawlibrary
We rule in favor of respondent.
The absence of a contract of sale means that there is
no source of obligations for respondent, as seller, or
petitioner, as buyer. Rescission is impossible because
there is no contract to rescind. The rule in Article 1592
that requires a judicial or notarial act to formalize
rescission of a contract of sale of an immovable
property does not apply. This court does not need to
rule whether a letter is a valid method of rescinding a
sales contract over an immovable property because
the question is moot and academic.
Even if we assume that respondent had full ownership
of the property and that he agreed to sell a portion of
the property to petitioner, the letter was enough to
cancel the contract to sell.
Generally, "[t]he power to rescind obligations is
implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent on
him."95chanRoblesvirtualLawlibrary
For the sale of immovable property, the following
provision governs its
Article 1592. In the sale of immovable property, even
though it may have been stipulated that upon failure to
pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long as
no demand for rescission of the contract has been
made upon him either judicially or by notarial act. After
the demand, the court may not grant him a new term.
This provision contemplates (1) a contract of sale of
an immovable property and (2) a stipulation in the
contract that failure to pay the price at the time agreed
upon will cause the rescission of the contract. The
vendee or the buyer can still pay even after the time
agreed upon, if the agreement between the parties
has these requisites. This right of the vendee to pay
ceases when the vendor or the seller demands the
rescission of the contract judicially or extrajudicially. In
case of an extrajudicial demand to rescind the
contract, it should be notarized.
Hence, this provision does not apply if it is not a
contract of sale of an immovable property and merely
a contract to sell an immovable property. A contract to
sell is "where the ownership or title is retained by the
seller and is not to pass until the full payment of the
price, such payment being a positive suspensive
condition and failure of which is not a breach, casual
or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring
binding force."96chanRoblesvirtualLawlibrary
In a similar case entitled Manuel v. Rodriguez,97
Eusebio Manuel offered to buy the land owned by
Payatas Subdivision, Inc. The Secretary-Treasurer of
Payatas Subdivision, Eulogio.Rodriguez, Sr., agreed
to sell the land to Eusebio Manuel after negotiations.
Similar to this case, the agreement was only made
orally and not in writing. An initial payment was made,
and a final payment was to be made nine (9) to ten
(10) months later. Manuel never paid for the latter
installment; hence, Eulogio Rodriguez cancelled their
agreement and sold the land to someone else.
In Manuel, this court categorically stated that Article
1592 "does not apply to a contract to sell or promise to
sell, where title remains with the vendor until fulfillment
to a positive suspensive condition, such as full
payment of the price."98 This court upheld that the
contract to sell was validly cancelled through the non-
payment of Eusebio Manuel. The same conclusion
applies in this case.
The law does not prescribe a form to rescind a
contract to sell immovable property. In Manuel, the
non-payment operated to cancel the contract. If mere
non-payment is enough to cancel a contract to sell,
the letter given to petitioner's lawyer is also an
acceptable form of rescinding the contract. The law
does not require notarization for a letter to rescind a
contract to sell immovable property. Notarization is
only required if a contract of sale is being rescinded.
Petitioner argued that he was willing to comply with
the suspensive condition on the contract to sell
because he was ready to pay the balance of the
purchase price on June 15, 1992.99 However, his
argument is unmeritorious. As ruled by the Regional
Trial Court, petitioner should have resorted to the
various modes of consignment when respondent's
wife refused to accept the payment on respondent's
behalf.100chanRoblesvirtualLawlibrary
Therefore, even if we assumed that the contract
between petitioner and respondents were perfected,
the strict requisites in Article 1592 did not apply
because the only perfected contract was a contract to
sell, not a contract of sale. The courts cannot enforce
the right of petitioner to buy respondent's property. We
cannot order the execution of a deed of sale between
petitioner and respondent.
The question of double sale also becomes moot and
academic. There was no valid sale between petitioner
and respondent, while there was a valid sale between
the local government of Naga City and respondent
and his co-owners. Since there is only one valid sale,
the rule on double sales under Article 1544 of the Civil
Code does not apply.101chanRoblesvirtualLawlibrary
Compensatory damages, attorney's
fees, and costs of litigation
Respondent argued that petitioner is not entitled to the
compensatory damages that the Court of Appeals
awarded. According to respondent, petitioner
continues to occupy the 95-square-meter property that
he has been leasing since 1986 because the parcel
was not included in the sale to the local government of
Naga City.102 Since April 30, 1990, petitioner has not
been paying rent to respondent despite his continued
occupation of the property.103 Therefore, there was no
unjust enrichment on the part of respondent when he
applied petitioner's initial payment over the sale of the
property as payment for rent.
Respondent argued further that the award of
attorney's fees and litigation expenses in favor of
petitioner was also erroneous because prior to this
litigation, respondent already informed petitioner that
his claim has no basis in law and fact.104 Yet,
petitioner persisted on filing this
case.105chanRoblesvirtualLawlibrary
We rule that petitioner is entitled to the return of the
amount of money because he paid it as consideration
for ownership of the land. Since the ownership of the
land could not be transferred to him, the money he
paid for that purpose must be returned to him.
Otherwise, respondent will be unjustly enriched.
Respondent's claim for rent in arrears is a separate
cause of action from this case. For petitioner's earnest
money payment to be considered payment for his rent
liabilities, the rules of compensation under Article 1279
of the Civil Code must be
followed.106chanRoblesvirtualLawlibrary

It was not proven during trial if petitioner's rental

liability to respondent is due, or if it is already
liquidated and demandable. Hence, this court is
limited to uphold the ruling of the Court of Appeals, but
such payment could be subject to the rule on
compensation.

However, petitioner is not entitled to attorney's fees

and the costs of litigation. The Court of Appeals
awarded attorney's fees to petitioner "just to protect
his right [because petitioner] reached this court to
seek justice for
himself."107chanRoblesvirtualLawlibrary

Contrary to the Court of Appeals' ruling, we find that

petitioner did not have a clear right over the property
in question. The Court of Appeals awarded attorney's
fees and litigation costs on the premise that the
contract between petitioner and respondent was
perfected. Without a valid contract that stipulates his
rights, petitioner risked litigation in order to determine
if he has rights, and not to protect rights that he
currently has. Hence, the award of attorney's fees and
litigation costs was not properly
justified.chanrobleslaw

WHEREFORE, the petition is DENIED. The Court of

Appeals' decision dated June 19, 2003 in CA-G.R. CV
No. 65869 is SET ASIDE. The contract between
petitioner and respondent is DECLARED invalid and,
therefore, cannot be subject to specific performance.
Respondent is ORDERED to return P10,600.00 to
petitioner, with legal interest of 12% per annum from
September 20, 1995 until June 30, 2013 and 6% per
annum from July 1, 2013 until fully paid. The award of
attorney's fees and litigation expenses is DELETED.

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and

Mendoza, JJ., concur.
 Republic of the Philippines within a period of one hundred fifty (150)
Supreme Court days from date hereof without interest;
Manila
b) That for any reason, BUYER fails to pay
SECOND DIVISION the remaining balance within above
mentioned period, the BUYER shall have a
DELFIN TAN, grace period of sixty (60) days within which
Petitioner, to make the payment, provided that there
shall be an interest of 15% per annum on
- versus - the balance amount due from the
SELLERS;
ERLINDA C. BENOLIRAO,
ANDREW C. BENOLIRAO, c) That should in case (sic) the BUYER fails
ROMANO C. BENOLIRAO, to comply with the terms and conditions
DION C. BENOLIRAO, within the above stated grace period, then
SPS. REYNALDO TANINGCO the SELLERS shall have the right to forfeit
and NORMA D. BENOLIRAO, the down payment, and to rescind this
EVELYN T. MONREAL, and conditional sale without need of judicial
ANN KARINA TANINGCO, action;
Respondents.
d) That in case, BUYER have complied with
x-------------------------------------------------------------------------------------- x the terms and conditions of this contract,
then the SELLERS shall execute and
DECISION deliver to the BUYER the appropriate Deed
of Absolute Sale;
BRION, J.:
Pursuant to the Deed of Conditional Sale, Tan
Is an annotation made pursuant to Section 4, issued and delivered to the co-owners/vendors
Rule 74 of the Rules of Court (Rules) on a certificate Metrobank Check No. 904407 for P200,000.00 as
of title covering real property considered an down payment for the property, for which the vendors
encumbrance on the property? We resolve this issued a corresponding receipt.
question in the petition for review on certiorari filed by
Delfin Tan (Tan) to assail the decision of the Court of On November 6, 1992, Lamberto Benolirao
Appeals (CA) in CA-G.R. CV No. 52033 and the died intestate. Erlinda Benolirao (his widow and one of
decision of the Regional Trial Court (RTC) that the vendors of the property) and her children, as heirs
commonly declared the forfeiture of his P200,000.00 of the deceased, executed an extrajudicial settlement
down payment as proper, pursuant to the terms of his of Lambertos estate on January 20, 1993. On the
contract with the respondents. basis of the extrajudicial settlement, a new certificate
of title over the property, TCT No. 27335, was issued
THE ANTECEDENTS on March 26, 1993 in the names of the Spouses
Reynaldo and Norma Taningco and Erlinda Benolirao
The facts are not disputed. Spouses Lamberto and and her children. Pursuant to Section 4, Rule 74 of the
Erlinda Benolirao and the Spouses Reynaldo and Rules, the following annotation was made on TCT No.
Norma Taningco were the co-owners of a 689-square 27335:
meter parcel of land (property) located in Tagaytay
City and covered by Transfer Certificate of Title (TCT) x x x any liability to credirots
No. 26423. On October 6, 1992, the co-owners (sic), excluded heirs and other persons
executed a Deed of Conditional Sale over the property having right to the property, for a period
in favor of Tan for the price of P1,378,000.00. The of two (2) years, with respect only to
deed stated: the share of Erlinda, Andrew, Romano
and Dion, all surnamed Benolirao
a) An initial down-payment of TWO
HUNDRED (P200,000.00) THOUSAND
PESOS, Philippine Currency, upon signing As stated in the Deed of Conditional Sale, Tan had
of this contract; then the remaining balance until March 15, 1993 to pay the balance of the
of ONE MILLION ONE HUNDRED purchase price. By agreement of the parties, this
SEVENTY EIGHT THOUSAND period was extended by two months, so Tan had until
(P1,178,000.00) PESOS, shall be payable May 15, 1993 to pay the balance. Tan failed to pay
and asked for another extension, which the vendors
again granted. Notwithstanding this second extension,
Tan still failed to pay the remaining balance due on
May 21, 1993. The vendors thus wrote him a letter
demanding payment of the balance of the purchase
price within five (5) days from notice; otherwise, they
would declare the rescission of the conditional sale
and the forfeiture of his down payment based on the
terms of the contract.
Tan refused to comply with the vendors
demand and instead wrote them a letter (dated May
28, 1993) claiming that the annotation on the title,
made pursuant to Section 4, Rule 74 of the Rules,
constituted an encumbrance on the property that
would prevent the vendors from delivering a clean title
to him. Thus, he alleged that he could no longer be
required to pay the balance of the purchase price and
demanded the return of his down payment.
When the vendors refused to refund the down
payment, Tan, through counsel, sent another demand
letter to the vendors on June 18, 1993. The vendors
still refused to heed Tans demand, prompting Tan to
file on June 19, 1993 a complaint with the RTC of
Pasay City for specific performance against the
vendors, including Andrew Benolirao, Romano
Benolirao, Dion Benolirao as heirs of Lamberto
Benolirao, together with Evelyn Monreal and Ann
Karina Taningco (collectively, the respondents). In his
complaint, Tan alleged that there was a novation of
the Deed of Conditional Sale done without his consent
since the annotation on the title created an
encumbrance over the property. Tan prayed for the
refund of the down payment and the rescission of the
contract.
On August 9, 1993, Tan amended his
Complaint, contending that if the respondents insist on
forfeiting the down payment, he would be willing to
pay the balance of the purchase price provided there
is reformation of the Deed of Conditional Sale. In the
meantime, Tan caused the annotation on the title of a
notice of lis pendens.
On August 21, 1993, the respondents
executed a Deed of Absolute Sale over the property in
favor of Hector de Guzman (de Guzman) for the price
of P689,000.00.
Thereafter, the respondents moved for the
cancellation of the notice of lis pendens on the ground
that it was inappropriate since the case that Tan filed
was a personal action which did not involve either title
to, or possession of, real property. The RTC issued an
order dated October 22, 1993 granting the
respondents motion to cancel the lis pendens
annotation on the title.
Meanwhile, based on the Deed of Absolute
Sale in his favor, de Guzman registered the property
and TCT No. 28104 was issued in his name. Tan then
filed a motion to carry over the lis pendens annotation
to TCT No. 28104 registered in de Guzmans name,
but the RTC denied the motion.
On September 8, 1995, after due proceedings, the
RTC rendered judgment ruling that the respondents
forfeiture of Tans down payment was proper in
accordance with the terms and conditions of the
contract between the parties. The RTC ordered Tan to
pay the respondents the amount of P30,000.00, plus
P1,000.00 per court appearance, as attorneys fees,
and to pay the cost of suit.
On appeal, the CA dismissed the petition and affirmed
the ruling of the trial court in toto. Hence, the present
petition.
THE ISSUES
Tan argues that the CA erred in affirming the
RTCs ruling to cancel the lis pendens annotation on
TCT No. 27335. Due to the unauthorized novation of
the agreement, Tan presented before the trial court
two alternative remedies in his complaint either the
rescission of the contract and the return of the down
payment, or the reformation of the contract to adjust
the payment period, so that Tan will pay the remaining
balance of the purchase price only after the lapse of
the required two-year encumbrance on the title. Tan
posits that the CA erroneously disregarded the
alternative remedy of reformation of contract when it
affirmed the removal of the lis pendens annotation on
the title.
Tan further contends that the CA erred when it
recognized the validity of the forfeiture of the down
payment in favor of the vendors. While admitting that
the Deed of Conditional Sale contained a forfeiture
clause, he insists that this clause applies only if the
failure to pay the balance of the purchase price was
through his own fault or negligence. In the present
case, Tan claims that he was justified in refusing to
pay the balance price since the vendors would not
have been able to comply with their obligation to
deliver a clean title covering the property.
Lastly, Tan maintains that the CA erred in
ordering him to pay the respondents P30,000.00, plus
P1,000.00 per court appearance as attorneys fees,
since he filed the foregoing action in good faith,
believing that he is in the right.
The respondents, on the other hand, assert that the
petition should be dismissed for raising pure questions
of fact, in contravention of the provisions of Rule 45 of
the Rules which provides that only questions of law
can be raised in petitions for review on certiorari.
THE COURTS RULING
The petition is granted.
No new
issues
can be
raised in
the
Memoran
dum
At the onset, we note that Tan raised the
following additional assignment of errors in his
Memorandum: (a) the CA erred in holding that the
petitioner could seek reformation of the Deed of
Conditional Sale only if he paid the balance of the
purchase price and if the vendors refused to execute
the deed of absolute sale; and (b) the CA erred in
holding that the petitioner was estopped from asking
for the reformation of the contract or for specific
performance.
The Courts September 27, 2004 Resolution
expressly stated that No new issues may be raised by
a party in his/its Memorandum. Explaining the reason
for this rule, we said that:
The raising of additional issues
in a memorandum before the Supreme
Court is irregular, because said
memorandum is supposed to be in
support merely of the position taken by
the party concerned in his petition, and
the raising of new issues amounts to
the filing of a petition beyond the
reglementary period. The purpose of
this rule is to provide all parties to a
case a fair opportunity to be heard. No
new points of law, theories, issues or
arguments may be raised by a party in
the Memorandum for the reason that to
permit these would be offensive to the
basic rules of fair play, justice and due
process.
Tan contravened the Courts explicit instructions by
raising these additional errors. Hence, we disregard
them and focus instead on the issues previously
raised in the petition and properly included in the
Memorandum.
Petition
raises a
question
of law
Contrary to the respondents claim, the issue raised in
the present petition defined in the opening paragraph
of this Decision is a pure question of law. Hence, the
petition and the issue it presents are properly
cognizable by this Court.
Lis
pendens
annotatio
n not
proper in
personal
actions
Section 14, Rule 13 of the Rules enumerates
the instances when a notice of lis pendens can be
validly annotated on the title to real property:
Sec. 14. Notice of lis pendens.
In an action affecting the title
or the right of possession of real
property, the plaintiff and the
defendant, when affirmative relief is
claimed in his answer, may record in
the office of the registry of deeds of the
province in which the property is
situated a notice of the pendency of the
action. Said notice shall contain the
names of the parties and the object of
the action or defense, and a description
of the property in that province affected
thereby. Only from the time of filing
such notice for record shall a
purchaser, or encumbrancer of the
property affected thereby, be deemed
to have constructive notice of the
pendency of the action, and only of its
pendency against the parties
designated by their real names.
The notice of lis pendens
hereinabove mentioned may be
cancelled only upon order of the court,
after proper showing that the notice is
for the purpose of molesting the
adverse party, or that it is not
necessary to protect the rights of the
party who caused it to be recorded.
The litigation subject of the notice of lis
pendens must directly involve a specific property
which is necessarily affected by the judgment.
Tans complaint prayed for either the rescission
or the reformation of the Deed of Conditional Sale.
While the Deed does have real property for its object,
we find that Tans complaint is an in personam action,
as Tan asked the court to compel the respondents to
do something either to rescind the contract and return
the down payment, or to reform the contract by
extending the period given to pay the remaining
balance of the purchase price. Either way, Tan wants
to enforce his personal rights against the respondents,
not against the property subject of the Deed. As we
explained in Domagas v. Jensen:
The settled rule is that the aim
and object of an action determine its
character. Whether a proceeding is in
rem, or in personam, or quasi in rem for
that matter, is determined by its nature
and purpose, and by these only. A
proceeding in personam is a
proceeding to enforce personal rights
and obligations brought against the
person and is based on the jurisdiction
of the person, although it may involve
his right to, or the exercise of
ownership of, specific property, or seek
to compel him to control or dispose of it
in accordance with the mandate of the
court. The purpose of a proceeding in
personam is to impose, through the
judgment of a court, some responsibility
or liability directly upon the person of
the defendant. Of this character are
suits to compel a defendant to
specifically perform some act or actions
to fasten a pecuniary liability on him.
Furthermore, as will be explained in detail below, the
contract between the parties was merely a contract to
sell where the vendors retained title and ownership to
the property until Tan had fully paid the purchase
price. Since Tan had no claim of ownership or title to
the property yet, he obviously had no right to ask for
the annotation of a lis pendens notice on the title of
the property.
Contract
is a mere
contract
to sell
A contract is what the law defines it to be,
taking into consideration its essential elements, and
not what the contracting parties call it. Article 1485 of
the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of
the contracting parties obligates himself
to transfer the ownership and to deliver
a determinate thing, and the other to
pay therefor a price certain in money or
its equivalent.
A contract of sale may be absolute or
conditional.
The very essence of a contract of sale is the transfer
of ownership in exchange for a price paid or
promised.
In contrast, a contract to sell is defined as a
bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property
despite delivery thereof to the prospective buyer,
binds himself to sell the property exclusively to
the prospective buyer upon fulfillment of the
condition agreed, i.e., full payment of the purchase
price. A contract to sell may not even be considered
as a conditional contract of sale where the seller
may likewise reserve title to the property subject of
the sale until the fulfillment of a suspensive
condition, because in a conditional contract of
sale, the first element of consent is present,
although it is conditioned upon the happening of a
contingent event which may or may not occur.
In the present case, the true nature of the
contract is revealed by paragraph D thereof, which
states:
xxx
d) That in case, BUYER has complied with
the terms and conditions of this contract,
then the SELLERS shall execute and
deliver to the BUYER the appropriate Deed
of Absolute Sale;
xxx
Jurisprudence has established that where the
seller promises to execute a deed of absolute sale
upon the completion by the buyer of the payment of
the price, the contract is only a contract to sell. Thus,
while the contract is denominated as a Deed of
Conditional Sale, the presence of the above-quoted
provision identifies the contract as being a mere
contract to sell.
A
Section
4, Rule
74
annotatio
n is an
encumbr
ance on
the
property
While Tan admits that he refused to pay the
balance of the purchase price, he claims that he had
valid reason to do so the sudden appearance of an
annotation on the title pursuant to Section 4, Rule 74
of the Rules, which Tan considered an encumbrance
on the property.
We find Tans argument meritorious.
The annotation placed on TCT No. 27335, the
new title issued to reflect the extrajudicial partition of
Lamberto Benoliraos estate among his heirs, states:
x x x any liability to credirots
(sic), excluded heirs and other persons
having right to the property, for a period
of two (2) years, with respect only to
the share of Erlinda, Andrew,
Romano and Dion, all surnamed
Benolirao [Emphasis supplied.]
This annotation was placed on the title
pursuant to Section 4, Rule 74 of the Rules, which
reads:
Sec. 4. Liability of distributees and
estate. - If it shall appear at any time
within two (2) years after the settlement
and distribution of an estate in
accordance with the provisions of either
of the first two sections of this rule, that
an heir or other person has been
unduly deprived of his lawful
participation in the estate, such heir or
such other person may compel the
settlement of the estate in the courts in
the manner hereinafter provided for the
purpose of satisfying such lawful
participation. And if within the same
time of two (2) years, it shall appear
that there are debts outstanding
against the estate which have not
been paid, or that an heir or other
person has been unduly deprived of
his lawful participation payable in
money, the court having jurisdiction
of the estate may, by order for that
purpose, after hearing, settle the
amount of such debts or lawful
participation and order how much
and in what manner each distributee
shall contribute in the payment
thereof, and may issue execution, if
circumstances require, against the
bond provided in the preceding
section or against the real estate
belonging to the deceased, or both.
Such bond and such real estate shall
remain charged with a liability to
creditors, heirs, or other persons for the
full period of two (2) years after such
distribution, notwithstanding any
transfers of real estate that may have
been made. [Emphasis supplied.]
Senator Vicente Francisco discusses this
provision in his book The Revised Rules of Court in
the Philippines, where he states:
The provision of Section 4, Rule
74 prescribes the procedure to be
followed if within two years after an
extrajudicial partition or summary
distribution is made, an heir or other
person appears to have been deprived
of his lawful participation in the estate,
or some outstanding debts which have
not been paid are discovered. When
the lawful participation of the heir is
not payable in money, because, for
instance, he is entitled to a part of
the real property that has been
partitioned, there can be no other
procedure than to cancel the
partition so made and make a new
division, unless, of course, the heir
agrees to be paid the value of his
participation with interest. But in case
the lawful participation of the heir
consists in his share in personal
property of money left by the decedent,
or in case unpaid debts are discovered
within the said period of two years, the
procedure is not to cancel the partition,
nor to appoint an administrator to re-
assemble the assets, as was allowed
under the old Code, but the court, after
hearing, shall fix the amount of such
debts or lawful participation in
proportion to or to the extent of the
assets they have respectively received
and, if circumstances require, it may
issue execution against the real estate
belonging to the decedent, or both. The
present procedure is more expedient
and less expensive in that it dispenses
with the appointment of an
administrator and does not disturb the
possession enjoyed by the distributees.
[Emphasis supplied.]
An annotation is placed on new certificates of
title issued pursuant to the distribution and partition of
a decedents real properties to warn third persons on
the possible interests of excluded heirs or unpaid
creditors in these properties. The annotation,
therefore, creates a legal encumbrance or lien on
the real property in favor of the excluded heirs or
creditors. Where a buyer purchases the real
property despite the annotation, he must be ready
for the possibility that the title could be subject to
the rights of excluded parties. The cancellation of
the sale would be the logical consequence where: (a)
the annotation clearly appears on the title, warning all
would-be buyers; (b) the sale unlawfully interferes with
the rights of heirs; and (c) the rightful heirs bring an
action to question the transfer within the two-year
period provided by law.
As we held in Vda. de Francisco v. Carreon:
And Section 4, Rule 74 xxx
expressly authorizes the court to give to
every heir his lawful participation in the
real estate notwithstanding any
transfers of such real estate and to
issue execution thereon. All this implies
that, when within the amendatory
period the realty has been alienated,
the court in re-dividing it among the
heirs has the authority to direct
cancellation of such alienation in the
same estate proceedings, whenever
it becomes necessary to do so. To
require the institution of a separate
action for such annulment would run
counter to the letter of the above rule
and the spirit of these summary
settlements. [Emphasis supplied.]
Similarly, in Sps. Domingo v. Roces, we said:
The foregoing rule clearly
covers transfers of real property to any
person, as long as the deprived heir or
creditor vindicates his rights within two
years from the date of the settlement
and distribution of estate. Contrary to
petitioners contention, the effects of
this provision are not limited to the
heirs or original distributees of the
estate properties, but shall affect any
transferee of the properties.
[Emphasis supplied.]
Indeed, in David v. Malay, although the title of
the property had already been registered in the name
of the third party buyers, we cancelled the sale and
ordered the reconveyance of the property to the estate
of the deceased for proper disposal among his rightful
heirs.
By the time Tans obligation to pay the balance
of the purchase price arose on May 21, 1993 (on
account of the extensions granted by the
respondents), a new certificate of title covering the
property had already been issued on March 26, 1993,
which contained the encumbrance on the property; the
encumbrance would remain so attached until the
expiration of the two-year period. Clearly, at this time,
the vendors could no longer compel Tan to pay the
balance of the purchase since considering they
themselves could not fulfill their obligation to transfer a
clean title over the property to Tan.
Contract
to sell is
not
rescinde
d but
terminate
d
What then happens to the contract?
We have held in numerous cases that the
remedy of rescission under Article 1191 cannot apply
to mere contracts to sell. We explained the reason for
this in Santos v. Court of Appeals, where we said:
[I]n a contract to sell, title remains with
the vendor and does not pass on to the
vendee until the purchase price is paid
in full. Thus, in a contract to sell, the
payment of the purchase price is a
positive suspensive condition. Failure
to pay the price agreed upon is not a
mere breach, casual or serious, but
a situation that prevents the
obligation of the vendor to convey
title from acquiring an obligatory
force. This is entirely different from the
situation in a contract of sale, where
non-payment of the price is a negative
resolutory condition. The effects in law
are not identical. In a contract of sale,
the vendor has lost ownership of the
thing sold and cannot recover it, unless
the contract of sale is rescinded and set
aside. In a contract to sell, however,
the vendor remains the owner for as
long as the vendee has not complied
fully with the condition of paying the
purchase price. If the vendor should
eject the vendee for failure to meet the
condition precedent, he is enforcing the
contract and not rescinding it. x x x
Article 1592 speaks of non-payment of
the purchase price as a resolutory
condition. It does not apply to a
contract to sell. As to Article 1191, it is
subordinated to the provisions of Article
1592 when applied to sales of
immovable property. Neither provision
is applicable [to a contract to sell].
[Emphasis supplied.]

We, therefore, hold that the contract to sell was
terminated when the vendors could no longer legally
compel Tan to pay the balance of the purchase price
as a result of the legal encumbrance which attached to
the title of the property. Since Tans refusal to pay was
due to the supervening event of a legal encumbrance
on the property and not through his own fault or
negligence, we find and so hold that the forfeiture of
Tans down payment was clearly unwarranted.
Award of Attorneys fees
As evident from our previous discussion, Tan
had a valid reason for refusing to pay the balance of
the purchase price for the property. Consequently,
there is no basis for the award of attorneys fees in
favor of the respondents.
WHEREFORE, premises considered, we
hereby GRANT the petition and, accordingly, ANNUL
and SET ASIDE the May 30, 2002 decision of the
Court of Appeals in CA-G.R. CV No. 52033. Another
judgment is rendered declaring the Deed of
Conditional Sale terminated and ordering the
respondents to return the P200,000.00 down payment
to petitioner Delfin Tan, subject to legal interest of 6%
per annum, computed from May 28, 1993. The
respondents are also ordered to pay, jointly and
severally, petitioner Delfin Tan the amount of
P50,000.00 as and by way of attorneys fees. Once
this decision becomes final and executory,
respondents are ordered to pay interest at 12% per
annum on the principal obligation as well as the
attorneys fees, until full payment of these amounts.
Costs against the respondents.
SO ORDERED.

On the other hand, we award attorneys fees in ARTURO D. BRION

favor of Tan, since he was compelled to litigate due to Associate Justice
the respondents refusal to return his down payment
despite the fact that they could no longer comply with
their obligation under the contract to sell, i.e., to
convey a clean title. Given the facts of this case, we
find the award of P50,000.00 as attorneys fees proper.

Monetary
award is
subject
to legal
interest

Undoubtedly, Tan made a clear and

unequivocal demand on the vendors to return his
down payment as early as May 28, 1993. Pursuant to
our definitive ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals, we hold that the vendors should
return the P200,000.00 down payment to Tan, subject
to the legal interest of 6% per annum computed from
May 28, 1993, the date of the first demand letter.

Furthermore, after a judgment has become final and

executory, the rate of legal interest, whether the
obligation was in the form of a loan or forbearance of
money or otherwise, shall be 12% per annum from
such finality until its satisfaction. Accordingly, the
principal obligation of P200,000.00 shall bear 6%
interest from the date of first demand or from May 28,
1993. From the date the liability for the principal
obligation and attorneys fees has become final and
executory, an annual interest of 12% shall be imposed
on these obligations until their final satisfaction, this
interim period being deemed to be by then an
equivalent to a forbearance of credit.
 Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 193787 April 7, 2014
SPOUSES JOSE C. ROQUE AND BEATRIZ DELA
CRUZ ROQUE, with deceased Jose C. Roque
represented by his substitute heir JOVETTE
ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C.
SABUG, JR., NATIONAL COUNCIL OF CHURCHES
IN THE PHILIPPINES (NCCP), represented by its
Secretary General SHARON ROSE JOY RUIZ-
DUREMDES, LAND BANK OF THE PHILIPPINES
(LBP), represented by Branch Manager EVELYN M.
MONTERO, ATTY. MARIO S.P. DIAZ, in his Official
Capacity as Register of Deeds for Rizal, Morong
Branch, and CECILIO U. PULAN, in his Official
Capacity as Sheriff, Office of the Clerk of Court,
Regional Trial Court, Binangonan, Rizal,
Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are
the Decision2 dated May 12, 2010 and the
Resolution3 dated September 15, 2010 of the Court of
Appeals (CA) in CA G.R. CV No. 92113 which
affirmed the Decision4 dated July 8, 2008 of the
Regional Trial Court of Binangonan, Rizal, Branch 69
(RTC) that dismissed Civil Case Nos. 03-022 and 05-
003 for reconveyance, annulment of sale, deed of real
estate mortgage, foreclosure and certificate of sale,
and damages.
The Facts
The property subject of this case is a parcel of land
with an area of 20,862 square meters (sq. m.), located
in Sitio Tagpos, Barangay Tayuman, Binangonan,
Rizal, known as Lot 18089.5
On July 21, 1977, petitioners-spouses Jose C. Roque
and Beatriz dela Cruz Roque (Sps. Roque) and the
original owners of the then unregistered Lot 18089 –
namely, Velia R. Rivero (Rivero), Magdalena Aguilar,
Angela Gonzales, Herminia R. Bernardo, Antonio
Rivero, Araceli R. Victa, Leonor R. Topacio, and
Augusto Rivero (Rivero, et al.) – executed a Deed of
Conditional Sale of Real Property6 (1977 Deed of
Conditional Sale) over a 1,231-sq. m. portion of Lot
18089 (subject portion) for a consideration of
P30,775.00. The parties agreed that Sps. Roque shall
make an initial payment of P15,387.50 upon signing,
while the remaining balance of the purchase price
shall be payable upon the registration of Lot 18089, as
well as the segregation and the concomitant issuance
of a separate title over the subject portion in their
names. After the deed’s execution, Sps. Roque took
possession and introduced improvements on the
subject portion which they utilized as a balut factory.7
On August 12, 1991, Fructuoso Sabug, Jr. (Sabug,
Jr.), former Treasurer of the National Council of
Churches in the Philippines (NCCP), applied for a free
patent over the entire Lot 18089 and was eventually
issued Original Certificate of Title (OCT) No. M-59558
in his name on October 21, 1991. On June 24, 1993,
Sabug, Jr. and Rivero, in her personal capacity and in
representation of Rivero, et al., executed a Joint
Affidavit9 (1993 Joint Affidavit), acknowledging that
the subject portion belongs to Sps. Roque and
expressed their willingness to segregate the same
from the entire area of Lot 18089.
On December 8, 1999, however, Sabug, Jr., through a
Deed of Absolute Sale10 (1999 Deed of Absolute
Sale), sold Lot 18089 to one Ma. Pamela P. Aguado
(Aguado) for P2,500,000.00, who, in turn, caused the
cancellation of OCT No. M-5955 and the issuance of
Transfer Certificate of Title (TCT) No. M-96692 dated
December 17, 199911 in her name.
Thereafter, Aguado obtained an P8,000,000.00 loan
from the Land Bank of the Philippines (Land Bank)
secured by a mortgage over Lot 18089.12 When she
failed to pay her loan obligation, Land Bank
commenced extra-judicial foreclosure proceedings
and eventually tendered the highest bid in the auction
sale. Upon Aguado’s failure to redeem the subject
property, Land Bank consolidated its ownership, and
TCT No. M-11589513 was issued in its name on July
21, 2003.14
On June 16, 2003, Sps. Roque filed a complaint15 for
reconveyance, annulment of sale, deed of real estate
mortgage, foreclosure, and certificate of sale, and
damages before the RTC, docketed as Civil Case No.
03-022, against Aguado, Sabug, Jr., NCCP, Land
Bank, the Register of Deeds of Morong, Rizal, and
Sheriff Cecilio U. Pulan, seeking to be declared as the
true owners of the subject portion which had been
erroneously included in the sale between Aguado and
Sabug, Jr., and, subsequently, the mortgage to Land
Bank, both covering Lot 18089 in its entirety.
In defense, NCCP and Sabug, Jr. denied any
knowledge of the 1977 Deed of Conditional Sale
through which the subject portion had been
purportedly conveyed to Sps. Roque.16
For her part, Aguado raised the defense of an
innocent purchaser for value as she allegedly derived
her title (through the 1999 Deed of Absolute Sale)
from Sabug, Jr., the registered owner in OCT No. M-
5955, covering Lot 18089, which certificate of title at
the time of sale was free from any lien and/or
encumbrances. She also claimed that Sps. Roque’s
cause of action had already prescribed because their
adverse claim was made only on April 21, 2003, or
four (4) years from the date OCT No. M-5955 was
issued in Sabug, Jr.’s name on December 17, 1999.17
On the other hand, Land Bank averred that it had no
knowledge of Sps. Roque’s claim relative to the
subject portion, considering that at the time the loan
was taken out, Lot 18089 in its entirety was registered
in Aguado’s name and no lien and/or encumbrance
was annotated on her certificate of title.18
Meanwhile, on January 18, 2005, NCCP filed a
separate complaint19 also for declaration of nullity of
documents and certificates of title and damages,
docketed as Civil Case No. 05-003. It claimed to be
the real owner of Lot 18089 which it supposedly
acquired from Sabug, Jr. through an oral contract of
sale20 in the early part of 1998, followed by the
execution of a Deed of Absolute Sale on December 2,
1998 (1998 Deed of Absolute Sale).21 NCCP also
alleged that in October of the same year, it entered
into a Joint Venture Agreement (JVA) with Pilipinas
Norin Construction Development Corporation
(PNCDC), a company owned by Aguado’s parents, for
the development of its real properties, including Lot
18089, into a subdivision project, and as such, turned
over its copy of OCT No. M-5955 to PNCDC.22 Upon
knowledge of the purported sale of Lot 18089 to
Aguado, Sabug, Jr. denied the transaction and alleged
forgery. Claiming that the Aguados23 and PNCDC
conspired to defraud NCCP, it prayed that PNCDC’s
corporate veil be pierced and that the Aguados be
ordered to pay the amount of ₱38,092,002.00
representing the unrealized profit from the JVA.24
Moreover, NCCP averred that Land Bank failed to
exercise the diligence required to ascertain the true
owners of Lot 18089. Hence, it further prayed that: (a)
all acts of ownership and dominion over Lot 18089
that the bank might have done or caused to be done
be declared null and void; (b) it be declared the true
and real owners of Lot 18089; and (c) the Register of
Deeds of Morong, Rizal be ordered to cancel any and
all certificates of title covering the lot, and a new one
be issued in its name.25 In its answer, Land Bank
reiterated its stance that Lot 18089 was used as
collateral for the P8,000,000.00 loan obtained by the
Countryside Rural Bank, Aguado, and one Bella
Palasaga. There being no lien and/ or encumbrance
annotated on its certificate of title, i.e., TCT No. M-
115895, it cannot be held liable for NCCP’s claims.
Thus, it prayed for the dismissal of NCCP’s
complaint.26
On September 7, 2005, Civil Case Nos. 02-022 and
05-003 were ordered consolidated.27
The RTC Ruling
After due proceedings, the RTC rendered a
Decision28 dated July 8, 2008, dismissing the
complaints of Sps. Roque and NCCP.
With respect to Sps. Roque’s complaint, the RTC
found that the latter failed to establish their ownership
over the subject portion, considering the following: (a)
the supposed owners-vendors, i.e., Rivero, et al., who
executed the 1977 Deed of Conditional Sale, had no
proof of their title over Lot 18089; (b) the 1977 Deed of
Conditional Sale was not registered with the Office of
the Register of Deeds;29 (c) the 1977 Deed of
Conditional Sale is neither a deed of conveyance nor
a transfer document, as it only gives the holder the
right to compel the supposed vendors to execute a
deed of absolute sale upon full payment of the
consideration; (d) neither Sps. Roque nor the alleged
owners-vendors, i.e., Rivero, et al., have paid real
property taxes in relation to Lot 18089; and (e) Sps.
Roque’s occupation of the subject portion did not ripen
into ownership that can be considered superior to the
ownership of Land Bank.30 Moreover, the RTC ruled
that Sps. Roque’s action for reconveyance had
already prescribed, having been filed ten (10) years
after the issuance of OCT No. M-5955.31
On the other hand, regarding NCCP’s complaint, the
RTC observed that while it anchored its claim of
ownership over Lot 18089 on the 1998 Deed of
Absolute Sale, the said deed was not annotated on
OCT No. M-5955. Neither was any certificate of title
issued in its name nor did it take possession of Lot
18089 or paid the real property taxes therefor. Hence,
NCCP’s claim cannot prevail against Land Bank’s title,
which was adjudged by the RTC as an innocent
purchaser for value. Also, the RTC disregarded
NCCP’s allegation that the signature of Sabug, Jr. on
the 1999 Deed of Absolute Sale in favor of Aguado
was forged because his signatures on both
instruments bear semblances of similarity and appear
genuine. Besides, the examiner from the National
Bureau of Investigation, who purportedly found that
Sabug, Jr.’s signature thereon was spurious leading to
the dismissal of a criminal case against him, was not
presented as a witness in the civil action.32
Finally, the RTC denied the parties’ respective claims
for damages.33
The CA Ruling
On appeal, the Court of Appeals (CA) affirmed the
foregoing RTC findings in a Decision34 dated May 12,
2010. While Land Bank was not regarded as a
mortgagee/purchaser in good faith with respect to the
subject portion considering Sps. Roque’s possession
thereof,35 the CA did not order its reconveyance or
segregation in the latter’s favor because of Sps.
Roque’s failure to pay the remaining balance of the
purchase price. Hence, it only directed Land Bank to
respect Sps. Roque’s possession with the option to
appropriate the improvements introduced thereon
upon payment of compensation.36
As regards NCCP, the CA found that it failed to
establish its right over Lot 18089 for the following
reasons: (a) the sale to it of the lot by Sabug, Jr. was
never registered; and (b) there is no showing that it
was in possession of Lot 18089 or any portion thereof
from 1998. Thus, as far as NCCP is concerned, Land
Bank is a mortgagee/purchaser in good faith.37
Aggrieved, both Sps. Roque38 and NCCP39 moved
for reconsideration but were denied by the CA in a
Resolution40 dated September 15, 2010, prompting
them to seek further recourse before the Court.
The Issue Before the Court
The central issue in this case is whether or not the CA
erred in not ordering the reconveyance of the subject
portion in Sps. Roque’s favor.
Sps. Roque maintain that the CA erred in not
declaring them as the lawful owners of the subject
portion despite having possessed the same since the
execution of the 1977 Deed of Conditional Sale,
sufficient for acquisitive prescription to set in in their
favor.41 To bolster their claim, they also point to the
1993 Joint Affidavit whereby Sabug, Jr. and Rivero
acknowledged their ownership thereof.42 Being the
first purchasers and in actual possession of the
disputed portion, they assert that they have a better
right over the 1,231- sq. m. portion of Lot 18089 and,
hence, cannot be ousted therefrom by Land Bank,
which was adjudged as a ortgagee/purchaser in bad
faith, pursuant to Article 1544 of the Civil Code.43
In opposition, Land Bank espouses that the instant
petition should be dismissed for raising questions of
fact, in violation of the proscription under Rule 45 of
the Rules of Court which allows only pure questions of
law to be raised.44 Moreover, it denied that ownership
over the subject portion had been acquired by Sps.
Roque who admittedly failed to pay the remaining
balance of the purchase price.45 Besides, Land Bank
points out that Sps. Roque’s action for reconveyance
had already prescribed.46
Instead of traversing the arguments of Sps. Roque,
NCCP, in its Comment47 dated December 19, 2011,
advanced its own case, arguing that the CA erred in
holding that it failed to establish its claimed ownership
over Lot 18089 in its entirety. Incidentally, NCCP’s
appeal from the CA Decision dated May 12, 2010 was
already denied by the Court,48 and hence, will no
longer be dealt with in this case.
The Court’s Ruling
The petition lacks merit.
The essence of an action for reconveyance is to seek
the transfer of the property which was wrongfully or
erroneously registered in another person’s name to its
rightful owner or to one with a better right.49 Thus, it is
incumbent upon the aggrieved party to show that he
has a legal claim on the property superior to that of the
registered owner and that the property has not yet
passed to the hands of an innocent purchaser for
value.50
Sps. Roque claim that the subject portion covered by
the 1977 Deed of Conditional Sale between them and
Rivero, et al. was wrongfully included in the
certificates of title covering Lot 18089, and, hence,
must be segregated therefrom and their ownership
thereof be confirmed. The salient portions of the said
deed state:
DEED OF CONDITIONAL SALE OF REAL
PROPERTY
KNOW ALL MEN BY THESE PRESENTS:
xxxx
That for and in consideration of the sum of THIRTY
THOUSAND SEVEN HUNDRED SEVENTY FIVE
PESOS (P30,775.00), Philippine Currency, payable in
the manner hereinbelow specified, the VENDORS do
hereby sell, transfer and convey unto the VENDEE, or
their heirs, executors, administrators, or assignors,
that unsegregated portion of the above lot, x x x.
That the aforesaid amount shall be paid in two
installments, the first installment which is in the
amount of __________ (P15,387.50) and the balance
in the amount of __________ (P15,387.50), shall be
paid as soon as the described portion of the property
shall have been registered under the Land
Registration Act and a Certificate of Title issued
accordingly;
That as soon as the total amount of the property has
been paid and the Certificate of Title has been issued,
an absolute deed of sale shall be executed
accordingly;
x x x x51
Examining its provisions, the Court finds that the
stipulation above-highlighted shows that the 1977
Deed of Conditional Sale is actually in the nature of a
contract to sell and not one of sale contrary to Sps.
Roque’s belief.52 In this relation, it has been
consistently ruled that where the seller promises to
execute a deed of absolute sale upon the completion
by the buyer of the payment of the purchase price, the
contract is only a contract to sell even if their
agreement is denominated as a Deed of Conditional
Sale,53 as in this case. This treatment stems from the
legal characterization of a contract to sell, that is, a
bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject
property despite delivery thereof to the prospective
buyer, binds himself to sell the subject property
exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, such as, the full payment
of the purchase price.54 Elsewise stated, in a contract
to sell, ownership is retained by the vendor and is not
to pass to the vendee until full payment of the
purchase price.55 Explaining the subject matter
further, the Court, in Ursal v. CA,56 held that:
[I]n contracts to sell the obligation of the seller to sell
becomes demandable only upon the happening of the
suspensive condition, that is, the full payment of the
purchase price by the buyer. It is only upon the
existence of the contract of sale that the seller
becomes obligated to transfer the ownership of the
thing sold to the buyer. Prior to the existence of the
contract of sale, the seller is not obligated to transfer
the ownership to the buyer, even if there is a contract
to sell between them.
Here, it is undisputed that Sps. Roque have not paid
the final installment of the purchase price.57 As such,
the condition which would have triggered the parties’
obligation to enter into and thereby perfect a contract
of sale in order to effectively transfer the ownership of
the subject portion from the sellers (i.e., Rivero et al.)
to the buyers (Sps. Roque) cannot be deemed to have
been fulfilled. Consequently, the latter cannot validly
claim ownership over the subject portion even if they
had made an initial payment and even took
possession of the same.58
The Court further notes that Sps. Roque did not even
take any active steps to protect their claim over the
disputed portion. This remains evident from the
following circumstances appearing on record: (a) the
1977 Deed of Conditional Sale was never registered;
(b) they did not seek the actual/physical segregation of
the disputed portion despite their knowledge of the
fact that, as early as 1993, the entire Lot 18089 was
registered in Sabug, Jr.’s name under OCT No. M-
5955; and (c) while they signified their willingness to
pay the balance of the purchase price,59 Sps. Roque
neither compelled Rivero et al., and/or Sabug, Jr. to
accept the same nor did they consign any amount to
the court, the proper application of which would have
effectively fulfilled their obligation to pay the purchase
price.60 Instead, Sps. Roque waited 26 years,
reckoned from the execution of the 1977 Deed of
Conditional Sale, to institute an action for
reconveyance (in 2003), and only after Lot 18089 was
sold to Land Bank in the foreclosure sale and title
thereto was consolidated in its name. Thus, in view of
the foregoing, Sabug, Jr. – as the registered owner of
Lot 18089 borne by the grant of his free patent
application – could validly convey said property in its
entirety to Aguado who, in turn, mortgaged the same
to Land Bank. Besides, as aptly observed by the RTC,
Sps. Roque failed to establish that the parties who
sold the property to them, i.e., Rivero, et al., were
indeed its true and lawful owners.61 In fine, Sps.
Roque failed to establish any superior right over the
subject portion as against the registered owner of Lot
18089, i.e., Land Bank, thereby warranting the
dismissal of their reconveyance action, without
prejudice to their right to seek damages against the
vendors, i.e., Rivero et al.62 As applied in the case of
Coronel v. CA:63
It is essential to distinguish between a contract to sell
and a conditional contract of sale specially in cases
where the subject property is sold by the owner not to
the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third
person buying such property despite the fulfilment of
the suspensive condition such as the full payment of
the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot
seek the relief of reconveyance of the property.
There is no double sale in such case.1âwphi1 Title to
the property will transfer to the buyer after registration
because there is no defect in the owner-seller’s title
per se, but the latter, of course, may be sued for
damages by the intending buyer. (Emphasis supplied)
On the matter of double sales, suffice it to state that
Sps. Roque’s reliance64 on Article 154465 of the Civil
Code has been misplaced since the contract they
base their claim of ownership on is, as earlier stated, a
contract to sell, and not one of sale. In Cheng v.
Genato,66 the Court stated the circumstances which
must concur in order to determine the applicability of
Article 1544, none of which are obtaining in this case,
viz.:
(a) The two (or more) sales transactions in
issue must pertain to exactly the same subject
matter, and must be valid sales transactions;
(b) The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each represent conflicting interests; and
(c) The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each have bought from the same seller.
Finally, regarding Sps. Roque’s claims of acquisitive
prescription and reimbursement for the value of the
improvements they have introduced on the subject
property,67 it is keenly observed that none of the
arguments therefor were raised before the trial court
or the CA.68 Accordingly, the Court applies the well-
settled rule that litigants cannot raise an issue for the
first time on appeal as this would contravene the basic
rules of fair play and justice. In any event, such claims
appear to involve questions of fact which are generally
prohibited under a Rule 45 petition.69
With the conclusions herein reached, the Court need
not belabor on the other points raised by the parties,
and ultimately finds it proper to proceed with the denial
of the petition.
WHEREFORE, the petition is DENIED. The Decision
dated May 12, 2010 and the Resolution dated
September 15, 2010 of the Court of Appeals in
CAG.R. CV No. 92113 are hereby AFFIRMED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 196950 June 18, 2014
HELEN E. CABLING, assisted by her husband
ARIEL CABLING, Petitioner,
vs.
JOSELIN TAN LUMAPAS, as represented by NORY
ABELLANES, Respondent.
DECISION
BRION, J.:
We review the present petition for review on certiorari1
that assails the May 12, 2011 decision2 of the Court of
Appeals (CA) in CA-G.R. SP No. 110865. The CA
dismissed the petition for certiorari, prohibition and
mandamus filed by petitioner Helen E. Cabling,
assisted by her husband Ariel Cabling, which
questioned the July 14, 20093 and September 10,
20094 orders of the Regional Trial Court (RTC) 3rd
Judicial Region, Branch 75, Olongapo City, in Other
Case No. 16-0-09.
The Facts
The petitioner was the highest bidder in an
extrajudicial foreclosure sale conducted on December
21, 2007 over a 216-square meter property situated in
the Barrio of Sta. Rita, Olongapo City and covered by
Transfer Certificate of Title (TCT) No. T-14852.5 The
Final Deed of Sale6 was issued by the Sheriff of
Olongapo City on February 14, 2009 and the title to
the property was duly transferred. TCT No. T-14853
was issued to the petitioner on March 23, 2009.7
On May 6, 2009, the petitioner filed an Application8 for
the Issuance of a Writ of Possession with the RTC.
On May 19, 2009, the RTC issued an order9 granting
the petitioner’s application, and subsequently issued a
Writ of Possession10 and Notice to Vacate11 dated
May 20, 2009 and May 25, 2009, respectively.
On May 29, 2009, respondent Joselin Tan Lumapas,
through counsel, filed a Motion for Leave of Court for
Intervention as Party Defendant (with Urgent Motion to
Hold in Abeyance Implementation of Writ of
Possession)12 and an Answer in Intervention,13 as a
third party in actual possession of the foreclosed
property. She claimed that the property had previously
been sold to her by Aida Ibabao, the property’s
registered owner and the judgment debtor/mortgagor
in the extrajudicial foreclosure sale, pursuant to a
Deed of Conditional Sale.14
On June 1, 2009, the RTC issued an order15 holding
in abeyance the implementation of the petitioner’s writ
of possession until after the resolution of the
respondent’s motion. The following day, the RTC
denied the respondent’s motion for intervention.16
The respondent promptly filed a motion for
reconsideration.17
The RTC’s Orders
On July 14, 2009, the RTC issued the 1st assailed
order18 granting the respondent’s motion for
reconsideration. It recalled and rendered ineffective
the writ of possession issued to the petitioner, stating
that "an ex-parte writ of possession issued pursuant to
Act No. 335 (sic), as amended, cannot be enforced
against a third person who is in actual possession of
the foreclosed property and who is not in privity with
the debtor/mortgagor."19 Considering that the
respondent was not a party to the extrajudicial
foreclosure, the RTC held that she cannot be ousted
of her possession by a mere ex-parte motion for the
issuance of a possessory writ, and that the petitioner
must now resort to the appropriate judicial process in
order to recover the foreclosed property.
This time, the petitioner moved to reconsider the
RTC’s July 14, 2009 order, but the RTC denied the
petitioner’s motion in an order dated September 10,
2009 - the 2nd assailed order.20
The CA Ruling
Before the CA, the petitioner filed a petition for
certiorari, prohibition and mandamus, under Rule 65 of
the Rules of Court, assailing the July 14, 2009 and
September 10, 2009 orders of the RTC.
In a decision dated May 12, 2011, the CA dismissed
the petitioner’s Rule 65 petition and affirmed in toto
the RTC’s assailed orders. It ruled that, while the
issuance of a writ of possession is generally a
ministerial act, the RTC committed no grave abuse of
discretion in recalling the petitioner’s writ of
possession because "the obligation of the trial court to
issue a writ of possession ceases to be ministerial
once it appears that there is a third party in
possession of the property claiming a right adverse to
that of the debtor/mortgagor[; and where] such third
party exists, the trial court should conduct a hearing to
determine the nature of his adverse possession."21
The Petition
The petitioner argues that the present case is not an
exception to the ministerial issuance of a writ of
possession.
While recognizing the respondent’s actual possession
of the subject property, the petitioner contends that
such possession is not adverse to that of the judgment
debtor/mortgagor. Neither is possession in the
concept of an owner because in a conditional sale,
ownership is retained by the seller until the fulfillment
of a positive suspensive condition, that is, the full
payment of the purchase price.
Our Ruling
We find merit in the petitioner’s arguments.
The well-settled rule is that in the extrajudicial
foreclosure of real estate mortgages under Act No.
313522 (as amended), the issuance of a writ of
possession23 is ministerial upon the court after the
foreclosure sale and during the redemption period
when the court may issue the order for a writ of
possession upon the mere filing of an ex parte motion
and the approval of the corresponding bond.24
The writ of possession also issues as a matter of
course, without need of a bond or of a separate and
independent action, after the lapse of the period of prove a right independent of and even superior to that
redemption,25 and after the consolidation of of the judgment debtor/mortgagor.
ownership and the issuance of a new TCT in the Under these circumstances, the general rule, and not
purchaser’s name.26 the exception, applies.
There is, however, an exception to the rule. WHEREFORE, premises considered, we GRANT the
Under Section 33,27 Rule 39 of the Rules of Court, petition for review on certiorari and REVERSE and
which is made applicable to extrajudicial foreclosures SET ASIDE the May 12, 2011 decision of the Court of
of real estate mortgages, the possession of the Appeals in CA-G.R. SP No. 110865.
property shall be given to the purchaser or last Accordingly, we ORDER the Regional Trial Court, 3rd
redemptioner unless a third party is actually holding Judicial Region, Branch 75, Olongapo City, to issue a
the property in a capacity adverse to the judgment Writ of Possession in favor of petitioner Helen E.
obligor.28 Thus, the court’s obligation to issue an ex Cabling.
parte writ of possession in favor of the purchaser in an SO ORDERED.
extrajudicial foreclosure sale ceases to be ministerial ARTURO D. BRION*
when there is a third party in possession of the Associate Justice
property claiming a right adverse to that of the
judgment debtor/mortgagor.
We emphasize that the exception provided under
Section 33, Rule 39 of the Rules of Court
contemplates a situation in which a third party holds
the property by adverse title or right, such as that of a
co-owner, tenant or usufructuary, who possesses the
property in his own right, and is not merely the
successor or transferee of the right of possession of
another co-owner or the owner of the property.29
In the present case, the respondent cannot be said to
possess the subject property by adverse title or right
as her possession is merely premised on the alleged
conditional sale of the property to her by the judgment
debtor/mortgagor.
The execution of a contract of conditional sale does
not immediately transfer title to the property to be sold
from seller to buyer.1âwphi1 In such contract,
ownership or title to the property is retained by the
seller until the fulfillment of a positive suspensive
condition which is normally the payment of the
purchase price in the manner agreed upon.30
In the present case, the Deed of Conditional Sale
between the respondent (buyer) and the subject
property’s registered owner (seller) expressly reserved
to the latter ownership over the property until full
payment of the purchase price, despite the delivery of
the subject property to the respondent. It is provided in
paragraph 6 of the parties’ contract that only upon full
payment of the total sale value of P2.2 million that the
seller shall execute a deed of absolute sale in favor of
the respondent.31
It likewise appears from the records that no deed of
absolute sale over the subject property has been
executed in the respondent's favor. Thus, the
respondent's possession from the time the subject
property was "delivered" to her by the seller cannot be
claimed as possession in the concept of an owner, as
the ownership and title to the subject property still then
remained with the seller until the title to the property
was transferred to the petitioner in March 2009. In
order for the respondent not to be ousted by the ex
parte issuance of a writ of possession, her possession
of the property must be adverse in that she must
 Republic of the Philippines property.8 Under the deed of conditional sale, Olivarez
SUPREME COURT RealtyCorporation shall file the action against the
Manila Philippine Tourism Authority "with the full assistance of
THIRD DIVISION [Castillo]."9 Paragraph C of the deed of conditional
G.R. No. 196251 July 9, 2014 sale provides:
OLIVAREZ REALTY CORPORATION and DR. C. [Olivarez Realty Corporation] assumes the
PABLO R. OLIVAREZ, Petitioner, responsibility of taking necessary legal action thru
vs. Court to have the claim/title TCT T-18493 of Philippine
BENJAMIN CASTILLO, Respondent. Tourism Authority over the above-described property
DECISION be nullified and voided; with the full assistance of
LEONEN, J.: [Castillo][.]10
Trial may be dispensed with and a summary judgment Should the action against the Philippine Tourism
rendered if the case can be resolved judiciously by Authority be denied, Castillo agreed to reimburse all
plain resort to the pleadings, affidavits, depositions, the amounts paid by Olivarez Realty Corporation.
and other papers filed by the parties. Paragraph D of the deed of conditional sale provides:
This is a petition for review on certiorari1 of the Court D. In the event that the Court denie[s] the petition
of Appeals' decision2 dated July 20, 2010 and against the Philippine Tourism Authority, all sums
resolution3 dated March 18, 2011 in CAG.R. CV No. received by [Castillo] shall be reimbursed to [Olivarez
91244. Realty Corporation] without interest[.]11
The facts as established from the pleadings of the As to the "legitimate tenants" occupying the property,
parties are as follows: Olivarez Realty Corporation undertook to pay them
Benjamin Castillo was the registered owner of a "disturbance compensation," while Castillo undertook
346,918-squaremeter parcel of land located in Laurel, to clear the land of the tenants within six months from
Batangas, covered by Transfer Certificate of Title No. the signing of the deed of conditional sale. Should
T-19972.4 The Philippine Tourism Authority allegedly Castillo fail to clear the land within six months,
claimed ownership of the sameparcel of land based on Olivarez Realty Corporation may suspend its monthly
Transfer Certificate of Title No. T-18493.5 On April 5, down payment until the tenants vacate the property.
2000, Castillo and Olivarez Realty Corporation, Paragraphs E and F of the deed of conditional sale
represented by Dr. Pablo R. Olivarez, entered into a provide: E. That [Olivarez Realty Corporation] shall
contract of conditional sale6 over the property. Under pay the disturbance compensation to legitimate
the deed of conditional sale, Castillo agreed to sell his agricultural tenants and fishermen occupants which in
property to Olivarez Realty Corporation for no case shall exceed ONE MILLION FIVE HUNDRED
P19,080,490.00. Olivarez Realty Corporation agreed THOUSAND (P1,500,000.00) PESOS. Said
toa down payment of P5,000,000.00, to be paid amountshall not form part of the purchase price. In
according to the following schedule: excess of this amount, all claims shall be for the
DATE AMOUNT account of [Castillo];
F. That [Castillo] shall clear the land of [the] legitimate
April 8, 2000 500,000.00 tenants within a period of six (6) months upon signing
of this Contract, and in case [Castillo] fails, [Olivarez
May 8, 2000 500,000.00 Realty Corporation] shall have the right to suspend the
monthly down payment until such time that the tenants
May 16, 2000 500,000.00
[move] out of the land[.]12
1,000,000.0 The parties agreed thatOlivarez Realty Corporation
June 8, 2000 may immediately occupy the property upon signing of
0
the deed of conditional sale. Should the contract be
July 8, 2000 500,000.00 cancelled, Olivarez RealtyCorporation agreed to return
the property’s possession to Castillo and forfeit all the
August 8, 2000 500,000.00 improvements it may have introduced on the property.
September 8, 2000 500,000.00 Paragraph I of the deed of conditional sale states:
I. Immediately upon signing thisContract, [Olivarez
October 8, 2000 500,000.00 Realty Corporation] shall be entitled to occupy,
possess and develop the subject property. In case this
November 8, 2000 500,000.00 7 Contract is canceled [sic], any improvement
As to the balance of P14,080,490.00, Olivarez Realty introduced by [the corporation] on the property shall
Corporation agreed to pay in 30 equal monthly be forfeited in favor of [Castillo][.]13
installments every eighth day of the month beginning On September 2, 2004, Castillo filed a complaint14
in the month that the parties would receive a decision against Olivarez Realty Corporation and Dr. Olivarez
voiding the Philippine Tourism Authority’s title to the with the Regional Trial Court of Tanauan City,
Batangas.
Castillo alleged that Dr. Olivarez convinced him into
selling his property to Olivarez Realty Corporation on
the representation that the corporation shall be
responsible in clearing the property of the tenants and
in paying them disturbance compensation. He further
alleged that Dr. Olivarez solely prepared the deed of
conditional sale and that he was made to sign the
contract with its terms "not adequately explained [to
him] in Tagalog."15
After the parties had signed the deed of conditional
sale, Olivarez Realty Corporation immediately took
possession of the property. However, the corporation
only paid 2,500,000.00 ofthe purchase price. Contrary
to the agreement, the corporation did not file any
action against the Philippine Tourism Authority to void
the latter’s title to the property. The corporation neither
cleared the land of the tenants nor paid them
disturbance compensation. Despite demand, Olivarez
Realty Corporation refused to fully pay the purchase
price.16
Arguing that Olivarez Realty Corporation committed
substantial breach of the contract of conditional sale
and that the deed of conditional sale was a contract of
adhesion, Castillo prayed for rescission of contract
under Article 1191 of the Civil Code of the Philippines.
He further prayed that Olivarez Realty Corporation
and Dr. Olivarez be made solidarily liable for moral
damages, exemplary damages, attorney’s fees, and
costs of suit.17
In their answer,18 Olivarez Realty Corporation and Dr.
Olivarez admitted that the corporation only paid
P2,500,000.00 ofthe purchase price. In their defense,
defendants alleged that Castillo failed to "fully
assist"19 the corporation in filing an action against the
Philippine Tourism Authority. Neither did Castillo clear
the property of the tenants within six months from the
signing of the deed of conditional sale. Thus,
according to defendants, the corporation had "all the
legal right to withhold the subsequent payments to
[fully pay] the purchase price."20
Olivarez Realty Corporation and Dr. Olivarez
prayedthat Castillo’s complaint be dismissed. By way
of compulsory counterclaim, they prayed for
P100,000.00 litigation expenses and P50,000.00
attorney’s fees.21
Castillo replied to the counterclaim,22 arguing that
Olivarez Realty Corporation and Dr. Olivarez had no
right to litigation expenses and attorney’s fees.
According to Castillo, the deed of conditional sale
clearly states that the corporation "assume[d] the
responsibility of taking necessary legal action"23
against the Philippine Tourism Authority, yet the
corporation did not file any case. Also, the corporation
did not pay the tenants disturbance compensation. For
the corporation’s failure to fully pay the purchase
price, Castillo claimed that hehad "all the right to pray
for the rescission of the [contract],"24 and he "should
not be held liable . . . for any alleged damages by way
of litigation expenses and attorney’s fees."25
On January 10, 2005, Castillo filed a request for
admission,26 requesting Dr. Olivarez to admit under
oath the genuineness of the deed of conditional sale
and Transfer Certificate of Title No. T-19972. He
likewise requested Dr. Olivarez to admit the truth of
the following factual allegations:
1. That Dr. Olivarez is the president of Olivarez
Realty Corporation;
2. That Dr. Olivarez offered to purchase the
parcel of land from Castillo and that he
undertook to clear the property of the tenants
and file the court action to void the Philippine
Tourism Authority’s title to the property;
3. That Dr. Olivarez caused the preparation of
the deed of conditional sale;
4. That Dr. Olivarez signed the deed of
conditional sale for and on behalf of Olivarez
Realty Corporation;
5. That Dr. Olivarez and the corporation did not
file any action against the Philippine Tourism
Authority;
6. That Dr. Olivarez and the corporation did not
pay the tenants disturbance compensation and
failed to clear the property of the tenants; and
7. That Dr. Olivarez and the corporation only
paid P2,500,000.00 of the agreed purchase
price.27
On January 25, 2005, Dr. Olivarez and Olivarez Realty
Corporation filed their objections to the request for
admission,28 stating that they "reiterate[d] the
allegations [and denials] in their [answer]."29
The trial court conducted pre-trial conference on
December 17, 2005.
On March 8, 2006, Castillo filed a motion for summary
judgment and/or judgment on the pleadings.30 He
argued that Olivarez Realty Corporation and Dr.
Olivarez "substantially admitted the material
allegations of [his] complaint,"31 specifically:
1. That the corporation failed to fully pay the
purchase price for his property;32
2. That the corporation failed to file an action to
void the Philippine Tourism Authority’s title to
his property;33 and
3. That the corporation failed to clear the
property of the tenants and pay them
disturbance compensation.34
Should judgment on the pleadings beimproper,
Castillo argued that summary judgment may still be
rendered asthere is no genuine issue as to any
material fact.35 He cited Philippine National Bank v.
Noah’s Ark Sugar Refinery36 as authority.
Castillo attached to his motion for summary judgment
and/or judgment on the pleadings his affidavit37 and
the affidavit of a Marissa Magsino38 attesting to the
truth of the material allegations of his complaint.
Olivarez Realty Corporation and Dr. Olivarez
opposed39 the motion for summary judgment and/or
judgment on the pleadings, arguing that the motion
was "devoid of merit."40 They reiterated their claim
that the corporation withheld further payments of the
purchase price because "there ha[d] been no
favorable decision voiding the title of the Philippine
Tourism Authority."41 They added that Castillo sold
the property to another person and that the sale was
allegedly litigated in Quezon City.42
Considering that a title adverse to that of Castillo’s
existed, Olivarez Realty Corporation and Dr. Olivarez
argued that the case should proceed to trial and
Castillo be required to prove that his title to the
property is "not spurious or fake and that he had not
sold his property to another person."43
In reply to the opposition to the motion for summary
judgment and/or judgment on the pleadings,44 Castillo
maintained that Olivarez Realty Corporation was
responsible for the filing of an action against the
Philippine Tourism Authority. Thus, the corporation
could not fault Castillo for not suing the
PhilippineTourism Authority.45 The corporation
illegally withheld payments of the purchase price.
As to the claim that the case should proceed to trial
because a title adverse to his title existed, Castillo
argued that the Philippine Tourism Authority’s title
covered another lot, not his property.46
During the hearing on August 3, 2006, Olivarez Realty
Corporation and Dr. Olivarez prayed that they be
given 30 days to file a supplemental memorandum on
Castillo’s motion for summary judgment and/or
judgment on the pleadings.47
The trial court granted the motion. Itgave Castillo 20
days to reply to the memorandum and the corporation
and Dr. Olivarez 15 days to respond to Castillo’s
reply.48
In their supplemental memorandum,49 Olivarez Realty
Corporation and Dr. Olivarez argued that there was
"an obvious ambiguity"50 as to which should occur
first — the payment of disturbance compensation to
the tenants or the clearing of the property of the
tenants.51 This ambiguity, according to defendants, is
a genuine issue and "oughtto be threshed out in a full
blown trial."52
Olivarez Realty Corporation and Dr. Olivarez added
that Castillo prayed for irreconcilable reliefs of
reformation of instrument and rescission of contract.53
Thus, Castillo’s complaint should be dismissed.
Castillo replied54 to the memorandum, arguing that
there was no genuine issue requiring trial of the case.
According to Castillo, "common sense dictates . . . that
the legitimate tenants of the [property] shall not vacate
the premises without being paid any disturbance
compensation . . ."55 Thus, the payment of
disturbance compensation should occur first before
clearing the property of the tenants.
With respect to the other issuesraised in the
supplemental memorandum, specifically, that Castillo
sold the property to another person, he argued that
these issues should not be entertained for not having
been presented during pre-trial.56
In their comment on the reply memorandum,57
Olivarez Realty Corporation and Dr. Olivarez
reiterated their arguments that certain provisions of
the deed of conditional sale were ambiguous and that
the complaint prayed for irreconcilable reliefs.58
As to the additional issues raised in the supplemental
memorandum, defendants argued that issues not
raised and evidence not identified and premarked
during pre-trial may still be raised and presented
during trial for good cause shown. Olivarez Realty
Corporation and Dr. Olivarez prayed that Castillo’s
complaint be dismissed for lack of merit.59
Ruling of the trial court
The trial court found that Olivarez Realty Corporation
and Dr. Olivarez’s answer "substantially [admitted the
material allegations of Castillo’s] complaint and [did]
not . . . raise any genuine issue [as to any material
fact]."60
Defendants admitted that Castillo owned the parcel of
land covered by Transfer Certificate of Title No. T-
19972. They likewise admitted the genuineness of the
deed of conditional sale and that the corporation only
paid P2,500,000.00 of the agreed purchase price.61
According to the trial court, the corporation was
responsible for suing the Philippine Tourism Authority
and for paying the tenants disturbance compensation.
Since defendant corporation neither filed any case nor
paid the tenants disturbance compensation, the trial
court ruled that defendant corporation had no right to
withhold payments from Castillo.62
As to the alleged ambiguity of paragraphs E and F of
the deed of conditional sale, the trial court ruled that
Castillo and his witness, Marissa Magsino, "clearly
established"63 in their affidavits that the deed of
conditional sale was a contract of adhesion. The true
agreement between the parties was that the
corporation would both clear the land of the tenants
and pay them disturbance compensation.
With these findings, the trial court ruled that Olivarez
Realty Corporation breached the contract ofconditional
sale.1âwphi1 In its decision64 dated April 23, 2007,
the trial court ordered the deed of conditional sale
rescinded and the P2,500,000.00 forfeited in favor of
Castillo "as damages under Article 1191 of the Civil
Code."65
The trial court declared Olivarez Realty Corporation
and Dr. Olivarez solidarily liable to Castillo for
500,000.00 as moral damages, P50,000.00 as
exemplary damages, and P50,000.00 as costs of
suit.66
Ruling of the Court of Appeals
Olivarez Realty Corporation and Dr. Olivarez appealed
to the Court of Appeals.67
In its decision68 dated July 20, 2010, the Court of
Appeals affirmed in totothe trial court’s decision.
According to the appellate court, the trial court "did not
err in its finding that there is no genuine controversy
as to the facts involved [in this case]."69 The trial
court, therefore, correctly rendered summary
judgment.70
As to the trial court’s award of damages, the
appellatecourt ruled that a court may award damages
through summary judgment "if the parties’ contract
categorically [stipulates] the respective obligations of
the parties in case of default."71 As found by the trial
court,paragraph I of the deed of conditional sale
categorically states that "in case [the deed of
conditional sale] is cancelled, any
improvementintroduced by [Olivarez Realty
Corporation] on the property shall be forfeited infavor
of [Castillo]."72 Considering that Olivarez Realty
Corporation illegally retained possession of the
property, Castillo forewent rentto the property and "lost
business opportunities."73 The P2,500,000.00 down
payment, according to the appellate court, shouldbe
forfeited in favor of Castillo. Moral and exemplary
damages and costs ofsuit were properly awarded.
On August 11, 2010, Olivarez RealtyCorporation and
Dr. Olivarez filed their motion for reconsideration,74
arguing that the trial court exceeded its authority in
forfeiting the P2,500,000.00 down payment and
awarding P500,000.00 in moral damages to Castillo.
They argued that Castillo only prayed for a total of
P500,000.00 as actual and moral damages in his
complaint.75 Appellants prayed that the Court of
Appeals "take a second hard look"76 at the case and
reconsider its decision.
In the resolution77 dated March 18, 2011, the Court of
Appeals denied the motion for reconsideration.
Proceedings before this court
Olivarez Realty Corporation and Dr. Olivarez filed their
petition for review on certiorari78 with this court.
Petitionersargue that the trial court and the Court of
Appeals erred in awarding damages to Castillo. Under
Section 3, Rule 35 of the 1997 Rules ofCivil
Procedure, summary judgment may be rendered
except as to the amountof damages. Thus, the Court
of Appeals "violated the procedural steps in rendering
summary judgment."79
Petitioners reiterate that there are genuine issues
ofmaterial fact to be resolved in this case. Thus, a full-
blown trial is required, and the trial court prematurely
decided the case through summary judgment. They
cite Torres v. Olivarez Realty Corporation and Dr.
Pablo Olivarez,80 a case decided by the Ninth
Division of the Court of Appeals.
In Torres, Rosario Torres was the registeredowner of
a parcel of land covered by Transfer Certificate of Title
No. T-19971. Under a deed of conditional sale, she
sold her property to OlivarezRealty Corporation for
P17,345,900.00. When the corporation failed to fully
pay the purchase price, she sued for rescission of
contractwith damages. In their answer, the corporation
and Dr. Olivarez argued thatthey discontinued
payment because Rosario Torres failed to clear the
land of the tenants.
Similar to Castillo, Torres filed a motion for summary
judgment, which the trial court granted. On appeal, the
Court of Appeals set aside the trial court’s summary
judgment and remanded the case to the trial court for
further proceedings.81 The Court of Appeals ruled that
the material allegations of the complaint "were directly
disputed by [the corporation and Dr. Olivarez] in their
answer"82 when they argued that they refused to pay
because Torres failed to clear the land of the tenants.
With the Court of Appeals’ decision in Torres,Olivarez
Realty Corporation and Dr. Olivarez argue that this
case should likewise be remanded to the trial court for
further proceedings under the equipoise rule.
Petitioners maintain that Castillo availed himself of the
irreconcilable reliefs of reformation of instrument and
rescission of contract.83 Thus, the trial court should
have dismissed the case outright.
Petitioners likewise argue that the trial court had no
jurisdiction to decide the case as Castillo failed topay
the correct docket fees.84 Petitioners argue that
Castillo should have paid docket fees based on the
property’s fair market value since Castillo’s complaint
is a real action.85
In his comment,86 Castillo maintains that there are no
genuine issues as to any material fact inthis case. The
trial court, therefore, correctly rendered summary
judgment.
As to petitioners’ claim that the trial court had no
jurisdiction to decide the case, Castillo argues that he
prayed for rescission of contract in his complaint. This
action is incapable of pecuniary estimation, and the
Clerk of Court properly computed the docket fees
based on this prayer.87 Olivarez Realty Corporation
and Dr. Olivarez replied,88 reiterating their arguments
in the petition for review on certiorari.
The issues for our resolution are the following:
I. Whether the trial court erred in rendering
summary judgment;
II. Whether proper docket fees were paid in
this case.
The petition lacks merit.
I
The trial court correctly rendered
summary judgment, as there were no
genuine issues of material fact in this case
Trial "is the judicial examination and determination of
the issues between the parties to the action."89 During
trial, parties "present their respective evidence of their
claims and defenses."90 Parties to an action have the
right "to a plenary trial of the case"91 to ensure that
they were given a right to fully present evidence on
their respective claims.
There are instances, however, whentrial may be
dispensed with. Under Rule 35 of the 1997 Rules of
Civil Procedure, a trial court may dispense with trial
and proceed to decide a case if from the pleadings,
affidavits, depositions, and other papers on file, there
is no genuine issue as to any material fact. In such a
case, the judgment issued is called a summary
judgment.
A motion for summary judgment is filed either by the
claimant or the defending party.92 The trial court then
hears the motion for summary judgment. If indeed
there are no genuine issues of material fact, the trial
court shall issue summary judgment. Section 3, Rule
35 of the 1997 Rules of Civil Procedure provides:
SEC. 3. Motion and proceedings thereon. – The
motion shall be served at least ten (10) days beforethe
time specified for the hearing. The adverse party may
serve opposing affidavits, depositions, or admission at
least three (3) days before the hearing. After the
hearing, the judgment sought shall be rendered
forthwith ifthe pleadings, supporting affidavits,
depositions, and admissions on file, showthat, except
as to the amount of damages, there is no genuine
issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.
An issue of material fact exists if the answer or
responsive pleading filed specifically denies the
material allegations of fact set forth in the complaint or
pleading. If the issue offact "requires the presentation
of evidence, it is a genuine issue of fact."93 However,
if the issue "could be resolved judiciously by plain
resort"94 to the pleadings, affidavits, depositions, and
other paperson file, the issue of fact raised is sham,
and the trial court may resolve the action through
summary judgment.
A summary judgment is usually distinguished from a
judgment on the pleadings. Under Rule 34 of the 1997
Rules of Civil Procedure, trial may likewise be
dispensed with and a case decided through judgment
on the pleadings if the answer filed fails to tender an
issue or otherwise admits the material allegations of
the claimant’s pleading.95
Judgment on the pleadings is proper when the answer
filed fails to tender any issue, or otherwise admitsthe
material allegations in the complaint.96 On the other
hand, in a summary judgment, the answer filed
tenders issues as specific denials and affirmative
defenses are pleaded, but the issues raised are sham,
fictitious, or otherwise not genuine.97
In this case, Olivarez Realty Corporation admitted that
it did not fully pay the purchase price as agreed upon
inthe deed of conditional sale. As to why it withheld
payments from Castillo, it set up the following
affirmative defenses: First, Castillo did not filea case to
void the Philippine Tourism Authority’s title to the
property; second,Castillo did not clear the land of the
tenants; third, Castillo allegedly sold the property to a
third person, and the subsequent sale is currently
being litigated beforea Quezon City court.
Considering that Olivarez RealtyCorporation and Dr.
Olivarez’s answer tendered an issue, Castillo properly
availed himself of a motion for summary judgment.
However, the issues tendered by Olivarez Realty
Corporation and Dr. Olivarez’s answer are not genuine
issues of material fact. These are issues that can be
resolved judiciously by plain resort to the pleadings,
affidavits, depositions, and other papers on file;
otherwise, these issues are sham, fictitious, or
patently unsubstantial.
Petitioner corporation refused to fully pay the
purchase price because no court case was filed to
void the Philippine Tourism Authority’s title on the
property. However, paragraph C of the deed of
conditional sale is clear that petitioner Olivarez Realty
Corporation is responsible for initiating court action
against the Philippine Tourism Authority:
C. [Olivarez Realty Corporation] assumes the
responsibility of taking necessary legal action thru
Court to have the claim/title TCT T-18493 of Philippine
Tourism Authority over the above-described property
be nullified and voided; with the full assistance of
[Castillo].98
Castillo’s alleged failureto "fully assist"99 the
corporation in filing the case is not a defense. As the
trial court said, "how can [Castillo] assist [the
corporation] when [the latter] did not file the action [in
the first place?]"100
Neither can Olivarez Realty Corporation argue that it
refused to fully pay the purchase price due to the
Philippine Tourism Authority’s adverse claim on the
property. The corporation knew of this adverse claim
when it entered into a contract of conditional sale. It
even obligated itself under paragraph C of the deed of
conditional sale to sue the Philippine Tourism
Authority. This defense, therefore, is sham.
Contrary to petitioners’ claim, there is no "obvious
ambiguity"101 as to which should occur first — the
payment of the disturbance compensation or the
clearing of the land within six months from the signing
of the deed of conditional sale. The obligations must
be performed simultaneously. In this case, the parties
should have coordinated to ensure that tenants on the
property were paid disturbance compensation and
were made to vacate the property six months after the
signingof the deed of conditional sale.
On one hand, pure obligations, or obligations whose
performance do not depend upon a future or
uncertainevent, or upon a past event unknown to the
parties, are demandable at once.102 On the other
hand, obligations with a resolutory period also take
effect at once but terminate upon arrival of the day
certain.103
Olivarez Realty Corporation’s obligation to pay
disturbance compensation is a pure obligation. The
performance of the obligation to pay disturbance
compensation did not depend on any condition.
Moreover, the deed of conditional sale did not give the
corporation a period to perform the obligation. As
such, the obligation to pay disturbance compensation
was demandable at once. Olivarez RealtyCorporation
should have paid the tenants disturbance
compensation upon execution of the deed of
conditional sale.
With respect to Castillo’s obligation to clear the land of
the tenants within six months from the signing of the
contract, his obligation was an obligation with a
resolutory period. The obligation to clear the land of
the tenants took effect at once, specifically, upon the
parties’ signing of the deed of conditional sale. Castillo
had until October 2, 2000, six months from April 5,
2000 when the parties signed the deed of conditional
sale, to clear the land of the tenants.
Olivarez Realty Corporation, therefore, had no right to
withhold payments of the purchase price. As the trial
court ruled, Olivarez Realty Corporation "can only
claim non-compliance [of the obligation to clear the
land of the tenants in] October 2000."104 It said:
. . . it is clear that defendant [Olivarez Realty
Corporation] should have paid the installments on the
P5 million downpayment up to October 8, 2000, or a
total of P4,500,000.00. That is the agreement because
the only time that defendant [corporation] can claim
non-compliance of the condition is after October, 2000
and so it has the clear obligation topay up to the
October 2000 the agreed installments. Since it paid
only 2,500,000.00, then a violation of the contract has
already been committed. . . .105
The claim that Castillo sold the property to another is
fictitious and was made in bad faith to prevent the trial
court from rendering summary judgment. Petitioners
did not elaborate on this defense and insisted on
revealing the identity of the buyer only during trial.106
Even in their petition for review on certiorari,
petitioners never disclosed the name of this alleged
buyer. Thus, as the trial court ruled, this defense did
not tender a genuine issue of fact, with the defense
"bereft of details."107
Castillo’s alleged prayer for the irreconcilable reliefs of
rescission of contract and reformation of instrument is
not a ground to dismiss his complaint. A plaintiff may
allege two or more claims in the complaint
alternatively or hypothetically, either in one cause of
action or in separate causes of action per Section 2,
Rule 8 of the 1997 Rules of Civil Procedure.108 It is
the filing of two separatecases for each of the causes
of action that is prohibited since the subsequently filed
case may be dismissed under Section 4, Rule 2 of the
1997 Rules of Civil Procedure109 on splitting causes
of action.
As demonstrated, there are no genuineissues of
material fact in this case. These are issues that can be
resolved judiciously by plain resort to the pleadings,
affidavits, depositions, and other papers on file. As the
trial court found, Olivarez Realty Corporation illegally
withheld payments of the purchase price. The trial
court did not err in rendering summary judgment.
II
Castillo is entitled to cancel the contract
of conditional sale
Since Olivarez Realty Corporation illegally withheld
payments of the purchase price, Castillo is entitled to
cancel his contract with petitioner corporation.
However, we properly characterize the parties’
contract as a contract to sell, not a contract of
conditional sale.
In both contracts to sell and contracts of conditional
sale, title to the property remains with the seller until
the buyer fully pays the purchase price.110 Both
contracts are subject to the positive suspensive
condition of the buyer’s full payment of the purchase
price.111
In a contract of conditional sale, the buyer
automatically acquires title to the property upon full
payment of the purchase price.112 This transfer of title
is "by operation of law without any further act having to
be performed by the seller."113 In a contract to sell,
transfer of title to the prospective buyer is not
automatic.114 "The prospective seller [must] convey
title to the property [through] a deed of conditional
sale."115
The distinction is important to determine the applicable
laws and remedies in case a party does not fulfill his
or her obligations under the contract. In contracts of
conditional sale, our laws on sales under the Civil
Code of the Philippines apply. On the other hand,
contracts to sell are not governed by our law on
sales116 but by the Civil Code provisions on
conditional obligations.
Specifically, Article 1191 of the Civil Code on the right
to rescind reciprocal obligations does not apply to
contracts to sell.117 As this court explained in Ong v.
Court of Appeals,118 failure to fully pay the purchase
price in contracts to sell is not the breach of contract
under Article 1191.119 Failure to fully pay the
purchase price is "merely an event which prevents the
[seller’s] obligation to convey title from acquiring
binding force."120 This is because "there can be no
rescission of an obligation that is still nonexistent, the
suspensive condition not having [happened]."121
In this case, Castillo reserved his title to the property
and undertook to execute a deed of absolute sale
upon Olivarez Realty Corporation’s full payment of the
purchase price.122 Since Castillo still has to execute a
deed of absolute sale to Olivarez RealtyCorporation
upon full payment of the purchase price, the transfer
of title is notautomatic. The contract in this case is a
contract to sell.
As this case involves a contract tosell, Article 1191 of
the Civil Code of the Philippines does not apply. The
contract to sell is instead cancelled, and the parties
shall stand as if the obligation to sell never existed.123
Olivarez Realty Corporation shall return the
possession of the property to Castillo. Any
improvement that Olivarez Realty Corporation may
have introduced on the property shall be forfeited in
favor of Castillo per paragraph I of the deed of
conditional sale:
I. Immediately upon signing thisContract, [Olivarez
Realty Corporation] shall be entitled to occupy,
possess and develop the subject property. In case this
Contract is cancelled, any improvement introduced by
[Olivarez Realty Corporation] on the property shall be
forfeited in favor of [Castillo.]124
As for prospective sellers, thiscourt generally orders
the reimbursement of the installments paidfor the
property when setting aside contracts to sell.125 This
is true especially ifthe property’s possession has not
been delivered to the prospective buyer prior to the
transfer of title.
In this case, however, Castillo delivered the
possession of the property to Olivarez Realty
Corporation prior to the transfer of title. We cannot
order the reimbursement of the installments paid.
In Gomez v. Court of Appeals,126 the City of Manila
and Luisa Gomez entered into a contract to sell over a
parcel of land. The city delivered the property’s
possession to Gomez. She fully paid the purchase
price for the property but violated the terms of the
contract to sell by renting out the property to other
persons. This court set aside the contract to sell for
her violation of the terms of the contract to sell. It
ordered the installments paid forfeited in favor of the
City of Manila "as reasonable compensation for
[Gomez’s] use of the [property]"127 for eight years.
In this case, Olivarez Realty Corporation failed to fully
pay the purchase price for the property. It only paid
P2,500,000.00 out of the P19,080,490.00 agreed
purchase price. Worse, petitioner corporation has
been in possession of Castillo’s property for 14 years
since May 5, 2000 and has not paid for its use of the
property.
Similar to the ruling in Gomez, we order the
P2,500,000.00 forfeited in favor of Castillo as
reasonable compensation for Olivarez Realty
Corporation’s use of the property.
III
Olivarez Realty Corporation is liable for
moral and exemplary damages and
attorney’s fees
We note that the trial court erred in rendering
summary judgment on the amount of damages. Under
Section 3, Rule 35 of the 1997 Rules of Civil
Procedure, summary judgment may be rendered,
except as to the amount of damages.
In this case, the trial court erred in forfeiting the
P2,500,000.00 in favor of Castillo as damages under
Article 1191 of the Civil Code of the Philippines. As
discussed, there is nobreach of contract under Article
1191 in this case.
The trial court likewise erred inrendering summary
judgment on the amount of moral and exemplary
damages and attorney’s fees.
Nonetheless, we hold that Castillois entitled to moral
damages, exemplary damages, and attorney’s fees.
Moral damages may be awarded in case the claimant
experienced physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar
injury.128
As for exemplary damages, they are awarded in
addition to moral damages by way of example or
correction for the public good.129 Specifically in
contracts, exemplary damages may be awarded if the
defendant acted in a wanton, fraudulent,reckless,
oppressive, or malevolent manner.130
Under the deed of conditional sale, Olivarez Realty
Corporation may only suspend the monthly down
payment in case Castillo fails to clear the land of the
tenants six months from the signing of the instrument.
Yet, even before the sixth month arrived, Olivarez
Realty Corporation withheld payments for Castillo’s
property. It evenused as a defense the fact that no
case was filed against the PhilippineTourism Authority
when, under the deed of conditional sale, Olivarez
Realty Corporation was clearly responsible for
initiating action against the Philippine Tourism
Authority. These are oppressive and malevolent acts,
and we find Castillo entitled to P500,000.00 moral
damages and P50,000.00 exemplary damages:
Plaintiff Castillo is entitled to moral damages because
of the evident bad faith exhibited by defendants in
dealing with him regarding the sale of his lot to
defendant [Olivarez Realty Corporation]. He suffered
much prejudice due to the failure of defendants to pay
him the balance of purchase price which he expected
touse for his needs which caused him wounded
feelings, sorrow, mental anxiety and sleepless nights
for which defendants should pay P500,000.00 as
moral damages more than six (6) years had elapsed
and defendants illegally and unfairly failed and refused
to pay their legal obligations to plaintiff, unjustly taking
advantage of a poor uneducated man like plaintiff
causing much sorrow and financial difficulties. Moral
damages in favor of plaintiff is clearly justified . . .
[Castillo] is also entitled to P50,000.00 as exemplary
damages to serve as a deterrent to other parties to a
contract to religiously comply with their prestations
under the contract.131
We likewise agree that Castillo is entitled to attorney’s
fees in addition to the exemplary damages.132
Considering that Olivarez Realty Corporation refused
to satisfy Castillo’splainly valid, just, and demandable
claim,133 the award of P50,000.00 as attorney’s fees
is in order. However, we find that Dr. Pablo R.Olivarez
is not solidarily liable with Olivarez Realty Corporation
for the amount of damages.
Under Article 1207 of the Civil Code of the Philippines,
there is solidary liability only when the obligation
states it or when the law or the nature of the obligation
requires solidarity.134 In case of corporations, they
are solely liable for their obligations.135 The directors
or trustees and officers are not liable with the
corporation even if it is through their acts that the
corporation incurred the obligation. This is because a
corporation is separate and distinct from the persons
comprising it.136
As an exception to the rule, directors or trustees and
corporate officers may be solidarily liable with the
corporation for corporate obligations if they acted "in
bad faith or with gross negligence in directing the
corporate affairs."137
In this case, we find that Castillo failed to prove with
preponderant evidence that it was through Dr.
Olivarez’s bad faith or gross negligence that Olivarez
Realty Corporation failed to fully pay the purchase
price for the property. Dr. Olivarez’s alleged act of
making Castillo sign the deed of conditional sale
without explaining to the latter the deed’s terms in
Tagalog is not reason to hold Dr. Olivarez solidarily
liable with the corporation. Castillo had a choice not to
sign the deed of conditional sale. He could have asked
that the deed of conditional sale be written in Tagalog.
Thus, Olivarez Realty Corporation issolely liable for
the moral and exemplary damages and attorney’s fees
to Castillo.
IV
The trial court acquired jurisdiction over
Castillo’s action as he paid the correct
docket fees
Olivarez Realty Corporation and Dr. Olivarez claimed
that the trial court had no jurisdiction to take
cognizance of the case. In the reply/motion to dismiss
the complaint138 they filed with the Court of Appeals,
petitioners argued that Castillo failed to pay the correct
amount of docket fees. Stating that this action is a real
action, petitioners argued that the docket fee Castillo
paid should have been based on the fair market value
of the property. In this case, Castillo only paid
4,297.00, which is insufficient "if the real nature of the
action was admitted and the fair market value of the
property was disclosed and made the basis of the
amount of docket fees to be paid to the court."139
Thus, according to petitioners, the case should be
dismissed for lack of jurisdiction.
Castillo countered that his action for rescission is an
action incapable of pecuniary estimation. Thus, the
Clerk of Court of the Regional Trial Court of Tanauan
City did not err in assessing the docket fees based on
his prayer.
We rule for Castillo. In De Leon v. Court of
Appeals,140 this court held that an action for
rescission of contract of sale of real property is an
action incapable of pecuniary estimation. In De Leon,
the action involved a real property. Nevertheless, this
court held that "it is the nature of the action as one for
rescission of contract which is controlling."141
Consequently, the docket fees to be paid shall be for
actions incapableof pecuniary estimation, regardless if
the claimant may eventually recover the real property.
This court said:
. . . the Court in Bautista v.Lim, held that an action for
rescission of contract is one which cannot be
estimated and therefore the docket fee for its filing
should be the flat amount of P200.00 as then fixed in
the former Rule 141, §141, §5(10). Said this Court:
We hold that Judge Dalisay did not err in considering
Civil Case No. V-144 as basically one for rescission or
annulment of contract which is not susceptible of
pecuniary estimation (1 Moran's Comments on the
Rules of Court, 1970 Ed, p. 55; Lapitan vs. Scandia,
Inc., L-24668, July 31, 1968, 24 SCRA 479, 781-483).
Consequently, the fee for docketing it is P200, an
amount already paid by plaintiff, now respondent
Matilda Lim.1âwphi1 (She should pay also the two
pesos legal research fund fee, if she has not paid it, as
required in Section 4 of Republic Act No. 3870, the
charter of the U.P. Law Center).
Thus, although eventually the result may be the
recovery of land, it is the nature of the action as one
for rescission of contract which is controlling. The
Court of Appeals correctly applied these cases to the
present one. As it said:
We would like to add the observations that since the
action of petitioners [private respondents] against
private respondents [petitioners] is solely for
annulment or rescission which is not susceptible of
pecuniary estimation, the action should not be
confused and equated with the "value of the property"
subject of the transaction; that by the very nature of
the case, the allegations, and specific prayer in the
complaint, sans any prayer for recovery of money
and/or value of the transaction, or for actual or
compensatory damages, the assessment and
collection of the legal fees should not be intertwined
with the merits of the case and/or what may be its end
result; and that to sustain private respondents'
[petitioners'] position on what the respondent court
may decide after all, then the assessment should be
deferred and finally assessed only after the court had
finally decided the case, which cannot be done
because the rules require that filing fees should be
based on what is alleged and prayed for in the face of
the complaint and paid upon the filing of the
complaint.142
Although we discussed that there isno rescission of
contract to speak of in contracts of conditional sale,
we hold that an action to cancel a contract to sell,
similar to an action for rescission of contract of sale, is
an action incapable of pecuniary estimation. Like any
action incapable of pecuniary estimation, an action to
cancel a contract to sell "demands an inquiry into
other factors"143 aside from the amount of money to
be awarded to the claimant. Specifically in this case,
the trial court principally determined whether Olivarez
Realty Corporation failed to pay installments of the
property’s purchase price as the parties agreed upon
in the deed of conditional sale. The principal natureof
Castillo’s action, therefore, is incapable of pecuniary
estimation.
All told, there is no issue that the parties in this case
entered into a contract to sell a parcel of land and that
Olivarez Realty Corporation failed to fully pay the
installments agreed upon.Consequently, Castillo is
entitled to cancel the contract to sell.
WHEREFORE, the petition for review on certiorari is
DENIED. The Court of Appeals’ decision dated July
20, 2010 and in CA-G.R. CV No. 91244 is
AFFIRMEDwith MODIFICATION.
The deed of conditional sale dated April 5, 2000 is
declared CANCELLED. Petitioner Olivarez Realty
Corporation shall RETURN to respondent Benjamin
Castillo the possession of the property covered by
Transfer Certificate of Title No. T-19972 together with
all the improvements that petitioner corporation
introduced on the property. The amount of
P2,500,000.00 is FORFEITED in favor of respondent
Benjamin Castillo as reasonable compensation for the
use of petitioner Olivarez Realty Corporation of the
property.
Petitioner Olivarez Realty Corporation shall PAY
respondent Benjamin Castillo P500,000.00 as moral
damages, P50,000.00 as exemplary damages, and
P50,000.00 as attorney's fees with interest at 6% per
annum from the time this decision becomes final and
executory until petitioner
corporation fully pays the amount of damages.144
SO ORDERED.
MARVIC MARIO VICTOR F. LEONEN
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124874 March 17, 2000
ALBERT R. PADILLA, petitioner,
vs.
SPOUSES FLORESCO PAREDES and ADELINA
PAREDES, and THE HONORABLE COURT OF
APPEALS, respondents.
DECISION
QUISUMBING, J.:
For resolution is a petition for review on certiorari,
seeking reversal of the decision of the Court of
Appeals in CA G.R. CV No. 33089, which set aside
the decision of the Regional Trial Court in Civil Case
No. 4357 and confirmed the rescission of the contract
between petitioner and private respondents.
From the records, we glean the following antecedent
facts:
On October 20, 1988, petitioner Albert R. Padilla and
private respondents Floresco and Adelina Paredes
entered into a contract to sell1 involving a parcel of
land in San Juan, La Union. At that time, the land was
untitled although private respondents were paying
taxes thereon. Under the contract, petitioner
undertook to secure title to the property in private
respondents' names. Of the P312,840.00 purchase
price, petitioner was to pay a downpayment of
P50,000.00 upon signing of the contract, and the
balance was to be paid within ten days from the
issuance of a court order directing issuance of a
decree of registration for the property.
On December 27, 1989, the court ordered the
issuance of a decree of land registration for the
subject property. The property was titled in the name
of private respondent Adelina Paredes. Private
respondents then demanded payment of the balance
of the purchase price, per the second paragraph of the
contract to sell,2 which reads as follows:
VENDEE agrees to pay the balance of the
purchase price of subject property in the
amount of TWO HUNDRED SIXTY TWO
THOUSAND EIGHT HUNDRED FORTY
(P262,840.00) PESOS, within ten (10) days
counted from issuance of the Order of the
Court for the issuance of a decree pursuant to
an application for registration and confirmation
of title of said subject property, of which the
VENDEE is under obligation to secure the title
of subject property at his own expense.
Petitioner made several payments to private
respondents, some even before the court issued an
order for the issuance of a decree of registration.3 Still,
petitioner failed to pay the full purchase price even
after the expiration of the period set. In a letter dated
February 14, 1990,4 private respondents, through
counsel, demanded payment of the remaining
balance, with interest and attorney's fees, within five
days from receipt of the letter. Otherwise, private
respondents stated they would consider the contract
rescinded.
On February 28, 1990, petitioner made a payment of
P100,000.00 to private respondents,5 still insufficient
to cover the full purchase price. Shortly thereafter, in a
letter dated April 17, 1990,6 private respondents
offered to sell to petitioner one-half of the property for
all the payments the latter had made, instead of
rescinding the contract. If petitioner did not agree with
the proposal, private respondents said they would take
steps to enforce the automatic rescission of the
contract.1âwphi1.nêt
Petitioner did not accept private respondents'
proposal. Instead, in a letter dated May 2, 1990,7 he
offered to pay the balance in full for the entire
property, plus interest and attorney's fees. Private
respondents refused the offer.
On May 14, 1990, petitioner instituted an action for
specific performance against private respondents,
alleging that he had already substantially complied
with his obligation under the contract to sell. He
claimed that the several partial payments he had
earlier made, upon private respondents' request, had
impliedly modified the contract. He also averred that
he had already spent P190,000.00 in obtaining title to
the property, subdividing it, and improving its right-of-
way.8
For their part, private respondents claimed before the
lower court that petitioner maliciously delayed
payment of the balance of the purchase price, despite
repeated demand and despite his knowledge of
private respondents' need therefor.9 According to
private respondents, their acceptance of partial
payments did not at all modify the terms of their
agreement, such that the failure of petitioner to fully
pay at the time stipulated was a violation of the
contract. 10 Private respondents claimed that this
violation led to the rescission of the contract, of which
petitioner was formally informed. 11
After trial, the lower court ruled in favor of petitioner,
saying that even if petitioner indeed breached the
contract to sell, it was only a casual and slight breach
that did not warrant rescission of the contract. The trial
court pointed out that private respondents themselves
breached the contract when they requested and
accepted installment payments from petitioner, even
before the land registration court ordered issuance of
a decree of registration for the property. 12 According
to the trial court, this constituted modification of the
contract, though not reduced into writing as required
by the contract itself. The payments, however, were
evidenced by receipts duly signed by private
respondents. Acceptance of delayed payments
estopped private respondents from exercising their
right of rescission, if any existed. 13
The Court of Appeals, however, reversed the ruling of
the trial court and confirmed private respondents'
rescission of the contract to sell. According to the
Court of Appeals, the issue of whether or not the
breach of contract committed is slight or casual is
irrelevant in the case of a contract to sell, where title
remains in the vendor if the vendee fails to "comply
with the condition precedent of making payment at the
time specified in the contract." 14
The Court of Appeals rejected petitioner's claim that
there had been a novation of the contract when he
tendered partial payments for the property even before
payment was due. The Court of Appeals noted that
the contract itself provides that no terms and
conditions therein shall be modified unless such
modification is in writing and duly signed by the
parties. The modification alleged by petitioner is not in
writing, much less signed by the parties. 15 Moreover,
the Court of Appeals ruled that private respondents
made a timely objection to petitioner's partial
payments when they offered to sell to petitioner only
one-half of the property for such partial payments. 16
The Court of Appeals ruled that private respondents
are entitled to rescission under Article 1191 of the Civil
Code, but with the obligation to return to petitioner the
payments the latter had made, including expenses
incurred in securing title to the property and in
subdividing and improving it right of way. Whatever
damages private respondents had suffered should be
deemed duly compensated by the benefits they
derived from the payments made by petitioner. 17
Hence, this petition, wherein petitioner assigns the
following errors allegedly committed by the Court of
Appeals:
1. . . . HOLDING THAT: "THE APPELLANTS
ARE ENTITLED TO RESCISSION UNDER
ARTICLE 1191 OF THE CIVIL CODE.
2. . . . IN CONFIRMING THE UNILATERAL
RESCISSION OF THE CONTRACT TO SELL
BY THE PRIVATE RESPONDENTS.
3. . . . WHEN IT INTERPRETED AND
APPLIED LIBERALLY IN FAVOR OF THE
PRIVATE RESPONDENTS AND STRICTLY
AGAINST THE HEREIN PETITIONERS, THE
PROVISIONS OF ARTICLE 1191 AND
OTHER PROVISIONS OF THE CIVIL CODE.
18
Petitioner contends that private respondents are not
entitled to rescission, because rescission cannot be
availed of when the breach of contract is only slight or
casual, and not so substantial and fundamental as to
defeat the object of the parties in making the contract.
Petitioner points out that he made partial payments
even before they were due — in fact, even before the
land registration court issued an order for the issuance
of a decree of registration for the property — since
private respondents requested it. Private respondents'
acceptance of the payments amounted to a
modification of the contract, though unwritten.
Petitioner believed in good faith that private
respondents would honor an alleged verbal agreement
that the latter would not strictly enforce the period for
the payment of the remaining balance.
Petitioner additionally argues that private respondents
were also guilty of breach of contract since they failed
to deliver the three-meter wide additional lot for a
right-of-way, as agreed upon in their contract.
For their part, private respondents reiterate that, as
ruled by the Court of Appeals, the issue of whether or
not the breach is slight or casual is irrelevant in a
contract to sell. They contend that in such a contract,
the non-payment of the purchase price is not a breach
but simply an event that prevents the vendor from
complying with his obligation to transfer title to the
property to the vendee. Moreover, they point out that
the degree of breach was never raised as an issue
during the pre-trial conference nor at trial of this case.
Private respondents also aver that petitioner cannot
avail of an action for specific performance since he is
not an injured party as contemplated in Article 1191 of
the Civil Code.
Private respondents admit having requested cash
advances from petitioner due to dire financial need.
Such need, they point out, is the same reason why
time is of the essence in the payment of the balance of
the purchase price. They claim that petitioner offered
to pay the balance only after more than three months
had lapsed from the date his obligation to pay became
due.
Private respondents argue that their acceptance of
advance payments does not amount to a novation of
the contract since, as provided in the contract itself,
modification of the contract would only be binding if
written and signed by the parties, which is not the
case here. Acceptance of advance payments is a
mere act of tolerance, which under the contract would
not be considered as a modification of the terms and
conditions thereof.
The core issue in this case is whether the respondent
Court of Appeals erred in reversing and setting aside
the judgment of the trial court, by holding that private
respondents are entitled to rescind their "contract to
sell" the land to petitioner.
To begin with, petitioner is alleging that the contract
entered into between the parties is a contract of sale,
in which case rescission will not generally be allowed
where the breach is only slight or casual. Petitioner
insists that the title "Contract to Sell" does not reflect
the true intention of the parties, which is to enter into a
contract of sale.
We note, however, that petitioner only made this claim
as to the nature of the contract in his reply to the
comment of private respondents to his petition for
review. In his complaint in the RTC and in his petition
for review, petitioner refers to the subject contract as a
contract to sell. The nature of the contract was never
in issue in the proceedings in the courts below.
Moreover, petitioner does not deny private
respondents' allegation that it was he and his counsel
who prepared the contract. Thus, the ambiguity, if any
exists, must be resolved strictly against him as the one
who caused the same. 19
At any rate, the contract between the parties in our
view is indeed a contract to sell, as clearly inferrable
from the following provisions thereof:
xxx xxx xxx
That the VENDORS hereby agree and bind
themselves not to allienate (sic), encumber, or
in any manner modify the right of title to said
property.
xxx xxx xxx
That the VENDORS agree to pay real estate
taxes of said subject property until the same
will have been transferred to the VENDEE.
That on payment of the full purchase price of
the above-mentioned property the VENDORS
will execute and deliver a deed conveying to
the VENDEE the title in fee simple of said
property free from all lien and encumbrances .
. . (Emphasis supplied.)20
These provisions signify that title to the property
remains in the vendors until the vendee should have
fully paid the purchase price, which is a typical
characteristic of a contract to sell.
Now, admittedly, petitioner failed to comply with his
obligation to pay the full purchase pride within the
stipulated period. Under the contract, petitioner was to
pay the balance of the purchase price within 10 days
from the date of the court order for the issuance of the
decree of registration for the property. Private
respondents claim, and petitioner admits, that there
was delay in the fulfillment of petitioner's obligation.
The order of the court was dated December 27, 1989.
By April 1990, or four months thereafter, petitioner still
had not fully paid the purchase price, clearly in
violation of the contract.
Petitioner's offer to pay is clearly not the payment
contemplated in the contract. While he might have
tendered payment through a check, this is not
considered payment until the check is encashed.21
Besides, a mere tender of payment is not sufficient.
Consignation is essential to extinguish petitioner's
obligation to pay the purchase price.22
We sustain the decision of the Court of Appeals, to the
effect that private respondents may validly cancel the
contract to sell their land to petitioner. However, the
reason for this is not that private respondents have the
power to rescind such contract, but because their
obligation thereunder did not arise.
Art. 1191 of the Civil Code, on rescission, is
inapplicable in the present case. This is apparent from
the text of the article itself:
Art. 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
The injured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case.
He may also seek rescission, even after he
has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed,
unless there be just cause authorizing the
fixing of a period.
This is understood to be without prejudice to
the rights of third persons who have acquired
the thing, in accordance with articles 1385 and
1388 and the Mortgage Law.
Art. 1191 speaks of obligations already existing, which
may be rescinded in case one of the obligors fails to
comply with what is incumbent upon him. However, in
the present case, there is still no obligation to convey
title of the land on the part of private respondents.
There can be no rescission of an obligation that is
non-existent, considering that the suspensive
condition therefor has not yet happened.23
In Rillo v. Court of Appeals,24 we ruled:
The respondent court did not err when it did
not apply Articles 1191 and 1592 of the Civil
Code on rescission to the case at bar. The
contract between the parties is not an absolute
conveyance of real property but a contract to
sell. In a contract to sell real property on
installments, the full payment of the purchase
price is a positive suspensive condition, the
failure of which is not considered a breach,
casual or serious, but simply an event which
prevented the obligation of the vendor to
convey title from acquiring any obligatory force.
The transfer of ownership and title would occur
after full payment of the purchase price.25
We reiterated this rule in Odyssey Park, Inc. v. Court
of Appeals, 280 SCRA 253 (1997). Moreover, we held
in Odyssey:
The breach contemplated in Article 1191 of the
Code is the obligor's failure to comply with an
obligation already extant, not a failure of a
condition to render binding that obligation.26
Under the parties' contract, the property will be
transferred to petition only upon the latter's "complete
compliance of his obligation provided in [the] contract."
Because of petitioner's failure to fully pay the purchase
price; the obligation of private respondents to convey
title to the property did not arise.27 Thus, private
respondents are under no obligation, and may not be
compelled, to convey title to petitioner and receive the
full purchase price.
Petitioner's reliance on Article 1592 of the Civil Code
is misplaced. It provides:
Art. 1592. In the sale of immovable property,
even though it may have been stipulated that
upon failure to pay the price at the time agreed
upon the rescission of the contract shall of right
take place, the vendee may pay, even after the
expiration of the period, as long as no demand
for rescission of the contract has been made
upon him either judicially or by a notarial act.
 After the demand, the court may not grant him
a new term.
Clearly, what this provision contemplates is an
absolute sale and not a contract to sell as in the
present case.
Private respondents' acceptance of several partial
payments did not modify the parties' contract as to
exempt petitioner from complying with his obligation to
pay within the stipulated period. The contract itself
provided:
No terms and conditions shall be considered
modified, changed, altered, or waived by any
verbal agreement by and between the parties
hereto or by an act of tolerance on the parties
unless such modification, change, alteration or
waiver appears in writing duly signed by the
parties hereto.28
Acceptance of the partial payments is, at best, an act
of tolerance on the part of private respondents that
could not modify the contract, absent any written
agreement to that effect signed by the parties.
The Court of Appeals is correct in ordering the return
to petitioner of the amounts received from him by
private respondents, on the principle that no one may
unjustly enrich himself at the expense of another.
WHEREFORE, the petition is DENIED, for lack of
merit. Costs against petitioner.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, JJ., concur.
 DECISION
THIRD DIVISION

CHICO-NAZARIO, J.:
SPOUSES EMMA H. VER G.R. No. 139047
REYES and RAMON
REYES, The two Petitions for Review on Certiorari now before
Petitioners, this Court seek to challenge, under Rule 45 of the
Rules of Court, the Decision dated 17 June 1999 of
the Court of Appeals in CA-G.R. CV No. 35688, which
- versus - reversed and set aside the Decision dated 25
November 1991 of the Regional Trial Court (RTC) of
Pasay City, Branch 119, in the consolidated cases of
DOMINADOR LRC Case No. LP-553-P (an application for
SALVADOR, SR., EMILIO registration of title to real property) and Civil Case No.
FUERTE, FELIZA 6914-P (an action to declare ownership over real
LOZADA, ROSALINA property, formerly numbered Pq-8557-P). The Court of
PADLAN, AURORA Appeals upheld the title of Rosario Bondoc to the
TOLENTINO, TRINIDAD disputed property, thus, overturning the finding of the
L. CASTILLO, ROSARIO RTC of Pasay City that Maria Q. Cristobal and Dulos
BONDOC, MARIA Q. Realty & Development Corporation have a registrable
CRISTOBAL and DULOS title to the same property.
REALTY &
DEVELOPMENT The Contracts
CORPORATION, At the core of the controversy in the Petitions
TRINIDAD LOZADA, at bar is a parcel of unregistered land located in
JOHN DOE and Tungtong, Las Pias, formerly of the Province of Rizal,
RICHARD DOE, G.R. No. 139365 now a part of Metro Manila, designated as Lot 1 of
Respondents. Plan Psu-205035, with an area of 19,545 square
meters (subject property). It previously formed part of
x- - - - - - - - - - - - - - - - - - - Present: a bigger parcel of agricultural land first declared in the
---x name of Domingo Lozada (Domingo) in the year 1916
TINGA,* J., under Tax Declaration No. 2932.
MARIA Q. CRISTOBAL CHICO-NAZARIO,
and DULOS REALTY & Acting Chairperson, During the lifetime of Domingo, he was married
DEVELOPMENT VELASCO,* twice. From his first marriage to Hisberta Guevarra in
CORPORATION, NACHURA, and the year 1873, he fathered two children, namely
Petitioners, REYES, JJ. Bernardo and Anatalia. After the death of Hisberta,
Domingo married Graciana San Jose in the year 1887
and their marriage produced two children, namely
- versus - Nicomedes and Pablo.

Promulgated: Domingo and Graciana died on 27 February

DOMINADOR 1930 and 12 August 1941, respectively. On 18 March
SALVADOR, SR., EMILIO 1965, Nicomedes and the heirs of his brother Pablo
FUERTE, FELIZA September 11, 2008 entered into an Extrajudicial Settlement of the
LOZADA, TRINIDAD Estate of their parents Domingo and Graciana.
LOZADA, ROSALINA According to the settlement, the entire parcel of
PADLAN, AURORA agricultural land declared in the name of Domingo was
TOLENTINO, TRINIDAD divided into two, Lot 1 and Lot 2, in accordance with
L. CASTILLO, ROSARIO the approved subdivision plan Psu-205035. The
BONDOC, SPOUSES subject property, i.e., Lot 1, was adjudicated to
EMMA H. VER REYES Nicomedes; while Lot 2 was given to the heirs of
and RAMON REYES, Pablo. Nicomedes then declared the subject property
Respondents. in his name in 1965 under Tax Declaration No. 2050.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - -x
 On 23 June 1965, Nicomedes executed a
Deed of Conditional Sale over the subject property in
favor of Emma Ver Reyes (Emma), which provided:
That the Vendor [Nicomedes] is
the true and lawful owner of a parcel of
land situated at Tungtong, Las Pinas,
Rizal, more particularly described as
follows:
A parcel of land
(Lot 1 of plan Psu-
205035), x x x;
containing an area of
NINETEEN THOUSAND
FIVE HUNDRED
FOURTY FIVE (19,545)
SQUARE METERS,
more or less, and still a
portion of the land
covered by Tax
Declaration No. 2304 of
Las Pinas, Rizal, in the
name of Domingo
Lozada, and with a total
assessed value of
P1,860.00.
That the [subject property] is a
paraphernal property of the Vendor
[Nicomedes], the same having been
inherited by him from his deceased
mother, Graciana San Jose, but was
declared for taxation in the name of his
deceased father, Domingo Lozada;
That for and in consideration of
the sum of FOUR PESOS AND FIFTY
CENTAVOS (P4.50), Philippine
Currency, per square meter to be paid
by the Vendee to the Vendor, the said
Vendor by these presents hereby
SELLS, CEDES, TRANSFERS and
CONVEYS by way of CONDITIONAL
SALE the above-described parcel of
land together with all the improvements
thereon to the said Vendee [Emma],
her heirs, assigns and successors, free
from all liens and encumbrances, under
the following terms and conditions, to
wit:
1. That the Vendee
[Emma] will pay the Vendor
[Nicomedes] as follows:
(a).
TWENTY FIVE
PERCENT (25%)
of the total price
on the date of
the signing of
this contract;
(b). The
next TWENTY
FIVE PERCENT
(25%) of the total
price upon the
issuance of the
title for the land
described above;
and
(c). The balance
of FIFTY PERCENT
(50%) of the total price
within one (1) year from
the issuance of the said
title;
2. That if the Vendee
[Emma] fails to pay the
Vendor [Nicomedes] the
sums stated in paragraphs
1(b) and 1(c) above within the
period stipulated and after
the grace period of one (1)
month for each payment, this
contract shall automatically
be null and void and of no
effect without the necessity of
any demand, notice or filing the
necessary action in court, and
the Vendor [Nicomedes] shall
have the full and exclusive
right to sell, transfer and
convey absolutely the above-
described property to any
person, but the said Vendor
[Nicomedes] shall return to
the Vendee [Emma] all the
amount paid to him by
reason of this contract
without any interest upon the
sale of the said property to
another person;
3. That the total price
shall be subject to adjustment
in accordance with the total
area of the above-described
property that will be finally
decreed by the court in favor of
the herein Vendor [Nicomedes];
and
 4. That the Vendor
[Nicomedes] will execute a
final deed of absolute sale
covering the said property in
favor of the Vendee [Emma]
upon the full payment of the
total consideration in
accordance with the stipulations
above. (Emphases ours.)
The Deed of Conditional Sale was registered in
the Registry of Property for Unregistered Lands in
August 1965.
It would appear from the records of the case
that Emma was only able to pay the first installment of
the total purchase price agreed upon by the parties.
Furthermore, as will be discussed later on, Nicomedes
did not succeed in his attempt to have any title to the
subject property issued in his name.
On 14 June 1968, Nicomedes entered into
another contract involving the subject property with
Rosario D. Bondoc (Rosario). Designated as an
Agreement of Purchase and Sale, the significant
portions thereof states:
NOW, THEREFORE, for and in
consideration of the foregoing premises
and of the sum of ONE HUNDRED
SEVENTY FIVE THOUSAND NINE
HUNDRED FIVE PESOS
(P175,905.00) Philippine Currency,
which the BUYER [Rosario] shall pay to
the SELLER [Nicomedes] in the
manner and form hereinafter specified,
the SELLER [Nicomedes] by these
presents hereby agreed and
contracted to sell all his rights,
interests, title and ownership over
the parcel of land x x x unto the
BUYER [Rosario], who hereby
agrees and binds herself to
purchase from the former, the
aforesaid parcel of land, subject to
the following terms and conditions:
1. Upon the execution of this
Agreement, the BUYER [Rosario] shall
pay the SELLER [Nicomedes], the sum
of FIFTEEN THOUSAND PESOS
(P15,000.00), Philippine Currency.
2. [That] upon the delivery by the
SELLER [Nicomedes] to the BUYER
[Rosario] of a valid title of the aforesaid
parcel of land, free from any and all
liens and encumbrances, and the
execution of the final Deed of Sale, the
BUYER [Rosario] shall pay to the
SELLER [Nicomedes], the sum of
THIRTY SEVEN THOUSAND SEVEN
HUNDRED FIVE PESOS (P37,705.00)
Philippine Currency, and the final
balance of ONE HUNDRED TWENTY
THREE THOUSAND AND TWO
HUNDRED PESOS (P123,200.00)
Philippine Currency, one year from the
date of execution of the final deed of
sale, all without interest.
3. That in the event the BUYER
[Rosario] fails to pay any amount as
specified in Section 2, Paragraph II,
then this contract, shall, by the mere
fact of non-payment expire itself and
shall be considered automatically
cancelled, of no value and effect,
and immediately thereafter the
SELLER [Nicomedes] shall return to
the BUYER [Rosario] the sums of
money he had received from the
BUYER [Rosario] without any interests
and whatever improvement or
improvements made or introduced
by the BUYER [Rosario] on the lot
being sold shall accrue to the
ownership and possession of the
SELLER [Nicomedes].
xxxx
6. The SELLER [Nicomedes] hereby
warrants the useful and peaceful
possession and occupation of the
lot subject matter of this agreement
by the BUYER [Rosario]. (Emphasis
ours.)
On 7 March 1969, Nicomedes and Rosario
executed a Joint Affidavit, whereby they
confirmed the sale of the subject property by
Nicomedes to Rosario through the Agreement of
Purchase and Sale dated 14 June 1968. They
likewise agreed to have the said Agreement
registered with the Registry of Deeds in
accordance with the provisions of Section 194 of
the Revised Administrative Code, as amended by
Act No. 3344. The Agreement of Purchase and
Sale was thus registered on 10 March 1969.
The records of this case show that, of the entire
consideration stipulated upon in the Agreement,
only the first installment was paid by Rosario. No
title to the subject property was ever delivered to
her since, at the time of the execution of the above
 contract, Nicomedess application for the
registration of the subject property was still
pending.
Five months thereafter, Nicomedes executed on
10 August 1969 a third contract, a Deed of
Absolute Sale of Unregistered Land, involving a
portion of the subject property measuring 2,000
square meters, in favor of Maria Q. Cristobal
(Maria). The relevant terms of the Deed recite:
THAT I, NICOMEDES J. LOZADA, of
legal age, Filipino citizen, married and
a resident of Las Pias, Rizal,
Philippines, for and in consideration of
the sum of TWENTY FIVE THOUSAND
(P25,000.00) PESOS, Philippine
currency, receipt of which is hereby
acknowledged to my full and entire
satisfaction, do hereby sell, transfer
and convey to MARIA Q.
CRISTOBAL, likewise of legal age,
Filipino citizen, married to Juan [Dulos],
and a resident of 114 Real Street, Las
Pias, Rizal, Philippines, her heirs,
executors, administrators and assigns,
TWO THOUSAND SQUARE METERS
(2,000) for an easement of way of a
parcel of unregistered land situated
in the Barrio of Tungtong, Municipality
of Las Pias, Province of Rizal,
Philippines, exclusively belonging to
and possessed by me, and more
particularly described as follows:
A parcel of land
described under Tax
Declaration No. 9575
(Lot No. 1, Psu 205035),
situated in the Barrio of
Tuntong, Municipality of
Las Pias, Province of
Rizal, Philippines. xxx
[C]ontaining an area of
1.9545 hectares, more
or less. (Emphasis ours.)
Nicomedes passed away on 29 June 1972. The Deed
of Absolute Sale of Unregistered Land between
Nicomedes and Maria was registered only on 8
February 1973, or more than seven months after the
formers death.
On 10 August 1979, Nicomedess heirs, namely, the
four children from his first marriage, the six children
from his second marriage, and his surviving second
spouse Genoveva Pallera Vda. De Lozada, executed
a Deed of Extrajudicial Settlement of the Estate of
the Late Nicomedes J. Lozada with Ratification of
a Certain Deed of Absolute Sale of Unregistered
Land. The heirs declared in said Deed of Extrajudicial
Settlement that the only property left by Nicomedes
upon his death was the subject property. They also
ratified therein the prior sale of a portion of the subject
property made by Nicomedes in favor of Maria, but
they clarified that the actual area of the portion sold as
presented in the plan was 2,287 square meters, not
2,000 square meters. After excluding the portion sold
to Maria, the heirs claimed equal pro indiviso shares in
the remaining 17,258 square meters of the subject
property.
On 30 July 1980, Nicomedess heirs collectively sold,
for the sum of P414,192.00, their shares in the subject
property in favor of Dulos Realty and Development
Corporation (Dulos Realty), as represented by its
President Juan B. Dulos, via a Deed of Absolute
Sale of an Unregistered Land. The said Deed of
Absolute Sale dated 30 July 1980, however, was not
registered.
The Cases
On 11 April 1966, after executing the Deed of
Conditional Sale in favor of Emma on 23 June 1965,
Nicomedes filed an application for the registration of
the subject property with the then Court of First
Instance (CFI) of Pasig, docketed as LRC Case No.
N-6577. The grandchildren of Domingo by his former
marriage opposed the application for registration and
Emma and her husband Ramon filed their
intervention.
Sometime in 1973, following the execution in
her favor of the Agreement of Purchase and Sale
dated 14 June 1968 and Joint Affidavit dated 7 March
1969, Rosario filed a motion to intervene in LRC Case
No. N-6577 then pending before the CFI of Pasig;
however, her motion was denied by the CFI of Pasig,
in an Order dated 2 June 1973. Rosario no longer
appealed from the order denying her motion to
intervene in said case.
In view of the conflicting claims over the
subject property, the CFI of Pasig dismissed without
prejudice LRC Case No. N-6577 on 21 November
1975 and ordered the parties therein, namely, the
applicant Nicomedes and the oppositors/intervenors,
to litigate first the issues of ownership and possession.
Five years later, on 27 June 1980, Domingos
grandchildren from his first marriage, Dominador, et
al., filed an Application for Registration of title to the
subject property with the CFI of Rizal, docketed as
LRC Case No. LP-553-P. In their Application,
Dominador, et al., alleged, inter alia, that they were
the owners of the subject property by virtue of
inheritance; they were the actual occupants of the said
property; and, other than Emma, they had no
knowledge of any encumbrance or claim of title
affecting the same.
On 6 November 1980, Rosario, assisted by her
husband Mariano Bondoc, invoking the Agreement of
Purchase and Sale executed in her favor by
Nicomedes on 14 June 1968, filed a Complaint before
the CFI of Rizal for the declaration in her favor of
ownership over the subject property, with an
application for a temporary restraining order or
preliminary injunction, against Trinidad Lozada (one of
Domingos heirs from his first marriage who applied for
registration of the subject property in LRC Case No.
LP-553-P) and two other persons, who allegedly
trespassed into the subject property. Rosarios
complaint was docketed as Civil Case No. Pq-8557-
P.
On 4 August 1981, the parties agreed to have LRC
Case No. LP-553-P (the application for land
registration of Dominador, et al.) consolidated with
Civil Case No. Pq-8557-P (the action for declaration of
ownership of Rosario).
By subsequent events, and in consideration of the
location of the subject property in Las Pias, LRC Case
No. LP-553-P and Civil Case No. Pq-8557-P,
reinstated as Civil Case No. 6914-P, were finally
transferred to and decided by the RTC of Pasay City.
In its Decision dated 25 November 1991, the RTC of
Pasay City, Branch 119, disposed of the cases thus:
WHEREFORE, considering all
the foregoing, the court denies the
application of Dominador Salvador, Sr.
et al, having no more right over the
land applied for, dismisses Civil Case
No. Pq-8557-P now 6914 for lack of
merit, and hereby declares Maria
Cristobal Dulos and Dulos Realty
and Development Corporation to
have a registrable title, confirming title
and decreeing the registration of Lot 1
PSU-205035 containing a total area of
19,545 square meters, 2,287 square
meters of which appertains to Maria
Cristobal Dulos married to Juan Dulos
and the remaining portion, in favor of
Dulos Realty and Development
Corporation, without pronouncement
as to costs. (Emphasis ours.)
In so ruling, the RTC rationalized that the subject
property constituted Domingos share in the conjugal
properties of his second marriage to Graciana San
Jose and, therefore, properly pertained to Nicomedes
as one of his sons in said marriage. Being Domingos
heirs from his first marriage, Dominador, et al., were
not entitled to the subject property.
The lower court also found that neither Emma
nor Rosario acquired a better title to the subject
property as against Maria and Dulos Realty. No final
deed of sale over the subject property was executed in
favor of Emma or Rosario, while the sales of portions
of the same property in favor of Maria and of the rest
to Dulos Realty were fully consummated as evidenced
by the absolute deeds of sale dated 10 August 1969
and 30 July 1980, respectively.
Dominador, et al., Emma and her spouse Ramon
Reyes (Ramon), and Rosario separately appealed to
the Court of Appeals the foregoing Decision dated 25
November 1991 of the RTC of Pasay City. Their
consolidated appeals were docketed as CA-G.R. CV
No. 35688.
Dominador, et al., however, moved to withdraw their
appeal in light of the amicable settlement they entered
into with Maria and Dulos Realty. In a Resolution
dated 24 September 1992, the Court of Appeals
granted their Motion to Withdraw Appeal. Dominador,
et al., later filed a motion to withdraw their earlier
Motion to Withdraw Appeal, but this was denied by the
Court of Appeals in a Resolution dated 15 January
1993.
In their respective Briefs before the appellate court,
Emma and Rosario both faulted the RTC of Pasay
City for awarding the subject property to Maria and
Dulos Realty. They each claimed entitlement to the
subject property and asserted the superiority of their
respective contracts as against those of the others.
On 17 June 1999, the Court of Appeals rendered its
assailed Decision, ruling as follows:
As gathered above, both
contracts [entered into with Emma and
Rosario] gave Nicomedes, as vendor,
the right to unilaterally rescind the
contract the moment the buyer failed
to pay within a fixed period (Pingol v.
CA, 226 SCRA 118), after which he,
as vendor, was obliged to return
without interest the sums of money he
had received from the buyer (under the
Deed of Conditional Sale [to Emma],
upon the sale of the property to
another). Additionally, under the
Agreement of Purchase and Sale [with
Rosario], the vendor, in case of
rescission, would become the owner
and entitled to the possession of
whatever improvements introduced by
the buyer.
Under the Deed of Conditional Sale [to
Emma], there was no provision that
possession would be, in case of
rescission, returned to the vendor,
thereby implying that possession
remained with him (vendor). Such
being the case, it appears to be a
contract to sell. Whereas under the
Agreement of Purchase and Sale [with
Rosario], the provision that in case of
rescission, any improvements
introduced by the vendee would
become the vendors implies that
possession was transferred to the
vendee and, therefore, it appears to be
a contract of sale.
That the Agreement of Purchase and
Sale [with Rosario] was a contract of
sale gains light from the Joint Affidavit
subsequently executed by Rosario and
Nicomedes stating that an Agreement
of Purchase and Sale wherein the
former (Nicomedes J. Lozada) sold to
the latter (Rosario D. Bondoc) a parcel
of land had been executed but that the
lot not having been registered under
Act No. 496 nor under the Spanish
Mortgage Law, the parties hereto have
agreed to register the Agreement of
Purchase and Sale ... under the
provision of Section 194 of the
Revised Administrative Code, as
amended by Act No. 3344.
Rosario registered the Agreement of
Purchase and Sale alright on March
10, 1969. She paid taxes on the lot
from 1980 1985. She fenced the lot
with concrete and hollow blocks. And
apart from opposing the land
registration case, she filed a complaint
against Trinidad, et al., for declaration
ownership.
Article 1371 of the Civil Code provides:
Art. 1371. In order to
judge the intention of
the contracting parties,
their contemporaneous
and subsequent acts
shall be principally
considered.
From the provisions of the Agreement
of Purchase and Sale [to Rosario] and
the subsequent acts of the parties then
including the execution of the Joint
Affidavit by Rosario and Nicomedes
stating that an Agreement of Purchase
and Sale wherein the former
(Nicomedes...) sold to the latter
(Rosario...) a parcel of land, had been
executed, there is no mistaking that
the lot was sold to Rosario xxx.
Anent the effect of Rosarios
registration of the Agreement of
Purchase and Sale on Emmas
contract involving the same lot, Act No.
3344 (Amending Sec. 194 of the
Administrative Code [Recording of
instruments or deeds relating to real
estate not registered under Act No.
496 or under the Spanish Mortgage
Law]) provides that any registration
made under Sec. 194 of the
Administrative Code shall be
understood to be without prejudice to a
third party who has a better right.
Better right, however, was not defined
by law.
But author Narciso Pea is inclined to
concur that better right should refer to
a right which must have been acquired
by a third party independently of the
unregistered deed, such as, for
instance, title by prescription, and that
it has no reference to rights acquired
under that unregistered deed itself, he
citing Nisce v. Milo, G.R. No. 425016,
January 17, 1936 Unrep. 62 Phil. 976
x x x.
Given the fact that the contract in
Emmas favor is a mere contract to sell,
as against Rosarios contract which, as
demonstrated above is one of sale
and, in any event, independently of
Emmas contract to sell, she has no
claim of a better right unlike Rosario
who has, not to mention the fact that
she (Rosario) registered her contract
earlier than Emmas, Rosario must
prevail.
The lot having been previously sold to
Rosario, there was no lot or portion
thereof to be later sold to Maria and to
Dulos Realty in 1979 and 1980,
respectively.
WHEREFORE, the appealed Joint
Decision is hereby REVERSED and
SET ASIDE and another is rendered
confirming the title of Rosario D.
 Bondoc over subject lot, Lot 1, PSU-
205035 containing an area of 19,545 III.
sq.m., ordering its registration in her
name, and dismissing the claims of WHETHER OR NOT EMMA VER
ownership of all other claimants. REYES AND RAMON REYES ARE
Appellees Maria Cristobal and Dulos BARRED BY PRESCRIPTION OR
Realty and Development Corporation LACHES.
and all other claimants to subject land
including all persons claiming under IV.
them are hereby ordered to vacate and
restore possession to appellant WHETHER OR NOT THE COURT OF
Rosario D. Bondoc. APPEALS PATENTLY AND
GRAVELY ERRED IN CONFIRMING
Upon issuance of title to subject lot, THE TITLE OF ROSARIO BONDOC
appellant Rosario D. Bondoc is OVER THE DISPUTED LOT,
ordered to pay the balance of the ORDERING ITS REGISTRATION IN
purchase price to the heirs of HER NAME AND DISMISSING THE
Nicomedes Lozada in accordance with CLAIM OF EMMA VER REYES AND
the Agreement of Purchase and Sale RAMON REYES.
executed by the latter in her favor. This
judgment is without prejudice to the
rights which Emma Ver Reyes and Maria and Dulos Realty, on the other hand, submitted
Maria Cristobal and Dulos Realty and in their Petition the following issues for consideration
Development Corporation might have of this Court:
against the estate or surviving heirs of
Nicomedes Lozada to the extent that
the latter was/were benefited.
(Emphasis ours.) I.

WHETHER OR NOT BONDOCS

Aggrieved, Emma and her husband Ramon, as well as AGREEMENT OF PURCHASE AND
Maria and Dulos Realty, without seeking SALE AND SPOUSES REYES DEED
reconsideration of the appellate courts decision, filed OF CONDITIONAL SALE ARE
directly before this Court separate Petitions for Review REGISTRABLE ABSOLUTE
on Certiorari under Rule 45 of the Rules of Court, CONVEYANCES IN FEE SIMPLE TO
docketed as G.R. No. 139047 and G.R. No. 139365, SERVE AS BASIS FOR AN AWARD
respectively, assailing the 17 June 1999 Decision of AND REGISTRATION OF THE
the appellate court. Upon the manifestation and SUBJECT LOT IN THEIR FAVOR.
motion of Maria and Dulos Realty, the two Petitions
were ordered consolidated by this Court in a II.
Resolution dated 13 December 1999.
WHETHER OR NOT RESPONDENTS
In their Petition, Emma and her husband Ramon raise BONDOC AND THE REYESES ARE
the following issues: BARRED BY LACHES AND/OR
PRESCRIPTION.
I.
III.
WHETHER OR NOT OWNERSHIP OF
THE DISPUTED LOT WAS VALIDLY WHETHER OR NOT RESPONDENT
AND LEGALLY TRANSFERRED TO BONDOC IS BARRED BY RES
EMMA VER REYES. JUDICATA.

II.
The fundamental issue that the Court is called upon to
WHETHER OR NOT MARIA resolve is, in consideration of all the contracts
CRISTOBAL DULOS AND DULOS executed by Nicomedes and/or his heirs involving the
REALTY AND DEVELOPMENT subject property, which party acquired valid and
CORPORATION ARE PURCHASERS registrable title to the same.
IN BAD FAITH.
Emma and Ramon contend that although the subject
property was conditionally sold to them by Nicomedes,
the conditionality of the sale did not suspend the
transfer of ownership over the subject property from
Nicomedes to Emma. Even though Nicomedes may
automatically rescind the contract in case of non-
payment by Emma of the balance of the purchase
price, it did not bar the transfer of title to the subject
property to Emma in the meantime. Emma and Reyes
likewise claim that there was constructive delivery of
the subject property to Emma, inasmuch as the Deed
of Conditional Sale in her favor was a public
instrument. Furthermore, Emma was in possession of
the subject property in the concept of owner since she
had been paying realty taxes for the same, albeit in
the name of Nicomedes (in whose name it was
declared), from the time of the sale in 1965 until 1972.
Emma and Ramon also assert that Maria and Dulos
Realty were in bad faith as the sales of the subject
property in their favor, on 10 August 1969 and 30 July
1980, respectively, occurred only after the filing of the
cases involving the property and the registration of the
sale to Emma. Finally, Emma and Ramon maintain
that the Court of Appeals erred in ruling that the
contract in favor of Rosario was a contract of sale for
the sole reason that actual possession of the property
was already transferred to the latter.
For their part, Maria and Dulos Realty point out that
Emma and Rosario are not holders of absolute deeds
of conveyances over the subject property, which
would have entitled them to register the same in their
respective names. They further buttress their alleged
superior right to the subject property based on the
execution of two notarized documents of sale in their
favor, which constituted symbolic and constructive
delivery of the subject property to them. Maria and
Dulos Realty likewise assert that the claims of Emma
and Rosario are already barred by laches and
prescription because they only decided to enforce
their respective rights over the subject property after
Domingos heirs filed with the CFI of Rizal on 27 June
1980 an application for registration of the subject
property, docketed as LRC Case No. LP-553-P,
notwithstanding their knowledge of Nicomedess death
on 29 June 1972. Lastly, Maria and Dulos Realty aver
that Rosario is already barred by res judicata since her
motion to intervene in LRC Case No. 6577, the case
instituted by Nicomedes to register the subject
property, was denied by the CFI of Pasig. The
dismissal of Rosarios motion to intervene in the case
for registration of the subject property already became
final and executory, thus, barring Rosario from
pursuing her claim over the same.
This Courts Ruling
After a conscientious review of the arguments
and evidence presented by the parties, the Court finds
that the Deed of Conditional Sale between Nicomedes
and Emma and the Agreement of Purchase and Sale
between Nicomedes and Rosario were both mere
contracts to sell and did not transfer ownership or
title to either of the buyers in light of their failure to fully
pay for the purchase price of the subject property.
In Coronel v. Court of Appeals, this Court effectively
provided the guidelines for differentiating between a
contract to sell and a contract of sale, to wit:
The Civil Code defines a
contract of sale, thus:
Art. 1458. By the
contract of sale one of
the contracting parties
obligates himself to
transfer the ownership of
and to deliver a
determinate thing, and
the other to pay therefor
a price certain in money
or its equivalent.
Sale, by its very nature, is a
consensual contract because it is
perfected by mere consent. The
essential elements of a contract of sale
are the following:
a) Consent or meeting of the
minds, that is, consent to
transfer ownership in
exchange for the price;
b) Determinate subject matter;
and
c) Price certain in money or its
equivalent.
Under this definition, a Contract
to Sell may not be considered as a
Contract of Sale because the first
essential element is lacking. In a
contract to sell, the prospective seller
explicitly reserves the transfer of title to
the prospective buyer, meaning, the
prospective seller does not as yet agree
or consent to transfer ownership of the
property subject of the contract to sell
until the happening of an event, which
for present purposes we shall take as
the full payment of the purchase price.
What the seller agrees or obliges
himself to do is to fulfill his promise to
sell the subject property when the entire
amount of the purchase price is
delivered to him. In other words the full
payment of the purchase price partakes
of a suspensive condition, the non-
fulfillment of which prevents the
obligation to sell from arising and thus,
ownership is retained by the
prospective seller without further
remedies by the prospective buyer. In
Roque vs. Lapuz (96 SCRA 741
[1980]), this Court had occasion to rule:
Hence, We hold
that the contract
between the petitioner
and the respondent was
a contract to sell where
the ownership or title is
retained by the seller
and is not to pass until
the full payment of the
price, such payment
being a positive
suspensive condition
and failure of which is
not a breach, casual or
serious, but simply an
event that prevented the
obligation of the vendor
to convey title from
acquiring binding force.
Stated positively, upon the
fulfillment of the suspensive condition
which is the full payment of the
purchase price, the prospective sellers
obligation to sell the subject property by
entering into a contract of sale with the
prospective buyer becomes
demandable as provided in Article 1479
of the Civil Code which states:
Art. 1479. A automatically transfer to the buyer
promise to buy and sell a
determinate thing for a
price certain is
reciprocally demandable.
An accepted
unilateral promise to buy
or to sell a determinate
thing for a price certain is
binding upon the
promissor if the promise
is supported by a
consideration distinct
from the price.
A contract to sell may thus be
defined as a bilateral contract whereby
the prospective seller, while expressly
reserving the ownership of the
subject property despite delivery
thereof to the prospective buyer, binds
himself to sell the said property
exclusively to the prospective buyer
upon fulfillment of the condition agreed
upon, that is, full payment of the
purchase price.
A contract to sell as defined
hereinabove, may not even be
considered as a conditional contract
of sale where the seller may likewise
reserve title to the property subject of
the sale until the fulfillment of a
suspensive condition, because in a
conditional contract of sale, the first
element of consent is present, although
it is conditioned upon the happening of
a contingent event which may or may
not occur. If the suspensive condition is
not fulfilled, the perfection of the
contract of sale is completely abated
(cf. Homesite and Housing Corp. vs.
Court of Appeals, 133 SCRA 777
[1984]). However, if the suspensive
condition is fulfilled, the contract of
sale is thereby perfected, such that if
there had already been previous
delivery of the property subject of the
sale to the buyer, ownership thereto
automatically transfers to the buyer
by operation of law without any further
act having to be performed by the
seller.
In a contract to sell, upon the
fulfillment of the suspensive
condition which is the full payment of
the purchase price, ownership will not
although the property may have been
previously delivered to him. The
prospective seller still has to convey
title to the prospective buyer by
entering into a contract of absolute
sale. (Emphases ours.)
Also in Coronel v. Court of Appeals, the Court
highlighted the importance of making the distinction
between a contract to sell and a contract of sale:
It is essential to distinguish
between a contract to sell and a
conditional contract of sale specially in
cases where the subject property is sold
by the owner not to the party the seller
contracted with, but to a third person, as
 in the case at bench. In a contract to
sell, there being no previous sale of the
property, a third person buying such
property despite the fulfillment of the
suspensive condition such as the full
payment of the purchase price, for
instance, cannot be deemed a buyer in
bad faith and the prospective buyer
cannot seek the relief of reconveyance
of the property. There is no double sale
in such case. Title to the property will
transfer to the buyer after registration
because there is no defect in the owner-
sellers title per se, but the latter, of
course, may be sued for damages by
the intending buyer.
In a conditional contract of
sale, however, upon the fulfillment of
the suspensive condition, the sale
becomes absolute and this will definitely
affect the sellers title thereto. In fact, if
there had been previous delivery of the
subject property, the sellers ownership
or title to the property is automatically
transferred to the buyer such that, the
seller will no longer have any title to
transfer to any third person. Applying
Article 1544 of the Civil Code, such
second buyer of the property who may
have had actual or constructive
knowledge of such defect in the sellers
title, or at least was charged with the
obligation to discover such defect,
cannot be a registrant in good faith.
Such second buyer cannot defeat the
first buyers title. In case a title is issued
to the second buyer, the first buyer may
seek reconveyance of the property
subject of the sale.
Even in the absence of an express stipulation to such
effect, the intention of the parties to execute a contract
to sell may be implied from the provisions of the
contract. While Article 1478 of the Civil Code
recognizes the right of the parties to agree that the
ownership of the thing shall not pass to the purchaser
until he has fully paid the price therefore, the same
statutory provision does not require that such be
expressly stipulated in the contract.
In Adelfa Properties, Inc. v. Court of Appeals,
the Court ruled that since the contract between the
parties therein did not contain a stipulation on
reversion or reconveyance of the property to the seller
in the event that the buyer did not comply with its
obligation, it may legally be inferred that the parties
never intended to transfer ownership to the buyer prior
to the completion of the payment of the purchase
price. Consequently, the contract involved in the
aforementioned case was a mere contract to sell.
An agreement is also considered a contract to sell if
there is a stipulation therein giving the vendor the
rights to unilaterally rescind the contract the moment
the vendee fails to pay within a fixed period and to
consequently open the subject property anew to
purchase offers. In the same vein, where the seller
promises to execute a deed of absolute sale upon the
completion by the buyer of the payment of the price,
the contract is only a contract to sell.
Viewed in light of the foregoing pronouncements,
the Deed of Conditional Sale executed by Nicomedes
in favor of Emma on 23 June 1965 is unmistakably a
mere contract to sell. The Court looks beyond the title
of said document, since the denomination or title given
by the parties in their contract is not conclusive of the
nature of its contents. In the construction or
interpretation of an instrument, the intention of the
parties is primordial and is to be pursued. If the terms
of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning
of its stipulations shall control. If the words appear to
be contrary to the evident intention of the parties, the
latter shall prevail over the former.
A simple reading of the terms of the 23 June 1965
Deed of Conditional Sale readily discloses that it
contains stipulations characteristic of a contract to sell.
It provides for the automatic cancellation of the
contract should Emma fail to pay the purchase price
as required therein; and, in such an event, it grants
Nicomedes the exclusive right to thereafter sell the
subject property to a third person. As in Adelfa
Properties, the contract between Nicomedes and
Emma does not provide for reversion or reconveyance
of the subject property to Nicomedes in the event of
nonpayment by Emma of the purchase price. More
importantly, the Deed in question clearly states that
Nicomedes will issue a final deed of absolute sale only
upon the full payment of the purchase price for the
subject property. Taken together, the terms of the
Deeds reveal the evident intention of the parties to
reserve ownership over the subject property to
Nicomedes pending payment by Emma of the full
purchase price for the same.
While the Deed of Conditional Sale dated 23 June
1965 was indeed contained in a public instrument, it
did not constitute constructive delivery of the subject
property to Emma in view of the contrary inference in
the Deed itself that the ownership over the subject
property was reserved by Nicomedes. Moreover, other
than her claim that she paid the realty taxes on the
subject property, Emma did not present any evidence
that she took actual and physical possession of the
subject property at any given time.
This Court also finds that, contrary to the ruling of the
Court of Appeals, the Agreement of Purchase and
Sale executed by Nicomedes in favor of Rosario on 14
June 1968 is likewise a mere contract to sell.
The Agreement itself categorically states that
Nicomedes only undertakes to sell the subject
property to Rosario upon the payment of the stipulated
purchase price and that an absolute deed of sale is
yet to be executed between the parties. Thus:
NOW, THEREFORE, for and in
consideration of the foregoing premises
and of the sum of ONE HUNDRED
SEVENTY FIVE THOUSAND NINE
HUNDRED FIVE PESOS
(P175,905.00) Philippine Currency,
which the BUYER shall pay to the
SELLER in the manner and form
hereinafter specified, the SELLER by
these presents hereby agreed and
contracted to sell all his rights,
interests, title and ownership over
the parcel of land xxx unto the
BUYER, who hereby agrees and
binds herself to purchase from the
former, the aforesaid parcel of land,
subject to the following terms and
conditions:
1. Upon the execution of this
Agreement, the BUYER shall pay the
SELLER, the sum of FIFTEEN
THOUSAND PESOS (P15,000.00),
Philippine Currency.
2. That upon the delivery by
the SELLER to the BUYER of a valid
title of the aforesaid parcel of land, free
from any and all liens and
encumbrances, and the execution of
the final Deed of Sale, the BUYER
shall pay to the SELLER, the sum of
THIRTY SEVEN THOUSAND SEVEN
HUNDRED FIVE PESOS (P37,705.00)
Philippine Currency, and the final
balance of ONE HUNDRED TWENTY
THREE THOUSAND AND TWO
HUNDRED PESOS (P123,200.00)
Philippine Currency, one year from the
date of the execution of the final deed
of sale, all without interest. (Emphases
ours.)
The Agreement additionally grants Nicomedes
the right to automatically cancel the same in the event
of nonpayment by Rosario of any of the specified
sums therein and any improvement introduced in the
subject property shall thereby accrue to Nicomedes,
viz:
3. That in the event the BUYER fails
to pay any amount as specified in
Section 2, Paragraph II, then this
contract, shall, by the mere fact of
non-payment expire itself and shall
be considered automatically
cancelled, of no value and effect,
and immediately thereafter the
SELLER shall return to the buyer the
sums of money he had received from
the BUYER without any interests and
whatever improvement or
improvements made or introduced
by the BUYER on the lot being sold
shall accrue to the ownership and
possession of the SELLER.
As can be clearly read above, only the rights to
possess the property and construct improvements
thereon have been evidently given to Rosario. The
provisions of the Agreement do not in any way
indicate that the ownership of the subject property has
likewise been transferred to Rosario. That Nicomedes
shall appropriate the improvements as his own should
Rosario default in her payment of the purchase price
only further supports the conclusion that title to the
subject property itself still remained with Nicomedes.
The Court concludes that the Deed of Conditional Sale
in favor of Emma and the Agreement of Purchase and
Sale in favor of Rosario were mere contracts to sell.
As both contracts remained unperfected by reason of
the non-compliance with conditions thereof by all of
the parties thereto, Nicomedes can still validly convey
the subject property to another buyer. This fact,
however, is without prejudice to the rights of Emma
and Rosario to seek relief by way of damages against
the estate and heirs of Nicomedes to the extent that
the latter were benefited by the sale to succeeding
buyers.
Thus, the Deeds of Absolute Sale in favor of Maria
and Dulos Realty were the only conveyances of the
subject property in this case that can be the source of
a valid and registrable title. Both contracts were
designated as absolute sales and the provisions
thereof leave no doubt that the same were true
contracts of sale. The total considerations for the
respective portions of the subject property were fully
paid by the buyers and no conditions whatsoever were
stipulated upon by the parties as regards the
transmission of the ownership of the said property to
the said buyers.
The fact that Rosario was the first among the parties
to register her contract in the Registry of Property for
Unregistered Lands on 10 March 1969 is of no
moment.

Act No. 3344, which amended Section 194 of the

Administrative Code, enunciates that any registration
made under Section 194 of the Administrative Code
shall be understood to be without prejudice to a third
party who has a better right.

In this case, Maria and Dulos Realty acquired their title

to the property in separate deeds of absolute sale
executed in their favor by Nicomedes and his heirs.
Upon the execution of these deeds, the ownership of
the subject property was vested unto the said buyers
instantly, unlike the contracts to sell executed in favor
of Emma and Rosario. Consequently, the rights to the
subject property of Maria and Dulos Realty, acquired
through the contracts of sale in their favor, are
undeniably better or superior to those of Emma or
Rosario, and can thus be confirmed by registration.

In sum, this Court recognizes the valid and registrable

rights of Maria and Dulos Realty to the subject
property, but without prejudice to the rights of Emma
and Rosario to seek damages against the estate and
heirs of Nicomedes.

WHEREFORE, premises considered, the Petition in

G.R. No. 139047 is DENIED, while the Petition in G.R.
No. 139365 is GRANTED. The assailed Decision of
the Court of Appeals in CA-G.R. CV No. 35688 dated
17 June 1999 is SET ASIDE and the Decision dated
25 November 1991 of the Regional Trial Court of
Pasay City, Branch 119, is REINSTATED. No costs.

SO ORDERED.

MINITA V. CHICO -
NAZARIO
Associate Justice
Acting Chair person

W E CONCUR:

DANTE O. TINGA
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 133749 August 23, 2001
HERNANDO R. PEÑALOSA alias "HENRY
PEÑALOSA," petitioner,
vs.
SEVERINO C. SANTOS (deceased), Substituted by
his heirs: OLIVER SANTOS and ADYLL M.
SANTOS, and ADELA DURAN MENDEZ SANTOS,
respondents.
QUISUMBING, J.:
Petitioner appeals by certiorari from the decision of the
Court of Appeals, which affirmed the judgment of the
Regional Trial Court of Quezon City, Branch 78, in
Civil Case No. Q-92-13531, declaring the deed of
absolute sale entered into between petitioner and
respondents as void and inexistent and ordering
petitioner to vacate the subject property and to pay
reasonable compensation for its use.
The facts, as revealed by the records, are as follows:
Respondents Severino C. Santos (deceased) and
Adela Mendez Santos are registered owners of a
residential house and lot located at No. 113 Scout
Rallos Street, Quezon City under TCT No. PT-23458
(54434).1 In 1988, Severino and Adela decided to sell
their property and for this purpose, negotiated with
petitioner Hernando (or Henry) Peñalosa. The
property was then occupied by a lessee, Eleuterio
Perez, who was given preference to buy it under the
same terms offered by the buyer.2 Perez proposed
less favorable terms3 and expectedly, Severino
rejected his offer.
On August 1, 1988, petitioner Henry Peñalosa and
respondent Severino Santos attempted to enter into
an agreement whereby the latter, for a consideration
of P1,800.000.00, would sell to the former the property
subject of the instant case. The deed of absolute sale4
(first deed) evidencing this transaction was signed by
Henry but not by Severino, because according to the
latter, Henry "took time to decide" on the matter.5
On August 15, 1988, Henry signed a document6
stating that the first deed was executed between him
and Severino, for the sole purpose of helping the latter
eject Perez, the occupant of the property. Henry
acknowledged in said document that although
Severino had agreed to sell the property to him, he
had not paid the consideration stated in the first deed.
Thereafter, Henry and Severino executed another
deed of absolute sale7 (second deed) for a higher
consideration of P2,000,000.00. Although the second
deed was originally dated "August 1988",
superimposed upon the same was the date
"September 12, 1988". This second deed was signed
by both parties and duly notarized. It states that
Severino sells and transfers the house and lot to
Henry, who had paid the full price of P2,000,000.00
therefor.
Severino explained that his initial asking price for the
property was only P1,800,000.00 as shown in the first
deed. But he later asked for a higher price because
Henry could not give the money as soon as expected.
However, Severino claimed that he made it clear to
Henry that he agreed to sell the property under the
second deed for P2,000,000.00, provided that
payment be immediately effected. Severino said that
he wanted to use the money to invest in another
property located in Alabang and told Henry that if
payment was made at a later date, the price would be
the current market value at the time of payment.
Henry then gave Severino P300,000.00 as "earnest
money", purportedly with the understanding that the
former was to pay the balance within 60 days.
Otherwise, said amount would be forfeited in favor of
Severino.8 The latter also maintained that he signed
the second deed only for the purpose of facilitating
Henry's acquisition of a bank loan to finance payment
of the balance of the purchase price9 and added that
execution of the second deed was necessary to
enable Henry to file a court action for ejectment of the
tenant.10
After execution of the second deed, Henry filed a loan
application with the Philippine American Life Insurance
Company (Philam Life) for the amount of
P2,500,000.00.11 According to Henry, he had agreed
with Severino during the signing of the second deed,
that the balance of P1,700,000.00 would be paid by
means of a loan, with the property itself given as
collateral.12
Meanwhile, on the strength of the first deed and as
new "owner" of the property, Henry wrote a letter13
dated August 8, 1988 to the lessee, Eleuterio Perez,
demanding that the latter vacate the premises within
10 days. Failing in this effort, Henry brought a
complaint for ejectment14 against Perez before the
Office of the Barangay Captain.
On September 1, 1988, a Certification To File Action15
was issued by the barangay lupon. This led to the
subsequent filing of Civil Case No. 88 0439 for
unlawful detainer, before the Metropolitan Trial Court
of Quezon City, Branch 43, entitled "Henry Peñalosa,
Plaintiff vs. Eleuterio Perez, Defendant". Claiming that
he still had a subsisting contract of lease over the
property, Perez countersued and brought Civil Case
No. Q-88-1062 before the Regional Trial Court of
Quezon City, Branch 96, entitled "Eleuterio Perez,
Plaintiffs vs. Severino Santos, et. al, Defendants". In
this latter case, Perez assailed the validity of the sale
transaction between Henry and Severino and
impleaded the former as co-defendant of Severino.
While the aforesaid court cases were pending
resolution, Philam Life informed Severino through a
letter,16 that Henry's loan application had been
approved by the company on January 18, 1989.
Philam Life stated in the letter that of the total
purchase price of P2,500,000.00, the amount of
P1,700,000.00 would be paid directly to Severino by
Philam Life, while P800,000.00 would be paid by
Henry.
The release of the loan proceeds was made subject to
the submission of certain documents in Severino's
possession, one of which is the owner's duplicate of
the Transfer Certificate of Title (TCT) pertaining to the
property. However, when Henry and Severino met
with officials of Philam Life to finalize the
loan/mortgage contract, Severino refused to surrender
the owner's duplicate title and insisted on being paid
immediately in cash.17 As a consequence, the
loan/mortgage contract with Philam Life did not
materialize.
Subsequently, on April 28, 1989, judgment18 was
rendered by the MTC-QC, Branch 43, in Civil Case
No. 0439, ordering the tenant Perez to vacate and
surrender possession of the property to Henry. In said
judgment, Henry was explicitly recognized as the new
owner of the property by virtue of the contract of sale
dated September 12, 1988, after full payment of the
purchase price of P2,000,000.00, receipt of which was
duly acknowledged by Severino.
Upon finality of said judgment, Henry and his family
moved into the disputed house and lot on August
1989, after making repairs and improvements.19 Henry
spent a total of P700,000.00 for the renovation, as
evidenced by receipts.20
On July 27, 1992, Severino sent a letter21 to Henry,
through counsel, demanding that Henry vacate the
house and lot, on the ground that Henry did not
conclusively offer nor tender a price certain for the
purchase of the property. The letter also stated that
Henry's alleged offer and promise to buy the property
has since been rejected by Severino.
When Henry refused to vacate the property, Severino
brought this action for quieting of title, recovery of
possession and damages before the Regional Trial
Court of Quezon City, Branch 78, on September 28,
1992. Severino alleged in his complaint22 that there
was a cloud over the title to the property, brought
about by the existence of the second deed of sale.
Essentially, Severino averred that the second deed
was void and inexistent because: a) there was no
cause or consideration therefor, since he did not
receive the P2,000,000.00 stated in the deed; b) his
wife, Adela, in whose name the property was titled, did
not consent to the sale nor sign the deed; c) the deed
was not registered with the Register of Deeds; d) he
did not acknowledge the deed personally before the
notary public; e) his residence certificate, as appearing
in the deed, was falsified; and f) the deed is fictitious
and simulated because it was executed only for the
purpose of placing Henry in possession of the property
because he tendered "earnest money". Severino also
claimed that there was no meeting of minds with
respect to the cause or consideration, since Henry's
varied offers of P1,800,000.00, P2,000,000.00, and
P2,500,000.00, were all rejected by him.
For his part, Henry asserted that he was already the
owner of the property being claimed by Severino, by
virtue of a final agreement reached with the latter.
Contrary to Severino's claim, the price of the property
was pegged at P2,000,000.00, as agreed upon by the
parties under the second deed. Prior to the filing of the
action, his possession of the property remained
undisturbed for three (3) years. Nevertheless, he
admitted that since the signing of the second deed, he
has not paid Severino the balance of the purchase
price. He, however, faulted the latter for the non-
payment, since according to him, Severino refused to
deliver the owner's duplicate title to the financing
company.
On Aug. 20, 1993, the trial court rendered judgment in
favor of Severino and disposed:
WHEREFORE, judgment is rendered as
follows:
1) DECLARING the "Deed of Absolute Sale"
which was signed by the plaintiff Severino C.
Santos as vendor and the defendant as
vendee and which was entered in the notarial
register of notary public Dionilo Marfil of
Quezon City as Doc. No. 474, Page No. 95,
Book No. 173, Series of 1988, as inexistent
and void from the beginning; and
consequently, plaintiff's title to the property
under T.C.T. No. PT-23458 (54434) issued by
the Register of Deeds of Quezon City is
quieted, sustained and maintained;
2) ORDERING the defendant to pay plaintiffs
the amount of P15, 000.00 a month as
reasonable compensation for the use of the
House and Lot located at No. 113 Scout Rallos
St., Quezon City, beginning on the month of
August, 1993, until the premises is fully
vacated, (the compensation for the use thereof
from the time the defendant had occupied the
premises up to July, 1993, is recompensed for
the repairs made by him); and
3) ORDERING the plaintiffs to reimburse the
defendant the amount of P300,000.00 after
defendant had vacated the premises in
question, and the reasonable compensation for
the use thereof had been paid.
All other claims and counterclaims are
DENIED for lack of legal and factual bases. No
pronouncement as to costs.
SO ORDERED.23
Both Henry and Severino appealed the above decision
to the Court of Appeals. Before the appellate court
could decide the same, Severino passed away and
was substituted by his wife and children as
respondents. Henry filed a motion for leave to be
allowed to deposit P1,700,000.00 in escrow with the
Landbank of the Philippines to answer for the money
portion of the decision.24 This motion was granted.
On December 29, 1997, the appellate court affirmed25
the judgment of the trial court and thereafter, denied
Henry's motion for reconsideration.26 Thus, Henry
brought this petition, citing the following as alleged
errors:
I.
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN CONCLUDING THAT
THERE WAS NO PERFECTED CONTRACT OF
SALE BETWEEN SEVERINO C. SANTOS AND
PETITIONER HENRY R. PEÑALOSA.
II.
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN CONSIDERING NON-
PAYMENT OF THE FULL PURCHASE PRICE AS
CAUSE FOR DECLARING A PERFECTED
CONTRACT OF SALE AS NULL AND VOID.
III.
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN REFUSING TO
RECOGNIZE THAT OWNERSHIP OF THE SUBJECT
PROPERTY HAD BEEN EFFECTIVELY VESTED
UPON PETITIONER HENRY R. PEÑALOSA WHEN
ACTUAL POSSESSION THEREOF HAD LAWFULLY
TRANSFERRED TO PETITIONER HENRY R.
PEÑALOSA BY VIRTUE OF THE COURT
JUDGMENT IN THE EJECTMENT SUIT AGAINST
THE FORMER LESSEE.27
The pivotal issue presented before us is whether or
not the second deed is valid and constitutes evidence
of the final agreement between the parties regarding
the sale transaction entered into by them.
Petitioner maintains that the existence of a perfected
contract of sale in this case is beyond doubt, since
there clearly was a meeting of minds between the
parties as to the object and consideration of the
contract. According to petitioner, the agreement of the
parties is evidenced by provisions contained in the
second deed, which cannot possibly be simulated or
fictitious. Subsequent and contemporaneous acts
indubitably point to the fact that the parties truly
intended to be bound by the second deed.
Accordingly, the P2,000,000.00 stated therein was the
actual price agreed upon by the parties as
consideration for the sale.
On the other hand, in their memorandum, respondents
insist that the second deed is a complete nullity
because, as found by both the appellate and trial
court: a) the consideration stated in the deed was not
paid; b) Severino's passport showed that he was in the
U.S. when said deed was notarized; c) Severino did
not surrender a copy of the title at the time of the
alleged sale; d) petitioner did not pay real estate taxes
on the property; e) it was executed only for the
purpose of helping Severino eject the tenant; f)
Severino's wife, Adela, did not sign the deed; and g)
the various documentary exhibits proved that there
was no price certain accepted or paid.
Respondents additionally argue that petitioner merely
seeks a review of the aforesaid factual findings of the
lower court and that consequently, we should deny the
petition on the ground that it raises only factual
questions.
Considering the pivotal issue presented after close
scrutiny of the assigned errors as well as the
arguments of the parties, we are unable to agree with
respondents and we must give due course to the
petition.
First of all, the petition filed before this Court explicitly
questions "the legal significance and consequences of
the established facts"28 and not the findings of fact
themselves. As pointed out by petitioner, he submits
to the factual findings of the lower court, but maintains
that its legal conclusions are irreconcilable and
inconsistent therewith. He also states that the grounds
relied upon in this petition do not call for the weighing
of conflicting evidence submitted by the parties.
Rather, he merely asks the Court to give due
significance to certain undisputed and admitted facts
spread throughout the record, which, if properly
appreciated, would justify a different conclusion.
At any rate, in Baricuatro, Jr. vs. Court of Appeals, 325
SCRA 137, 145 (2000), we reiterated the doctrine that
findings of fact of the Court of Appeals are binding and
conclusive upon this Court, subject to certain
exceptions, one of which is when the judgment is
based on a misapprehension of facts. In this case,
after carefully poring over the records, we are
convinced that the lower courts misappreciated the
evidence presented by the parties and that, indeed, a
reversal of the assailed judgment is in order.
It should have been readily apparent to the trial court
that the circumstances it cited in its decision are not
proper grounds for holding that the second deed is
simulated. Simulation is a declaration of a fictitious
will, deliberately made by agreement of the parties, in
order to produce, for purposes of deception, the
appearance of a juridical act which does not exist or is
different from that which was really executed. Its
requisites are: a) an outward declaration of will
different from the will of the parties; b) the false
appearance must have been intended by mutual
agreement; and c) the purpose is to deceive third
persons.29 None of these requisites is present in this
case.
The basic characteristic of an absolutely simulated or
fictitious contract is that the apparent contract is not
really desired or intended to produce legal effects or
alter the juridical situation of the parties in any way.30
However, in this case, the parties already undertook
certain acts which were directed towards fulfillment of
their respective covenants under the second deed,
indicating that they intended to give effect to their
agreement.
In particular, as early as August 8, 1988, after
execution of the first deed, Severino authorized
petitioner to bring an action for ejectment against the
overstaying tenant and allowed petitioner to pursue
the ejectment case to its final conclusion, presumably
to secure possession of the property in petitioner's
favor. Petitioner also applied for a loan, which was
approved by Philam Life, to complete payment of the
stipulated price. After making extensive repairs with
the knowledge of Severino, petitioner moved into the
premises and actually occupied the same for three
years before this action was brought. Moreover,
simultaneous with the execution of the second deed,
petitioner gave Severino P300,000.00 in earnest
money, which under Article 148231 of the New Civil
Code, is part of the purchase price and proof of
perfection of the contract.
What may have led the lower courts into incorrectly
believing that the second deed was simulated is
Exhibit D — a document in which petitioner declared
that the deed was executed only for the purpose of
helping Severino eject the tenant. However, a perusal
of this document reveals that it made reference to the
first deed and not the second deed, which was
executed only after Exhibit D. So that while the first
deed was qualified by stipulations contained in Exhibit
D, the same cannot be said of the second deed which
was signed by both parties.
Further, the fact that Severino executed the two deeds
in question, primarily so that petitioner could eject the
tenant and enter into a loan/mortgage contract with
Philam Life, is to our mind, a strong indication that he
intended to transfer ownership of the property to
petitioner. For why else would he authorize the latter
to sue the tenant for ejectment under a claim of
ownership, if he truly did not intend to sell the property
to petitioner in the first place? Needless to state, it
does not make sense for Severino to allow petitioner
to pursue the ejectment case, in petitioner's own
name, with petitioner arguing that he had bought the
property from Severino and thus entitled to possession
thereof, if petitioner did not have any right to the
property.
Also worth noting is the fact that in the case filed by
Severino's tenant against Severino and petitioner in
1989, assailing the validity of the sale made to
petitioner, Severino explicitly asserted in his sworn
answer to the complaint that the sale was a legitimate
transaction. He further alleged that the ejectment case
filed by petitioner against the tenant was a legitimate
action by an owner against one who refuses to turn
over possession of his property.32
Our attention is also drawn to the fact that the
genuineness and due execution of the second deed
was not denied by Severino. Except to allege that he
was not physically present when the second deed was
notarized before the notary public, Severino did not
assail the truth of its contents nor deny that he ever
signed the same. As a matter of fact, he even
admitted that he affixed his signature on the second
deed to help petitioner acquire a loan. This can only
signify that he consented to the manner proposed by
petitioner for payment of the balance and that he
accepted the stipulated price of P2,000,000.00 as
consideration for the sale.
Since the genuineness and due execution of the
second deed was not seriously put in issue, it should
be upheld as the best evidence of the intent and true
agreement of the parties. Oral testimony, depending
as it does exclusively on human memory, is not as
reliable as written or documentary evidence.33
It should be emphasized that the non-appearance of
the parties before the notary public who notarized the
deed does not necessarily nullify nor render the
parties' transaction void ab initio. We have held
previously that the provision of Article 135834 of the
New Civil Code on the necessity of a public document
is only for convenience, not for validity or
enforceability. Failure to follow the proper form does
not invalidate a contract. Where a contract is not in the
form prescribed by law, the parties can merely compel
each other to observe that form, once the contract has
been perfected.35 This is consistent with the basic
principle that contracts are obligatory in whatever form
they may have been entered into, provided all
essential requisites are present.36
The elements of a valid contract of sale under Art.
1458 of the Civil Code are: (1) consent or meeting of
the minds; (2) determinate subject matter; and (3)
price certain in money or its equivalent.37 In the instant
case, the second deed reflects the presence of all
these elements and as such, there is already a
perfected contract of sale.
Respondent's contention that the second deed was
correctly nullified by the lower court because
Severino's wife, Adela, in whose name the property
was titled, did not sign the same, is unavailing. The
records are replete with admissions made by Adela
that she had agreed with her husband to sell the
property38 which is conjugal in nature39 and that she
was aware of this particular transaction with petitioner.
She also said that it was Severino who actually
administered their properties with her consent,
because she did not consider this as her
responsibility.40
We also observe that Severino's testimony in court
contained (1) admissions that he indeed agreed to sell
the property and (2) references to petitioner's failure to
pay the purchase price.41 He did not mention that he
did not intend at all to sell the property to petitioner
and instead, stressed the fact that the purchase price
had not yet been paid. Why would Severino stress
non-payment if there was no sale at all?
However, it is well-settled that non-payment of the
purchase price is not among the instances where the
law declares a contract to be null and void. It should
be pointed out that the second deed specifically
provides:
That for and in consideration of' the sum of
TWO MILLION PESOS (P2,000,000.00),
Philippine Currency paid in full by HENRY R.
PEÑALOSA, receipt of which is hereby
acknowledged by me to my full satisfaction, I
hereby by these presents, sells (sic), cede,
 convey and otherwise dispose of the above escrow, representing the balance of the purchase
described parcel of land, unto HENRY R. price agreed upon by the parties under the deed of
PEÑALOSA, his heirs, successors and absolute sale. Finally, the respondents are ordered to
assigns, free from all liens and encumbrances. DELIVER to petitioner the owner's duplicate copy of
xxx xxx xxx TCT No. PT-23458 after said release, with the
(SGD.) corresponding payment of taxes due. Costs against
SEVERINO C. SANTOS respondents.
VENDOR SO ORDERED.
xxx xxx xxx42 Bellosillo, Mendoza, Buena and De Leon, Jr., JJ .,
As can be seen from above, the contract in this case concur.
is absolute in nature and is devoid of any proviso that
title to the property is reserved in the seller until full
payment of the purchase price. Neither does the
second deed give Severino a unilateral right to resolve
the contract the moment the buyer fails to pay within a
fixed period.43 At most, the non-payment of the
contract price merely results in a breach of contract for
non-performance and warrants an action for rescission
or specific performance under Article 1191 of the Civil
Code.44
Be that as it may, we agree with petitioner that
although the law allows rescission as a remedy for
breach of contract, the same may not be availed of by
respondents in this case. To begin with, it was
Severino who prevented full payment of the stipulated
price when he refused to deliver the owner's original
duplicate title to Philam Life. His refusal to cooperate
was unjustified, because as Severino himself
admitted, he signed the deed precisely to enable
petitioner to acquire the loan. He also knew that the
property was to be given as security therefor. Thus, it
cannot be said that petitioner breached his obligation
towards Severino since the former has always been
willing to and could comply with what was incumbent
upon him.
In sum, the only conclusion which can be deduced
from the aforesaid circumstances is that ownership of
the property has been transferred to petitioner. Article
1477 of the Civil Code states that ownership of the
thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof. It is undisputed
that the property was placed in the control and
possession of petitioner45 when he came into material
possession thereof after judgment in the ejectment
case. Not only was the contract of sale perfected, but
also actual delivery of the property effectively
consummated the sale.
WHEREFORE, the petition is GRANTED. The
decision of the Court of Appeals dated December 29,
1997 and its resolution dated April 15, 1998 in CA-
G.R. CV No. 45206 which had affirmed the judgment
of the Regional Trial Court of Quezon City, Branch 78,
are REVERSED and SET ASIDE. A new judgment is
hereby rendered UPHOLDING the validity of Exhibit B,
the Deed of Absolute Sale dated September 12, 1988,
entered into between the parties. The Landbank of the
Philippines is further ordered to RELEASE to
respondents the amount of P1,700,000.00 held in
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 135634 May 31, 2000
HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA)
and SALVACION S. TRIA, petitioners,
vs.
VICENTE RODRIGUEZ, respondent.
MENDOZA, J.:
This is a petition for review on certiorari of the decision
of the Court of Appeals 1 reversing the decision of the
Regional Trial Court, Naga City, Branch 19, in Civil
Case No. 87-1335, as well as the appellate court's
resolution denying reconsideration.
The antecedent facts are as follows:
Juan San Andres was the registered owner of Lot No.
1914-B-2 situated in Liboton, Naga City. On
September 28, 1964, he sold a portion thereof,
consisting of 345 square meters, to respondent
Vicente S. Rodriguez for P2,415.00. The sale is
evidenced by a Deed of Sale. 2
Upon the death of Juan San Andres on May 5, 1965,
Ramon San Andres was appointed judicial
administrator of the decedent's estate in Special
Proceedings No. R-21, RTC, Branch 19, Naga City.
Ramon San Andres engaged the services of a
geodetic engineer, Jose Peñero, to prepare a
consolidated plan (Exh. A) of the estate. Engineer
Peñero also prepared a sketch plan of the 345-square
meter lot sold to respondent. From the result of the
survey, it was found that respondent had enlarged the
area which he purchased from the late Juan San
Andres by 509 square meters. 3
Accordingly, the judicial administrator sent a letter, 4
dated July 27, 1987, to respondent demanding that
the latter vacate the portion allegedly encroached by
him. However, respondent refused to do so, claiming
he had purchased the same from the late Juan San
Andres. Thereafter, on November 24, 1987, the
judicial administrator brought an action, in behalf of
the estate of Juan San Andres, for recovery of
possession of the 509-square meter lot.
In his Re-amended Answer filed on February 6, 1989,
respondent alleged that apart from the 345-square
meter lot which had been sold to him by Juan San
Andres on September 28, 1964, the latter likewise
sold to him the following day the remaining portion of
the lot consisting of 509 square meters, with both
parties treating the two lots as one whole parcel with a
total area of 854 square meters. Respondent alleged
that the full payment of the 509-square meter lot would
be effected within five (5) years from the execution of
a formal deed of sale after a survey is conducted over
said property. He further alleged that with the consent
of the former owner, Juan San Andres, he took
possession of the same and introduced improvements
thereon as early as 1964.
As proof of the sale to him of 509 square meters,
respondent attached to his answer a receipt (Exh. 2) 5
signed by the late Juan San Andres, which reads in
full as follows:
Received from Vicente Rodriguez the
sum of Five Hundred (P500.00) Pesos
representing an advance payment for a
residential lot adjoining his previously
paid lot on three sides excepting on the
frontage with the agreed price of
Fifteen (15.00) Pesos per square meter
and the payment of the full
consideration based on a survey shall
be due and payable in five (5) years
period from the execution of the formal
deed of sale; and it is agreed that the
expenses of survey and its approval by
the Bureau of Lands shall be borne by
Mr. Rodriguez.
Naga City, September 29, 1964.
(Sgd.)
JUAN R. SAN ANDRES
Vendor
Noted:
(Sgd.)
VICENTE RODRIGUEZ
Vendee
Respondent also attached to his answer a
letter of judicial administrator Ramon San
Andres (Exh. 3), 6 asking payment of the
balance of the purchase price. The letter
reads:
Dear Inting,
Please accommodate my request for
Three Hundred (P300.00) Pesos as I
am in need of funds as I intimated to
you the other day.
We will just adjust it with whatever
balance you have payable to the
subdivision.
Thanks.
Sincerely,
(Sgd.)
RAMON SAN ANDRES
Vicente Rodriguez
Penafrancia Subdivision, Naga City
P.S.
You can let bearer Enrique del Castillo
sign for the amount.
Received
One
Hundred
Only
 d to identify the property subject of the sale, hence, the
. need to execute a new contract.
) Respondent appealed to the Court of Appeals, which
RAMON on April 21, 1998 rendered a decision reversing the
SAN decision of the trial court. The appellate court held that
ANDRES the object of the contract was determinable, and that
3/30/66 there was a conditional sale with the balance of the
Respondent deposited in court the balance of the purchase price payable within five years from the
purchase price amounting to P7,035.00 for the execution of the deed of sale. The dispositive portion
aforesaid 509-square meter lot. of its decision's reads:
While the proceedings were pending, judicial IN VIEW OF ALL THE FOREGOING,
administrator Ramon San Andres died and was the judgment appealed from is hereby
substituted by his son Ricardo San Andres. On the REVERSED and SET ASIDE and a
other band, respondent Vicente Rodriguez died on new one entered DISMISSING the
August 15, 1989 and was substituted by his heirs. 7 complaint and rendering judgment
Petitioner, as plaintiff, presented two witnesses. The against the plaintiff-appellee:
first witness, Engr. Jose Peñero, 8 testified that based 1. to accept the P7,035.00 representing
on his survey conducted sometime between 1982 and the balance of the purchase price of the
1985, respondent had enlarged the area which he portion and which is deposited in court
purchased from the late Juan San Andres by 509 under Official Receipt No. 105754
square meters belonging to the latter's estate. (page 122, Records);
According to Peñero, the titled property (Exh. A-5) of 2. to execute the formal deed of sale
respondent was enclosed with a fence with metal over the said 509 square meter portion
holes and barbed wire, while the expanded area was of Lot 1914-B-2 in favor of appellant
fenced with barbed wire and bamboo and light Vicente Rodriguez;
materials. 3. to pay the defendant-appellant the
The second witness, Ricardo San Andres, 9 amount of P50,000.00 as damages and
administrator of the estate, testified that respondent P10,000.00 attorney's fees as
had not filed any claim before Special Proceedings stipulated by them during the trial of
No. R-21 and denied knowledge of Exhibits 2 and 3. this case; and
However, he recognized the signature in Exhibit 3 as 4. to pay the costs of the suit.
similar to that of the former administrator, Ramon San SO ORDERED.
Andres. Finally, he declared that the expanded portion Hence, this petition. Petitioner assigns the following
occupied by the family of respondent is now enclosed errors as having been allegedly committed by the trial
with barbed wire fence unlike before where it was court:
found without fence. I. THE HON. COURT OF
On the other hand, Bibiana B. Rodriguez, 10 widow of APPEALS ERRED IN
respondent Vicente Rodriguez, testified that they had HOLDING THAT THE
purchased the subject lot from Juan San Andres, who DOCUMENT (EXHIBIT
was their compadre, on September 29, 1964, at "2") IS A CONTRACT
P15.00 per square meter. According to her, they gave TO SELL DESPITE ITS
P500.00 to the late Juan San Andres who later affixed LACKING ONE OF THE
his signature to Exhibit 2. She added that on March ESSENTIAL
30, 1966; Ramon San Andres wrote them a letter ELEMENTS OF A
asking for P300.00 as partial payment for the subject CONTRACT, NAMELY,
lot, but they were able to give him only P100.00. She OBJECT CERTAIN AND
added that they had paid the total purchase price of SUFFICIENTLY
P7,035.00 on November 21, 1988 by depositing it in DESCRIBED.
court. Bibiana B. Rodriquez stated that they had been II. THE HON. COURT
in possession of the 509-square meter lot since 1964 OF APPEALS ERRED
when the late Juan San Andres signed the receipt. IN HOLDING THAT
(Exh. 2) Lastly, she testified that they did not know at PETITIONER IS
that time the exact area sold to them because they OBLIGED TO HONOR
were told that the same would be known after the THE PURPORTED
survey of the subject lot. CONTRACT TO SELL
On September 20, 1994, the trial court 11 rendered DESPITE NON-
judgment in favor of petitioner. It ruled that there was FULFILLMENT BY
no contract of sale to speak of for lack of a valid object RESPONDENT OF THE
because there was no sufficient indication in Exhibit 2 CONDITION THEREIN
 OF PAYMENT OF THE
BALANCE OF THE
PURCHASE PRICE.
III. THE HON. COURT
OF APPEALS ERRED
IN HOLDING THAT
CONSIGNATION WAS
VALID DESPITE NON-
COMPLIANCE WITH
THE MANDATORY
REQUIREMENTS
THEREOF.
IV. THE HON. COURT
OF APPEALS ERRED
IN HOLDING THAT
LACHES AND
PRESCRIPTION DO
NOT APPLY TO
RESPONDENT WHO
SOUGHT INDIRECTLY
TO ENFORCE THE
PURPORTED
CONTRACT AFTER
THE LAPSE OF 24
YEARS.
The petition has no merit.
First. Art. 1458 of the Civil Code provides:
By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership of and to deliver
a determinate thing, and the other to
pay therefor a price certain in money or
its equivalent.
A contract of sale may be absolute or
conditional.
As thus defined, the essential elements 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. 12
As shown in the receipt, dated September 29, 1964,
the late Juan San Andres received P500.00 from
respondent as "advance payment for the residential lot
adjoining his previously paid lot on three sides
excepting on the frontage; the agreed purchase price
was P15.00 per square meter; and the full amount of
the purchase price was to be based on the results of a
survey and would be due and payable in five (5) years
from the execution of a deed of sale.
Petitioner contends, however, that the "property
subject of the sale was not described with sufficient
certainty such that there is a necessity of another
agreement between the parties to finally ascertain the
identity; size and purchase price of the property which
is the object of the alleged sale." 1 He argues that the
"quantity of the object is not determinate as in fact a
survey is needed to determine its exact size and the
full purchase price therefor" 14 In support of his
contention, petitioner cites the following provisions of
the Civil Code:
Art. 1349. The object of every contract
must be determinate as to its kind. The
fact that the quantity is not
determinable shall not be an obstacle
to the existence of a contract, provided
it is possible to determine the same
without the need of a new contract
between the parties.
Art. 1460. . . . The requisite that a thing
be determinate is satisfied if at the time
the contract is entered into, the thing is
capable of being made determinate
without the necessity of a new and
further agreement between the parties.
Petitioner's contention is without merit. There is no
dispute that respondent purchased a portion of Lot
1914-B-2 consisting of 345 square meters. This
portion is located in the middle of Lot 1914-B-2, which
has a total area of 854 square meters, and is clearly
what was referred to in the receipt as the "previously
paid lot." Since the lot subsequently sold to
respondent is said to adjoin the "previously paid lot"
on three sides thereof, the subject lot is capable of
being determined without the need of any new
contract. The fact that the exact area of these
adjoining residential lots is subject to the result of a
survey does not detract from the fact that they are
determinate or determinable. As the Court of Appeals
explained: 15
Concomitantly, the object of the sale is
certain and determinate. Under Article
1460 of the New Civil Code, a thing
sold is determinate if at the time the
contract is entered into, the thing is
capable of being determinate without
necessity of a new or further agreement
between the parties. Here, this
definition finds realization.
Appellee's Exhibit "A" (page 4,
Records) affirmingly shows that the
original 345 sq. m. portion earlier sold
lies at the middle of Lot 1914-B-2
surrounded by the remaining portion of
the said Lot 1914-B-2 on three (3)
sides, in the east, in the west and in the
north. The northern boundary is a 12
meter road. Conclusively, therefore,
this is the only remaining 509 sq. m.
portion of Lot 1914-B-2 surrounding the
345 sq. m. lot initially purchased by
Rodriguez. It is quite difined,
determinate and certain. Withal, this is
the same portion adjunctively occupied
and possessed by Rodriguez since
September 29, 1964, unperturbed by
 anyone for over twenty (20) years until
appellee instituted this suit.
Thus, all of the essential elements of a contract of sale
are present, i.e., that there was a meeting of the minds
between the parties, by virtue of which the late Juan
San Andres undertook to transfer ownership of and to
deliver a determinate thing for a price certain in
money. As Art. 1475 of the Civil Code provides:
The contract of sale is perfected at the
moment there is a meeting of minds
upon the thing which is the object of the
contract and upon the price. . . .
That the contract of sale is perfected was confirmed
by the former administrator of the estates, Ramon San
Andres, who wrote a letter to respondent on March 30,
1966 asking for P300.00 as partial payment for the
subject lot. As the Court of Appeals observed:
Without any doubt, the receipt
profoundly speaks of a meeting of the
mind between San Andres and
Rodriguez for the sale of the property
adjoining the 345 square meter portion
previously sold to Rodriguez on its
three (3) sides excepting the frontage.
The price is certain, which is P15.00
per square meter. Evidently, this is a
perfected contract of sale on a deferred
payment of the purchase price. All the
pre-requisite elements for a valid
purchase transaction are present. Sale
does not require any formal document
for its existence and validity. And
delivery of possession of land sold is a
consummation of the sale (Galar vs.
Husain, 20 SCRA 186 [1967]). A
private deed of sale is a valid contract
between the parties (Carbonell v. CA,
69 SCRA 99 [1976]).
In the same vein, after the late Juan R.
San Andres received the P500.00
downpayment on March 30, 1966,
Ramon R. San Andres wrote a letter to
Rodriguez and received from
Rodriguez the amount of P100.00
(although P300.00 was being
requested) deductible from the
purchase price of the subject portion.
Enrique del Castillo, Ramon's
authorized agent, correspondingly
signed the receipt for the P100.00.
Surely, this is explicitly a veritable proof
of he sale over the remaining portion of
Lot 1914-B-2 and a confirmation by
Ramon San Andres of the existence
thereof. 16
There is a need, however, to clarify what the Court of
Appeals said is a conditional contract of sale.
Apparently, the appellate court considered as a
"condition" the stipulation of the parties that the full
consideration, based on a survey of the lot, would be
due and payable within five (5) years from the
execution of a formal deed of sale. It is evident from
the stipulations in the receipt that the vendor Juan San
Andres sold the residential lot in question to
respondent and undertook to transfer the ownership
thereof to respondent without any qualification,
reservation or condition. In Ang Yu Asuncion v. Court
of Appeals, 17 we held:
In Dignos v. Court of Appeals (158
SCRA 375), we have said that,
although denominated a "Deed of
Conditional Sale," a sale is still absolute
where the contract is devoid of any
proviso that title is reserved or the right
to unilaterally rescind is stipulated, e.g.,
until or unless the price is paid.
Ownership will then be transferred to
the buyer upon actual or constructive
delivery (e.g., by the execution of a
public document) of the property sold.
Where the condition is imposed upon
the perfection of the contract itself, the
failure of the condition would prevent
such perfection. If the condition is
imposed on the obligation of a party
which is not fulfilled, the other party
may either waive the condition or
refuse to proceed with the sale. (Art.
1545, Civil Code).
Thus, in. one case, when the sellers declared in a
"Receipt of Down Payment" that they received an
amount as purchase price for a house and lot without
any reservation of title until full payment of the entire
purchase price, the implication was that they sold their
property. 18 In People's Industrial Commercial
Corporation v. Court of Appeals, 19 it was stated:
A deed of sale is considered absolute
in nature where there is neither a
stipulation in the deed that title to the
property sold is reserved in the seller
until full payment of the price, nor one
giving the vendor the right to
unilaterally resolve the contract the
moment the buyer fails to pay within a
fixed period.
Applying these principles to this case, it cannot be
gainsaid that the contract of sale between the parties
is absolute, not conditional. There is no reservation of
ownership nor a stipulation providing for a unilateral
rescission by either party. In fact, the sale was
consummated upon the delivery of the lot to
respondent. 20 Thus, Art. 1477 provides that the
ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery
thereof.
The stipulation that the "payment of the full
consideration based on a survey shall be due and
payable in five (5) years from the execution of a formal
deed of sale" is not a condition which affects the approved by the Bureau of Lands, respondent's heirs,
efficacy of the contract of sale. It merely provides the assign or successors-in-interest should reimburse the
manner by which the full consideration is to be expenses incurred by herein petitioners, pursuant to
computed and the time within which the same is to be the provisions of the contract.
paid. But it does not affect in any manner the WHEREFORE, the decision of the Court of Appeals is
effectivity of the contract. Consequently, the AFFIRMED with the modification that respondent is
contention that the absence of a formal deed of sale ORDERED to reimburse petitioners for the expenses
stipulated in the receipt prevents the happening of a of the survey.
sale has no merit. SO ORDERED.
Second. With respect to the contention that the Court Bellosillo and Buena, JJ., concur.
of Appeals erred in upholding the validity of a Quisumbing and De Leon, Jr., JJ., are on leave.
consignation of P7,035.00 representing the balance of
the purchase price of the lot, nowhere in the decision
of the appellate court is there any mention of
consignation. Under Art. 1257 of this Civil Code,
consignation is proper only in cases where an existing
obligation is due. In this case, however, the
contracting parties agreed that full payment of
purchase price shall be due and payable within five (5)
years from the execution of a formal deed of sale. At
the time respondent deposited the amount of
P7,035.00 in the court, no formal deed of sale had yet
been executed by the parties, and, therefore, the five-
year period during which the purchase price should be
paid had not commenced. In short, the purchase price
was not yet due and payable.
This is not to say, however, that the deposit of the
purchase price in the court is erroneous. The Court of
Appeals correctly ordered the execution of a deed of
sale and petitioners to accept the amount deposited
by respondent.
Third. The claim of petitioners that the price of
P7,035.00 is iniquitous is untenable. The amount is
based on the agreement of the parties as evidenced
by the receipt (Exh. 2). Time and again, we have
stressed the rule that a contract is the law between the
parties, and courts have no choice but to enforce such
contract so long as they are not contrary to law,
morals, good customs or public policy. Otherwise,
court would be interfering with the freedom of contract
of the parties. Simply put, courts cannot stipulate for
the parties nor amend the latter's agreement, for to do
so would be to alter the real intentions of the
contracting parties when the contrary function of
courts is to give force and effect to the intentions of
the parties.
Fourth. Finally, petitioners argue that respondent is
barred by prescription and laches from enforcing the
contract. This contention is likewise untenable. The
contract of sale in this case is perfected, and the
delivery of the subject lot to respondent effectively
transferred ownership to him. For this reason,
respondent seeks to comply with his obligation to pay
the full purchase price, but because the deed of sale is
yet to be executed, he deemed it appropriate to
deposit the balance of the purchase price in court.
Accordingly, Art. 1144 of the Civil Code has no
application to the instant case. 21 Considering that a
survey of the lot has already been conducted and
THIRD DIVISION B, was adjudicated to respondent, but no title had
been issued in her name.

HEIRS OF ARTURO G.R. No. 176474 On 25 June 1998, respondent Elena Socco-
REYES, represented by Beltran filed an application for the purchase of Lot No.
Evelyn R. San 6-B before the Department of Agrarian Reform (DAR),
Buenaventura, Present: alleging that it was adjudicated in her favor in the
Petitioners, extra-judicial settlement of Constancia Soccos estate.
YNARES- Petitioners herein, the heirs of the late Arturo
SANTIAGO, Reyes, filed their protest to respondents petition
J., before the DAR on the ground that the subject
Chairperson, property was sold by respondents brother, Miguel R.
- versus - AUSTRIA- Socco, in favor of their father, Arturo Reyes, as
MARTINEZ, evidenced by the Contract to Sell, dated 5 September
CHICO-NAZARIO, 1954, stipulating that:
NACHURA, and
REYES, JJ. That I am one of the co-heirs of
ELENA SOCCO- the Estate of the deceased Constancia
BELTRAN, Promulgated: Socco; and that I am to inherit as such
Respondent. a portion of her lot consisting of Four
November 27, 2008 Hundred Square Meters (400) more or
x-------------------------------------- less located on the (sic) Zamora St.,
-----------x Municipality of Dinalupihan, Province of
Bataan, bounded as follows:

DECISION xxxx

That for or in consideration of the sum

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule
45 of the Rules of Court, assailing the Decision dated
31 January 2006 rendered by the Court of Appeals in
CA-G.R. SP No. 87066, which affirmed the Decision
dated 30 June 2003 of the Office of the President, in
O.P. Case No. 02-A-007, approving the application of
respondent Elena Socco-Beltran to purchase the
subject property.
The subject property in this case is a parcel of
land originally identified as Lot No. 6-B, situated in
Zamora Street, Dinalupihan, Bataan, with a total area
of 360 square meters. It was originally part of a larger
parcel of land, measuring 1,022 square meters,
allocated to the Spouses Marcelo Laquian and
Constancia Socco (Spouses Laquian), who paid for
the same with Japanese money. When Marcelo died,
the property was left to his wife Constancia. Upon
Constancias subsequent death, she left the original
parcel of land, along with her other property, with her
heirs her siblings, namely: Filomena Eliza Socco,
Isabel Socco de Hipolito, Miguel R. Socco, and Elena
Socco-Beltran. Pursuant to an unnotarized document
entitled Extrajudicial Settlement of the Estate of the
Deceased Constancia R. Socco, executed by
Constancias heirs sometime in 1965, the parcel of
land was partitioned into three lotsLot No. 6-A, Lot No.
6-B, and Lot No. 6-C. The subject property, Lot No. 6-
of FIVE PESOS (P5.00) per square
meter, hereby sell, convey and transfer
by way of this conditional sale the
said 400 sq.m. more or less unto Atty.
Arturo C. Reyes, his heirs,
administrator and assigns x x x.
(Emphasis supplied.)
Petitioners averred that they took physical possession
of the subject property in 1954 and had been
uninterrupted in their possession of the said property
since then.
Legal Officer Brigida Pinlac of the DAR Bataan
Provincial Agrarian Reform Office conducted an
investigation, the results of which were contained in
her Report/ Recommendation dated 15 April 1999.
Other than recounting the afore-mentioned facts,
Legal Officer Pinlac also made the following findings in
her Report/Recommendation:
Further investigation was
conducted by the undersigned and
based on the documentary evidence
presented by both parties, the following
facts were gathered: that the house of
[the] Reyes family is adjacent to the
landholding in question and portion of
the subject property consisting of about
15 meters [were] occupied by the heirs
 of Arturo Reyes were a kitchen and
bathroom [were] constructed therein;
on the remaining portion a skeletal form
made of hollow block[s] is erected and
according to the heirs of late Arturo
Reyes, this was constructed since the
year (sic) 70s at their expense; that
construction of the said skeletal
building was not continued and left
unfinished which according to the
affidavit of Patricia Hipolito the Reyes
family where (sic) prevented by Elena
Socco in their attempt of occupancy of
the subject landholding; (affidavit of
Patricia Hipolito is hereto attached as
Annex F); that Elena Socco cannot
physically and personally occupy the
subject property because of the skeletal
building made by the Reyes family who
have been requesting that they be paid
for the cost of the construction and the
same be demolished at the expense of
Elena Socco; that according to Elena
Socco, [she] is willing to waive her right
on the portion where [the] kitchen and
bathroom is (sic) constructed but not
the whole of Lot [No.] 6-B adjudicated
to her; that the Reyes family included
the subject property to the sworn
statement of value of real properties
filed before the municipality of
Dinalupihan, Bataan, copies of the
documents are hereto attached as
Annexes G and H; that likewise Elena
Socco has been continuously and
religiously paying the realty tax due on
the said property.
In the end, Legal Officer Pinlac recommended
the approval of respondents petition for issuance of
title over the subject property, ruling that respondent
was qualified to own the subject property pursuant to
Article 1091 of the New Civil Code. Provincial Agrarian
Reform Officer (PARO) Raynor Taroy concurred in the
said recommendation in his Indorsement dated 22
April 1999.
In an Order dated 15 September 1999, DAR
Regional Director Nestor R. Acosta, however,
dismissed respondents petition for issuance of title
over the subject property on the ground that
respondent was not an actual tiller and had
abandoned the said property for 40 years; hence, she
had already renounced her right to recover the same.
The dispositive part of the Order reads:
1. DISMISSING the claims of
Elena Socco-Beltran, duly represented
by Myrna Socco for lack of merit;
2. ALLOCATING Lot No. 6-B
under Psd-003-008565 with an area of
360 square meters, more or less,
situated Zamora Street, Dinalupihan,
Bataan, in favor of the heirs of Arturo
Reyes.
3. ORDERING the complainant
to refrain from any act tending to
disturb the peaceful possession of
herein respondents.
4. DIRECTING the MARO of
Dinalupihan, Bataan to process the
pertinent documents for the issuance of
CLOA in favor of the heirs of Arturo
Reyes.
Respondent filed a Motion for Reconsideration
of the foregoing Order, which was denied by DAR
Regional Director Acosta in another Order dated 15
September 1999.
Respondent then appealed to the Office of the
DAR Secretary. In an Order, dated 9 November 2001,
the DAR Secretary reversed the Decision of DAR
Regional Director Acosta after finding that neither
petitioners predecessor-in-interest, Arturo Reyes, nor
respondent was an actual occupant of the subject
property. However, since it was respondent who
applied to purchase the subject property, she was
better qualified to own said property as opposed to
petitioners, who did not at all apply to purchase the
same. Petitioners were further disqualified from
purchasing the subject property because they were
not landless. Finally, during the investigation of Legal
Officer Pinlac, petitioners requested that respondent
pay them the cost of the construction of the skeletal
house they built on the subject property. This was
construed by the DAR Secretary as a waiver by
petitioners of their right over the subject property. In
the said Order, the DAR Secretary ordered that:
WHEREFORE, premises
considered, the September 15, 1999
Order is hereby SET ASIDE and a new
Order is hereby issued APPROVING
the application to purchase Lot [No.] 6-
B of Elena Socco-Beltran.
Petitioners sought remedy from the Office of
the President by appealing the 9 November 2001
Decision of the DAR Secretary. Their appeal was
docketed as O.P. Case No. 02-A-007. On 30 June
2003, the Office of the President rendered its Decision
denying petitioners appeal and affirming the DAR
Secretarys Decision. The fallo of the Decision reads:
WHEREFORE, premises
considered, judgment appealed from is
AFFIRMED and the instant appeal
DISMISSED.
2004 both issued by the Office of the
President are hereby AFFIRMED in
toto.
The Court of Appeals denied petitioners Motion
for Reconsideration of its Decision in a Resolution
dated 16 August 2006.
Hence, the present Petition, wherein
petitioners raise the following issues:

Petitioners Motion for Reconsideration was I

likewise denied by the Office of the President in a WHETHER OR NOT THE
Resolution dated 30 September 2004. In the said HONORABLE COURT OF APPEALS
Resolution, the Office of the President noted that ERRED IN AFFIRMING THE
petitioners failed to allege in their motion the date FINDINGS OF THE OFFICE OF THE
when they received the Decision dated 30 June 2003. PRESIDENT THAT THE SUBJECT
Such date was material considering that the LOT IS VACANT AND THAT
petitioners Motion for Reconsideration was filed only PETITIONERS ARE NOT ACTUAL
on 14 April 2004, or almost nine months after the OCCUPANTS THEREOF BY
promulgation of the decision sought to be DENYING THE LATTERS CLAIM
reconsidered. Thus, it ruled that petitioners Motion for THAT THEY HAVE BEEN IN OPEN,
Reconsideration, filed beyond fifteen days from receipt CONTINUOUS, EXCLUSIVE,
of the decision to be reconsidered, rendered the said NOTORIOUS AND AVDERSE
decision final and executory. POSSESSION THEREOF SINCE 1954
OR FOR MORE THAN THIRTY (30)
Consequently, petitioners filed an appeal YEARS.
before the Court of Appeals, docketed as CA-G.R. SP
No. 87066. Pending the resolution of this case, the II
DAR already issued on 8 July 2005 a Certificate of WHETHER OR NOT THE COURT OF
Land Ownership Award (CLOA) over the subject APPEALS ERRED WHEN IT HELD
property in favor of the respondents niece and THAT PETITIONERS CANNOT
representative, Myrna Socco-Beltran. Respondent LEGALLY ACQUIRE THE SUBJECT
passed away on 21 March 2001, but the records do PROPERTY AS THEY ARE NOT
not ascertain the identity of her legal heirs and her CONSIDERED LANDLESS AS
legatees. EVIDENCED BY A TAX
DECLARATION.
Acting on CA-G.R. SP No. 87066, the Court of
Appeals subsequently promulgated its Decision, dated III
31 January 2006, affirming the Decision dated 30 WHETHER OR NOT THE COURT OF
June 2003 of the Office of the President. It held that APPEALS ERRED IN HOLDING THAT
petitioners could not have been actual occupants of WHATEVER RESERVATION WE
the subject property, since actual occupancy requires HAVE OVER THE RIGHT OF MYRNA
the positive act of occupying and tilling the land, not SOCCO TO SUCCEED WAS
just the introduction of an unfinished skeletal structure ALREADY SETTLED WHEN NO LESS
thereon. The Contract to Sell on which petitioners THAN MIGUEL SOCCO
based their claim over the subject property was (PREDECESSOR-IN INTEREST OF
executed by Miguel Socco, who was not the owner of HEREIN PETITIONERS) EXECUTED
the said property and, therefore, had no right to HIS WAIVER OF RIGHT DATED
transfer the same. Accordingly, the Court of Appeals APRIL 19, 2005 OVER THE SUBJECT
affirmed respondents right over the subject property, PROPERTY IN FAVOR OF MYRNA
which was derived form the original allocatees thereof. SOCCO.
The fallo of the said Decision reads:
IV
WHEREFORE, premises WHETHER OR NOT THE COURT OF
considered, the instant PETITION FOR APPEALS ERRED WHEN IT DENIED
REVIEW is DISMISSED. Accordingly, PETITIONERS MOTION FOR NEW
the Decision dated 30 June 2003 and TRIAL THEREBY BRUSHING ASIDE
the Resolution dated 30 December THE FACT THAT MYRNA V. SOCCO-
 ARIZO GROSSLY
MISREPRESENTED IN HER
INFORMATION SHEET OF
BENEFICIARIES AND APPLICATION
TO PURCHASE LOT IN LANDED
ESTATES THAT SHE IS A FILIPINO
CITIZEN, WHEN IN TRUTH AND IN
FACT, SHE IS ALREADY AN
AMERICAN NATIONAL.
The main issue in this case is whether or not
petitioners have a better right to the subject property
over the respondent. Petitioners claim over the subject
property is anchored on the Contract to Sell executed
between Miguel Socco and Arturo Reyes on 5
September 1954. Petitioners additionally allege that
they and their predecessor-in-interest, Arturo Reyes,
have been in possession of the subject lot since 1954
for an uninterrupted period of more than 40 years.
The Court is unconvinced.
Petitioners cannot derive title to the subject
property by virtue of the Contract to Sell. It was
unmistakably stated in the Contract and made clear to
both parties thereto that the vendor, Miguel R. Socco,
was not yet the owner of the subject property and was
merely expecting to inherit the same as his share as a
co-heir of Constancias estate. It was also declared in
the Contract itself that Miguel R. Soccos conveyance
of the subject to the buyer, Arturo Reyes, was a
conditional sale. It is, therefore, apparent that the sale
of the subject property in favor of Arturo Reyes was
conditioned upon the event that Miguel Socco would
actually inherit and become the owner of the said
property. Absent such occurrence, Miguel R. Socco
never acquired ownership of the subject property
which he could validly transfer to Arturo Reyes.
Under Article 1459 of the Civil Code on
contracts of sale, The thing must be licit and the
vendor must have a right to transfer ownership thereof
at the time it is delivered. The law specifically requires
that the vendor must have ownership of the property
at the time it is delivered. Petitioners claim that the
property was constructively delivered to them in 1954
by virtue of the Contract to Sell. However, as already
pointed out by this Court, it was explicit in the Contract
itself that, at the time it was executed, Miguel R.
Socco was not yet the owner of the property and was
only expecting to inherit it. Hence, there was no valid
sale from which ownership of the subject property
could have transferred from Miguel Socco to Arturo
Reyes. Without acquiring ownership of the subject
property, Arturo Reyes also could not have conveyed
the same to his heirs, herein petitioners.
Petitioners, nevertheless, insist that they
physically occupied the subject lot for more than 30
years and, thus, they gained ownership of the property
through acquisitive prescription, citing Sandoval v.
Insular Government and San Miguel Corporation v.
Court of Appeals.
In Sandoval, petitioners therein sought the
enforcement of Section 54, paragraph 6 of Act No.
926, otherwise known as the Land Registration Act,
which required -- for the issuance of a certificate of
title to agricultural public lands -- the open, continuous,
exclusive, and notorious possession and occupation of
the same in good faith and under claim of ownership
for more than ten years. After evaluating the evidence
presented, consisting of the testimonies of several
witnesses and proof that fences were constructed
around the property, the Court in the afore-stated case
denied the petition on the ground that petitioners failed
to prove that they exercised acts of ownership or were
in open, continuous, and peaceful possession of the
whole land, and had caused it to be enclosed to the
exclusion of other persons. It further decreed that
whoever claims such possession shall exercise acts of
dominion and ownership which cannot be mistaken for
the momentary and accidental enjoyment of the
property.
In San Miguel Corporation, the Court reiterated the
rule that the open, exclusive, and undisputed
possession of alienable public land for the period
prescribed by law creates the legal fiction whereby
land ceases to be public land and is, therefore, private
property. It stressed, however, that the occupation of
the land for 30 years must be conclusively
established. Thus, the evidence offered by petitioner
therein tax declarations, receipts, and the sole
testimony of the applicant for registration, petitioners
predecessor-in-interest who claimed to have occupied
the land before selling it to the petitioner were
considered insufficient to satisfy the quantum of proof
required to establish the claim of possession required
for acquiring alienable public land.
As in the two aforecited cases, petitioners
herein were unable to prove actual possession of the
subject property for the period required by law. It was
underscored in San Miguel Corporation that the open,
continuous, exclusive, and notorious occupation of
property for more than 30 years must be no less than
conclusive, such quantum of proof being necessary
to avoid the erroneous validation of actual fictitious
claims of possession over the property that is being
claimed.
In the present case, the evidence presented by
the petitioners falls short of being conclusive. Apart
from their self-serving statement that they took
possession of the subject property, the only proof
offered to support their claim was a general statement
made in the letter dated 4 February 2002 of Barangay
Captain Carlos Gapero, certifying that Arturo Reyes
was the occupant of the subject property since peace
time and at present. The statement is rendered
doubtful by the fact that as early as 1997, when
respondent filed her petition for issuance of title before
the DAR, Arturo Reyes had already died and was
already represented by his heirs, petitioners herein.
Moreover, the certification given by Barangay
Captain Gapero that Arturo Reyes occupied the
premises for an unspecified period of time, i.e., since
peace time until the present, cannot prevail over Legal
Officer Pinlacs more particular findings in her
Report/Recommendation. Legal Officer Pinlac
reported that petitioners admitted that it was only in
the 1970s that they built the skeletal structure found
on the subject property. She also referred to the
averments made by Patricia Hipolito in an Affidavit,
dated 26 February 1999, that the structure was left
unfinished because respondent prevented petitioners
from occupying the subject property. Such findings
disprove petitioners claims that their predecessor-in-
interest, Arturo Reyes, had been in open, exclusive,
and continuous possession of the property since 1954.
The adverted findings were the result of Legal Officer
Pinlacs investigation in the course of her official
duties, of matters within her expertise which were later
affirmed by the DAR Secretary, the Office of the
President, and the Court of Appeals. The factual
findings of such administrative officer, if supported by
evidence, are entitled to great respect.
In contrast, respondents claim over the subject
property is backed by sufficient evidence. Her
predecessors-in-interest, the spouses Laquian, have
been identified as the original allocatees who have
fully paid for the subject property. The subject property
was allocated to respondent in the extrajudicial
settlement by the heirs of Constancias estate. The
document entitled Extra-judicial Settlement of the
Estate of the Deceased Constancia Socco was not
notarized and, as a private document, can only bind
the parties thereto. However, its authenticity was
never put into question, nor was its legality impugned.
Moreover, executed in 1965 by the heirs of
Constancia Socco, or more than 30 years ago, it is an
ancient document which appears to be genuine on its
face and therefore its authenticity must be upheld.
Respondent has continuously paid for the realty tax
due on the subject property, a fact which, though not
conclusive, served to strengthen her claim over the
property.
From the foregoing, it is only proper that
respondents claim over the subject property be
upheld. This Court must, however, note that the Order
of the DAR Secretary, dated 9 November 2001, which
granted the petitioners right to purchase the property,
is flawed and may be assailed in the proper
proceedings. Records show that the DAR affirmed that
respondents predecessors-in-interest, Marcelo
Laquian and Constancia Socco, having been identified
as the original allocatee, have fully paid for the subject
property as provided under an agreement to sell. By
the nature of a contract or agreement to sell, the title
over the subject property is transferred to the vendee
upon the full payment of the stipulated consideration.
Upon the full payment of the purchase price, and
absent any showing that the allocatee violated the
conditions of the agreement, ownership of the subject
land should be conferred upon the allocatee. Since the
extrajudicial partition transferring Constancia Soccos
interest in the subject land to the respondent is valid,
there is clearly no need for the respondent to
purchase the subject property, despite the application
for the purchase of the property erroneously filed by
respondent. The only act which remains to be
performed is the issuance of a title in the name of her
legal heirs, now that she is deceased.
Moreover, the Court notes that the records
have not clearly established the right of respondents
representative, Myrna Socco-Arizo, over the subject
property. Thus, it is not clear to this Court why the
DAR issued on 8 July 2005 a CLOA over the subject
property in favor of Myrna Socco-Arizo. Respondents
death does not automatically transmit her rights to the
property to Myrna Socco-Beltran. Respondent only
authorized Myrna Socco-Arizo, through a Special
Power of Attorney dated 10 March 1999, to represent
her in the present case and to administer the subject
property for her benefit. There is nothing in the Special
Power of Attorney to the effect that Myrna Socco-Arizo
can take over the subject property as owner thereof
upon respondents death. That Miguel V. Socco,
respondents only nephew, the son of the late Miguel
R. Socco, and Myrna Socco-Arizos brother, executed
a waiver of his right to inherit from respondent, does
not automatically mean that the subject property will
go to Myrna Socco-Arizo, absent any proof that there
is no other qualified heir to respondents estate. Thus,
this Decision does not in any way confirm the
issuance of the CLOA in favor of Myrna Socco-Arizo,
which may be assailed in appropriate proceedings.
IN VIEW OF THE FOREGOING, the instant
Petition is DENIED. The assailed Decision of the
Court of Appeals in CA-G.R. SP No. 87066,
promulgated on 31 January 2006, is AFFIRMED with
MODIFICATION. This Court withholds the
confirmation of the validity of title over the subject
property in the name of Myrna Socco-Arizo pending
determination of respondents legal heirs in appropriate
proceedings. No costs.
SO ORDERED.
 In their Motion for Reconsideration, petitioners
Republic of the Philippines contend that the 10-year period for reconveyance is
Supreme Court applicable if the action is based on an implied or a
Manila constructive trust; that since respondents' action for
reconveyance was based on fraud, the action must be filed
within four years from the discovery of the fraud, citing
SPECIAL Gerona v. De Guzman, which was reiterated in Balbin v.
THIRD DIVISION Medalla.

We do not agree.
ROGELIA DACLAG and G.R. No. 159578
ADELINO DACLAG In Caro v. Court of Appeals, we have explicitly held
(deceased), that the prescriptive period for the reconveyance of
substituted by RODEL Present: fraudulently registered real property is 10 years
M. DACLAG, reckoned from the date of the issuance of the certificate
and ADRIAN M. of title x x x.
DACLAG, However, notwithstanding petitioners' unmeritorious
Petitioners, QUISUMBING,* J. argument, the Court deems it necessary to make certain
CARPIO,* J. clarifications. We have earlier ruled that respondents' action
- versus - AUSTRIA- for reconveyance had not prescribed, since it was filed within
MARTINEZ,* J., the 10-year prescriptive period.
Acting Chairperson,
ELINO MACAHILIG, CHICO-NAZARIO, and However, a review of the factual antecedents of the
ADELA case shows that respondents' action for reconveyance was
MACAHILIG, CONRADO NACHURA, JJ. not even subject to prescription.
MACAHILIG, LORENZA
HABER The deed of sale executed by Maxima in favor of
and BENITA DEL Promulgated: petitioners was null and void, since Maxima was not the
ROSARIO, owner of the land she sold to petitioners, and the one-half
Respondents. February 18, 2009 northern portion of such land was owned by respondents.
x--------------------------------------------- Being an absolute nullity, the deed is subject to attack
-------------x anytime, in accordance with Article 1410 of the Civil Code
that an action to declare the inexistence of a void contract
does not prescribe. Likewise, we have consistently ruled that
RESOLUTION when there is a showing of such illegality, the property
registered is deemed to be simply held in trust for the real
owner by the person in whose name it is registered, and the
AUSTRIA-MARTINEZ, J.: former then has the right to sue for the reconveyance of the
property. An action for reconveyance based on a void
Before us is petitioners' Motion for Reconsideration contract is imprescriptible. As long as the land wrongfully
of our Decision dated July 28, 2008 where we affirmed the registered under the Torrens system is still in the name of
Decision dated October 17, 2001 and the Resolution dated the person who caused such registration, an action in
August 7, 2003 of the Court of Appeals (CA) in CA-G.R. CV personam will lie to compel him to reconvey the property to
No. 48498. the real owner. In this case, title to the property is in the
name of petitioner Rogelia; thus, the trial court correctly
Records show that while the land was registered in ordered the reconveyance of the subject land to
the name of petitioner Rogelia in 1984, respondents respondents.
complaint for reconveyance was filed in 1991, which was
within the 10-year prescriptive period. Petitioners next contend that they are possessors in
good faith, thus, the award of damages should not have
We ruled that since petitioners bought the property been imposed. They further contend that under Article 544,
when it was still an unregistered land, the defense of having a possessor in good faith is entitled to the fruits received
purchased the property in good faith is unavailing. We before the possession is legally interrupted; thus, if indeed
affirmed the Regional Trial Court (RTC) in finding that petitioners are jointly and severally liable to respondents for
petitioners should pay respondents their corresponding the produce of the subject land, the liability should be
share in the produce of the subject land from the time they reckoned only for 1991 and not 1984.
were deprived thereof until the possession is restored to
them. We find partial merit in this argument.
 Article 528 of the Civil Code provides that
possession acquired in good faith does not lose this
character, except in a case and from the moment facts exist
which show that the possessor is not unaware that he
possesses the thing improperly or wrongfully. Possession in
good faith ceases from the moment defects in the title are
made known to the possessors, by extraneous evidence or
by suit for recovery of the

property by the true owner. Whatever may be the cause or

the fact from which it can be deduced that the possessor has
knowledge of the defects of his title or mode of acquisition, it
must be considered sufficient to show bad faith. Such
interruption takes place upon service of summons.

Article 544 of the same Code provides that a

possessor in good faith is entitled to the fruits only so long as
his possession is not legally interrupted. Records show that
petitioners received a summons together with respondents'
complaint on August 5, 1991; thus, petitioners' good faith
ceased on the day they received the summons.
Consequently, petitioners should pay respondents 10
cavans of palay per annum beginning August 5, 1991
instead of 1984.

Finally, petitioner would like this Court to look into the

finding of the RTC that since Maxima died in October 1993,
whatever charges and claims petitioners may recover from
her expired with her; and that the proper person to be held
liable for damages to be awarded to respondents should be
Maxima Divison or her estate, since she misrepresented
herself to be the true owner of the subject land.

We are not persuaded.

Notably, petitioners never raised this issue in their

appellants' brief or in their motion for reconsideration filed
before the CA. In fact, they never raised this matter before us
when they filed their petition for review. Thus, petitioners
cannot raise the same in this motion for reconsideration
without offending the basic rules of fair play, justice and due
process, specially since Maxima was not substituted at all by
her heirs after the promulgation of the RTC Decision.

WHEREFORE, petitioners Motion for

Reconsideration is PARTLY GRANTED. The Decision of
the Court of Appeals dated July 28, 2008 is MODIFIED only
with respect to prescription as discussed in the text of herein
Resolution, and the dispositive portion of the Decision is
MODIFIED to the effect that petitioners are ordered to pay
respondents 10 cavans of palay per annum beginning
August 5, 1991 instead of 1984.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice
Acting Chairperson
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 116635 July 24, 1997
CONCHITA NOOL and GAUDENCIO ALMOJERA,
petitioner,
vs.
COURT OF APPEALS, ANACLETO NOOL and
EMILIA NEBRE, respondents.
PANGANIBAN, J.:
A contract of repurchase arising out of a contract of
sale where the seller did not have any title to the
property "sold" is not valid. Since nothing was sold,
then there is also nothing to repurchase.
Statement of the Case
This postulate is explained by this Court as it resolves
this petition for review on certiorari assailing the
January 20, 1993 Decision 1 of Respondent Court of
Appeals 2 in CA-G.R. CV No. 36473, affirming the
decision 3 of the trial court 4 which disposed as follows:
5
WHEREFORE, judgment is hereby
rendered dismissing the complaint for
no cause of action, and hereby:
1. Declaring the private
writing, Exhibit "C", to be
an option to sell, not
binding and considered
validly withdrawn by the
defendants for want of
consideration;
2. Ordering the plaintiffs
to return to the
defendants the sum of
P30,000.00 plus interest
thereon at the legal rate,
from the time of filing of
defendants' counterclaim
until the same is fully
paid;
3. Ordering the plaintiffs
to deliver peaceful
possession of the two
hectares mentioned in
paragraph 7 of the
complaint and in
paragraph 31 of
defendants' answer
(counterclaim);
4. Ordering the plaintiffs
to pay reasonable rents
on said two hectares at
P5,000.00 per annum or
at P2,500.00 per
cropping from the time of
judicial demand
mentioned in paragraph
2 of the dispositive
portion of this decision,
until the said two
hectares shall have been
delivered to the
defendants; and
5. To pay the costs.
SO ORDERED.
The Antecedent Facts
The facts, which appear undisputed by the parties, are
narrated by the Court of Appeals as follows:
Two (2) parcels of land are in dispute
and litigated upon here. The first has an
area of 1 hectare. It was formerly
owned by Victorino Nool and covered
by Transfer Certificate of Title No. T-
74950. With an area of 3.0880
hectares, the other parcel was
previously owned by Francisco Nool
under Transfer Certificate of Title No. T-
100945. Both parcel's are situated in
San Manuel, Isabela. The plaintiff
spouses, Conchita Nool and Gaudencio
Almojera, now the appellants, seek
recovery of the aforementioned parcels
of land from the defendants, Anacleto
Nool, a younger brother of Conchita,
and Emilia Nebre, now the appellees.
In their complaint, plaintiff-appellants
alleged inter alia that they are the
owners of subject parcels of land, and
they bought the same from Conchita's
other brothers, Victorino Nool and
Francisco Nool; that as plaintiffs were
in dire need of money, they obtained a
loan from the Ilagan Branch of the
Development Bank of the Philippines,
in Ilagan, Isabela, secured by a real
estate mortgage on said parcels of
land, which were still registered in the
names of Victorino Nool and Francisco
Nool, at the time, and for the failure of
plaintiffs to pay the said loan, including
interest and surcharges, totaling
P56,000.00, the mortgage was
foreclosed; that within the period of
redemption, plaintiffs contacted
defendant Anacleto Nool for the latter
to redeem the foreclosed properties
from DBP, which the latter did; and as a
result, the titles of the two (2) parcels of
land in question were transferred to
Anacleto Nool; that as part of their
arrangement or understanding,
Anacleto Nool agreed to buy from
plaintiff Conchita Nool the two (2)
parcels of land under controversy, for a
total price of P100,000.00, P30,000.00
of which price was paid to Conchita,
and upon payment of the balance of
P14,000.00, plaintiffs were to regain
possession of the two (2) hectares of
land, which amounts defendants failed
to pay, and the same day the said
arrangement 6 was made; another
covenant 7 was entered into by the
parties, whereby defendants agreed to
return to plaintiffs the lands in question,
at anytime the latter have the
necessary amount; that plaintiffs asked
the defendants to return the same but
despite the intervention of the
Barangay Captain of their place,
defendants refused to return the said
parcels of land to plaintiffs; thereby
impelling them (plaintiffs) to come to
court for relief.
In their Answer, defendants-appellees
theorized that they acquired the lands
in question from the Development Bank
of the Philippines, through negotiated
sale, and were misled by plaintiffs when
defendant Anacleto Nool signed the
private writing, agreeing to return
subject lands when plaintiffs have the
money to redeem the same; defendant
Anacleto having been made to believe,
then, that his sister, Conchita, still had
the right to redeem the said properties.
The pivot of inquiry here, as aptly
observed below, is the nature and
significance of the private document,
marked Exhibit "D" for plaintiffs, which
document has not been denied by the
defendants, as defendants even
averred in their Answer that they gave
an advance payment of P30,000.00
therefor, and acknowledged that they
had a balance of P14,000.00 to
complete their payment. On this crucial
issue, the lower court adjudged the said
private writing (Exhibit "D") as an option
to sell not binding upon and considered
the same validly withdrawn by
defendants for want of consideration;
and decided the case in the manner
above-mentioned.
There is no quibble over the fact that
the two (2) parcels of land in dispute
were mortgaged to the Development
Bank of the Philippines, to secure a
loan obtained by plaintiffs from DBP
(Ilagan Branch), Ilagan, Isabela. For the
non-payment of said loan, the
mortgage was foreclosed and in the
process, ownership of the mortgaged
lands was consolidated in DBP
(Exhibits 3 and 4 for defendants). After
DBP became the absolute owner of the
two parcels of land, defendants
negotiated with DBP and succeeded in
buying the same. By virtue of such sale
by DBP in favor of defendants, the titles
of DBP were cancelled and the
corresponding Transfer Certificates of
Title (Annexes "C" and "D" to the
Complaint) issued to the defendants. 8
It should be stressed that Manuel S. Mallorca,
authorized officer of DBP, certified that the one-year
redemption period was from March 16, 1982 up to
March 15, 1983 and that the mortgagors' right of
redemption was not exercised within this period. 9
Hence, DBP became the absolute owner of said
parcels of land for which it was issued new certificates
of title, both entered on May 23, 1983 by the Registry
of Deeds for the Province of Isabela. 10 About two
years thereafter, on April 1, 1985, DBP entered into a
Deed of Conditional Sale 11 involving the same parcels
of land with Private Respondent Anacleto Nool as
vendee. Subsequently, the latter was issued new
certificates of title on February 8, 1988. 12
The Court of Appeals ruled: 13
WHEREFORE, finding no reversible
error infirming it, the appealed
Judgment is hereby AFFIRMED in toto.
No pronouncement as to costs.
The Issues
Petitioners impute to Respondent Court the following
alleged "errors":
1. The Honorable Court of Appeals,
Second Division has misapplied the
legal import or meaning of Exhibit "C" in
a way contrary to law and existing
jurisprudence in stating that it has no
binding effect between the parties and
considered validly withdrawn by
defendants-appellees for want of
consideration.
2. The Honorable Court of Appeals,
Second Division has miserably failed to
give legal significance to the actual
possession and cultivation and
appropriating exclusively the palay
harvest of the two (2) hectares land
pending the payment of the remaining
balance of fourteen thousand pesos
(P14,000.00) by defendants-appellees
as indicated in Exhibit "C".
3. The Honorable Court of Appeals has
seriously erred in affirming the decision
of the lower court by awarding the
payment of rents per annum and the
return of P30,000.00 and not allowing
the plaintiffs-appellants to re-acquire
the four (4) hectares, more or less upon
payment of one hundred thousand
 pesos (P100,000.00) as shown in
Exhibit "D". 14
The Court's Ruling
The petition is bereft of merit.
First Issue: Are Exhibits "C" and "D" Valid and
Enforceable?
The petitioner-spouses plead for the enforcement of
their agreement with private respondents as contained
in Exhibits "C" and "D," and seek damages for the
latter's alleged breach thereof. In Exhibit C, which was
a private handwritten document labeled by the parties
as Resibo ti Katulagan or Receipt of Agreement, the
petitioners appear to have "sold" to private
respondents the parcels of land in controversy
covered by TCT No. T-74950 and TCT No. T-100945.
On the other hand, Exhibit D, which was also a private
handwritten document in Ilocano and labeled as
Kasuratan, private respondents agreed that Conchita
Nool "can acquire back or repurchase later on said
land when she has the money." 15
In seeking to enforce her alleged right to repurchase
the parcels of land, Conchita (joined by her co-
petitioner-husband) invokes Article 1370 of the Civil
Code which mandates that "(i)f the terms of a contract
are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its
stipulations shall control." Hence, petitioners contend
that the Court of Appeals erred in affirming the trial
court's finding and conclusion that said Exhibits C and
D were "not merely voidable but utterly void and
inexistent."
We cannot sustain petitioners' view. Article 1370 of the
Civil Code is applicable only to valid and enforceable
contracts. The Regional Trial Court and the Court of
Appeals ruled that the principal contract of sale
contained in Exhibit C and the auxiliary contract of
repurchase in Exhibit D are both void. This conclusion
of the two lower courts appears to find support in
Dignos vs. Court of Appeals, 16 where the Court held:
Be that as it may, it is evident that when
petitioners sold said land to the
Cabigas spouses, they were no longer
owners of the same and the sale is null
and void.
In the present case, it is clear that the sellers no
longer had any title to the parcels of land at the time of
sale. Since Exhibit D, the alleged contract of
repurchase, was dependent on the validity of Exhibit
C, it is itself void. A void contract cannot give rise to a
valid one. 17 Verily, Article 1422 of the Civil Code
provides that "(a) contract which is the direct result of
a previous illegal contract, is also void and inexistent."
We should however add that Dignos did not cite its
basis for ruling that a "sale is null and void" where the
sellers "were no longer the owners" of the property.
Such a situation (where the sellers were no longer
owners) does not appear to be one of the void
contracts enumerated in Article 1409 of the Civil Code.
18
Moreover, the Civil Code 19 itself recognizes a sale
where the goods are to be "acquired . . . by the seller
after the perfection of the contract of sale," clearly
implying that a sale is possible even if the seller was
not the owner at the time of sale, provided he acquires
title to the property later on.
In the present case however, it is likewise clear that
the sellers can no longer deliver the object of the sale
to the buyers, as the buyers themselves have already
acquired title and delivery thereof from the rightful
owner, the DBP. Thus, such contract may be deemed
to be inoperative 20 and may thus fall, by analogy,
under item no. 5 of Article 1409 of the Civil Code:
"Those which contemplate an impossible service."
Article 1459 of the Civil Code provides that "the
vendor must have a right to transfer the ownership
thereof [object of the sale] at the time it is delivered."
Here, delivery of ownership is no longer possible. It
has become impossible.
Furthermore, Article 1505 of the Civil Code provides
that "where goods are sold by a person who is not the
owner thereof, and who does not sell them under
authority or with consent of the owner, the buyer
acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct
precluded from denying the seller's authority to sell."
Here, there is no allegation at all that petitioners were
authorized by DBP to sell the property to the private
respondents. Jurisprudence, on the other hand,
teaches us that "a person can sell only what he owns
or is authorized to sell; the buyer can as a
consequence acquire no more than what the seller
can legally transfer." 21 No one can give what he does
not have — nono dat quod non habet. On the other
hand, Exhibit D presupposes that petitioners could
repurchase the property that they "sold" to private
respondents. As petitioners "sold" nothing, it follows
that they can also "repurchase" nothing. Nothing sold,
nothing to repurchase. In this light, the contract of
repurchase is also inoperative — and by the same
analogy, void.
Contract of Repurchase
Dependent on Validity of Sale
As borne out by the evidence on record, the private
respondents bought the two parcels of land directly
from DBP on April 1, 1985 after discovering that
petitioners did not own said property, the subject of
Exhibits C and D executed on November 30, 1984.
Petitioners, however, claim that they can exercise their
alleged right to "repurchase" the property, after private
respondents had acquired the same from DBP. 22 We
cannot accede to this, for it clearly contravenes the
intention of the parties and the nature of their
agreement. Exhibit D reads:
WRITING
Nov. 30, 1984
That I, Anacleto Nool have bought from
my sister Conchita Nool a land an area
of four hectares (4 has.) in the value of
 One Hundred Thousand (100,000.00)
Pesos. It is our agreement as brother
and sister that she can acquire back or
repurchase later on said land when she
has the money. [Emphasis supplied].
As proof of this agreement we sign as
brother and sister this written document
this day of Nov. 30, 1984, at District 4,
San Manuel, Isabela.
Sgd ANACLETO NOOL
Anacleto Nool
Sgd Emilio Paron
Witness
Sgd Conchita Nool
Conchita Nool 23
One "repurchases" only what one has previously sold.
In other words, the right to repurchase presupposes a
valid contract of sale between the same parties.
Undisputedly, private respondents acquired title to the
property from DBP, and not from petitioners.
Assuming arguendo that Exhibit D is separate and
distinct from Exhibit C and is not affected by the nullity
of the latter, still petitioners do not thereby acquire a
right to repurchase the property. In that scenario,
Exhibit D ceases to be a "right to repurchase" ancillary
and incidental to the contract of sale; rather, it
becomes an accepted unilateral promise to sell. Article
1479 of the Civil Code, however, provides that "an
accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price." In the present
case, the alleged written contract of repurchase
contained in Exhibit D is bereft of any consideration
distinct from the price. Accordingly, as an independent
contract, it cannot bind private respondents. The ruling
in Diamante vs. CA 24 supports this. In that case, the
Court through Mr. Justice Hilario G. Davide, Jr.
explained:
Article 1601 of the Civil Code provides:
Conventional redemption shall take
place when the vendor reserves the
right to repurchase the thing sold, with
the obligation to comply with the
provisions of article 1616 and other
stipulations which may have been
agreed upon.
In Villarica, et al. Vs. Court of Appeals,
et al., decided on 29 November 1968,
or barely seven (7) days before the
respondent Court promulgated its
decisions in this case, this Court,
interpreting the above Article, held:
The right of repurchase is not a right
granted the vendor by the vendee in a
subsequent instrument, but is a right
reserved by the vendor in the same
instrument of sale as one of the
stipulations of the contract. Once the
instrument of absolute sale is executed,
the vendor can not longer reserve the
right to repurchase, and any right
thereafter granted the vendor by the
vendee in a separate instrument cannot
be a right of repurchase but some other
right like the option to buy in the instant
case. . . .
In the earlier case of Ramos, et al. vs.
Icasiano, et al., decided in 1927, this
Court had already ruled that "an
agreement to repurchase becomes a
promise to sell when made after the
sale, because when the sale is made
without such an agreement, the
purchaser acquires the thing sold
absolutely, and if he afterwards grants
the vendor the right to purchase, it is a
new contract entered into by the
purchaser, as absolute owner already
of the object. In that case the vendor
has nor reserved to himself the right to
repurchase.
In Vda. De Cruzo, et al. vs. Carriaga, et
al. this Court found another occasion to
apply the foregoing principle.
Hence, the Option to Repurchase
executed by private respondent in the
present case, was merely a promise to
sell, which must be governed by Article
1479 of the Civil Code which reads as
follows:
Art. 1479. A promise to buy and sell a
determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy
or to sell a determinate thing for a price
certain is binding upon the promissor if
the promise is supported by a
consideration distinct from the price.
Right to Repurchase Based on
Homestead or Trust Non-Existent
Petitioners also base their alleged right to repurchase
on (1) Sec. 119 of the Public Land Act 25 and (2) an
implied trust relation as "brother and sister." 26
The Court notes that Victorino Nool and Francisco
Nool mortgaged the land to DBP. The brothers,
together with Conchita Nool and Anacleto Nool, were
all siblings and heirs qualified to repurchase the two
parcels of land under Sec. 119 of the Public Land Act
which provides that "(e)very conveyance of land
acquired under the free patent or homestead
provisions, when proper, shall be subject to
repurchase by the applicant, his widow or legal heirs, to order petitioners to pay rent when they "were
within a period of five years from the date of allowed to cultivate the said two hectares." 31
conveyance." Assuming the applicability of this We are not persuaded. Based on the previous
statutory provision to the case at bar, it is indisputable discussion, the balance of P14,000.00 under the void
that Private Respondent Anacleto Nool already contract of sale may not be enforced. Petitioners are
repurchased from DBP the contested properties. the ones who have an obligation to return what they
Hence, there was no more right of repurchase that his unduly and improperly received by reason of the
sister Conchita or brothers Victorino and Francisco invalid contract of sale. Since they cannot legally give
could exercise. The properties were already owned by title to what they "sold," they cannot keep the money
an heir of the homestead grantee and the rationale of paid for the object of the sale. It is basic that "(e)very
the provision to keep homestead lands within the person who through an act of performance by another,
family of the grantee was thus fulfilled. 27 or any other means, acquires or comes into
The claim of a trust relation is likewise without merit. possession of something at the expense of the latter
The records show that private respondents did not without just or legal ground, shall return the same." 32
purchase the contested properties from DBP in trust Thus, if a void contract has already "been performed,
for petitioners. The former, as previously mentioned, in the restoration of what has been given is in order." 33
fact bought the land from DBP upon realization that Corollarily and as aptly ordered by respondent
the latter could not validly sell the same. Obviously, appellate court, interest thereon will run only from the
petitioners bought it for themselves. There is no time of private respondents' demand for the return of
evidence at all in the records that they bought the land this amount in their counterclaim. 34 In the same vein,
in trust for private respondents. The fact that Anacleto petitioners' possession and cultivation of the two
Nool was the younger brother of Conchita Nool and hectares are anchored on private respondents'
that they signed a contract of repurchase, which as tolerance. Clearly, the latter's tolerance ceased upon
discussed earlier was void, does not prove the their counterclaim and demand on the former to
existence of an implied trust in favor of petitioners. vacate. Hence, their right to possess and cultivate the
Second Issue: No Estoppel in Impugning the land ipso facto ceased.
Validity of Void Contracts WHEREFORE, the petition is DENIED and the
Petitioners argue that "when Anacleto Nool took the assailed Decision of the Court of Appeals affirming
possession of the two hectares, more or less, and let that of the trial court is hereby AFFIRMED.
the other two hectares to be occupied and cultivated SO ORDERED.
by plaintiffs-appellant, Anacleto Nool cannot later on Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ.,
disclaim the terms or contions (sic) agreed upon and concur.
his actuation is within the ambit of estoppel . . . 28 We
disagree. The private respondents cannot be
estopped from raising the defense of nullity of
contract, specially in this case where they acted in
good faith, believing that indeed petitioners could sell
the two parcels of land in question. Article 1410 of the
Civil Code mandates that "(t)he action or defense for
the declaration of the inexistence of a contract does
not prescribe." It is a well-settled doctrine that "as
between parties to a contract, validity cannot be given
to it by estoppel if it is prohibited by law or it is against
public policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away what public
policy by law seeks to preserve." 29 Thus, it is
immaterial that private respondents initially acted to
implement the contract of sale, believing in good faith
that the same was valid. We stress that a contract void
at inception cannot be validated by ratification or
prescription and certainly cannot be binding on or
enforceable against private respondents. 30
Third Issue: Return of P30,000.00 with Interest
and Payment of Rent
Petitioners further argue that it would be a
"miscarriage of justice" to order them (1) to return the
sum of P30,000.00 to private respondents when
allegedly it was Private Respondent Anacleto Nool
who owed the former a balance of P14,000.00 and (2)
 SECOND DIVISION
[A.C. No. 3046. October 26, 1998]
REGALADO DAROY, complainant, vs. ATTY.
ESTEBAN ABECIA, respondent.
DECISION
MENDOZA, J.:
This refers to the complaint for malpractice filed by
Regalado Daroy (now deceased) against Esteban
Abecia, a member of the Bar. Complainant Daroy
accused respondent Abecia of having forged his
signature in a deed of absolute sale by means of
which the latter was able to transfer a parcel of land in
Opol, Misamis Oriental, first to Jose Gangay and
eventually to his (respondents) wife Nena Abecia.
The facts of the instant case are as follows:
Respondent Abecia was counsel of complainant
Daroy in a case for forcible entry before the Municipal
Trial Court of Opol, Misamis Oriental. Judgment was
rendered in favor of complainant as plaintiff in the
ejectment case, ordering the defendants to pay
damages, attorneys fees, and the costs of the suit. To
satisfy the judgment, the sheriff sold at public auction
on March 25, 1971 a parcel of land belonging to one
of the defendants to complainant Daroy as highest
bidder for P1,250.00. Upon failure of the defendants to
redeem the land, its ownership was consolidated in
complainant Daroy.
Complainant Daroy claimed that respondent Abecia
forged his signature in a deed of absolute sale, dated
March 31, 1971, transferring the subject parcel of land
to Jose Gangay purportedly for the sum of P1,250.00
and that in a fictitious deed of absolute sale, dated
April 17, 1971, it was made to appear that Gangay in
turn conveyed the land to Nena Abecia, wife of
respondent Abecia, for the sum of P1,350.00.
Complainant alleged that he entrusted the title to the
land (TCT No. T-315) to Abecia as his counsel and
allowed him to take possession of the land upon the
latters request. By means of the forged deed of sale,
Abecia was able to obtain new transfer certificates of
title, first in the name of Gangay and then in that of
Mrs. Abecia, from the Registry of Deeds of Misamis
Oriental. Daroy claimed he discovered the fraud only
in 1984.
Daroy submitted in evidence a report of the National
Bureau of Investigation, which had examined the deed
of sale in favor of Jose Gangay, showing that Daroys
signature in the deed of sale had been written by a
different hand. In addition, Daroy presented the
affidavit, executed on August 10, 1988, of Anita
Gangay, wife of Jose Gangay, in which she retracted
an earlier affidavit executed on June 5, 1985. In the
first affidavit, she stated that she had bought the land
in question from Regalado Daroy and then sold it to
her sister Nena Abecia, wife of respondent Esteban.
Now, in her present affidavit, it is stated that she did
not buy the land from Daroy nor later sell it to Nena
Abecia and that she really did not know anything
about the controversy between Regalado Daroy and
Esteban Abecia, both of whom are her brothers-in-law.
(It appears that Mrs. Conchita Daroy, Mrs. Anita
Gangay, and Mrs. Nena Abecia are sisters, although
Conchita Daroy and Regalado Daroy are not married
but lived together in a common-law relationship.)
A complaint for falsification of public document was
also filed against respondent Abecia in the Office of
the City Prosecutor of Cagayan de Oro which,
however, dismissed the same. On appeal, then
Undersecretary of Justice Silvestre H. Bello III
reversed on May 6, 1988 the findings of the City
Prosecutor of Cagayan de Oro and consequently
ordered the filing of the corresponding information in
court. Accordingly, City Prosecutor Rodolfo R. Waga
filed an information for falsification of public document,
dated June 30, 1988, with the Regional Trial Court of
Misamis Oriental.
Respondent Abecia was unable to attend the
hearings. He asked for their transfer to Cagayan de
Oro on the ground that he did not have the means to
travel, but his request was apparently denied sub
silencio as the Commission continued the hearings in
Pasig, Metro Manila. As a result only his counsel was
present at the hearings.
As respondent reiterated his request for the transfer of
venue, it was agreed at the hearing of January 30,
1989 that respondents answer, dated August 3, 1987,
and the affidavits of his witnesses as well as his own
would be considered as their direct testimonies.
In his answer, respondent Esteban Abecia maintained
that on March 31, 1971, Regalado Daroy sold the land
in question to Jose Gangay, and the latter in turn sold
the land to Nena Abecia on April 17, 1971. He cited
the sheriffs return, dated August 6, 1973, in which it
was stated that on August 4, 1993 Regalado Daroy
and his assignee Nena Abecia were . . . placed in
actual possession of the parcel of land subject matter
of the Deed of Conveyance and Possession. He also
referred to the resolution of the Assistant Provincial
Fiscal of Misamis Oriental, who dismissed the
complaint for grave coercion and malicious mischief
filed by Gertrudes De Bajuyo, one of the defendants in
the ejectment case, against Regalado Daroy and
Nena Abecia for the demolition of her house, precisely
on the basis of the right of Mrs. Nena Abecia . . . as
assignee to do whatever she wants to do of the things
she owns.
On July 15, 1993, Commissioner Plaridel C. Jose
rendered a report finding respondent Abecia guilty of
malpractice and recommending his disbarment. In his
report, Commissioner Jose stated:
. . . In the course of his law practice, the respondent
handled several cases in behalf of the complainant
Regalado Daroy, among which is Civil Case No. 3288,
wherein a parcel of land located at Opol, Misamis
Oriental covered by TCT No. T-15924 (TCT No. T-
315) was the subject of litigation. In the course of
handling the same, the complainant entrusted to the
respondent the pertinent documents necessary in the
said case which included his said TCT No. T-15924.
In the year 1971, without the knowledge of the
complainant, a document entitled Deed of Sale dated
March 31, 1971 was executed and notarized by
Notary Public Erasmo G. Damasing as Doc. No. 68,
Page No. 16, Book No. VIII, Series of 1971, which
appears to have been signed by complainant
Regalado Daroy, thereby conveying the said property
in favor of a certain Jose Gangay, married to Anita
Basmayor, by virtue of which TCT No. T-15925 was
issued in the name of Jose Gangay.
Two weeks thereafter, under date of April 17, 1971,
the said Jose Gangay executed a Deed of Sale of the
same property in favor of Mrs. Nena Abecia, the wife
of the respondent, by virtue of which TCT No. T-15926
was issued in the name of Nena Abecia, married to
Atty. Esteban Abecia, the respondent.
Sometime in the year 1984, the complainant
discovered that his said property was already in the
name of Mrs. Nena Abecia and Atty. Esteban Abecia.
....
The foregoing evidence sufficiently proved
respondents acts complained of in the present case . .
. . The significant fact is that the herein respondent
was instrumental and responsible for falsifying the
signature of his client, complainant Daroy, in the deed
of conveyance in favor of Jose Gangay, for which he
is at present criminally charged in Criminal Case No.
88-443 before the Regional Trial Court of Misamis
Oriental.
In an unclear manner, respondent tried to justify his
act by alleging that the transfer of his clients property
to his wife was proper because he allegedly was not
paid for his professional services. Such allegation,
even if true, would not exculpate him from liability. A
lawyer who executed with his client a deed
transferring ownership over a parcel of land involved
in a pending litigation as his attorneys fees violates the
rule prohibiting the purchase of property in litigation by
a lawyer from his client.
. . . What is saddening is the fact that he is presently
an incumbent labor arbiter of the National Labor
Relations Commission with the delicate responsibility
of administering justice to the parties before him. . . .
The Commission has no alternative but to recommend
his disbarment. It is likewise recommended that the
National Labor Relations Commission be furnished
with these findings for its guidance and appropriate
action.
The Board of Governors of the Integrated Bar of the
Philippines in Resolution No. XI-94-072, dated March
26 1994, approved the report but reduced the penalty
to indefinite suspension.
Respondent Abecia filed a Motion for Reconsideration
and/or Appeal. Among other things, he contends that:
....
1. The Commission on Bar Discipline erred when it
held that complainant had no knowledge of the
execution of the Deed of Absolute Sale on March 31,
1971 before Notary Public Erasmo G. Damasing.
Complainant very well knew of the execution of the
deed of sale as shown in the Sheriffs Return of
Service (Respondents Annex 9) dated August 6, 1973,
where he declared that he was accompanied by the
complainant and his assignee, Nena Abecia, in
implementing the Deed of Conveyance and
Possession on August 4, 1973. The Deputy Sheriff
even went as far as declaring that the land was
already in the name of complainants assignee.
Paragraph 2 of the said Sheriffs Return of Service is
herein quoted verbatim:
2. The undersigned then proceeded to the parcel of
land which is the subject matter of the Deed of
Conveyance and Possession together with purchaser
Regalado Daroy, his assignee Nena Abecia, Atty.
Esteban Abecia, Ex-LTC Registrar Clemente Quiblat,
P.M. Salazar, and the Police Sgt. of Opol, Misamis
Oriental, Felix Abejuela. Regalado Daroy and his
assignee, Nena Abecia, were then formally placed in
actual and physical possession of the parcel of land
subject matter of the Deed of Conveyance and
Possession. Regalado Daroy and his assignee, Nena
Abecia, then asserted their ownership of the parcel of
land by making use of the improvements found on the
land such as the young coconuts and bananas. As a
matter of fact the parcel of land is already in the name
of Nena Abecia per Transfer Certificate of Title No. T-
15926 entered in the Register of Deeds of Cagayan
de Oro City on June 18, 1973 at 1:00 P.M.
(Underscoring Ours).
Likewise, in Office File No. 419-74 of the Office of the
Provincial Fiscal (Respondents Annex 10) dated April
18, 1974, wherein complainant Regalado Daroy was
the accused, then 4th Asst. Fiscal Alejo G. Rola
referred to Nena Abecia as the owner of the subject
property by virtue of her being the assignee and/or
transferee of the rights of Regalado Daroy.
Furthermore, in Criminal Case No. 88-443 before
Branch 25 of the RTC of Misamis Oriental,
complainant testified in open court that he came to
know of the Deed of Absolute Sale (Exhibit A) when
the sheriff awarded the land to him (TSN, p. 3. Oct. 4,
1989). The Sheriffs Deed of Conveyance and
Possession, however, was executed by the Provincial
Sheriffs way back in April 11, 1972.
How indeed can complainant now have the temerity to
claim that he discovered that the subject property was
transferred only in 1984? And how could the
Commission on Bar Discipline have overlooked the
above evidence and believed the complainant hook,
line and sinker?
2. The Commission on Bar Discipline erred in not
giving credence and weight to the testimony/sworn
statement of the Notary Public (Respondents Annex 4)
and the instrumental witnesses to the execution of the
questioned Deed of Absolute Sale (Respondents
Annexes 5 and 6). Between the Notary Public and the
complainant, the Notary Public, who is known for his
unquestioned integrity, honesty and probity, is more
believable. In fact, Notary Public Erasmo G.
Damasing, then the incumbent vice-mayor, went on to
become the congressman of Cagayan de Oro City.
And between the positive identification of the
complainant as the person who executed the
instrument by the Notary Public (and the instrumental
witnesses) and the assertion of the alleged
handwriting expert, the positive identification must
prevail especially since the questioned signature of
complainant has as many strokes as the sample
signatures in the documents submitted for
comparison.
Respondents motion is well taken. As already stated,
the land in question was purchased by complainant at
the sheriffs sale held on March 25, 1971. The land
was owned by Gertrudes de Bajuyo, wife of one of the
defendants in the action for forcible entry. Upon the
lapse of one year and the failure of the owner to
redeem the land, its ownership was consolidated in
the name of complainant Regalado Daroy. In his
sheriffs Return of Service issued on August 6, 1973 -
long before the complaint in this case was filed on
May 25, 1987 Deputy Sheriff Eufrosino P. Castillo
stated that when he finally transferred the land to the
buyer, he placed in possession of the land not only the
buyer, Regalado Daroy, but also the latters assignee,
Nena Abecia, in whose name the title to the land had
in fact been transferred. The Deputy Sheriff said in his
report:
2. The undersigned then proceeded to the
parcel of land which is the subject matter
of the Deed of Conveyance and
Possession together with purchaser
Regalado Daroy, his assignee Nena
Abecia, Atty. Esteban Abecia, Ex-LTC
Registrar Clemente Quiblat, P.M. Salazar,
and the Police Sgt. of Opol, Misamis
Oriental, Felix Abejuela. Regalado Daroy
and his assignee, Nena Abecia, were then
formally place in actual and physical
possession of the parcel of land subject of
the Deed of Conveyance and Possession.
Regalado Daroy and his assignee, Nena
Abecia, then asserted their ownership of
the parcel of land by making use of the
improvements found in the land such as
the young coconuts and bananas. As a
matter of fact the parcel of land is already
in the name of Nena Abecia per Transfer
Certificate of Title No. T-15926 entered in
the Register of Deeds at Cagayan de Oro
City on June 18, 1973 at 1:00 P.M.
3. At about 2:00 P.M. of the same day,
August 4, 1973, the undersigned
accompanied with police Sgt. Felex
Abejuela of Opol Police Department and
P.M. Salazar went to the house of
Restituto Bajuyo at Mulugan, Opol, Mis.
Or. The undersigned explained to
Restituto Bajuyo that Regalado Daroy and
his assignee Nena Abecia were already
placed in actual and physical possession
of the parcel of land subject matter of the
Deed of Conveyance and Possession and
admonished him not to molest Regalado
Daroy and his assignee or anybody
appointed by them to take care of the
aforecited parcel of land. He was warned
that any violation will be contrary to law
and will subject him to court punishment.
It would appear, therefore, that as early as August 4,
1973 Daroy already knew that title to the land had
already been transferred in the name of respondents
wife. Complainants claim that he came to know of
such transfer only in 1984 is thus belied. Nor does it
appear that the transfer was made without his
knowledge and consent. To the contrary, the sheriffs
return suggests that Daroy had agreed to such
transfer. Hence, the references to Mrs. Abecia as
Daroys assignee.
It appears further that as a consequence of the
demolition of the former owners house, complainant
and Mrs. Abecia were charged, together with Deputy
Sheriff Eufrosino P. Castillo, with grave
coercion/malicious mischief in the Office of the
Provincial Fiscal of Misamis Oriental. In his resolution,
dated April 18, 1974, dismissing the charges,
Assistant Provincial Fiscal Alejo G. Rola stated,
among other things:
The undersigned despite the declaration of
complainant Gertrudes de Bajuyo corroborated by the
testimony of Josefina Jaraula that she was intimidated
by a PC soldier, is of the opinion that such evidence is
insufficient to warrant a belief that such an act was in
fact done by Sgt. Abalos, because the other witnesses
for the complainant namely, Lito Ejina and Jose Jaime
never mentioned that there was such intimidation
employed by Sgt. Abalos at the time despite the fact
that these two (2) aforenamed witnesses, were
present at the time and on the date Josefina Jaraula
was around. The undersigned is however of the
considered opinion that the house occupied by
complainant Gertrudes de Bajuyo was demolished by
respondents, but such an act is a right of Mrs. Nena
Abecia in her capacity as an assignee to do whatever
she wants to do of the thing she owns. Furthermore,
the allegation of complainant regarding the
intimidation made against her by the PC Sgt.
corroborated by the other witness Josefina Jaraula is
insufficient to offset the presumption of regularity of
performance of an official duty by a public officer,
apart from the fact that the testimony of Gertrudes
Bajuyo and Josefina Jaraula are of dubious credibility.
Like the sheriffs return made in 1973, this resolution of
the Assistant Provincial Fiscal rendered the following
year (1974) belies complainants allegation that the
land in question was transferred to Mrs. Abecia
without his knowledge and consent and that he came
to know about it only in 1984.
The aforementioned documents were attached to the
answer of respondent Esteban Abecia. However,
despite the parties agreement made at the hearing
held on January 30, 1989, that the said documents
would be considered the evidence of respondent
Abecia, they were not even mentioned in the report of
the Commissioner who investigated the case.
Indeed, what appears to have happened in this case is
that the parties thought that because the land had
been acquired by complainant at a public sale held in
order to satisfy a judgment in his favor in a case in
which respondent was complainants counsel, the
latter could not acquire the land. The parties
apparently had in mind Art. 1491 of the Civil Code
which provides, in pertinent parts, as follows:
ART. 1491. The following persons cannot acquire by
purchase, even at a public or judicial auction, either in
person or through the mediation of another:
....
(5) Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and
employees connected with the administration of
justice, the property and rights in litigation or levied
upon an execution before the court within whose
jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring
by assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of
any litigation in which they may take part by virtue of
their profession.
Of course, the parties were mistaken in thinking that
respondent could not validly acquire the land. In
Guevara v. Calalang, on facts similar to those in this
case, we held that the prohibition in Art. 1491 does not
apply to the sale of a parcel of land, acquired by a
client to satisfy a judgment in his favor, to his attorney
as long as the property was not the subject of the
litigation. For indeed, while judges, prosecuting
attorneys, and others connected with the
administration of justice are prohibited from acquiring
property or rights in litigation or levied upon in
execution, the prohibition with respect to attorneys in
the case extends only to property and rights which
may be the object of any litigation in which they may
take part by virtue of their profession.
The point is, the parties in this case thought the
transfer of the land to respondent Abecia was
prohibited and so they contrived a way whereby the
land would be sold to Jose Gangay, whose wife Anita
is the sister of Mrs. Nena Abecia, and then Gangay
would sell the land to Mrs. Abecia. As Jose Gangay
stated in his affidavit of March 6, 1985:
4. T - Ano ba ang iyong masasabi tungkol sa
nangyari?
S - Sinabihan ako ni Atty. Esteban Abecia,
sapagkat siya raw ang abogado sa lupang
pinagkaguluhan, hindi maari na siya ang
nakalagay na nagbili ng upa sa kanyang
cliente na si Regalado Daroy, dahil laban raw
sa kanilang batas sa mga abogado, kaya
sinabihan ako ni Atty. Esteban Abecia na
maari bang gamitin niya ang pangalan ko na
ako raw ang nakabili sa lupa ni Regalado
Daroy at paglipas raw ng isang taon, ay kanya
ng ilipat sa pangalan sa documento at tituto
hanggang sa pangalan ng kanyang asawa na
si Nena Abecia.
5.T - Sumagot ka ba sa hiling ni Atty. Esteban
Abecia?
S - Opo, pumayag ako dahil silang dalawa, si
Regalado Daroy at si Atty. Esteban Abecia ay
aking mga bilas, sapagkat ang isat-isa naming
mga asawa ay magkakapatid.
6. T - Ano man ang nangyari pagkatapos noon?
S - Isang araw, ay pumunta si Atty. Esteban Abecia sa
amin at sinama niya ako doon kay Atty. Wilfredo
Linaac upang ipa tunayan ang aking pangalan doon
sa documento sa pagbili, at dahil doon, iyong
documento sa pabili ay na notariohan ni Atty. Wilfredo
Linaac.
7. T - Binayaran ba kayo ni Nena Abecia at ni Atty.
Esteban Abecia sa pera na naghaga ng isang libo
tatlong daan at limang[pung] pesos (P1,350.00) na
iyong ang halaga sa lupa.
S - Wala.
8. T - Ipakita ko sa iyo itong documento ng pagbili at
may takda ng petsa na Abril 17, 1971 notariadad ni
Atty. Wilfredo Linaac Signes sa Doc. No. 333, Pahina
48, Aklat No. VI; taon series sa 1971; ano mang ang
kaugnayan nito sa documento ng pagbili?
S - Ang lahat na mga papiles sa sinasabi ninyo ay
wala akong nalalaman, ang nalaman ko lang noon
akoy dinala ni Atty. Esteban Abecia sa oficina ni Atty.
Wilfredo Linaac tinanong ako kong aking pirma iyong
sa sa documento.
The sale of the land to Gangay may be fictitious and,
therefore, void, but that complainant Regalado Daroy
intended to convey the land ultimately to respondent
Esteban Abecia appears to be the case.
It is true that the NBI found the signature of Regalado
Daroy on the deed of sale made in favor of Jose
Gangay to have been forged. But Erasmo Damasing,
the notary public who notarized the deed, affirmed that
Daroy and his wife appeared before him on March 31,
1971 and, in his presence, signed the document in
question. Daisy Felicilda likewise stated in an affidavit
executed on February 17, 1986 that she was a
witness to the execution of the deed of sale and that
she saw Daroy signing the deed of sale.
Daroy never denied these claims of the notary public
and a witness to the execution of the deed of sale. Nor
was the NBI writing expert ever called to testify on his
finding that the signature of Daroy in the deed of sale
appeared to have been signed by a different hand.
The finding that the deed of sale was forged was
simply implied from the report of the NBI writing
expert. As complainant, Daroy had the burden of
proving that contrary to the recital in the jurat he and
his wife never appeared before the notary public and
acknowledged the deed to be their voluntary act.
WHEREFORE, the resolution dated March 26, 1994,
of the IBP Board of Governors is RECONSIDERED
and the complaint against respondent Esteban Abecia
is DISMISSED.
SO ORDERED.
Melo, (Acting Chairman), Puno, and Martinez, JJ.,
concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
A.M. No. MTJ-89-270 July 5, 1993
THELMA ARCENIO and MARGARITA PONTING,
complainants,
vs.
JUDGE VIRGINIA PAGOROGON, respondent.
A.M. No. MTJ-92-637 July 5, 1993
OFFICE OF THE COURT ADMINISTRATOR,
complainants,
vs.
JUDGE VIRGINIA PAGOROGON, respondent.
PER CURIAM:
These are two (2) administrative complaints
commenced by different parties against Municipal Trial
Court Judge Virginia Pagorogon of San Jose del
Monte, Bulacan. The factual background of these
complaints will be treated herein separately, as
follows:
A.M. No. MTJ 89-270:
Complainants Arcenio and Ponting were the accused
in two criminal complaints filed by one Cipriano de
Guzman, Jr. for Illegal Squatting (P.D. 772) before
respondent judge Pagorogon.
After a preliminary examination, respondent judge
issued warrants for arrest of the complainants. On
January 23, 1989, complainants were apprehended
and filed their respective bail bonds. Respondent
judge then issued an Order requiring complainants to
file their counter-affidavits within ten (10) days from
receipt of the Order. Complainants failed to comply
with the aforestated Order. Complainants failed to
comply with the aforestated Order but instead filed a
Motion for Extension of time to file counter-affidavits in
the afternoon of February 3, 1989, the last day for
compliance. Respondent judge denied the Motion for
Extension filed by the accused for being moot and
academic. It appears that in the morning of the same
day, respondent judge had already issued an Order
forwarding the records to the Provincial Fiscal for the
filing of the corresponding information on the ground
that "accused Ponting failed to submit her witnesses".
The Order denial however, erroneously referred to the
Motion for Extension as a Motion for Reconsideration,
which mistake respondent judge attributed to clerical
error.
On February 14, 1989 complainants filed their
counter-affidavits alleging that they are DAR-identified
farmer beneficiaries of the disputed parcel of land
which is devoted to agriculture and such, is beyond
the coverage of P.D. 772.
On the same day, the accused filed a Motion for
Reconsideration of the Order transmitting the cases to
the Provincial Fiscal on the ground that the Motion for
Extension filed by them served to suspend the running
of the period within which to file their counter-
affidavits. Respondent judge allegedly denied the
Motion for Reconsideration on the same day that it
was filed but the Order itself is missing from the
records of the case.
On February 22, 1989 complainants filed the present
administrative complaint against respondent judge
with the Office of the Court Administrator for gross
ignorance of the law, grave abuse of discretion and
acting in excess of her jurisdiction, alleging that
respondent judge found probable cause only on the
basis of the sworn statements of the complainant and
his witness, ordered their arrest on the basis of P.D.
that is not applicable to them, and for acting with
undue haste in transmitting the records to the
Provincial Fiscal without first ruling on Motion for
Extension and Motion for Reconsideration.
In her Comment, respondent judge claimed as
erroneous and without basis the complaint filed
against her, arguing that the fact that only one witness
was presented does not militate against the existence
of probable cause as found by her. Furthermore, she
alleged compliance with the requirements of
examination in writing and under oath to justify the
issuance of the warrants of arrest. On the issue of
acting with undue haste, respondent claimed that she
acted upon the Motion for Extension and the Motion
for Reconsideration by denying both motions.
Thereupon, complainants were ordered to file their
Reply by way of a Resolution of this Court dated
August 7, 1990. However, despite several Resolutions
ordering compliance and service of the said
Resolutions upon the complainants, no Reply has yet
been filed by the complainants. In the meantime,
respondent Judge filed a motion for resolution of the
complaint.
A.M. No. MTJ-92-637:
This case originated from an anonymous letter-
complaint filed by one A.C.B. with the Office of the
Ombudsman accusing respondent judge of abuse of
authority and irregularity in connection with a motor
vehicle in custodia legis alleged to have been used in
connection with a robbery case filed with respondent's
court. In turn, the Office of the Ombudsman referred
the undated letter to this Court for administrative
investigation.
Per Resolution dated August 29, 1991, the Court
directed the Court Administrator to file a formal
complaint for misconduct against respondent judge
and thereafter, to refer the complaint to Executive
Judge Natividad G. Dizon of the Regional Trial Court
of Malolos, Bulacan for investigation, report and
recommendation.
The report of the Executive Judge disclosed that
respondent judge conducted a preliminary
examination of a robbery (hold-up) case entitled
"People of the Philippines vs. Robert Geroi, et al." on
August 26, 1988. Part of the evidence in the
aforementioned case was a black and white renegade
type jeepney. On September 19, 1988, the robbery
case was endorsed to the Office of the Provincial
Fiscal of Malolos, Bulacan, for filing of the information
inasmuch as three (3) of the accused were detained.
However, the jeep was not turned over to the
Provincial Fiscal because the Clerk of Court had no
available funds to tow said jeep. The subject vehicle,
therefore, remained in the premises of the municipal
building of San Jose del Monte, Bulacan.
In March 1989, the Station Commander of San Jose
del Monte requested respondent judge to remove the
jeep from the premises of the municipal building as it
was becoming as eyesore. Respondent judge then
sought the opinion of then Acting RTC Executive
Judge Benjamin de Vega and Provincial Fiscal
Liberato L. Reyes and was allegedly advised that
since the RTC of Malolos has no impounding area,
she should keep and maintain the jeep herself. In their
sworn affidavits, however, the Executive Judge merely
remembered disclaiming control over the jeep until the
Provincial Fiscal files the criminal case with the RTC;
the Provincial Fiscal, on the other hand, had a vague
recollection of the conversation and remembered only
his hesitation to accept the turnover of the jeep to his
office. Neither one of the officials confirmed having
advised respondent judge to have custody of the
subject vehicle.
On March 31, 1989 respondent Judge took
possession of the jeep and had an auto mechanic tow
it to his (the auto mechanic's) shop in Marilao,
Bulacan, repair and repaint the same from black and
white to red. Respondent judge even provided new
batteries for the jeep and initially spent P1,500.00 to
put the jeep in good running condition. Her brother
volunteered "to take care of the jeep" as she "could
not afford to hire a driver." In addition, her brother
shouldered additional expenses for the further repair
and maintenance of the jeep. It is for these expenses
that respondent judge is seeking reimbursement from
the anonymous owner with the threat that unless she
is reimbursed "she is to return the jeep to its original
condition."
The anonymous letter-complaint further alleged that
the respondent judge even had the vehicle registered
in her brother's name but respondent judge denied the
same nor is there any evidence to support such
allegation. However, the investigation of Executive
Judge Dizon revealed that on the basis of the report
from the Land Transportation Office, the sticker
attached to the vehicle appears to be falsified.
To all these accusations, respondent judge maintains
the defense of having acted in good faith. In fact to
show her alleged good faith, respondent judge
officially turned over the jeep to the office of the
Provincial Fiscal on February 25, 1992, three (3) years
after having received custody thereof in March 1989.
She did so only after this case was referred to the
Executive Judge of Bulacan for investigation, report
and recommendation.
On the basis of the documentary evidence obtaining in
the present case, the investigating Executive Judge
found respondent judge guilty of misconduct in that
she "exerted undue interest" over the vehicle by
spending for its repair and maintenance over and
beyond what the circumstances and the duties of her
office called for. Moreover, by having the jeep
repainted from its original color of black and white to
red, with full knowledge that the jeep constitutes vital
evidence in a robbery case, respondent judge
tampered with the evidence in a criminal case for
which she should be held answerable. In view of her
findings, the investigating judge recommended the
imposition of the appropriate penalty upon respondent
judge.
On the first administrative complaint for gross
ignorance, grave abuse of discretion and acting in
excess of her jurisdiction, this Court believes and so
holds that respondent judge is not guilty of the facts
complained of as to warrant an administrative
sanction. From the aforestated facts, it appears that
respondent judge faithfully complied with the
procedure for preliminary examination outlined in Rule
112 sections 9(b) and 6(b) of the Rules on Criminal
Procedure. She did not base her finding of probable
cause solely on the sworn statements of the complaint
therein and his witness as alleged by the
complainants. Instead she propounded her own
searching questions to the aforestated parties during
the preliminary examination, consistently with the
Rules. Apparently however, such "searching"
questions (and answers thereto) proved insufficient to
elicit the nature of the property subject matter of the
complaint as to justify the application of P. D. 772
against the accused. However such fact alone is not
sufficient to justify a charge of gross ignorance of the
law against respondent judge.
Not every error or mistake of a judge in the
performance of her duties makes her liable
administratively. To hold a judge accountable for every
erroneous ruling or decision that he renders, would be
nothing short of harassment and would make his
position unbearable. For after all, no judge, in the
process of administering justice, can be infallible in his
judgment (Gallardo vs. Judge Quintos, Adm. Mat. No.
RTJ-90-577, 2 July 1991 En Banc, Minute Resolution).
Even the allegation that respondent judge acted with
undue haste in forwarding the case to the Provincial
Fiscal is devoid of merit. Complainants had no right to
assume that respondent judge will grant their Motion
for Extension, especially in the present case where the
motion was filed on the very last day for filing of the
counter-affidavits and more so, where the respondent
judge had already issued an order of transmittal of the
records to the Provincial Fiscal, thereby rendering the
motion moot and academic. Neither do complainants
have the right to assume that by the mere act of filing
a motion for an extension, the period for compliance
with the Order will be automatically "suspended".
Nowhere in the Rules is such automatic suspension
sanctioned. The fact that respondent judge denied
their motion for extension cannot be deemed as an
abuse of discretion inasmuch as the decision on
whether to grant motions or not rest entirely upon the
discretion of the judge.
There being no merit in the charges against
respondent judge, the Court resolved to dismiss the
first administrative case against her.
However, as to the second administrative complaint
involving the vehicle in custodia legis, there is
sufficient evidence on record to warrant a finding that
respondent judge committed gross misconduct in
office deserving the imposition of the most stringent of
penalties possible. The intention of respondent judge
to make use of and benefit from the vehicle, a property
in custodia legis, was manifest. Respondent judge had
no reason to go overboard in spending for the repair of
the jeep. The most she should have done, if her real
intention was the preservation of evidence and her
goal was to turn over the same to the office of the
Provincial Fiscal, was simply to have the jeep, then
already in a dilapidated condition owing to its
prolonged exposure to the elements, towed to the
premises of the RTC of Malolos, Bulacan. From that
moment on, the vehicle would have been out of her
hands, which was how it should be considering that
the robbery case had already been endorsed by her to
the office of the Provincial Fiscal. Had she effected the
delivery of the vehicle, then her insistence on being
reimbursed, this time only for the towing expenses,
would have been reasonable. But instead, respondent
judge engaged the services of a mechanic, not only to
tow the jeep but also to place the jeep in good running
condition, spending in the process P1,500.00 of her
own money. No other logical inference could be
deduced from such an action other than respondent
judge's desire to use and enjoy the jeep for her own
benefit and convenience. Quite obviously, respondent
judge exhibited manifest intent to gain.
The act of respondent judge is not unlike the
prohibited acquisition by purchase described in Article
1491 of the New Civil code and is in fact, even worse.
In Article 1491 paragraphs 4 and 5, public officers and
employees, justices, judges, lawyers and similar
persons charged with the administration of justice are
prohibited from acquiring by purchase, property the
administration of which has been entrusted to them or
any other property which is the object of litigation.
Here, respondent judge did not even offer to purchase
the jeep from the owner but by the mere fact of having
whimsically spent for its repairs, automatically
appropriated the jeep for her own use and benefit.
Assuming, arguendo, that respondent judge was
indeed acting in good faith, i.e., she was acting upon
the "advise" of the Executive Judge of Malolos and the
Provincial Fiscal, still the fact that she and her brother
regularly used the subject vehicle as if it were their
own destroys her pretensions of good intentions.
Furthermore, respondent judge had absolutely no right
and/or authority to change the color of the jeep from
black and white to red. She knew very well that the
jeep was vital evidence in a robbery case since in fact,
she was even the one who conducted the preliminary
examination in said case. Her act of having the jeep
repainted to a different color clearly amounted to
tampering with evidence in a criminal case. The fact
that the person who committed the act of tampering is
a member of the judiciary makes the act even more
deplorable, and sad to say, leaves a bitter taste.
In addition to the foregoing irregularities, the
investigating Judge also discovered, in the process of
investigating whether the jeep was actually registered
in the name of respondent judge's brother, that the
sticker attached to the jeep appears to be falsified
inasmuch as the control numbers in the sticker remain
unissued and are in fact, still in the possession of the
Land Transportation Office. Whether the sticker was
already attached to the jeep when it was used in the
robbery or whether the same was attached by
respondent judge in the course of her use of the jeep,
does not appear on record. Nevertheless, the mere
fact of suspicion tips the scale against herein
respondent judge who, as a member of the judiciary,
should be beyond reproach at all times.
There is indeed no doubt that respondent judge took
advantages of the powers vested in her office in
committing the facts complained of herein. For, had
she not been the judge who conducted the preliminary
examination in the robbery case, she would not have
acquired jurisdiction over the subject vehicle and
consequently, she could not have taken possession of
the said vehicle and used the same for her personal
benefit.
Undoubtedly, respondent judge committed gross
misconduct in her office. Misconduct is "a
transgression of some established and definite rule of
action, more particularly, unlawful behavior or gross
negligence by the public officer" (Amasco v. Margo, 73
SCRA 107 [1976]). It is this kind of gross and flaunting
misconduct on the part of those who are charged with
the responsibility of administering the law and
rendering justice that so quickly and surely corrodes
the respect for law and the courts without which the
government cannot continue and that tears apart the
very bonds of our polity (Ompoc vs. Judge Torres,
A.M. No. MTJ-86-11, 17 Sept. 1989 En Banc, Per
Curiam).
Respondent judge utterly failed to conduct herself in
the manner prescribed by Cannon 2 of the code of
Judicial Conduct which is to "avoid impropriety and the
appearance of impropriety in all activities." The case at
bar presents an occasion to again remind the
members of the Judiciary to so conduct themselves as
to be beyond reproach and suspicion, and be free
from any appearance of impropriety in their personal
behavior not only in the discharge of their official
duties but also in their private capacities (National
Intelligence and Security Authority vs. Tablang, 199
SCRA 766 [1991]). For, as we have often stated,
"(a)lthough every office in the government service is a
public trust, no position exacts as greater demand on
moral righteousness and uprightness of an individual
than a seat in the Judiciary. A magistrate of the law
must comport himself at all times in such manner that
his conduct, official or otherwise, can bear the most
searching scrutiny of the public that looks up to him as
the epitome of integrity and justice" (Dia-Annuevo vs.
Bercasio, 68 SCRA 81, 89 [1975]).
In the case at bar, respondent judge has shown
herself unfit to be a member of the Judiciary and must
therefore be removed from office.
WHEREFORE, the Court finds respondent judge
Virginia Pagorogon guilty of gross misconduct in A. M.
No. 92-637 and she is hereby ordered DISMISSED
from the service with forfeiture of all benefits except
accrued leave credits with prejudice to reinstatement
or reappointment to any public office including
government-owned or controlled corporations.
The complaint against respondent Judge in A.M. No.
MTJ 89-270 is DISMISSED for lack of merit.
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Griño-
Aquino, Regalado, Davide, Jr., Romero, Nocon, Melo
and Quiason, JJ., concur.
Bellosillo, J., took no part.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
A.M. Nos. 1302, 1391 and 1543 April 26,
1991
PAULINO VALENCIA, complainant,
vs.
ATTY. ARSENIO FER CABANTING, respondent.
CONSTANCIA L. VALENCIA, complainant,
vs.
ATTY. DIONISIO C. ANTINIW, ATTY. EDUARDO U.
JOVELLANOS and ATTY. ARSENIO FER.
CABANTING, respondents.
LYDIA BERNAL, complainant,
vs.
ATTY. DIONISIO C. ANTINIW, respondent.
PER CURIAM:
These consolidated administrative cases seek to
disbar respondents Dionisio Antiniw, Arsenio Fer.
Cabanting and Eduardo Jovellanos (the last named,
now an MCTC Judge) for grave malpractice and
misconduct in the exercise of their legal profession
committed in the following manner:
1. Administrative Cases No. 1302 and 1391.
In 1933, complainant Paulino Valencia (Paulino in
short) and his wife Romana allegedly bought a parcel
of land, where they built their residential house, from a
certain Serapia Raymundo, an heir of Pedro
Raymundo the original owner. However, they failed to
register the sale or secure a transfer certificate of title
in their names.
Sometime in December, 1968, a conference was held
in the house of Atty. Eduardo Jovellanos to settle the
land dispute between Serapia Raymundo (Serapia in
short) another heir of Pedro Raymundo, and the
Valencia spouses since both were relatives and
distant kin of Atty. Jovellanos. Serapia was willing to
relinquish ownership if the Valencias could show
documents evidencing ownership. Paulino exhibited a
deed of sale written in the Ilocano dialect. However,
Serapia claimed that the deed covered a different
property. Paulino and Serapia were not able to settle
their differences. (Report of Investigating Judge
Catalino Castaneda, Jr., pp. 21-22).
On December 15, 1969 Serapia, assisted by Atty.
Arsenio Fer. Cabanting, filed a complaint against
Paulino for the recovery of possession with damages.
The case was docketed as Civil Case No. V-2170,
entitled "Serapia Raymundo, Plaintiff, versus Paulino
Valencia, Defendant." (Report, p. 11).
Summoned to plead in Civil Case No. V-2170, the
Valencias engaged the services of Atty. Dionisio
Antiniw. Atty. Antiniw advised them to present a
notarized deed of sale in lieu of the private document
written in Ilocano. For this purpose, Paulino gave Atty.
Antiniw an amount of P200.00 to pay the person who
would falsify the signature of the alleged vendor
(Complaint, p. 2; Rollo, p. 7). A "Compraventa
Definitiva" (Exh. B) was executed purporting to be a
sale of the questioned lot.
On January 22, 1973, the Court of First Instance of
Pangasinan, Branch V, rendered a decision in favor of
plaintiff, Serapia Raymundo. The lower court
expressed the belief that the said document is not
authentic. (Report, p. 14)
Paulino, thereafter, filed a Petition for Certiorari, under
Rule 65, with Preliminary Injunction before the Court
of Appeals alleging that the trial court failed to provide
a workable solution concerning his house. While the
petition was pending, the trial court, on March 9, 1973,
issued an order of execution stating that "the decision
in this case has already become final and executory"
(Exhibits 3 and 3-A). On March 14, 1973, a writ of
execution was issued.
On March 20, 1973, Serapia sold 40 square meters of
the litigated lot to Atty. Jovellanos and the remaining
portion she sold to her counsel, Atty. Arsenio Fer.
Cabanting, on April 25, 1973. (Annex "A" of
Administrative Case No. 1302).
On March 4, 1974, Paulino filed a disbarment
proceeding (docketed as Administrative Case No.
1302) against Atty. Cabanting on the ground that said
counsel allegedly violated Article 1491 of the New Civil
Code as well as Article II of the Canons of
Professional Ethics, prohibiting the purchase of
property under litigation by a counsel.
On March 21, 1974 the appellate court dismissed the
petition of Paulino.
On October 14, 1974, Constancia Valencia, daughter
of Paulino, filed a disbarment proceeding (docketed as
Administrative Case No. 1391) against Atty. Dionisio
Antiniw for his participation in the forgery of
"Compraventa Definitiva" and its subsequent
introduction as evidence for his client; and also,
against Attys. Eduardo Jovellanos and Arsenio
Cabanting for purchasing a litigated property allegedly
in violation of Article 1491 of the New Civil Code; and
against the three lawyers, for allegedly rigging Civil
Case No. V-2170 against her parents. On August 17,
1975, Constancia Valencia filed additional charges
against Atty. Antiniw and Atty. Jovellanos as follows:
1. AGAINST ATTY. DIONISIO ANTINIW:
In the year 1973 Atty. Dionisio Antiniw
fraudulently and in confabulation with one
Lydia Bernal had a deed of sale, fabricated,
executed and ratified before him as Notary
Public by one Santiago Bernal in favor of Lydia
Bernal when as a matter of fact said Santiago
Bernal had died already about eight years
before in the year 1965.
2. AGAINST ATTY. EDUARDO
JOVELLANOS:
In the year 1954 Atty. Eduardo Jovellanos,
fraudulently and in bad faith, in confabulation
with Rosa de los Santos as vendee had, as
 Notary Public, executed and ratified before
him, two (2) deeds of sale in favor of said Rosa
de los Santos when as a matter of fact the said
deeds were not in fact executed by the
supposed vendor Rufino Rincoraya and so
Rufino Rincoraya had filed a Civil Case in
Court to annul and declare void the said sales
(p. 7, Report)
2. Administrative Case No. 1543.
A deed of donation propter nuptias involving the
transfer of a piece of land by the grandparents of
Lydia Bernal (complainant,) in favor of her parents,
was lost during the last world war. For this reason, her
grandmother (the living donor) executed a deed of
confirmation of the donation propter nuptias with
renunciation of her rights over the property.
(Complaint, p. 1). Notwithstanding the deed, her
grandmother still offered to sell the same property in
favor of the complainant, ostensibly to strengthen the
deed of donation (to prevent others from claim-ing the
property).
On consultation, Atty., Antiniw advised them to
execute a deed of sale. Atty. Antiniw allegedly
prepared and notarized the deed of sale in the name
of her grandfather (deceased at the time of signing)
with her grandmother's approval.
Felicidad Bernal-Duzon, her aunt who had a claim
over the property filed a complaint against her (Lydia
Bernal) and her counsel, Atty. Antiniw for falsification
of a public document. (Complaint, pp. 1-2) The fiscal
exonerated the counsel for lack of evidence, while a
case was filed in court against Lydia Bernal.
On October 3, 1975, Lydia Bernal filed a disbarment
proceeding (docketed as Administrative Case
No.1543) against Atty. Antiniw for illegal acts and bad
advice.
Pursuant to the resolution of the First Division of this
Court dated December 9, 1974, the resolution of the
Second Division dated March 3, 1975 and the two
resolutions of the Second Division both dated
December 3, 1975, Administrative Cases Nos. 1302,
1391 and 1543 were referred to the Office of the
Solicitor General for investigation, report and
recommendation.
Upon formal request of Constancia L. Valencia and
Lydia Bernal dated March 3, 1976, all of these cases
were ordered consolidated by Solicitor General
Estelito P. Mendoza per his handwritten directive of
March 9, 1976.
On April 12, 1988, We referred the investigation of
these cases to the Integrated Bar of the
Philippines.1âwphi1 When Atty. Jovellanos was
appointed as Municipal Circuit Trial Court Judge of
Alcala-Bautista, Pangasinan, We referred the
investigation of these cases to Acting Presiding Judge
Cesar Mindaro, Regional Trial Court, Branch 50,
Villasis, Pangasinan, for further investigation.
In view of the seriousness of the charge against the
respondents and the alleged threats against the
person of complainant Constancia L. Valencia, We
directed the transfer of investigation to the Regional
Trial Court of Manila.
The three administrative cases were raffled to Branch
XVII of the Regional Trial Court of Manila, under the
sala of Judge Catalino Castaneda, Jr.
After investigation, Judge Catalino Castañeda, Jr.,
recommended the dismissal of cases against Atty.
Jovellanos and Atty. Arsenio Fer. Cabanting; dismissal
of Administrative Case No. 1543 and the additional
charges in Administrative Case No. 1391 against
Antiniw and Judge Jovellanos; however, he
recommended the suspension of Atty. Antiniw from
the practice of law for six months finding him guilty of
malpractice in falsifying the "Compraventa Definitiva."
The simplified issues of these consolidated cases are:
I. Whether or not Atty. Cabanting purchased
the subject property in violation of Art. 1491 of
the New Civil Code.
II. Whether or not Attys. Antiniw and
Jovellanos are guilty of malpractice in falsifying
notarial documents.
III. Whether or not the three lawyers connived
in rigging Civil Case No. V-2170.
I
Under Article 1491 of the New Civil Code:
The following persons cannot acquire by
purchase, even at a public of judicial auction,
either in person or through the mediation of
another:
xxx xxx xxx
(5) . . . this prohibition includes the act of
acquiring by assignment and shall apply to
lawyers, with respect to the property and rights
which may be the object of any litigation in
which they make take part by virtue of their
profession.
Public policy prohibits the transactions in view of the
fiduciary relationship involved. It is intended to curtail
any undue influence of the lawyer upon his client.
Greed may get the better of the sentiments of loyalty
and disinterestedness. Any violation of this prohibition
would constitute malpractice (In re: Attorney Melchor
Ruste, 40 O.G. p. 78) and is a ground for suspension.
(Beltran vs. Fernandez, 70 Phil. 248).
Art. 1491, prohibiting the sale to the counsel
concerned, applies only while the litigation is pending.
(Director of Lands vs. Adaba, 88 SCRA 513;
Hernandez vs. Villanueva, 40 Phil. 775).
In the case at bar, while it is true that Atty. Arsenio
Fer. Cabanting purchased the lot after finality of
judgment, there was still a pending certiorari
proceeding. A thing is said to be in litigation not only if
there is some contest or litigation over it in court, but
also from the moment that it becomes subject to the
judicial action of the judge. (Gan Tingco vs. Pabinguit,
35 Phil. 81). Logic indicates, in certiorari proceedings,
that the appellate court may either grant or dismiss the
petition. Hence, it is not safe to conclude, for purposes
under Art. 1491 that the litigation has terminated when
the judgment of the trial court become final while a
certiorari connected therewith is still in progress. Thus,
purchase of the property by Atty. Cabanting in this
case constitutes malpractice in violation of Art. 1491
and the Canons of Professional Ethics. Clearly, this
malpractice is a ground for suspension.
The sale in favor of Atty. Jovellanos does not
constitute malpractice. There was no attorney-client
relationship between Serapia and Atty. Jovellanos,
considering that the latter did not take part as counsel
in Civil Case No. V-2170. The transaction is not
covered by Art. 1491 nor by the Canons adverted to.
II
It is asserted by Paulino that Atty. Antiniw asked for
and received the sum of P200.00 in consideration of
his executing the document "Compraventa Definitiva"
which would show that Paulino bought the property.
This charge, Atty. Antiniw simply denied. It is settled
jurisprudence that affirmative testimony is given
greater weight than negative testimony (Bayasen vs.
CA, L-25785, Feb. 26, 1981; Vda. de Ramos vs. CA,
et al., L40804, Jan. 31, 1978). When an individual's
integrity is challenged by evidence, it is not enough
that he deny the charges against him; he must meet
the issue and overcome the evidence for the relator
and show proofs that he still maintains the highest
degree of morality and integrity which at all time is
expected of him. (De los Reyes vs. Aznar, Adm. Case
No. 1334, Nov. 28, 1989).
Although Paulino was a common farmer who finished
only Grade IV, his testimony, even if not corroborated
by another witness, deserves credence and can be
relied upon. His declaration dwelt on a subject which
was so delicate and confidential that it would be
difficult to believe the he fabricated his evidence.
There is a clear preponderant evidence that Atty.
Antiniw committed falsification of a deed of sale, and
its subsequent introduction in court prejudices his
prime duty in the administration of justice as an officer
of the court.
A lawyer owes entire devotion to the interest of his
client (Santos vs. Dichoso, 84 SCRA 622), but not at
the expense of truth. (Cosmos Foundry Shopworkers
Union vs. La Bu, 63 SCRA 313). The first duty of a
lawyer is not to his client but to the administration of
justice. (Lubiano vs. Gordalla, 115 SCRA 459) To that
end, his client's success is wholly subordinate. His
conduct ought to and must always be scrupulously
observant of law and ethics. While a lawyer must
advocate his client's cause in utmost earnestness and
with the maximum skill he can marshal, he is not at
liberty to resort to illegal means for his client's interest.
It is the duty of an attorney to employ, for the purpose
of maintaining the causes confided to him, such
means as are consistent with truth and honor.
(Pangan vs. Ramos, 93 SCRA 87).
Membership in the Bar is a privilege burdened with
conditions. By far, the most important of them is
mindfulness that a lawyer is an officer of the court. (In
re: Ivan T. Publico, 102 SCRA 722). This Court may
suspend or disbar a lawyer whose acts show his
unfitness to continue as a member of the Bar. (Halili
vs. CIR, 136 SCRA 112). Disbarment, therefore, is not
meant as a punishment depriving him of a source of
livelihood but is rather intended to protect the
administration of justice by requiring that those who
exercise this function should be competent, honorable
and reliable in order that courts and the public may
rightly repose confidence in them. (Noriega vs. Sison,
125 SCRA 293). Atty. Antiniw failed to live up to the
high standards of the law profession.
The other charges of malpractice against Atty. Antiniw
and Atty. Jovellanos should be dismissed for lack of
evidence.
During the proceedings in Administrative Case No.
1543, Lydia Bernal testified in full on direct
examination, but she never submitted herself for
cross-examination. Several subpoenas for cross-
examination were unheeded. She eventually
requested the withdrawal of her complaint.
Procedural due process demands that respondent
lawyer should be given an opportunity to cross-
examine the witnesses against him.1âwphi1 He
enjoys the legal presumption that he is innocent of the
charges against him until the contrary is proved.
(Santos vs. Dichoso, 84 SCRA 622). The case must
be established by clear, convincing and satisfactory
proof. (Camus vs. Diaz, Adm. Case No. 1616,
February 9, 1989), Since Atty. Antiniw was not
accorded this procedural due process, it is but proper
that the direct testimony of Lydia Bernal be stricken
out.
In view also of the affidavit of desistance executed by
the complainant, Administrative Case No. 1543 should
be dismissed. Although the filing of an affidavit of
desistance by complainant for lack of interest does not
ipso facto result in the termination of a case for
suspension or disbarment of an erring lawyer (Munar
vs. Flores, 122 SCRA 448), We are constrained in the
case at bar, to dismiss the same because there was
no evidence to substantiate the charges.
The additional charge against Atty. Antiniw in
Administrative Case No. 1391 is predicated on the
information furnished by Lydia Bernal. It was not
based on the personal knowledge of Constancia L.
Valencia: hence, hearsay. "Any evidence, whether oral
or documentary, is hearsay if its probative value is not
based on the personal knowledge of the witness but
on the knowledge of some other person not on the
witness stand." (Regalado, Remedial Law
Compendium, 6th ed., vol. 2, 1989, p. 486). Being
hearsay, the evidence presented is inadmissible.
The additional charge filed by Constancia L. Valencia
against Atty. Jovellanos in Administrative Case No.
1391 was not proved at all. Complainant failed to
prove her additional charges.
III
There is no evidence on record that the three lawyers
involved in these administrative cases conspired in
executing the falsified "Compraventa Definitiva" and
rigged the Civil Case No. V-2170.
Atty. Jovellanos is a distant kin of the Raymundos and
Valencias. In fact, he and the Valencias are neighbors
and only two meters separate their houses. It would
not be believable that Atty. Jovellanos, a practicing
lawyer, would hold a meeting with the heirs of Pedro
Raymundo in his house with the intention of inducing
them to sue the Valencias. Atty. Jovellanos even tried
to settle the differences between the parties in a
meeting held in his house. He appeared in Civil Case
No. V-2170 as an involuntary witness to attest to the
holding of the conference.
Besides, the camaraderie among lawyers is not proof
of conspiracy, but a sign of brotherhood among them.
One of the fourfold duties of a lawyer is his duty to the
Bar. A lawyer should treat the opposing counsel, and
his brethren in the law profession, with courtesy,
dignity and civility. They may "do as adversaries do in
law: strive mightily but (they) eat and drink as friends."
This friendship does not connote conspiracy.
WHEREFORE, judgment is hereby rendered
declaring: 1. Dionisio Antiniw DISBARRED from the
practice of law, and his name is ordered stricken off
from the roll of attorneys; 2. Arsenio Fer. Cabanting
SUSPENDED from the practice of law for six months
from finality of this judgment; and 3. Administrative
Case No. 1391 against Attorney Eduardo Jovellanos
and additional charges therein, and Administrative
Case No. 1543 DISMISSED.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez,
Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Griño-Aquino, Medialdea, Regalado and
Davide, Jr., JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-68838 March 11, 1991
FLORENCIO FABILLO and JOSEFA TANA
(substituted by their heirs Gregorio Fabillo,
Roman Fabillo, Cristeta F. Maglinte and Antonio
Fabillo), petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE
COURT (Third Civil Case Division) and ALFREDO
MURILLO (substituted by his heirs Fiamita M.
Murillo, Flor M. Agcaoili and Charito M. Babol),
respondents.
Francisco A. Tan for petitioners.
Von Kaiser P. Soro for private respondent.
FERNAN, C.J.:
In the instant petition for review on certiorari,
petitioners seek the reversal of the appellate court's
decision interpreting in favor of lawyer Alfredo M.
Murillo the contract of services entered into between
him and his clients, spouses Florencio Fabillo and
Josefa Taña.
In her last will and testament dated August 16, 1957,
Justina Fabillo bequeathed to her brother, Florencio, a
house and lot in San Salvador Street, Palo, Leyte
which was covered by tax declaration No. 19335, and
to her husband, Gregorio D. Brioso, a piece of land in
Pugahanay, Palo, Leyte. 1 After Justina's death,
Florencio filed a petition for the probate of said will. On
June 2, 1962, the probate court approved the project
of partition "with the reservation that the ownership of
the land declared under Tax Declaration No. 19335
and the house erected thereon be litigated and
determined in a separate proceedings." 2
Two years later, Florencio sought the assistance of
lawyer Alfredo M. Murillo in recovering the San
Salvador property. Acquiescing to render his services,
Murillo wrote Florencio the following handwritten letter:
Dear Mr. Fabillo:
I have instructed my stenographer to prepare the
complaint and file the same on Wednesday if you are
ready with the filing fee and sheriffs fee of not less
than P86.00 including transportation expenses.
Considering that Atty. Montilla lost this case and the
present action is a revival of a lost case, I trust that
you will gladly give me 40% of the money value of the
house and lot as a contigent (sic) fee in case of a
success. When I come back I shall prepare the
contract of services for your signature.
Thank you.
Cordially yours,
(Sgd.) Alfredo M. Murillo
Aug. 9, 1964 3
Thirteen days later, Florencio and Murillo entered into
the following contract:
CONTRACT OF SERVICES
KNOW ALL MEN BY THESE PRESENTS:
That I, FLORENCIO FABILLO, married
to JOSEFA TANA, of legal age, Filipino
citizen and with residence and postal
address at Palo, Leyte, was the
Petitioner in Special Proceedings No.
843, entitled "In the Matter of the
Testate Estate of the late Justina
Fabillo, Florencio Fabillo, Petitioner" of
the Court of First Instance of Leyte;
That by reason of the Order of the
Court of First Instance of Leyte dated
June 2, 1962, my claim for the house
and lot mentioned in paragraph one (1)
of the last will and testament of the late
Justina Fabillo, was denied altho the
will was probated and allowed by the
Court;
That acting upon the counsel of Atty.
Alfredo M. Murillo, I have cause(d) the
preparation and filing of another case,
entitled "Florencio Fabillo vs. Gregorio
D. Brioso," which was docketed as Civil
Case No. 3532 of the Court of First
Instance of Leyte;
That I have retained and engaged the
services of Atty. ALFREDO M.
MURILLO, married and of legal age,
with residence and postal address at
Santa Fe, Leyte to be my lawyer not
only in Social Proceedings No. 843 but
also in Civil Case No. 3532 under the
following terms and conditions;
That he will represent me and my heirs,
in case of my demise in the two cases
until their successful conclusion or until
the case is settled to my entire
satisfaction;
That for and in consideration for his
legal services, in the two cases, I
hereby promise and bind myself to pay
Atty. ALFREDO M. MURILLO, in case
of success in any or both cases the
sum equivalent to FORTY PER
CENTUM (40%) of whatever benefit I
may derive from such cases to be
implemented as follows:
If the house and lot in question is finally
awarded to me or a part of the same by
virtue of an amicable settlement, and
the same is sold, Atty. Murillo, is hereby
constituted as Atty. in-fact to sell and
convey the said house and lot and he
shall be given as his compensation for
his services as counsel and as
attorney-in-fact the sum equivalent to
forty per centum of the purchase price
of the house and lot;
 If the same house and lot is just
mortgage(d) to any person, Atty. Murillo
shall be given the sum equivalent to
forty per centum (40%) of the proceeds
of the mortgage;
If the house and lot is leased to any
person, Atty. Murillo shall be entitled to
receive an amount equivalent to 40%
(FORTY PER CENTUM) of the rentals
of the house and lot, or a part thereof;
If the house and lot or a portion thereof
is just occupied by the undersigned or
his heirs, Atty. Murillo shall have the
option of either occupying or leasing to
any interested party FORTY PER
CENT of the house and lot.
Atty. Alfredo M. Murillo shall also be
given as part of his compensation for
legal services in the two cases FORTY
PER CENTUM of whatever damages,
which the undersigned can collect in
either or both cases, provided, that in
case I am awarded attorney's fees, the
full amount of attorney's fees shall be
given to the said Atty. ALFREDO M.
MURILLO;
That in the event the house and lot is
(sic) not sold and the same is
maintained by the undersigned or his
heirs, the costs of repairs,
maintenance, taxes and insurance
premiums shall be for the account of
myself or my heirs and Attorney Murillo,
in proportion to our rights and interest
thereunder that is forty per cent shall be
for the account of Atty. Murillo and sixty
per cent shall be for my account or my
heirs.
IN WITNESS HEREOF, I hereby set
unto my signature below this 22nd day
of August 1964 at Tacloban City.
(Sgd.) FLORENCIO FABILLO
(Sgd.) JOSEFA T. FABILLO
WITH MY CONFORMITY:
(Sgd.) ALFREDO M. MURILLO
(Sgd.) ROMAN T. (Sgd.) CRISTETA F.
FABILLO MAGLINTE
(Witness) (Witness) 4
Pursuant to said contract, Murillo filed for Florencio
Fabillo Civil Case No. 3532 against Gregorio D. Brioso
to recover the San Salvador property. The case was
terminated on October 29, 1964 when the court, upon
the parties' joint motion in the nature of a compromise
agreement, declared Florencio Fabillo as the lawful
owner not only of the San Salvador property but also
the Pugahanay parcel of land.
Consequently, Murillo proceeded to implement the
contract of services between him and Florencio Fabillo
by taking possession and exercising rights of
ownership over 40% of said properties. He installed a
tenant in the Pugahanay property.
Sometime in 1966, Florencio Fabillo claimed exclusive
right over the two properties and refused to give
Murillo his share of their produce. 5 Inasmuch as his
demands for his share of the produce of the
Pugahanay property were unheeded, Murillo filed on
March 23, 1970 in the then Court of First Instance of
Leyte a complaint captioned "ownership of a parcel of
land, damages and appointment of a receiver" against
Florencio Fabillo, his wife Josefa Taña, and their
children Ramon (sic) Fabillo and Cristeta F. Maglinte.
6
Murillo prayed that he be declared the lawful owner of
forty per cent of the two properties; that defendants be
directed to pay him jointly and severally P900.00 per
annum from 1966 until he would be given his share of
the produce of the land plus P5,000 as consequential
damages and P1,000 as attorney's fees, and that
defendants be ordered to pay moral and exemplary
damages in such amounts as the court might deem
just and reasonable.
In their answer, the defendants stated that the consent
to the contract of services of the Fabillo spouses was
vitiated by old age and ailment; that Murillo misled
them into believing that Special Proceedings No. 843
on the probate of Justina's will was already terminated
when actually it was still pending resolution; and that
the contingent fee of 40% of the value of the San
Salvador property was excessive, unfair and
unconscionable considering the nature of the case,
the length of time spent for it, the efforts exerted by
Murillo, and his professional standing.
They prayed that the contract of services be declared
null and void; that Murillo's fee be fixed at 10% of the
assessed value of P7,780 of the San Salvador
property; that Murillo be ordered to account for the
P1,000 rental of the San Salvador property which he
withdrew from the court and for the produce of the
Pugahanay property from 1965 to 1966; that Murillo
be ordered to vacate the portion of the San Salvador
property which he had occupied; that the Pugahanay
property which was not the subject of either Special
Proceedings No. 843 or Civil Case No. 3532 be
declared as the exclusive property of Florencio Fabillo,
and that Murillo be ordered to pay moral damages and
the total amount of P1,000 representing expenses of
litigation and attorney's fees.
In its decision of December 2, 1975, 7 the lower court
ruled that there was insufficient evidence to prove that
the Fabillo spouses' consent to the contract was
vitiated. It noted that the contract was witnessed by
two of their children who appeared to be highly
educated. The spouses themselves were old but
literate and physically fit.
In claiming jurisdiction over the case, the lower court
ruled that the complaint being one "to recover real
property from the defendant spouses and their heirs or
to enforce a lien thereon," the case could be decided
independent of the probate proceedings. Ruling that
the contract of services did not violate Article 1491 of
the Civil Code as said contract stipulated a contingent
fee, the court upheld Murillo's claim for "contingent
attorney's fees of 40% of the value of recoverable
properties." However, the court declared Murillo to be
the lawful owner of 40% of both the San Salvador and
Pugahanay properties and the improvements thereon.
It directed the defendants to pay jointly and severally
to Murillo the amount of P1,200 representing 40% of
the net produce of the Pugahanay property from 1967
to 1973; entitled Murillo to 40% of the 1974 and 1975
income of the Pugahanay property which was on
deposit with a bank, and ordered defendants to pay
the costs of the suit.
Both parties filed motions for the reconsideration of
said decision: Fabillo, insofar as the lower court
awarded 40% of the properties to Murillo and the latter
insofar as it granted only P1,200 for the produce of the
properties from 1967 to 1973. On January 29, 1976,
the lower court resolved the motions and modified its
decision thus:
ACCORDINGLY, the judgment heretofore
rendered is modified to read as follows:
(a) Declaring the plaintiff as entitled to and the
true and lawful owner of forty percent (40%) of
the parcels of land and improvements thereon
covered by Tax Declaration Nos. 19335 and
6229 described in Paragraph 5 of the
complaint;
(b) Directing all the defendants to pay jointly
and severally to the plaintiff the sum of Two
Thousand Four Hundred Fifty Pesos
(P2,450.00) representing 40% of the net
produce of the Pugahanay property from 1967
to 1973;
(c) Declaring the plaintiff entitled to 40% of the
1974 and 1975 income of said riceland now on
deposit with the Prudential Bank, Tacloban
City, deposited by Mr. Pedro Elona, designated
receiver of the property;
(d) Ordering the defendants to pay the plaintiff
the sum of Three Hundred Pesos (P 300.00)
as attorney's fees; and
(e) Ordering the defendants to pay the costs of
this suit.
SO ORDERED.
In view of the death of both Florencio and Justina
Fabillo during the pendency of the case in the lower
court, their children, who substituted them as parties
to the case, appealed the decision of the lower court
to the then Intermediate Appellate Court. On March
27, 1984, said appellate court affirmed in toto the
decision of the lower court. 8
The instant petition for review on certiorari which was
interposed by the Fabillo children, was filed shortly
after Murillo himself died. His heirs likewise substituted
him in this case. The Fabillos herein question the
appellate court's interpretation of the contract of
services and contend that it is in violation of Article
1491 of the Civil Code.
The contract of services did not violate said provision
of law. Article 1491 of the Civil Code, specifically
paragraph 5 thereof, prohibits lawyers from acquiring
by purchase even at a public or judicial auction,
properties and rights which are the objects of litigation
in which they may take part by virtue of their
profession. The said prohibition, however, applies only
if the sale or assignment of the property takes place
during the pendency of the litigation involving the
client's property. 9
Hence, a contract between a lawyer and his client
stipulating a contingent fee is not covered by said
prohibition under Article 1491 (5) of the Civil Code
because the payment of said fee is not made during
the pendency of the litigation but only after judgment
has been rendered in the case handled by the lawyer.
In fact, under the 1988 Code of Professional
Responsibility, a lawyer may have a lien over funds
and property of his client and may apply so much
thereof as may be necessary to satisfy his lawful fees
and disbursements. 10
As long as the lawyer does not exert undue influence
on his client, that no fraud is committed or imposition
applied, or that the compensation is clearly not
excessive as to amount to extortion, a contract for
contingent fee is valid and enforceable. 11 Moreover,
contingent fees were impliedly sanctioned by No. 13 of
the Canons of Professional Ethics which governed
lawyer-client relationships when the contract of
services was entered into between the Fabillo
spouses and Murillo. 12
However, we disagree with the courts below that the
contingent fee stipulated between the Fabillo spouses
and Murillo is forty percent of the properties subject of
the litigation for which Murillo appeared for the
Fabillos. A careful scrutiny of the contract shows that
the parties intended forty percent of the value of the
properties as Murillo's contingent fee. This is borne out
by the stipulation that "in case of success of any or
both cases," Murillo shall be paid "the sum equivalent
to forty per centum of whatever benefit" Fabillo would
derive from favorable judgments. The same stipulation
was earlier embodied by Murillo in his letter of August
9, 1964 aforequoted.
Worth noting are the provisions of the contract which
clearly states that in case the properties are sold,
mortgaged, or leased, Murillo shall be entitled
respectively to 40% of the "purchase price," "proceeds
of the mortgage," or "rentals." The contract is vague,
however, with respect to a situation wherein the
properties are neither sold, mortgaged or leased
because Murillo is allowed "to have the option of
occupying or leasing to any interested party forty per
cent of the house and lot." Had the parties intended
that Murillo should become the lawful owner of 40% of
the properties, it would have been clearly and
unequivocally stipulated in the contract considering
that the Fabillos would part with actual portions of their
properties and cede the same to Murillo.
The ambiguity of said provision, however, should be
resolved against Murillo as it was he himself who
drafted the contract. 13 This is in consonance with the
rule of interpretation that, in construing a contract of
professional services between a lawyer and his client,
such construction as would be more favorable to the
client should be adopted even if it would work
prejudice to the lawyer. 14 Rightly so because of the
inequality in situation between an attorney who knows
the technicalities of the law on the one hand and a
client who usually is ignorant of the vagaries of the law
on the other hand. 15
Considering the nature of the case, the value of the
properties subject matter thereof, the length of time
and effort exerted on it by Murillo, we hold that Murillo
is entitled to the amount of Three Thousand Pesos
(P3,000.00) as reasonable attorney's fees for services
rendered in the case which ended on a compromise
agreement. In so ruling, we uphold "the time-honored
legal maxim that a lawyer shall at all times uphold the
integrity and dignity of the legal profession so that his
basic ideal becomes one of rendering service and
securing justice, not money-making. For the worst
scenario that can ever happen to a client is to lose the
litigated property to his lawyer in whom all trust and
confidence were bestowed at the very inception of the
legal controversy." 16
WHEREFORE, the decision of the then Intermediate
Appellate Court is hereby reversed and set aside and
a new one entered (a) ordering the petitioners to pay
Atty. Alfredo M. Murillo or his heirs the amount of
P3,000.00 as his contingent fee with legal interest
from October 29, 1964 when Civil Case No. 3532 was
terminated until the amount is fully paid less any and
all amounts which Murillo might have received out of
the produce or rentals of the Pugahanay and San
Salvador properties, and (b) ordering the receiver of
said properties to render a complete report and
accounting of his receivership to the court below within
fifteen (15) days from the finality of this decision.
Costs against the private respondent.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ.,
concur.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
A.M. No. 2430 August 30, 1990
MAURO P. MANANQUIL, complainant,
vs.
ATTY. CRISOSTOMO C. VILLEGAS, respondent.
Geminiano M. Eleccion for complainant.
RESOLUTION
CORTES, J.:
In a verified complaint for disbarment dated July 5,
1982, Mauro P. Mananquil charged respondent Atty.
Crisostomo C. Villegas with gross misconduct or
malpractice committed while acting as counsel of
record of one Felix Leong in the latter's capacity as
administrator of the Testate Estate of the late
Felomina Zerna in Special Proceedings No. 460
before then Court of First Instance of Negros
Occidental. The complainant was appointed special
administrator after Felix Leong died.
In compliance with a resolution of this Court,
respondent filed his comment to the complaint on
January 20, 1983. After complainant filed his reply, the
Court resolved to refer the case to the Solicitor
General for investigation, report and recommendation.
In a hearing conducted on May 15, 1985 by the
investigating officer assigned to the case, counsel for
the complainant proposed that the case be considered
on the basis of position papers and memoranda to be
submitted by the parties. Respondent agreed. Thus,
the investigating officer required the parties to submit
their respective position papers and memoranda, with
the understanding that with or without the memoranda,
the case will be deemed submitted for resolution after
the expiration of 30 days. In compliance, both parties
submitted their respective position papers; but no
memorandum was filed by either party. Thereafter, the
case was deemed submitted.
In the pleadings submitted before the Court and the
Office of the Solicitor General, complainant alleges
that over a period of 20 years, respondent allowed
lease contracts to be executed between his client Felix
Leong and a partnership HIJOS DE JOSE VILLEGAS,
of which respondent is one of the partners, covering
several parcels of land of the estate, i.e. Lots Nos.
1124, 1228, 2221, 2402, 3939, 3942 and 3957 of the
Tanjay Cadastre, under iniquitous terms and
conditions. Moreover, complainant charges that these
contracts were made without the approval of the
probate court and in violation of Articles 1491 and
1646 of the new Civil Code.
On the basis of the pleadings submitted by the parties,
and other pertinent records of the investigation, the
Solicitor General submitted his report dated February
21, 1990, finding that respondent committed a breach
in the performance of his duties as counsel of
administrator Felix Leong when he allowed the
renewal of contracts of lease for properties involved in
the testate proceedings to be undertaken in favor of
HIJOS DE JOSE VILLEGAS without notifying and
securing the approval of the probate court. However,
the Solicitor General opined that there was no
sufficient evidence to warrant a finding that
respondent had allowed the properties to be leased in
favor of his family partnership at a very low rental or in
violation of Articles 1491 and 1646 of the new Civil
Code. Thus, the Solicitor General recommended that
respondent be suspended from the practice of law for
a period of THREE (3) months with a warning that
future misconduct on respondent's part will be more
severely dealt with [Report and Recommendation of
the Solicitor General, pp. 1-10; Rollo, pp. 37-46. Also,
Complaint of the Solicitor General, pp. 1-3; Rollo, pp.
47-49].
As gleaned from the record of the case and the report
and recommendation of the Solicitor General, the
following facts are uncontroverted:
That as early as March 21, 1961,
respondent was retained as counsel of
record for Felix Leong, one of the heirs
of the late Felomina Zerna, who was
appointed as administrator of the
Testate Estate of the Felomina Zerna in
Special No. 460 on May 22, 1961;
That, a lease contract dated August 13,
1963 was executed between Felix
Leong and the "Heirs of Jose Villegas"
represented by respondent's brother-in-
law Marcelo Pastrano involving, among
others, sugar lands of the estate
designated as Lot Nos. 1124, 1228,
2221, 2402, 3939, 3942 and 3957 of
the Tanjay Cadastre;
That Felix Leong was designated
therein as administrator and "owner, by
testamentary disposition, of 5/6 of all
said parcels of land";
That, the lifetime of the lease contract
was FOUR (4) sugar crop years, with a
yearly rental of TEN PERCENT (10%)
of the value of the sugar produced from
the leased parcels of land;
That, on April 20, 1965, the formal
partnership of HIJOS DE JOSE
VILLEGAS was formed amongst the
heirs of Jose Villegas, of which
respondent was a member;
That, on October 18, 1965, another
lease contract was executed between
Felix Leong and the partnership HIJOS
DE JOSE VILLEGAS, containing
basically the same terms and
conditions as the first contract, with
 Marcelo Pastrano signing once again
as representative of the lessee;
That, on March 14, 1968, after the
demise of Marcelo Pastrano,
respondent was appointed manager of
HIJOS DE JOSE VILLEGAS by the
majority of partners;
That, renewals of the lease contract
were executed between Felix Leong
and HIJOS DE JOSE VILLEGAS on
January 13, 1975 and on December 4,
1978, with respondent signing therein
as representative of the lessee; and,
That, in the later part of 1980,
respondent was replaced by his
nephew Geronimo H. Villegas as
manager of the family partnership.
Under the above circumstances, the Court finds
absolutely no merit to complainant's charge, and the
Solicitor General's finding, that respondent committed
acts of misconduct in failing to secure the approval of
the court in Special Proceedings No. 460 to the
various lease contracts executed between Felix Leong
and respondent's family partnership.
Pursuant to Section 3 of Rule 84 of the Revised Rules
of Court, a judicial executor or administrator has the
right to the possession and management of the real as
well as the personal estate of the deceased so long as
it is necessary for the payment of the debts and the
expenses of administration. He may, therefore,
exercise acts of administration without special
authority from the court having jurisdiction of the
estate. For instance, it has long been settled that an
administrator has the power to enter into lease
contracts involving the properties of the estate even
without prior judicial authority and approval [See
Ferraris v. Rodas, 65 Phil. 732 (1938); Jocson de
Hilado v. Nava, 69 Phil. 1 (1939); San Diego, Sr. v.
Hombre, G.R No. L-19265, May 29, 1964, 11 SCRA
165].
Thus, considering that administrator Felix Leong was
not required under the law and prevailing
jurisprudence to seek prior authority from the probate
court in order to validly lease real properties of the
estate, respondent, as counsel of Felix Leong, cannot
be taken to task for failing to notify the probate court of
the various lease contracts involved herein and to
secure its judicial approval thereto.
Nevertheless, contrary to the opinion of the Solicitor
General, the Court finds sufficient evidence to hold
respondent subject to disciplinary sanction for having,
as counsel of record for the administrator in Special
Proceedings No. 460, participated in the execution in
1975 and 1978 of renewals of the lease agreement
involving properties of the estate in favor of the
partnership HIJOS DE JOSE VILLEGAS, of which
respondent is a member and in 1968 was appointed
managing partner.
By virtue of Article 1646 of the new Civil Code, the
persons referred to in Article 1491 are prohibited from
leasing, either in person or through the mediation of
another, the properties or things mentioned in that
article, to wit:
xxx xxx xxx
(1) The guardian, the property of the
person or persons who may be under
his guardianship;
(2) Agents, the property whose
administration or sale may have been
intrusted to them, unless the consent of
the principal have been given;
(3) Executors and administrators, the
property of the estate under
administration
(4) Public officers and employees, the
property of the State or of any
subdivision thereof, or of any
government owned or controlled
corporation, or institution, the
administration of which has been
intrusted to them; this provision shall
apply to judges and government
experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting
attorneys, clerks of superior and inferior
courts, and other officers and
employees connected with the
administration of justice, the property or
rights in litigation or levied upon on
execution before the court within whose
jurisdiction or territory they exercise
their respective functions; this
prohibition includes the act of acquiring
by assignment and shall apply to
lawyers, with respect to the property
and rights which may be the object of
any litigation in which they may take
part by virtue of their profession.
(6) Any others specially disqualified by
law
xxx xxx xxx
[Article 1491 of the new Civil Code;
Emphasis supplied.]
The above disqualification imposed on public and
judicial officers and lawyers is grounded on public
policy considerations which disallow the transactions
entered into by them, whether directly or indirectly, in
view of the fiduciary relationship involved, or the
peculiar control exercised by these individuals over
the properties or rights covered [See Rubias v.
Batiller, G.R. No. L-35702, May 29, 1973, 51 SCRA
120; Maharlika Publishing Corporation v. Tagle, G.R.
No. 65594, July 9, 1986, 142 SCRA 553; Fornilda v.
The Branch 164, RTC Fourth Judicial Region, Pasig,
G.R. No. 72306, October 5, 1988, 166 SCRA 281 and
January 24, 1989, 169 SCRA 351].
Thus, even if the parties designated as lessees in the
assailed lease contracts were the "Heirs of Jose
Villegas" and the partnership HIJOS DE JOSE
VILLEGAS, and respondent signed merely as an
agent of the latter, the Court rules that the lease
contracts are covered by the prohibition against any
acquisition or lease by a lawyer of properties involved
in litigation in which he takes part. To rule otherwise
would be to lend a stamp of judicial approval on an
arrangement which, in effect, circumvents that which
is directly prohibited by law. For, piercing through the
legal fiction of separate juridical personality, the Court
cannot ignore the obvious implication that respondent
as one of the heirs of Jose Villegas and partner, later
manager of, in HIJOS DE JOSE VILLEGAS stands to
benefit from the contractual relationship created
between his client Felix Leong and his family
partnership over properties involved in the ongoing
testate proceedings.
In his defense, respondent claims that he was neither
aware of, nor participated in, the execution of the
original lease contract entered into between his client
and his family partnership, which was then
represented by his brother-in-law Marcelo Pastrano.
And although he admits that he participated in the
execution of subsequent renewals of the lease
contract as managing partner of HIJOS DE JOSE
VILLEGAS, he argues that he acted in good faith
considering that the heirs of Filomena Zerna
consented or acquiesced to the terms and conditions
stipulated in the original lease contract. He further
contends that pursuant to the ruling of the Court in
Tuason v. Tuason [88 Phil. 428 (1951)] the renewal
contracts do not fall within the prohibition of Articles
1491 and 1646 since he signed the same as a mere
agent of the partnership.
Respondent's contentions do not provide sufficient
basis to escape disciplinary action from this Court.
It taxes this Courts imagination that respondent
disclaims any knowledge in the execution of the
original lease contract between his client and his
family partnership represented by his brother-in-law.
Be that as it may, it cannot be denied that respondent
himself had knowledge of and allowed the subsequent
renewals of the lease contract. In fact, he actively
participated in the lease contracts dated January 13,
1975 and December 4, 1978 by signing on behalf of
the lessee HIJOS DE JOSE VILLEGAS.
Moreover, the claim that the heirs of Filomena Zerna
have acquiesced and consented to the assailed lease
contracts does not militate against respondent's
liability under the rules of professional ethics. The
prohibition referred to in Articles 1491 and 1646 of the
new Civil Code, as far as lawyers are concerned, is
intended to curtail any undue influence of the lawyer
upon his client on account of his fiduciary and
confidential association [Sotto v. Samson, G.R. No. L-
16917, July 31, 1962, 5 SCRA 733]. Thus, the law
makes the prohibition absolute and permanent
[Rubias v. Batiller, supra]. And in view of Canon 1 of
the new Code of Professional Responsibility and
Sections 3 & 27 of Rule 138 of the Revised Rules of
Court, whereby lawyers are duty-bound to obey and
uphold the laws of the land, participation in the
execution of the prohibited contracts such as those
referred to in Articles 1491 and 1646 of the new Civil
Code has been held to constitute breach of
professional ethics on the part of the lawyer for which
disciplinary action may be brought against him [See
Bautista v. Gonzalez, Adm. Matter No. 1625, February
12, 1990). Accordingly, the Court must reiterate the
rule that the claim of good faith is no defense to a
lawyer who has failed to adhere faithfully to the legal
disqualifications imposed upon him, designed to
protect the interests of his client [See In re Ruste, 70
Phil. 243 (1940); Also, Severino v. Severino, 44 Phil.
343 (1923)].
Neither is there merit in respondent's reliance on the
case of Tuason v. Tuason [supra.] It cannot be
inferred from the statements made by the Court in that
case that contracts of sale or lease where the vendee
or lessee is a partnership, of which a lawyer is a
member, over a property involved in a litigation in
which he takes part by virtue of his profession, are not
covered by the prohibition under Articles 1491 and
1646.
However, the Court sustains the Solicitor General's
holding that there is no sufficient evidence on record
to warrant a finding that respondent allowed the
properties of the estate of Filomena Zerna involved
herein to be leased to his family partnership at very
low rental payments. At any rate, it is a matter for the
court presiding over Special Proceedings No. 460 to
determine whether or not the agreed rental payments
made by respondent's family partnership is reasonable
compensation for the use and occupancy of the estate
properties.
Considering thus the nature of the acts of misconduct
committed by respondent, and the facts and
circumstances of the case, the Court finds sufficient
grounds to suspend respondent from the practice of
law for a period of three (3) months.
WHEREFORE, finding that respondent Atty.
Crisostomo C. Villegas committed acts of gross
misconduct, the Court Resolved to SUSPEND
respondent from the practice of law for four (4) months
effective from the date of his receipt of this Resolution,
with a warning that future misconduct on respondent's
part will be more severely dealt with. Let copies of this
Resolution be circulated to all courts of the country for
their information and guidance, and spread in the
personal record of Atty. Villegas.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ.,
concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
A.M. No. 1625 February 12, 1990
ANGEL L. BAUTISTA, complainant,
vs.
ATTY. RAMON A. GONZALES, respondent.
RESOLUTION
PER CURIAM:
In a verified complaint filed by Angel L. Bautista on
May 19, 1976, respondent Ramon A. Gonzales was
charged with malpractice, deceit, gross misconduct
and violation of lawyer's oath. Required by this Court
to answer the charges against him, respondent filed
on June 19, 1976 a motion for a bill of particulars
asking this Court to order complainant to amend his
complaint by making his charges more definite. In a
resolution dated June 28, 1976, the Court granted
respondent's motion and required complainant to file
an amended complaint. On July 15, 1976, complainant
submitted an amended complaint for disbarment,
alleging that respondent committed the following acts:
1. Accepting a case wherein he agreed with his
clients, namely, Alfaro Fortunado, Nestor Fortunado
and Editha Fortunado [hereinafter referred to as the
Fortunados] to pay all expenses, including court fees,
for a contingent fee of fifty percent (50%) of the value
of the property in litigation.
2. Acting as counsel for the Fortunados in Civil Case
No. Q-15143, wherein Eusebio Lopez, Jr. is one of the
defendants and, without said case being terminated,
acting as counsel for Eusebio Lopez, Jr. in Civil Case
No. Q-15490;
3. Transferring to himself one-half of the properties of
the Fortunados, which properties are the subject of the
litigation in Civil Case No. Q-15143, while the case
was still pending;
4. Inducing complainant, who was his former client, to
enter into a contract with him on August 30, 1971 for
the development into a residential subdivision of the
land involved in Civil Case No. Q-15143, covered by
TCT No. T-1929, claiming that he acquired fifty
percent (50%) interest thereof as attorney's fees from
the Fortunados, while knowing fully well that the said
property was already sold at a public auction on June
30, 1971, by the Provincial Sheriff of Lanao del Norte
and registered with the Register of Deeds of Iligan
City;
5. Submitting to the Court of First Instance of Quezon
City falsified documents purporting to be true copies of
"Addendum to the Land Development Agreement
dated August 30, 1971" and submitting the same
document to the Fiscal's Office of Quezon City, in
connection with the complaint for estafa filed by
respondent against complainant designated as I.S.
No. 7512936;
6. Committing acts of treachery and disloyalty to
complainant who was his client;
7. Harassing the complainant by filing several
complaints without legal basis before the Court of First
Instance and the Fiscal's Office of Quezon City;
8. Deliberately misleading the Court of First Instance
and the Fiscal's Office by making false assertion of
facts in his pleadings;
9. Filing petitions "cleverly prepared (so) that while he
does not intentionally tell a he, he does not tell the
truth either."
Respondent filed an answer on September 29, 1976
and an amended answer on November 18, 1976,
denying the accusations against him. Complainant
filed a reply to respondent's answer on December 29,
1976 and on March 24, 1977 respondent filed a
rejoinder.
In a resolution dated March 16, 1983, the Court
referred the case to the Office of the Solicitor General
for investigation, report and recommendation. In the
investigation conducted by the Solicitor General,
complainant presented himself as a witness and
submitted Exhibits "A" to "PP", while respondent
appeared both as witness and counsel and submitted
Exhibits "1" to "11". The parties were required to
submit their respective memoranda.
On May 16, 1988 respondent filed a motion to dismiss
the complaint against him, claiming that the long delay
in the resolution of the complaint against him
constitutes a violation of his constitutional right to due
process and speedy disposition of cases. Upon order
of the Court, the Solicitor General filed a comment to
the motion to dismiss on August 8, 1988, explaining
that the delay in the investigation of the case was due
to the numerous requests for postponement of
scheduled hearings filed by both parties and the
motions for extension of time to file their respective
memoranda." [Comment of the Solicitor General, p. 2;
Record, p. 365]. Respondent filed a reply to the
Solicitor General's comment on October 26, 1988. In a
resolution dated January 16, 1989 the Court required
the Solicitor General to submit his report and
recommendation within thirty (30) days from notice.
On April 11, 1989, the Solicitor General submitted his
report with the recommendation that Atty. Ramon A.
Gonzales be suspended for six (6) months. The
Solicitor General found that respondent committed the
following acts of misconduct:
a. transferring to himself one-half of the
properties of his clients during the
pendency of the case where the
properties were involved;
b. concealing from complainant the fact
that the property subject of their land
development agreement had already
been sold at a public auction prior to
the execution of said agreement; and
 c. misleading the court by submitting
alleged true copies of a document
where two signatories who had not
signed the original (or even the xerox
copy) were made to appear as having
fixed their signatures [Report and
Recommendation of the Solicitor
General, pp. 17-18; Rollo, pp. 403-404].
Respondent then filed on April 14, 1989 a motion to
refer the case to the Integrated Bar of the Philippines
(IBP) for investigation and disposition pursuant to Rule
139-B of the Revised Rules of Court. Respondent
manifested that he intends to submit more evidence
before the IBP. Finally, on November 27, 1989,
respondent filed a supplemental motion to refer this
case to the IBP, containing additional arguments to
bolster his contentions in his previous pleadings.
I.
Preliminarily, the Court will dispose of the procedural
issue raised by respondent. It is respondent's
contention that the preliminary investigation conducted
by the Solicitor General was limited to the
determination of whether or not there is sufficient
ground to proceed with the case and that under Rule
139 the Solicitor General still has to file an
administrative complaint against him. Respondent
claims that the case should be referred to the IBP
since Section 20 of Rule 139-B provides that:
This Rule shall take effect on June 1,
1988 and shall supersede the present
Rule 139 entitled DISBARMENT OR
SUSPENSION OF ATTORNEYS. All
cases pending investigation by the
Office of the Solicitor General shall be
transferred to the Integrated Bar of the
Philippines Board of Governors for
investigation and disposition as
provided in this Rule except those
cases where the investigation has been
substantially completed.
The above contention of respondent is untenable. In
the first place, contrary to respondent's claim,
reference to the IBP of complaints against lawyers is
not mandatory upon the Court [Zaldivar v.
Sandiganbayan, G.R. Nos. 79690-707; Zaldivar v.
Gonzales, G.R. No. 80578, October 7, 1988].
Reference of complaints to the IBP is not an exclusive
procedure under the terms of Rule 139-B of the
Revised Rules of Court [Ibid]. Under Sections 13 and
14 of Rule 139-B, the Supreme Court may conduct
disciplinary proceedings without the intervention of the
IBP by referring cases for investigation to the Solicitor
General or to any officer of the Supreme Court or
judge of a lower court. In such a case, the report and
recommendation of the investigating official shall be
reviewed directly by the Supreme Court. The Court
shall base its final action on the case on the report and
recommendation submitted by the investigating official
and the evidence presented by the parties during the
investigation.
Secondly, there is no need to refer the case to the IBP
since at the time of the effectivity of Rule 139-B [June
1, 1988] the investigation conducted by the Office of
the Solicitor General had been substantially
completed. Section 20 of Rule 139-B provides that
only pending cases, the investigation of which has not
been substantially completed by the Office of the
Solicitor General, shall be transferred to the IBP. In
this case the investigation by the Solicitor General was
terminated even before the effectivity of Rule 139-B.
Respondent himself admitted in his motion to dismiss
that the Solicitor General terminated the investigation
on November 26, 1986, the date when respondent
submitted his reply memorandum [Motion to Dismiss,
p. 1; Record, p. 353].
Thirdly, there is no need for further investigation since
the Office of the Solicitor General already made a
thorough and comprehensive investigation of the
case. To refer the case to the IBP, as prayed for by
the respondent, will result not only in duplication of the
proceedings conducted by the Solicitor General but
also to further delay in the disposition of the present
case which has lasted for more than thirteen (13)
years.
Respondent's assertion that he still has some
evidence to present does not warrant the referral of
the case to the IBP. Considering that in the
investigation conducted by the Solicitor General
respondent was given ample opportunity to present
evidence, his failure to adduce additional evidence is
entirely his own fault. There was therefore no denial of
procedural due process. The record shows that
respondent appeared as witness for himself and
presented no less than eleven (11) documents to
support his contentions. He was also allowed to cross-
examine the complainant who appeared as a witness
against him.
II.
The Court will now address the substantive issue of
whether or not respondent committed the acts of
misconduct alleged by complainant Bautista.
After a careful review of the record of the case and the
report and recommendation of the Solicitor General,
the Court finds that respondent committed acts of
misconduct which warrant the exercise by this Court of
its disciplinary power.
The record shows that respondent prepared a
document entitled "Transfer of Rights" which was
signed by the Fortunados on August 31, 1971. The
document assigned to respondent one-half (1/2) of the
properties of the Fortunados covered by TCT No. T-
1929, with an area of 239.650 sq. mm., and TCT No.
T-3041, with an area of 72.907 sq. m., for and in
consideration of his legal services to the latter. At the
time the document was executed, respondent knew
that the abovementioned properties were the subject
of a civil case [Civil Case No. Q-15143] pending
before the Court of First Instance of Quezon City since
he was acting as counsel for the Fortunados in said
case [See Annex "B" of Original Complaint, p. 12;
Rollo, p. 16]. In executing the document transferring
one-half (1/2) of the subject properties to himself,
respondent violated the law expressly prohibiting a
lawyer from acquiring his client's property or interest
involved in any litigation in which he may take part by
virtue of his profession [Article 1491, New Civil Code].
This Court has held that the purchase by a lawyer of
his client's property or interest in litigation is a breach
of professional ethics and constitutes malpractice
[Hernandez v. Villanueva, 40 Phil. 774 (1920); Go
Beltran v. Fernandez, 70 Phil. 248 (1940)].
However, respondent notes that Canon 10 of the old
Canons of Professional Ethics, which states that "[t]he
lawyer should not purchase any interests in the
subject matter of the litigation which he is conducting,"
does not appear anymore in the new Code of
Professional Responsibility. He therefore concludes
that while a purchase by a lawyer of property in
litigation is void under Art. 1491 of the Civil Code,
such purchase is no longer a ground for disciplinary
action under the new Code of Professional
Responsibility.
This contention is without merit. The very first Canon
of the new Code states that "a lawyer shall uphold the
Constitution, obey the laws of the land and promote
respect for law and legal process" (Emphasis
supplied), Moreover, Rule 138, Sec. 3 of the Revised
Rules of Court requires every lawyer to take an oath to
44 obey the laws [of the Republic of the Philippines]
as well as the legal orders of the duly constituted
authorities therein." And for any violation of this oath, a
lawyer may be suspended or disbarred by the
Supreme Court [Rule 138, Sec. 27, Revised Rules of
Court]. All of these underscore the role of the lawyer
as the vanguard of our legal system. The
transgression of any provision of law by a lawyer is a
repulsive and reprehensible act which the Court will
not countenance. In the instant case, respondent,
having violated Art. 1491 of the Civil Code, must be
held accountable both to his client and to society.
Parenthetically, it should be noted that the persons
mentioned in Art. 1491 of the Civil Code are prohibited
from purchasing the property mentioned therein
because of their existing trust relationship with the
latter. A lawyer is disqualified from acquiring by
purchase the property and rights in litigation because
of his fiduciary relationship with such property and
rights, as well as with the client. And it cannot be
claimed that the new Code of Professional
Responsibility has failed to emphasize the nature and
consequences of such relationship. Canon 17 states
that "a lawyer owes fidelity to the cause of his client
and he shall be mindful of the trust and confidence
reposed in him." On the other hand, Canon 16
provides that "a lawyer shall hold in trust all moneys
and properties of his client that may come into his
possession." Hence, notwithstanding the absence of a
specific provision on the matter in the new Code, the
Court, considering the abovequoted provisions of the
new Code in relation to Art. 1491 of the Civil Code, as
well as the prevailing jurisprudence, holds that the
purchase by a lawyer of his client's property in
litigation constitutes a breach of professional ethics for
which a disciplinary action may be brought against
him.
Respondent's next contention that the transfer of the
properties was not really implemented, because the
land development agreement on which the transfer
depended was later rescinded, is untenable. Nowhere
is it provided in the Transfer of Rights that the
assignment of the properties of the Fortunados to
respondent was subject to the implementation of the
land development agreement. The last paragraph of
the Transfer of Rights provides that:
... for and in consideration of the legal
services of ATTY. RAMON A.
GONZALES, Filipino, married to Lilia
Yusay, and a resident of 23 Sunrise
Hill, New Manila, Quezon City,
rendered to our entire satisfaction, we
hereby, by these presents, do transfer
and convey to the said ATTY. RAMON
A. GONZALES, his heirs, successor,
and assigns, one-half (1/2) of our rights
and interests in the abovedescribed
property, together with all the
improvements found therein [Annex D
of the Complaint, Record, p. 28;
Emphasis supplied].
It is clear from the foregoing that the parties intended
the transfer of the properties to respondent to be
absolute and unconditional, and irrespective of
whether or not the land development agreement was
implemented.
Another misconduct committed by respondent was his
failure to disclose to complainant, at the time the land
development agreement was entered into, that the
land covered by TCT No. T-1929 had already been
sold at a public auction. The land development
agreement was executed on August 31, 1977 while
the public auction was held on June 30, 1971.
Respondent denies that complainant was his former
client, claiming that his appearance for the
complainant in an anti-graft case filed by the latter
against a certain Gilbert Teodoro was upon the
request of complainant and was understood to be only
provisional. Respondent claims that since complainant
was not his client, he had no duty to warn complainant
of the fact that the land involved in their land
development agreement had been sold at a public
auction. Moreover, the sale was duly annotated at the
back of TCT No. T-1929 and this, respondent argues,
serves as constructive notice to complainant so that
there was no concealment on his part.
The above contentions are unmeritorious. Even
assuming that the certificate of sale was annotated at
the back of TCT No. T-1929, the fact remains that
respondent failed to inform the complainant of the sale
of the land to Samauna during the negotiations for the
land development agreement. In so doing, respondent
failed to live up to the rigorous standards of ethics of
the law profession which place a premium on honesty
and condemn duplicitous conduct. The fact that
complainant was not a former client of respondent
does not exempt respondent from his duty to inform
complainant of an important fact pertaining to the land
which is subject of their negotiation. Since he was a
party to the land development agreement, respondent
should have warned the complainant of the sale of the
land at a public auction so that the latter could make a
proper assessment of the viability of the project they
were jointly undertaking. This Court has held that a
lawyer should observe honesty and fairness even in
his private dealings and failure to do so is a ground for
disciplinary action against him [Custodio v. Esto, Adm.
Case No. 1113, February 22, 1978, 81 SCRA 517].
Complainant also charges respondent with submitting
to the court falsified documents purporting to be true
copies of an addendum to the land development
agreement.
Based on evidence submitted by the parties, the
Solicitor General found that in the document filed by
respondent with the Court of First Instance of Quezon
City, the signatories to the addendum to the land
development agreement namely, Ramon A. Gonzales,
Alfaro T. Fortunado, Editha T. Fortunado, Nestor T.
Fortunado, and Angel L. Bautista—were made to
appear as having signed the original document on
December 9, 1972, as indicated by the letters (SGD.)
before each of their names. However, it was only
respondent Alfaro Fortunado and complainant who
signed the original and duplicate original (Exh. 2) and
the two other parties, Edith Fortunado and Nestor
Fortunado, never did. Even respondent himself
admitted that Edith and Nestor Fortunado only signed
the xerox copy (Exh. 2-A) after respondent wrote them
on May 24, 1973, asking them to sign the said xerox
copy attached to the letter and to send it back to him
after signing [Rejoinder to Complainant's Reply, pp. 4-
6; Rollo, pp. 327-329]. Moreover, respondent
acknowledged that Edith and Nestor Fortunado had
merely agreed by phone to sign, but had not actually
signed, the alleged true copy of the addendum as of
May 23, 1973 [Respondent's Supplemental Motion to
Refer this Case to the Integrated Bar of the
Philippines, p. 16]. Thus, when respondent submitted
the alleged true copy of the addendum on May 23,
1973 as Annex "A" of his Manifestation filed with the
Court of First Instance of Quezon City, he knowingly
misled the Court into believing that the original
addendum was signed by Edith Fortunado and Nestor
Fortunado. Such conduct constitutes willful disregard
of his solemn duty as a lawyer to act at all times in a
manner consistent with the truth. A lawyer should
never seek to mislead the court by an artifice or false
statement of fact or law [Section 20 (d), Rule 138,
Revised Rules of Court; Canon 22, Canons of
Professional Ethics; Canon 10, Rule 10.01, Code of
Professional Responsibility].
Anent the first charge of complainant, the Solicitor
General found that no impropriety was committed by
respondent in entering into a contingent fee contract
with the Fortunados [Report and Recommendation, p.
8; Record, p. 394]. The Court, however, finds that the
agreement between the respondent and the
Fortunados, which provides in part that:
We the [Fortunados] agree on the 50%
contingent fee, provided, you
[respondent Ramon Gonzales] defray
all expenses, for the suit, including
court fees.
Alfaro T. Fortunado [signed]
Editha T. T. Fortunado [signed]
CONFORMERamon A. Gonzales
[signed]
[Annex A to the Complaint, Record, p.
4].
is contrary to Canon 42 of the Canons of Professional
Ethics which provides that a lawyer may not properly
agree with a client to pay or bear the expenses of
litigation. [See also Rule 16.04, Code of Professional
Responsibility]. Although a lawyer may in good faith,
advance the expenses of litigation, the same should
be subject to reimbursement. The agreement between
respondent and the Fortunados, however, does not
provide for reimbursement to respondent of litigation
expenses paid by him. An agreement whereby an
attorney agrees to pay expenses of proceedings to
enforce the client's rights is champertous [JBP Holding
Corp. v. U.S. 166 F. Supp. 324 (1958)]. Such
agreements are against public policy especially where,
as in this case, the attorney has agreed to carry on the
action at his own expense in consideration of some
bargain to have part of the thing in dispute [See
Sampliner v. Motion Pictures Patents Co., et al., 255
F. 242 (1918)]. The execution of these contracts
violates the fiduciary relationship between the lawyer
and his client, for which the former must incur
administrative sanctions.
The Solicitor General next concludes that respondent
cannot be held liable for acting as counsel for Eusebio
Lopez, Jr. in Civil Case No. Q-15490 while acting as
counsel for the Fortunados against the same Eusebio
Lopez, Jr. in Civil Case No. Q-15143. The Court, after
considering the record, agrees with the Solicitor
General's findings on the matter. The evidence
presented by respondent shows that his acceptance of
Civil Case No. Q-15490 was with the knowledge and
consent of the Fortunados. The affidavit executed by
the Fortunados on June 23, 1976 clearly states that
they gave their consent when respondent accepted
the case of Eusebio Lopez, Jr. [Affidavit of
Fortunados, dated June 23, 1976; Rollo, p. 198]. One SO ORDERED.
of the recognized exceptions to the rule against Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras,
representation of conflicting interests is where the Feliciano, Gancayco, Padilla, Bidin and Cortes, JJ.,
clients knowingly consent to the dual representation concur.
after full disclosure of the facts by counsel [Canon 6, Gutierrez, Jr., Sarmiento, Griño-Aquino, Medialdea,
Canons of Professional Ethics; Canon 15, Rule 15.03, Regalado, JJ., took no part.
Code of Professional Responsibility].
Complainant also claims that respondent filed several
complaints against him before the Court of First
Instance and the Fiscal's Office of Quezon City for the
sole purpose of harassing him.
The record shows that at the time of the Solicitor
General's investigation of this case, Civil Case No. Q-
18060 was still pending before the Court of First
Instance of Quezon City, while the complaints for libel
(I.S. No. 76-5912) and perjury (I.S. No. 5913) were
already dismissed by the City Fiscal for insufficiency of
evidence and lack of interest, respectively [Report and
Recommendation, pp. 16-17; Rollo, pp. 402-403]. The
Solicitor General found no basis for holding that the
complaints for libel and perjury were used by
respondent to harass complainant. As to Civil Case
No. Q-18060, considering that it was still pending
resolution, the Solicitor General made no finding on
complainants claim that it was a mere ploy by
respondent to harass him. The determination of the
validity of the complaint in Civil Case No. Q-18060
was left to the Court of First Instance of Quezon City
where the case was pending resolution.
The Court agrees with the above findings of the
Solicitor General, and accordingly holds that there is
no basis for holding that the respondent's sole
purpose in filing the aforementioned cases was to
harass complainant.
Grounds 6, 8 and 9 alleged in the complaint need not
be discussed separately since the above discussion
on the other grounds sufficiently cover these
remaining grounds.
The Court finds clearly established in this case that on
four counts the respondent violated the law and the
rules governing the conduct of a member of the legal
profession. Sworn to assist in the administration of
justice and to uphold the rule of law, he has "miserably
failed to live up to the standards expected of a
member of the Bar." [Artiaga v. Villanueva, Adm.
Matter No. 1892, July 29, 1988, 163 SCRA 638, 647].
The Court agrees with the Solicitor General that,
considering the nature of the offenses committed by
respondent and the facts and circumstances of the
case, respondent lawyer should be suspended from
the practice of law for a period of six (6) months.
WHEREFORE, finding that respondent Attorney
Ramon A. Gonzales committed serious misconduct,
the Court Resolved to SUSPEND respondent from the
practice of law for SIX (6) months effective from the
date of his receipt of this Resolution. Let copies of this
Resolution be circulated to all courts of the country for
their information and guidance, and spread in the
personal record of Atty. Gonzales.
EN BANC
[B.M. No. 793. July 30, 2004]
IN RE: SUSPENSION FROM THE PRACTICE OF
LAW IN THE TERRITORY OF GUAM OF ATTY.
LEON G. MAQUERA
RESOLUTION
TINGA, J.:
May a member of the Philippine Bar who was
disbarred or suspended from the practice of law in a
foreign jurisdiction where he has also been admitted
as an attorney be meted the same sanction as a
member of the Philippine Bar for the same infraction
committed in the foreign jurisdiction? There is a Rule
of Court provision covering this cases central issue.
Up to this juncture, its reach and breadth have not
undergone the test of an unsettled case.
In a Letter dated August 20, 1996, the District Court of
Guam informed this Court of the suspension of Atty.
Leon G. Maquera (Maquera) from the practice of law
in Guam for two (2) years pursuant to the Decision
rendered by the Superior Court of Guam on May 7,
1996 in Special Proceedings Case No. SP0075-94, a
disciplinary case filed by the Guam Bar Ethics
Committee against Maquera.
The Court referred the matter of Maqueras suspension
in Guam to the Bar Confidant for comment in its
Resolution dated November 19, 1996. Under Section
27, Rule 138 of the Revised Rules of Court, the
disbarment or suspension of a member of the
Philippine Bar in a foreign jurisdiction, where he has
also been admitted as an attorney, is also a ground for
his disbarment or suspension in this realm, provided
the foreign courts action is by reason of an act or
omission constituting deceit, malpractice or other
gross misconduct, grossly immoral conduct, or a
violation of the lawyers oath.
In a Memorandum dated February 20, 1997, then Bar
Confidant Atty. Erlinda C. Verzosa recommended that
the Court obtain copies of the record of Maqueras
case since the documents transmitted by the Guam
District Court do not contain the factual and legal
bases for Maqueras suspension and are thus
insufficient to enable her to determine whether
Maqueras acts or omissions which resulted in his
suspension in Guam are likewise violative of his oath
as a member of the Philippine Bar.
Pursuant to this Courts directive in its Resolution
dated March 18, 1997, the Bar Confidant sent a letter
dated November 13, 1997 to the District Court of
Guam requesting for certified copies of the record of
the disciplinary case against Maquera and of the rules
violated by him.
The Court received certified copies of the record of
Maqueras case from the District Court of Guam on
December 8, 1997.
Thereafter, Maqueras case was referred by the Court
to the Integrated Bar of the Philippines (IBP) for
investigation report and recommendation within sixty
(60) days from the IBPs receipt of the case records.
The IBP sent Maquera a Notice of Hearing requiring
him to appear before the IBPs Commission on Bar
Discipline on July 28, 1998. However, the notice was
returned unserved because Maquera had already
moved from his last known address in Agana, Guam
and did not leave any forwarding address.
On October 9, 2003, the IBP submitted to the Court its
Report and Recommendation and its Resolution No.
XVI-2003-110, indefinitely suspending Maquera from
the practice of law within the Philippines until and
unless he updates and pays his IBP membership dues
in full.
The IBP found that Maquera was admitted to the
Philippine Bar on February 28, 1958. On October 18,
1974, he was admitted to the practice of law in the
territory of Guam. He was suspended from the
practice of law in Guam for misconduct, as he
acquired his clients property as payment for his legal
services, then sold it and as a consequence obtained
an unreasonably high fee for handling his clients case.
In its Decision, the Superior Court of Guam stated that
on August 6, 1987, Edward Benavente, the creditor of
a certain Castro, obtained a judgment against Castro
in a civil case. Maquera served as Castros counsel in
said case. Castros property subject of the case, a
parcel of land, was to be sold at a public auction in
satisfaction of his obligation to Benavente. Castro,
however, retained the right of redemption over the
property for one year. The right of redemption could
be exercised by paying the amount of the judgment
debt within the aforesaid period.
At the auction sale, Benavente purchased Castros
property for Five Hundred U.S. Dollars (US$500.00),
the amount which Castro was adjudged to pay him.
On December 21, 1987, Castro, in consideration of
Maqueras legal services in the civil case involving
Benavente, entered into an oral agreement with
Maquera and assigned his right of redemption in favor
of the latter.
On January 8, 1988, Maquera exercised Castros right
of redemption by paying Benavente US$525.00 in
satisfaction of the judgment debt. Thereafter, Maquera
had the title to the property transferred in his name.
On December 31, 1988, Maquera sold the property to
C.S. Chang and C.C. Chang for Three Hundred
Twenty Thousand U.S. Dollars (US$320,000.00).
On January 15, 1994, the Guam Bar Ethics
Committee (Committee) conducted hearings regarding
Maqueras alleged misconduct.
Subsequently, the Committee filed a Petition in the
Superior Court of Guam praying that Maquera be
sanctioned for violations of Rules 1.5 and 1.8(a) of the
Model Rules of Professional Conduct (Model Rules) in
force in Guam. In its Petition, the Committee claimed
that Maquera obtained an unreasonably high fee for
his services. The Committee further alleged that
Maquera himself admitted his failure to comply with
the requirement in Rule 1.8 (a) of the Model Rules that
a lawyer shall not enter into a business transaction
with a client or knowingly acquire a pecuniary interest
adverse to a client unless the transaction and the
terms governing the lawyers acquisition of such
interest are fair and reasonable to the client, and are
fully disclosed to, and understood by the client and
reduced in writing.
The Committee recommended that Maquera be: (1)
suspended from the practice of law in Guam for a
period of two [2] years, however, with all but thirty (30)
days of the period of suspension deferred; (2) ordered
to return to Castro the difference between the sale
price of the property to the Changs and the amount
due him for legal services rendered to Castro; (3)
required to pay the costs of the disciplinary
proceedings; and (4) publicly reprimanded. It also
recommended that other jurisdictions be informed that
Maquera has been subject to disciplinary action by the
Superior Court of Guam.
Maquera did not deny that Castro executed a
quitclaim deed to the property in his favor as
compensation for past legal services and that the
transaction, except for the deed itself, was oral and
was not made pursuant to a prior written agreement.
However, he contended that the transaction was made
three days following the alleged termination of the
attorney-client relationship between them, and that the
property did not constitute an exorbitant fee for his
legal services to Castro.
On May 7, 1996, the Superior Court of Guam
rendered its Decision suspending Maquera from the
practice of law in Guam for a period of two (2) years
and ordering him to take the Multi-State Professional
Responsibility Examination (MPRE) within that period.
The court found that the attorney-client relationship
between Maquera and Castro was not yet completely
terminated when they entered into the oral agreement
to transfer Castros right of redemption to Maquera on
December 21, 1987. It also held that Maquera profited
too much from the eventual transfer of Castros
property to him since he was able to sell the same to
the Changs with more than US$200,000.00 in profit,
whereas his legal fees for services rendered to Castro
amounted only to US$45,000.00. The court also
ordered him to take the MPRE upon his admission
during the hearings of his case that he was aware of
the requirements of the Model Rules regarding
business transactions between an attorney and his
client in a very general sort of way.
On the basis of the Decision of the Superior Court of
Guam, the IBP concluded that although the said court
found Maquera liable for misconduct, there is no
evidence to establish that [Maquera] committed a
breach of ethics in the Philippines. However, the IBP
still resolved to suspend him indefinitely for his failure
to pay his annual dues as a member of the IBP since
1977, which failure is, in turn, a ground for removal of
the name of the delinquent member from the Roll of
Attorneys under Section 10, Rule 139-A of the
Revised Rules of Court.
The power of the Court to disbar or suspend a lawyer
for acts or omissions committed in a foreign
jurisdiction is found in Section 27, Rule 138 of the
Revised Rules of Court, as amended by Supreme
Court Resolution dated February 13, 1992, which
states:
Section 27. Disbarment or suspension of attorneys by
Supreme Court, grounds therefor.A member of the bar
may be disbarred or suspended from his office as
attorney by the Supreme Court for any deceit,
malpractice, or other gross misconduct in such
office, grossly immoral conduct, or by reason of his
conviction of a crime involving moral turpitude, or for
any violation of the oath which he is required to
take before admission to practice, or for a willful
disobedience appearing as attorney for a party to a
case without authority to do so. The practice of
soliciting cases at law for the purpose of gain, either
personally or through paid agents or brokers,
constitutes malpractice.
The disbarment or suspension of a member of the
Philippine Bar by a competent court or other
disciplinatory agency in a foreign jurisdiction
where he has also been admitted as an attorney is
a ground for his disbarment or suspension if the
basis of such action includes any of the acts
hereinabove enumerated.
The judgment, resolution or order of the foreign
court or disciplinary agency shall be prima facie
evidence of the ground for disbarment or
suspension (Emphasis supplied).
The Court must therefore determine whether
Maqueras acts, namely: acquiring by assignment
Castros right of redemption over the property subject
of the civil case where Maquera appeared as counsel
for him; exercising the right of redemption; and,
subsequently selling the property for a huge profit,
violate Philippine law or the standards of ethical
behavior for members of the Philippine Bar and thus
constitute grounds for his suspension or disbarment in
this jurisdiction.
The Superior Court of Guam found that Maquera
acquired his clients property by exercising the right of
redemption previously assigned to him by the client in
payment of his legal services. Such transaction falls
squarely under Article 1492 in relation to Article 1491,
paragraph 5 of the Civil Code of the Philippines.
Paragraph 5 of Article 1491 prohibits the lawyers
acquisition by assignment of the clients property which
is the subject of the litigation handled by the lawyer.
Under Article 1492, the prohibition extends to sales in
legal redemption.
The prohibition ordained in paragraph 5 of Article 1491
and Article 1492 is founded on public policy because,
by virtue of his office, an attorney may easily take
advantage of the credulity and ignorance of his client
and unduly enrich himself at the expense of his client.
The case of In re: Ruste illustrates the significance of
the aforementioned prohibition. In that case, the
attorney acquired his clients property subject of a case
where he was acting as counsel pursuant to a deed of
sale executed by his clients in his favor. He contended
that the sale was made at the instance of his clients
because they had no money to pay him for his
services. The Court ruled that the lawyers acquisition
of the property of his clients under the circumstances
obtaining therein rendered him liable for malpractice.
The Court held:
Whether the deed of sale in question was executed at
the instance of the spouses driven by financial
necessity, as contended by the respondent, or at the
latters behest, as contended by the complainant, is of
no moment. In either case an attorney occupies a
vantage position to press upon or dictate his terms to
a harassed client, in breach of the rule so amply
protective of the confidential relations, which must
necessarily exist between attorney and client, and of
the rights of both.
The Superior Court of Guam also hinted that
Maqueras acquisition of Castros right of redemption,
his subsequent exercise of said right, and his act of
selling the redeemed property for huge profits were
tainted with deceit and bad faith when it concluded
that Maquera charged Castro an exorbitant fee for his
legal services. The court held that since the
assignment of the right of redemption to Maquera was
in payment for his legal services, and since the
property redeemed by him had a market value of
US$248,220.00 as of December 21, 1987 (the date
when the right of redemption was assigned to him), he
is liable for misconduct for accepting payment for his
legal services way beyond his actual fees which
amounted only to US$45,000.00.
Maqueras acts in Guam which resulted in his two (2)-
year suspension from the practice of law in that
jurisdiction are also valid grounds for his suspension
from the practice of law in the Philippines. Such acts
are violative of a lawyers sworn duty to act with fidelity
toward his clients. They are also violative of the Code
of Professional Responsibility, specifically, Canon 17
which states that [a] lawyer owes fidelity to the cause
of his client and shall be mindful the trust and
confidence reposed in him; and Rule 1.01 which
prohibits lawyers from engaging in unlawful,
dishonest, immoral or deceitful conduct. The
requirement of good moral character is not only a
condition precedent to admission to the Philippine Bar
but is also a continuing requirement to maintain ones
goods standing in the legal profession.
It bears stressing that the Guam Superior Courts
judgment ordering Maqueras suspension from the
practice of law in Guam does not automatically result
in his suspension or disbarment in the Philippines.
Under Section 27, Rule 138 of the Revised Rules of
Court, the acts which led to his suspension in Guam
are mere grounds for disbarment or suspension in this
jurisdiction, at that only if the basis of the foreign
courts action includes any of the grounds for
disbarment or suspension in this jurisdiction. Likewise,
the judgment of the Superior Court of Guam only
constitutes prima facie evidence of Maqueras
unethical acts as a lawyer. More fundamentally, due
process demands that he be given the opportunity to
defend himself and to present testimonial and
documentary evidence on the matter in an
investigation to be conducted in accordance with Rule
139-B of the Revised Rules of Court. Said rule
mandates that a respondent lawyer must in all cases
be notified of the charges against him. It is only after
reasonable notice and failure on the part of the
respondent lawyer to appear during the scheduled
investigation that an investigation may be conducted
ex parte.
The Court notes that Maquera has not yet been able
to adduce evidence on his behalf regarding the
charges of unethical behavior in Guam against him, as
it is not certain that he did receive the Notice of
Hearing earlier sent by the IBPs Commission on Bar
Discipline. Thus, there is a need to ascertain
Maqueras current and correct address in Guam in
order that another notice, this time specifically
informing him of the charges against him and requiring
him to explain why he should not be suspended or
disbarred on those grounds (through this Resolution),
may be sent to him.
Nevertheless, the Court agrees with the IBP that
Maquera should be suspended from the practice of
law for non-payment of his IBP membership dues from
1977 up to the present. Under Section 10, Rule 139-A
of the Revised Rules of Court, non-payment of
membership dues for six (6) months shall warrant
suspension of membership in the IBP, and default in
such payment for one year shall be ground for
removal of the name of the delinquent member from
the Roll of Attorneys.
WHEREFORE, Atty. Leon G. Maquera is required to
SHOW CAUSE, within fifteen (15) days from receipt of
this Resolution, why he should not be suspended or
disbarred for his acts which gave rise to the
disciplinary proceedings against him in the Superior
Court of Guam and his subsequent suspension in said
jurisdiction.
The Bar Confidant is directed to locate the current and
correct address of Atty. Maquera in Guam and to
serve upon him a copy of this Resolution.
In the meantime, Atty. Maquera is SUSPENDED from
the practice of law for ONE (1) YEAR or until he shall
have paid his membership dues, whichever comes
later.
Let a copy of this Resolution be attached to Atty.
Maqueras personal record in the Office of the Bar
Confidant and copies be furnished to all chapters of
the Integrated Bar of the Philippines and to all courts
in the land.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing,
Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-
Martinez, Carpio-Morales, Callejo, Sr., Azcuna, and
Chico-Nazario, JJ., concur.
Corona, J., on leave.
 THIRD DIVISION
PROVINCE OF CEBU, G.R. No. 170115
Petitioner,
Present:
Ynares-Santiago, J. (Chairperson),
Austria-Martinez,
- versus - Corona,*
Na
chura,
and
Re
yes, JJ.
HEIRS OF RUFINA MORALES,
NAMELY: FELOMINA V. PANOPIO,
NENITA VILLANUEVA, ERLINDA V.
ADRIANO and CATALINA V. QUESADA,
Respondents. Promulgated:
February 19, 2008
x ----------------------------------------------------------------------
------------------ x
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari of the
Decision of the Court of Appeals dated March 29,
2005 in CA-G.R. CV No. 53632, which affirmed in toto
the Decision of the Regional Trial Court of Cebu City,
Branch 6, in Civil Case No. CEB-11140 for specific
performance and reconveyance of property. Also
assailed is the Resolution dated August 31, 2005
denying the motion for reconsideration.
On September 27, 1961, petitioner Province of Cebu
leased in favor of Rufina Morales a 210-square meter
lot which formed part of Lot No. 646-A of the Banilad
Estate. Subsequently or sometime in 1964, petitioner
donated several parcels of land to the City of Cebu.
Among those donated was Lot No. 646-A which the
City of Cebu divided into sub-lots. The area occupied
by Morales was thereafter denominated as Lot No.
646-A-3, for which Transfer Certificate of Title (TCT)
No. 30883 was issued in favor of the City of Cebu.
On July 19, 1965, the city sold Lot No. 646-A-3 as well
as the other donated lots at public auction in order to
raise money for infrastructure projects. The highest
bidder for Lot No. 646-A-3 was Hever Bascon but
Morales was allowed to match the highest bid since
she had a preferential right to the lot as actual
occupant thereof. Morales thus paid the required
deposit and partial payment for the lot.
In the meantime, petitioner filed an action for reversion
of donation against the City of Cebu docketed as Civil
Case No. 238-BC before Branch 7 of the then Court of
First Instance of Cebu. On May 7, 1974, petitioner and
the City of Cebu entered into a compromise
agreement which the court approved on July 17, 1974.
The agreement provided for the return of the donated
lots to petitioner except those that have already been
utilized by the City of Cebu. Pursuant thereto, Lot No.
646-A-3 was returned to petitioner and registered in its
name under TCT No. 104310.
Morales died on February 20, 1969 during the
pendency of Civil Case No. 238-BC. Apart from the
deposit and down payment, she was not able to make
any other payments on the balance of the purchase
price for the lot.
On March 11, 1983, one of the nieces of
Morales, respondent Catalina V. Quesada, wrote to
then Cebu Governor Eduardo R. Gullas asking for the
formal conveyance of Lot No. 646-A-3 to Morales
surviving heirs, in accordance with the award earlier
made by the City of Cebu. This was followed by
another letter of the same tenor dated October 10,
1986 addressed to Governor Osmundo G. Rama.
The requests remained unheeded thus,
Quesada, together with the other nieces of Morales
namely, respondents Nenita Villanueva and Erlinda V.
Adriano, as well as Morales sister, Felomina V.
Panopio, filed an action for specific performance and
reconveyance of property against petitioner, which
was docketed as Civil Case No. CEB-11140 before
Branch 6 of the Regional Trial Court of Cebu City.
They also consigned with the court the amount of
P13,450.00 representing the balance of the purchase
price which petitioner allegedly refused to accept.
Panopio died shortly after the complaint was filed.
Respondents averred that the award at public auction
of the lot to Morales was a valid and binding contract
entered into by the City of Cebu and that the lot was
inadvertently returned to petitioner under the
compromise judgment in Civil Case No. 238-BC. They
alleged that they could not pay the balance of the
purchase price during the pendency of said case due
to confusion as to whom and where payment should
be made. They thus prayed that judgment be rendered
ordering petitioner to execute a final deed of absolute
sale in their favor, and that TCT No. 104310 in the
name of petitioner be cancelled.
Petitioner filed its answer but failed to present
evidence despite several opportunities given thus, it
was deemed to have waived its right to present
evidence.
 On March 6, 1996, the trial court rendered
judgment, the dispositive part of which reads:
WHEREFORE, judgment is rendered in
favor of the plaintiffs and against the
defendant Province of Cebu, hereby
directing the latter to convey Lot 646-A-
3 to the plaintiffs as heirs of Rufina
Morales, and in this connection, to
execute the necessary deed in favor of
said plaintiffs.
No pronouncement as to costs.
SO ORDERED.
In ruling for the respondents, the trial court held thus:
[T]he Court is convinced that there was
already a consummated sale between
the City of Cebu and Rufina Morales.
There was the offer to sell in that public
auction sale. It was accepted by Rufina
Morales with her bid and was granted
the award for which she paid the
agreed downpayment. It cannot be
gainsaid that at that time the owner of
the property was the City of Cebu. It
has the absolute right to dispose of it
thru that public auction sale. The
donation by the defendant Province of
Cebu to Cebu City was not voided in
that Civil Case No. 238-BC. The
compromise agreement between the
parties therein on the basis of which
judgment was rendered did not provide
nullification of the sales or disposition
made by the City of Cebu. Being
virtually successor-in-interest of City of
Cebu, the defendant is bound by the
contract lawfully entered into by the
former. Defendant did not initiate any
move to invalidate the sale for one
reason or another. Hence, it stands as
a perfectly valid contract which
defendant must respect. Rufina
Morales had a vested right over the
property. The plaintiffs being the heirs
or successors-in-interest of Rufina
Morales, have the right to ask for the
conveyance of the property to them.
While it may be true that the title of the
property still remained in the name of
the City of Cebu until full payment is
made, and this could be the reason
why the lot in question was among
those reverted to the Province, the
sellers obligation under the contract
was, for all legal purposes, transferred
to, and assumed by, the defendant
Province of Cebu. It is then bound by
such contract.
Petitioner appealed to the Court of Appeals which
affirmed the decision of the trial court in toto. Upon
denial of its motion for reconsideration, petitioner filed
the instant petition under Rule 45 of the Rules of
Court, alleging that the appellate court erred in:
FINDING THAT RUFINA MORALES
AND RESPONDENTS, AS HER
HEIRS, HAVE THE RIGHT TO EQUAL
THE BID OF THE HIGHEST BIDDER
OF THE SUBJECT PROPERTY AS
LESSEES THEREOF;
FINDING THAT WITH THE DEPOSIT
AND PARTIAL PAYMENT MADE BY
RUFINA MORALES, THE SALE WAS
IN EFFECT CLOSED FOR ALL LEGAL
PURPOSES, AND THAT THE
TRANSACTION WAS PERFECTED
AND CONSUMMATED;
FINDING THAT LACHES AND/OR
PRESCRIPTION ARE NOT
APPLICABLE AGAINST
RESPONDENTS;
FINDING THAT DUE TO THE
PENDENCY OF CIVIL CASE NO. 238-
BC, PLAINTIFFS WERE NOT ABLE
TO PAY THE AGREED
INSTALLMENTS;
AFFIRMING THE DECISION OF THE
TRIAL COURT IN FAVOR OF THE
RESPONDENTS AND AGAINST THE
PETITIONERS.
The petition lacks merit.
The appellate court correctly ruled that petitioner, as
successor-in-interest of the City of Cebu, is bound to
respect the contract of sale entered into by the latter
pertaining to Lot No. 646-A-3. The City of Cebu was
the owner of the lot when it awarded the same to
respondents predecessor-in-interest, Morales, who
later became its owner before the same was
erroneously returned to petitioner under the
compromise judgment. The award is tantamount to a
perfected contract of sale between Morales and the
City of Cebu, while partial payment of the purchase
price and actual occupation of the property by Morales
and respondents effectively transferred ownership of
the lot to the latter. This is true notwithstanding the
failure of Morales and respondents to pay the balance
of the purchase price.

Petitioner can no longer assail the award of the lot to
Morales on the ground that she had no right to match
the highest bid during the public auction. Whether
Morales, as actual occupant and/or lessee of the lot,
was qualified and had the right to match the highest
bid is a foregone matter that could have been
questioned when the award was made. When the City
of Cebu awarded the lot to Morales, it is assumed that
she met all qualifications to match the highest bid. The
subject lot was auctioned in 1965 or more than four
decades ago and was never questioned. Thus, it is
safe to assume, as the appellate court did, that all
requirements for a valid public auction sale were
complied with.
A sale by public auction is perfected when the
auctioneer announces its perfection by the fall of the
hammer or in other customary manner. It does not
matter that Morales merely matched the bid of the
highest bidder at the said auction sale. The contract of
sale was nevertheless perfected as to Morales, since
she merely stepped into the shoes of the highest
bidder.
Consequently, there was a meeting of minds
between the City of Cebu and Morales as to the lot
sold and its price, such that each party could
reciprocally demand performance of the contract from
the other. A contract of sale is a consensual contract
and is perfected at the moment there is a meeting of
minds upon the thing which is the object of the
contract and upon the price. From that moment, the
parties may reciprocally demand performance subject
to the provisions of the law governing the form of
contracts. The elements of a valid contract of sale
under Article 1458 of the Civil Code are: (1) consent or
meeting of the minds; (2) determinate subject matter;
and (3) price certain in money or its equivalent. All
these elements were present in the transaction
between the City of Cebu and Morales.
There is no merit in petitioners assertion that
there was no perfected contract of sale because no
Contract of Purchase and Sale was ever executed by
the parties. As previously stated, a contract of sale is a
consensual contract that is perfected upon a meeting
of minds as to the object of the contract and its price.
Subject to the provisions of the Statute of Frauds, a
formal document is not necessary for the sale
transaction to acquire binding effect. For as long as
the essential elements of a contract of sale are proved
to exist in a given transaction, the contract is deemed
perfected regardless of the absence of a formal deed
evidencing the same.
Similarly, petitioner erroneously contends that
the failure of Morales to pay the balance of the
purchase price is evidence that there was really no
contract of sale over the lot between Morales and the
City of Cebu. On the contrary, the fact that there was
an agreed price for the lot proves that a contract of
sale was indeed perfected between the parties.
Failure to pay the balance of the purchase price did
not render the sale inexistent or invalid, but merely
gave rise to a right in favor of the vendor to either
demand specific performance or rescission of the
contract of sale. It did not abolish the contract of sale
or result in its automatic invalidation.
As correctly found by the appellate court, the
contract of sale between the City of Cebu and Morales
was also partially consummated. The latter had paid
the deposit and downpayment for the lot in
accordance with the terms of the bid award. She first
occupied the property as a lessee in 1961, built a
house thereon and was continuously in possession of
the lot as its owner until her death in 1969.
Respondents, on the other hand, who are all surviving
heirs of Morales, likewise occupied the property during
the latters lifetime and continue to reside on the
property to this day.
The stages of a contract of sale are as follows:
(1) negotiation, covering the period from the time the
prospective contracting parties indicate interest in the
contract to the time the contract is perfected; (2)
perfection, which takes place upon the concurrence of
the essential elements of the sale which are the
meeting of the minds of the parties as to the object of
the contract and upon the price; and (3)
consummation, which begins when the parties perform
their respective undertakings under the contract of
sale, culminating in the extinguishment thereof. In this
case, respondents predecessor had undoubtedly
commenced performing her obligation by making a
down payment on the purchase price. Unfortunately,
however, she was not able to complete the payments
due to legal complications between petitioner and the
city.
Thus, the City of Cebu could no longer dispose
of the lot in question when it was included as among
those returned to petitioner pursuant to the
compromise agreement in Civil Case No. 238-BC. The
City of Cebu had sold the property to Morales even
though there remained a balance on the purchase
price and a formal contract of sale had yet to be
executed. Incidentally, the failure of respondents to
pay the balance on the purchase price and the non-
execution of a formal agreement was sufficiently
explained by the fact that the trial court, in Civil Case
No. 238-BC, issued a writ of preliminary injunction
enjoining the city from further disposing the donated
lots. According to respondents, there was confusion
as to the circumstances of payment considering that
both the city and petitioner had refused to accept
payment by virtue of the injunction. It appears that the
parties simply mistook Lot 646-A-3 as among those
not yet sold by the city. Finally, petitioner cannot raise the issue of prescription
and laches at this stage of the proceedings. Contrary
The City of Cebu was no longer the owner of to petitioners assignment of errors, the appellate court
Lot 646-A-3 when it ceded the same to petitioner made no findings on the issue because petitioner
under the compromise agreement in Civil Case No. never raised the matter of prescription and laches
238-BC. At that time, the city merely retained rights as either before the trial court or Court of Appeals. It is
an unpaid seller but had effectively transferred basic that defenses and issues not raised below
ownership of the lot to Morales. As successor-in- cannot be considered on appeal. Thus, petitioner
interest of the city, petitioner could only acquire rights cannot plead the matter for the first time before this
that its predecessor had over the lot. These rights Court.
include the right to seek rescission or fulfillment of the
terms of the contract and the right to damages in WHEREFORE, in view of the foregoing, the petition is
either case. hereby DENIED and the decision and resolution of the
Court of Appeals in CA-G.R. CV No. 53632 are
In this regard, the records show that AFFIRMED.
respondent Quesada wrote to then Cebu Governor
Eduardo R. Gullas on March 11, 1983, asking for the SO ORDERED.
formal conveyance of Lot 646-A-3 pursuant to the
award and sale earlier made by the City of Cebu. On
October 10, 1986, she again wrote to Governor
Osmundo G. Rama reiterating her previous request.
This means that petitioner had known, at least as far
back as 1983, that the city sold the lot to respondents
predecessor and that the latter had paid the deposit
and the required down payment. Despite this
knowledge, however, petitioner did not avail of any
rightful recourse to resolve the matter.

Article 1592 of the Civil Code pertinently provides:

Article 1592. In the sale of immovable

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

Thus, respondents could still tender payment of the

full purchase price as no demand for rescission had
been made upon them, either judicially or through
notarial act. While it is true that it took a long time for
respondents to bring suit for specific performance and
consign the balance of the purchase price, it is equally
true that petitioner or its predecessor did not take any
action to have the contract of sale rescinded. Article
1592 allows the vendee to pay as long as no demand
for rescission has been made. The consignation of the
balance of the purchase price before the trial court
thus operated as full payment, which resulted in the
extinguishment of respondents obligation under the
contract of sale.