1.Spouses Firmer v.

Bukal Enterprise
G.R. No. 146608. October 23, 2003]

DEED OF ABSOLUTE SALE

SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, petitioners, vs. BUKAL

ENTERPRISES AND DEVELOPMENT CORPORATION, respondent.

KNOW ALL MEN BY THESE PRESENTS:

This DEED OF ABSOLUTE SALE made and executed by and between the Spouses
CONSTANTE FIRME and AZUCENA E. FIRME, both of legal age, Filipino citizens and
with postal address at No. 1450 Union, Paco, City of Manila, hereinafter called the
VENDOR, and

DECISION
CARPIO, J.:
The Case
[1]

This is a petition for review on certiorari of the Decision dated 3 January

2001 of the Court of Appeals in CA-G.R. CV No. 60747. The Court of Appeals
[2]
reversed the Decision of the Regional Trial Court, Branch 223, Quezon City (trial
court), which held that there was no perfected contract of sale since there was no
consent on the part of the seller.
The Facts
Petitioner Spouses Constante and Azucena Firme (Spouses Firme) are the
[3]
registered owners of a parcel of land (Property) located on Dahlia
Avenue, Fairview Park, Quezon City. Renato de Castro (De Castro), the vice
president of Bukal Enterprises and Development Corporation (Bukal Enterprises)
authorized his friend, Teodoro Aviles (Aviles), a broker, to negotiate with the
Spouses Firme for the purchase of the Property.
On 28 March 1995, Bukal Enterprises filed a complaint for specific
performance and damages with the trial court, alleging that the Spouses Firme
reneged on their agreement to sell the Property. The complaint asked the trial
court to order the Spouses Firme to execute the deed of sale and to deliver the title
to the Property to Bukal Enterprises upon payment of the agreed purchase price.
During trial, Bukal Enterprises presented five witnesses, namely, Aviles, De
Castro, Antonio Moreno, Jocelyn Napa and Antonio Ancheta.
Aviles testified that De Castro authorized him to negotiate on behalf of Bukal
Enterprises for the purchase of the Property. According to Aviles, he met with the
Spouses Firme on 23 January 1995 and he presented them with a draft deed of
[4]
sale (First Draft) dated February 1995. The First Draft of the deed of sale
provides:

BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a corporation duly

organized and registered in accordance with Philippine Laws, with business address
atDahlia Avenue, Fairview Park, Quezon City, herein represented by its PRESIDENT,
MRS. ZENAIDA A. DE CASTRO, hereinafter called the VENDEE.
WITNESSETH:
That the VENDOR is the absolute and registered owner of a certain parcel of land
located at Fairview Park, Quezon City, and more particularly described as follows:
A parcel of land (Lot 4, Block 33 of the consolidation-subdivision plan (LRC) Pcs8124, Sheet No. I, being a portion of the consolidation of Lots 41-B-2-A and 41-B-2C, Psd-1136 and Lot (LRC) Pcs-2665, (LRC) GLRO) Record. No. 1037), situated
in Quezon City, Island of Luzon. Bounded on the NE., points 2 to 5 by Road Lot 24,
of the consolidation-subdivision plan. Beginning at a point marked 1 on plan,
being S. 67 deg. 23W., 9288.80 m. from BLLM I, Mp of Montalban, Rizal; thence N.
85 deg. 35E., 17.39 m. to point 2; thence S. 54 deg. 22E., 4.00 m. to point 3;
thence S. 14 deg. 21E., 17.87 m. to point 4; thence 3 deg. 56E., 17.92 m. to point
5; thence N. 85 deg. 12 W., 23.38 m. to point 6; thence N. 4 deg. 55 W., 34.35 m.
to the point of beginning; containing an area of EIGHT HUNDRED AND SIX (806)
SQUARE METERS, more or less.
VENDORS title thereto being evidenced by Transfer Certificate of Title No. 264243
issued by the Register of Deeds of Quezon City;
That the VENDOR, for and in consideration of the sum of THREE MILLION TWO
HUNDRED TWENTY FOUR THOUSAND PESOS (P3,224,000.00) Philippine Currency,
to them in hand paid and receipt whereof is hereby acknowledged, do hereby

SELL, TRANSFER and CONVEY unto the said VENDEE, its assigns, transferees and
successors in interest the above described property, free from all liens and
encumbrances whatsoever;
It is hereby mutually agreed that the VENDEE shall bear all the expenses for the
capital gains tax, documentary stamps, documentation, notarization, removal and
relocation of the squatters, registration, transfer tax and other fees as may be
required by law;
That the VENDOR shall pay the real estate tax for the current year and back real
estate taxes, charges and penalties if there are any.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day of
February, 1995, at Quezon City, Philippines.
CONSTANTE FIRME

BUKAL ENTERPRISES AND

DEVEL
OPMEN
T CORP.
BY:

AZUCENA E. FIRME
VENDOR

ZENAIDA A. DE CASTRO
President

xxx
The Spouses Firme rejected this First Draft because of several objectionable
conditions, including the payment of capital gains and other government taxes by
the seller and the relocation of the squatters at the sellers expense. During their
second meeting, Aviles presented to the Spouses Firme another draft deed of
[5]
sale (Second Draft) dated March 1995. The Spouses Firme allegedly accepted
the Second Draft in view of the deletion of the objectionable conditions contained
in the First Draft. According to Aviles, the Spouses Firme were willing to sell the
Property at P4,000 per square meter. They then agreed that payment would be
made at the Far East Bank and Trust Company (FEBTC), Padre Faura
Branch, Manila. However, the scheduled payment had to be postponed due to

problems in the transfer of funds. The Spouses Firme later informed Aviles that
[6]
they were no longer interested in selling the Property.
De Castro testified that he authorized Aviles to negotiate for Bukal
Enterprises the purchase of the Property owned by the Spouses Firme. The
Property was located beside the Dahlia Commercial Complex owned by Bukal
Enterprises. Aviles informed him that the Spouses Firme agreed to sell the Property
atP4,000 per square meter, payable in cash for a lump sum of P3,224,000.
Furthermore, Bukal Enterprises agreed to pay the taxes due and to undertake the
relocation of the squatters on the Property. For this purpose, Bukal Enterprises
applied for a loan of P4,500,000 which FEBTC granted. Bukal Enterprises then
relocated the four families squatting on the Property at a cost of P60,000 per
family. After the squatters vacated the Property, Bukal Enterprises fenced the
area, covered it with filling materials, and constructed posts and riprap. Bukal
Enterprises spent approximately P300,000 for these improvements. In a
[7]
letter dated 7 March 1995, Bukal Enterprises offered to pay the purchase price
of P3,224,000 to the Spouses Firme upon execution of the transfer documents and
delivery of the owners duplicate copy of TCT No. 264243. The Spouses Firme did
not accept this offer but instead sent Bukal Enterprises a letter demanding that its
workers vacate the Property. Bukal Enterprises then filed a complaint for specific
[8]
performance and damages.
Antonio Moreno, one of the alleged squatters on the Property, testified that
he constructed his house on the Property sometime in 1982. On 26 February 1995,
he was summoned together with the other squatters to a meeting
with Aviles regarding their relocation. They agreed to relocate provided they
would be given financial assistance of P60,000 per family. Thus, on 6 March 1995,
the squatter families were each paid P60,000 in the presence of De Castro
andAviles. Thereafter, they voluntarily demolished their houses and vacated the
[9]
Property.
Jocelyn Mapa, the manager of FEBTC, Padre Faura Branch, testified that Bukal
Enterprises has been their client since 1994. According to her, Bukal Enterprises
applied for a loan of P4,500,000 on the third week of February 1995 allegedly to
buy a lot in Fairview. FEBTC approved the loan on the last week of February and
[10]
released the proceeds on the first week of March.
Antonio Ancheta (Ancheta), barangay captain of Barangay Fairview,
testified that he was present when one of the officers of Bukal Enterprises, a
certain Renato, paid each of the four squatter families around P60,000

to P100,000. Ancheta informed Dr. Constante Firme that he told the squatters to
leave considering that they already received payment for their relocation.
According to Ancheta, Dr. Constante Firme must have misunderstood him and
[11]
thought that the squatters left through Anchetas own efforts.

accordance with the Land Registration Act, as evidenced by Transfer Certificate of

Title No. 264243 issued by the Register of Deeds of Quezon City, more particularly
described and bounded as follows:

On the other hand, Dr. Constante Firme (Dr. Firme) was the sole witness for
the defendant spouses.

(DESCRIPTION AND BOUNDARIES OF PROPERTY)

Dr. Firme testified that on 30 January 1995, he and his wife met with Aviles at
the Aristocrat Restaurant in Quezon City. Aviles arranged the meeting with the
Spouses Firme involving their Property in Fairview. Aviles offered to buy the
Property at P2,500 per square meter. The Spouses Firme did not accept the offer
because they were reserving the Property for their children. On 6 February 1995,
the Spouses Firme met again with Aviles upon the latters
insistence. Aviles showed the Spouses Firme a copy of a draft deed of
[12]
sale (Third Draft) which Aviles prepared. The Third Draft of the deed of sale
provides:
CONRACT OF SALE
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT, executed this ___ day of February, 1995, by and between the
Spouses CONSTANTE FIRME and AZUCENA E. FIRME, both of legal age, Filipino
citizen and with postal address at __________, Quezon City, hereinafter referred to
as the VENDORS, and BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a
corporation duly organized and registered in accordance with Philippine Laws, with
postal address at Fairview Park, Quezon City, herein represented by its President
and Chief Executive Officer, hereinafter referred to as the VENDEE.
WITNESSETH:
That for and in consideration of the sum of THREE MILLION TWO HUNDRED
TWENTY FOUR THOUSAND PESOS (P3,224,000.00), Philippine Currency, payable in
the form hereinafter expressed, agreed to sell to the VENDEE and the VENDEE has
agreed to buy from the VENDORS, a parcel of land situated at Dahlia Avenue corner
Rolex Street, Fairview Park, Quezon City, containing an area of 806 Square Meters
more or less, of which the VENDORS are the absolute registered owners in

THE FURTHER TERMS AND CONDITIONS OF THE CONTRACT ARE AS FOLLOWS:

1. The VENDEE agrees to pay the VENDORS upon execution of this
Contract the sum of ONE MILLION PESOS (P1,000,000.00),
Philippine Currency, as downpayment and agrees to pay the
balance of TWO MILLION TWO HUNDRED TWENTY FOUR
THOUSAND PESOS (P2,224,000.00) at the post office address of the
VENDORS in Quezon City, or such other place or Office as the
VENDORS may designate within a period of sixty (60) days counted
from the date of this Contract;
2. The VENDORS have hereunto authorized the VENDEE to mortgage
the property and submit this Contract, together with a certified
true copy of the TCT, Tax Declaration, Tax Clearance and
Vicinity/Lot Plan, with their Lending Bank. The proceeds of the
VENDEES Loan shall directly be paid and remitted by the Bank to
the VENDORS;
3. The said parcel of land shall remain in the name of the VENDORS
until the Lending Bank of the VENDEE shall have issued a Letter
Guaranty Payment in favor of the VENDORS, at which time the
VENDORS agree to execute a Deed of Absolute Sale in favor of the
VENDEE and cause the issuance of the Certificate of Title in the
name of the latter. The Capital Gains Tax and Documentary Stamps
shall be charged from the VENDORS in accordance with law;
4. The payment of the balance of P2,224,000.00 by the VENDEE to the
VENDORS shall be within a period of sixty (60) days effective from
the date of this Contract. After the lapse of 60 days and the loan
has not yet been released due to fortuitous events the VENDEE
shall pay an interest of the balance a monthly interest based on
existing bank rate until said fortuitous event is no longer present;

5. The VENDEE shall remove and relocate the Squatters, however, such
actual, reasonable and necessary expenses shall be charged to the
VENDORS upon presentation of receipts and documents to support
the act;
6. The VENDEE shall be allowed for all legal purposes to take
possession of the parcel of land after the execution of this Contract
and payment of the downpayment;

On 7 August 1998, the trial court rendered judgment against Bukal

Enterprises as follows:
WHEREFORE, in the light of the foregoing premises, the above-entitled case [is]
hereby DISMISSED and plaintiff BUKAL ENTERPRISES DEVELOPMENT CORPORATION
is hereby ordered to pay the defendants Spouses Constante and Azucena Firme:
1.

the sum of Three Hundred Thirty Five Thousand Nine Hundred

Sixty Four and 90/100 (P335,964.90) as and by way of actual
and compensatory damages;

IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day of
February, 1995, at Quezon City, Philippines.

2.

the sum of Five Hundred Thousand Pesos (P500,000.00) as and by

way of moral damages;

CONSTANTE E. FIRME
VENDOR

3.

the sum of One Hundred Thousand Pesos (P100,000.00) as and by

way of attorneys fees; and

4.

the costs of the suit.

7. The VENDEE shall shoulder all expenses like the documentation,

registration, transfer tax and relocation of the property.

AZUCENA E. FIRME
VENDOR

BUKAL ENTERPRISES DEV. CORP.

VENDEE
BY:
________________________
President & Chief Executive Officer

SO ORDERED.

[16]

xxx
The Spouses Firme did not accept the Third Draft because they found its
provisions one-sided. The Spouses Firme particularly opposed the provision on the
delivery of the Propertys title to Bukal Enterprises for the latter to obtain a loan
from the bank and use the proceeds to pay for the Property. The Spouses Firme
repeatedly told Aviles that the Property was not for sale when Aviles called on 2
and 4 March 1995 regarding the Property. On 6 March 1995, the Spouses Firme
visited their Property and discovered that there was a hollow block fence on one
side, concrete posts on another side and bunkers occupied by workers of a certain
Florante de Castro. On 11 March 1995, Spouses Firme visited the Property again
with a surveyor. Dr. Firme talked with Ancheta who told him that the squatters had
[13]
voluntarily demolished their shanties. The Spouses Firme sent a letter dated 20
March 1995 to Bukal Enterprises demanding removal of the bunkers and
vacation by the occupants of the Property. On 22 March 1995, the
[14]
Spouses Firme received a letter dated 7 March 1995 from Bukal Enterprises
[15]
demanding that they sell the Property.

Bukal Enterprises appealed to the Court of Appeals, which reversed and set
aside the decision of the trial court. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the Decision, dated August 7, 1998, is hereby
REVERSED and SET ASIDE. The complaint is granted and the appellees are directed
to henceforth execute the Deed of Absolute Sale transferring the ownership of the
subject property to the appellant immediately upon receipt of the purchase price
ofP3,224,000.00 and to perform all such acts necessary and proper to effect the
transfer of the property covered by TCT No. 264243 to appellant. Appellant is
directed to deliver the payment of the purchase price of the property within sixty
days from the finality of this judgment. Costs against appellees.
SO ORDERED.

[17]

Hence, the instant petition.

The Ruling of the Trial Court

The trial court held there was no perfected contract of sale. Bukal
Enterprises failed to establish that the Spouses Firme gave their consent to the sale
of the Property. The parties did not go beyond the negotiation stage and there was
no evidence of meeting of the minds between the parties. Furthermore,Aviles had
no valid authority to bind Bukal Enterprises in the sale transaction. Under Sections
23 and 36 (No. 7) of the Corporation Code, the corporate power to purchase a
specific property is exercised by the Board of Directors of the corporation. Without
an authorization from the Board of Directors, Avilescould not validly finalize the
purchase of the Property on behalf of Bukal Enterprises. There is no basis to apply
the Statute of Frauds since there was no perfected contract of sale.

The Ruling of the Court of Appeals

The Court of Appeals held that the lack of a board resolution

authorizing Aviles to act on behalf of Bukal Enterprises in the purchase of the
Property was cured by ratification. Bukal Enterprises ratified the purchase when it
filed the complaint for the enforcement of the sale.
The Court of Appeals also held there was a perfected contract of sale. The
appellate court ruled that the Spouses Firme revealed their intent to sell the
Property when they met with Aviles twice. The Spouses Firme rejected the First
Draft because they considered the terms unacceptable. When Avilespresented the
Second Draft without the objectionable provisions, the Spouses Firme no longer
had any cause for refusing to sell the Property. On the other hand, the acts of
Bukal Enterprises in fencing the Property, constructing posts, relocating the
squatters and obtaining a loan to purchase the Property are circumstances
supporting their claim that there was a perfected contract of sale.
The Spouses Firme allowed Bukal Enterprises to exercise acts of ownership
over the Property when the latter introduced improvements on the Property and
evicted the squatters. These acts constitute partial performance of the contract of
sale that takes the oral contract out of the scope of the Statute of Frauds.

The Issues

The Spouses Firme raise the following issues:

1. WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT THERE
WAS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONERS AND
RESPONDENT DESPITE THE ADDUCED EVIDENCE PATENTLY TO THE
CONTRARY;
2. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT
THE ALLEGED CONTRACT OF SALE IS ENFORCEABLE DESPITE THE
FACT THAT THE SAME IS COVERED BY THE STATUTE OF FRAUDS;
3. WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE
FACT THAT IT WAS NOT LEGALLY AND FACTUALLY POSSIBLE FOR
RESPONDENT TO PERFECT A CONTRACT OF SALE; AND
4. THE COURT OF APPEALS ERRED IN RULING THAT THE AWARD BY THE
TRIAL COURT OF MORAL AND COMPENSATORY DAMAGES TO
[18]
PETITIONERS IS IMPROPER.

The Ruling of the Court

The petition is meritorious.

The fundamental question for resolution is whether there was a perfected
contract of sale between the Spouses Firme and Bukal Enterprises. This requires a
review of the factual and legal issues of this case. As a rule, only questions of law
[19]
are appealable to this Court under Rule 45 of the Rules of Civil Procedure. The
findings of fact by the Court of Appeals are generally conclusive and binding on the
[20]
parties and are not reviewable by this Court. However, when the factual findings
of the Court of Appeals are contrary to those of the trial court or when the
inference made is manifestly mistaken, this Court has the authority to review the
[21]
findings of fact. Likewise, this Court may review findings of fact when the
judgment of the Court of Appeals is premised on a misapprehension of
[22]
facts. This is the situation in this case.

Whether there was a perfected contract of sale

We agree with the finding of the trial court that there was no perfected
contract of sale. Clearly, the Court of Appeals misapprehended the facts of the
case in ruling otherwise.
First, the records indubitably show that there was no consent on the part of
the Spouses Firme. Aviles did not present any draft deed of sale during his first
[23]
meeting with the Spouses Firme on 30 January 1995. Dr. Firme was consistent in
his testimony that he and his wife rejected the provisions of the Third Draft
presented by Aviles during their second meeting on 6 February 1995. The Spouses
Firme found the terms and conditions unacceptable and toldAviles that they would
[24]
not sell the property. Aviles showed them only one draft deed of sale (Third
[25]
Draft) during their second and last meeting on 6 February 1995. When shown a
copy of the First Draft, Dr. Firme testified that it was not the deed of sale shown to
[26]
them by Aviles during their second meeting and that the Third Draft was
[27]
completely different from the First Draft.
On the other hand, Aviles gave conflicting testimony as to what transpired
during the two meetings with the Spouses Firme. In his direct
examination,Aviles testified that during his first meeting with the
Spouses Firme on 23 January 1995, he showed them the First Draft which the
[28]
Spouses Firme rejected. On their second meeting, Aviles showed the
Spouses Firme the Second Draft, which the Spouses Firme allegedly approved
because the objectionable conditions contained in the First Draft were already
deleted. However, a perusal of the First Draft and the Second Draft would show
that both deeds of sale contain exactly the same provisions. The only difference is
that the date of the First Draft is February 1995 while that of the Second Draft is
March 1995.
When Aviles testified again as rebuttal witness, his testimony became more
confusing. Aviles testified that during his first meeting with the Spouses Firme
on 30 January 1995, he showed them the Third Draft, which was not acceptable to
[29]
the latter. However, upon further questioning by his counsel,Aviles concurred
with Dr. Firmes testimony that he presented the Third Draft (Exh. 5; Exh. L)
to the Spouses Firme only during their second meeting. He also stated that he
prepared and presented to the Spouses Firme the First Draft (Exh. C) and the
Second Draft (Exh. C-1) during their first or second meeting. He testified:

ATTY. MARQUEDA:
Q: On page 11 of the tsn dated August 5, 1997 a question was posed
How did you find this draft the Contract of Sale which was
presented to you by Mr. Aviles on the second meeting? The
answer is On the first meeting(sic), we find it totally
[30]
unacceptable, sir.
What can you say on this? Before that, Mr.
Witness, what is this Contract of Sale that you presented to Mr.
Aviles on the second meeting? Is this different from the Contract
of Sale that was marked as Exhibit 5-L?
Q: May I see the document Exhibit 5 L?

[31]

INTERPRETER:
Witness going over the record.
ATTY. MARQUEDA:
Q: Is that the same document that was presented by you to Mr.
Firme on the second meeting or there is a different contract?
A: This is the same document draft of the document that I
submitted to them during our second meeting. That was
February. This was the draft.
Q: What about Exhibit C and C-1 [which] were identified by
you. When was this presented to Dr. Firme?
A: This is the same.
Q: Exhibit C and C-1?
A: Yes because I prepared two documents during our meeting. One
already with notarial, the one without notarial page and the other
one with notarial page already, so I prepared two documents but
[32]
with the same contents both were dated February of 1995.
Q: So, you are referring now to Exhibit C and C-1 for the plaintiff?
A: C-1 is already in the final form because we agreed already as to the
date of the payment, so I prepared already another document
[33]
which is dated March 1995. (Emphasis supplied)

In his cross-examination, Aviles again changed his testimony. According to

him, he presented the Third Draft to the Spouses Firme during their first
[34]
meeting. However, when he went over the records, he again changed his answer
[35]
and stated that he presented the Third Draft during their second meeting.

A. He mentioned that they are no longer interested to sell their

property, perhaps they would like a higher price of the
property. They did not mention to me. I do not know what was
their reason.

In his re-direct examination, Aviles gave another version of what he

presented to the Spouses Firme during the two meetings. According to him, he
presented the Third Draft during the first meeting. On their second meeting, he
[36]
presented the First and the Second Drafts to the Spouses Firme.

Q. The next question So, what happened next? The answer is He

called up two days later, March 4 and my wife answered the
telephone and told him that the property is not for sale,
sir. What can you say on this?

Furthermore, Aviles admitted that the first proposal of Bukal Enterprises was
[37]
at P2,500 per square meter for the Property.
But the First, Second and Third
Drafts of the deed of sale prepared by Aviles all indicated a purchase price
of P4,000 per square meter or a lump sum of P3,224,000 (P4,000 per sq.m. x 806
sq.m. = P3,224,000) for the Property. Hence, Aviles could not have presented any
of these draft deeds of sale to the Spouses Firme during their first meeting.

A. That is true. That is what Mrs. Firme told me during our

conversation on the telephone that they are no longer
interested to sell the property for obvious reason.
Q. When was that?
A. March 4, 1995, your honor.

[39]

(Emphasis supplied)

Considering the glaring inconsistencies in Aviles testimony, it was proper for

the trial court to give more credence to the testimony of Dr. Firme.

Significantly, De Castro also admitted that he was aware of the

[40]
Spouses Firmes refusal to sell the Property.

Even after the two meetings with Aviles, the Spouses Firme were firm in their
decision not to sell the Property. Aviles called the Spouses Firme twice after their
last meeting. The Spouses Firme informed Aviles that they were not selling the
[38]
Property.
Aviles himself admitted this during his testimony, thus:

The confusing testimony of Aviles taken together with De Castros admission

that he was aware of the Spouses Firmes refusal to sell the Property reinforces Dr.
Firmes testimony that he and his wife never consented to sell the Property.

Q. Now, the next question which states: But did you not have any
occasion to talk to him after that second meeting? and the
answer of Dr. Firme is He called up a month after, thats March
2, 1995. What can you say on this?
A. I called him to inform him that the loan was already transferred
from Makati to Padre Faura Branch of the Far East Bank, so I
scheduled already the payment of their property.

Consent is one of the essential elements of a valid contract. The Civil Code
provides:
Art. 1318. There is no contract unless the following requisites concur:
1.
3.

Consent of the contracting parties;

2.
Object certain which is the subject matter of the contract;
Cause of the obligation which is established.

Q. When?
A. On March 4, 1995.
Q. And then the next question which also states: What did you talked
(sic) about over the telephone? The answer of Dr. Firme was
When I found out that he was calling, I told him that the
property is not for sale. What can you say on this?

The absence of any of these essential elements will negate the existence of a
[41]
perfected contract of sale. Thus, where there is want of consent, the contract is
[42]
[43]
non-existent. As held in Salonga, et al. v. Farrales, et al.:
It is elementary that consent is an essential element for the existence of a contract,
and where it is wanting, the contract is non-existent. The essence of consent is the

conformity of the parties on the terms of the contract, the acceptance by one of
the offer made by the other. The contract to sell is a bilateral contract. Where
there is merely an offer by one party, without the acceptance of the other, there is
no consent. (Emphasis supplied)

and held by the board of directors or trustees to be elected from among the
holders of stock, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are
elected and qualified. x x x

In this case, the Spouses Firme flatly rejected the offer of Aviles to buy the
Property on behalf of Bukal Enterprises. There was therefore no concurrence of
the offer and the acceptance on the subject matter, consideration and terms of
[44]
payment as would result in a perfected contract of sale. Under Article 1475 of
the Civil Code, the contract of sale is perfected at the moment there is a meeting of
minds on the thing which is the object of the contract and on the price.

SEC. 36. Corporate powers and capacity. Every corporation incorporated under
this Code has the power and capacity:
xxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge,
mortgage and otherwise deal with such real and personal property,
including securities and bonds of other corporations, as the transaction
of a lawful business of the corporation may reasonably and necessarily
require, subject to the limitations prescribed by the law and the
Constitution.
xxx

Another piece of evidence which supports the contention of the

Spouses Firme that they did not consent to the contract of sale is the fact they
never signed any deed of sale. If the Spouses Firme were already agreeable to the
offer of Bukal Enterprises as embodied in the Second Draft, then the Spouses Firme
could have simply affixed their signatures on the deed of sale, but they did not.
Even the existence of a signed document purporting to be a contract of sale
does not preclude a finding that the contract is invalid when the evidence shows
[45]
that there was no meeting of the minds between the seller and buyer. In this
case, what were offered in evidence were mere unsigned deeds of sale which have
[46]
no probative value. Bukal Enterprises failed to show the existence of a perfected
contract of sale by competent proof.
Second, there was no approval from the Board of Directors of Bukal
Enterprises as would finalize any transaction with the Spouses Firme. Aviles did not
have the proper authority to negotiate for Bukal Enterprises. Aviles testified that
his friend, De Castro, had asked him to negotiate with the Spouses Firme to buy the
[47]
Property. De Castro, as Bukal Enterprises vice president, testified that he
[48]
authorized Aviles to buy the Property. However, there is no Board Resolution
authorizing Aviles to negotiate and purchase the Property on behalf of Bukal
[49]
Enterprises.
It is the board of directors or trustees which exercises almost all the
corporate powers in a corporation. Thus, the Corporation Code provides:
SEC. 23. The board of directors or trustees. Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations controlled

Under these provisions, the power to purchase real property is vested in the
board of directors or trustees. While a corporation may appoint agents to
negotiate for the purchase of real property needed by the corporation, the final say
[50]
will have to be with the board, whose approval will finalize the transaction. A
corporation can only exercise its powers and transact its business through its board
of directors and through its officers and agents when authorized by a board
[51]
resolution or its by-laws. As held in AF Realty & Development, Inc.
[52]
v. Dieselman Freight Services, Co.:
Section 23 of the Corporation Code expressly provides that the corporate powers
of all corporations shall be exercised by the board of directors. Just as a natural
person may authorize another to do certain acts in his behalf, so may the board of
directors of a corporation validly delegate some of its functions to individual
officers or agents appointed by it. Thus, contracts or acts of a corporation must be
made either by the board of directors or by a corporate agent duly authorized by
the board. Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but
not in the course of, or connected with, the performance of authorized duties of
such director, are held not binding on the corporation. (Emphasis supplied)
In this case, Aviles, who negotiated the purchase of the Property, is neither
an officer of Bukal Enterprises nor a member of the Board of Directors of Bukal

Enterprises. There is no Board Resolution authorizing Aviles to negotiate and

purchase the Property for Bukal Enterprises. There is also no evidence to prove
that Bukal Enterprises approved whatever transaction Aviles made with the
Spouses Firme. In fact, the president of Bukal Enterprises did not sign any of the
deeds of sale presented to the Spouses Firme. Even De Castro admitted that he
[53]
had never met the Spouses Firme. Considering all these circumstances, it is
highly improbable for Aviles to finalize any contract of sale with the Spouses Firme.
Furthermore, the Court notes that in the Complaint filed by Bukal Enterprises
[54]
with the trial court, Aviles signed the verification and certification of non-forum
[55]
shopping. The verification and certification of non-forum shopping was not
accompanied by proof that Bukal Enterprises authorized Aviles to file the complaint
on behalf of Bukal Enterprises.
The power of a corporation to sue and be sued is exercised by the board of
directors. The physical acts of the corporation, like the signing of documents, can
be performed only by natural persons duly authorized for the purpose by corporate
[56]
by-laws or by a specific act of the board of directors.
The purpose of verification is to secure an assurance that the allegations in
[57]
the pleading are true and correct and that it is filed in good faith. True, this
requirement is procedural and not jurisdictional. However, the trial court should
have ordered the correction of the complaint since Aviles was neither an officer of
Bukal Enterprises nor authorized by its Board of Directors to act on behalf of Bukal
Enterprises.

Whether the Statute of Frauds is applicable

The Court of Appeals held that partial performance of the contract of sale
takes the oral contract out of the scope of the Statute of Frauds. This conclusion
arose from the appellate courts erroneous finding that there was a perfected
contract of sale. The records show that there was no perfected contract of
sale. There is therefore no basis for the application of the Statute of Frauds. The
application of the Statute of Frauds presupposes the existence of a perfected
[58]
contract. Article 1403 of the Civil Code provides:
Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum thereof,
be in writing and subscribed by the party charged or by his agent; evidence,
therefore, of the agreement cannot be received without the writing, or a secondary
evidence of its contents:
xxx
(e) An agreement for the leasing for a longer period than one year, or for the sale
of real property or of an interest therein;
xxx

Whether Bukal Enterprises is a builder in good faith

Bukal Enterprises is not a builder in good faith. The Spouses Firme did not
accept Aviles offer to purchase the Property. Aviles testified that when he called
the Spouses Firme on 2 March 1995, Dr. Firme informed him that they were no
longer interested in selling the Property. On 4 March 1995, Avilescalled again and
this time Mrs. Firme told him that they were not selling the
Property. Aviles informed De Castro of the refusal of the Spouses Firme to sell the
Property. However, Bukal Enterprises still proceeded in relocating the squatters
and constructing improvements on the Property. De Castro testified:
ATTY. EJERCITO:
Q: The truth of the matter, Mr. Witness, is that the post was
constructed sometime late 1994. Is that not correct?
A: No, sir. It is not true.
Q: When was it constructed?

A: That March.
Q: When in March?

Q: Mr. Aviles relayed to you that the Spouses Firme were no longer
interested in selling to you the property in March 2, 1995. Is
that correct?

A: 1995.

A: Yes, sir. Mr. Aviles told me.

Q: When in March 1995?

Q: When were the squatters removed?

Q: In so many words, Mr. Witness, you learned that the Spouses

Firme were no longer interested in selling the property before
you spent allegedly all the sum of money for the relocation of
squatters for all this construction that you are telling this Court
now?

WITNESS:

WITNESS:

A: March 6 and 7 because there were four (4) squatters.

A: The refusal to sell is not yet formal and the lawyer sent a letter
tendering full payment of the purchase price.

A: From the period of March 2, 1995 or two (2) weeks after the
removal of the squatters.

ATTY. EJERCITO:
Q: When did you find out that the Spouses Firme did not want to sell
the same?
A: First week of March 1995.
Q: In your Complaint you said you find out on March 3, 1995. Is that
not correct?
A: I cannot exactly remember, sir.
ATTY. MARQUEDA:
In the Complaint it does not state March 3. Maybe counsel was
thinking of this Paragraph 6 which states, When the property
was rid of the squatters onMarch 2, 1995 for the documentation
and payment of the sale, xxx.
ATTY. EJERCITO:
Q: So, you found out on March 2, 1995 that the defendants were no
longer interested in selling to you the property. Is that correct?
A: Yes, sir, because Mr. Aviles relayed it to me.

ATTY. EJERCITO:
Q: You mean to say that you did not believe Mr. Aviles when he told
you that the Spouses Firme were no longer selling the property?
A: No, sir.
Q: Was there anything formal when you say the Spouses Firme
agreed to sell the property?
A: None, sir.
Q: And yet that time you believe Mr. Aviles when he verbally told
you that the Sps. Firme agreed to sell the property? At what
point of the transaction with the Spouses Firme were you
advised by your lawyer?
WITNESS:
A: At the time when they refused to sell the lot.
ATTY. EJERCITO:
Q: Was that before the squatters were relocated allegedly by Bukal
Enterprises?
A: Yes, sir.

Q: In fact, it was the lawyer who advised you to relocate the

squatters. Is it not true?
A: No, sir.

[59]

Whether the Spouses Firme are entitled to

compensatory and moral damages

(Emphasis supplied)

Bukal Enterprises is obviously a builder in bad faith. No deed of sale has been
executed in this case. Despite the refusal of the Spouses Firme to sell the Property,
Bukal Enterprises still proceeded to introduce improvements on the
Property. Bukal Enterprises introduced improvements on the Property without the
knowledge and consent of the Spouses Firme. When the Spouses Firme learned
about the unauthorized constructions made by Bukal Enterprises on the Property,
[60]
they advised the latter to desist from further acts of trespass on their Property.
The Civil Code provides:
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses
what is built, planted or sown without right of indemnity.
Art. 450. The owner of the land on which anything has been built, planted or sown
in bad faith may demand the demolition of the work, or that the planting or sowing
be removed, in order to replace things in their former condition at the expense of
the person who built, planted or sowed; or he may compel the builder or planter to
pay the price of the land, and the owner the proper rent.
Under these provisions the Spouses Firme have the following options: (1) to
appropriate what Bukal Enterprises has built without any obligation to pay
indemnity; (2) to ask Bukal Enterprises to remove what it has built; or (3) to compel
[61]
Bukal Enterprises to pay the value of the land.
Since the SpousesFirme are
undoubtedly not selling the Property to Bukal Enterprises, they may exercise any of
the first two options. They may appropriate what has been built without paying
indemnity or they may ask Bukal Enterprises to remove what it has built at Bukal
Enterprises own expense.
Bukal Enterprises is not entitled to reimbursement for the expenses incurred
in relocating the squatters. Bukal Enterprises spent for the relocation of the
squatters even after learning that the Spouses Firme were no longer interested in
selling the Property. De Castro testified that even though the SpousesFirme did not
require them to remove the squatters, they chose to spend for the relocation of
[62]
the squatters since they were interested in purchasing the Property.

The Court agrees with the Court of Appeals to delete the award for
compensatory and moral damages. In awarding actual damages, the trial court
took into account the traveling expenses incurred by the Spouses Firme who are
already residing in the United States. However, the trial court failed to consider the
testimony of Dr. Firme that they normally travel to the Philippines more than once
[63]
a year to visit their children. Thus, the expenses for the roundtrip tickets dated
1996-1997 could not be attributed solely for the attendance of hearings in the case.
Nevertheless, an award of nominal damages of P30,000 is warranted since
[64]
Bukal Enterprises violated the property rights of the Spouses Firme. The Civil
Code provides:
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.
Art. 2222. The court may award nominal damages in every obligation arising from
any source enumerated in article 1157, or in every case where any property right
has been invaded.
The award of damages is also in accordance with Article 451 of the Civil Code
which states that the landowner is entitled to damages from the builder in bad
[65]
faith.
WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RENDER
a new one:
1.

Declaring that there was no perfected contract of sale;

2.

Ordering Bukal Enterprises to pay the Spouses Firme P30,000 as

nominal damages.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, and Azcuna, JJ., concur.

Ynares-Santiago, J., on official leave.
2.Yason v. Arciaga
[G.R. No. 145017. January 28, 2005]
DR. JOSE and AIDA YASON, petitioners, vs. FAUSTINO ARCIAGA, FELIPE NERI
ARCIAGA, DOMINGO ARCIAGA, and ROGELIO ARCIAGA, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997
[1]
Rules of Civil Procedure, as amended, assailing the Amended Decision of the
Court of Appeals dated September 13, 2000 in CA G.R. CV No. 55668, entitled
Faustino Arciaga, et. al. vs. Dr. Jose Yason and Aida Yason.
The factual antecedents as borne by the records are:
Spouses Emilio and Claudia Arciaga were owners of Lot No. 303-B situated in
Barangay Putatan, Muntinlupa City, with an area of 5,274 square meters covered
by TCT No. 40913 of the Registry of Deeds of Makati City. On March 28, 1983, they
executed a Deed of Conditional Sale whereby they sold Lot No. 303-B
for P265,000.00 to spouses Dr. Jose and Aida Yason, petitioners. They tendered an
initial payment of P150,000.00. On April 19, 1983, upon payment of the balance
of P115,000.00, spouses Emilio and Claudia Arciaga executed a Deed of Absolute
Sale. That day, Claudia died. She was survived by her spouse and their six (6)
children, namely: Faustino, Felipe Neri, Domingo, Rogelio, Virginia, and Juanita.
Petitioners had the Deed of Absolute Sale registered in the Registry of Deeds
of Makati City. They entrusted its registration to one Jesus Medina to whom they
delivered the document of sale and the amount of P15,000.00 as payment for the
capital gains tax. Without their knowledge, Medina falsified the Deed of Absolute
Sale and had the document registered in the Registry of Deeds of Makati City. He
made it appear that the sale took place on July 2, 1979, instead of April 19, 1983,
and that the price of the lot was only P25,000.00, instead of P265,000.00. On the
basis of the fabricated deed, TCT No. 40913 in the names of spouses Arciaga was
cancelled and in lieu thereof, TCT No. 120869 was issued in the names of
petitioners.

Subsequently, petitioners had Lot No. 303-B subdivided into 23 smaller

lots. Thus, TCT No. 120869 was cancelled and in lieu thereof, TCT Nos. 132942 to
132964 were issued. Petitioners then sold several lots to third persons, except the
13 lots covered by TCT Nos. 132942, 132943, 132945, 132946, 132948, 132950,
132951, 132953, 132954, 132955, 132958, 132962 and 132963, which they
retained.
Sometime in April 1989, spouses Arciagas children learned of the falsified
document of sale. Four of them, namely: Faustino, Felipe Neri, Domingo and
Rogelio, herein respondents, caused the filing with the Office of the Provincial
Prosecutor of Makati City a complaint for falsification of documents against
petitioners, docketed as I.S No. 89-1966. It was only after receiving the subpoena
in April 1989 when they learned that the Deed of Absolute Sale was
falsified. However, after the preliminary investigation, the Provincial Prosecutor
dismissed the complaint for falsification for lack of probable cause.
Undaunted, respondents, on October 12, 1989, filed with the Regional Trial
Court (RTC), Branch 62, Makati City, a complaint for annulment of the 13 land titles,
mentioned earlier, against petitioners. Respondents alleged inter alia that the
Deed of Absolute Sale is void ab initio considering that (1) Claudia Arciaga did not
give her consent to the sale as she was then seriously ill, weak, and unable to talk
and (2) Jesus Medina falsified the Deed of Absolute Sale; that without Claudias
consent, the contract is void; and that the 13 land titles are also void because a
forged deed conveys no title.
In their answer, petitioners specifically denied the allegations in the
complaint and averred that they validly acquired the property by virtue of the
notarized Deed of Conditional Sale and the Deed of Absolute Sale executed by
spouses Emilio and Claudia Arciaga, respondents parents. The Deed of Absolute
Sale was duly signed by the parties in the morning of April 19, 1983 when Claudia
was still alive. It was in the evening of the same day when she died. Hence, the
contract of sale is valid. Furthermore, they have no participation in the falsification
of the Deed of Absolute Sale by Medina. In fact, they exerted efforts to locate him
but to no avail.
On August 29, 1995, the trial court rendered a Decision dismissing
respondents complaint and sustaining the validity of the Deed of Conditional Sale
and the Deed of Absolute Sale. The dispositive portion reads:

WHEREFORE, Premises Considered, the COMPLAINT is hereby ordered DISMISSED,

without pronouncement as to costs.

It turned out that Medina did not use the Deed of Sale dated April 19, 1983 but
fabricated a Deed of Absolute Sale dated July 2, 1979 with a reduced consideration
ofP25,000.00.

SO ORDERED.
xxx
In their appeal to the Court of Appeals, respondents alleged that the trial
court clearly overlooked vital and significant facts which, if considered, would alter
the result. Likewise, the trial court erred in concluding that the Deed of Absolute
Sale forged by Medina transferred ownership to the vendees, being buyers in good
faith; and in finding that Claudia Arciaga consented to the sale of the lots to
[2]
petitioner spouses.
Initially, the Court of Appeals in its Decision dated February 21, 2000 affirmed
the trial courts ruling. But upon respondents motion for reconsideration, the
Appellate Court reconsidered its Decision. In its Amended Decision, it declared the
Deed of Absolute Sale void, thus:
WHEREFORE, Our decision dated February 21, 2000 is hereby SET ASIDE. The
Deed of Absolute Sale dated April 19, 1983 is hereby declared null and void. The
Registry of Deeds for Makati City is hereby ordered to cancel TCT Nos. 132942,
132943, 132945, 132946, 132948, 132950, 132951, 132953, 132954, 132955,
132958, 132962 and 132963 issued in the name of Jose Yason and to reinstate TCT
No. 40913 in the name of Emilio Arciaga.
SO ORDERED.
In reversing its own Decision, the Appellate Court held:
There is no evidence showing that said July 2, 1979 Deed of Absolute Sale covering
the subject property was ever executed by the parties. The appellees themselves
who were supposedly the vendees did not even know of the existence of such
sale. What the appellees were claiming was that they entrusted to one Jesus
Medina the original copies of the purported Deed of Absolute Sale dated April 19,
1983 and the owners copy of TCT No. 40913 together with the amount
of P15,000.00 for capital gains tax and expenses for registration.
xxx

Being a forged document, the July 2, 1979 Deed of Absolute Sale is indeed null and
void.
It appears, however, that a Deed of Conditional Sale dated March 28, 1983 (Exh. 1,
Record, p. 289) and a Deed of Absolute Sale dated April 19, 1983 (Exh. 2, Record, p.
290) were purportedly executed by Emilio Arciaga and the appellees and that the
said property was allegedly sold for P265,000.00.
xxx
The curious part about the controversial deeds is the date of their supposed
execution, especially the date of the Absolute Deed of Sale which coincides with
the date of the death of Claudia Arciaga. Also intriguing is the fact that only a
thumbmark and not a signature of Claudia Arciaga was affixed on the supposed
deeds, when in fact she could definitely read and write.
Appellants claimed that their mother Claudia Rivera never gave her consent to the
sale. They said that the thumbmark of their mother Claudia Arciaga was allegedly
fixed on the Deed of Conditional Sale, if indeed it was prepared before the death of
their mother on April 19, 1983, when she was already very ill and bedridden and
could not anymore give her consent thereto, and the Deed of Absolute Sale was
thumbmarked when she was already dead.
xxx
As between the testimony of the appellants and their sister Virginia Arciaga-Reyes,
We are inclined to believe the claim of the former that their mother Claudia Rivera
Arciaga died at around 10:00 in the morning.
xxx

The time when Claudia Rivera Arciaga actually died, to Us, is crucial if only to
determine the credibility of witnesses.

confirmed by the Court of Appeals, are final and conclusive on this

[3]
Court. However, there are exceptions, such as when the findings of the Court of
[4]
Appeals are contrary to those of the trial court, as in this case.

As between Virginia Arciaga Reyes and Jacklyn de Mesa, the latter is more
credible. She did not have any interest in the controverted property, unlike the
appellants and Virginia Reyes, who are the children of Claudia Rivera Arciaga. The
cardinal rule in the law of evidence is that the testimony must not only proceed
from the mouth of a credible witness but must also be credible in itself (People vs.
Serdan, G.R. 87318, September 2, 1992).

In determining whether the Deed of Absolute Sale dated April 19, 1983 is
valid, it must contain the essential requisites of contracts, viz: (1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract;
[5]
and (3) cause of the obligation which is established. A contract of sale is
perfected at the moment there is a meeting of the minds upon the thing which is
[6]
the object of the contract and upon the price. Consent is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are
[7]
to constitute the contract. To enter into a valid legal agreement, the parties must
have the capacity to do so.

xxx
We certainly cannot believe the testimony of Virginia Arciaga Reyes that her
mother Claudia went to the house of Atty. Fresnedi for the execution of the Deed
of Conditional Sale. A person who is physically fit to travel can definitely write his
signature, as only minimal effort is needed to perform this simple mechanical
act. But what appeared in the deed was only a purported thumb mark of
Claudia. Even Virginia Reyes said that her mother could write. Her testimony only
supports the claim of the appellants that Claudia Rivera Arciaga was already very ill
and weak when the Deed of Conditional Sale was purportedly executed, and was
already dead when she was made to affix her thumb mark on the Deed of Absolute
Sale.
xxx
In sum, the inconsistent testimonies of the appellee and his witnesses, particularly
that of Virginia Arciaga Reyes, clearly show that Claudia Rivera Arciaga did not
voluntarily affix her thumb mark on the Deed of Conditional Sale and Deed of
Absolute Sale.
Hence, this petition for review on certiorari alleging that the Court of Appeals
erred in declaring the Deed of Absolute Sale void for lack of consent on the part of
Claudia Arciaga and because the same document was forged by Medina.
The petition is impressed with merit.
The rule is that only questions of law may be raised in a petition for review
on certiorari; and that the factual findings of the trial court, when adopted and

The law presumes that every person is fully competent to enter into a
contract until satisfactory proof to the contrary is presented. The burden of proof
is on the individual asserting a lack of capacity to contract, and this burden has
been characterized as requiring for its satisfaction clear and convincing evidence.
The Appellate Court, in its Amended Decision, held that the Deed of Absolute
Sale is void for lack of consent on the part of Claudia Arciaga who could not have
affixed her thumbmark thereon since she was very ill then. In fact, she died a few
hours thereafter.
Thus, the basic issue for our resolution is whether Claudia Arciaga voluntarily
affixed her thumbmark on the documents of sale.
Respondents contend that Claudia did not give her consent to the contracts
of sale. Since she knew how to read and write, she should have signed each
document instead of merely affixing her thumbmark thereon.
Domingo Arciaga, one of the respondents, testified that her mother Claudia
was 82 years old when she died on April 19, 1983 due to old age and illness for
four (4) months. On March 28, 1983, when the Conditional Deed of Sale was
allegedly executed, she was already very weak and thin and could no longer
speak. Considering her physical condition, she could not have affixed her
[8]
thumbmark on the Conditional Deed of Sale that day.
Domingo further testified that their mother Claudia, at the time of her death,
was being attended to by his sisters Juanita and Virginia Arciaga; that he saw

Virginia holding the thumb of their mother to enable her to affix her thumbmark on
the Deed of Absolute Sale, then being held by Juanita, thus:

Q:

After that what happened?

A:

Q: Now, you have examined the document entitled Deed of Sale

dated April 19, 1983, when for the first time did you see this
document?
A:

When my mother died.

Q:

When?

A:

April 19, 1983.

Q:

After that what happened next?

A:

Q:

At what particular occasion or will you please tell the Honorable

Court the circumstances how you were able to see this
document on April 19, 1983?

A:

This is like this. While my mother was being attended, I went over
to the porch and I saw Mr. Rogelio Arciaga. We talked with
each other. After that I went inside the house wherein I saw
Juliana Arciaga holding that document, the Deed of Sale, and
Virginia Arciaga was holding the thumb of mother affixing said
thumb to the document.

Q:

Who is Virginia Arciaga?

A:

My sister.

Q:

How about Juanita Arciaga?

A:

My sister also.

Q:

How about Rogelio Arciaga?

A:

I have also a brother named Rogelio Arciaga but the one I

mentioned has the same name as my brother.

I asked, what is that? And they told me that one parcel of land was
sold already by us and they said that this is the Deed of Absolute
Sale as proof that we have sold that parcel of land. I asked them:
Why did you do that? It cannot be! Our mother is a good
mother, why still permit her to commit a sin.

They told me that they are not going to pursue with it and I told
[9]
them it cannot be really done.

Domingos testimony was corroborated by his brother Felipe Arciaga who

testified that their mother was already dead when her thumbmark was affixed on
the document of sale, thus:
Q: Did you hear any conversation between Domingo and your sisters
holding the document?
A:

Yes, sir.

Q:

What was the conversation that you heard?

A:

My brother said that it should not be thumbmarked since my

mother is already dead. My sisters Virginia and Juanita replied
[10]
that the thumb marking will no longer proceed.

Upon the other hand, petitioners maintain that Claudia voluntarily affixed her
thumbmark on the Deeds of Conditional and Absolute Sale which were notarized
by Atty. Jaime Fresnedi. and Absolute Sale which were notarized by Atty. Jaime
Fresnedi. Virginia Arciaga Andres, daughter of Claudia, testified that she took care
of her mother. Five (5) months prior to the execution of the Conditional Deed of
Sale on March 28, 1983, her parents informed her and her siblings that they would
sell their land. After the sale, her brother Felipe Neri borrowed P50,000.00 from
their father. Her father signed the two documents of sale, while her mother affixed

her thumbmark thereon. Then Atty. Jaime Fresnedi notarized the Conditional Deed
of Sale in his office, while the Deed of Absolute Sale was notarized in her
[11]
house. Her brothers (respondents herein) were all notified of the sale.
Atty. Jaime Fresnedi testified that he notarized the subject documents and
knew that Claudia affixed her thumbmark thereon, thus:

Q:

A:

Prior to the execution of this document, Absolute Deed of Sale

dated April 19, 1983, have you not met Claudia Rivera?

I cannot remember.
xxx

Q: What is the importance of the signatures in these two (2)

documents?
A:

That the parties who executed these documents appeared before

me, your Honor.

Q:

A:

I cannot remember.

And when did you notarize the said document, this Deed of
Absolute Sale dated April 19, 1983?

COURT:
Q:

A:

It was notarized in the same date.

Q:

Where was it notarized?

A:

It was also notarized in my office.

A:

Yes, sir.

A:

Did you ascertain whether the person who affixed that

thumbmark was really CLAUDIA ARCIAGA?

Yes, your Honor.

Q:

What means did you take to ascertain that the one who affixed
that thumbmark was CLAUDIA ARCIAGA?

A:

Because, your Honor, when there is a party, not necessarily your

Honor in this case, whenever a party would request me to
prepare a document and notarize such document, I asked his
name and he answered. Let us say for example, this Mr. dela
Cruz, he says he is Mr. dela Cruz or Mrs. Arciaga. That thru that
introduction I knew that they were the ones who affixed their
signatures or affix their thumbmarks.

[12]

xxx
Q:

A:

[13]

xxx

xxx
Q:

When you notarized this document on April 19, 1983, did you talk
to Claudia Rivera?

Do you know personally Claudia Arciaga, the wife of Emilio

Arciaga?

No, I do not know her personally.

Q:

In this particular case, did you do that?

A:

Yes, your Honor.

xxx
[14]

The Court of Appeals, reversing the trial court, held that respondents were
able to prove that Claudia Arciaga could not have affixed her thumbmark
voluntarily on the Conditional Deed of Sale as she was already very ill and
bedridden and could not anymore give her consent thereto; and that the
Absolute Deed of Sale was thumbmarked when she was already dead.
While it is true that Claudia was sick and bedridden, respondents failed to
prove that she could no longer understand the terms of the contract and that she
did not affix her thumbmark thereon. Unfortunately, they did not present the
doctor or the nurse who attended to her to confirm that indeed she was mentally
and physically incapable of entering into a contract. Mere weakness of mind alone,
[15]
without imposition of fraud, is not a ground for vacating a contract. Only if there
is unfairness in the transaction, such as gross inadequacy of consideration, the low
degree of intellectual capacity of the party, may be taken into consideration for the
purpose of showing such fraud as will afford a ground for annulling a
[16]
contract. Hence, a person is not incapacitated to enter into a contract merely
because of advanced years or by reason of physical infirmities, unless such age and
infirmities impair his mental faculties to the extent that he is unable to properly,
intelligently and fairly understand the provisions of said contract. Respondents
failed to show that Claudia was deprived of reason or that her condition hindered
her from freely exercising her own will at the time of the execution of the Deed of
Conditional Sale.
Also, it is of no moment that Claudia merely affixed her thumbmark on the
document. The signature may be made by a persons cross or mark even though he
is able to read and write and is valid if the deed is in all other respects a valid
[17]
one.
Significantly, there is no evidence showing that Claudia was forced or coerced
in affixing her thumbmark on the Deed of Conditional Sale.
Respondents insist that their mother died in the morning of April 19, 1983,
hence, she could no longer affix her thumbmark on the Deed of Absolute
Sale. Petitioners, however, maintain that she died in the evening of that day and
that she affixed her thumbmark on the deed in the morning of that same day.
Respondents should have offered in evidence the Certificate of Death of
Claudia to show the exact date and time of her death. Again, they should have
presented the attending physician to testify whether or not Claudia could still affix
her thumbmark then.

As earlier mentioned, the burden is on the respondents to prove the lack of

capacity on the part of Claudia to enter into a contract. And in proving this, they
must offer clear and convincing evidence. This they failed to do.
The Court of Appeals also held that there is inconsistency in the testimonies
of Virginia Arciaga and Atty. Jaime Fresnedi. While Virginia testified that the Deed
of Absolute Sale was notarized in her house where Claudia lived, Atty. Fresnedi
declared on the witness stand that he notarized the document in his office. The
Appellate Court concluded that such inconsistency clearly shows that Claudia did
not voluntarily affix her thumbmark on the document of absolute sale.
Records disclose, however, that when Atty. Fresnedi testified in court, nine
(9) years had passed from the time he notarized the Deed of Absolute
Sale. Considering the length of time that passed and the numerous documents he
must have notarized, his failure to remember exactly where he notarized the
contract of sale is understandable. Thus, we cannot sustain the finding and
conclusion of the Court of Appeals on this point.
[18]

In Chilianchin vs. Coquinco, this Court held that a notarial document must
be sustained in full force and effect so long as he who impugns it does not present
strong, complete, and conclusive proof of its falsity or nullity on account of some
flaws or defects provided by law. Here, respondents failed to present such proof.
It bears emphasis that a notarized Deed of Absolute Sale has in its favor the
presumption of regularity, and it carries the evidentiary weight conferred upon it
[19]
with respect to its execution.
All told, we are convinced and so hold that there was consent on the part of
Claudia Arciaga when she executed the Conditional Deed of Sale and the Deed of
Absolute Sale being assailed by respondents. These documents, therefore, are
valid.
WHEREFORE, the challenged Decision of the Court of Appeals in CA-G.R. CV
No. 55668 is REVERSED. The Decision of the RTC, Branch 62, Makati City dismissing
respondents complaint is AFFIRMED.
SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur

3. Sps. Ramos v. Spouses Heruela

SPOUSES GOMER and

LEONOR RAMOS,
Petitioners,

G.R. No. 145330

The Antecedent Facts

Present:
Davide, Jr., C.J.,
Chairman,
Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.

- versus -

The spouses Gomer and Leonor Ramos (spouses Ramos) own a parcel of
land, consisting of 1,883 square meters, covered by Transfer Certificate of
Title (TCT) No. 16535 of the Register of Deeds of Cagayan de Oro City. On 18

SPOUSES SANTIAGO and

MINDA HERUELA, and
SPOUSES CHERRY and
RAYMOND PALLORI,
Respondents.

Promulgated:

February 1980, the spouses Ramos made an agreement with the spouses Santiago
[3]

October 14, 2005

and Minda Heruela (spouses Heruela) covering 306 square meters of the land

x-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

(land). According to the spouses Ramos, the agreement is a contract of

conditional sale. The spouses Heruela allege that the contract is a sale on

CARPIO, J.:

installment basis.

The Case
On 27 January 1998, the spouses Ramos filed a complaint for Recovery of

[1]

[2]

Ownership with Damages against the spouses Heruela. The case was docketed as

Before the Court is a petition for review assailing the Decision dated 23
August 2000 and the Order dated 20 September 2000 of the Regional Trial Court
(trial court) of Misamis Oriental, Branch 21, in Civil Case No. 98-060. The trial

Civil Case No. 98-060. The spouses Ramos allege that out of
[4]

the P15,300 consideration for the sale of the land, the spouses Heruela paid

court dismissed the plaintiffs action for recovery of ownership with damages.
only P4,000. The last installment that the spouses Heruela paid was on 18

December 1981. The spouses Ramos assert that the spouses Heruelas unjust
The spouses Heruela further allege that the 306 square meters specified
refusal to pay the balance of the purchase price caused the cancellation of the
in the contract was reduced to 282 square meters because upon subdivision of the
Deed of Conditional Sale. In June 1982, the spouses Ramos discovered that the
land, 24 square meters became part of the road. The spouses Heruela claim that in
spouses Heruela were already occupying a portion of the land. Cherry and
March 1982, they expressed their willingness to pay the balance of P11,300 but the
Raymond Pallori (spouses Pallori), daughter and son-in-law, respectively, of the
spouses Ramos refused their offer.
spouses Heruela, erected another house on the land. The spouses Heruela and the
spouses Pallori refused to vacate the land despite demand by the spouses Ramos.

The spouses Heruela allege that the contract is a sale on installment

The Ruling of the Trial Court

[5]

In its Decision dated 23 August 2000, the trial court ruled

that the

basis. They paid P2,000 as down payment and made the following installment
contract is a sale by installment. The trial court ruled that the spouses Ramos
payments:

[6]

failed to comply with Section 4 of Republic Act No. 6552 (RA 6552), as follows:
31 March 1980
2 May 1980
20 June 1980
8 October 1980

P200
P400
P200
P500

5 March 1981

P400

18 December 1981

P300

(for April and May 1980)

(for June 1980)
(for July, August and part of
September 1980)
(for October and November
1980)
(for December 1980 and
part of January 1981)

SEC. 4. In case where less than two years of

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

The dispositive portion of the Decision reads:

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

I.

Whether RA 6552 is applicable to an absolute sale

of land;

II.

Whether Articles 1191 and 1592 of the Civil Code are

applicable to the present case;

III.

Whether the spouses Ramos have a right to cancel

the sale;

IV.

Whether the spouses Heruela have a right to

[9]
damages.

[7]

The Ruling of the Court

[8]

In an Order dated 20 September 2000, the trial court denied the spouses
The petition is partly meritorious.
Ramos motion for reconsideration.
Hence, this petition.
The Agreement is a Contract to Sell

The Issues

In its Decision, the trial court ruled on whether the contract made by the
parties is a conditional sale or a sale on installment. The spouses Ramos premise is

The spouses Ramos raise the following issues:

that since the trial court ruled that the contract is a sale on installment, the trial

court also in effect declared that the sale is an absolute sale. The spouses Ramos
allege that RA 6552 is not applicable to an absolute sale.

In this case, the agreement of the parties is embodied in a one-page,

handwritten document.

[15]

The document does not contain the usual terms and

conditions of a formal deed of sale. The original document, elevated to this Court
Article 1458 of the Civil Code provides that a contract of sale may be
as part of the Records, is torn in part. Only the words LMENT BASIS is legible on
absolute or conditional. A contract of sale is absolute when title to the property
passes to the vendee upon delivery of the thing sold.

the title. The names and addresses of the parties and the identity of the property

[10]

A deed of sale is absolute

cannot be ascertained. The agreement only provides for the following terms of the

when there is no stipulation in the contract that title to the property remains with
the seller until full payment of the purchase price.

[11]

sale:
The sale is also absolute if
TERM[S] OF SALE:

there is no stipulation giving the vendor the right to cancel unilaterally the contract
the moment the vendee fails to pay within a fixed period.

[12]

In a conditional sale,

as in a contract to sell, ownership remains with the vendor and does not pass to
the vendee until full payment of the purchase price.

[13]

PRICE PER SQM P50.00 X 306

SQM
P 15,300.00
DOWN PAYMENT (TWO THOUSAND PESOS)

2,000.00
BALANCE PAYABLE AT MINIMUM
OF P200.00
P 13,300.00
PER MONTH UNTIL FULLY PAID
=======

The full payment of the

purchase price partakes of a suspensive condition, and non-fulfillment of the

condition prevents the obligation to sell from arising.

[14]

In Manuel v. Rodriguez, et al.,

[16]

the Court ruled that to be a written

contract, all the terms must be in writing, so that a contract partly in writing and

partly oral is in legal effect an oral contract. The Court reiterated the Manuel ruling
[17]

in Alfonso v. Court of Appeals:

xxx In Manuel, only the price and the terms of

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

occupation of the land is lawful because having made partial payments of the
purchase price, they already considered themselves owners of the
land.

[18]

Clearly, there was no transfer of title to the spouses Heruela. The spouses

Ramos retained their ownership of the land. This only shows that the parties did
not intend the transfer of ownership until full payment of the purchase price.

RA 6552 is the Applicable Law

The trial court did not err in applying RA 6552 to the present case.

Articles 1191
The records show that the spouses Heruela did not immediately take
actual, physical possession of the land. According to the spouses Ramos, in March
1981, they allowed the niece of the spouses Heruela to occupy a portion of the
land. Indeed, the spouses Ramos alleged that they only discovered in June 1982
that the spouses Heruela were already occupying the land. In their answer to the
complaint, the spouses Heruela and the spouses Pallori alleged that their

[19]

and 1592

[20]

of the Civil Code are applicable to contracts of

sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals,

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

[21]

the Court

Sections 3 and 4 of RA 6552 provide:

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

(b)

To pay, without additional interest,

the unpaid installments due within
the total grace period earned by him,
which is hereby fixed at the rate of
one month grace period for every
one year of installment payments
made: Provided, That this right shall
be exercised by the buyer only once
in every five years of the life of the
contract and its extensions, if any.
If the contract is cancelled, the seller
shall refund to the buyer the cash
surrender value of the payments on
the property equivalent to fifty per
cent of the total payments made
and, after five years of installments,
an additional five per cent every year
but not to exceed ninety per cent of
the total payments
made: Provided, That the actual
cancellation of the contract shall take

place after thirty days from receipt

by the buyer of the notice of
cancellation or the demand for
rescission of the contract by a
notarial act and upon full payment of
the cash surrender value to the
buyer.
Down payments, deposits or options on the contract
shall be included in the computation of the total number of
installments made.
Sec. 4. In case where less than two years of installments
were paid, the seller shall give the buyer a grace period of not
less than sixty days from the date the installment became
due. If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the
contract by a notarial act.

In this case, the spouses Heruela paid less than two years of
installments. Thus, Section 4 of RA 6552 applies. However, there was neither a
notice of cancellation nor demand for rescission by notarial act to the spouses
Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp.,

[22]

the Court ruled

that the vendor could go to court to demand judicial rescission in lieu of a notarial

act of rescission. However, an action for reconveyance is not an action for

the statutory grace period within which to pay. The trial court should have fixed

rescission. The Court explained in Olympia:

the grace period to sixty days conformably with Section 4 of RA 6552.

The action for reconveyance filed by petitioner was

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

The spouses Heruela are not entirely fault-free. They have been remiss in
performing their obligation. The trial court found that the spouses Heruela offered
once to pay the balance of the purchase price. However, the spouses Heruela did

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

not consign the payment during the pendency of the case. In the meanwhile, the
spouses Heruela enjoyed the use of the land.

For the breach of obligation, the court, in its discretion, and applying
Article 2209 of the Civil Code,
on the amount of damages.

[24]

[25]

may award interest at the rate of 6% per annum

The spouses Heruela have been enjoying the use of

the land since 1982. In 1995, they allowed their daughter and son-in-law, the

In the present case, there being no valid rescission of the contract to sell, the
action for reconveyance is premature. Hence, the spouses Heruela have not lost

spouses Pallori, to construct a house on the land. Under the circumstances, the
Court deems it proper to award interest at 6% per annum on the balance of the
purchase price.

The records do not show when the spouses Ramos made a demand from
the spouses Heruela for payment of the balance of the purchase price. The

On the Award of Attorneys Fees and Litigation Expenses

complaint only alleged that the spouses Heruelas unjust refusal to pay in full the
The trial court ordered the spouses Ramos to pay the
purchase price xxx has caused the Deed of Conditional Sale to be rescinded,
spouses Heruela and the spouses Pallori the amount of P20,000 as
[26]

revoked and annulled.

The complaint did not specify when the spouses Ramos

attorneys fees and P10,000 as litigation expenses. Article 2208

[28]

of the Civil

made the demand for payment. For purposes of computing the legal interest, the
Code provides that subject to certain exceptions, attorneys fees and expenses of
reckoning period should be the filing on 27 January 1998 of the complaint for
litigation, other than judicial costs, cannot be recovered in the absence of
reconveyance, which the spouses Ramos erroneously considered an action for
stipulation. None of the enumerated exceptions applies to this case. Further, the
rescission of the contract.
policy of the law is to put no premium on the right to litigate.
The Court notes the reduction of the land area from 306 square meters

[29]

Hence, the award

of attorneys fees and litigation expenses should be deleted.

to 282 square meters. Upon subdivision of the land, 24 square meters became part
WHEREFORE, we AFFIRM the Decision dated 23 August 2000 of the
of the road. However, Santiago Heruela expressed his willingness to pay for the
Regional Trial Court of Misamis Oriental, Branch 21, dismissing the complaint for
306 square meters agreed upon despite the reduction of the land area.

[27]

Thus,
Recovery of Ownership with Damages, with the following MODIFICATION:

there is no dispute on the amount of the purchase price even with the reduction of
the land area.

1.

The spouses Heruela shall pay the spouses Ramos P11,300 as

balance of the purchase price plus interest at 6% per annum from
27 January 1998. The spouses Heruela shall pay within 60 days

SO ORDERED.
4. Sps. Cruz vs. Sps. Fernando
SPS. LUIS V. CRUZ and
AIDA CRUZ,
Petitioners,

G.R. NO. 145470

Present:
PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

from finality of this Decision;

- versus 2.

Upon payment, the spouses Ramos shall execute a deed of absolute

spouses Heruela;

SPS. ALEJANDRO FERNANDO,

SR., and RITA FERNANDO,
Promulgated:
Respondents.
December 9, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

In case of failure to thus pay within 60 days from finality of this

DECISION

Decision, the spouses Heruela and the spouses Pallori shall

AUSTRIA-MARTINEZ, J.:

sale of the land and deliver the certificate of title in favor of the

3.

immediately vacate the premises without need of further demand,

and the down payment and installment payments of P4,000 paid by

For resolution is a petition for review on certiorari under Rule 45 of the

[1]

Rules of Court, assailing the Decision dated October 3, 2000 of the Court of
Appeals (CA) in CA-G.R. CV No. 61247, dismissing petitioners appeal and affirming

the spouses Heruela shall constitute rental for the land;

4.

The award of P20,000 as attorneys fees and P10,000 as litigation

the decision of the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 79, in
Civil Case No. 877-M-94.
The antecedent facts are as follows:

expenses in favor of the spouses Heruela and the spouses Pallori is

deleted.

Luis V. Cruz and Aida Cruz (petitioners) are occupants of the front portion of a

relocated their house from the rear portion of the lot to the front portion that was

710-square meter property located in Sto. Cristo, Baliuag, Bulacan. On October 21,

sold to them; (3) Mrs. Glorioso prevented the complete consummation of the sale

1994, spouses Alejandro Fernando, Sr. and Rita Fernando (respondents) filed

when she refused to have the exact boundaries of the lot bought by petitioners

before the RTC a complaint for accion publiciana against petitioners, demanding

surveyed, and the existing survey was made without their knowledge and

the latter to vacate the premises and to pay the amount of P500.00 a month as

participation; and (4) respondents are buyers in bad faith having bought that

reasonable rental for the use thereof. Respondents alleged in their complaint that:

portion of the lot occupied by them (petitioners) with full knowledge of the prior

(1) they are owners of the property, having bought the same from the spouses

sale to them by the Gloriosos.

[4]

Clodualdo and Teresita Glorioso (Gloriosos) per Deed of Sale dated March 9, 1987;
(2) prior to their acquisition of the property, the Gloriosos offered to sell to
petitioners the rear portion of the property but the transaction did not materialize

After due proceedings, the RTC rendered a Decision on April 3, 1998 in favor
of respondents. The decretal portion of the decision provides:

due to petitioners failure to exercise their option; (3) the offer to sell is embodied
in a Kasunduan dated August 6, 1983 executed before the Barangay Captain; (4)
due to petitioners failure to buy the allotted portion, respondents bought the
whole property from the Gloriosos; and (5) despite repeated demands, petitioners
refused to vacate the property.

[2]

Petitioners filed a Motion to Dismiss but the RTC dismissed it for lack of merit
in its Order dated March 6, 1995.

[3]

Petitioners then filed their Answer setting forth

PREMISES CONSIDERED, the herein plaintiffs was able

to prove by preponderance of evidence the case of accion
publiciana, against the defendants and judgment is hereby
rendered as follows:
1. Ordering defendants and all persons claiming
under them to vacate placefully (sic) the premises in question
and to remove their house therefore (sic);
2. Ordering defendants to pay plaintiff the sum
of P500.00 as reasonable rental per month beginning October
21, 1994 when the case was filed before this Court and every
month thereafter until they vacate the subject premises and to
pay the costs of suit.

the affirmative defenses that: (1) the Kasunduan is a perfected contract of sale; (2)
the agreement has already been partially consummated as they already

The counter claim is hereby DISMISSED for lack of

merit.

SO ORDERED.

[5]

The RTC dwelt on the issue of which portion was being sold by the
Petitioners appealed the RTC decision but it was affirmed by the CA per its
Gloriosos to petitioners, finding that it was the rear portion and not the front
Decision dated October 3, 2000.
portion that was being sold; while the CA construed the Kasunduan as a mere
contract to sell and due to petitioners failure to pay the purchase price, the
Hence, the present petition raising the following issues:
Gloriosos were not obliged to deliver to them (petitioners) the portion being sold.
1. Whether the Honorable Court of Appeals
committed an error of law in holding that the Agreement
(Kasunduan) between the parties was a mere offer to sell,
and not a perfected Contract of Purchase and Sale?
2. Whether the Honorable Court of Appeals
committed an error of law in not holding that where the parties
clearly gave the petitioners a period of time within which to pay
the price, but did not fix said period, the remedy of the vendors
is to ask the Court to fix the period for the payment of the
price, and not an accion publiciana?

3. Whether the Honorable Court of Appeals

committed an error of law in not ordering respondents to at
least deliver the back portion of the lot in question upon
payment of the agreed price thereof by petitioners, assuming
that the Regional Trial Court was correct in finding that the
subject matter of the sale was said back portion, and not the
front portion of the property?

Petitioners, however, insist that the agreement was a perfected contract

of sale, and their failure to pay the purchase price is immaterial. They also contend
that respondents have no cause of action against them, as the obligation set in
the Kasunduan did not set a period, consequently, there is no breach of any
obligation by petitioners.

The resolution of the issues in this case principally is dependent on the

interpretation of the Kasunduan dated August 6, 1983 executed by petitioners and
the Gloriosos. The Kasunduan provided the following pertinent stipulations:

a.
4. Whether the Honorable Court of Appeals
committed an error of law in affirming the decision of the trial
court ordering the petitioners, who are possessors in good
faith, to pay rentals for the portion of the lot possessed by
[6]
them?

Na pumayag ang mga maysumbong (referring to the

Gloriosos) na pagbilhan ang mga ipinagsumbong
(referring to petitioners) na bahagi ng lupa at ang
ipagbibili ay may sukat na 213 metrong parisukat
humigit kumulang sa halagang P40.00 bawat metrong
parisukat;

b.

c.

d.

e.

Na sa titulong papapanaugin ang magiging kabuuang

sukat na mauukol sa mga ipinagsusumbong ay 223
metrong parisukat at ang 10 metro nito ay bilang
kaloob ng mga maysumbong sa mga
Ipinagsusumbong na bahagi ng right of way;
Na ang right of way ay may luwang na 1.75 meters
magmula sa daang Lopez Jaena patungo sa likuran ng
lote na pagtatayuan ng bahay ng mga
Ipinagsusumbong na kanyang bibilhin;
Na ang gugol sa pagpapasukat at pagpapanaog ng titulo
ay paghahatian ng magkabilang panig na ang panig ay
magbibigay ng halagang hindi kukulanging sa
halagang tig-AAPAT NA DAANG PISO (P400.00);
Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa
bahaging kanilang nabili o mabibili sa buwan ng Enero
[7]
31, 1984; (Emphasis supplied)

the parties may reciprocally demand performance subject to the provisions of the
law governing the form of contracts.

In a contract of sale, the title to the property passes to the vendee upon
the delivery of the thing sold, as distinguished from a contract to sell where
ownership is, by agreement, reserved in the vendor and is not to pass to the
vendee until full payment of the purchase price.

[8]

Otherwise stated, in a contract

of sale, the vendor loses ownership over the property and cannot recover it until
and unless the contract is resolved or rescinded; whereas, in a contract to sell, title
is retained by the vendor until full payment of the price. In the latter contract,
payment of the price is a positive suspensive condition, failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title from

Under Article 1458 of the Civil Code, a contract of sale is a contract by which

becoming effective.

one of the contracting parties obligates himself to transfer the ownership and to
deliver a determinate thing,

The Kasunduan provides for the following terms and conditions: (a) that

and the other to pay therefor a price certain in money or its

the Gloriosos agreed to sell to petitioners a portion of the property with an area of

equivalent. Article 1475 of the Code further provides that the contract of sale is

213 meters at the price of P40.00 per square meter; (b) that in the title that will be

perfected at the moment there is meeting of the minds upon the thing

caused to be issued, the aggregate area is 223 square meters with 10 meters

which is the object of the contract and upon the price. From that moment

thereof serving as right of way; (c) that the right of way shall have a width of 1.75
meters from Lopez Jaena road going towards the back of the lot where petitioners

will build their house on the portion of the lot that they will buy; (d) that the

For another, the telltale provision in the Kasunduan that: Na pumayag

expenses for the survey and for the issuance of the title will be divided between

ang mga maysumbong na pagbilhan ang mga ipinagsumbong na bahagi ng lupa at

the parties with each party giving an amount of no less than P400.00; and (e) that

ang ipagbibili ay may sukat na 213 metrong parisukat humigit kumulang sa

petitioners will definitely relocate their house to the portion they bought or will

halagang P40.00 bawat metrong parisukat, simply means that the Gloriosos

buy by January 31, 1984.

only agreed to sell a portion of the property and that the portion to be
sold measures 213 square meters.

The foregoing terms and conditions show that it is a contract to sell and
not a contract of sale. For one, the conspicuous absence of a definite manner of

Another significant provision is that which reads: Na ang

payment of the purchase price in the agreement confirms the conclusion that it is a

ipinagsusumbong ay tiyakang ililipat ang bahay sa bahaging kanilang nabili

contract to sell. This is because the manner of payment of the purchase price is

omabibili sa buwan ng Enero 31, 1984. The foregoing indicates that a contract of

an essential element before a valid and binding contract of sale can

sale is yet to be consummated and ownership of the property remained in the

[9]

exist. Although the Civil Code does not expressly state that the minds of the

Gloriosos. Otherwise, why would the alternative term mabibili be used if indeed

parties must also meet on the terms or manner of payment of the price, the same

the property had already been sold to petitioners.

is needed, otherwise there is no sale.

Appeals,

[11]

[10]

As held in Toyota Shaw, Inc. vs. Court of

a definite agreement on the manner of payment of the price is an

essential element in the formation of a binding and enforceable contract of sale.

In addition, the absence of any formal deed of conveyance is a strong

indication that the parties did not intend immediate transfer of ownership.

[12]

The Kasunduan does not establish any definite agreement between the
parties concerning the terms of payment. What it merely provides is the purchase
price for the 213-square meter property at P40.00 per square meter.

Normally, in a contract to sell, the payment of the purchase price is the

positive suspensive condition upon which the transfer of ownership
depends.

[13]

The parties, however, are not prohibited from stipulating other lawful

conditions that must be fulfilled in order for the contract to be converted from a
contract to sell or at the most an executory sale into an executed one.

[14]

title to petitioners; and the Kasunduan from having obligatory force.

[15]

It is

established by evidence that the petitioners did not transfer their house located in
the front portion of the subject property to the rear portion which, under

In the present case, aside from the payment of the purchase price, there

the Kasunduan, they intended to buy. Thus, no obligation arose on the part of the

existed another suspensive condition, i.e.: that petitioners will relocate their house

Gloriosos to consider the subject property as having been sold to petitioners

to the portion they bought or will buy by January 31, 1984.

because the latters non-fulfillment of the suspensive condition rendered the

contract to sell ineffective and unperfected.

Petitioners failed to abide by the express condition that they should

relocate to the rear portion of the property being bought by January 31,

Petitioners admit that they have not paid a single centavo to the

1984. Indeed, the Kasunduan discloses that it is the rear portion that was being

Gloriosos. However, petitioners argue that their nonpayment of the purchase price

sold by the Gloriosos, and not the front portion as petitioners stubbornly

was due to the fact that there is yet to be a survey made of the property. But

claim. This is evident from the provisions establishing a right of way from Lopez

evidence shows, and petitioners do not dispute, that as early as August 12, 1983, or

Jaena road going towards the back of the lot, and requiring them to relocate their

six days after the execution of the Kasunduan, a survey has already been made and

house to the portion being sold by January 31, 1984. Petitioners are presently

the property was subdivided into Lot Nos. 565-B-1 (front portion) and 565-B-2 (rear

occupying the front portion of the property. Why the need for a right of way and

portion), with Lot No. 565-B-2 measuring 223 square meters as the portion to be

for petitioners to relocate if the front portion on which their house stands is the

bought by petitioners.

portion being sold?

Petitioners question the survey made, asserting that it is a table survey
This condition is a suspensive condition noncompliance of which
prevented the Gloriosos from proceeding with the sale and ultimately transferring

made without their knowledge and participation. It should be pointed out that
the Kasunduan merely provides that the expenses for the survey will be divided

between them and that each party should give an amount of no less

not parties to the Kasunduan between petitioners and the Gloriosos, and they have

than P400.00. Nowhere is it stated that the survey is a condition precedent for the

no standing whatsoever to seek such recourse. In the second place, such recourse

payment of the purchase price.

properly pertains to petitioners. It was they who should have sought the courts
intercession. If petitioners believed that they have an actionable contract for the

Petitioners further claim that respondents have no cause of action

sale of the property, prudence and common sense dictate that they should have

against them because their obligation to pay the purchase price did not yet arise, as

sought its enforcement forthwith. Instead, petitioners whiled away their time.

the agreement did not provide for a period within which to pay the purchase
price. They argue that respondents should have filed an action for specific

Furthermore, there is no need for a judicial rescission of

performance or judicial rescission before they can avail of accion publiciana.

the Kasunduan for the simple reason that the obligation of the Gloriosos to transfer
the property to petitioners has not yet arisen. There can be no rescission of an

Notably, petitioners never raised these arguments during the

obligation that is nonexistent, considering that the suspensive conditions therefor

proceedings before the RTC. Suffice it to say that issues raised for the first time on

have not yet happened.

[18]

appeal and not raised timely in the proceedings in the lower court are barred by
estoppel.

[16]

Matters, theories or arguments not brought out in the original

Hence, petitioners have no superior right of ownership or possession to

proceedings cannot be considered on review or appeal where they are raised for

speak of. Their occupation of the property was merely through the tolerance of

the first time. To consider the alleged facts and arguments raised belatedly would

the owners. Evidence on record shows that petitioners and their predecessors

amount to trampling on the basic principles of fair play, justice and due process.

[17]

were able to live and build their house on the property through the permission and
kindness of the previous owner, Pedro Hipolito, who was their relative,

Moreover, it would be inutile for respondents to first petition the court to

fix a period for the performance of the contract. In the first place, respondents are

[19]

and

subsequently, Teresita Glorioso, who is also their relative. They have no title or, at
the very least, a contract of lease over the property. Based as it was on mere

tolerance, petitioners possession could neither ripen into ownership nor operate
to bar any action by respondents to recover absolute possession thereof.

[20]

RTC at P500.00 per month beginning October 21, 1994 when respondents filed the
case against them until they vacate the premises.

There is also no merit to petitioners contention that respondents are

buyers in bad faith. As explained in Coronel vs. Court of Appeals:

Finally, petitioners seek compensation for the value of the improvements

introduced on the property. Again, this is the first time that they are raising this
point. As such, petitioners are now barred from seeking such relief.

In a contract to sell, there being no previous sale of

the property, a third person buying such property despite 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 of the property. 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
[21]
for damages by the intending buyer. (Emphasis supplied)

[23]

WHEREFORE, the petition is DENIED. The Decision of the Court of

Appeals dated October 3, 2000 in CA-G.R. CV No. 61247 isAFFIRMED.

SO ORDERED.
A person who occupies the land of another at the latter's forbearance or
permission without any contract between them is necessarily bound by an implied
promise that he will vacate upon demand.

[22]

5. Ursal vs. Court of Appeals

WINIFREDA URSAL,

G.R. No. 142411

Petitioner,
Present:

Considering that petitioners continued possession of the property has

already been rendered unlawful, they are bound to pay reasonable rental for the
use and occupation thereof, which in this case was appropriately pegged by the

- versus -

PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

COURT OF APPEALS, THE RURAL BANK OF

LARENA (SIQUIJOR), INC. and SPOUSES JESUS
MONESET and CRISTITA MONESET,
Respondents.

Promulgated:
October 14, 2005

1. That on the date of the signing of this agreement, the VENDEE

will tender an earnest money or downpayment of P50,000.00 to the
VENDOR, and by these presents, the latter hereby acknowledges
receipt of said amount from the former;

x----------------------------------------------------------- x
2. That the balance of the selling price of P80,000.00 shall be paid
by the VENDEE to the VENDOR in equal monthly installments of
P3,000.00 starting the month of February, 1985, until said balance of
the selling price shall be fully paid;

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of

[1]

Court seeking the reversal of the Decision of the Court of Appeals (CA) dated June
28, 1999 and the Resolution dated January 31, 2000 denying petitioners motion
for reconsideration.

3. That if the VENDEE shall fail or in default to pay six (6) monthly
installments to the VENDOR the herein agreement is deemed
cancelled, terminated and/or rescinded and in such event, the
VENDEE (sic) binds to refund to the VENDOR (sic) the deposit
of P50,000.00 and with the latters (sic) obligation to pay the former
(sic) as a corresponding refund for cost of improvements made in
the premises by VENDEE;

[2]

4. That on the date of receipt of the downpayment of P50,000.00

by the VENDOR, it is mutually agreed for VENDEE to occupy and take
physical possession of the premises as well as for the latter
(VENDEE) to keep and hold in possession the corresponding transfer
certificate of title No. ______ of the land in question which is the
subject of this agreement;

These are the facts:

The spouses Jesus and Cristita Moneset (Monesets) are the registered owners
of a 333-square meter land together with a house thereon situated at Sitio Laguna,
Basak, Cebu City covered by Transfer Certificate of Title No. 78374.

[3]

On January 9,

1985, they executed a Contract to Sell Lot & House in favor of petitioner
Winifreda Ursal (Ursal), with the following terms and conditions:

5. That on the date of final payment by the VENDEE to the

VENDOR, the latter shall execute at her expense the corresponding
document of DEED OF ABSOLUTE SALE for the former as well as the
payment of realty clearances, BIR Capital Gain Tax, sales tax or
transfer fees and attorneys fees; that, for the issuance of title in
[4]
VENDEEs name shall be the exclusive account of said VENDEE.

Petitioner paid the down payment and took possession of the property. She
That the VENDOR (Cristita R. Moneset) offers to SELL and the
VENDEE accepts to BUY at the agreed lump sum price
of P130,000.00 payable on the installment basis as follows:

immediately built a concrete perimeter fence and an artesian well, and planted
fruit bearing trees and flowering plants thereon which all amounted

to P50,000.00. After paying six monthly installments, petitioner stopped paying

due to the Monesets failure to deliver to her the transfer certificate of title of the

The Monesets answered that it was Ursal who stopped paying the agreed
[12]

property as per their agreement; and because of the failure of the Monesets to

monthly installments in breach of their agreement.

turn over said title, petitioner failed to have the contract of sale annotated

hand, averred that the title of the property was in the name of Cristita Radaza

thereon.

[5]

The Bank, on the other

Moneset married to Jesus Moneset and did not show any legal infirmity.

Unknown to petitioner, the Monesets executed on November 5, 1985 an

absolute deed of sale in favor of Dr. Rafael Canora, Jr. over the said property
for P14,000.00.

[6]

[13]

Bundalo, meanwhile, was not served summons because he could no

longer be found at his given address.

[14]

On September 15, 1986, the Monesets executed another sale,

this time with pacto de retro with Restituto Bundalo.

[7]

On the same day, Bundalo,

as attorney-in-fact of the Monesets, executed a real estate mortgage over said

Trial on the merits proceeded. Thereafter, the Regional Trial Court of Cebu

property with Rural Bank of Larena (hereafter Bank) located in Siquijor for the

City, Branch 24, rendered its decision finding that Ursal is more credible than the

amount of P100,000.00.

[8]

The special power of attorney made by the Monesets in

favor of Bundalo as well as the real estate mortgage was then annotated on the
title on September 16, 1986.

[9]

Monesets and that the Monesets are liable for damages for fraud and breach of the
contract to sell:

For the failure of the Monesets to pay the loan, the

Bank served a notice of extrajudicial foreclosure dated January 27, 1988 on

Bundalo.

[10]

On September 30, 1989, Ursal filed an action for declaration of non-effectivity

of mortgage and damages against the Monesets, Bundalo and the Bank. She
claimed that the defendants committed fraud and/or bad faith in mortgaging the
property she earlier bought from the Monesets with a bank located in another
island, Siquijor; and the Bank acted in bad faith since it granted the real estate
mortgage in spite of its knowledge that the property was in the possession of
petitioner.

[11]

The evidence of [Ursal] show that she was the first to

acquire a substantial interest over the lot and house by virtue
of the execution of the Contract to Sell (Exh. A). After the
execution of Exh. A plaintiff took possession of the
questioned lot and houseafter she made a downpayment
of P50,000.00. *S+he paid the installments for six (6) months
without fail. [However] plaintiff (stopped) paying the
installment because defendant spouses failed to give her the
Transfer Certificate of Title over the lot and house despite
repeated demands. It is evident then that the first to violate
the conditions of Exh. A were the defendants Spouses
Moneset. This is the reason why plaintiff was not able to
annotate Exh. A on the TCT. The evidence of plaintiff show
that there was no intention on her part to discontinue paying
the installments. In a reciprocal obligation, one cannot be

compelled to do if the other party fails to do his part (Art. 1169,

New Civil Code).

The acts of defendant Spouses Moneset in selling again

the lot and house in question to Dr. Canora by executing a Deed
of Absolute Sale; in selling the same on pacto de retro to
defendant Bundalo; and in mortgaging the same to defendant
Rural Bank of Larena are plainly and clearly fraudulent because
they were done while Exh. A was still existing and the
transaction was done without notice to the plaintiff. As
provided in Art. 1170 of the New Civil Code, those who are
guilty of fraud in the performance of their obligation --- and
those who in any manner contravene the tenor thereof, are
liable for damages.

Another ground for liability under this article is when

there is fraud/deceit. In the instant case, there was
fraud/deceit on the part of the defendant spouses Moneset
when they executed the Deed of Sale to Dr. Canora; the Deed
of Sale with Pacto de Retro to Bundalo and the Special Power of
Attorney for Bundalo to execute for and in their behalf the Real
Estate Mortgage with the Rural Bank of Larena knowing fully
well that the Contract to Sell house and lot, Exh. A was still
existing notwithstanding their violation to the provisions
thereto. It is therefore crystal clear that defendant spouses
[15]
Moneset are liable for damages.

As to the real estate mortgage, the trial court held that the same was
valid and the Bank was not under any obligation to look beyond the title, although
the present controversy could have been avoided had the Bank been more astute
in ascertaining the nature of petitioners possession of the property, thus:

The Real Estate Mortgage and the Foreclosure

Proceedings cannot be considered null and void in the sense
that per se the formalities required by law were complied with
except for the fact that behind their execution there was fraud,
deceit and bad faith on the part of defendant spouses Moneset
and Bundalo.
The defendant Rural Bank of Larena for its part could
have avoided this situation if the bank appraiser who made the
ocular inspection of the subject house and lot went deeper and
investigated further when he learned that the owner is not the
actual occupant. He was however told by Moneset that the
actual occupant was only a lessee. Banking on this information
that the actual occupant was only a lessee with no other right
over and above such, the bank approved a loan of P100,000.00
in favor of Moneset through Bundalo their attorney-in-fact.

Likewise the Rural Bank of Larena had the right to rely on

what appeared on the certificate of title of the Monesets and it
was under no obligation to look beyond the certificate and
investigate the title of the mortgagor appearing on the face of
the certificate.
The approval of the P100,000.00 loan from the Rural
Bank of Larena was made possible through the deception and
bad faith of defendant spouses Moneset and Bundalo but the
pertinent documents were per se in order. The court is of the
honest belief that the case against the defendant bank be
dismissed for lack of merit. The court however believes that for
reasons of equity the bank should give the plaintiff Ursal the
[16]
preferential right to redeem the subject house and lot.

The trial court then disposed of the case as follows:

presence of Ursal on the property in question, while the Monesets claimed that the
trial court erred in giving preferential right to Ursal to redeem the property and in

Wherefore premises considered, judgment is hereby

rendered in favor of the defendant Rural Bank of Larena
dismissing the complaint against it for lack of merit and against
the defendant spouses Moneset ordering them to:

ordering them to pay damages.

[18]

The CA affirmed in toto the decision of the trial court. It held that the Bank
1.

2.

3.

reimburse to plaintiff Ursal the following:

a.) downpayment of P50,000.00
b.) monthly installments for six months
at P3,000.00 per month --- P18,000.00
c.) expenses improvements P61, 676.52
pay to plaintiff the following:
a.) moral damages ----------------P30,000.00
b.) exemplary damages ----------P20,000.00
c.) litigation expenses------------P 5,000.00
d.) attorneys fees ----------------P10,000.00
e.) costs
order the defendant Rural Bank of Larena to give
the plaintiff the preferential right to redeem the
subject house and lot.

SO ORDERED.

[17]

did not have prior knowledge of the contract to sell the house and lot and the
Monesets acted fraudulently thus they cannot be given preferential right to
redeem the property and were therefore correctly ordered to pay damages.

[19]

The Monesets filed a motion for reconsideration which was denied outright
for having been filed out of time.

[20]

Ursals motion for reconsideration was denied

by the CA on January 31, 2000 for lack of merit.

[21]

Hence, the present petition raising the sole error:

That with grave abuse of discretion amounting to

excess of jurisdiction, the Honorable Court of Appeals erred in
rendering a decision and Resolution NOT in accordance with
[22]
law and the applicable rulings of the Supreme Court.

Both Ursal and the Monesets appealed the decision to the CA. Ursal
alleged that the Bank was guilty of bad faith for not investigating the

Petitioner claims that: the Bank was duly informed through its appraiser
that the house and lot to be mortgaged by Monesets were in the possession of a

lessee; the Bank should have taken this as a cue to investigate further the
Monesets right over the same; the case of Embrado vs. Court of Appeals (233 SCRA
335) held that where a purchaser neglects to make the necessary inquiry and closes

the processing and approval of the loan; Sec. 50 of Act No. 496 is also inapplicable
since the alleged prior existing interest was only that of a lessee; in any case, it was
the Monesets who lied to the Bank anent the real nature of the encumbrance,
thus, it is the Monesets who are guilty of fraud and not the Bank.

[25]

his eyes to facts which should put a reasonable man on his guard to the possibility
of the existence of a defect in his vendors title, he cannot claim that he is a
purchaser in good faith; Sec. 50 of Act 496 provides that where a party has
knowledge of a prior existing interest which is unregistered at the time he acquired
the land, his knowledge of that prior unregistered interest has the effect of

In her Rejoinder,

[26]

petitioner argued that: under the law on mortgage, the

mortgagor must be the owner of the property he offers as security of his loan; the
mortgagee like herein Bank which neglects to verify the ownership of the property
offered as security of the loan runs the risk of his folly; the Banks negligence is not

registration as to him and the Torrens system cannot be used as a shield against

excusable because an adverse claim and notice of lis pendens were already

fraud; following Art. 2176 of the Civil Code, respondent Bank is obliged to pay for

annotated on the certificate of title when the mortgage was constituted or when

the damage done.

the deed of real estate mortgage was annotated; it would be unfair to put the

[23]

blame on petitioner who was innocent of the transaction; the trial court found that
the Bank even provided its appraiser the amount of P15,000.00 to redeem
Petitioner then prayed that the Deed of Real Estate Mortgage be declared as

the pacto de retro sale allegedly executed in favor of Dr. Canora; this should have

non-effective and non-enforceable as far as petitioner is concerned; that she be

aroused the Banks suspicion and prompted it to investigate further the property;

declared as the absolute owner of the house and lot in question; that the Monesets

the trial court recognized the bad faith committed by the Monesets and ordered

be ordered to execute a deed of absolute sale covering the subject property; and

them to pay the sum of P126,676.52 in damages but exonerated the Bank who is

that the Bank be ordered to direct the collection or payment of the loan

equally guilty of bad faith; the Monesets cannot pay the damages as they have no

of P100,000.00 plus interest from the Monesets for they were the ones who

money and property thus if the decision of the trial court as affirmed by the CA is to

received and enjoyed the said loan.

[24]

On the other hand, respondent Bank in its Comment argues that: its interest

be enforced, they will only be holding an empty bag while the Bank which is equally
guilty will go free; what would be fair is to let the

in the property was only that of mortgagee and not a purchaser thus its

two respondents bear jointly and severally the consequences of their transaction

interest is limited only to ascertaining that the mortgagor is the registered owner;

and let the innocent petitioner ultimately own the house and lot in question.

the case cited is inapplicable at bar since it involves the purchase of real property;
Ursal was purportedly only a lessee of the property, thus as mortgagor who is not
entitled to possess the mortgaged property, they no longer considered the lease in

[27]

The petitioner, in her Memorandum dated July 31, 2005, raised the
issues of: (1) Whether or not the document captioned: Contract to Sell Lot and
House (Exh. A) is valid and binding so much so that the herein Petitioner who is
the Vendee is the lawful and true owner of the lot and house in question; (2)

The crux of petitioners contention is that the Bank failed to look beyond the
transfer certificate of title of the property for which it must be held liable.

Whether or not the herein respondents spouses Jesus Moneset and Cristita
Moneset who were the vendors and/or mortgagors together with respondent
Restituto Bundalo were conniving and acting in bad faith; and (3) Whether or not

We agree. Banks cannot merely rely on certificates of title in ascertaining the

respondent Rural Bank of Larena measured up to the strict requirement of making

status of mortgaged properties; as their business is impressed with public interest,

a thorough investigation of the property offered as collateral before granting a loan

they are expected to exercise more care and prudence in their dealings than

and be considered as innocent mortgagee and entitled to the protection of the

private individuals.

law.

[28]

Petitioner reiterated her arguments in support of the first and third issues

[31]

Indeed, the rule that persons dealing with registered lands

can rely solely on the certificate of title does not apply to banks.

[32]

raised in the Memorandum while she merely adopted the CA findings in support of
the second issue, i.e., when the Monesets encumbered the Transfer Certificate of
Title (TCT) to Dr. Canora and thereafter to Bundalo, they committed bad faith or
fraud since the contract to sell with Ursal was still valid and subsisting.

[33]

As enunciated in Cruz vs. Bancom:

[29]

Respondent Bank, in its Memorandum dated July 20, 2005, reiterated the
arguments it made in its Comment that: the case cited by petitioner requiring extra
ordinary diligence is inapplicable in this case since what is involved here is
mortgage and not sale; as mortgagee, its interest is limited only to determining
whether the mortgagor is the registered owner of the property whose certificate of

Respondent is not an ordinary mortgagee; it is a mortgageebank. As such, unlike private individuals, it is expected to exercise
greater care and prudence in its dealings, including those involving
registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract. The
ascertainment of the status or condition of a property offered to it
as security for a loan must be a standard and indispensable part of
[34]
its operations.

title showed that there were no existing encumbrances thereon; and even with
unregistered encumbrances, the Bank has priority by the registration of the loan
documents.

[30]

Our agreement with petitioner on this point of law, notwithstanding, we

are constrained to refrain from granting the prayers of her petition, to wit: that the
Deed of Real Estate Mortgage be declared as non-effective and non-enforceable as

No memorandum is filed by respondent Monesets.

far as petitioner is concerned; that she be declared as the absolute owner of the

house and lot in question; that the Monesets be ordered to execute a deed of

prevents the obligation to sell from arising and thus, ownership is retained by the

absolute sale covering the subject property; and that the Bank be ordered to direct

prospective seller without further remedies by the prospective buyer.

[37]

the collection or payment of the loan of P100,000.00 plus interest from the
Monesets for they were the ones who received and enjoyed the said loan.

[35]

It is different from contracts of sale, since ownership in contracts to sell is

reserved by the vendor and is not to pass to the vendee until full payment of the
The reason is that, the contract between petitioner and the Monesets being

purchase price, while in contracts of sale, title to the property passess to the
vendee upon the delivery of the thing sold. In contracts of sale the vendor loses

one of Contract to Sell Lot and House, petitioner, under the circumstances, never

ownership over the property and cannot recover it unless and until the contract is

acquired ownership over the property and her rights were limited to demand for

resolved or rescinded, while in contracts to sell, title is retained by the vendor until

specific performance from the Monesets, which at this juncture however is no

full payment of the price.

longer feasible as the property had already been sold to other persons.

A contract to sell is a bilateral contract whereby the prospective seller,

[38]

In contracts to sell, full payment is a positive

suspensive condition while incontracts of sale, non-payment is a negative

resolutory condition.

[39]

A contract to sell may further be distinguished from a conditional contract

while expressly reserving the ownership of the subject property despite delivery

of sale, in that, the fulfillment of the suspensive condition, which is the full

thereof to the prospective buyer, binds himself to sell the said property exclusively

payment of the purchase price, will not automatically transfer ownership to the

to the prospective buyer upon fulfillment of the condition agreed upon, that is, full

buyer although the property may have been previously

payment of the purchase price.

[36]

delivered to him. The prospective vendor still has to convey title to the
prospective buyer by entering into a contract of absolute sale. While in
a conditional contract of sale, the fulfillment of the suspensive condition renders

In such contract, the prospective seller expressly reserves the transfer of

the sale absolute and affects the sellers title thereto such that if there was

title to the prospective buyer, until the happening of an event, which in this case is

previous delivery of the property, the sellers ownership or title to the property is

the full payment of the purchase price. What the seller agrees or obligates himself

automatically transferred to the buyer.

to do is to fulfill his promise to sell the subject property when the entire amount of
the purchase price is delivered to him. Stated differently, the full payment of the
purchase price partakes of a suspensive condition, the non-fulfillment of which

[40]

Indeed, in contracts to sell the obligation of the seller to sell becomes

Petitioner attributes her decision to stop paying installments to the

demandable only upon the happening of the suspensive condition, that is, the full

failure of the Monesets to comply with their agreement to deliver the transfer

payment of the purchase price by the buyer. It is only upon the existence of

certificate of title after the down payment of P50,000.00. On this point, the trial

the contract of sale that the seller becomes obligated to transfer the ownership of

court was correct in holding that for such failure, the Monesets are liable to pay

the thing sold to the buyer. Prior to the existence of the contract of sale, the seller

damages pursuant to Art. 1169 of the Civil Code on reciprocal obligations.

[47]

is not obligated to transfer the ownership to the buyer, even if there is a contract
to sell between them.

[41]

The vendors breach of the contract, notwithstanding, ownership still

remained with the Monesets and petitioner cannot justify her failure to complete
In this case, the parties not only titled their contract as Contract to Sell Lot

the payment.

and House but specified in their agreement that the vendor shall only execute a
deed of absolute sale on the date of the final payment by vendee.

[42]

Such

provision signifies that the parties truly intended their contract to be that
of contract to sell.

[43]

In Pangilinan vs. Court of Appeals,

[48]

the vendees contended that their

failure to pay the balance of the total contract price was because the vendor
reneged on its obligation to improve the subdivision and its facilities. In said case,
the Court held that the vendees were barred by laches from asking for specific
performance eight years from the date of last installment. The Court held that:

Since the contract in this case is a contract to sell, the ownership of the
property remained with the Monesets even after petitioner has paid the down
payment and took possession of the property. In Flancia vs. Court of
Appeals,

[44]

where the vendee in the contract to sell also took possession of the

property, this Court held that the subsequent mortgage constituted by the owner
over said property in favor of another person was valid since the vendee
retained absolute ownership over the property.
contract to sell was entitled only to damages.

[45]

[46]

At most, the vendee in the

(the vendees) instead of being vigilant and diligent

in asserting their rights over the subject property had failed to
assert their rights when the law requires them to act. Laches or
stale demands is based upon grounds of public policy which
requires, for the peace of society, the discouragement of stale
claims and unlike the statute of limitations, is not a mere
question of time but is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or
asserted.
The legal adage finds application in the case at
bar. Tempus enim modus tollendi obligations et actiones, quia
tempus currit contra desides et sui juris contemptoresFor time

is a means of dissipating obligations and actions, because time

[49]
runs against the slothful and careless of their own rights.

In this case, petitioner instituted an action for Declaration of NonEffectivity of Mortgage with Damages four years from the date of her last
installment and only as a reaction to the foreclosure proceedings instituted by
respondent Bank. After the Monesets failed to deliver the TCT, petitioner merely
stopped paying installments and did not institute an action for specific
performance, neither did she consign payment of the remaining balance as proof of

In a contract to sell, there being no previous sale of

the property, a third person buying such property despite 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 of the property. 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
[53]
for damages by the intending buyer.
(Emphasis supplied)

her willingness and readiness to comply with her part of the obligation. As we held
in San Lorenzo Development Corp. vs. Court of Appeals,

[50]

the perfected contract to

sell imposed on the vendee the obligation to pay the balance of the purchase
price. There being an obligation to pay the price, the vendee should have made the

In this case, the lower courts found that the property was sold to Dr.

proper tender of payment and consignation of the price in court as required by

Canora and then to Bundalo who in turn acted as attorney-in-fact for the Monesets

law. Consignation of the amounts due in court is essential in order to extinguish

in mortgaging the property to respondent Bank. The trial court and the CA erred in

the vendees obligation to pay the balance of the purchase price.

[51]

Since there is

giving petitioner the preferential right to redeem the property as such would

no indication in the records that petitioner even attempted to make the proper

prejudice the rights of the subsequent buyers who were not parties in the

consignation of the amounts due, the obligation on the part of the Monesets to

proceedings below. While the matter of giving petitioner preferential right to

transfer ownership never acquired obligatory force.

redeem the property was not put in issue before us, in the exercise of our
discretionary power to correct manifest and palpable error, we deem it proper to
delete said portion of the decision for being erroneous.

[54]

In other words, petitioner did not acquire ownership over the subject
property as she did not pay in full the equal price of the contract to sell. Further,

Petitioners rights were limited to asking for specific performance and

the Monesets breach did not entitle petitioner to any preferential treatment over

damages from the Monesets. Specific performance, however, is no longer feasible

the property especially when such property has been sold to other persons.

at this point as explained above. This being the case, it follows that petitioner
never had any cause of action against respondent Bank. Having no cause of action
against the bank and not being an owner of the subject property, petitioner is not

As explained in Coronel vs. Court of Appeals:

[52]

entitled to redeem the subject property.

petitioner the preferential right to redeem the house and lot covered by Transfer
Certificate of Title No. 78374 is DELETED for lack of legal basis.
Petitioner had lost her right to demand specific performance when the
Monesets executed a Deed of Absolute Sale in favor of Dr. Canora. Contrary to
what she claims, petitioner had no vested right over the property.

Indeed, it is the Monesets who first breached their obligation towards

petitioner and are guilty of fraud against her. It cannot be denied however that
petitioner is also not without fault. She sat on her rights and never consigned the
full amount of the property. She therefore cannot ask to be declared the owner of
the property, this late, especially since the same has already passed hands several
times, neither can she question the mortgage constituted on the property years
after title has already passed to another person by virtue of a deed of absolute
sale.

At this point, let it be stated that the courts below and even this Court
have no jurisdiction to resolve the issue whether there was bad faith among the
Monesets, Canora and Bundalo. Canora was never impleaded. Bundalo has not
been served with summons.

WHEREFORE, the petition is DENIED. The decision of the Regional Trial

Court of Cebu City, Branch 24, promulgated on February 5, 1993 and the decision
of the Court of Appeals dated June 28, 1999 are hereby AFFIRMED. However, in
the higher interest of substantial justice, the Court MODIFIES the same to the
effect that the portion ordering the Rural Bank of Larena (Siquijor), Inc. to give

No costs.

SO ORDERED.