G.R. No.

118114 December 7, 1995

TEODORO ACAP, petitioner,
vs.
COURT OF APPEALS and EDY DE LOS REYES, respondents.

PADILLA, J .:
This is a petition for review on certiorari of the decision
1
of the Court of Appeals, 2nd Division,
in CA-G.R. No. 36177, which affirmed the decision
2
of the Regional Trial Court of
Himamaylan, Negros Occidental holding that private respondent Edy de los Reyes had acquired
ownership of Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental based on a
document entitled "Declaration of Heirship and Waiver of Rights", and ordering the
dispossession of petitioner as leasehold tenant of the land for failure to pay rentals.
The facts of the case are as follows:
The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was
evidenced by OCT No. R-12179. The lot has an area of 13,720 sq. meters. The title was issued
and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both
spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly
notarized document entitled "Declaration of Heirship and Deed of Absolute Sale" in favor of
Cosme Pido.
The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had
been the tenant of a portion of the said land, covering an area of nine thousand five hundred
(9,500) meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap
continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and
thereafter, upon Pido's death, to his widow Laurenciana.
The controversy began when Pido died intestate and on 27 November 1981, his surviving heirs
executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of
Lot No. 1130 Hinigaran Cadastre," wherein they declared; to quote its pertinent portions, that:
. . . Cosme Pido died in the Municipality of Hinigaran, Negros Occidental, he died
intestate and without any known debts and obligations which the said parcel of
land is (sic) held liable.
That Cosme Pido was survived by his/her legitimate heirs, namely:
LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR all
surnamed PIDO; children;
That invoking the provision of Section 1, Rule 74 of the Rules of Court, the
above-mentioned heirs do hereby declare unto [sic] ourselves the only heirs of the
late Cosme Pido and that we hereby adjudicate unto ourselves the above-
mentioned parcel of land in equal shares.
Now, therefore, We LAURENCIANA
3
, ELY, ELMER, ERVIN and ELECHOR
all surnamed PIDO, do hereby waive, quitclaim all our rights, interests and
participation over the said parcel of land in favor of EDY DE LOS REYES, of
legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of
Hinigaran, Negros Occidental, Philippines. . . .
4
(Emphasis supplied)
The document was signed by all of Pido's heirs. Private respondent Edy de los Reyes did not sign
said document.
It will be noted that at the time of Cosme Pido's death, title to the property continued to be
registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with
Waiver of Rights in his favor, private respondent Edy de los Reyes filed the same with the
Registry of Deeds as part of a notice of an adverse claimagainst the original certificate of title.
Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he
(Edy) had become the new owner of the land and that the lease rentals thereon should be paid to
him. Private respondent further alleged that he and petitioner entered into an oral lease
agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In
1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to
pay any further lease rentals on the land, prompting private respondent to seek the assistance of
the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR
invited petitioner to a conference scheduled on 13 October 1983. Petitioner did not attend the
conference but sent his wife instead to the conference. During the meeting, an officer of the
Ministry informed Acap's wife about private respondent's ownership of the said land but she
stated that she and her husband (Teodoro) did not recognize private respondent's claim of
ownership over the land.
On 28 April 1988, after the lapse of four (4) years, private respondent filed a complaint for
recovery of possession and damages against petitioner, alleging in the main that as his leasehold
tenant, petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay
despite repeated demands.
During the trial before the court a quo, petitioner reiterated his refusal to recognize private
respondent's ownership over the subject land. He averred that he continues to recognize Cosme
Pido as the owner of the said land, and having been a registered tenant therein since 1960, he
never reneged on his rental obligations. When Pido died, he continued to pay rentals to Pido's
widow. When the latter left for abroad, she instructed him to stay in the landholding and to pay
the accumulated rentals upon her demand or return from abroad.
Petitioner further claimed before the trial court that he had no knowledge about any transfer or
sale of the lot to private respondent in 1981 and even the following year after Laurenciana's
departure for abroad. He denied having entered into a verbal lease tenancy contract with private
respondent and that assuming that the said lot was indeed sold to private respondent without his
knowledge, R.A. 3844, as amended, grants him the right to redeem the same at a reasonable
price. Petitioner also bewailed private respondent's ejectment action as a violation of his right to
security of tenure under P.D. 27.
On 20 August 1991, the lower court rendered a decision in favor of private respondent, the
dispositive part of which reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the
plaintiff, Edy de los Reyes, and against the defendant, Teodoro Acap, ordering the
following, to wit:
1. Declaring forfeiture of defendant's preferred right to issuance of a Certificate of
Land Transfer under Presidential Decree No. 27 and his farmholdings;
2. Ordering the defendant Teodoro Acap to deliver possession of said farm to
plaintiff, and;
3. Ordering the defendant to pay P5,000.00 as attorney's fees, the sum of
P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual
damages.
5

In arriving at the above-mentioned judgment, the trial court stated that the evidence had
established that the subject land was "sold" by the heirs of Cosme Pido to private respondent.
This is clear from the following disquisitions contained in the trial court's six (6) page decision:
There is no doubt that defendant is a registered tenant of Cosme Pido. However,
when the latter died their tenancy relations changed since ownership of said land
was passed on to his heirs who, by executing a Deed of Sale, which defendant
admitted in his affidavit, likewise passed on their ownership of Lot 1130 to herein
plaintiff (private respondent). As owner hereof, plaintiff has the right to demand
payment of rental and the tenant is obligated to pay rentals due from the time
demand is made. . . .
6

xxx xxx xxx
Certainly, the sale of the Pido family of Lot 1130 to herein plaintiff does not of
itself extinguish the relationship. There was only a change of the personality of
the lessor in the person of herein plaintiff Edy de los Reyes who being the
purchaser or transferee, assumes the rights and obligations of the former
landowner to the tenant Teodoro Acap, herein defendant.
7

Aggrieved, petitioner appealed to the Court of Appeals, imputing error to the lower court when it
ruled that private respondent acquired ownership of Lot No. 1130 and that he, as tenant, should
pay rentals to private respondent and that failing to pay the same from 1983 to 1987, his right to
a certificate of land transfer under P.D. 27 was deemed forfeited.
The Court of Appeals brushed aside petitioner's argument that the Declaration of Heirship and
Waiver of Rights (Exhibit "D"), the document relied upon by private respondent to prove his
ownership to the lot, was excluded by the lower court in its order dated 27 August 1990. The
order indeed noted that the document was not identified by Cosme Pido's heirs and was not
registered with the Registry of Deeds of Negros Occidental. According to respondent court,
however, since the Declaration of Heirship and Waiver of Rights appears to have been duly
notarized, no further proof of its due execution was necessary. Like the trial court, respondent
court was also convinced that the said document stands as prima facie proof of appellee's
(private respondent's) ownership of the land in dispute.
With respect to its non-registration, respondent court noted that petitioner had actual knowledge
of the subjectsale of the land in dispute to private respondent because as early as 1983, he
(petitioner) already knew of private respondent's claim over the said land but which he thereafter
denied, and that in 1982, he (petitioner) actually paid rent to private respondent. Otherwise
stated, respondent court considered this fact of rental payment in 1982 as estoppel on petitioner's
part to thereafter refute private respondent's claim of ownership over the said land. Under these
circumstances, respondent court ruled that indeed there was deliberate refusal by petitioner to
pay rent for a continued period of five years that merited forfeiture of his otherwise preferred
right to the issuance of a certificate of land transfer.
In the present petition, petitioner impugns the decision of the Court of Appeals as not in accord
with the law and evidence when it rules that private respondent acquired ownership of Lot No.
1130 through the aforementioned Declaration of Heirship and Waiver of Rights.
Hence, the issues to be resolved presently are the following:
1. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND
WAIVER OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING
OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION.
2. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A
DEED OF SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN
QUESTION.
Petitioner argues that the Regional Trial Court, in its order dated 7 August 1990, explicitly
excluded the document marked as Exhibit "D" (Declaration of Heirship, etc.) as private
respondent's evidence because it was not registered with the Registry of Deeds and was not
identified by anyone of the heirs of Cosme Pido. The Court of Appeals, however, held the same
to be admissible, it being a notarized document, hence, a prima facie proof of private
respondents' ownership of the lot to which it refers.
Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the
recognized modes of acquiring ownership under Article 712 of the Civil Code. Neither can the
same be considered a deed of sale so as to transfer ownership of the land to private respondent
because no consideration is stated in the contract (assuming it is a contract or deed of sale).
Private respondent defends the decision of respondent Court of Appeals as in accord with the
evidence and the law. He posits that while it may indeed be true that the trial court excluded his
Exhibit "D" which is the Declaration of Heirship and Waiver of Rights as part of his evidence,
the trial court declared him nonetheless owner of the subject lot based on other evidence adduced
during the trial, namely, the notice of adverse claim (Exhibit "E") duly registered by him with the
Registry of Deeds, which contains the questioned Declaration of Heirship and Waiver of Rights
as an integral part thereof.
We find the petition impressed with merit.
In the first place, an asserted right or claim to ownership or a real right over a thing arising from
a juridical act, however justified, is not per se sufficient to give rise to ownership over the res.
That right or title must be completed by fulfilling certain conditions imposed by law. Hence,
ownership and real rights are acquired only pursuant to a legal mode or process. While title is the
juridical justification, mode is the actual process of acquisition or transfer of ownership over a
thing in question.
8

Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified
into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription,
law or intellectual creation) and thederivative mode (i.e., through succession mortis causa or
tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum).
In the case at bench, the trial court was obviously confused as to the nature and effect of the
Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale.
They are not the same.
In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other party to pay a price certain in money or its
equivalent.
9

Upon the other hand, a declaration of heirship and waiver of rights operates as a public
instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and
divide the estate left by the decedent among themselves as they see fit. It is in effect an
extrajudicial settlement between the heirs under Rule 74 of the Rules of Court.
10

Hence, there is a marked difference between a sale of hereditary rights and a waiver of
hereditary rights. The first presumes the existence of a contract or deed of sale between the
parties.
11
The second is, technically speaking, a mode of extinction of ownership where there is
an abdication or intentional relinquishment of a known right with knowledge of its existence and
intention to relinquish it, in favor of other persons who are co-heirs in the succession.
12
Private
respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim
ownership over the subject lot on the sole basis of the waiver document which neither recites the
elements of either a sale,
13
or a donation,
14
or any other derivative mode of acquiring ownership.
Quite surprisingly, both the trial court and public respondent Court of Appeals concluded that a
"sale" transpired between Cosme Pido's heirs and private respondent and that petitioner acquired
actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to
discuss private respondent's claim over the lot in question. This conclusion has no basis both in
fact and in law.
On record, Exhibit "D", which is the "Declaration of Heirship and Waiver of Rights"
was excluded by the trial court in its order dated 27 August 1990 because the document was
neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. There is
no showing that private respondent had the same document attached to or made part of the
record. What the trial court admitted was Annex "E", a notice of adverse claim filed with the
Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was
annotated at the back of the Original Certificate of Title to the land in question.
A notice of adverse claim, by its nature, does not however prove private respondent's ownership
over the tenanted lot. "A notice of adverse claim is nothing but a notice of a claim adverse to the
registered owner, the validity of which is yet to be established in court at some future date, and is
no better than a notice of lis pendenswhich is a notice of a case already pending in court."
15

It is to be noted that while the existence of said adverse claim was duly proven, there is no
evidence whatsoever that a deed of sale was executed between Cosme Pido's heirs and private
respondent transferring the rights of Pido's heirs to the land in favor of private respondent.
Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which
cannot by itself be sufficient to cancel the OCT to the land and title the same in private
respondent's name.
Consequently, while the transaction between Pido's heirs and private respondent may be
binding on both parties, the right of petitioner as a registered tenant to the land cannot be
perfunctorily forfeited on a mere allegation of private respondent's ownership without the
corresponding proof thereof.
Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease
rentals thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his
family (after Pido's death), even if in 1982, private respondent allegedly informed petitioner that
he had become the new owner of the land.
Under the circumstances, petitioner may have, in good faith, assumed such statement of private
respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982
to private respondent. But in 1983, it is clear that petitioner had misgivings over private
respondent's claim of ownership over the said land because in the October 1983 MAR
conference, his wife Laurenciana categorically denied all of private respondent's allegations. In
fact, petitioner even secured a certificate from the MAR dated 9 May 1988 to the effect that he
continued to be the registered tenant of Cosme Pido and not of private respondent. The reason is
that private respondent never registered the Declaration of Heirship with Waiver of Rights with
the Registry of Deeds or with the MAR. Instead, he (private respondent) sought to do indirectly
what could not be done directly,i.e., file a notice of adverse claim on the said lot to establish
ownership thereover.
It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by
petitioner to pay the lease rentals or amortizations to the landowner/agricultural lessor which, in
this case, private respondent failed to establish in his favor by clear and convincing evidence.
16

Consequently, the sanction of forfeiture of his preferred right to be issued a Certificate of Land
Transfer under P.D. 27 and to the possession of his farmholdings should not be applied against
petitioners, since private respondent has not established a cause of action for recovery of
possession against petitioner.
WHEREFORE, premises considered, the Court hereby GRANTS the petition and the decision of
the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan,
Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondent's
complaint for recovery of possession and damages against petitioner Acap is hereby
DISMISSED for failure to properly state a cause of action, without prejudice to private
respondent taking the proper legal steps to establish the legal mode by which he claims to have
acquired ownership of the land in question.
SO ORDERED.
DELPHER TRADES CORPORATION
vs.
IACG.R. No. L-69259 January 26, 1988Facts:
Delfin Pacheco and sister Pelagia were the owners of a parcel of land in Polo (now
Valenzuela). On April 3,1974, they leased to Construction Components International Inc. the
property and providing for a right of firstrefusal should it decide to buy the said
property.Construction Components International, Inc. assigned its rights and
obligations under the contract of lease infavor of Hydro Pipes Philippines, Inc. with the
signed conformity and consent of Delfin and Pelagia. In 1976, a
deed of exchange
was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher
TradesCorporation whereby the Pachecos conveyed to the latter the leased property
together with another parcel of land also located in Malinta Estate, Valenzuela for 2,500
shares of stock of defendant corporation with a totalvalue of P1.5M.On the ground that it was
not given the first option to buy the leased property pursuant to the proviso in
thelease agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for
reconveyance of thelot.Trivia lang: Delpher Trades Corp is owned by the Pacheco
Family, managed by the sons and daughters of Del f i n and Pel agi a. Thei r
pr i mar y def ens e i s t hat t her e i s no t r ans f er of owner s hi p becaus e t he
Pachecos remained in control of the original co-owners. The transfer of ownership,
if anything, was merely in form butnot in substance.
Issue:
WON t he Deed of Exchange of t he pr oper t i es execut ed by t he Pachecos
and t he Del pher Tr ades Corporation on the other was meant to be a
contract of sale
which, in effect, prejudiced the Hydro Phil's rightof first refusal over the leased property
included in the "deed of exchange"?
NOHeld:
By their ownership of the 2,500 no par shares of stock, the Pachecos have control of
the corporation. Their equity capital is 55% as against 45% of the other
stockholders, who also belong to the same family group. Ineffect, the Delpher Trades
Corporation is a business conduit of the Pachecos. What they really did was to
investt hei r pr oper t i es and change t he nat ur e of t hei r owner s hi p f r om uni nco
r por at ed t o i ncor por at ed f or m byor gani zi ng Del pher
Tr ades Cor por at i on t o t ake cont r ol of t hei r pr oper t i es and at t he
s ame t i me s ave oninheritance
taxes.The "Deed of Exchange" of pr oper t y bet ween t he Pachecos and Del ph
er Tr ades Cor por at i on cannot beconsidered a contract of sale.
There was no transfer of actual ownership interests by the Pachecos to athird party.
The Pacheco family merely changed their ownership from one form to another. The
ownershipremained in the same hands. Hence, the private respondent has no basis
for its claim of a light of first refusalunder the lease contract.
TOYOTA SHAW, INC.
vs.
COURT OF APPEALSG.R. No. L-116650 May 23, 1995Facts:
Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It
was then a seller's marketand Sosa had difficulty finding a dealer with an available unit for
sale. But upon contacting Toyota Shaw, Inc.,he was told that there was an available unit. So on
14 June 1989, Sosa and his son, Gilbert, went to the Toyotaoffice at Shaw. There they met
Popong Bernardo, a sales representative of Toyota.Sosa emphasized to Bernardo that he
needed the Lite Ace not later than 17 June 1989 because he, his family,and a
balikbayan
guest would use it on 18 June 1989 to go to Marinduque, his home province, where he
wouldcelebrate his birthday on the 19th of June. He added that if he does not arrive in his
hometown with the new car,he would become a "laughing stock." Bernardo assured Sosa that a
unit would be ready for pick up at 10AM on17 June 1989. Bernardo then signed the
"Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw,Inc." P100 thousand
was the downpayment, but the purchase price was not mentioned in the contract. It
wasalso agreed upon by the parties that the balance of the purchase price would be paid by credit
financing throughB.A. Finance.Toyota contends, however, that the Lite Ace was not
delivered to Sosa because of the disapproval by B.A.Finance of the credit financing
application of Sosa. It further alleged that a particular unit had already beenreserved
and earmarked for Sosa but could not be released due to the uncertainty of payment of the
balance of the purchase price. Toyota then gave Sosa the option to purchase the unit
by paying the full purchase price incash but Sosa refused. The financing
corporation seemed to have not approved Sosas application.
Issue:
WON there was a perfected contract of sale?
NOHeld:Exhibit "A" or the Agreement is NOT a
perfected contract of sale
.
Not hi ng was ment i oned about t he f ul l pur chas e pr i ce and t he manner t he
i ns t al l ment s wer e t o be pai d. Adefinite agreement on the manner of payment of the
price is an essential element in the formation of a bindingand enforceable contract of
sale. This is so because the agreement as to the manner of payment goes into
the pr i ce s uch t hat a di s agr eement on t he manner of pa yment i s t ant amount
t o a f ai l ur e t o agr ee on t he pr i ce. Definiteness as to the price is an essential element
of a binding agreement to sell personal property.Exhibit "A" shows the absence of a
meeting of minds between Toyota and Sosa. For one thing, Sosa did
note v e n s i g n i t . He wa s n o t d e a l i n g wi t h T o y o t a b u t wi t h P o p o n g B
e r n a r d o . Be r n a r d o wa s o n l y a
salesrepresentative
of Toyota and hence a mere agent of the latter.Exhibit "A" may be considered as part of
the initial phase of the generation or negotiation stage
of a contractof sale. Accordingly, in a sale on installment basis which is financed by a financing
company, three parties arethus involved: the buyer who executes a note or notes for the unpaid
balance of the price of the thing purchasedon installment, the seller who assigns the notes or
discounts them with a financing company, and the financingcompany which is subrogated in
the place of the seller, as the creditor of the installment buyer.

Since B.A.Finance did not approve Sosa's application, there was then no meeting of minds on
the sale on installment basis.
The Vehicle Sales Proposal was a mere
proposal

which was aborted in lieu of subsequent events. It followsthat the VSP created no
demandable right in favor of Sosa for the delivery of the vehicle to him, and its
non-delivery did not cause any legally indemnifiable injury.

1.

POLYTECHNIC
UNIVERSITY v CA
FACTS: The
National
Development Corp.
(NDC) ownedthe
NDC Compound, a
portion of which was
leased toFirestone
Ceramics, which
built several
warehouses
andfacilities therein.
Since business
between NDC
andFirestone went
smooth, the lease
was twice
renewedthis time
conferring upon
Firestone a right of
firstrefusal should
NDC decide to
dispose of the
property.Also, under
the contract,
Firestone was
obliged tointroduce
considerable
improvements
thereon.Eventually
though, Memo Order
No. 214 was
issuedordering the
transfer of NDC
Compound to
thegovernment in
consideration of the
cancellation
ofNDCs P57M debt.
Pursuant thereto,
NDC transferred
theproperty to
Polytechnic
University (PUP).
Firestone suedfor
specific performance
invoking its right of
firstrefusal, and
sought to enjoin
NDC and PUP
fromproceeding with
the sale. Both PUP
and NDC aver
thatthere was no
sale involved since
ownership of
theproperty
remained with the
government
bothcompanies
being
GOCCs.ISSUE:
W/N there was a
saleHELD: YES.
The argument of
PUP and NDC
wasuntenable.
GOCCs have
personalities
separate anddistinct
from the
government. Sale
brings within
itsgrasp the whole
gamut of transfers
where ownership ofa
thing is ceded for
consideration.
Further, judging
fromthe conduct of
the parties in this
case, all the
elementsof a valid
sale attend. Consent
is manifested by
theMemo Order No.
214, the cancellation
of
liabilitiesconstituted
consideration; the
subject matter was
ofcourse the
property subject of
the dispute.Since a
sale was involved,
the right of first
refusal infavor of
Firestone must be
respected. It forms
anintegral part of the
lease and is
supported
byconsideration
Firestone having
made
substantialinvestme
nts therein. Only
when Firestone fails
toexercise such right
may the sale to PUP
proceed.
Manila vs PNB

G.R. No. 166862 December 20, 2006


Lessons Applicable: Doctrine of Centralized Management: Powers of Board of Directors (Corporate Law)
Doctrine of Centralized Management (Corporate Law)
Price (Sales)
Earnest Money (Sales)
FACTS:
Manila Metal Corp. executed a real estate mortgage (TCT. 32098) as a security for its loan from PNB
amounting to 900,000 php, later on 1,000,000 php and 653,000 php
Aug. 5, 1982: PNB filed a petition for extrajudicial foreclosure for the property to be sold at a public
auction 911,532.21 php (outstanding as of June 30) + interest + attorney's fees
Sept. 2, 1982: PNB won the public auction at 1,000,000 php
Feb. 17, 1983: Certificate of Sale was issued and registered at the Registry of Deeds and was annotated at
the dorsal portion of the title (Redeemable until Feb 17,1983)
Petitioner requested 1 year extension until Feb 17,1984 but was rejected by PNB saying it is their policy
not to accept partial redemption
Jun. 1,1984: Since petitioner failed to redeem, TCT. 32098 was cancelled and a new title was issued in
favor of PNB
Meanwhile, Special Assets Management Department (SAMD) had prepared a statement of account as of
Jun 25,1984 amounting to 1,574,560.47 php (bid price + interest + advances of insurance premiums +
advances on relaty taxes + reg. exp. +misc. exp + piblication cost)
Petitioner deposited 725,000 php as deposit to repurchase and was issued an O.R.
PNB management rejected the recommendation of SAMD and demanded that petitioner pay the markt
value of 2,660,000 php.
Jun 24, 1984: PNB informed petitioner that its B.O.D had agreed to accept its offer to purchase but at
1,931,389.53 less the 725,000 php.
PNB President did not conform to the letter but merely indicated that he has received it.
Petitioner rejected this since PNB has already accepted its downpayment so it can no longer increase the
price.
PNB also rejected petitioners payment for the balance.
Petitioner filed a complaint against PNB for Annulment of Mortgage and Mortgage Foreclosure, Delivery
of Title, or Specific Performance with Damages
CA affirmed RTC: Favored PNB and demanded that it refund the 725,000 php (no sale because no
meeting of the minds in terms of price)
Lot was later transferred to its PNB President Bayani Gabriel
Petitioner filed a petition for certiorari
ISSUE:
1. W/N the statement of account by SAMD is only a recommendation subject to the approval of the BOD -
YES
2. W/N there was a contract of sale - NO
3. W/N earnest money establishes a contract of sale - NO
HELD: Denied. Costs Against Petitioner.
1. YES
Art. 1318 of NCC:
no contract unless the following requisites concur:
Consent of the contracting parties;
Object certain which is the subject matter of the contract;
Cause of the obligation which is established
The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed
by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.
When there is merely an offer by one party without acceptance of the other, there is no contract.
2. NO
Section 23 of the Corporation Code:
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.
a corporation can only execute its powers and transact its business through its:
Board of Directors
officers and agents when authorized by:
a board resolution;or
its by-laws
3. NO
ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract
The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to
the approval of the PNB Board
Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest
money cannot establish the existence of a perfected contract of sale.

Cruz vs Fernando
December 9, 2005, 477 SCRA 173
Manner of Payment Essential in a Contract of Sale
In 1983, Cruz executed a Kasunduan with the Gloriosos for the consideration of the rear portion of a
223 sq m lot. The Kasunduan provides that the lot will be sold at a P40 per sq m. That the portion of
the lot to be sold is the rear portion of it. That upon selling, the Cruz will transfer their house from the
front portion to the rear portion of the land once it is bought. That they will have a right of way from
the front portion going to the back end of the lot. The Cruz never gave anything to the Gloriosos for
there was an alleged failure to have the land surveyed. Due to non payment, the Gloriosos instead
sold the whole lot (back and rear portion) to the Fernandos.
In 1994, after repeated demands, the Fernandos filed a case in court for accion publiciana
demanding the Cruz to vacate the lot and to pay a rental of P500.00. The RTC ruled in favor of the
Fernandos. The CA affirmed the RTC ruling.
ISSUE: Whether or not what transpired between the Cruzes and the Gloriosos was a contract of
sale.
HELD: No. The absence of a specific manner of payment in the terms and conditions of the contract
makes it a contract to sell. Ownership was never transferred to the Cruzes. This is because the
manner of payment of the purchase price is an essential element before a valid and binding contract
of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must
also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no
sale. Also, the Cruzes never transferred their house from the front portion to the rear portion of the
lot. It was evident in the contract that they will transfer the house to the rear portion once they were
able to buy it.
The SC also ruled that the Fernandos were not buyers in bad faith. There was no consummated sale
between the Cruzes and the Gloriosos. 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 for damages by the
intending buyer.
Velarde, et.al. vs. CA [361 SCRA 56 GR No. 108346. July 11,
2001]
Facts: David Raymundo (private respondent) is the
absolute andregistered owner of a parcel of land, located
at 1918 Kamias St., Dasmarias Village Makati, together
with the house and other improvements, which was under
lease. It was negotiated by Davids father with plaintiffs
Avelina and Mariano Velarde (petitioners). ADeed of
Sale with Assumption of Mortgage was executed in favor
of the plaintiffs. Part of the consideration of the sale was
the vendees assumption to pay the
mortgage obligations of the property sold in the amount of
P 1,800,000.00 in favor of the Bank of the Philippine
Islands. And while their application for the assumption of
the mortgage obligations is not yet approved by the
mortgagee bank, they have agreed to pay the
mortgage obligations on the property with the bank in the
name of Mr. David Raymundo. It was further stated that in
the event Velardes violate any of the terms and conditions
of the said Deed of Real Estate Mortgage, they agree that
the downpayment P800,000.00, plus all the payments
made with the BPI on the mortgage loan, shall be forfeited
in Favor of Mr. Raymundo, as and by way of liquidated
damages, w/out necessity of notice or any judicial
declaration to that effect, and Mr. Raymundo shall resume
total and complete ownership and possession of the
property, and the same shall be
deemed automatically cancelled, signed by the Velardes.

Pursuant to said agreements, plaintiffs paid BPI the
monthly interest loan for three months but stopped in
paying the mortgage when informed that their application
for the assumption of mortgage was not approved. The
defendants through a counsel, wrote plaintiffs informing
the latter that their non-payment to the mortgagee bank
constituted non-performance of their obligation and the
cancellation and rescission of the intended sale. And after
two days, the plaintiffs responded and advised the vendor
that he is willing to pay provided that Mr. Raymundo: (1)
delivers actual possession of the property tothem not later
than January 15, 1987 for their occupancy (2) causes the
release of title and mortgage from the BPI and make the
title available and free from any liens and encumbrances
(3) executes an absolute deed of sale in their favor free
from any liens and encumbrances not later than Jan. 21,
1987.

The RTC of Makati dismissed the complaint of the
petitioners against Mr. Raymundo for specific
performance, nullity of cancellation, writ of possession and
damages. However, their Motion for Reconsideration was
granted and the Court instructed petitioners to pay the
balance of P 1.8 million to private respondent who, in turn
were ordered to execute a deed of absolute sale and to
surrender possession of the disputed property
to petitioners.

Upon the appeal of the private respondent to the CA, the
court upheld the earlier decision of the RTC regarding the
validity of the rescission made by private respondents.

Issue: Whether the rescission of contract made by the
private respondent is valid.

Held: There is a breach of contract because the
petitioners did not merely stopped paying the
mortgage obligations but they also failed to pay the
balance purchase price. Their conditional offer to Mr.
Raymundo cannot take the place of actual payment as
would discharge the obligation of the buyer under contract
of sale.

Mr. Raymundos source of right to rescind the contract is
Art. 1191 of the Civil Code predicated on a breach of faith
by the other party who violates the reciprocity between
them. Moreover, the new obligationsas preconditions to
the performance of the petitioners ownobligation were
repudiation of an existing obligation, which was legally due
and demandable under the contract of sale.

The breach committed by the petitioners was the non-
performance of a reciprocal obligation. The mutual
restitution is required to bring back the parties to their
original situation prior to the inception of the contract. The
initial payment and the mortgage payments advanced by
petitioners should be returned by private respondents, lest
the latter unjustly enriched at the expense of the other.
Rescission creates the obligation to return the obligation of
contract. To rescind, is to declare a contract void at its
inception and to put an end to it as though it never was.

The decision of the CA is affirmed with modification that
privaterespondents are ordered to return to petitioners, the
amount they have received in advanced payment.
Velarde vs. Court of Appeals (361 SCRA 57)
14JAN
FACTS:
The private respondent executed a Deed of Sale with Assumption of Mortgage, with a balance of P1.8
million, in favor of the petitioners. Pursuant to said agreements, plaintiffs paid the bank (BPI) for three (3)
months until they were advised that the Application for Assumption of Mortgage was denied. This
prompted the plaintiffs not to make any further payment. Private respondent wrote the petitioners
informing the non-fulfillment of the obligations. Petitioners, thru counsel responded that they are willing to
pay in cash the balance subject to several conditions. Private respondents sent a notarial notice of
cancellation/rescission of the Deed of Sale. Petitioners filed a complaint which was consequently
dismissed by an outgoing judge but was reversed by the assuming judge in their Motion for
Reconsideration. The Court of Appeals reinstated the decision to dismiss.
ISSUE:
Whether or not there is a substantial breach of contract that would entitle its rescission.
RULING:
YES. Article 1191 of the New Civil Code applies. The breach committed did not merely consist of a slight
delay in payment or an irregularity; such breach would not normally defeat the intention of the parties to
the contract. Here, petitioners not only failed to pay the P1.8 million balance, but they also imposed upon
private respondents new obligations as preconditions to the performance of their own obligation. In effect,
the qualified offer to pay was a repudiation of an existing obligation, which was legally due and
demandable under the contract of sale. Hence, private respondents were left with the legal option of
seeking rescission to protect their own interest.