SECOND DIVISION

G.R. NO. 173622 : March 11, 2013

ROBERN DEVELOPMENT CORPORATION and RODOLFO M. BERNARDO, JR., Petitioners, v.PEOPLE'S LANDLESS ASSOCIATION represented by FLORIDA RAMOS and NARDO LABORA,Respondent.

D E C I S I O N

DEL CASTILLO, J.:

"This Court cannot presume the existence of a sale of land, absent any direct proof of it."1chanroblesvirtualawlibrary

Challenged in this Petition for Review on Certiorari are the August 16, 2005 Decision2 and May 30, 2006 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 66071, which ordered petitioner Robern Development Corporation (Robern) to reconvey the 2,000-square meter lot it bought from Al-Amanah Islamic Development Bank of the Philippines (Al-Amanah) to respondent People's Landless Association (PELA).

Factual Antecedents

Al-Amanah owned a 2000-square meter lot located in Magtu-od, Davao City and covered by Transfer Certificate of Title (TCT) No. 138914.4 On December 12, 1992, Al-Amanah Davao Branch, thru its officer-in-charge Febe O. Dalig (OIC Dalig), asked5 some of the members of PELA6 to desist from building their houses on the lot and to vacate the same, unless they are interested to buy it. The informal settlers thus expressed their interest to buy the lot at P100.00 per square meter, which Al-Amanah turned down for being far below its asking price.7 Consequently, Al-Amanah reiterated its demand to the informal settlers to vacate the lot.8chanroblesvirtualawlibrary

In a letter9 dated March 18, 1993, the informal settlers together with other members comprising PELA offered to purchase the lot for P300,000.00, half of which shall be paid as down payment and the remaining half to be paid within one year. In the lower portion of the said letter, Al-Amanah made the following annotation:chanroblesvirtualawlibrary

Note:chanroblesvirtualawlibrary

Subject offer has been acknowledged/received but processing to take effect upon putting up of the partial amt. of P150,000.00 on or before April 15, 1993.

By May 3, 1993, PELA had deposited P150,000.00 as evidenced by four bank receipts.10 For the first three receipts, the bank labelled the payments as "Partial deposit on sale of TCT No. 138914", while it noted the 4th receipt as "Partial/Full payment on deposit on sale of A/asset TCT No. 138914."

In the meantime, the PELA members remained in the property and introduced further improvements.

On November 29, 1993, Al-Amanah, thru Davao Branch Manager Abraham D. Ututalum-Al Haj, wrote then PELA President Bonifacio Cuizon, Sr. informing him of the Head Office's disapproval of PELA's offer to buy the said 2,000-square meter lot, viz:chanroblesvirtualawlibrary

Dear Mr. Cuizon, Sr.,

Please be inform[ed] that your offer to purchase the lot covered by TCT No. T-138914, containing an area of 2,000 square meters, located at Bakingan, Barangay Magtuod, Davao City for P300,000.00 has been turned down by the top management, due to the reason that your offered price is way below the selling price of the Bank which isP500.00 per square meter, or negotiate but on Cash basis only.

You had been told regarding this matter, but you failed to counter offer since you have [conferred] with the Bank's local management. Despite x x x the time given to you to counter offer or to vacate the lot presently and illegally occupied by you and the members of the association, still you refrain to hear our previous notices. You even deliberately construct more residential structures without our permission. As such, you are finally instructed to vacate the lot and remove all the house structures erected on the said lot within 15 days upon receipt of this letter. Failure on your part including that of the members, the Bank will be constrained to take legal action against you.

Furthermore, you can withdraw the amount deposited in the name of your association anytime during banking hours.11chanroblesvirtualawlibrary

Subsequently, Al-Amanah sent similarly worded letters,12 all dated December 14, 1993, to 19 PELA members demanding that they vacate the lot.

In a letter13 dated December 20, 1993, PELA, through Atty. Pedro S. Castillo, replied that it had already reached an agreement with Al-Amanah regarding the sale of the subject lot based on their offered price:chanroblesvirtualawlibrary

Dear Mr. Ututalum-Al-Haj,

The People's Landless Association, Inc., through Mr. Bonifacio Cuizon, Sr. has requested us to assist them in communicating with you anent your letter of 29 November 1993. According to Mr. Cuizon the present occupants of the lot covered by T.C.T. No. T-138914 with an area of 2,000 square meters, had a definite agreement with the Islamic Bank through its previous Manager or

Officer-in-Charge to buy this foreclosed property at P300,000.00. As a matter of fact their deposit ofP150,000.00 was on that basis. For this reason, the occupants, who are members of the association, have already made lot allocations among themselves and have improved their respective houses.

It would be most unfair if the Bank would now renege on its commitment and eject these occupants. In line with the national policy of granting landless members of our society the opportunity of owning land and providing shelter to their families, it would be equitable and socially justifiable to grant these occupants their occupied areas pursuant to the earlier agreement with the Bank.

For the foregoing reasons we hope that the Islamic Bank, for legal, moral and social grounds would reconsider.

Meanwhile, acting on Robern's undated written offer,14 Al-Amanah issued a Recommendation Sheet15 dated December 27, 1993 addressed to its Board Operations Committee, indicating therein that Robern is interested to buy the lot for P400,000.00; that it has already deposited 20% of the offered purchase price; that it is buying the lot on "as is" basis; and, that it is willing to shoulder the relocation of all informal settlers therein. On December 29, 1993, the Head Office informed the Davao Branch Manager that the Board Operations Committee had accepted Robern's offer.16chanroblesvirtualawlibrary

Eight days later, Robern was informed of the acceptance. Al-Amanah stressed that it is Robern's responsibility to eject the occupants in the subject lot, if any, as well as the payment of the remaining amount within 15 days; otherwise, the P80,000.00 deposit shall be forfeited.17chanroblesvirtualawlibrary

In a letter18 dated January 13, 1994, Robern expressed to Al-Amanah its uncertainty on the status of the subject lot, viz.:chanroblesvirtualawlibrary

This is in connection with TCT No. 138914 which your bank offered to sell to us and which we committed to buy.

A group calling itself PEOPLE'S LANDLESS ASSOCIATION, INC. made representation with our office bringing with them copies of official receipts totalling P150,000.00 issued by your bank which stated---"PARTIAL PAYMENT/DEPOSIT on sale of TCT #138914".

While condition no. 6 in the sale of property to us states that the buyer shall be responsible for ejecting the squatters of the property, the occupants of the said lot could hardly be categorized as squatters considering the supposed transaction previously entered by your bank with them. We were greatly appalled that we should learn about this not from the bank but from outside sources.

My company is ready to finalize our transaction provided, however, that the problem with this group is cleared. In this connection, we are requesting for a definite statement from your bank on whether the official receipts being brandished by this group are genuine or not, and if they were, were they ever invalidated by virtue of the return of their deposit and whether there was a cancellation of your agreement with them.

In the meantime, please consider the 15-day period for us to pay the amount of P320,000.00 imposed by your bank suspended until such time that the legal problem with the lot occupants is settled.

To convince Robern that it has no existing contract with PELA, Al-Amanah furnished it with copies of the Head Office's rejection letter of PELA's bid, the demand letters to vacate, and the proof of consignment of PELA's P150,000.00 deposit to the Regional Trial Court (RTC) of Davao City that PELA refused to withdraw.19 Thereafter, on February 2, 1994, it informed Robern that should the latter fail to pay the balance by February 9, 1994, its P80,000.00 deposit will be forfeited and the lot shall be up for sale to other prospective buyers.20 Meanwhile, Al-Amanah requested for assistance for the removal of the houses not only from the Office of the City Engineer of Davao City21 but also from Mayor Rodrigo Duterte. Gaining a favorable legal opinion from the City Legal Officer, the matter was indorsed to the Chief of Demolition Consensus of the Department of Public Services for action.22chanroblesvirtualawlibrary

On March 4, 1994, Robern paid the balance of the purchase price.23 The Deed of Sale24 over the realty was executed on April 6, 1994 and TCT No. T-21298325 was issued in Robern's name the following day.

A week later, PELA consigned P150,000.00 in the RTC of Davao City.26 Then on April 14, 1994, it wrote27 Al-Amanah asking the latter to withdraw the amount consigned. Part of the letter states:chanroblesvirtualawlibrary

x x x

On March 21, 1994 (almost one month before the April 15, 1994 deadline) we came to your bank to remit the balance and full payment [for] the abovementioned lot. [Inasmuch] as you refuse[d] to accept the payment, we have decided to deposit the amount consigned to your bank.

In our dialogue at your office in 1993, we have agreed that documents will be processed as soon as we pay the P150,000.00 initial deposit. [Inasmuch] as we have not only paid the deposit but have also made full payment of the account, kindly facilitate processing of the documents to finalize transaction.

We have not been remiss in doing our part of the transaction; please do your share.

Thank you.

Very truly yours,

For the occupants/claimants

T.C.T. No. T-13891428chanroblesvirtualawlibrary

Three months later, as its members were already facing eviction and possible demolition of their houses, and in order to protect their rights as vendees, PELA filed a suit for Annulment and Cancellation of Void Deed of Sale29 against Al-Amanah, its Director Engr. Farouk Carpizo (Engr. Carpizo), OIC Dalig, Robern, and Robern's President and General Manager, petitioner Rodolfo Bernardo (Bernardo) before the RTC of Davao City. It insisted that as early as March 1993 it has a perfected contract of sale with Al-Amanah. However, in an apparent act of bad faith and in cahoots with Robern, Al-Amanah proceeded with the sale of the lot despite the prior sale to PELA.

Incidentally, the trial court granted PELA's prayer for a temporary restraining order.30 Subsequently, it issued on August 12, 1994 an Order31 finding merit in the issuance of the writ of preliminary injunction, inter alia. The RTC's grant of injunctive relief was affirmed by the CA in CA-G.R. SP No. 3523832 when the factual and legal bases for its issuance were questioned before the appellate court.

The respondents in the annulment case filed their respective Answers.33 Al-Amanah and Engr. Carpizo claimed that the bank has every right to sell its lot to any interested buyer with the best offer and thus they chose Robern. They clarified that the P150,000.00 PELA handed to them is not part of the payment but merely a deposit in connection with its offer. They asserted that PELA was properly apprised that its offer to buy was subject to the approval of Al-Amanah's Head Office. They stressed that Al-Amanah never entered into a sale with PELA for there was no perfected agreement as to the price since the Head Office rejected

PELA's offer.

For their part, Robern and Bernardo asserted the corporation's standing as a purchaser in good faith and for value in the sale of the property, having relied on the clean title of Al-Amanah. They also alleged that the purported sale to PELA is violative of the Statute of Frauds34 as there is no written agreement covering the same.

Ruling of the Regional Trial Court

In its August 10, 1999 Decision,35 the RTC dismissed PELA's Complaint. It opined that the March 18, 1993 letter PELA has been relying upon as proof of a perfected contract of sale was a mere offer which was already rejected.

Furthermore, the annotation appearing in the bottom part of the said letter could not be construed as an acceptance because the same is a mere acknowledgment of receipt of the letter (not the offer) which will still be subject to processing. The RTC likewise ruled that being a corporation, only Al-Amanah's board of directors can bind the bank with third persons involving the sale of its property. Thus, the purported offer made by Al-Amanah's OIC, who was never conferred authority by the board of directors to sell the lot, cannot bind the bank. In contrast, when the Head Office accepted Robern's offered price, it was duly approved by the board of directors, giving birth to a perfected contract of sale between Al-Amanah and Robern.

Refusing to accept the Decision, PELA elevated its case to the CA.36chanroblesvirtualawlibrary

Ruling of the Court of Appeals

Reversing the RTC in its assailed Decision37 of August 16, 2005, the CA ruled that there was already a perfected contract of sale between PELA and Al-Amanah. It held that the annotationon the lower portion of the March 18, 1993 letter could be construed to mean that for Al-Amanah to accept PELA's offer, the sum of P150,000.00 must be first put up. The CA also observed that the subsequent receipt by Al-Amanah of the amounts totalling P150,000.00, and the annotation of "deposit on sale of TCT No. 138914," on the receipts it issued explicitly indicated an acceptance of the association's offer to buy. Consequently, the CA invalidated the sale between Robern and Al-Amanah.

The CA also concluded that Al-Amanah is guilty of bad faith in dealing with PELA because it took Al-Amanah almost seven months to reject PELA's offer while holding on to the P150,000.00 deposit. The CA thus adjudged PELA entitled to moral and exemplary damages as well as attorney's fees.

The dispositive portion of the CA Decision reads:chanroblesvirtualawlibrary

WHEREFORE, premises considered, the assailed Decision is SET ASIDE. Judgment is hereby rendered:chanroblesvirtualawlibrary

1. DECLARING the contract of sale between PELA and defendant Bank valid and subsisting.

2. ORDERING the defendant Bank to receive the balance of P150,000.00 of the purchase price from PELA as consigned in court.

3. DECLARING the deed of sale executed by defendant Bank in favor or Robern Development Corporation as invalid and, therefore, void.

4. ORDERING defendant Bank to return to Robern the full amount of P400,000.00 which Robern paid as the purchase price of the subject property within ten (10) days from finality of this decision. It shall 

earn a legal interest of twelve percent (12%) per annum from the tenth (10th) day aforementioned if there is delay in payment.

5. ORDERING Robern Development Corporation to reconvey the land covered by T.C.T. No. 212983 in favor of People's Landless Association within a similar period of ten (10) days from finality of this decision.

6. ORDERING defendant Bank to pay plaintiffs-appellants the following:chanroblesvirtualawlibrary

a. The sum of P100,000.00 as moral damages;cralawlibrary

b. The sum of P30,000.00 as exemplary damages;cralawlibrary

c. The sum of P30,000.00 as attorney's fees;cralawlibrary

d. A legal interest of SIX PERCENT (6%) per annum on the sums awarded in (a), (b), and (c) from the date of this Decision up to the time of full payment thereof.

SO ORDERED.38chanroblesvirtualawlibrary

Robern and Bernardo filed a Motion for Reconsideration39 which Al-Amanah adopted. The CA, however, was firm in its disposition and thus denied40 the same. Aggrieved, Robern and Al-Amanah separately filed Petitions for Review on Certiorari before us. However, Al-Amanah's Petition docketed as G.R. NO. 173437, was denied on September 27, 2006 on procedural grounds.41 Al-Amanah's Motion for Reconsideration of the said Resolution of dismissal was

denied with finality on December 4, 2006.42chanroblesvirtualawlibrary

Hence, only the Petition of Robern and Bernardo subsists.

Petitioners' Arguments

Petitioners stress that there was no sale between PELA and Al-Amanah, for neither a deed nor any written agreement was executed. They aver that Dalig was a mere OIC of Al-Amanah's Davao Branch, who was never vested with authority by the board of directors of Al-Amanah to sell the lot. With regard to the notation on the March 18, 1993 letter and the four bank receipts, Robern contends that these are only in connection with PELA's offer.

Petitioners likewise contend that Robern is a purchaser in good faith. The PELA members are mere informal settlers. The title to the lot was clean on its face, and at the time Al-Amanah accepted 

Robern's offer, the latter was unaware of the alleged transaction with PELA. And when PELA later represented to Robern that it entered into a transaction with Al-Amanah regarding the subject lot, Robern even wrote Al-Amanah to inquire about PELA's claim over the property. And when informed by Al-Amanah that it rejected the offer of PELA and of its action of requesting assistance from the local government to remove the occupants from the subject property, only then did Robern push through with the sale.

Respondent's Arguments

PELA, on the other hand, claims that petitioners are not the proper parties who can assail the contract of sale between it and the bank. It likewise argues that the Petition should be dismissed because the petitioners failed to attach the material portions of the records that would support its allegations, as required by Section 4, Rule 45 of the Rules of Court.43chanroblesvirtualawlibrary

Aside from echoing the finding of the CA that Al-Amanah has a perfected contract of sale with PELA, the latter further invokes the reasoning of the RTC and the CA (CA-G.R. SP No. 35238) in finding merit in the issuance of the writ of preliminary injunction, that is, that there was an apparent perfection of contract (of sale) between the Bank and PELA. 44 Furthermore, PELA claims that Al-Amanah accepted its offered price and the P150,000.00, thus barring the application of the Statute of Frauds as the contract was already partially executed. As to the non-existence of a written contract evidencing the same, PELA ascribes fault on the bank claiming that nothing happened despite its repeated follow-ups for the OIC of Al-Amanah to execute the deed after payment of the P150,000.00 in May 1993.

Issue

At issue before us is whether there was a perfected contract of sale between PELA and Al-Amanah, the resolution of which will decide whether the sale of the lot to Robern should be sustained or not.

Our Ruling

We shall first briefly address some matters raised by PELA.

PELA's contention that Robern cannot assail the alleged sale between PELA and Al-Amanah is untenable. Robern is one of the parties who claim title to the disputed lot. As such, it is a real party in interest since it stands to be benefited or injured by the judgment.45chanroblesvirtualawlibrary

Petitioners' failure to attach the material portions of the record that would support the allegations in the Petition is not fatal. We ruled in F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,46 thus:chanroblesvirtualawlibrary

x x x However, such a requirement failure to attach material portions of the record was not meant to be an ironclad rule such that the failure to follow the same would merit the outright dismissal of the petition. In accordance with Section 7 of Rule 45, the Supreme Court may require or allow the filing of such pleadings, briefs, memoranda or documents as it may deem necessary within such periods and under such conditions as it may consider appropriate. More importantly, Section 8 of Rule 45 declares that [i]f the petition is given due course, the Supreme Court may require the elevation of the complete record of the case or specified parts thereof within fifteen (15) days from notice. x x x47chanroblesvirtualawlibrary

Anent the statement of the courts below that there was an apparent perfection of contract (of sale) between Al-Amanah and PELA , we hold that the same is strictly confined to the resolution of whether a writ of preliminary injunction should issue since the PELA members were then about to be evicted. PELA should not rely on such statement as the same is not decisive of the rights of the parties and the merits of this case.

We shall now delve into the crucial issue of whether there was a perfected contract of sale between PELA and Al-Amanah.

Essential Elements of a Contract of Sale

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.48 Thus, for a contract of sale to be valid, all of the following essential elements must concur: "a) consent or meeting of the minds; b) determinate subject matter; and c) price certain in money or its equivalent."49chanroblesvirtualawlibrary

In the case at bench, there is no controversy anent the determinate subject matter, i.e., the 2,000-square meter lot. This leaves us to resolve whether there was a concurrence of the remaining elements.

As for the price, fixing it can never be left to the decision of only one of the contracting parties.50"But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale."51chanroblesvirtualawlibrary

As regards consent, "when there is merely an offer by one party without acceptance of the other, there is no contract."52 The decision to accept a bidder's proposal must be communicated to the bidder.53 However, a binding contract may exist between the parties whose minds have met, although they did not affix their signatures to any written document,54 as acceptance may be expressed or implied.55 It "can be inferred from the contemporaneous and subsequent acts of the contracting parties."56 Thus, we held:chanroblesvirtualawlibrary

x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale.57chanroblesvirtualawlibrary

There is no perfected contract of sale between PELA and Al-Amanah for want of consent and agreement on the price.

After scrutinizing the testimonial and documentary evidence in the records of the case, we find no proof of a perfected contract of sale between Al-Amanah and PELA. The parties did not agree on the price and no consent was given, whether express or implied.

When PELA Secretary Florida Ramos (Ramos) testified, she referred to the March 18, 1993 letter which PELA sent to Al-Amanah as the document supposedly embodying the perfected contract of sale.58 However, we find that the March 18, 1993 letter referred to was merely an offer to buy, viz:chanroblesvirtualawlibrary

March 18, 1993

The ManagerIslamic BankDavao Branch

Davao City

Sir/Madam:chanroblesvirtualawlibrary

This has reference to the offer made by Messrs. Alejandro Padilla, Leonardo Labora, Boy Bartiana, Francisco Paig, and Mr. Asterio Aki for the purchase of the acquired asset of the bank with an area of 2,000 square meters and covered by T.C.T. No. T-138914, portions of which are occupied by their houses. These occupants have formed and registered a group of x x x landless families who have occupied shoulders of National Highways, to be able to raise an amount that would meet the approval of the Bank as the consideration for the purchase of the property. The group which is known as PELA or People's Landless Association, is offering the bank the amount of THREE HUNDRED THOUSAND PESOS (P300,000.00) for the whole 2,000 sq. meters. Of this amount the buyers will pay a down payment of ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00) and the balance payable in one (1) year.

According to the plan of PELA, about 24 landless families can be accommodated in the property. We hope the Bank can help these families own even a small plot for their shelter. This would be in line with 

the government's program of housing which the present administration promised to put in high gear this year.59 (Emphasis supplied)

Neither can the note written by the bank that "subject offer has been acknowledged/received but processing to take effect upon putting up of the partial amount of P150,000.00 on or before April 15, 1993" be construed as acceptance of PELA's offer to buy. Taken at face value, the annotation simply means that the bank merely acknowledged receipt of PELA's letter-offer. Furthermore, by processing, Al-Amanah only meant that it will act on the offer , i.e., it still has to evaluate whether PELA's offer is acceptable. Until and unless Al-Amanah accepts, there is as yet no perfected contract of sale. Notably here, the bank never signified its approval or acceptance of the offer.

We cannot agree with the CA's ratiocination that receipt of the amount, coupled with the phrase written on the four receipts as "deposit on sale of TCT No. 138914," signified a tacit acceptance by Al-Amanah of PELA's offer. For sure, the money PELA gave was not in the concept of an earnest money. Besides, as testified to by then OIC Dalig, it is the usual practice of Al-Amanah to require submission of a bid deposit which is acknowledged by way of bank receipts before it entertains offers. Thus:chanroblesvirtualawlibrary

Atty. Bolcan:chanroblesvirtualawlibrary

Now, as far as you can remember, these receipts state that these are partial deposits, what do you mean by that?

WITNESS:chanroblesvirtualawlibrary

A: x x x, we normally request an offeror to submit or make deposit, actually the bank does not entertain any offer without any deposit and just like that, during my time x x x in buying the property for those interested the bank does not entertain any offer unless they make a deposit.

x x x

Q: Why do you issue receipts as officer-in-charge stating only partial deposits?

A: Because there was no sale, there was no consu[m]mated sale, so any amount which you will give as a deposit will be accepted by the bank for the offer and that if their offer will be disapproved we will return the deposit because their offer was very low and this might be disapproved by the head office in Manila.60chanroblesvirtualawlibrary

x x x

Atty. Taasan:chanroblesvirtualawlibrary

Do you confirm that based on the interest of the plaintiff to acquire the property they made a deposit with said bank, as evidenced by the receipts that were shown to you by your counsel, correct?

A: Yes, sir.

Q: And according to you, the bank does not entertain any offer to buy the property without deposits?

A: Yes, sir.

Q: In this case since the plaintiffs made a deposit x x x they were properly entertained, correct?

A: Yes because it is under negotiation, now while their offer price is below the selling price of the bank.61chanroblesvirtualawlibrary

The absence of a perfected contract of sale was further buttressed by the testimony of PELA Secretary Ramos on cross examination, viz:chanroblesvirtualawlibrary

Atty. Rabor:chanroblesvirtualawlibrary

Since it was x x x hard earned money you did not require the Amanah Bank when you gave thatP150,000.00 to reduce your agreement into writing regarding the sale of this property?

A: I insisted but she will not issue that.62chanroblesvirtualawlibrary

x x x

Atty. Bolcan:chanroblesvirtualawlibrary

Now, on April 15, 1993 when the deposit was made, you were present?

A: Yes, sir.

Q: Now, after making the deposit of One Hundred Fifty Thousand (P150,000.00) Pesos on April 15, 1993 did you not request for the bank to execute a document to prove that actually you are buying the property?

A: I even said to the OIC or the manager that ma am, now that you have received our money, where is our paper that we were the ones to buy that property, sir.

Q: To whom are you referring to?

A: Febe Dalig, the OIC, sir.

Q: And this OIC Febe Dalig informed you that the Offer on your part to buy the property is subject for approval by the head office in Manila, is that correct?

A: Yes she told me that it would be subject to approval in Manila x x x.

Q: And later on you were informed by the bank that your offer was not accepted by the head office in Manila, is that correct?

A: She did not inform us but we kept on following it up with their office and she told us that it did not arrive yet, sir.63 (Emphasis supplied)

PELA Secretary Ramos' testimony thus corroborated OIC Dalig's consistent stand that it is the Head Office which will decide whether Al-Amanah would accept PELA's offer:chanroblesvirtualawlibrary

Atty. Bolcan:chanroblesvirtualawlibrary

And now, if there are interested persons making offer x x x what would you do?

A: Well, we have to screen the offer before we forward the offer to Manila for approval because

Court:chanroblesvirtualawlibrary

What would you do before you forward that to Manila?

A: We will be screening the offer x x x.

Atty. Bolcan:chanroblesvirtualawlibrary

And you said that it is referred to Manila?

A: Yes, sir.

Q: Who will eventually approve the offer made by the interested persons to buy the property?

A: We have a committee in Manila to approve the sale of the property.

Q: Do you have any idea who will approve the offer of the property?

A: I have no idea but the president, rather it consists of the president I think and then signed also by the vice-president and some officers in the office, sir.

x x x

Q: Now, in case of offers of the property of the bank, x x x the officer-in-charge of the bank, Al-Amanah Bank branch, usually refers this matter to the head office in Manila?

A: Yes, sir.

Q: And it is the head office that will decide whether the offer will be approved or not?

A: Yes as head of the branch, we have to forward the offer whether it was acceptable or not.64chanroblesvirtualawlibrary

It is thus undisputed, and PELA even acknowledges, that OIC Dalig made it clear that the acceptance of the offer, notwithstanding the deposit, is subject to the approval of the Head Office. Recognizing the corporate nature of the bank and that the power to sell its real properties is lodged in the higher authorities,65 she never falsely represented to the bidders that she has authority to sell the bank's property. And regardless of PELA's insistence that she execute a written agreement of the sale, she refused and told PELA to wait for the decision of the Head Office, making it clear that she has no authority to execute any deed of sale.

Contracts undergo three stages: "a) negotiation which begins from the time the prospective contracting parties indicate interest in the contract and ends at the moment of their agreement[; b) perfection or birth, x x x which takes place when the parties agree upon all the essential elements of the contract x x x; and c) consummation, which occurs when the parties fulfill or perform the terms agreed upon, culminating in the extinguishment thereof."66chanroblesvirtualawlibrary

In the case at bench, the transaction between Al-Amanah and PELA remained in the negotiation stage. The offer never materialized into a perfected sale, for no oral or documentary evidence categorically proves that Al-Amanah expressed amenability to the offered P300,000.00 purchase price. Before the lapse of the 1-year period PELA had set to pay the remaining balance, Al-Amanah expressly rejected its offered purchase price, although it took the latter around seven months to inform the former and this entitled PELA to award of damages.67 Al-Amanah's act of selling the lot to another buyer is the final nail in the coffin of the negotiation with PELA. Clearly, there is no double sale, thus, we find no reason to disturb the consummated sale between Al-Amanah and Robern.

At this juncture, it is well to stress that Al-Amanah's Petition before this Court docketed as G.R. NO. 173437 was already denied with finality on December 4, 2006. Hence, we see no reason to disturb paragraph 6 of the CA's Decision ordering Al-Amanah to pay damages to PELA.

WHEREFORE, we PARTIALLY GRANT the Petition. Except for paragraph 6 of the Court of Appeals Decision which had already been long settled,68 the rest of the judgment in the assailed August 16, 2005 Decision and May 30, 2006 Resolution of the Court of Appeals in CA-G.R. NO. CV No. 66071 are hereby ANNULLED and SET ASIDE. The August 10, 1999 Decision of the Regional Trial Court of Davao City, Branch 12, dismissing the Complaint for Annulment and Cancellation of Void Deed of Sale filed by respondent People's Landless Association is REINSTATED and AFFIRMED. The amount of Pesos: Three Hundred Thousand (P300,000.00) consigned with the Regional Trial Court of Davao City may now be withdrawn by People's Landless Association.

SO ORDERED.

THIRD DIVISION[G.R. No. 149750. June 16, 2003]

AURORA ALCANTARA-DAUS, petitioner, vs. Spouses HERMOSO and SOCORRO DE LEON, respondents.D E C I S I O N

PANGANIBAN, J.:While a contract of sale is perfected by mere consent, ownership of the thing sold is acquired only 

upon its delivery to the buyer.  Upon the perfection of the sale, the seller assumes the obligation to transfer ownership and to deliver the thing sold, but the real right of ownership is transferred only “by tradition” or delivery thereof to the buyer.The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the February 9, 2001 Decision and the August 31, 2001 Resolution of the Court of Appeals[2](CA) in CA-GR CV No. 47587.  The dispositive portion of the assailed Decision reads as follows:“WHEREFORE, premises considered, the decision of the trial court is hereby REVERSED, and judgment rendered:

1.  Declaring null and void and of no effect, the [D]eed of [A]bsolute [S]ale dated December 6, 1975, the [D]eed of [E]xtra-judicial [P]artition and [Q]uitclaim dated July 1, 1985, and T.C.T. No. T-31262;

2.  Declaring T.C.T. No. 42238 as valid and binding;3.  Eliminating the award of P5,000.00 each to be paid to defendants-appellees.”[3]

The assailed Resolution[4] denied petitioner’s Motion for Reconsideration.The Facts

The antecedents of the case were summarized by the Regional Trial Court (RTC) and adopted by the CA as follows:“This   is   a   [C]omplaint   for   annulment   of   documents   and   title,   ownership,   possession,   injunction, preliminary injunction, restraining order and damages.“[Respondents] alleged in their [C]omplaint that they are the owners of a parcel of land hereunder described as follows, to wit:‘A parcel of land (Lot No. 4786 of the Cadastral Survey of San Manuel) situated in the Municipality of San Manuel,  Bounded on the NW.,  by Lot  No. 4785;  and on the SE.,  by  Lot Nos.  11094 & 11096; containing an area of Four Thousand Two Hundred Twelve (4,212) sq. m., more or less. Covered by Original Certificate of Title No. 22134 of the Land Records of Pangasinan.’which [Respondent] Hermoso de Leon inherited from his father Marcelino de Leon by virtue of a [D]eed of [E]xtra-judicial [P]artition.  Sometime in the early 1960s, [respondents] engaged the services of the late Atty. Florencio Juan to take care of the documents of the properties of his parents.  Atty. Juan let them sign voluminous documents.  After the death of Atty. Juan, some documents surfaced and most revealed that  their properties had been conveyed by sale or  quitclaim to [Respondent]  Hermoso’s brothers and sisters, to Atty. Juan and his sisters, when in truth and in fact, no such conveyances were ever intended by them.  His signature in the [D]eed of [E]xtra-judicial [P]artition with [Q]uitclaim made in favor of x x x Rodolfo de Leon was forged. They discovered that the land in question was sold by x x x Rodolfo de Leon to [Petitioner] Aurora Alcantara. They demanded annulment of the document and reconveyance but defendants refused x x x.

x x x                                                                      x x x                                                                                    x x x“[Petitioner] Aurora Alcantara-Daus [averred] that she bought the land in question in good faith and for value on December 6, 1975. [She] has been in continuous, public, peaceful, open possession over the same and has been appropriating the produce thereof without objection from anyone.”[5]

On August  23, 1994,  the RTC (Branch 48)  of Urdaneta,  Pangasinan[6] rendered  its  Decision[7] in favor of herein petitioner.  It ruled that respondents’ claim was barred by laches, because more than 18 years had passed since the land was sold.  It further ruled that since it was a notarial document, the Deed of Extrajudicial Partition in favor of Rodolfo de Leon was presumptively authentic.Ruling of the Court of Appeals

In   reversing   the  RTC,   the   CA   held   that   laches   did   not  bar   respondents   from pursuing   their claim.  Notwithstanding the delay, laches is a doctrine in equity and may not be invoked to resist the enforcement of a legal right.

The appellate court also held that since Rodolfo de Leon was not the owner of the land at the time of the sale, he could not transfer any land rights to petitioner.  It further declared that the signature of Hermoso de Leon on the Deed of Extrajudicial Partition and Quitclaim -- upon which petitioner bases her claim -- was a forgery.  It added that under the above circumstances, petitioner could not be said to be a buyer in good faith.

Hence, this Petition.[8]

The IssuesPetitioner raises the following issues for our consideration:

“1. Whether or not the Deed of Absolute Sale dated December 6, 1975 executed by Rodolfo de Leon (deceased) over the land in question in favor of petitioner was perfected and binding upon the parties therein?“2.  Whether   or   not   the  evidentiary  weight  of   the  Deed  of   Extrajudicial   Partition  with  Quitclaim, executed by [R]espondent Hermoso de Leon, Perlita de Leon and Carlota de Leon in favor of Rodolfo de Leon was overcome by more than [a] preponderance of evidence of respondents?“3. Whether or not the possession of petitioner including her predecessor-in-interest Rodolfo de Leon over the land in question was in good faith?“4. And whether or not the instant case initiated and filed by respondents on February 24, 1993 before the trial court has prescribed and respondents are guilty of laches?”[9]

The Court’s RulingThe Petition has no merit.

First Issue:Validity of the Deed of Absolute Sale

Petitioner argues that, having been perfected, the Contract of Sale executed on December 6, 1975 was thus binding upon the parties thereto. 

A   contract  of   sale   is   consensual.  It   is   perfected   by  mere   consent,[10] upon  a  meeting  of   the minds[11] on the offer and the acceptance thereof based on subject matter, price and terms of payment.[12]  At this stage, the seller’s ownership of the thing sold is not an element in the perfection of the contract of sale.

The contract, however, creates an obligation on the part of the seller to transfer ownership and to deliver the subject matter of the contract.[13]  It is during the delivery that the law requires the seller to 

have the right to transfer ownership of the thing sold.[14]  In general, a perfected contract of sale cannot be   challenged  on   the   ground  of   the   seller’s   non-ownership  of   the   thing   sold   at   the  time  of   the perfection of the contract.[15]  

Further, even after the contract of sale has been perfected between the parties, its consummation by delivery is yet another matter.  It is through tradition or delivery that the buyer acquires the real right of ownership over the thing sold.[16]

Undisputed is the fact that at the time of the sale, Rodolfo de Leon was not the owner of the land he delivered to petitioner.  Thus, the consummation of the contract and the consequent transfer of ownership would depend on whether he subsequently acquired ownership of the land in accordance with Article 1434 of the Civil Code.[17]  Therefore, we need to resolve the issue of the authenticity and the due execution of the Extrajudicial Partition and Quitclaim in his favor.Second Issue:Authenticity of the Extrajudicial Partition

Petitioner contends   that   the Extrajudicial  Partition and Quitclaim  is  authentic,  because   it  was notarized  and executed   in  accordance  with   law.  She  claims   that   there   is  no  clear  and  convincing evidence  to  set  aside  the  presumption of  regularity   in  the   issuance  of  such public  document.  We disagree.

As   a   general   rule,   the   due   execution   and   authenticity   of   a   document  must   be   reasonably established before it may be admitted in evidence.[18] Notarial documents, however, may be presented in evidence without further proof of their authenticity, since the certificate of acknowledgment is prima facie evidence of the execution of the instrument or document involved.[19]  To contradict facts in a notarial   document   and   the   presumption   of   regularity   in   its   favor,   the   evidence  must   be   clear, convincing and more than merely preponderant.[20]

The CA ruled that the signature of Hermoso de Leon on the Extrajudicial Partition and Quitclaim was forged.  However, this factual finding is in conflict with that of the RTC.  While normally this Court does not review factual issues,[21] this rule does not apply when there is a conflict between the holdings of the CA and those of the trial court,[22] as in the present case.

After poring over the records, we find no reason to reverse the factual finding of the appellate court.  A comparison of the genuine signatures of Hermoso de Leon[23] with his purported signature on the Deed of Extrajudicial Partition with Quitclaim[24] will readily reveal that the latter is a forgery.  As aptly held by the CA, such variance cannot be attributed to the age or the mechanical acts of the person signing.[25]

Without the corroborative testimony of the attesting witnesses, the lone account of the notary regarding the due execution of the Deed is insufficient to sustain the authenticity of this document.  He can hardly be expected to dispute the authenticity of the very Deed he notarized.[26]  For this reason, his testimony was -- as it should be --minutely scrutinized by the appellate court, and was found wanting.Third Issue:Possession in Good Faith

Petitioner claims that her possession of the land is in good faith and that, consequently, she has acquired ownership thereof by virtue of prescription.  We are not persuaded. 

It is well-settled that no title to registered land in derogation of that of the registered owner shall be acquired by prescription or adverse possession.[27]  Neither can prescription be allowed against the 

hereditary   successors   of   the   registered   owner,   because   they  merely   step   into   the   shoes   of   the decedent   and   are   merely   the   continuation   of   the   personality   of   their   predecessor   in   interest.[28] Consequently, since a certificate of registration[29] covers it, the disputed land cannot be acquired by prescription regardless of petitioner’s good faith.Fourth Issue:Prescription of Action and Laches

Petitioner also argues that the right to recover ownership has prescribed, and that respondents are guilty of laches.  Again, we disagree.

Article 1141 of the New Civil Code provides that real actions over immovable properties prescribe after thirty years.  This  period for filing an action  is  interrupted when a complaint   is filed  in court.[30] Rodolfo de Leon alleged that the land had been allocated to him by his brother Hermoso de Leon in March 1963,[31] but that the Deed of Extrajudicial Partition assigning the contested land to the latter was executed only on September 16, 1963.[32]  In any case, the Complaint to recover the land from petitioner was filed on February 24, 1993,[33] which was within the 30-year prescriptive period.

On the claim of laches, we find no reason to reverse the ruling of the CA.  Laches is based upon equity and the public policy of discouraging stale claims.[34]  Since laches is an equitable doctrine, its application   is   controlled  by  equitable   considerations.[35]  It   cannot  be  used   to  defeat   justice  or   to perpetuate fraud and injustice.[36]  Thus, the assertion of laches to thwart the claim of respondents is foreclosed, because the Deed upon which petitioner bases her claim is a forgery.

WHEREFORE,   the   Petition   is DENIED and   the   assailed   Decision AFFIRMED.  Costs   against petitioner.

SO ORDERED.

FIRST DIVISION[G.R. No. 126376. November 20, 2003]

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD

JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN

and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and

FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.

D E C I S I O NCARPIO, J.:The Case

This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of Appeals in CA-G.R. CV No. 41996.  The Court of Appeals affirmed the Decision[3] dated 18 February 1993 rendered by Branch 65 of the Regional Trial Court of Makati (“trial court”) in Civil Case No. 89-5174.  The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of action against the defendants.The Facts

The Court of Appeals summarized the facts of the case as follows:Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino,   all   surnamed   JOAQUIN.  The  married   Joaquin   children   are   joined   in   this   action   by   their respective spouses.Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names, to wit:

1.  Deed   of   Absolute   Sale   covering   Lot   168-C-7   of   subdivision   plan   (LRC)   Psd-256395 executed on 11 July 1978,  in favor of defendant Felicitas  Joaquin, for a consideration of P6,000.00 (Exh. “C”), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. “C-1”);

2.  Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on   7   June   1979,   in   favor   of   defendant   Clarita   Joaquin,   for   a   consideration of P1[2],000.00 (Exh. “D”), pursuant to which TCT No. S-109772 was issued in her name (Exh. “D-1”);

3   Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh. “E”), pursuant to which TCT No. 155329 was issued to them (Exh. “E-1”);

4.  Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration ofP[54,3]00.00 (Exh. “F”), pursuant to which TCT No. 155330 was issued to them (Exh. “F-1”); and

5.  Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed   on   9   September   1988,   in   favor   of   Tomas   Joaquin,   for   a   consideration 

of P20,000.00 (Exh. “G”), pursuant to which TCT No. 157203 was issued in her name (Exh. “G-1”).

[6.   Deed   of   Absolute   Sale   covering   Lot   168-C-1   of   subdivision   plan   (LRC)   Psd-256395 executed   on   7   October   1988,   in   favor   of   Gavino   Joaquin,   for   a   consideration of P25,000.00 (Exh. “K”), pursuant to which TCT No. 157779 was issued in his name (Exh. “K-1”).]

In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their complaint, aver:- XX-The deeds of sale, Annexes “C,” “D,” “E,” “F,” and “G,” [and “K”] are simulated as they are, are NULL AND VOID AB INITIO because –

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

b)      Secondly,   assuming   that   there   was   consideration   in   the   sums   reflected   in   the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein;

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

d)      Fourthly,   the  purported sale  of   the  properties in   litis was  the  result  of  a  deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.

- XXI -Necessarily,   and  as   an   inevitable   consequence,   Transfer  Certificates  of   Title  Nos.   36113/T-172,   S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties in litis xxx are NULL AND VOID AB INITIO.Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were issued with sufficient factual and legal basis.[4] (Emphasis in the original)The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted that “compulsory heirs have the right to a legitime but such right is contingent since said right commences only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines.”[7]

After trial, the trial court ruled in favor of the defendants and dismissed the complaint.  The trial court stated:In the first place, the testimony of the defendants, particularly that of the xxx father will show that the Deeds  of   Sale  were   all   executed   for   valuable   consideration.  This   assertion  must  prevail   over   the negative allegation of plaintiffs.

And then there is the argument that plaintiffs do not have a valid cause of action against defendants since there can be no legitime to speak of prior to the death of their parents.  The court finds this contention tenable.  In determining the legitime, the value of the property  left at the death of the testator shall be considered (Art. 908 of the New Civil Code).  Hence, the legitime of a compulsory heir is   computed   as   of   the   time   of   the   death   of   the   decedent.  Plaintiffs   therefore   cannot   claim   an impairment of their legitime while their parents live.All the foregoing considered, this case is DISMISSED.In order to preserve whatever is left of the ties that should bind families together, the counterclaim is likewise DISMISSED.No costs.SO ORDERED.[8]

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

To the mind of the Court,  appellants are skirting the real  and decisive  issue in this  case, which is,  whether xxx they have a cause of action against appellees.Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their parents.  However,   their right to the properties of  their  defendant  parents,  as compulsory  heirs,   is merely inchoate and vests only upon the latter’s death.  While still alive, defendant parents are free to dispose of their properties, provided that such dispositions are not made in fraud of creditors.Plaintiffs-appellants are definitely not parties to the deeds of sale in question.  Neither do they claim to be creditors of their defendant parents.  Consequently, they cannot be considered as real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express the true intent of the parties.  In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence, they have no legal capacity to challenge their validity.Plaintiffs-appellants   anchor   their   action   on   the   supposed   impairment   of   their   legitime   by   the dispositions made by their defendant parents in favor of their defendant brothers and sisters.  But, as correctly held by the court a quo, “the legitime of a compulsory heir is computed as of the time of the death of the decedent.  Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.”With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is inconsequential.WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.SO ORDERED.[9]

Hence, the instant petition.Issues

Petitioners assign the following as errors of the Court of Appeals:1.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION 

HAD NO VALID CONSIDERATION.

2.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.

3.  THE COURT  OF APPEALS  ERRED  IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES.

4.  THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.

5.  THE COURT OF APPEALS  ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.[10]

The Ruling of the CourtWe find the petition without merit.We will discuss petitioners’ legal interest over the properties subject of the Deeds of Sale before 

discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the Deeds of Sale.Whether Petitioners have a legal interestover the properties subject of the Deeds of Sale

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

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

[T]he question as to “real party-in-interest” is whether he is “the party who would be benefitted or injured by the judgment, or the ‘party entitled to the avails of the suit.’”x x xIn actions for the annulment of contracts, such as this action, the real parties are those who are parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the contracting parties and can show the detriment which would positively result to them from the contract even though they did not intervene in it (Ibañez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.These are parties with “a present substantial   interest,  as distinguished from a mere expectancy or future, contingent, subordinate, or consequential interest…. The phrase ‘present substantial interest’ more concretely is meant such interest of a party in the subject matter of the action as will entitle him, under the substantive  law, to recover  if  the evidence  is sufficient,  or that he has the  legal title to demand and the defendant will be protected in a payment to or recovery by him.”[13]

Petitioners do not have any legal interest over the properties subject of the Deeds of Sale.  As the appellate court stated, petitioners’ right to their parents’ properties is merely inchoate and vests only 

upon their  parents’  death.  While  still   living,   the parents of  petitioners are free to dispose of  their properties.  In   their   overzealousness   to   safeguard   their   future   legitime,   petitioners   forget   that theoretically,   the   sale   of   the   lots   to   their   siblings   does   not   affect   the   value   of   their   parents’ estate.  While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.Whether the Deeds of Sale are voidfor lack of consideration

Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of Sale to their respondent father.  Thus, petitioners ask the court to declare the Deeds of Sale void.

A contract of sale is not a real contract, but a consensual contract.  As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price.  If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment.  If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void.[14] Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.

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

Petitioners failed to show that  the prices  in the Deeds of  Sale  were absolutely  simulated.  To prove simulation,  petitioners presented Emma Joaquin Valdoz’s  testimony stating that  their  father, respondent Leonardo Joaquin, told her that he would transfer a  lot to her through a deed of sale without need for her payment of the purchase price.[16] The trial court did not find the allegation of absolute   simulation  of   price   credible.  Petitioners’   failure   to  prove  absolute   simulation  of   price   is magnified   by   their   lack   of   knowledge   of   their   respondent   siblings’   financial   capacity   to   buy   the questioned lots.[17]On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold.  Not only did respondents’ minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale.  As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father.[18]

Whether the Deeds of Sale are voidfor gross inadequacy of price

Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of Sale.

Articles 1355 of the Civil Code states:Art.  1355.  Except   in   cases   specified  by   law, lesion  or   inadequacy  of   cause   shall  not   invalidate  a contract, unless there has been fraud, mistake or undue influence.  (Emphasis supplied)

Article 1470 of the Civil Code further provides:

Art. 1470.  Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.   (Emphasis supplied)

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

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

Moreover,   the  factual  findings  of  the  appellate  court  are conclusive on  the parties and carry greater weight when they coincide with the factual findings of the trial court.  This Court will not weigh the evidence all over again unless there has been a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion.[20]  In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant children actually paid the purchase price stipulated in their respective Deeds of Sale.  Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us.

WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.SO ORDERED.

FIRST DIVISIONSPOUSES GOMER and LEONOR RAMOS, Petitioners versus SPOUSES SANTIAGO and MINDA HERUELA,

and SPOUSES CHERRY and RAYMOND PALLORI,

x-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xDECISION

CARPIO, J.:The Case          Before the Court is a petition for review[1] assailing the Decision[2] dated 23 August 2000 and the Order dated 20 September 2000 of the Regional Trial Court (“trial court”) of Misamis Oriental, Branch 21, in Civil Case    No. 98-060.  The trial court dismissed the plaintiffs’ action for recovery of ownership with damages.The Antecedent Facts           The spouses Gomer and Leonor Ramos (“spouses Ramos”) own a parcel of land, consisting of 1,883 square meters,  covered by Transfer  Certificate of  Title   (“TCT”)  No.  16535 of the Register  of Deeds of Cagayan de Oro City.  On 18 February 1980, the spouses Ramos made an agreement with the spouses  Santiago and Minda Heruela  (“spouses Heruela”)[3]covering 306 square meters of the  land (“land”).  According to the spouses Ramos, the agreement is a contract of conditional sale. The spouses Heruela allege that the contract is a sale on installment basis.           On  27   January  1998,   the   spouses  Ramos  filed  a   complaint   for  Recovery  of  Ownership  with Damages against the spouses Heruela.  The case was docketed as Civil Case No. 98-060.  The spouses Ramos allege that out of the P15,300[4] consideration for the sale of the land, the spouses Heruela paid only P4,000.   The   last   installment   that   the   spouses  Heruela  paid  was  on  18  December  1981.   The spouses Ramos assert that the spouses Heruela’s unjust refusal to pay the balance of the purchase price   caused  the  cancellation  of   the  Deed of  Conditional   Sale.   In   June 1982,   the   spouses  Ramos discovered   that   the   spouses   Heruela  were   already   occupying   a   portion  of   the   land.   Cherry   and Raymond Pallori   (“spouses Pallori”),  daughter  and son-in-law,  respectively,  of  the spouses Heruela, erected another house on the land.  The spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos.           The spouses Heruela allege that the contract is a sale on installment basis.  They paid P2,000 as down payment and made the following installment payments:

31 March 1980 P200  2 May 1980 P400 (for April and May 1980)20 June 1980 P200 (for June 1980)8 October 1980 P500 (for   July,   August   and   part   of 

September 1980)5 March 1981 P400 (for October and November 1980)18 December 1981 P300 (for   December   1980   and   part   of 

January 1981)

The spouses Heruela further allege that the 306 square meters specified in the contract was reduced to 282 square meters because upon subdivision of the land, 24 square meters became part of the road. The spouses Heruela claim that in March 1982, they expressed their willingness to pay the balance of P11,300 but the spouses Ramos refused their offer.

The Ruling of the Trial Court           In its Decision[5] dated 23 August 2000, the trial court ruled              that the contract is a sale by installment.   The trial court ruled that the spouses Ramos failed to comply with Section 4 of Republic Act No. 6552 (“RA 6552”),[6] as follows:

SEC.  4.   In case where less than two years of  installments were paid,  the seller shall give the buyer a grace period of not less than sixty days from the date the installment   became   due.   If   the   buyer   fails   to   pay   the   installments   due   at   the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.

          The dispositive portion of the Decision reads:          WHEREFORE, the complaint is hereby dismissed and plaintiff[s] are ordered to execute the corresponding Deed of Sale in favor of defendants after the latter have paid   the   remaining   balance   of   Eleven   Thousand   and   Three   Hundred   Pesos (P11,300.00).             Plaintiffs  are   further  ordered  to pay defendants   the  sum of P20,000.00,  as Attorney’s fees and P10,000.00 as litigation expenses.            SO ORDERED.[7]

           In an Order[8] dated 20 September 2000, the trial court denied the spouses Ramos’ motion for reconsideration.    

Hence, this petition.The Issues          The spouses Ramos raise the following issues:

I.                   Whether RA 6552 is applicable to an absolute sale of land;II.                Whether Articles 1191 and 1592 of the Civil  Code are applicable to the 

present case;III.             Whether the spouses Ramos have a right to cancel the sale;IV.            Whether the spouses Heruela have a right to damages.[9] 

The Ruling of the Court          The petition is partly meritorious.The Agreement is a Contract to Sell

In   its  Decision,   the   trial   court   ruled   on  whether   the   contract  made   by   the   parties   is   a conditional sale or a sale on installment. The spouses Ramos’ premise is that since the trial court ruled that the contract  is  a sale on installment,  the trial  court also in effect declared that the sale  is an absolute sale.  The spouses Ramos allege that RA 6552 is not applicable to an absolute sale. 

Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional.  A contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold.[10]  A deed of sale is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price.[11]  The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period.[12]   In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price.[13]  The full 

payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising.[14]

In this case, the agreement of the parties is embodied in a one-page, handwritten document.[15]   The document does not contain the usual  terms and conditions of a  formal  deed of sale.   The original document, elevated to this Court as part of the Records, is torn in part. Only the words “LMENT BASIS” is legible on the title.  The names and addresses of the parties and the identity of the property cannot be ascertained.  The agreement only provides for the following terms of the sale:

TERM[S] OF SALE:       PRICE PER SQM P50.00 X 306 SQM                                P 15,300.00       DOWN PAYMENT (TWO THOUSAND PESOS)               –   2,000.00          BALANCE PAYABLE AT MINIMUM OF P200.00        P 13,300.00            PER MONTH UNTIL FULLY PAID                     =======In Manuel v. Rodriguez, et al.,[16] the Court ruled that to be a written contract, all the terms 

must be in writing, so that a contract partly in writing and partly oral is in legal effect an oral contract.  The Court reiterated the Manuel ruling in Alfonso v. Court of Appeals:[17]

xxx In Manuel, “only the price and the terms of payment were in writing,” but the most important matter in the controversy, the alleged transfer of title was never “reduced to any written document.[”]  It was held that the contract should not be considered as a written but an oral one; not a sale but a promise to sell; and that “the absence  of  a   formal  deed of  conveyance” was  a  strong  indication “that   the parties   did   not   intend   immediate   transfer   of   title,   but   only   a   transfer   after   full payment of the price.”  Under these circumstances, the Court ruled Article 1504 of the  Civil  Code of  1889  (Art.  1592 of  the  present  Code)  to  be   inapplicable  to  the contract in controversy – a contract to sell or promise to sell – “where title remains with   the   vendor  until   fulfillment  of   a   positive   suspensive   condition,   such  as   full payment of the price x x [x].

The   records   show   that   the   spouses   Heruela   did   not   immediately   take   actual,   physical possession of the land.  According to the spouses Ramos, in March 1981, they allowed the niece of the spouses Heruela to occupy a portion of the land.   Indeed, the spouses Ramos alleged that they only discovered in June 1982 that the spouses Heruela were already occupying the land.  In their answer to the complaint, the spouses Heruela and the spouses Pallori alleged that their occupation of the land is lawful   because   having   made   partial   payments   of   the   purchase   price,   “they   already   considered themselves owners” of the land.[18]  Clearly, there was no transfer of title to the spouses Heruela.  The spouses Ramos retained their ownership of the land.  This only shows that the parties did not intend the transfer of ownership until full payment of the purchase price.RA 6552 is the Applicable Law

The trial court did not err in applying RA 6552 to the present case.          Articles 1191[19] and 1592[20] of the Civil Code are applicable to contracts of sale.   In contracts to sell, RA 6552 applies.  In Rillo v. Court of Appeals,[21] the Court declared: 

xxx Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds  of   real  estate   (industrial,   commercial,   residential)   the   right  of   the   seller   to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding   force.   It   also  provides   the   right  of   the  buyer  on   installments   in  case  he defaults in the payment of succeeding installments xxx.

Sections 3 and 4 of RA 6552 provide:           Sec. 3.   In all  transactions or contracts   involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act   Numbered   Thirty-eight   hundred   forty-four   as   amended   by   Republic   Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: 

(a)        To pay, without additional interest, the unpaid installments due within   the   total  grace  period  earned by him,  which   is hereby fixed at the rate of one month grace period for every one year of  installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

(b)        If   the  contract   is   cancelled,   the   seller   shall   refund   to   the buyer   the   cash   surrender   value   of   the   payments   on   the property  equivalent to fifty per cent  of  the total  payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total  payments made: Provided, That the actual  cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission   of   the   contract   by   a   notarial   act   and   upon   full payment of the cash surrender value to the buyer.

 Down payments, deposits or options on the contract shall be included in the 

computation of the total number of installments made.             Sec. 4.  In case where less than two years of installments were paid, the seller shall  give the buyer a grace period of not  less than sixty days from the date the installment   became   due.   If   the   buyer   fails   to   pay   the   installments   due   at   the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.

In this case, the spouses Heruela paid less than two years of installments.  Thus, Section 4 of RA 6552 applies.  However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela.   In Olympia Housing, Inc. v. Panasiatic Travel Corp.,[22] the Court ruled   that   the  vendor  could  go   to   court   to  demand  judicial   rescission   in   lieu  of  a  notarial   act  of rescission.  However, an action for reconveyance is not an action for rescission.  The Court explained in Olympia: 

The   action   for   reconveyance   filed   by   petitioner   was   predicated   on   an assumption that its contract to sell executed in favor of respondent buyer had been validly   cancelled   or   rescinded.   The   records   would   show   that,   indeed,   no   such cancellation   took   place   at   any   time   prior   to   the   institution   of   the   action   for reconveyance.  xxx

 xxx 

xxx Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects.   The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise  in  an action for  reconveyance.   Additionally,   in  an action for  rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an extrajudicial   rescission (rescission by notarial  act),   the Court,   instead of  decreeing rescission, may authorize for a just cause the fixing of a period.[23] 

                    In   the   present   case,   there   being   no   valid   rescission   of   the   contract   to   sell,   the   action   for reconveyance   is  premature.   Hence,   the  spouses  Heruela  have  not   lost   the  statutory  grace  period within which to pay.  The trial court should have fixed the grace period to sixty days conformably with Section 4 of RA 6552.

The spouses Heruela are not entirely fault-free.   They have been remiss in performing their obligation.    The trial  court found that the spouses Heruela offered once to pay the balance of the purchase price.  However, the spouses Heruela did not consign the payment during the pendency of the case.  In the meanwhile, the spouses Heruela enjoyed the use of the land. 

For the breach of obligation, the court, in its discretion, and applying Article 2209 of the Civil Code,[24] may award interest at the rate of 6% per annum on the amount of damages.[25]  The spouses Heruela have been enjoying the use of the land since 1982.  In 1995, they allowed their daughter and son-in-law, the spouses Pallori, to construct a house on the land.  Under the circumstances, the Court deems it proper to award interest at 6% per annum on the balance of the purchase price. 

The records do not show when the spouses Ramos made a demand from the spouses Heruela for  payment  of   the   balance  of   the   purchase  price.   The   complaint  only   alleged   that   the   spouses Heruela’s “unjust refusal to pay in full the purchase price xxx has caused the Deed of Conditional Sale to be rescinded, revoked and annulled.”[26]  The complaint did not specify when the spouses Ramos made the demand for payment.  For purposes of computing the legal interest, the reckoning period should be 

the filing on 27 January 1998 of the complaint for reconveyance, which the spouses Ramos erroneously considered an action for rescission of the contract.

The Court notes the reduction of the land area from 306 square meters to 282 square meters.  Upon subdivision of the land, 24 square meters became part of the road.  However, Santiago Heruela expressed his willingness to pay for the 306 square meters agreed upon despite the reduction of the land area.[27]  Thus, there is no dispute on the amount of the purchase price even with the reduction of the land area. On the Award of Attorney’s Fees and Litigation Expenses           The trial  court  ordered the spouses Ramos to pay the spouses    Heruela    and    the spouses   Pallori    the   amount   of   P20,000   as   attorney’s    fees   and P10,000   as   litigation   expenses.   Article 2208[28] of the Civil Code provides that subject to certain exceptions, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered in the absence of stipulation.   None of the enumerated exceptions applies to this case.  Further, the policy of the law is to put no premium on the right to litigate.[29]  Hence, the award of attorney’s fees and litigation expenses should be deleted.

WHEREFORE, we AFFIRM the Decision dated 23 August 2000 of the Regional Trial  Court of Misamis Oriental, Branch 21, dismissing the complaint for Recovery of Ownership with Damages, with the following MODIFICATION:

1.       The spouses Heruela shall pay the spouses Ramos P11,300 as balance of the purchase price plus interest at 6% per annum from 27 January 1998.  The spouses Heruela shall pay within 60 days from finality of this Decision; 

2.       Upon payment, the spouses Ramos shall execute a deed of absolute sale of the land and deliver the certificate of title in favor of the spouses Heruela;

3.       In case of failure to thus pay within 60 days from finality of this Decision, the spouses Heruela and the spouses Pallori shall immediately vacate the premises without need of further demand, and the down payment and installment payments of P4,000 paid by the spouses Heruela shall constitute rental for the land;

4.       The award of P20,000 as attorney’s fees and P10,000 as litigation expenses in favor of the spouses Heruela and the spouses Pallori is deleted.

 

SO ORDERED

Republic of the PhilippinesSUPREME COURTSECOND DIVISION

G.R. No. 120820 August 1, 2000

SPS. FORTUNATO SANTOS and ROSALINDA R SANTOS, petitioners, vs.

COURT OF APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.QUISUMBING, J.:For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995, in CA-G.R. CV No. 30955, which reversed and set aside the judgment of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 89-4759. Petitioners (the Santoses) were the owners of a house and lot informally sold, with conditions, to herein private respondents (the Casedas). In the trial court, the Casedas had complained that the Santoses refused to deliver said house and lot despite repeated demands. The trial court dismissed the complaint for specific performance and damages, but in the Court of Appeals, the dismissal was reversed, as follows:

"WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and SET ASIDE and a new one entered:"1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the finality of   judgment  within  which   to  pay   the  balance  of   the  obligation   in   accordance  with   their agreement;"2. Ordering appellees to restore possession of the subject house and lot to the appellants upon receipt of the full amount of the balance due on the purchase price; and"3. No pronouncement as to costs."SO ORDERED."1

The undisputed facts of this case are as follows:The spouses Fortunato and Rosalinda Santos owned the house and lot consisting of 350 square meters located at Lot 7, Block 8, Better Living Subdivision, Parañaque, Metro Manila, as evidenced by TCT (S-11029) 28005 of the Register of Deeds of Parañaque. The land together with the house, was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16, 1987.Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in Pasay City and soon became very good friends with her. The duo even became kumadres when Carmen stood as a wedding sponsor of Rosalinda's nephew.On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84 in unpaid interest and other charges. Since the Santos couple had no funds, Rosalinda offered to sell the house and lot to Carmen. After inspecting the real property, Carmen and her husband agreed.

Sometime that month of June, Carmen and Rosalinda signed a document, which reads:"Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the (total) amount of 350,000.00 (house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.(Sgd.) Carmen H. Casedadirect buyerMrs. Carmen Caseda"(Sgd.) Rosalinda Del R. SantosOwnerMrs. Rosalinda R. SantosHouse and LotBetter Living Subd. Parañaque, Metro Manila

Section V Don Bosco St."2

The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay: (1) the balance of the mortgage loan with the Rural bank amounting to P135,385.18; (2) the real estate taxes; (3) the electric and water bills; and (4) the balance of the cash price to be paid not later than June 16, 1987, which was the maturity date of the loan.3

The Casedas gave an initial payment of P54,100.00 and immediately took possession of the property, which they then  leased out.  They also  paid  in   installments,  P81,696.84 of  the mortgage   loan.  The Casedas, however, failed to pay the remaining balance of the loan because they suffered bankruptcy in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes on the property for 1981-1984. She also settled the electric bills from December 12, 1988 to July 12, 1989. All these payments were made in the name of Rosalinda Santos.In   January   1989,   the   Santoses,   seeing   that   the   Casedas   lacked   the  means   to   pay   the   remaining installments and/or amortization of the loan, repossessed the property. The Santoses then collected the rentals from the tenants.In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached petitioners and offered to pay the balance of the purchase price for the house and lot. The parties, however, could not agree,   and   the   deal   could   not   push   through   because   the   Santoses  wanted   a   higher   price.   For understandably, the real estate boom in Metro Manila at this time, had considerably jacked up realty values. On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati, to have the   Santoses   execute   the   final   deed   of   conveyance   over   the   property,   or   in   default   thereof,   to reimburse   the  amount  of  P180,000.00  paid   in   cash  and  P249,900.00  paid   to   the   rural  bank,  plus interest,  as well  as  rentals   for  eight  months amounting to  P32,000.00,  plus damages and costs of suit.1âwphi1.nêtAfter trial on the merits, the lower court disposed of the case as follows:

"WHEREFORE, judgment is hereby ordered:(a) dismissing plaintiff's (Casedas') complaint; and(b) declaring the agreement; marked as Annex "C" of the complaint rescinded. Costs against plaintiffs."SO ORDERED."4

Said judgment of dismissal is mainly based on the trial court's finding that:"Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as cash payment   and   P135,385.18,   assumption   of   mortgage.   Of   it   plaintiffs   [Casedas]   paid   the following:   (1)  P54,100.00 down payment;  and  (2)  P81,694.64  installment  payments  to  the bank on the loan (Exhs. E to E-19) or a total of P135,794.64. Thus, plaintiffs were short of the purchase price. They cannot, therefore, demand specific performance."5

The trial court further held that the Casedas were not entitled to reimbursement of payments already made, reasoning that:

"As earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the purchase price of P485,385.18. The property was in plaintiffs' possession from June 1984 to January 1989 or a period of fifty-five months. During that time, plaintiffs leased the property. Carmen said the property was rented for P25.00 a day or P750.00 a month at the start and in 1987 it was increased to P2,000.00 and P4,000 a month. But the evidence is not precise when the 

different amounts of rental took place. Be that as it may, fairness demands that plaintiffs must pay defendants for the exercise of dominical rights over the property by renting it to others. The amount of P2,000.00 a month would be reasonable based on the average of P750.00, P2,000.00, P4,000.00 lease-rentals charged. Multiply P2,000 by 55 months, the plaintiffs must pay   defendants   P110,000   for   the   use   of   the   property.  Deducting   this   amount   from   the P135,794.64 payment of the plaintiffs on the property the difference is P25,794.64. Should the plaintiffs  be  entitled   to  a   reimbursement  of   this  amount?  The answer   is   in   the  negative. Because of failure of plaintiffs to liquidated the mortgage loan on time, it had ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of December 31, 1988. Defendants [Santoses]  had to pay the last  amount to the bank to save the property  from foreclosure. Logically, plaintiffs must share in the burden arising from their failure to liquidate the loan per their contractual commitment. Hence, the amount of P25,794.64 as their share in the defendants' damages in the form of increased loan-amount, is reasonable."6

On appeal, the appellate court, as earlier noted, reversed the lower court. The appellate court held that rescission was not justified under the circumstances and allowed the Caseda spouses a period of ninety days within which to pay the balance of the agreed purchase price.Hence, this instant petition for review on certiorari filed by the Santoses.Petitioners now submit the following issues for our consideration:

WHETHER   OR   NOT   THE   COURT   OF   APPEALS,   HAS   JURISDICTION   TO   DECIDE   PRIVATE RESPONDENT'S APPEAL INTERPOSING PURELY QUESTIONS OF LAW.WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE BUT A MERE ORAL   CONTRACT   TO   SELL   IN   WHICH   CASE   JUDICIAL   DEMAND   FOR   RESCISSION   (ART. 1592,7 CIVIL CODE) IS NOT APPLICABLE.ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED, WHETHER PETITIONERS' DEMAND AND PRAYER FOR RESCISSION CONTAINED IN THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT.WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE PURCHASE PRICE INCLUDING THE NON-COMPLIANCE WITH THE STIPULATION TO LIQUIDATE THE MORTGAGE LOAN   ON   TIME   WHICH   CAUSED   GRAVE   DAMAGE   AND   PREJUDICE   TO   PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO JUSTIFY RESCISSION OF A CONTRACT TO SELL UNDER ARTICLE 1191 8(CIVIL CODE).

On the first issue, petitioners argue that, since both the parties and the apellate court adopted the findings of trial  court,9 no questions of  fact were raised before the Court  of Appeals.  According to petitioners, CA-G.R. CV No. 30955, involved only pure questions of law. They aver that the court a quo had no jurisdiction to hear, much less decide, CA-G.R. CV No. 30955, without running afoul of Supreme Court Circular No. 290 (4) [c].10

There is a question of law in a given case when the doubt or difference arises as to how the law is on a  certain set of facts, and there is a question of fact when the doubt or difference arises as to the truth or falsehood   of   the   alleged   facts.11 But   we   note   that   the   first   assignment   of   error   submitted   by respondents for consideration by the appellate court dealt with the trial court's finding that herein petitioners got back the property in question because respondents did not have the means to pay the installments and/or amortization of the loan.12 The resolution of this question involved an evaluation of 

proof, and not only a consideration of the applicable statutory and case laws. Clearly, C.A.-G.R. CV No. 30955 did not involve pure questions of law, hence the Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-90.Moreover, we find that petitioners took an active part in the proceedings before the Court of Appeals, yet they did not raise there the issue of jurisdiction. They should have raised this issue at the earliest opportunity before the Court of Appeals. A party taking part in the proceedings before the appellate court and submitting his case for its decision ought not to later on attack the court's decision for want of jurisdiction because the decision turns out to be adverse to him.13

The second and third issues deal  with   the  question:  Did   the  Court  of  Appeals  err   in  holding   that  a judicial   rescission of the agreement was necessary?  In resolving both  issues,  we must first make a preliminary  determination of   the nature  of  the  contract   in  question:  Was  it  a  contract  of   sale,  as insisted by the respondents or a mere contract to sell, as contended by petitioners?Petitioners argue that the transaction between them and respondents was a mere contract to sell, and not   a   contract   of   sale,   since   the   sole   documentary   evidence   (Exh.   D,   receipt)   referring   to   their agreement   clearly   showed   that   they   did   not   transfer   ownership   of   the   property   in   question simultaneous  with   its   delivery   and   hence   remained   its   owners,   pending   fulfillment   of   the   other suspensive   conditions,   i.e.   full   payment   of   the   balance   of   the   purchase   price   and   the   loan amortizations. Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972), where he held that article 1592 of the Civil Code is inapplicable to a contract to sell.  They charge the court a quo with reversible error in holding that petitioners should have judicially rescinded the agreement with respondents when the latter failed to pay the amortizations on the bank loan.Respondents insist that there was a perfected contract of sale, since upon their partial payment of the purchase price, they immediately took possession of the property as vendees, and subsequently leased it, thus exercising all the rights of ownership over the property. This showed that transfer of ownership was simultaneous with the delivery of the realty sold, according to respondents.It must be emphasized from the outset that a contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it.14 Article 145815 of the Civil Code defines a contract of sale. Note that the said article expressly obliges the vendor to transfer the ownership  of  the thing sold as  an essential  element  of  a contract  of  sale.16 We have carefully examined the contents of the unofficial receipt, Exh. D, with the terms and conditions informally agreed upon by the parties, as well as the proofs submitted to support their respective contentions. We are far from  persuaded   that   there  was   a   transfer  of   ownership   simultaneously  with   the  delivery  of   the property purportedly sold. The records clearly show that, notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005 (S-11029) issued by the Register of Deeds of Parañaque, has remained always in the name of Rosalinda Santos.17 Note further that although the parties agreed that the Casedas would assume the mortgage, all   amortization  payments  made   by   Carmen  Caseda   to   the   bank  were   in   the   name  of  Rosalinda Santos.18 We likewise find that the bank's cancellation and discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda Santos.19 The foregoing circumstances categorically and clearly show  that  no valid   transfer  of  ownership  was  made by   the  Santoses   to   the  Casedas.  Absent   this essential element, their agreement cannot be deemed a contract of sale. We agree with petitioner's 

averment that the agreement between Rosalinda Santos and Carmen Caseda is a contract to sell. In contracts to sell, ownership is reserved the by the vendor and is not to pass until full payment of the purchase price. This we find fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require notarial and other formalities of law before transfer thereof could be validly effected.In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. As we earlier pointed, in 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 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.20 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.21 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. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full,  they were merely enforcing the contract and not rescinding it. As petitioners correctly point out the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil  Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell.22 As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property.23 Neither provision is applicable in the present case.As to the last issue, we need not tarry to make a determination of whether the breach of contract by private   respondents   is   so  substantial  as   to  defeat   the  purpose  of   the  parties   in  entering   into   the agreement and thus entitle petitioners to rescission. Having ruled that there is no rescission to speak of in this case, the question is moot.WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court of Appeals in CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional Trial Court of Makati, Branch  133,  with   respect   to   the DISMISSAL of   the   complaint   in  Civil   Case  No.   89-4759,   is   hereby REINSTATED. No pronouncement as to costs.1âwphi1.nêtSO ORDERED.

Republic of the PhilippinesSUPREME COURT

ManilaFIRST DIVISION

G.R. No. 78903 February 28, 1990

SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners, vs.

THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR., respondents.Francisco A. Puray, Sr. for petitioners.

Gabriel N. Duazo for private respondent. MEDIALDEA, J.:This is a petition to annul and set aside the decision of the Court of Appeals rendered on May 26, 1987, upholding the validity of the sale of a parcel of land by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private respondent Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:

A parcel of land located at Panyawan, Sogod, Southern Leyte, declared in the name of Segundo Dalion, under Tax Declaration No. 11148, with an area of 8947 hectares, assessed at P 180.00, and bounded on the North, by Sergio Destriza and Titon Veloso, East, by Feliciano Destriza, by Barbara Bonesa (sic); and West, by Catalino Espina. (pp. 36-37, Rollo)

The decision affirms in toto the ruling of the trial court 1 issued on January 17, 1984, the dispositive portion of which provides as follows:

WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders judgment.(a) Ordering the defendants to deliver to the plaintiff the parcel of land subject of this case, declared in the name of Segundo Dalion previously under Tax Declaration No. 11148   and   lately   under   Tax   Declaration   No.   2297   (1974)   and   to   execute   the corresponding   formal   deed  of   conveyance   in   a  public   document   in   favor  of   the plaintiff of the said property subject of this case, otherwise, should defendants for any reason fail to do so, the deed shall be executed in their behalf by the Provincial Sheriff or his Deputy;(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as attorney's fees and P 500.00 as litigation expenses, and to pay the costs; and(c) Dismissing the counter-claim. (p. 38, Rollo)

The facts of the case are as follows:On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, dated July 1, 1965 (Exhibit "A"), allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery, and that subject  land is conjugal  property,  which he and his  wife acquired in 1960 from Saturnina Sabesaje as evidenced by the "Escritura de Venta Absoluta" (Exhibit "B"). The spouses denied claims of Sabesaje that after executing a deed of sale over the parcel of land, they had pleaded with Sabesaje, their   relative,   to   be   allowed   to   administer   the   land   because  Dalion   did   not   have   any  means   of livelihood.   They   admitted,   however,   administering   since   1958,   five   (5)   parcels   of   land   in   Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They never received their agreed 10% and 15% commission on the sales of copra and abaca, respectively. Sabesaje's suit, they countered, was intended merely to harass, preempt and forestall Dalion's threat to sue for these unpaid commissions.

From the adverse decision of the trial court, Dalion appealed, assigning errors some of which, however, were disregarded by the appellate court, not having been raised in the court below. While the Court of Appeals duly recognizes Our authority to review matters even if not assigned as errors in the appeal, We are not inclined to do so since a review of the case at bar reveals that the lower court has judicially  decided the case on its merits.As to the controversy regarding the identity of the land, We have no reason to dispute the Court of Appeals' findings as follows:

To be sure, the parcel of land described in Exhibit "A" is the same property deeded out in Exhibit "B". The boundaries delineating it from adjacent lots are identical. Both documents detail out the following boundaries, to wit:On the North-property of Sergio Destriza and Titon Veloso;On the East-property of Feliciano Destriza;On the South-property of Barbara Boniza andOn the West-Catalino Espina.(pp. 41-42, Rollo)

The issues in this case may thus be limited to: a) the validity of the contract of sale of a parcel of land and b) the necessity of a public document for transfer of ownership thereto.The appellate court upheld the validity of the sale on the basis of Secs. 21 and 23 of Rule 132 of the Revised Rules of Court.

SEC.   21.  Private writing, its execution and authenticity, how proved.-Before   any private writing may be received in evidence, its due execution and authenticity must be proved either:(a) By anyone who saw the writing executed;(b) By evidence of the genuineness of the handwriting of the maker; or(c) By a subscribing witnessxxx xxx xxxSEC. 23. Handwriting, how proved. — The handwriting of a person may be proved by any witness who believes it to be the handwriting of such person, and has seen the person write, or has seen writing purporting to be his upon which the witness has acted or been charged, and has thus acquired knowledge of the handwriting of such person.  Evidence  respecting the  handwriting  may also  be given by a  comparison, made by the witness or the court, with writings admitted or treated as genuine by the party   against   whom   the   evidence   is   offered,   or   proved   to   be   genuine   to   the satisfaction of the judge. (Rule 132, Revised Rules of Court)

And on the basis of the findings of fact of the trial court as follows:Here, people who witnessed the execution of subject deed positively testified on the authenticity thereof. They categorically stated that it had been executed and signed by the signatories thereto. In fact, one of such witnesses, Gerardo M. Ogsoc, declared on the witness stand that he was the one who prepared said deed of sale and had copied parts thereof from the "Escritura De Venta Absoluta" (Exhibit B) by which one Saturnina Sabesaje sold the same parcel of land to appellant Segundo Dalion. Ogsoc copied  the bounderies   thereof  and the name of  appellant  Segundo Dalion's  wife, 

erroneously written as "Esmenia" in Exhibit "A" and "Esmenia" in Exhibit "B". (p. 41, Rollo)xxx xxx xxxAgainst   defendant's   mere   denial   that   he   signed   the   document,   the   positive testimonies   of   the   instrumental   Witnesses   Ogsoc   and   Espina,   aside   from   the testimony of the plaintiff, must prevail. Defendant has affirmatively alleged forgery, but he never presented any witness or evidence to prove his claim of forgery. Each party must prove his own affirmative allegations (Section 1, Rule 131, Rules of Court). Furthermore, it is presumed that a person is innocent of a crime or wrong (Section 5 (a), Idem), and defense should have come forward with clear and convincing evidence to show that plaintiff committed forgery or caused said forgery to be committed, to overcome the presumption of   innocence.  Mere denial  of  having signed,  does not suffice to show forgery.In addition, a comparison of the questioned signatories or specimens (Exhs. A-2 and A-3) with the admitted signatures or specimens (Exhs. X and Y or 3-C) convinces the court that Exhs. A-2 or Z and A-3 were written by defendant Segundo Dalion who admitted that Exhs. X and Y or 3-C are his signatures. The questioned signatures and the specimens are very similar to each other and appear to be written by one person.Further   comparison   of   the   questioned   signatures   and   the   specimens   with   the signatures Segundo D. Dalion appeared at the back of the summons (p. 9, Record); on the return card (p. 25, Ibid.); back of the Court Orders dated December 17, 1973 and July 30, 1974 and for October 7, 1974 (p. 54 & p. 56, respectively, Ibid.), and on the open court notice of April 13, 1983 (p. 235, Ibid.) readily reveal that the questioned signatures are the signatures of defendant Segundo Dalion.It may be noted that two signatures of Segundo D. Dalion appear on the face of the questioned document (Exh. A), one at the right corner bottom of the document (Exh. A-2) and the other at the left hand margin thereof (Exh. A-3). The second signature is already a  surplusage.  A   forger  would  not  attempt   to   forge  another  signature,  an unnecessary one, for fear he may commit a revealing error or an erroneous stroke. (Decision, p. 10) (pp. 42-43, Rollo)

We see no reason for deviating from the appellate court's ruling (p. 44, Rollo) as we reiterate thatAppellate courts have consistently subscribed to the principle that conclusions and findings of fact by the trial courts are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons, since it is undeniable that the trial court is in a more advantageous position to examine real evidence, as well as to observe   the   demeanor   of   the   witnesses   while   testifying   in   the   case   (Chase   v. Buencamino, Sr., G.R. No. L-20395, May 13, 1985, 136 SCRA 365; Pring v. Court of Appeals, G.R. No. L-41605, August 19, 1985, 138 SCRA 185)

Assuming authenticity of his signature and the genuineness of the document, Dalion nonetheless still impugns the validity of the sale on the ground that the same is embodied in a private document, and did not thus convey title or right to the lot in question since "acts and contracts which have for their 

object the creation, transmission, modification or extinction of real rights over immovable property must appear in a public instrument" (Art. 1358, par 1, NCC).This argument is misplaced. The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument.A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC).The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in a public document. Under Art. 1498, NCC, when the sale is made through a public instrument, the execution thereof is equivalent to the delivery of the thing. Delivery may either be actual (real) or constructive. Thus delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive).As   regards   petitioners'   contention   that   the   proper   action   should   have   been   one   for   specific performance, We believe that the suit for recovery of ownership is proper. As earlier stated, Art. 1475 of the Civil  Code gives the parties to a perfected contract of sale the right to reciprocally demand performance, and to observe a particular form, if warranted, (Art. 1357). The trial court, aptly observed that Sabesaje's complaint sufficiently alleged a cause of action to compel Dalion to execute a formal deed of sale,  and the suit  for recovery of ownership,  which  is  premised on the binding effect and validity inter partes of the contract of sale, merely seeks consummation of said contract.

... . A sale of a real property may be in a private instrument but that contract is valid and binding between the parties upon its perfection. And a party may compel the other party to execute a public instrument embodying their contract affecting real rights once the contract appearing in a private instrument hag been perfected (See Art. 1357).... . (p. 12, Decision, p. 272, Records)

ACCORDINGLY, the petition is DENIED and the decision of the Court of Appeals upholding the ruling of the trial court is hereby AFFIRMED. No costs.SO ORDERED.

Republic of the PhilippinesSUPREME COURT

ManilaTHIRD DIVISION

G.R. No. 142013 October 15, 2002

BIÑAN STEEL CORPORATION, petitioner, vs.

HON. COURT OF APPEALS, MYLENE C. GARCIA and MYLA C. GARCIA, respondents.D E C I S I O N

CORONA, J.:Before us are two consolidated petitions: (1) G.R. No. 142013, a special civil action for certiorari and mandamus seeking to annul and set aside the Resolutions1 of the Court of Appeals dated October 21, 1999 and January 31, 2000, denying petitioner Biñan Steel Corporation’s motion for intervention and motion for reconsideration, and (2) G.R. No. 148430, seeking to set aside the decision2 and resolution of the Court of Appeals dated February 10, 2000 and May 31, 2001, respectively, dismissing the petition of petitioners Mylene C. Garcia and Myla C. Garcia for violating the rules on forum-shopping.Stripped of the non-essentials, the facts of the case are as follows:On July 22, 1998, Biñan Steel Corporation (BSC) filed with the Regional Trial Court of Manila a complaint against Joenas Metal Corporation and spouses Ng Ley Huat and Leticia Dy Ng (the spouses Ng) for collection of a sum of money with damages, docketed as Civil Case No. 98-89831.On July 24, 1998, the trial court3 issued a Writ of Preliminary Attachment after BSC filed an attachment bond. Pursuant thereto, on July 27, 1998, the sheriff of Branch 7 of the RTC of Manila, Manuelito P. Viloria, levied on the property registered in the names of the spouses Ng and covered by TCT No. 11387 of   the  Registry  of  Deeds  of  Quezon City.  This  property  under  preliminary  attachment  was   in   fact mortgaged to the Far East Bank and Trust Company (FEBTC), now Bank of the Philippine Islands (BPI), and consisted  of  a  268-square-meter   lot   located  at  14  Tulip  Road,  Gardenville  Town and Country Homes, Congressional Avenue, Project 8, Quezon City.On August 5, 1998, a sheriff’s return was filed by Viloria, stating that, as of that date, summons was not served upon the defendant spouses Ng because they could not be located. BSC caused the filing of a motion to serve the summons by publication which was granted. Summons by publication thereafter ensued.In the meantime, defendant-spouses Ng sold the property to petitioners (in G.R. No. 148430) Mylene and Myla Garcia by means of a deed of sale dated June 29, 1998. Said transaction was registered only about a month-and-a-half later, on August 12, 1998, after the mortgagee FEBTC gave its approval to the sale. On August 19, 1998, TCT No. 11387 in the name of the spouses Ng was cancelled and, in lieu thereof, TCT No. 194226 in the names of Mylene and Myla Garcia was issued. The annotation of the preliminary attachment made earlier on July 27, 1998 by sheriff Viloria on the old title, TCT No. 11387, was transferred to TCT No. 194226.On August 28, 1998, the Garcias filed a complaint-in-intervention in Civil Case No. 98-89831 pending at Branch 7 of the Manila RTC, alleging that they were the registered owners of the property covered by TCT No. 194226 which was the subject of  BSC’s  writ  of preliminary attachment.  Said  complaint-in-intervention was denied by the trial court for lack of merit.On April 14, 1999, the trial court rendered judgment by default in favor of BSC, the dispositive portion of which was:WHEREFORE,  decision  is  hereby rendered  in   favor  of  plaintiff Biñan Steel  Corporation,  and against defendants Joenas Metal Corporation, Ng Ley Huat and Leticia Dy Ng, ordering the latter to jointly and severally:

1. pay the plaintiff the amount of FIVE MILLION EIGHT HUNDRED FIFTY SIX THOUSAND PESOS (P5,856,000.00) as actual damages;2.   pay   the   plaintiff   the   amount   of   ONE   MILLION   PESOS   (P1,000,000.00)   as   and   for consequential damages;3. pay the plaintiff the amount equivalent to 25% of the total amount due the plaintiff from the defendant as and for attorney’s fees; and4. to pay the costs of suit.

SO ORDERED.4

On June 14, 1999, a Notice of Sale of Execution on Real Property was issued by respondent sheriff Rufo J. Bernardo. It scheduled the public auction of the property on July 7, 1999.Meanwhile,  on  February  18,  1999,   in  view  of   the  dismissal  of   their  complaint-in-intervention,   the Garcias filed an action against BSC, sheriff Manuelito P. Viloria, the Register of Deeds of Quezon City and FEBTC (now BPI) for cancellation of the notice of levy annotated on TCT No. 194226 before Branch 98 of the Regional Trial Court of Quezon City,5 docketed as Civil Case No. 99-36804. The Garcias claimed that they were the registered owners of the property in dispute, having acquired the same on June 29, 1998 by means of a deed of sale with assumption of mortgage from spouses Ng Ley Huat and Leticia Dy Ng.In said case in the Quezon City RTC, the Garcias were able to secure a temporary restraining order enjoining sheriff Rufo J. Bernardo or any person acting in his behalf from continuing with the public auction sale of the subject property initially scheduled on July 7, 1999. This TRO was disregarded by the Manila RTC.Acting on the ex-parte manifestation with motion to proceed with the execution sale filed by BSC, Judge Enrico  Lanzanas  of  Branch 7,  RTC,  Manila  affirmed,  on  July  8,  1999,  his  previous  order  and directed the public auction of the attached property, unless otherwise enjoined by the Court of Appeals or this Court. Thereafter, the public auction was rescheduled from July 7, 1999 to August 6, 1999.On August 4, 1999, the Garcias filed another case with the Court of Appeals for the issuance of a writ of preliminary injunction with prayer for temporary restraining order which sought to perpetually enjoin Judge Lanzanas and sheriff Bernardo from proceeding with the public auction on August 6, 1999. Their petition did not implead BSC as private respondent.In a resolution dated August 5, 1999, the Third Division of the Court of Appeals6 temporarily restrained public   respondents   Judge  Lanzanas   and Bernardo   from proceeding  with   the  public  auction  of   the subject property. Hence, the scheduled public sale on August 6, 1999 did not transpire. This prompted petitioner BSC to file a  motion for   intervention on August  16,  1999,  praying  that   it  be allowed to intervene and be heard in the case as private respondent, and to comment and oppose the petition filed by the Garcias. Likewise, said motion sought to oppose the prayer for preliminary injunction with urgent request for the issuance of the temporary restraining order.On October 21, 1999, the First Division of the Court of Appeals, in its resolution,7 denied BSC’s motion for intervention on the ground that its rights could be protected in a separate proceeding, particularly in the cancellation case filed by the Garcias. BSC's motion for reconsideration was likewise denied on January 31, 2000. Thus, on March 13, 2000, BSC filed with this Court a special civil action for certiorari  and mandamus, docketed as G.R. No. 142013, seeking to annul and set aside the Resolutions of the Court of Appeals dated October 21, 1999 and January 31, 2000. BSC is invoking the following issues:

ITHE   RESPONDENT   HONORABLE   COURT   OF   APPEALS   COMMITTED   GRAVE   ABUSE   OF   DISCRETION TANTAMOUNT   TO   LACK   OR   EXCESS   OF   JURISDICTION   IN   DENYING   PETITIONER’S   MOTION   FOR INTERVENTION FOR BEING IMPROPER AS INTERVENOR’S RIGHTS MAY BE PROTECTED IN A SEPARATE PROCEEDING IN CIVIL CASE NO. 99-36804 OF THE RTC, BRANCH 98, QUEZON CITY, FOR CANCELLATION OF THE NOTICE OF LEVY ANNOTATED ON TCT NO. 194226.IITHE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF  JURISDICTION  IN HOLDING THAT TO ENTERTAIN PETITIONER’S   INTERVENTION WOULD  NECESSARY   (SIC)   PRE-EMPT   THE   ADJUDICATION  OF   ISSUES   IN   CIVIL   CASE  NO.   99-36804 BECAUSE EVIDENCE AND COUNTER-EVIDENCE WILL BE PRODUCED BY THE PARTIES IN THE INJUNCTION SUIT,  AND THIS  WILL  UNDULY  DELAY  OR  PREJUDICE  THE  ADJUDICATION  OF  THE  RIGHTS  OF  THE PRINCIPAL PARTIES.IIITHE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK  OR   EXCESS  OF   JURISDICTION   IN   RULING   THAT   THE   ALLOWANCE  OR  DISALLOWANCE  OF   A MOTION TO INTERVENE IS ADDRESSED TO THE SOUND DISCRETION OF THE COURT, OVERLOOKING THE FACT  THAT  IN  THE   INSTANT  CASE,  THE  APPELLATE  COURT  DID NOT EXERCISE  WISELY   ITS  SOUND DISCRETION WHEN IT DENIED PETITIONER’S MOTION FOR INTERVENTION.Similarly,   the  Fifteenth  Division  of   the  Court  of  Appeals,   in   its   decision8 dated  February  10,  2000, dismissed the petition of the Garcias for violating the rules on forum-shopping. It denied their motion for reconsideration on May 31, 2001.The Garcias thus filed with this Court a petition for review on certiorari, docketed as G.R. No. 148430, seeking to set aside the February 10, 2000 decision of the Court of Appeals as well as its resolution dated May 31, 2001 denying their motion for reconsideration, raising the following errors:IWHETHER OR NOT PETITIONERS WERE GUILTY OF VIOLATING THE RULES ON FORUM-SHOPPING.IIWHETHER OR NOT PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT OF INJUNCTION.Subsequently,  G.R.  No.   142013   and  G.R.  No.   148430  were   consolidated   pursuant   to   this   Court's Resolution dated February 27, 2002.In the meantime, on August 4, 2001, the Garcias were again served by the sheriff of the Manila RTC with a notice of sale of execution of the disputed property scheduled for August 7, 2001. Because no TRO was issued by this Court, the public auction ordered by the Manila RTC was held as scheduled and the property was awarded to BSC as the highest bidder.On August 15, 2001, a little too late, this Court9 issued the TRO sought by the Garcias in a resolution which partially stated that:Acting on the Petitioners’ Urgent Motion for the Issuance of a temporary restraining order and/or writ of  preliminary   injunction dated  August  6,  2001,  praying  that  public   respondents  be  enjoined  from proceeding with the conduct of the public auction sale involving Petitioners’ property, registered under TCT No. 194226 of the Registry of Deeds of Quezon City, the Court Resolved to ISSUE the TEMPORARY RESTRAINING ORDER prayed for, effective immediately until further orders from this Court.10

A year after the public auction, on August 6, 2002, the Garcias, fearful of the impending consolidation of title in favor of BSC, filed before this Court an urgent ex-parte motion for the issuance of an order maintaining the status quo ante. They wanted to prevent the consolidation of the title and possession by BSC until such time as the rights and interests of both sets of petitioners in the two cases before us shall have been determined and finally resolved.Acting on the said motion, on August 9, 2002, the Court11 resolved to grant the motion and directed the parties to maintain the status quo as of August 6, 2002.Going over the merits of the petitions, the Court deems it essential to resolve two pivotal issues: (1) who, between BSC and the Garcias, has a better right to the disputed property, and (2) whether the Garcias violated the rule against forum- shopping.It should be noted that, at the time of the attachment of the property on July 27, 1998, the spouses Ng were  still   the   registered owners  of   said  property.   It   should  also  be observed  that   the  preliminary attachment in favor of petitioner BSC was annotated and recorded in the Registry of Deeds of Quezon City on July 27, 1998 in accordance with the provisions of the Property Registration Decree (PD 1529). This annotation produced all the effects which the law gives to its registration or inscription.12

This Court has always held that attachment is a proceeding in rem. It is against the particular property, enforceable against the whole world. The attaching creditor acquires a specific lien on the attached property  which   ripens   into   a   judgment   against   the   res  when   the   order  of   sale   is  made.   Such   a proceeding in effect means that the property attached is an indebted thing and a virtual condemnation of   it   to pay the owner’s  debt.13 This  doctrine was validated by this  Court   in  the  more recent  case of Republic vs. Saludares14:x x x.The law does not provide the length of time an attachment lien shall continue after the rendition of the judgment,  and   it  must   therefore  necessarily   continue  until   the  debt   is  paid,  or   sale   is  had under execution issued on the judgment, or until the judgment is satisfied, or the attachment discharged or vacated  in some manner provided by law. Thus,  if  the property attached is  subsequently  sold,  the purchaser  of   the  attached property  acquires   it   subject   to  an  attachment   legally  and validly   levied thereon.x x x.In the instant case, the records reveal that the levy on attachment covering the subject property was annotated on TCT No. 11387 on July 27, 1998. The deed of sale executed on June 29, 1998 in favor of the Garcias was approved by FEBTC only on August 12, 1998 which was also the date when the sale was registered.   From  the  foregoing,   it   can  be   seen  that,  when  the  Garcias  purchased   the  property   in question, it was already under a duly registered preliminary attachment. In other words, there was already notice to said purchasers (and the whole world) of the impending acquisition by BSC, as the judgment creditor, of a legal lien on the title of the Ng spouses as judgment debtors — in case BSC won its case in the Manila RTC.The Garcias claim they acquired the subject property by means of a deed of sale with assumption of mortgage dated June 29, 1998, meaning, they purchased the property ahead of the inscription of the levy on attachment thereon on July 27, 1998. But, even if consensual, not all contracts of sale became automatically and immediately effective.15 In Ramos vs. Court of Appeals16 we held:

In sales with assumption of mortgage, the assumption of mortgage is a condition precedent to the seller’s consent and therefore, without approval of the mortgagee, the sale is not perfected.Apart therefrom, notwithstanding the approval of the sale by mortgagee FEBTC (BPI), there was yet another step the Garcias had to take and it was the registration of the sale from the Ngs to them. Insofar as third persons are concerned, what validly transfers or conveys a person's interest in real property is the registration of the deed.17

Thus, when the Garcias bought the property on June 29, 1998, it was, at that point, no more than a private transaction between them and the Ngs.  It needed to be registered before it could become binding on all third parties, including BSC. It turned out that the Garcias registered it only on August 12, 1998, after FEBTC (now BPI) approved the sale. It was too late by then because, on July 27, 1998, the levy in favor of BSC, pursuant to the preliminary attachment ordered by the Manila RTC, had already been annotated on the original  title on file with the Registry of Deeds. This registration of levy (or notice, in layman’s language) now became binding on the whole world, including the Garcias. The rights which had already accrued in favor of BSC by virtue of the levy on attachment over the property were never adversely affected by the unregistered transfer from the spouses Ng to the Garcias.We sympathize with the Garcias but, had they only bothered to check first with the Register of Deeds of Quezon City before buying the property — as a prudent buyer would have done — they would have seen the warning about BSC’s superior rights over it. This alone should have been sufficient reason for them to back out of the deal.It is doctrinal that a levy on attachment, duly registered, has preference over a prior unregistered sale and, even if the prior unregistered sale is subsequently registered before the sale on execution but after the levy is made, the validity of the execution sale should be upheld because it retroacts to the date of levy. The priority enjoyed by the levy on attachment extends, with full force and effect, to the buyer at the auction sale conducted by virtue of such levy.18 The sale between the spouses Ng and the Garcias was undoubtedly a valid transaction between them. However,   in view of the prior  levy on attachment  on   the   same property,   the  Garcias   took   the  property   subject   to   the  attachment.  The Garcias, in buying registered land, stood exactly in the shoes of their vendors, the Ngs, and their title ipso facto became subject to the incidents or results of the pending litigation19 between the Ngs and BSC.Even the alleged lack of actual and personal knowledge of the existence of the levy on attachment over the subject property by the Garcias cannot be sustained by this Court on the ground that one who deals with registered land is charged with notice of the burdens on the property which are duly noted on the certificate of title. On this specific point, we are concerned not with actual or personal knowledge but constructive notice through registration in the Registry of Deeds. Otherwise stated, what we should follow is the annotation (or lack thereof) on the original title on file with the Registry of Deeds, not on the duplicate title in the hands of the private parties.When a conveyance has been properly recorded, such record is constructive notice of its contents and all interests, legal and equitable, included therein. Under the rule on notice, it is presumed that the purchaser has examined every instrument on record affecting the title. Such presumption is irrefutable and cannot be overcome by any claim of innocence or good faith. Therefore, such presumption cannot be defeated by proof of lack of knowledge of what the public record contains any more than one may be permitted to show that he was ignorant of the provisions of the law. The rule that all persons must 

take notice of the facts which the public record contains is a rule of law. The rule must be absolute. Any variation would  lead   to  endless  confusion and useless   litigation.20Otherwise,   the  very  purpose  and object of the law requiring public registration would be for naught.Pertinent to the matter at hand is Article 1544 of the New Civil Code which provides:If the same thing should have been sold to different vendees, x x x should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. x x xBecause of the principle of constructive notice to the whole world,  one who deals with registered property  which   is   the   subject  of  an  annotated   levy  on  attachment   cannot   invoke   the   rights  of  a purchaser in good faith. As between two purchasers, the one who registers the sale in his favor has a preferred right over the other who has not registered his title even if the latter is in actual possession of the immovable property.21 And, as between two purchasers who both registered the respective sales in their favor, the one who registered his sale ahead of the other would have better rights than the other who registered later.Applying said provision of the law and settled jurisprudence to the instant case, when the disputed property  was   consequently   sold  on  execution   to  BSC,   this  auction  sale   retroacted   to   the  date  of inscription of  BSC's  notice  of  attachment  on   July  27,  1998.  The earlier   registration  thus  gave  BSC superior and preferential rights over the attached property as against the Garcias22 who registered their purchase of the property at a later date. Notably, the Garcias were not purchasers for value in view of the fact that they acquired the property in payment of the loan earlier obtained from them by the Spouses Ng.23

All   told,  the purchaser  of a property subject to an attachment  legally  and validly   levied thereon  is merely subrogated to the rights of the vendor and acquires the property subject to the rights of the attachment creditor. An attaching creditor who registers the order of attachment and the sale by public auction of the property to him as the highest bidder acquires a superior title to the property as against a vendee who previously  bought   the same property   from the registered owner but  who failed  to register his deed of sale.24

Petitioners Garcias failed to show that BSC acted in bad faith which would have impelled this Court to rule otherwise.The   foregoing  considerations   show  that   the  Garcias  are  not  entitled   to   the   issuance  of  a  writ  of preliminary injunction from this Court. For the issuance of the writ to be proper, it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of the Garcias is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage.25 Such requirements are all wanting in the case at bar. Thus, in view of the clear and unmistakable absence of any legal basis for the issuance thereof, the same must be denied.On the second question — whether the Garcias violated the rule against forum-shopping — we answer in the affirmative.The Court of Appeals, in dismissing the Garcias' petition on the ground of forum-shopping, explained:A party is guilty of forum-shopping where he repetitively availed of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances,  and all raising substantially the same issues either pending in, or already resolved adversely by some other court (Gatmaytan vs. Court of Appeals, 267 SCRA 487).

The test to determine whether a party violated the rule against forum-shopping is where the elements of  litis pendentia are present or where a final  judgment in one case will  amount to res  judicata  in another (Solid Homes, Inc. vs. Court of Appeals, 271 SCRA 157).What   is   truly   important   to   consider   in   determining  whether   forum-shopping   exists   or   not   is   the vexation   caused   the   courts   and   parties-litigants   by   a   party   who   asks   different   courts   and/or administrative agencies to rule on the same or related causes and/or grant the same or substantially the   same reliefs,   in   the  process   creating possibility  of   conflicting decisions  being   rendered  by   the different fora upon the same issues (Golangco vs. Court of Appeals, 283 SCRA 493).The above jurisprudence instructs us the various  indicia of forum-shopping. The more important of these are: when the final judgment in one case will amount to res judicata in another, or where the cases  filed   are   substantially   founded  on   the   same   transactions   and   the   same  essential   facts   and circumstances, or raising substantially the same issues, or more importantly, where there exists the possibility of conflicting decisions being rendered by different fora upon the same issues.If we take a look closely on the instant Petition for Injunction, forum-shopping is evident. In Civil Case No. 99-36804 raffled to Branch 98 of RTC- Quezon City, petitioners therein prayed for the cancellation of the notice of levy in their title. They are claiming that the controverted property is owned by them such that the respondent  therein has no right to  levy on their  property,  petitioners not  being the respondent’s debtor. In the present petition, petitioners seek that the scheduled auction sale of the same property be perpetually enjoined, claiming that the property is owned by them and that the same is erroneously made to answer for liability not owing by them. Ultimately, the two actions involve the same essential facts and circumstances, and are raising the same issues.x x x The propriety of the issuance of injunction would depend on the finding that the petitioners have a clear legal right over the property - a right in esse or the existence of a right to be protected. Thus, this court must make a categorical finding of fact. This very same issue of fact – who as between the two contending parties have a better right to the property – is the very issue presented before the RTC of Quezon City. Clearly therefore, this Court and that of RTC – Quezon City are called upon to decide on the same issues based on the same essential facts and circumstances. Hence, the possibility of these two courts rendering or coming up with different or conflicting decisions is very much real. Needless to say,   the  decision   in  one  case  would   constitute   res   judicata   in   the  other.  The   instant  petition   for injunction obviously violates the rule on forum-shopping.We agree with the Court of Appeals.As clearly demonstrated, the willful attempt by the Garcias to obtain a preliminary injunction in another court (the Court of Appeals) after they filed a case seeking the same relief from the original court (the Quezon City RTC) constitutes grave abuse of the judicial process. Such contemptuous act is penalized by the   summary   dismissal   of   both   actions   as  mandated   by   paragraph   17   of   the   Interim  Rules   and Guidelines issued by this Court on January 11, 1983 and Supreme Court Circular No. 28-91, to wit:x x xSUBJECT: ADDITIONAL REQUISITES FOR PETITIONS FILED WITH THE SUPREME COURT AND THE COURT OF APPEALS TO PREVENT FORUM-SHOPPING OR MULTIPLE FILING OF PETITIONS AND COMPLAINTS.The attention of the Court has been called to the filing of multiple petitions and complaints involving the same issues in the Supreme Court, the Court of Appeals or different Divisions thereof, or any other tribunal or agency, with the result that said tribunals or agency have to resolve the same issues.

x x x.3. Penalties.(a) Any violation of this Circular shall be a cause for the summary dismissal of the multiple petition or complaint;x x x.In Bugnay Construction & Development Corporation vs. Laron,26 we declared:Forum-shopping, an act of malpractice, is proscribed and condemned as trifling with the courts and abusing their processes. It is improper conduct that degrades the administration of justice. The rule has been formalized in Paragraph 17 of the Interim Rules and Guidelines issued by this Court of January 11, 1983, in connection with the implementation of the Judiciary Reorganization Act x x x. The Rule ordains that (a) violation of the rule shall constitute a contempt of court and shall be a cause for the summary dismissal of both petitions, without prejudice to the taking of appropriate action against the counsel or party concerned.The rule against  forum-shopping has been further strengthened by the  issuance of Supreme Court Administrative Circular No. 04-94. Said circular formally established the rule that the deliberate filing of multiple complaints to obtain favorable action constitutes forum-shopping and shall be a ground for summary dismissal thereof.Accordingly, the Garcias cannot pursue simultaneous remedies in two different fora. This is a practice which degrades the judicial process, messes up the orderly rules of procedure and is vexatious and unfair to the other party in the case.We rule therefore that the execution sale in favor of BSC was superior to the sale of the same property by   the  Ngs   to   the  Garcias  on  August  12,  1998.  The right  of  petitioner  BSC   to   the  ownership  and possession of the property, the surrender of the owner's duplicate copy of TCT No. 194226 covering the subject property for inscription of the certificate of sale, the cancellation of TCT No. 194226 and the issuance of a new title in favor of BSC, is affirmed without prejudice to the right of the Garcias to seek reimbursement from the spouses Ng.In view of our disposition of the first issue resulting in the denial of the Garcias’ petition, the petition of BSC praying that it be allowed to intervene therein has been rendered moot. The Court thus finds it unnecessary to discuss it.WHEREFORE,   the  petitions  are DENIED.  The Resolution dated  August  9,  2002  issued by  this  Court directing the parties to maintain the status quo as of August 6, 2002 is hereby lifted and set aside. The Registry of Deeds of Quezon City is hereby ordered to cancel TCT No. 194226 in the names of Myla and Mylene Garcia and issue a new title in favor of BSC without further delay.SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISIONG.R. No. 143513 November 14, 2001

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, petitioner, vs.

COURT OF APPEALS and FIRESTONE CERAMICS, INC., respondents.x---------------------------------------------------------x

G.R. No. 143590 November 14, 2001NATIONAL DEVELOPMENT CORPORATION, petitioner, 

vs.FIRESTONE CERAMICS, INC., respondents.

BELLOSILLO, J.:A litigation is not simply a contest of litigants before the bar of public opinion; more than that, it is a pursuit of justice through legal and equitable means. To prevent the search for justice from evolving into   a   competition   for  public   approval,   society   invests   the   judiciary  with   complete   independence thereby insulating it from demands expressed through any medium, the press not excluded. Thus, if the court would merely reflect, and worse, succumb to the great pressures of the day, the end result, it is feared, would be a travesty of justice.In  the early  sixties,  petitioner National  Development Corporation (NDC),  a  government owned and controlled corporation created under CA 182 as amended by CA 311 and PD No. 668, had in its disposal a  ten  (10)-hectare property   located along Pureza St.,  Sta.  Mesa,  Manila.  The estate  was popularly known as the NDC compound and covered by Transfer Certificates of Title Nos. 92885, 110301 and 145470.Sometime in May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested its desire to lease a portion of the property for its ceramic manufacturing business. On 24 August 1965 NDC and FIRESTONE entered into a contract of lease denominated as Contract No. C-30-65 covering a portion of the property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten (10) years, renewable for another ten (10) years under the same terms and conditions.1 In consequence of the   agreement,   FIRESTONE   constructed   on   the   leased   premises   several   warehouses   and   other improvements needed for the fabrication of ceramic products.Three and a half (3-1/2) years later, or on 8 January 1969, FIRESTONE entered into a second contract of lease  with  NDC over   the   latter's   four   (4)-unit  pre-fabricated   reparation steel  warehouse   stored   in Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual assembly within the NDC compound. The second contract, denominated as Contract No. C-26-68, was for similar use as a ceramic manufacturing plant and was agreed expressly to be "co-extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot."2

On 31 July  1974 the parties signed a similar  contract concerning a six  (6)-unit  pre-fabricated steel warehouse which,  as agreed upon by the parties, would expire on 2 December 1978.3 Prior to the expiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an extension of their lease   agreement.   Consequently   on   29   November   1978   the   Board   of   Directors   of   NDC   adopted Resolution No. 11-78-117 extending the term of the lease, subject to several conditions among which was that in the event NDC "with the approval of higher authorities, decide to dispose and sell these properties including the lot, priority should be given to the LESSEE"4 (underscoring supplied).  On 22 December 1978, in pursuance of the resolution, the parties entered into a new agreement for a ten-year lease of the property, renewable for another ten (10) years, expressly granting FIRESTONE the first 

option   to   purchase   the   leased   premises   in   the   event   that   it   decided   "to   dispose   and   sell   these properties including the lot . . . . "5

The contracts of lease conspicuously contain an identically worded provision requiring FIRESTONE to construct   buildings   and   other   improvements  within   the   leased   premises   worth   several   hundred thousands of pesos.6

The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE, cognizant of the   impending  expiration of   their   lease  agreement  with  NDC,   informed  the  latter   through several letters and telephone calls that it was renewing its lease over the property. While its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who promised immediate action on the matter, the rest of its communications remained unacknowledged.7 FIRESTONE's predicament worsened  when   rumors  of  NDC's   supposed   plans   to   dispose  of   the   subject  property   in   favor   of petitioner Polytechnic University of the Philippines (PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in the exercise of its contractual right of first refusal.Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. FIRESTONE averred that it was  pre-empting   the   impending   sale   of   the  NDC   compound   to   petitioner  PUP   in   violation  of   its leasehold rights over the 2.60-hectare8 property and the warehouses thereon which would expire in 1999. FIRESTONE likewise prayed for the issuance of a writ of preliminary injunction to enjoin NDC from disposing of the property pending the settlement of the controversy.9

In support of its complaint, FIRESTONE adduced in evidence a letter of Antonio A. Henson dated 15 July 1988 addressed to Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary Catalino Macaraeg, reviewing a proposed memorandum order submitted to then President Corazon C. Aquino transferring   the  whole  NDC  compound,   including   the   leased  property,   in   favor  of  petitioner  PUP. Attached to the letter was a draft of the proposed memorandum order as well as a summary of existing leases on the subject property. The survey listed FIRESTONE as lessee of a portion of the property, placed   at   29,00010 square  meters,  whose   contract  with  NDC  was   set   to   expire   on   31  December 198911 renewable for another ten (10) years at the option of the lessee. The report expressly recognized FIRESTONE's right of first refusal to purchase the leased property "should the lessor decide to sell the same."12

Meanwhile,  on 21 February 1989 PUP moved to  intervene and asserted  its   interest   in  the  subject property, arguing that a "purchaser pendente lite of property which is subject of a litigation is entitled to   intervene   in   the   proceedings."13 PUP   referred   to Memorandum Order No. 214 issued   by   then President  Aquino ordering the  transfer  of  the whole NDC compound to the  National  Government, which  in  turn would convey the aforementioned property  in   favor of  PUP at  acquisition cost.  The issuance was supposedly made in recognition of PUP's status as the "Poor Man's University" as well as its serious need to extend its campus in order to accommodate the growing student population. The order of conveyance of the 10.31-hectare property would automatically result in the cancellation of NDC's total obligation in favor of the National Government in the amount of P57,193,201.64.Convinced   that   PUP  was   a   necessary   party   to   the   controversy   that   ought   to  be   joined  as   party defendant  in order to avoid multiplicity of suits, the trial court granted PUP's motion to intervene. FIRESTONE moved for reconsideration but was denied. On certiorari, the Court of Appeals affirmed the 

order of the trial court. FIRESTONE came to us on review but in a Resolution dated 11 July 1990 we upheld PUP's inclusion as party-defendant in the present controversy.Following the denial of its petition, FIRESTONE amended its complaint to include PUP and Executive Secretary  Catalino  Macaraeg,   Jr.,  as  party-defendants,  and  sought   the  annulment  of Memorandum Order No. 214. FIRESTONE alleged that although Memorandum Order No. 214 was issued "subject to such liens/leases existing [on the subject property]," PUP disregarded and violated its existing lease by increasing   the   rental   rate   atP200,000.00  a  month  while  demanding   that   it   vacated   the   premises immediately.14 FIRESTONE  prayed   that   in   the  event Memorandum Order No. 214 was  not  declared unconstitutional,  the property should be sold  in  its favor at the price for which it was sold to PUP - P554.74 per square meter or for a total purchase price ofP14,423,240.00.15

Petitioner PUP, in its answer to the amended complaint,  argued in essence that the lease contract covering the property had expired long before the institution of the complaint, and that further, the right of first refusal invoked by FIRESTONE applied solely to the six-unit pre-fabricated warehouse and not the lot upon which it stood.After trial on the merits, judgment was rendered declaring the contracts of lease executed between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses constructed thereon valid and existing until 2 June 1999. PUP was ordered and directed to sell to FIRESTONE the "2.6 hectare leased premises or as may be determined by actual verification and survey of the actual size of the leased   properties   where   plaintiff's   fire   brick   factory   is   located"   at P1,500.00   per   square   meter considering that, as admitted by FIRESTONE, such was the prevailing market price thereof.The   trial   court   ruled   that   the   contracts   of   lease   executed   between   FIRESTONE   and   NDC  were interrelated and inseparable because "each of them forms part of the integral system of plaintiff's brick manufacturing plant x x x if one of the leased premises will be taken apart or otherwise detached from the two others, the purpose of the lease as well as plaintiff's business operations would be rendered useless and inoperative."16 It thus decreed that FIRESTONE could exercise its option to purchase the property until 2 June 1999 inasmuch as the 22 December 1978 contract embodied a covenant to renew the lease for another ten (10) years at the option of the lessee as well as an agreement giving the lessee the right of first refusal.The trial court also sustained the constitutionality of Memorandum Order No. 214 which was not per se hostile to FIRESTONE's property rights, but deplored as prejudicial thereto the "very manner with which defendants NDC and PUP interpreted and applied the same, ignoring in the process that plaintiff has   existing   contracts   of   lease   protectable   by   express   provisions   in   the  Memorandum   No.   214 itself."17 It further explained that the questioned memorandum was issued "subject to such liens/leases existing   thereon"18 and  petitioner  PUP  was  under  express   instructions   "to  enter,  occupy  and   take possession of the transferred property subject to such leases or liens and encumbrances that may be existing thereon"19 (italics supplied).Petitioners PUP, NDC and the Executive Secretary separately filed their Notice of Appeal, but a few days thereafter, or on 3 September 1996, perhaps realizing the groundlessness and the futility of it all, the Executive Secretary withdrew his appeal.20

Subsequently, the Court of Appeals affirmed the decision of the trial court ordering the sale of the property   in   favor of  FIRESTONE but  deleted   the  award of  attorney's   fees   in   the  amount  of  Three Hundred Thousand Pesos (P300,000.00). Accordingly, FIRESTONE was given a grace period of six (6) 

months from finality of the court's judgment within which to purchase the property in questioned in the exercise of its right of first refusal. The Court of Appeals observed that as there was a sale of the subject property, NDC could not excuse itself from its obligation TO OFFER THE PROPERTY FOR SALE FIRST TO FIRESTONE BEFORE IT COULD TO OTHER PARTIES. The Court of Appeals held: "NDC cannot look   to Memorandum Order No. 214 to   excuse   or   shield   it   from   its   contractual   obligations   to FIRESTONE. There is nothing therein that allows NDC to disavow or repudiate the solemn engagement that it freely and voluntarily undertook, or agreed to undertake."21

PUP moved for reconsideration asserting that in ordering the sale of the property in favor of FIRESTONE the courts a quo unfairly created a contract to sell between the parties. It argued that the "court cannot substitute or decree its mind or consent for that of the parties in determining whether or not a contract (has been)  perfected between PUP and NDC."22 PUP further  contended that  since "a real  property located in Sta. Mesa can readily command a sum of P10,000.00 per square (meter)," the lower court gravely   erred   in  ordering   the   sale  of   the  property   at   only P1,500.00  per   square  meter.   PUP   also advanced the theory that the enactment of Memorandum Order No. 214 amounted to a withdrawal of the option to purchase the property granted to FIRESTONE. NDC, for its part, vigorously contended that the contracts of lease executed between the parties had expired without being renewed by FIRESTONE; consequently, FIRESTONE was no longer entitled to any preferential right in the sale or disposition of the leased property.We do  not   see   it   the  way  PUP  and  NDC  did.   It   is  elementary   that  a  party   to  a   contract   cannot unilaterally withdraw a right of first refusal that stands upon valuable consideration. That principle was clearly   upheld   by   the   Court   of   Appeals   when   it   denied   on   6   June   2000   the   twin  motions   for reconsideration  filed  by  PUP   and  NDC  on   the   ground   that   the   appellants   failed   to   advance  new arguments substantial enough to warrant a reversal of the Decision sought to be reconsidered.23 On 28 June 2000 PUP filed an urgent motion for an additional period of fifteen (15) days from 29 June 2000 or until 14 July 2000 within which to file a Petition for Review on Certiorari of the Decisionof the Court of Appeals.On   the   last   day   of   the   extended   period   PUP   filed   its Petition for Review on Certiorari assailing the Decision of   the Court  of Appeals  of 6  December 1999 as well  as the Resolution of  6  June 2000 denying reconsideration thereof. PUP raised two issues: (a) whether the courts a quo erred when they "conjectured" that the transfer of the leased property from NDC to PUP amounted to a sale; and, (b) whether FIRESTONE can rightfully invoke its right of first refusal. Petitioner posited that if we were to place   our imprimatur on   the   decisions   of   the   courts a quo,   "public   welfare   or   specifically   the constitutional priority accorded to education" would greatly be prejudiced.24

Paradoxically, our paramount interest in education does not license us, or any party for that matter, to destroy the sanctity of binding obligations. Education may be prioritized for legislative or budgetary purposes,   but  we   doubt   if   such   importance   can   be   used   to   confiscate   private   property   such   as FIRESTONE's right of first refusal.On 17 July 2000 we denied PUP's motion for extension of fifteen (15) days within which to appeal inasmuch as the aforesaid pleading lacked an affidavit of service of copies thereof on the Court of Appeals and the adverse party, as well as written explanation for not filing and serving the pleading personally.25

Accordingly,  on 26  July  2000 we  issued a Resolution dismissing PUP's Petition for Review for  having been filed out of time. PUP moved for reconsideration imploring a resolution or decision on the merits of its petition. Strangely, about the same time, several articles came out in the newspapers assailing the denial  of the petition. The daily papers reported that we unreasonably dismissed PUP's petition on technical grounds, affirming in the process the decision of the trial court to sell the disputed property to the prejudice of the government  in the amount of P1,000,000,000.00.26 Counsel  for petitioner PUP, alleged that the trial court and the Court of Appeals "have decided a question of substance in a way definitely not in accord with law or jurisprudence."27

At the outset, let it be noted that the amount of P1,000,000,000.00 as reported in the papers was way too exaggerated, if not fantastic. We stress that NDC itself sold the whole 10.31-hectare property to PUP at onlyP57,193,201.64 which represents NDC's obligation to the national government that was, in exchange,  written off. The price offered per square meter of the property was pegged at P554.74. FIRESTONE's   leased  premises  would   therefore  be worth  only P14,423,240.00.  From any  angle,   this amount is certainly far below the ballyhooed price of P1,000,000,000.00.On 4 October 2000 we granted PUP's Motion for Reconsideration to give it a chance to ventilate its right, if any it still had in the leased premises, thereby paving the way for a reinstatement of its Petition for Review.28 In its appeal, PUP took to task the courts a quo for supposedly "substituting or decreeing its mind or consent for that of the parties (referring to NDC and PUP) in determining whether or not a contract of sale was perfected." PUP also argued that inasmuch as "it is the parties alone whose minds must meet in reference to the subject matter and cause," it concluded that it was error for the lower courts  to have decreed the existence of  a sale of  the NDC compound thus allowing FIRESTONE to exercise its right of first refusal.On the other hand, NDC separately filed its own Petition for Review and advanced arguments which, in fine, centered on whether or not the transaction between petitioners NDC and PUP amounted to a sale considering   that   "ownership   of   the   property   remained   with   the   government."29 Petitioner   NDC introduced   the   novel   proposition   that   if   the   parties   involved   are   both   government   entities   the transaction cannot be legally called a sale.In due course both petitions were consolidated.30

We believe that  the courts a quo did  not hypothesize,  much  less conjure,  the sale of the disputed property by NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC and PUP to enter into a contract of sale was clearly expressed in the Memorandum Order No. 214,31 a close perusal of the circumstances of this case strengthens the theory that the conveyance of the property from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper transfer as argued by petitioners.A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its equivalent.32 It is therefore a general requisite for the existence of  a  valid  and enforceable   contract  of   sale   that   it  be  mutually  obligatory,   i.e.,   there  should  be  a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all"  provision  which  effectively  brings  within   its   grasp  a  whole  gamut  of   transfers  whereby ownership of a thing is ceded for a consideration.

Contrary   to  what   petitioners  PUP   and  NDC  propose,   there   is   not   just   one  party   involved   in   the questioned transaction. Petitioners NDC and PUP have their respective charters and therefore each possesses a separate and distinct individual personality.33 The inherent weakness of NDC's proposition that there was no sale as it was only the government which was involved in the transaction thus reveals itself.  Tersely put,  it   is not necessary to write an extended dissertation on government owned and controlled corporations and their legal personalities. Beyond cavil, a government owned and controlled corporation has a personality  of   its  own, distinct  and separate from that  of  the government.34 The intervention in the transaction of the Office of the President through the Executive Secretary did not change the independent existence of these entities. The involvement of the Office of the President was limited to brokering the consequent relationship between NDC and PUP. But the withdrawal of the appeal by the Executive Secretary is considered significant as he knew, after a review of the records, that   the   transaction  was   subject   to   existing   liens   and   encumbrances,   particularly   the   priority   to purchase the leased premises in favor of FIRESTONE.True that there may be instances when a particular deed does not disclose the real intentions of the parties, but their action may nevertheless indicate that a binding obligation has been undertaken. Since the conduct of the parties to a contract may be sufficient to establish the existence of an agreement and the terms thereof, it becomes necessary for the courts to examine the contemporaneous behavior of the parties in establishing the existence of their contract.The preponderance of evidence shows that NDC sold to PUP the whole NDC compound, including the leased premises, without the knowledge much less consent of private respondent FIRESTONE which had a valid and existing right of first refusal.All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject matter,and consideration therefor.Consent   to   the   sale   is   obvious   from   the   prefatory   clauses  of Memorandum Order No. 214 which explicitly states the acquiescence of the parties to the sale of the property -

WHEREAS,  PUP  has expressed its willingness to acquire said NDC properties and NDC has expressed its willingness to sell the properties to PUP (underscoring supplied).35

Furthermore, the cancellation of NDC's liabilities in favor of the National Government in the amount ofP57,193,201.64 constituted the "consideration" for the sale. As correctly observed by the Court of Appeals-

The defendants-appellants' interpretation that there was a mere transfer, and not a sale, apart from being specious sophistry and a mere play of words, is too strained and hairsplitting. For it is axiomatic that every sale imposes upon the vendor the obligation to transfer ownership as an essential element of the contract. Transfer of title or an agreement to transfer title for a price paid, or promised to be paid, is the very essence of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid & Oberly, Inc., v. RJL Martinez Fishing Corp., 166 SCRA 493). At whatever legal angle we view it, therefore, the inescapable fact remains that all the requisites of a valid sale were attendant in the transaction between co-defendants-appellants NDC and PUP concerning the realities subject of the present suit.36

What is more, the conduct of petitioner PUP immediately after the transaction is in itself an admission that there was a sale of the NDC compound in its favor. Thus, after the issuance of Memorandum Order

No. 214 petitioner   PUP   asserted   its   ownership   over   the   property   by   posting   notices   within   the compound   advising   residents   and   occupants   to   vacate   the   premises.37 In   its Motion for Intervention petitioner  PUP also admitted   that   its   interest   as   a   "purchaser pendente lite"  would  be better  protected   if   it  was   joined  as  party-defendant   in   the  controversy   thereby  confessing   that   it indeed purchased the property.In  light of the foregoing disquisition, we now proceed to determine whether FIRESTONE should be allowed to exercise its right of first refusal over the property. Such right was expressly stated by NDC and FIRESTONE in par. XV of their third contract denominated as A-10-78 executed on 22 December 1978 which, as found by the courts a quo, was interrelated to and inseparable from their first contract denominated as C-30-65 executed on 24 August 1965 and their second contract denominated as C-26-68 executed on 8 January 1969. Thus -Should   the  LESSOR desire   to   sell   the   leased  premises  during   the   term of   this  Agreement,   or  any extension thereof, the LESSOR shall first give to the LESSEE, which shall have the right of first option to purchase the leased premises subject to mutual agreement of both parties.38

In the instant case, the right of first refusal is an integral and indivisible part of the contract of lease and is   inseparable   from the whole contract.  The consideration for   the right   is  built   into  the reciprocal obligations of the parties. Thus, it is not correct for petitioners to insist that there was no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the stipulation is part and parcel of the contract of lease making the consideration for the lease the same as that for the option.It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it.39 The lessee has a right that the lessor's first offer shall be in his favor.The option in this case was incorporated in the contracts of lease by NDC for the benefit of FIRESTONE which, in view of the total amount of its investments in the property, wanted to be assured that it would be given the first opportunity  to buy the property at a price for which it would be offered. Consistent with their agreement, it was then implicit for NDC to have first offered the leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to petitioner PUP.It   now   becomes apropos to   ask   whether   the   courts a quo were   correct   in   fixing   the   proper consideration of the sale at P1,500.00 per square meter. In contracts of sale, the basis of the right of first refusal must be the current offer of the seller to sell or the offer to purchase of the prospective buyer. Only after the lessee-grantee fails to exercise its right under the same terms and within the period contemplated can the owner validly offer to sell the property to a third person, again, under the same terms as offered to the grantee.40 It appearing that the whole NDC compound was sold to PUP for P554.74 per square meter, it would have been more proper for the courts below to have ordered the sale of the property also at the same price. However, since FIRESTONE never raised this as an issue, while on the other hand  it  admitted that  the value of  the property stood at P1,500.00 per square meter, then we see no compelling reason to modify the holdings of the courts a quo that the leased premises be sold at that price.

Our attention is invited by petitioners to Ang Yu Asuncion v. CA41 in concluding that if our holding in Ang Yu would   be   applied   to   the   facts  of   this   case   then   FIRESTONE's   "option,   if   still   subsisting,   is   not enforceable," the option being merely a preparatory contract which cannot be enforced.The  contention  has  no  merit.  At   the  heels  of Ang Yu came Equatorial Realty Development, Inc., v. Mayfair Theater, Inc.,42 where after much deliberation we declared, and so we hold, that a right of first refusal is neither "amorphous nor merely preparatory" and can be enforced and executed according to its terms. Thus, inEquatorial we ordered the rescission of the sale which was made in violation of the lessee's right of first refusal and further ordered the sale of the leased property in favor of Mayfair Theater, as grantee of the right. Emphatically, we held that "(a right of first priority) should be enforced according to the law on contracts instead of the panoramic and indefinite rule on human relations." We then concluded that the execution of the right of first refusal consists in directing the grantor to comply with his obligation according to the terms at which he should have offered the property in favor of the grantee and at that price when the offer should have been made.One final word. Petitioner PUP should be cautioned against bidding for public sympathy by bewailing the dismissal of its petition before the press. Such advocacy is not likely to elicit the compassion of this Court or of any court for that matter. An entreaty for a favorable disposition of a case not made directly through pleadings and oral arguments before the courts do not persuade us, for as judges, we are ruled only by our forsworn duty to give justice where justice is due.WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590 are DENIED. Inasmuch as the first contract of lease fixed the area of the leased premises at 2.90118 hectares while the second contract placed it at 2.60 hectares, let a ground survey of the leased premises be immediately conducted by a duly licensed, registered surveyor at the expense of private respondent FIRESTONE CERAMICS, INC., within   two   (2)  months   from finality  of   the   judgment   in   this   case.  Thereafter,  private   respondent FIRESTONE CERAMICS, INC., shall have six (6) months from receipt of the approved survey within which to exercise  its  right  to purchase the leased property atP1,500.00 per square meter,  and petitioner Polytechnic University of the Philippines is ordered to reconvey the property to FIRESTONE CERAMICS, INC., in the exercise of its right of first refusal upon payment of the purchase price thereof.SO ORDERED.

SECOND DIVISION[G.R. No. 117660. December 18, 2000]

AGRO CONGLOMERATES, INC. and MARIO SORIANO, petitioners, vs. THE HON. COURT OF APPEALS and REGENT SAVINGS and LOAN BANK, INC.,respondents.

D E C I S I O NQUISUMBING, J.:

This is a petition for review challenging the decision[1] dated October 17, 1994 of the Court of Appeals in CA-G.R. No. 32933, which affirmed in toto the judgment of the Manila Regional Trial Court, Branch 27, in consolidated Cases Nos. 86-37374, 86-37388, 86-37543.

This petition springs from three complaints for sums of money filed by respondent bank against herein petitioners.  In the decision of the Court of Appeals, petitioners were ordered to pay respondent bank, as follows:Wherefore, judgment is hereby rendered in favor of plaintiff and against defendants, as follows:

1)  In Civil   Case  No.   86-37374,   defendants   [petitioners,   herein]   are   ordered   jointly   and severally, to pay to plaintiff the amount of P78,212.29, together with interest and service charge thereon, at the rates of 14% and 3% per annum, respectively,  computed from November 10, 1982, until fully paid, plus stipulated penalty on unpaid principal at the rate  of  6% per  annum,  computed   from November  10,  1982,  plus  15% as   liquidated damage plus 10% of the total amount due, as attorney’s fees, plus costs;

2)  In Civil   Case   No.   86-37388,   defendant   is   ordered   to   pay   plaintiff   the   amount   of P632,911.39, together  with interest and service charge thereon at the rate of 14% and 3% per  annum,   respectively,   computed   from  January  15,   1983,  until   fully  paid,   plus stipulated penalty  on  unpaid  principal  at   the   rate  of  6% per  annum, computed  from January 15, 1983, plus liquidated damages equivalent to 15% of the total amount due, plus attorney’s fees equivalent to 10% of the total amount due, plus costs; and

3)  In Civil  Case No. 86-37543, defendant  is ordered to pay plaintiff, on the first cause of action, the amount of P510,000.00, together with interest and service charge thereon, at the rates of 14% and 2% per annum, respectively, computed from March 13, 1983, until fully paid, plus a penalty of 6% per annum, based on the outstanding principal  of the loan, computed from March 13, 1983, until fully paid; and on the second cause of action, the amount of P494,936.71,  together with interest and service charge thereon at the rates   of   14%   and   2%, per   annum,   respectively,   computed   from   March   30,   1983, until  fully paid, plus a penalty charge of 6% per annum, based on the unpaid principal, computed   from March  30,  1983,  until   fully  paid,  plus   (on  both  causes  of  action)  an amount equal to 15% of the total amounts due, as liquidated damages, plus attorney’s fees equal to 10% of the total amounts due, plus costs.[2]

Based on the records, the following are the factual antecedents.On  July  17,  1982,  petitioner Agro Conglomerates,   Inc.  as vendor,  sold  two parcels  of   land to 

Wonderland Food Industries, Inc.  In their Memorandum of Agreement,[3] the parties covenanted that the purchase price of Five Million (P5,000,000.00) Pesos would be settled by the vendee, under the following terms and conditions:  (1) One Million (P1,000,000.00) Pesos shall be paid in cash upon the signing of the agreement; (2)  Two Million (P2,000,000.00) Pesos worth of common shares of stock of the Wonderland Food Industries, Inc.; and  (3) The balance of P2,000,000.00 shall be paid in four equal installments, the first installment falling due, 180 days after the signing of the agreement and every six months thereafter, with an interest  rate of 18% per annum, to be advanced by the vendee upon the signing of the agreement.

On July 19, 1982, the vendor, the vendee, and the respondent bank Regent Savings & Loan Bank (formerly Summa Savings & Loan Association), executed an Addendum[4]to the previous Memorandum of  Agreement.  The new arrangement pertained to the revision of settlement of the initial payments of P1,000,000.00 and prepaid interest of P360,000.00 (18% of P2,000,000.00) as follows:Whereas,  the parties have agreed to qualify  the stipulated terms for the payment of the said ONE MILLION THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS.WHEREFORE, in consideration of the mutual covenant and agreement of the parties, they do further covenant and agree as follows:

1.  That the VENDEE instead of paying the amount of ONE MILLION THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS in cash, hereby authorizes the VENDOR to obtain a loan from Summa Savings and Loan Association with office address at Valenzuela, Metro Manila,  being   represented  herein  by   its  President,  Mr.   Jaime Cariño  and referred   to hereafter   as   Financier;   in   the   amount   of   ONE   MILLION   THREE   HUNDRED   SIXTY THOUSAND  (P1,360,000.00)PESOS, plus interest thereon at such rate as the VENDEE and the Financier may agree, which amount shall  cover the ONE MILLION (P1,000,000.00) PESOS   cash  which   was   agreed   to   be   paid   upon   signing   of   the   Memorandum   of Agreement, plus 18% interest on the balance of two million pesos stipulated upon in Item No. 1(c) of the said agreement; provided however, that said loan shall be made for and in the name of the VENDOR.

2.  The VENDEE also agrees that the full amount of ONE MILLION THREE HUNDRED SIXTY THOUSAND   (P1,360,000.00)   PESOS   be   paid   directly   to   the   VENDOR;   however,   the VENDEE hereby undertakes to pay the full amount of the said loan to the Financier on such   terms  and  conditions  agreed  upon  by   the  Financier  and   the  VENDOR,   it  being understood that while the loan will be secured from and in the name of the VENDOR, the VENDEE will be the one liable to pay the entire proceeds thereof including interest and other charges.[5]

This addendum was not notarized.Consequently, petitioner Mario Soriano signed as maker several promissory notes,[6] payable to 

the respondent bank.  Thereafter, the bank released the proceeds of the loan to petitioners.  However, petitioners   failed   to   meet   their   obligations   as   they   fell   due.  During   that   time,   the   bank   was experiencing   financial   turmoil   and  was   under   the   supervision   of   the   Central   Bank.  Central   Bank examiner and liquidator Cordula de Jesus, endorsed the subject promissory notes to the bank’s counsel for collection.  The bank gave petitioners opportunity to settle their account by extending payment due dates. Mario Soriano manifested his intention to re-structure the loan, yet did not show up nor submit his formal written request.

Respondent bank filed three separate complaints before the Regional Trial Court of Manila for Collection of Sums of money.  The corresponding case histories are illustrated in the table below:

Date of Loan

Amount Payment Due

Payment Extension

Date DatesCivil Case 86-37374   August 12, 1982

 P   78,212.29

 Nov.  10, 1982

 Feb.    8, 1983May    9, 1983Aug.    7, 1983 

Civil Case 86-37388   July   19, 1982

 P 632,911.39

 Jan.   15, 1983

 May   16, 1983Aug.   14, 1983 

Civil Case 86-37543  September 14, 1982     October 1, 1982

 P 510,000.00  P 494,936.71

 March 13, 1983  March 30, 1983

 June   11, 1983Sept.    9, 1983 June   28, 1983Sept.  26, 1983

In   their   answer,   petitioners   interposed   the   defense   of   novation   and   insisted   there  was   a   valid substitution   of   debtor.  They   alleged   that   the   addendum   specifically   states   that   although   the promissory notes were in their names, Wonderland shall be responsible for the payment thereof.

The trial court held that petitioners are liable, to wit:The  evidences,   however,  disclose   that  Wonderland  did  not   comply  with   its   obligation  under   said ‘Addendum’ (Exh. ‘S’) as the agreement to turn over the farmland to it, did not materialize (57 tsn, May 29,   1990),   and   there  was,   actually   no   sale  of   the   land   (58   tsn,   ibid).  Hence,  Wonderland   is   not answerable.  And since the loans obtained under the four promissory notes (Exhs. ‘A’, ‘C’, ‘G’, and ‘E’) have not been paid, despite opportunities given by plaintiff to defendants to make payments, it stands to reason that defendants are liable to pay their obligations thereunder to plaintiff.  In fact, defendants failed to file a third-party complaint against Wonderland, which shows the weakness of its stand that Wonderland is answerable to make said payments.[7]

Petitioners  appealed   to   the  Court  of  Appeals.  The   trial   court’s  decision  was  affirmed  by   the appellate court.

Hence, this recourse, wherein petitioners raise the sole issue of:

WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ADDENDUM, SIGNED BY THE PETITIONERS,   RESPONDENT   BANK   AND  WONDERLAND   INC.,   CONSTITUTES   A   NOVATION   OF   THE CONTRACT BY SUBSTITUTION OF DEBTOR, WHICH EXEMPTS THE PETITIONERS FROM ANY LIABILITY OVER THE PROMISSORY NOTES.

Revealed by the facts on record, the conflict among the parties started from a contract of sale of a farmland between petitioners and Wonderland Food Industries, Inc.  As found by the trial court, no such sale materialized.

A contract of sale is a reciprocal transaction.  The obligation or promise of each party is the cause or consideration for the obligation or promise by the other.  The vendee is obliged to pay the price, while the vendor must deliver actual possession of the land.  In the instant case the original plan was that the initial payments would be paid in cash.  Subsequently, the parties (with the participation of respondent bank) executed an addendum providing instead, that the petitioners would secure a loan in the name of Agro Conglomerates Inc. for the total amount of the initial payments, while the settlement of   said   loan   would   be   assumed   by   Wonderland.  Thereafter,   petitioner   Soriano   signed   several promissory notes and received the proceeds in behalf of petitioner-company.

By this time, we note a subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Petitioners became  liable  as  accommodation party.  An accommodation party   is  a  person  who has  signed the instrument as maker, acceptor, or indorser, without receiving value therefor, and for the purpose of lending   his   name   to   some   other   person   and   is   liable   on   the   instrument   to   a   holder   for   value, notwithstanding   such  holder   at   the  time of   taking   the   instrument  knew  (the   signatory)   to  be   an accommodation party.[8] He has the right, after paying the holder, to obtain reimbursement from the party accommodated,   since the  relation between them has   in  effect  become one of  principal  and surety, the accommodation party being the surety.[9] Suretyship is defined as the relation which exists where one person has undertaken an obligation and another person is also under the obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform.[10] The surety’s liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal.[11] And the creditor may proceed against any one of the solidary debtors.[12]

We do not  give   credence   to  petitioners’  assertion that,   as  provided  by   the  addendum,   their obligation   to   pay   the   promissory   notes   was   novated   by   “substitution”   of   a   new   debtor, Wonderland.  Contrary to petitioners’ contention, the attendant facts herein do not make a case of novation.

Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of  the creditor.[13] In  order that  a  novation can take place,   the concurrence of  the following requisites[14] are indispensable:

1)  There must be a previous valid obligation;2)  There must be an agreement of the parties concerned to a new contract;3)  There must be the extinguishment of the old contract; and4)  There must be the validity of the new contract.

In the instant case, the first requisite for a valid novation is lacking. There was no novation by “substitution”   of   debtor  because   there  was   no  prior   obligation  which  was   substituted   by   a   new contract.  It  will   be   noted   that   the   promissory   notes,  which   bound   the   petitioners   to   pay,  were executed after the addendum.  The addendum modified the contract of sale, not the stipulations in the promissory   notes  which   pertain   to   the   surety   contract.  At   this   instance,  Wonderland   apparently assured the payment of future debts to be incurred by the petitioners.  Consequently, only a contract of surety arose. It was wrong for petitioners to presume a novation had taken place.  The well-settled rule is that novation is never presumed,[15] it must be clearly and unequivocally shown.[16]

As it turned out, the contract of surety between Wonderland and the petitioners was extinguished by the rescission of the contract of sale of the farmland.  With the rescission, there was confusion or merger   in   the persons  of   the  principal  obligor  and the  surety,  namely   the  petitioners  herein.  The addendum which was dependent thereon likewise lost its efficacy.

It is true that the basic and fundamental rule in the interpretation of contract is that, if the terms thereof are clear and leave no doubt as to the intention of the contracting parties, the literal meaning shall  control.  However,   in  order  to  judge the  intention of  the parties,   their  contemporaneous and subsequent acts should be considered.[17]

The   contract   of   sale   between  Wonderland   and   petitioners   did   not  materialize.  But   it   was admitted that petitioners received the proceeds of the promissory notes obtained from respondent bank.

Sec. 22 of the Civil Code provides:Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

Petitioners had no legal or just ground to retain the proceeds of the loan at the expense of private respondent.  Neither could petitioners excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract.  If petitioners sustained damages as a result of the rescission,   they   should   have   impleaded  Wonderland   and   asked   damages.  The   non-inclusion   of   a necessary party does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party.[18] But respondent appellate court   did  not   err   in  holding   that  petitioners   are  duty-bound  under   the   law   to  pay   the  claims  of respondent bank from whom they had obtained the loan proceeds.

WHEREFORE,   the  petition   is  DENIED  for   lack  of  merit.  The  assailed  decision  of   the  Court  of Appeals dated October 17, 1994 is AFFIRMED.  Costs against petitioners.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANCG.R. No. L-11827             July 31, 1961

FERNANDO A. GAITE, plaintiff-appellee, vs.

ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR and FERNANDO

TY, defendants-appellants.Alejo Mabanag for plaintiff-appellee.

Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants.REYES, J.B.L., J.:This appeal comes to us directly from the Court of First Instance because the claims involved aggregate more than P200,000.00.Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself or in a representative capacity, of 11 iron lode mineral claims, known as the Dawahan Group, situated in the municipality of Jose Panganiban, province of Camarines Norte.By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier constituted and appointed plaintiff-appellee Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims aforementioned on a royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom. On March 19, 1954, Gaite in turn executed a general assignment (Record on Appeal, pp. 17-19) conveying the development and exploitation of said mining claims into the Larap Iron Mines, a single proprietorship owned solely by and belonging to him, on the same royalty basis provided for in Exhibit "3". Thereafter, Gaite embarked upon the development and exploitation of the mining claims in question, opening and paving roads within and outside their boundaries, making other improvements and installing facilities therein for use in the development of the mines, and in time extracted therefrom what he claim and estimated to be approximately 24,000 metric tons of iron ore.For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop the mining claims in question, and Gaite assented thereto subject to certain conditions. As a result, a document entitled "Revocation of Power of Attorney and Contract" was executed on December 8, 1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the consideration of P20,000.00, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to use the business name "Larap Iron Mines" and its goodwill, and all the records and documents relative to the mines. In the same document, Gaite transferred to Fonacier all his rights and interests over the "24,000 tons of iron ore, more or less" that the former had already extracted from the mineral claims, in consideration of the sum of P75,000.00, P10,000.00 of which was paid upon the signing of the agreement, and

b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from and out of the first letter of credit covering the first shipment of iron ores and of the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co. Inc., its assigns, administrators, or successors in interests.

To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite a surety bond, and pursuant to the promise, Fonacier delivered to Gaite a surety bond dated December 8, 1954 with himself (Fonacier) as principal and the Larap Mines and

Smelting Co. and its stockholders George Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties (Exhibit "A-1"). Gaite testified, however, that when this bond was presented to him by Fonacier together with the "Revocation of Power of Attorney and Contract", Exhibit "A", on December 8, 1954, he refused to sign said Exhibit "A" unless another bond under written by a bonding company was put up by defendants to secure the payment of the P65,000.00 balance of their price of the iron ore in the stockpiles in the mining claims. Hence, a second bond, also dated December 8, 1954 (Exhibit "B"),was executed by the same parties to the first bond Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less then P65,000.00, and that, furthermore, the liability of said surety company would automatically expire on December 8, 1955. Both bonds were attached to the "Revocation of Power of Attorney and Contract", Exhibit "A", and made integral parts thereof.On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two executed and signed the "Revocation of Power of Attorney and Contract", Exhibit "A", Fonacier entered into a "Contract of Mining Operation", ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the right to develop, exploit, and explore the mining claims in question, together with the improvements therein and the use of the name "Larap Iron Mines" and its good will, in consideration of certain royalties. Fonacier likewise transferred, in the same document, the complete title to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap & Smelting Co., in consideration for the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite (Record on Appeal, pp. 82-94).Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far Eastern Surety and Insurance Company, no sale of the approximately 24,000 tons of iron ore had been made by the Larap Mines & Smelting Co., Inc., nor had the P65,000.00 balance of the price of said ore been paid to Gaite by Fonacier and his sureties payment of said amount, on the theory that they had lost right to make use of the period given them when their bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24"). And when Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the present complaint against them in the Court of First Instance of Manila (Civil Case No. 29310) for the payment of the P65,000.00 balance of the price of the ore, consequential damages, and attorney's fees.All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by Gaite was subject to a condition that the amount of P65,000.00 would be payable out of the first letter of credit covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the complaint, no sale of the iron ore had been made, hence the condition had not yet been fulfilled; and that consequently, the obligation was not yet due and demandable. Defendant Fonacier also contended that only 7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered, and counterclaimed for more than P200,000.00 damages.At the trial of the case, the parties agreed to limit the presentation of evidence to two issues:(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00 become due and demandable when the defendants failed to renew the surety bond underwritten by the

Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which expired on December 8, 1955; and(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were actually in existence in the mining claims when these parties executed the "Revocation of Power of Attorney and Contract", Exhibit "A."On the first question, the lower court held that the obligation of the defendants to pay plaintiff the P65,000.00 balance of the price of the approximately 24,000 tons of iron ore was one with a term: i.e., that it would be paid upon the sale of sufficient iron ore by defendants, such sale to be effected within one year or before December 8, 1955; that the giving of security was a condition precedent to Gait's giving of credit to defendants; and that as the latter failed to put up a good and sufficient security in lieu of the Far Eastern Surety bond (Exhibit "B") which expired on December 8, 1955, the obligation became due and demandable under Article 1198 of the New Civil Code.As to the second question, the lower court found that plaintiff Gaite did have approximately 24,000 tons of iron ore at the mining claims in question at the time of the execution of the contract Exhibit "A."Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally, P65,000.00 with interest at 6% per annum from December 9, 1955 until payment, plus costs. From this judgment, defendants jointly appealed to this Court.During the pendency of this appeal, several incidental motions were presented for resolution: a motion to declare the appellants Larap Mines & Smelting Co., Inc. and George Krakower in contempt, filed by appellant Fonacier, and two motions to dismiss the appeal as having become academic and a motion for new trial and/or to take judicial notice of certain documents, filed by appellee Gaite. The motion for contempt is unmeritorious because the main allegation therein that the appellants Larap Mines & Smelting Co., Inc. and Krakower had sold the iron ore here in question, which allegedly is "property in litigation", has not been substantiated; and even if true, does not make these appellants guilty of contempt, because what is under litigation in this appeal is appellee Gaite's right to the payment of the balance of the price of the ore, and not the iron ore itself. As for the several motions presented by appellee Gaite, it is unnecessary to resolve these motions in view of the results that we have reached in this case, which we shall hereafter discuss.The main issues presented by appellants in this appeal are:(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite the P65,000.00 (balance of the price of the iron ore in question)is one with a period or term and not one with a suspensive condition, and that the term expired on December 8, 1955; and(2) that the lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite to appellant Fonacier.The first issue involves an interpretation of the following provision in the contract Exhibit "A":

7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his rights and interests over the 24,000 tons of iron ore, more or less, above-referred to together with all his rights and interests to operate the mine in consideration of the sum of SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which the latter binds to pay as follows:

a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this agreement.b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from and out of the first letter of credit covering the first shipment of iron ore made by the Larap Mines & Smelting Co., Inc., its assigns, administrators, or successors in interest.

We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. That the parties to the contract Exhibit "A" did not intend any such state of things to prevail is supported by several circumstances:1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of Sixty-Five Thousand Pesos (P65,000.00) will be paid out of the first letter of credit covering the first shipment of iron ores . . ." etc. There is no uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is deferred.2) A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price),but each party anticipates performance by the other from the very start. While in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one by a surety company; and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000.00.3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or shipment of the ore as a condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the sale or shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus be able to postpone payment indefinitely. The desireability of avoiding such a construction of the contract Exhibit "A" needs no stressing.4) Assuming that there could be doubt whether by the wording of the contract the parties indented a suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules of interpretation would incline the scales in favor of "the greater reciprocity of interests", since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides:

If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.

and there can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, that if such obligation were viewed as non-existent or not binding until the ore was sold.The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment.This issue settled, the next point of inquiry is whether appellants, Fonacier and his sureties, still have the right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment; or, in other words, whether or not they are entitled to take full advantage of the period granted them for making the payment.We agree with the court below that the appellant have forfeited the right court below that the appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking on December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid P65,000.00, a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier (Exhibit "A"). The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines:

"ART. 1198. The debtor shall lose every right to make use of the period:(1) . . .(2) When he does not furnish to the creditor the guaranties or securities which he has promised.(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.

Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced.There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to gain barely; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8, 1955. But in the latter case the defendants-appellants' obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A.".All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding payment and instituting this action one year from and after the contract (Exhibit "A") was executed, either because the appellant debtors had impaired the securities originally given and thereby forfeited any further time within which to pay; or because the term of payment was originally of no more than one year, and the balance of P65,000.00 became due and payable thereafter.

Coming now to the second issue in this appeal, which is whether there were really 24,000 tons of iron ore in the stockpiles sold by appellee Gaite to appellant Fonacier, and whether, if there had been a short-delivery as claimed by appellants, they are entitled to the payment of damages, we must, at the outset, stress two things:first, that this is a case of a sale of a specific mass of fungible goods for a single price or a lump sum, the quantity of "24,000 tons of iron ore, more or less," stated in the contract Exhibit "A," being a mere estimate by the parties of the total tonnage weight of the mass; and second, that the evidence shows that neither of the parties had actually measured of weighed the mass, so that they both tried to arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter.The sale between the parties is a sale of a specific mass or iron ore because no provision was made in their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor was the price of P75,000,00 agreed upon by the parties based upon any such measurement.(see Art. 1480, second par., New Civil Code). The subject matter of the sale is, therefore, a determinate object, the mass, and not the actual number of units or tons contained therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwithstanding that the quantity delivered is less than the amount estimated by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil Code). There is no charge in this case that Gaite did not deliver to appellants all the ore found in the stockpiles in the mining claims in questions; Gaite had, therefore, complied with his promise to deliver, and appellants in turn are bound to pay the lump price.But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy, not a definite mass, but approximately 24,000 tons of ore, so that any substantial difference in this quantity delivered would entitle the buyers to recover damages for the short-delivery, was there really a short-delivery in this case?We think not. As already stated, neither of the parties had actually measured or weighed the whole mass of ore cubic meter by cubic meter, or ton by ton. Both parties predicate their respective claims only upon an estimated number of cubic meters of ore multiplied by the average tonnage factor per cubic meter.Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the stockpiles of ore that he sold to Fonacier, while appellants contend that by actual measurement, their witness Cirpriano Manlañgit found the total volume of ore in the stockpiles to be only 6.609 cubic meters. As to the average weight in tons per cubic meter, the parties are again in disagreement, with appellants claiming the correct tonnage factor to be 2.18 tons to a cubic meter, while appellee Gaite claims that the correct tonnage factor is about 3.7.In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor of iron ore in this case to be that made by Leopoldo F. Abad, chief of the Mines and Metallurgical Division of the Bureau of Mines, a government pensionado to the States and a mining engineering graduate of the Universities of Nevada and California, with almost 22 years of experience in the Bureau of Mines. This witness placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to 5 metric tons as maximum. This estimate, in turn, closely corresponds to the average tonnage factor of 3.3 adopted in his corrected report (Exhibits "FF" and FF-1") by engineer Nemesio Gamatero, who was sent by the Bureau of Mines to the mining claims involved at the request of appellant Krakower,

precisely to make an official estimate of the amount of iron ore in Gaite's stockpiles after the dispute arose.Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles made by appellant's witness Cipriano Manlañgit is correct, if we multiply it by the average tonnage factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons, which is not very far from the estimate of 24,000 tons made by appellee Gaite, considering that actual weighing of each unit of the mass was practically impossible, so that a reasonable percentage of error should be allowed anyone making an estimate of the exact quantity in tons found in the mass. It must not be forgotten that the contract Exhibit "A" expressly stated the amount to be 24,000 tons,  more or less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).There was, consequently, no short-delivery in this case as would entitle appellants to the payment of damages, nor could Gaite have been guilty of any fraud in making any misrepresentation to appellants as to the total quantity of ore in the stockpiles of the mining claims in question, as charged by appellants, since Gaite's estimate appears to be substantially correct.WHEREFORE, finding no error in the decision appealed from, we hereby affirm the same, with costs against appellants.

FIRST DIVISION[G. R. No. 130972. January 23, 2002]

PHILIPPINE LAWIN BUS, CO., MASTER TOURS & TRAVEL CORP., MARCIANO TAN, ISIDRO TAN, ESTEBAN TAN and HENRY TAN, petitioners, vs. COURT OF APPEALS and ADVANCE CAPITAL

CORPORATION, respondents.D E C I S I O N

PARDO, J.:The Case

The case is a petition for review via certiorari of the decision of the Court of Appeals,[1] reversing that of the trial court[2] and sentencing petitioners as follows:“WHEREFORE,   the  appealed  decision   should  be,  as   it   is  hereby  REVERSED  and  SET  ASIDE.  In   lieu thereof, a new one is hereby rendered ordering  the  defendants-appellees to pay, jointly and solidarily, in favor of plaintiff-appellant Advance Capital Corporation, the following amounts:“1. P16,484,994.42, the principal obligation under the two promissory note Nos. 003 and 00037 plus interest and penalties;“2. P100,000.00 for loss of goodwill and good reputation;“3.  An amount equivalent to 10% of the collectible amount, plus P50,000, as acceptance fee and P500 per appearance, as and for attorney’s fees: and“4. P100,000 as litigation expenses.“Costs shall be taxed against defendant-appellees.“SO ORDERED.”[3]

The FactsThe facts, as found by the Court of Appeals, are as follows:

“On 7 August 1990 plaintiff Advance Capital Corporation, a licensed lending investor, extended a loan to  defendant  Philippine   Lawin  Bus  Company   (hereafter   referred   to   as   LAWIN),   in   the   amount  of P8,000,000.00 payable within a period of one (1) year, as evidenced by a Credit Agreement (Exhibits “B”   to   “B-4-B”).   The   defendant,   through   Marciano   Tan,   its   Executive   Vice   President,   executed Promissory Note No. 003, for the amount of P8,000,000.00 (Exhs. “C” to “C-1”).“To  guarantee  payment  of   the   loan,   defendant   Lawin  executed   in   favor  of   plaintiff   the   following documents: (1) A Deed of Chattel Mortgage wherein 9 units of buses were constituted as collaterals (Exhibits “F” to “F-7”): (2) A joint and several UNDERTAKING of defendant Master Tours and Travel Corporation dated 07 August 1990, signed by Isidro Tan and Marciano Tan (Exhs. “H” to “H-1): and (3) A joint   and   several  UNDERTAKING  dated   21  August   1990,   executed   and   signed   by   Esteban,   Isidro, Marciano and Henry, all surnamed Tan (Exhs. “I” to “I-6”).“Out of the P8,000,000.00 loan, P1,800,000.00 was paid.  Thus, on 02 November 1990, defendant Bus Company was able to avail an additional loan of P2,000,000.00 for one (1) month under Promissory Note 00028 (Exhs. “J”-“J-1”).“Defendant LAWIN failed to pay the aforementioned promissory note and the same was renewed on 03 December 1990 to become due on or before 01 February 1991, under Promissory Note 00037 (Exh. “K”).“On 15 May 1991 for failure to pay the two promissory notes, defendant LAWIN was granted a loan re-structuring for two (2) months to mature on 31 July 1991.

“Despite the restructuring, defendant LAWIN failed to pay. Thus, plaintiff foreclosed the mortgaged buses and as the sole bidder thereof, the amount of P2,000,000.00 was accepted by the deputy sheriff conducting the sale and credited to the account of defendant LAWIN.“Thereafter,  on  27  May  1992,   identical  demand  letters  were   sent   to   the  defendants   to  pay   their obligation   (Exhs.   “X”   to   “CC”).   Despite   repeated   demands,   the   defendants   failed   to   pay   their indebtedness which totaled of P16,484,992.42 as of 31 July 1992 (Exhs. “DD”-“DD-1”).“Thus, the suit for sum of money, wherein the plaintiff prays that defendants solidarily pay plaintiff as of July 31, 1992 the sum of (a) P16,484,994.12 as principal obligation under the two promissory notes Nos.  003  and 00037,  plus   interests  and penalties:   (b)  P300,000.00   for   loss  of  good will  and  good business   reputation:   (c)   attorney’s   fees   amounting   to   P100,000.00   as   acceptance   fee   and   a   sum equivalent   to  10% of   the  collectible   amount,  and  P500.00  as  appearance   fee;   (d)   P200,000.00  as litigation expenses; (e) exemplary damages in an amount to be awarded at the court’s discretion; and (f) the costs.“On 04 September  1993,  a writ  of  preliminary  injunction was  issued with respect  to movable  and immovable properties of the defendants.“In answer to the complaint, defendants-appellees assert  by way of special and affirmative defense, that there was already an arrangement as to the full settlement of the loan obligation by way of:“17.A. Sale of the nine (9) units passenger buses the proceeds of which will be credited against the loan amount as full payment thereof; or in the alternative.“17.B. Plaintiff will shoulder and bear the cost of rehabilitating the buses, with the amount thereof to be included in the total obligation of defendant Lawin and the bus operated, with the earnings thereof to be applied to the loan obligation of defendant Lawin.” (p. 4 Answer; p. 166, rec.)“Defendants further assert that the foreclosure sale was in violation of the aforequoted arrangement and prayed for the nullification of the same and the dismissal of the complaint.”[4]

On 28 June 1995, the trial court rendered a decision dismissing the complaint, as follows:“WHEREFORE, judgment is rendered as follows:“1.  Dismissing the complaint for lack of merit;“2. Declaring the foreclosure and auction sale null and void;“3. Declaring the obligation or indebtedness of defendants EXTINGUISHED;“4.  Declaring the writ of attachment issued in this case null and void and, therefore, is hereby declared dissolved; and“5.  Ordering the Sheriff of this Branch or whoever is in possession, to return all the personal properties attached in this case to the owner/s thereof within one (1) week from the finality of this decision;“6.  Dismissing defendant’s counterclaim for lack of sufficient merit.“No pronouncement as to costs.“SO ORDERED.”[5]

In  time,  respondent  Advance Capital  Corporation appealed  from the decision to  the Court  of Appeals.[6]

On 30 September 1997, the Court of Appeals promulgated a decision reversing that of the trial court, the dispositive portion of which is set out in the opening paragraph of this decision.

Hence, this appeal.[7]

The Issue

The issue raised is whether there was dacion en pago between the parties upon the surrender or transfer of the mortgaged buses to the respondent.[8]

The Court’s RulingWe deny the petition, with modification.The issue raised is factual. In an appeal via certiorari, we may not review the factual findings of 

the Court of Appeals.[9] When supported by substantial evidence, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court,[10] unless the case falls under any of the recognized exceptions to the rule.[11]

Petitioner failed to prove that the case falls within the exceptions.[12] The Supreme Court is not a trier of facts.[13] It is not our function to review, examine and evaluate or weigh the probative value of the evidence presented.[14] A question of fact would arise in such event.[15]

Nonetheless,  we agree with the Court of Appeals that there was no dacion en pago that took place between the parties.

In dacion en pago, property is alienated to the creditor in satisfaction of a debt in money.[16] It is “the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance  of  the obligation.”[17] It “extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished."[18]

Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of dacion en pago.  A contract of sale is perfected at the moment there is a meeting of the minds of the parties thereto upon the thing which is the object of the contract and upon the price.[19] In Filinvest Credit Corporation v. Philippine Acetylene Co., Inc., we said:“x  x  x.  In dacion en pago,   as  a   special  mode  of  payment,   the  debtor  offers  another   thing   to   the creditor who accepts it as equivalent of payment of an outstanding obligation.  The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the  debtor,  payment   for  which   is   to  be  charged against   the  debtor’s  debt.  As  such,   the  essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present.  In its modern concept, what actually takes place in dacion en pago is an objective novation of  the   obligation  where   the   thing   offered   as   an   accepted   equivalent   of   the performance  of  an  obligation is  considered as the object of the contract of sale,  while the debt  is considered as the purchase price.  In any case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation.”[20]

In this case, there was no meeting of the minds between the parties on whether the loan of the petitioners would be extinguished by dacion en pago.  The petitioners anchor their claim solely on the testimony of Marciano Tan that he proposed to extinguish petitioners’ obligation by the surrender of the   nine   buses   to   the  respondent   acceded   to   as   shown   by   receipts   its   representative  made.[21]However,  the receipts executed by respondent’s representative as proof of an agreement of the parties   that  delivery  of   the  buses   to  private   respondent  would   result   in  extinguishing  petitioner’s obligation do not in any way reflect the intention of the parties that ownership thereof by respondent would be complete and absolute.  The receipts show that the two buses were delivered to respondent in order that it would take custody  for the purpose of selling the same.  The receipts themselves in fact 

show that petitioners deemed  respondent as their agent in the sale of the two vehicles whereby the proceeds thereof would be applied in payment of petitioners’ indebtedness to respondent.  Such an agreement negates transfer of absolute ownership over the property to  respondent, as in a sale. Thus, in Philippine National Bank v. Pineda[22] we   held   that   where   machinery   and   equipment   were repossessed   to   secure   the  payment  of   a   loan  obligation   and   not   for   the  purpose  of   transferring ownership   thereof   to   the   creditor   in   satisfaction   of   said   loan,   no dacion en pago was   ever accomplished.The Fallo

IN VIEW WHEREOF,  the Court  DENIES the petition and AFFIRMS the decision of  the Court  of Appeals[23] with MODIFICATION as follows:WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE.  In lieu thereof, judgment is hereby   rendered   ordering   defendants-appellees   to   pay,   jointly   and   severally,   plaintiff-appellant Advance Capital Corp. the following amounts:(1) P16,484,994.42, the principal obligation under the two promissory notes plus 12% per annum from the finality of this decision until fully paid;(2) P50,000.00 as attorney’s fees;(3) Costs of suit.

All other monetary awards are deleted.SO ORDERED.

Republic of the PhilippinesSUPREME COURT

ManilaFIRST DIVISION

G.R. No. 149420 October 8, 2003SONNY LO, petitioner, 

vs.KJS ECO-FORMWORK SYSTEM PHIL., INC., respondent.

D E C I S I O NYNARES-SANTIAGO, J.:Respondent  KJS   ECO-FORMWORK  System Phil.,   Inc.   is   a   corporation  engaged   in   the   sale  of   steel scaffoldings, while petitioner Sonny L. Lo, doing business under the name and style San’s Enterprises, is a   building   contractor.   On   February   22,   1990,   petitioner   ordered   scaffolding   equipments   from respondent worth P540,425.80.1 He paid a downpayment in the amount of P150,000.00. The balance was made payable in ten monthly installments.Respondent delivered the scaffoldings to petitioner.2 Petitioner was able to pay the first two monthly installments.1a\^/phi1.netHis business, however, encountered financial difficulties and he was unable to settle his obligation to respondent despite oral and written demands made against him.3

On October 11, 1990, petitioner and respondent executed a Deed of Assignment,4 whereby petitioner assigned to respondent his receivables in the amount of P335,462.14 from Jomero Realty Corporation. Pertinent portions of the Deed provide:WHEREAS,   the  ASSIGNOR   is   the   contractor   for   the   construction  of   a   residential   house   located  at Greenmeadow Avenue, Quezon City owned by Jomero Realty Corporation;WHEREAS, in the construction of the aforementioned residential house, the ASSIGNOR purchased on account scaffolding equipments from the ASSIGNEE payable to the latter;WHEREAS, up to the present the ASSIGNOR has an obligation to the ASSIGNEE for the purchase of the aforementioned scaffoldings now in the amount of Three Hundred Thirty Five Thousand Four Hundred Sixty Two and 14/100 Pesos (P335,462.14);NOW, THEREFORE, for and in consideration of the sum of Three Hundred Thirty Five Thousand Four Hundred Sixty Two and 14/100 Pesos (P335,462.14), Philippine Currency which represents part of the ASSIGNOR’s collectible from Jomero Realty Corp.,  said ASSIGNOR hereby assigns, transfers and sets over unto the ASSIGNEE all collectibles amounting to the said amount of P335, 462.14;And the ASSIGNOR does hereby grant the ASSIGNEE, its successors and assigns, the full power and authority to demand, collect, receive, compound, compromise and give acquittance for the same or any part thereof, and in the name and stead of the said ASSIGNOR;And the ASSIGNOR does hereby agree and stipulate to and with said ASSIGNEE,   its  successors and assigns that said debt is justly owing and due to the ASSIGNOR for Jomero Realty Corporation and that said ASSIGNOR has not done and will not cause anything to be done to diminish or discharge said debt, or delay or to prevent the ASSIGNEE, its successors or assigns, from collecting the same;And   the  ASSIGNOR   further   agrees   and   stipulates   as   aforesaid   that   the   said  ASSIGNOR,   his   heirs, executors, administrators, or assigns, shall and will at times hereafter, at the request of said ASSIGNEE, its successors or assigns, at his cost and expense, execute and do all such further acts and deeds as shall

be reasonably necessary to effectually enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR has in accordance with the true intent and meaning of these presents. xxx5 (Italics supplied)However, when respondent tried to collect the said credit from Jomero Realty Corporation, the latter refused to honor the Deed of Assignment because it claimed that petitioner was also indebted to it.6 On November 26, 1990, respondent sent a letter7 to petitioner demanding payment of his obligation, but petitioner refused to pay claiming that his obligation had been extinguished when they executed the Deed of Assignment.Consequently, on January 10, 1991, respondent filed an action for recovery of a sum of money against the petitioner before the Regional Trial Court of Makati, Branch 147, which was docketed as Civil Case No. 91-074.8

During the trial, petitioner argued that his obligation was extinguished with the execution of the Deed of Assignment of credit. Respondent, for its part, presented the testimony of its employee, Almeda Bañaga, who testified that Jomero Realty refused to honor the assignment of credit because it claimed that petitioner had an outstanding indebtedness to it.On August 25, 1994, the trial court rendered a decision9 dismissing the complaint on the ground that the assignment of credit extinguished the obligation. The decretal portion thereof provides:WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the defendant and against   the  plaintiff,  dismissing   the  complaint  and ordering  the  plaintiff to pay  the  defendant attorney’s fees in the amount of P25,000.00.1a\^/phi1.netRespondent appealed the decision to the Court of Appeals.  On April  19, 2001, the appellate court rendered a decision,10 the dispositive portion of which reads:WHEREFORE,  finding  merit   in   this   appeal,   the   court   REVERSES   the   appealed  Decision   and   enters judgment ordering defendant-appellee Sonny Lo to pay the plaintiff-appellant  KJS ECO-FORMWORK SYSTEM PHILIPPINES, INC. Three Hundred Thirty Five Thousand Four Hundred Sixty-Two and 14/100 (P335,462.14) with legal interest of 6% per annum from January 10, 1991 (filing of the Complaint) until fully paid and attorney’s fees equivalent to 10% of the amount due and costs of the suit.SO ORDERED.11

In  finding   that   the  Deed  of  Assignment  did  not  extinguish   the  obligation of   the  petitioner   to   the respondent, the Court of Appeals held that (1) petitioner failed to comply with his warranty under the Deed; (2) the object of the Deed did not exist at the time of the transaction, rendering it void pursuant to Article 1409 of the Civil Code; and (3) petitioner violated the terms of the Deed of Assignment when he   failed   to   execute   and   do   all   acts   and   deeds   as   shall   be   necessary   to   effectually   enable   the respondent to recover the collectibles.12

Petitioner filed a motion for reconsideration of the said decision, which was denied by the Court of Appeals.13

In this petition for review, petitioner assigns the following errors:ITHE  HONORABLE  COURT  OF  APPEALS  COMMITTED A  GRAVE  ERROR  IN DECLARING THE  DEED  OF ASSIGNMENT (EXH. "4") AS NULL AND VOID FOR LACK OF OBJECT ON THE BASIS OF A MERE HEARSAY CLAIM.II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF ASSIGNMENT (EXH. "4") DID NOT EXTINGUISH PETITIONER’S OBLIGATION ON THE WRONG NOTION THAT PETITIONER FAILED TO COMPLY WITH HIS WARRANTY THEREUNDER.IIITHE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE TRIAL COURT AND IN ORDERING PAYMENT OF INTERESTS AND ATTORNEY’S FEES.14

The petition is without merit.An assignment  of  credit   is  an  agreement  by  virtue  of  which   the owner  of  a  credit,  known as  the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor.15

Corollary thereto, in dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt.16 In order that there be a valid dation in payment, the following are the requisites: (1) There must be the performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a   real   right  or  a  credit  against   the  third  person;   (2)  There  must  be  some difference  between the prestation due and that which is given in substitution (aliud pro alio); (3) There must be an agreement between the creditor  and debtor that  the obligation  is   immediately  extinguished by reason of  the performance of a prestation different from that due.17 The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor’s debt. As such, the vendor in good faith shall be responsible, for the existence and legality of the credit at the time of the sale but not for the solvency of the debtor, in specified circumstances.18

Hence,   it  may well  be  that   the  assignment  of  credit,  which   is   in  the  nature of  a  sale  of  personal property,19produced the effects of a dation in payment which may extinguish the obligation.20 However, as   in   any   other   contract   of   sale,   the   vendor   or   assignor   is   bound   by   certain  warranties.  More specifically, the first paragraph of Article 1628 of the Civil Code provides:The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it  has  been   so  expressly   stipulated  or  unless   the   insolvency  was  prior   to   the   sale   and  of   common knowledge.From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence and legality of the credit at the time of the sale or assignment. When Jomero claimed that it was no longer indebted to petitioner since the latter also had an unpaid obligation to it, it essentially meant that its obligation to petitioner has been extinguished by compensation.21 In other words, respondent alleged the non-existence of the credit and asserted its claim to petitioner’s warranty under the assignment. Therefore, it behooved on petitioner to make good its warranty and paid the obligation.Furthermore, we find that petitioner breached his obligation under the Deed of Assignment, to wit:And   the  ASSIGNOR   further   agrees   and   stipulates   as   aforesaid   that   the   said  ASSIGNOR,   his   heirs, executors, administrators, or assigns, shall and will at times hereafter, at the request of said ASSIGNEE, its successors or assigns, at his cost and expense, execute and do all such further acts and deeds as shall 

be   reasonably  necessary   to  effectually  enable  said  ASSIGNEE  to   recover  whatever  collectibles  said ASSIGNOR has in accordance with the true intent and meaning of these presents.22 (underscoring ours)Indeed, by warranting the existence of the credit, petitioner should be deemed to have ensured the performance thereof in case the same is later found to be inexistent. He should be held liable to pay to respondent the amount of his indebtedness.Hence, we affirm the decision of the Court of Appeals ordering petitioner to pay respondent the sum of P335,462.14 with legal interest thereon. However, we find that the award by the Court of Appeals of attorney’s fees is without factual basis. No evidence or testimony was presented to substantiate this claim. Attorney’s fees, being in the nature of actual damages, must be duly substantiated by competent proof.WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated April 19, 2001 in CA-G.R. CV No. 47713, ordering petitioner to pay respondent the sum of P335,462.14 with legal interest of 6% per annum from January 10, 1991 until fully paid is AFFIRMED with MODIFICATION. Upon finality of this  Decision,   the  rate of   legal   interest   shall  be  12% per  annum,  inasmuch as   the  obligation shall thereafter become equivalent to a forbearance of credit.23 The award of attorney’s fees is DELETED for lack of evidentiary basis.SO ORDERED.

Republic of the PhilippinesSUPREME COURT

ManilaSECOND DIVISION

G.R. No. 128669 October 4, 2002MAMERTA VDA. DE JAYME,

and her children and/or heirs of the late GRACIANO JAYME, namely: WILFREDO, MARCIAL, MANUEL, ANTONIO, all surnamed JAYME;

the heirs of DOMINADOR JAYME, namely: SUPREMA (surviving spouse) and his children, namely: ARMANDO, NICANOR, ZENAIDA, CATHERINE, ROSALINE, DORIS, VICKY and MARILYN, all surnamed

JAYME; and the heirs of the late NILIE JAYME SANCHEZ, namely, INOCENCIO SANCHEZ (surviving spouse) and her children: ELSA, CONCEPCION, CLEOFE, ALEJANDRO, EFREN and MACRINA, all surnamed SANCHEZ;

and FLORA JAYME RAVANES, assisted by her husband, CESAR RAVANES, petitioners, vs.

HON. COURT OF APPEALS, SIXTEENTH DIVISION, CEBU ASIANCARS INC., GEORGE NERI, CONNIE NERI, WILLIAM LEONG KOC LEE,

EDUARD JAMES LEE, ROBERTO UY KIM, AND CHARLES UY KIM;1 METROPOLITAN BANK AND TRUST COMPANY, RENE NATIVIDAD AND/OR JOHN DOE in substitution

of MAXIMO PEREZ, sued in his capacity as City Sheriff of Mandaue City, respondents.

D E C I S I O NQUISUMBING, J.:This petition assails the decision2 dated September 19, 1996, of the Court of Appeals in CA-G.R. CV No. 46496   and   its   resolution3 dated   February   21,   1997,   denying   the  motion   for   reconsideration.   Said decision had affirmed that of the Regional Trial Court of Cebu City, Branch 15, in Civil Case No. CEB-21369 for Annulment of Contract and Damages with Prayer for the Issuance of Preliminary Injunction. 4

The following facts are borne by the records:The spouses  Graciano and Mamerta  Jayme are the  registered owners of  Lot  2700,  situated  in  the Municipality of Mandaue (now Mandaue City), Cebu, consisting of 2,568 sq.m. and covered by Transfer Certificate of Title No. 8290.On January 8,  1973,  they entered  into a Contract  of Lease5 with George Neri,  president of Airland Motors Corporation (now Cebu Asiancars Inc.), covering one-half of Lot 2700. The lease was for twenty (20) years.The   terms   and   conditions   of   the   lease   contract6 stipulated   that   Cebu   Asiancars   Inc.   (hereafter, Asiancars) may use the leased premises as a collateral to secure payment of a loan which Asiancars may obtain from any bank, provided that the proceeds of the loan shall be used solely for the construction of  a  building  which,   upon   the   termination  of   the   lease  or   the  voluntary   surrender  of   the   leased premises before the expiration of the contract, shall automatically become the property of the Jayme spouses (the lessors).

A Special Power of Attorney7 dated January 26, 1974, was executed in favor of respondent George Neri, who used the lot to secure a loan of P300,000 from the General Bank and Trust Company. The loan was fully paid on August 14, 1977.8

In  October  1977,  Asiancars  obtained  a   loan  of  P6,000,000   from  the  Metropolitan  Bank  and  Trust Company (MBTC). The entire Lot 2700 was offered as one of several properties given as collateral for the loan. As mortgagors, the spouses signed a Deed of Real Estate Mortgage9 dated November 21, 1977 in favor of MBTC. It stated that the deed was to secure the payment of a loan obtained by Asiancars from the bank.To assure the Jayme spouses, Neri and the other officers of Asiancars, namely Benny Liongben Lee, William Leong Koc  Lee,  Connie  U.  Neri,  Edward   James  Lee,  Roberto  Uykim and Charles  P.  Uykim, executed an undertaking10 dated November 7, 1977. In it they promised, in their personal capacities and/or in representation of Cebu Asiancars, Inc., "to compensate Mr. & Mrs. Graciano Jayme for any and all or whatever damage they may sustain or suffer by virtue and arising out of the mortgage to MBTC   of   the   aforestated   parcel   of   land."11 In   addition,   Neri   wrote   a   letter   dated   September   1, 198112 addressed to Mamerta Jayme acknowledging her "confidence and help" extended to him, his family and Asiancars. He promised to pay their indebtedness to MBTC before the loan was due.Meeting financial  difficulties and  incurring an outstanding balance on the loan,  Asiancars conveyed ownership of the building on the leased premises to MBTC, by way of "dacion en pago."13 The building was  valued  at  P980,000  and  the  amount  was  applied  as  partial  payment   for   the   loan.  There   still remained a balance of P2,942,449.66, which Asiancars failed to pay.Eventually, MBTC extrajudicially foreclosed the mortgage. A public auction was held on February 4, 1981.  MBTC  was   the  highest   bidder   for   P1,067,344.35.   A   certificate   of   sale  was   issued   and  was registered with the Register of Deeds on February 23, 1981.Meanwhile, Graciano Jayme died, survived by his widow Mamerta and their children. As a result of the foreclosure, Graciano’s heirs filed a civil complaint,14 in January of 1982, for Annulment of Contract with Damages with Prayer for Issuance of Preliminary Injunction, against respondent Asiancars, its officers and incorporators and MBTC. Later, in 1999, Mamerta Jayme also passed away.Petitioners   claim  that  Neri  and Asiancars  did  not   tell   them  that   the   indebtedness  secured  by  the mortgage was for P6,000,000 and that the security was the whole of Lot 2700. Petitioners allege that the  deed  presented   to   the   Jayme   spouses  was   in  blank,  without   explanation  on   the   stipulations contained therein,  except that  its  conditions were  identical  to those of the stipulations when they mortgaged half the lot’s area previously with General  Bank. Petitioners also alleged that the Jayme spouses were illiterate and only knew how to sign their names. That because they did not know how to read nor write, and had given their full trust and confidence to George Neri, the spouses were deceived into signing the Deed of Real Estate Mortgage. Their intention as well as consent was only to be bound as guarantors.Respondents deny that any fraud was employed, nor was there a scheme to make the spouses sign as mortgagors instead of guarantors. They aver that the spouses were fully advised and compensated for the use of their property as collateral with MBTC; that they voluntarily signed the deed of mortgage upon the request of George Neri, whom they previously trusted and who fulfilled his promise to pay the loan to General Bank and who obtained the release of the same property by faithfully paying his indebtedness with General Bank.

After trial, the RTC rendered a decision, disposing as follows:WHEREFORE,   in  view of  the foregoing  evidences,  arguments  and considerations,   this  Court  hereby renders judgment as follows:

1. Declaring the Real Estate Mortgage executed by the Jaymes in favor of Metrobank as valid and binding;2. Declaring the Undertaking executed by George Neri, Benny Leongben Lee already deceased, William Leong Koc, Connie U. Neri, Edward James Lee, Roberto Uykim, and Charles P. Uykim on November 7, 1977 to be valid and binding as well upon the signatories thereof;3. Allowing the Jaymes to redeem the mortgaged property, Lot 2700 covered by TCT 8290 of the Register of Deeds of Mandaue City for the amount of P2,942,448.66 plus interest at the rate of 6% per annum within ninety (90) days from date of finality of this judgment until paid. However, if the plaintiffs fail to redeem said property, then let a Certificate of Sale/definite Deed of Sale be issued in favor of Metropolitan Bank and Trust Co. covering said Lot 2700;4. Holding the defendants George Neri, William Leong Koc, Connie U. Neri, Edward James Lee, Roberto Uykim, and Charles Uykim jointly liable on their Undertaking dated November 7, 1977 as they are hereby required to reimburse the Jaymes the amount that the Jaymes will pay to Metropolitan Bank and Trust Co. for the redemption;5. Requiring the defendants George Neri, William Leong Koc, Connie U. Neri, Edward James Lee,  Roberto  Uykim and Charles  Uykim to  pay jointly  attorneys  fees   to   the  Jaymes  in  the amount of P50,000.00;6. Requiring the defendants George Neri, William Leong Koc, Connie U. Neri, Edwards James Lee, Roberto Uykim and Charles Uykim to pay jointly the cost of this suit.

SO ORDERED.15

Petitioners and respondent MBTC elevated the case to the Court of Appeals, which affirmed the ruling of the RTC, with modifications stated in this wise:

1.  Declaring  valid  and binding   the Real  Estate  Mortgage  executed  by plaintiffs   in   favor of defendant MBTC;2. Declaring valid the foreclosure of the mortgage and the foreclosure sale;3. Declaring that the period to redeem Lot 2700 had expired on February 23, 1982 without plaintiffs redeeming it;4. Ordering the Sheriff of Mandaue City to issue a definite Deed of Sale covering Lot 2700 in favor of defendant MBTC;5. Declaring valid and binding the dacion en pago executed by defendant Asiancars in favor of defendant MBTC;6. Declaring defendant MBTC as owner of the building on Lot 2700;7. Ordering defendant MBTC to pay to plaintiffs the amount of P92,083.33 for the use of the land from December 18, 1981 to February 23, 1982, with six percent (6%) interest per annum until paid;8. Ordering defendant Asiancars, Neris, Uykims, Lee and Koc to pay jointly and severally the plaintiffs the (a) actual value of the lot in the amount of P3,852,000.00; (b) P400,000.00 moral damages;   (c)  P150,000.00 exemplary  damages  and P100,000.00 attorney’s   fee,  all  with six percent (6%) interest per annum until fully paid;

9. Cost against defendants Asiancars, Neris, Uykims, Lee and Koc.SO ORDERED.16

Petitioners filed a motion for reconsideration, which the CA denied. Hence, this petition which assigns the following errors:ITHAT WITH GRAVE ABUSE OF DISCRETION, AMOUNTING TO EXCESS OF JURISDICTION, THE LOWER COURT   GROSSLY   AND   SERIOUSLY   ERRED   IN   DECLARING   VALID   AND   BINDING   THE   REAL   ESTATE MORTGAGE EXECUTED BY THE PLAINTIFFS IN FAVOR OF THE MBTC, FOR SAID DECLARATION IS ILLEGAL AND NOT WELL-FOUNDED IN LAW BECAUSE IT ULTIMATELY VIOLATED ARTS. 2058, 2076 AND 2077, CIVIL CODE OF THE PHILIPPINES, SINCE THE REAL ESTATE MORTGAGE, EXH. "G", IS NOT LEGALLY A REAL ESTATE   MORTGAGE,   BUT   RATHER   A   DEED   OF   GUARANTY,   CONSIDERING   THAT   THE   PLAINTIFF MAMERTA   VDA.   DE   JAYME   AND   HER   HUSBAND   GRACIANO   JAYME,   NOW   DECEASED,   SIGNED INNOCENTLY THE SAID DOCUMENT AS GUARANTORS/ACCOMODATORS ONLY AND DEFINITELY NOT AS DEBTORS/MORTGAGORS;IITHAT WITH GRAVE ABUSE OF DISCRETION, THE LOWER COURT ERRED IN DECLARING THE PERIOD TO REDEEM LOT NO. 2700 HAD EXPIRED ON FEBRUARY 23, 1982, WITHOUT THE PLAINTIFFS REDEEMING IT FOR SUCH DECLARATION IS NOT WELL-FOUNDED IN LAW AND IN FACT;IIITHAT WITH  GRAVE  ABUSE  OF  DISCRETION,  THE  LOWER  COURT ERRED  IN DECLARING VALID AND BINDING   THE   DACION   EN   PAGO   EXECUTED   BY   DEFENDANT   CEBU   ASIAN-   CARS   IN   FAVOR   OF DEFENDANT MBTC, FOR SAID DECLARATION IS ILLEGAL AND IS CLEARLY FOUNDED ON WANTON BAD FAITH COMMITTED BY BOTH PARTIES, IN VIOLATION OF ART. 1312, CIVIL CODE OF THE PHILIPPINES AND SEC. 10, ART. III, CONSTITUTION OF THE PHILIPPINES;IVGRANTING ARGUENDO THAT THE DACION EN PAGO IS VALID, STILL THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION, BY NOT DECLARING THAT THE P574,690.00 INDEBTEDNESS, INCLUDING INTEREST AND ADDITIONAL CHARGES OF CEBU ASIANCARS WAS COMPLETELY EXTINGUISHED OR PAID OFF, BY WAY OF DACION EN PAGO PURSUANT TO ARTS. 1255, 2076 AND 2077 OF THE CIVIL CODE OF THE PHILIPPINES.VTHAT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO EXCESS OF JURISDICTION,   IN   DECLARING   VALID   AND   BINDING   THE  MORTGAGE   AND   THE   CORRESPONDING FORECLOSURE, FOR SAID DECLARATION IS ILLEGAL, IN VIOLATION OF ARTS. 1231 (5), 1245 AND 1255, CIVIL   CODE   AND   BY   THE   INDUBITABLE   EVIDENCE   OF   ALL   THE   PARTIES   TESTIMONIAL   AND DOCUMENTARY, TO THE EFFECT THAT THE SIX (6) MILLION INDEBTEDNESS OF CEBU ASIANCARS WAS OVERPAID, THUS MBTC ALSO VIOLATED ARTS. 2142, CIVIL CODE OF THE PHILIPPINES;VITHAT WITH GRAVE ABUSE OF DISCRETION, THE LOWER COURT ERRED BY VIOLATING EXH. "C", THE CONTRACT  OF   LEASE,  WHICH   IS   THE   LAW  BETWEEN   THE   PARTIES,   AND   INSTEAD,   DELIBERATELY DECLARED VALID AND BINDING THE MORTGAGE EXH. "G", AND THE FORECLOSURE OF MORTGAGE, AND IN NOT ORDERING MBTC TO VACATE THE PREMISES UPON THE TERMINATION OF THE CONTRACT 

OF LEASE ON JANUARY 9, 1993 PURSUANT TO EXH. "C", AND LIKEWISE PAY RENTAL THEREAFTER, FOR ITS USE AT P96,300.00 MONTHLY UNTIL MBTC ACTUALLY VACATES THE PREMISES.17

On March 13, 2002, the Court set a hearing on this petition, and parties were given thirty days for simultaneous   submission   of   their   respective   memoranda.   Petitioners   additionally   submitted "reply/rejoinder" and respondent MBTC also submitted its "rejoinder – sur-rejoinder."Two main issues are for our resolution. First, whether or not the REM should be annulled on the ground of vitiated consent; and second, whether or not the dacion en pago by Asiancars in favor of MBTC is valid and binding despite the stipulation in the lease contract that ownership of the building will vest on the Jaymes at the termination of the lease.The facts show that the spouses affixed their signature on the Deed of Real Estate Mortgage, in the presence of two instrumental witnesses, and duly notarized by Atty. Rodolfo Y. Cabrera. As a notarized document, it has in its favor the presumption of regularity, and to overcome this presumption, there must   be   evidence   that   is   clear,   convincing   and  more   than  merely   preponderant   that   there  was irregularity in its execution; otherwise, the document should be upheld.18

The  Deed  of  Real   Estate  Mortgage   entered   into  by   the   Jayme   spouses   partake  of   a   Third   Party Mortgage under Art. 2085 (3) of the Civil Code which reads:The following requisites are essential to the contracts of pledge and mortgage: xxx (3) That the persons constituting   the  pledge or  mortgage  have  the   free  disposal  of   their  property,  and  in   the  absence thereof, that they be legally authorized for the purpose.Third persons who are not parties to the principal  obligation may secure the  latter by pledging or mortgaging their own property.In the case of Lustan vs. CA, et al.,19 this Court recognized the abovecited provision and held that "so long as valid consent was given, the fact that the loans were solely for the benefit of (the debtor) would not invalidate the mortgage with respect to petitioner’s property. In consenting thereto even granting that petitioner may not be assuming personal liability for the debt, her property shall  nevertheless secure and respond for the performance of the principal obligation."Clearly, the law recognizes instances when persons not directly parties to a loan agreement may give as security their  own properties for  the principal   transaction.   In  this  case,  the spouses should not be allowed to disclaim the validity of a transaction they voluntarily and knowingly entered into for the simple reason that such transaction turned out prejudicial to them later on.Both   the   trial   and   appellate   courts   found   that   no   fraud   attended   the   execution  of   the   deed   of mortgage. This is a factual finding that binds this  Court. Further,  the records clearly show that the spouses Jayme agreed to use their property as collateral for Neri’s loan because Neri had their full trust and confidence. Mamerta herself testified that she and her husband were assured by Neri’s promise that he would take full responsibility for whatever happens to the property of the spouses and that he would comply with his obligations to the bank.20

The spouses were assisted by their own lawyer, Atty. Cirilo Sanchez, in all their transactions, including the ones with Asiancars and MBTC. Atty. Sanchez even signed as an instrumental witness to a Special Power of Attorney executed by the spouses in favor of Neri, authorizing the latter to mortgage the same property to MBTC. Although the said SPA was eventually not used because MBTC required that the spouses themselves execute the REM, still, the fact remains that the spouses were already set on allowing the mortgage. In addition, we note that Nelia Sanchez, the daughter of the spouses and one of 

the petitioners herein, admitted that their parents consulted her and her siblings before their parents executed the Deed.21

With   the  assistance  of  a   lawyer  and consultation  with   their   literate   children,   the   spouses   though illiterate could not feign ignorance of the stipulations in the deed. Patently, theirs was not a vitiated consent. It could not now be justifiably asserted by petitioners that the Jayme spouses only intended to be bound as guarantors and not as mortgagors.In   this   jurisdiction,  when   the  property  of   a   third  person  which  has  been  expressly  mortgaged   to guarantee an obligation to which the said person is a stranger, said property is directly and jointly liable for the fulfillment thereof, in the same manner as the mortgaged property of the debtor himself.22

In the case at bar,  when Asiancars failed to pay its obligations with MBTC, the properties given as security  (one of them being the land owned by the Jaymes) became subject to foreclosure.  When several things are given to secure the same debt in its entirety, all of them are liable for the debt, and the  creditor  does  not  have  to  divide  his  action by  distributing the  debt  among the various   things pledged or mortgaged. Even when only a part of the debt remains unpaid, all the things are liable for such balance.23

At the time of the foreclosure, Asiancars had a remaining balance of P2,010,633.28. Thus, MBTC had every right to effect the extrajudicial foreclosure of the mortgaged properties to satisfy its claim.The appellate court found that the spouses lost their right to redeem their property. Under Section 78 of the General  Banking Act then in force,24 the mortgagor or debtor whose real property has been foreclosed and sold at public auction, has the right to redeem the property within one year from the sale of the real estate as a result of the foreclosure. The reckoning date in the case of a registered land is from the date of registration of the certificate of sale.25 If no redemption is timely made, the buyer in a foreclosure sale becomes the absolute owner of the property purchased.26 In this case, the certificate of sale was registered on February 23, 1981, giving petitioners until February 23, 1982 to redeem the property. This they failed to do, hence, ownership of the property already vested in the purchaser, private respondent MBTC.Much as we sympathize with petitioners’  plight,  we are unable  to find merit   in  their  plea  for  the annulment of the deed of sale covering Lot 2700 as a result of foreclosure of mortgage. Petitioners failed   to   show   the   required   quantum   of   evidence   that   they  were   fraudulently  made   to   sign   as mortgagors. As early as Vales v. Villa, 35 Phil. 769 (1916), this Court has sounded a note of warning to litigants:…The law furnishes no protection to the inferior simply because he is inferior any more than it protects the strong because he is strong. The law furnishes protection to both alike – to one no more or less than the other. It makes no distinction between the wise and the foolish, the great and the small, the strong and the weak. The foolish may lose all they have to the wise; but that does not mean that the law will give it back to them again. Courts cannot follow one every step of his life and extricate him from bad bargains,  protect him from unwise investments,  relieve him from one-sided contracts,  or annul the effects of foolish acts.27

Petitioners however, are not without recourse for the loss of their property. Although they cannot go after respondent MBTC, they have in their favor the undertaking executed by George Neri and other members of his family. The undertaking also bound respondent Asiancars, as well as its officers who 

were signatories to the aforesaid Undertaking, to reimburse petitioners for the damages they suffered by reason of the mortgage.The   alienation   of   the   building   by   Asiancars   in   favor   of  MBTC   for   the   partial   satisfaction   of   its indebtedness is, in our view, also valid. The ownership of the building had been effectively in the name of the lessee-mortgagor (Asiancars), though with the provision that said ownership be transferred to the Jaymes upon termination of the lease or the voluntary surrender of the premises. The lease was constituted on January 8, 1973 and was to expire 20 years thereafter,  or  on January 8, 1993. The alienation via dacion en pago was made by Asiancars  to MBTC on December 18, 1980, during the subsistence  of   the   lease.   At   this   point,   the  mortgagor,  Asiancars,   could   validly   exercise   rights   of ownership, including the right to alienate it, as it did to MBTC.Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation.28 It is a special mode of payment where the   debtor   offers   another   thing   to   the   creditor  who   accepts   it   as   equivalent   of   payment   of   an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor’s debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation.29

We also find that the Court of Appeals did not err in considering MBTC as a purchaser in good faith. MBTC  had   no   knowledge   of   the   stipulation   in   the   lease   contract.   Although   the   same   lease  was registered   and   duly   annotated   on   the   certificate   of   title   of   Lot   2700,  MBTC   was   charged  with constructive knowledge only of the fact of lease of the land and not of the specific provision stipulating transfer  of  ownership  of   the building   to  the  Jaymes upon termination of   the  lease.  There was no annotation on the title of any encumbrance.30 While the alienation was in violation of the stipulation in the lease contract between the Jaymes and Asiancars, MBTC’s own rights could not be prejudiced by Asiancars’  actions unbeknownst to MBTC.  Thus,   the transfer of  the building  in   favor of  MBTC was properly held valid and binding by respondent Court of Appeals.One point, however, has to be cleared. The appellate court ordered MBTC to pay rentals to petitioners at the rate of P25.00 monthly per square meter. For the Asiancars’ building stood on the lot owned by the petitioners, until the time MBTC also consolidated its ownership over the lot. Rentals would have to be paid starting on December 18, 1980, when the building’s ownership was transferred to MBTC, until February 23, 1982, when MBTC finally consolidated its ownership over Lot 2700. Hence, we agree that there was error in the computation of rentals by the CA.31 From December 18, 1980 until February 23, 1982, is a period of 1 year, 2 months and 5 days. Thus, MBTC should pay to petitioners rentals for the use of the occupied lot,32 consisting of 1,700 sq. m. at the monthly rate of P25.00 per sq. m. for that period, in the total amount of P602,083.33, with six (6) percent interest per annum until fully paid.Finally,  we are   in  agreement   that  bad  faith  attended Asiancars’   transfer  of   the building   to  MBTC. Asiancars was well  aware of  its covenant with the Jaymes that the building’s ownership was to be transferred to the Jaymes upon termination of the lease. Indeed, petitioners suffered mental anxiety 

and nervous shock upon learning that the ownership of the building standing on their property had already been transferred to MBTC. The apparent disregard of petitioners’ right by Asiancars and other private respondents provides enough basis for an award of moral as well as exemplary damages33 by the appellate court.WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with the MODIFICATION that private respondent MBTC is ordered to pay petitioners rentals in the total amount of P602,083.33, with six   (6)  percent   interest  per  annum until   fully  paid.   In  all  other  respects,   the assailed decision and resolution of the Court of Appeals are AFFIRMED.SO ORDERED.

THIRD DIVISION[G.R. NO. 194785 - July 11, 2012]

VIRGILIO S. DAVID, Petitioner, v. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC.,Respondent.D E C I S I O N

MENDOZA, J.:Before this Court is a Petition for Review under Rule 45 of the Rules of Court assailing the July 8, 2010 Decision1 of the Court of Appeals (CA), in CA-G.R. CR No. 91839, which affirmed the July 17, 2008 Decision2 of the Regional Trial Court, Branch VIII, Manila (RTC) in Civil Case No. 94-69402, an action for specific performance and damages.The Facts:Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric Sales, a company engaged in the business of supplying electrical hardware including transformers for rural electric cooperatives like respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI), with principal office located in Ozamis City.To solve its problem of power shortage affecting some areas within its coverage, MOELCI expressed its intention to purchase a 10 MVA power transformer from David. For this reason, its General Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet David in the latter s office in Quezon City. David agreed to supply the power transformer provided that MOELCI would secure a board resolution because the item would still have to be imported.On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who was in-charge of procurement, returned to Manila and presented to David the requested board resolution which authorized the purchase of one 10 MVA power transformer. In turn, David presented his proposal for the acquisition of said transformer. This proposal was the same proposal that he would usually give to his clients.After the reading of the proposal and the discussion of terms, David instructed his then secretary and bookkeeper, Ellen M. Wong, to type the names of Engr. Rada and Jimenez at the end of the proposal. Both signed the document under the word "conforme." The board resolution was thereafter attached to the proposal.As stated in the proposal, the subject transformer, together with the basic accessories, was valued at P5,200,000.00. It was also stipulated therein that 50% of the purchase price should be paid as downpayment and the remaining balance to be paid upon delivery. Freight handling, insurance, customs duties, and incidental expenses were for the account of the buyer.The Board Resolution, on the other hand, stated that the purchase of the said transformer was to be financed through a loan from the National Electrification Administration (NEA). As there was no immediate action on the loan application, Engr. Rada returned to Manila in early December 1992 and requested David to deliver the transformer to them even without the required downpayment. David granted the request provided that MOELCI would pay interest at 24% per annum. Engr. Rada acquiesced to the condition. On December 17, 1992, the goods were shipped to Ozamiz City via William Lines. In the Bill of Lading, a sales invoice was included which stated the agreed interest rate of 24% per annum.When nothing was heard from MOELCI for sometime after the shipment, Emanuel Medina (Medina), David s Marketing Manager, went to Ozamiz City to check on the shipment. Medina was able to confer with Engr. Rada who told him that the loan was not yet released and asked if it was possible to withdraw the shipped items. Medina agreed.When no payment was made after several months, Medina was constrained to send a demand letter, dated September 15, 1993, which MOELCI duly received. Engr. Rada replied in writing that the goods were still in the warehouse of William Lines again reiterating that the loan had not been approved by NEA. This prompted Medina to head back to Ozamiz City where he found out that the goods had already been released to MOELCI evidenced by the shipping company s copy of the Bill of Lading which was stamped "Released," and with the notation that the arrastre charges in the

amount of P5,095.60 had been paid. This was supported by a receipt of payment with the corresponding cargo delivery receipt issued by the Integrated Port Services of Ozamiz, Inc.Subsequently, demand letters were sent to MOELCI demanding the payment of the whole amount plus the balance of previous purchases of other electrical hardware. Aside from the formal demand letters, David added that several statements of accounts were regularly sent through the mails by the company and these were never disputed by MOELCI.On February 17, 1994, David filed a complaint for specific performance with damages with the RTC. In response, MOECLI moved for its dismissal on the ground that there was lack of cause of action as there was no contract of sale, to begin with, or in the alternative, the said contract was unenforceable under the Statute of Frauds. MOELCI argued that the quotation letter could not be considered a binding contract because there was nothing in the said document from which consent, on its part, to the terms and conditions proposed by David could be inferred. David knew that MOELCI s assent could only be obtained upon the issuance of a purchase order in favor of the bidder chosen by the Canvass and Awards Committee.Eventually, pursuant to Rule 16, Section 5 of the Rules of Court, MOELCI filed its Motion for Preliminary Hearing of Affirmative Defenses and Deferment of the Pre-Trial Conference which was denied by the RTC to abbreviate proceedings and for the parties to proceed to trial and avoid piecemeal resolution of issues. The order denying its motion was raised with the CA, and then with this Court. Both courts sustained the RTC ruling.Trial ensued. By reason of MOELCI s continued failure to appear despite notice, David was allowed to present his testimonial and documentary evidence ex parte, pursuant to Rule 18, Section 5 of the Rules. A Very Urgent Motion to Allow Defendant to Present Evidence was filed by MOELCI, but was denied.In its July 17, 2008 Decision, the RTC dismissed the complaint. It found that although a contract of sale was perfected, it was not consummated because David failed to prove that there was indeed a delivery of the subject item and that MOELCI received it.3

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Aggrieved, David appealed his case to the CA.On July 8, 2010, the CA affirmed the ruling of the RTC. In the assailed decision, the CA reasoned out that although David was correct in saying that MOELCI was deemed to have admitted the genuineness and due execution of the "quotation letter" (Exhibit A), wherein the signatures of the Chairman and the General Manager of MOELCI appeared, he failed to offer any textual support to his stand that it was a contract of sale instead of a mere price quotation agreed to by MOELCI representatives. On this score, the RTC erred in stating that a contract of sale was perfected between the parties despite the irregularities that tainted their transaction. Further, the fact that MOELCI s representatives agreed to the terms embodied in the agreement would not preclude the finding that said contract was at best a mere contract to sell.A motion for reconsideration was filed by David but it was denied.4

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Hence, this petition.Before this Court, David presents the following issues for consideration: ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ

I.WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE.II.WHETHER OR NOT THERE WAS A DELIVERY THAT CONSUMMATED THE CONTRACT.chanrobles virtual law library

The Court finds merit in the petition.I.On the issue as to whether or not there was a perfected contract of sale, this Court is required to delve into the evidence of the case. In a Petition for Review on Certiorari under Rule 45 of the Rules of Court, the issues to be threshed out are generally questions of law only, and not of fact.This was reiterated in the case of Buenaventura v. Pascual,5 where it was written: Ï‚rαlαω

Time and again, this Court has stressed that its jurisdiction in a Petition for Review on Certiorariunder Rule 45 of the Rules of Court is limited to reviewing only errors of law, not of fact, unless the findings of fact complained of are devoid of support by the evidence on record, or

the assailed judgment is based on the misapprehension of facts. The trial court, having heard the witnesses and observed their demeanor and manner of testifying, is in a better position to decide the question of their credibility. Hence, the findings of the trial court must be accorded the highest respect, even finality, by this Court.That being said, the Court is not unmindful, however, of the recognized exceptions well-entrenched in jurisprudence. It has always been stressed that when supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls under any of the following recognized exceptions: ςηαñrοblεš

νιr†υαl  lαω  lιbrαrÿ

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;(2) When the inference made is manifestly mistaken, absurd or impossible;(3) Where there is a grave abuse of discretion: ςrαlαω

(4) When the judgment is based on a misapprehension of facts;(5) When the findings of fact are conflicting;(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee;(7) When the findings are contrary to those of the trial court;(8) When the findings of fact are without citation of specific evidence on which the conclusions are based;(9) When the facts set forth in the petition as well as in the petitioner s main and reply briefs are not disputed by the respondents; and cralawlibrary

(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record.6 [Emphasis supplied]chanrobles virtual law library

In this case, the CA and the RTC reached different conclusions on the question of whether or not there was a perfected contract of sale. The RTC ruled that a contract of sale was perfected although the same was not consummated because David failed to show proof of delivery.7

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The CA was of the opposite view. The CA wrote: ςrαlαω

Be that as it may, it must be emphasized that the appellant failed to offer any textual support to his insistence that Exhibit "A" is a contract of sale instead of a mere price quotation conformed to by MOELCI representatives. To that extent, the trial court erred in laying down the premise that "indeed a contract of sale is perfected between the parties despite the irregularities attending the transaction." x x xThat representatives of MOELCI conformed to the terms embodied in the agreement does not preclude the finding that such contract is, at best, a mere contract to sell with stipulated costs quoted should it ultimately ripen into one of sale. The conditions upon which that development may occur may even be obvious from statements in the agreement itself, that go beyond just "captions." Thus, the appellant opens with, "WE are pleased to submit our quotation xxx." The purported contract also ends with. "Thank you for giving us the opportunity to quote on your requirements and we hope to receive your order soon" apparently referring to a purchase order which MOELCI contends to be a formal requirement for the entire transaction.8

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In other words, the CA was of the position that Exhibit A was at best a contract to sell.A perusal of the records persuades the Court to hold otherwise.The elements of a contract of sale are, to wit: 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.9 It is the absence of the first element which distinguishes a contract of sale from that of a contract to sell.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, such as, in most cases, 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.10

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In a contract of sale, on the other hand, the title to the property passes to the vendee upon the delivery of the thing sold. Unlike in a contract to sell, 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. 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. The vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded.11

ςrνll

An examination of the alleged contract to sell, "Exhibit A," despite its unconventional form, would show that said document, with all the stipulations therein and with the attendant circumstances surrounding it, was actually a Contract of Sale. The rule is that it is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into by the parties.12 First, there was meeting of minds as to the transfer of ownership of the subject matter. The letter (Exhibit A), though appearing to be a mere price quotation/proposal, was not what it seemed. It contained terms and conditions, so that, by the fact that Jimenez, Chairman of the Committee on Management, and Engr. Rada, General Manager of MOELCI, had signed their names under the word "CONFORME," they, in effect, agreed with the terms and conditions with respect to the purchase of the subject 10 MVA Power Transformer. As correctly argued by David, if their purpose was merely to acknowledge the receipt of the proposal, they would not have signed their name under the word "CONFORME."Besides, the uncontroverted attending circumstances bolster the fact that there was consent or meeting of minds in the transfer of ownership. To begin with, a board resolution was issued authorizing the purchase of the subject power transformer. Next, armed with the said resolution, top officials of MOELCI visited David s office in Quezon City three times to discuss the terms of the purchase. Then, when the loan that MOELCI was relying upon to finance the purchase was not forthcoming, MOELCI, through Engr. Rada, convinced David to do away with the 50% downpayment and deliver the unit so that it could already address its acute power shortage predicament, to which David acceded when it made the delivery, through the carrier WilliamLines, as evidenced by a bill of lading.Second, the document specified a determinate subject matter which was one (1) Unit of 10 MVA Power Transformer with corresponding KV Line Accessories. And third, the document stated categorically the price certain in money which was P5,200,000.00 for one (1) unit of 10 MVA Power Transformer and P2,169,500.00 for the KV Line Accessories.In sum, since there was a meeting of the minds, there was consent on the part of David to transfer ownership of the power transformer to MOELCI in exchange for the price, thereby complying with the first element. Thus, the said document cannot just be considered a contract to sell but rather a perfected contract of sale.II.Now, the next question is, was there a delivery? chanroblesvirtualawlibrary

MOELCI, in denying that the power transformer was delivered to it, argued that the Bill of Lading which David was relying upon was not conclusive. It argued that although the bill of lading was stamped "Released," there was nothing in it that indicated that said power transformer was indeed released to it or delivered to its possession. For this reason, it is its position that it is not liable to pay the purchase price of the 10 MVA power transformer.This Court is unable to agree with the CA that there was no delivery of the items. On the contrary, there was delivery and release.To begin with, among the terms and conditions of the proposal to which MOELCI agreed stated: ςrαlαω

2. Delivery Ninety (90) working days upon receipt of your purchase order and downpayment.

C&F Manila, freight, handling, insurance, custom duties and incidental expenses shall be for the account of MOELCI II.13 (Emphasis supplied)cralawlibrary

On this score, it is clear that MOELCI agreed that the power transformer would be delivered and that the freight, handling, insurance, custom duties, and incidental expenses shall be shouldered by it.On the basis of this express agreement, Article 1523 of the Civil Code becomes applicable. It provides:ςrαlαω

Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears. (Emphasis supplied)cralawlibrary

Thus, the delivery made by David to William Lines, Inc., as evidenced by the Bill of Lading, was deemed to be a delivery to MOELCI. David was authorized to send the power transformer to the buyer pursuant to their agreement. When David sent the item through the carrier, it amounted to a delivery to MOELCI.Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco,14 it was pointed out that a specification in a contract relative to the payment of freight can be taken to indicate the intention of the parties with regard to the place of delivery. So that, if the buyer is to pay the freight, as in this case, it is reasonable to suppose that the subject of the sale is transferred to the buyer at the point of shipment. In other words, the title to the goods transfers to the buyer upon shipment or delivery to the carrier.Of course, Article 1523 provides a mere presumption and in order to overcome said presumption, MOELCI should have presented evidence to the contrary. The burden of proof was shifted to MOELCI, who had to show that the rule under Article 1523 was not applicable. In this regard, however, MOELCI failed.There being delivery and release, said fact constitutes partial performance which takes the case out of the protection of the Statute of Frauds. It is elementary that the partial execution of a contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential requisites of consent of the contracting parties, object and cause of the obligation concur and are clearly established to be present.15

ςrνll

That being said, the Court now comes to David s prayer that MOELCI be made to pay the total sum ofP 5,472,722.27 plus the stipulated interest at 24% per annum from the filing of the complaint. Although the Court agrees that MOELCI should pay interest, the stipulated rate is, however, unconscionable and should be equitably reduced. While there is no question that parties to a loan agreement have wide latitude to stipulate on any interest rate in view of the Central Bank Circular No. 905 s. 1982 which suspended the Usury Law ceiling on interest effective January 1, 1983, it is also worth stressing that interest rates whenever unconscionable may still be reduced to a reasonable and fair level. There is nothing in the said circular which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.16 Accordingly, the excessive interest of 24% per annum stipulated in the sales invoice should be reduced to 12% per annum.Indeed, David was compelled to file an action against MOELCI but this reason alone will not warrant an award of attorney s fees. It is settled that the award of attorney's fees is the exception rather than the rule. Counsel's fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not necessarily equated to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter; while in its extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party. Attorney's fees as part of damages are awarded only in the instances specified in Article

2208 of the Civil Code 17 which demands factual, legal, and equitable justification. Its basis cannot be left to speculation or conjecture. In this regard, none was proven.Moreover, in the absence of stipulation, a winning party may be awarded attorney's fees only in case plaintiffs action or defendant's stand is so untenable as to amount to gross and evident bad faith.18 is MOELCI's case cannot be similarly classified.Also, David's claim for the balance of P73,059.76 plus the stipulated interest is denied for being unsubstantiated.WHEREFORE, the petition Is GRANTED. The July 8, 2010 Decision of the Court of Appeals Is REVERSED and SET ASIDE. Respondent Misamis Occidental II Electric Cooperative, Inc. is ordered to pay petitioner Virgilio S. David the total sum of P5,472,722.27 with interest at the rate of 12o/o per annum reckoned from the filing of the complaint until fully paid.SO ORDERED.

Republic of the PhilippinesSUPREME COURT

ManilaSECOND DIVISION

G.R. No. 190016 October 2, 2013FREDERICK VENTURA, MARITES VENTURA-ROXAS, and PHILIP VENTURA (HEIRS OF DECEASED

DOLORES C. VENTURA), Petitioners, vs.

HEIRS OF SPOUSES EUSTACIO T. ENDAYA and TRINIDAD L. ENDAYA, namely, TITUS L. ENDAYA, ENRICO L. ENDAYA, and JOSEPHINE ENDAYA-BANTUG,1 Respondents.

D E C I S I O NPERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari2 is the Decision3 dated August 18, 2006 of the Court of Appeals (CA) in CA-G.R. CV No.68465 which reversed and set aside the Decision4 dated August 7, 2000 of the Regional Trial Court of Parañaque City, Branch 258 (RTC) in Civil Case No. 96-0500, dismissing petitioners' complaint for specific performance seeking to compel respondents to execute a deed of sale over the properties subject of this case.The factsOn June 29, 1981, Dolores Ventura (Dolores) entered into a Contract to Sell5 (contract to sell)  with spouses Eustacio and Trinidad Endaya (Sps. Endaya) for the purchase of two parcels of land covered by Transfer   Certificates   of   Title   (TCT)   Nos.   3922256 and   (343392)   S-679757 (subject   properties), denominated as Lots 8 and 9, Block 3, situated in Marian Road II, Marian Park8 (now Barangay San Martin de Porres),9 Parañaque City, Metro Manila.The contract to sell  provides that the purchase price of P347,760.00shall  be paid by Dolores  in the following  manner:   (a)  down payment  of P103,284.00  upon  execution of   the   contract;   and   (b)   the balance of P244,476.00 within a 15-year period (payment period), plus 12% interest per annum (p.a.) on the outstanding balance and 12% interest p.a. on arrearages. It further provides that all payments made shall be applied in the following order: first, to the reimbursement of real estate taxes and other charges; second, to the  interest accrued to the date of payment;  third,   to the amortization of the principal   obligation;   and   fourth,   to   the   payment   of   any   other   accessory   obligation   subsequently incurred by the owner in favor of the buyer. It likewise imposed upon Dolores the obligation to pay the real property taxes over the subject properties, or to reimburse Sps. Endaya for any tax payments made by them, plus 1% interest per month. Upon full payment of the stipulated consideration, Sps. Endaya undertook to execute a final deed of sale and transfer ownership over the same in favor of Dolores.10

Meanwhile, Dolores was placed in possession of the subject properties and allowed to erect a building thereon.11However, on April 10, 1992, before the payment period expired, Dolores passed away.12

On  November   28,   1996,   Dolores’   children,   Frederick   Ventura,  Marites   Ventura-Roxas,   and   Philip Ventura (petitioners), filed before the RTC a Complaint13 and, thereafter, an Amended Complaint14 for specific  performance,   seeking   to   compel  Sps.   Endaya   to  execute  a  deed  of   sale  over   the   subject properties. In this regard, they averred that due to the close friendship between their parents and Sps. Endaya, the latter did not require the then widowed Dolores to pay the down payment stated in the contract to sell and, instead, allowed her to pay amounts as her means would permit. The payments were made in cash as well as in kind,15 and the same were recorded by respondent Trinidad herself in a passbook16 given to Dolores to evidence the receipt of said payments. As of June 15, 1996, the total payments made by Dolores and petitioners amounted to P952,152.00, which is more than the agreed purchase price of P347,760.00, including the 12%interest p.a. thereon computed on the outstanding balance.17

However, when petitioners demanded18 the execution of the corresponding deed of sale, Sps. Endaya refused.For   their   part,   Sps.   Endaya   filed   their   Answer,19 admitting   the   execution   and   genuineness   of   the contract to sell and the passbook. However, they countered that Dolores did not pay the stipulated down payment and remitted only a total of 22 installments.  After her death in1992, petitioners no longer remitted any  installment.  Sps.  Endaya also averred that prior  to Dolores'  death,   the parties agreed   to   a   restructuring   of   the   contract   to   sell   whereby   Dolores   agreed   to   give   a   "bonus" 

of P265,673.93 and to pay interest at the increased rate of 24% p.a. on the outstanding balance. They further claimed that in April 1996, when the balance of the purchase price stood atP1,699,671.69, a final   restructuring   of   the   contract   to   sell   was   agreed   with   petitioners,   fixing   the   obligation atP3,000,000.00. Thereafter, the latter paid a total of P380,000.00 on two separate occasions,20 leaving a balance  of P2,620,000.00.   In  any event,  Sps.  Endaya pointed out   that   the automatic cancellation clause under the foregoing contract rendered the same cancelled as early as 1981 with Dolores’ failure to make a down payment and to faithfully  pay the installments;21 hence, petitioners’  complaint  for specific  performance  must   fail.   In  addition,  Sps.  Endaya  interposed  a  counterclaim  for   the  alleged unpaid balance of P2,620,000.00, plus damages, attorney's fees and costs of suit.22

In their Reply with Answer to Counterclaim,23 petitioners denied the existence of any restructuring of the contract to sell, invoking24 the Dead Man's Statute25 and the Statute of Frauds.26 In turn, Sps. Endaya filed a Rejoinder,27challenging the inapplicability of the foregoing principles since the case was not filed against  an estate or  an administrator  of  an estate,  and  in view of   the partial  performance  of  the contract to sell.28

While the oral depositions of Sps. Endaya were taken at the 4th Municipal Circuit Trial Court of Malvar-Balete, Batangas on account of their frailty and old age, they, however, did not make a formal offer of their depositions and documentary evidence. Hence, the case was submitted for decision on the basis of the petitioners' evidence.29

The RTC RulingIn   a   Decision30 dated   August   7,   2000,   the   RTC   found   that   petitioners  were   able   to   prove   by   a preponderance   of   evidence   the   fact   of   full   payment   of   the   purchase   price   for   the   subject properties.31 As such, it ordered Sps. Endaya to execute a deed of absolute sale covering the sale of the subject properties in petitioners’ favor and to pay them attorney's fees and costs of suit.32 Dissatisfied, Sps. Endaya elevated the matter to the CA.The CA Ruling and Subsequent ProceedingsIn a Decision33 dated August 18, 2006 (August 18, 2006 Decision),the CA reversed and set aside the RTC ruling. It found that petitioners were not able to show that they fully complied with their obligations under the contract to sell.  It observed that aside from the payment of the purchase price and 12% interest p.a. on the outstanding balance, the contract to sell imposed upon petitioners the obligations to pay 12% interest p.a. on the arrears and to reimburse Sps. Endaya the amount of the pertinent real estate taxes due on the subject properties, which the former, however, totally disregarded as shown in their summary of payments.34

Meanwhile, counsel for petitioners, Atty. German A. Gineta, passed away on June 12, 2006,35 hence, the notice of the August 18, 2006 Decision sent to him was returned unserved.36 On the other hand, the notice  sent   to  petitioners  at  No.  2,  Barangay  San  Martin de  Porres,  Parañaque City,  was   likewise returned unserved for the reason "insufficient address."37 Nonetheless, the CA deemed the service of the said notice to them as valid and complete as of March 9, 2007 pursuant to Section 8,38 Rule 13 of the   Rules   of   Court   (Rules).   Accordingly,   it   directed39 the   Division   Clerk   of   Court   to   issue   the corresponding Entry of Judgment. An Entry of Judgment40 was, thus, made in the CA Book of Entries of Judgments  certifying   that   the August  18,  2006 Decision became final  and executory  on March 25, 2007.The records were thereafter remanded41 to the RTC.

In   July  2009,  respondent  Titus  Endaya,  heir  of  Sps.  Endaya,42 demanded43 petitioners   to vacate  the subject properties, which they refused.On November 10, 2009, petitioners filed the instant petition invoking the benevolence of the Court to set aside the CA’s August 18, 2006 Decision and, instead, reinstate the RTC Decision in the interest of substantial justice. They claimed that they had no knowledge of the demise of their counsel; therefore, they were unable to file a timely  motion for reconsideration before the CA or the proper petition before the Court. Further,  they contend that they have proven full  payment of the purchase price within the payment period as required by the contract to sell.For their part, the heirs of Sps. Endaya (respondents) objected44 to the belated filing of the petition long after the said CA Decision had lapsed into finality, especially as the petition raised factual issues that are   improper   in  a  petition  for   review on certiorari  under  Rule  45  of   the  Rules.   In  any  case,   they countered that the CA correctly held that petitioners failed to fully comply with their obligations under the contract to sell; thus, respondents are under no obligation to execute any deed of sale over the subject properties in favor of petitioners.On September 22, 2010, the Court gave due course to the petition and required the parties to file their respective memoranda,45 which they duly submitted.The Issues Before the CourtThe principal issues in this case are: (a) whether or not petitioners’ right to appeal before the Court should be upheld; and (b) whether or not respondents should execute a deed of sale over the subject properties in favor of petitioners.The Court's RulingThe petition is partly meritorious.Anent the first issue, it is observed that the CA erroneously sent the notice of the assailed August 18, 2006 Decision to petitioners at No. 2, Barangay San Martin de Porres, Parañaque City, instead of their address of record, i.e., Marian Road 2, Brgy. San Martin de Porres, Parañaque, Metro Manila46 and thus, was returned unserved for the reason "insufficient address."47

The notices of the Entry of  Judgment48 and the transmittal  letter49 to the Clerk of Court of the RTC indicate this fact. As such, there was clearly no proper and valid service of the said CA Decision which deprived  petitioners  of  the  opportunity   to  file  a  motion  for  reconsideration before   the CA and/or further appeal to the Court. Verily,   it would be unjust and unfair  to allow petitioners to suffer the adverse effects of the premature entry of judgment made by the CA. Therefore, the Court deems it prudent to set aside the foregoing entry and upholds petitioners' right to appeal.Nevertheless, with respect to the second issue, a thorough review of the records reveals no sufficient reason to warrant the reversal of the CA’s August 18, 2006 Decision dismissing petitioners' complaint for specific performance which sought to enforce the contract to sell and to compel respondents to execute a deed of sale over the subject properties.1âwphi1A contract  to sell   is  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 latter upon his fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price50 and/or compliance with the other obligations stated in the contract to sell. Given its contingent nature, the failure of the prospective buyer to make full payment51 and/or abide by his commitments stated in the contract to sell prevents the obligation of 

the prospective seller to execute the corresponding deed of sale to effect the transfer of ownership to the buyer from arising. As discussed in Sps. Serrano and Herrera v. Caguiat:52

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. x x x.53

To note, while the quality of contingency inheres in a contract to sell, the same should not be confused with a conditional contract of sale. In a contract to sell, the fulfillment of the suspensive condition will not automatically transfer ownership to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.54On the other hand, in a conditional contract of sale, the fulfillment of the suspensive condition renders the sale absolute and the previous delivery of the property has the effect of automatically transferring the seller’s ownership or title to the property to the buyer.55

Keeping with these principles,  the Court finds that respondents had no obligation to petitioners to execute a deed of sale over the subject properties. As aptly pointed out by the CA, aside from the payment of the purchase price and 12% interest p.a. on the outstanding balance, the contract to sell likewise   imposed  upon  petitioners   the  obligation   to  pay   the   real  property   taxes  over   the   subject properties as well as 12% interest p.a. on the arrears.56However, the summary of payments57 as well as the statement of account58 submitted by petitioners clearly show that only the payments corresponding to the principal obligation and the 12% interest p.a. on the outstanding balance were considered in arriving at the amount of P952,152.00. The Court has examined the petition59 as well as petitioners' memorandum60 and found no justifiable reason for the said omission. Hence, the reasonable conclusion would therefore be that petitioners indeed failed to comply with all their obligations under the contract to sell and, as such, have no right to enforce the same. Consequently, there lies no error on the part of the CA in reversing the RTC Decision and dismissing petitioners’ complaint for specific performance seeking to compel respondents to execute a deed of sale over the subject properties.WHEREFORE, the Entry of Judgment in CA-G.R. CV No. 68465 is hereby LIFTED. The Decision dated August 18, 2006 of the Court of Appeals in the said case is, however, AFFIRMED.SO ORDERED.