LOYOLA vs CA

G.R. No. 115734. February 23, 2000

D E C I S I O N

QUISUMBING, J.:

For review on certiorari is the decision of the Court of Appeals in CA-G.R. No. CV 36090, promulgated on August 31, 1993, reversing the judgment of the

Regional Trial Court of Biñan, Laguna, Branch 24, in Civil Case No. B-2194. In said decision, the appellate court decreed:

"PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and a new judgment rendered as follows:

1. Dismissing the plaintiff’s Complaint;

2. Declaring the "Bilihang Tuluyan ng Kalahati (1/2) ng Isang (1) Lagay na Lupa" dated August 24, 1980 (Exhibit

1) as well as Transfer Certificate of Title No. T-116067 of the Registry of Deeds for the Calamba Branch to be lawful,

valid, and effective.

"SO ORDERED."[1]

The RTC decision reversed by the Court of Appeals had disposed of the complaint as follows:

"WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:

1. Declaring the simulated deed of absolute sale purportedly executed by the late Gaudencia Zarraga on August 24, 1980 as well a s

the issuance of the corresponding certificate of title in favor of the defendants null and void from the beginning;

2. Ordering the Register of Deeds of Laguna, Calamba Branch to cancel Transfer Certificate of Title No. T -116087 issued in favor of the

defendants and to issue another one, if feasible, in favor of the plaintiffs and the defendants as co-owners and legal heirs of the late

Gaudencia Zarraga;

3. Order(ing) the defendants to reconvey and deliver the possession of the shares of the plaintiff on (sic) the subject property ;

4. Ordering the defendants to pay the amount of P20,000 as and for attorney’s fees and the costs of this suit.

5. As there is no preponderance of evidence showing that the plaintiffs suffered moral and exemplary damages, their claim for su ch

damages is hereby dismissed.

The plaintiffs’ claim under the second cause of action is hereby dismissed on the ground of prescription.

Likewise, the defendants’ counterclaim is hereby dismissed for lack of merit.

"SO ORDERED."[2]

We shall now examine the factual antecedents of this petition.

In dispute here is a parcel of land in Biñan, Laguna, particularly described as follows:

"A PARCEL OF LAND (Lot 115-A-1) of the subdivision plan (LRC) Psd-32117), being a portion of Lot 115-A, described on Plan Psd-55228,

LRC (GLRO) Record No. 8374), situated in the Poblacion, Municipality of Biñan, Province of Laguna, Island of Luzon. Bounded on the NE.,

points 3 to 4 by the Biñan River; on the SE., points 4 to 1 by Lot 115-A-2 of the subd. Plan; on the SW., points 1 to 2 by the Road and on

points 2 to 3 by Lot 115-B, Psd-55228 x x x containing an area of SEVEN HUNDRED FIFTY THREE (753) SQ. METERS, more or less x x x." [3]

Originally owned in common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their father, the parcel is c overed by Transfer Certificate of

Title (TCT) No. T-32007. Mariano predeceased his sister who died single, without offspring on August 5, 1983, at the age of 97.

Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano. Victorina died on October 18, 198 9, while Civil Case No. B-2194

was pending with the trial court. Cecilia died on August 4, 1990, unmarried and childless. Victorina and Cecilia were substituted by petitioners as plaintiffs.

Private respondents, children of Mariano excepting those denominated as the "Heirs of Jose Zarraga," are first cousins of petitioners. Respondents designated

as the "Heirs of Jose Zarraga" are first cousins once removed of the petitioners.

Private respondents allege that they are the lawful owners of Lot 115-A-1, the one-half share inherited by their father, Mariano and the other half purchased

from their deceased aunt, Gaudencia. Transfer Certificate of Title No. 116067 was issued in their names covering Lot 115-A-1.

The records show that the property was earlier the subject of Civil Case No. B-1094 before the then Court of First Instance of Laguna, Branch 1,

entitled "Spouses Romualdo Zarraga, et al. v. Gaudencia Zarraga, et al." Romualdo Zarraga, one of the private respondents now, was the plaintiff in Civil Case

No. B-1094. The defendants were his siblings: Nieves, Romana, Guillermo, Purificacion, Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as well as

his aunt, the late Gaudencia. The trial court decided Civil Case No. B-1094 in favor of the defendants. Gaudencia was adjudged owner of the one-half portion of

Lot 115-A-1. Romualdo elevated the decision to the Court of Appeals and later the Supreme Court. The petition, docketed as G.R. No. 59529, was denied by this

Court on March 17, 1982.

The present controversy began on August 24, 1980, nearly three years before the death of Gaudencia while G.R. No. 59529 was still pending before th is Court.

On said date, Gaudencia allegedly sold to private respondents her share in Lot 115-A-1 for P34,000.00. The sale was evidenced by a notarized document

denominated as "Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa."[4] Romualdo, the petitioner in G.R. No. 59529, was among the vendees.

Meanwhile, the decision in Civil Case No. B-1094 became final. Private respondents filed a motion for execution. On February 16, 1984, the sheriff executed

the corresponding deed of reconveyance to Gaudencia. On July 23, 1984, however, the Register of Deeds of Laguna, Calamba Branch, issued in favor of private

respondents, TCT No. T-116067, on the basis of the sale on August 24, 1980 by Gaudencia to them.

On January 31, 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case No. B-2194, with the RTC of Biñan, Laguna, for the purpose of annulling the

sale and the TCT. The trial court rendered judgment in favor of complainants.

On appeal, the appellate court REVERSED the trial court. On September 15, 1993, herein petitioners (as substitute parties for Victorina and Cecilia, the original

plaintiffs) filed a motion for reconsideration, which was denied on June 6, 1994.

Hence, the instant petition.

Petitioners submit the following issues for resolution by this Court:

1. WHETHER OR NOT THERE ARE STRONG AND COGENT REASON(S) TO DISTURB THE FINDINGS AND CONCLUSIONS OF THE TRIAL COURT

THAT THE CONTRACT DENOMINATED AS DEED OF ABSOLUTE SALE IS SIMULATED AND THEREFORE NULL AND VOID.

2. WHETHER THE ACTS OF PRIVATE RESPONDENTS IS (SIC) CONSISTENT WITH THE ACTS OF VENDEES WHEN THEY DEFIED LOGIC AS

FOUND BY THE TRIAL COURT...

3. WHETHER THE ALLEGED VENDORS (SIC) GAUDENCIA ZARRAGA WHO WAS THEN 94 YEARS OLD, ALREADY WEAK AND WHO WAS UNDER

THE CARE OF ONE OF THE VENDEES PRIVATE RESPONDENT ROMANA ZARRAGA, SINGLE AND WITHOUT ANY CHILD BUT HAS SISTERS AND

OTHER NEPHEWS AND NIECES WILL SELL HER PROPERTY THEN WORTH P188,250.00 IN 1980 FOR ONLY P34,000, AND WHETHER A

CONTRACT OF SALE OF REALTY IS PERFECTED, VALID AND GENUINE WHEN ONE OF THE VENDEES ROMUALDO ZARRAGA DOES NOT KNOW

OF THE TRANSACTION, THE OTHER VENDEE JOSE ZARRAGA WAS ALREADY LONG DEAD BEFORE THE EXECUTION OF THE BILIHAN IN

QUESTION AND YET WAS INCLUDED AS ONE OF THE VENDEES, LIKEWISE, OTHER SUPPOSED VENDEES NIEVES ZARRAGA AND GUILLERMO

ZARRAGA ASIDE FROM ROMUALDO WERE NOT PRESENT WHEN THE TRANSACTION TOOK PLACE.

4. THE LEGAL MEANING AND IMPORT OF SIMULATED CONTRACT OF SALE WHICH INVALIDATES A TRANSACTION IS ALSO A LEGAL ISSUE TO

BE THRESHED OUT IN THIS CASE AT BAR.

5. WHETHER PETITIONERS HAVE THE LEGAL PERSONALITY TO SUE.[5]

Notwithstanding petitioners’ formulation of the issues, we find the only issue for resolution in this case is whether or not the deed of absolute sale is valid.

Petitioners vigorously assail the validity of the execution of the deed of absolute sale suggesting that since the notary pub lic who prepared and acknowledged

the questioned Bilihan did not personally know Gaudencia, the execution of the deed was suspect. However, the notary public testified that he interviewed

Gaudencia prior to preparing the deed of sale. [6] Petitioners failed to rebut this testimony. The rule is that a notarized document carries the evidentiary weight

conferred upon it with respect to its due execution, [7] and documents acknowledged before a notary public have in their favor the presumption of regularity. [8] By

their failure to overcome this presumption, with clear and convincing evidence, petitioners are estopped from questioning the regularity of the execution of the

deed.[9]

Petitioners also charge that one of the vendees, Jose Zarraga, was already dead at the time of the sale. However, the records reveal that Jose died on July 29,

1981.[10] He was still alive on August 24, 1980, when the sale took place.

Petitioners then contend that three of the vendees included in the deed, namely, Romualdo, Guillermo, and Nieves, were not aw are of the transaction, which

casts doubt on the validity of the execution of the deed. Curiously, Romualdo who questioned Gaudencia’s ownership in Civil Case No. B-1094, was one of those

included as buyer in the deed of sale. Romana, however, testified that Romualdo really had no knowledge of the transaction an d he was included as a buyer of

the land only because he was a brother.

Petitioners suggest that all the aforecited circumstances lead to the conclusion that the deed of sale was simulated.

Simulation is "the declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception, the

appearances of a juridical act which does not exist or is different what that which was really executed." [11] Characteristic of simulation is that the apparent

contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. Perusal of the questioned deed will show

that the sale of the property would convert the co-owners to vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the requisite

of simulation that the apparent contract was not really meant to produce any legal effect. Also in a simulated contract, the parties have no intention to be bound

by the contract. But in this case, the parties clearly intended to be bound by the contract of sale, an intention they did not deny.

The requisites for simulation are: (a) an outward declaration of will different from the will of the parties; (b) the false appearance must have been intended by

mutual agreement; and (c) the purpose is to deceive third persons. [12] None of these are present in the assailed transaction.

Anent Romualdo’s lack of knowledge and participation in the sale, the rule is that contracts are binding only upon the parties who execute them.[13] Romualdo

had no knowledge of the sale. He was a stranger and not a party to it. Article 1311 of the Civil Code [14] clearly covers this situation.

Petitioners fault the Court of Appeals for not considering that at the time of the sale in 1980, Gaudencia was already 94 yea rs old; that she was already weak;

that she was living with private respondent Romana; and was dependent upon the latter for her daily needs, such that under these circumstances, fraud or

undue influence was exercised by Romana to obtain Gaudencia’s consent to the sale.

The rule on fraud is that it is never presumed, but must be both alleged and proved.[15] For a contract to be annulled on the ground of fraud, it must be shown

that the vendor never gave consent to its execution. If a competent person has assented to a contract freely and fairly, said person is bound. There also is a

disputable presumption, that private transactions have been fair and regular. [16] Applied to contracts, the presumption is in favor of validity and regularity. In this

case, the allegations of fraud was unsupported, and the presumption stands that the contract Gaudencia entered into was fair and regular.

Petitioners also claim that since Gaudencia was old and senile, she was incapable of independent and clear judgment. However, a person is not incapacitated

to contract merely because of advanced years or by reason of physical infirmities. [17] Only when such age or infirmities impair his mental faculties to such extent

as to prevent him from properly, intelligently, and fairly protecting his property rights, [18] is he considered incapacitated. Petitioners show no proof that

Gaudencia had lost control of her mental faculties at the time of the sale. The notary public who interviewed her, testified that when he talked to Gaudencia

before preparing the deed of sale, she answered correctly and he was convinced that Gaudencia was mentally fit and knew what she was doing.

On whether or not Gaudencia was under the undue influence of the private respondents, Article 1337 of the Civil Code states:

"There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a

reasonable freedom of choice. The following circumstances shall be considered: confidential, family, spiritual, and other relations between

the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in

financial distress."

Undue influence depends upon the circumstances of each case[19] and not on bare academic rules.[20] For undue influence to be established to justify the

cancellation of an instrument, three elements must be present: (a) a person who can be influenced; (b) the fact that improper influence was exerted; (c)

submission to the overwhelming effect of such unlawful conduct.[21] In the absence of a confidential or fiduciary relationship between the parties, the law does

not presume that one person exercised undue influence upon the other. [22] A confidential or fiduciary relationship may include any relation between persons,

which allows one to dominate the other, with the opportunity to use that superiority to the other’s disadvantage. [23] Included are those of attorney and

client,[24] physician and patient,[25] nurse and invalid,[26] parent and child,[27] guardian and ward,[28] member of a church or sect and spiritual adviser, [29] a person

and his confidential adviser,[30] or whenever a confidential relationship exists as a fact. [31] That Gaudencia looked after Romana in her old age is not sufficient to

show that the relationship was confidential. To prove a confidential relationship from which undue influence may arise, the relationship must reflect a dominant,

overmastering influence which controls over the dependent person. [32] In the present case, petitioners failed to show that Romana used her aunt’s reliance

upon her to take advantage or dominate her and dictate that she sell her land. Undue influence is not to be inferred from age, sickness, or debility of body, if

sufficient intelligence remains.[33] Petitioners never rebutted the testimony of the notary public that he observed Gaudencia still alert and sharp.

In Bañez v. Court of Appeals, 59 SCRA 15 (1974), we had occasion to say that solicitation, importunity, argument, and persuasion are not undue influence. A

contract is not to be set aside merely because one party used these means to obtain the consent of the other. We have likewis e held in Martinez v. Hongkong

and Shanghai Bank, 15 Phil. 252 (1910), that influence obtained by persuasion, argument, or by appeal to the affections is not prohibited either in law or

morals, and is not obnoxious even in courts of equity. Absent any proof that Romana exerted undue influence, the presumption is that she did not.

Petitioners also seek the annulment of the sale due to gross inadequacy of price. They contend that Gaudencia, in her right senses, would never have sold her

property worth P188,250.00 in 1980 for only P34,000.00. The records show that much of petitioners’ evidence was meant to prove the market value of the lot

at the time of the sale.[34] A review of the records will show that lesion was not an issue raised before the lower courts. An issue which was neither averred in the

complaint nor raised in the court below, cannot be raised for the first time on appeal. To do so would be offensive to the basic rules of fair play.

Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for being absolutely simulated or for inadequacy of the price. These two

grounds are irreconcilable. If there exists an actual consideration for transfer evidenced by the alleged act of sale, no mat ter how inadequate it be, the

transaction could not be a "simulated sale."[35] No reversible error was thus committed by the Court of Appeals in refusing to annul the questioned sale for

alleged inadequacy of the price.

WHEREFORE, the petition is DENIED, and the assailed decision of the Court of Appeals AFFIRMED. Costs against petitioners.

SO ORDERED.

UY vs CA

G.R. No. 120465. September 9, 1999

D E C I S I O N

KAPUNAN, J.:

Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners

offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project.

On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of said lands, with an area of 31.82 31 hectares, at the cost

ofP23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of land, however,

only five were paid for by the NHA because of the report [1] it received from the Land Geosciences Bureau of the Department of Environment and Natural

Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project.

On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three parcels of land. The NHA, through Resolution No. 2394,

subsequently offered the amount of P1.225 million to the landowners as daños perjuicios.

On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint for Damages against NHA and its General Manager

Robert Balao.

After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to

plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages.

Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that

since there was “sufficient justifiable basis” in cancelling the sale, “it saw no reason” for the award of damages. The Court of Appeals also noted that

petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court.

xxx In paragraph 4 of the complaint, plaintiffs alleged themselves to be “sellers’ agents” for several owners of the 8 lots subject matter of the case. Obviously,

William Uy and Rodel Roxas in filing this case acted as attorneys-in-fact of the lot owners who are the real parties in interest but who were omitted to be pleaded

as party-plaintiffs in the case. This omission is fatal. Where the action is brought by an attorney-in-fact of a land owner in his name, (as in our present action)

and not in the name of his principal, the action was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) because

the rule is that every action must be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court).

When plaintiffs Uy and Roxas sought payment of damages in their favor in view of the partial rescission of Resolution No. 1632 and the Deed of Absolute Sale

covering TCT Nos. 10998, 10999 and 11292 (Prayer complaint, page 5, RTC records), it becomes obviously indispensable that the lot owners be included,

mentioned and named as party-plaintiffs, being the real party-in-interest. Uy and Roxas, as attorneys-in-fact or apoderados, cannot by themselves lawfully

commence this action, more so, when the supposed special power of attorney, in their favor, was never presented as an evidence in this case. Besides, even if

herein plaintiffs Uy and Roxas were authorized by the lot owners to commence this action, the same must still be filed in the name of the pricipal, (Filipino

Industrial Corporation vs. San Diego, 23 SCRA 706 [1968]). As such indispensable party, their joinder in the action is mandatory and the complaint may be

dismissed if not so impleaded (NDC vs. CA, 211 SCRA 422 [1992]).[2]

Their motion for reconsideration having been denied, petitioners seek relief from this Court contending that:

I. COMPLAINT FINDING THE RESPONDENT CA ERRED IN DECLARING THAT RESPONDENT NHA HAD ANY LEGAL BASIS FOR RESCINDING THE SALE INVOLV ING

THE LAST THREE (3) PARCELS COVERED BY NHA RESOLUTION NO. 1632.

II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HAD LEGAL BASIS TO RESCIND THE SUBJECT SALE, THE RESPONDENT CA NONETHELESS ERRED IN

DENYING HEREIN PETITIONERS’ CLAIM TO DAMAGES, CONTRARY TO THE PROVISIONS OF ART. 1191 OF THE CIVIL CODE.

III. THE RESPONDENT CA ERRED IN DISMISSING THE SUBJECT COMPLAINT FINDING THAT THE PETITIONERS FAILED TO JOIN AS INDISPENSABLE PARTY

PLAINTIFF THE SELLING LOT-OWNERS.[3]

We first resolve the issue raised in the third assignment of error.

Petitioners claim that they lodged the complaint not in behalf of their principles but in their own name as agents directly d amaged by the termination of

the contract. The damages prayed for were intended not for the benefit of their principals but to indemnify petitioners for the losses they themselves allegedly

incurred as a result of such termination. These damages consist mainly of “unearned income” and advances. [4] Petitioners, thus, attempt to distinguish the

case at bar from those involving agents or apoderados instituting actions in their own name but in behalf of their principals.[5] Petitioners in this case

purportedly brought the action for damages in their own name and in their own behalf.

We find this contention unmeritorious.

Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real

party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. “Interest,” within the meaning of

the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere inte rest in the question involved, or a

mere incidental interest.[6] Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real

party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be

enforced.[7]

Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the negative.

The applicable substantive law in this case is Article 1311 of the Civil Code, which states:

Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not

transmissible by their nature, or by stipulation, or by provision of law. x x x.

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor

before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a

favor upon a third person. (Underscoring supplied.)

Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the

sale. As agents, they only render some service or do something in representation or on behalf of their principals.[8] The rendering of such service did not make

them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real

parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contra ct.[9]

Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals.

Are petitioners assignees to the rights under the contracts of sale? In McMicking vs. Banco Español-Filipino,[10] we held that the rule requiring every

action to be prosecuted in the name of the real party-in-interest

x x x recognizes the assignments of rights of action and also recognizes that when one has a right of action assigned to him he is then the real party in interest

and may maintain an action upon such claim or right. The purpose of [this rule] is to require the plaintiff to be the real party in interest, or, in other words, he

must be the person to whom the proceeds of the action shall belong, and to prevent actions by persons who have no interest in the result of the same. xxx

Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract. We find the

following declaration in Section 372 (1) of the Restatement of the Law on Agency (Second): [11]

Section 372. Agent as Owner of Contract Right

(1) Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a

promisee, maintain such action thereon as might a transferee having a similar interest.

The Comment on subsection (1) states:

a. Agent a transferee. One who has made a contract on behalf of another may become an assignee of the contract and bring suit against the other part y to it,

as any other transferee. The customs of business or the course of conduct between the principal and the agent may indicate that an agent who ordinarily ha s

merely a security interest is a transferee of the principals rights under the contract and as such is permitted to bring suit . If the agent has settled with his

principal with the understanding that he is to collect the claim against the obligor by way of reimbursing himself for his advances and commissions, the agent is

in the position of an assignee who is the beneficial owner of the chose in action. He has an irrevocable power to sue in his principal’s name. x x x. And, under

the statutes which permit the real party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by a settlement

between the principal and the obligor if the latter has notice of the agent’s interest. x x x. Even though the agent has not settled with his principal, he may, by

agreement with the principal, have a right to receive payment and out of the proceeds to reimburse himself for advances and commissions before turning the

balance over to the principal. In such a case, although there is no formal assignment, the agent is in the position of a transferee of the whole claim for s ecurity;

he has an irrevocable power to sue in his principal’s name and, under statutes which permit the real party in interest to sue, he can maintain an a ction in his

own name.

Petitioners, however, have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and

that they suffered loss of commissions, they have not established any agreement granting them “the right to receive payment a nd out of the proceeds to

reimburse [themselves] for advances and commissions before turning the balance over to the principal[s].”

Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil

Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale “clearly and deliberately” conferring a favor to any third person.

That petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the

action below against respondent NHA. Section 372 (2) of the Restatement of the Law on Agency (Second) states:

(2) An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entilted to

a portion of the proceeds as compensation for making it or because he is liable for its breach.

The following Comment on the above subsection is illuminating:

The fact that an agent who makes a contract for his principal will gain or suffer loss by the perf ormance or nonperformance of the contract by the principal or by

the other party thereto does not entitle him to maintain an action on his own behalf against the other party for its breach. An agent entitled to receive a

commission from his principal upon the performance of a contract which he has made on his principal’s account does not, from this fact alone, have any claim

against the other party for breach of the contract, either in an action on the contract or otherwise. An agent who is not a promisee cannot maintain an action at

law against a purchaser merely because he is entitled to have his compensation or advances paid out of the purchase price bef ore payment to the principal. x x

x.

Thus, in Hopkins vs. Ives,[12] the Supreme Court of Arkansas, citing Section 372 (2) above, denied the claim of a real estate broker to recover his alleged

commission against the purchaser in an agreement to purchase property.

In Goduco vs. Court of Appeals,[13] this Court held that:

x x x granting that appellant had the authority to sell the property, the same did not make the buyer liable for the commission she claimed. At most, the owner

of the property and the one who promised to give her a commission should be the one liable to pay the same and to whom the cl aim should have been

directed. xxx

As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law,

possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case.

Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since the same would not bind the real parties-in-

interest.[14]

Nevertheless, to forestall further litigation on the substantive aspects of this case, we shall proceed to rule on the merits. [15]

Petitioners submit that respondent NHA had no legal basis to “rescind” the sale of the subject three parcels of land. The existence of such legal basis,

notwithstanding, petitioners argue that they are still entitled to an award of damages.

Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right of rescission

or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the oth er party that violates the reciprocity

between them.[16] The power to rescind, therefore, is given to the injured party. [17] Article 1191 states:

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek

rescission, even after he has chosen fulfillment, if the latter should become impossible.

In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors, did not

commit any breach, much less a substantial breach, [18] of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation

that they fulfilled. The NHA did not suffer any injury by the performance thereof.

The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the

realization that the lands, which were the object of the sale, were not suitable for housing.

Cause is the essential reason which moves the contracting parties to enter into it. [19] In other words, the cause is the immediate, direct and proximate

reason which justifies the creation of an obligation through the will of the contracting parties.[20] Cause, which is the essential reason for the contract, should be

distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. [21]

For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor (petitioner’s principals) in entering into the contract is to

obtain the price. For the vendee, NHA, it is the acquisition of the land. [22] The motive of the NHA, on the other hand, is to use said lands for housing. This is

apparent from the portion of the Deeds of Absolute Sale[23] stating:

WHEREAS, under the Executive Order No. 90 dated December 17, 1986, the VENDEE is mandated to focus and concentrate its efforts and resources in

providing housing assistance to the lowest thirty percent (30%) of urban income earners, thru slum upgrading and development of sites and services projects;

WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by Letter of Instruction No. 630, prescribed slum improvement and upgrading, as well as the

development of sites and services as the principal housing strategy for dealing with slum, squatter and other blighted communities;

x x x

WHEREAS, the VENDEE, in pursuit of and in compliance with the above-stated purposes offers to buy and the VENDORS, in a gesture of their willing to cooperate

with the above policy and commitments, agree to sell the aforesaid property together with all the existing improvements there or belonging to the VENDORS;

NOW, THEREFORE, for and in consideration of the foregoing premises and the terms and conditions hereinbelow stipulated, the VENDORS hereby, sell, transfer,

cede and convey unto the VENDEE, its assigns, or successors-in-interest, a parcel of land located at Bo. Tadiangan, Tuba, Benguet containing a total area of

FIFTY SIX THOUSAND EIGHT HUNDRED NINETEEN (56,819) SQUARE METERS, more or less x x x.

Ordinarily, a party’s motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may

be regarded as the cause. In Liguez vs. Court of Appeals,[24] this Court, speaking through Justice J.B.L. Reyes, held:

xxx It is well to note, however, that Manresa himself (Vol. 8, pp. 641-642) while maintaining the distinction and upholding the inoperativeness of the motives of

the parties to determine the validity of the contract, expressly excepts from the rule those contracts that are conditioned upon the attainment of the motives of

either party.

The same view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and December 4, 1946, holding that the motive may be regarded

ascausa when it predetermines the purpose of the contract.

In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other

words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its

being a party to the sale.

Were the lands indeed unsuitable for the housing as NHA claimed?

We deem the findings contained in the report of the Land Geosciences Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale, thus:

In Tadiangan, Tuba, the housing site is situated in an area of moderate topography. There [are] more areas of less sloping ground apparently habitable. The

site is underlain by x x x thick slide deposits (4-45m) consisting of huge conglomerate boulders (see Photo No. 2) mix[ed] with silty clay materials. These clay

particles when saturated have some swelling characteristics which is dangerous for any civil structures especially mass housing development.[25]

Petitioners content that the report was merely “preliminary,” and not conclusive, as indicated in its title:

MEMORANDUM

TO: EDWIN G. DOMINGO

Chief, Lands Geology Division

FROM: ARISTOTLE A. RILLON

Geologist II

SUBJECT: Preliminary Assessment of Tadiangan Housing Project in Tuba, Benguet[26]

Thus, page 2 of the report states in part:

x x x

Actually there is a need to conduct further geottechnical [sic] studies in the NHA property. Standard Penetration Test (SPT) must be carried out to give an

estimate of the degree of compaction (the relative density) of the slide deposit and also the bearing capacity of the soil materials. Another thing to consider is

the vulnerability of the area to landslides and other mass movements due to thick soil cover. Preventive physical mitigation methods such as surface and

subsurface drainage and regrading of the slope must be done in the area. [27]

We read the quoted portion, however, to mean only that further tests are required to determine the “degree of compaction,” “the bearing capacity of the

soil materials,” and “vulnerability of the area to landslides,” since the tests already conducted were inadequate to ascertain such geological attributes. It is only

in this sense that the assessment was “preliminary.”

Accordingly, we hold that the NHA was justified in cancelling the contract. The realization of the mistake as regards the quality of the land resulted in the

negation of the motive/cause thus rendering the contract inexistent. [28] Article 1318 of the Civil Code states that:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established. (Underscoring supplied.)

Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entit led to any award of damages.

WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED.

MAPALO vs MAPALO

G.R. No. L-21489 and L-21628 May 19, 1966

BENGZON, J.P., J.:

The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners, with Torrens title certificate O.C.T. No. 46503, of a 1,635-

square-meter residential land in Manaoag, Pangasinan. Said spouses-owners, out of love and affection for Maximo Mapalo — a brother of Miguel who was about

to get married — decided to donate the eastern half of the land to him. O.C.T. No. 46503 was delivered. As a result, however, they were deceiv ed into signing, on

October 15, 1936, a deed of absolute sale over the entire land in his favor. Their signatures thereto were procured by fraud, that is, they were made to believe

by Maximo Mapalo and by the attorney who acted as notary public who "translated" the document, that the same was a deed of donation in Maximo's favor

covering one-half (the eastern half) of their land. Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses

did not receive anything of value for the land. The attorney's misbehaviour was the subject of an investigation but its resu lt does not appear on record. However

we took note of the fact that during the hearing of these cases said notary public was present but did not take the witness stand to rebut the plaintiffs'

testimony supporting the allegation of fraud in the preparation of the document.

Following the execution of the afore-stated document, the spouses Miguel Mapalo and Candida Quiba immediately built a fence of permanent structure in the

middle of their land segregating the eastern portion from its western portion. Said fence still exists. The spouses have always been in continued possession over

the western half of the land up to the present.

Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938, registered the deed of sale in his favor and obtained in his name Transfer Certificate of

Title No. 12829 over the entire land. Thirteen years later on October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo, Petronila Pacifico and

Miguel all surnamed Narciso. The sale to the Narcisos was in turn registered on November 5, 1951 and Transfer Certificate of Title No. 11350 was issued for

the whole land in their names.

The Narcisos took possession only of the eastern portion of the land in 1951, after the sale in their favor was made. On February 7, 1952 they filed suit in the

Court of First Instance of Pangasinan (Civil Case No. 1191) to be declared owners of the entire land, for possession of its western portion; for damages; and for

rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land

with the consent of the spouses Mapalo and Quiba.

The Mapalo spouses filed their answer with a counterclaim on March 17, 1965, seeking cancellation of the Transfer Certificate of Title of the Narcisos as to the

western half of the land, on the grounds that their (Mapalo spouses) signatures to the deed of sale of 1936 was procured by f raud and that the Narcisos were

buyers in bad faith. They asked for reconveyance to them of the western portion of the land and issuance of a Transfer Certificate of Title in their names as to

said portion.

In addition, the Mapalo spouses filed on December 16, 1957 their own complaint in the Court of First Instance of Pangasinan (Civil Case No. U-133) against the

aforestated Narcisos and Maximo Mapalo. They asked that the deeds of sale of 1936 and of 1951 over the land in question be declared null and void as to the

western half of said land.

Judge Amado Santiago of the Court of First Instance of Pangasinan located in the municipality of Urdaneta tried the two cases jointly. Said court rendered

judgment on January 18, 1961, as follows:

WHEREFORE, judgment is hereby rendered as follows, to wit:

(a) dismissing the complaint in Civil Case No. 11991;

(b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1, defendants in Case No. U-133 as a donation only over the eastern half portion of

the above-described land, and as null and void with respect to the western half portion thereof;

(c) declaring as null and void and without legal force and effect Transfer Certificate of Title No. 12829 issued in favor of Maximo Ma palo as regards

the western half portion of the land covered therein;

(d) declaring as null and void Transfer Certificate of Title No. 11350 in the names of the Narcisos insofar as the western half portion of the land

covered therein is concerned;

(e) ordering the spouses Mapalo and Quiba and the Narcisos to have the above-described land be subdivided by a competent land surveyor and that

the expenses incident thereto be borne out by said parties pro rata;

(f) ordering the Register of Deeds of Pangasinan to issue in lieu of Transfer Certificate of Title No. 11350 two new titles upon completion of the

subdivision plan, one in favor of the spouses Miguel Mapalo and Candida Quiba covering the western half portion and another for the Narcisos

covering the eastern half portion of the said land, upon payment of the legal fees; meanwhile the right of the spouses Mapalo and Quiba is hereby

ordered to be annotated on the back of Transfer Certificate of Title No. 11350; and

(g) sentencing Maximo Mapalo and the Narcisos to pay the costs.

IT IS SO ORDERED.

The Narcisos appealed to the Court of Appeals. In its decision on May 28, 1963, the Court of Appeals reversed the judgment of the Court of First Instance, solely

on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab initio,

and, therefore, the action to annul the same, within four years from notice of the fraud, had long prescribed. It reckoned said notice of the fraud from the date of

registration of the sale on March 15, 1938. The Court of First Instance and the Court of Appeals are therefore unanimous tha t the spouses Mapalo and Quiba

were definitely the victims of fraud. It was only on prescription that they lost in the Court of Appeals.

From said decision of the Court of Appeals, the Mapalo spouses appealed to this Court.

And here appellants press the contention that the document dated October 15, 1936, purporting to sell the entire land in favor of Maximo Mapalo, is void, not

merely voidable, as to the western portion of the land for being absolutely simulated or fictitious.

Starting with fundamentals, under the Civil Code, either the old or the new, for a contract to exist at all, three essential requisites must concur: (1) c onsent, (2)

object, and (3) cause or consideration.1 The Court of Appeals is right in that the element of consent is present as to the deed of sale of October 15, 1936. For

consent was admittedly given, albeit obtained by fraud. Accordingly, said consent, although defective, did exist. In such case, the defect in the consent would

provide a ground for annulment of a voidable contract, not a reason for nullity ab initio.

The parties are agreed that the second element of object is likewise present in the deed of October 15, 1936, namely, the parcel of land subject matter of the

same.

Not so, however, as to the third element of cause or consideration. And on this point the decision of the Court of Appeals is silent.

As regards the eastern portion of the land, the Mapalo spouses are not claiming the same, it being their stand that they have donated and freely given said half

of their land to Maximo Mapalo. And since they did not appeal from the decision of the trial court finding that there was a valid and effect ive donation of the

eastern portion of their land in favor of Maximo Mapalo, the same pronouncement has become final as to them, rendering it no longer proper herein to examine

the existence, validity efficacy of said donation as to said eastern portion.1äwphï1.ñët

Now, as to the western portion, however, the fact not disputed herein is that no donation by the Mapalo spouses obtained as to said portion. Accordingly, we

start with the fact that liberality as a cause or consideration does not exist as regards the western portion of the land in relation to the deed of 1936; that there

was no donation with respect to the same.

It is reduced, then, to the question whether there was an onerous conveyance of ownership, that is, a sale, by virtue of said deed of October 15, 1936, with

respect to said western portion. Specifically, was there a cause or consideration to support the existence of a contrary of sale?

The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or consideration produce no effect whatsoever.2 Nonetheless,

under the Old Civil Code, the statement of a false consideration renders the contract voidable, unless it is proven that it is supported by

another real and licit consideration.3 And it is further provided by the Old Civil Code that the action for annulment of a contract on the ground of falsity of

consideration shall last four years, the term to run from the date of the consummation of the contract.4

Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should be asked whether its case is one wherein there is no consideration, or

one with a statement of a false consideration. If the former, it is void and inexistent; if the latter, only voidable, under the Old Civil Code. As observed earlier, the

deed of sale of 1936 stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however, sa id consideration was totally absent. The

problem, therefore, is whether a deed which states a consideration that in fact did not exist, is a contract without consideration, and therefore void ab initio, or a

contract with a false consideration, and therefore, at least under the Old Civil Code, voidable.

According to Manresa, what is meant by a contract that states a false consideration is one that has in fact a real considerat ion but the same is not the one

stated in the document. Thus he says:

En primer lugar, nor interesa recordar la diferencia entre simulacion y el contrato con proposito fraudulento. Este aunque ilicito es rea l; mas el

primero es falso en realidad, aunque se le presente como verdadero. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 354.)

And citing a decision of the Supreme Court of Spain on the matter, Manresa further clarifies the difference of false cause and no cause, thus:

Insiste en el distingo con mas detenida descripcion la sentencia de 25 de mayo de 1944, en la que se argumenta:

Si bien es elemento fundamental de todo negocio, la declaracion de voluntad substracto de una voluntad efectiva, y la existencia de una causa que

leconfiera significado juridico señalando la finalidad que con este se persigue, no ha de deducirse de esta doctrina, fundamentalmente recogida en

el articulo 1.261 y concordantes del Codigo civil, que cualquier falta de adecuacion entre cualquier incongruencia entre la causa expresada y la

verdadera, y, en general, entre la estructuracion y la finalidad economica; hayan de producir la ineficacia del negocio, pues por el contrario, puede

este ser valido y producir sus efectos tanto en el caso de la mera disonancia entre el medio juridico adoptado y el fin pract ico perseguido, por

utilizacion de una via oblicua o combinacion de formas juridicas entrelazadas que permita la obtencion de un resultado no previsto en los cuadros de

la ley — negocios indirectos y negocios fiduciarlos, validos cuando no envuelven fraude de ley, como en el caso de la verdadera disconformidad entre

la apariencia del acto y su real contenido, preparada deliberadamente por las partes — negocio simulado — , ya que, cuando esta divergencia

implica no una ausencia total de voluntad y de acto real, sino mera ocultacion de un negocio verdadero bajo la falsa apariencia de un negocio

fingido "sirulacion relativa", la ineficacia de la forma externa simulada, no es obstaculo para la posible validez del negocio disimulado que contiene,

en tanto este ultimo sea licito y reuna no solo los requisitos generales, sino tambien los que corresponden a su naturaleza especial, doctrina, en

obligada aplicacion de los preceptos de nuestra Ley civil, especialmente en su art. 1.276, que, al establecer el principio de nulidad de los contratos

en los que se hace expresion de una causa falsa, deja a salvo el caso de que esten fundados en otra verdadera y licita . (Manresa, Codigo Civil, Tomo

VIII, Vol. II pp. 357-358)

Sanchez Roman says:

Ya hemos dicho que la intervencion de causa en los contratos es necesaria, y que sin ellos son nulos; solo se concibe que un hombre perturbado en

su razon pueda contratar sin causa. ...

Por la misma razon de la necesidad de la intervencion de causa en el contrato, es preciso que esta seaverdadera y no supuesta, aparente o figurada.

Que la falsedad de la causa vicia el consentimiento y anula el contrato, es, no solo doctrina indudable de Derecho Cientifico sino tambien de antiguo

Derecho de Castilla, que en multitud de leyes asi lo declararon. (Sanchez Roman, Derecho Civil, Tomo IV, p. 206.).

In a clearer exposition of the above distinction, Castan states:

2.º. La causa ha de ser verdadera. La causa falsa puede ser erronea o simulada. Es erronea como dice Giorgi, la causa que tiene por base la

credulidad en un hecho no existente; y simulada la que tiene lugar cuando se hace aparecer artificiosamente una distinta de la verdadera. La

erronea produce siempre la inexistencia del contrato; la simulada no siempre produce este efecto, porque puede suceder que la causa oculta, pero

verdadera, baste para sostener el contrato. De acuerdo con esta doctrina, dice el art. 1.276 de nuestro Codigo que "la expresion de una causa falsa

en los contratos dara lugar a la nulidad, si no se probase que estaban fundados en otra verdadera y licita". (Castan Derecho Civil Español, Tomo II,

pp. 618-619)

From the foregoing it can be seen that where, as in this case, there was in fact no consideration, the statement of one in the deed will not suffice to bring it

under the rule of Article 1276 of the Old Civil Code as stating a false consideration. Returning to Manresa:

Figurando en nuestro Derecho positivo la causa, como un elemento esential del contrato, es consecuencia ineludible, se reputar simulada la entrega

del precio en la compraventa de autos, el que haya que declararla nula por inexistente haciendose aplicacion indebida de art. 1.276 por el Tribunal

sentenciador al cohonestar la falta de precio admitiendo se pueda tratar de una donacion, ya que la recta aplicacion del cita do precepto exige que

los negocios simulados, o sea con causa falsa, se justifique la verdadera y licita en que se funda el acto que las partes han querido ocultar y el

cumplimiento de las formalidades impuestas por la Ley y, cual dice la sentencia de 3 de marzo de 1932, esta rigurosa doctrina ha de ser

especialmente impuesta en la donaciones puras y simples; de los que deduce que la sentencia recurrida al no decretar la nulidad instada por falta

de causa, incide en la infraccion de los articulos 1.261, 1.274, 1.275 y 1.276 del Codigo Civil. (Sentencia de 22 de febrero de 1940). (Manresa,

Codigo Civil, Tomo VIII, Vol. II, p. 356)

In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case we ruled that a contract of

purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which

appears thereon as paid has in fact never been paid by the purchaser to the vendor.

Needless to add, the inexistence of a contract is permanent and incurable and cannot be the subject of prescription. In the words of Castan: "La inexistenc ia es

perpetua e insubsanable no pudiendo ser objecto de confirmacion ni prescripcion (Op. cit., p. 644.) In Eugenio v. Perdido, 97 Phil. 41, 42-43, involving a sale

dated 1932, this Court, speaking through Justice Cesar Bengzon, now Chief Justice, stated:

Under the existing classification, such contract would be "inexisting" and "the action or defense for declaration" of such inexistence "does not

prescribe". (Art. 1410, New Civil Code). While it is true that this is a new provision of the New Civil Code, it is neverthel ess a principle recognized

since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of time cannot give efficacy to contracts that are null and void".

Anent the matter of whether the Narcisos were purchasers in good faith, the trial court in its decision resolved this issue, thus:

With regard to the second issue, the Narcisos contend that they are the owners of the above-described property by virtue of the deed of sale (Exh. B,

plaintiffs in 11991 and Exh. 2, defendants in U-133) executed in their favor by Maximo Mapalo, and further claim that they are purchasers for value

and in good faith. This court, however, cannot also give weight and credit on this theory of the Narcisos on the following reasons: Firstly, it has been

positively shown by the undisputed testimony of Candida Quiba that Pacifico Narciso and Evaristo Narciso stayed for some days on the western side

(the portion in question) of the above-described land until their house was removed in 1940 by the spouses Mapalo and Quiba; secondly, Pacifica

Narciso admitted in his testimony in chief that when they bought the property, Miguel Mapalo was still in the premises in question (western part)

which he is occupying and his house is still standing thereon; and thirdly, said Pacifico Narciso when presented as a rebutta l and sub-rebuttal witness

categorically declared that before buying the land in question he went to the house of Miguel Mapalo and Candida Quiba and asked them if they will

permit their elder brother Maximo to sell the property.

Aside from the fact that all the parties in these cases are neighbors, except Maximo Mapalo the foregoing facts are explicit enough and sufficiently

reveal that the Narcisos were aware of the nature and extent of the interest of Maximo Mapalo their vendor, over the above-described land before

and at the time the deed of sale in their favor was executed.

Upon the aforestated declaration of Pacifico Narciso the following question arises: What was the necessity, purpose and reason of Pacifico Narciso in

still going to the spouses Mapalo and asked them to permit their brother Maximo to dispose of the above-described land? To this question it is safe to

state that this act of Pacifico Narciso is a conclusive manifestation that they (the Narcisos) did not only have prior knowledge of the ownership of said

spouses over the western half portion in question but that they also have recognized said ownership. It also conclusively shows their prior knowledge

of the want of dominion on the part of their vendor Maximo Mapalo over the whole land and also of the flaw of his title thereto. Under this situation,

the Narcisos may be considered purchasers in value but certainly not as purchasers in good faith. ... (pp. 97-98, Record on Appeal.)

And said finding — which is one of fact — is found by us not a bit disturbed by the Court of Appeals. Said the Court of Appeals:

In view of the conclusion thus reached, it becomes unnecessary to pass on the other errors assigned.Suffice it to say that, on the merits the appealed

decision could have been upheld under Article 1332 of the new Civil Code and the following authorities: Ayola vs. Valderrama Lumber Manufacturers

Co., Inc., 49 O.G. 980, 982; Trasporte vs. Beltran, 51 O.G. 1434, 1435; Cortez vs. Cortez, CA-G.R. No. 18451-R, August 8, 1961; Castillo vs.

Laberinto, CA-G.R. No. 18118-R, December 20, 1961; and 13 C.J. 372-373, as well as the several facts and circumstances appreciated by the trial

court as supporting appellees' case.

thereby in effect sustaining — barring only its ruling on prescription — the judgment and findings of the trial court, including that of bad faith on the part of the

Narcisos in purchasing the land in question. We therefore see no need to further remand this case to the Court of Appeals for a ruling on this point, as appellees

request in their brief in the event we hold the contract of 1936 to be inexistent as regards the western portion of the land.

In view of defendants' bad faith under the circumstances we deem it just and equitable to award, in plaintiffs' favor, attorneys' fees on appeal, in the amount of

P1,000.00 as prayed for in the counterclaim.

Wherefore, the decision of the Court of Appeals is hereby reversed and set aside, and another one is hereby rendered affirming in toto the judgment of the Court

of First Instance a quo, with attorney's fees on appeal in favor of appellants in the amount of P1,000.00, plus the costs, both against the private appellees. So

ordered.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar and Sanchez, JJ., concur.

BAGNAS vs CA

G.R. No. L-38498 August 10, 1989

NARVASA, J.:

The facts underlying this appeal by certiorari are not in dispute. Hilario Mateum of Kawit, Cavite, died on March 11, 1964, single, without ascendants or

descendants, and survived only by collateral relatives, of whom petitioners herein, his first cousins, were the nearest . Mateum left no will, no debts, and an

estate consisting of twenty-nine parcels of land in Kawit and Imus, Cavite, ten of which are involved in this appeal. 1

On April 3, 1964, the private respondents, themselves collateral relatives of Mateum though more remote in degree than the petitioners, 2 registered with the

Registry of Deeds for the Province of Cavite two deeds of sale purportedly executed by Mateum in their (respondents') favor c overing ten parcels of land. Both

deeds were in Tagalog, save for the English descriptions of the lands conveyed under one of them; and each recited the reconsideration of the sale to be" ...

halagang ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod, ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO Pl.00), Philippine Currency,

and services rendered, being rendered and to be rendered for my benefit"). One deed was dated February 6,1963 and covered five parcels of land, and the

other was dated March 4, 1963, covering five other parcels, both, therefore, antedating Mateum's death by more than a year. 3 It is asserted by the petitioners,

but denied by the respondents, that said sales notwithstanding, Mateum continued in the possession of the lands purportedly c onveyed until his death, that he

remained the declared owner thereof and that the tax payments thereon continued to be paid in his name. 4 Whatever the truth, however, is not crucial. What is

not disputed is that on the strength of the deeds of sale, the respondents were able to secure title in their favor over three of the ten parcels of land conveyed

thereby. 5

On May 22,1964 the petitioners commenced suit against the respondents in the Court of First Instance of Cavite, seeking annulment of the deeds of sale as

fictitious, fraudulent or falsified, or, alternatively, as donations void for want of acceptance embodied in a public instrument. Claiming ownership pro indiviso of

the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum, the petitioners prayed for recovery of ownership and possession of said

lands, accounting of the fruits thereof and damages. Although the complaint originally sought recovery of all the twenty -nine parcels of land left by Mateum, at

the pre-trial the parties agreed that the controversy be limited to the ten parcels subject of the questioned sales, and the Trial Court ordered the exclusion of the

nineteen other parcels from the action. 6 Of the ten parcels which remained in litigation, nine were assessed for purposes of taxation at values aggregating

P10,500 00. The record does not disclose the assessed value of the tenth parcel, which has an area of 1,443 square meters. 7

In answer to the complaint, the defendants (respondents here) denied the alleged fictitious or fraudulent character of the sa les in their favor, asserting that said

sales were made for good and valuable consideration; that while "... they may have the effect of donations, yet the formalities and solemnities of donation are

not required for their validity and effectivity, ... that defendants were collateral relatives of Hilario Mateum and had done many good things for him, nursing him

in his last illness, which services constituted the bulk of the consideration of the sales; and (by way of affirmative defens e) that the plaintiffs could not question

or seek annulment of the sales because they were mere collateral relatives of the deceased vendor and were not bound, principally or subsidiarily, thereby. 8

After the plaintiffs had presented their evidence, the defendants filed a motion for dismissal in effect, a demurrer to the evidence reasserting the defense set up

in their answer that the plaintiffs, as mere collateral relatives of Hilario Mateum, had no light to impugn the latter's disposition of his properties by means of the

questioned conveyances and submitting, additionally, that no evidence of fraud maintaining said transfers had been presented. 9

The Trial Court granted the motion to dismiss, holding (a) on the authority of Armentia vs. Patriarca, 10 that the plaintiffs, as mere collateral relatives, not forced

heirs, of Hilario Mateum, could not legally question the disposition made by said deceased during his lifetime, regardless of whether, as a matter of objective

reality, said dispositions were valid or not; and (b) that the plaintiffs evidence of alleged fraud was insufficient, the fact that the deeds of sale each stated a

consideration of only Pl.00 not being in itself evidence of fraud or simulation. 11

On appeal by the plaintiffs to the Court of Appeals, that court affirmed, adverting with approval to the Trial Court's reliance on the Armentia ruling which, it would

appear, both courts saw as denying, without exception, to collaterals, of a decedent, not forced heirs, the right to impugn the latter's dispositions inter vivos of

his property. The Appellate Court also analyzed the testimony of the plaintiffs' witnesses, declared that it failed to establ ish fraud of any kind or that Mateum

had continued paying taxes on the lands in question even after executing the deeds conveying them to the defendants, and closed with the statement that "...

since in duly notarized and registered deeds of sale consideration is presumed, we do not and it necessary to rule on the alternative allegations of the

appellants that the said deed of sale were (sic) in reality donations. 12

One issue clearly predominates here. It is whether, in view of the fact that, for properties assuredly worth in actual value many times over their total assessed

valuation of more than P10,000.00, the questioned deeds of sale each state a price of only one peso (P1.00) plus unspecified past, present and future services

to which no value is assigned, said deeds were void or inexistent from the beginning ("nulo") or merely voidable, that is, va lid until annulled. If they were only

voidable, then it is a correct proposition that since the vendor Mateum had no forced heirs whose legitimes may have been imp aired, and the petitioners, his

collateral relatives, not being bound either principally or subsidiarily to the terms of said deeds, the latter had and have no actionable right to question those

transfers.

On the other hand, if said deeds were void ab initio because to all intents and purposes without consideration, then a different legal situation arises, and quite

another result obtains, as pointed out by the eminent civil law authority, Mr. Justice J.B.L. Reyes who, in his concurring opinion in Armentia, said:

I ... cannot bring myself to agree to the proposition that the heirs intestate would have no legal standing to contest the conveyance made

by the deceased if the same were made without any consideration, or for a false and fictitious consideration. For under the C ivil Code of

the Philippines, Art. 1409, par. 3, contracts with a cause that did not exist at the time of the transaction are inexistent and void from the

beginning. The same is true of contracts stating a false cause (consideration) unless the persons interested in upholding the contract

should prove that there is another true and lawful consideration therefor. (lbid., Art. 1353).

If therefore the contract has no causa or consideration, or the causa is false and fictitious (and no true hidden causa is proved) the

property allegedly conveyed never really leaves the patrimony of the transferor, and upon the latter's death without a testament, such

property would pass to the transferor's heirs intestate and be recoverable by them or by the Administrator of the transferor's estate. In this

particular regard, I think Concepcion vs. Sta. Ana, 87 Phil. 787 and Sobs vs. Chua Pua Hermanos, 50 Phil. 536, do not correctly state the

present law, and must be clarified.

To be sure the quoted passage does not reject and is not to be construed as rejecting the Concepcion and Solisrulings 13 as outrightly erroneous, far from it. On

the contrary, those rulings undoubtedly read and applied correctly the law extant in their time: Art. 1276 of the Civil Code of 1889 under which the statement of

a false cause in a contract rendered it voidable only, not void ab initio. In observing that they "... do not correctly state the present law and must be clarified,"

Justice Reyes clearly had in mind the fact that the law as it is now (and already was in the time Armentia) no longer deems c ontracts with a false cause, or which

are absolutely simulated or fictitious, merely voidable, but declares them void, i.e., inexistent ("nulo") unless it is shown that they are supported by another true

and lawful cause or consideration. 14 A logical consequence of that change is the juridical status of contracts without, or with a false, cause is that conveyances

of property affected with such a vice cannot operate to divest and transfer ownership, even if unimpugned. If afterwards the transferor dies the property

descends to his heirs, and without regard to the manner in which they are called to the succession, said heirs may bring an action to recover the property from

the purported transferee. As pointed out, such an action is not founded on fraud, but on the premise that the property never leaves the estate of the transferor

and is transmitted upon his death to heirs, who would labor under no incapacity to maintain the action from the mere fact tha t they may be only collateral

relatives and bound neither principally or subsidiarily under the deed or contract of conveyance.

In Armentia the Court determined that the conveyance questioned was merely annullable not void ab initio, and that the plaintiff s action was based on fraud

vitiating said conveyance. The Court said:

Hypothetically admitting the truth of these allegations (of plaintiffs complaint), the conclusion is irresistible that the sale is merely voidable.

Because Marta Armentia executed the document, and this is not controverted by plaintiff. Besides, the fact that the vendees w ere minors,

makes the contract, at worst, annullable by them, Then again, inadequacy of consideration does not imply total want of consideration.

Without more, the parted acts of Marta Armentia after the sale did not indicate that the said sale was void from the being.

The sum total of all these is that, in essence, plaintiffs case is bottomed on fraud, which renders the contract voidable.

It therefore seems clear that insofar as it may be considered as setting or reaffirming precedent, Armentia only ruled that transfers made by a decedent in his

lifetime, which are voidable for having been fraudulently made or obtained, cannot be posthumously impugned by collateral relatives succeeding to his estate

who are not principally or subsidiarily bound by such transfers. For the reasons already stated, that ruling is not extendible to transfers which, though made

under closely similar circumstances, are void ab initio for lack or falsity of consideration.

The petitioners here argue on a broad front that the very recitals of the questioned deeds of sale reveal such want or spuriousness of consideration and

therefore the void character of said sales. They:

1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59 O.G. No. 47, pp, 8101, 8118) holding that a price of P l.00 for the sale of things

worth at least P20,000.00 is so insignificant as to amount to no price at all, and does not satisfy the law which, while not requiring for the validity of a sale that

the price be adequate, prescribes that it must be real, not fictitious, stressing the obvious parallel between that case and the present one in stated price and

actual value of the property sold;

2. cite Manresa to the same effect: that true price, which is essential to the validity of a sale, means existent, real and effective price, that which does not

consist in an insignificant amount as, say, P.20 for a house; that it is not the same as the concept of a just price which entails weighing and measuring, for

economic equivalence, the amount of price against all the factors that determine the value of the thing sold; but that there is no need of such a close

examination when the immense disproportion between such economic values is patent a case of insignificant or ridiculous price, the unbelievable amount of

which at once points out its inexistence; 15

3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for a ... price certain in money or its equivalent ... requires that "equivalent" be something

representative of money, e.g., a check or draft, again citing Manresa 16 to the effect that services are not the equivalent of money insofar as said requirement is

concerned and that a contract is not a true sale where the price consists of services or prestations;

4. once more citing Manresa 17 also point out that the "services" mentioned in the questioned deeds of sale are not only vague and uncertain, but are unknown

and not susceptible of determination without the necessity of a new agreement between the parties to said deeds.

Without necessarily according all these assertions its full concurrence, but upon the consideration alone that the apparent gross, not to say enormous,

disproportion between the stipulated price (in each deed) of P l.00 plus unspecified and unquantified services and the undisp utably valuable real estate

allegedly sold worth at least P10,500.00 going only by assessments for tax purposes which, it is well-known, are notoriously low indicators of actual value plainly

and unquestionably demonstrates that they state a false and fictitious consideration, and no other true and lawful cause having been shown, the Court finds

both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.

Neither can the validity of said conveyances be defended on the theory that their true causa is the liberality of the transferor and they may be considered in

reality donations 18 because the law 19 also prescribes that donations of immovable property, to be valid, must be made and accepted in a public instrument,

and it is not denied by the respondents that there has been no such acceptance which they claim is not required. 20

The transfers in question being void, it follows as a necessary consequence and conformably to the concurring opinion in Armentia, with which the Court fully

agrees, that the properties purportedly conveyed remained part of the estate of Hilario Mateum, said transfers notwithstanding, recoverable by his intestate

heirs, the petitioners herein, whose status as such is not challenged.

The private respondents have only themselves to blame for the lack of proof that might have saved the questioned transfers from the taint of invalidity as being

fictitious and without ilicit cause; proof, to be brief, of the character and value of the services, past, present, and future, constituting according to the very terms

of said transfers the principal consideration therefor. The petitioners' complaint (par. 6) 21 averred that the transfers were "... fraudulent, fictitious and/or

falsified and (were) ... in reality donations of immovables ...," an averment that the private respondents not only specifically denied, alleging that the transfers

had been made "... for good and valuable consideration ...," but to which they also interposed the affirmative defenses that said transfers were "... valid, binding

and effective ...," and, in an obvious reference to the services mentioned in the deeds, that they "... had done many good th ings to (the transferor) during his

lifetime, nursed him during his ripe years and took care of him during his previous and last illness ...," (pars. 4, 6, 16 and 17, their answer). lâwphî1.ñèt 22 The

onus, therefore, of showing the existence of valid and illicit consideration for the questioned conveyances rested on the private respondents. But even on a

contrary assumption, and positing that the petitioners initially had the burden of showing that the transfers lacked such consideration as they alleged in their

complaint, that burden was shifted to the private respondents when the petitioners presented the deeds which they claimed showed that defect on their face

and it became the duty of said respondents to offer evidence of existent lawful consideration.

As the record clearly demonstrates, the respondents not only failed to offer any proof whatsoever, opting to rely on a demurrer to the petitioner's evidence and

upon the thesis, which they have maintained all the way to this Court, that petitioners, being mere collateral relatives of the deceased transferor, were without

right to the conveyances in question. In effect, they gambled their right to adduce evidence on a dismissal in the Trial Court and lost, it being the rule that when

a dismissal thus obtained is reversed on appeal, the movant loses the right to present evidence in his behalf. 23

WHEREFORE, the appealed Decision of the Court of Appeals is reversed. The questioned transfers are declared void and of no force or effect. Such certificates

of title as the private respondents may have obtained over the properties subject of said transfers are hereby annulled, and said respondents are ordered to

return to the petitioners possession of an the properties involved in tills action, to account to the petitioners for the fru its thereof during the period of their

possession, and to pay the costs. No damages, attorney's fees or litigation expenses are awarded, there being no evidence thereof before the Court.

SO ORDERED.

MATE vs CA

G.R. No. 120724-25. May 21, 1998

D E C I S I O N

MARTINEZ, J.:

In this petition for review, petitioner assails the Decision[1] of the Court of Appeals dated August 29, 1994 in CA-G.R. CV No. 28225-26, which affirmed

with modification the decision of the trial court, the dispositive portion of which reads, to wit:

“WHEREFORE, this Court finds the Deed of Sale with Right of Repurchase executed October 6, 1986 valid and binding between pla intiff and defendant (as

vendor and vendee-a-retro respectively); that as the period to redeem has expired, ownership thereof was consolidated by operation of law, and the Register of

Deeds is hereby ordered to REGISTER this decision consolidating the defendant’s ownership over the properties covered by Transfer Certificate of Title No. T-90-

71, covering Lot 8; Original Certificate of Title No. N-311 covering Lot 5370, all of the Tacloban Cadastre, and issuing to defendant Inocencio Tan his titles after

cancellation of the titles presently registered in plaintiff Fernando T. Mate’s name and that of his wife.

“The plaintiff Fernando Mate is further ordered to pay defendant the sum of ONE HUNDRED FORTY THOUSAND (P140,000.00) PESOS, for and as attorney’s

fees.

“With costs against the plaintiff Fernando Mate.

“SO ORDERED.”[2]

The facts of this case, as summarized in the petition, are reproduced hereunder:

“On October 6, 1986 Josefina R. Rey (hereafter referred to as “Josie” for short) and private respondent went to the residence of petitioner at Tacloban

City. Josie who is a cousin of petitioner’s wife solicited his help to stave off her and her family’s prosecution by private respondent for v iolation of B.P. 22 on

account of the rubber checks that she, her mother, sister and brother issued to private respondent amounting toP4,432,067.00. She requested petitioner to

cede to private respondent his three (3) lots in Tacloban City in order to placate him. On hearing Josie’s proposal, he immediately rejected it as he owed private

respondent nothing and he was under no obligation to convey to him his properties. Furthermore, his lots were not for sale. Josie explained to him that he was

in no danger of losing his properties as he will merely execute a simulated document transferring them to private respondent but they will be redeemed by her

with her own funds. After a long discussion, he agreed to execute a fictitious deed of sale with right to repurchase covering his three (3) lots mentioned above

subject to the following conditions:

1. The amount to be stated in the document is P1,400,000.00 with interest thereon at 5% a month;

2. The properties will be repurchased within six (6) months or on or before April 4, 1987;

3. Although it would appear in the document that petitioner is the vendor, it is Josie who will provide the money for the redemp tion of the

properties with her own funds;

4. Titles to the properties will be delivered to private respondent but the sale will not be registered in the Register of Deeds and annotated on

the titles.

“To assure petitioner that Josie will redeem the aforesaid properties, she issued to him two (2) BPI checks both postdated December 15, 1986. One check was

for P1,400,000.00 supposedly for the selling price and the other was for P420,000.00 corresponding to the interests for 6 months. Immediately thereafter

petitioner prepared the Deed of Sale with Right to Repurchase (Exh. A) and after it has been signed and notarized, it was given to private respondent together

with the titles of the properties and the latter did not register the transaction in the Register of Deeds as agreed upon.

“On January 14, 1987, petitioner deposited the check for P1,400,000.00 (Exh. B) in his account at the United Coconut Planters Bank and the other check

for P420,000.00 (Exh. D) in his account at METROBANK preparatory to the redemption of his properties. However, both of them were dishonored by the drawee

bank for having been drawn against a closed account. Realizing that he was swindled, he sent Josie a telegram about her checks and when she failed to

respond, he went to Manila to look for her but she could not be found. So he returned to Tacloban City and filed Criminal Cases Nos. 8310 and 8312 against

her for violation of B.P. 22 but the cases were later archived as the accused (Josie) could not be found as she went into hid ing. To protect his interest, he filed

Civil Case No. 7396 of the Regional Trial Court of Leyte, Branch VI I, entitled `Fernando T. Mate vs. Josefina R. Rey and Inocencio Tan’ for Annulment of Contract

with Damages. Defendant Josefina R. Rey (Josie) was declared in default and the case proceeded against private respondent. But during the trial the RTC court

asked private respondent to file an action for consolidation of ownership of the properties subject of the sale and pursuant thereto he filed Civil Case No. 7587

that was consolidated with the case he filed earlier which were later decided jointly by the trial court in favor of private respondent and was subsequently

appealed to respondent Court that affirmed it with modification. Thereupon, petitioner filed a motion to reconsider the decision but it was denied. Hence, the

instant petition for review.”[3]

In this petition for review, the petitioner presents as the sole issue the validity of the Deed of Sale with Right to Repurch ase. He contends that it is null

and void for lack of consideration because allegedly no money changed hands when he signed it and the checks that were issued for redemption of the

properties involved in the sale have been dishonored by the drawee bank for having been drawn against a closed account.[4]

The contention is without merit.

There was a consideration. The respondent court aptly observed that -

“In preparing and executing the deed of sale with right of repurchase and in delivering to Tan the land titles, appellant actually accommodated Josefina so she

would not be charged criminally by Tan. To ensure that he could repurchase his lots, appellant got a check of P1,400,000.00 from her. Also, by allowing his

titles to be in possession of Tan for a period of six months, appellant secured from her another check forP420,000.00. With this arrangement, appellant was

convinced he had a good bargain. Unfortunately his expectation crumbled. For this tragic incident, not only Josefina, but also Tan, according to appellant must

be answerable.

x x x x x x x x x

“It is plain that consideration existed at the time of the execution of the deed of sale with right of repurchase. It is not only appellant’s kindness to Josefina,

being his cousin, but also his receipt of P420,000.00 from her which impelled him to execute such contract.” [5]

Furthermore, while petitioner did not receive the P1.4 Million purchase price from respondent Tan, he had in his possession a postdated check of Josie

Rey in an equivalent amount precisely to repurchase the two lots on or before the sixth month.

As admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey gave him, as vendor-a-retro, a postdated check in the amount of P1.4 Million,

which represented the repurchase price of the two (2) lots. Aside from the P1.4 Million check, Josie gave another postdated check to petitioner in the amount

of P420,000.00, ostensibly as interest for six (6) months but which apparently was his fee for having executed the pacto de retro document. Josie thus

assumed the responsibility of paying the repurchase price on behalf of petitioner to private respondent.

Unfortunately, the two checks issued by Josie Rey were worthless. Both were dishonored upon presentment by petitioner with the drawee banks.

However, there is absolutely no basis for petitioner to file a complaint against private respondent Tan and Josie Rey to annul the pacto de retro sale on the

ground of lack of consideration, invoking his failure to encash the two checks. Petitioner’s cause of action was to file criminal actions against Josie Rey under

B.P. 22, which he did. The filing of the criminal cases was a tacit admission by petitioner that there was a consideration of the pacto de retro sale.

Petitioner further claims that the pacto de retro sale was subject to the condition that in the event the checks given by Josie Reyes to him for the

repurchase of the property were dishonored, then the document shall be declared null and void for lack of consideration.

We are not persuaded.

Private respondent Tan was already poised to file criminal cases against Josie Rey and her family. It would not be logical for respondent Tan to agree to

the conditions allegedly imposed by petitioner. Petitioner knew that he was bound by the deed of sale with right t o repurchase, as evidenced by his

filing criminal cases against Josie Rey when the two checks bounced.

The respondent court further made the candid but true observation that:

“If there is anybody to blame for his predicament, it is appellant himself. He is a lawyer. He was the one who prepared the contract. He knew what he was

entering into. Surely, he must have been aware of the risk involved. When Josefina’s checks bounced, he should have repurchased his lots with his own

money. Instead, he sued not only Josefina but also Tan for annulment of contract on the ground of lack of consideration and false pretenses on their pa rt.”

Petitioner then postulates that “it is not only illegal but immoral to require him to repurchase his own properties with his own money when he did not

derive any benefit from the transaction.” Thus, he invokes the case of Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said that “where one or

two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear consequences.” Petitioner’s reliance on this

doctrine is misplaced. He is not an innocent person. As a matter of fact, he gave occasion for the damage caused by virtue of the deed of sale with right to

repurchase which he prepared and signed. Thus, there is the equitable maxim thatbetween two innocent parties, the one who made it possible for the wrong to

be done should be the one to bear the resulting loss.[6]

Petitioner further insinuates that private respondent deceived him into signing the deed of sale with right to repurchase. This is not borne out by the

evidence nor by petitioner’s own statement of facts which we heretofore reproduced. As aptly observed by the respondent court “We are at a loss why herein

appellant ascribes false pretenses to Tan who merely signed the contract.”[7] Contrary to petitioner’s pretension, respondent Tan did not employ any devious

scheme to make the former sign the deed of sale. It is to be noted that Tan waived his right to collect from Josefina Rey by virtue of the pacto de retro sale. In

turn, Josefina gave petitioner a postdated check in the amount of P1.4 Million to ensure that the latter would not lose his two lots. Petitioner, a lawyer, should

have known that the transaction was fraught with risks since Josefina Rey and family had a checkered history of issuing worthless checks. But had petitioner

not agreed to the arrangement, respondent Tan would not have agreed to waive prosecution of Josefina Rey.

Apparently, it was petitioner’s greed for a huge profit that impelled him to accede to the scheme of Josefina Rey even if he knew it was a dangerous

undertaking. When he drafted the pacto de retro document, he threw caution to the winds forgetting that prudence might have been the better course of

action. We can only sympathize with petitioner’s predicament. However, a contract is a contract. Once agreed upon, and provided all the essential elements

are present, it is valid and binding between the parties.

Petitioner has no one to blame but himself for his misfortune.

WHEREFORE, the Decision of the Court of Appeals dated August 29, 1994 is hereby AFFIRMED. The petition for review is hereby DENIED DUE COURSE

for lack of merit.

SO ORDERED.

Regalado (Chairman), Melo, Puno, and Mendoza, JJ., concur.

LADANGA vs CA

G.R. No. L-55999 August 24, 1984

AQUINO, J.:

The spouses Salvacion Serrano and Doctor Agustin S. Ladanga appealed from the decision of the Court of Appeals (affirming the decision of the Manila Court of

First Instance), declaring void the sale to Salvacion by her aunt, Clemencia A. Aseneta, of the 166-square-meter lot with a house located at 1238 Sison Street,

Paco, Manila for non-payment of the price of P26,000. It ordered the register of deeds of Manila to issue a new title to Clemencia.

The said spouses were further ordered to pay to Clemencia's estate P21,000 as moral and exemplary damages and attorney's fees and to render to Bernardo

an accounting of the rentals of the property from April 6, 1974.

The Appellate Court and Judge Jose C. Colayco found that Clemencia, a spinster who retired as division superintendent of public schools at 65 in 1961, had a

nephew named Bernardo S. Aseneta, the child of her sister Gloria, and a niece named Salvacion, the daughter of her sister Flora. She legally adopted Bernardo

in 1961 (Exh. B).

On a single date, April 6, 1974 (when Clemencia was about 78 years old), she signed nine deeds of sale in favor of Salvacion for various real properties. One

deed of sale concerned the said Paco property (administered by the Ladanga spouses) which purportedly was sold to Salvacion for P26,000 (Exh. C). The total

price involved in the nine deeds of sale and in the tenth sale executed on November 8, 1974 was P92,200.

On the witness stand, Clemencia denied having "received even one centavo" of the price of P26,000 (15, 16, 32 tsn August 16, 1976), much less the P92,000.

She considered the allegation that she received the price as a he, exclaiming on the witness stand: "Susmaryosep! P92,000!" (15, 28-30 tsn August 16, 1976).

This testimony was corroborated by Soledad L. Maninang, 69, a dentist with whom Clemencia had lived for more than thirty years in Kamuning, Quezon City.

The notary testified that the deed of sale for the Paco property was signed in the office of the Quezon City registry of deeds. He did not see Salvacion giving any

money to Clemencia.

In May, 1975, Bernardo as guardian of Clemencia, filed an action for reconveyance of the Paco property, accounting of the rentals and damages. Clemencia

was not mentally incompetent but she was placed under guardianship because she was an easy prey for exploitation and deceit.

Parenthetically, it should be stated that she died on May 21, 1977 at the age of 80. She allegedly bequeathed her properties in a holographic will

dated November 23, 1973 to Doctor Maninang. In that will she disinherited Bernardo. The will was presented for probate (Exh. 22-A and 22-C).

The testate case was consolidated with the intestate proceeding filed by Bernardo in the sala of Judge Ricardo L. Pronove at Pasig, Rizal. He dismissed the

testate case. He appointed Bernardo as administrator in the intestate case (p. 23, Bernardo's brief).

As already stated, in the instant case, the trial court and the Appellate Court declared void the sale of the Paco property. The Ladanga spouses contend that the

Appellate Court disregarded the rule on burden of proof. This contention is devoid of merit because Clemencia herself testified that the price of P26,000 was

not paid to her. The burden of the evidence shifted to the Ladanga spouses. They were not able to prove the payment of that amount. The sale was fictitious.

The Ladanga spouses argue that the Appellate Court erred in not considering that inadequacy of price may indicate a donation or some other contract; in

disregarding the presumption that the sale was fair and regular and for a sufficient consideration; in overlooking important facts and in not holding that

Bernardo had no right to file a complaint to annul the sale.

As a rule, only important legal issues, as contemplated in section 4, Rule 45 of the Rules of Court, may be raised in a review of the Appellate Court's decision.

This case does not fall within any of the exceptions to that rule (2 Moran's Comments on the Rules of Court, 1979 Ed. p. 475; Ramos vs. Pepsi-Cola Bottling Co.,

125 Phil. 701).

The questions ventilated by the Ladangas in their briefs and in their comment of April 3, 1984 may be reduced to the issue of the validity of the sale which the

vendor Clemencia herself assailed in her testimony on August 16 and December 3, 1976 when she was eighty years old. Her testimony and that of the notary

leave no doubt that the price of P26,000 was never paid.

A contract of sale is void and produces no effect whatsoever where the price, which appears therein as paid, has in fact never been paid by the purchaser to the

vendor (Meneses Vda. de Catindig vs. Heirs of Catalina Roque, L-25777, November 26, 1976, 74 SCRA 83, 88; Mapalo vs. Mapalo, 123 Phil. 979, 987;

Syllabus, Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921).

Such a sale is inexistent and cannot be considered consummated (Borromeo' vs. Borromeo, 98 Phil. 432; Cruzado vs. Bustos and Escaler, 34 Phil. 17;

Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229).

It was not shown that Clemencia intended to donate the Paco property to the Ladangas. Her testimony and the notary's testimony destroyed any presumption

that the sale was fair and regular and for a true consideration.

Judge Colayco concluded that the Ladangas abused Clemencia's confidence and defrauded her of properties with a market value of P393,559.25 when she

was already 78 years old.

The contention that Bernardo had no right to institute the instant action because he was not a compulsory heir of Clemencia cannot be sustained. Bernardo was

Clemencia's adopted son. Moreover, Clemencia, by testifying in this case, tacitly approved the action brought in her behalf.

But the moral damages awarded by the trial court is not sanctioned by articles 2217 to 2220 of the Civil Code. Clemencia's ow n signature in the deed brought

about the mess within which she was entangled.

WHEREFORE, the judgment of the Appellate Court is affirmed with the modification that the adjudication for moral and exemplar y damages is discarded. No

costs.

SO ORDERED.

Concepcion, Jr., Guerrero, Escolin and Cuevas, JJ., concur.

Makasiar, J., (Chairman) and Abad Santos, JJ., took no part.

BALATBAT vs CA

G.R. No. 109410. August 28, 1996

D E C I S I O N

TORRES, JR., J.:

Petitioner Clara M. Balatbat instituted this petition for review pursuant to Rule 45 of the Revised Rules of Court seeking to set aside the decision dated

August 12, 1992 of the respondent Court of Appeals in CA-G.R. CV No. 29994 entitled “Alejandro Balatbat and Clara Balatbat, plaintiffs-appellants, versus Jose

Repuyan and Aurora Repuyan, defendants-appellees,” the dispositive portion of which reads: [1]

“WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of P10,000.00 for attorney’s fees and P5,000.00 as costs of

litigation are deleted.

SO ORDERED.”

The records show the following factual antecedents:

It appears that on June 15, 1977, Aurelio A. Roque filed a complaint for partition docketed as C ivil Case No. 109032 against Corazon Roque, Alberto de

los Santos, Feliciano Roque, Severa Roque and Osmundo Roque before the then Court of First Instance of Manila, Branch IX. [2] Defendants therein were

declared in default and plaintiff presented evidence ex-parte. On March 29, 1979, the trial court rendered a decision in favor of plaintiff Aurelio A. Roque, the

pertinent portion of which reads:[3]

“From the evidence, it has been clearly established that the lot in question covered by Transfer Certificate of Title No. 51330 was acquired by plaintiff Aurelio

Roque and Maria Mesina during their conjugal union and the house constructed thereon was likewise built during their marital union. Out of their union,

plaintiff and Maria Mesina had four children, who are the defendants in this case. When Maria Mesina died on August 28, 1966, the only conjugal properties

left are the house and lot above stated of which plaintiff herein, as the legal spouse, is entitled to one-half share pro-indiviso thereof. With respect to the one-

half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four children, the defendants here, are each entitled to one-fifth (1/5)

share pro-indiviso. The deceased wife left no debt.

Wherefore, judgment is hereby rendered ordering the partition of the properties, subject matter of this case consisting of the house and lot, in the following

manner:

1. Of the house and lot forming the conjugal properties, plaintiff is entitled to one-half share pro-indiviso thereof while the other half forms the estate of the

deceased Maria Mesina;

2. Of the Estate of deceased Maria Mesina, the same is to be divided into five (5) shares and plaintiff and his four children ar e entitled each to one-fifth share

thereofpro-indiviso.

Plaintiff claim for moral, exemplary and actual damages and attorney’s fees not having been established to the satisfaction of the Court, the same is hereby

denied.

Without pronouncement as to costs.

SO ORDERED.”

On June 2, 1979, the decision became final and executory. The corresponding entry of judgment was made on March 29, 1979.[4]

On October 5, 1979, the Register of Deeds of Manila issued a Transfer Certificate of Title No. 135671 in the name of the foll owing persons in the

following proportions:[5]

Aurelio A. Roque 6/10 share

Severina M. Roque 1/10 share

Osmundo M. Roque 1/10 share

Feliciano M. Roque 1/10 share

Corazon M. Roque 1/10 share

On April 1, 1980, Aurelio A. Roque sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan and Jose Repuyan as evidenced by a

“Deed of Absolute Sale.”[6]

On July 21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim [7] on the Transfer Certificate of Title No. 135671, [8] to

wit:

“Entry No. 5627/T-135671 - NOTICE OF ADVERSE CLAIM - Filed by Aurora Tuazon Repuyan, married, claiming among others that she bought 6/10 portion of the

property herein described from Aurelio Roque for the amount of P50,000.00 with a down payment of P5,000.00 and the balance of P45,000.00 to be paid

after the partition and subdivision of the property herein described, other claims set forth in Doc. No. 954, page 18, Book 94 of _____________________ 64

________PEDRO DE CASTRO, Notary Public of Manila.

Date of instrument - July 21, 1980

Date of inscription- July 21, 1980 at 3:35 p.m.

TERESITA H. NOBLEJAS

Acting Register of Deeds

By:

RAMON D. MACARICAN

Acting Second Deputy”

On August 20, 1980, Aurelio A. Roque filed a complaint for “Rescission of Contract” docketed as Civil Case No. 134131 against spouses Aurora Tuazon-

Repuyan and Jose Repuyan before Branch IV of the then Court of First Instance of Manila. The complaint is grounded on spouses Repuyan’s failure to pay the

balance of P45,000.00 of the purchase price. [9] On September 5, 1980, spouses Repuyan filed their answer with counterclaim. [10]

In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case) dated February 2, 1982, to wit: [11]

“In view of all the foregoing and finding that the amount of P100,000.00 as purchase price for the sale of the parcel of land covered by TCT No. 51330 of the

Registry of Deeds of Manila consisting of 84 square meters situated in Callejon Sulu, District of Santa Cruz, Manila, to be reasonable and fair, and considering

the opportunities given defendants to sign the deed of absolute sale voluntarily, the Court has no alternative but to order, as it hereby orders, the Deputy Clerk

of this Court to sign the deed of absolute sale for and in behalf of defendants pursuant to Sec. 10, Rule 39 of the Rules of Court, in order to effect the partition

of the property involved in this case.

SO ORDERED.”

A deed of absolute sale was executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and

Clara Balatbat, married to Alejandro Balatbat. [12] On April 14, 1982, Clara Balatbat filed a motion for the issuance of a writ of possession which was granted by

the trial court on September 14, 1982 “subject, however, to valid rights and interest of third persons over the same portion thereof, other than vendor or any

other person or persons privy to or claiming any rights or interest under it.” The corresponding writ of possession was issued on September 20, 1982. [13]

On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No. 134131[14] which was granted as per court’s resolution of

October 21, 1982.[15] However, Clara Balatbat failed to file her complaint in intervention. [16] On April 15, 1986, the trial court rendered a decision dismissing the

complaint, the pertinent portion of which reads: [17]

“The rescission of contracts are provided for in the laws and nowhere in the provision of the Civil Code under the title Rescissible Contracts does the

circumstances in the case at bar appear to have occurred, hence, the prayer for rescission is outside the ambit for which rescissible [sic] could be granted.

“The Intervenor - Plaintiff, Clara Balatbat, although allowed to intervene, did not file her complaint in intervention.

“Consequently, the plaintiff having failed to prove with sufficient preponderance his action, the relief prayed for had to be denied. The contract of sale

denominated as “Deed of Absolute Sale” (Exh. 7 and sub-markings) being valid and enforceable, the same pursuant to the provisions of Art. 1159 of the Civil

Code which says:

“Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.”

has the effect of being the law between the parties and should be complied with. The obligation of the plaintiff under the contract being to have the land

covered by TCT No. 135671 partitioned and subdivided, and title issued in the name of the defendant buyer (see page 2 par. C of Exh. 7-A) plaintiff had to

comply thereto to give effect to the contract.

“WHEREFORE, judgment is rendered against the plaintiff, Aurelio A. Roque, and the plaintiff in intervention, Clara Balatbat, and in favor of the defendants,

dismissing the complaint for lack of merit, and declaring the Deed of Absolute Sale dated April 1, 1980 as valid and enforceable and the plaintiff is, as he is

hereby ordered, to partition and subdivide the land covered by T.C.T. No. 135671, and to aggregate therefrom a portion equivalent to 6/10 thereof, and cau se

the same to be titled in the name of the defendants, and after which, the defendants to pay the plaintiff the sum of P45,000. 00. Considering further that the

defendants suffered damages since they were forced to litigate unnecessarily, by way of their counterclaim, plaintiff is hereby ordered to pay defendants the

sum of P15,000.00 as moral damages, attorney’s fees in the amount of P5,000.00.

Costs against plaintiff.

SO ORDERED.”

On March 3, 1987, petitioner Balatbat filed a notice of lis pendens in Civil Case No. 109032 before the Register of Deeds of Manila. [18]

On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the instant complaint for delivery of the owner's duplicate copy

of T.C.T. No. 135671 docketed as Civil Case No. 88-47176 before Branch 24 of the Regional Trial Court of Manila against private respondents Jose Repuyan

and Aurora Repuyan.[19]

On January 27, 1989, private respondents filed their answer with affirmative defenses and compulsory counterclaim. [20]

On November 13, 1989, private respondents filed their memorandum [21] while petitioners filed their memorandum on November 23, 1989. [22]

On August 2, 1990, the Regional Trial Court of Manila, Branch 24, rendered a decision dismissing the complaint, the dispositive portion of which reads:[23]

“Considering all the foregoing, this Court finds that the plaintiffs have not been able to establish their cause of action against the defendants and have no right

to the reliefs demanded in the complaint and the complaint of the plaintiff against the defendants is hereby DISMISSED. On the counterclaim, the plaintiff are

ordered to pay defendants the amount of Ten Thousand Pesos by way of attorney’s fees, Five Thousand Pesos as costs of litigat ion and further to pay the costs

of the suit.

SO ORDERED.”

Dissatisfied, petitioner Balatbat filed on appeal before the respondent Court of Appeals which rendered the assailed decision on August 12, 1992, to

wit:[24]

“WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of P10,000.00 for attorney’s fees and P5,000.00 as costs of

litigation are deleted.

SO ORDERED.”

On March 22, 1993, the respondent Court of Appeals denied petitioner’s motion for reconsideration.[25]

Hence, this petition for review.

Petitioner raised the following issues for this Court’s resolution:

I

WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE RESPONDENTS WAS MERELY EXECUTORY AND NOT A CONSUMMATED TRANSACTION?

II

WHETHER OR NOT THERE WAS A DOUBLE SALE AS CONTEMPLATED UNDER ART. 1544 OF THE CIVIL CODE?

III

WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD FAITH AND FOR VALUE?

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING WEIGHT AND CONSIDERATION TO THE EVIDENCE OF THE PRIVATE RESPONDENTS WHICH WERE

NOT OFFERED?

Petitioner asseverates that the respondent Court of Appeals committed grave abuse of discretion tantamount to lack or exc ess of jurisdiction in affirming

the appealed judgment considering (1) that the alleged sale in favor of the private respondents Repuyan was merely executory; (2) that there is no double sale;

(3) that petitioner is a buyer in good faith and for value; and (4) that private respondents did not offer their evidence during the trial.

Contrary to petitioner’s contention that the sale dated April 1, 1980 in favor of private respondents Repuyan was merely executory for the reason that

there was no delivery of the subject property and that consideration/price was not fully paid, we find the sale as consummated, hence, valid and enforceab le. In

a decision dated April 15, 1986 of the Regional Trial Court of Manila, Branch IV in Civil Case No. 134131, the Court dismissed vendor’s Aurelio Roque complaint

for rescission of the deed of sale and declared that the sale dated April 1, 1980, as valid and enforceable. No appeal having been made, the decision became

final and executory. It must be noted that herein petitioner Balatbat filed a motion for intervention in that case but did not file her complaint in intervention. In

that case wherein Aurelio Roque sought to rescind the April 1, 1980 deed of sale in favor of the private respondents for non -payment of the P45,000.00

balance, the trial court dismissed the complaint for rescision. Examining the terms and conditions of the “Deed of Sale” dated April 1, 1980, the P45,000.00

balance is payable only “after the property covered by T.C.T. No. 135671 has been partitioned and subdivided, and title issued in the name of the BUYER”

hence, vendor Roque cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of the private

respondents. Devoid of any stipulation that “ownership in the thing shall not pass to the purchaser until he has fully paid the price,” [26] ownership in the thing

shall pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price has not yet been fully paid. The failure

of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved

pursuant to Article 1191 of the New Civil Code. [27] Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract.

With respect to the non-delivery of the possession of the subject property to the private respondent, suffice it to say that ownership of the thing s old is

acquired only from the time of delivery thereof, either actual or constructive.[28] Article 1498 of the Civil Code provides that - when the sale is made through a

public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not

appear or cannot be inferred.[29] The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the

vendee, who may thereafter exercise the rights of an owner over the same. [30] In the instant case, vendor Roque delivered the owner’s certificate of title to

herein private respondent. It is not necessary that vendee be physically present at every square inch of the land bought by him, possession of the public

instrument of the land is sufficient to accord him the rights of ownership. 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). The provision of Article 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.[31]

A contract of sale being consensual, it is perfected by the mere consent of the parties. [32] Delivery of the thing brought or payment of the price is not

necessary for the perfection of the contract; and failure of the vendee to pay the price after the execution of the contract does not make the sale null and void

for lack of consideration but results at most in default on the part of the vendee, for which the vendor may exercise his legal remedies.[33]

Article 1544 of the New Civil Code provides:

“If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in

good faith, if it should be movable property.

“Should it be movable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

“Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession and in the absence thereof, to the person

who present the oldest title, provided there is good faith.”

Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred (1) to the person acquiring it

who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default

thereof, to the person who presents the oldest title, provided there is good faith.[34]

In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private respondents Repuyan on A pril 1,

1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to Section

10, Rule 39 of the Rules of Court, on February 4, 1982. Undoubtedly, this is a case of double sale contemplated under Article 1544 of the New Civil Code.

This is an instance of a double sale of an immovable property hence, the ownership shall vests in the person acquiring it who in good faith first recorded it

in the Registry of Property. Evidently, private respondents Repuyan’s caused the annotation of an adverse claim on the title of the subject property

denominated as Entry No. 5627/T-135671 on July 21, 1980.[35] The annotation of the adverse claim on TCT No. 135671 in the Registry of Property is sufficient

compliance as mandated by law and serves notice to the whole world.

On the other hand, petitioner filed a notice of lis pendens only on February 2, 1982. Accordingly, private respondents who first caused the annotation of

the adverse claim in good faith shall have a better right over herein petitioner. Moreover, the physical possession of herein petitioners by virtue of a writ of

possession issued by the trial court on September 20, 1982 is “subject to the valid rights and interest of third persons over the same portion thereof, other than

vendor or any other person or persons privy to or claiming any rights to interest under it.” [36] As between two purchasers, the one who has registered 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.[37] Further,

even in default of the first registrant or first in possession, private respondents have presented the oldest title.[38] Thus, private respondents who acquired the

subject property in good faith and for valuable consideration established a superior right as against the petitioner.

Evidently, petitioner cannot be considered as a buyer in good faith. In the complaint for rescission filed by vendor Aurelio Roque on August 20, 1980,

herein petitioner filed a motion for intervention on May 20, 1982 but did not file her complaint in intervention, hence, the decision was rendered adversely

against her. If petitioner did investigate before buying the land on February 4, 1982, she should have known that there was a pending case and an annotation

of adverse claim was made in the title of the property before the Register of Deeds and she could have discovered that the subject property was already sold to

the private respondents. It is incumbent upon the vendee of the property to ask for the delivery of the owner’s duplicate copy of the title from the vendor. A

purchaser of a valued piece of property cannot just close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in

good faith and under the belief that there were no defect in the title of the vendor.[39] One who purchases real estate with knowledge of a defect or lack of title in

his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be

applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the

defects in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind

which can only be judged of by actual or fancied tokens or signs. [40]

In fine, petitioner had nobody to blame but herself in dealing with the disputed property for failure to inquire or discover a flaw in the title to the property,

thus, it is axiomatic that - culpa lata dolo aequiparatur - gross negligence is equivalent to intentional wrong.

IN VIEW OF THE FOREGOING PREMISES, this petition for review is hereby DISMISSED for lack of merit. No pronouncement as to costs.

IT IS SO ORDERED.

Regalado (Chairman), Romero, Puno, and Mendoza, JJ., concur.

HEIRS OF ESCANLAR vs CA

G.R. No. 119777. October 23, 1997

D E C I S I ON

ROMERO, J.:

Before us are consolidated petitions for review of the decision of the Court of Appeals in CA-G.R. CV No. 39975 which affirmed the trial court’s

pronouncement that the deed of sale of rights, interests and participation in favor of petitioners is null and void.

The case arose from the following facts:

Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924 and 1938, respectively. Nombre’s heirs include his nephews and

grandnephews. Victoriana Cari-an was succeeded by her late brother’s son, Gregorio Cari-an. The latter was declared as Victoriana’s heir in the estate

proceedings for Nombre and his wife (Special Proceeding No 7-7279).[1] After Gregorio died in 1971, his wife, Generosa Martinez, and children, Rodolfo,

Carmen, Leonardo and Fredisminda, all surnamed Cari-an, were also adjudged as heirs by representation to Victoriana’s estate. [2] Leonardo Cari-an passed

away, leaving his widow, Nelly Chua vda. de Cari-an and minor son Leonell, as his heirs.

Two parcels of land, denominated as Lot No. 1616 and 1617 of the Kabankalan Cadastre with an area of 29,350 square meters and 460,948 square meters,

respectively, formed part of the estate of Nombre and Cari-an.

On September 15, 1978, Gregorio Cari-an’s heirs, herein collectively referred to as private respondents Cari-an, executed the Deed of Sale of Rights,

Interests and Participation worded as follows:

“NOW, THEREFORE, for and in consideration of the sum of TWO HUNDRED SEVENTY-FIVE THOUSAND (P275,000.00) Pesos, Philippine Currency, to be paid by

the VENDEES to the VENDORS, except the share of the minor child of Leonardo Cari-an, which should be deposited with the Municipal Treasurer of Himamaylan,

Province of Negros Occidental, by the order of the Court of First Instance of Negros Occidental, Branch VI, Himamaylan, by those presents, do hereby SELL,

CEDE, TRANSFER and CONVEY by way of ABSOLUTE SALE, all the RIGHTS, INTERESTS and PARTICIPATION of the Vendors as to the one-half (1/2) portion pro-

indiviso of Lots Nos. 1616 and 1617 (Fishpond), of the Kabankalan Cadastre, pertaining to the one-half (1/2) portion pro-indiviso of the late Victoriana Cari-

an unto and in favor of the Vendees, their heirs, successors and assigns;

x x x x x x x x x

That this Contract of Sale of rights, interests and participations shall become effective only upon the approval by the Honorable Court of First Instance of Negros

Occidental, Branch VI- Himamaylan.” (Underscoring supplied.)

Pedro Escanlar and Francisco Holgado, the vendees, were concurrently the lessees of the lots referred to above. [3] They stipulated that the balance of the

purchase price (P225,000.00) shall be paid on or before May 1979 in a Deed of Agreement executed by the parties on the same day:

“WHEREAS, at the time of the signing of the Contract, VENDEES has (sic) only FIFTY THOUSAND (P50,000.00) Pesos available thereof, and was not able to

secure the entire amount;

WHEREAS, the Vendors and one of the Vendees by the name of Pedro Escanlar are relatives, and absolute faith and trust exist between them, wherein during

economic crisis, has not failed to give monetary succor to the Vendors;

WHEREAS, Vendors herein understood the present scarcity of securing available each (sic) in the amount stated in the contract;

NOW THEREFORE, for and in consideration of the sum of FIFTY THOUSAND (P50,000.00) Pesos, Philippine Currency, the balance of TWO HUNDRED TWENTY

FIVE THOUSAND (P225,000.00) Pesos to be paid by the Vendees on or before May, 1979, the Vendors herein, by these Presents, do hereby CONFIRM and

AFFIRM the Deed of Sale of the Rights, Interests and Participation dated September 15, 1978, over Lots Nos. 1616 and 1617 (fi shpond) of the Kabankalan

Cadastre in favor of the VENDEES, their heirs and assigns.

That pending the complete payment thereof, Vendees shall not assign, sell, lease, nor mortgage the rights, interests and participa tion thereof;

That in the event the Vendees fail and/ or omit to pay the balance of said purchase price on May 31, 1979 and the cancellation of said Contract of Sale is made

thereby, the sum of FIFTY THOUSAND (P50,000.00) Pesos shall be deemed as damages thereof to Vendors.” (Underscoring supplied) [4]

Petitioners were unable to pay the Cari-an heirs’ individual shares, amounting to P55,000.00 each, by the due date. However, said heirs received at least

12 installments from petitioners after May 1979. [5] Rodolfo Cari-an was fully paid by June 21, 1979. Generosa Martinez, Carmen Cari-an and Fredisminda Cari-

an were likewise fully compensated for their individual shares, per receipts given in evidence.[6] The minor Leonell’s share was deposited with the Regional Trial

Court on September 7, 1982.[7]

Being former lessees, petitioners continued in possession of Lot Nos. 1616 and 1617. Interestingly, they continued to pay rent based on their lease

contract. On September 10, 1981, petitioners moved to intervene in the probate proceedings of Nombre and Cari-an as the buyers of private respondent Cari-

an’s share in Lot Nos. 1616 and 1617. Petitioners’ motion for approval of the September 15, 1978 sale before the same court, filed on November 10, 1981,

was opposed by private respondents Cari-an on January 5, 1982.[8]

On September 16, 1982, the probate court approved a motion filed by the heirs of Cari -an and Nombre to sell their respective shares in the estate. On

September 21, 1982, private respondents Cari-an, in addition to some heirs of Guillermo Nombre, [9] sold their shares in eight parcels of land including Lot Nos.

1616 and 1617 to the spouses Ney Sarrosa Chua and Paquito Chua for P1,850,000.00. One week later, the vendor-heirs, including private respondents Cari-

an, filed a motion for approval of sale of hereditary rights, i.e. the sale made on September 21, 1982 to the Chuas.

Private respondents Cari-an instituted this case for cancellation of sale against petitioners (Escanlar and Holgado) on November 3, 1982. [10]They

complained of petitioners’ failure to pay the balance of the purchase price by May 31, 1979 and alleged that they only receiv ed a total ofP132,551.00 in cash

and goods. Petitioners replied that the Cari-ans, having been paid, had no right to resell the subject lots; that the Chuas were purchasers in bad faith; and that

the court approval of the sale to the Chuas was subject to their existing claim over said properties.

On April 20, 1983, petitioners also sold their rights and interests in the subject parcels of land (Lot Nos. 1616 and 1617) to Edwin Jayme

forP735,000.00[11] and turned over possession of both lots to the latter. The Jaymes in turn, were included in the civil case as fourth-party defendants.

On December 3, 1984, the probate court approved the September 21, 1982 sale “without prejudice to whatever rights, claims and interests over any of

those properties of the estate which cannot be properly and legally ventilated and resolved by the court in the same intestate pr oceedings.”[12] The certificates

of title over the eight lots sold by the heirs of Nombre and Cari-an were later issued in the name of respondents Ney Sarrosa Chua and Paquito Chua.

The trial court allowed a third-party complaint against the third-party defendants Paquito and Ney Chua on January 7, 1986 where Escanlar and Holgado

alleged that the Cari-ans conspired with the Chuas when they executed the second sale on September 21, 1982 and that the latter sale is illegal and of no

effect. Respondents Chua countered that they did not know of the earlier sale of one-half portion of the subject lots to Escanlar and Holgado. Both parties

claimed damages.[13]

On April 28, 1988, the trial court approved the Chuas’ motion to file a fourth-party complaint against the spouses Jayme. Respondents Chua alleged that

the Jaymes refused to vacate said lots despite repeated demands; and that by reason of the illegal occupation of Lot Nos. 1616 and 1617 by the Jaymes, they

suffered materially from uncollected rentals.

Meanwhile, the Regional Trial Court of Himamaylan which took cognizance of Special Proceeding No. 7-7279 (Intestate Estate of Guillermo Nombre and

Victoriana Cari-an) had rendered its decision on October 30, 1987.[14] The probate court concluded that since all the properties of the estate were disposed of or

sold by the declared heirs of both spouses, the case is considered terminated and the intestate estate of Guillermo Nombre and Victoriana Cari -an is

closed. The court held:

“As regards the various incidents of this case, the Court finds no cogent reason to resolve them since the very object of the various incidents in this case is no

longer in existence, that is to say, the properties of the estate of Guillermo Nombre and Victoriana Cari -an had long been disposed of by the rightful heirs of

Guillermo Nombre and Victoriana Cari-an. In this respect, there is no need to resolve the Motion for Subrogation of Movants Pedro Escanlar and Francisco

Holgado to be subrogated to the rights of the heirs of Victoriana Cari-an since all the properties of the estate had been transferred and titled to in the name of

spouses Ney S. Chua and Dr. Paquito Chua. Since the nature of the proceedings in this case is summary, this Court, being a Probate Court, has no jurisdiction

to pass upon the validity or invalidity of the sale of rights of the declared heirs of Guillermo Nombre and Victoriana Cari-an to third parties. This issue must be

raised in another action where it can be properly ventilated and resolved. x x x Having determined, after exhausted (sic) and lengthy hearings, the rightful heirs

of Guillermo Nombre and Victoriana Cari-an, the Court found out that the second issue has become moot and academic considering that there are no more

properties left to be partitioned among the declared heirs as that had long ago been disposed of by the declared heirs x x x .” (Underscoring supplied)

The seminal case at bar was resolved by the trial court on December 18, 1991 in favor of cancellation of the September 15, 1978 sale. Said transaction

was nullified because it was not approved by the probate court as required by the contested deed of sale of rights, interests and participation and because the

Cari-ans were not fully paid. Consequently, the Deed of Sale executed by the heirs of Nombre and Cari-an in favor of Paquito and Ney Chua, which was

approved by the probate court, was upheld. The dispositive portion of the lower court’s decision reads:

“WHEREFORE, premises considered, judgment is hereby rendered as follows:

1) Declaring the following contracts null and void and of no effect:

a) The Deed of Sale, dated Sept. 15, 1978, executed by the plaintiffs in favor of the defendants Pedro Escanlar and Francisco Holgado (Exh .

“A,” Plaintiffs)

b) The Deed of Agreement, dated Sept. 15, 1978, executed by the plaintiffs in favor of the defendants, Pedro Escanlar and Francisco Holgado

(Exh. “B,” Plaintiffs)

c) The Deed of Sale, dated April 20, 1983, executed by the defendants in favor of the fourth-party defendants, Dr. Edwin Jayme and Elisa Tan

Jayme

d) The sale of leasehold rights executed by the defendants in favor of the fourth-party defendants

2) Declaring the amount of Fifty Thousand Pesos (P50,000.00) paid by the defendants to the plaintiffs in connection with the Sept. 15, 1978 deed of

sale, as forfeited in favor of the plaintiffs, but ordering the plaintiffs to return to the defendants whatever amounts they have received from the latter after May

31, 1979 and the amount of Thirty Five Thousand Two Hundred Eighteen & 75/100 (P35,218.75)[15] deposited with the Treasurer of Himamaylan, Negros

Occidental, for the minor Leonell C. Cari-an -

3) Declaring the deed of sale, dated September 23, 1982, executed by Lasaro Nombre, Victorio Madalag, Domingo Campillanos, Sofronio Campillanos,

Generosa Vda. de Martinez, Carmen Cari-an, Rodolfo Cari-an, Nelly Chua Vda. de Cari-an, for herself and as guardian ad litem of the minor Leonell C. Cari-an,

and Fredisminda Cari-an in favor of the third-party defendants and fourth-party plaintiffs, spouses Dr. Paquito Chua and Ney Sarrosa Chua (Exh. “2”-Chua) as

legal, valid and enforceable provided that the properties covered by the said deed of sale are subject of the burdens of the estate, if the same have not been

paid yet.

4) Ordering the defendants Francisco Holgado and Pedro Escanlar and the fourth-party defendants, spouses Dr. Edwin Jayme and Elisa Tan Jayme, to

pay jointly and severally the amount of One Hundred Thousand Pesos (P100,000.00 as moral damages and the further sum of Thirty Thousand Pesos

(P30,000.00) as attorney’s fees to the third-party defendant spouses, Dr. Paquito Chua and Ney Sarrosa-Chua.

5) Ordering the fourth-party defendant spouses, Dr. Edwin Jayme and Elisa Tan Jayme, to pay to the third-party defendants and fourth-party plaintiffs,

spouses Dr. Paquito Chua and Ney Sarrosa-Chua, the sum of One Hundred Fifty Seven Thousand Pesos (P157,000.00) as rentals for the riceland and Three

Million Two Hundred Thousand Pesos (P3,200,000.00) as rentals for the fishpond from October, 1985 to July 24, 1989 plus the rentals from the latter date

until the property shall have been delivered to the spouses Dr. Paquito Chua and Ney Sarrosa-Chua;

6) Ordering the defendants and the fourth-party defendants to immediately vacate Lots Nos. 1616 and 1617, Kabankalan Cadastre;

7) Ordering the defendants and the fourth-party defendants to pay costs.

SO ORDERED.”[16]

Petitioners raised the case to the Court of Appeals. [17] Respondent court affirmed the decision of the trial court on February 17, 1995 and held that the

questioned deed of sale of rights, interests and participation is a contract to sell because it shall become effective only upon approval by the probate court and

upon full payment of the purchase price.[18]

Petitioners’ motion for reconsideration was denied by respondent court on April 3, 1995. [19] Hence, these petitions.[20]

1. We disagree with the Court of Appeals’ conclusion that the September 15, 1978 Deed of Sale of Rights, Interests and Participation is a contract to sell

and not one of sale.

The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in repeated decisions, according to

Justice J.B.L. Reyes in Luzon Brokerage Co. Inc. v. Maritime Building Co., Inc., [21] upholding the power of promisors under contracts to sell in case of failure of the

other party to complete payment, to extrajudicially terminate the operation of the contract, refuse the conveyance, and retain the sums of installments already

received where such rights are expressly provided for.

In contracts to sell, ownership is retained by the seller and is not to pass until the full payment of the price. Such payment is a positive suspensive

condition, the failure of which is not a breach of contract but simply an event that prevented the obligation of the vendor t o convey title from acquiring binding

force.[22] To illustrate, although a deed of conditional sale is denominated as such, absent a proviso that title to the property sold is reserved in the vendor until

full payment of the purchase price nor a stipulation giving the vendor the right to unilaterally rescind the contract the mom ent the vendee fails to pay within a

fixed period, by its nature, it shall be declared a deed of absolute sale.[23]

The September 15, 1978 sale of rights, interests and participation as to 1/2 portion pro indiviso of the two subject lots is a contract of sale for the

following reasons: First, private respondents as sellers did not reserve unto themselves the ownership of the property until full payment of the unpaid balance

of P225,000.00. Second, there is no stipulation giving the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed

period.[24] Prior to the sale, petitioners were in possession of the subject property as lessees. Upon sale to them of the rights, interests and participation as to

the 1/2 portion pro indiviso, they remained in possession, not in concept of lessees anymore but as owners now through symbolic delivery known as traditio

brevi manu.[25] Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the vendee upon actual or constructive delivery thereof.[26]

In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the

obligations created thereunder. The remedy of an unpaid seller in a contract of sale is to seek either specific performance or rescission. [27]

2. Next to be discussed is the stipulation in the disputed September 15, 1978 Deed of Sale of Rights, Interests and Participation which reads: “(t)his

Contract of Sale of rights, interests and participations shall become effective only upon the approval by the Honorable Court of First Instance of Negros

Occidental, Branch VI-Himamaylan.” Notably, the trial court and the Court of Appeals both held that the deed of sale is null and void for not having been

approved by the probate court.

There has arisen here a confusion in the concepts of validity and the efficacy of a contract. Under Art. 1318 of the Civil Code, the essential requisites of a

contract are: consent of the contracting parties; object certain which is the subject matter of the contract and cause of the obligation which is

established. Absent one of the above, no contract can arise. Conversely, where all are present, the result is a valid contract. However, some parties introduce

various kinds of restrictions or modalities, the lack of which will not, however, affect the validity of the contract.

In the instant case, the Deed of Sale, complying as it does with the essential requisites, is a valid one. However, it did not bear the stamp of approval of

the court. This notwithstanding, the contract’s validity was not affected for in the words of the stipulation, “ . . . this Contract of Sale of rights, interests and

participations shall become effective only upon the approval by the Honorable Court . . .” In other words, only the effectivity and not the validity of the contract

is affected.

Then, too, petitioners are correct in saying that the need for approval by the probate court exists only where specific properties of the estate are sold and

not when only ideal and indivisible shares of an heir are disposed of.

In the case of Dillena v. Court of Appeals, [28] the Court declared that it is within the jurisdiction of the probate court to approve the sale of properties of a

deceased person by his prospective heirs before final adjudication. [29] It is settled that court approval is necessary for the validity of any disposition of the

decedent’s estate. However, reference to judicial approval cannot adversely affect the substantive rights of the heirs to dispose of their ideal share in the co-

heirship and/or co-ownership among the heirs.[30] It must be recalled that during the period of indivision of a decedent’s estate, each heir, being a co-owner, has

full ownership of his part and may therefore alienate it. [31] But the effect of the alienation with respect to the co-owners shall be limited to the portion which may

be allotted to him in the division upon the termination of the co-ownership.[32]

From the foregoing, it is clear that hereditary rights in an estate can be validly sold without need of court approval and th at when private respondents

Cari-an sold their rights, interests and participation in Lot Nos. 1616 and 1617, they could legally sell the same without the app roval of the probate court.

As a general rule, the pertinent contractual stipulation (requiring court approval) should be considered as the law between the parties. However, the

presence of two factors militate against this conclusion. First, the evident intention of the parties appears to be contrary to the mandatory character of said

stipulation.[33] Whoever crafted the document of conveyance, must have been of the belief that the controversial stipulation was a legal requi rement for the

validity of the sale. But the contemporaneous and subsequent acts of the parties reveal that the original objective of the parties was to give effect to the deed

of sale even without court approval.[34] Receipt and acceptance of the numerous installments on the balance of the purchase price by the Cari -ans and leaving

petitioners in possession of Lot Nos. 1616 and 1617 reveal their intention to effect the mutual transmission of rights and obligations. It was only after private

respondents Cari-an sold their shares in the subject lots again to the spouses Chua, in September 1982, that these same heirs filed the case a t bar for the

cancellation of the September 1978 conveyance. Worth considering too is the fact that although the period to pay the balance of the purchase price expired in

May 1979, the heirs continued to accept payments until late 1979 and did not seek judicial relief until late 1982 or three years later.

Second, we hold that the requisite approval was virtually rendered impossible by the Cari-ans because they opposed the motion for approval of the sale

filed by petitioners[35] and sued the latter for the cancellation of that sale. The probate court explained:

“(e) While it is true that Escanlar and Holgado filed a similar motion for the approval of Deed of Sale executed by some of the heirs in their favor concerning

the one-half (1/2) portions of Lots 1616 and 1617 as early as November 10, 1981, yet the Court could not have favorably acted upon it , because there exists a

pending case for the rescission of that contract, instituted by the vendors therein against Pedro Escanlar and Francisco Holgado and filed before another branch

of this Court. Until now, this case, which attacks the very source of whatever rights or interests Holgado and Escanlar may have acquired over one-half (1/2)

portions of Lots Nos. 1616 and 1617, is pending resolution by another court. Otherwise, if this Court meddles on these issues raised in that ordinary civil action

seeking for the rescission of an existing contract, then, the act of this Court would be totally ineffective, as the same would be in excess of its jurisdiction.”[36]

Having provided the obstacle and the justification for the stipulated approval not to be granted, private respondents Cari-an should not be allowed to

cancel their first transaction with petitioners because of lack of approval by the probate court, which lack is of their own making.

3. With respect to rescission of a sale of real property, Article 1592 of the Civil Code governs:

“In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time ag reed upon the rescission of the

contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been

made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.” (Underscoring added)

In the instant case, the sellers gave the buyers until May 1979 to pay the balance of the purchase price. After the latter failed to pay installments due,

the former made no judicial demand for rescission of the contract nor did they execute any notarial act demanding the same, a s required under Article

1592. Consequently, the buyers could lawfully make payments even after the May 1979 deadline, as in fact they paid several installments to the sellers which

the latter accepted. Thus, upon the expiration of the period to pay, the sellers made no move to rescind but continued accepting late payments, an act which

cannot but be construed as a waiver of the right to rescind. When the sellers, instead of availing of their right to rescind, accepted and received delayed

payments of installments beyond the period stipulated, and the buyers were in arrears, the sellers in effect waived and are now estopped from exercising said

right to rescind.[37]

4. The matter of full payment is another issue taken up by petitioners. An exhaustive review of the records of this case impels us to arrive at a conclusion

at variance with that of both the trial and the appellate courts.

The sole witness in the cancellation of sale case was private respondent herein Fredisminda Cari-an Bustamante. She initially testified that after several

installments, she signed a receipt for the full payment of her share in December 1979 but denied having actually received the P5,000.00 intended to complete

her share. She claims that Escanlar and Holgado made her sign the receipt late in the afternoon and promised to give the money to her th e following morning

when the banks opened. She also claimed that while her brother Rodolfo Cari-an’s share had already been fully paid, her mother Generosa Martinez only

received P28,334.00 and her sister-in-law Nelly Chua vda. de Cari-an received onlyP11,334.00. Fredisminda also summed up all the installments and came up

with the total of P132,551.00 from the long list on a sheet of a calendar which was transferred from a small brown notebook. She later admitted that her list

may not have been complete for she gave the receipts for installments to petitioners Escanlar and Holgado. She thus claimed that they were defrauded

because petitioners are wealthy and private respondents are poor.

However, despite all her claims, Fredisminda’s testimony fails to convince this Court that they were not fully compensated by petitioners. Fredisminda

admits that her mother and her sister signed their individual receipts of full payment on their own and not in her presence. [38] The receipts presented in

evidence show that Generosa Martinez was paid P45,625.00; Carmen Cari-an, P45,625.00; Rodolfo Cari-an,P47,500.00 on June 21, 1979; Nelly Chua vda. de

Cari-an, P11,334.00 and the sum of P34,218.00 was consigned in court for the minor Leonell Cari-an.[39] Fredisminda insists that she signed a receipt for full

payment without receiving the money therefor and admits that she did not object to the computation. We find it incredible that a mature woman like

Fredisminda Cari-an, would sign a receipt for money she did not receive. Furthermore, her claims regarding the actual amount of the installments paid to her

and her kin are quite vague and unsupported by competent evidence. She even admits that all the receipts were taken by petitioner Escanlar. [40] Worth noting

too is the absence of supporting testimony from her co-heirs and siblings Carmen Cari-an, Rodolfo Cari-an and Nelly Chua vda. de Cari-an.

The trial court reasoned out that petitioners, in continuing to pay the rent for the parcels of land they allegedly bought, a dmit not having fully paid the Cari-

ans. Petitioners’ response, that they paid rent until 1986 in compliance with their lease contract, only proves that they respected this contract and did not take

undue advantage of the heirs of Nombre and Cari-an who benefited from the lease. Moreover, it is to be stressed that petitioners purchased the hereditary

shares solely of the Cari-ans and not the entire lot.

The foregoing discussion ineluctably leads us to conclude that the Cari-ans were indeed paid the balance of the purchase price, despite having accepted

installments therefor belatedly. There is thus no ground to rescind the contract of sale because of non-payment.

5. Recapitulating, we have held that the September 15, 1978 deed of sale of rights, interests and participations is valid and th at the sellers-private

respondents Cari-an were fully paid the contract price. However, it must be emphasized that what was sold was only the Cari-an’s hereditary shares in Lot Nos.

1616 and 1617 being held pro indiviso by them and is thus a valid conveyance only of said ideal shares. Specific or designated portions of land were not

involved.

Consequently, the subsequent sale of 8 parcels of land, including Lot Nos. 1616 and 1617, to the spouses Chua is valid except to the extent of what was

sold to petitioners in the September 15, 1978 conveyance. It must be noted however, that the probate court in Special Proceeding No. 7-7279 desisted from

awarding the individual shares of each heir because all the properties belonging to the estate had already been sold. [41] Thus it is not certain how much private

respondents Cari-an were entitled to with respect to the two lots, or if they were even going to be awarded shares in said lots.

The proceedings surrounding the estate of Nombre and Cari-an having attained finality for nearly a decade now, the same cannot be re-opened. The

protracted proceedings which have undoubtedly left the property under a cloud and the parties involved in a state of uncertainty compels us to resolve it

definitively.

The decision of the probate court declares private respondents Cari-an as the sole heirs by representation of Victoriana Cari-an who was indisputably

entitled to half of the estate.[42] There being no exact apportionment of the shares of each heir and no competent proof that the heirs received unequal shares

in the disposition of the estate, it can be assumed that the heirs of Victoriana Cari-an collectively are entitled to half of each property in the estate. More

particularly, private respondents Cari-an are entitled to half of Lot Nos. 1616 and 1617, i.e. 14,675 square meters of Lot No. 1616 and 230,474 square meters

of Lot No. 1617. Consequently, petitioners, as their successors-in-interest, own said half of the subject lots and ought to deliver the possession of the other

half, as well as pay rents thereon, to the private respondents Ney Sarrosa Chua and Paquito Chua but only if the former (petitioners) remained in possession

thereof.

The rate of rental payments to be made were given in evidence by Ney Sarrosa Chua in her unrebutted testimony on July 24, 198 9: For the fishpond (Lot

No. 1617) - From 1982 up to 1986, rental payment of P3,000.00 per hectare; from 1986-1989 (and succeeding years), rental payment of P10,000.00 per

hectare. For the riceland (Lot No. 1616) - 15 cavans per hectare per year; from 1982 to 1986, P125.00 per cavan; 1987-1988, P175.00 per cavan; and 1989

and succeeding years, P200.00 per cavan.[43]

WHEREFORE, the petitions are hereby GRANTED. The decision of the Court of Appeals under review is hereby REVERSED AND SET ASIDE. The case is

REMANDED to the Regional Trial Court of Negros Occidental, Branch 61 for petitioners and private respondents Cari -an or their successors-in-interest to

determine exactly which 1/2 portion of Lot Nos. 1616 and 1617 will be owned by each party, at the option of petitioners. The trial court is DIRECTED to order

the issuance of the corresponding certificates of title in the name of the respective parties and to resolve the matter of rental payments of the land not delivered

to the Chua spouses subject to the rates specified above with legal interest from date of demand.

SO ORDERED.

Melo, Francisco, and Panganiban, JJ., concur.

Narvasa, C.J., (Chairman), on leave.

REPUBLIC OF THE PHILIPPINES vs PHIL. RESOURCES DEVT

G.R. No. L-10141 January 31, 1958

PADILLA, J.:

This is a petition under Rule 46 to review a judgment rendered by the Court of Appeals,in CA-GR No. 15767-R, Philippine Resources Development Corporation

vs. The Hon. Judge Magno Gatmaitan et al.

The findings of the Court of Appeals are, as follows.

It appears that on May 6, 1955, the Republic of the Philippines in representation of the Bureau of Prisons instituted against Macario Apostol and the

Empire Insurance Co. a complaint docketed as Civil Case No. 26166 of the Court of First instance of Manila. The complaint alleges as the first cause

of action, that defendant Apostol submitted the highest bid the amount P450.00 per ton for the purchase of 100 tons of Palawa n Almaciga from the

Bureau of Prisons; that a contract therefor was drawn and by virtue of which, Apostol obtained goods from the Bureau of Prisons valued P15,878.59;

that of said account, Apostol paid only P691.10 leaving a balane obligation of P15,187.49. The complaint further averes, as second cause of action,

that Apostol submitted the best bid with the Bureau of Prisons for the purchase of three million board feet of logs at P88.00 per 1,000 board feet;

that a contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at

P65.830.00, and that Apostol failed to pay a balance account Of P18,827.57. All told, for the total demand set forth in complaint against Apostol is

for P34,015.06 with legal interests thereon from January 8, 1952. The Empire lnsurance Company was included in the complaint having executed a

performance bond of P10,000.00 in favor of Apostol.

In his answer, Apostol interposed payment as a defense and sought the dismissal of the complaint.

On July 19, 1955, the Philippine Resources Development Corporation moved to intervene, appending to its motion, the complaint in the intervention

of even date. The complaint recites that for sometime prior to Apostol's transactions the corporate had some goods deposited in a warehouse at

1201 Herran, Manila; that Apostol, then the president of the corporation but without the knowledge or consent of the stockholders thereof, disposed

of said goods by delivering the same to the Bureau of Prisons of in an attempt to settle his personal debts with the latter entity; that upon discovery of

Apodol's act, the corporation took steps to recover said goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal

of the Bureau to return said goods, the corporation sought leave to intervene in Civil Case No. 26166.

As aforestated, His Honor denied the motion for intervention and thereby issued an order to this effect on July 23, 1955. A motion for the

reconsideration of said order was filed by the movant corporation and the same was likewise denied by His Honor on August 18, 1955 . . . (Annex L.).

On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals, the herein respondent corporation prayed for the setting aside of the

order of the Court of First Instance that had denied the admission of its complaint-in-intervention and for an order directing the latter Court to allow the herein

respondent corporation to intervene in the action (Annex G). On 12 December 1955 the Court of Appeals set aside the order denying the motion to intervene

and ordered the respondent court to admit the herein respondent corporation's complaint-in-intervention with costs against Macario Apostol.

On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the purpose stated at the beginning of this opinion.

The Goverment contends that the intervenor has no legal interest in the matter in litigation, because the action brought in the Court of First Instance of Manila

against Macario Apostol and the Empire Insurance Company (Civil Case No. 26166, Annex A) is just for the collection from the defendant Apostol of a sum of

money, the unpaid balance of the purchase price of logs and almaciga bought by him from the Bureau of Prisons, whereas the intervenor seeks to recover

ownership and possession of G. I. sheets, black sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an intervention which would change a

personal action into one ad rem and would unduly delay the disposition of the case.

The Court of Appeals held that:

Petitioner ardently claims that the reason behind its motion to intervene is the desire to protect its rights and interests over some materials

purportedly belonging to it; that said material were unauthorizedly and illegally assigned and delivered to the Bureau of Prisons by petitioning

corporation's president Macario Apostol in payment of the latter's personal accounts with the said entity; and that the Burea u of Prisons refused to

return said materials despite petitioner's demands to do so.

Petitioner refers to the particulars recited in Apostol's answer dated July 12, 1955 to the effect that Apostol had paid unto the Bureau of Prisons his

accounts covered, among others, by BPPO 1077 for the sum of P4,638.40 and BPPO 1549 for the amount of P4,398.54. Petitioner moreover, points

to the State of Paid and Unpaid accounts of Apostol dated January 16, 1954 prepared by the accounting of officer of the Burea u of Prisons (Annex B.

Complaint in Intervention), wherein it appears that the aforementioned accounts covered respectively by BPPO Nos. 1077 for 892 p ieces of GI sheets

and 1549 for 399 pieces of GI pipes in the total sum of P9,036.94 have not been credited to Apostol's account in view of lack of supporting papers;

and that according to the reply letter of the Undersecretary of Justice, said GI sheets and pipes were delivered by Macario Apostol to the Bureau of

Prisons allegedly in Apostol's capacity as owner and that the black iron sheets were delivered by Apostol as President of the petitioner corporation.

Respondents, on the other hand, assert that the subject matter of the original litigation is a sum of money allegedly due to the Bureau of Prisons from

Macario Apostol and not the goods or the materials reportedly turned over by Apostol as payment of his private debts to the Bureau of Prisons and

the recovery of which is sought by the petitioner; and that for this reason, petitioner has no legal interest in the very sub ject matter in litigation as to

entitle it to intervene.

We find no merit in respondents' contention. It is true that the very subject matter of the original case is a sum of money. But it is likewise true as

borne out by the records, that the materials purportedly belonging to the petitioner corporation have been assessed and evaluated and their price

equivalent in terms of money have been determined; and that said materials for whatever price they have been assigned by defendant now

respondent Apostol as tokens of payment of his private debts with the Bureau of Prisons. In view of these considerations, it becomes enormously

plain in the event the respondent judge decides to credit Macario Apostol with the value of the goods delivered by the latter to the Bureau of Prisons,

the petitioner corporation stands to be adversely affected by such judgment. The conclusion, therefore, is inescapable that the petitioner possesses a

legal interest in the matter in litigation and that such interest is of an actual, material, direct and immediate nature as to entitle petitioner to

intervene.

x x x x x x x x x

Section 3 of Rule 13 of the Rules of Court endows the lower Court with discretion to allow or disapprove the motion for intrv ention (Santarromana et

al. vs. Barrios, 63 Phil. 456); and that in the exercise of such discretion, the court shall consider whether or not the interventi on will unduly delay or

prejudice the adjudicatio of the rights of the original parties and whether or not the intervenors the rights may be fully protected in a separate

proceeding. The petitioner in the instant case positively authorized to a separate action against any of all the respondents. But considering that the

resolution of the issues raised in and enjoined by the pleadings in the main case, would virtally affect the rights not only the original parties but also

of the berein petitioner: that far from unduly delaying or prejudicing the adjudication of the rights of the original parties or bringing about confusion in

the original case, the adnission of the complaint in intervention would help clarify the vital issue of the true and real ownership of the materials

involved, besides preventing an abhorrent munltiplicity of suit, we believe that the motion to intervene should be g iven due to cause.

We find no reason for disturbing the foregoing pronouncements. The Government argues that "Price . . . is always paid in terms of money and the supposed

payment beeing in kind, it is no payment at all, "citing Article 1458 of the new Civil Code. However, the same Article provides that the purschaser may pay "a

price certain in money or its equivalent," which means that they meant of the price need not be in money. Whether the G.I. sheets, black sheets, M. S. Plates,

round bars and G. I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau of Prison by Macario Apostol in payment of his

account is sufficient payment therefore, is for the court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as

to credit Apostol with the value or price of the materials delivered by him, certainly the herein respondent corporation would be affected adversely if its claim of

ownership of such sheets, plates, bars and pipes is true.

The Government reiterates in its original stand that counsel appearing for the respondent corporation has no authority to rep resent it or/and sue in its behalf,

the Court of Appeals held that:

Respondents aver also that petitioner lacks legal capacity to sue and that its counsel is acting merely in an individual capacity without the benefit of

the corporate act authorizing him to bring sue. In this connection, respondents invoked among others section 20 of Rule 127 w hich provision, in our

opinion, squarely disproves their claim as by virtue thereof, the authority of petitioner's counsel is pressumed. Withal, the claim of the counsel for the

petitioner that a resolution to proceed against Apostol, had been unanonimously adopted by the stockholders of the corporation, has not been

refuted.

Evidently, petitioner is a duly organized corporation with offices at the Samanillo Building and that as such, it is endowed with a personality distinct

and separate from that of its president or stockholders. It has the right to bring suit to safeguard its interests and ordinarily, such right is exercised at

the instance of the president. However, under the circumstance now obtaining, such right properly devolves upon the other off icers of the

corporations as said right is sought to be exercised against the president himself who is the very object of the intended suit.

The power of a corporation to sue and be sued in any court1 is lodged in the board of directors which exercises it corporater powers,2 and not in the president,

as contended by the Government. The "motion for admission of complaint in intervention" (Annex C) and the "complaint in intervention" attached thereto, signed

by counsel and filed in the Court of First Instance begin with the following statement: "COMES NOW the above-name Intervenor, by its undersigned counsel, . . . ,

"and underneath his typewritten name is affixed the description" Counsel for the Intervenor." As counsels authority to appeal for the respondent corporation was

newer questioned in the Court of First Instance, it is to be pressumed that he was properly authorized to file the complaint in intervention a nd appeal for his

client.1 It was only in the Court of Appeals where his authority to appear was questioned. As the Court of Appeals was satisfied that counsel was duly authorized

by his client to file the complaint does in intervention and to appear in its behalf, hte resolution of the Court of Appeals on this point should not be disturbed.

Granting that counsel has not been actually authorized by the board of directors to appear for and in behalf of the respondent corporation, the fact that counsel

is the secretary treasurer of the respondent corporation and member of the board of directors; and that the other members of the board, namely, Macario

Apostol, the president, and his wife Pacita R. Apostol, who shuold normally initiate the action to protect the corporate prop erties and in interest are the ones to

be adversely affected thereby, a single stockholder under such circumstances may sue in behalf of the corporation.2 Counsel as a stockholder and director of

the respondent corporation may sue in its behalf and file the complaint in intervention in the proper court.

The judgment under review is affirmed, without pronouncements as to costs.

Bengzon, Paras, C.J., Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ., concur.

TORRES vs CA

G.R. No. 134559 December 9, 1999

PANGANIBAN, J.:

Courts may not extricate parties from the necessary consequences of their acts. That the terms of a contract turn out to be financially disadvantageous to them

will not relieve them of their obligations therein. The lack of an inventory of real property will not ipso facto release the contracting partners from their respective

obligations to each other arising from acts executed in accordance with their agreement.

The Case

The Petition for Review on Certiorari before us assails the March 5, 1998 Decision 1 of the Court of Appeals 2(CA) in CA-GR CV No. 42378 and its June 25, 1998

Resolution denying reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of Cebu City in Civil Case No. R-21208, which

disposed as follows:

WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and against the plaintiffs, orders the dismissal of the

plaintiffs complaint. The counterclaims of the defendant are likewise ordered dismissed. No pronouncement as to costs. 3

The Facts

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of

a parcel of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had

it registered in his name. By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement,

was to be used for the development of the subdivision. 4 All three of them also agreed to share the proceeds from the sale of the subdivided lots.

The project did not push through, and the land was subsequently foreclosed by the bank.

According to petitioners, the project failed because of "respondent's lack of funds or means and skills." They add that respondent used the loan not for the

development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.

On the other hand, respondent alleged that he used the loan to implement the Agreement. With the said amount, he was able to effect the survey and the

subdivision of the lots. He secured the Lapu Lapu City Council's approval of the subdivision project which he advertised in a local newspaper. He also caused

the construction of roads, curbs and gutters. Likewise, he entered into a contract with an engineering firm for the building of s ixty low-cost housing units and

actually even set up a model house on one of the subdivision lots. He did all of these for a total expense of P85,000.

Respondent claimed that the subdivision project failed, however, because petitioners and their relatives had separately caused the annotations of adverse

claims on the title to the land, which eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the claims,

thereby forcing him to give up on the project. 5

Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted. Thereafter, they filed the present civil

case which, upon respondent's motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal, however, the appellate court

remanded the case for further proceedings. Thereafter, the RTC issued its assailed Decision, which, as earlier stated, was affirmed by the CA.

Hence, this Petition. 6

Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed a partnership for the development of the subdivision. Thus,

they must bear the loss suffered by the partnership in the same proportion as their share in the profits stipulated in the contract. Disagreeing with the trial

court's pronouncement that losses as well as profits in a joint venture should be distributed equally, 7 the CA invoked Article 1797 of the Civil Code which

provides:

Art. 1797 — The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the profit s has

been agreed upon, the share of each in the losses shall be in the same proportion.

The CA elucidated further:

In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what he may have contributed,

but the industrial partner shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just

and equitable under the circumstances. If besides his services he has contributed capital, he shall also receive a share in the profits in

proportion to his capital.

The Issue

Petitioners impute to the Court of Appeals the following error:

. . . [The] Court of Appeals erred in concluding that the transaction

. . . between the petitioners and respondent was that of a joint venture/partnership, ignoring outright the provision of Article 1769, and

other related provisions of the Civil Code of the Philippines. 8

The Court's Ruling

The Petition is bereft of merit.

Main Issue:

Existence of a Partnership

Petitioners deny having formed a partnership with respondent. They contend that the Joint Venture Agreement and the earlier Deed of Sale, both of which were

the bases of the appellate court's finding of a partnership, were void.

In the same breath, however, they assert that under those very same contracts, respondent is liable for his failure to implement the project. Because the

agreement entitled them to receive 60 percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay them damages equivalent to

60 percent of the value of the property. 9

The pertinent portions of the Joint Venture Agreement read as follows:

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March, 1969, by and between MR. MANUEL R.

TORRES, . . . the FIRST PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS EMETERIA BARING, . . . the SECOND PARTY:

WITNESSETH:

That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property located at Lapu-Lapu City, Island of Mactan, under

Lot No. 1368 covering TCT No. T-0184 with a total area of 17,009 square meters, to be sub-divided by the FIRST PARTY;

Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency upon

the execution of this contract for the property entrusted by the SECOND PARTY, for sub-division projects and development purposes;

NOW THEREFORE, for and in consideration of the above covenants and promises herein contained the respective parties hereto do hereby

stipulate and agree as follows:

ONE: That the SECOND PARTY signed an absolute Deed of Sale . . . dated March 5, 1969, in the amount of TWENTY FIVE THOUSAND F IVE

HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50) Philippine Currency, for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50)

Philippine Currency, in favor of the FIRST PARTY, but the SECOND PARTY did not actually receive the payment.

SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary amount of TWENTY THOUSAND (P20,000.00)

pesos, Philippine currency, for their personal obligations and this particular amount will serve as an advance payment from the FIRST

PARTY for the property mentioned to be sub-divided and to be deducted from the sales.

THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the principal amount involving the amount of

TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, until the sub-division project is terminated and ready for sale to any

interested parties, and the amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, will be deducted accordingly.

FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should be paid by the FIRST PARTY, exclusively and

all the expenses will not be deducted from the sales after the development of the sub-division project.

FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for the SECOND PARTY and FORTY PERCENTUM

40% for the FIRST PARTY, and additional profits or whatever income deriving from the sales will be divided equally according to the . . .

percentage [agreed upon] by both parties.

SIXTH: That the intended sub-division project of the property involved will start the work and all improvements upon the adjacent lots will

be negotiated in both parties['] favor and all sales shall [be] decided by both parties.

SEVENTH: That the SECOND PARTIES, should be given an option to get back the property mentioned provided the amount of TWENTY

THOUSAND (P20,000.00) Pesos, Philippine Currency, borrowed by the SECOND PARTY, will be paid in full to the FIRST PARTY, including all

necessary improvements spent by the FIRST PARTY, and-the FIRST PARTY will be given a grace period to turnover the property mentioned

above.

That this AGREEMENT shall be binding and obligatory to the parties who executed same freely and voluntarily for the uses and purposes

therein stated. 10

A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership pursuant to Article 1767 of the Civil Code, which provides:

Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common

fund, with the intention of dividing the profits among themselves.

Under the above-quoted Agreement, petitioners would contribute property to the partnership in the form of land which was to be developed into a subdivision;

while respondent would give, in addition to his industry, the amount needed for general expenses and other costs. Furthermore, the income from the said

project would be divided according to the stipulated percentage. Clearly, the contract manifested the intention of the parties to form a partnership. 11

It should be stressed that the parties implemented the contract. Thus, petitioners transferred the title to the land to facilitate its use in the name of the

respondent. On the other hand, respondent caused the subject land to be mortgaged, the proceeds of which were used for the su rvey and the subdivision of the

land. As noted earlier, he developed the roads, the curbs and the gutters of the subdivision and entered into a contract to construct low-cost housing units on

the property.

Respondent's actions clearly belie petitioners' contention that he made no contribution to the partnership. Under Article 1767 of the Civil Code, a partner may

contribute not only money or property, but also industry.

Petitioners Bound by

Terms of Contract

Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly stipulated, but also to all necessary consequences thereof,

as follows:

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has

been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and

law.

It is undisputed that petitioners are educated and are thus presumed to have understood the terms of the contract they volunt arily signed. If it was not in

consonance with their expectations, they should have objected to it and insisted on the provisions they wanted.

Courts are not authorized to extricate parties from the necessary consequences of their acts, and the fact that the contractual stipulations may turn out to be

financially disadvantageous will not relieve parties thereto of their obligations. They cannot now disavow the relationship formed from such agreement due to

their supposed misunderstanding of its terms.

Alleged Nullity of the

Partnership Agreement

Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code, which provides:

Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not

made, signed by the parties, and attached to the public instrument.

They contend that since the parties did not make, sign or attach to the public instrument an inventory of the real property contributed, the partnership is void.

We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent Arturo M. Tolentino states that under the a forecited provision

which is a complement of Article 1771, 12 "The execution of a public instrument would be useless if there is no inventory of the property contributed, because

without its designation and description, they cannot be subject to inscription in the Registry of Property, and their contribution cannot prejudice third persons.

This will result in fraud to those who contract with the partnership in the belief [in] the efficacy of the guaranty in which the immovables may consist. Thus, the

contract is declared void by the law when no such inventory is made." The case at bar does not involve third parties who may be prejudiced.

Second, petitioners themselves invoke the allegedly void contract as basis for their claim that respondent should pay them 60 percent of the value of the

property. 13 They cannot in one breath deny the contract and in another recognize it, depending on what momentarily suits their purpose. Parties cannot adopt

inconsistent positions in regard to a contract and courts will not tolerate, much less approve, such practice.

In short, the alleged nullity of the partnership will not prevent courts from considering the Joint Venture Agreement an ordinary contract from which the parties'

rights and obligations to each other may be inferred and enforced.

Partnership Agreement Not the Result

of an Earlier Illegal Contract

Petitioners also contend that the Joint Venture Agreement is void under Article 1422 14 of the Civil Code, because it is the direct result of an earlier illegal

contract, which was for the sale of the land without valid consideration.

This argument is puerile. The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision

project. Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration, more properly

denominated as cause, can take different forms, such as the prestation or promise of a thing or service by another. 15

In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project, for

which the land was intended to be used. As explained by the trial court, "the land was in effect given to the partnership as [petitioner's] participation therein. . . .

There was therefore a consideration for the sale, the [petitioners] acting in the expectation that, should the venture come into fruition, they [would] get sixty

percent of the net profits."

Liability of the Parties

Claiming that rerpondent was solely responsible for the failure of the subdivision project, petitioners maintain that he should be made to pay damages

equivalent to 60 percent of the value of the property, which was their share in the profits under the Joint Venture Agreement .

We are not persuaded. True, the Court of Appeals held that petitioners' acts were not the cause of the failure of the project. 16 But it also ruled that neither was

respondent responsible therefor. 17 In imputing the blame solely to him, petitioners failed to give any reason why we should disregard the factual findings of the

appellate court relieving him of fault. Verily, factual issues cannot be resolved in a petition for review under Rule 45, as in this case. Petitioners have not

alleged, not to say shown, that their Petition constitutes one of the exceptions to this doctrine. 18 Accordingly, we find no reversible error in the CA's ruling that

petitioners are not entitled to damages.

WHEREFORE, the Perition is hereby DENIED and the challenged Decision AFFIRMED. Costs against petitioners.

TOYOTA vs CA

G.R. No. L-116650 May 23, 1995

DAVIDE, JR., J.:

At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent, which was signed by a sales representative of Toyota

Shaw, Inc. named Popong Bernardo. The document reads as follows:

4 June 1989

AGREEMENTS BETWEEN MR. SOSA

& POPONG BERNARDO OF TOYOTA

SHAW, INC.

1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from the

Province (Marinduque) where the unit will be used on the 19th of June.

2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.

3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m.

Very truly yours,

(Sgd.) POPONG BERNARDO.

Was this document, executed and signed by the petitioner's sales representative, a perfected contract of sale, binding upon the petitioner, breach of which

would entitle the private respondent to damages and attorney's fees? The trial court and the Court of Appeals took the affirmative view. The petitioner

disagrees. Hence, this petition for review oncertiorari.

The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc.

(hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite

Ace. It was then a seller's market and Sosa had difficulty finding a dealer with an available unit for sale. But upon contacting Toyota Shaw, Inc., he was told that

there was an available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro Manila. There they met

Popong Bernardo, a sales representative of Toyota.

Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and a balikbayan guest would use it on 18 June

1989 to go to Marinduque, his home province, where he would celebrate his birthday on the 19th of June. He added that if he does not arrive in his hometown

with the new car, he would become a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo

then signed the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by t he parties that the balance of

the purchase price would be paid by credit financing through B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota and B.A.

Finance pertaining to the application for financing.

The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00. They met Bernardo wh o then accomplished a printed

Vehicle Sales Proposal (VSP) No. 928, 2 on which Gilbert signed under the subheading CONFORME. This document shows that the customer's name is "MR.

LUNA SOSA" with home address at No. 2316 Guijo Street, United Parañaque II; that the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr

minibus"; that payment is by "installment," to be financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down as follows:

a) Downpayment — P 53,148.00

b) Insurance — P 13,970.00

c) BLT registration fee — P 1,067.00

CHMO fee — P 2,715.00

service fee — P 500.00

Accessories — P 29,000.00

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" were not filled-up. It also contains the following pertinent

provisions:

CONDITIONS OF SALES

1. This sale is subject to availability of unit.

2. Stated Price is subject to change without prior notice, Price prevailing and in effect at time of selling will apply. . . .

Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.

On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle would not be ready for pick up a t 10:00 a.m. as previously agreed

upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office. According to Sosa, Bernardo informed them that the Lite

Ace was being readied for delivery. After waiting for about an hour, Bernardo told them that the car could not be delivered because "nasulot ang unit ng ibang

malakas."

Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credi t financing application of Sosa. It

further alleged that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the

balance of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused.

After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be refunded. Toyota did so on the very same day by

issuing a Far East Bank check for the full amount of P100,000.00, 4 the receipt of which was shown by a check voucher of Toyota, 5 which Sosa signed with the

reservation, "without prejudice to our future claims for damages."

Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, he demanded the refund, within five days from receipt, of

the downpayment of P100,000.00 plus interest from the time he paid it and the payment of damages with a warning that in case of Toyota's failure to do so he

would be constrained to take legal action. 6 The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded one million pesos

representing interest and damages, again, with a warning that legal action would be taken if payment was not made within three days. 7 Toyota's counsel

answered through a letter dated 27 November 1989 8 refusing to accede to the demands of Sosa. But even before this answer was made and received by Sosa,

the latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages under Articles 19

and 21 of the Civil Code in the total amount of P1,230,000.00. 9 He alleges, inter alia, that:

9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff suffered embarrassment, humiliation, ridicule,

mental anguish and sleepless nights because: (i) he and his family were constrained to take the public transportation from Ma nila to

Lucena City on their way to Marinduque; (ii) his balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid the

inconvenience of taking public transportation; and (iii) his relatives, friends, neighbors and other provincemates, continuou sly irked him

about "his Brand-New Toyota Lite Ace — that never was." Under the circumstances, defendant should be made liable to the plaintiff for

moral damages in the amount of One Million Pesos (P1,000,000.00). 10

In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that Bernardo had no author ity to sign Exhibit "A" for and in its

behalf, and that Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of delivery;

Sosa had not completed the documents required by the financing company, and as a matter of policy, the vehicle could not and would not be released prior to

full compliance with financing requirements, submission of all documents, and execution of the sales agreement/invoice; the P100,000.00 was returned to and

received by Sosa; the venue was improperly laid; and Sosa did not have a sufficient cause of action against it. It also interposed compuls ory counterclaims.

After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled that

Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid perfected contract of sale between Sosa and T oyota which bound

Toyota to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to another the unit already reserved for him.

As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held that the extent of Bernardo's authority "was not made

known to plaintiff," for as testified to by Quirante, "they do not volunteer any information as to the company's sales policy and guidelines because they are

internal matters." 13 Moreover, "[f]rom the beginning of the transaction up to its consummation when the downpayment was made by the plaintiff, the

defendants had made known to the plaintiff the impression that Popong Bernardo is an authorized sales executive as it permitt ed the latter to do acts within the

scope of an apparent authority holding him out to the public as possessing power to do these acts." 14 Bernardo then "was an agent of the defendant Toyota

Shaw, Inc. and hence bound the defendants." 15

The court further declared that "Luna Sosa proved his social standing in the community and suffered besmirched reputation, wounded feelings and sleepless

nights for which he ought to be compensated." 16 Accordingly, it disposed as follows:

WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor of the plaintiff and against the defendant:

1. ordering the defendant to pay to the plaintiff the sum of P75,000.00 for moral damages;

2. ordering the defendant to pay the plaintiff the sum of P10,000.00 for exemplary damages;

3. ordering the defendant to pay the sum of P30,000.00 attorney's fees plus P2,000.00 lawyer's transportation fare

per trip in attending to the hearing of this case;

4. ordering the defendant to pay the plaintiff the sum of P2,000.00 transportation fare per trip of the plaintiff in

attending the hearing of this case; and

5. ordering the defendant to pay the cost of suit.

SO ORDERED.

Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 40043. In its decision

promulgated on 29 July 1994, 17 the Court of Appeals affirmed in toto the appealed decision.

Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of the ponenciaand also the following related issues: (a)

whether or not the standard VSP was the true and documented understanding of the parties which would have led to the ultimate contract of sale, (b) whether

or not Sosa has any legal and demandable right to the delivery of the vehicle despite the non-payment of the consideration and the non-approval of his credit

application by B.A. Finance, (c) whether or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) whether or not Toyota may be held

liable for damages.

We find merit in the petition.

Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract of sale.

Article 1458 of the Civil Code defines a contract of sale as follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate

thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

and Article 1475 specifically provides when it is deemed perfected:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract

and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It is not a contract of sa le. No obligation on the part of Toyota to

transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The

provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a

sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned about the full purchase price and the manner the

installments were to be paid.

This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and

enforceable contract of sale. 18 This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of

payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. 19

Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well

aware from its title, written in bold letters, viz.,

AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC.

that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. He

knew that Bernardo was only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence

and reasonable diligence to know the extent of Bernardo's authority as an

agent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the

agent. 21

At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. There are three stages in the

contract of sale, namely:

(a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the

parties;

(b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and

(c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. 22

The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder, the downpayment of

the purchase price was P53,148.00 while the balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed

that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP.

Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or partnerships, except

those regulated by the Central Bank of the Philippines, the Insurance Commission and the Cooperatives Administration Office, which are primarily organized for

the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial

papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles,

heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property." 23

Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for

the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts them with a financing company, and the

financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since B.A. Finance did not approve Sosa's

application, there was then no meeting of minds on the sale on installment basis.

We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which reason it suggested to Sosa that he pay the full purchase

price. When the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00. Sosa's version that the VSP was cancelled because, according

to Bernardo, the vehicle was delivered to another who was "mas malakas" does not inspire belief and was obviously a delayed afterthought. It is claimed that

Bernardo said, "Pasensiya kayo, nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an hour for the delivery of the vehicle in the

afternoon of 17 June 1989. However, in paragraph 7 of his complaint, Sosa solemnly states:

On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales representative, Mr. Popong Bernardo, called plaintiff's house

and informed the plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day

instead. Plaintiff and his son went to defendant's office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant for

reasons known only to its representatives, refused and/or failed to release the vehicle to the plaintiff. Plaintiff demanded for an

explanation, but nothing was given; . . . (Emphasis supplied). 25

The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no demandable right in favor of Sosa for the

delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury.

The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal basis. Besides, the only ground upon which Sosa claimed

moral damages is that since it was known to his friends, townmates, and relatives that he was buying a Toyota Lite Ace which they expected to see on his

birthday, he suffered humiliation, shame, and sleepless nights when the van was not delivered. The van became the subject mat ter of talks during his

celebration that he may not have paid for it, and this created an impression against his business standing and reputation. At the b ottom of this claim is nothing

but misplaced pride and ego. He should not have announced his plan to buy a Toyota Lite Ace knowing that he might not be able to pay the full purchase price.

It was he who brought embarrassment upon himself by bragging about a thing which he did not own yet.

Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or compensatory damages, he is likewise not entitled to

exemplary damages. Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by way of example or correction for the public good, in

addition to moral, temperate, liquidated, or compensatory damages.

Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body of the decision, and not only in the dispositive portion thereof,

the legal reason for the award of attorney's fees. 26 No such explicit determination thereon was made in the body of the decision of the trial court. No reason

thus exists for such an award.

WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the

Regional Trial Court of Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The

counterclaim therein is likewise DISMISSED.

No pronouncement as to costs.