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Sales full casesfrom set 2

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  • YU TEK and CO., plaintiff-appellant, vs. BASILIO GONZALES, defendant-appellant.

    Beaumont, Tenney and Ferrier for plaintiff. Buencamino and Lontok for defendant.

    TRENT, J.:

    The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of which follow:

    1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine currency from Messrs. Yu Tek and Co., and that in consideration of said sum be obligates himself to deliver to the said Yu Tek and Co., 600 piculs of sugar of the first and second grade, according to the result of the polarization, within the period of three months, beginning on the 1st day of January, 1912, and ending on the 31st day of March of the same year, 1912.

    2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said Messrs. Yu Tek and Co., of this city the said 600 piculs of sugar at any place within the said municipality of Santa Rosa which the said Messrs. Yu Tek and Co., or a representative of the same may designate.

    3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek and Co. the 600 piculs of sugar within the period of three months, referred to in the second paragraph of this document, this contract will be rescinded and the said Mr. Basilio Gonzales will then be obligated to return to Messrs. Yu Tek and Co. the P3,000 received and also the sum of P1,200 by way of indemnity for loss and damages.

    Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover the P3,000. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000 only, and from this judgment both parties appealed.

    The points raised by the defendant will be considered first. He alleges that the court erred in refusing to permit parol evidence showing that the parties intended that the sugar was to be secured from the crop which the defendant raised on his plantation, and that he was unable to fulfill the contract by reason of the almost total failure of his crop. This case appears to be one to which the rule which excludes parol evidence to add to or vary the terms of a written contract is decidedly applicable. There is not the slightest intimation in the contract that the sugar was to be raised by the defendant. Parties are presumed to have reduced to writing all the essential conditions of their contract. While parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. In an early case this court declined to allow parol evidence showing that a party to a written contract was to become a partner in a firm instead of a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of employment provided that the plaintiff should receive from the defendant a stipulated salary and expenses. The defendant sought to interpose as a defense to recovery that the payment of the salary was contingent upon the plaintiff's employment redounding to the benefit of the defendant company. The contract contained no such condition and the court declined to receive parol evidence thereof.

  • In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant. There is no clause in the written contract which even remotely suggests such a condition. The defendant undertook to deliver a specified quantity of sugar within a specified time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at liberty to purchase it on the market or raise it himself. It may be true that defendant owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the contract by parol evidence cannot be considered. The rights of the parties must be determined by the writing itself.

    The second contention of the defendant arises from the first. He assumes that the contract was limited to the sugar he might raise upon his own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved from complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that there was a perfected sale. Article 1450 defines a perfected sale as follows:

    The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the price, even when neither has been delivered.

    Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been perfected, be governed by the provisions of articles 1096 and 1182."

    This court has consistently held that there is a perfected sale with regard to the "thing" whenever the article of sale has been physically segregated from all other articles Thus, a particular tobacco factory with its contents was held sold under a contract which did not provide for either delivery of the price or of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the recent case of Barretto vs. Santa Marina(26 Phil. Rep., 200) where specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price and the stock until the latter had been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of the price was withheld until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, the hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already delivered, the title had passed and the loss was the vendee's. It is our purpose to distinguish the case at bar from all these cases.

    In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of the first and second classes. Was this an agreement upon the "thing" which was the object of the contract within the meaning of article 1450, supra? Sugar is one of the staple commodities of this country. For the purpose of sale its bulk is weighed, the customary unit of weight being denominated a "picul." There was no delivery under the contract. Now, if called upon to designate the article sold, it is clear that the defendant could only say that it was "sugar." He could only use this generic name for the thing sold. There was no "appropriation" of any particular lot of sugar. Neither party could point to any specific quantity of sugar and say: "This is the article which was the subject of our contract." How different is this from the contracts discussed in the cases referred to above! In the McCullough case, for instance, the tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco

  • case, where a quantity of hemp was the subject of the contract, it was shown that that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp.

    A number of cases have been decided in the State of Louisiana, where the civil law prevails, which confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47 Sou., 444). In this case a contract was entered into by a traveling salesman for a quantity of shoes, the sales having been made by sample. The court said of this contract:

    But it is wholly immaterial, for the purpose of the main question, whether Mitchell was authorized to make a definite contract of sale or not, since the only contract that he was in a position to make was an agreement to sell or an executory contract of sale. He says that plaintiff sends out 375 samples of shoes, and as he was offering to sell by sample shoes, part of which had not been manufactured and the rest of which were incorporated in plaintiff's stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should at that time have agreed upon the specific objects, the title to which was to pass, and hence there could have been no sale. He and Seegars and Co. might have agreed, and did (in effect ) agree, that the identification of the objects and their appropriation to the contract necessary to make a sale should thereafter be made by the plaintiff, acting for itself and for Seegars and Co., and the legend printed in red ink on plaintiff's billheads ("Our responsibility ceases when we take transportation Co's. receipt `In good order'" indicates plaintiff's idea of the moment at which such identification and appropriation would become effective. The question presented was carefully considered in the case of State vs. Shields, et al. (110 La., 547, 34 Sou., 673) (in which it was absolutely necessary that it should be decided), and it was there held that in receiving an order for a quantity of goods, of a kind and at a price agreed on, to be supplied from a general stock, warehoused at another place, the agent receiving the order merely enters into an executory contract for the sale of the goods, which does not divest or transfer the title of any determinate object, and which becomes effective for that purpose only when specific goods are thereafter appropriated to the contract; and, in the absence of a more specific agreement on the subject, that such appropriated takes place only when the goods as ordered are delivered to the public carriers at the place from which they are to be shipped, consigned to the person by whom the order is given, at which time and place, therefore, the sale is perfected and the title passes.

    This case and State vs. Shields, referred to in the above quotation are amply illustrative of the position taken by the Louisiana court on the question before us. But we cannot refrain from referring to the case of Larue and Prevost vs. Rugely, Blair and Co. (10 La. Ann., 242) which is summarized by the court itself in the Shields case as follows:

    . . . It appears that the defendants had made a contract for the sale, by weight, of a lot of cotton, had received $3,000 on account of the price, and had given an order for its delivery, which had been presented to the purchaser, and recognized by the press in which the cotton was stored, but that the cotton had been destroyed by fire before it was weighed. It was held that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000 paid on account of the price.

    We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The defendant having defaulted in his engagement, the plaintiff is entitled to recover the P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must therefore be affirmed.

  • The plaintiff has appealed from the judgment of the trial court on the ground that it is entitled to recover the additional sum of P1,200 under paragraph 4 of the contract. The court below held that this paragraph was simply a limitation upon the amount of damages which could be recovered and not liquidated damages as contemplated by the law. "It also appears," said the lower court, "that in any event the defendant was prevented from fulfilling the contract by the delivery of the sugar by condition over which he had no control, but these conditions were not sufficient to absolve him from the obligation of returning the money which he received."

    The above quoted portion of the trial court's opinion appears to be based upon the proposition that the sugar which was to be delivered by the defendant was that which he expected to obtain from his own hacienda and, as the dry weather destroyed his growing cane, he could not comply with his part of the contract. As we have indicated, this view is erroneous, as, under the contract, the defendant was not limited to his growth crop in order to make the delivery. He agreed to deliver the sugar and nothing is said in the contract about where he was to get it.

    We think is a clear case of liquidated damages. The contract plainly states that if the defendant fails to deliver the 600 piculs of sugar within the time agreed on, the contract will be rescinded and he will be obliged to return the P3,000 and pay the sum of P1,200 by way of indemnity for loss and damages. There cannot be the slightest doubt about the meaning of this language or the intention of the parties. There is no room for either interpretation or construction. Under the provisions of article 1255 of the Civil Code contracting parties are free to execute the contracts that they may consider suitable, provided they are not in contravention of law, morals, or public order. In our opinion there is nothing in the contract under consideration which is opposed to any of these principles.

    For the foregoing reasons the judgment appealed from is modified by allowing the recovery of P1,200 under paragraph 4 of the contract. As thus modified, the judgment appealed from is affirmed, without costs in this instance.

    Arellano, C.J., Torres, Carson and Araullo, JJ., concur. Johnson, J., dissents.

    COMPAIA GENERAL DE TABACOS DE FILIPINAS, petitioner, vs. COURT OF APPEALS, PHILIPPINE NATIONAL BANK and DEVELOPMENT BANK OF THE PHILIPPINES,respondents.

    Siguion Reyna, Montecillo & Ongsiako for petitioner.

    Pelaez, Adriano & Gregorio for respondents San Carlos Planters' Association & Theo Davis & Co., Far East Ltd. et al.

    NARVASA, J.:

    The conflicting claims of the mortgagees of a sugar quota or production allowance, on the one hand, and the mortgagors' subsequent vendees of the same, on the other, are the subject of the petition for review on certiorariat bar.

    It appears that an unregistered partnership known as Gomez & Torres composed of Francisco M. Gomez and Hector Torres was the "principal and majority stockholder of the Philippine Milling

  • Company, a domestic corporation which owns and operates in the Mindoro Mill District a sugar mill where all the sugar cane planters of that mill district mill their sugar cane." 1 "Gomez & Torres" was also "registered in the Sugar Quota Administration as the owner and holder of the entire production allowance or quota appertaining to Plantation No. 30-15 of the Mindoro Mill District." 2

    As security for a loan of P2,000,000.00 obtained from the Rehabilitation Finance Corporation (RFC), said Philippine Milling Company (thru its president, Hector A. Torres), and the above mentioned Hector A. Torres and Francisco Gomez, executed on August 7, 1950, a deed of mortgage hypothecating to the RFC, particularly described real and personal property, "together with all the buildings and improvements now existing or which may hereafter be constructed on the mortgaged property, all easements, sugar quotas, agricultural or land indemnities, aids or subsidies and all other rights or benefits annexed to or inherent therein, now existing or which may hereafter exist." 3

    The mortgagors above named also assigned to the RFC on August 16, 1950, in a public instrument, 4 the sugar quota of the mill district aggregating no less than 148,000 piculs and sugar warehouse receipts covering, the first 29,500 piculs of sugar milled by the sugar central annually and such additional sugar as may be necessary to cover the annual amortization of the loan, taking into consideration the fluctuating sugar prices, which assignments shall remain in full force and effect as long as . . . (their) aforementioned loan has not been settled in full."

    Some fifteen months later, or on November 2, 1951, the same mortgagors executed in favor of the same mortgagee (the R.F.C) a second mortgage, this time as security for another loan of P1,860,000.00. The mortgage covered real and/or personal properties listed in the deed, "together with all the buildings and improvements now existing or which may hereafter be constructed on the mortgaged property, all easements, sugar quotas, agricultural or land indemnities, aids or subsidies, and all other rights or benefits annexed to or inherent therein, now existing or which may hereafter exist . . . and also other assets acquired with the proceeds of such loan . . . " 5

    The mortgagors also executed on November 2, 1951 an assignment in favor of the RFC, like that of August 16, 1950, supra, respecting "its rights and interests on all the sugar quota of the Mindoro Mill District aggregating no less than 148,000 piculs and additional sugar warehouse receipts covering the first 27,350 piculs of sugar milled by the sugar central annually, and such additional sugar may be necessary to cover the annual amortization on the loan, until the full amount of the additional loan has been fully paid." 6

    Both deeds of (real estate and chattel) mortgages were registered in the Register of Deeds of Occidental Mindoro on August 20, 1950 and November 9, 1951, respectively. 7

    Earlier, or on or about January 13, 1951, the real estate and personal property subject of the two (2) mortgages just described, were again mortgaged by Philippine Milling Co., Francisco M. Gomez and Hector A. Torres, this time in favor of the Philippine National Bank as collateral for a loan of P235,000.00. This real estate and chattel mortgage was amended on April 6, 1951 by increasing its consideration from P235,000.00 to P335,000.00, and still later, on January 18, 1952, by further increasing the consideration to P1,405,0,00.00. 8 The original deed and its two (2) amendments were all registered with the Register of Deeds of Occidental Mindoro.

    In July, 1957, two (2) letters-agreements were executed between Gomez & Torres (represented by Francisco M. Gomez) on the one hand, and Theo H. Davies & Co., Ltd. ("for itself and representing [or as authorized representative of) San Carlos Planters' Association"]), on the other, by virtue of which the former sold to the latter a total of 18,000 piculs of the production allowance (or sugar quota) of Plantation No. 30-15, to wit:

  • 1) On July 3, 1957: 8,250 piculs of "our ''A" quota and 1,750.00 piculs of our "B" quota corresponding to Plantation No. 30-15 of the Mindoro Mill District which is duly registered in our name;" 9 and

    2) on July 11, 1957: 6,600.00 piculs of "our "A" quota and 1,400.00 piculs of our "B" quota . . ."

    In the later agreement, Gomez & Torres guaranteed "that said 8,000.00 piculs of quotas as well as the 10,000.00 piculs sold to you on July 3, 1957, belong to us and are free from any lien or incumbrance whatsoever." 10

    The transferees presented the two (2) agreements for recording in the District Office of the Sugar Quota Administration, on July 12, 1957. But the Sugar Quota Administration declined to give due course to the transfer until "necessary corrections" were made in the registration documents (known as DTRs: "district transfer registries"), and "the written conformity of the PNB," secured. 11

    In a letter to the Philippine Mining Company dated September 10, 1957, the Administrator cited several reasons for his refusal: 12

    1. There is no signature nor initial of the Permit Agent assigned to your District.

    2. There is no distribution of coefficients in Columns F, I, and J in both of your DTR's.

    3. This Office received a letter from the Philippine National Bank advising this Office that the allotments of Plantations Nos. 30-4, 30-8c, 30-9c, 30-14, 30-15 and 30-16a are mortgaged to the PNB and to advise the PNB of any sale, transfer or conveyance affecting the quota of the Philippine Milling Company, Hector A. Torres and Francisco M. Gomez and to withhold the registration without the consent of the PNB.

    The letter of the PNB above referred to (par. 3) was that written by its Vice President, J.V. Buenaventura, dated September 4, 1957. 13

    On October 2, 1957, San Carlos Planters' Association and Theo H. Davies Co. Ltd. submitted "two copies of the mill district coefficients and allowances of the 1957-1958 crop of the San Carlos Mill District." In response, the Sugar Quota Administrator sent them a letter dated October 3, 1957 advising that it was inappropriate for them to include "in said list, sugar allotments rights in the quantity of 14,850 piculs for 'A' and 3,150 for 'B' purchased by San Carlos Milling Co., Ltd. from Mindoro Mill District," because "this purchase has not been given due course by this office in view of the defects . . . (which) have not yet been corrected." 14

    The Governor of the RFC also wrote to the SQA, under date of October 9, 1957, informing it of the mortgage to it of the sugar quota in question "aggregating no less than 148,000 piculs," and requesting "that no transfer or conveyance affecting the said sugar quota rights of the Philippine Milling Co. and Messrs. Hector A. Torres and Francisco Gomez that may have been presented or . . . may be presented . . . be given due course without the written consent of this Corporation." 15

    On October 17, 1957, the San Carlos Milling Co. Ltd. and Theo H. Davies & Co. Far East Ltd. wrote to the SQA, in reply to the latter's communication of October 3, 1957. Adverting to a letter of the Philippine Milling Co. "of Sept. 15th, 1957 and . . . memorandum enclosure of the same date addressed to the Phil. Milling Co., the transferor central, by Torres and Gomez, owners and sellers of the quota rights in question, " they demanded "that the transfer of said quotas be given effect immediately from Mindoro Plantation Audit 30-15 of Torres and Gomez to Plantation Audit No. 38-E-

  • 24 of the San Carlos Mill District for account of the San Carlos Planters Association." 16

    The matter of registration remained in a state of flux until about a year later, or more precisely, August 5, 1958, when the Administrator ultimately authorized the transfer. 17

    On January 6 and 7, 1959, the San Carlos Planters' Association in turn executed sales of portions of the sugar quota of 18,000 piculs acquired by it in favor of various individual sugar planters, all of which sales were recorded in the San Carlos District Transfer Registry. 18 Then on January 16, 1959, San Carlos effected a change in the Plantation Number of its remaining portion of the sugar quota purchased by it (57.06 piculs of "A" quota and 12.12, piculs of "B" quota) from No. 38-E-24 to No. 38-343. 19

    Eventually, the Development Bank of the Philippines (formerly RFC) caused the extrajudicial foreclosure of its mortgages of August 7, 1950 and November 2, 1951 by the Provincial Sheriff of Occidental Mindoro. The foreclosure sale was held on November 28, 1958. The DBP was the highest bidder. A certificate of sale was accordingly drawn up in its favor by the Sheriff on January 19, 1959. 20 As might be expected, among the properties specified in the certificate of sale, as having been sold to DBP, were. 21

    All sugar quota rights of the Philippine Milling Company including those of Spouses, Francisco M. Gomez and Francisca Villanueva and the Spouses, Hector A. Torres and Galinica Romano, as well as those of Gomez and Torres partnership in the Mindoro Mill District aggregating to no less than 148,000 piculs of sugar, which are attached to any and or all parcels of land described above and mortgaged to the Rehabilitation Finance Corporation now Development Bank, of the Philippines as well as the said sugar central's share in the above sugar and quota rights.

    On June 17, 1960 the one-year redemption period granted by law to the mortgagors, having expired without a redemption having been attempted, and the DBP having consolidated its ownership over the real and personal property subject of the mortgage sale the DBP executed a deed of sale in favor of the PNB covering all the foreclosed property, for P5,147,309.07 and other valuable consideration. 22

    Now, as regards the sugar quota in question, said deed stipulated inter alia that:

    1) The "sugar quota rights pertaining to the Philippine Milling Company shall not be covered-by this agreement until after the expiration of the 1959-1960 crop year, but in no case earlier than June 30, 1960;" 23 and

    2) ". . . while the l8,000 piculs of "A" and "B" sugar are expressly excluded in this Deed of Sale because of certain circumstances, the Vendee may, however, take such action as it may deem proper in order to recover the said 18,000 piculs of "A" and "B" sugar quotaand Vendor agrees to join such action whenever requested by the Vendee, it being understood, however, that Vendor shall not in any way be responsible for said 18,000 piculs nor be liable for the outcome of such action . . . 24

    After about two (2) years, in March, 1962, PNB wrote to the San Carlos Planters' Association and the planters to whom the latter had sold portions of the 18,000 piculs of the sugar quota in

  • question, supra, demanding the restoration and delivery to it (the PNB) of their respective portions of said quota. As already mentioned, 25 the 18,000 piculs consisted of 14,850 piculs of 'A' quota and 3,150 piculs of 'B' quota.

    When the latter failed to do so, the PNB together with the DBP brought suit in the Court of First Instance of Occidental Mindoro against Francisco M. Gomez and Hector A. Torres and their spouses; the partnership of Gomez & Torres; the Philippine Planters' Association; all the sugar planters to whom as aforementioned had been sold parts of the 18,000 piculs of the sugar quota in question; and the Sugar Quota Administration. 26 It set out three (3) causes of action in its complaint and prayed for judgment as follows:

    ON THE FIRST CAUSE OF ACTION

    a. Declare the plaintiff PNB owner of the sugar quota in question in the quantity equal to 14,850 piculs of "A" quota and 3,150 piculs of "B" quota presently registered in the Sugar Quota Administration in the names of the defendants PLANTERS and defendant San Carlos Planters' Ass'n in the quantity and under the plantation numbers indicated in par. 3 of the First Cause of Action of this Complaint;

    b. Order the defendants PLANTERS of the San Carlos Mill District and the defendant San Carlos Planters' Ass'n to return and restore to the plaintiff PNB the sugar quota in question;

    c. Order the cancellation of the District Transfer Registry . . . (regarding the transfers to the defendants) and declare same of no force and effect.

    ON THE SECOND AND ALTERNATIVE CAUSE OF ACTION

    a. Declare the plaintiff PNB owner of the sugar quota in question in the quantity equal to 14,850 piculs of "A" quota and 3,150 piculs of "B" quota presently registered in the Sugar Quota Administration in the names of the defendants PLANTERS and defendant San Carlos Planters' Assn. in the quantity and under the plantation numbers indicated in par. 3 of the First Cause of Action of this Complaint;

    b. Declare the sale of the sugar quota in question made by defendant TORRES & GOMEZ on July 3, 1957 and July 11, 1957 null and void;

    c. Declare the transfer of the sugar quota in question from the Mindoro Mill District to the San Carlos Mill District null and void;

    d. Declare the subsequent transfer of the sugar quota in question made by defendant San Carlos Planters' Assn. to the defendant PLANTERS of the San Carlos Mill District null and void;

    e. Order the said defendants PLANTERS and the defendant San Carlos Planters' Assn. to return and restore to the plaintiff PNB the sugar quota in question; and

    f. Order the cancellation of the. District Transfer Registry, Annexes "F", "G", "H", "I" and "J" and declare same of no force and effect.

    ON THE THIRD CAUSE OF ACTION

  • a. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A. Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies & Co. Ltd. and the San Carlos Planters' Assn. to pay jointly and severally the plaintiff PNB the sum of P50,400.00 as lost and/or unrealized rental of the sugar quota in question for the 1958-1959 crop year;

    b. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A. Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies & Co. Ltd. and the San Carlos Planters' Assn. to pay jointly and severally the plaintiff PNB the sum of P93,465.00 as unrealized profits on the sugar quota in question in connection with the agreement for conversion for 1959-1960 crop year;

    c. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A. Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies & Co. Ltd. and the San Carlos Planters' Assn. to pay jointly and severally the plaintiff PNB the sum of P93,465.00 as unrealized profits on the sugar quota in question in connection with the agreement for conversion entered with the BISCOM for the 1960-1961 crop year;

    d. Order the defendants TORRES & GOMEZ, Francisco Gomez, Hector A. Torres, Conrado Manalansan, as Sugar Quota Administrator, Theo H. Davies & Co. Ltd., San Carlos Planters' Assn. and the defendants PLANTERS to pay jointly and severally the Plaintiff PNB the sum of P9,000.00 annually for three crop years beginning with the 1961-1962 as lost and/or unrealized rental of the sugar quota in question.

    Plaintiff further pray for such other relief which this Honorable Court may deem just and proper to grant in the premises, with costs against the defendants.

    Answers were in due course filed by the several defendants. At the pre-trial, the parties entered into a partial stipulation of facts which contained, in substance:

    1) an admission of all the relevant documents appended to the complaint, as well as other documents, already above specified;

    2) an acknowledgment that the consideration fixed in the two (2) letters-contracts between Gomez & Torres and Theo H. Davies & Co., Ltd. and the San Carlos Planters' Association, dated July 3 and 11, 1957, 27 had been paid;

    3) a statement that the transfer of a part of the sugar quota to Cia. General de Tabacos de Filipinos (TABACALERA) was for valid consideration, and was accompanied by the usual warranty of the vendor's full right of disposition thereof and of absence of any lien or encumbrance thereon; and

    4) a request that the court "take judicial notices of all executive orders, circulars and regulations which are pertinent to sugar quotas or which are otherwise in implementation of, or connected with, legislation on sugar trade and industry." 28

    Trial ensued after which judgment was rendered. The Trial Court's judgment, rendered on April 8, 1968, 29 went against the plaintiffs. 30 It made the following explicit findings:

  • 1. That while the defendants, Philippine Milling Company and Gomez and Torres assigned the rights over the Sugar Quota to the R.F.C., said assignment of rights, not having been duly registered in accordance with the rules and regulations of the Sugar Quota Administration, did not effect third parties who acquired said sugar quota in good faith and for value;

    2. That the San Carlos Planters Association, the Theo H. Davies, the TABACALERA and all the transferees had acquired the sugar quota in question legally and in good faith, hence, the plaintiff has no cause of action against them; (and)

    3. That nevertheless, a valid cause of action exists as against defendants Francisco M. Gomez and Hector Torres on the basis of the mortgage and assignment executed by them in favor of the Development Bank of the Philippines and the Philippine National Bank.

    And on said findings, the Court:

    1) dismissed the case "as against the San Carlos (Planters') Association, Theo H. Davies Co., Ltd., TABACALERA, the Sugar Quota Administrator and all the other private defendants who are the transferees;" but

    2) ordered defendants 'Francisco M. Gomez and Hector Torres . . . to pay the value of the 18,000 piculs of 'A' and 'B' sugar quota allowance in the amount of P270,000.00 to the Philippine National Bank, plus interest at the legal rate from 1958 up to the actual payment thereof and to pay the costs."

    PNB and Francisco Gomez appealed to the Court of Appeals. 31 The PNB ascribed to the Trial Court the following errors to wit:

    1) not finding that a valid mortgage was duly constituted also on the sugar quota allowances in question with binding effect against third persons including the defendants-appellees;

    2) not finding that the defendants-appellees had both actual and constructive notice of the mortgage in favor of the Philippine National Bank and the Development Bank of the Philippines which covered the sugar quota allowances;

    3) not finding that the PNB is the owner of the sugar quota allowance and in not ordering the defendants-appellees to return or reconvey the said sugar quota allowances to the PNB.

    The decision of the Court of Appeals 32 was rendered on October 30, 1980. 33 It modified the Trial Court's judgment as follows:

    IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed from is hereby modified, in these aspects:

    1. declaring the Philippine National Bank the owner of the sugar quota or production allowances in question;

    2. ordering the defendants-appellees (excepting the defendant-appellee Administrator of the Sugar Quota Office) to reconvey to plaintiff-appellant PNB, the said sugar quota or production allowance

  • in question registered in their names, or if the same can not now be legally done, directing the defendants-appellees (excepting appellee Administrator of the Sugar Quota Office) to jointly and severally pay to PNB the value of the sugar quota or production allowance in question.

    The appealed judgment is hereby affirmed in all other respects.

    From this judgment, the Compaia General de Tabacos (TABACALERA) has appealed to this Court. Here it submits that said judgment should be reversed on the basis of the following considerations, to wit:

    1) that sugar quotas are not "ordinary property . . . which may be appropriated, transferred, conveyed and/or encumbered by the private grantee at his whim and discretion without the intervention of the State," it being "regulated property, the disposal or encumbrance of which is made subject to certain restrictions and regulations provided for by law;" hence, "any form of alienation thereof should be made subject to governmental regulations and should be processed and approved by the implementing arm of the government, the Sugar Quota Administration;" and the mortgage constituted over the sugar quota in this case by the parties to whom the same had originally been awarded the partnership of Gomez and Torres or the Philippine Milling Company was void, "(a)pproval or sanction of the Sugar Quota Administration . . . (being) sorely and fatally lacking;"

    a) moreover, "the very terms of the deed of sale executed by the DBP in favor of PNB on June 17, 1966 specifically and expressly excluded the 18,000 piculs in question;

    2) even if the mortgage be accorded validity, it was "binding only as between the mortgagors and the mortgagees and did not have any effect in third persons who subsequently acquired the same," because the mortgages had not yet been "duly registered with the Sugar Quota Administration" when TABACALERA and others purchased parts of the quota in question from the Philippine Planters' Association; indeed, the transferees from the latter had "received the sanction and approval of the Sugar Quota Administrator;"

    3) the direction by the Court of Appeals for TABACALERA among others, to reconvey the quota to the PNB is vague and indefinite since it does not state the point of time to be considered in computing the value thereof; furthermore, since it "benefited only to the extent of the . . . (precise quantity purchased by it, out of the 18,000 piculs), it would be "clearly contrary to law and grossly iniquitous" for it to be made solidarily liable for the value of the entire sugar quota in question; and

    4) if TABACALERA reconveys or pays the value of the sugar quota acquired from San Carlos Planters' Association, the latter should, upon its implied and express warranty against eviction, reimburse it therefor.

    The argument that Theo H. Davies & Co., Ltd., San Carlos Planters' Association, and their privies and successors in interest like TABACALERA, are purchasers in good faith of the sugar quota in question because they could not he deemed to have prior knowledge of the encumbrances thereon, is untenable.

    For one thing, as the Court of Appeals has pointed out, the intangible property that is the sugar quota in question should be considered as real property by destination, "an improvement attaching to the land entitled thereto." 34 Moreover, as is axiomatic, the recording in the Registry of Deeds of a mortgage over lands

  • and other immovables operates to charge "the whole world" with notice thereof. 35 The registration therefore of the mortgages executed by the Philippine Milling Company, Hector A. Torres and Francisco Gomez in favor of the RFC and later of the PNB, thus had the effect of charging all persons, including Theo H. Davies & Co., Ltd., San Carlos Planters' Association, and their privies and successors in interest, with notice of the encumbrance, not only over the lands belonging to the mortgagors but also of the sugar quotas as well as "all the buildings and improvements . . . existing or which may hereafter be constructed on the mortgaged property, all; elements, . . . agricultural or land indemnities, aids or subsidies and all other rights or benefits annexed to or inherent therein, now existing or which may hereafter exist." So, none of the parties in this case can plead lack of knowledge of the mortgage lien over the sugar quota or production allowance.

    Even if the sugar quota is assumed to be personal, not raid property, and hence not embraced in the mortgage of the immovables created by the corresponding deeds, it would nevertheless still be covered by the chattel mortgage created in and by the same deeds. Since, like the recording of a real estate mortgage, registration of a chattel mortgage also puts all persons on notice of its existence, the legal situation would be exactly the same: the registration of the above described deeds of chattel (and real estate) mortgage over the sugar quota, among other things, would also have charged all persons with notice thereof from the time of such registration. 36

    Again, being themselves engaged and possessed of no little experience in the sugar industry, said Theo H. Davies & Co., Ltd., San Carlos Planters' Association (and their own transferees) could not but have known, when negotiations for their respective purchases of the sugar quota in question commenced, that the sugar quota they were dealing with had perforce to pertain to some specific sugar plantation or farm, i.e., Plantation 30-15 of the Mindoro Mill District. Sugar quota allocations do not have existence independently of any particular tract of land. They are essentially ancillary, not principal, assets, necessarily annexed to a specific sugar plantation or land, improvements "attaching to the land entitled thereto." 37 Hence, the very first inquiry in any negotiation affecting sugar quotas necessarily would have to do with the identification of the district, plantation or land to which the quotas appertain. No transaction can be had of sugar quotas in the abstract, without reference whatsoever to any particular land. Indeed, any deed of conveyance of sugar quota would unavoidably have to describe the sugar plantation and district to which it refers or relates. There can be no sale simply of sugar quota of a certain number of piculs without specification of the land to which it relates. Such a sale would be inconsistent with established usage, and would be void for want of a determinate subject matter. 38 Theo H. Davies & Co., Ltd. and San Carlos Planters' Association can not therefore plead ignorance of the fact that the quota they were buying pertained to land belonging to the sellers, Plantation No. 30-15 of the Mindoro Mill District.

    Furthermore, Theo H. Davies & Co., Ltd. and San Carlos Planters' Association were obviously of the belief that a mortgage or sale of a sugar quota is void if "(a)pproval or sanction of the Sugar Quota Administration . . . (is) lacking," this being in fact a proposition TABACALERA lays before this Court, although it cites no particular authority for it and has thus failed to convince this Court of its validity. Be this as it may, it was with this proposition in mind that Theo H. Davies & Co. Ltd. and San Carlos Planters' Association submitted the deed of conveyance in their favor of the sugar quota in question, to the SQA, precisely to obtain the latter's approval of that transaction. That approval, as already stated, was not given until a year later. But long before that approval, they were clearly and categorically informed that the sugar quota, subject of the sale to them for which they were seeking approval by the SQA was already mortgaged to the RFC and then to the PNB. Since good faith is obviously a state of the mind, and since prior to the approval of the conveyance to them of the sugar quota by the SQA which approval they thought to be essential for the validity of said conveyance-they came to know of the earlier encum brance thereof to other parties, it is not possible for them without, contradicting themselves, to claim good faith in the transaction.

  • Turning now to TABACALERA and the other vendees of Theo H. Davies & Co. Ltd. and San Carlos Planters' Association, it is self-evident that they are also quite familiar with sugar quotas, including the nature and process of transferring the same, these being an important factor in their operations and transactions. They therefore had to know that the sugar quotas they were purchasing had originally to be part and parcel of some sugar plantation. Hence, apart from being charged with knowledge, as above discussed, of the mortgage of the land to which the sugar quota in question was an integrated adjunct and that the mortgage extended to said sugar quotas like the buildings and improvements thereon standing it may reasonably be assumed as a fact, too, that they inquired about and were duly informed of the origin of, and immediately preceding transactions involving, the sugar quotas they were acquiring.

    They should therefore all be regarded as buyers in bad faith the original vendees of Gomez and Torres and the Philippine Milling Company (i.e., the Philippine Planters Association and Theo H. Davies & Co. Ltd.) as well as the latter's own vendees (TABACALERA, et al.). The Court of Appeals was thus quite correct in "ordering the defendants-appellees (excepting the defendant-appellee Administrator of the Sugar Quota Office) to reconvey to plaintiff-appellant PNB, the said sugar quota or production allowance in question registered in their names, or if the same can not now be legally done, directing the defendants-appellees (excepting appellee Administrator of the Sugar Quota Office) to jointly and severally pay to PNB the value of the sugar quota or production allowance in question."

    The fact that "the very terms of the deed of sale executed by the DBP in favor of PNB on June 17, 1966 specifically and expressly excluded the 18,000 piculs in question," of which TABACALERA would make capital, is of no moment. As also held by the Court of Appeals, the exclusion is more apparent than real. It is true that the deed of June 17, 1966 does provide that "the 18,000 piculs of 'A' and 'B' sugar are expressly excluded . . . because of certain circumstances." It is however pointed out that "the Vendee may . . . take such action as it may deem proper in order to recover the said 18, 000 piculs of 'A' and 'B' sugar quota and Vendor agrees to join such action whenever requested by the Vendee." The clear implication is that notwithstanding those "certain circumstances" causing the exclusion of the 18,000 piculs, there was an express assertion that a right to recover the same existed in favor of the vendor and/or its vendee; a declaration, in other words, that the sugar quota of 18,000 piculs rightfully belonged to the vendor and, by the sale, to the vendee. The ambivalent stipulation, in the mind of the Court of Appeals, merely evidenced the DBP's intention not be rendered liable to PNB on any warranty of legal title considering that the quota had in point of fact already been sold to third persons before foreclosure; the ostensible exclusion of the 18,000 piculs was a mere cautionary proviso. This Court agrees, after undertaking a review and analysis of the relevant facts.

    However, TABACALERA's argument that it should not be made solidarily liable for the value of the entire sugar quota in question, because it benefited only to the extent of the precise quantity purchased by it, out of the 18,000 piculs is well taken. It does not appear that it acted in concert with the other vendees in the acquisition of all the 18,000 piculs comprising the sugar quota in question. For aught that appears on the record, it dealt separately and individually with its vendor. Its liability should indeed be limited to a return of the exact quantity and quality of the sugar quota separately purchased by it, as indubitably appears on record, or the payment of the value thereof computed as of the time that its obligation to return that quota was adjudged by the Court of Appeals.

    One final question remains to be resolved, that posed by TABACALERA, to wit: if it reconveys the sugar quota acquired from San Carlos Planters' Association, or pays its value, should not it be reimbursed therefor by the latter, upon its implied and express warranty against eviction? The answer win have to be in the negative. They, vendor and vendee, are in pari delicto. At the time of the transaction between them they were well aware of the encumbrance on the property dealt with, they had the common intention of negating the rights that they knew had earlier and properly been

  • acquired by the mortgagee of the property they were treating of; they were both consequently acting in bad faith. The object or purpose of their contract was "contrary to law, morals, good customs, public order or public policy." 39 The law says that in such a case, where "the unlawful or forbidden cause consists does not constitute a criminal offense, . . . and the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking." 40 No relief can be granted to either party; the law will leave them where they are. 41

    WHEREFORE, the challenged judgment of the Court of Appeals is hereby AFFIRMED, with the modification that the liability of petitioner Compaia General de Tabacos de Filipinas (TABACALERA) is limited to the return to the Philippine National Bank of the exact quantity and quality of the sugar quota purchased by it from the Philippine Planters Association and/or Theo H. Davies & Co., Ltd., as indubitably appears on record, or the payment of the value thereof to said Philippine National Bank computed as of the time that its obligation to return that quota was adjudged by the Court of Appeals.

    IT IS SO ORDERED.

    Grio-Aquino and Medialdea, JJ., concur.

    Cruz, J., took no part.

    Gancayno, J., is on leave.

    HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners, vs. VICENTE RODRIGUEZ, respondent.

    D E C I S I O N

    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 courts resolution denying reconsideration. Slxsc

    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 decedents estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City. Ramon San Andres engaged the services of a geodetic engineer, Jose Peero, to prepare a

  • consolidated plan (Exh. A) of the estate. Engineer Peero 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. Slxmis

    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: Missdaa

    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

    (Sgd.)

    RAMON SAN ANDRES

    3/30/66

    Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot. Sdaadsc

    While the proceedings were pending, judicial administrator Ramon San Andres died and was substituted by his son Ricardo San Andres. On the other hand, respondent Vicente Rodriguez died on August 15, 1989 and was substituted by his heirs.[7]

    Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peero,[8] testified that based on his survey conducted sometime between 1982 and 1985, respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters belonging to the latters estate. According to Peero, the titled property (Exh. A-5) of respondent was enclosed with a fence with metal holes and barbed wire, while the expanded area was fenced with barbed wire and bamboo and light materials. Rtcspped

    The second witness, Ricardo San Andres,[9] administrator of the estate, testified that respondent had not filed any claim before Special Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3. However, he recognized the signature in Exhibit 3 as similar to that of the former administrator, Ramon

  • San Andres. Finally, he declared that the expanded portion occupied by the family of respondent is now enclosed with barbed wire fence unlike before where it was found without fence.

    On the other hand, Bibiana B. Rodriguez,[10] widow of respondent Vicente Rodriguez, testified that they had purchased the subject lot from Juan San Andres, who was their compadre, on September 29, 1964, at P15.00 per square meter. According to her, they gave P500.00 to the late Juan San Andres who later affixed his signature to Exhibit 2. She added that on March 30, 1966, Ramon San Andres wrote them a letter asking for P300.00 as partial payment for the subject lot, but they were able to give him only P100.00. She added that they had paid the total purchase price of P7,035.00 on November 21, 1988 by depositing it in court. Bibiana B. Rodriquez stated that they had been in possession of the 509-square meter lot since 1964 when the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know at that time the exact area sold to them because they were told that the same would be known after the survey of the subject lot. Korte

    On September 20, 1994, the trial court[11] rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a new contract.

    Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale. The dispositive portion of its decisions reads:

    IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered DISMISSING the complaint and rendering judgment against the plaintiff-appellee:

    1. to accept the P7,035.00 representing the balance of the purchase price of the portion and which is deposited in court under Official Receipt No. 105754 (page 122, Records);

  • 2. to execute the formal deed of sale over the said 509 square meter portion of Lot 1914-B-2 in favor of appellant Vicente Rodriguez;

    3. to pay the defendant-appellant the amount of P50,000.00 as damages and P10,000.00 attorneys fees as stipulated by them during the trial of this case; and

    4. to pay the costs of the suit.

    SO ORDERED.

    Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the trial court: Sclaw

    I.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED.

    II.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS OBLIGED TO HONOR THE PURPORTED CONTRACT TO SELL DESPITE NON-FULFILLMENT BY RESPONDENT OF THE 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."[13] 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: Sclex

    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.

  • Petitioners 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.

    Appellees 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 defined, 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: Xlaw

    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]). Xsc

    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, Ramons authorized agent, correspondingly signed the receipt for the P100.00. Surely, this is explicitly a veritable proof of the 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: Sc

    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 Peoples Industrial and 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. Scmis

    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 efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit. Missc

    Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a 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, courts would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latters 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. Misspped

    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 approved by the Bureau of Lands, respondents heirs, assigns or successors-in-interest should reimburse the expenses incurred by herein petitioners, pursuant to the provisions of the contract. Spped

    WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse petitioners for the expenses of the survey. Jospped

    SO ORDERED.

  • G.R. No. L-36902 January 30, 1982

    LUIS PICHEL, petitioner, vs. PRUDENCIO ALONZO, respondent.

    GUERRERO, J.:

    This is a petition to review on certiorari the decision of the Court of First Instance of Basilan City dated January 5, 1973 in Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel, defendant."

    This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by the Philippine Government under Republic Act No. 477. Pertinent portions of the document sued upon read as follows:

    That the VENDOR for and in consideration of the sum of FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00), Philippine Currency, in hand paid by the VENDEE to the entire satisfaction of the VENDOR, the VENDOR hereby sells transfers, and conveys, by way of absolute sale, all the coconut fruits of his coconut land, designated as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at Balactasan Plantation, Lamitan, Basilan City, Philippines;

    That for the herein sale of the coconut fruits are for all the fruits on the aforementioned parcel of land presently found therein as well as for future fruits to be produced on the said parcel of land during the years period; which shag commence to run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);

    That the delivery of the subject matter of the Deed of Sale shall be from time to time and at the expense of the VENDEE who shall do the harvesting and gathering of the fruits;

    That the Vendor's right, title, interest and participation herein conveyed is of his own exclusive and absolute property, free from any liens and encumbrances and he warrants to the Vendee good title thereto and to defend the same against any and all claims of all persons whomsoever. 1

    After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972 which in part read thus:

    The following facts are admitted by the parties:

    Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot No. 21 of Subdivision Plan Psd 32465 of Balactasan, Lamitan, Basilan City in accordance with Republic Act No. 477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that, previous thereto, plaintiff was proved to have alienated the land to another, in violation of law. In 197 2, plaintiff's rights to the land were reinstated.

  • On August 14, 1968, plaintiff and his wife sold to defendant an the fruits of the coconut trees which may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to one, Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment plaintiff refused to snow the defendant to make any harvest.

    In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land.

    xxx xxx xxx

    Considering the foregoing, two issues appear posed by the complaint and the answer which must needs be tested in the crucible of a trial on the merits, and they are:

    First. Whether or nor defendant actually paid to plaintiff the full sum of P4,200.00 upon execution of the deed of sale.

    Second. Is the deed of sale, Exhibit 'A', the prohibited encumbrance contemplated in Section 8 of Republic Act No. 477? 2

    Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed that his client ... admits fun payment thereof by defendant. 3 The remaining issue being one of law, the Court below considered the case submitted for summary judgment on the basis of the pleadings of the parties, and the admission of facts and documentary evidence presented at the pre-trial conference.

    The lower court rendered its decision now under review, holding that although the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, a contract of lease of the land itself. According to the Court:

    ... the sale aforestated has given defendant complete control and enjoyment of the improvements of the land. That the contract is consensual; that its purpose is to allow the enjoyment or use of a thing; that it is onerous because rent or price certain is stipulated; and that the enjoyment or use of the thing certain is stipulated to be for a certain and definite period of time, are characteristics which admit of no other conclusion. ... The provisions of the contract itself and its characteristics govern its nature. 4

    The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by Republic Act No. 477 which provides thus:

    Sec. 8. Except in favor of the Government or any of its branches, units, or institutions, land acquired under the provisions of this Act or any permanent improvements thereon shall not be thereon and for a term of ten years from and after the date of issuance of the certificate of title, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of such period.

  • Any occupant or applicant of lands under this Act who transfers whatever rights he has acquired on said lands and/or on the improvements thereon before the date of the award or signature of the contract of sale, shall not be entitled to apply for another piece of agricultural land or urban, homesite or residential lot, as the case may be, from the National Abaca and Other Fibers Corporation; and such transfer shall be considered null and void. 5

    The dispositive portion of the lower Court's decision states:

    WHEREFORE, it is the judgment of this Court that the deed of sale, Exhibit 'A', should be, as it is, hereby declared nun and void; that plaintiff be, as he is, ordered to pay back to defendant the consideration of the sale in the sum of P4,200.00 the same to bear legal interest from the date of the filing of the complaint until paid; that defendant shall pay to the plaintiff the sum of P500.00 as attorney's fees.

    Costs against the defendant. 6

    Before going into the issues raised by the instant Petition, the matter of whether, under the admitted facts of this case, the respondent had the right or authority to execute the "Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled previously by the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras vs. Sua 7 wherein it was categorically stated by this Court that a cancellation of an award granted pursuant to the provisions of Republic Act No. 477 does not automatically divest the awardee of his rights to the land. Such cancellation does not result in the immediate reversion of the property subject of the award, to the State. Speaking through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that he may have over the same property." 8

    There is nothing in the record to show that at any time after the supposed cancellation of herein respondent's award on January 27, 1965, reversion proceedings against Lot No. 21 were instituted by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying the doctrine announced in the above-cited Ras case, therefore, herein respondent is not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could exercise all the rights pertaining to a grantee with respect to Lot No. 21.

    This brings Us to the issues raised by the instant Petition. In his Brief, petitioner contends that the lower Court erred:

    1. In resorting to construction and interpretation of the deed of sale in question where the terms thereof are clear and unambiguous and leave no doubt as to the intention of the parties;

    2. In declaring granting without admitting that an interpretation is necessary the deed of sale in question to be a contract of lease over the land itself where the respondent himself waived and abandoned his claim that said deed did not express the true agreement of the parties, and on the contrary, respondent admitted at the pre-trial that his agreement with petitioner was one of sale of the fruits of the coconut trees on the land;

  • 3. In deciding a question which was not in issue when it declared the deed of sale in question to be a contract of lease over Lot 21;

    4. In declaring furthermore the deed of sale in question to be a contract of lease over the land itself on the basis of facts which were not proved in evidence;

    5. In not holding that the deed of sale, Exhibit "A" and "2", expresses a valid contract of sale;

    6. In not deciding squarely and to the point the issue as to whether or not the deed of sale in question is an encumbrance on the land and its improvements prohibited by Section 8 of Republic Act 477; and

    7. In awarding respondent attorney's fees even granting, without admitting, that the deed of sale in question is violative of Section 8 of Republic Act 477.

    The first five assigned errors are interrelated, hence, We shall consider them together. To begin with, We agree with petitioner that construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that:

    Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control ... .

    Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. 9

    Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for thelease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides 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.

    A contract of sale may be absolute or conditional.

    The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. And inSibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing Mechem

  • on Sales and American cases said which have potential existence may be the subject matter of sale. Here, the Supreme Court, citing Mechem on Sales and American cases said:

    Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possess. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next case of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the goodwill of a trade and the like. The thing sold, however, must be specific and Identified. They must be also owned at the time by the vendor. (Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523).

    We do not agree with the trial court that the contract executed by and between the parties is "actually a contract of lease of the land and the coconut trees there." (CFI Decision, p. 62, Records). The Court's holding that the contract in question fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased.

    In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:

    Since according to article 1543 of the same Code the contract of lease is defined as the giving or the concession of the enjoyment or use of a thing for a specified time and fixed price, and since such contract is a form of enjoyment of the property, it is evident that it must be regarded as one of the means of enjoyment referred to in said article 398, inasmuch as the terms enjoyment, use, and benefit involve the same and analogous meaning relative to the general utility of which a given thing is capable. (104 Jurisprudencia Civil, 443)

    In concluding that the possession and enjoyment of the coconut trees can therefore be said to be the possession and enjoyment of the land itself because the defendant-lessee in order to enjoy his right under the contract, he actually takes possession of the land, at least during harvest time, gather all of the fruits of the coconut trees in the land, and gain exclusive use thereof without the interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is excluded in fact from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the seven-year period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself.

  • The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error and as already stated above, refers to the validity of the "Deed of Sale", as such contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower Court did not rule on this question, having reached the conclusion that the contract at bar was one of lease. It was from the context of a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the instant case.

    Resolving now this principal issue, We find after a close and careful examination of the terms of the first paragraph of Section 8 hereinabove quoted, that the grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land are things incorporated or attached to the property in a fixed manner, naturally or artificially. They include whatever is built, planted or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of which is prohibited by R.A. No. 477. While coconut trees are permanent improvements of a land, their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from the Government, had the right and prerogative to sell the coconut fruits of the trees growing on the property.