SECOND DIVISION defendants and judgment
SPS. LUIS V. CRUZ and G.R. NO. 145470
AIDA CRUZ,
Petitioners, Present:
- versus
SPS. ALEJANDRO FERNANDO,
SR., and RITA FERNANDO, Promulgated:
Respondents. December 9, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
AUSTRIA-MARTINEZ, J.:
For resolution is a petition for review
on certiorari under Rule 45 of the Rules of Court,
assailing the Decision[1] dated October 3, 2000 of the
Court of Appeals (CA) in CA-G.R. CV No. 61247,
dismissing petitioners appeal and affirming the decision
of the Regional Trial Court (RTC) of Malolos, Bulacan,
Branch 79, in Civil Case No. 877-M-94.
The antecedent facts are as follows:
Luis V. Cruz and Aida Cruz (petitioners) are occupants of
the front portion of a 710-square meter property located
in Sto. Cristo, Baliuag, Bulacan. On October 21, 1994,
spouses Alejandro Fernando, Sr. and Rita Fernando
(respondents) filed before the RTC a complaint for accion
publiciana against petitioners, demanding the latter to
vacate the premises and to pay the amount of P500.00 a
month as reasonable rental for the use thereof.
Respondents alleged in their complaint that: (1) they are
owners of the property, having bought the same from the
spouses Clodualdo and Teresita Glorioso (Gloriosos) per
Deed of Sale dated March 9, 1987; (2) prior to their
acquisition of the property, the Gloriosos offered to sell
to petitioners the rear portion of the property but the
transaction did not materialize due to petitioners failure
to exercise their option; (3) the offer to sell is embodied
in a Kasunduan dated August 6, 1983 executed before
the Barangay Captain; (4) due to petitioners failure to
buy the allotted portion, respondents bought the whole
property from the Gloriosos; and (5) despite repeated
demands, petitioners refused to vacate the property. [2]
Petitioners filed a Motion to Dismiss but the RTC
dismissed it for lack of merit in its Order dated March 6,
1995.[3] Petitioners then filed their Answer setting forth
the affirmative defenses that: (1) the Kasunduan is a
perfected contract of sale; (2) the agreement has already
been partially consummated as they already relocated
their house from the rear portion of the lot to the front
portion that was sold to them; (3) Mrs. Glorioso
prevented the complete consummation of the sale when
she refused to have the exact boundaries of the lot
bought by petitioners surveyed, and the existing survey
was made without their knowledge and participation;
and (4) respondents are buyers in bad faith having
bought that portion of the lot occupied by them
(petitioners) with full knowledge of the prior sale to them
by the Gloriosos.[4]
After due proceedings, the RTC rendered a Decision on
April 3, 1998 in favor of respondents. The decretal
portion of the decision provides:
PREMISES CONSIDERED, the
herein plaintiffs was able to prove by
preponderance of evidence the case
of accion publiciana, against the
is hereby
rendered as follows:
1. Ordering defendants and all
persons claiming under them to vacate
placefully (sic) the premises in question
and to remove their house therefore
(sic);
2. Ordering defendants to pay
plaintiff the sum of P500.00 as
reasonable rental per month beginning
October 21, 1994 when the case was
filed before this Court and every month
thereafter until they vacate the subject
premises and to pay the costs of suit.
The counter claim is hereby
DISMISSED for lack of merit.
SO ORDERED.[5]
Petitioners appealed the RTC decision but it was
affirmed by the CA per its Decision dated October 3,
2000.
Hence, the present petition raising the following issues:
1. Whether the Honorable Court
of Appeals committed an error of law in
holding that the Agreement
(Kasunduan) between the parties was a
mere offer to sell, and not a perfected
Contract of Purchase and Sale?
2. Whether the Honorable Court
of Appeals committed an error of law in
not holding that where the parties
clearly gave the petitioners a period of
time within which to pay the price, but
did not fix said period, the remedy of the
vendors is to ask the Court to fix the
period for the payment of the price, and
not an accion publiciana?
3. Whether the Honorable Court
of Appeals committed an error of law in
not ordering respondents to at least
deliver the back portion of the lot in
question upon payment of the agreed
price thereof by petitioners, assuming
that the Regional Trial Court was
correct in finding that the subject
matter of the sale was said back portion,
and not the front portion of the
property?
4. Whether the Honorable Court
of Appeals committed an error of law in
affirming the decision of the trial court
ordering the petitioners, who are
possessors in good faith, to pay rentals
for the portion of the lot possessed by
them?[6]
The RTC dwelt on the issue of which portion was
being sold by the Gloriosos to petitioners, finding that it
was the rear portion and not the front portion that was
being sold; while the CA construed the Kasunduan as a
mere contract to sell and due to petitioners failure to pay
the purchase price, the Gloriosos were not obliged to
deliver to them (petitioners) the portion being sold.
Petitioners, however, insist that the agreement
was a perfected contract of sale, and their failure to pay
the purchase price is immaterial. They also contend that
respondents have no cause of action against them, as
the obligation set in the Kasunduan did not set a period,
consequently, there is no breach of any obligation by
petitioners.
The resolution of the issues in this case principally is
dependent on the interpretation of the Kasunduan dated
August 6, 1983 executed by petitioners and the
Gloriosos. The Kasunduan provided the following
pertinent stipulations:
a. Na pumayag ang mga maysumbong
(referring to the Gloriosos) na
pagbilhan ang mga
ipinagsumbong (referring to
petitioners) na bahagi ng lupa at
ang ipagbibili ay may sukat na
213 metrong parisukat humigit
kumulang sa halagang P40.00
bawat metrong parisukat;
b. Na sa titulong papapanaugin ang
magiging kabuuang sukat na
mauukol sa mga
ipinagsusumbong ay 223
metrong parisukat at ang 10
metro nito ay bilang kaloob ng
mga maysumbong sa mga
Ipinagsusumbong na bahagi ng
right of way;
c. Na ang right of way ay may luwang na
1.75 meters magmula sa daang
Lopez Jaena patungo sa
likuran ng lote na
pagtatayuan ng bahay ng mga
Ipinagsusumbong na kanyang
bibilhin;
d. Na ang gugol sa pagpapasukat at
pagpapanaog ng titulo ay
paghahatian ng magkabilang
panig na ang panig ay
magbibigay ng halagang hindi
kukulanging sa halagang tig-
AAPAT NA DAANG PISO
(P400.00);
e. Na ang ipinagsusumbong ay tiyakang
ililipat ang bahay sa bahaging
kanilang nabili o mabibili sa
buwan ng Enero 31, 1984;
[7]
(Emphasis supplied)
Under Article 1458 of the Civil Code, a contract of sale is
a contract by which one of the contracting parties
obligates himself to transfer the ownership and to deliver
a determinate thing, and the other to pay therefor a price
certain in money or its equivalent. Article 1475 of the
Code further provides that the contract of sale is
perfected at the moment there is meeting of the 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.
In a contract of sale, the title to the property
passes to the vendee upon the delivery of the thing sold,
as distinguished from a contract to sell where ownership
is, by agreement, reserved in the vendor and is not to
pass to the vendee until full payment of the purchase
price.[8] Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained
by the vendor until full payment of the price. In the
latter contract, payment of the price is a positive
suspensive condition, failure of which is not a breach
but an event that prevents the obligation of the vendor to
convey title from becoming effective.
The Kasunduan provides for the following terms
and conditions: (a) that the Gloriosos agreed to sell to
petitioners a portion of the property with an area of 213
meters at the price of P40.00 per square meter; (b) that
in the title that will be caused to be issued, the aggregate
area is 223 square meters with 10 meters thereof serving
as right of way; (c) that the right of way shall have a
width of 1.75 meters from Lopez Jaena road going
towards the back of the lot where petitioners will build
their house on the portion of the lot that they will buy;
(d) that the expenses for the survey and for the issuance
of the title will be divided between the parties with each
party giving an amount of no less than P400.00; and (e)
that petitioners will definitely relocate their house to the
portion they bought or will buy by January 31, 1984.
The foregoing terms and conditions show that it
is a contract to sell and not a contract of sale. For one,
the conspicuous absence of a definite manner of
payment of the purchase price in the agreement
confirms the conclusion that it is a contract to sell. This
is because the manner of payment of the purchase
price is an essential element before a valid and
binding contract of sale can exist.[9] Although the Civil
Code does not expressly state that the minds of the
parties must also meet on the terms or manner of
payment of the price, the same is needed, otherwise
there is no sale.[10] As held in Toyota Shaw, Inc. vs. Court
of Appeals,[11] a definite agreement on the manner of
payment of the price is an essential element in the
formation of a binding and enforceable contract of sale.
The Kasunduan does not establish any definite
agreement between the parties concerning the terms of
payment. What it merely provides is the purchase price
for the 213-square meter property at P40.00 per square
meter.
For another, the telltale provision in
the Kasunduan that: Na pumayag ang mga maysumbong
na pagbilhan ang mga ipinagsumbong na bahagi ng lupa
at ang ipagbibili ay may sukat na 213 metrong parisukat
humigit kumulang sa halagang P40.00 bawat metrong
parisukat, simply means that the Gloriosos only agreed
to sell a portion of the property and that the portion to
be sold measures 213 square meters.
Another significant provision is that which
reads: Na ang ipinagsusumbong ay tiyakang ililipat ang
bahay sa bahaging kanilang nabili o mabibili sa buwan
ng Enero 31, 1984. The foregoing indicates that a
contract of sale is yet to be consummated and ownership
of the property remained in the Gloriosos. Otherwise,
why would the alternative term mabibili be used if indeed
the property had already been sold to petitioners.
 In addition, the absence of any formal deed of
conveyance is a strong indication that the parties did not
intend immediate transfer of ownership.[12]
Normally, in a contract to sell, the payment of
the purchase price is the positive suspensive condition
upon which the transfer of ownership depends.[13] The
parties, however, are not prohibited from stipulating
other lawful conditions that must be fulfilled in order for
the contract to be converted from a contract to sell or at
the most an executory sale into an executed one.[14]
In the present case, aside from the payment of
the purchase price, there existed another suspensive
condition, i.e.: that petitioners will relocate their house
to the portion they bought or will buy by January 31,
1984.
Petitioners failed to abide by the express
condition that they should relocate to the rear portion of
the property being bought by January 31, 1984. Indeed,
the Kasunduan discloses that it is the rear portion that
was being sold by the Gloriosos, and not the front
portion as petitioners stubbornly claim. This is evident
from the provisions establishing a right of way from
Lopez Jaena road going towards the back of the lot, and
requiring them to relocate their house to the portion
being sold by January 31, 1984. Petitioners are
presently occupying the front portion of the property.
Why the need for a right of way and for petitioners to
relocate if the front portion on which their house stands
is the portion being sold?
This condition is a suspensive condition
noncompliance of which prevented the Gloriosos from
proceeding with the sale and ultimately transferring title
to petitioners; and the Kasunduan from having
[15]
obligatory force. It is established by evidence that the
petitioners did not transfer their house located in the
front portion of the subject property to the rear portion
which, under the Kasunduan, they intended to buy.
Thus, no obligation arose on the part of the Gloriosos to
consider the subject property as having been sold to
petitioners because the latters non-fulfillment of the
suspensive condition rendered the contract to sell
ineffective and unperfected.
Petitioners admit that they have not paid a
single centavo to the Gloriosos. However, petitioners
argue that their nonpayment of the purchase price was
due to the fact that there is yet to be a survey made of
the property. But evidence shows, and petitioners do not
dispute, that as early as August 12, 1983, or six days
after the execution of the Kasunduan, a survey has
already been made and the property was subdivided into
Lot Nos. 565-B-1 (front portion) and 565-B-2 (rear
portion), with Lot No. 565-B-2 measuring 223 square
meters as the portion to be bought by petitioners.
Petitioners question the survey made, asserting
that it is a table survey made without their knowledge
and participation. It should be pointed out that
the Kasunduan merely provides that the expenses for the
survey will be divided between them and that each party
should give an amount of no less than P400.00. Nowhere
is it stated that the survey is a condition precedent for
the payment of the purchase price.
Petitioners further claim that respondents have
no cause of action against them because their obligation
to pay the purchase price did not yet arise, as the
agreement did not provide for a period within which to
pay the purchase price. They argue that respondents
should have filed an action for specific performance or
judicial rescission before they can avail of accion
publiciana.
Notably, petitioners never raised these
arguments during the proceedings before the RTC.
Suffice it to say that issues raised for the first time on
appeal and not raised timely in the proceedings in the
lower court are barred by estoppel. [16] Matters, theories
or arguments not brought out in the original proceedings
cannot be considered on review or appeal where they are
raised for the first time. To consider the alleged facts and
arguments raised belatedly would amount to trampling
on the basic principles of fair play, justice and due
process.[17]
Moreover, it would be inutile for respondents to
first petition the court to fix a period for the performance
of the contract. In the first place, respondents are not
parties to the Kasunduan between petitioners and the
Gloriosos, and they have no standing whatsoever to seek
such recourse. In the second place, such recourse
properly pertains to petitioners. It was they who should
have sought the courts intercession. If petitioners
believed that they have an actionable contract for the
sale of the property, prudence and common sense
dictate that they should have sought its enforcement
forthwith. Instead, petitioners whiled away their time.
Furthermore, there is no need for a judicial
rescission of the Kasunduan for the simple reason that
the obligation of the Gloriosos to transfer the property to
petitioners has not yet arisen. There can be no rescission
of an obligation that is nonexistent, considering that the
suspensive conditions therefor have not yet happened.[18]
Hence, petitioners have no superior right of
ownership or possession to speak of. Their occupation of
the property was merely through the tolerance of the
owners. Evidence on record shows that petitioners and
their predecessors were able to live and build their house
on the property through the permission and kindness of
the previous owner, Pedro Hipolito, who was their
relative,[19] and subsequently, Teresita Glorioso, who is
also their relative. They have no title or, at the very least,
a contract of lease over the property. Based as it was on
mere tolerance, petitioners possession could neither
ripen into ownership nor operate to bar any action by
respondents to recover absolute possession thereof. [20]
There is also no merit to petitioners contention
that respondents are buyers in bad faith. As explained
in Coronel vs. Court of Appeals:
In a contract to sell, there being
no previous sale of the property, a third
person buying such property despite
the fulfillment of the suspensive
condition such as the full payment of
the purchase price, for instance,
cannot be deemed a buyer in bad
faith and the prospective buyer cannot
seek the relief of reconveyance of the
property. There is no double sale in
such case. Title to the property will
transfer to the buyer after registration
because there is no defect in the owner-
sellers title per se, but the latter, of
 course, may be sued for damages by the
intending buyer.[21] (Emphasis supplied)
A person who occupies the land of another at
the latter's forbearance or permission without any
contract between them is necessarily bound by an
implied promise that he will vacate upon demand.[22]
Considering that petitioners continued
possession of the property has already been rendered
unlawful, they are bound to pay reasonable rental for the
use and occupation thereof, which in this case was
appropriately pegged by the RTC at P500.00 per month
beginning October 21, 1994 when respondents filed the
case against them until they vacate the premises.
Finally, petitioners seek compensation for the
value of the improvements introduced on the property.
Again, this is the first time that they are raising this
point. As such, petitioners are now barred from seeking
such relief.[23]
WHEREFORE, the petition is DENIED. The
Decision of the Court of Appeals dated October 3, 2000
in CA-G.R. CV No. 61247 is AFFIRMED.
SO ORDERED.
FIRST DIVISION
G.R. No. 102909 September 6, 1993
SPOUSES VICENTE and LOURDES PINGOL, petitioners,
vs.
HON. COURT OF APPEALS and HEIRS OF FRANCISCO N.
DONASCO, namely: MELINDA D. PELAYO, MARIETTA D.
SINGSON, MYRNA D. CUEVAS, NATIVIDAD D. PELAYO,
YOLANDA D. CACERES and MARY DONASCO, respondents.
Bernardo S. Chan for petitioners.
Orlando A. Galope for respondents.
DAVIDE, JR., J.:
An action denominated as one for specific performance and
damages was brought by the private respondents against the
petitioners before the Regional Trial Court (RTC) of Caloocan
City which, after due trial, rendered a decision in favor of the
petitioners. On appeal, the respondent Court reversed the trial
court's decision.
It is from this judgment that the petitioners have appealed to
this Court by way of a petition for review on certiorari.
The material facts of this case are simple and undisputed.
Petitioner Vicente Pingol is the owner of Lot No. 3223 of
the Cadastral Survey of Caloocan, with an area of 549
square meters, located at Bagong Barrio, Caloocan City
and more particularly described in Transfer Certificate of
Title (TCT) No. 7435 of the Registry of Deeds of Caloocan
City. On 17 February 1969, he executed a "DEED OF
ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN
UNDIVIDED PORTION OF A PARCEL OF LAND" in favor
of Francisco N. Donasco which was acknowledged before
a notary public. The parcel of land referred to herein is
Lot No. 3223 and the pertinent portions of the document
read as follows:
That for and in consideration of the sum of
TWENTY THOUSAND AND FIVE HUNDRED
THIRTY (P20,530.00) PESOS, Philippine
Currency, the VENDOR hereby these
presents SELL, CONVEY AND CONVEY by
way of Absolute Sale the one-half (1/2)
portion, equivalent to Two Hundred Seventy
Four and point Fifty (274.50) square meters,
to VENDEE, the above-mentioned property,
his heirs, assigns and successors-in- interest;
That the VENDOR hereby confesses and
acknowledges the receipt of TWO THOUSAND
(P2,000.00) PESOS from VENDEE as
advanced (sic) and partial payment to the
above-cited consideration of the Sale herein
mentioned, leaving therefor a balance of
Eighteen Thousand and Five Hundred Thirty
(P18,530) Pesos to be paid in several equal
installments within a period of six (6) years,
beginning January, 1970;
That after computing the above-mentioned
equal installments, the VENDEE agrees and
undertakes to pay unto the VENDOR a
 monthly amount equivalent to Two Hundred
Fifty Seven (sic) and Thirty Six Centavos
(P257.36) within a period of Seventy One (71)
months and on the Seven Two [sic] (72)
month, the amount of (P257.44) as the last
and final installment thereof;
That the VENDEE agrees that in case of
default in the payment of the installment due
the same shall earn a legal rate of interest,
and to which the VENDOR likewise agrees;
That the VENDEE undertakes to pay unto the
VENDOR the herein monthly installment
within the first five (5) days of each month
and the same shall be made available and to
be paid at the residence of the VENDOR,
payment to be made either directly to the
VENDOR, his wife or his authorized
representative or factor;
That in case of partition of the above-
described property between herein VENDOR
and VENDEE the same shall be divided into
two (2) equal parts, the VENDOR gets the
corner facing J. De Jesus and Malolos
Avenue and the VENDEE shall get the portion
with fifteen 15 meters frontage facing J. De
Jesus Street only. 1
Pursuant to the contract, Donasco paid P2,000.00 to
Pingol. The one-half portion, designated as Lot No. 3223-
A, was then segregated from the mother lot, and the
parties prepared a subdivision plan (Exhibit "C") which
was approved by the Land Registration Commission. 2
Francisco immediately took possession of the subject lot
and constructed a house thereon. In January 1970, he
started paying the monthly installments but was able to
pay only up to 1972.
On 13 July 1984, Francisco Donasco died. At the time of
his demise, he had paid P8,369.00, plus the P2,000.00
advance payment, leaving a balance of P10,161.00 on
the contract price. 3 Lot No. 3223-A remained in the
possession of Donasco's heirs.
On 19 October 1988, the heirs of Francisco Donasco
filed an action for "Specific Performance and Damages,
with Prayer for Writ of Preliminary Injunction" against
the spouses Vicente and Lourdes Pingol (petitioners
herein) before the RTC of Caloocan City. The action was
docketed as Civil Case No. 13572 and raffled off to
Branch 125 of the said court.
In their complaint, 4 the plaintiffs (private respondents
herein) averred that after the death of their father, they
offered to pay the balance of P10,161.00 plus the
stipulated legal rate of interest thereon to Vicente Pingol
but the latter rebuffed their offer and has "been
demanding for a bigger and unreasonable amount, in
complete variance to what is lawfully due and payable."
They stated that they had "exerted earnest efforts to
forge or reach an amicable and peaceful settlement with
the defendants" for the payment of the property in
question but to no avail. They further alleged that the
defendants were committing "acts of forcible entry and
encroachment" upon their land and asked that a writ of
preliminary injunction be issued to restrain the
defendants from the acts complained of.
Plaintiffs then prayed that the defendants be ordered, inter alia:
a. . . . to accept the amount of P10,161.00,
more or less, plus the stipulated legal rate of
interest due thereon, as full and complete
payment of the balance for the agreed
price/consideration on the one- half (1/2)
portion of the parcel of land . . .; [and]
b. . . . to execute the final deed of sale on the
one-half (1/2) portion of the lot . . . in
accordance with the partition reflected in the
survey and subdivision plan, . . . . 5
In their answer with counterclaim, 6 defendants admitted the
execution of the aforementioned deed of sale, the segregation of
the portion sold and the preparation and approval of the
subdivision plan, but set up the following special and
affirmative defenses: (1) plaintiffs' cause of action had already
prescribed; (2) the deed of sale embodied a conditional contract
of sale "as the consideration is to be paid on installment basis
within a period of six years beginning January, 1970"; (3) the
subdivision plan was prepared on the assumption that
Francisco Donasco would be able to comply with his obligation;
(4) when Francisco died, he had not fully paid the total
consideration agreed upon; and (5) considering the breach by
Francisco of his contractual obligation way back in 1976, the
sale was deemed to have been cancelled and the continuous
occupancy of Francisco after 1976 and by his heirs thereafter
was by mere tolerance of Vicente Pingol. They then asked that
the plaintiffs be ordered to vacate the premises and to pay them
attorney's fees and a reasonable compensation for the use of the
land.
In their Reply and Answer to Counterclaim, 7 the plaintiffs
pointed out that there is no provision in the deed of sale for its
cancellation in case of default in the payment of the monthly
installments and invoked Article 1592 of the New Civil Code.
They specifically denied the allegations in the counterclaim.
The issues having been joined, the case was then tried on the
merits.
On 22 January 1990, the trial court rendered a
decision 8 dismissing the complaint and ordering the plaintiffs
to pay the defendants P350.00 as reasonable monthly rental for
the use of the premises from the filing of the complaint,
P10,000.00 by way of attorney's fees, and the costs of the suit.
It held that: (1) the deed of absolute sale in question, marked
and offered in evidence as Exhibit "A," is a contract to sell, not
a contract of sale, since Vicente Pingol had no intention to part
with the ownership of the loan unless the full amount of the
agreed price had been paid; (2) the contract was deemed to have
been cancelled from the moment the late father of the plaintiffs
defaulted in the payment of the monthly installments; (3) title
and ownership over the lot did not pass to Francisco Donasco
and his heirs since the contract to sell was never consummated;
and (5) assuming, arguendo, that the plaintiffs have a cause of
action for specific performance, such action had already
prescribed since the complaint was filed only on 19 October
1988 or more than ten years from the time that they could have
lawfully demanded performance. 9
Plaintiffs elevated the case to the Court of Appeals where the
appeal was docketed as CA-G.R. CV No. 25967. On 12
10
November 1991, the said court rendered a decision reversing
the appealed decision and decreeing as follows:
 WHEREFORE, the decision appealed from is
hereby REVERSED and SET ASIDE and
another one is rendered:
(1) Ordering appellee-vendor Vicente Pingol to
accept the sum of P10,161.00, plus the legal
interest due thereon from the date of
institution of this action on October 19,
1988;
(2) Upholding the validity of the "DEED OF
ABSOLUTE SALE OF ONE- HALF (1/2) (of)
AN UNDIVIDED PORTION OF A PARCEL OF
LAND" (Exh. A), and by virtue and on the
strength of which declaring the "Heirs of the
Deceased Francisco N. Domingo" as the
owners of the 274.50 sq. m. land,
denominated as Lot 3223-A, (LRC) Psd-
146255 under the technical description (exh.
D) and reflected in the Plan of Subdivision
Survey which was approved By Commissioner
of Land Registration on August 13, 1971
(exh. C), representing one-half portion [of] lot
3223, situated at the corner of Malolos
Avenue and G. de Jesus St., Bagong Barrio,
Caloocan City, and covered by TCT No. 7435
of the Registry of Deeds of Caloocan City
(exh. B); and
(3) Ordering the defendants-appellees to pay
the costs.
11
SO ORDERED.
The Court of Appeals ruled that the deed of sale in question
reveals the clear intention of Vicente Pingol to part with the
ownership of the one-half portion of the land by way of an
absolute sale; that the failure to fully pay the agreed price was
not a ground for the cancellation of the sale; and that the
plaintiffs' action is imprescriptible since it is akin to an action
to quiet title to property in one's possession. 12
Dissatisfied with the decision of the Court of Appeals, the
defendants, hereinafter referred to as the petitioners, filed this
petition for certiorari on 9 January 1992. Plaintiffs, hereinafter
referred to as the private respondents, filed their comment
thereto on 10 September 1992 to which the petitioners filed a
reply 11 November 1992. We gave due course to the petition and
required the parties to submit their respective
13
memoranda, which they subsequently complied with.
Petitioners contend that the Court of Appeals erred:
I
IN HOLDING THAT THE DOCUMENT
(EXHIBIT "A") DENOMINATED AS
"ABSOLUTE DEED OF SALE OF ONE-HALF
() OF AN UNDIVIDED PORTION OF A
PARCEL OF LAND" IS AN ABSOLUTE DEED
OF SALE SUFFICIENT TO CONFER
OWNERSHIP ON THE VENDEE AND HIS
SUCCESSORS-IN-INTEREST, DESPITE THE
FACT THAT BY ITS TERMS AND
CONDITIONS, LIKE THE PRICE BEING
PAYABLE ON INSTALLMENTS WITHIN A
FIXED PERIOD, THE SAME IS A
CONDITIONAL DEED OF SALE.
II
IN HOLDING THAT NOTWITHSTANDING THE
FACT THAT THE VENDEE FAILED TO
COMPLY WITH THE TERMS OF THE
CONTRACT (EXHIBIT "A") SPECIFICALLY TO
COMPLETE THE PAYMENT OF THE
CONSIDERATION ON THE DATE
STIPULATED IN THE CONTRACT WHICH
WAS SUPPOSED TO BE IN JANUARY 1976,
COMPLETE PAYMENT THEREOF CAN STILL
BE ENFORCED IN AN ACTION INSTITUTED
BY THE HEIRS OF THE VENDEE FILED
ON OCTOBER 19, 1988 OR A PERIOD OF
MORE THAN TWELVE (12) YEARS FROM
THE TIME COMPLETE PAYMENT SHOULD
HAVE BEEN MADE;
III
IN HOLDING THAT THE PRIVATE
RESPONDENTS' ACTION IS ONE WHICH IS
AN OFFER TO COMPLETE THE PAYMENT
LEFT UNPAID BY PRIVATE RESPONDENTS'
FATHER WHICH DOES NOT PRESCRIBE;
IV
IN HOLDING THAT PRIVATE RESPONDENTS'
CAUSE OF ACTION HAS NOT PRESCRIBE. 14
The decisive issue in this case is whether Exhibit "A" embodies
a contract of sale or a contract to sell. The distinction between
the two is important for in a contract of sale, the title passes to
the vendee upon the delivery of the thing sold, whereas in a
contract to sell, by agreement, ownership is reserved in the
vendor and is not to pass until the full payment of the price. In
a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or
rescinded, whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment being
a positive suspensive condition, failure of which is not a breach
but an event that prevented the obligation of the vendor to
convey title from becoming
effective. 15
A perusal of Exhibit "A" leads to no other conclusion than that
it embodies a contract of sale. The plain and clear tenor of the
"DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN
UNDIVIDED PORTION OF A PARCEL OF LAND" is that "the
VENDOR hereby . . . SELL, CONVEY AND CONVEY by way
Absolute Sale the one-half (1/2) portion . . . to the VENDEE . . .
his heirs, assigns and successors-in-interest." That the vendor,
petitioner Vicente Pingol, had that clear intention was further
evidenced by his failure to reserve his title thereto until the full
payment of the price.
In Dignos vs. Court of Appeals, 16 we held that a deed of sale is
absolute in nature although denominated as a "Deed of
Conditional Sale" where there is no stipulation in the deed that
title to the property sold is reserved in the seller until the full
payment of the price, nor is there a stipulation giving the
vendor the right to unilaterally resolve the contract the moment
the buyer fails to pay within a fixed period. Exhibit "A" contains
neither stipulation. What is merely stated therein is that "the
VENDEE agrees that in case of default in the payment of the
installments due the same shall earn a legal rate of interest,
and to which the VENDOR likewise agrees."
Furthermore, as found by the Court of Appeals, the acts of the
parties, contemporaneous and subsequent to the contract,
clearly show that an absolute deed of sale was intended, by the
parties and not a contract to sell:
 [P]ursuant to the deed, the vendor delivered
actual and constructive possession of the
property to the vendee, who occupied and
took such possession, constructed a building
thereon, had the property surveyed and
subdivided and a plan of the property was
prepared and submitted to the Land
Registration Commission which approved it
preparatory to segregating the same and
obtaining the corresponding TCT in his
name. Since the sale, appellee continuously
possessed and occupied the property as
owner up to his death on July 13, 1984 and
his heirs, after his death, continued the
occupancy and possession of the property up
to the present. Those contemporaneous and
subsequent events are demonstrative acts
that the vendor since the sale recognized the
vendee as the absolute owner of the property
sold. All those attributes of ownership are
admitted by defendants in their answer,
specifically in paragraphs 7 and 9 of their
special and affirmative defenses. 17
The contract here being one of absolute sale, the ownership of
the subject lot was transferred to the buyer upon the actual and
constructive delivery thereof. The constructive delivery of the
subject lot was made upon the execution of the deed of
sale 18 while the actual delivery was effected when the private
respondents took possession of and constructed a house on Lot
No. 3223-A.
The delivery of the object of the contract divested the vendor of
the ownership over the same and he cannot recover the title
unless the contract is resolved or rescinded pursuant to Article
1592 of the New Civil Code which provides that:
In the sale of immovable property, even
though it may have been stipulated that upon
failure to pay the price at the time agreed
upon the rescission of the contract shall of
right take place, the vendee may pay, even
after the expiration of the period, as long as
no demand for rescission of the contract has
been made upon him either judicially or by a
notarial act. After the demand, the court may
not grant him a new term.
Both the trial court and the Court of Appeals did not find that a
notarial or judicial rescission of the contract had been made.
Although Vicente Pingol asserts that he had declared to
Francisco Donasco that he was cancelling the contract, he did
not prove that his demand for rescission was made either
judicially or by a notarial act.
Petitioners fault the respondent Court for holding that the
action of the petitioners is not barred by the statute of
limitations. They argue that the private respondents' action,
being based upon a written contract, has prescribed since it
was brought only in 1988 or more than ten years from the time
when the latter could have lawfully demanded performance. 19
We disagree.
Although the private respondents' complaint before the
trial court was denominated as one for specific
performance, it is in effect an action to quiet title. In this
regard, the following excerpt from Bucton vs.
20
Gabar is apropos:
The real and ultimate basis of
petitioners' action is their ownership of
one- half of the lot coupled with their
possession thereof, which entitles them
to a conveyance of the property.
In Sapto, et al. v. Fabiana [103 Phil. 683,
686-87 (1958)], this Court, speaking
thru Mr. Justice J.B.L. Reyes, explained
that under the circumstances no
enforcement of the contract is needed,
since the delivery of possession of the
land sold had consummated the sale
and transferred title to the purchaser,
and that, actually, the action for
conveyance is one to quiet title, i.e., to
remove the cloud upon the appellee's
ownership by the refusal of the
appellants to recognize the sale made by
their predecessors.
That a cloud has been cast on the title of the private
respondents is indubitable. Despite the fact that the title
had been transferred to them by the execution of the
deed of sale and the delivery of the object of the
contract, the petitioners adamantly refused to accept the
tender of payment by the private respondents and
steadfastly insisted that their obligation to transfer title
had been rendered ineffective.
A vendee in an oral contract to convey land who had
made part payment thereof, entered upon the land and
had made valuable improvements thereon, is entitled to
bring suit to clear his title against the vendor who had
refused to transfer the title to him. It is not necessary
that the vendee has an absolute title, an equitable title
being sufficient to clothe him with personality to bring
an action to quiet title. 21
Prescription thus cannot be invoked against the private
respondents for it is aphoristic that an action to quiet
title to property in one's possession is
imprescriptible. 22 The rationale for this rule has been
aptly stated thus:
The owner of real property who is in
possession thereof may wait until his
possession is invaded or his title is
attacked before taking steps to vindicate
his right. A person claiming title to real
property, but not in possession thereof,
must act affirmatively and within the
time provided by the statute. Possession
is a continuing right as is the right to
defend such possession. So it has been
determined that an owner of real
property in possession has a continuing
right to invoke a court of equity to
remove a cloud that is a continuing
menace to his title. Such a menace is
compared to a continuing nuisance or
trespass which is treated as successive
nuisances or trespasses, not barred by
statute until continued without
interruption for a length of time
 sufficient to affect a change of title as a
matter of law. 23
Private respondents shall, however, be liable to pay the
legal rate of interest on the unpaid balance of the
purchase price from the date default or on 6 January
1976, when the entire balance should have been paid,
pursuant to the provision in the deed of sale.
WHEREFORE, except as above modified, the Decision appealed
from is hereby AFFIRMED. As modified, the interest on the
unpaid balance of P10,161.00, at the legal rate, shall be
computed from 6 January 1976. Upon the payment by the
private respondents to the petitioners of the said amount and
the interest thereon, the latter are ordered to deliver Transfer
Certificate of Title No. 7435 to the Register of Deeds of Caloocan
City who shall cancel the same and issue two new transfer
certificates of title in lieu thereof, one of which shall be in the
name of the herein private respondents covering Lot No. 3223-A
and the other in the name of the petitioners covering the
remainder of the lot.
SO ORDERED.
SECOND DIVISION
G.R. No. 73564 March 25, 1988
CORNELIA CLANOR VDA. DE PORTUGAL,
FRANCISCO C. PORTUGAL, PETRONA C.
PORTUGAL, CLARITA PORTUGAL, LETICIA
PORTUGAL, and BENEDICTO PORTUGAL,
JR., petitioners,
vs.
INTERMEDIATE APPELLATE COURT and HUGO
C. PORTUGAL, respondents.
SARMIENTO, J.:
Seeking the reversal of the decision 1 dated October
21, 1985 of the former Intermediate Appellate
Court in CA-G.R. CV No. 70247, entitled "Cornelia
Clanor Vda. de Portugal, et al. vs. Hugo Portugal,
and the reinstatement of the decision 2 in their
favor, dated June 30, 1980, of the Court of First
Instance of Cavite in Civil Case No. NC-699
entitled "Cornelia Vda. de Portugal, et al. vs. Hugo
Portugal," the petitioners now come to us by way of
this petition for review by certiorari.
The factual background that gave rise to the
present controversy is summarized as follows:
Petitioner Cornelia Clanor and her late husband
Pascual Portugal, during the lifetime of the latter,
were able to accumulate several parcels of real
property. Among these were a parcel of residential
land situated in Poblacion, Gen. Trias, Cavite,
designated as Lot No. 3201, consisting of 2,069
square meters, more or less, and covered by T.C.T.
No. RT-9355, in their names, and an agricultural
land located at Pasong Kawayan, Gen. Trias,
Cavite, with an area of 43,587 square meters, more
or less, known as Lot No. 2337, and also registered
in their names under T.C.T. No. RT-9356 of the
Registry of Deeds for the Province of Cavite.
Sometime in January, 1967, the private
respondent Hugo Portugal, a son of the spouses,
borrowed from his mother, Cornelia, the
certificates of title to the above-mentioned parcels
of land on the pretext that he had to use them in
securing a loan that he was negotiating. Cornelia,
the loving and helpful mother that she was,
assented and delivered the titles to her son. The
matter was never again brought up until after
Pascual Portugal died on November 17, 1974.
(Cornelia herself died on November 12, 1987.)
When the other heirs of the deceased Pascual
Portugal, the petitioners herein, for the purposes of
executing an extra-judicial partition of Pascual's
estate, wished to have all the properties of the
spouses collated, Cornelia asked the private
respondent for the return of the two titles she
previously loaned, Hugo manifested that the said
titles no longer exist. When further questioned,
Hugo showed the petitioners Transfer Certificate of
Title T.C.T. No. 23539 registered in his and his
brother Emiliano Portugal's names, and which new
T.C.T. cancelled the two previous ones. This
falsification was triggered by a deed of sale by
which the spouses Pascual Portugal and Cornelia
Clanor purportedly sold for P8,000.00 the two
parcels of land adverted to earlier to their two sons,
Hugo and Emiliano. Confronted by his mother of
this fraud, Emiliano denied any participation. And
to show his good faith, Emiliano caused the
reconveyance of Lot No. 2337 previously covered by
TCT No. RT-9356 and which was conveyed to him
in the void deed of sale. Hugo, on the other hand,
refused to make the necessary restitution thus
compelling the petitioners, his mother and his
other brothers and sisters, to institute an action for
the annulment of the controversial deed of sale and
the reconveyance of the title over Lot No. 3201 (the
residential land). After hearing, the trial court
rendered its decision, the dispositive portion of
which reads:
xxx xxx xxx
WHEREFORE, under our present perspectives,
judgment is hereby rendered; and the Court hereby
declares inoperative the Deed of Sale (Exhibit A
and Exhibit 1) and all its appertaining and
subsequent documents corresponding with
Transfer Certificate of Title No. T-23539 of the
Register of Deeds for the Province of Cavite, as well
as all subsequent Transfer Certificates of Title
which may have been produced corresponding to
the parcels of land, subject matter hereof.
3
SO ORDERED.
From this decision, Hugo Portugal, the private
respondent herein and the defendant in the trial
court, appealed to the respondent appellate court
which reversed, hence the present petition.
The issues raised by the petitioners are:
1. Whether or not the present action has
prescribed;
2. Whether or not the respondent court was
justified in disturbing the trial court's findings on
the credibility of the witnesses presented during
the trial; and
3. Whether or not the appellate court could
entertain the defense of prescription which was not
raised by the private respondents in their answer
to the complaint nor in a motion to dismiss.
We find the petition meritorious.
There is really nothing novel in this case as an the
issues raised had been, on several occasions, ruled
upon by the Court. Apropos the first issue, which
is the timeliness of the action, the trial court
correctly ruled that the action instituted by the
petitioners has not yet prescribed. Be that as it
may, the conclusion was reached through an
erroneous rationalization, i.e., the case is purely
for reconveyance based on an implied or
constructive trust. Obviously, the trial court failed
to consider the lack of consideration or cause in
the purported deed of sale by which the residential
lot was allegedly transferred to the private
respondent by his parents. On the other hand, the
respondent Intermediate Appellate Court held that
since the action for reconveyance was fathered by a
fraudulent deed of sale, Article 1391 of the Civil
Code which lays down the rule that an action to
annul a contract based on fraud prescribes in four
years, applies. Hence, according to the respondent
court, as more than four years had elapsed from
January 23, 1967 when the assailed deed was
registered and the petitioners' cause of action
supposedly accrued, the suit has already become
stale when it was commenced on October 26,
1976, in the Court of First Instance of Cavite. For
reasons shortly to be shown, we can not give our
imprimatur to either view.
The case at bar is not purely an action for
reconveyance based on an implied or constructive
trust. Neither is it one for the annullment of a
fraudulent contract. A closer scrutiny of the
records of the case readily supports a finding that
fraud and mistake are not the only vices present in
the assailed contract of sale as held by the trial
court. More than these, the alleged contract of sale
is vitiated by the total absence of a valid cause or
consideration. The petitioners in their complaint,
assert that they, particularly Cornelia, never knew
of the existence of the questioned deed of sale.
They claim that they came to know of the supposed
sale only after the private respondent, upon their
repeated entreaties to produce and return the
owner's duplicate copy of the transfer certificate of
title covering the two parcels of land, showed to
them the controversial deed. And their claim was
immeasurably bolstered when the private
respondent's co-defendant below, his brother
Emiliano Portugal, who was allegedly his co-vendee
in the transaction, disclaimed any knowledge or
participation therein. If this is so, and this is not
contradicted by the decisions of the courts below,
the inevitable implication of the allegations is that
contrary to the recitals found in the assailed deed,
no consideration was ever paid at all by the private
respondent. Applying the provisions of Articles
1350, 1352, and 1409 of the new Civil Code in
relation to the indispensable requisite of a valid
cause or consideration in any contract, and what
constitutes a void or inexistent contract, we rule
that the disputed deed of sale is void ab initio or
inexistent, not merely voidable. And it is provided
in Article 1410 of the Civil Code, that '(T)he action
or defense for the declaration of the inexistence of
a contract does not prescribe.
But even if the action of the petitioners is for
reconveyance of the parcel of land based on an
implied or constructive trust, still it has been
seasonably filed. For as heretofore stated, it is now
settled that actions of this nature prescribe in ten
years, the point of reference being the date of
registration of the deed or the date of the issuance
of the certificate of titIe over the property. 4 In this
case, the petitioner commenced the instant action
for reconveyance in the trial court on October 26,
1976, or less than ten years from January 23,
1967 when the deed of sale was registered with the
Register of Deeds. 5 Clearly, even on this basis
alone, the present action has not yet prescribed.
On the credibility of witnesses presented in court,
there is no doubt that the trial court's findings on
this score deserves full respect and we do not have
any reason to disturb it here now. 6 After all, the
trial court judge is in a better position to make that
appreciation for having heard personally the
witnesses and observed their deportment and
manner of testifying during the trial. 7 The
exceptions to this time honored policy are: when
the trial court plainly overlooked certain facts of
substantial import and value which if only
correctly considered by the court might change the
outcome of the case; 8 and, if the judge who
rendered the decision was not the one who heard
the evidence. 9 Neither of these exceptions is
present here. Therefore, the respondent appellate
court's ruling questioning the credibility of
petitioner Cornelia Clanor Vda. de Portugal must
be reversed.

Anent the last issue raised by the petitioner, we

have already ruled that the defense of prescription
although not raised by the defendant may EN BANC
nevertheless be passed upon by the court when its
presence is plainly apparent on the face of the
complaint itself. 10 At any rate, in view of our
G.R. No. L-25494 June 14, 1972
earlier finding that the deed of sale in controversy
is not simply fraudulent but void ab initio or
NICOLAS SANCHEZ, plaintiff-appellee,
inexistent our ruling on this third issue would not vs.
have any material bearing on the overall outcome SEVERINA RIGOS, defendant-appellant.
of this petition. The petitioner's action remains to
be seasonably instituted. Santiago F. Bautista for plaintiff-appellee.

Jesus G. Villamar for defendant-appellant.

WHEREFORE, the petition is hereby GRANTED;
the Decision dated October 21, 1985 and the
Resolution dated January 24, 1986 of the
Intermediate Appellate Court are hereby
REVERSED and SET ASIDE; the deed of sale dated
January 23, 1967 evidencing the sale of Lot No.
3201 to private respondent Hugo Portugal is
declared VOID AB INITIO; and the private
respondent is ORDERED to reconvey to petitioners
the title over the said Lot No. 3201 which is now
under TCT No. T-23539. Costs against the private
respondent.
SO ORDERED.
CONCEPCION, C.J.:p
Appeal from a decision of the Court of First Instance of Nueva
Ecija to the Court of Appeals, which certified the case to Us,
upon the ground that it involves a question purely of law.
The record shows that, on April 3, 1961, plaintiff Nicolas
Sanchez and defendant Severina Rigos executed an instrument
entitled "Option to Purchase," whereby Mrs. Rigos "agreed,
promised and committed ... to sell" to Sanchez the sum of
P1,510.00, a parcel of land situated in the barrios of Abar and
Sibot, municipality of San Jose, province of Nueva Ecija, and
more particularly described in Transfer Certificate of Title No.
NT-12528 of said province, within two (2) years from said date
with the understanding that said option shall be deemed
"terminated and elapsed," if "Sanchez shall fail to exercise his
right to buy the property" within the stipulated period.
Inasmuch as several tenders of payment of the sum of
Pl,510.00, made by Sanchez within said period, were rejected by
Mrs. Rigos, on March 12, 1963, the former deposited said
amount with the Court of First Instance of Nueva Ecija and
commenced against the latter the present action, for specific
performance and damages.

After the filing of defendant's answer admitting some

allegations of the complaint, denying other allegations thereof,
and alleging, as special defense, that the contract between the
parties "is a unilateral promise to sell, and the same being
unsupported by any valuable consideration, by force of the New
Civil Code, is null and void" on February 11, 1964, both
parties, assisted by their respective counsel, jointly moved for a
judgment on the pleadings. Accordingly, on February 28, 1964,
the lower court rendered judgment for Sanchez, ordering Mrs.
Rigos to accept the sum judicially consigned by him and to
execute, in his favor, the requisite deed of conveyance. Mrs.
Rigos was, likewise, sentenced to pay P200.00, as attorney's
fees, and other costs. Hence, this appeal by Mrs. Rigos.
This case admittedly hinges on the proper application of Article
1479 of our Civil Code, which provides:
ART. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
In his complaint, plaintiff alleges that, by virtue of the option
under consideration, "defendant agreed and committed to sell"
and "the plaintiff agreed and committed to buy" the land
described in the option, copy of which was annexed to said
pleading as Annex A thereof and is quoted on the
margin. 1 Hence, plaintiff maintains that the promise contained
in the contract is "reciprocally demandable," pursuant to the
first paragraph of said Article 1479. Although defendant had
really "agreed, promised and committed" herself to sell the land
to the plaintiff, it is not true that the latter had, in turn, "agreed
and committed himself " to buy said property. Said Annex A
does not bear out plaintiff's allegation to this effect. What is
more, since Annex A has been made "an integral part" of his
complaint, the provisions of said instrument form part "and
parcel" 2 of said pleading.
The option did not impose upon plaintiff the obligation to
purchase defendant's property. Annex A is not a "contract to buy
and sell." It merely granted plaintiff an "option" to buy. And
both parties so understood it, as indicated by the caption,
"Option to Purchase," given by them to said instrument. Under
the provisions thereof, the defendant "agreed, promised and
committed" herself to sell the land therein described to the
plaintiff for P1,510.00, but there is nothing in the contract to
indicate that her aforementioned agreement, promise and
undertaking is supported by a consideration "distinct from the
price" stipulated for the sale of the land.
Relying upon Article 1354 of our Civil Code, the lower
court presumed the existence of said consideration, and this
would seem to be the main factor that influenced its decision in
plaintiff's favor. It should be noted, however, that:
(1) Article 1354 applies to contracts in general, whereas the
second paragraph of Article 1479 refers to "sales" in particular,
and, more specifically, to "an accepted unilateral promise to buy
or to sell." In other words, Article 1479 is controlling in the case
at bar.
(2) In order that said unilateral promise may be "binding upon
the promisor, Article 1479 requires the concurrence of a
condition, namely, that the promise be "supported by a
consideration distinct from the price." Accordingly, the promisee
can not compel the promisor to comply with the promise, unless
the former establishes the existence of said distinct
consideration. In other words, the promisee has the burden of
proving such consideration. Plaintiff herein has not even
alleged the existence thereof in his complaint.
(3) Upon the other hand, defendant explicitly averred in her
answer, and pleaded as a special defense, the absence of said
consideration for her promise to sell and, by joining in the
petition for a judgment on the pleadings, plaintiff has impliedly
admitted the truth of said averment in defendant's answer.
Indeed as early as March 14, 1908, it had been held,
in Bauermann v. Casas, 3 that:
One who prays for judgment on the pleadings without offering
proof as to the truth of his own allegations, and without giving
the opposing party an opportunity to introduce evidence, must
be understood to admit the truth of all the material and relevant
allegations of the opposing party, and to rest his motion for
judgment on those allegations taken together with such of his
own as are admitted in the pleadings. (La Yebana Company vs.
Sevilla, 9 Phil. 210). (Emphasis supplied.)
This view was reiterated in Evangelista v. De la
Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5
Squarely in point is Southwestern Sugar & Molasses Co. v.
Atlantic Gulf & Pacific Co., 6 from which We quote:
The main contention of appellant is that the option granted to
appellee to sell to it barge No. 10 for the sum of P30,000 under
the terms stated above has no legal effect because it is not
supported by any consideration and in support thereof it
invokes article 1479 of the new Civil Code. The article provides:
"ART. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the
price."
On the other hand, Appellee contends that, even granting that
the "offer of option" is not supported by any consideration, that
option became binding on appellant when the appellee gave
notice to it of its acceptance, and that having accepted it within
the period of option, the offer can no longer be withdrawn and
in any event such withdrawal is ineffective. In support this
contention, appellee invokes article 1324 of the Civil Code
which provides:
"ART. 1324. When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn any time before
acceptance by communicating such withdrawal, except when
the option is founded upon consideration as something paid or
promised."
There is no question that under article 1479 of the new Civil
Code "an option to sell," or "a promise to buy or to sell," as used
in said article, to be valid must be "supported by a
consideration distinct from the price." This is clearly inferred
from the context of said article that a unilateral promise to buy
or to sell, even if accepted, is only binding if supported by
consideration. In other words, "an accepted unilateral promise
can only have a binding effect if supported by a consideration
which means that the option can still be withdrawn, even if
accepted, if the same is not supported by any consideration. It
is not disputed that the option is without consideration. It can
therefore be withdrawn notwithstanding the acceptance of it by
appellee.
It is true that under article 1324 of the new Civil Code, the
general rule regarding offer and acceptance is that, when the
offerer gives to the offeree a certain period to accept, "the offer
may be withdrawn at any time before acceptance" except when
the option is founded upon consideration, but this general rule
must be interpreted as modified by the provision of article 1479
above referred to, which applies to "a promise to buy and
sell" specifically. As already stated, this rule requires that a
promise to sell to be valid must be supported by a consideration
distinct from the price.
We are not oblivious of the existence of American authorities
which hold that an offer, once accepted, cannot be withdrawn,
regardless of whether it is supported or not by a consideration
(12 Am. Jur. 528). These authorities, we note, uphold
the general rule applicable to offer and acceptance as contained
in our new Civil Code. But we are prevented from applying them
in view of the specific provision embodied in article 1479. While
under the "offer of option" in question appellant has assumed a
clear obligation to sell its barge to appellee and the option has
been exercised in accordance with its terms, and there appears
to be no valid or justifiable reason for appellant to withdraw its
offer, this Court cannot adopt a different attitude because the
law on the matter is clear. Our imperative duty is to apply it
unless modified by Congress.
However, this Court itself, in the case of Atkins, Kroll and Co.,
Inc. v. Cua Hian Tek, 8 decided later that Southwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction
between Articles 1324 and 1479 of the Civil Code and applied
the former where a unilateral promise to sell similar to the one
sued upon here was involved, treating such promise as an
option which, although not binding as a contract in itself for
lack of a separate consideration, nevertheless generated a
bilateral contract of purchase and sale upon acceptance.
Speaking through Associate Justice, later Chief Justice, Cesar
Bengzon, this Court said:
Furthermore, an option is unilateral: a promise to sell at the
price fixed whenever the offeree should decide to exercise his
option within the specified time. After accepting the promise
and before he exercises his option, the holder of the option is not
bound to buy. He is free either to buy or not to buy later. In this
case, however, upon accepting herein petitioner's offer a
bilateral promise to sell and to buy ensued, and the
respondent ipso facto assumed the obligation of a purchaser. He
did not just get the right subsequently to buy or not to buy. It
was not a mere option then; it was a bilateral contract of sale.
Lastly, even supposing that Exh. A granted an option which is
not binding for lack of consideration, the authorities hold that:
"If the option is given without a consideration, it is a mere offer
of a contract of sale, which is not binding until accepted. If,
however, acceptance is made before a withdrawal, it constitutes
a binding contract of sale, even though the option was not
supported by a sufficient consideration. ... . (77 Corpus Juris
Secundum, p. 652. See also 27 Ruling Case Law 339 and cases
cited.)
"It can be taken for granted, as contended by the defendant,
that the option contract was not valid for lack of consideration.
But it was, at least, an offer to sell, which was accepted by
letter, and of the acceptance the offerer had knowledge before
said offer was withdrawn. The concurrence of both acts the
offer and the acceptance could at all events have generated a
contract, if none there was before (arts. 1254 and 1262 of the
Civil Code)." (Zayco vs. Serra, 44 Phil. 331.)
In other words, since there may be no valid contract without a
cause or consideration, the promisor is not bound by his
promise and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the
nature of an offer to sell which, if accepted, results in a
perfected contract of sale.
This view has the advantage of avoiding a conflict between
Articles 1324 on the general principles on contracts and
1479 on sales of the Civil Code, in line with the cardinal
rule of statutory construction that, in construing different
provisions of one and the same law or code, such interpretation
should be favored as will reconcile or harmonize said provisions
and avoid a conflict between the same. Indeed, the presumption
is that, in the process of drafting the Code, its author has
maintained a consistent philosophy or position. Moreover, the
decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf
& Pacific Co., 10 holding that Art. 1324 is modified by Art. 1479
of the Civil Code, in effect, considers the latter as
an exception to the former, and exceptions are not favored,
unless the intention to the contrary is clear, and it is not so,
insofar as said two (2) articles are concerned. What is more, the
reference, in both the second paragraph of Art. 1479 and Art.
1324, to an option or promise supported by or founded upon a
consideration, strongly suggests that the two (2) provisions
intended to enforce or implement the same principle.
Upon mature deliberation, the Court is of the considered
opinion that it should, as it hereby reiterates the doctrine laid
down in the Atkins, Kroll & Co. case, and that, insofar as
inconsistent therewith, the view adhered to in the Southwestern
Sugar & Molasses Co. case should be deemed abandoned or
modified.
WHEREFORE, the decision appealed from is hereby affirmed,
with costs against defendant-appellant Severina Rigos. It is so
ordered.
Reyes, J.B.L., Makalintal, Zaldivar, Teehankee, Barredo and
Makasiar, JJ., concur.
Castro, J., took no part.
Separate Opinions
ANTONIO, J., concurring:
I concur in the opinion of the Chief Justice.
I fully agree with the abandonment of the view previously
adhered to in Southwestern Sugar & Molasses Co. vs. Atlantic
Gulf and Pacific Co., 1 which holds that an option to sell can still
be withdrawn, even if accepted, if the same is not supported by
any consideration, and the reaffirmance of the doctrine
in Atkins, Kroll & Co., Inc. vs. Cua Hian Tek, 2holding that "an
option implies ... the legal obligation to keep the offer (to sell)
open for the time specified;" that it could be withdrawn before
acceptance, if there was no consideration for the option, but
once the "offer to sell" is accepted, a bilateral promise to sell
and to buy ensues, and the offeree ipso facto assumes the
obligations of a purchaser. In other words, if the option is given
without a consideration, it is a mere offer to sell, which is not
binding until accepted. If, however, acceptance is made before a
withdrawal, it constitutes a binding contract of sale. The
concurrence of both acts the offer and the acceptance
could in such event generate a contract.
While the law permits the offeror to withdraw the offer at any
time before acceptance even before the period has expired, some
writers hold the view, that the offeror can not exercise this right
in an arbitrary or capricious manner. This is upon the principle
that an offer implies an obligation on the part of the offeror to
maintain in such length of time as to permit the offeree to
decide whether to accept or not, and therefore cannot arbitrarily
revoke the offer without being liable for damages which the
offeree may suffer. A contrary view would remove the stability
and security of business transactions. 3
In the present case the trial court found that the "Plaintiff
(Nicolas Sanchez) had offered the sum of Pl,510.00 before any
withdrawal from the contract has been made by the Defendant
(Severina Rigos)." Since Rigos' offer sell was accepted by
Sanchez, before she could withdraw her offer, a bilateral
reciprocal contract to sell and to buy was generated.

SECOND DIVISION
SPOUSES ALFREDO and G.R. No. 139233
BRIGIDA ROSARIO,
Petitioners,
- versus -
PCI LEASING AND FINANCE, INC.,
Respondent.
Promulgated:
November 11, 2005
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari[1] of the
Decision[2] dated June 30, 1999, of the Court of Appeals (CA) in
CA-G.R. SP No. 56081 affirming the decision of the Regional
Trial Court (RTC) of Dagupan City, Branch 44, holding the
spouses Alfredo and Brigida Rosario, jointly and severally, liable
to PCI Leasing and Finance, Inc. (PCI Leasing) for the sum
of P338,786.03, with interest, attorneys fees and costs.
The antecedent facts of the case are as follows:
On April 18, 1994, the spouses Rosario
purchased an Isuzu Elf Pick-up Utility vehicle from
CarMerchants, Inc. The transaction was covered by a
Purchase Agreement whereby the spouses undertook to
make a downpayment of P190,000.00 of the total
purchase price of P380,000.00. The spouses then
applied for a loan with PCI Leasing to pay for the balance
of P190,000.00.
Upon the approval of their loan application, the spouses
Rosario executed a Promissory Note[3] on May 6, 1994, in
favor of PCI Leasing covering the amount of the loan
plus P84,008.00 as finance charges, in the total amount
of P274,008.00. The spouses undertook to pay the loan
in monthly installments of P11,417.00, payable on the
29th day of each month starting on May 29, 1994 to April
29, 1996, at 22.10% annual interest. The spouses
Rosario also agreed that, in case of default, the payment
of the outstanding sum with interest shall immediately
become due and payable. To secure the payment of the
loan, they executed, on the same day, a Chattel
Mortgage[4] in favor of PCI Leasing over the Isuzu Elf
4BD1. The motor vehicle was delivered to the spouses
and it was registered in their names on May 16, 1994. [5]
Despite demands,[6] the spouses Rosario failed to pay the
amortizations on their loan to PCI Leasing which, as of
November 29, 1995, amounted to P338,786.03, inclusive
of P20,000.00 attorneys fees.[7]
On January 25, 1995, PCI Leasing filed a
Complaint[8] against the spouses Rosario in the RTC of
Dagupan City for Sum of Money with Damages with a
Prayer for a Writ of Replevin. The case was docketed as
CV-95-00408-D.
After PCI Leasing posted the necessary bond for the
manual delivery of the motor vehicle, [9] the RTC issued
an Order[10] for the issuance of a writ of replevin. On
April 21, 1995, the Sheriff [11] seized the motor vehicle.
After five (5) days, without the court issuing an order
discharging the writ, the Sheriff turned over the
possession of the vehicle to PCI Leasing.[12]
In their Answer to the complaint, the spouses Rosario
alleged that the chattel mortgage they executed in favor
of PCI Leasing covering the motor vehicle was in effect a
contract of sale of personal property, payable in
installments to be governed by Article 1484 [13] of the New
Civil Code of the Philippines. They further alleged that
since PCI Leasing opted to foreclose the chattel
mortgage, it was estopped from collecting the balance of
their account under the promissory note and chattel
mortgage.[14] By way of counterclaim, the spouses
Rosario claimed P100,000.00 as moral damages
and P25,000.00 as attorneys fees, thus:
WHEREFORE, it is respectfully
prayed that the Complaint be dismissed, the
writ of replevin quashed or dissolved, and the
motor vehicle referred to therein returned and
restored to the possession of the defendants.
It is further prayed that the plaintiff be made
to pay the defendants the sum
of P100,000.00 as moral damages
and P25,000.00 as reimbursable attorneys
fees. It is finally prayed that the defendants
be granted such other measures of relief as
this Honorable Court may deem just and
equitable in the premises.[15]
PCI Leasing presented its evidence. When it was time
for the spouses Rosario to present their own evidence, they
failed to appear despite notice and were consequently declared
in default.[16]
The trial court rendered judgment on September 12,
1996 in favor of PCI Leasing. The trial court declared that the
spouses Rosario were only able to pay the monthly installments
on their loan from May to November 1994, and that, as of
November 29, 1995, their account was overdue by P338,786.03,
inclusive of attorneys fees and liquidated damages. The trial
court did not, however, resolve the issue of whether Article 1484
of the New Civil Code was applicable. The decretal portion of the
decision reads:
WHEREFORE, judgment is rendered
in favor of the plaintiff and against the
defendants, sentencing the defendants to pay
plaintiff the sum of P338,786.03 with interest
as stipulated in the contract plus the sum of
22.10% of the total amounts due for and as
attorneys fees, plus costs.
SO ORDERED.[17]
The spouses Rosario appealed the decision to the CA
and ascribed the following errors to the trial court:
I. THE LOWER COURT ERRED IN NOT
HOLDING AND DECLARING THAT THE
PLAINTIFF-APPELLEE WAS IN FACT THE
ASSIGNEE OR ONE SUBROGATED TO THE
RIGHTS AND OBLIGATIONS OF THE SELLER
OF THE MOTOR VEHICLE,
CARMERCHANTS, INC.;
II. THE LOWER COURT ERRED IN
ADJUDGING THE DEFENDANTS-
APPELLANTS LIABLE FOR THE UNPAID
BALANCE UNDER THE CHATTEL
 MORTGAGE AS WELL AS FOR DAMAGES,
INTEREST AND ATTORNEYS FEES.[18]
The spouses Rosario averred that, based on the
evidence on record, CarMerchants, Inc. had assigned to PCI
Leasing its right to collect the balance of the purchase price of
the motor vehicle; hence, it was subrogated to the rights of
CarMerchants, Inc., subject to the limitations and burdens
provided for by law. The spouses Rosario maintained that, by
securing a writ of replevin from the RTC, PCI Leasing had opted
to foreclose the chattel mortgage under Article 1484 of the New
Civil Code; thus, it was barred from suing for the unpaid
balance of the purchase price of the vehicle.
On June 30, 1999, the CA rendered judgment
dismissing the appeal, declaring that the spouses Rosario failed
to prove their claim that PCI Leasing had agreed to be
subrogated to the right of CarMerchants, Inc. to collect the
unpaid balance of the purchase price of the motor vehicle. The
appellate court also ruled that even if Article 1484 of the New
Civil Code were to be applied, the chattel mortgage had not been
foreclosed; hence, PCI Leasing was not precluded from collecting
the balance of the appellants account. It held that the remedy
of the unpaid seller under Article 1484 of the New Civil Code is
alternative and not cumulative.[19]
The spouses Rosario, now the petitioners, filed
the instant petition, raising the following as errors
committed by the CA:
(1) FOR NOT HOLDING THAT
THE RESPONDENT WAS IN FACT AN
ASSIGNEE AND SUBROGATED TO THE
RIGHTS AND THE LIMITATIONS
THEREOF OF CARMERCHANTS, INC.,
AS SELLER OF THE MOTOR VEHICLE
BY INSTALLMENT;
(2) FOR NOT APPLYING THE
PROVISIONS OF ART. 1484 OF THE
CIVIL CODE AND THE DECISIONS OF
THE SUPREME COURT RELEVANT
THERETO IN RESOLVING THE APPEAL
BEFORE IT;
(3) FOR AFFIRMING THE
DECISION OF THE TRIAL COURT
SENTENCING THE PETITIONERS TO
PAY THE UNPAID INSTALLMENTS
UNDER THE PROMISSORY NOTE AS
WELL AS DAMAGES, INTERESTS AND
EXCESSIVE ATTORNEYS FEES
DESPITE RESPONDENTS
REPOSSESSION OF THE MOTOR
VEHICLE.
The petitioners arguments are basically a rehash
of what they submitted in their appeal before the
appellate court. They aver that since respondent PCI
Leasing was an assignee of CarMerchants, Inc., it was
proscribed from collecting from them the balance of the
purchase price of the vehicle after having taken
possession of the chattel for purposes of foreclosure.
They maintain that the respondent is not entitled to
damages and attorneys fees.
The petition is partially granted.
The Court notes that the principal issues raised
by the petitioners are factual: (1) whether the
respondent, based on the evidence on record, is the
assignee of the petitioners account with CarMerchants,
Inc. (as the vendor of the motor vehicle), and (2) whether
the respondent is entitled to attorneys fees of 22.10% of
the total amount due from the petitioners. It is settled
that in a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, only questions of law
may be raised.[20] This rule, however, is not without
exceptions. Factual issues may be resolved by this Court
in cases where (1) the conclusion is a finding grounded
entirely on speculation, surmise and conjecture; (2) the
inference made is manifestly mistaken; (3) there is grave
abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are
conflicting; (6) the CA went beyond the issues of the case
and its findings are contrary to the admissions of both
appellant and appellees; (7) the findings of fact of the CA
are contrary to those of the trial court; (8) said findings
of fact are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth
in the petition as well as in the petitioners main and
reply briefs are not disputed by the respondents; and
(10) the findings of fact of the CA are premised on the
supposed absence of evidence and contradicted by the
evidence on record.[21] Upon careful review of the records,
the Court finds that the RTC and the CA misappreciated
the evidence on record and as such, the ruling in this
case needs to be modified.
On the first issue, there is no factual basis for
the petitioners claim that CarMerchants, Inc. had
assigned its rights to collect the balance of the purchase
price to the respondent. The fact of the matter is that the
petitioners admitted in their petition at bench that they
were declared in default and failed to prove such claim.
The evidence on record clearly shows that the petitioners
secured a loan from the respondent to pay
the P190,000.00 balance to CarMerchants, Inc., and
even executed a promissory note evidencing their loan in
favor of the respondent. The petitioners forthwith
executed a chattel mortgage in favor of the respondent
over the vehicle as security for the payment of their loan
and the interests thereon.
It bears stressing that, under Article 1625 of the
New Civil Code, an assignment of credit, right or action
must appear in a public document to bind third persons.
There is no evidence on record to prove that Car
Merchants, Inc. executed such a deed, assigning its right
to collect the balance of the purchase price of the vehicle
from the petitioners; hence, Article 1484 of the New Civil
Code does not apply in this case.
Even a cursory reading of the respondents
complaint in the RTC will readily show that the
respondent did not allege that it was the assignee of
CarMerchants, Inc. insofar as the right to collect the
balance of the purchase price of the vehicle from the
petitioners was concerned. Neither did the respondent
adduce any evidence that it was such assignee. The
respondent sued the petitioners for sum of money with
prayer for a writ of replevin based on the promissory
note and the chattel mortgage executed by the
petitioners in its favor.
Even assuming that the respondent is the
assignee of CarMerchants, Inc. and that Article 1484 of
the New Civil Code is applicable, it is not proscribed
from suing the petitioners for their unpaid balance. The
fact of the matter is that the respondent did not foreclose
the chattel mortgage, but opted to sue the petitioners for
the balance of their account under the promissory note,
with a plea for a writ of replevin. By securing a writ of
replevin, the respondent did not thereby foreclose the
chattel mortgage. As correctly ruled by the CA:
We rule: if there has been no foreclosure
of the chattel mortgage or a foreclosure sale,
then the prohibition against further collection of
the balance of the price does not apply. Where
the remedy is not foreclosure of the chattel
mortgage, but specific performance of the
obligation to do payment, then the levy on the
property is indeed not a foreclosure of the
mortgage but is instead a levy on execution
(Tanjanlangit, et al. v. Southern Motors, Inc., L-
10789, May 28, 1957; Southern Motors v.
Moscoso, 2 SCRA 168).
A creditor is not obliged to foreclose a chattel
mortgage even if there is one; precisely the law says
that any of the remedies may be exercised by the
seller. He may still sue for fulfillment or for
cancellation of the obligation, if he does not want to
foreclose (Bachrach Motor Co. v. Millan, 61 Phil. 409).
As a matter of fact, he may avail himself of remedy no.
1 (specific performance) and may still ask that a real
estate mortgage be executed to secure the payment of
the obligation, in which case, and in the event of
foreclosure, there can still be recovery of the deficiency
(Manila Trading v. Jalandoni [CA]O.G., August 31,
1941, p. 1698).
In the case before Us, that there was
foreclosure of the chattel mortgage has not been
established; as a matter of fact, this is not obvious
either in the evidence having been presented to the
court. What is only apparent was the execution of the
promissory note and the chattel mortgage.[22]
Anent the award of 22.10% of the total amount due as
attorneys fees, this Court finds the same to be without basis.
The trial court awarded the
same without stating the reason therefor.[23] Moreover, as
gleaned from the Statement of Account[24] issued by the
respondent, the P338,786.03 sought to be collected from the
petitioners already includes the legal expenses and attorneys
fees of the respondent. Thus, the award of attorneys fees should
be deleted.
IN LIGHT OF ALL THE FOREGOING, the petition is
hereby PARTIALLY GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 56081 is AFFIRMED WITH
MODIFICATION, in that the award of 22.10% of the total
amount due for and as attorneys fees is DELETED. No costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 72306. January 24, 1989.]
DAVID P. FORNILDA, JUAN P. FORNILDA, EMILIA P.
FORNILDA OLILI, LEOCADIA P. FORNILDA LABAYEN
and ANGELA P. FORNILDA GUTIERREZ, Petitioners,
v. THE BRANCH 164, REGIONAL TRIAL COURT IVTH
JUDICIAL REGION, PASIG, JOAQUIN C. ANTONIL,
Deputy Sheriff, RTC, 4JR Tanay, Rizal and ATTY.
SERGIO AMONOY, Respondents.
Irene C. Ishiwata for petitioner A. Gutierrez.
MELENCIO-HERRERA, J.:
On 5 October 1988, this Court rendered a Decision, the
dispositive portion of which reads:jgc:chanrobles.com.ph
"WHEREFORE, Certiorari is granted; the Order of
respondent Trial Court, dated 25 July 1985, granting a
Writ of Possession, as well as its Orders, dated 25 April
1986 and 16 May 1986, directing and authorizing
respondent Sheriff to demolish the houses of petitioners
Angela and Leocadia Fornilda are hereby set aside, and
the Temporary Restraining Order heretofore issued, is
made permanent. The six (6) parcels of land herein
controverted are hereby ordered returned to petitioner
unless some of them have been conveyed to innocent
third persons.
"With respect to petitioners prayer for disbarment by
reason of malpractice of Respondent Amonoy embodied
in their pleading entitled "Mahigpit na Musiyun para
Papanagutin Kaugnay ng Paglalapastangan" and
"Masasamang Gawain (Mal-Practices)" and
"Paninindigan (Memorandum)" both filed on 16 June
1988, Respondent Sergio I. Amonoy is hereby required,
within fifteen (15) days from notice hereof, to submit an
answer thereto. After receipt of the same, a new docket
number will be assigned to the case.
"Costs against respondent, Sergio I. Amonoy." (pp. 497-
498, Rollo)
The case for disbarment is dealt with in a separate
Resolution of even date in AC No. 3277.
On 25 October 1988 respondent Amonoy filed his Motion
for Reconsideration, followed by his "Supplemental
Arguments in Support of Motion for Reconsideration"
dated 8 November 1988. In essence, he advances the
following points:chanrob1es virtual 1aw library
1) The transaction involved herein being a mortgage,
Article 1491[5] of the Civil Code does not apply.
Consequently, the mortgage contract executed in favor of
respondent Amonoy is valid;
2) Article 1491[5] does not apply to foreclosure sales in
favor of judgment creditors;
3) The instant petition is barred by res judicata;
4) The jurisdiction of the foreclosing court does not
depend on the alleged invalidity of the mortgage being
foreclosed. Thus, the lower court had jurisdiction over
the foreclosure case, the alleged invalidity of the contract
merely serving as a ground for the dismissal of the
petition due to lack of cause of action;
5) Under BP 129, only the Court of Appeals has original
and exclusive jurisdiction over actions for annulment of
judgment.
We find the foregoing submissions without merit.
Respondent Amonoy avers that at the time of the
execution of the mortgage on 20 January 1965, subject
properties were no longer "properties in litigation" since
the Project of Partition (as signed by the intestate heirs)
covering said properties was approved by the lower
Court as early as 12 January 1965.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
This argument must fail for the reason that while the
Project of Partition was approved on 12 January 1965, it
was only on 6 August 1969, and after all charges against
the estate had been paid, that the estate was declared
closed and terminated. In fact, by his own admission, he
had acted as counsel from 1959 until 1968 (Comment,
p. 145, Rollo). Thus, at the time of the execution of the
mortgage contract, the Controverted Parcels were still in
litigation and a fiduciary relationship of lawyer and
client, which Article 1491[5] precisely seeks to protect,
still existed between the parties. To state that mortgages
are not included within the prohibition is to open the
door to an indirect circumvention of that statutory
injunction, acquisition of the property being merely
postponed till eventual foreclosure.
Respondent asserts further that Article 1491[5] does not
apply to judgment creditors of which, he claims, he was
one. Under ordinary circumstances, the argument of
respondent could be considered plausible. Unfortunately,
however, as heretofore explained, the mortgage was
executed in violation of Article 1491[5] so that this
Article has a direct bearing on this case and respondent
can not escape its provision. Having violated the same,
he cannot be considered in the general run of a
judgment creditor.
Respondent likewise stresses that res judicata should
apply herein since it was a little more than four (4) years
from the 22 July 1981 Decision of the Court of Appeals
in the Annulment Case (CA-G.R. No. 63214-R) when this
Petition was filed. Consequently, he contends that this
Petition should be dismissed since it merely raises the
same issues brought up and already resolved in the
earlier case.
The question of res judicata and jurisdiction of the lower
Court over the subject matter of the Foreclosure Case
had been amply discussed in the Decision sought to be
reconsidered, citing the case of Municipality of Antipolo
v. Zapanta (133 SCRA 822 [1984]), and we find no need
to dwell on them again.
Neither of the cases cited by respondent to support his
contention that the lower Court had jurisdiction over the
Foreclosure Case notwithstanding the invalidity of the
mortgage contract, viz., Florentin v. Galera (5 SCRA 500
[1962] and Talosig v. Vda. de Nieba (43 SCRA 472
[1972]), refers to a void subject matter over which the
Courts involved could not acquire jurisdiction.
Finally, respondent movant submits that only the Court
of Appeals has original and exclusive jurisdiction over
actions for annulment of judgments of the lower Court
under BP Blg. 129 so that the Supreme Court should
not take cognizance of the instant case. The focal issue
raised herein, however, i.e., whether or not the
acquisition by respondent of the property in litigation is
valid or not, is a pure question of law. As such, this
Court is vested with jurisdiction to take cognizance of
this case.
ACCORDINGLY, private respondents Motion for
Reconsideration is hereby DENIED and this denial is
FINAL.
SO ORDERED.
SECOND DIVISION
G.R. No. 91029 February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,
vs.
THE COURT OF APPEALS & ALBERTO
NEPALES, respondents.
Jose D. Palma for petitioner.
Public Attorney's Office for private respondent.
GRIO-AQUINO, J.:
Subject of this petition for review is the decision of the
Court of Appeals (Seventeenth Division) in CA-G.R. No.
09149, affirming with modification the judgment of the
Regional Trial Court, Sixth (6th) Judicial Region, Branch
LVI. Himamaylan, Negros Occidental, in Civil Case No.
1272, which was private respondent Alberto Nepales'
action for specific performance of a contract of sale with
damages against petitioner Norkis Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is
the distributor of Yamaha motorcycles in Negros
Occidental with office in Bacolod City with Avelino
Labajo as its Branch Manager. On September 20, 1979,
private respondent Alberto Nepales bought from the
Norkis-Bacolod branch a brand new Yamaha Wonderbike
motorcycle Model YL2DX with Engine No. L2-329401K
Frame No. NL2-0329401, Color Maroon, then displayed
in the Norkis showroom. The price of P7,500.00 was
payable by means of a Letter of Guaranty from the
Development Bank of the Philippines (DBP), Kabankalan
Branch, which Norkis' Branch Manager Labajo agreed to
accept. Hence, credit was extended to Nepales for the
price of the motorcycle payable by DBP upon release of
his motorcycle loan. As security for the loan, Nepales
would execute a chattel mortgage on the motorcycle in
favor of DBP. Branch Manager Labajo issued Norkis
Sales Invoice No. 0120 (Exh.1) showing that the contract
of sale of the motorcycle had been perfected. Nepales
signed the sales invoice to signify his conformity with the
terms of the sale. In the meantime, however, the
motorcycle remained in Norkis' possession.
On November 6, 1979, the motorcycle was registered in
the Land Transportation Commission in the name of
Alberto Nepales. A registration certificate (Exh. 2) in his
name was issued by the Land Transportation
Commission on November 6, 1979 (Exh. 2-b). The
registration fees were paid by him, evidenced by an
official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a
certain Julian Nepales who was allegedly the agent of
Alberto Nepales but the latter denies it (p. 15, t.s.n.,
August 2, 1984). The record shows that Alberto and
Julian Nepales presented the unit to DBP's Appraiser-
Investigator Ernesto Arriesta at the DBP offices in
Kabankalan, Negros Occidental Branch (p. 12, Rollo).
The motorcycle met an accident on February 3, 1980 at
Binalbagan, Negros Occidental. An investigation
conducted by the DBP revealed that the unit was being
driven by a certain Zacarias Payba at the time of the
accident (p. 33, Rollo). The unit was a total wreck (p. 36,
t.s.n., August 2,1984; p. 13, Rollo), was returned, and
stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of
private respondent's motorcycle loan to Norkis in the
total sum of P7,500. As the price of the motorcycle later
increased to P7,828 in March, 1980, Nepales paid the
difference of P328 (p. 13, Rollo) and demanded the
delivery of the motorcycle. When Norkis could not deliver,
he filed an action for specific performance with damages
against Norkis in the Regional Trial Court of
Himamaylan, Negros Occidental, Sixth (6th) Judicial
Region, Branch LVI, where it was docketed as Civil Case
No. 1272. He alleged that Norkis failed to deliver the
motorcycle which he purchased, thereby causing him
damages.
Norkis answered that the motorcycle had already been
delivered to private respondent before the accident,
hence, the risk of loss or damage had to be borne by him
as owner of the unit.
After trial on the merits, the lower court rendered a
decision dated August 27, 1985 ruling in favor of private
respondent (p. 28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of
the plaintiff and against the defendants. The
defendants are ordered to pay solidarity to the
plaintiff the present value of the motorcycle
which was totally destroyed, plus interest
equivalent to what the Kabankalan Sub-Branch
of the Development Bank of the Philippines will
have to charge the plaintiff on fits account, plus
P50.00 per day from February 3, 1980 until full
payment of the said present value of the
motorcycle, plus P1,000.00 as exemplary
damages, and costs of the litigation. In lieu of
paying the present value of the motorcycle, the
defendants can deliver to the plaintiff a brand-
new motorcycle of the same brand, kind, and
quality as the one which was totally destroyed in
their possession last February 3, 1980. (pp. 28-
29, Rollo.)
On appeal, the Court of appeals affirmed the appealed
judgment on August 21, 1989, but deleted the award of
damages "in the amount of Fifty (P50.00) Pesos a day
from February 3, 1980 until payment of the present
value of the damaged vehicle" (p35, Rollo). The Court of
Appeals denied Norkis' motion for reconsideration.
Hence, this Petition for Review.
The principal issue in this case is who should bear the
loss of the motorcycle. The answer to this question would
depend on whether there had already been a transfer of
ownership of the motorcycle to private respondent at the
time it was destroyed.
Norkis' theory is that:
. . . After the contract of sale has been perfected
(Art. 1475) and even before delivery, that is, even
before the ownership is transferred to the
vendee, the risk of loss is shifted from the
vendor to the vendee. Under Art. 1262, the
obligation of the vendor to deliver
a determinate thing becomes extinguished if the
thing is lost by fortuitous event (Art. 1174), that
is, without the fault or fraud of the vendor and
before he has incurred in delay (Art. 11 65, par.
3). If the thing sold is generic, the loss or
destruction does not extinguish the obligation
(Art. 1263). A thing is determinate when it is
particularly designated or physically segregated
from all others of the same class (Art. 1460).
Thus, the vendor becomes released from his
obligation to deliver the determinate thing sold
while the vendee's obligation to pay the price
subsists. If the vendee had paid the price in
advance the vendor may retain the same. The
legal effect, therefore, is that the vendee
assumes the risk of loss by fortuitous event (Art.
1262) after the perfection of the contract to the
time of delivery. (Civil Code of the Philippines,
Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.)
Norkis concedes that there was no "actual" delivery of
the vehicle. However, it insists that there was
constructive delivery of the unit upon: (1) the issuance of
the Sales Invoice No. 0120 (Exh. 1) in the name of the
private respondent and the affixing of his signature
thereon; (2) the registration of the vehicle on November
6, 1979 with the Land Transportation Commission in
private respondent's name (Exh. 2); and (3) the issuance
of official receipt (Exh. 3) for payment of registration fees
(p. 33, Rollo).
That argument is not well taken. As pointed out by the
private respondent, the issuance of a sales invoice does
not prove transfer of ownership of the thing sold to the
buyer. An invoice is nothing more than a detailed
statement of the nature, quantity and cost of the thing
sold and has been considered not a bill of sale (Am. Jur.
2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of
delivery whether constructive or actual, be coupled with
the intention of delivering the thing. The act, without the
intention, is insufficient (De Leon, Comments and Cases
on Sales, 1978 Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the
name of private respondent, Norkis did not intend yet to
transfer the title or ownership to Nepales, but only to
facilitate the execution of a chattel mortgage in favor of
the DBP for the release of the buyer's motorcycle loan.
The Letter of Guarantee (Exh. 5) issued by the DBP,
reveals that the execution in its favor of a chattel
mortgage over the purchased vehicle is a pre-requisite for
the approval of the buyer's loan. If Norkis would not
accede to that arrangement, DBP would not approve
private respondent's loan application and, consequently,
there would be no sale.
In other words, the critical factor in the different modes
of effecting delivery, which gives legal effect to the act, is
the actual intention of the vendor to deliver, and its
acceptance by the vendee. Without that intention, there
is no tradition (Abuan vs. Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404,
408), this Court held:
The Code imposes upon the vendor the
obligation to deliver the thing sold. The thing is
 considered to be delivered when it is "placed in SO ORDERED.
the hands and possession of the vendee." (Civil
Code, Art. 1462). It is true that the same article
declares that the execution of a public
instrument is equivalent to the delivery of the
thing which is the object of the contract, but, in
order that this symbolic delivery may produce
the effect of tradition, it is necessary that the
vendor shall have had such control over the
thing sold that, at the moment of the sale, its
material delivery could have been made. It is not
enough to confer upon the purchaser
the ownership and the right of possession. The
thing sold must be placed in his control. When
there is no impediment whatever to prevent the
thing sold passing into the tenancy of the
purchaser by the sole will of the vendor,
symbolic delivery through the execution of a
public instrument is sufficient. But if
notwithstanding the execution of the instrument,
the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it
himself or through another in his name, because
such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to
reality-the delivery has riot been effects .
(Emphasis supplied.)

The Court of Appeals correctly ruled that the purpose of

the execution of the sales invoice dated September 20,
1979 (Exh. B) and the registration of the vehicle in the
name of plaintiff-appellee (private respondent) with the
Land Registration Commission (Exhibit C) was not to
transfer to Nepales the ownership and dominion over the
motorcycle, but only to comply with the requirements of
the Development Bank of the Philippines for processing
private respondent's motorcycle loan. On March 20,
1980, before private respondent's loan was released and
before he even paid Norkis, the motorcycle had already
figured in an accident while driven by one Zacarias FIRST DIVISION
Payba. Payba was not shown by Norkis to be a
representative or relative of private respondent. The GAISANO CAGAYAN, INC. G.R. No. 147839
latter's supposed relative, who allegedly took possession Petitioner,
of the vehicle from Norkis did not explain how Payba got
-versus-
hold of the vehicle on February 3, 1980. Norkis' claim
that Julian Nepales was acting as Alberto's agent when
INSURANCE COMPANY OF
he allegedly took delivery of the motorcycle (p. 20, NORTH AMERICA, Promulgated:
Appellants' Brief), is controverted by the latter. Alberto Respondent. June 8, 2006
denied having authorized Julian Nepales to get the x - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
motorcycle from Norkis Distributors or to enter into any
transaction with Norkis relative to said motorcycle. (p. 5, DECISION
t.s.n., February 6, 1985). This circumstances more than
amply rebut the disputable presumption of delivery upon AUSTRIA-MARTINEZ, J.:
which Norkis anchors its defense to Nepales' action (pp.
33-34, Rollo).
Before the Court is a petition for review on certiorari of the
Decision[1] dated October 11, 2000 of the Court of Appeals (CA)
Article 1496 of the Civil Code which provides that "in the in CA-G.R. CV No. 61848 which set aside the Decision dated
absence of an express assumption of risk by the buyer, August 31, 1998 of the Regional Trial Court, Branch 138,
the things sold remain at seller's risk until the Makati (RTC) in Civil Case No. 92-322 and upheld the causes of
ownership thereof is transferred to the buyer," is action for damages of Insurance Company of North America
applicable to this case, for there was neither an actual (respondent) against Gaisano Cagayan, Inc. (petitioner); and the
CA Resolution dated April 11, 2001 which denied petitioners
nor constructive delivery of the thing sold, hence, the
motion for reconsideration.
risk of loss should be borne by the seller, Norkis, which
was still the owner and possessor of the motorcycle when The factual background of the case is as follows:
it was wrecked. This is in accordance with the well-
known doctrine of res perit domino. Intercapitol Marketing Corporation (IMC) is the maker of
Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is
WHEREFORE, finding no reversible error in the decision the local distributor of products bearing trademarks
of the Court of Appeals in CA-G.R. No. 09149, we deny owned by Levi Strauss & Co.. IMC and LSPI separately
the petition for review and hereby affirm the appealed obtained from respondent fire insurance policies with
decision, with costs against the petitioner. book debt endorsements. The insurance policies provide
for coverage on book debts in connection with ready-
made clothing materials which have been sold or
delivered to various customers and dealers of the
Insured anywhere in the Philippines.[2] The policies
defined book debts as the unpaid account still appearing
in the Book of Account of the Insured 45 days after the
time of the loss covered under this Policy. [3] The policies
also provide for the following conditions:
1. Warranted that the Company shall
not be liable for any unpaid account
in respect of the merchandise sold
and delivered by the Insured which
are outstanding at the date of loss
for a period in excess of six (6)
months from the date of the
covering invoice or actual delivery of
the merchandise whichever shall
first occur.
2. Warranted that the Insured shall
submit to the Company within
twelve (12) days after the close of
every calendar month all amount
shown in their books of accounts as
unpaid and thus become receivable
item from their customers and
dealers. x x x[4]
xxxx
Petitioner is a customer and dealer of the
products of IMC and LSPI. On February 25, 1991, the
Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in
the items lost or destroyed in the fire were stocks of
ready-made clothing materials sold and delivered by IMC
and LSPI.
On February 4, 1992, respondent filed a
complaint for damages against petitioner. It alleges that
IMC and LSPI filed with respondent their claims under
their respective fire insurance policies with book debt
endorsements; that as of February 25, 1991, the unpaid
accounts of petitioner on the sale and delivery of ready-
made clothing materials with IMC was P2,119,205.00
while with LSPI it was P535,613.00; that respondent
paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against
petitioner; that respondent made several demands for
payment upon petitioner but these went unheeded.[5]
In its Answer with Counter Claim dated July 4,
1995, petitioner contends that it could not be held liable
because the property covered by the insurance policies
were destroyed due to fortuities event or force majeure;
that respondents right of subrogation has no basis
inasmuch as there was no breach of contract committed
by it since the loss was due to fire which it could not
prevent or foresee; that IMC and LSPI never
communicated to it that they insured their properties;
that it never consented to paying the claim of the
insured.[6]
At the pre-trial conference the parties failed to
arrive at an amicable settlement.[7] Thus, trial on the
merits ensued.
On August 31, 1998, the RTC rendered its
decision dismissing respondents complaint.[8] It held that
the fire was purely accidental; that the cause of the fire
was not attributable to the negligence of the petitioner;
that it has not been established that petitioner is the
debtor of IMC and LSPI; that since the sales invoices
state that it is further agreed that merely for purpose of
securing the payment of purchase price, the above-
described merchandise remains the property of the
vendor until the purchase price is fully paid, IMC and
LSPI retained ownership of the delivered goods and must
bear the loss.
Dissatisfied, petitioner appealed to the CA.
On October 11, 2000, the CA rendered its decision setting
[9]
aside the decision of the RTC. The dispositive portion of the
decision reads:
WHEREFORE, in view of the
foregoing, the appealed decision is
REVERSED and SET ASIDE and a new one is
entered ordering defendant-appellee Gaisano
Cagayan, Inc. to pay:
1. the amount of P2,119,205.60
representing the amount paid by the plaintiff-
appellant to the insured Inter Capitol
Marketing Corporation, plus legal interest
from the time of demand until fully paid;
2. the amount of P535,613.00
representing the amount paid by the plaintiff-
appellant to the insured Levi Strauss Phil.,
Inc., plus legal interest from the time of
demand until fully paid.
With costs against the defendant-
appellee.
SO ORDERED.[10]
The CA held that the sales invoices are proofs of sale,
being detailed statements of the nature, quantity and cost of the
thing sold; that loss of the goods in the fire must be borne by
petitioner since the proviso contained in the sales invoices is an
exception under Article 1504 (1) of the Civil Code, to the general
rule that if the thing is lost by a fortuitous event, the risk is
borne by the owner of the thing at the time the loss under the
principle of res perit domino; that petitioners obligation to IMC
and LSPI is not the delivery of the lost goods but the payment of
its unpaid account and as such the obligation to pay is not
extinguished, even if the fire is considered a fortuitous event;
that by subrogation, the insurer has the right to go against
petitioner; that, being a fire insurance with book debt
endorsements, what was insured was the vendors interest as a
creditor.[11]
Petitioner filed a motion for reconsideration [12] but it
was denied by the CA in its Resolution dated April 11, 2001.[13]
Hence, the present petition for review
on certiorari anchored on the following Assignment of Errors:
THE COURT OF APPEALS ERRED IN
HOLDING THAT THE INSURANCE IN THE
INSTANT CASE WAS ONE OVER CREDIT.
THE COURT OF APPEALS ERRED IN
HOLDING THAT ALL RISK OVER THE
SUBJECT GOODS IN THE INSTANT CASE
HAD TRANSFERRED TO PETITIONER UPON
DELIVERY THEREOF.
THE COURT OF APPEALS ERRED IN
HOLDING THAT THERE WAS AUTOMATIC
SUBROGATION UNDER ART. 2207 OF THE
CIVIL CODE IN FAVOR OF RESPONDENT.[14]
Anent the first error, petitioner contends that the
insurance in the present case cannot be deemed to be
over credit since an insurance on credit belies not only
the nature of fire insurance but the express terms of the
policies; that it was not credit that was insured since
respondent paid on the occasion of the loss of the
insured goods to fire and not because of the non-
payment by petitioner of any obligation; that, even if the
insurance is deemed as one over credit, there was no
loss as the accounts were not yet due since no prior
demands were made by IMC and LSPI against petitioner
for payment of the debt and such demands came from
respondent only after it had already paid IMC and LSPI
under the fire insurance policies.[15]
appellant and the appellee; (7) when the findings are
contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply
briefs are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record;
and (11) when the CA manifestly overlooked certain
relevant facts not disputed by the parties, which, if
properly considered, would justify a different
conclusion.[21] Exceptions (4), (5), (7), and (11) apply to
the present petition.

At issue is the proper interpretation of the

As to the second error, petitioner avers that despite
questioned insurance policy. Petitioner claims that the
delivery of the goods, petitioner-buyer IMC and LSPI
CA erred in construing a fire insurance policy on book
assumed the risk of loss when they secured fire
debts as one covering the unpaid accounts of IMC and
insurance policies over the goods.
LSPI since such insurance applies to loss of the ready-
Concerning the third ground, petitioner submits
made clothing materials sold and delivered to petitioner.
that there is no subrogation in favor of respondent as no
valid insurance could be maintained thereon by IMC and
The Court disagrees with petitioners stand.
LSPI since all risk had transferred to petitioner upon
delivery of the goods; that petitioner was not privy to the
It is well-settled that when the words of a
insurance contract or the payment between respondent
contract are plain and readily understood, there is no
and its insured nor was its consent or approval ever
room for construction.[22] In this case, the questioned
secured; that this lack of privity forecloses any real
insurance policies provide coverage for book debts in
interest on the part of respondent in the obligation to
connection with ready-made clothing materials which
pay, limiting its interest to keeping the insured goods
have been sold or delivered to various customers and
safe from fire.
dealers of the Insured anywhere in the Philippines. [23];
and defined book debts as the unpaid account still
For its part, respondent counters that while ownership
appearing in the Book of Account of the Insured 45 days
over the ready- made clothing materials was transferred
after the time of the loss covered under this Policy.
upon delivery to petitioner, IMC and LSPI have insurable [24]
Nowhere is it provided in the questioned insurance
interest over said goods as creditors who stand to suffer
policies that the subject of the insurance is the goods
direct pecuniary loss from its destruction by fire; that
sold and delivered to the customers and dealers of the
petitioner is liable for loss of the ready-made clothing
insured.
materials since it failed to overcome the presumption of
liability under Article 1265[16] of the Civil Code; that the
Indeed, when the terms of the agreement are
fire was caused through petitioners negligence in failing
clear and explicit that they do not justify an attempt to
to provide stringent measures of caution, care and
read into it any alleged intention of the parties, the
maintenance on its property because electric wires do
terms are to be understood literally just as they appear
not usually short circuit unless there are defects in their
on the face of the contract.[25] Thus, what were insured
installation or when there is lack of proper maintenance
against were the accounts of IMC and LSPI with
and supervision of the property; that petitioner is guilty
petitioner which remained unpaid 45 days after the loss
of gross and evident bad faith in refusing to pay
through fire, and not the loss or destruction of the goods
respondents valid claim and should be liable to
delivered.
respondent for contracted lawyers fees, litigation
expenses and cost of suit.[17]
Petitioner argues that IMC bears the risk of loss
because it expressly reserved ownership of the goods by
As a general rule, in petitions for review, the
stipulating in the sales invoices that [i]t is further agreed
jurisdiction of this Court in cases brought before it from
that merely for purpose of securing the payment of the
the CA is limited to reviewing questions of law which
purchase price the above described merchandise
involves no examination of the probative value of the
remains the property of the vendor until the purchase
evidence presented by the litigants or any of them. [18] The
price thereof is fully paid.[26]
Supreme Court is not a trier of facts; it is not its
function to analyze or weigh evidence all over again.
[19] The Court is not persuaded.
Accordingly, findings of fact of the appellate court are
generally conclusive on the Supreme Court. [20]
The present case clearly falls under paragraph
(1), Article 1504 of the Civil Code:
Nevertheless, jurisprudence has recognized
several exceptions in which factual issues may be ART. 1504. Unless otherwise
resolved by this Court, such as: (1) when the findings agreed, the goods remain at the sellers
are grounded entirely on speculation, surmises or risk until the ownership therein is
conjectures; (2) when the inference made is manifestly transferred to the buyer, but when the
mistaken, absurd or impossible; (3) when there is grave ownership therein is transferred to the
abuse of discretion; (4) when the judgment is based on buyer the goods are at the buyers risk
a misapprehension of facts; (5) when the findings of whether actual delivery has been made
facts are conflicting; (6) when in making its findings or not, except that:
the CA went beyond the issues of the case, or
its findings are contrary to the admissions of both the
 (1) Where delivery of the goods
has been made to the buyer or to a
bailee for the buyer, in pursuance of the
contract and the ownership in the
goods has been retained by the seller
merely to secure performance by the
buyer of his obligations under the
contract, the goods are at the buyers
risk from the time of such
delivery; (Emphasis supplied)
xxxx
Thus, when the seller retains ownership only to
insure that the buyer will pay its debt, the risk of loss is
borne by the buyer.[27] Accordingly, petitioner bears the
risk of loss of the goods delivered.
IMC and LSPI did not lose complete interest over
the goods. They have an insurable interest until full
payment of the value of the delivered goods. Unlike the
civil law concept of res perit domino, where ownership is
the basis for consideration of who bears the risk of loss,
in property insurance, ones interest is not determined by
concept of title, but whether insured has substantial
economic interest in the property. [28]
Section 13 of our Insurance Code defines
insurable interest as every interest in property, whether
real or personal, or any relation thereto, or liability in
respect thereof, of such nature that a contemplated peril
might directly damnify the insured. Parenthetically,
under Section 14 of the same Code, an insurable interest
in property may consist in: (a) an existing interest; (b) an
inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out
of which the expectancy arises.
Therefore, an insurable interest in property does
not necessarily imply a property interest in, or a lien
upon, or possession of, the subject matter of the
insurance, and neither the title nor a beneficial interest
is requisite to the existence of such an interest, it is
sufficient that the insured is so situated with reference
to the property that he would be liable to loss should it
be injured or destroyed by the peril against which it is
insured.[29] Anyone has an insurable interest in property
who derives a benefit from its existence or would suffer
loss from its destruction.[30] Indeed, a vendor or seller
retains an insurable interest in the property sold so long
as he has any interest therein, in other words, so long as
he would suffer by its destruction, as where he has a
vendors lien.[31] In this case, the insurable interest of IMC
and LSPI pertain to the unpaid accounts appearing in their
Books of Account 45 days after the time of the loss covered by
the policies.
The next question is: Is petitioner liable for the unpaid
accounts?
Petitioners argument that it is not liable because the
fire is a fortuitous event under Article 1174[32] of the Civil Code
is misplaced. As held earlier, petitioner bears the loss under
Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance
in this case is not for loss of goods by fire but for
petitioners accounts with IMC and LSPI that remained
unpaid 45 days after the fire. Accordingly, petitioners
obligation is for the payment of money. As correctly
stated by the CA, where the obligation consists in the
payment of money, the failure of the debtor to make the
payment even by reason of a fortuitous event shall not
relieve him of his liability.[33] The rationale for this is that
the rule that an obligor should be held exempt from
liability when the loss occurs thru a fortuitous event
only holds true when the obligation consists in the
delivery of a determinate thing and there is no
stipulation holding him liable even in case of fortuitous
event. It does not apply when the obligation is pecuniary
in nature.[34]
Under Article 1263 of the Civil Code, [i]n an
obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not
extinguish the obligation. If the obligation is generic in
the sense that the object thereof is designated merely by
its class or genus without any particular designation or
physical segregation from all others of the same class,
the loss or destruction of anything of the same kind even
without the debtors fault and before he has incurred in
delay will not have the effect of extinguishing the
obligation.[35] This rule is based on the principle that the
genus of a thing can never perish. Genus nunquan perit.
[36]
An obligation to pay money is generic; therefore, it is
not excused by fortuitous loss of any specific property of
the debtor.[37]
Thus, whether fire is a fortuitous event or
petitioner was negligent are matters immaterial to this
case. What is relevant here is whether it has been
established that petitioner has outstanding accounts
with IMC and LSPI.
With respect to IMC, the respondent has
adequately established its claim. Exhibits C to C-
22[38] show that petitioner has an outstanding account
with IMC in the amount of P2,119,205.00. Exhibit E[39] is
the check voucher evidencing payment to IMC. Exhibit
F[40] is the subrogation receipt executed by IMC in favor of
respondent upon receipt of the insurance proceeds. All
these documents have been properly
identified, presented and marked as exhibits in
court. The subrogation receipt, by itself, is sufficient to
establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount
paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the
insurance company of the insurance claim.
[41]
Respondents action against petitioner is squarely
sanctioned by Article 2207 of the Civil Code which
provides:
Art. 2207. If the plaintiffs
property has been insured, and he has
received indemnity from the insurance
company for the injury or loss arising
out of the wrong or breach of contract
complained of, the insurance company
shall be subrogated to the rights of the
insured against the wrongdoer or the
person who has violated the
contract. x x x
Petitioner failed to refute respondents evidence.
As to LSPI, respondent failed to present
sufficient evidence to prove its cause of action. No
evidentiary weight can be given to Exhibit F Levi
Strauss,[42] a letter dated April 23, 1991 from petitioners
General Manager, Stephen S. Gaisano, Jr., since it is not
an admission of petitioners unpaid account with LSPI. It
only confirms the loss of Levis products in the amount
of P535,613.00 in the fire that razed petitioners building
on February 25, 1991.
Moreover, there is no proof of full settlement of
the insurance claim of LSPI; no subrogation receipt was
offered in evidence. Thus, there is no evidence that
respondent has been subrogated to any right which LSPI
may have against petitioner. Failure to substantiate the
claim of subrogation is fatal to petitioners case for
recovery of the amount of P535,613.00.
WHEREFORE, the petition is partly GRANTED.
The assailed Decision dated October 11, 2000 and
Resolution dated April 11, 2001 of the Court of Appeals
in CA-G.R. CV No. 61848 are AFFIRMED with
the MODIFICATION that the order to pay the amount
of P535,613.00 to respondent is DELETED for lack of
factual basis.
No pronouncement as to costs.
SO ORDERED.