sales cases july 12 full text

8/12/2019 Sales Cases July 12 Full Text

1/43

SALES CASES JULY 12, 2014

1. Yu Tek v. Gonzales

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-9935 February 1, 1915

YU TEK and CO.,plaintiff-appellant,vs.

BASILIO GONZALES,defendant-appellant.

Beaumont, Tenney and Ferrier for plaintiff.

Buencamino and Lontok for defendant.

TRENT, J.:

The basis of this action is a written contract, Exhibit A, the

pertinent paragraphs of which follow:

1. That Mr. Basilio Gonzalez hereby acknowledges receipt ofthe sum of P3,000 Philippine currency from Messrs. Yu Tek

and Co., and that in consideration of said sum be obligates

himself to deliver to the said Yu Tek and Co., 600 piculs of

sugar of the first and second grade, according to the result of

the polarization, within the period of three months, beginning

on the 1st day of January, 1912, and ending on the 31st day of

March of the same year, 1912.

2. That the said Mr. Basilio Gonzales obligates himself to

deliver to the said Messrs. Yu Tek and Co., of this city the said

600 piculs of sugar at any place within the said municipality of

Santa Rosa which the said Messrs. Yu Tek and Co., or a

representative of the same may designate.

3. That in case the said Mr. Basilio Gonzales does not deliver

to Messrs. Yu Tek and Co. the 600 piculs of sugar within the

period of three months, referred to in the second paragraph of

this document, this contract will be rescinded and the said Mr.

Basilio Gonzales will then be obligated to return to Messrs. Yu

Tek and Co. the P3,000 received and also the sum of P1,200

by way of indemnity for loss and damages.

Plaintiff proved that no sugar had been delivered to it under

this contract nor had it been able to recover the P3,000.

Plaintiff prayed for judgment for the P3,000 and, in addition, for

P1,200 under paragraph 4, supra. Judgment was rendered forP3,000 only, and from this judgment both parties appealed.

The points raised by the defendant will be considered first. He

alleges that the court erred in refusing to permit parol evidence

showing that the parties intended that the sugar was to be

secured from the crop which the defendant raised on his

plantation, and that he was unable to fulfill the contract by

reason of the almost total failure of his crop. This case appears

to be one to which the rule which excludes parol evidence to

add to or vary the terms of a written contract is decidedly

applicable. There is not the slightest intimation in the contract

that the sugar was to be raised by the defendant. Parties are

presumed to have reduced to writing all the essentia

conditions of their contract. While parol evidence is admissible

in a variety of ways to explain the meaning of written contracts

it cannot serve the purpose of incorporating into the contrac

additional contemporaneous conditions which are no

mentioned at all in the writing, unless there has been fraud or

mistake. In an early case this court declined to allow paro

evidence showing that a party to a written contract was to

become a partner in a firm instead of a creditor of the firm.(Pastor vs.Gaspar, 2 Phil. Rep., 592.) Again, in

Eveland vs.Eastern Mining Co. (14 Phil. Rep., 509) a contract

of employment provided that the plaintiff should receive from

the defendant a stipulated salary and expenses. The defendan

sought to interpose as a defense to recovery that the paymen

of the salary was contingent upon the plaintiff's employmen

redounding to the benefit of the defendant company. The

contract contained no such condition and the court declined to

receive parol evidence thereof.

In the case at bar, it is sought to show that the sugar was to be

obtained exclusively from the crop raised by the defendant

There is no clause in the written contract which even remotelysuggests such a condition. The defendant undertook to deliver

a specified quantity of sugar within a specified time. The

contract placed no restriction upon the defendant in the matter

of obtaining the sugar. He was equally at liberty to purchase i

on the market or raise it himself. It may be true that defendan

owned a plantation and expected to raise the sugar himself

but he did not limit his obligation to his own crop of sugar. Our

conclusion is that the condition which the defendant seeks to

add to the contract by parol evidence cannot be considered

The rights of the parties must be determined by the writing

itself.

The second contention of the defendant arises from the firstHe assumes that the contract was limited to the sugar he migh

raise upon his own plantation; that the contract represented a

perfected sale; and that by failure of his crop he was relieved

from complying with his undertaking by loss of the thing due

(Arts. 1452, 1096, and 1182, Civil Code.) This argument is

faulty in assuming that there was a perfected sale. Article 1450

defines a perfected sale as follows:

The sale shall be perfected between vendor and vendee and

shall be binding on both of them, if they have agreed upon the

thing which is the object of the contract and upon the price,

even when neither has been delivered.

Article 1452 reads: "The injury to or the profit of the thing sold

shall, after the contract has been perfected, be governed by

the provisions of articles 1096 and 1182."

This court has consistently held that there is a perfected sale

with regard to the "thing" whenever the article of sale has been

physically segregated from all other articles Thus, a particular

tobacco factory with its contents was held sold under a

contract which did not provide for either delivery of the price or

of the thing until a future time. McCullough vs.Aenlle and Co

(3 Phil. Rep., 295). Quite similar was the recent case


2/43

of Barretto vs. Santa Marina(26 Phil. Rep., 200) where

specified shares of stock in a tobacco factory were held sold by

a contract which deferred delivery of both the price and the

stock until the latter had been appraised by an inventory of the

entire assets of the company. In Borromeo vs. Franco(5 Phil.

Rep., 49) a sale of a specific house was held perfected

between the vendor and vendee, although the delivery of the

price was withheld until the necessary documents of ownership

were prepared by the vendee. In Tan Leonco vs. Go Inqui(8

Phil. Rep., 531) the plaintiff had delivered a quantity of hempinto the warehouse of the defendant. The defendant drew a bill

of exchange in the sum of P800, representing the price which

had been agreed upon for the hemp thus delivered. Prior to the

presentation of the bill for payment, the hemp was destroyed.

Whereupon, the defendant suspended payment of the bill. It

was held that the hemp having been already delivered, the title

had passed and the loss was the vendee's. It is our purpose to

distinguish the case at bar from all these cases.

In the case at bar the undertaking of the defendant was to sell

to the plaintiff 600 piculs of sugar of the first and second

classes. Was this an agreement upon the "thing" which was

the object of the contract within the meaning of article1450, supra? Sugar is one of the staple commodities of this

country. For the purpose of sale its bulk is weighed, the

customary unit of weight being denominated a "picul." There

was no delivery under the contract. Now, if called upon to

designate the article sold, it is clear that the defendant could

only say that it was "sugar." He could only use this generic

name for the thing sold. There was no "appropriation" of any

particular lot of sugar. Neither party could point to any specific

quantity of sugar and say: "This is the article which was the

subject of our contract." How different is this from the contracts

discussed in the cases referred to above! In the McCullough

case, for instance, the tobacco factory which the parties dealt

with was specifically pointed out and distinguished from all

other tobacco factories. So, in the Barretto case, the particular

shares of stock which the parties desired to transfer were

capable of designation. In the Tan Leonco case, where a

quantity of hemp was the subject of the contract, it was shown

that that quantity had been deposited in a specific warehouse,

and thus set apart and distinguished from all other hemp.

A number of cases have been decided in the State of

Louisiana, where the civil law prevails, which confirm our

position. Perhaps the latest is Witt Shoe Co. vs.Seegars and

Co. (122 La., 145; 47 Sou., 444). In this case a contract was

entered into by a traveling salesman for a quantity of shoes,

the sales having been made by sample. The court said of this

contract:

But it is wholly immaterial, for the purpose of the main

question, whether Mitchell was authorized to make a definite

contract of sale or not, since the only contract that he was in a

position to make was an agreement to sell or an executory

contract of sale. He says that plaintiff sends out 375 samples

of shoes, and as he was offering to sell by sample shoes, part

of which had not been manufactured and the rest of which

were incorporated in plaintiff's stock in Lynchburg, Va., it was

impossible that he and Seegars and Co. should at that time

have agreed upon the specific objects, the title to which was to

pass, and hence there could have been no sale. He and

Seegars and Co. might have agreed, and did (in effect ) agree

that the identification of the objects and their appropriation to

the contract necessary to make a sale should thereafter be

made by the plaintiff, acting for itself and for Seegars and Co.

and the legend printed in red ink on plaintiff's billheads ("Our

responsibility ceases when we take transportation Co's. receipt

`In good order'" indicates plaintiff's idea of the moment at whichsuch identification and appropriation would become effective

The question presented was carefully considered in the case o

State vs.Shields, et al. (110 La., 547, 34 Sou., 673) (in which it

was absolutely necessary that it should be decided), and it was

there held that in receiving an order for a quantity of goods, o

a kind and at a price agreed on, to be supplied from a genera

stock, warehoused at another place, the agent receiving the

order merely enters into an executory contract for the sale of

the goods, which does not divest or transfer the title of any

determinate object, and which becomes effective for tha

purpose only when specific goods are thereafter appropriated

to the contract; and, in the absence of a more specific

agreement on the subject, that such appropriated takes place

only when the goods as ordered are delivered to the public

carriers at the place from which they are to be shipped

consigned to the person by whom the order is given, at which

time and place, therefore, the sale is perfected and the title

passes.

This case and State vs.Shields, referred to in the above

quotation are amply illustrative of the position taken by the

Louisiana court on the question before us. But we canno

refrain from referring to the case of Larue and

Prevost vs.Rugely, Blair and Co. (10 La. Ann., 242) which is

summarized by the court itself in the Shields case as follows:

. . . It appears that the defendants had made a contract for the

sale, by weight, of a lot of cotton, had received $3,000 on

account of the price, and had given an order for its delivery

which had been presented to the purchaser, and recognized by

the press in which the cotton was stored, but that the cotton

had been destroyed by fire before it was weighed. It was held

that it was still at the risk of the seller, and that the buyer was

entitled to recover the $3,000 paid on account of the price.

We conclude that the contract in the case at bar was merely an

executory agreement; a promise of sale and not a sale. A

there was no perfected sale, it is clear that articles 1452, 1096

and 1182 are not applicable. The defendant having defaultedin his engagement, the plaintiff is entitled to recover the P3,000

which it advanced to the defendant, and this portion of the

judgment appealed from must therefore be affirmed.

The plaintiff has appealed from the judgment of the trial cour

on the ground that it is entitled to recover the additional sum o

P1,200 under paragraph 4 of the contract. The court below

held that this paragraph was simply a limitation upon the

amount of damages which could be recovered and no

liquidated damages as contemplated by the law. "It also

appears," said the lower court, "that in any event the defendan


3/43

was prevented from fulfilling the contract by the delivery of the

sugar by condition over which he had no control, but these

conditions were not sufficient to absolve him from the

obligation of returning the money which he received."

The above quoted portion of the trial court's opinion appears to

be based upon the proposition that the sugar which was to be

delivered by the defendant was that which he expected to

obtain from his own hacienda and, as the dry weather

destroyed his growing cane, he could not comply with his partof the contract. As we have indicated, this view is erroneous,

as, under the contract, the defendant was not limited to his

growth crop in order to make the delivery. He agreed to deliver

the sugar and nothing is said in the contract about where he

was to get it.

We think is a clear case of liquidated damages. The contract

plainly states that if the defendant fails to deliver the 600 piculs

of sugar within the time agreed on, the contract will be

rescinded and he will be obliged to return the P3,000 and pay

the sum of P1,200 by way of indemnity for loss and damages.

There cannot be the slightest doubt about the meaning of this

language or the intention of the parties. There is no room foreither interpretation or construction. Under the provisions of

article 1255 of the Civil Code contracting parties are free to

execute the contracts that they may consider suitable, provided

they are not in contravention of law, morals, or public order. In

our opinion there is nothing in the contract under consideration

which is opposed to any of these principles.

For the foregoing reasons the judgment appealed from is

modified by allowing the recovery of P1,200 under paragraph 4

of the contract. As thus modified, the judgment appealed from

is affirmed, without costs in this instance.

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

2. Compania General v. CA


SUPREME COURTManila

FIRST DIVISION

G.R. No. L-59534 May 10, 1990

COMPAIA GENERAL DE TABACOS DEFILIPINAS, petitioner,

vs.

COURT OF APPEALS, PHILIPPINE NATIONAL BANK andDEVELOPMENT BANK OF THE PHILIPPINES,respondents.

Siguion Reyna, Montecillo & Ongsiako for petitioner.

Pelaez, Adriano & Gregorio for respondents San Carlos

Planters' Association & Theo Davis & Co., Far East Ltd. et al.

NARVASA, J.:

The conflicting claims of the mortgagees of a sugar quota or

production allowance, on the one hand, and the mortgagors

subsequent vendees of the same, on the other, are the subjecof the petition for review on certiorariat bar.

It appears that an unregistered partnership known as Gomez &

Torres composed of Francisco M. Gomez and Hecto

Torres was the "principal and majority stockholder of the

Philippine Milling Company, a domestic corporation which

owns and operates in the Mindoro Mill District a sugar mil

where all the sugar cane planters of that mill district mill their

sugar cane." 1"Gomez & Torres" was also "registered in theSugar Quota Administration as the owner and holder of the

entire production allowance or quota appertaining to Plantation

No. 30-15 of the Mindoro Mill District."2

As security for a loan of P2,000,000.00 obtained from the

Rehabilitation Finance Corporation (RFC), said Philippine

Milling Company (thru its president, Hector A. Torres), and the

above mentioned Hector A. Torres and Francisco Gomez

executed on August 7, 1950, a deed of mortgage

hypothecating to the RFC, particularly described real and

personal property, "together with all the buildings and

improvements now existing or which may hereafter be

constructed on the mortgaged property, all easements, suga

quotas, agricultural or land indemnities, aids or subsidies and

all other rights or benefits annexed to or inherent therein, now

existing or which may hereafter exist."3

The mortgagors above named also assigned to the RFC on

August 16, 1950, in a public instrument,4the sugar quota o

the mill district aggregating no less than 148,000 piculsand

sugar warehouse receipts covering, the first 29,500 piculs of

sugar milled by the sugar central annually and such additiona

sugar as may be necessary to cover the annual amortization o

the loan, taking into consideration the fluctuating sugar prices

which assignments shall remain in full force and effect as long

as . . . (their) aforementioned loan has not been settled in full."

Some fifteen months later, or on November 2, 1951, the same

mortgagors executed in favor of the same mortgagee (the

R.F.C) a second mortgage, this time as security for anotheloan of P1,860,000.00. The mortgage covered real and/o

personal properties listed in the deed, "together with all the

buildings and improvements now existing or which may

hereafter be constructed on the mortgaged property, al

easements, sugar quotas, agricultural or land indemnities, aids

or subsidies, and all other rights or benefits annexed to o

inherent therein, now existing or which may hereafter exist . .

and also other assets acquired with the proceeds of such loan

. . "5


4/43

The mortgagors also executed on November 2, 1951 an

assignment in favor of the RFC, like that of August 16,

1950, supra, respecting "its rights and interests on all the sugar

quota of the Mindoro Mill District aggregating no less than

148,000 piculs and additional sugar warehouse receipts

covering the first 27,350 piculs of sugar milled by the sugar

central annually, and such additional sugar may be necessary

to cover the annual amortization on the loan, until the full

amount of the additional loan has been fully paid."6

Both deeds of (real estate and chattel) mortgages were

registered in the Register of Deeds of Occidental Mindoro on

August 20, 1950 and November 9, 1951, respectively. 7

Earlier, or on or about January 13, 1951, the real estate and

personal property subject of the two (2) mortgages just

described, were again mortgaged by Philippine Milling Co.,

Francisco M. Gomez and Hector A. Torres, this time in favor of

the Philippine National Bank as collateral for a loan of

P235,000.00. This real estate and chattel mortgage was

amended on April 6, 1951 by increasing its consideration from

P235,000.00 to P335,000.00, and still later, on January 18,

1952, by further increasing the consideration toP1,405,0,00.00. 8The original deed and its two (2)

amendments were all registered with the Register of Deeds of

Occidental Mindoro.

In July, 1957, two (2) letters-agreements were executed

between Gomez & Torres (represented by Francisco M.

Gomez) on the one hand, and Theo H. Davies & Co., Ltd. ("for

itself and representing [or as authorized representative of) San

Carlos Planters' Association"]), on the other, by virtue of which

the former sold to the latter a total of 18,000 piculs of the

production allowance (or sugar quota) of Plantation No. 30-15,

to wit:

1) On July 3, 1957: 8,250 piculs of "our ''A" quota and 1,750.00

piculs of our "B" quota corresponding to Plantation No . 30-15

of the Mindoro Mill District which is duly registered in our

name;" 9and

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

1,400.00 piculs of our "B" quota . . ."

In the later agreement, Gomez & Torres guaranteed "that said

8,000.00 piculs of quotas as well as the 10,000.00 piculs sold

to you on July 3, 1957, belong to us and are free from any lien

or incumbrance whatsoever."10

The transferees presented the two (2) agreements for

recording in the District Office of the Sugar Quota

Administration, on July 12, 1957. But the Sugar Quota

Administration declined to give due course to the transfer until

"necessary corrections" were made in the registration

documents (known as DTRs: "district transfer registries"), and

"the written conformity of the PNB," secured.11

In a letter to the Philippine Mining Company dated September

10, 1957, the Administrator cited several reasons for his

refusal:12

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

to your District.

2. There is no distribution of coefficients in Columns F, I, and J

in both of your DTR's.

3. This Office received a letter from the Philippine Nationa

Bank advising this Office that the allotments of Plantations

Nos. 30-4, 30-8c, 30-9c, 30-14, 30-15 and 30-16a are

mortgaged to the PNB and to advise the PNB of any saletransfer or conveyance affecting the quota of the Philippine

Milling Company, Hector A. Torres and Francisco M. Gomez

and to withhold the registration without the consent of the PNB

The letter of the PNB above referred to (par. 3) was that written

by its Vice President, J.V. Buenaventura, dated September 4

1957. 13

On October 2, 1957, San Carlos Planters' Association and

Theo H. Davies Co. Ltd. submitted "two copies of the mil

district coefficients and allowances of the 1957-1958 crop o

the San Carlos Mill District." In response, the Sugar Quota

Administrator sent them a letter dated October 3, 1957advising that it was inappropriate for them to include "in said

list, sugar allotments rights in the quantity of 14,850 piculs for

'A' and 3,150 for 'B' purchased by San Carlos Milling Co., Ltd

from Mindoro Mill District," because "this purchase has no

been given due course by this office in view of the defects . . .

(which) have not yet been corrected."14

The Governor of the RFC also wrote to the SQA, under date of

October 9, 1957, informing it of the mortgage to it of the sugar

quota in question "aggregating no less than 148,000 piculs,"

and requesting "that no transfer or conveyance affecting the

said sugar quota rights of the Philippine Milling Co. and

Messrs. Hector A. Torres and Francisco Gomez that may havebeen presented or . . . may be presented . . . be given due

course without the written consent of this Corporation." 15

On October 17, 1957, the San Carlos Milling Co. Ltd. and Theo

H. Davies & Co. Far East Ltd. wrote to the SQA, in reply to the

latter's communication of October 3, 1957. Adverting to a letter

of the Philippine Milling Co. "of Sept. 15th, 1957 and . .

memorandum enclosure of the same date addressed to the

Phil. Milling Co., the transferor central, by Torres and Gomez

owners and sellers of the quota rights in question, " they

demanded "that the transfer of said quotas be given effect

immediately from Mindoro Plantation Audit 30-15 of Torres and

Gomez to Plantation Audit No. 38-E-24 of the San Carlos MilDistrict for account of the San Carlos Planters

Association." 16

The matter of registration remained in a state of flux until about

a year later, or more precisely, August 5, 1958, when the

Administrator ultimately authorized the transfer.17

On January 6 and 7, 1959, the San Carlos Planters

Association in turn executed sales of portions of the suga

quota of 18,000 piculs acquired by it in favor of various

individual sugar planters, all of which sales were recorded in


5/43

the San Carlos District Transfer Registry.18Then on January

16, 1959, San Carlos effected a change in the Plantation

Number of its remaining portion of the sugar quota purchased

by it (57.06 piculs of "A" quota and 12.12, piculs of "B" quota)

from No. 38-E-24 to No. 38-343. 19

Eventually, the Development Bank of the Philippines (formerly

RFC) caused the extrajudicial foreclosure of its mortgages of

August 7, 1950 and November 2, 1951 by the Provincial Sheriff

of Occidental Mindoro. The foreclosure sale was held onNovember 28, 1958. The DBP was the highest bidder. A

certificate of sale was accordingly drawn up in its favor by the

Sheriff on January 19, 1959. 20As might be expected, amongthe properties specified in the certificate of sale, as having

been sold to DBP, were. 21

All sugar quota rights of the Philippine Milling Company

including those of Spouses, Francisco M. Gomez and

Francisca Villanueva and the Spouses, Hector A. Torres and

Galinica Romano, as well as those of Gomez and Torres

partnership in the Mindoro Mill District aggregating to no less

than 148,000 piculs of sugar, which are attached to any and or

all parcels of land described aboveand mortgaged to theRehabilitation Finance Corporation now Development Bank, of

the Philippines as well as the said sugar central's share in the

above sugar and quota rights.

On June 17, 1960 the one-year redemption period granted

by law to the mortgagors, having expired without a redemption

having been attempted, and the DBP having consolidated its

ownership over the real and personal property subject of the

mortgage sale the DBP executed a deed of sale in favor of

the PNB covering all the foreclosed property, for

P5,147,309.07 and other valuable consideration.22

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

1) The "sugar quota rights pertaining to the Philippine Milling

Company shall not be covered-by this agreement until after the

expiration of the 1959-1960 crop year, but in no case earlier

than June 30, 1960;" 23and

2) ". . . while the l8,000 piculs of "A" and "B" sugar

are expressly excluded in this Deed of Sale because of certain

circumstances, the Vendee may, however, take such action as

it may deem proper in order to recover the said 18,000 piculs

of "A" and "B" sugar quotaand Vendor agrees to join such

action whenever requested by the Vendee, it beingunderstood, however, that Vendor shall not in any way be

responsible for said 18,000 piculs nor be liable for the outcome

of such action . . .24

After about two (2) years, in March, 1962, PNB wrote to the

San Carlos Planters' Association and the planters to whom the

latter had sold portions of the 18,000 piculs of the sugar quota

in question, supra, demanding the restoration and delivery to it

(the PNB) of their respective portions of said quota. As already

mentioned,25the 18,000 piculs consisted of 14,850 piculs of

'A' quota and 3,150 piculs of 'B' quota.

When the latter failed to do so, the PNB together with the DBP

brought suit in the Court of First Instance of Occidenta

Mindoro against Francisco M. Gomez and Hector A. Torres

and their spouses; the partnership of Gomez & Torres; the

Philippine Planters' Association; all the sugar planters to whom

as aforementioned had been sold parts of the 18,000 piculs o

the sugar quota in question; and the Sugar Quota

Administration.26It set out three (3) causes of action in its

complaint and prayed for judgment as follows:

ON THE FIRST CAUSE OF ACTION

a. Declare the plaintiff PNB owner of the sugar quota in

question in the quantity equal to 14,850 piculs of "A" quota and

3,150 piculs of "B" quota presently registered in the Sugar

Quota Administration in the names of the defendants

PLANTERS and defendant San Carlos Planters' Ass'n in the

quantity and under the plantation numbers indicated in par. 3

of the First Cause of Action of this Complaint;

b. Order the defendants PLANTERS of the San Carlos Mil

District and the defendant San Carlos Planters' Ass'n to return

and restore to the plaintiff PNB the sugar quota in question;

c. Order the cancellation of the District Transfer Registry . .

(regarding the transfers to the defendants) and declare same

of no force and effect.

ON THE SECOND AND ALTERNATIVE CAUSE OF ACTION

a. Declare the plaintiff PNB owner of the sugar quota in

question in the quantity equal to 14,850 piculs of "A" quota and

3,150 piculs of "B" quota presently registered in the Sugar

Quota Administration in the names of the defendants

PLANTERS and defendant San Carlos Planters' Assn. in the

quantity and under the plantation numbers indicated in par. 3of the First Cause of Action of this Complaint;

b. Declare the sale of the sugar quota in question made by

defendant TORRES & GOMEZ on July 3, 1957 and July 11

1957 null and void;

c. Declare the transfer of the sugar quota in question from the

Mindoro Mill District to the San Carlos Mill District null and

void;

d. Declare the subsequent transfer of the sugar quota in

question made by defendant San Carlos Planters' Assn. to the

defendant PLANTERS of the San Carlos Mill District null and

void;

e. Order the said defendants PLANTERS and the defendan

San Carlos Planters' Assn. to return and restore to the plaintif

PNB the sugar quota in question; and

f. Order the cancellation of the. District Transfer Registry

Annexes "F", "G", "H", "I" and "J" and declare same of no force

and effect.

ON THE THIRD CAUSE OF ACTION


6/43

a. Order the defendants TORRES & GOMEZ, Francisco

Gomez, Hector A. Torres, Conrado Manalansan, as Sugar

Quota Administrator, Theo H. Davies & Co. Ltd. and the San

Carlos Planters' Assn. to pay jointly and severally the plaintiff

PNB the sum of P50,400.00 as lost and/or unrealized rental of

the sugar quota in question for the 1958-1959 crop year;

b. Order the defendants TORRES & GOMEZ, Francisco


Quota Administrator, Theo H. Davies & Co. Ltd. and the SanCarlos Planters' Assn. to pay jointly and severally the plaintiff

PNB the sum of P93,465.00 as unrealized profits on the sugar

quota in question in connection with the agreement for

conversion for 1959-1960 crop year;

c. Order the defendants TORRES & GOMEZ, Francisco


Quota Administrator, Theo H. Davies & Co. Ltd. and the San

Carlos Planters' Assn. to pay jointly and severally the plaintiff

PNB the sum of P93,465.00 as unrealized profits on the sugar

quota in question in connection with the agreement for

conversion entered with the BISCOM for the 1960-1961 crop

year;

d. Order the defendants TORRES & GOMEZ, Francisco


Quota Administrator, Theo H. Davies & Co. Ltd., San Carlos

Planters' Assn. and the defendants PLANTERS to pay jointly

and severally the Plaintiff PNB the sum of P9,000.00 annually

for three crop years beginning with the 1961-1962 as lost

and/or unrealized rental of the sugar quota in question.

Plaintiff further pray for such other relief which this Honorable

Court may deem just and proper to grant in the premises, with

costs against the defendants.

Answers were in due course filed by the several defendants. At

the pre-trial, the parties entered into a partial stipulation of facts

which contained, in substance:

1) an admission of all the relevant documents appended to the

complaint, as well as other documents, already above

specified;

2) an acknowledgment that the consideration fixed in the two

(2) letters-contracts between Gomez & Torres and Theo H.

Davies & Co., Ltd. and the San Carlos Planters' Association,

dated July 3 and 11, 1957, 27had been paid;

3) a statement that the transfer of a part of the sugar quota to

Cia. General de Tabacos de Filipinos (TABACALERA) was for

valid consideration, and was accompanied by the usual

warranty of the vendor's full right of disposition thereof and of

absence of any lien or encumbrance thereon; and

4) a request that the court "take judicial notices of all executive

orders, circulars and regulations which are pertinent to sugar

quotas or which are otherwise in implementation of, or

connected with, legislation on sugar trade and industry."28

Trial ensued after which judgment was rendered. The Tria

Court's judgment, rendered on April 8, 1968,29went agains

the plaintiffs. 30It made the following explicit findings:

1. That while the defendants, Philippine Milling Company and

Gomez and Torres assigned the rights over the Sugar Quota to

the R.F.C., said assignment of rights, not having been duly

registered in accordance with the rules and regulations of the

Sugar Quota Administration, did not effect third parties who

acquired said sugar quota in good faith and for value;

2. That the San Carlos Planters Association, the Theo H

Davies, the TABACALERA and all the transferees had

acquired the sugar quota in question legally and in good faith

hence, the plaintiff has no cause of action against them; (and)

3. That nevertheless, a valid cause of action exists as against

defendants Francisco M. Gomez and Hector Torres on the

basis of the mortgage and assignment executed by them in

favor of the Development Bank of the Philippines and the

Philippine National Bank.

And on said findings, the Court:

1) dismissed the case "as against the San Carlos (Planters')

Association, Theo H. Davies Co., Ltd., TABACALERA, the

Sugar Quota Administrator and all the other private defendants

who are the transferees;" but

2) ordered defendants 'Francisco M. Gomez and Hector Torres

. . . to pay the value of the 18,000 piculs of 'A' and 'B' sugar

quota allowance in the amount of P270,000.00 to the

Philippine National Bank, plus interest at the legal rate from

1958 up to the actual payment thereof and to pay the costs."

PNB and Francisco Gomez appealed to the Court o

Appeals. 31The PNB ascribed to the Trial Court the followingerrors to wit:

1) not finding that a valid mortgage was duly constituted also

on the sugar quota allowances in question with binding effect

against third persons including the defendants-appellees;

2) not finding that the defendants-appellees had both actua

and constructive notice of the mortgage in favor of the

Philippine National Bank and the Development Bank of the

Philippines which covered the sugar quota allowances;

3) not finding that the PNB is the owner of the sugar quota

allowance and in not ordering the defendants-appellees toreturn or reconvey the said sugar quota allowances to the

PNB.

The decision of the Court of Appeals32

was rendered on

October 30, 1980.33

It modified the Trial Court's judgment as

follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the

judgment appealed from is hereby modified, in these aspects:


7/43

1. declaring the Philippine National Bank the owner of the

sugar quota or production allowances in question;

2. ordering the defendants-appellees (excepting the defendant-

appellee Administrator of the Sugar Quota Office) to reconvey

to plaintiff-appellant PNB, the said sugar quota or production

allowance in question registered in their names, or if the same

can not now be legally done, directing the defendants-

appellees (excepting appellee Administrator of the Sugar

Quota Office) to jointly and severally pay to PNB the value ofthe sugar quota or production allowance in question.

The appealed judgment is hereby affirmed in all other respects.

From this judgment, the Compaia General de Tabacos

(TABACALERA) has appealed to this Court. Here it submits

that said judgment should be reversed on the basis of the

following considerations, to wit:

1) that sugar quotas are not "ordinary property . . . which may

be appropriated, transferred, conveyed and/or encumbered by

the private grantee at his whim and discretion without the

intervention of the State," it being "regulated property, thedisposal or encumbrance of which is made subject to certain

restrictions and regulations provided for by law;" hence, "any

form of alienation thereof should be made subject to

governmental regulations and should be processed and

approved by the implementing arm of the government, the

Sugar Quota Administration;" and the mortgage constituted

over the sugar quota in this case by the parties to whom the

same had originally been awarded the partnership of

Gomez and Torres or the Philippine Milling Company was

void, "(a)pproval or sanction of the Sugar Quota Administration

. . . (being) sorely and fatally lacking;"

a) moreover, "the very terms of the deed of sale executed bythe DBP in favor of PNB on June 17, 1966 specifically and

expressly excluded the 18,000 piculs in question;

2) even if the mortgage be accorded validity, it was "binding

only as between the mortgagors and the mortgagees and did

not have any effect in third persons who subsequently acquired

the same," because the mortgages had not yet been "duly

registered with the Sugar Quota Administration" when

TABACALERA and others purchased parts of the quota in

question from the Philippine Planters' Association; indeed, the

transferees from the latter had "received the sanction and

approval of the Sugar Quota Administrator;"

3) the direction by the Court of Appeals for TABACALERA

among others, to reconvey the quota to the PNB is vague and

indefinite since it does not state the point of time to be

considered in computing the value thereof; furthermore, since it

"benefited only to the extent of the . . . (precise quantity

purchased by it, out of the 18,000 piculs), it would be "clearly

contrary to law and grossly iniquitous" for it to be made

solidarily liable for the value of the entire sugar quota in

question; and

4) if TABACALERA reconveys or pays the value of the suga

quota acquired from San Carlos Planters' Association, the

latter should, upon its implied and express warranty agains

eviction, reimburse it therefor.

The argument that Theo H. Davies & Co., Ltd., San Carlos

Planters' Association, and their privies and successors in

interest like TABACALERA, are purchasers in good faith of the

sugar quota in question because they could not he deemed to

have prior knowledge of the encumbrances thereon, isuntenable.

For one thing, as the Court of Appeals has pointed out, the

intangible property that is the sugar quota in question should

be considered as real property by destination, "an

improvement attaching to the land entitled

thereto." 34Moreover, as is axiomatic, the recording in theRegistry of Deeds of a mortgage over lands and othe

immovables operates to charge "the whole world" with notice

thereof.35The registration therefore of the mortgages

executed by the Philippine Milling Company, Hector A. Torres

and Francisco Gomez in favor of the RFC and later of the

PNB, thus had the effect of charging all persons, includingTheo H. Davies & Co., Ltd., San Carlos Planters' Association

and their privies and successors in interest, with notice of the

encumbrance, not only over the lands belonging to the

mortgagors but also of the sugar quotas as well as "all the

buildings and improvements . . . existing or which may

hereafter be constructed on the mortgaged property, all

elements,

. . . agricultural or land indemnities, aids or subsidies and al

other rights or benefits annexed to or inherent therein, now

existing or which may hereafter exist." So, none of the parties

in this case can plead lack of knowledge of the mortgage lien

over the sugar quota or production allowance.

Even if the sugar quota is assumed to be personal, not raid

property, and hence not embraced in the mortgage of the

immovables created by the corresponding deeds, it would

nevertheless still be covered by the chattel mortgage created

in and by the same deeds. Since, like the recording of a rea

estate mortgage, registration of a chattel mortgage also puts al

persons on notice of its existence, the legal situation would be

exactly the same: the registration of the above described

deeds of chattel (and real estate) mortgage over the suga

quota, among other things, would also have charged al

persons with notice thereof from the time of such

registration.36

Again, being themselves engaged and possessed of no little

experience in the sugar industry, said Theo H. Davies & Co.

Ltd., San Carlos Planters' Association (and their own

transferees) could not but have known, when negotiations fo

their respective purchases of the sugar quota in question

commenced, that the sugar quota they were dealing with had

perforce to pertain to some specific sugar plantation o

farm, i.e., Plantation 30-15 of the Mindoro Mill District. Sugar

quota allocations do not have existence independently of any

particular tract of land. They are essentially ancillary, no

principal, assets, necessarily annexed to a specific sugar


8/43

plantation or land, improvements "attaching to the land entitled

thereto."37Hence, the very first inquiry in any negotiation

affecting sugar quotas necessarily would have to do with the

identification of the district, plantation or land to which the

quotas appertain. No transaction can be had of sugar quotas in

the abstract, without reference whatsoever to any particular

land. Indeed, any deed of conveyance of sugar quota would

unavoidably have to describe the sugar plantation and district

to which it refers or relates. There can be no sale simply of

sugar quota of a certain number of piculs without specificationof the land to which it relates. Such a sale would be

inconsistent with established usage, and would be void for

want of a determinate subject matter.38Theo H. Davies & Co.,

Ltd. and San Carlos Planters' Association can not therefore

plead ignorance of the fact that the quota they were buying

pertained to land belonging to the sellers, Plantation No. 30-15

of the Mindoro Mill District.

Furthermore, Theo H. Davies & Co., Ltd. and San Carlos

Planters' Association were obviously of the belief that a

mortgage or sale of a sugar quota is void if "(a)pproval or

sanction of the Sugar Quota Administration . . . (is) lacking,"

this being in fact a proposition TABACALERA lays before thisCourt, although it cites no particular authority for it and has

thus failed to convince this Court of its validity. Be this as it

may, it was with this proposition in mind that Theo H. Davies &

Co. Ltd. and San Carlos Planters' Association submitted the

deed of conveyance in their favor of the sugar quota in

question, to the SQA, precisely to obtain the latter's approval of

that transaction. That approval, as already stated, was not

given until a year later. But long before that approval, they

were clearly and categorically informed that the sugar quota,

subject of the sale to them for which they were seeking

approval by the SQA was already mortgaged to the RFC and

then to the PNB. Since good faith is obviously a state of the

mind, and since prior to the approval of the conveyance to

them of the sugar quota by the SQA which approval they

thought to be essential for the validity of said conveyance-they

came to know of the earlier encum brance thereof to other

parties, it is not possible for them without, contradicting

themselves, to claim good faith in the transaction.

Turning now to TABACALERA and the other vendees of Theo

H. Davies & Co. Ltd. and San Carlos Planters' Association, it is

self-evident that they are also quite familiar with sugar quotas,

including the nature and process of transferring the same,

these being an important factor in their operations and

transactions. They therefore had to know that the sugar quotas

they were purchasing had originally to be part and parcel of

some sugar plantation. Hence, apart from being charged with

knowledge, as above discussed, of the mortgage of the land to

which the sugar quota in question was an integrated adjunct

and that the mortgage extended to said sugar quotas like the

buildings and improvements thereon standing it may

reasonably be assumed as a fact, too, that they inquired about

and were duly informed of the origin of, and immediately

preceding transactions involving, the sugar quotas they were

acquiring.

They should therefore all be regarded as buyers in bad faith

the original vendees of Gomez and Torres and the Philippine

Milling Company (i.e., the Philippine Planters Association and

Theo H. Davies & Co. Ltd.) as well as the latter's own vendees

(TABACALERA, et al.). The Court of Appeals was thus quite

correct in "ordering the defendants-appellees (excepting the

defendant-appellee Administrator of the Sugar Quota Office) to

reconvey to plaintiff-appellant PNB, the said sugar quota or

production allowance in question registered in their names, o

if the same can not now be legally done, directing thedefendants-appellees (excepting appellee Administrator of the

Sugar Quota Office) to jointly and severally pay to PNB the

value of the sugar quota or production allowance in question."

The fact that "the very terms of the deed of sale executed by

the DBP in favor of PNB on June 17, 1966 specifically and

expressly excluded the 18,000 piculs in question," of which

TABACALERA would make capital, is of no moment. As also

held by the Court of Appeals, the exclusion is more apparen

than real. It is true that the deed of June 17, 1966 does provide

that "the 18,000 piculs of 'A' and 'B' sugar are expressly

excluded . . . because of certain circumstances." It is however

pointed out that "the Vendee may . . . take such action as imay deem proper in order to recover the said 18, 000 piculs of

'A' and 'B' sugar quota and Vendor agrees to join such action

whenever requested by the Vendee." The clear implication is

that notwithstanding those "certain circumstances" causing the

exclusion of the 18,000 piculs, there was an express assertion

that a right to recover the same existed in favor of the vendo

and/or its vendee; a declaration, in other words, that the sugar

quota of 18,000 piculs rightfully belonged to the vendor and, by

the sale, to the vendee. The ambivalent stipulation, in the mind

of the Court of Appeals, merely evidenced the DBP's intention

not be rendered liable to PNB on any warranty of legal title

considering that the quota had in point of fact already been

sold to third persons before foreclosure; the ostensible

exclusion of the 18,000 piculs was a mere cautionary proviso

This Court agrees, after undertaking a review and analysis of

the relevant facts.

However, TABACALERA's argument that it should not be

made solidarily liable for the value of the entire sugar quota in

question, because it benefited only to the extent of the precise

quantity purchased by it, out of the 18,000 piculs is well taken

It does not appear that it acted in concert with the othe

vendees in the acquisition of all the 18,000 piculs comprising

the sugar quota in question. For aught that appears on the

record, it dealt separately and individually with its vendor. Its

liability should indeed be limited to a return of the exac

quantity and quality of the sugar quota separately purchased

by it, as indubitably appears on record, or the payment of the

value thereof computed as of the time that its obligation to

return that quota was adjudged by the Court of Appeals.

One final question remains to be resolved, that posed by

TABACALERA, to wit: if it reconveys the sugar quota acquired

from San Carlos Planters' Association, or pays its value

should not it be reimbursed therefor by the latter, upon its

implied and express warranty against eviction? The answe


9/43

win have to be in the negative. They, vendor and vendee, are

inpari delicto. At the time of the transaction between them they

were well aware of the encumbrance on the property dealt

with, they had the common intention of negating the rights that

they knew had earlier and properly been acquired by the

mortgagee of the property they were treating of; they were both

consequently acting in bad faith. The object or purpose of their

contract was "contrary to law, morals, good customs, public

order or public policy."39The law says that in such a case,

where "the unlawful or forbidden cause consists does notconstitute a criminal offense, . . . and the fault is on the part of

both contracting parties, neither may recover what he has

given by virtue of the contract, or demand the performance of

the other's undertaking." 40No relief can be granted to eitherparty; the law will leave them where they are.

41

WHEREFORE, the challenged judgment of the Court of

Appeals is hereby AFFIRMED, with the modification that the

liability of petitioner Compaia General de Tabacos de

Filipinas (TABACALERA) is limited to the return to the

Philippine National Bank of the exact quantity and quality of the

sugar quota purchased by it from the Philippine Planters

Association and/or Theo H. Davies & Co., Ltd., as indubitablyappears on record, or the payment of the value thereof to said

Philippine National Bank computed as of the time that its

obligation to return that quota was adjudged by the Court of

Appeals.

IT IS SO ORDERED.

Grio-Aquino and Medialdea, JJ., concur.

Cruz, J., took no part.

Gancayno, J., is on leave.

3. Heirs of San Andres v. Rodriguez


SUPREME COURTManila

SECOND DIVISION

G.R. No. 135634 May 31, 2000

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) andSALVACION S. TRIA,petitioners,

vs.

VICENTE RODRIGUEZ,respondent.

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the

Court of Appeals1reversing the decision of the Regional Trial

Court, Naga City, Branch 19, in Civil Case No. 87-1335, as

well as the appellate court's resolution denying

reconsideration.

The antecedent facts are as follows:

Juan San Andres was the registered owner of Lot No. 1914-B

2 situated in Liboton, Naga City. On September 28, 1964, he

sold a portion thereof, consisting of 345 square meters, to

respondent Vicente S. Rodriguez for P2,415.00. The sale isevidenced by a Deed of Sale.

2

Upon the death of Juan San Andres on May 5, 1965, Ramon

San Andres was appointed judicial administrator of the

decedent's estate in Special Proceedings No. R-21, RTC

Branch 19, Naga City. Ramon San Andres engaged the

services of a geodetic engineer, Jose Peero, to prepare a

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

prepared a sketch plan of the 345-square meter lot sold to

respondent. From the result of the survey, it was found that

respondent had enlarged the area which he purchased from

the late Juan San Andres by 509 square meters.3

Accordingly, the judicial administrator sent a letter,4dated July

27, 1987, to respondent demanding that the latter vacate the

portion allegedly encroached by him. However, responden

refused to do so, claiming he had purchased the same from

the late Juan San Andres. Thereafter, on November 24, 1987

the judicial administrator brought an action, in behalf of the

estate of Juan San Andres, for recovery of possession of the

509-square meter lot.

In his Re-amended Answer filed on February 6, 1989

respondent alleged that apart from the 345-square meter lo

which had been sold to him by Juan San Andres on Septembe

28, 1964, the latter likewise sold to him the following day theremaining portion of the lot consisting of 509 square meters

with both parties treating the two lots as one whole parcel with

a total area of 854 square meters. Respondent alleged that the

full payment of the 509-square meter lot would be effected

within five (5) years from the execution of a formal deed of sale

after a survey is conducted over said property. He further

alleged that with the consent of the former owner, Juan San

Andres, he took possession of the same and introduced

improvements thereon as early as 1964.

As proof of the sale to him of 509 square meters, responden

attached to his answer a receipt (Exh. 2)5signed by the late

Juan San Andres, which reads in full as follows:

Received from Vicente Rodriguez the sum of Five Hundred

(P500.00) Pesos representing an advance payment for a

residential lot adjoining his previously paid lot on three sides

excepting on the frontage with the agreed price of Fifteen

(15.00) Pesos per square meter and the payment of the ful

consideration based on a survey shall be due and payable in

five (5) years period from the execution of the formal deed of

sale; and it is agreed that the expenses of survey and its

approval by the Bureau of Lands shall be borne by Mr

Rodriguez.
http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt1http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt1http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt1http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt2http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt2http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt2http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt2http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt1


10/43

Naga City, September 29, 1964.

(Sgd.)

JUAN R. SAN ANDRES

Vendor

Noted:

(Sgd.)

VICENTE RODRIGUEZ

Vendee

Respondent also attached to his answer a letter of judicial

administrator Ramon San Andres (Exh. 3),6asking payment of

the balance of the purchase price. The letter reads:

Dear Inting,

Please accommodate my request for Three Hundred (P300.00)

Pesos as I am in need of funds as I intimated to you the otherday.

We will just adjust it with whatever balance you have payable

to the subdivision.

Thanks.

Sincerely,

(Sgd.)

RAMON SAN ANDRES

Vicente Rodriguez

Penafrancia Subdivision, Naga City

P.S.

You can let bearer Enrique del Castillo sign for the amount.

Received One Hundred Only

(Sgd.)

RAMON SAN ANDRES

3/30/66

Respondent deposited in court the balance of the purchase

price amounting to P7,035.00 for the aforesaid 509-square

meter lot.

While the proceedings were pending, judicial administrator

Ramon San Andres died and was substituted by his son

Ricardo San Andres. On the other band, respondent Vicente

Rodriguez died on August 15, 1989 and was substituted by his

heirs.7

Petitioner, as plaintiff, presented two witnesses. The firs

witness, Engr. Jose Peero,8testified that based on his survey

conducted sometime between 1982 and 1985, respondent had

enlarged the area which he purchased from the late Juan San

Andres by 509 square meters belonging to the latter's estate

According to Peero, the titled property (Exh. A-5) o

respondent was enclosed with a fence with metal holes and

barbed wire, while the expanded area was fenced with barbed

wire and bamboo and light materials.

The second witness, Ricardo San Andres,9administrator o

the estate, testified that respondent had not filed any claim

before Special Proceedings No. R-21 and denied knowledge of

Exhibits 2 and 3. However, he recognized the signature in

Exhibit 3 as similar to that of the former administrator, Ramon

San Andres. Finally, he declared that the expanded portion

occupied by the family of respondent is now enclosed with

barbed wire fence unlike before where it was found without

fence.

On the other hand, Bibiana B. Rodriguez,10

widow o

respondent Vicente Rodriguez, testified that they had

purchased the subject lot from Juan San Andres, who wastheir compadre, on September 29, 1964, at P15.00 per square

meter. According to her, they gave P500.00 to the late Juan

San Andres who later affixed his signature to Exhibit 2. She

added that on March 30, 1966; Ramon San Andres wrote them

a letter asking for P300.00 as partial payment for the subjec

lot, but they were able to give him only P100.00. She added

that they had paid the total purchase price of P7,035.00 on

November 21, 1988 by depositing it in court. Bibiana B

Rodriquez stated that they had been in possession of the 509-

square meter lot since 1964 when the late Juan San Andres

signed the receipt. (Exh. 2) Lastly, she testified that they did

not know at that time the exact area sold to them because they

were told that the same would be known after the survey of thesubject lot.

On September 20, 1994, the trial court11

rendered judgment in

favor of petitioner. It ruled that there was no contract of sale to

speak of for lack of a valid object because there was no

sufficient indication in Exhibit 2 to identify the property subject

of the sale, hence, the need to execute a new contract.

Respondent appealed to the Court of Appeals, which on Apri

21, 1998 rendered a decision reversing the decision of the tria

court. The appellate court held that the object of the contrac

was determinable, and that there was a conditional sale with

the balance of the purchase price payable within five yearsfrom the execution of the deed of sale. The dispositive portion

of its decision's reads:

IN VIEW OF ALL THE FOREGOING, the judgment appealed

from is hereby REVERSED and SET ASIDE and a new one

entered DISMISSING the complaint and rendering judgmen

against the plaintiff-appellee:

1. to accept the P7,035.00 representing the balance of the

purchase price of the portion and which is deposited in cour

under Official Receipt No. 105754 (page 122, Records);
http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt6http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt6http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt6http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt7http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt7http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt7http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt8http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt8http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt8http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt10http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt10http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt10http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt10http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt8http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt7http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt6


11/43

2. to execute the formal deed of sale over the said 509 square

meter portion of Lot 1914-B-2 in favor of appellant Vicente

Rodriguez;

3. to pay the defendant-appellant the amount of P50,000.00 as

damages and P10,000.00 attorney's fees as stipulated by them

during the trial of this case; and

4. to pay the costs of the suit.

SO ORDERED.

Hence, this petition. Petitioner assigns the following errors as

having been allegedly committed by the trial court:

I. THE HON. COURT OF APPEALS ERRED IN HOLDING

THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO

SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL

ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN

AND SUFFICIENTLY DESCRIBED.

II. THE HON. COURT OF APPEALS ERRED IN HOLDING

THAT PETITIONER IS OBLIGED TO HONOR THE

PURPORTED CONTRACT TO SELL DESPITE NON-

FULFILLMENT BY RESPONDENT OF THE CONDITION

THEREIN OF PAYMENT OF THE BALANCE OF THE

PURCHASE PRICE.

III. THE HON. COURT OF APPEALS ERRED IN HOLDING

THAT CONSIGNATION WAS VALID DESPITE NON-

COMPLIANCE WITH THE MANDATORY REQUIREMENTS

THEREOF.

IV. THE HON. COURT OF APPEALS ERRED IN HOLDING

THAT LACHES AND PRESCRIPTION DO NOT APPLY TO

RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE

THE PURPORTED CONTRACT AFTER THE LAPSE OF 24

YEARS.

The petition has no merit.

First. Art. 1458 of the Civil Code provides:

By the contract of sale one of the contracting parties obligates

himself to transfer the ownership of and to deliver a

determinate thing, and the other to pay therefor a price certain

in money or its equivalent.

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the

following:

a) Consent or meeting of the minds, that is, consent to transfer

ownership in exchange for the price;

b) Determinate subject matter; and,

c) Price certain in money or its equivalent.12

As shown in the receipt, dated September 29, 1964, the late

Juan San Andres received P500.00 from respondent as

"advance payment for the residential lot adjoining his

previously paid lot on three sides excepting on the frontage

the agreed purchase price was P15.00 per square meter; and

the full amount of the purchase price was to be based on the

results of a survey and would be due and payable in five (5)

years from the execution of a deed of sale.

Petitioner contends, however, that the "property subject of the

sale was not described with sufficient certainty such that there

is a necessity of another agreement between the parties tofinally ascertain the identity; size and purchase price of the

property which is the object of the alleged sale."1He argues

that the "quantity of the object is not determinate as in fact a

survey is needed to determine its exact size and the ful

purchase price therefor"14

In support of his contention

petitioner cites the following provisions of the Civil Code:

Art. 1349. The object of every contract must be determinate as

to its kind. The fact that the quantity is not determinable shal

not be an obstacle to the existence of a contract, provided it is

possible to determine the same without the need of a new

contract between the parties.

Art. 1460. . . . The requisite that a thing be determinate is

satisfied if at the time the contract is entered into, the thing is

capable of being made determinate without the necessity of a

new and further agreement between the parties.

Petitioner's contention is without merit. There is no dispute tha

respondent purchased a portion of Lot 1914-B-2 consisting o

345 square meters. This portion is located in the middle of Lo

1914-B-2, which has a total area of 854 square meters, and is

clearly what was referred to in the receipt as the "previously

paid lot." Since the lot subsequently sold to respondent is said

to adjoin the "previously paid lot" on three sides thereof, the

subject lot is capable of being determined without the need ofany new contract. The fact that the exact area of these

adjoining residential lots is subject to the result of a survey

does not detract from the fact that they are determinate or

determinable. As the Court of Appeals explained:15

Concomitantly, the object of the sale is certain and

determinate. Under Article 1460 of the New Civil Code, a thing

sold is determinate if at the time the contract is entered into

the thing is capable of being determinate without necessity of a

new or further agreement between the parties. Here, this

definition finds realization.

Appellee's Exhibit "A" (page 4, Records) affirmingly shows thathe original 345 sq. m. portion earlier sold lies at the middle o

Lot 1914-B-2 surrounded by the remaining portion of the said

Lot 1914-B-2 on three (3) sides, in the east, in the west and in

the north. The northern boundary is a 12 meter road

Conclusively, therefore, this is the only remaining 509 sq. m

portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially

purchased by Rodriguez. It is quite difined, determinate and

certain. Withal, this is the same portion adjunctively occupied

and possessed by Rodriguez since September 29, 1964

unperturbed by anyone for over twenty (20) years unti

appellee instituted this suit.
http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt12http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt12http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt12http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnthttp://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnthttp://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnthttp://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnthttp://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt12


12/43

Thus, all of the essential elements of a contract of sale are

present, i.e., that there was a meeting of the minds between

the parties, by virtue of which the late Juan San Andres

undertook to transfer ownership of and to deliver a determinate

thing for a price certain in money. As Art. 1475 of the Civil

Code provides:

The contract of sale is perfected at the moment there is a

meeting of minds upon the thing which is the object of the

contract and upon the price. . . .

That the contract of sale is perfected was confirmed by the

former administrator of the estates, Ramon San Andres, who

wrote a letter to respondent on March 30, 1966 asking for

P300.00 as partial payment for the subject lot. As the Court of

Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting

of the mind between San Andres and Rodriguez for the sale of

the property adjoining the 345 square meter portion previously

sold to Rodriguez on its three (3) sides excepting the frontage.

The price is certain, which is P15.00 per square meter.

Evidently, this is a perfected contract of sale on a deferredpayment of the purchase price. All the pre-requisite elements

for a valid purchase transaction are present. Sale does not

require any formal document for its existence and validity. And

delivery of possession of land sold is a consummation of the

sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed

of sale is a valid contract between the parties (Carbonell v. CA,

69 SCRA 99 [1976]).

In the same vein, after the late Juan R. San Andres received

the P500.00 downpayment on March 30, 1966, Ramon R. San

Andres wrote a letter to Rodriguez and received from

Rodriguez the amount of P100.00 (although P300.00 was

being requested) deductible from the purchase price of thesubject portion. Enrique del Castillo, Ramon's authorized

agent, correspondingly signed the receipt for the P100.00.

Surely, this is explicitly a veritable proof of he sale over the

remaining portion of Lot 1914-B-2 and a confirmation by

Ramon San Andres of the existence thereof.16

There is a need, however, to clarify what the Court of Appeals

said is a conditional contract of sale. Apparently, the appellate

court considered as a "condition" the stipulation of the parties

that the full consideration, based on a survey of the lot, would

be due and payable within five (5) years from the execution of

a formal deed of sale. It is evident from the stipulations in the

receipt that the vendor Juan San Andres sold the residential lotin question to respondent and undertook to transfer the

ownership thereof to respondent without any qualification,

reservation or condition. InAng Yu Asuncion v. Court of

Appeals,17

we held:

In Dignos v. Court of Appeals (158 SCRA 375), we have said

that, although denominated a "Deed of Conditional Sale," a

sale is still absolute where the contract is devoid of

anyproviso that title is reserved or the right to unilaterally

rescind is stipulated, e.g., until or unless the price is paid.

Ownership will then be transferred to the buyer upon actual or

constructive delivery (e.g., by the execution of a public

document) of the property sold. Where the condition is

imposed upon the perfection of the contract itself, the failure of

the condition would prevent such perfection. If the condition is

imposed on the obligation of a party which is not fulfilled, the

other party may either waive the condition or refuse to proceed

with the sale. (Art. 1545, Civil Code).

Thus, in. one case, when the sellers declared in a "Receipt of

Down Payment" that they received an amount as purchaseprice for a house and lot without any reservation of title until ful

payment of the entire purchase price, the implication was tha

they sold their property.18

In People's Industrial Commercia

Corporation v. Court of Appeals,19

it was stated:

A deed of sale is considered absolute in nature where there is

neither a stipulation in the deed that title to the property sold is

reserved in the seller until full payment of the price, nor one

giving the vendor the right to unilaterally resolve the contract

the moment the buyer fails to pay within a fixed period.

Applying these principles to this case, it cannot be gainsaid

that the contract of sale between the parties is absolute, noconditional. There is no reservation of ownership nor a

stipulation providing for a unilateral rescission by either party

In fact, the sale was consummated upon the delivery of the lo

to respondent.20

Thus, Art. 1477 provides that the ownership

of the thing sold shall be transferred to the vendee upon the

actual or constructive delivery thereof.

The stipulation that the "payment of the full consideration

based on a survey shall be due and payable in five (5) years

from the execution of a formal deed of sale" is not a condition

which affects the efficacy of the contract of sale. It merely

provides the manner by which the full consideration is to be

computed and the time within which the same is to be paid. Butit does not affect in any manner the effectivity of the contract

Consequently, the contention that the absence of a forma

deed of sale stipulated in the receipt prevents the happening o

a sale has no merit.

Second. With respect to the contention that the Court o

Appeals erred in upholding the validity of a consignation o

P7,035.00 representing the balance of the purchase price o

the lot, nowhere in the decision of the appellate court is there

any mention of consignation. Under Art. 1257 of this Civi

Code, consignation is proper only in cases where an existing

obligation is due. In this case, however, the contracting parties

agreed that full payment of purchase price shall be due andpayable within five (5) years from the execution of a forma

deed of sale. At the time respondent deposited the amount of

P7,035.00 in the court, no formal deed of sale had yet been

executed by the parties, and, therefore, the five-year period

during which the purchase price should be paid had no

commenced. In short, the purchase price was not yet due and

payable.

This is not to say, however, that the deposit of the purchase

price in the court is erroneous. The Court of Appeals correctly
http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt16http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt16http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt16http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt16


13/43

ordered the execution of a deed of sale and petitioners to

accept the amount deposited by respondent.

Third. The claim of petitioners that the price of P7,035.00 is

iniquitous is untenable. The amount is based on the agreement

of the parties as evidenced by the receipt (Exh. 2). Time and

again, we have stressed the rule that a contract is the law

between the parties, and courts have no choice but to enforce

such contract so long as they are not contrary to law, morals,

good customs or public policy. Otherwise, court would beinterfering with the freedom of contract of the parties. Simply

put, courts cannot stipulate for the parties nor amend the

latter's agreement, for to do so would be to alter the real

intentions of the contracting parties when the contrary function

of courts is to give force and effect to the intentions of the

parties.

Fourth. Finally, petitioners argue that respondent is barred by

prescription and laches from enforcing the contract. This

contention is likewise untenable. The contract of sale in this

case is perfected, and the delivery of the subject lot to

respondent effectively transferred ownership to him. For this

reason, respondent seeks to comply with his obligation to paythe full purchase price, but because the deed of sale is yet to

be executed, he deemed it appropriate to deposit the balance

of the purchase price in court. Accordingly, Art. 1144 of the

Civil Code has no application to the instant

case.21

Considering that a survey of the lot has already been

conducted and approved by the Bureau of Lands, respondent's

heirs, assign or successors-in-interest should reimburse the

expenses incurred by herein petitioners, pursuant to the

provisions of the contract.

WHEREFORE, the decision of the Court of Appeals is

AFFIRMED with the modification that respondent is ORDERED

to reimburse petitioners for the expenses of the survey.

SO ORDERED.

Bellosillo and Buena, JJ., concur.

Quisumbing and De Leon, Jr., JJ., are on leave.

4. Pichel v. Alonzo


SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-36902 January 30, 1982

LUIS PICHEL, petitioner,vs.

PRUDENCIO ALONZO, respondent.

GUERRERO, J.:

This is a petition to review on certiorari the decision of the

Court of First Instance of Basilan City dated January 5, 1973 in

Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis

Pichel, defendant."

This case originated in the lower Court as an action for the

annulment of a "Deed of Sale" dated August 14, 1968 and

executed by Prudencio Alonzo, as vendor, in favor of LuisPichel, as vendee, involving property awarded to the former by

the Philippine Government under Republic Act No. 477

Pertinent portions of the document sued upon read as follows:

That the VENDOR for and in consideration of the sum o

FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00)

Philippine Currency, in hand paid by the VENDEE to the entire

satisfaction of the VENDOR, the VENDOR hereby sells

transfers, and conveys, by way of absolute sale, all the

coconut fruits of his coconut land, designated as Lot No. 21 -

Subdivision Plan No. Psd- 32465, situated at Balactasan

Plantation, Lamitan, Basilan City, Philippines;

That for the herein sale of the coconut fruits are for all the fruits

on the aforementioned parcel of land presently found therein

as well as for future fruits to be produced on the said parcel of

land during the years period; which shag commence to run as

of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);

That the delivery of the subject matter of the Deed of Sale shal

be from time to time and at the expense of the VENDEE who

shall do the harvesting and gathering of the fruits;

That the Vendor's right, title, interest and participation herein

conveyed is of his own exclusive and absolute property, free

from any liens and encumbrances and he warrants to theVendee good title thereto and to defend the same against any

and all claims of all persons whomsoever.1

After the pre-trial conference, the Court a quo issued an Orde

dated November 9, 1972 which in part read thus:

The following facts are admitted by the parties:

Plaintiff Prudencio Alonzo was awarded by the Governmen

that parcel of land designated as Lot No. 21 of Subdivision

Plan Psd 32465 of Balactasan, Lamitan, Basilan City in

accordance with Republic Act No. 477. The award was

cancelled by the Board of Liquidators on January 27, 1965 on

the ground that, previous thereto, plaintiff was proved to have

alienated the land to another, in violation of law. In 197 2

plaintiff's rights to the land were reinstated.

On August 14, 1968, plaintiff and his wife sold to defendant an

the fruits of the coconut trees which may be harvested in the

land in question for the period, September 15, 1968 to January

1, 1976, in consideration of P4,200.00. Even as of the date of

sale, however, the land was still under lease to one, Ramon

Sua, and it was the agreement that part of the consideration of

the sale, in the sum of P3,650.00, was to be paid by defendan

directly to Ramon Sua so as to release the land from the
http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/may2000/gr_135634_2000.html#fnt21


14/43

clutches of the latter. Pending said payment plaintiff refused to

snow the defendant to make any harvest.

In July 1972, defendant for the first time since the execution of

the deed of sale in his favor, caused the harvest of the fruit of

the coconut trees in the land.

xxx xxx xxx

Considering the foregoing, two issues appear posed by thecomplaint and the answer which must needs be tested in the

crucible of a trial on the merits, and they are:

First.Whether or nor defendant actually paid to plaintiff the

full sum of P4,200.00 upon execution of the deed of sale.

Second. Is the deed of sale, Exhibit 'A', the prohibited

encumbrance contemplated in Section 8 of Republic Act No.

477?2

Anent the first issue, counsel for plaintiff Alonzo subsequently

'stipulated and agreed that his client ... admits fun payment

thereof by defendant.3The remaining issue being one of law,

the Court below considered the case submitted for summary

judgment on the basis of the pleadings of the parties, and the

admission of facts and documentary evidence presented at the

pre-trial conference.

The lower court rendered its decision now under review,

holding that although the agreement in question is

denominated by the parties as a deed of sale of fruits of the

coconut trees found in the vendor's land, it actually is, for all

legal intents and purposes, a contract of lease of the land itself.

According to the Court:

... the sale aforestated has given defendant complete control

and enjoyment of the improvements of the land. That the

contract is consensual; that its purpose is to allow the

enjoyment or use of a thing; that it is onerous because rent or

price certain is stipulated; and that the enjoyment or use of the

thing certain is stipulated to be for a certain and definite period

of time, are characteristics which admit of no other conclusion.

... The provisions of the contract itself and its characteristics

govern its nature.4

The Court, therefore, concluded that the deed of sale in

question is an encumbrance prohibited by Republic Act No.

477 which provides thus:

Sec. 8. Except in favor of the Government or any of itsbranches, units, or institutions, land acquired under the

provisions of this Act or any permanent improvements thereon

shall not be thereon and for a term of ten years from and after

the date of issuance of the certificate of title, nor shall they

become liable to the satisfaction of any debt contracted prior to

the expiration of such period.

Any occupant or applicant of lands under this Act who transfers

whatever rights he has acquired on said lands and/or on the

improvements thereon before the date of the award or

signature of the contract of sale, shall not be entitled to apply

for another piece of agricultural land or urban, homesite or

residential lot, as the case may be, from the National Abaca

and Other Fibers Corporation; and such transfer shall be

considered null and void.5

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

WHEREFORE, i

sales cases july 12 full text

Documents