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Coronel v. CA [G.R. No. 103577. October 7, 1996.]Third division, Melo (J): 3 concurring, 1 took no partFacts: On 19 January 1985, Romulo Coronel, et al. executed a document entitled Receipt of DownPayment in favor of Ramona Patricia Alcaraz forP50,000 downpayment of the total amount of P1.24M aspurchase price for an inherited house and lot (TCT 119627, Registry of Deeds of Quezon City), promising toexecute a deed of absolute sale of said property as soon as such has been transferred in their name. Thebalance of P1.19M is due upon the execution of said deed. On the same date, Concepcion D. Alcaraz, motherof Ramona, paid the down payment of P50,000.00. On 6 February 1985, the property originally registered inthe name of the Coronels father was transferred in their names (TCT 327043). However, on 18 February

1985, the Coronels sold the property to Catalina B. Mabanag for P1,580,000.00 after the latter has paidP300,000.00. For this reason, Coronels canceled and rescinded the contract with Alcaraz by depositing thedown payment in the bank in trust for Alcaraz.On 22 February 1985, Alcaraz filed a complaint for specific performance against the Coronels and caused theannotation of a notice of lis pendens at the back of TCT 327403. On 2 April 1985, Mabanag caused theannotation of a notice of adverse claim covering the same property with the Registry of Deeds of QuezonCity. On 25 April 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor ofMabanag. On 5 June 1985, a new title over the subject property was issued in the name of Mabanag underTCT 351582.In the course of the proceedings, the parties agreed to submit the case for decision solely on the basis ofdocumentary exhibits. Upon submission of their respective memoranda and the corresponding comment orreply thereto, and on 1 March 1989, judgment was handed down in favor of the plaintiffs, ordering the

defendant to execute a deed of absolute sale of the land covered by TCT 327403 and canceling TCT 331582and declaring the latter without force and effect. Claims for damages by plaintiffs and counterclaims by thedefendants and intervenors were dismissed. A motion for reconsideration was thereafter filed, which wasdenied.Petitioners interposed an appeal, but on 16 December 1991, the CA rendered its decision fully agreeing withthe trial court. Hence, the instant petition.The Supreme Court dismissed the petition and affirmed the appealed judgment.1. Receipt of downpayment a binding contract; Meeting of the mindsThe document embodied the binding contract between Ramona Patricia Alcaraz and the heirs of( 62 )

Constancio P. Coronel, pertaining to a particular house and lot covered by TCT 119627, as defined in Article

1305 of the Civil Code of the Philippines.2. Definition of contract of saleThe Civil Code defines a contract of sale, in Articl e 1458, as one of the contracting parties obligateshimself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a pricecertain in money or its equivalent. Sale, thus, by its very nature a consensual contract because it is perfectedby mere consent.3. Elements of contract of sale; Contract to sell not contract of sale due to the lack of first element;Distinction necessary when property is sold to a third personThe essential elements of a contract of sale are (a) Consent or meeting of the minds, that is, consent totransfer ownership in exchange for the price; (b) Determinate subject matter; and (c) Price certain in money orits equivalent. A Contract to Sell may not be considered as a Contract of Sale because the first essentialelement is lacking. It is essential to distinguish between a contract to sell and a conditional contract of sale

specially in cases where the subject property is sold by the owner not to the party the seller contracted with,but to a third person.4. Contract to sell: Seller agrees to sell property when purchase price is delivered to him; sellerreserves transfer of title until fulfillment of suspensive condition (payment)In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospectivebuyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the propertysubject of the contract to sell until the happening of an event, which for present purposes taken to be the fullpayment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sellthe subject property when the entire amount of the purchase price is delivered to him. In other words the fullpayment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents theobligation to sell from arising and thus, ownership is retained by the prospective seller without furtherremedies by the prospective buyer.

5. Contract to sell: failure to deliver payment is not a breach but event preventing vendor toconvey title; obligation demandable upon full payment of price; promise binding if supported bypayment distinct from the priceWhen a contract is a contract to sell where the ownership or title is retained by the seller and is not topass until the full payment of the price, such payment being a positive suspensive condition and failure ofwhich is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor toconvey title from acquiring binding force (Roque v. Lapuz). Upon the fulfillment of the suspensive conditionwhich is the full payment of the purchase price, the prospective sellers obligation to sell the subject propertyby entering into a contract of sale with the prospective buyer becomes demandable as provided in Art ic le1479of the Civil Code (A promise to buy and sell a determinate thing for a price certain is reciprocallydemandable.) An accepted unilateral promise to buy or to sell a determinate thing for a price certain is

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binding upon the promissor if the promise is supported by a consideration distinct from the price.6. Contract to sell defined

A contract to sell be defined as a bilateral contract whereby the prospective seller, while expresslyreserving the ownership of the subject property despite delivery thereof to the prospective buyer, bindshimself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreedupon, that is, full payment of the purchase price.7. Contract to sell not a conditional contract of sale (existence of first element)

A contract to sell may not even be considered as a conditional contract of sale where the seller maylikewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because( 63 )

in a conditional contract of sale, the first element of consent is present, although it is conditioned upon thehappening of a contingent event which may or may not occur.8. Conditional contract of sale: if suspensive condition not fulfilled, pefection abated; if fulfilled,contract of sale perfected and ownership automatically transfers to buyerIf the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated(cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensivecondition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previousdelivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyerby operation of law without any further act having to be performed by the seller.9. Contract to sell: if suspensive condition fulfilled, seller has still to convey title even if property is

previously deliveredIn a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of thepurchase price, ownership will not automatically transfer to the buyer although the property may have beenpreviously delivered to him. The prospective seller still has to convey title to the prospective buyer byentering into a contract of absolute sale.10. Contract to sell: there is no double sale; if property sold to another, the seller may be sued fordamagesIn a contract to sell, there being no previous sale of the property, a third person buying such propertydespite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance,cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance oftheproperty. There is no double sale in such case. Title to the property will transfer to the buyer after registration

because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damagesby the intending buyer.11. Conditional contract of sale: sale becomes absolute upon fulfillment of condition; if propertysold to another, first buyer may seek reconveyanceIn a conditional contract of sale, upon the fulfillment of the suspensive condition, the sale becomesabsolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery ofthe subject property, the sellers ownership or title to the property is automatically transferred to the buyersuch that, the seller will no longer have any title to transfer to any third person. Applying Artic le 1544of theCivil Code, such second buyer of the property who may have had actual or constructive knowledge of suchdefect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be aregistrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to thesecond buyer, the first buyer may seek reconveyance of the property subject of the sale.

12. Interpretation of contracts, natural and meaning of words unless technical meaning wasintended It is a canon in the interpretation of contracts that the words used therein should be given theirnaturaland ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586[1992]).13. Document entitled Receiptof Down Payment indicates Conditional Contract of Sale and notcontract to sellThe agreement could not have been a contract to sell because the sellers made no express reservationof ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the partiesfrom entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title wasnot in their names) and not the full payment of the purchase price. Under the established facts andcircumstances of the case, had the certificate of title been in the names of petitioners-sellers at that time,

there( 64 )

would have been no reason why an absolute contract of sale could not have been executed andconsummatedright there and then. Moreover, unlike in a contract to sell, petitioners did not merely promise to sell theproperty to private respondent upon the fulfillment of the suspensive condition. On the contrary, havingalready agreed to sell the subject property, they undertook to have the certificate of title changed to theirnames and immediately thereafter, to execute the written deed of absolute sale. What is clearly established bythe plain language of the subject document is that when the said Receipt of Down Payment was preparedand signed by petitioners, the parties had agreed to a conditional contract of sale, consummation of which is

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subject only to the successful transfer of the certificate of title from the name of petitioners father to theirnames. The suspensive condition was fulfilled on 6 February 1985 and thus, the conditional contract of salebetween the parties became obligatory, the only act required for the consummation thereof being the deliveryof the property by means of the execution of the deed of absolute sale in a public instrument, whichpetitioners unequivocally committed themselves to do as evidenced by the Receipt of Down Payment.14. Article 1475 and 1181 applies to present case; Perfection of a contract of sale and Conditionalobligation based on the happening of the eventArtic le 1475of the New Civil Code provides that the contract of sale is perfected at the momentthere 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 theform of contracts. Artic le 1181of the same code provides that in conditional obligations, the acquisition ofrights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening oftheevent which constitutes the condition. In the present case, since the condition contemplated by the partieswhich is the issuance of a certificate of title in petitioners names was fulfilled on 6 February 1985, therespective obligations of the parties under the contract of sale became mutually demandable, i.e. the sellerswere obliged to present the TCT already in their names to he buyer, and to immediately execute the deed ofabsolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase priceamounting to P1,190,000.00.15. Condition deemed fulfilled when obligor voluntary prevents its fulfillment; Condition fulfilled,such fact controlling over hypothetical arguments

Artic le 1186provides that the condition shall be deemed fulfilled when the obligor voluntarilyprevents its fulfillment. Thus, in the present case, the petitioners having recognized that they entered into acontract of sale subject to a suspensive condition, as evidenced in the first paragraph in page 9 of theirpetition, cannot now contend that there could have been no perfected contract of sale had the petitioners notcomplied with the condition of first transferring the title of the property under their names. It should bestressed and emphasized that the condition was fulfilled on 6 February 1985, when TCT 327403 was issuedinpetitioners name, and such fact is more controlling than mere hypothetical arguments.16. Retroactivity of conditional obligation to day of constitution of obligation

Article 1187 provides that the effects of conditional obligation to give, once the condition has beenfulfilled, shall retroact to the day of the constitution of the obligation. In obligations to do or not to do, thecourts shall determine, in each case, the retroactive effect of the condition that has been complied with. In the

present case, the rights and obligations of the parties with respect to the perfected contract of sale becamemutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on 6February 1985. As of that point in time, reciprocal obligations of both seller and buyer arose.17. Succession as a mode of transferring ownership

Article 774 of the Civil Code defines Succession as a mode of transferring ownership, providingsuccession is a mode of acquisition by virtue of which the property, rights and obligations to the extent andvalue of the inheritance of a person are transmitted through his death to another or others by his will or byoperation of law. In the present case, petitioners-sellers being the sons and daughters of the decedentConstancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the( 65 )

instance of their fathers death, petitioners stepped into his shoes insofar as the subject property is concerned,

such that any rights or obligations pertaining thereto became binding and enforceable upon them. It isexpressly provided that rights to the succession are transmitted from the moment of death of the decedent(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).18. Estoppel, as to lack of capacity

Article 1431 provides that through estoppel an admission or representation is rendered conclusiveupon the person making it, and cannot be denied or disproved as against the person relying thereon. In thepresent case, the petitioners, having represented themselves as the true owners of the subject property at thetime of sale, cannot claim now that they were not yet the absolute owners thereof at the time they entered intoagreement.19. Mere allegation is not evidenceThe supposed grounds for petitioners rescission, are mere allegations found only in their responsivepleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the

plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supportingevidence to substantiate petitioners allegations. We have stressed time and again that allegations must beproven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).20. No stipulation to authorize extrajudicial rescission of contract of saleEven assuming arguendo that Ramona P. Alcaraz was in the United States of America on 6 February1985, petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale cannot be

justified as there was no express stipulation authorizing the sellers to extrajudicially rescind the contract ofsale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])21. Estoppel, acceptance ofcheck from buyers mother; buyers absence not a ground for rescission Petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the

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evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers hadbeen dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter,if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her ownpersonal check (Exh. B;Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no evidence showingthat petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz when they acceptedher personal check. Neither did they raise any objection as regards payment being effected by a third person.

Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a groundtorescind the contract of sale.22. Buyer not in default as there is no proof that seller presented the TCT and signify theirreadiness to execute the deed of absolute saleArtic le 1169of the Civil Code defines when a party in a contract involving reciprocal obligations maybe considered in default. Said article provides that those obliged to deliver or to do something, incur in delayfrom the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.xxx In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready tocomply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill hisobligation, delay by the other begins. In the present case, there is no proof offered whatsoever to show thatthe seller actually presented the new transfer certificate of title in their names and signified their willingnessand readiness to execute the deed of absolute sale in accordance with their agreement. Ramonascorresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer)never became due and demandable and, therefore, she cannot be deemed to have been in default.

23. Double sale; Article 1544, paragraph 2 applies in the present case( 66 )

Artic le 1544of the Civil Code provides that If the same thing should have been sold to differentvendees, the ownership shall be transferred to the person who may have first taken possession thereof ingoodfaith, if it should be movable property. Should if be immovable property, the ownership shall belong to theperson acquiring it who in good faith first recorded it in the Registry of Property. Should there be noinscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in theabsence thereof to the person who presents the oldest title, provided there is good faith. In the present case,the record of the case shows that the Deed of Absolute Sale dated 25 April 1985 as proof of the secondcontract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new

certificate of title in the name of Catalina B. Mabanag on 5 June 1985. Thus, the second paragraph of Article1544 shall apply.24. Double sale presumes title to pass to first buyer, exceptions

Article 1544, the provision on double sale, presumes title or ownership to pass to the first buyer, theexceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b)should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquirespossession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements,titleor ownership will not transfer to him to the prejudice of the first buyer.25. Prius tempore, potior jure (first in time, stronger in right); First to register in good faithThe governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge bythe first buyer of the second sale cannot defeat the first buyers rights except when the second buyer first

registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gainedby the second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints hisregistration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). It wasfurther held that it is essential, to merit the protection of Article 1544, second paragraph, that the second realtybuyer must act in good faith in registering his deed of sale (Cruz v. Cabana, 129 SCRA 656, citing Carbonellvs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).26. Double sale; good faith in recording of second sale, not in buyingIn a case of double sale, what finds relevance and materiality is not whether or not the second buyerwas a buyer in good faith but whether or not said second buyer registers such second sale in good faith, thatis, without knowledge of any defect in the title of the property sold. In the present case, Mabanag could nothave in good faith registered the sale entered into on 18 February 1985 because as early as 22 February1985,

a notice of lis pendens had been annotated on the TCT in the names of petitioners, whereas Mabanagregistered the said sale sometime in April 1985. At the time of registration, therefore, petitioner knew that thesame property had already been previously sold to Coronel, or, at least, she was charged with knowledge thata previous buyer is claiming title to the same property. Mabanag thus cannot close her eyes to the defect inpetitioners title to the property at the time of the registration of the property.27. Double sale; Bad faith in registration does not confer registrant any rightIf a vendee in a double sale registers the sale after he has acquired knowledge that there was aprevious sale of the same property to a third party or that another person claims said property in a previoussale, the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvorovs. Tanega, 87 SCRA 349 [1981];citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

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28. Agency; The issue whether Concepcion, mother of Ramona, is an agent or a co-buyer isundisturbed

Although there may be ample indications that there was in fact an agency between Ramona asprincipal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issueof whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the( 67 )

instant petition, nor in such assumption disputed between mother and daughter. The Court did not touch thisissue and did not disturb the lowercourts ruling on this point.

Romero v. CA [G.R. No. 103577. October 7, 1996.]Third division, Vitug (J): 4 concurFacts: Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture andexportation of perlite filter aids, permalite insulation and process perlite ore. In 1988, Romero and his foreignpartners decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000 sq. m.The project was made known to several freelance real estate brokers. A day or so after the announcement,Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring 1,952 sq. m.Located in Barangay San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT 361402 in thename of Enriqueta Chua Vda. de Ongsiong. Romero visited the property and, except for the presence of

squatters in the area, he found the place suitable for a central warehouse. Later, the Flores spouses called onRomero with a proposal that should he advance the amount of P50,000.00 which could be used in taking upan ejectment case against the squatters, Ongsiong would agree to sell the property for only P800.00 per sq. m.Romero expressed his concurrence. On 09 June 1988, a contract, denominated Deed of Conditional Sale,was executed between Romero and Ongsiong. Flores, in behalf of Ongsiong, forthwith received andacknowledge a check for P50,000.00 from Romero.( 223 )

Pursuant to this agreement, Ongsiong filed a complaint for ejectment (Civil Case 7579) against Melchor Musaand 29 other squatter families with the MTC Paraaque. A few months later, or on 21 February 1989,judgment was rendered ordering the defendants to vacate the premises. The decision was handed downbeyond the 60-day period (expiring 09 August 1988) stipulated in the contract. The writ of execution of thejudgment was issued, still later, on 30 March 1989.In a letter, dated 07 April 1989, Ongsiong sought to return the P50,000.00 she received from Romero since,she said, she could not get ridof the squatters on the lot. Atty. Sergio A.F. Apostol, counsel for Romero, refused the tender, citing the favorable decision and the writ of execution issued pursuant thereto, andexpressed Romeros willingness to underwrite the expenses for the execution of the judgment and ejectmentof the occupants chargeable to the purchase price of the land.Meanwhile, the Presidential Commission for the Urban Poor (PCUD), through its Regional Director forLuzon (Viloria), asked the MTC Paraaque for a grace period of 45 days from 21 April 1989 within which torelocate and transfer the squatter families. Acting favorably on the request, the court suspended theenforcement of the writ of execution accordingly.On 08 June 1989, Atty. Apostol reminded Ongsiong on the expiry of the 45-day grace period and reiteratedhis clients willingness to underwrite the expenses for the execution of the judgment and ejectment of theoccupants. On 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for Ongsion, advised Atty. Apostol that theDeed of Conditional Sale had been rendered null and void by virtue of his clients failure to evict the squatters from the premises within the agreed 60-day period. He added that private respondent had decided to retain

the property.Meanwhile, on 25 August 1989, the MTC issued an alias writ of execution in Civil Case 7579 on motion ofOngsiong but the squatters apparently still stayed on.On 27 June 1989, Ongsiong prompted by Romeros continued refusal to accept the return of the P50,000.00 advance payment, filed with the RTC Makati (Branch 133, Civil Case 89-4394) for a rescission of the deed ofconditional sale, plus damages, and for the consignation of P50,000.00 cash. On 26 June 1990, the RTC rendered decision holding that Ongsiong had no right to rescind the contract since it was she who violated her obligation to eject the squatters from the subject property and that Romero, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The lower court, thusdismissed the complaint and ordered Ongsiong to eject or cause the ejectment of the squatters from theproperty and to execute the absolute deed of conveyance upon payment of the full purchase price by Romero.Ongsiong appealed to the Court of Appeals. On 29 May 1992, the appellate court rendered its decision,reversed and set aside the decision appealed from and entered another declaring he contract of conditional

sale of 9 June 1988 cancelled and ordering Romero to accept the return of the downpayment in the amount ofP50,000 deposited with the trial court; without pronouncement as to cost. Failing to obtain a reconsideration,Romero filed his petition for review on certiorari before the Supreme Court.The Supreme Court reversed and set aside the questioned decision of the Court of Appeals, and enteredanother ordering Romero to pay Ongsiong the balance of the purchase price and the latter to execute the deedof absolute sale in favor of petitioner; without costs.

1. Perfected contract of sale, absolute or conditionalA perfected contract of sale may either be absolute or conditional depending on whether theagreement is devoid of, or subject to, any condition imposed on the passing of title of the thing to be

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conveyed or on the obligation of party thereto. When ownership is retained until the fulfillment of a positive( 224 )

condition the breach of the condition will simply prevent the duty to convey title from acquiring an obligatoryforce. If the condition is imposed on an obligation of a party which is not complied with, the other party mayeither refuse to proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition isimposed upon the perfection of the contract itself, the failure of such condition would prevent the juridicalrelation itself from coming into existence.2. Real character of a contract, substance more significant than title given to it by partiesIn determining the real character of the contract, the title given to it by the parties is not as much assignificant as its substance. For example, a deed of sale, although denominated as a deed of conditional sale,may be treated as absolute in nature, if title to the property sold is not reserved in the vendor or if the vendoris not granted the right to unilaterally rescind the contract predicated on the fulfillment or non-fulfillment, asthe case may be, of the prescribed condition.3. Condition in the context of a perfected contract of saleThe term condition in the context of a perfected contract of sale pertains, in reality, to thecompliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandabilityof the reciprocal prestation of the other party. The reciprocal obligations referred to would normally be, in thecase of vendee, the payment of the agreed purchase price and, in the case of the vendor, the fulfillment ofcertain express warranties (which, in the present case is the timely eviction of the squatters on the property).4. Perfection of a sale; Parties bound to fulfill what is expressly stipulated and all consequences inkeeping with good faith, usage and lawA sale is at once perfected where a person (the seller) obligates himself, for a price certain, to deliver

and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees.From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has beenexpressly stipulated but also to all the consequences which, according to their nature, may be in keeping withgood faith, usage and law. In the present cas, under the agreement, Ongsiong is obligated to evict the squatterson the property. The ejectment of the squatters is a condition the operative act of which sets into motion theperiod of compliance by Romero of his own obligation, i.e., to pay the balance of the purchase price.5. Options available under Article 1545 belongs to injured partyOngsiongs failure to remove the squatters from the property within the stipulated period givesRomero the right to either refuse to proceed with the agreement or waive that condition in consonance withArticle 1545 of the Civil Code. This option clearly belongs to petitioner (Romero) and not to privaterespondent (Ongsiong).In contracts of sale particularly, Article 1545 of the Civil Code allows the obligee to choose betweenproceeding with the agreement or waiving the performance of the condition. Evidently, Romero has waived

the performance of the condition imposed on Ongsiong to free the property from squatters.6. Potestative condition is mixed, and not dependent on the sole will of the debtor; If condition isimposed on the fulfillment of the obligation and not the birth thereof, only the condition is avoided anddoes not affect obligation itselfThe undertaking required of private respondent does not constitute a potestative condition dependentsolely on his will that might, otherwise, be void in accordance with Article 1182 of the Civil Code but a mixed condition dependent not on the will of the vendor alone but also of third persons like the squattersand government agencies and personnel concerned. However, where the so -called potestative condition isimposed not on the birth of the obligation but on its fulfillment, only the condition is avoided, leavingunaffected obligation itself.7. Rescission by non-injured party not warranted; Article 1191The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated( 225 )

on a breach of faith by the other party violates the reciprocity between them. In the present case, Ongsiongsaction for rescission was not warranted as she was not the injured party. It was Ongsiong who has failed in herobligation under the contract. Romero did not breach the agreement. He has agreed, in fact, to shoulder theexpenses of the execution of the judgment in the ejectment case and to make arrangement with the sheriff toeffect such execution. Parenthetically, this offer to pay, hiring been made prior to the demand for rescission,assuming for the sake of argument that such a demand is proper under Article 1592 of the Civil Code, wouldlikewise suffice to defeat Ongsiongs prerogative to rescind thereunder.8. Petitioner, opting to proceed with sale, may not demand the reimbursement of the advancepaymentWhen petitioner having opted to proceed with the sale, neither may petitioner demand itsreimbursement from private respondent. Further, private respondent may not subject it to forfeiture.

Fule v. CA [G.R. No. 112212. March 2, 1998.]

Third division, Romero (J): 3 concurFacts: Fr. Antonio Jacobe initially mortgage a 10-hectare property in Tanay, Rizal (covered by TCT 320725)to the Rural Bank of Alaminos, Laguna to secure a loan in the amount of P10,000. Said mortgage was laterforeclosed and the property offered for public auction upon his default. In June 1984, Gregorio Fule, ascorporate secretary of the bank, asked Remelia Dichoso and Olivia Mendoza to look for a buyer who mightbe interested in the Tanay property. The two found one in the person of Ninevetch Cruz. It so happened that inJanuary of said year, Gregorio Fule, also a jeweler, has shown interest in buying a pair of emerald-cutdiamond earrings owned by Dr. Cruz. Dr. Cruz has dec lined Fules offer to buy said jewelry for P100,000; and a subsequent bid by Fule to buy them for US$6,000 at $1 to P25 while making a sketch of said jewelryduring an inspection at the lobby of Prudential Bank (the latter instance was declined, since the exchange rateappreciated to P19 per dollar). Subsequently, however, negotiations for the barter of the jewelry and the Tanayproperty ensued. Atty. Belarmino was requested by Dr. Cruz to check the property and found out that no sale

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or barter was feasible as the 1-year period of redemption has not expired. In an effort to cut through any legalimpediment, Fule executed on 19 October 1984, a deed of redemption on behalf of Fr. Jacobe purportedly in( 124 )

the amount of P15,987.78, and on even date, Fr. Jacobe sold the property to Fule for P75,000.00. The hastewith which the two deeds were executed is shown by the fact that the deed of sale was notarized ahead of thedeed of redemption. As Dr. Cruz had already agreed to the proposed barter, Fule went to Prudential Bank totake a look at the jewelry.On 23 October 1984, Fule met Atty. Belarmino at the latters residence to prepare the documents of sale. Atty. Belarmino accordingly caused the preparation of a deed of absolute sale while Fule and Dr. Cruz attended tothe safekeeping of the jewelry. The following day, Fule, together with Dichoso and Mendoza, arrived at theresidence of Atty. Belarmino to finally execute a deed of absolute sale. Fule signed the deed and gave Atty.Belarmino the amount of P13,700.00 for necessary expenses in the transfer of title over the Tanay property;and issued a certification to the effect that the actual consideration of the sale was P200,000.00 and notP80,000.00 as indicated in the deed of absolute sale (the disparity purportedly aimed at minimizing theamount of the capital gains tax that Fule would have to shoulder). Since the jewelry was appraised only atP160,000.00, the parties agreed that the balance of P40,000.00 would just be paid later in cash. Thereafter, atthe bank, as pre-arranged, Dr. Cruz and the cashier opened the safety deposit box, and delivered the contentsthereof to Fule. Fule inspected the jewelry, near the electric light at the banks lobby, for 10 -15 minutes. Fuleexpressed his satisfaction by nodding his head when asked by Dr. Cruz if the jewelry was okay. For servicesrendered, Fule paid the agents, Dichoso and Mendoza, the amount of US$300.00 and some pieces of jewelry.He did not, however, give them half of the pair of earrings in question, which he had earlier promised. Laterin the evening, Fule arrived at the residence of Atty. Belarmino complaining that the jewelry given him was

fake. Dichoso, who borrowed the car of Dr. Cruz, called up Atty. Belarmino. Informed that Fule was at thelawyers house, went there posthaste thinking that Fule had finally agreed to give them half of the pair ofearrings, only to find Fule demonstrating with a tester that the earrings were fake. Fule then accused Dichosoand Mendoza of deceiving him which they, however, denied. They countered that Fule could not have beenfooled because he had vast experience regarding jewelry. Fule nonetheless took back the US$300.00 andjewelry he had given them. Thereafter, the group decided to go to the house of a certain Macario Dimayuga, ajeweler, to have the earrings tested. Dimayuga, after taking one look at the earrings, immediately declaredthem counterfeit. At around 9:30 p.m., Fule went to one Atty. Reynaldo Alcantara residing at LakesideSubdivision in San Pablo City, complaining about the fake jewelry. Upon being advised by the latter, Fulereported the matter to the police station where Dichoso and Mendoza likewise executed sworn statements.On 26 October 1984, Fule filed a complaint before the RTC San Pablo City against private respondentspraying, among other things, that the contract of sale over the Tanay property be declared null and void on theground of fraud and deceit. On 30 October 1984, the lower court issued a temporary restraining order

directing the Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in thetransaction. On 20 November 1984, however, the same court lifted its previous order and denied the prayerfor a writ of preliminary injunction. After trial, the lower court rendered its decision on 7 March 1989;holding that the genuine pair of earrings used as consideration for the sale was delivered by Dr. Cruz to Fule,that the contract was valid even if the agreement between the parties was principally a barter contract, thatthe agreement has been consummated at the time the principal parties parted ways at the bank, and thatdamages are due to the defendants. From the trial courts adverse decision, petitioner elevated the matter to the Court of Appeals. On 20 October 1992, the Court of Appeals, however, rendered a decision affirming intoto the lower courts decision. His motion for reconsideration having been denied on 19 October 1993. Hence, the petition for review on certiorari.The Supreme Court affirmed in toto the decision of the Court of Appeals, but ordered Dr. Cruz to pay Fule thebalance of the purchase price of P40,000 within 10 days from the finality of the decision; with costs againstpetitioner.1. New factual issues cannot be examined as it unduly transcends the limits of the SupremeCourts review power( 125 )

The Supreme Court cannot entertain a factual issue, and thus examine and weigh anew the factsregarding the genuineness of the earrings bartered in exchange for the Tanay property, as this would undulytranscend the limits of the Courts review power in petitions of this nature which are confined merely to pure questions of law. As a general rule, the Supreme Court accords conclusiveness to a lower courts findings offact unless it is shown, inter alia, that: (1) the conclusion is a finding grounded on speculations, surmises orconjectures; (2) the inference is manifestly mistaken, absurd and impossible; (3) when there is a grave abuseof discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact areconflicting; and (6) when the Court of Appeals, in making its findings, went beyond the issues of the case andthe same is contrary to the admission of both parties. To reiterate, the Supreme Courts jurisdic tion is onlylimited to reviewing errors of law in the absence of any showing that the findings complained of are totally

devoid of support in the record or that they are glaringly erroneous as to constitute serious abuse of discretion.2. Immediate rendition of decision not anomalousNo proof has been adduced that Judge Jaramillo was motivated by a malicious or sinister intent indisposing of the case with dispatch. Neither is there proof that someone else wrote the decision for him. Theimmediate rendition of the decision was no more than Judge Jaramillos compliance with his duty as a judge to dispose of the courts business promptly and decide cases within the required periods. The two -yearperiod within which Judge Jaramillo handled the case provided him with all the time to study it and evenwrite down its facts as soon as these were presented to court. In fact, the Supreme Court does not see anythingwrong in the practice of writing a decision days before the scheduled promulgation of judgment and leavingthe dispositive portion for typing at a time close to the date of promulgation, provided that no malice or anywrongful conduct attends its adoption. The practice serves the dual purposes of safeguarding theconfidentiality of draft decisions and rendering decisions with promptness. Neither can Judge Jaramillo be

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made administratively answerable for the immediate rendition of the decision. The acts of a judge whichpertain to his judicial functions are not subject to disciplinary power unless they are committed with fraud,dishonesty, corruption or bad faith. Hence, in the absence of sufficient proof to the contrary, Judge Jaramillois presumed to have performed his job in accordance with law and should instead be commended for his closeattention to duty.3. Contract perfected by mere consent, binds parties to stipulation and all the consequences;Contract of sale perfected upon meeting of minds upon the thing object of the contract and upon price;Embodiment of contract in public instrument only for convenience, and registration only to affect thirdparties; Lack of formal requirements does not invalidate the contractThe Civil Code provides that contracts are perfected by mere consent. From this moment, the partiesare bound not only to the fulfillment of what has been expressly stipulated but also to all the consequenceswhich, according to their nature, may be in keeping with good faith, usage and law.A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which isthe object of the contract and upon the price. Being consensual, a contract of sale has the force of law betweenthe contracting parties and they are expected to abide in good faith by their respective contractualcommitments.Article 1358 of the Civil Code which requires the embodiment of certain contracts in a publicinstrument, is only for convenience, and registration of the instrument only adversely affects third parties.Formal requirements are, therefore, for the benefit of third parties. Non-compliance therewith does notadversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder.4. Voidable or annullable contractsContracts that are voidable or annullable, even though there may have been no damage to thecontracting parties are: (1) those where one of the parties is incapable of giving consent to a contract; and (2)

those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. The contractcan be voided in accordance with law so as to compel the parties to restore to each other the things that havebeen the subject of the contract with their fruits, and the price with interest.( 126 )

5. Fraud; No inducement made by the private respondentsThere is fraud when, through the insidious words or machinations of one of the contracting parties,the other is induced to enter into a contract which, without them, he would not have agreed to. In the presentcase, the records, are bare of any evidence manifesting that private respondents employed such insidiouswords or machinations to entice petitioner into entering the contract of barter. Neither is there any evidenceshowing that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the earringsin exchange for said property. On the contrary, Dr. Cruz did not initially accede to petitioners proposal to buythe said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz to believe that

the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 ormore than double that of the jewelry which was valued only at P160,000.00. If indeed petitioners propertywas truly worth that much, it was certainly contrary to the nature of a businessman-banker like him to haveparted with his real estate for half its price. In short, it was in fact petitioner who resorted to machinations toconvince Dr. Cruz to exchange her jewelry for the Tanay property.6. Mistake; Mistake caused by manifest negligence cannot invalidate a judicial actTo invalidate a contract, mistake must refer to the substance of the thing that is the object of the contract, orto those conditions which have principally moved one or both parties to e nter into the contract. An exampleof mistake as to the object of the contract is the substitution of a specific thing contemplated by the partieswith another. In the present case, the petitioner failed to prove the fact that prior to the delivery of the jewelryto him, private respondents endeavored to make such substitution of an inferior one or one with Russiandiamonds for the jewelry he wanted to exchange with his 10-hectare land. Further, on account of his work as abanker-jeweler, it can be rightfully assumed that he was an expert on matters regarding gems. He had theintellectual capacity and the business acumen as a banker to take precautionary measures to avert such amistake, considering the value of both the jewelry and his land. A mistake caused by manifest negligencecannot invalidate a juridical act. As the Civil Code provides, (t)here is no mistake if the party alleging itknew the doubt, contingency or risk affecting the object of the contract. 7. Contract of sale absolute if no stipulation that title to property is reserved to seller until fullpayment; Ownership transferred upon actual or constructive deliveryA contract of sale being absolute in nature, title passed to the vendee upon delivery of the thing soldsince there was no stipulation in the contract that title to the property sold has been reserved in the seller untilfull payment of the price or that the vendor has the right to unilaterally resolve the contract the moment thebuyer fails to pay within a fixed period. Such stipulations are not manifest in the contract of sale. In thepresent case, both the trial and appellate courts, therefore, correctly ruled that there were no legal bases for thenullification of the contract of sale. Ownership over the parcel of land and the pair of emerald-cut diamondearrings had been transferred to Dr. Cruz and Fule, respectively, upon the actual and constructive deliverythereof.

8. Contract silent when balance is due and demandable; non-payment does not invalidate thecontractWhile it is true that the amount of P40,000.00 forming part of the consideration was still payable to Fule, itsnonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar the transfer of ownershipand possession of the things exchanged considering the fact that their contract is silent as to when it becomesdue and demandable.9. No interest due if it is not stipulatedFailure to pay the balance of the purchase price does not result in the payment of interest thereon.Article 1589 of the Civil Code prescribes the payment of interest by the vendee for the period between the delivery of the thing and the payment of the price in cases (1) Should it have been so stipulated; (2) Should the thing sold and delivered produce fruits or income; (3) Should he be in default, from the time of judicial or( 127 )

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extrajudicial demand for the payment of the price.10. Case distinguished from de la Cruz v LegaspiThe present case should be distinguished from De la Cruz v. Legaspi, where the court held that failureto pay the consideration after the notarization of the contract as previously promised resulted in the vendees liability for payment of interest. In the present, there is no stipulation for the payment of interest in thecontract of sale nor proof that the Tanay property produced fruits or income. Neither did petitioner demandpayment of the price as in fact he filed an action to nullify the contract of sale.11. Award of moral and exemplary damagesMoral and exemplary damages may be awarded without proof of pecuniary loss. In awarding suchdamages, the court shall take into account the circumstances obtaining in the case and assess damagesaccording to its discretion. To warrant the award of damages, it must be shown that the person to whom theseare awarded has sustained injury. He must likewise establish sufficient data upon which the court can properlybase its estimate of the amount of damages. Statements of facts should establish such data rather than mereconclusions or opinions of witnesses. Thus, for moral damages to be awarded, it is essential that the claimantmust have satisfactorily proved during the trial the existence of the factual basis of the damages and its causalconnection with the adverse partys acts. If the court has no proo f or evidence upon which the claim for moraldamages could be based, such indemnity could not be outrightly awarded. The same holds true with respect tothe award of exemplary damages where it must be shown that the party acted in a wanton, oppressive ormalevolent manner.12. Rule that moral damages cannot be recovered from person who filed a complaint does notapply in present caseWhile, as a rule, moral damages cannot be recovered from a person who has filed a complaint against

another in good faith because it is not sound policy to place a penalty on the right to litigate, the same,however, cannot apply in the present case. This is not a situation where petitioners complaint was simplyfound later to be based on an erroneous ground which, under settled jurisprudence, would not have been areason for awarding moral and exemplary damages. Instead, the cause of action of the instant case appears tohave been contrived by petitioner himself. The factual findings of the courts a quo to the effect that petitionerfiled this case because he was the victim of fraud; that he could not have been such a victim because heshould have examined the jewelry in question before accepting delivery thereof, considering his exposure tothe banking and jewelry businesses; and that he filed the action for the nullification of the contract of salewith unclean hands, all deserve full faith and credit to support the conclusion that petitioner was motivatedmore by ill will than a sincere attempt to protect his rights in commencing suit against respondents. It must benoted that before petitioner was able to convince Dr. Cruz to exchange her jewelry for the Tanay property,petitioner took pains to thoroughly examine said jewelry, even going to the extent of sketching theirappearance. Why at the precise moment when he was about to take physical possession thereof he failed to

exert extra efforts to check their genuineness despite the large consideration involved has never beenexplained at all by petitioner. His acts thus failed to accord with what an ordinary prudent man would havedone in the same situation.

Ong v. CA [G.R. No. 97347. July 6, 1999.]First division, Ynares-Santiago (J): 4 concurFacts: On 10 May 1983, Jaime Ong and spouses Miguel and Alejandra Robles execut ed an Agreement ofPurchase and Sale respecting 2 parcels of land situated at Barrio Puri, San Antonio, Quezon (agriculturalincluding rice mill, piggery) for P2M (initial payment of P600,000 broken into P103,499.91 directly paid toseller on 22 March 1983 and P496,500.09 directly paid to BPI to answer for part of sellers loan with thebank; and balance of 1.4M to be paid in 4 equal quarterly installments of P350,000 the first of which due anddemandable on 15 June 1983); binding themselves that upon the payment of the total purchase price the sellerdelivers a good and sufficient deed of sale and conveyance for the parcels of land free and clear from liensand encumbrances, that seller delivers, surrenders and transfers the parcels of land including all improvementsthereon and to transfer the operations of the piggery and rice mill to the buyer; and that all payments due anddemandable under the contract effected in the residence of the seller unless otherwise designated by theparties in writing. On 15 May 1983, Ong took possession of the subject parcels of land together with thepiggery, building, ricemill, residential house and other improvements thereon. Pursuant to the contract, Ongpaid the spouses the sum of P103,499.91 2 by depositing it with the UUCPB. Subsequently, Ong depositedsums of money with the BPI, in accordance with their stipulation that petitioner pay the loan of the spouseswith BPI. To answer for his balance of P 1.4M, Ong issued 4 post-dated Metro Bank checks payable to thespouses in the amount of P350,000.00 each (Check 137708-157711). When presented for payment, however,the checks were dishonored due to insufficient funds. Ong promised to replace the checks but failed to do so.To make matters worse, out of the P496,500.00 loan of the spouses with BPI, which ong, as per agreement,should have paid, Ong only managed to dole out no more than P393,679.60. When the bank threatened toforeclose the spouses mortgage, they sold 3 transformers of the rice mill worth P51,411.00 to pay offtheir

outstanding obligation with said bank, with the knowledge and conformity of Ong. Ong, in return, voluntarilygave the spouses authority to operate the rice mill. He, however, continued to be in possession of the twoparcels of land while the spouses were forced to use the rice mill for residential purposes.On 2 August 1985, the spouses, through counsel, sent Ong a demand letter asking for the return of theproperties. Their demand was left unheeded, so, on 2 September 1985, they filed with the RTC Lucena City,Branch 60, a complaint for rescission of contract and recovery of properties with damages. Later, while thecase was still pending with the trial court, Ong introduced major improvements on the subject properties byconstructing a complete fence made of hollow blocks and expanding the piggery. These prompted the spousesto ask for a writ of preliminary injunction; which the trial court granted, and thus enjoined Ong fromintroducing improvements on the properties except for repairs. On 1 June 1989, the trial court rendered adecision in favor of the spouses: ordering the contract entered into by the parties set aside, ordering thedelivery of the parcels of land and the improvements thereon to the spouses, ordering the return of the sum of

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P497,179.51 to Ong by the spouses, ordering Ong to pay the spouses P100,000 for exemplary damages andP20,000 as attorneys fees and litigation expenses. From this decision, petitioner appealed to the Court ofAppeals, which affirmed the decision of the RTC but deleted the award of exemplary damages. In aff irmingthe decision of the trial court, the Court of Appeals noted that the failure of petitioner to completely pay thepurchase price is a substantial breach of his obligation which entitles the private respondents to rescind theircontract under Article 1191 of the New Civil Code. Hence, the petition for review on certiorari.The Supreme Court affirmed the decision rendered by the Court of Appeals with the modification that the( 186 )

spouses are ordered to return to Ong the sum P48,680.00 in addition to the amounts already awarded; withcosts against petitioner Ong.1. Reevaluation of evidence not the function of the Supreme CourtIt is not the function of the Supreme Court to assess and evaluate all over again the evidence,testimonial and documentary, adduced by the parties to an appeal, particularly where the findings of both thetrial court and the appellate court on the matter coincide. There is no cogent reason shown that would justifythe court to discard the factual findings of the two courts below and to superimpose its own.2. Rescission as a remedy to secure the reparation of damages caused by a contract; Article 1380Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is a remedy granted bylaw to the contracting parties and even to third persons, to secure the reparation of damages caused to them bya contract, even if this should be valid, by restoration of things to their condition at the moment prior to thecelebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniarydamage to someone.3. Rescission applicable to reciprocal obligations under Article 1191

Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations.Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and acreditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are tobe performed simultaneously such that the performance of one is conditioned upon the simultaneousfulfillment of the other.4. Rescission of reciprocal obligations under Article 1191 distinguished from rescission of contractunder Article 1383Rescission of reciprocal obligations under Article 1191 of the New Civil Code should bedistinguished from rescission of contracts under Article 1383. Although both presuppose contracts validlyentered into and subsisting and both require mutual restitution when proper, they are not entirely identical.While Article 1191 uses the term rescission, the original term which was used in the old Civil Code, from which the article was based, was resolution. Resolution is a principal action which is based on breach of a party, while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under

Article 1381 of the New Civil Code.5. Rescissible contract under Article 1381Article 1381 of the New Civil Code enumerates rescissible contracts as (1) those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the valueof the things which are the object thereof; (2) those agreed upon in representation of absentees, if the lattersuffer the lesion stated in the preceding number; (3) those undertaken in fraud of creditors when the lattercannot in any manner collect the claims due them; (4) those which refer to things under litigation if they havebeen entered into by the defendant without the knowledge and approval of the litigants or of competentjudicial authority; (5) all other contracts specially declared by law to be subject to rescission. In the presentcase, the contract entered into by the parties obviously does not fall under any of those mentioned by Article1381. Consequently, Article 1383 is inapplicable.6. Contract to sell distinguished from contract of saleIn a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold;while in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendeeuntil full payment of the purchase price. In a contract to sell, the payment of the purchase price is a positivesuspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents theobligation of the vendor to convey title from acquiring an obligatory force.( 187 )

7. Agreement of Purchase and Sale is in the nature of contract to sell A careful reading of the parties Agreement of Purchase and Sale shows that it is in the nature of acontract to sell. The spouses bound themselves to deliver a deed of absolute sale and clean title covering thetwo parcels of land upon full payment by the buyer of the purchase price of P2M. This promise to sell wassubject to the fulfillment of the suspensive condition of full payment of the purchase price by the Ong. Thenon-fulfillment of the condition of full payment rendered the contract to sell ineffective and without force andeffect. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligors failure to comply with an obligation already extant, not a failure of a condition to render binding that

obligation. Failure to pay, in this instance, is not even a breach but merely an event which prevents thevendors obligation to convey title from acquiring binding force. Hence, the agreement of the parties the present case may be set aside, but not because of a breach on the part of Ong for failure to complete paymentof the purchase price. Rather, his failure to do so brought about a situation which prevented the obligation ofthe spouses to convey title from acquiring an obligatory force.8. Contract was not novated as to the manner and time of payment; Novation not presumedArticle 1292 of the New Civil Code states that, In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the oldand the new obligations be on every point incompatible with each other. Novation is never presumed, it must be proven as a fact either by express stipulation of the parties or by implication derived from anirreconcilable incompatibility between the old and the new obligation. In the present case, the parties nevereven intended to novate their previous agreement. It is true that Ong paid the spouses small sums of money

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amounting to P48,680.00, in contravention of the manner of payment stipulated in their contract. Theseinstallments were, however, objected to by the spouses, and ong replied that these represented the interest ofthe principal amount which he owed them. Records further show that Ong agreed to the sale of MERALCOtransformers by the spousess to pay for the balance of their subsisting loan with BPI. Although the partiesagreed to credit the proceeds from the sale of the transformers to petitioners obligation, he was supposed toreimburse the same later to respondent spouses. This can only mean that there was never an intention on thepart of either of the parties to novate petitioners manner of payment.9. Requisites of novationIn order for novation to take place, the concurrence of the following requisites is indispensable: (1)there must be a previous valid obligation; (2) there must be an agreement of the parties concerned to a newcontract; (3) there must be the extinguishment of the old contract; and (4) there must be the validity of thenew contract. In the present case, the requisites are not found. The subsequent acts of the parties hardlydemonstrate their intent to dissolve the old obligation as a consideration for the emergence of the new one.Novation is never presumed, there must be an express intention to novate.10. Builder in bad faithAs regards the improvements introduced by Ong to the premises and for which he claimsreimbursement, the Court found no reason to depart from the ruling of the trial court and the appellate courtthat petitioner is a builder in bad faith. He introduced the improvements on the premises knowing fully wellthat he has not paid the consideration of the contract in full and over the vigorous objections of respondentspouses. Moreover, Ong introduced major improvements on the premises even while the case against him waspending before the trial court.11. Deletion of award of exemplary damages correctThe award of exemplary damages was correctly deleted by the Court of Appeals inasmuch as no

moral, temperate, liquidated or compensatory damages in addition to exemplary damages were awarded.

Gaite v. Fonacier [G.R. No. L-11827. July 31, 1961.]En Banc, Reyes JBL (J): 9 concurFacts: Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims (Dawahan Group),situated in Jose Panganiban, Camarines Norte. By a Deed of Assignment dated 29 September 1952,Fonacier constituted and appointed Fernando A. Gaite as his true and lawful attorney-in-fact to enter into acontract with any individual or juridical person for the exploration and development of the mining claims on a( 128 )

royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom. On 19 March 1954, Gaitein turn executed a general assignment conveying the development and exploitation of said mining claims unto

the Larap Iron Mines, owned solely by him. Thereafter Gaite embarked upon the development andexploitation of the mining claims, opening and paving roads within and outside their boundaries, makingother improvements and installing facilities therein for use in the development of the mines, and in timeextracted therefrom what he claimed and estimated to be approximately 24,000 metric tons of iron ore.For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite, andGaite assented thereto subject to certain conditions. As a result, a document entitled Revocation of Power ofAttorney and Contract was executed on 8 December 1954, wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that Fonacier would receive from the mining claims, allhis rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to usethe business name Larap Iron Mines and its goodwill, and all the records and documents relative to themines. In the same document, Gaite transferred to Fonacier all his rights and interests over the 24,000 tons ofiron ore, more or less that the former had already extracted from the mineral claims, in consideration o f thesum of P75,000, P10,000, of which was paid upon the signing of the agreement, and the balance to be paidout of the first letter of credit covering the first shipment of iron ores or the first amount derived from thelocal sale of iron ore made by the Larap Mines & Smelting Co. To secure the payment of the balance,Fonacier promised to execute in favor of Gaite a surety bond; delivered on 8 December 1954 with Fonacier asprincipal and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond was executedby the parties to the first bond, on the same day, with the Far Eastern Surety and Insurance Co. as additionalsurety, but it provided that the liability of the surety company would attach only when there had been anactual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000. Both bondwere attached and made integral parts of the Revocation of Power of Attorney and Contract. On the sameday that Fonacier revoked the power of attorney, Fonacier entered into a Contract of Mining Operation with Larap Mines and Smelting Co., Inc. to grant it the right to develop, exploit, and explore the mining claims,together with the improvements therein and the use of the name Larap Iron Mines and its goodwill, inconsideration of certain royalties. Fonacier likewise transferred, in the same document, the complete title tothe approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co.,in consideration for the signing by the company and its stockholders of the surety bonds delivered by

Fonacier to Gaite. On 8 December 1955, the bond with respect to the Far Eastern Surety and InsuranceCompany expired with no sale of the approximately 24,000 tons of iron ore, nor had the 65,000 balance of theprice of said ore been paid to Gaite by Fonacier and his sureties. Whereupon, Gaite demanded from Fonacierand his sureties payment of said amount.When Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed a complaint against themin the CFI Manila (Civil Case 29310) for the payment of the P65,000 balance of the price of the ore,consequential damages, and attorneys fees. Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with interest at 6% per annum from 9December 1955 until full payment, plus costs. From this judgment, defendants jointly appealed to theSupreme Court as the claims involved aggregate to more than P200,000.The Supreme Court affirmed the decision appealed from, with costs against appellants.1. Shipment or local sale of ore not a condition precedent but a suspensive period or term

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The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the paymentof the balance of P65,000, but was only a suspensive period or term. What characterizes a conditionalobligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) issubordinated to the happening of a future and uncertain event; so that if the suspensive condition does nottake place, the parties would stand as if the conditional obligation had never existed.( 129 )

2. The words of the contract express no contingency in the buyers obligation to pay.The contract stipulates that the balance of Sixty-Five Thousand Pesos (P65,000) will be paid out ofthe first letter of credit covering the first shipment of iron ore . . . etc. There is no uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which it willbe made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized;only its maturity or demandability is deferred.3. Contract of sale commutative and onerous; Each party assume correlative obligation andanticipate performance from the otherA contract of sale is normally commutative and onerous: not only does each one of the parties assumea correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay theprice), but each party anticipates performance by the other from the very start. While in a sale the obligationof one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumesthe risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei),it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearlyappear. In the present case, nothing is found in the record to evidence that Gaite desired or assumed to run therisk of losing his rights over the ore without getting paid for it, or that Fonacier understood that Gaite assumed

any such risk. The fact that appellants did put up such bonds indicates that they admitted the definite existenceof their obligation to pay the balance of P65,000.4. To consider sale as a condition precedent leaves the payment at the discretion o fthe debtorTo subordinate the obligation to pay the remaining P65,000 to the sale or shipment of the ore as acondition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the saleor shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus be ableto postpone payment indefinitely. Such construction of the contract should be avoided.5. Interpretation incline in favor of the greatest reciprocity of interestsAssuming that there could be doubt whether by the wording of the contract the parties intended asuspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000, the rules ofinterpretation would incline the scales in favor of the greatest reciprocity of interests, since sa le isessentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides if the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests and there can be

no question that greaterreciprocity obtains if the buyers obligation is deemed to be actually existing, withonly its maturity (due date) postponed or deferred, than if such obligation were viewed as non-existent or notbinding until the ore was sold.6. Sale of ore to Fonacier was a sale on credit, not an aleatory contractThe sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor,Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was nota suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix thefuture date of the payment.7. Non-renewal of bond impaired the securities given to the creditorAppellants have forfeited the right to compel Gaite to wait for the sale of the ore before receivingpayment of the balance of P65,000, because of their failure to renew the bond of the Far Eastern SuretyCompany or else replace it with an equivalent guarantee. The expiration of the bonding companysundertaking on 8 December 1955 substantially reduced the security of the vendors rights as creditor for the unpaid P65,000, a security that Gaite considered essential and upon which he had insisted when he executedthe deed of sale of the ore to Fonacier. The case squarely comes under paragraphs 2 and 3 of Article 1198 ofthe Civil Code of the Philippines which provides (2) When he does not furnish to the creditor the guarantiesor securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities( 130 )

after their establishment, and when through fortuitous event they disappear, unless he immediately gives newones equally satisfactory. Appellants failure to renew or extend the surety companys bond upon itsexpiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewedor replaced.8. No waiver intended by creditorGaites acceptance of the surety companys bond with full knowledge that on its face it would automatically expire within one year was not a waiver of its renewal after the expiration date. No such waivercould have been intended, for Gaite stood to lose and had nothing to gain thereby; and if there was any, it

could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the suretycompanys bond expired on 8 December 1955. But in the latter case the defendants - appellants obligation topay became absolute after 1 year from the transfer of the ore to Fonacier by virtue of the deed.9. No short-delivery made by GaiteThis is a case of a sale of a specific mass of fungible goods for a single price or a lump sum, thequantity of 24,000 tons of iron ore, more or less, stated in the contract, being a mere estimate by the partiesof the total tonnage weight of the mass; and second, that the evidence shows that neither of the parties hadactually measured or weighed the mass, so that they both tried to arrive at the total quantity by making anestimate of the volume thereof in cubic meters and then multiplying it by the estimated weight per ton of eachcubic meter. The sale between the parties is a sale of a specific mass of iron ore because no provision wasmade in their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale,nor was the price of P75,000 agreed upon by the parties based upon any such measurement (see Art. 1480,

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second par., New Civil Code). The subject-matter of the sale is, therefore, a determinate object, the mass, andnot the actual number of units or tons contained therein, so that all that was required of the seller Gaite was todeliver in good faith to his buyer all of the ore found in the mass, notwithstanding that the quantity deliveredis less than the amount estimated by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield SalvageCo., Inc. 171 So. 872, applying art. 2459 of the Luisiana Civil Code). The contract expressly stated theamount to be 24,000 tons, more or less. Applying the tonnage factor provided by the chief of Mines andMetallurgical Division of the Bureau of Mines which was between 3 metric tons minimum to 5 metric tonsmaximum, which was near the 3.3 metric ton tonnage factor adopted by Engr. Gamatero (at the request ofKrakower, a stockholder of Larap), and if appellants witness is correct in his estimate of 6,609 cubic metersof ore, the product is 21,809.7 tons which is not far from the 24,000 tons estimate. (cf. Pine River Logging &Improvement Co. vs. U. S., 186 U.S. 279, 46, L. Ed. 1164). Thus, there was no short-delivery as would entitleappellants to the payment of damages, nor could Gaite have been guilty of any fraud in making anymisrepresentation to appellants as to the total quantity of ore in the stockpiles of the mining claims in questionsince Gaites estimate appears to be substantially correct.

Acap v. CA [G.R. No. 118114. December 7, 1995.]First Division, Padilla (J): 4 concurringFacts: The title to Lot 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCTR-12179. The lot has an area of 13,720 sq. m. The title was issued and is registered in the name of spousesSantiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In1975, Felixberto executed a duly notarized document entitled Declaration of Heirship and Deed of AbsoluteSale in favor of Cosme Pido. Since 1960, Teodoro Acap had been the tenant of a portion of the said land,

covering an area of 9,500 sq. m. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acapcontinued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter,upon Pidos death, to his widow Laurenciana. The controversy began when Pido died interstate and on 27November 1981, his surviving heirs executed a notarized document denominated as Declaration of Heirshipand Waiver of Rights of Lot 1130 Hinigaran Cadastre, wherein they declared to have adjudicated upon themselves the parcel of land in equal share, and that they waive, quitclaim all right, interests andparticipation over the parcel of land in favor of Edy de los Reyes. The document was signed by all of Pidos heirs. Edy de los Reyes did not sign said document. It will be noted that at the time of Cosme Pidos death,title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining theDeclaration of Heirship with Waiver of Rights in his favor, de los Reyes filed the same with the Registry ofDeeds as part of a notice of an adverse claim against the original certificate of title.Thereafter, delos Reyes sought for Acap to personally inform him that he had become the new owner of theland and that the lease rentals thereon should be paid to him. Delos Reyes alleged that he and Acap entered

into an oral lease agreement wherein Acap agreed to pay 10 cavans of palay per annum as lease rental. In1982, Acap allegedly complied with said obligation. In 1983, however, Acap refused to pay any further leaserentals on the land, prompting delos Reyes to seek the assistance of the then Ministry of Agrarian Reform(MAR) in Hinigaran, Negros Occidental. The MAR invited Acap, who sent his wife, to a conferencescheduled on 13 October 1983. The wife stated that the she and her husband did not recognize delos Reyessclaim of ownership over the land. On 28 April 1988, after the lapse of four (4) years, delos Reys field acomplaint for recovery of possession and damages against Acap, alleging that as his leasehold tenant, Acaprefused and failed to pay the agreed annual rental of 10 cavans of palay despite repeated demands. On 20August 1991, the lower court rendered a decision in favor of delos Reyes, ordering the forfeiture of Acaps preferred right of a Certificae of Land Transfer under PD 27 and his farmholdings, the return of the farmlandin Acaps possession to delos Reyes, and Acap to pay P5,000.00 as attorneys fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages.Aggrieved, petitioner appealed to the Court of Appeals. Subsequently, the CA affirmed the lower courtsdecision, holding that de los Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey ofHinigaran, Negros Occidental based on a document entitled Declaration of Heirship and Waiver of Rights, and ordering the dispossession of Acap as leasehold tenant of the land for failure to pay rentals. Hence, thepetition for review on certiorari.The Supreme Court granted the petition, set aside the decision of the RTC Negros Occidental, dismissed thecomplaint for recovery of possession and damages against Acap for failure to properly state a cause of action,without prejudice to private respondent taking the proper legal steps to establish the legal mode by which heclaims to have acquired ownership of the land in question.1. Asserted right or claim to ownership not sufficient per se to give rise to ownership over the resAn asserted right or claim to ownership or a real right over a thing arising from a juridical act,however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be( 1 )

completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only

pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process ofacquisition transfer of ownership over a thing in question.2. Classes of modes of acquiring ownershipUnder Article 712 of the Civil Code, the modes of acquiring ownership are generally classified intotwo (2) classes, namely, the original mode (i.e, through occupation, acquisitive prescription, law orintellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result ofcertain contracts, such as sale, barter, donation, assignment or mutuum).3. Contract of Sale; Declaration of Heirship and Waiver of Rights an extrajudicial settlementbetween heirs under Rule 74 of the Rules of CourtIn a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of andto deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. On theother hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the

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Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent amongthemselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of theRules of Court. In the present case, the trial court erred in equating the nature and effect of the Declaration ofHeirship and Waiver of Rights the same with a contract (deed) of sale.4. Sale of hereditary rights and waiver of hereditary rights distinguishedThere is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. Thefirst presumes the existence of a contract or deed of sale between the parties. The second is, technicallyspeaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of aknown right with knowledge of its existence and intention to relinquish it, in favor of other persons who areco-heirs in the succession. In the present case, de los Reyes, being then a stranger to the succession of CosmePido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver documentwhich neither recites the elements of either a sale, or a donation, or any other derivative mode of acquiringownership.5. Summon of Ministry of Agrarian Reform does not conclude actuality of sale nor notice of suchsaleThe conclusion, made by the trial and appellate courts, that a sale transpired between Cosme Pidosheirs and de los Reyes and that Acap acquired actual knowledge of said sale when he was summoned by theMinistry of Agrarian Reform to discuss de los Reyes claim over the lot in question, has no basis both in fact and in law.6. A notice of adverse claim does not prove ownership over the lot; Adverse claim not sufficient tocancel the certificate of tile and for another to be issued in his nameA notice of adverse claim, by its nature, does not however prove private respondents ownership overthe tenanted lot. A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner,

the validity of which is yet to be established in court at some future date, and is no better than a notice of lispendens which is a notice of a case already pending in court. In the present case, while the existenc e of saidadverse claim was duly proven (thus being filed with the Registry of Deeds which contained the Declarationof Heirship with Waiver of rights an was annotated at the back of the Original Certificate of Title to the landin question), there is no evidence whatsoever that a deed of sale was executed between Cosme Pidos heirs and de los Reyes transferring the rights of the heirs to the land in favor of de los Reyes. De los Reyes right orinterest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancelthe OCT to the land and title to be issued in de los Reyes name. 7. Transaction between heirs and de los Reyes binding between parties, but cannot affect right of( 2 )

Acap to tenanted land without corresponding proof thereofWhile the transaction between Pidos heirs and de los Reyes may be binding on both parties, the right

of Acap as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of de losReyes ownership without the corresponding proof thereof. Acap had been a registered tenant in the subjectland since 1960 and religiously paid lease rentals thereon. In his mind, he continued to be the registered tenantof Cosme Pido and his family (after Pidos death), even if in 1982, de los Reyes allegedly informed Acap thathe had become the new owner of the land.8. No unjustified or deliberate refusal to pay the lease rentals to the landowner / agriculturallessorDe los Reyes never registered the Declaration of Heirship with Waiver of Rights with the Registry ofDeeds or with the MAR, but instead, he filed a notice of adverse claim on the said lot to establish ownershipthereof (which cannot be done). It stands to reason, therefore, to hold that there was no unjustified ordeliberate refusal by Acap to pay the lease rentals or amortizations to the landowner/agricultural lessor which,in this case, de los Reyes failed to established in his favor by clear and convincing evidence. Thisnotwithstanding the fact that initially, Aca