G.R. No.

L-26872 July 25, 1975

VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE TAGLE,
intervenor-appellee,
vs.
BORMAHECO, INC., FRANCISCO N. CERVANTES and ROSARIO N.
CERVANTES, defendants-appellants. Meer, Meer & Meer for plaintiff-appellee.
AQUINO, J.:
This action was instituted by Villonco Realty Company against Bormaheco, Inc. and
the spouses Francisco N. Cervantes and Rosario N. Cervantes for the specific
performance of a supposed contract for the sale of land and the improvements
thereon for one million four hundred thousand pesos. Edith Perez de Tagle, as agent,
intervened in order to recover her commission. The lower court enforced the sale.
Bormaheco, Inc. and the Cervantes spouses, as supposed vendors, appealed.
This Court took cognizance of the appeal because the amount involved is more than
P200,000 and the appeal was perfected before Republic Act No. 5440 took effect on
September 9, 1968. The facts are as follows:
Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of
lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with a total area of
three thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532,
Exh. A, A-1 and A-2). The lots were mortgaged to the Development Bank of the Phil
(DBP) on April 21, 1959 as security for a loan of P441,000. The mortgage debt was
fully paid on July 10, 1969.
Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial
and agricultural machinery. The entire lots are occupied by the building, machinery
and equipment of Bormaheco, Inc. and are adjacent to the property of Villonco
Realty Company situated at 219 Buendia Avenue.
In the early part of February, 1964 there were negotiations for the sale of the said
lots and the improvements thereon between Romeo Villonco of Villonco Realty
Company "and Bormaheco, Inc., represented by its president, Francisco N.
Cervantes, through the intervention of Edith Perez de Tagle, a real estate broker".
In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco
conferred with Cervantes in his office to discuss the price and terms of the sale.
Later, Cervantes "went to see Villonco for the same reason until some agreement"
was arrived at. On a subsequent occasion, Cervantes, accompanied by Edith Perez
de Tagle, discussed again the terms of the sale with Villonco.
During the negotiations, Villonco Realty Company assumed that the lots belonged to
Bormaheco, Inc. and that Cervantes was duly authorized to sell the same. Cervantes

did not disclose to the broker and to Villonco Realty Company that the lots were
conjugal properties of himself and his wife and that they were mortgaged to the
DBP.
Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964,
to Romeo Villonco for the sale of the property. The offer reads (Exh. B):
BORMAHECO, INC.
February 12, 1964
Mr. Romeo
Villonco Villonco Building
Buendia Avenue
Makati, Rizal.
Dear Mr. Villonco:
This is with reference to our telephone conversation this noon on the
matter of the sale of our property located at Buendia Avenue, with a
total area of 3,500 sq. m., under the following conditions:
(1) That we are offering to sell to you the above property
at the price of P400.00 per square meter;
(2) That a deposit of P100,000.00 must be placed as
earnest money on the purchase of the above property
which will become part payment of the property in the
event that the sale is consummated;
(3) That this sale is to be consummated only after I shall
have also consummated my purchase of another property
located at Sta. Ana, Manila;
(4) That if my negotiations with said property will not be
consummated by reason beyond my control, I will return
to you your deposit of P100,000 and the sale of my
property to you will not also be consummated; and
(5) That final negotiations on both properties can be
definitely known after 45 days.
If the above terms is (are) acceptable to your Board, please issue out
the said earnest money in favor of Bormaheco, Inc., and deliver the
same thru the bearer, Miss Edith Perez de Tagle.

Very truly yours,

SGD. FRANCISCO
N. CERVANTES
President
The property mentioned in Bormaheco's letter was the land of the National
Shipyards & Steel Corporation (Nassco), with an area of twenty thousand square
meters, located at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964
that land was awarded to Bormaheco, Inc., the highest bidder, for the price of
P552,000. The Nassco Board of Directors in its resolution of February 18, 1964
authorized the General Manager to sign the necessary contract (Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a letter to the
Economic Coordinator, requesting approval of that resolution. The Acting Economic
Coordinator approved the resolution on March 24, 1964 (Exh. 1).
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their
negotiations for the sale of the Buendia Avenue property. Cervantes and Teofilo
Villonco had a final conference on February 27, 1964. As a result of that conference
Villonco Realty Company, through Teofilo Villonco, in its letter of March 4, 1964
made a revised counter- offer (Romeo Villonco's first counter-offer was dated
February 24, 1964, Exh. C) for the purchase of the property. The counter-offer was
accepted by Cervantes as shown in Exhibit D, which is quoted below:
VILLONCO REALTY COMPANY
V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines
March 4, 1964
Mr. Francisco Cervantes.
Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal
Dear Mr. Cervantes:
In reference to the letter of Miss E. Perez de Tagle dated February 12th
and 26, 1964 in respect to the terms and conditions on the purchase of
your property located at Buendia Ave., Makati, Rizal, with a total area
of 3,500 sq. meters., we hereby revise our offer, as follows:
1. That the price of the property shall be P400.00 per sq. m., including
the improvements thereon;

2. That a deposit of P100,000.00 shall be given to you as earnest

money which will become as part payment in the event the sale is
consummated;
3. This sale shall be cancelled, only if your deal with another property
in Sta. Ana shall not be consummated and in such case, the P100,00000 earnest money will be returned to us with a 10% interest p.a.
However, if our deal with you is finalized, said P100,000.00 will become
as part payment for the purchase of your property without interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and
650,000.00 as part of the down payment, or
P750,000.00 as total down payment
b. The balance is payable as follows:
P100,000.00 after 3 months
125,000.00 -do212,500.00 -doP650,000.00 Total
As regards to the other conditions which we have discussed during our
last conference on February 27, 1964, the same shall be finalized upon
preparation of the contract to sell.*
If the above terms and conditions are acceptable to you, kindly sign
your conformity hereunder. Enclosed is our check for ONE HUNDRED
THOUSAND (P100,000.00) PESOS, MBTC Check No. 448314, as earnest
money.
Very truly yours,
VILLONCO REALTY
COMPANY
(Sgd.) TEOFILO
VILLONCO
CONFORME:
BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
That this sale shall be subject to favorable consummation of a property
in Sta. Ana we are negotiating.

(Sgd.) FRANCISCO CERVANTES

The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was
delivered by Edith Perez de Tagle to Bormaheco, Inc. on March 4, 1964 and was
received by Cervantes. In the voucher-receipt evidencing the delivery the broker
indicated in her handwriting that the earnest money was "subject to the terms and
conditions embodied in Bormaheco's letter" of February 12 and Villonco Realty
Company's letter of March 4, 1964 (Exh. E-1; 14 tsn).
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the
signing of the contract of sale, Exhibit D, Cervantes returned the earnest money,
with interest amounting to P694.24 (at ten percent per annum). Cervantes cited as
an excuse the circumstance that "despite the lapse of 45 days from February 12,
1964 there is no certainty yet" for the acquisition of the Punta property (Exh. F; F-I
and F-2). Villonco Realty Company refused to accept the letter and the checks of
Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded the
contract, he was already aware that the Punta lot had been awarded to Bormaheco,
Inc. (25-26 tsn).
Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964
articulated her shock and surprise at Bormaheco's turnabout. She reviewed the
history of the deal and explained why Romeo Villonco could not agree to the
rescission of the sale (Exh. G).**
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the
forty-five day period had already expired and the sale to Bormaheco, Inc. of the
Punta property had not been consummated. Cervantes said that his letter was a
"manifestation that we are no longer interested to sell" the Buendia Avenue
property to Villonco Realty Company (Annex I of Stipulation of Facts). The latter was
furnished with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to
Bormaheco, Inc., stating that the condition for the cancellation of the contract had
not arisen and at the same time announcing that an action for breach of contract
would be filed against Bormaheco, Inc. (Annex G of Stipulation of
Facts).1wph1.t
On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated
April 6) for specific performance against Bormaheco, Inc. Also on that same date,
April 7, at eight-forty-five in the morning, a notice of lis pendens was annotated on
the titles of the said lots.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that
the perfection of the contract of sale was subject to the conditions (a) "that final
acceptance or not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc.
"acquires the Sta. Ana property".

On June 2, 1964 or during the pendency of this case, the Nassco Acting General
Manager wrote to Bormaheco, Inc., advising it that the Board of Directors and the
Economic Coordinator had approved the sale of the Punta lot to Bormaheco, Inc.
and requesting the latter to send its duly authorized representative to the Nassco
for the signing of the deed of sale (Exh. 1).
The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc.
was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs. Abanes, L-28087,
July 31, 1973, 52 SCRA 73).
In view of the disclosure in Bormaheco's amended answer that the three lots were
registered in the names of the Cervantes spouses and not in the name of
Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed an amended
complaint impleading the said spouses as defendants. Bormaheco, Inc. and the
Cervantes spouses filed separate answers.
As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers'
Bank & Trust Company the sum of P8,712.25 as interests on the overdraft line of
P100,000 and the sum of P27.39 as interests daily on the same loan since January
16, 1965. (That overdraft line was later settled by Villonco Realty Company on a
date not mentioned in its manifestation of February 19, 1975).
Villonco Realty Company had obligated itself to pay the sum of P20,000 as
attorney's fees to its lawyers. It claimed that it was damaged in the sum of P10,000
a month from March 24, 1964 when the award of the Punta lot to Bormaheco, Inc.
was approved. On the other hand, Bormaheco, Inc. claimed that it had sustained
damages of P200,000 annually due to the notice of lis pendens which had
prevented it from constructing a multi-story building on the three lots. (Pars. 18 and
19, Stipulation of Facts).1wph1.t
Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes,
obligated itself to pay her a three percent commission on the price of P1,400,000 or
the amount of forty-two thousand pesos (14 tsn).
After trial, the lower court rendered a decision ordering the Cervantes spouses to
execute in favor of Bormaheco, Inc. a deed of conveyance for the three lots in
question and directing Bormaheco, Inc. (a) to convey the same lots to Villonco
Realty Company, (b) to pay the latter, as consequential damages, the sum of
P10,000 monthly from March 24, 1964 up to the consummation of the sale, (c) to
pay Edith Perez de Tagle the sum of P42,000 as broker's commission and (d) pay
P20,000 as to attorney's fees (Civil Case No. 8109).
Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions
are (a) that no contract of sale was perfected because Cervantes made a
supposedly qualified acceptance of the revised offer contained in Exhibit D, which
acceptance amounted to a counter-offer, and because the condition that

Bormaheco, inc. would acquire the Punta land within the forty-five-day period was
not fulfilled; (2) that Bormaheco, Inc. cannot be compelled to sell the land which
belongs to the Cervantes spouses and (3) that Francisco N. Cervantes did not bind
the conjugal partnership and his wife when, as president of Bormaheco, Inc., he
entered into negotiations with Villonco Realty Company regarding the said land.
We hold that the appeal, except as to the issue of damages, is devoid of merit.
"By the contract of sale one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determining thing, and the other to pay therefor a
price certain in money or its equivalent. A contract of sale may be absolute or
conditional" (Art. 1458, Civil Code).
"The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price. From that moment,
the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts" (Art. 1475, Ibid.).
"Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in keeping with good
faith, usage and law" (Art. 1315, Civil Code).
"Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain
and the acceptance absolute. A qualified acceptance constitutes a counter-offer"
(Art. 1319, Civil Code). "An acceptance may be express or implied" (Art. 1320, Civil
Code).
Bormaheco's acceptance of Villonco Realty Company's offer to purchase the
Buendia Avenue property, as shown in Teofilo Villonco's letter dated March 4, 1964
(Exh. D), indubitably proves that there was a meeting of minds upon the subject
matter and consideration of the sale. Therefore, on that date the sale was
perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs.
Tambunting, 1 Phil. 490). Not only that Bormaheco's acceptance of the part
payment of one hundred ,thousand pesos shows that the sale was conditionally
consummated or partly executed subject to the purchase by Bormaheco, Inc. of the
Punta property. The nonconsummation of that purchase would be a negative
resolutory condition (Taylor vs. Uy Tieng Piao, 43 Phil. 873).
On February 18, 1964 Bormaheco's bid for the Punta property was already accepted
by the Nassco which had authorized its General Manager to sign the corresponding
deed of sale. What was necessary only was the approval of the sale by the
Economic Coordinator and a request for that approval was already pending in the
office of that functionary on March 4, 1964.

Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected
because Cervantes allegedly qualified his acceptance of Villonco's revised offer and,
therefore, his acceptance amounted to a counter-offer which Villonco Realty
Company should accept but no such acceptance was ever transmitted to
Bormaheco, Inc. which, therefore, could withdraw its offer.
That contention is not well-taken. It should be stressed that there is no evidence as
to what changes were made by Cervantes in Villonco's revised offer. And there is no
evidence that Villonco Realty Company did not assent to the supposed changes and
that such assent was never made known to Cervantes.
What the record reveals is that the broker, Miss Tagle, acted as intermediary
between the parties. It is safe to assume that the alleged changes or qualifications
made by Cervantes were approved by Villonco Realty Company and that such
approval was duly communicated to Cervantes or Bormaheco, Inc. by the broker as
shown by the fact that Villonco Realty Company paid, and Bormaheco, Inc.
accepted, the sum of P100,000 as earnest money or down payment. That crucial
fact implies that Cervantes was aware that Villonco Realty Company had accepted
the modifications which he had made in Villonco's counter-offer. Had Villonco Realty
Company not assented to those insertions and annotations, then it would have
stopped payment on its check for P100,000. The fact that Villonco Realty Company
allowed its check to be cashed by Bormaheco, Inc. signifies that the company was in
conformity with the changes made by Cervantes and that Bormaheco, Inc. was
aware of that conformity. Had those insertions not been binding, then Bormaheco,
Inc. would not have paid interest at the rate of ten percent per annum, on the
earnest money of P100,000.
The truth is that the alleged changes or qualifications in the revised counter offer
(Exh. D) are not material or are mere clarifications of what the parties had
previously agreed upon.
Thus, Cervantes' alleged insertion in his handwriting of the figure and the words
"12th and" in Villonco's counter-offer is the same as the statement found in the
voucher-receipt for the earnest money, which reads: "subject to the terms and
conditions embodied in Bormaheco's letter of Feb. 12, 1964 and your letter of March
4, 1964" (Exh. E-1).
Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's
revised counter-offer and substituted for it the word "another" so that the original
phrase, "Nassco's property in Sta. Ana", was made to read as "another property in
Sta. Ana". That change is trivial. What Cervantes did was merely to adhere to the
wording of paragraph 3 of Bormaheco's original offer (Exh. B) which mentions
"another property located at Sta. Ana." His obvious purpose was to avoid
jeopardizing his negotiation with the Nassco for the purchase of its Sta. Ana
property by unduly publicizing it.

It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex
1) or after the Nassco property had been awarded to Bormaheco, Inc., alluded to the
"Nassco property". At that time, there was no more need of concealing from the
public that Bormaheco, Inc. was interested in the Nassco property.
Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the
word "interest" in that same paragraph 3 of the revised counter-offer (Exh. D) could
not be categorized as a major alteration of that counter-offer that prevented a
meeting of the minds of the parties. It was understood that the parties had
contemplated a rate of ten percent per annum since ten percent a month or semiannually would be usurious.
Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in
clarifying in the voucher for the earnest money of P100,000 that Bormaheco's
acceptance thereof was subject to the terms and conditions embodied in
Bormaheco's letter of February 12, 1964 and your (Villonco's) letter of March 4,
1964" made Bormaheco's acceptance "qualified and conditional".
That contention is not correct. There is no incompatibility between Bormaheco's
offer of February 12, 1964 (Exh. B) and Villonco's counter-offer of March 4, 1964
(Exh. D). The revised counter-offer merely amplified Bormaheco's original offer.
The controlling fact is that there was agreement between the parties on the subject
matter, the price and the mode of payment and that part of the price was paid.
"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" (Art. 1482, Civil
Code).
"It is true that an acceptance may contain a request for certain changes in the
terms of the offer and yet be a binding acceptance. 'So long as it is clear that the
meaning of the acceptance is positively and unequivocally to accept the offer,
whether such request is granted or not, a contract is formed.' " (Stuart vs. Franklin
Life Ins. Co., 165 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).
Thus, it was held that the vendor's change in a phrase of the offer to purchase,
which change does not essentially change the terms of the offer, does not amount
to a rejection of the offer and the tender of a counter-offer (Stuart vs. Franklin Life
Ins. Co., supra).
The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41
Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In those two cases
the acceptance radically altered the offer and, consequently, there was no meeting
of the minds of the parties.
Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar
central for P1,000,000 on condition that the price be paid in cash, or, if not paid in

cash, the price would be payable within three years provided security is given for
the payment of the balance within three years with interest. Zayco, instead of
unconditionally accepting those terms, countered that he was going to make a down
payment of P100,000, that Serra's mortgage obligation to the Philippine National
Bank of P600,000 could be transferred to Zayco's account and that he (plaintiff)
would give a bond to secure the payment of the balance of the price. It was held
that the acceptance was conditional or was a counter-offer which had to be
accepted by Serra. There was no such acceptance. Serra revoked his offer. Hence,
there was no perfected contract.
In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan
Hacienda owned by Benito Legarda, who had empowered Valdes to sell it. Borck was
given three months from December 4, 1911 to buy the hacienda for P307,000. On
January 17, 1912 Borck wrote to Valdes, offering to purchase the hacienda for
P307,000 payable on May 1, 1912. No reply was made to that letter. Borck wrote
other letters modifying his proposal. Legarda refused to convey the property.
It was held that Borck's January 17th letter plainly departed from the terms of the
offer as to the time of payment and was a counter-offer which amounted to a
rejection of Valdes' original offer. A subsequent unconditional acceptance could not
revive that offer.
The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil.
270 where the written offer to sell was revoked by the offer or before the offeree's
acceptance came to the offeror's knowledge.
Appellants' next contention is that the contract was not perfected because the
condition that Bormaheco, Inc. would acquire the Nassco land within forty-five days
from February 12, 1964 or on or before March 28, 1964 was not fulfilled. This
contention is tied up with the following letter of Bormaheco, Inc. (Exh. F):
BORMAHECO, INC.
March 30, 1964
Villonco Realty Company
V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
Gentlemen:
We are returning herewith your earnest money together with interest
thereon at 10% per annum. Please be informed that despite the lapse
of the 45 days from February 12, 1964 there is no certainty yet for us

to acquire a substitute property, hence the return of the earnest

money as agreed upon.
Very truly yours,
SGD. FRANCISCO
N. CERVANTES
President
Encl.: P.N.B. Check No. 112994 J
P.N.B. Check No. 112996J
That contention is predicated on the erroneous assumption that Bormaheco, Inc.
was to acquire the Nassco land within forty-five days or on or before March 28,
1964.
The trial court ruled that the forty-five-day period was merely an estimate or a
forecast of how long it would take Bormaheco, Inc. to acquire the Nassco property
and it was not "a condition or a deadline set for the defendant corporation to decide
whether or not to go through with the sale of its Buendia property".
The record does not support the theory of Bormaheco, Inc. and the Cervantes
spouses that the forty-five-day period was the time within which (a) the Nassco
property and two Pasong Tamo lots should be acquired, (b) when Cervantes would
secure his wife's consent to the sale of the three lots and (c) when Bormaheco, Inc.
had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of
the Buendia lots would be consummated after he had consummated the purchase
of the Nassco property. Then, in paragraph 5 of the same offer he stated "that final
negotiations on both properties can be definitely known after forty-five days" (See
Exh. B).
It is deducible from the tenor of those statements that the consummation of the
sale of the Buendia lots to Villonco Realty Company was conditioned on
Bormaheco's acquisition of the Nassco land. But it was not spelled out that such
acquisition should be effected within forty-five days from February 12, 1964. Had it
been Cervantes' intention that the forty-five days would be the period within which
the Nassco land should be acquired by Bormaheco, then he would have specified
that period in paragraph 3 of his offer so that paragraph would read in this wise:
"That this sale is to be consummated only after I shall have consummated my
purchase of another property located at Sta. Ana, Manila within forty-five days from
the date hereof ." He could have also specified that period in his "conforme" to
Villonco's counter-offer of March 4, 1964 (Exh. D) so that instead of merely stating
"that this sale shall be subject to favorable consummation of a property in Sta. Ana
we are negotiating" he could have said: "That this sale shall be subject to favorable

consummation within forty-five days from February 12, 1964 of a property in Sta.
Ana we are negotiating".
No such specification was made. The term of forty-five days was not a part of the
condition that the Nassco property should be acquired. It is clear that the statement
"that final negotiations on both property can be definitely known after 45 days"
does not and cannot mean that Bormaheco, Inc. should acquire the Nassco property
within forty-five days from February 12, 1964 as pretended by Cervantes. It is
simply a surmise that after forty-five days (in fact when the forty-five day period
should be computed is not clear) it would be known whether Bormaheco, Inc. would
be able to acquire the Nassco property and whether it would be able to sell the
Buendia property. That aforementioned paragraph 5 does not even specify how long
after the forty-five days the outcome of the final negotiations would be known.
It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended
complaint, which answer was verified by Cervantes, it was alleged that Cervantes
accepted Villonco's revised counter-offer of March 4, 1964 subject to the condition
that "the final negotiations (acceptance) will have to be made by defendant within
45 days from said acceptance" (31 Record on Appeal). If that were so, then the
consummation of Bormaheco's purchase of the Nassco property would be made
within forty-five days from March 4, 1964.
What makes Bormaheco's stand more confusing and untenable is that in its three
answers it invariably articulated the incoherent and vague affirmative defense that
its acceptance of Villonco's revised counter-offer was conditioned on the
circumstance "that final acceptance or not shall be made after 45 days" whatever
that means. That affirmative defense is inconsistent with the other aforequoted
incoherent statement in its third answer that "the final negotiations (acceptance)
will have to be made by defendant within 45 days from said acceptance" (31 Record
on Appeal).1wph1.t
Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964
do not sustain at all its theory that the Nassco property should be acquired on or
before March 28, 1964. Its rescission or revocation of its acceptance cannot be
anchored on that theory which, as articulated in its pleadings, is quite equivocal and
unclear.
It should be underscored that the condition that Bormaheco, Inc. should acquire the
Nassco property was fulfilled. As admitted by the appellants, the Nassco property
was conveyed to Bormaheco, Inc. on June 26, 1964. As early as January 17, 1964
the property was awarded to Bormaheco, Inc. as the highest bidder. On February 18,
1964 the Nassco Board authorized its General Manager to sell the property to
Bormaheco, Inc. (Exh. H). The Economic Coordinator approved the award on March
24, 1964. It is reasonable to assume that had Cervantes been more assiduous in
following up the transaction, the Nassco property could have been transferred to

Bormaheco, Inc. on or before March 28, 1964, the supposed last day of the fortyfive-day period.
The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot
be required to sell the three lots in question because they are conjugal properties of
the Cervantes spouses. They aver that Cervantes in dealing with the Villonco
brothers acted as president of Bormaheco, Inc. and not in his individual capacity
and, therefore, he did not bind the conjugal partnership nor Mrs. Cervantes who was
allegedly opposed to the sale.
Those arguments are not sustainable. It should be remembered that Cervantes, in
rescinding the contract of sale and in returning the earnest money, cited as an
excuse the circumstance that there was no certainty in Bormaheco's acquisition of
the Nassco property (Exh. F and Annex 1). He did not say that Mrs. Cervantes was
opposed to the sale of the three lots. He did not tell Villonco Realty Company that
he could not bind the conjugal partnership. In truth, he concealed the fact that the
three lots were registered "in the name of FRANCISCO CERVANTES, Filipino, of legal
age, married to Rosario P. Navarro, as owner thereof in fee simple". He certainly led
the Villonco brothers to believe that as president of Bormaheco, Inc. he could
dispose of the said lots. He inveigled the Villoncos into believing that he had
untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots and
that he was invested with adequate authority to sell the same.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three
lots as "our property" which "we are offering to sell ..." (Opening paragraph and par.
1 of Exh. B). Whether the prounoun "we" refers to himself and his wife or to
Bormaheco, Inc. is not clear. Then, in paragraphs 3 and 4 of the offer, he used the
first person and said: "I shall have consummated my purchase" of the Nassco
property; "... my negotiations with said property" and "I will return to you your
deposit". Those expressions conveyed the impression and generated the belief that
the Villoncos did not have to deal with Mrs. Cervantes nor with any other official of
Bormaheco, Inc.
The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and
studiously avoided making the allegation that Cervantes was not authorized by his
wife to sell the three lots or that he acted merely as president of Bormaheco, Inc.
That defense was not interposed so as not to place Cervantes in the ridiculous
position of having acted under false pretenses when he negotiated with the
Villoncos for the sale of the three lots.
Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on
February 12, 1964, after some prior negotiations, the defendant (Bormaheco, Inc.)
made a formal offer to sell to the plaintiff the property of the said defendant
situated at the abovenamed address along Buendia Avenue, Makati, Rizal, under the
terms of the letter-offer, a copy of which is hereto attached as Annex A hereof", now
Exhibit B (2 Record on Appeal).

That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer
dated May 5, 1964. It did not traverse that paragraph 2. Hence, it was deemed
admitted. However, it filed an amended answer dated May 25, 1964 wherein it
denied that it was the owner of the three lots. It revealed that the three lots "belong
and are registered in the names of the spouses Francisco N. Cervantes and Rosario
N. Cervantes."
The three answers of Bormaheco, Inc. contain the following affirmative defense:
13. That defendant's insistence to finally decide on the proposed sale
of the land in question after 45 days had not only for its purpose the
determination of its acquisition of the said Sta. Ana (Nassco) property
during the said period, but also to negotiate with the actual and
registered owner of the parcels of land covered by T.C.T. Nos. 43530,
43531 and 43532 in question which plaintiff was fully aware that the
same were not in the name of the defendant (sic; Par. 18 of Answer to
Amended Complaint, 10, 18 and 34, Record on Appeal).
In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five
days within which to acquire the Nassco property and "to negotiate" with the
registered owner of the three lots. The absurdity of that pretension stands out in
bold relief when it is borne in mind that the answers of Bormaheco, Inc. were
verified by Cervantes and that the registered owner of the three lots is Cervantes
himself. That affirmative defense means that Cervantes as president of Bormaheco,
Inc. needed forty-five days in order to "negotiate" with himself (Cervantes).
The incongruous stance of the Cervantes spouses is also patent in their answer to
the amended complaint. In that answer they disclaimed knowledge or information of
certain allegations which were well-known to Cervantes as president of Bormaheco,
Inc. and which were admitted in Bormaheco's three answers that were verified by
Cervantes.
It is significant to note that Bormaheco, Inc. in its three answers, which were verified
by Cervantes, never pleaded as an affirmative defense that Mrs. Cervantes opposed
the sale of the three lots or that she did not authorize her husband to sell those lots.
Likewise, it should be noted that in their separate answer the Cervantes spouses
never pleaded as a defense that Mrs. Cervantes was opposed to the sale of three
lots or that Cervantes could not bind the conjugal partnership. The appellants were
at first hesitant to make it appear that Cervantes had committed the skullduggery
of trying to sell property which he had no authority to alienate.
It was only during the trial on May 17, 1965 that Cervantes declared on the witness
stand that his wife was opposed to the sale of the three lots, a defense which, as
already stated, was never interposed in the three answers of Bormaheco, Inc. and in
the separate answer of the Cervantes spouses. That same viewpoint was adopted in
defendants' motion for reconsideration dated November 20, 1965.

But that defense must have been an afterthought or was evolved post litem motam
since it was never disclosed in Cervantes' letter of rescission and in his letter to Miss
Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not testify at the trial to
fortify that defense which had already been waived for not having been pleaded
(See sec. 2, Rule 9, Rules of Court).
Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife
and the fact that the three lots were entirely occupied by Bormaheco's building,
machinery and equipment and were mortgaged to the DBP as security for its
obligation, and considering that appellants' vague affirmative defenses do not
include Mrs. Cervantes' alleged opposition to the sale, the plea that Cervantes had
no authority to sell the lots strains the rivets of credibility (Cf. Papa and Delgado vs.
Montenegro, 54 Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31).
"Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith" (Art. 1159, Civil Code). Inasmuch
as the sale was perfected and even partly executed, Bormaheco, Inc., and the
Cervantes spouses, as a matter of justice and good faith, are bound to comply with
their contractual commitments.
Parenthetically, it may be observed that much misunderstanding could have been
avoided had the broker and the buyer taken the trouble of making some research in
the Registry of Deeds and availing themselves of the services of a competent
lawyer in drafting the contract to sell.
Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail
the trial court's award to Villonco Realty Company of consequential damage
amounting to ten thousand pesos monthly from March 24, 1964 (when the
Economic Coordinator approved the award of the Nassco property to Bormaheco,
Inc.) up to the consummation of the sale. The award was based on paragraph 18 of
the stipulation of facts wherein Villonco Realty Company "submits that the delay in
the consummation of the sale" has caused it to suffer the aforementioned damages.
The appellants contend that statement in the stipulation of facts simply means that
Villonco Realty Company speculates that it has suffered damages but it does not
mean that the parties have agreed that Villonco Realty Company is entitled to those
damages.
Appellants' contention is correct. As rightly observed by their counsel, the damages
in question were not specifically pleaded and proven and were "clearly conjectural
and speculative".
However, appellants' view in their seventh assignment of error that the trial court
erred in ordering Bormaheco, Inc. to pay Villonco Realty Company the sum of twenty
thousand pesos as attorney's fees is not tenable. Under the facts of the case, it is
evident that Bormaheco, Inc. acted in gross and evident bad faith in refusing to

satisfy the valid and just demand of Villonco Realty Company for specific
performance. It compelled Villonco Realty Company to incure expenses to protect its
interest. Moreover, this is a case where it is just and equitable that the plaintiff
should recover attorney's fees (Art. 2208, Civil Code).
The appellants in their eighth assignment of error impugn the trial court's
adjudication of forty-two thousand pesos as three percent broker's commission to
Miss Tagle. They allege that there is no evidence that Bormaheco, Inc. engaged her
services as a broker in the projected sale of the three lots and the improvements
thereon. That allegation is refuted by paragraph 3 of the stipulation of facts and by
the documentary evidence. It was stipulated that Miss Tagle intervened in the
negotiations for the sale of the three lots. Cervantes in his original offer of February
12, 1964 apprised Villonco Realty Company that the earnest money should be
delivered to Miss Tagle, the bearer of the letter-offer. See also Exhibit G and Annex I
of the stipulation of facts.
We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay
Miss Tagle her three percent commission.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive notice from
the clerk of the lower court that the records of this case have been received from
this Court, the spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes
should execute a deed conveying to Bormaheco, Inc. their three lots covered by
Transfer Certificate of Title Nos. 43530, 43531 and 43532 of the Registry of Deeds of
Rizal.
2. Within five (5) days from the execution of such deed of conveyance, Bormaheco,
Inc. should execute in favor of Villonco Realty Company, V. R. C. Building, 219
Buendia Avenue, Makati, Rizal a registerable deed of sale for the said three lots and
all the improvements thereon, free from all lien and encumbrances, at the price of
four hundred pesos per square meter, deducting from the total purchase price the
sum of P100,000 previously paid by Villonco Realty Company to Bormaheco, Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to
pay Bormaheco, Inc. the balance of the price in the sum of one million three
hundred thousand pesos (P1,300,000).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand
pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle the sum of
forty-two thousand pesos (P42,000) as commission. Costs against the defendantsappellants.
SO ORDERED.

G.R. No. L-36083 September 5, 1975

Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses
RAMON DOROMAL, JR., and GAUDELIA VEGA, petitioners,
vs.
HON. COURT OF APPEALS and FILOMENA JAVELLANA, respondents.
BARREDO, J.:
Petition for review of the decision of the Court of Appeals in CA-G.R. No.
47945-R entitled Filomena Javellana vs. Spouses Ramon Doromal, Sr., et al. which
reversed the decision of the Court of First Instance of Iloilo that had in turn
dismissed herein private respondent Filomena Javellana's action for redemption of a
certain property sold by her co-owners to herein petitioners for having been made
out of time.
The factual background found by the Court of Appeals and which is binding on this
Court, the same not being assailed by petitioners as being capricious, is as follows:
IT RESULTING: That the facts are quite simple; Lot 3504 of the
cadastral survey of Iloilo, situated in the poblacion of La Paz, one of its
districts, with an area of a little more than 2- hectares was originally
decreed in the name of the late Justice Antonio Horilleno, in 1916,
under Original Certificate of Title No. 1314, Exh. A; but before he died,
on a date not particularized in the record, he executed a last will and
testament attesting to the fact that it was a co-ownership between

himself and his brothers and sisters, Exh. C; so that the truth was that
the owners or better stated, the co-owners were; beside Justice
Horilleno,
"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was
succeeded by her only daughter and heir herein plaintiff. Filomena
Javellana, in the proportion of 1/7 undivided ownership each; now then,
even though their right had not as yet been annotated in the title, the
co-owners led by Carlos, and as to deceased Justice Antonio Horilleno,
his daughter Mary, sometime since early 1967, had wanted to sell their
shares, or if possible if Filomena Javellana were agreeable, to sell the
entire property, and they hired an acquaintance Cresencia Harder, to
look for buyers, and the latter came to interest defendants, the father
and son, named Ramon Doromal, Sr. and Jr., and in preparation for the
execution of the sale, since the brothers and sisters Horilleno were
scattered in various parts of the country, Carlos in Ilocos Sur, Mary in
Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan
City, they all executed various powers of attorney in favor of their
niece, Mary H. Jimenez Exh. 1-8, they also caused preparation of a
power of attorney of identical tenor for signature by plaintiff, Filomena
Javellana, Exh. M, and sent it with a letter of Carlos, Exh. 7 dated 18
January, 1968 unto her thru Mrs. Harder, and here, Carlos informed her
that the price was P4.00 a square meter, although it now turns out
according to Exh. 3 that as early as 22 October, 1967, Carlos had
received in check as earnest money from defendant Ramon Doromal,
Jr., the sum of P5,000.00 and the price therein agreed upon was five
(P5.00) pesos a square meter as indeed in another letter also of Carlos
to Plaintiff in 5 November, 1967, Exh. 6, he had told her that the
Doromals had given the earnest money of P5,000.00 at P5.00 a square
meter, at any rate, plaintiff not being agreeable, did not sign the
power of attorney, and the rest of the co-owners went ahead with their
sale of their 6/7, Carlos first seeing to it that the deed of sale by their
common attorney in fact, Mary H. Jimenez be signed and ratified as it
was signed and ratified in Candon, Ilocos Sur, on 15 January, 1968,
Exh. 2, then brought to Iloilo by Carlos in the same month, and
because the Register of Deeds of Iloilo refused to register right away,
since the original registered owner, Justice Antonio Horilleno was
already dead, Carlos had to ask as he did, hire Atty. Teotimo Arandela
to file a petition within the cadastral case, on 26 February, 1968, for
the purpose, Exh. C, after which Carlos returned to Luzon, and after
compliance with the requisites of publication, hearing and notice, the
petition was approved, and we now see that on 29 April, 1968, Carlos
already back in Iloilo went to the Register of Deeds and caused the
registration of the order of the cadastral court approving the issuance
of a new title in the name of the co-owners, as well as of the deed of

sale to the Doromals, as a result of which on that same date, a new

title was issued TCT No. 23152, in the name of the Horillenos to 6/7
and plaintiff Filomena Javellana to 1/7, Exh. D, only to be cancelled on
the same day under TCT No. 23153, Exh. 2, already in the names of the
vendees Doromals for 6/7 and to herein plaintiff, Filomena Javellana,
1/7, and the next day 30 April, 1968, the Doromals paid unto Carlos by
check, the sum of P97,000.00 Exh. 1, of Chartered Bank which was
later substituted by check of Phil. National Bank, because there was no
Chartered Bank Branch in Ilocos Sur, but besides this amount paid in
check, the Doromals according to their evidence still paid an additional
amount in cash of P18,250.00 since the agreed price was P5.00 a
square meter; and thus was consummated the transaction, but it is
here where complications set in,
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo,
plaintiff's lawyer, Atty. Arturo H. Villanueva, bringing with him her letter of that date,
reading,
"P.O.
Box
Bacolod
June 10, 1968

189,
City

Mr. & Mrs. Ramon Doromal, Sr.

and Mr. and Mrs. Ramon Doromal, Jr.
"Dumangas Iloilo
Dear Mr. and Mrs. Doromal:
The bearer of this letter is my nephew, Atty. Arturo H.
Villanueva, Jr., of this City. Through him, I am making a
formal offer to repurchase or redeem from you the 6/7
undivided share in Lot No. 3504, of the Iloilo Cadastre,
which you bought from my erstwhile co-owners, the
Horillenos, for the sum of P30,000.00, Atty. Villanueva has
with him the sum of P30,000.00 in cash, which he will
deliver to you as soon as you execute the contract of sale
in my favor.
Thank you very much for whatever favorable consideration you can
give this request.
Very truly yours,

(SIGNED)
Mrs.
FILOMENA
JAVELLANA"
p. 26, Exh. "J", Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he
had the P30,000.00 with him in cash, and tendered it to them, for the
exercise of the legal redemption, the Doromals were aghast, and
refused. and the very next day as has been said. 11 June, 1968,
plaintiff filed this case, and in the trial, thru oral and documentary
proofs sought to show that as co-owner, she had the right to redeem at
the price stated in the deed of sale, Exh. 2, namely P30,000.00 of the
but defendants in answer, and in their evidence, oral and documentary
sought to show that plaintiff had no more right to redeem and that if
ever she should have, that it should be at the true and real price by
them paid, namely, the total sum of P115,250.00, and trial judge, after
hearing the evidence, believed defendants, that plaintiff had no more
right, to redeem, because,
"Plaintiff was informed of the intended sale of the 6/7
share belonging to the Horillenos."
and that,
"The plaintiff have every reason to be grateful to Atty. Carlos Horilleno
because in the petition for declaration of heirs of her late uncle Antonio
Horilleno in whose name only the Original Certificate of Title covering
the Lot in question was issued, her uncle Atty. Carlos Horilleno included
her as one of the heirs of said Antonio Horilleno. Instead, she filed this
case to redeem the 6/7 share sold to the Doromals for the simple
reason that the consideration in the deed of sale is the sum of
P30,000.00 only instead of P115,250.00 approximately which was
actually paid by the defendants to her co-owners, thus she wants to
enrich herself at the expense of her own blood relatives who are her
aunts, uncles and cousins. The consideration of P30,000.00 only was
placed in the deed of sale to minimize the payment of the registration
fees, stamps, and sales tax. pp. 77-78, R.A.,
and dismiss and further condemned plaintiff to pay attorney's fees,
and moral and exemplary damages as set forth in few pages back, it is
because of this that plaintiff has come here and contends, that Lower
Court erred:

"I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of

the Iloilo Cadastre, the right of legal redemption under Art. 1620, of the
Civil Code:
"II. ... as a consequence of the above error, in refusing to order the
defendants-appellees, the vendees of a portion of the aforesaid Lot No.
3504 which they bought from the co-owners of the plaintiff-appellant,
to reconvey the portion they purchased to the herein plaintiffappellant..
"III. ... in admitting extrinsic evidence in the determination of the
consideration of the sale, instead of simply adhering to the purchase
price of P30,000.00, set forth in the pertinent Deed of Sale executed by
the vendors and owners of the plaintiff-appellant in favor of the
defendants-appellees.
"IV. ... in dismissing the complaint filed in this case." pp. 1-3,
Appellant's Brief,.
which can be reduced to the simple question of whether or not on tile
basis of the evidence and the law, the judgment appealed from should
be maintained; (Pp. 16-22, Record.) .
Upon these facts, the Court of Appeals reversed the trial court's decision and held
that although respondent Javellana was informed of her co-owners' proposal to sell
the land in question to petitioners she was, however, "never notified ... least of all,
in writing", of the actual execution and registration of the corresponding deed of
sale, hence, said respondent's right to redeem had not yet expired at the time she
made her offer for that purpose thru her letter of June 10, 1968 delivered to
petitioners on even date. The intermediate court further held that the redemption
price to be paid by respondent should be that stated in the deed of sale which is
P30,000 notwithstanding that the preponderance of the evidence proves that the
actual price paid by petitioners was P115,250. Thus, in their brief, petitioners assign
the following alleged errors:
I
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE
IN WRITING OF THE SALE CONTEMPLATED IN ARTICLE 1623 OF THE
CIVIL CODE REFERS TO A NOTICE IN WRITING AFTER THE EXECUTION
AND REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF THE
DOCUMENT OF SALE.
II

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE

INSCRIPTION OF THE SALE IN THE REGISTRY OF PROPERTY TAKES
EFFECT AS AGAINST THIRD PERSONS INCLUDING CLAIMS OF POSSIBLE
REDEMPTIONERS.
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT
TO REDEEM, THE COURT OF APPEALS ERRED IN HOLDING THAT THE
REDEMPTION PRICE SHOULD BE THAT STATED IN THE DEED OF SALE.
(Pp. 1-2, Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7
co-owner of the property in dispute. The thrust of their first assignment of error is
that for purposes of Article 1623 of the Civil Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining
owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968,
Exhibit 7, and November 5, 1967, Exhibit 6, constituted the required notice in
writing from which the 30-day period fixed in said provision should be computed.
But to start with, there is no showing that said letters were in fact received by
respondent and when they were actually received. Besides, petitioners do not
pinpoint which of these two letters, their dates being more than two months apart,
is the required notice. In any event, as found by the appellate court, neither of said
letters referred to a consummated sale. As may be observed, it was Carlos Horilleno
alone who signed them, and as of January 18, 1968, powers of attorney from the
various co-owners were still to be secured. Indeed, the later letter of January 18,
1968 mentioned that the price was P4.00 per square meter whereas in the earlier
letter of November 5, 1967 it was P5.00, as in fact, on that basis, as early as
October 27, 1967, Carlos had already received P5,000 from petitioners supposedly
as earnest money, of which, however, mention was made by him to his niece only in
the later letter of January 18, 1968, the explanation being that "at later negotiation
it was increased to P5.00 per square meter." (p. 4 of petitioners' brief as appellees
in the Court of Appeals quoting from the decision of the trial court.) In other words,
while the letters relied upon by petitioners could convey the idea that more or less
some kind of consensus had been arrived at among the other co-owners to sell the
property in dispute to petitioners, it cannot be said definitely that such a sale had

even been actually perfected. The fact alone that in the later letter of January 18,
1968 the price indicated was P4.00 per square meter while in that of November 5,
1967, what was stated was P5.00 per square meter negatives the possibility that a
"price definite" had already been agreed upon. While P5,000 might have indeed
been paid to Carlos in October, 1967, there is nothing to show that the same was in
the concept of the earnest money contemplated in Article 1482 of the Civil Code,
invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of
the factual milieu thereof extant in the record, We are more inclined to believe that
the said P5,000 were paid in the concept of earnest money as the term was
understood under the Old Civil Code, that is, as a guarantee that the buyer would
not back out, considering that it is not clear that there was already a definite
agreement as to the price then and that petitioners were decided to buy 6/7 only of
the property should respondent Javellana refuse to agree to part with her 1/7 share.
In the light of these considerations, it cannot be said that the Court of Appeals erred
in holding that the letters aforementioned sufficed to comply with the requirement
of notice of a sale by co-owners under Article 1623 of the Civil Code. We are of the
considered opinion and so hold that for purposes of the co-owner's right of
redemption granted by Article 1620 of the Civil Code, the notice in writing which
Article 1623 requires to be made to the other co-owners and from receipt of which
the 30-day period to redeem should be counted is a notice not only of a perfected
sale but of the actual execution and delivery of the deed of sale. This is implied from
the latter portion of Article 1623 which requires that before a register of deeds can
record a sale by a co-owner, there must be presented to him, an affidavit to the
effect that the notice of the sale had been sent in writing to the other co-owners. A
sale may not be presented to the register of deeds for registration unless it be in
the form of a duly executed public instrument. Moreover, the law prefers that all the
terms and conditions of the sale should be definite and in writing. As aptly observed
by Justice Gatmaitan in the decision under review, Article 1619 of the Civil Code
bestows unto a co-owner the right to redeem and "to be subrogated under the same
terms and conditions stipulated in the contract", and to avoid any controversy as to
the terms and conditions under which the right to redeem may be exercised, it is
best that the period therefor should not be deemed to have commenced unless the
notice of the disposition is made after the formal deed of disposal has been duly
executed. And it being beyond dispute that respondent herein has never been
notified in writing of the execution of the deed of sale by which petitioners acquired
the subject property, it necessarily follows that her tender to redeem the same
made on June 10, 1968 was well within the period prescribed by law. Indeed, it is
immaterial when she might have actually come to know about said deed, it
appearing she has never been shown a copy thereof through a written
communication by either any of the petitioners-purchasers or any of her co-ownersvendees. (Cornejo et al. vs. CA et al., 16 SCRA 775.)
The only other pivotal issue raised by petitioners relates to the price which
respondent offered for the redemption in question. In this connection, from the
decision of the Court of Appeals, We gather that there is "decisive preponderance of
evidence" establishing "that the price paid by defendants was not that stated in the

document, Exhibit 2, of P30,000 but much more, at least P97,000, according to the
check, Exhibit 1, if not a total of P115,250.00 because another amount in cash of
P18,250 was paid afterwards."
It is, therefore, the contention of petitioners here that considering said finding of
fact of the intermediate court, it erred in holding nevertheless that "the redemption
price should be that stated in the deed of sale."
Again, petitioners' contention cannot be sustained. As stated in the decision under
review, the trial court found that "the consideration of P30,000 only was placed in
the deed of sale to minimize the payment of the registration fees, stamps and sales
tax." With this undisputed fact in mind, it is impossible for the Supreme Court to
sanction petitioners' pragmatic but immoral posture. Being patently violative of
public policy and injurious to public interest, the seemingly wide practice of
understating considerations of transactions for the purpose of evading taxes and
fees due to the government must be condemned and all parties guilty thereof must
be made to suffer the consequences of their ill-advised agreement to defraud the
state. Verily, the trial court fell short of its devotion and loyalty to the Republic in
officially giving its stamp of approval to the stand of petitioners and even berating
respondent Javellana as wanting to enrich herself "at the expense of her own blood
relatives who are her aunts, uncles and cousins." On the contrary, said "blood
relatives" should have been sternly told, as We here hold, that they are in paridelicto with petitioners in committing tax evasion and should not receive any
consideration from any court in respect to the money paid for the sale in dispute.
Their situation is similar to that of parties to an illegal contract. 1
Of course, the Court of Appeals was also eminently correct in its considerations
supporting the conclusion that the redemption in controversy should be only for the
price stipulated in the deed, regardless of what might have been actually paid by
petitioners that style inimitable and all his own, Justice Gatmaitan states those
considerations thus:
CONSIDERING: As to this that the evidence has established with
decisive preponderance that the price paid by defendants was not that
stated in the document, Exh. 2 of P30,000.00 but much more, at least
P97,000.00 according to the check, Exh. 1 if not a total of P115,250.00
because another amount in cash of P18,250.00 was paid afterwards,
perhaps it would be neither correct nor just that plaintiff should be
permitted to redeem at only P30,000.00, that at first glance would
practically enrich her by the difference, on the other hand, after some
reflection, this Court can not but have to bear in mind certain definite
points.
1st According to Art. 1619

"Legal redemption is the right to be subrogated, upon the same terms

and conditions stipulated in the contract, in the place of one who
acquires a thing by purchase or dation in payment, or by any other
transaction whereby ownership is transmitted by onerous title." pp.
471-472, New Civil Code,
and note that redemptioner right is to be subrogated
"upon the same terms and conditions stipulated in the contract."
and here, the stipulation in the public evidence of the contract, made
public by both vendors and vendees is that the price was P30,000.00;
2nd According to Art. 1620,
"A co-owner of a thing may exercise the right of redemption in case the share of all
the other co-owners or any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one. p.
472, New Civil Code, .
from which it is seen that if the price paid is 'grossly excessive'
redemptioner is required to pay only a reasonable one; not that
actually paid by the vendee, going to show that the law seeks to
protect redemptioner and converts his position into one not that of a
contractually but of a legally subrogated creditor as to the right of
redemption, if the price is not 'grossly excessive', what the law had
intended redemptioner to pay can be read in Art. 1623.
The right of a legal pre-emption or redemption shall not
be exercised except within thirty (30) days from the notice
in writing by the prospective vendor, or by the vendor as
the case may be. The deed of sale shall not be recorded in
the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice
thereof of all possible redemptioners.' p. 473, New Civil
Code,
if that be so that affidavit must have been intended by the lawmakers
for a definite purpose, to argue that this affidavit has no purpose is to
go against all canons of statutory construction, no law mandatory in
character and worse, prohibitive should be understood to have no
purpose at all, that would be an absurdity, that purpose could not but
have been to give a clear and unmistakable guide to redemptioner, on
how much he should pay and when he should redeem; from this must
follow that that notice must have been intended to state the truth and
if vendor and vendee should have instead, decided to state an untruth

therein, it is they who should bear the consequences of having thereby

misled the redemptioner who had the right to rely and act thereon and
on nothing else; stated otherwise, all the elements of equitable
estoppel are here since the requirement of the law is to submit the
affidavit of notice to all possible redemptioners, that affidavit to be a
condition precedent to registration of the sale therefore, the law must
have intended that it be by the parties understood that they were
there asking a solemn representation to all possible redemptioners,
who upon faith of that are thus induced to act, and here worse for the
parties to the sale, they sought to avoid compliance with the law and
certainly refusal to comply cannot be rewarded with exception and
acceptance of the plea that they cannot be now estopped by their own
representation, and this Court notes that in the trial and to this appeal,
plaintiff earnestly insisted and insists on their estoppel;
3rd If therefore, here vendors had only attempted to comply with
the law, they would have been obligated to send a copy of the deed of
sale unto Filomena Javellana and from that copy, Filomena would have
been notified that she should if she had wanted to redeem, offered no
more, no less, that P30,000.00, within 30 days, it would have been
impossible for vendors and vendees to have inserted in the affidavit
that the price was truly P97,000.00 plus P18,250.00 or a total of
P115,250.00; in other words, if defendants had only complied with the
law, they would have been obligated to accept the redemption money
of only P30,000.00;
4th If it be argued that foregoing solution would mean unjust
enrichment for plaintiff, it need only be remembered that plaintiff's
right is not contractual, but a mere legal one, the exercise of a right
granted by the law, and the law is definite that she can subrogate
herself in place of the buyer,
"upon the same terms and conditions stipulated in the contract,"
in the words of Art. 1619, and here the price
"stipulated in the contract"
was P30,000.00, in other words, if this be possible enrichment on the
part of Filomena, it was not unjust but just enrichment because
permitted by the law; if it still be argued that plaintiff would thus be
enabled to abuse her right, the answer simply is that what she is
seeking to enforce is not an abuse but a mere exercise of a right; if it
be stated that just the same, the effect of sustaining plaintiff would be
to promote not justice but injustice, the answer again simply is that
this solution is not unjust because it only binds the parties to make

good their solemn representation to possible redemptioners on the

price of the sale, to what they had solemnly averred in a public
document required by the law to be the only basis for that exercise of
redemption; (Pp. 24-27, Record.)
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against
petitioners..

G.R. No. 126812 November 24, 1998

GOLDENROD, INC., petitioner,
vs.
COURT OF APPEALS, PIO BARRETO & SONS, INC., PIO BARRETO REALTY
DEVELOPMENT, INC. and ANTHONY QUE, respondents.
BELLOSILLO, J.:
In the absence of a specific stipulation, may the seller of real estate keep the
earnest money to answer for damages in the event the sale fails due to the fault of
the prospective buyer?
Pio Barreto and Sons, Inc. (BARRETO & SONS) owned forty-three (43) parcels of
registered land with a total area of 18,500 square meters located at Carlos Palanca
St., Quiapo, Manila, which were mortgaged with United Coconut Planters Bank
(UCPB). In 1988, the obligation of the corporation with UCPB remained unpaid
making foreclosure of the mortgage imminent.
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETO & SONS.
On 25 May 1988, through its president Sonya G. Mathay, petitioner wrote
respondent Anthony Que, President of respondent BARRETO & SONS, as follows:
Thank you for your reply to our letter offering to buy your property in
Echague (C. Palanca) Quiapo.
We are happy that you accepted our offer except the two amendments
concerning the payment of interest which should be monthly instead of

semi-annually and the period to remove the trusses, steel frames etc.
which shall be 180 days instead of 90 days only. Please be advised that
we agree to your amendments.
As to your other query, we prefer that the lots be reconsolidated back
to its (sic) mother titles.
Enclosed is the earnest money of P1 million which shall form part of
the purchase price.
Payment of the agreed total consideration shall be effected in
accordance with our offer as you have accepted and upon execution of
the necessary documents of sale to be implemented after the said
reconsolidation of the lots.
Kindly acknowlege receipt of the earnest money.
When the term of existence of BARRETO & SONS expired, all its assets and liabilities
including the property located in Quiapo were transferred to respondent Pio Barreto
Realty Development, Inc. (BARRETO REALTY). Petitioner's offer to buy the property
resulted in its agreement with respondent BARRETO REALTY that petitioner would
pay the following amounts: (a) P24.5 million representing the outstanding
obligations of BARRETO REALTY with UCPB on 30 June 1988, the deadline set by the
bank for payment; and, (b) P20 million which was the balance of the purchase price
of the property to be paid in installments within a 3-year period with interes at 18%
per annum.
Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETO REALTY on
the deadline set for payment; instead, it asked for an extension of one (1) month or
up to 31 July 1988 to settle the obligation, which the bank granted. On 31 July 1988,
petitioner requested another extension of sixty (60) days to pay the loan. This time
bank demurred.
In the meantime BARRETO REALTY was able to cause the reconsolidation of the
forty-three (43) titles covering the property subject of the purchase into two (2)
titles covering Lots 1 and 2, which were issued on 4 August 1988. The
reconsolidation of the titles was made pursuant to the request of petitioner in its
letter to private respondents on 25 May 1988. Respondent BARRETO REALTY
allegedly incurred expenses for the reconsolidation amounting to P250,000.00.
On 25 August 1988 petitioner sought reconsideration of the denial by the bank of its
request for extension of sixty (60) days by asking for a shorter period of thirty (30)
days. This was again denied by UCPB.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and Development
Corporation (LOGARTA REALTY), which acted as agent and broker of petitioner,

wrote private respondent Anthony Que informing him on behalf of petitioner that it
could not go through with the purchase of the property due to circumstances
beyond its fault, i.e., the denial by UCPB of its request for extension of time to pay
the obligation. In the same letter, Logarta also demanded the refund of the earnest
money of P1 million which petitioner gave to respondent BARRETO REALTY.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld Trade Center
Phils., Inc. (ASIAWORLD), Lot 2, one of the two (2) consolidated lots, for the price of
P23 million. On 13 October 1988 respondent BARRETTO REALTY executed a deed
transferring by way of "dacion" the property reconsolidated as Lot 1 in favor of
UCPB, which in turn sold the property to ASIAWORLD for P24 million.
On 12 December 1988 Logarta again wrote respondent Que demanding the return
of the earnest money to GOLDENROD. On 7 February 1989 petitioner through its
lawyer reiterated its demand, but the same remained unheeded by private
respondents. This prompted petitioner to file a complaint with the Regional Trial
Court of Manila against private respondents for the return of the amount of P1
million and the payment of damages including lost interests or profits. In their
answer, private respondents contended that it was the agreement of the parties
that the earnest money of P1 million would be forfeited to answer for losses and
damages that might be suffered by private respondents in case of failure by
petitioner to comply with the terms of their purchase agreement.
On 15 March 1991 the trial court rendered a decision 1 ordering private respondents
jointly and severally to pay petitioner P1,000.000.00 with legal interest from 9
February 1989 until fully paid, P50,000.00 representing unrealized profits and
P10,000.00 as attorney's fees. The trial court found that there was no written
agreement between the parties concerning forfeiture of the earnest money if the
sale did not push through. It further declared that the earnest money given by
petitioner to respondent BARRETO REALTY was intended to form part of the
purchase price; thus, the refusal of the latter to return the money when the sale was
not consummated violated Arts. 22 and 23 of the Civil Code against unjust
enrichment.
Obviously dissatisfied with the decision of the trial court, private respondents
appealed to the Court of Appeals which reversed the trial court and ordered the
dismissal of the complaint; hence, this petition.
Petitioner alleges that the Court of Appeals erred in disregarding the finding of the
trial court that the earnest money given by petitioner to respondent BARRETTO
REALTY should be returned to the former. The absence of an express stipulation that
the same shall be forfeited in favor of the seller in case the buyer fails to comply
with his obligation is compelling. It argues that the forfeiture of the money in favor
of respondent BARRETTO REALTY would amount to unjust enrichment at the
expense of petitioner.

We sustain petitioner. Under Art. 1482 of the Civil Code, whenever earnest money is
given in a contract of sale, it shall be considered as part of the purchase price and
as proof of the perfection of the contract. Petitioner clearly stated without any
objection from private respondents that the earnest money was intended to form
part of the purchase price. It was an advance payment which must be deducted
from the total price. Hence, the parties could not have intended that the earnest
money or advance payment would be forfeited when the buyer should fail to pay
the balance of the price, especially in the absence of a clear and express agreement
thereon. By reason oi its failure to make payment petitioner, through its agent,
informed private respondents that it would no longer push through with the sale. In
other words, petitioner resorted to extrajudicial rescission of its agreement with
private respondents.
In University of the Philippines v. de los Angeles, 2 the right to rescind contracts is
not absolute and is subject to scrutiny and review by the proper court. We held
further, in the more recent case of Adelfa Properties, Inc. v. Court of Appeals, 3 that
rescission of reciprocal contracts may be extrajudicially rescinded unless
successfully impugned in court. If the party does not oppose the declaration of
rescission of the other party, specifying the grounds therefor, and it fails to reply or
protest against it, its silence thereon suggests an admission of the veracity and
validity of the rescinding party's claim.
Private respondents did not interpose any objection to the rescission by petitioner of
the agreement. As found by the Court of Appeals, private respondent BARRETTO
REALTY even sold Lot 2 of the subject consolidated lots to another buyer,
ASIAWORLD, one day after its President Anthony Que received the broker's letter
rescinding tne sale. Subsequently, on 13 October 1988 respondent BARRETO
REALTY also conveyed ownership over Lot 1 to UCPB which, in turn, sold the same to
ASIAWORLD.
Art. 1385 of the Civil Code provides that rescission creates the obligation to return
the things which were the object of the contract together with their fruits and
interest. The vendor is therefore obliged to return the purchase price paid to him by
the buyer if the latter rescinds the sale, 4 or when the transaction was called off and
the subject property had already been sold to a third person, as what obtained in
this case. 5 Therefore, by virtue of the extrajudicial rescission of the contract to sell
by petitioner without opposition from private respondents who, in turn, sold the
property to other persons, private respondent BARRETTO REALTY, as the vendor,
had the obligation to return the earnest money of P1000,000.00 plus legal interest
from the date it received notice of rescission from petitioner, i.e., 30 August 1988,
up to the date of the return or payment. It would be most inequitable if resondent
BARRETTO REALTY would be allowed to retain petitioner's payment of
P1,000,000.00 and at the same time appropriate the proceeds of the second sale
made to another. 6

WHEREFORE, the Petition is GRANTED. The decision of the Court of Appeals is

REVERSED and SET ASIDE. Private respondent Pio Barretto Realty Development, Inc.
(BARRETTO REALTY), its successors and assigns are ordered to return to petitioner
Goldenrod, Inc. (GOLDENROD), the amount of P1,000,000.00 with legal interest
thereon from 30 August 1988, the date of notice of extrajudicial rescission, until the
amount is fully paid, with costs against private respondents.
SO ORDERED.
G.R. No. 78903 February 28, 1990
SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners,
vs.
THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR.,
respondents.
MEDIALDEA, J.:
This is a petition to annul and set aside the decision of the Court of Appeals
rendered on May 26, 1987, upholding the validity of the sale of a parcel of land by
petitioner Segundo Dalion (hereafter, "Dalion") in favor of private respondent
Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:
A parcel of land located at Panyawan, Sogod, Southern Leyte, declared
in the name of Segundo Dalion, under Tax Declaration No. 11148, with
an area of 8947 hectares, assessed at P 180.00, and bounded on the
North, by Sergio Destriza and Titon Veloso, East, by Feliciano Destriza,
by Barbara Bonesa (sic); and West, by Catalino Espina. (pp. 36-37,
Rollo)
The decision affirms in toto the ruling of the trial court
the dispositive portion of which provides as follows:

issued on January 17, 1984,

WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders

judgment.
(a) Ordering the defendants to deliver to the plaintiff the parcel of land
subject of this case, declared in the name of Segundo Dalion previously
under Tax Declaration No. 11148 and lately under Tax Declaration No.
2297 (1974) and to execute the corresponding formal deed of
conveyance in a public document in favor of the plaintiff of the said
property subject of this case, otherwise, should defendants for any
reason fail to do so, the deed shall be executed in their behalf by the
Provincial Sheriff or his Deputy;

(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as

attorney's fees and P 500.00 as litigation expenses, and to pay the
costs; and
(c) Dismissing the counter-claim. (p. 38, Rollo)
The facts of the case are as follows:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on
a private document of absolute sale, dated July 1, 1965 (Exhibit "A"), allegedly
executed by Dalion, who, however denied the fact of sale, contending that the
document sued upon is fictitious, his signature thereon, a forgery, and that subject
land is conjugal property, which he and his wife acquired in 1960 from Saturnina
Sabesaje as evidenced by the "Escritura de Venta Absoluta" (Exhibit "B"). The
spouses denied claims of Sabesaje that after executing a deed of sale over the
parcel of land, they had pleaded with Sabesaje, their relative, to be allowed to
administer the land because Dalion did not have any means of livelihood. They
admitted, however, administering since 1958, five (5) parcels of land in Sogod,
Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje,
who died in 1956. They never received their agreed 10% and 15% commission on
the sales of copra and abaca, respectively. Sabesaje's suit, they countered, was
intended merely to harass, preempt and forestall Dalion's threat to sue for these
unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning errors some
of which, however, were disregarded by the appellate court, not having been raised
in the court below. While the Court of Appeals duly recognizes Our authority to
review matters even if not assigned as errors in the appeal, We are not inclined to
do so since a review of the case at bar reveals that the lower court has judicially
decided the case on its merits.
As to the controversy regarding the identity of the land, We have no reason to
dispute the Court of Appeals' findings as follows:
To be sure, the parcel of land described in Exhibit "A" is the same
property deeded out in Exhibit "B". The boundaries delineating it from
adjacent lots are identical. Both documents detail out the following
boundaries, to wit:
On the North-property of Sergio Destriza and Titon Veloso;
On the East-property of Feliciano Destriza;
On the South-property of Barbara Boniza and
On the West-Catalino Espina.

(pp. 41-42, Rollo)

The issues in this case may thus be limited to: a) the validity of the contract of sale
of a parcel of land and b) the necessity of a public document for transfer of
ownership thereto. The appellate court upheld the validity of the sale on the basis of
Secs. 21 and 23 of Rule 132 of the Revised Rules of Court.
SEC. 21. Private writing, its execution and authenticity, how proved.Before any private writing may be received in evidence, its due
execution and authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker; or
(c) By a subscribing witness
xxx xxx xxx
SEC. 23. Handwriting, how proved. The handwriting of a person may
be proved by any witness who believes it to be the handwriting of such
person, and has seen the person write, or has seen writing purporting
to be his upon which the witness has acted or been charged, and has
thus acquired knowledge of the handwriting of such person. Evidence
respecting the handwriting may also be given by a comparison, made
by the witness or the court, with writings admitted or treated as
genuine by the party against whom the evidence is offered, or proved
to be genuine to the satisfaction of the judge. (Rule 132, Revised Rules
of Court)
And on the basis of the findings of fact of the trial court as follows:
Here, people who witnessed the execution of subject deed positively
testified on the authenticity thereof. They categorically stated that it
had been executed and signed by the signatories thereto. In fact, one
of such witnesses, Gerardo M. Ogsoc, declared on the witness stand
that he was the one who prepared said deed of sale and had copied
parts thereof from the "Escritura De Venta Absoluta" (Exhibit B) by
which one Saturnina Sabesaje sold the same parcel of land to appellant
Segundo Dalion. Ogsoc copied the bounderies thereof and the name of
appellant Segundo Dalion's wife, erroneously written as "Esmenia" in
Exhibit "A" and "Esmenia" in Exhibit "B". (p. 41, Rollo)
xxx xxx xxx

Against defendant's mere denial that he signed the document, the

positive testimonies of the instrumental Witnesses Ogsoc and Espina,
aside from the testimony of the plaintiff, must prevail. Defendant has
affirmatively alleged forgery, but he never presented any witness or
evidence to prove his claim of forgery. Each party must prove his own
affirmative allegations (Section 1, Rule 131, Rules of Court).
Furthermore, it is presumed that a person is innocent of a crime or
wrong (Section 5 (a), Idem), and defense should have come forward
with clear and convincing evidence to show that plaintiff committed
forgery or caused said forgery to be committed, to overcome the
presumption of innocence. Mere denial of having signed, does not
suffice to show forgery.
In addition, a comparison of the questioned signatories or specimens
(Exhs. A-2 and A-3) with the admitted signatures or specimens (Exhs. X
and Y or 3-C) convinces the court that Exhs. A-2 or Z and A-3 were
written by defendant Segundo Dalion who admitted that Exhs. X and Y
or 3-C are his signatures. The questioned signatures and the
specimens are very similar to each other and appear to be written by
one person.
Further comparison of the questioned signatures and the specimens
with the signatures Segundo D. Dalion appeared at the back of the
summons (p. 9, Record); on the return card (p. 25, Ibid.); back of the
Court Orders dated December 17, 1973 and July 30, 1974 and for
October 7, 1974 (p. 54 & p. 56, respectively, Ibid.), and on the open
court notice of April 13, 1983 (p. 235, Ibid.) readily reveal that the
questioned signatures are the signatures of defendant Segundo Dalion.
It may be noted that two signatures of Segundo D. Dalion appear on
the face of the questioned document (Exh. A), one at the right corner
bottom of the document (Exh. A-2) and the other at the left hand
margin thereof (Exh. A-3). The second signature is already a
surplusage. A forger would not attempt to forge another signature, an
unnecessary one, for fear he may commit a revealing error or an
erroneous stroke. (Decision, p. 10) (pp. 42-43, Rollo)
We see no reason for deviating from the appellate court's ruling (p. 44, Rollo) as we
reiterate that
Appellate courts have consistently subscribed to the principle that
conclusions and findings of fact by the trial courts are entitled to great
weight on appeal and should not be disturbed unless for strong and
cogent reasons, since it is undeniable that the trial court is in a more
advantageous position to examine real evidence, as well as to observe
the demeanor of the witnesses while testifying in the case (Chase v.

Buencamino, Sr., G.R. No. L-20395, May 13, 1985, 136 SCRA 365; Pring
v. Court of Appeals, G.R. No. L-41605, August 19, 1985, 138 SCRA 185)
Assuming authenticity of his signature and the genuineness of the document, Dalion
nonetheless still impugns the validity of the sale on the ground that the same is
embodied in a private document, and did not thus convey title or right to the lot in
question since "acts and contracts which have for their object the creation,
transmission, modification or extinction of real rights over immovable property must
appear in a public instrument" (Art. 1358, par 1, NCC). This argument is misplaced.
The provision of Art. 1358 on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not a requirement for the validity
of a contract of sale of a parcel of land that this be embodied in a public instrument.
A contract of sale is a consensual contract, which means that the sale is perfected
by mere consent. No particular form is required for its validity. Upon perfection of
the contract, the parties may reciprocally demand performance (Art. 1475, NCC),
i.e., the vendee may compel transfer of ownership of the object of the sale, and the
vendor may require the vendee to pay the thing sold (Art. 1458, NCC). The trial
court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land
and to execute corresponding formal deed of conveyance in a public document.
Under Art. 1498, NCC, when the sale is made through a public instrument, the
execution thereof is equivalent to the delivery of the thing. Delivery may either be
actual (real) or constructive. Thus delivery of a parcel of land may be done by
placing the vendee in control and possession of the land (real) or by embodying the
sale in a public instrument (constructive).
As regards petitioners' contention that the proper action should have been one for
specific performance, We believe that the suit for recovery of ownership is proper.
As earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected
contract of sale the right to reciprocally demand performance, and to observe a
particular form, if warranted, (Art. 1357). The trial court, aptly observed that
Sabesaje's complaint sufficiently alleged a cause of action to compel Dalion to
execute a formal deed of sale, and the suit for recovery of ownership, which is
premised on the binding effect and validity inter partes of the contract of sale,
merely seeks consummation of said contract.
... . A sale of a real property may be in a private instrument but that
contract is valid and binding between the parties upon its perfection.
And a party may compel the other party to execute a public instrument
embodying their contract affecting real rights once the contract
appearing in a private instrument hag been perfected (See Art. 1357).
... . (p. 12, Decision, p. 272, Records)
ACCORDINGLY, the petition is DENIED and the decision of the Court of Appeals
upholding the ruling of the trial court is hereby AFFIRMED. No costs. SO ORDERED.

G.R. No. L-55048 May 27, 1981

SUGA SOTTO YUVIENCO, BRITANIA SOTTO, and MARCELINO SOTTO,
petitioners,
vs.
HON. AUXENCIO C. DACUYCUY, Judge of the CFI of Leyte, DELY RODRIGUEZ,
FELIPE ANG CRUZ, CONSTANCIA NOGAR, MANUEL GO, INOCENTES DIME,
WILLY JULIO, JAIME YU, OSCAR DY, DY CHIU SENG, BENITO YOUNG,
FERNANDO YU, SEBASTIAN YU, CARLOS UY, HOC CHUAN and MANUEL DY,
respondents.
BARREDO, J.:
Petition for certiorari and prohibition to declare void for being in grave abuse of
discretion the orders of respondent judge dated November 2, 1978 and August 29,
1980, in Civil Case No. 5759 of the Court of First Instance of Leyte, which denied the
motion filed by petitioners to dismiss the complaint of private respondents for
specific performance of an alleged agreement of sale of real property, the said
motion being based on the grounds that the respondents' complaint states no cause
of action and/or that the claim alleged therein is unenforceable under the Statute of
Frauds.
Finding initially prima facie merit in the petition, We required respondents to answer
and We issued a temporary restraining order on October 7, 1980 enjoining the
execution of the questioned orders.
In essence, the theory of petitioners is that while it is true that they did express
willingness to sell to private respondents the subject property for P6,500,000
provided the latter made known their own decision to buy it not later than July 31,
1978, the respondents' reply that they were agreeable was not absolute, so much
so that when ultimately petitioners' representative went to Cebu City with a
prepared and duly signed contract for the purpose of perfecting and consummating
the transaction, respondents and said representative found variance between the
terms of payment stipulated in the prepared document and what respondents had
in mind, hence the bankdraft which respondents were delivering to petit loners'
representative was returned and the document remained unsigned by respondents.
Hence the action below for specific performance.
To be more specific, the parties do not dispute that on July 12, 1978, petitioners,
thru a certain Pedro C. Gamboa, sent to respondents the following letter:
Mr. Yao King Ong
Life Bakery
Tacloban City

Dear Mr. Yao: 1wph1.t

This refers to the Sotto property (land and building) situated at
Tacloban City. My clients are willing to sell them at a total price of
P6,500,000.00.
While there are other parties who are interested to buy the property, I
am giving you and the other occupants the preference, but such
priority has to be exercised within a given number of days as I do not
want to lose the opportunity if you are not interested. I am therefore
gluing you and the rest of the occupants until July 31, 1978 within it
which to decide whether you want to buy the property. If I do not hear
from you by July 31, I will offer or close the deal with the other
interested buyer.
Thank you so much for the hospitality extended to me during my last
trip to Tacloban, and I hope to hear from you very soon.
Very
truly
yours,
(Page 9, Record.)
Reacting to the foregoing letter, the following telegram was sent by
"Yao King Ong & tenants" to Atty. Pedro Gamboa in Cebu City:
Atty. Pedro Gamboa
Room 314, Maria Cristina Bldg.
Osmea Boulevard, Cebu City
Reurlet dated July 12 inform Dra. Yuvienco we agree to buy property
proceed Tacloban to negotiate details
Likewise uncontroverted is the fact that under date of July 27, 1978,
Atty. Gamboa wired Yao King Ong in Tacloban City as follows:
NLT
YAO KING ONG
LIFE BAKERY
TACLOBAN CITY

PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH CONTRACT

PREPARE PAYMENT BANK DRAFT 1wph1.t
Now, Paragraph 10 of the complaint below of respondents alleges:
10. That on August 1, 1978, defendant Pedro Gamboa arrived Tacloban
City bringing with him the prepared contract to purchase and to sell
referred to in his telegram dated July 27, 1978 (Annex 'D' hereof) for
the purpose of closing the transactions referred to in paragraphs 8 and
9 hereof, however, to the complete surprise of plaintiffs, the defendant
(except def. Tacloban City Ice Plant, Inc.) without giving notice to
plaintiffs, changed the mode of payment with respect to the balance of
P4,500,000.00 by imposing upon plaintiffs to pay same amount within
thirty (30) days from execution of the contract instead of the former
term of ninety (90) days as stated in paragraph 8 hereof. (Pp. 10-11,
Record.)
Additionally and to reenforce their position, respondents alleged further in their
complaint: 1wph1.t
8. That on July 12, 1978, defendants (except defendant Tacloban City
Ice Plant, Inc.) finally sent a telegram letter to plaintiffs- tenants,
through same Mr. Yao King Ong, notifying them that defendants are
willing to sell the properties (lands and building) at a total price of
P6,500,000.00, which herein plaintiffs-tenants have agreed to buy the
said properties for said price; a copy of which letter is hereto attached
as integral part hereof and marked as Annex 'C', and plaintiffs
accepted the offer through a telegram dated July 25, 1978, sent to
defendants (through defendant Pedro C. Gamboa), a copy of which
telegram is hereto attached as integral part hereof and marked as
Annex C-1 and as a consequence hereof. plaintiffs except plaintiff
Tacloban - merchants' Realty Development Corporation) and
defendants (except defendant Tacloban City Ice Plant. Inc.) agreed to
the following terms and conditions respecting the payment of said
purchase price, to wit: 1wph1.t
P2,000,000.00 to be paid in full on the date of the
execution of the contract; and the balance of
P4,500,000.00 shall be fully paid within ninety (90) days
thereafter;
9. That on July 27, 1978, defendants sent a telegram to plaintifftenants, through the latter's representative Mr. Yao King Ong,
reiterating their acceptance to the agreement referred to in the next
preceding paragraph hereof and notifying plaintiffs-tenants to prepare
payment by bank drafts; which the latter readily complied with; a copy

of which telegram is hereto attached as integral part hereof and

marked as Annex "D"; (Pp 49-50, Record.)
It was on the basis of the foregoing facts and allegations that herein petitioners filed
their motion to dismiss alleging as main grounds: 1wph1.t
I. That plaintiff, TACLOBAN MERCHANTS' REALTY DEVELOPMENT
CORPORATION, amended complaint, does not state a cause of action
and the claim on which the action is founded is likewise unenforceable
under the provisions of the Statute of Frauds.
II. That as to the rest of the plaintiffs, their amended complaint does
not state a cause of action and the claim on which the action is
founded is likewise unenforceable under the provisions of the Statute
of Frauds. (Page 81, Record.)
With commendable knowledgeability and industry, respondent judge ruled
negatively on the motion to dismiss, discoursing at length on the personality as real
party-in-interest of respondent corporation, while passing lightly, however, on what
to Us are the more substantial and decisive issues of whether or not the complaint
sufficiently states a cause of action and whether or not the claim alleged therein is
unenforceable under the Statute of Frauds, by holding thus: 1wph1.t
The second ground of the motion to dismiss is that plaintiffs' claim is
unenforceable under the Statute of Frauds. The defendants argued
against this motion and asked the court to reject the objection for the
simple reason that the contract of sale sued upon in this case is
supported by letters and telegrams annexed to the complaint and
other papers which will be presented during the trial. This contention of
the defendants is not well taken. The plaintiffs having alleged that the
contract is backed up by letters and telegrams, and the same being a
sufficient memorandum, the complaint states a cause of action and
they should be given a day in court and allowed to substantiate their
allegations (Paredes vs. Espino, 22 SCRA 1000).
To take a contract for the sale of land out of the Statute of Frauds a
mere note or memorandum in writing subscribed by the vendor or his
agent containing the name of the parties and a summary statement of
the terms of the sale either expressly or by reference to something
else is all that is required. The statute does not require a formal
contract drawn up with technical exactness for the language of Par. 2
of Art. 1403 of the Philippine Civil Code is' ... an agreement ... or some
note or memorandum thereof,' thus recognizing a difference between
the contract itself and the written evidence which the statute requires
(Berg vs. Magdalena Estate, Inc., 92 Phil. 110; Ill Moran, Comments on

the Rules of Court, 1952 ed. p. 187). See also Bautista's Monograph on
the Statute of Frauds in 21 SCRA p. 250. (Pp. 110-111, Record)
Our first task then is to dwell on the issue of whether or not in the light of the
foregoing circumstances, the complaint in controversy states sufficiently a cause of
action. This issue necessarily entails the determination of whether or not the
plaintiffs have alleged facts adequately showing the existence of a perfected
contract of sale between herein petitioners and the occupant represented by
respondent Yao King Ong.
In this respect, the governing legal provision is, of course, Article 1319 of the Civil
Code which provides:1wph1.t
ART. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are constitute the
contract. The offer must be certain the acceptance absolute. A
qualified acceptance constitute a counter-offer.
Acceptance made by letter or telegram does not bind offerer except
from the time it came to his knowledge. The contract, in a case, is
presumed to have been entered into in the place where the offer was
made.
In the instant case, We can lay aside, for the moment, petitioners' contention that
the letter of July 12, 1978 of Atty. Pedro C. Gamboa to respondents Yao King Ong
and his companions constitute an offer that is "certain", although the petitioners
claim that it was a mere expression of willingness to sell the subject property and
not a direct offer of sale to said respondents. What We consider as more important
and truly decisive is what is the correct juridical significance of the telegram of
respondents instructing Atty. Gamboa to "proceed to Tacloban to negotiate details."
We underline the word "negotiate" advisedly because to Our mind it is the key word
that negates and makes it legally impossible for Us to hold that respondents'
acceptance of petitioners' offer, assuming that it was a "certain" offer indeed, was
the "absolute" one that Article 1319 above-quoted requires.
Dictionally, the implication of "to negotiate" is practically the opposite of the Idea
that an agreement has been reached. Webster's Third International Dictionary, Vol.
II (G. & C. Merriam Co., 1971 Philippine copyright) gives the meaning of negotiate as
"to communicate or confer with another so as to arrive at the settlement of some
matter; meet with another so as to arrive through discussion at some kind of
agreement or compromise about something; to arrange for or bring about
through conference or discussion; work at or arrive at or settle upon by meetings
and agreements or compromises ". Importantly, it must be borne in mind that Yao
King Ong's telegram simply says "we agree to buy property". It does not necessarily
connote acceptance of the price but instead suggests that the details were to be
subject of negotiation.

Respondents now maintain that what the telegram refers to as "details" to be

"negotiated" are mere "accidental elements", not the essential elements of the
contract. They even invite attention to the fact that they have alleged in their
complaint (Par. 6) that it was as early as "in the month of October, 1977 (that)
negotiations between plaintiffs and defendants for the purchase and sale (in
question) were made, thus resulting to offers of same defendants and counteroffer of plaintiffs". But to Our mind such alleged facts precisely indicate the failure
of any meeting of the minds of the parties, and it is only from the letter and
telegrams above-quoted that one can determine whether or not such meeting of the
minds did materialize. As We see it, what such allegations bring out in bold relief is
that it was precisely because of their past failure to arrive at an agreement that
petitioners had to put an end to the uncertainty by writing the letter of July 12,
1978. On the other hand, that respondents were all the time agreeable to buy the
property may be conceded, but what impresses Us is that instead of "absolutely"
accepting the "certain" offer if there was one of the petitioners, they still
insisted on further negotiation of details. For anyone to read in the telegram of Yao
that they accepted the price of P6,500,000.00 would be an inference not necessarily
warranted by the words "we agree to buy" and "proceed Tacloban to negotiate
details". If indeed the details being left by them for further negotiations were merely
accidental or formal ones, what need was there to say in the telegram that they had
still "to negotiate (such) details", when, being unessential per their contention, they
could have been just easily clarified and agreed upon when Atty. Gamboa would
reach Tacloban?
Anent the telegram of Atty. Gamboa of July 27, 1978, also quoted earlier above, We
gather that it was in answer to the telegram of Yao. Considering that Yao was in
Tacloban then while Atty. Gamboa was in Cebu, it is difficult to surmise that there
was any communication of any kind between them during the intervening period,
and none such is alleged anyway by respondents. Accordingly, the claim of
respondents in paragraph 8 of their complaint below that there was an agreement
of a down payment of P2 M, with the balance of P4.5M to be paid within 90 days
afterwards is rather improbable to imagine to have actually happened.
Respondents maintain that under existing jurisprudence relative to a motion to
dismiss on the ground of failure of the complaint to state a cause of action, the
movant-defendant is deemed to admit the factual allegations of the complaint,
hence, petitioners cannot deny, for purposes of their motion, that such terms of
payment had indeed been agreed upon.
While such is the rule, those allegations do not detract from the fact that under
Article 1319 of the Civil Code above-quoted, and judged in the light of the telegramreply of Yao to Atty. Gamboa's letter of July 12, 1978, there was not an absolute
acceptance, hence from that point of view, petitioners' contention that the
complaint of respondents state no cause of action is correct.

Nonetheless, the alleged subsequent agreement about the P2 M down and P4.5 M in
90 days may at best be deemed as a distinct cause of action. And placed against
the insistence of petitioners, as demonstrated in the two deeds of sale taken by
Atty. Gamboa to Tacloban, Annexes 9 and 10 of the answer of herein respondents,
that there was no agreement about 90 days, an issue of fact arose, which could
warrant a trial in order for the trial court to determine whether or not there was
such an agreement about the balance being payable in 90 days instead of the 30
days stipulated in Annexes 9 and 10 above-referred to. Our conclusion, therefore, is
that although there was no perfected contract of sale in the light of the letter of
Atty. Gamboa of July 12, 1978 and the letter-reply thereto of Yao; it being doubtful
whether or not, under Article 1319 of the Civil Code, the said letter may be deemed
as an offer to sell that is "certain", and more, the Yao telegram is far from being an
"absolute" acceptance under said article, still there appears to be a cause of action
alleged in Paragraphs 8 to 12 of the respondents' complaint, considering it is
alleged therein that subsequent to the telegram of Yao, it was agreed that the
petitioners would sell the property to respondents for P6.5 M, by paving P2 M down
and the balance in 90 days and which agreement was allegedly violated when in the
deeds prepared by Atty. Gamboa and taken to Tacloban, only 30 days were given to
respondents.
But the foregoing conclusion is not enough to carry the day for respondents. It only
brings Us to the question of whether or not the claim for specific performance of
respondents is enforceable under the Statute of Frauds. In this respect, We man,
view the situation at hand from two angles, namely, (1) that the allegations
contained in paragraphs 8 to 12 of respondents' complaint should be taken together
with the documents already aforementioned and (2) that the said allegations
constitute a separate and distinct cause of action. We hold that either way We view
the situation, the conclusion is inescapable e that the claim of respondents that
petitioners have unjustifiably refused to proceed with the sale to them of the
property v in question is unenforceable under the Statute of Frauds.
It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any
writing or memorandum, much less a duly signed agreement to the effect that the
price of P6,500,000 fixed by petitioners for the real property herein involved was
agreed to be paid not in cash but in installments as alleged by respondents. The
only documented indication of the non-wholly-cash payment extant in the record is
that stipulated in Annexes 9 and 10 above-referred to, the deeds already signed by
the petitioners and taken to Tacloban by Atty. Gamboa for the signatures of the
respondents. In other words, the 90-day term for the balance of P4.5 M insisted
upon by respondents choices not appear in any note, writing or memorandum
signed by either the petitioners or any of them, not even by Atty. Gamboa. Hence,
looking at the pose of respondents that there was a perfected agreement of
purchase and sale between them and petitioners under which they would pay in
installments of P2 M down and P4.5 M within ninety 90) days afterwards it is evident
that such oral contract involving the "sale of real property" comes squarely under
the Statute of Frauds (Article 1403, No. 2(e), Civil Code.)

On the other score of considering the supposed agreement of paying installments

as partly supported by the letter and t telegram earlier quoted herein, His Honor
declared with well studied ratiocination, albeit legally inaccurate, that: 1wph1.t
The next issue relate to the State of Frauds. It is contended that
plaintiffs' action for specific performance to compel the defendants to
execute a good and sufficient conveyance of the property in question
(Sotto land and building) is unenforceable because there is no other
note memorandum or writing except annexes "C", "C-l" and "D", which
by themselves did not give birth to a contract to sell. The argument is
not well founded. The rules of pleading limit the statement of the
cause of action only to such operative facts as give rise to the right of
action of the plaintiff to obtain relief against the wrongdoer. The details
of probative matter or particulars of evidence, statements of law,
inferences and arguments need not be stated. Thus, Sec. 1 of Rule 8
provides that 'every pleading shall contain in a methodical and logical
form, a plain concise and direct statement of the ultimate facts on
which the party pleading relies for his claim or defense, as the case
may be, omitting the statement of mere evidentiary facts.' Exhibits
need not be attached. The contract of sale sued upon in this case is
supported by letters and telegrams annexed to the complaint and
plaintiffs have announced that they will present additional evidences
during the trial to prove their cause of action. The plaintiffs having
alleged that the contract is backed up by letters and telegrams, and
the same being sufficient memorandum, the complaint states a cause
of action and they should be given their day in court and allowed to
substantiate their allegations (Parades vs. Espino, 22 SCRA 1000). (Pp
165-166, Record.)
The foregoing disquisition of respondent judge misses at least two (2) juridical
substantive aspects of the Statute of Frauds insofar as sale of real property is
concerned. First, His Honor assumed that the requirement of perfection of such kind
of contract under Article 1475 of the Civil Code which provides that "(t)he contract
of sale is perfected at the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price", the Statute would no longer
apply as long as the total price or consideration is mentioned in some note or
memorandum and there is no need of any indication of the manner in which such
total price is to be paid.
We cannot agree. In the reality of the economic world and the exacting demands of
business interests monetary in character, payment on installments or staggered
payment of the total price is entirely a different matter from cash payment,
considering the unpredictable trends in the sudden fluctuation of the rate of
interest. In other words, it is indisputable that the value of money - varies from day
to day, hence the indispensability of providing in any sale of the terms of payment
when not expressly or impliedly intended to be in cash.

Thus, We hold that in any sale of real property on installments, the Statute of Frauds
read together with the perfection requirements of Article 1475 of the Civil Code
must be understood and applied in the sense that the idea of payment on
installments must be in the requisite of a note or memorandum therein
contemplated. Stated otherwise, the inessential elements" mentioned in the case of
Parades vs. Espino, 22 SCRA 1000, relied upon by respondent judge must be
deemed to include the requirement just discussed when it comes to installment
sales. There is nothing in the monograph re the Statute of Frauds appearing in 21
SCRA 250 also cited by His Honor indicative of any contrary view to this ruling of
Ours, for the essence and thrust of the said monograph refers only to the form of
the note or memorandum which would comply with the Statute, and no doubt, while
such note or memorandum need not be in one single document or writing and it can
be in just sufficiently implicit tenor, imperatively the separate notes must, when put
together', contain all the requisites of a perfected contract of sale. To put it the
other way, under the Statute of Frauds, the contents of the note or memorandum,
whether in one writing or in separate ones merely indicative for an adequate
understanding of all the essential elements of the entire agreement, may be said to
be the contract itself, except as to the form.
Secondly, We are of the considered opinion that under the rules on proper pleading,
the ruling of the trial court that, even if the allegation of the existence of a sale of
real property in a complaint is challenged as barred from enforceability by the
Statute of Frauds, the plaintiff may simply say there are documents, notes or
memoranda without either quoting them in or annexing them to the complaint, as if
holding an ace in the sleeves is not correct. To go directly to the point, for Us to
sanction such a procedure is to tolerate and even encourage undue delay in
litigation, for the simple reason that to await the stage of trial for the showing or
presentation of the requisite documentary proof when it already exists and is asked
to be produced by the adverse party would amount to unnecessarily postponing,
with the concomitant waste of time and the prolongation of the proceedings,
something that can immediately be evidenced and thereby determinable with
decisiveness and precision by the court without further delay.
In this connection, Moran observes that unlike when the ground of dismissal alleged
is failure of the complaint to state a cause of action, a motion to dismiss invoking
the Statute of Frauds may be filed even if the absence of compliance does not
appear an the face of the complaint. Such absence may be the subject of proof in
the motion stage of the proceedings. (Moran, Comment on the Rules of Court, Vol.
1, p. 494, 1979 ed.) It follows then that when such a motion is filed and all the
documents available to movant are before the court, and they are insufficient to
comply with the Statute, it becomes incumbent upon the plaintiff, for the reasons of
policy We have just' indicated regarding speedy administration of justice, to bring
out what note or memorandum still exists in his possession in order to enable the
court to expeditiously determine then and there the need for further proceedings. In
other words, it would be inimical to the public interests in speedy justice for plaintiff
to play hide and seek at his own convenience, particularly, when, as is quite
apparent as in the instant case that chances are that there are no more writings,

notes or memoranda of the installment agreement alleged by respondents. We

cannot divine any reason why any such document would be withheld if they existed,
except the unpermissible desire of the respondents to force the petitioners to
undergo the ordeals, time, effort and expenses of a futile trial.
In the foregoing premises, We find no alternative than to render judgment in favor
of petitioners in this certiorari and prohibition case. If at all, appeal could be
available if the petitioners subjected themselves to the trial ruled to be held by the
trial court. We foresee even at this point, on the basis of what is both extant and
implicit in the records, that no different result can be probable. We consider it as
sufficiently a grave abuse of discretion warranting the special civil actions herein
the failure of respondent judge to properly apply the laws on perfection of contracts
in relation to the Statute of Frauds and the pertinent rules of pleading and practice,
as We have discussed above.
ACCORDINGLY, the impugned orders of respondent judge of November 2, 1978 and
August 29, 1980 are hereby set aside and private respondents' amended complaint,
Annex A of the petition, is hereby ordered dismissed and the restraining order
heretofore issued by this Court on October 7, 1980 is declared permanent. Costs
against respondents.
G.R. No. 115849

January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the

Philippines) and MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO
DEMETRIA, and JOSE JANOLO, respondents.
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in
an exchange of letters and/or in a meeting with the buyers constitute a perfected
and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna?
Does the doctrine of "apparent authority" apply in this case? If so, may the Central
Bank-appointed conservator of Producers Bank (now First Philippine International
Bank) repudiate such "apparent authority" after said contract has been deemed
perfected? During the pendency of a suit for specific performance, does the filing of
a "derivative suit" by the majority shareholders and directors of the distressed bank
to prevent the enforcement or implementation of the sale violate the ban against
forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant
Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the
Decision promulgated January 14, 1994 of the respondent Court of Appeals 1 in CAG.R CV No. 35756 and the Resolution promulgated June 14, 1994 denying the
motion for reconsideration. The dispositive portion of the said Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the elimination

of the damages awarded under paragraphs 3, 4 and 6 of its dispositive
portion and the reduction of the award in paragraph 5 thereof to P75,000.00,
to be assessed against defendant bank. In all other aspects, said decision is
hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive
portion are deemed, herein and hereafter, to legally refer to the plaintiffappellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's 2 decision dated July 10, 1991, on the other
hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiffs and against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six
(6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101
hectares, more or less, covered by and embraced in Transfer Certificates of
Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna,
between the plaintiffs as buyers and the defendant Producers Bank for an
agreed price of Five and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this
decision and receipt from the plaintiffs the amount of P5.5 Million, to execute
in favor of said plaintiffs a deed of absolute sale over the aforementioned six
(6) parcels of land, and to immediately deliver to the plaintiffs the owner's
copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of
registration of the same deed and transfer of the six (6) titles in the names of
the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A.
Janolo and Demetrio Demetria the sums of P200,000.00 each in moral
damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of
P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the
amount of P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual
and moderate damages in the amount of P20,000.00;
With costs against the defendants.

After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to surrejoinder, the petition was given due course in a Resolution dated January 18, 1995.
Thence, the parties filed their respective memoranda and reply memoranda. The
First Division transferred this case to the Third Division per resolution dated October
23, 1995. After carefully deliberating on the aforesaid submissions, the Court
assigned the case to the undersigned ponente for the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the
Philippines; petitioner Bank, for brevity) is a banking institution organized and
existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera
(petitioner Rivera, for brevity) is of legal age and was, at all times material to this
case, Head-Manager of the Property Management Department of the petitioner
Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is
the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution
sought to be set aside through this petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision 3 as
follows:
(1) In the course of its banking operations, the defendant Producer Bank of
the Philippines acquired six parcels of land with a total area of 101 hectares
located at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates
of Title Nos. T-106932 to T-106937. The property used to be owned by BYME
Investment and Development Corporation which had them mortgaged with
the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria
and Jose O. Janolo, wanted to purchase the property and thus initiated
negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of
BYME investment's legal counsel, Jose Fajardo, met with defendant Mercurio
Rivera, Manager of the Property Management Department of the defendant
bank. The meeting was held pursuant to plaintiffs' plan to buy the property
(TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following
the advice of defendant Rivera, made a formal purchase offer to the bank
through a letter dated August 30, 1987 (Exh. "B"), as follows:

August 30, 1987

The Producers Bank of the Philippines

Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept.
Gentleman:
I have the honor to submit my formal offer to purchase your properties
covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total
area of 101 hectares, more or less.

TCT NO.

AREA

T-106932

113,580
m.

sq.

T-106933

70,899
m.

sq.

T-106934

52,246
m.

sq.

T-106935

96,768
m.

sq.

T-106936

187,114
m.

sq.

T-106937

481,481
m.

sq.

My offer is for PESOS: THREE

(P3,500,000.00) PESOS, in cash.

MILLION

FIVE

Kindly contact me at Telephone Number 921-1344.

HUNDRED

THOUSAND

(3) On September 1, 1987, defendant Rivera made on behalf of the bank a

formal reply by letter which is hereunder quoted (Exh. "C"):

September 1, 1987

JP M-P GUTIERREZ ENTERPRISES

142 Charisma St., Doa Andres II
Rosario, Pasig, Metro Manila
Attention: JOSE O. JANOLO
Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at
Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be
informed however that the bank's counter-offer is at P5.5 million for more
than 101 hectares on lot basis.
We shall be very glad to hear your position on the on the matter.
Best regards.
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's
aforequoted reply, wrote (Exh. "D"):

September 17, 1987

Producers Bank
Paseo de Roxas
Makati, Metro Manila
Attention: Mr. Mercurio Rivera
Gentlemen:
In reply to your letter regarding my proposal to purchase your 101-hectare lot
located at Sta. Rosa, Laguna, I would like to amend my previous offer and I
now propose to buy the said lot at P4.250 million in CASH..
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolo's foregoing letter of September 17, 1987.
What took place was a meeting on September 28, 1987 between the plaintiffs
and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as

Fajardo, the BYME lawyer, attended the meeting. Two days later, or on
September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the
following letter (Exh. "E"):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila
Attention: Mr. Mercurio Rivera
Re: 101 Hectares of Land
in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform
you that we are accepting your offer for us to purchase the property at Sta.
Rosa, Laguna, formerly owned by Byme Investment, for a total price of
PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed
under conservatorship by the Central Bank since 1984) was replaced by an
Acting Conservator in the person of defendant Leonida T. Encarnacion. On
November 4, 1987, defendant Rivera wrote plaintiff Demetria the following
letter (Exh. "F"):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme
investment Corp. located at Sta. Rosa, Laguna is under study yet as of this
time by the newly created committee for submission to the newly designated
Acting Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for
compliance by the bank with what plaintiff considered as a perfected contract
of sale, which demands were in one form or another refused by the bank. As
detailed by the trial court in its decision, on November 17, 1987, plaintiffs
through a letter to defendant Rivera (Exhibit "G") tendered payment of the
amount of P5.5 million "pursuant to (our) perfected sale agreement."
Defendants refused to receive both the payment and the letter. Instead, the
parcels of land involved in the transaction were advertised by the bank for
sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the

execution by the bank of the documents on what was considered as a

"perfected agreement." Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to
purchase your 101-hectare lot located in Sta. Rosa, Laguna, and which are
covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated
September 1, 1987 of this same lot in the amount of P5.5 million was
accepted by our client thru a letter dated September 30, 1987 and was
received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been
perfected. We were also informed that despite repeated follow-up to
consummate the purchase, you now refuse to honor your commitment.
Instead, you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you
to consummate and execute the necessary actions/documentation within
three (3) days from your receipt hereof. We are ready to remit the agreed
amount of P5.5 million at your advice. Otherwise, we shall be constrained to
file the necessary court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the
foregoing letter and stated, in its communication of December 2, 1987 (Exh.
"I"), that said letter has been "referred . . . to the office of our Conservator for
proper disposition" However, no response came from the Acting Conservator.
On December 14, 1987, the plaintiffs made a second tender of payment (Exh.
"L" and "L-1"), this time through the Acting Conservator, defendant
Encarnacion. Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator

We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO,
MBTC Check No. 258387 in the amount of P5.5 million as our agreed
purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933,
106934, 106935, 106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your
offer of P5.5 Million as the purchase price of the said lots. Please inform us of
the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then,
on May 3, 1988, plaintiff, through counsel, made a final demand for
compliance by the bank with its obligations under the considered perfected
contract of sale (Exhibit "N"). As recounted by the trial court (Original Record,
p. 656), in a reply letter dated May 12, 1988 (Annex "4" of defendant's
answer to amended complaint), the defendants through Acting Conservator
Encarnacion repudiated the authority of defendant Rivera and claimed that
his dealings with the plaintiffs, particularly his counter-offer of P5.5 Million are
unauthorized or illegal. On that basis, the defendants justified the refusal of
the tenders of payment and the non-compliance with the obligations under
what the plaintiffs considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with
damages against the bank, its Manager Rivers and Acting Conservator
Encarnacion. The basis of the suit was that the transaction had with the bank
resulted in a perfected contract of sale, The defendants took the position that
there was no such perfected sale because the defendant Rivera is not
authorized to sell the property, and that there was no meeting of the minds
as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel
Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in the
trial court, alleging that as owner of 80% of the Bank's outstanding shares of
stock, he had a substantial interest in resisting the complaint. On July 8,
1991, the trial court issued an order denying the motion to intervene on the
ground that it was filed after trial had already been concluded. It also denied
a motion for reconsideration filed thereafter. From the trial court's decision,
the Bank, petitioner Rivera and conservator Encarnacion appealed to the
Court of Appeals which subsequently affirmed with modification the said
judgment. Henry Co did not appeal the denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was
substituted in place of Demetria and Janolo, in view of the assignment of the latters'
rights in the matter in litigation to said private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals,
Henry Co and several other stockholders of the Bank, through counsel Angara
Abello Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case")

purportedly a "derivative suit" with the Regional Trial Court of Makati, Branch
134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo
"to declare any perfected sale of the property as unenforceable and to stop Ejercito
from enforcing or implementing the sale" 4 In his answer, Janolo argued that the
Second Case was barred by litis pendentia by virtue of the case then pending in the
Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed
a Motion for Leave of Court to Dismiss the Case Without Prejudice. "Private
respondent opposed this motion on the ground, among others, that plaintiff's act of
forum shopping justifies the dismissal of both cases, with prejudice." 5 Private
respondent, in his memorandum, averred that this motion is still pending in the
Makati RTC.
In their Petition6 and Memorandum7, petitioners summarized their position as
follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected
between Ejercito (in substitution of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable
contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have
the power to overrule or revoke acts of previous management.

IV.
The findings and conclusions of the Court of Appeals do not conform to the
evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the
ground8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by
the evidence on record and may no longer be questioned in this case.

III.
The Court of Appeals correctly held that there was a perfected contract
between Demetria and Janolo (substituted by; respondent Ejercito) and the
bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from
being estopped from repudiating the agency and the contract, has no
authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed
up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute
of frauds?
4) Did the bank conservator have the unilateral power to repudiate the
authority of the bank officers and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of
facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme
Court promulgated Revised Circular No. 28-91 requiring that a party "must certify
under oath . . . [that] (a) he has not (t)heretofore commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of Appeals, or
any other tribunal or agency; (b) to the best of his knowledge, no such action or
proceeding is pending" in said courts or agencies. A violation of the said circular
entails sanctions that include the summary dismissal of the multiple petitions or
complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in
their Petition stating "for the record(,) the pendency of Civil Case No. 92-1606
before the Regional Trial Court of Makati, Branch 134, involving a derivative suit
filed by stockholders of petitioner Bank against the conservator and other
defendants but which is the subject of a pending Motion to Dismiss Without
Prejudice.9
Private respondent Ejercito vigorously argues that in spite of this verification,
petitioners are guilty of actual forum shopping because the instant petition pending
before this Court involves "identical parties or interests represented, rights asserted

and reliefs sought (as that) currently pending before the Regional Trial Court, Makati
Branch 134 in the Second Case. In fact, the issues in the two cases are so
interwined that a judgement or resolution in either case will constitute res judicata
in the other." 10
On the other hand, petitioners explain

11

that there is no forum-shopping because:

1) In the earlier or "First Case" from which this proceeding arose, the Bank
was impleaded as a defendant, whereas in the "Second Case" (assuming the
Bank is the real party in interest in a derivative suit), it was plaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the
corporation under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank
president and attached to the Petition identifies the action as a "derivative
suit," it "does not mean that it is one" and "(t)hat is a legal question for the
courts to decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law. 12,
where non-resident litigants are given the option to choose the forum or place
wherein to bring their suit for various reasons or excuses, including to secure
procedural advantages, to annoy and harass the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. To combat these less than honorable
excuses, the principle of forum non conveniens was developed whereby a court, in
conflicts of law cases, may refuse impositions on its jurisdiction where it is not the
most "convenient" or available forum and the parties are not precluded from
seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a
party attempts to have his action tried in a particular court or jurisdiction where he
feels he will receive the most favorable judgment or verdict." Hence, according to
Words and Phrases14, "a litigant is open to the charge of "forum shopping" whenever
he chooses a forum with slight connection to factual circumstances surrounding his
suit, and litigants should be encouraged to attempt to settle their differences
without imposing undue expenses and vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not
only a choice of venues, as it was originally understood in conflicts of laws, but also
to a choice of remedies. As to the first (choice of venues), the Rules of Court, for
example, allow a plaintiff to commence personal actions "where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies,
aggrieved parties, for example, are given a choice of pursuing civil liabilities

independently of the criminal, arising from the same set of facts. A passenger of a
public utility vehicle involved in a vehicular accident may sue on culpa contractual,
culpa aquiliana or culpa criminal each remedy being available independently of
the others although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant
actually shops for a forum of his action, This was the original concept of the
term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their
actions, litigants, through the encouragement of their lawyers, file their
actions in all available courts, or invoke all relevant remedies simultaneously.
This practice had not only resulted to (sic) conflicting adjudications among
different courts and consequent confusion enimical (sic) to an orderly
administration of justice. It had created extreme inconvenience to some of
the parties to the action.
Thus, "forum shopping" had acquired a different concept which is unethical
professional legal practice. And this necessitated or had given rise to the
formulation of rules and canons discouraging or altogether prohibiting the
practice. 15
What therefore originally started both in conflicts of laws and in our domestic law as
a legitimate device for solving problems has been abused and mis-used to assure
scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme
Court, as already mentioned, promulgated Circular 28-91. And even before that, the
Court had prescribed it in the Interim Rules and Guidelines issued on January 11,
1983 and had struck down in several cases 16 the inveterate use of this insidious
malpractice. Forum shopping as "the filing of repetitious suits in different courts"
has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of
Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible
manipulation of court processes and proceedings . . ." 17 when does forum shopping
take place?
There is forum-shopping whenever, as a result of an adverse opinion in one
forum, a party seeks a favorable opinion (other than by appeal or certiorari)
in another. The principle applies not only with respect to suits filed in the
courts but also in connection with litigations commenced in the courts while
an administrative proceeding is pending, as in this case, in order to defeat
administrative processes and in anticipation of an unfavorable administrative
ruling and a favorable court ruling. This is specially so, as in this case, where
the court in which the second suit was brought, has no jurisdiction. 18
The test for determining whether a party violated the rule against forum shopping
has been laid dawn in the 1986 case of Buan vs. Lopez 19, also by Chief Justice
Narvasa, and that is, forum shopping exists where the elements of litis pendentia

are present or where a final judgment in one case will amount to res judicata in the
other, as follows:
There thus exists between the action before this Court and RTC Case No. 8636563 identity of parties, or at least such parties as represent the same
interests in both actions, as well as identity of rights asserted and relief
prayed for, the relief being founded on the same facts, and the identity on
the two preceding particulars is such that any judgment rendered in the other
action, will, regardless of which party is successful, amount to res adjudicata
in the action under consideration: all the requisites, in fine, of auter action
pendant.
xxx

xxx

xxx

As already observed, there is between the action at bar and RTC Case No. 8636563, an identity as regards parties, or interests represented, rights
asserted and relief sought, as well as basis thereof, to a degree sufficient to
give rise to the ground for dismissal known as auter action pendant or lis
pendens. That same identity puts into operation the sanction of twin
dismissals just mentioned. The application of this sanction will prevent any
further delay in the settlement of the controversy which might ensue from
attempts to seek reconsideration of or to appeal from the Order of the
Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986,
which dismissed the petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or person)
sues the same party against whom another action or actions for the alleged
violation of the same right and the enforcement of the same relief is/are still
pending, the defense of litis pendencia in one case is bar to the others; and, a final
judgment in one would constitute res judicata and thus would cause the dismissal of
the rest. In either case, forum shopping could be cited by the other party as a
ground to ask for summary dismissal of the two 20 (or more) complaints or petitions,
and for imposition of the other sanctions, which are direct contempt of court,
criminal prosecution, and disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the
Second Case, it is obvious that there exist identity of parties or interests
represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the
instant petition was filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein petitioners) to enforce the
alleged perfected sale of real estate. On the other hand, the complaint 21 in the
Second Case seeks to declare such purported sale involving the same real property
"as unenforceable as against the Bank", which is the petitioner herein. In other
words, in the Second Case, the majority stockholders, in representation of the Bank,
are seeking to accomplish what the Bank itself failed to do in the original case in the
trial court. In brief, the objective or the relief being sought, though worded
differently, is the same, namely, to enable the petitioner Bank to escape from the
obligation to sell the property to respondent. In Danville Maritime, Inc. vs.

Commission on Audit. 22, this Court ruled that the filing by a party of two apparently
different actions, but with the same objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner
impleaded different respondents therein PNOC in the case before the lower
court and the COA in the case before this Court and sought what seems to be
different reliefs. Petitioner asks this Court to set aside the questioned letterdirective of the COA dated October 10, 1988 and to direct said body to
approve the Memorandum of Agreement entered into by and between the
PNOC and petitioner, while in the complaint before the lower court petitioner
seeks to enjoin the PNOC from conducting a rebidding and from selling to
other parties the vessel "T/T Andres Bonifacio", and for an extension of time
for it to comply with the paragraph 1 of the memorandum of agreement and
damages. One can see that although the relief prayed for in the two (2)
actions are ostensibly different, the ultimate objective in both actions is the
same, that is, approval of the sale of vessel in favor of petitioner and to
overturn the letter-directive of the COA of October 10, 1988 disapproving the
sale. (emphasis supplied).
In an earlier case

23

but with the same logic and vigor, we held:

In other words, the filing by the petitioners of the instant special civil action
for certiorari and prohibition in this Court despite the pendency of their action
in the Makati Regional Trial Court, is a species of forum-shopping. Both
actions unquestionably involve the same transactions, the same essential
facts and circumstances. The petitioners' claim of absence of identity simply
because the PCGG had not been impleaded in the RTC suit, and the suit did
not involve certain acts which transpired after its commencement, is
specious. In the RTC action, as in the action before this Court, the validity of
the contract to purchase and sell of September 1, 1986, i.e., whether or not it
had been efficaciously rescinded, and the propriety of implementing the
same (by paying the pledgee banks the amount of their loans, obtaining the
release of the pledged shares, etc.) were the basic issues. So, too, the relief
was the same: the prevention of such implementation and/or the restoration
of the status quo ante. When the acts sought to be restrained took place
anyway despite the issuance by the Trial Court of a temporary restraining
order, the RTC suit did not become functus oficio. It remained an effective
vehicle for obtention of relief; and petitioners' remedy in the premises was
plain and patent: the filing of an amended and supplemental pleading in the
RTC suit, so as to include the PCGG as defendant and seek nullification of the
acts sought to be enjoined but nonetheless done. The remedy was certainly
not the institution of another action in another forum based on essentially the
same facts, The adoption of this latter recourse renders the petitioners
amenable to disciplinary action and both their actions, in this Court as well as
in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests
represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not
name parties in the First Case, they represent the same interest and entity, namely,
petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct
personal interest in the matter in controversy. They are not principally or even
subsidiarily liable; much less are they direct parties in the assailed contract of sale;
and
Secondly, the allegations of the complaint in the Second Case show that the
stockholders are bringing a "derivative suit". In the caption itself, petitioners claim
to have brought suit "for and in behalf of the Producers Bank of the Philippines" 24.
Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf
of the corporation wherein he holdsstock in order to protect or vindicate
corporate rights, whenever the officials of the corporation refuse to sue, or
are the ones to be sued or hold the control of the corporation. In such actions,
the suing stockholder is regarded as a nominal party, with the corporation as
the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979];
emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second
Case, petitioners, quite strangely, sought to deny that the Second Case was a
derivative suit, reasoning that it was brought, not by the minority shareholders, but
by Henry Co et al., who not only own, hold or control over 80% of the outstanding
capital stock, but also constitute the majority in the Board of Directors of petitioner
Bank. That being so, then they really represent the Bank. So, whether they sued
"derivatively" or directly, there is undeniably an identity of interests/entity
represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of
the Bank is separate and distinct from its shareholders. But the rulings of this Court
are consistent: "When the fiction is urged as a means of perpetrating a fraud or an
illegal act or as a vehicle for the evasion of an existing obligation, the circumvention
of statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will be lifted to allow
for its consideration merely as an aggregation of individuals." 25
In addition to the many cases 26 where the corporate fiction has been disregarded,
we now add the instant case, and declare herewith that the corporate veil cannot be
used to shield an otherwise blatant violation of the prohibition against forumshopping. Shareholders, whether suing as the majority in direct actions or as the
minority in a derivative suit, cannot be allowed to trifle with court processes,
particularly where, as in this case, the corporation itself has not been remiss in
vigorously prosecuting or defending corporate causes and in using and applying
remedies available to it. To rule otherwise would be to encourage corporate litigants
to use their shareholders as fronts to circumvent the stringent rules against forum
shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs
sought, "because it (the Bank) was the defendant in the (first) case while it was the

plaintiff in the other (Second Case)",citing as authority Victronics Computers, Inc.,

vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only
to him, commences a new action against the plaintiff instead of filing a
responsive pleading in the other case setting forth therein, as causes of
action, specific denials, special and affirmative defenses or even
counterclaims, Thus, Velhagen's and King's motion to dismiss Civil Case No.
91-2069 by no means negates the charge of forum-shopping as such did not
exist in the first place. (emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it
could not have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting
between Victronics and the present suit. In the former, as underscored in the abovequoted Court ruling, the defendants did not file any responsive pleading in the first
case. In other words, they did not make any denial or raise any defense or counterclaim therein In the case before us however, petitioners filed a responsive pleading
to the complaint as a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counterclaims in their
responsive pleadings, the petitioners became plaintiffs themselves in the original
case, giving unto themselves the very remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forumshopping exists or not is the vexation caused the courts and parties-litigant by a
party who asks different courts and/or administrative agencies to rule on the same
or related causes and/or to grant the same or substantially the same reliefs, in the
process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issue. In this case, this is exactly the problem: a
decision recognizing the perfection and directing the enforcement of the contract of
sale will directly conflict with a possible decision in the Second Case barring the
parties front enforcing or implementing the said sale. Indeed, a final decision in one
would constitute res judicata in the other 28.
The foregoing conclusion finding the existence of forum-shopping notwithstanding,
the only sanction possible now is the dismissal of both cases with prejudice, as the
other sanctions cannot be imposed because petitioners' present counsel entered
their appearance only during the proceedings in this Court, and the Petition's
VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of
the Second Case to show good faith in observing Circular 28-91. The Lawyers who
filed the Second Case are not before us; thus the rudiments of due process prevent
us from motu propio imposing disciplinary measures against them in this Decision.
However, petitioners themselves (and particularly Henry Co, et al.) as litigants are
admonished to strictly follow the rules against forum-shopping and not to trifle with
court proceedings and processes They are warned that a repetition of the same will
be dealt with more severely.

Having said that, let it be emphasized that this petition should be dismissed not
merely because of forum-shopping but also because of the substantive issues
raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on
the basis of the facts established, a perfected contract of sale as the ultimate issue.
Holding that a valid contract has been established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned
by the defendant bank as acquired assets consisting of six (6) parcels of land
specifically identified under Transfer Certificates of Title Nos. T-106932 to T106937. It is likewise beyond cavil that the bank intended to sell the property.
As testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was
looking for buyers of the property. It is definite that the plaintiffs wanted to
purchase the property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department of the
defendant bank, in early August 1987. The procedure in the sale of acquired
assets as well as the nature and scope of the authority of Rivera on the
matter is clearly delineated in the testimony of Rivera himself, which
testimony was relied upon by both the bank and by Rivera in their appeal
briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me
and then I published it in the form of an inter-office memorandum
distributed to all branches that these are acquired assets for sale. I was
instructed to advertise acquired assets for sale so on that basis, I have
to entertain offer; to accept offer, formal offer and upon having been
offered, I present it to the Committee. I provide the Committee with
necessary information about the property such as original loan of the
borrower, bid price during the foreclosure, total claim of the bank, the
appraised value at the time the property is being offered for sale and
then the information which are relative to the evaluation of the bank to
buy which the Committee considers and it is the Committee that
evaluate as against the exposure of the bank and it is also the
Committee that submit to the Conservator for final approval and once
approved, we have to execute the deed of sale and it is the
Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their
purpose of buying the property, dealt with and talked to the right person.
Necessarily, the agenda was the price of the property, and plaintiffs were
dealing with the bank official authorized to entertain offers, to accept offers
and to present the offer to the Committee before which the said official is
authorized to discuss information relative to price determination. Necessarily,
too, it being inherent in his authority, Rivera is the officer from whom official
information regarding the price, as determined by the Committee and
approved by the Conservator, can be had. And Rivera confirmed his authority

when he talked with the plaintiff in August 1987. The testimony of plaintiff
Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio
Rivera, did you ask him point-blank his authority to sell any property?
A: No, sir. Not point blank although it came from him, (W)hen I asked
him how long it would take because he was saying that the matter of
pricing will be passed upon by the committee. And when I asked him
how long it will take for the committee to decide and he said the
committee meets every week. If I am not mistaken Wednesday and in
about two week's (sic) time, in effect what he was saying he was not
the one who was to decide. But he would refer it to the committee and
he would relay the decision of the committee to me.
Q Please answer the question.
A He did not say that he had the authority (.) But he said he would
refer the matter to the committee and he would relay the decision to
me and he did just like that.
"Parenthetically, the Committee referred to was the Past Due Committee of
which Luis Co was the Head, with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with
the authority and the duties of Rivera and the bank's internal procedure in
the matter of the sale of bank's assets. As advised by Rivera, the plaintiffs
made a formal offer by a letter dated August 20, 1987 stating that they would
buy at the price of P3.5 Million in cash. The letter was for the attention of
Mercurio Rivera who was tasked to convey and accept such offers.
Considering an aspect of the official duty of Rivera as some sort of
intermediary between the plaintiffs-buyers with their proposed buying price
on one hand, and the bank Committee, the Conservator and ultimately the
bank itself with the set price on the other, and considering further the
discussion of price at the meeting of August resulting in a formal offer of P3.5
Million in cash, there can be no other logical conclusion than that when, on
September 1, 1987, Rivera informed plaintiffs by letter that "the bank's
counter-offer is at P5.5 Million for more than 101 hectares on lot basis," such
counter-offer price had been determined by the Past Due Committee and
approved by the Conservator after Rivera had duly presented plaintiffs' offer
for discussion by the Committee of such matters as original loan of borrower,
bid price during foreclosure, total claim of the bank, and market value.
Tersely put, under the established facts, the price of P5.5 Million was, as
clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at
which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that
the P5.5 Million price was not discussed by the Committee and that price. As
correctly characterized by the trial court, this is not credible. The testimonies

of Luis Co and Jose Entereso on this point are at best equivocal and
considering the gratuitous and self-serving character of these declarations,
the bank's submission on this point does not inspire belief. Both Co ad
Entereso, as members of the Past Due Committee of the bank, claim that the
offer of the plaintiff was never discussed by the Committee. In the same vein,
both Co and Entereso openly admit that they seldom attend the meetings of
the Committee. It is important to note that negotiations on the price had
started in early August and the plaintiffs had already offered an amount as
purchase price, having been made to understand by Rivera, the official in
charge of the negotiation, that the price will be submitted for approval by the
bank and that the bank's decision will be relayed to plaintiffs. From the facts,
the official bank price. At any rate, the bank placed its official, Rivera, in a
position of authority to accept offers to buy and negotiate the sale by having
the offer officially acted upon by the bank. The bank cannot turn around and
later say, as it now does, that what Rivera states as the bank's action on the
matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible
authority, that if a corporation knowingly permits one of its officers, or any
other agent, to do acts within the scope of an apparent authority, and thus
holds him out to the public as possessing power to do those acts, the
corporation will, as against any one who has in good faith dealt with the
corporation through such agent, he estopped from denying his authority
(Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA
357, 369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14,
1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected
contract as follows: "(1) Consent of the contracting parties; (2) Object certain which
is the subject matter of the contract; (3) Cause of the obligation which is
established."
There is no dispute on requisite no. 2. The object of the questioned contract consists
of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about
101 hectares, more or less, and covered by Transfer Certificates of Title Nos. T106932 to T-106937. There is, however, a dispute on the first and third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any
supposed counter-offer which Rivera (or Co) may have made is unauthorized. Since
there was no counter-offer by the Bank, there was nothing for Ejercito (in
substitution of Demetria and Janolo) to accept." 30 They disputed the factual basis of
the respondent Court's findings that there was an offer made by Janolo for P3.5
million, to which the Bank counter-offered P5.5 million. We have perused the
evidence but cannot find fault with the said Court's findings of fact. Verily, in a
petition under Rule 45 such as this, errors of fact if there be any - are, as a rule,
not reviewable. The mere fact that respondent Court (and the trial court as well)
chose to believe the evidence presented by respondent more than that presented
by petitioners is not by itself a reversible error. In fact, such findings merit serious
consideration by this Court, particularly where, as in this case, said courts carefully
and meticulously discussed their findings. This is basic.

Be that as it may, and in addition to the foregoing disquisitions by the Court of

Appeals, let us review the question of Rivera's authority to act and petitioner's
allegations that the P5.5 million counter-offer was extinguished by the P4.25 million
revised offer of Janolo. Here, there are questions of law which could be drawn from
the factual findings of the respondent Court. They also delve into the contractual
elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or
apparent. The doctrine of "apparent authority", with special reference to banks, was
laid out in Prudential Bank vs. Court of Appeals 31, where it was held that:
Conformably, we have declared in countless decisions that the principal is
liable for obligations contracted by the agent. The agent's apparent
representation yields to the principal's true representation and the contract is
considered as entered into between the principal and the third person (citing
National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of
the bank or in the course of dealings of the officers in their
representative capacity but not for acts outside the scape of their
authority (9 C.J.S., p. 417). A bank holding out its officers and agents as
worthy of confidence will not be permitted to profit by the frauds they
may thus be enabled to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk its responsibility for such
frauds even though no benefit may accrue to the bank therefrom (10
Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to
innocent third persons where the representation is made in the course
of its business by an agent acting within the general scope of his
authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate a fraud upon his
principal or some other person, for his own ultimate benefit (McIntosh
v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a
fiduciary relationship with the public and their stability depends on the
confidence of the people in their honesty and efficiency. Such faith will be
eroded where banks do not exercise strict care in the selection and
supervision of its employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera
has apparent or implied authority to act for the Bank in the matter of selling its
acquired assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times
material to this case, Manager of the Property Management Department of
the Bank". By his own admission, Rivera was already the person in charge of
the Bank's acquired assets (TSN, August 6, 1990, pp. 8-9);

(b) As observed by respondent Court, the land was definitely being sold by
the Bank. And during the initial meeting between the buyers and Rivera, the
latter suggested that the buyers' offer should be no less than P3.3 million
(TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5
million (TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the
property for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the
buyers' proposal to buy the property for P4.25 million (TSN, July 30, 1990, p.
12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was
the final price of the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on
September 28, 1994, during which the Bank's offer of P5.5 million was
confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a
major shareholder and officer of the Bank, confirmed Rivera's statement as to
the finality of the Bank's counter-offer of P5.5 million (TSN, January 16, 1990,
p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred
to Rivera as the officer acting for the Bank in relation to parties interested in
buying assets owned/acquired by the Bank. In fact, Rivera was the officer
mentioned in the Bank's advertisements offering for sale the property in
question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32,
the Court, through Justice Jose A. R. Melo, affirmed the doctrine of apparent
authority as it held that the apparent authority of the officer of the Bank of P.I. in
charge of acquired assets is borne out by similar circumstances surrounding his
dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through
documents and testimony which seek to establish Rivera's actual authority. These
pieces of evidence, however, are inherently weak as they consist of Rivera's selfserving testimony and various inter-office memoranda that purport to show his
limited actual authority, of which private respondent cannot be charged with
knowledge. In any event, since the issue is apparent authority, the existence of
which is borne out by the respondent Court's findings, the evidence of actual
authority is immaterial insofar as the liability of a corporation is concerned 33.
Petitioners also argued that since Demetria and Janolo were experienced lawyers
and their "law firm" had once acted for the Bank in three criminal cases, they should
be charged with actual knowledge of Rivera's limited authority. But the Court of

Appeals in its Decision (p. 12) had already made a factual finding that the buyers
had no notice of Rivera's actual authority prior to the sale. In fact, the Bank has not
shown that they acted as its counsel in respect to any acquired assets; on the other
hand, respondent has proven that Demetria and Janolo merely associated with a
loose aggrupation of lawyers (not a professional partnership), one of whose
members (Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in
the letter dated September 17, 1987 extinguished the Bank's offer of P5.5 million
34
.They disputed the respondent Court's finding that "there was a meeting of minds
when on 30 September 1987 Demetria and Janolo through Annex "L" (letter dated
September 30, 1987) "accepted" Rivera's counter offer of P5.5 million under Annex
"J" (letter dated September 17, 1987)", citing the late Justice Paras35, Art. 1319 of
the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs.
Prieto 37.
However, the above-cited authorities and precedents cannot apply in the instant
case because, as found by the respondent Court which reviewed the testimonies on
this point, what was "accepted" by Janolo in his letter dated September 30, 1987
was the Bank's offer of P5.5 million as confirmed and reiterated to Demetria and
Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987.
Note that the said letter of September 30, 1987 begins with"(p)ursuant to our
discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the testimonies of
Rivera and Co that the September 28, 1987 meeting "was meant to have the
offerors improve on their position of P5.5. million." 38 However, both the trial court
and the Court of Appeals found petitioners' testimonial evidence "not credible", and
we find no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA)
common finding that private respondents' evidence is more in keeping with truth
and logic that during the meeting on September 28, 1987, Luis Co and Rivera
"confirmed that the P5.5 million price has been passed upon by the Committee and
could no longer be lowered (TSN of April 27, 1990, pp. 34-35)" 39. Hence, assuming
arguendo that the counter-offer of P4.25 million extinguished the offer of P5.5
million, Luis Co's reiteration of the said P5.5 million price during the September 28,
1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter
accepting this revived offer, there was a meeting of the minds, as the acceptance in
said letter was absolute and unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's
authority and action, particularly the latter's counter-offer of P5.5 million, as being
"unauthorized and illegal" came only on May 12, 1988 or more than seven (7)
months after Janolo' acceptance. Such delay, and the absence of any circumstance
which might have justifiably prevented the Bank from acting earlier, clearly
characterizes the repudiation as nothing more than a last-minute attempt on the
Bank's part to get out of a binding contractual obligation.

Taken together, the factual findings of the respondent Court point to an implied
admission on the part of the petitioners that the written offer made on September
1, 1987 was carried through during the meeting of September 28, 1987. This is the
conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5
million was raised for the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that
points of law, theories, issues of fact and arguments not adequately brought
to the attention of the trial court need not be, and ordinarily will not be,
considered by a reviewing court, as they cannot be raised for the first time on
appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592). 40
. . . It is settled jurisprudence that an issue which was neither averred in the
complaint nor raised during the trial in the court below cannot be raised for
the first time on appeal as it would be offensive to the basic rules of fair play,
justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo
vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157
SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R.
77029, August 30, 1990).41
Since the issue was not raised in the pleadings as an affirmative defense, private
respondent was not given an opportunity in the trial court to controvert the same
through opposing evidence. Indeed, this is a matter of due process. But we passed
upon the issue anyway, if only to avoid deciding the case on purely procedural
grounds, and we repeat that, on the basis of the evidence already in the record and
as appreciated by the lower courts, the inevitable conclusion is simply that there
was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged42:
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5
million during the meeting of 28 September 1987, and it was this verbal offer
that Demetria and Janolo accepted with their letter of 30 September 1987,
the contract produced thereby would be unenforceable by action there
being no note, memorandum or writing subscribed by the Bank to evidence
such contract. (Please see article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official price and
the plaintiffs' acceptance of the price on September 30, 1987, are not, in
themselves, formal contracts of sale. They are however clear embodiments of
the fact that a contract of sale was perfected between the parties, such
contract being binding in whatever form it may have been entered into (case
citations omitted). Stated simply, the banks' letter of September 1, 1987,

taken together with plaintiffs' letter dated September 30, 1987, constitute in
law a sufficient memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications
commenced not only from September 1, 1987 but from Janolo's August 20, 1987
letter. We agree that, taken together, these letters constitute sufficient memoranda
since they include the names of the parties, the terms and conditions of the
contract, the price and a description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on
September 28, 1987 did constitute a "new" offer which was accepted by Janolo on
September 30, 1987. Still, the statute of frauds will not apply by reason of the
failure of petitioners to object to oral testimony proving petitioner Bank's counteroffer of P5.5 million. Hence, petitioners by such utter failure to object are
deemed to have waived any defects of the contract under the statute of frauds,
pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of
article 1403, are ratified by the failure to object to the presentation of oral
evidence to prove the same, or by the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the
reaffirmation of the counter-offer of P5.5 million is a plenty and the silence of
petitioners all throughout the presentation makes the evidence binding on them
thus;
A Yes, sir, I think it was September 28, 1987 and I was again present because
Atty. Demetria told me to accompany him we were able to meet Luis Co at
the Bank.
xxx

xxx

xxx

Q Now, what transpired during this meeting with Luis Co of the Producers
Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q What price?
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr.
Mercurio Rivera is the final price and that is the price they intends (sic) to
have, sir.
Q What do you mean?.
A That is the amount they want, sir.

Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic)
that the defendant Rivera's counter-offer of 5.5 million was the defendant's
bank (sic) final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.
A He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
Q What transpired during that meeting between you and Mr. Luis Co of the
defendant Bank?
A We went straight to the point because he being a busy person, I told him if
the amount of P5.5 million could still be reduced and he said that was already
passed upon by the committee. What the bank expects which was contrary to
what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5
million and we should indicate our position as soon as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he said
that was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us at the
time at his office.
Q For the record, your Honor please, will you tell this Court who was with Mr.
Co in his Office in Producers Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede on
(sic) the counter offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank
which offer we accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was
reached by the Committee and it is not within his power to reduce this
amount. What can you say to that statement that the amount of P5.5 million
was reached by the Committee?

A It was not discussed by the Committee but it was discussed initially by Luis
Co and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that
September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The
Fourth
Issue:
May
the Perfected and Enforceable Contract.

the

Conservator

Revoke

It is not disputed that the petitioner Bank was under a conservator placed by the
Central Bank of the Philippines during the time that the negotiation and perfection
of the contract of sale took place. Petitioners energetically contended that the
conservator has the power to revoke or overrule actions of the management or the
board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise
known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising
or examining department, the Monetary Board finds that a bank or a nonbank financial intermediary performing quasi-banking functions is in a state
of continuing inability or unwillingness to maintain a state of liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary
Board may appoint a conservator to take charge of the assets, liabilities, and
the management of that institution, collect all monies and debts due said
institution and exercise all powers necessary to preserve the assets of the
institution, reorganize the management thereof, and restore its viability. He
shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or non-bank financial
intermediary performing quasi-banking functions, any provision of law to the
contrary notwithstanding, and such other powers as the Monetary Board shall
deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or
repudiate the perfected contract of sale was raised for the first time in this Petition
as this was not litigated in the trial court or Court of Appeals. As already stated
earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of
Appeals, "cannot be raised for the first time on appeal as it would be offensive to
the basic rules of fair play, justice and due process." 43
In the second place, there is absolutely no evidence that the Conservator, at the
time the contract was perfected, actually repudiated or overruled said contract of
sale. The Bank's acting conservator at the time, Rodolfo Romey, never objected to
the sale of the property to Demetria and Janolo. What petitioners are really referring
to is the letter of Conservator Encarnacion, who took over from Romey after the sale
was perfected on September 30, 1987 (Annex V, petition) which unilaterally
repudiated not the contract but the authority of Rivera to make a binding offer
and which unarguably came months after the perfection of the contract. Said
letter dated May 12, 1988 is reproduced hereunder:

May 12, 1988

Atty. Noe C. Zarate

Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and
Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of
your clients nor perfected a "contract to sell and buy" with any of them for
the following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and
approved by former Acting Conservator Mr. Andres I. Rustia, Producers Bank
Senior Manager Perfecto M. Pascua detailed the functions of Property
Management Department (PMD) staff and officers (Annex A.), you will
immediately read that Manager Mr. Mercurio Rivera or any of his subordinates
has no authority, power or right to make any alleged counter-offer. In short,
your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines
(Bates Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No.
265, as amended), only the Board of Directors/Conservator may authorize the
sale of any property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or
by any of the bank conservators (starting January, 1984) to sell the aforesaid
property to any of your clients. Apparently, what took place were just
preliminary discussions/consultations between him and your clients, which
everyone knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your
clients, as the same is patently violative of corporate and banking laws. We
believe that this is more than sufficient legal justification for refusing said
alleged tender.
Rest assured that we have nothing personal against your clients. All our acts
are official, legal and in accordance with law. We also have no personal
interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,

(Sgd.) Leonida T. Encarnacion

LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and farreaching powers to the conservator of a bank, it must be pointed out that such
powers must be related to the "(preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the restoration of) its viability."
Such powers, enormous and extensive as they are, cannot extend to the post-facto
repudiation of perfected transactions, otherwise they would infringe against the
non-impairment clause of the Constitution 44. If the legislature itself cannot revoke
an existing valid contract, how can it delegate such non-existent powers to the
conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke
contracts that are, under existing law, deemed to be defective i.e., void, voidable,
unenforceable or rescissible. Hence, the conservator merely takes the place of a
bank's board of directors. What the said board cannot do such as repudiating a
contract validly entered into under the doctrine of implied authority the
conservator cannot do either. Ineluctably, his power is not unilateral and he cannot
simply repudiate valid obligations of the Bank. His authority would be only to bring
court actions to assail such contracts as he has already done so in the instant
case. A contrary understanding of the law would simply not be permitted by the
Constitution. Neither by common sense. To rule otherwise would be to enable a
failing bank to become solvent, at the expense of third parties, by simply getting
the conservator to unilaterally revoke all previous dealings which had one way or
another or come to be considered unfavorable to the Bank, yielding nothing to
perfected contractual rights nor vested interests of the third parties who had dealt
with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court,
findings of fact by the Court of Appeals are not reviewable by the Supreme Court. In
Andres vs. Manufacturers Hanover & Trust Corporation, 45, we held:
. . . The rule regarding questions of fact being raised with this Court in a
petition for certiorari under Rule 45 of the Revised Rules of Court has been
stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA
138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a
petition for certiorari under Rule 45 of the Revised Rules of Court. "The
jurisdiction of the Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing and revising the errors of law imputed to it, its
findings of the fact being conclusive " [Chan vs. Court of Appeals, G.R. No. L27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This
Court has emphatically declared that "it is not the function of the Supreme
Court to analyze or weigh such evidence all over again, its jurisdiction being
limited to reviewing errors of law that might have been committed by the

lower court" (Tiongco v. De la Merced, G. R. No. L-24426, July 25, 1974, 58

SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121
SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-47531, February 20,
1984, 127 SCRA 596). "Barring, therefore, a showing that the findings
complained of are totally devoid of support in the record, or that they are so
glaringly erroneous as to constitute serious abuse of discretion, such findings
must stand, for this Court is not expected or required to examine or contrast
the oral and documentary evidence submitted by the parties" [Santa Ana, Jr.
vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp.
144-145.]
Likewise, in Bernardo vs. Court of Appeals

46

, we held:

The resolution of this petition invites us to closely scrutinize the facts of the
case, relating to the sufficiency of evidence and the credibility of witnesses
presented. This Court so held that it is not the function of the Supreme Court
to analyze or weigh such evidence all over again. The Supreme Court's
jurisdiction is limited to reviewing errors of law that may have been
committed by the lower court. The Supreme Court is not a trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock
Construction and Development Corp. 47:
The Court has consistently held that the factual findings of the trial court, as
well as the Court of Appeals, are final and conclusive and may not be
reviewed on appeal. Among the exceptional circumstances where a
reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or
impossible; when there is grave abuse of discretion in the appreciation of
facts; when the judgment is premised on a misapprehension of facts; when
the findings went beyond the issues of the case and the same are contrary to
the admissions of both appellant and appellee. After a careful study of the
case at bench, we find none of the above grounds present to justify the reevaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and
Insurance Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally applicable to
the present case:
We see no valid reason to discard the factual conclusions of the appellate
court, . . . (I)t is not the function of this Court to assess and evaluate all over
again the evidence, testimonial and documentary, adduced by the parties,
particularly where, such as here, the findings of both the trial court and the
appellate court on the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with
findings and conclusions which were not only contrary to the evidence on record but
have no bases at all," specifically the findings that (1) the "Bank's counter-offer

price of P5.5 million had been determined by the past due committee and approved
by conservator Romey, after Rivera presented the same for discussion" and (2) "the
meeting with Co was not to scale down the price and start negotiations anew, but a
meeting on the already determined price of P5.5 million" Hence, citing Philippine
National Bank vs. Court of Appeals 49, petitioners are asking us to review and
reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals

50

, thus:

There can be no other logical conclusion than that when, on September 1,

1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at
P5.5 Million for more than 101 hectares on lot basis, "such counter-offer price
had been determined by the Past Due Committee and approved by the
Conservator after Rivera had duly presented plaintiffs' offer for discussion by
the Committee . . . Tersely put, under the established fact, the price of P5.5
Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and
definitive price at which the bank was selling the property. (p. 11, CA
Decision)
xxx

xxx

xxx

. . . The argument deserves scant consideration. As pointed out by plaintiff,

during the meeting of September 28, 1987 between the plaintiffs, Rivera and
Luis Co, the senior vice-president of the bank, where the topic was the
possible lowering of the price, the bank official refused it and confirmed that
the P5.5 Million price had been passed upon by the Committee and could no
longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point,
characterizing it as "not credible" and "at best equivocal and considering the
gratuitous and self-serving character of these declarations, the bank's submissions
on this point do not inspire belief."
To become credible and unequivocal, petitioners should have presented then
Conservator Rodolfo Romey to testify on their behalf, as he would have been in the
best position to establish their thesis. Under the rules on evidence 51, such
suppression gives rise to the presumption that his testimony would have been
adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners'
evidence was deemed insufficient by both the trial court and the respondent Court,
and instead, it was respondent's submissions that were believed and became bases
of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of
fact by the lower courts are valid and correct. But the petitioners are now asking
this Court to disturb these findings to fit the conclusion they are espousing, This we
cannot do.

To be sure, there are settled exceptions where the Supreme Court may disregard
findings of fact by the Court of Appeals 52. We have studied both the records and the
CA Decision and we find no such exceptions in this case. On the contrary, the
findings of the said Court are supported by a preponderance of competent and
credible evidence. The inferences and conclusions are seasonably based on
evidence duly identified in the Decision. Indeed, the appellate court patiently
traversed and dissected the issues presented before it, lending credibility and
dependability to its findings. The best that can be said in favor of petitioners on this
point is that the factual findings of respondent Court did not correspond to
petitioners' claims, but were closer to the evidence as presented in the trial court by
private respondent. But this alone is no reason to reverse or ignore such factual
findings, particularly where, as in this case, the trial court and the appellate court
were in common agreement thereon. Indeed, conclusions of fact of a trial judge
as affirmed by the Court of Appeals are conclusive upon this Court, absent any
serious abuse or evident lack of basis or capriciousness of any kind, because the
trial court is in a better position to observe the demeanor of the witnesses and their
courtroom manner as well as to examine the real evidence presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping and the
raising of issues for the first time on appeal [viz., the extinguishment of the Bank's
offer of P5.5 million and the conservator's powers to repudiate contracts entered
into by the Bank's officers] which per se could justify the dismissal of the present
case. We did not limit ourselves thereto, but delved as well into the substantive
issues the perfection of the contract of sale and its enforceability, which required
the determination of questions of fact. While the Supreme Court is not a trier of
facts and as a rule we are not required to look into the factual bases of respondent
Court's decisions and resolutions, we did so just the same, if only to find out
whether there is reason to disturb any of its factual findings, for we are only too
aware of the depth, magnitude and vigor by which the parties through their
respective eloquent counsel, argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating
abnormally under a government-appointed conservator and "there is need to
rehabilitate the Bank in order to get it back on its feet . . . as many people depend
on (it) for investments, deposits and well as employment. As of June 1987, the
Bank's overdraft with the Central Bank had already reached P1.023 billion . . . and
there were (other) offers to buy the subject properties for a substantial amount of
money." 53
While we do not deny our sympathy for this distressed bank, at the same time, the
Court cannot emotionally close its eyes to overriding considerations of substantive
and procedural law, like respect for perfected contracts, non-impairment of
obligations and sanctions against forum-shopping, which must be upheld under the
rule of law and blind justice.
This Court cannot just gloss over private respondent's submission that, while the
subject properties may currently command a much higher price, it is equally true
that at the time of the transaction in 1987, the price agreed upon of P5.5 million

was reasonable, considering that the Bank acquired these properties at a

foreclosure sale for no more than P3.5 million 54. That the Bank procrastinated and
refused to honor its commitment to sell cannot now be used by it to promote its
own advantage, to enable it to escape its binding obligation and to reap the benefits
of the increase in land values. To rule in favor of the Bank simply because the
property in question has algebraically accelerated in price during the long period of
litigation is to reward lawlessness and delays in the fulfillment of binding contracts.
Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution,
the Court hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover,
petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that
a repetition of the same or similar acts will be dealt with more severely. Costs
against petitioners.
SO ORDERED.

G.R. No. 92871 August 2, 1991

MARIA P. VDA. DE JOMOC, ET AL., petitioners,
vs.
THE COURT OF APPEALS, REGIONAL TRIAL COURT OF MISAMIS ORIENTAL,
10th Judicial Region, Br. 25, respondents.
G.R. No. 92860 August 2, 1991
SPOUSES LIM LEONG KANG & LIM PUE KING, petitioners,
vs.
MAURA SO & HON. COURT OF APPEALS (Eleventh Division), respondents.
GUTIERREZ, JR., J.:
The main issue raised in these consolidated petitions is whether or not private
respondent Maura So abandoned or backed out from the agreement for the
purchase of a lot belonging to the heirs of Pantaleon Jomoc, so that the subsequent
sale to petitioner spouses Lim is null and void.
The subject lot in Cagayan de Oro City forms part of the estate of the late Pantaleon
Jomoc. Because it was fictitiously sold and transferred to third persons, petitioner
Maria P. Vda. Jomoc, as administratrix of the estate and in behalf of all the heirs,
filed suit to recover the property before the trial court of Misamis Oriental in Civil
Case No. 4750. Mariano So, the last of the transferees and the husband of Maria So,

intervened. The case was decided in favor of Jomoc and was accordingly appealed
by Mariano So and one Gaw Sur Cheng to the Court of Appeals. In February 1979,
pending the appeal, Jomoc executed a Deed of Extrajudicial Settlement and Sale of
Land (Exhibit "A") with private respondent for P300,000.00. The document was not
yet signed by all the parties nor notarized but in the meantime, Maura So had made
partial payments amounting to P49,000.00.
In 1983, Mariano So, the appellant in the recovery proceeding, agreed to settle the
case by executing a Deed of Reconveyance of the land in favor of the heirs of
Pantaleon Jomoc. The reconveyance was in compliance with the decision in the
recovery case and resulted in the dismissal of his appeal. On February 28, 1983, the
heirs of Jomoc executed another extra-judicial settlement with absolute sale in favor
of intervenors Lim Leong Kang and Lim Pue filing. Later, Maura So demanded from
the Jomoc family the execution of a final deed of conveyance. They ignored the
demand.
Thus, private respondent Maria So sued petitioners-heirs for specific performance to
compel them to execute and deliver the proper registrable deed of sale over the lot.
The case was docketed as Civil Case No. 8983. So then filed a notice of lis pendens
with the Register of Deeds on February 28, 1983. It was on the same date, February
28, 1983, allegedly upon the Jomocs' belief that Maura So had backed out from the
transaction that the Jomocs executed the other extrajudicial settlement with sale of
registered land in favor of the spouses Lim for a consideration of P200,000.00 part
of which amount was allegedly intended to be returned to Maura So as
reimbursement. The spouses Lim, however, registered their settlement and sale
only on April 27, 1983.
The Jomocs as defendants, and the spouses Lim as intervenors alleged that
complainant Maura so backed out as evidenced by an oral testimony that she did so
in a conference with the Jomocs' lawyers where she expressed frustration in evicting
squatters who demanded large sums as a condition for vacating. They alleged the
lack of signatures of four of the heirs of Jomoc and Maura So herself as well as the
lack of notarization.
The lower court, finding that there was no sufficient evidence to show complainantrespondents' withdrawal from the sale, concluded that: (1) the case is one of double
sale; (2) the spouses-intervenors are registrants in bad faith who registered their
questioned deed of sale long after the notice of lis pendens of Civil Case No. 8983
was recorded.
On appeal, the trial court decision was affirmed except for the award of moral and
exemplary damages and attorney's fees and expenses for litigation. Hence, these
petitions.
The petitioners' allegation that the contract of sale by Maria P. Jomoc with private
respondent is unenforceable under the Statute of Frauds, is without merit. The

petitioners-heirs, in their brief before the appellate court, admitted that the
extrajudicial settlement with sale in favor of Maura So is valid and enforceable
under the Statute of Frauds.
Of importance to the Court is the fact that the petitioners do not deny the existence
of Exhibit "A"; including its terms and contents, notwithstanding the incompleteness
in form. The meeting of the minds and the delivery of sums as partial payment is
clear and this is admitted by both parties to the agreement. Hence, there was
already a valid and existing contract, not merely perfected as the trial court saw it,
but partly executed. It is of no moment whether or not it is enforceable under the
Statute of Frauds, which rule we do not find to be applicable because of partial
payment of the vendee's obligation and its acceptance by the vendors-heirs. The
contract of sale of real property even if not complete in form, so long as the
essential requisites of consent of the contracting parties, object, and cause of the
obligation concur and they were clearly established to be present, is valid and
effective as between the parties. Under Article 1357 of the Civil Code, its
enforceability is recognized as each contracting party is granted the right to compel
the other to execute the proper public instrument so that the valid contract of sale
of registered land can be duly registered and can bind third persons. The
complainant respondent correctly exercised such right simultaneously with a prayer
for the enforcement of the contract in one complaint.
The Court finds no cogent reason to reverse the factual finding of the Regional Trial
Court and the Court of Appeals that private respondent did not subsequently
abandon her intention of purchasing the subject lot.
The facts reveal an agreement between the contracting parties to Exhibit "A" to the
effect that "the consideration of P300,000.00 or whatever balance remains after
deducting the advanced payments thereon, shall be paid upon the termination of
(Mariano So's) appeal in the case involving the property in question." (G.R. No.
92871, Rollo, p. 123). The finding is supported by substantial evidence. As reasoned
by both courts, even if the sums paid by Maura So were allegedly intended to
expedite the dismissal of the appeal of Mariano So, such payment only indicates
interest in acquiring the subject lot. In addition, the claim by the defendantspetitioners that the payments were for the gathering of the several heirs from far
places to sign Exhibit "A" confirms respondent Maura So's continuing interest. The
terms of Exhibit "A" and the actual intention of the parties are clear and no reform
requiring parole evidence is being sought to elucidate the intention further. The oral
evidence offered by defendants-petitioners to show a subsequent refusal to proceed
with the sale cannot be considered to reverse the express intention in the contract.
Moreover, the two courts below had definite findings on this factual issue and we
see no reason to reject and reverse their conclusion.
The petitioners contend that the trial court and the appellate court erred in
declaring as void the subsequent deed of extra-judicial settlement with spouses Lim
since specific performance and not annulment of contract due to existence of

double sale, was the thrust of the complaint. This argument is untenable. The issue
of double sale had to be resolved to determine whether or not complainant Maura
So was entitled to the reliefs prayed for There was no hard evidence to show that
the vinculum or contractual relation between petitioners-heirs and Maura So had
been cut-off. Yet, petitioners-heirs sold the same lot to spouses Lim. The case
therefore requires us to discern who has the better right to the property.
Article 1544 of the Civil Code provides:
xxx xxx xxx
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
xxx xxx xxx
In view of this provision, the two courts below correctly ruled that the spouses Lim
do not have a better right. They purchased the land with full knowledge of a
previous sale to private respondent and without requiring from the vendors-heirs
any proof' of the prior vendee's revocation of her purchase. They should have
exercised extra caution in their purchase especially if at the time of the sale, the
land was still covered by TCT No. 19648 bearing the name of Mariano So and was
not yet registered in the name of petitioners- heirs of Pantaleon Jomoc (Original
Records, p. 80), although it had been reconveyed to said heirs. Not having done
this, petitioners spouses Lim cannot be said to be buyers in good faith. When they
registered the sale on April 27, 1983 after having been charged with notice of lis
pendens annotated as early as February 28, 1983 (the same date of their purchase),
they did so in bad faith or on the belief that a registration may improve their
position being subsequent buyers of the same lot. Under Article 1544, mere
registration is not enough to acquire new title. Good faith must concur. ( Bergado v.
Court of Appeals, 173 SCRA 497 [1989]; Concepcion V. Court of Appeals, G.R. No.
83208, February 6,1991)
Considering the failure of the petitioners to show that the findings of the two courts
below are not supported by substantial trial evidence or that their conclusions are
contrary to law and jurisprudence, we find no reversible error in the questioned
decision.
WHEREFORE, the petitions are hereby DISMISSED for lack of merit. The decision of
the Court of Appeals dated September 13, 1989 and its resolution dated April 2,
1990 are AFFIRMED.
SO ORDERED.

G.R. No. L-10265

March 3, 1916

EUTIQUIANO CUYUGAN, plaintiff-appellant,

vs.
ISIDORO SANTOS, defendant-appellee.
CARSON, J.:
The complaint in this case alleges that the plaintiff is the sole heir of his mother,
Guillerma Cuyugan y Candia, deceased; that in the year 1895 she borrowed the
sum of P3,500 from the defendant and executed, at the same time, the document,
Exhibit C, attached to the complaint, which purports on its face to be a deed of sale
of the land described therein, with a reservation in favor of the vendor of the right
to repurchase for the sum of P3,500; that although the instrument purports on its
face to be a deed of sale, it was intended by the parties merely to evidence the loan
of the nominal purchase price and to serve as a security for the repayment of the
amount of the loan; that under the terms of the instrument plaintiff's mother was
left in possession of the land as a nominal tenant of the defendant at an annual
rental of P420, an amount equal to the agreed upon annual interest on the loan at
the rate of 12 per cent per annum; that in the year 1897 the borrower paid P1,000
on the loan, whereupon the nominal rent on the land was reduced from P420 to
P300 per annum, that being the amount of the interest on the unpaid balance of the
loan at the rate of 12 per cent per annum; that plaintiff and his mother continued in
the peaceable possession of the land until the defendant, in the year prior to the
institution of this action, served notice on the plaintiff that an annual payment of
P420 would be required of him thereafter, that is to say, the original amount of the
annual payments as agreed upon prior to the payment of P1,000 on the debt in the
year 1897; that upon plaintiff's refusal to meet this demand, defendant set up a
claim of ownership in himself and threatened to eject the plaintiff from the land;
that thereupon plaintiff offered to pay, and still stands ready to pay the balance due
on the original indebtedness and the unpaid interest thereon for one year, but that
defendant declined and continues to decline to accept the amount tendered and to
cancel the formal deed of sale to the land.
The prayer of the complaint is that the defendant be required to accept the amount
thus tendered, and to cancel the formal deed of conveyance.
A demurrer to the complaint was sustained by the court below on the ground that it
does not set forth facts constituting a cause of action it appearing on the face of
the deed of conveyance attached to the complaint that it was a deed of sale of land

with a reserved right in the vendor to repurchase; and the allegations of the
complaint disclosing that the deed of conveyance was executed by plaintiff's
mother, that the stipulated price of repurchase has not been paid in full, and that
the time allowed in the deed for repurchase has long since expired.
This is an appeal from the order sustaining the demurrer and dismissing the
complaint.
We are of opinion that the demurrer should have been overruled on two separate
and distinct grounds, either one of which is sufficient to sustain the ruling.
1. Since the demurrer to the complaint admits all the material facts well pleaded
therein, it follows that, for the purposes of the demurrer, the defendant admits that
the true nature and intent of the transaction mentioned in the complaint was a
mere loan of money secured by a formal conveyance of the land of the vendor; that
the written instrument, purporting to be a deed of sale of the land, with a right of
repurchase reserved by the vendor, did not set forth the real nature of the
agreement between the parties thereto; and that the true intention and
understanding of the parties at the time when the deed was executed and delivered
was that it should be held by the defendant, not as a deed of sale of the land, but
rather as an instrument in the nature of a mortgage, evidencing a loan secured by
the lands of the borrower. The demurrer further admits that the borrower's
successor in interest had tendered the full amount of the indebtedness together
with the interest due and payable thereon at the time of the tender, and that he
stands ready at any time to pay the full amount due on the loan with interest, upon
the cancellation by the defendant of the formal deed of conveyance of the land.
But proof of these facts would clearly entitle the plaintiff to the relief prayed for. The
demurrer should therefore have been overruled and the plaintiff should have been
given an opportunity to submit his evidence in support of the allegation of his
complaint.
It is contended, however, that even if all these allegations in the complaint were
true in fact, nevertheless, the demurrer should be sustained, because, as it is said,
these allegations of fact can not be sustained at the trial by the introduction of
competent testimony, since the court will be compelled to exclude any evidence
offered by the plaintiff which would tend to alter, vary, or defeat the terms of the
written deed of conveyance which is attached to the complaint as an exhibit, and
the execution of which the plaintiff's mother is expressly alleged and admitted in
the complaint.
In support of this contention we are cited to various decisions of this court wherein
we have held that the intent of the parties executing instruments purporting to
evidence sales of lands with the right of repurchase reserved to the vendors was
sufficiently and satisfactorily disclosed by the terms of the instruments themselves;
and that the intent of the parties as disclosed by the terms of these instruments

should be given full force and effect in accordance therewith, despite the
contentions of the vendors that the original transactions between the parties were
had in contemplation of, and to give effect to contracts or agreements for the loan
of money, the repayment of which was to be secured by the lands of the borrower.
It is true that in a number of cases submitted to this court in which such a
contention has been advanced, and in which the language of the instrument
evidencing the transaction under investigation clearly and without ambiguity set
forth a contract of sale with a reserved right to repurchase, we have uniformly
declined to maintain such contentions, and have enforced the contract in accord
with the terms of the instrument by which it was evidence. But it does not
necessarily follow that such a contention can never be successfully asserted and
maintained in the courts in this jurisdiction.
An examination of these cases will disclose that the true ground upon which they
are based was the lack of evidence sufficiently clear, satisfactory and convincing to
sustain a holding that the true nature of the transaction between the parties was
any other than that set forth in written instruments executed by them and
purporting to evidence sales of land with a right of repurchase reserved to the
vendors. And the fact that, in the cases relied upon, the court examined and
weighed the evidence before rejecting it as insufficient affords reasonable ground
for an inference that had the court been of the opinion that the parol evidence
submitted in any of these cases was clear, satisfactory and convincing, it might, and
doubtless would have arrived at a different conclusion.
But however this may be, and without entering upon an extend review of the
reported opinions of this court to ascertain whether language has been used in any
of them which might be construed as an intimation by this court of its views on the
question now under consideration, we are of the opinion that the issues raised on
this appeal are such as to impose on us the duty of reexamining the whole question
as to the power of the courts in this jurisdiction to admit extraneous parol evidence
in support of allegations that an instrument in writing, purporting on its face to
transfer the absolute title to property, or to transfer the title with a mere right of
repurchase under specified conditions reserved to the vendor, was in truth and in
fact given merely as a security; and upon proof of the truth of such allegations to
enforce such an agreement or understanding in accord with the true intend of the
parties at the time when it was executed. The question having been brought here
on an appeal from a ruling on a demurrer, the issue of law is squarely presented,
without being obscured or befogged by the intervention of any doubtful question of
fact, or of the relevancy, materiality, competence or probative value of specific
questions and answers in a particular case.
We are of opinion, and so hold, that on both principle and authority, this question
must be answered in the affirmative.

The Supreme Court of Porto Rico in the case of Monagas vs. Albertucci (17 Porto
Rico, 684, cited and in effect affirmed as to this ruling by the Supreme Court of the
United States, 235 U. S., 81) observed in the course of a discussion of a similar
question that "The American doctrine on this subject does not differ materially
from the principles set forth in our Civil Code," a code which is substantially
identical with the Civil Code of the Philippines in all its provisions with relation to the
question under consideration; and we are satisfied on a full review of the whole
question that, under our Codes, both substantive and adjective, the doctrine which
must be applied in this jurisdiction "does not differ materially" from the equitable
doctrine frequently announced and applied by the Supreme Court of the United
States in the numerous cases in which similar questions have come to it from the
various states and territories within its jurisdiction.
We shall consider first, whether the provisions of the new Code of Civil Procedure
should be so construed as to deny the right to the borrower in such cases, to
introduce extraneous and parol evidence to support his allegations as to the
existence of a parol agreement, whereby the lender obligated himself to hold the
title to the lands merely as security for the repayment of the debt; and further
whether there is anything in that Code which would deny the right of the borrower
in such cases, upon proof of such allegations, to enforce the agreement in
accordance with its terms. The authors of the new Code of Civil Procedure (Act No.
190 of the Civil Commission) were American lawyers, and the avowed purpose and
object of its enactment was to introduce in these Islands a system of procedure of
civil cases modelled upon precedents in general use in the United States. Most of its
provisions are borrowed directly from the statute books of one or other of the States
of the Union, and many of its more important provisions have been construed and
applied by both state and federal courts of last resort. We have, therefore, in the
Supreme Court Reports of the various States from which these provisions were
borrowed, numerous precedents of strong and persuasive, if not conclusive
authority; and, except in so far as they are affected by the substantive law in force
in this jurisdiction or necessarily modified by local conditions, we have always felt
ourselves bound by the rulings of the Supreme Court of the United States in
construing and applying statutory enactments modelled upon or borrowed from
English or American originals.
The various provisions of the new Code of Civil Procedure which have any bearing
on the question now under consideration, or statutory provisions of like tenor and
effect, have been construed and applied by all or nearly all the courts of last resorts
in England and the United States; and while these courts are not wholly in accord as
to the reasoning upon which their conclusions are based, it may safely be asserted
that with substantial, if not absolute unanimity, they have arrived a substantially
similar results.
But we shall not shop at this time to review all the questions which have been
raised in connection with the subject now under consideration. It will be sufficient
for our purposes to examine the obligations which have been advanced against the

admission of parol evidence to sustain allegations similar in effect to those set forth
in the case at bar, based either on the ground that such evidence should be
excluded under the "Statute of Frauds," the alleged agreement not having been
reduced to writing, or on the ground that its admission would violate the rule that
parol evidence will not be admitted to vary or contradict the terms of a written
instrument.
For this purpose we can do no better than to insert here a few citations from the
books, which set forth quite fully the doctrine in this regard that has been
announced by the great weight of authority, and which in our opinion should prevail
in this jurisdiction in applying and construing the pertinent provisions of the new
Code of Civil Procedure. But, before doing so, it may be well to indicate that we do
not adopt every proposition advanced in these somewhat extended citations from
text-book and judicial authority, and that, at this time, we make the doctrine our
own only to the extent of declaring that the provisions of the new Code of Civil
Procedure do not have the effect of excluding parol evidence in support of
allegations such as those set forth in the complaint in the case at bar, or of denying
the right of the borrower in cases of this kind to enforce the alleged agreement in
accordance with its terms. Supported by numerous citations the doctrine summarily
stated in 27 Cyclopedia, page 1023, is as follows:
Effect of statute of frauds. The statute of frauds does not stand in the way
of treating an absolute deed as a mortgage, when such was the intention of
the parties, although the agreement for redemption or defeasance rests
wholly in parol, or is proved by parol evidence. The courts will not permit the
statute to be used as a shield for fraud, or as a means for perpetrating fraud.
Rule prohibiting contradiction of written documents. The admission of parol
testimony to prove that a deed absolute in form was in fact given and
accepted as a mortgage does not violate the rule against the admission of
oral evidence to vary or contradict the terms of a written instrument.
In the case of Russell vs. Southard (53 U. S., 139, 147), the Supreme Court of the
United States dealt with these objections in part as follows:
The first question is, whether this transaction was a mortgage, or a sale.
It is insisted, on behalf of the defendants, that this question is to be
determined by inspection of the written papers alone, oral evidence not being
admissible to contradict, vary, or add to, their contents. But we have no
doubt extraneous evidence is admissible to inform the court of every material
fact known to the parties when the deed and memorandum were executed.
This is clear, both upon principle and authority. To insist on what was really a
mortgage, as a sale, is in equity a fraud, which cannot be successfully
practiced, under the shelter of any written papers, however precise and
complete they may appear to be. In Conway vs. Alexander (7 Cranch, 238),

Ch. J. Marshall says: `Having made these observations on the deed itself, the
court will proceed to examine those extrinsic circumstances, which are to
determine whether it was a sale or a mortgage;' and in Morris vs. Nixon (1
How., 126), it is stated; 'The charge against Nixon is, substantially, a
fraudulent attempt to convert that into an absolute sale, which was originally
meant to be a security for a loan. It is in this view of the case that the
evidence is admitted to ascertain the truth of the transaction, though the
deed be absolute on its face.'
These views are supported by many authorities. (Maxwell vs. Montacute, Pr.
in Ch., 526; Dixon vs. Parker, 2 Ves., Sen., 225; Prince vs. Bearden, 1 A. K.
Marsh. [Ky.], 170; Oldham vs. Halley, 2 J. J. March. [Ky.], 114; Whittick vs.
Kane, 1 Paige [N. Y.], 202; Taylor vs. Luther, 2 Sumn, 232; Flagg vs. Mann, Id.,
538; Overton vs. Bigelow, 3 Yerg. [Tenn.] 513; Brainerd vs. Brainerd, 15
Conn., 575; Wright vs. Bates, 13 Vt., 341; McIntyre vs. Humphries, 1 Hoffm.
[N. Y.] Ch., 331; 4 Kent, 143, note A., and 2 Green. Cruise, 86, n.)
It is suggested that a different rule is held by the highest court of equity in
Kentucky. If it were, with great respect for that learned court, this court would
not feel bound thereby. This being a suit in equity, and oral evidence being
admitted, or rejected, not by the mere force of any state statute, but upon
the principles of general equity jurisprudence, this court must be governed by
its own views of those principles. (Robinson vs. Campbell, 3 Wheat., 212;
United States vs. Howland, 4 Id., 108; Boyle vs. Zacharie et al., 6 Pet., 658;
Swift vs. Tyson, 16 Id., 1; Foxcroft vs. Mallett, 4 How., 379.) But we do not
perceive that the rule held in Kentucky differs from that above laid down. The
rule, as stated in Thomas vs. McCormack (9 Dana [Ky.], 109), is that oral
evidence is not admissible in opposition to the legal import of the deed, and
the positive denial in the answer, unless a foundation for such evidence had
been first laid by an allegation, and some proof of fraud or mistake in the
execution of the conveyance, or some vice in the consideration.
But the inquiry still remains, what amounts to an allegation of fraud, or of
some vice in the consideration and it is the doctrine of this court, that
when it is alleged and proved that a loan on security was really intended, and
the defendant sets up the loan as a payment of purchase money, and the
conveyance as a sale, both fraud and a vice in the consideration are
sufficiently averred and proved to require a court of equity to hold the
transaction to be a mortgage; and we know of no court which has stated this
doctrine with more distinctness, than the Court of Appeals of the State of
Kentucky. In Edrington vs. Harper (3 J. J. Marsh. [Ky.], 355), that court
declared: `The fact that the real transaction between the parties was a
borrowing and lending, will, whenever, or however it may appear, show that a
deed absolute on its face was intended as a security for money; and
whenever it can be ascertained to be a security for money, it is only a
mortgage, however artfully it may be disguised.'

xxx

xxx

xxx

In respect to the written memorandum, it was clearly intended to manifest a

conditional sale. Very uncommon pains are taken to do this. Indeed, so much
anxiety is manifested on this point, as to make it apparent that the draftsman
considered he had a somewhat difficult task to perform. But it is not to be
forgotten, that the same language which truly describes a real sale, may also
be employed to cut off the right of redemption, in case of a loan on security;
that it is the duty of the court to watch vigilantly these exercises of skill, lest
they should be effectual to accomplish what equity forbids; and that, in
doubtful cases, the court leans to the conclusion that the reality was a
mortgage, and not a sale. (Conway vs. Alexander, 7 Cranch, 218; Flagg vs.
Mann, 2 Sumn., 533; Secrest vs. Turner, 2 J. J. March. [Ky.], 471; Edrington vs.
Harper, 3 Id., 354; Crane vs. Bonnell, 1 Green [N. J.] Ch., 264; Robertson vs.
Campbell, 2 Call. [Va.], 421; Poindexter vs. McCannon, 1 Dev. [N. C.] Eq.,
373.)
It is true Russell must have given his assent to this form of the memorandum;
but the distress for money under which he then was, places him in the same
condition as other borrowers, in numerous cases reported in the books, who
have submitted to the dictation of the lender under the pressure of their
wants; and a court of equity does not consider a consent, thus obtained, to
be sufficient to fix the rights of the parties. `Necessitous men,' says the Lord
Chancellor, in Vernon vs. Bethell (2 Eden, 113), `are not, truly speaking, free
men; but, to answer a present emergency, will submit to any terms that the
crafty may impose upon them.'
The memorandum does not contain any promise by Russell to repay the
money, and no personal security was taken; but it is settled that this
circumstance does not make the conveyance less effectual as a mortgage.
(Floyer vs. Lavington, 1 P. Wms., 268; Lawly vs. Hooper, 3 Atk., 278; Scott vs.
Fields, 7 Watts. [Pa.], 360; Flagg vs. Mann, 2 Sumn., 533; Ancaster vs. Mayer,
1 Bro. C. C., 464.) And consequently it is not only entirely consistent with the
conclusion that a mortgage was intended, but in a case where it was the
design of one of the parties to clothe the transaction with the forms of a sale,
in order to cut off the right of redemption, it is not to be expected that the
party would, by taking personal security, effectually defeat his own attempt
to avoid the appearance of a loan.
Citing and relying upon this case Mr. Justice Field speaking for the Supreme Court of
the United States (Brick vs. Brick, 98 U. S., 514) announced the doctrine with
relation to transactions in personal property, which is summarized as follows in the
head notes:
Parol evidence is admissible in equity to show that a certificate of stock
issued to a party as owner was delivered to him as security for a loan of

money. A court of equity will look beyond the terms of an instrument to the
real transaction, and when that is shown to be one of security and not of sale,
it will give effect to the actual contract of the parties.
The rule which excludes such evidence to contradict or vary a written
instrument does not forbid an inquiry into the object of the parties in
execution and receiving it.
In the case of Monagas vs. Albertucci (235 U. S., 81, 83) the Supreme Court of the
United States inserts the following excerpt from the opinion of the Supreme Court of
Porto Rico (17 Porto Rico, 684, 686):
The whole case really turns on the question of whether the written instrument
in controversy was a mortgage or a conditional sale. If it is the latter, it must
be complied with according to its terms; if the former, the plaintiff must be
allowed to repay the money received and take a reconveyance of the land.
The real intention of the parties at the time the written instrument was made
must govern in the interpretation given to it by the courts. This must be
ascertained from the circumstances surrounding the transaction and from the
language of the document itself. The correct test, where it can be applied, is
the continued existence of a debt or liability between the parties. If such
exists, the conveyance may be held to be merely a security for the debt or an
indemnity against the liability. On the contrary, if no debt or liability is found
to exist, then the transaction is not a mortgage, but merely a sale with a
contract of repurchase within a fixed time. While every case depends on its
own special facts, certain circumstances are considered as important, and the
courts regard them as throwing much light upon the real intent of the parties
and upon the nature of such transactions: such are the existence of a
collateral agreement made by the grantor for the payment of money to the
grantee, his liability to pay interest, inadequacy of price paid for the
conveyance, the grantor still remaining in possession of the land conveyed,
and any negotiation or application for a loan made preceding or during the
transaction resulting in the conveyance. The American doctrine on this
subject does not differ materially from the principles set forth in our Civil
Code.
We insert here an extract of some length from the discussion of the subject
(supported by numerous citations of authority) found in Jones' Commentaries on
Evidence, (1913) volume 3, paragraphs 446, 447:
446. To show that instruments apparently absolute are only securities. It
has long been the settled rule that in courts exercising equitable jurisdiction it
is admissible to prove by parol that instruments in writing apparently
transferring the absolute title are in fact only given as security. The doctrine
is thus stated by Mr. Field: `It is an established doctrine that a court of equity
will treat a deed, absolute in form, as a mortgage, when it is executed as

security for loan of money. That court looks beyond the terms of the
instrument to the real transaction; and when that is shown to be one of
security and not of sale, it will give effect to the actual contract of the parties.
As the equity, upon which the court acts in such cases, arises from the real
character of the transaction, any evidence, written or oral, tending to show
this is admissible. The rule which excludes parol testimony to contradict or
vary a written instrument has reference to the language used by the parties.
That cannot be qualified or varied from its natural import, but must speak for
itself. The rule does not forbid an inquiry into the object of the parties in
executing and receiving the instrument.' Although in some of the earlier
cases this evidence was received only on the grounds of fraud or mistake, yet
in later cases it was deemed sufficient evidence of fraud for the grantee to
treat the conveyance as absolute, when in fact it was not, and the tendency
of the modern decisions is that such evidence may be received to show the
real nature and object of the transaction, although no fraud or mistake of any
kind is alleged or proved. It is held that "the agreement for the defeasance,
whether written or unwritten, is no more than one of the conditions upon
which the deed was given, and therefore constitutes a part of the
consideration for the conveyance . . . . Where the deed does not contain the
defeasance, the presumption arises that the conveyance is absolute, and, in
making proof that a defeasance was intended by the parties, and was in fact
a part of the consideration upon which the conveyance was made, this
presumption must be removed by testimony before the debtor can use the
evidence showing his right to defeat the absolute character of the
conveyance . . . . It comes finally to a question of what was the understanding
and the intention of the parties at the time the instrument was made; and
this, like any other fact, depends for its support upon what was said and done
by the parties at the time, together with all the other circumstances bearing
upon the question.'
447. Same Real intention of the parties to be ascertained. In applying
the exception under discussion, the extrinsic evidence will not be received
because of any particular form of language which the parties may have
adopted. As we have shown in the preceding section, the intention of the
parties must govern; and it matters not what peculiar form the transaction
may have taken. The inquiry always is, Was a security for the loan of money
or other property intended? But where the deed and accompanying papers
on their face constitute a mortgage, parol evidence is not competent to show
the contrary. In solving the question upon the facts, a few things are
absolutely necessary to be found to exist before the deed can be construed a
mortgage. A debt owing to the mortgagee, or a liability incurred for the
grantor, either preexisting or created at the time the deed is made, is
essential to give the deed the character of a mortgage. The relation of debtor
and creditor must appear. The existence of the debt is one of the tests. The
amount of the debt, as well as its continuance, should also be made to
appear where a foreclosure is asked in the same suit wherein it is sought to
establish the character of the instrument. It is also of importance to know

precisely when the character claimed for the instrument was fixed. In
construing the deed to be a mortgage, its character as such must have
existed from its very inception, created at the time the conveyance was
made. The character of the transaction is precisely what the intention of the
parties at the time made it. It will therefore be discovered that the testimony
of those who were present at the time the instrument was made, and
especially of those who participated in the transaction, becomes most
important. In arriving at the real intent of the parties, their statements and
acts at the time of the transaction, the inadequacy of the consideration
named in the deed, the prior existence of a debt, and the recognition of its
continuance, as by the payment of interest or other acts, are all facts to be
considered, and are relevant to the issue. But although parol evidence is
received in such cases to show the real nature of the transaction, the
presumption is that the instrument is what it purports to be; and before a
deed absolute in form can be shown to be a mortgage, the proof should be
clear and convincing. The burden rests upon the moving party of overcoming
the strong presumption arising from the terms of a written instrument. If the
proofs are doubtful and unsatisfactory, if there is a failure to overcome this
presumption by testimony entirely plain and convincing beyond reasonable
controversy, the writing will be held to express correctly the intention of the
parties. A judgment of the court, a deliberate deed or writing, are of too much
solemnity to be brushed away by loose and inconclusive evidence. Proof
tending to show that no transfer of title was contemplated does not fall within
the condemnation of the rule prohibiting oral evidence to vary the terms of a
written instrument. As the rule has often been stated, `to convert a deed
absolute into a mortgage, the evidence should be so clear as to leave no
substantial doubt that the real intention of the parties was to execute a
mortgage.'"
Having disposed of the contention that the provisions of the new Code of Civil
Procedure, enacted under American sovereignty, forbid the introduction of parol
evidence to establish the true nature of transactions such as that under
consideration in the case at bar, we come now to consider whether there is
anything in the Spanish Codes which denies the power of the courts to enforce the
equitable doctrine announced by the Supreme Court of the United States with
reference to agreements and understandings of this nature.
But first, it may be well at this time to emphasize the fact that the courts of these
Islands are not organized with reference to the old English and American
classification into courts of law and equity; and that our Codes recognize no
distinction between actions at law and suits in equity, as these terms are
understood in English and American jurisdictions, wherein a distinction is made
between law and equity in the enforcement of private rights and the redress of
private wrongs.

Deeply embedded among the fundamental principles on which the authors of the
Civil Code of Spain erected that monument to their genuis as codifiers, is the broad
equitable rule that "No man may wrongfully (tortiously) enrich himself at the
expense of (to the injury of) another." ("E aun dixeron, que ninguno non deue
enriqueszer tortizeramente con dao de otro"). (Regla 17, Title 34, Setena Partida,
sentencias Tribunal de Espaa, May 1, 1875; December 16, 1880; May 24, 1882,
April 24, 1896.)
As deeply embedded at the very foundation of all the provisions of the Spanish
Code touching the nature and effect of all contractual obligations is the maxim that
the will of the contracting parties is the law of their contract a maxim which is
amplified in the elementary propositions that "contracts are perfected by mere
consent" (article 1258); that "the contracting parties may make any agreement and
establish any clauses and conditions which they may deem advisable, provided they
are not in contravention of law, morals, or public order" (article 1255); that "the
validity and fulfillment of contracts cannot be left to the will of one of the
contracting parties" (article 1256); and that "contracts shall be binding, whatever be
the form in which they may have been executed, provided the essential conditions
required for their validity exist" (article 1278).
In the light of these elementary and basic principles of the Code there can be no
question, in the absence of express statutory prohibition, as to the validity of an
agreement or understanding whereby the lender of money, who as security for the
repayment of the loan has taken a deed to land, absolute on its face or in the form
of a deed reserving a mere right of repurchase to the vendor, obligates himself to
hold such deed, not as evidence of a contract of sale but by way of security for the
repayment of the debt; and that unless the rights of innocent third persons have
intervened the lender of the money may be compelled to comply specifically with
the terms of such an agreement, whether it be oral or written; and further, that he
will not be permitted, in violation of its terms, to set up title in himself or to assert a
claim or absolute ownership.
If the parties actually enter into such an agreement, the lender of the money is
legally and morally bound to fulfill it. Of course such an oral contract does not give
the borrower a real right in the lands unless it is executed in compliance with the
formalities prescribed by law. If entered into orally, it creates a mere personal
obligation which in no wise effects the lands, and if the lender conveys the lands to
innocent third persons, the borrower must content himself with a mere right of
action for damages against the lender, for failure to comply with his agreement. But
so long as the land remains in the hands of the lender, the borrower may demand
the fulfillment of the agreement, and a mere lack of any of the formalities
prescribed under the Spanish Code for the execution of contracts affecting real
estate will not defeat his right to have the contract fulfilled, as the lender may be
compelled in appropriate proceedings to execute the contract with the necessary
prescribed formalities.

We have frequently held that under the Spanish Codes an oral contract affecting
lands, even an oral contract for the sale of lands, was valid and enforceable,
provided none of the essential requisites of all valid contracts is lacking, that is to
say, (1) consent, (2) definite object, and (3) causa or consideration. The lack of the
formal requisites prescribed by the Code in order that such contracts may become
effective to bind or convey the property, such as their execution in public
instruments and the like, does not invalidate them as personal obligations, as
"either party may compel the other to comply with such formalities" from the
moment the valid personal obligation has been entered into. (Article 1279 of the
Civil Code.)
In like manner an agreement such as we have just described, entered into by a
lender of money, who has taken lands and security for its repayment, is a valid
contract, and we know of no provision in the Codes which denies the right of the
borrower to demand its fulfillment. On the contrary, provided the rights of innocent
purchasers for valuable consideration have not intervened, and provided of course
that the borrower can establish satisfactorily the fact that such a contract was
actually entered into, the principle that no man may wrongfully enrich himself at the
expense of another imposes an imperative obligation on the lender to carry out his
contract, and secures the right to the borrower to have it enforced by the courts.
And on the other hand, the same principle secures to the lender the right to enforce
the contract upon the failure of the borrower to comply with its terms, that is to say,
to have the lands held as security sold and the proceeds applied to the payment of
the debt.
But this conclusion is in substance and in effect identical with that arrived at by the
courts in England and the United States, when they declare that the transaction in
such cases will be treated as in the nature of an equitable mortgage and enforced
as such. That is merely to say that the parties will be compelled to comply with the
terms of the agreement that the lands should be held as security for the debt,
provided of course the agreement can be established by competent evidence and
the rights of innocent third parties have not intervened.
Under neither system will the contract be given the effect of a duly recorded or a
valid mortgage, so as to bind the lands in the hands of innocent third persons; but
the result under both systems is substantially identical in that as long as the
property remains in the hands of the lender he cannot deny the right of the
borrower to recover the lands by the payment of the debt, nor can he set up a claim
of absolute ownership on the lands which will defeat the right of the borrower in this
regard until and unless the borrower's right of action has prescribed.
The real difficulty which has confronted the borrowers in attempting to enforce
alleged contracts of this nature has not lain in the failure of the law to recognize
their rights in the premises, but rather in the inherent difficulties confronting them
in their attempts to prove the existence of such a contract.

In the very nature of things the disqualification of those directly interested in an

action to testify as witnesses, prescribed in article 1247 of the Spanish Code, must
have enormously increased the difficulties confronting a borrower in an attempt to
establish the existence of such an oral contract, prior to the enactment of the new
Code of Civil Procedure prescribing new rules in this regard. This because, as a rule,
the existence of such contracts is made known to few persons other than the
contracting parties themselves.
And while the new rules of evidence have removed this difficulty from the path of
the lender seeking to establish the existence of such an agreement, they by no
means relief him of the necessity of establishing his allegations by clear, convincing
and satisfactory evidence. The principle on which the codifiers rested the rule laid
down in article 1248 of the Civil Code is not less imperative under the new rules of
evidence than under those found in the Spanish Code. That article is as follows:
The probative force of the testimony of the witnesses shall be valued by the
courts in accordance with the provisions of the Law of Civil Procedure, taking
care to avoid that, by the simple coincidence of some testimony, unless its
truthfulness be evident, the affairs may be finally decided in which are
usually employed public deeds, private documents, or any commencement of
written evidence.
In this jurisdiction, as in the United States, the existence of an oral agreement or
understanding such as that alleged in the complaint in the case at bar cannot be
maintained on vague, uncertain and indefinite testimony, against the reasonable
presumption that prudent men who enter into such contracts will execute them in
writing, and comply with the formalities prescribed by law for the creation of a valid
mortgage. But where the evidence as to the existence of such an understanding or
agreement is clear, convincing and satisfactory, the same broad principles of equity
operate in this jurisdiction as in the United States to compel the parties to live up to
the terms of their contract.
2. The second ground upon which the demurrer should have been overruled is that
it admits the truth of the allegation of the complaint that in the year 1897, two
years after the date of the execution of the instrument purporting to be a deed of
sale, the nominal vendor paid the nominal purchaser P1,000, whereupon the
nominal rent of the land was reduced from P420 to P300 per annum, the real
purpose and object of this arrangement being to reduce the amount of the annual
interest on the original loan made to the nominal vendor of the land, proportionately
to the reduction of the amount of the loan itself by the payment of P1,000. If it be
true that two years after the transaction evidenced by the instrument attached to
the complaint, the defendant accepted from the plaintiff's mother the sum of
P1,000, and thereafter reduced the amount of the annual payments to be made by
her, it cannot be doubted that the plaintiff has a good cause of action against the
defendant.

The acceptance by the defendant of this large sum of money, under the
circumstances as they appear from the complaint, can only be accounted for on one
of two hypotheses. Either the original transaction was in truth and in fact an
arrangement or agreement by virtue of which a loan of money was made and
secured by a formal deed of sale of land with a reserved right of repurchase; or, if
the original transaction was in truth and in fact one of purchase and sale of real
estate, with a reserved right of repurchase in the vendor, then the purchaser, by the
acceptance from the vendor of the sum of P1,000, waived and surrendered his
rights under the original contract, and entered into a new contract with the vendor,
under which he obligated himself to cancel the deed, or resell the land to the
original vendor on the payment of the balance of the original purchase price, and
bound himself not to exercise his right, under the original deed of sale, to refuse to
allow the original vendor to repurchase after the expiration of the period stipulated
in the original contract for that purpose.
Upon either hypothesis, plaintiff would clearly be entitled to the relief prayed for in
his complaint. Of course the defendant is not entitled to keep both the land and the
payment of a thousand pesos. The acceptance and retention of such a payment is
wholly inconsistent with a claim of a right of absolute ownership in the land, without
any obligation to resell it to the original vendor. Defendant can not eat his cake and
have it too.
In the case of Lichauco vs. Berenguer (20 Phil. Rep., 12), we found the fact that
various partial payments had been made by the vendor, and accepted by the
purchaser, for the purpose of repaying the original purchase price, absolutely
incompatible "with the idea of the irrevocability of the title of ownership of the
purchaser" at the expiration of the term stipulated in the original contract for the
exercise of the right of repurchase. Speaking through the Chief Justice, we said in
that case:
The vendee, who has been reimbursed by the vendor for a part of the
repurchase price, is bound to fulfill the obligation to sell back, derived from
the sale with right to repurchase, or must show reason why he may keep this
part of the price and, notwithstanding his so doing, be considered released
from effecting the resale. He may be entitled to require the completion of the
price, or that he be paid other expenses before he returns the thing which he
had purchased under such a condition subsequent; but the exercise of the
right of redemption having been begun and admitted, the irrevocability of the
ownership in such manner acquired is in all respects incompatible with these
acts so performed.
The order entered in the court below, sustaining the demurrer to the complaint
must be reversed, and the record remanded for further proceedings, without costs
in this instance.
Let judgment be entered in accordance herewith. So ordered.