its desire to lease a portion of the property for its
ceramic manufacturing business. On 24 August
[G.R. No. 143513. November 14, 2001]
POLYTECHNIC UNIVERSITY OF THE
PHILIPPINES, petitioner, vs.
COURT OF APPEALS and
FIRESTONE CERAMICS,
INC., respondents.
[G.R. No. 143590. November 14, 2001]
NATIONAL DEVELOPMENT
CORPORATION, petitioner, vs. FI
RESTONE CERAMICS,
INC., respondents.
DECISION
BELLOSILLO, J.:
A litigation is not simply a contest of litigants
before the bar of public opinion; more than that, it is
a pursuit of justice through legal and equitable
means. To prevent the search for justice from
evolving into a competition for public approval,
society invests the judiciary with complete
independence thereby insulating it from demands
expressed through any medium, the press not
excluded. Thus, if the court would merely reflect,
and worse, succumb to the great pressures of the
day, the end result, it is feared, would be a travesty
of justice.
In the early sixties, petitioner National
Development Corporation (NDC), a government
owned and controlled corporation created under CA
182 as amended by CA 311 and PD No. 668, had in
its disposal a ten (10)-hectare property located
along Pureza St., Sta. Mesa, Manila. The estate was
popularly known as the NDC compound and
covered by Transfer Certificates of Title Nos.
92885, 110301 and 145470.
Sometime in May 1965 private respondent
Firestone Ceramics Inc. (FIRESTONE) manifested
1965 NDC and FIRESTONE entered into a contract
of lease denominated as Contract No. C-30-65
covering a portion of the property measured at
2.90118 hectares for use as a manufacturing plant
for a term of ten (10) years, renewable for another
ten (10) years under the same terms and
conditions.[1] In consequence of the agreement,
FIRESTONE constructed on the leased premises
several warehouses and other improvements needed
for the fabrication of ceramic products.
Three and a half (3-1/2) years later, or on 8
January 1969, FIRESTONE entered into a second
contract of lease with NDC over the latter's four (4)-
unit pre-fabricated reparation steel warehouse
stored in Daliao, Davao. FIRESTONE agreed to
ship the warehouse to Manila for eventual assembly
within the NDC compound. The second contract,
denominated as Contract No. C-26-68, was for
similar use as a ceramic manufacturing plant and
was agreed expressly to be "co-extensive with the
lease of LESSEE with LESSOR on the 2.60
hectare-lot."[2]
On 31 July 1974 the parties signed a similar
contract concerning a six (6)-unit pre-fabricated
steel warehouse which, as agreed upon by the
parties, would expire on 2 December 1978.[3] Prior
to the expiration of the aforementioned contract,
FIRESTONE wrote NDC requesting for an
extension of their lease agreement. Consequently on
29 November 1978 the Board of Directors of NDC
adopted Resolution No. 11-78-117 extending the
term of the lease, subject to several conditions
among which was that in the event NDC "with the
approval of higher authorities, decide to dispose and
sell these properties including the lot, priority
should be given to the LESSEE"[4] (underscoring
supplied). On 22 December 1978, in pursuance of
the resolution, the parties entered into a new
agreement for a ten-year lease of the property,
renewable for another ten (10) years, expressly
granting FIRESTONE the first option to purchase
the leased premises in the event that it decided "to
dispose and sell these properties including the lot . .
. . "[5]
The contracts of lease conspicuously contain an
identically worded provision requiring
FIRESTONE to construct buildings and other
improvements within the leased premises worth
several hundred thousands of pesos.[6]
The parties' lessor-lessee relationship went
smoothly until early 1988 when FIRESTONE,
cognizant of the impending expiration of their lease
agreement with NDC, informed the latter through
several letters and telephone calls that it was
renewing its lease over the property. While its letter
of 17 March 1988 was answered by Antonio A.
Henson, General Manager of NDC, who promised
immediate action on the matter, the rest of its
communications remained
unacknowledged.[7] FIRESTONE's predicament
worsened when rumors of NDC's supposed plans to
dispose of the subject property in favor of petitioner
Polytechnic University of the Philippines (PUP)
came to its knowledge. Forthwith, FIRESTONE
served notice on NDC conveying its desire to
purchase the property in the exercise of its
contractual right of first refusal.
Apprehensive that its interest in the property
would be disregarded, FIRESTONE instituted an
action for specific performance to compel NDC to
sell the leased property in its favor. FIRESTONE
averred that it was pre-empting the impending sale
of the NDC compound to petitioner PUP in
violation of its leasehold rights over the 2.60-
hectare[8] property and the warehouses thereon
which would expire in 1999. FIRESTONE likewise
prayed for the issuance of a writ of preliminary
injunction to enjoin NDC from disposing of the
property pending the settlement of the
controversy.[9]
In support of its complaint, FIRESTONE
adduced in evidence a letter of Antonio A. Henson
dated 15 July 1988 addressed to Mr. Jake C.
Lagonera, Director and Special Assistant to
Executive Secretary Catalino Macaraeg, reviewing
a proposed memorandum order submitted to then
President Corazon C. Aquino transferring the whole
NDC compound, including the leased property, in
favor of petitioner PUP.Attached to the letter was a
draft of the proposed memorandum order as well as
a summary of existing leases on the subject
property. The survey listed FIRESTONE as lessee
of a portion of the property, placed at
29,000[10] square meters, whose contract with NDC
was set to expire on 31 December 1989[11] renewable
for another ten (10) years at the option of the
lessee. The report expressly recognized
FIRESTONE's right of first refusal to purchase the
leased property "should the lessor decide to sell the
same."[12]
Meanwhile, on 21 February 1989 PUP moved
to intervene and asserted its interest in the subject
property, arguing that a "purchaser pendente lite of
property which is subject of a litigation is entitled to
intervene in the proceedings."[13] PUP referred
to Memorandum Order No. 214 issued by then
President Aquino ordering the transfer of the whole
NDC compound to the National Government, which
in turn would convey the aforementioned property
in favor of PUP at acquisition cost. The issuance
was supposedly made in recognition of PUP's status
as the "Poor Man's University" as well as its serious
need to extend its campus in order to accommodate
the growing student population. The order of
conveyance of the 10.31-hectare property would
automatically result in the cancellation of NDC's
total obligation in favor of the National Government
in the amount of P57,193,201.64.
Convinced that PUP was a necessary party to
the controversy that ought to be joined as party
defendant in order to avoid multiplicity of suits, the
trial court granted PUP's motion to
intervene.FIRESTONE moved for reconsideration
but was denied. On certiorari, the Court of Appeals
affirmed the order of the trial court. FIRESTONE
came to us on review but in a Resolution dated 11
July 1990 we upheld PUP's inclusion as party-
defendant in the present controversy.
Following the denial of its petition,
FIRESTONE amended its complaint to include PUP
and Executive Secretary Catalino Macaraeg, Jr., as
party-defendants, and sought the annulment
of Memorandum Order No. 214. FIRESTONE
alleged that although Memorandum Order No.
214 was issued "subject to such liens/leases existing
[on the subject property]," PUP disregarded and
violated its existing lease by increasing the rental
rate at P200,000.00 a month while demanding that it
vacated the premises immediately.[14] FIRESTONE
prayed that in the event Memorandum Order No.
214 was not declared unconstitutional, the property
should be sold in its favor at the price for which it
was sold to PUP - P554.74 per square meter or for a
total purchase price of P14,423,240.00.[15]
Petitioner PUP, in its answer to the amended
complaint, argued in essence that the lease contract
covering the property had expired long before the
institution of the complaint, and that further, the
right of first refusal invoked by FIRESTONE
applied solely to the six-unit pre-fabricated
warehouse and not the lot upon which it stood.
After trial on the merits, judgment was
rendered declaring the contracts of lease executed
between FIRESTONE and NDC covering the 2.60-
hectare property and the warehouses constructed
thereon valid and existing until 2 June 1999. PUP
was ordered and directed to sell to FIRESTONE the
"2.6 hectare leased premises or as may be
determined by actual verification and survey of the
actual size of the leased properties where plaintiff's
fire brick factory is located" at P1,500.00 per square
meter considering that, as admitted by
FIRESTONE, such was the prevailing market price
thereof.
The trial court ruled that the contracts of lease
executed between FIRESTONE and NDC were
interrelated and inseparable because "each of them
forms part of the integral system of plaintiff's brick
manufacturing plant x x x if one of the leased
premises will be taken apart or otherwise detached
from the two others, the purpose of the lease as well
as plaintiff's business operations would be rendered
useless and inoperative."[16] It thus decreed that
FIRESTONE could exercise its option to purchase
the property until 2 June 1999 inasmuch as the 22
December 1978 contract embodied a covenant to
renew the lease for another ten (10) years at the
option of the lessee as well as an agreement giving
the lessee the right of first refusal.
The trial court also sustained the
constitutionality of Memorandum Order No.
214 which was not per se hostile to FIRESTONE's
property rights, but deplored as prejudicial thereto
the "very manner with which defendants NDC and
PUP interpreted and applied the same, ignoring in
the process that plaintiff has existing contracts of
lease protectable by express provisions in the
Memorandum No. 214 itself."[17]It further explained
that the questioned memorandum was issued
"subject to such liens/leases existing thereon"[18] and
petitioner PUP was under express instructions "to
enter, occupy and take possession of the transferred
property subject to such leases or liens and
encumbrances that may be existing
thereon" (underscoring supplied).
[19]
Petitioners PUP, NDC and the Executive
Secretary separately filed their Notice of Appeal, but
a few days thereafter, or on 3 September 1996,
perhaps realizing the groundlessness and the futility
of it all, the Executive Secretary withdrew his
appeal.[20]
Subsequently, the Court of Appeals affirmed
the decision of the trial court ordering the sale of the
property in favor of FIRESTONE but deleted the
award of attorney's fees in the amount of Three
Hundred Thousand Pesos
(P300,000.00). Accordingly, FIRESTONE was
given a grace period of six (6) months from finality
of the court's judgment within which to purchase
the property in questioned in the exercise of its right
of first refusal. The Court of Appeals observed that
as there was a sale of the subject property, NDC
could not excuse itself from its obligation TO
OFFER THE PROPERTY FOR SALE FIRST TO
FIRESTONE BEFORE IT COULD TO OTHER
PARTIES. The Court of Appeals held: "NDC
cannot look to Memorandum Order No. 214 to
excuse or shield it from its contractual obligations
to FIRESTONE. There is nothing therein that
allows NDC to disavow or repudiate the solemn
engagement that it freely and voluntarily undertook,
or agreed to undertake."[21]
PUP moved for reconsideration asserting that
in ordering the sale of the property in favor of
FIRESTONE the courts a quo unfairly created a
contract to sell between the parties. It argued that
the "court cannot substitute or decree its mind or
consent for that of the parties in determining
whether or not a contract (has been) perfected
between PUP and NDC."[22] PUP further contended
that since "a real property located in Sta. Mesa can
readily command a sum of P10,000.00 per square
(meter)," the lower court gravely erred in ordering
the sale of the property at only P1,500.00 per square
meter. PUP also advanced the theory that the
enactment of Memorandum Order No.
214 amounted to a withdrawal of the option to
purchase the property granted to
FIRESTONE. NDC, for its part, vigorously
contended that the contracts of lease executed
between the parties had expired without being
renewed by FIRESTONE; consequently,
FIRESTONE was no longer entitled to any
preferential right in the sale or disposition of the
leased property.
We do not see it the way PUP and NDC did. It
is elementary that a party to a contract cannot
unilaterally withdraw a right of first refusal that
stands upon valuable consideration. That principle
was clearly upheld by the Court of Appeals when it
denied on 6 June 2000 the twin motions for
reconsideration filed by PUP and NDC on the
ground that the appellants failed to advance new
arguments substantial enough to warrant a reversal
of the Decision sought to be reconsidered.[23] On 28
June 2000 PUP filed an urgent motion for an
additional period of fifteen (15) days from 29 June
2000 or until 14 July 2000 within which to file
a Petition for Review on Certiorari of
the Decision of the Court of Appeals.
On the last day of the extended period PUP
filed its Petition for Review on Certiorari assailing
the Decision of the Court of Appeals of 6 December
1999 as well as the Resolution of 6 June 2000
denying reconsideration thereof. PUP raised two
issues: (a) whether the courts a quo erred when they
"conjectured" that the transfer of the leased property
from NDC to PUP amounted to a sale; and, (b)
whether FIRESTONE can rightfully invoke its right
of first refusal. Petitioner posited that if we were to
place our imprimatur on the decisions of the
courts a quo, "public welfare or specifically the
constitutional priority accorded to education" would
greatly be prejudiced.[24]
Paradoxically, our paramount interest in
education does not license us, or any party for that
matter, to destroy the sanctity of binding
obligations. Education may be prioritized for
legislative or budgetary purposes, but we doubt if
such importance can be used to confiscate private
property such as FIRESTONE's right of first
refusal.
On 17 July 2000 we denied PUP's motion for
extension of fifteen (15) days within which to
appeal inasmuch as the aforesaid pleading lacked an
affidavit of service of copies thereof on the Court of
Appeals and the adverse party, as well as written
explanation for not filing and serving the pleading
personally.[25]
Accordingly, on 26 July 2000 we issued
a Resolution dismissing PUP's Petition for
Review for having been filed out of time. PUP
moved for reconsideration imploring a resolution or
decision on the merits of its petition. Strangely,
about the same time, several articles came out in the
newspapers assailing the denial of the petition. The
daily papers reported that we unreasonably
dismissed PUP's petition on technical grounds,
affirming in the process the decision of the trial
court to sell the disputed property to the prejudice
of the government in the amount
of P1,000,000,000.00.[26] Counsel for petitioner
PUP, alleged that the trial court and the Court of
Appeals "have decided a question of substance in a
way definitely not in accord with law or
jurisprudence."[27]
At the outset, let it be noted that the amount
of P1,000,000,000.00 as reported in the papers was
way too exaggerated, if not fantastic. We stress that
NDC itself sold the whole 10.31-hectare property to
PUP at only P57,193,201.64 which represents
NDC's obligation to the national government that
was, in exchange, written off. The price offered per
square meter of the property was pegged
at P554.74.FIRESTONE's leased premises would
therefore be worth only P14,423,240.00. From any
angle, this amount is certainly far below the
ballyhooed price of P1,000,000,000.00.
On 4 October 2000 we granted PUP's Motion
for Reconsideration to give it a chance to ventilate
its right, if any it still had in the leased premises,
thereby paving the way for a reinstatement of
its Petition for Review.[28] In its appeal, PUP took to
task the courts a quo for supposedly "substituting or
decreeing its mind or consent for that of the parties
(referring to NDC and PUP) in determining whether
or not a contract of sale was perfected." PUP also
argued that inasmuch as "it is the parties alone
whose minds must meet in reference to the subject
matter and cause," it concluded that it was error for
the lower courts to have decreed the existence of a
sale of the NDC compound thus allowing
FIRESTONE to exercise its right of first refusal.
On the other hand, NDC separately filed its
own Petition for Review and advanced arguments
which, in fine, centered on whether or not the
transaction between petitioners NDC and PUP
amounted to a sale considering that ownership of
the property remained with the
government. Petitioner NDC introduced the novel
[29]
proposition that if the parties involved are both
government entities the transaction cannot be
legally called a sale.
In due course both petitions were
consolidated.[30]
 We believe that the courts a quo did not
hypothesize, much less conjure, the sale of the
disputed property by NDC in favor of petitioner
PUP. Aside from the fact that the intention of NDC
and PUP to enter into a contract of sale was clearly
expressed in the Memorandum Order No. 214,[31] a
close perusal of the circumstances of this case
strengthens the theory that the conveyance of the
property from NDC to PUP was one of absolute
sale, for a valuable consideration, and not a mere
paper transfer as argued by petitioners.
A contract of sale, as defined in the Civil Code,
is a contract where one of the parties obligates
himself to transfer the ownership of and to deliver a
determinate thing to the other or others who shall
pay therefore a sum certain in money or its
equivalent.[32] It is therefore a general requisite for
the existence of a valid and enforceable contract of
sale that it be mutually obligatory, i.e., there should
be a concurrence of the promise of the vendor to
sell a determinate thing and the promise of the
vendee to receive and pay for the property so
delivered and transferred. The Civil Code provision
is, in effect, a "catch-all" provision which
effectively brings within its grasp a whole gamut of
transfers whereby ownership of a thing is ceded for
a consideration.
Contrary to what petitioners PUP and NDC
propose, there is not just one party involved in the
questioned transaction. Petitioners NDC and PUP
have their respective charters and therefore each
possesses a separate and distinct individual
personality.[33] The inherent weakness of NDCs
proposition that there was no sale as it was only the
government which was involved in the transaction
thus reveals itself.Tersely put, it is not necessary to
write an extended dissertation on government
owned and controlled corporations and their legal
personalities. Beyond cavil, a government owned
and controlled corporation has a personality of its
own, distinct and separate from that of the
government.[34] The intervention in the transaction
of the Office of the President through the Executive
Secretary did not change the independent existence
of these entities. The involvement of the Office of
the President was limited to brokering the
consequent relationship between NDC and
PUP. But the withdrawal of the appeal by the
Executive Secretary is considered significant as he
knew, after a review of the records, that the
transaction was subject to existing liens and
encumbrances, particularly the priority to purchase
the leased premises in favor of FIRESTONE.
True that there may be instances when a
particular deed does not disclose the real intentions
of the parties, but their action may nevertheless
indicate that a binding obligation has been
undertaken. Since the conduct of the parties to a
contract may be sufficient to establish the existence
of an agreement and the terms thereof, it becomes
necessary for the courts to examine the
contemporaneous behavior of the parties in
establishing the existence of their contract.
The preponderance of evidence shows that
NDC sold to PUP the whole NDC compound,
including the leased premises, without the
knowledge much less consent of private respondent
FIRESTONE which had a valid and existing right
of first refusal.
All three (3) essential elements of a valid sale,
without which there can be no sale, were attendant
in the "disposition" and "transfer" of the property
from NDC to PUP - consent of the parties,
determinate subject
matter, and consideration therefor.
Consent to the sale is obvious from the
prefatory clauses of Memorandum Order No.
214 which explicitly states the acquiescence of the
parties to the sale of the property -
WHEREAS, PUP has expressed its
willingness to acquire said NDC properties
and NDC has expressed its willingness to
sell the properties to PUP (underscoring
supplied).[35]
Furthermore, the cancellation of NDC's
liabilities in favor of the National Government in
the amount of P57,193,201.64 constituted the
"consideration" for the sale. As correctly observed
by the Court of Appeals-
The defendants-appellants' interpretation that
there was a mere transfer, and not a sale, apart
from being specious sophistry and a mere play
of words, is too strained and hairsplitting. For
it is axiomatic that every sale imposes upon
the vendor the obligation to transfer
ownership as an essential element of the
contract. Transfer of title or an agreement to
transfer title for a price paid, or promised to
be paid, is the very essence of sale (Kerr &
Co. v. Lingad, 38 SCRA 524; Schmid &
Oberly, Inc., v. RJL Martinez Fishing Corp.,
166 SCRA 493). At whatever legal angle we
view it, therefore, the inescapable fact remains
that all the requisites of a valid sale were
attendant in the transaction between co-
defendants-appellants NDC and PUP
concerning the realities subject of the present
suit.[36]
What is more, the conduct of petitioner PUP
immediately after the transaction is in itself an
admission that there was a sale of the NDC
compound in its favor. Thus, after the issuance
of Memorandum Order No. 214 petitioner PUP
asserted its ownership over the property by posting
notices within the compound advising residents and
occupants to vacate the premises.[37] In its Motion
for Intervention petitioner PUP also admitted that
its interest as a "purchaser pendente lite" would be
better protected if it was joined as party-defendant
in the controversy thereby confessing that it
indeed purchased the property.
In light of the foregoing disquisition, we now
proceed to determine whether FIRESTONE should
be allowed to exercise its right of first refusal over
the property. Such right was expressly stated by
NDC and FIRESTONE in par. XV of their third
contract denominated as A-10-78 executed on 22
December 1978 which, as found by the courts a
quo, was interrelated to and inseparable from their
first contract denominated as C-30-65 executed on
24 August 1965 and their second contract
denominated as C-26-68 executed on 8 January
1969. Thus -
Should the LESSOR desire to sell the leased
premises during the term of this Agreement,
or any extension thereof, the LESSOR shall
first give to the LESSEE, which shall have
the right of first option to purchase the leased
premises subject to mutual agreement of both
parties.[38]
In the instant case, the right of first refusal is an
integral and indivisible part of the contract of lease
and is inseparable from the whole contract. The
consideration for the right is built into the reciprocal
obligations of the parties. Thus, it is not correct for
petitioners to insist that there was no consideration
paid by FIRESTONE to entitle it to the exercise of
the right, inasmuch as the stipulation is part and
parcel of the contract of lease making the
consideration for the lease the same as that for the
option.
It is a settled principle in civil law that when a
lease contract contains a right of first refusal, the
lessor is under a legal duty to the lessee not to sell
to anybody at any price until after he has made an
offer to sell to the latter at a certain price and the
lessee has failed to accept it.[39] The lessee has a
right that the lessor's first offer shall be in his favor.
The option in this case was incorporated in the
contracts of lease by NDC for the benefit of
FIRESTONE which, in view of the total amount of
its investments in the property, wanted to be assured
that it would be given the first opportunity to buy
the property at a price for which it would be
offered. Consistent with their agreement, it was then
implicit for NDC to have first offered the leased
premises of 2.60 hectares to FIRESTONE prior to
the sale in favor of PUP. Only if FIRESTONE
failed to exercise its right of first priority could
NDC lawfully sell the property to petitioner PUP.
It now becomes apropos to ask whether the
courts a quo were correct in fixing the proper
consideration of the sale at P1,500.00 per square
meter. In contracts of sale, the basis of the right of
first refusal must be the current offer of the seller to
sell or the offer to purchase of the prospective
buyer. Only after the lessee-grantee fails to exercise
its right under the same terms and within the period
contemplated can the owner validly offer to sell the
property to a third person, again, under the same
terms as offered to the grantee.[40] It appearing that
the whole NDC compound was sold to PUP
for P554.74 per square meter, it would have been
more proper for the courts below to have ordered
the sale of the property also at the same
price. However, since FIRESTONE never raised
this as an issue, while on the other hand it admitted
that the value of the property stood at P1,500.00 per
square meter, then we see no compelling reason to
modify the holdings of the courts a quo that the
leased premises be sold at that price.
 Our attention is invited by petitioners to Ang Yu exercise its right to purchase the leased property
Asuncion v. CA[41] in concluding that if our holding at P1,500.00 per square meter, and petitioner
in Ang Yu would be applied to the facts of this case Polytechnic University of the Philippines is ordered
then FIRESTONE's "option, if still subsisting, is not to reconvey the property to FIRESTONE
enforceable," the option being merely a preparatory CERAMICS, INC., in the exercise of its right of
contract which cannot be enforced. first refusal upon payment of the purchase price
thereof.
The contention has no merit. At the heels
of Ang Yu came Equatorial Realty Development, SO ORDERED.
Inc., v. Mayfair Theater, Inc.,[42] where after much
deliberation we declared, and so we hold, that a
right of first refusal is neither "amorphous nor
merely preparatory" and can be enforced and
executed according to its terms. Thus, [G.R. No. 126444. December 4, 1998]
in Equatorial we ordered the rescission of the sale
which was made in violation of the lessee's right of
first refusal and further ordered the sale of the
leased property in favor of Mayfair Theater, as ALFONSO QUIJADA, CRESENTE
grantee of the right. Emphatically, we held that "(a QUIJADA, REYNELDA
right of first priority) should be enforced according QUIJADA, DEMETRIO
to the law on contracts instead of the panoramic and
indefinite rule on human relations." We then
QUIJADA, ELIUTERIA
concluded that the execution of the right of first QUIJADA, EULALIO QUIJADA,
refusal consists in directing the grantor to comply and WARLITO
with his obligation according to the terms at which QUIJADA, petitioners, vs. COURT
he should have offered the property in favor of the OF APPEALS, REGALADO
grantee and at that price when the offer should have MONDEJAR, RODULFO
been made.
GOLORAN, ALBERTO ASIS,
One final word. Petitioner PUP should be SEGUNDINO RAS, ERNESTO
cautioned against bidding for public sympathy by GOLORAN, CELSO ABISO,
bewailing the dismissal of its petition before the
press. Such advocacy is not likely to elicit the
FERNANDO BAUTISTA,
compassion of this Court or of any court for that ANTONIO MACASERO, and
matter. An entreaty for a favorable disposition of a NESTOR
case not made directly through pleadings and oral MAGUINSAY, respondents.
arguments before the courts do not persuade us, for
as judges, we are ruled only by our forsworn duty to DECISION
give justice where justice is due.
MARTINEZ, J.:
WHEREFORE, the petitions in G.R. No.
143513 and G.R. No. 143590 are Petitioners, as heirs of the late Trinidad
DENIED. Inasmuch as the first contract of lease Quijada, filed a complaint against private
fixed the area of the leased premises at 2.90118 respondents for quieting of title, recovery of
hectares while the second contract placed it at 2.60 possession and ownership of parcels of land with
hectares, let a ground survey of the leased premises claim for attorney's fees and damages. The suit was
be immediately conducted by a duly licensed, premised on the following facts found by the Court
registered surveyor at the expense of private of Appeals, which is materially the same as that
respondent FIRESTONE CERAMICS, INC., within found by the trial court:
two (2) months from finality of the judgment in this
case. Thereafter, private respondent FIRESTONE "Plaintiffs-appellees (petitioners) are the
CERAMICS, INC., shall have six (6) months from children of the late Trinidad Corvera Vda. de
receipt of the approved survey within which to
Quijada. Trinidad was one of the heirs of the
late Pedro Corvera and inherited from the
latter the two-hectare parcel of land subject of
the case, situated in the barrio of San Agustin,
Talacogon, Agusan del Sur. On April 5, 1956,
Trinidad Quijada together with her sisters
Leonila Corvera Vda. de Sequea and Paz
Corvera Cabiltes and brother Epapiadito
Corvera executed a conditional deed of
donation (Exh. C) of the two-hectare parcel of
land subject of the case in favor of the
Municipality of Talacogon, the condition
being that the parcel of land shall be used
solely and exclusively as part of the campus
of the proposed provincial high school in
Talacogon. Apparently, Trinidad remained in
possession of the parcel of land despite the
donation. On July 29, 1962, Trinidad sold one
(1) hectare of the subject parcel of land to
defendant-appellant Regalado Mondejar (Exh.
1). Subsequently, Trinidad verbally sold the
remaining one (1) hectare to defendant-
appellant (respondent) Regalado Mondejar
without the benefit of a written deed of sale
and evidenced solely by receipts of
payment. In 1980, the heirs of Trinidad, who
at that time was already dead, filed a
complaint for forcible entry (Exh. E) against
defendant-appellant (respondent) Regalado
Mondejar, which complaint was, however,
dismissed for failure to prosecute (Exh. F). In
1987, the proposed provincial high school
having failed to materialize, the Sangguniang
Bayan of the municipality of Talacogon
enacted a resolution reverting the two (2)
hectares of land donated back to the donors
(Exh. D). In the meantime, defendant-
appellant (respondent) Regalado Mondejar
sold portions of the land to defendants-
appellants (respondents) Fernando Bautista
(Exh. 5), Rodolfo Goloran (Exh. 6), Efren
Guden (Exh. 7) and Ernesto Goloran (Exh. 8).
"On July 5, 1988, plaintiffs-appellees
(petitioners) filed this action against
defendants-appellants (respondents). In the
complaint, plaintiffs-appellees (petitioners)
alleged that their deceased mother never sold,
conveyed, transferred or disposed of the
property in question to any person or entity
much less to Regalado Mondejar save the
donation made to the Municipality of
Talacogon in 1956; that at the time of the
alleged sale to Regalado Mondejar by
Trinidad Quijada, the land still belongs to the
Municipality of Talacogon, hence, the
supposed sale is null and void.
"Defendants-appellants (respondents), on the
other hand, in their answer claimed that the
land in dispute was sold to Regalado
Mondejar, the one (1) hectare on July 29,
1962, and the remaining one (1) hectare on
installment basis until fully paid. As
affirmative and/or special defense,
defendants-appellants (respondents) alleged
that plaintiffs' action is barred by laches or has
prescribed.
"The court a quo rendered judgment in favor of
plaintiffs-appellees (petitioners): firstly because
'Trinidad Quijada had no legal title or right to sell
the land to defendant Mondejar in 1962, 1966, 1967
and 1968, the same not being hers to dispose of
because ownership belongs to the Municipality of
Talacogon' (Decision, p. 4; Rollo, p. 39) and,
secondly, that the deed of sale executed by Trinidad
Quijada in favor of Mondejar did not carry with it
the conformity and acquiescence of her children,
more so that she was already 63 years old at the
time, and a widow (Decision, p. 6; Rollo, p. 41)."[1]
The dispositive portion of the trial court's decision
reads:
"WHEREFORE, viewed from the above
perceptions, the scale of justice having tilted
in favor of the plaintiffs, judgment is, as it is
hereby rendered:
1) ordering the Defendants to return and vacate
the two (2) hectares of land to Plaintiffs as
described in Tax Declaration No. 1209 in
the name of Trinidad Quijada;
2) ordering any person acting in Defendants'
behalf to vacate and restore the peaceful
 possession of the land in question to
Plaintiffs;
3) ordering the cancellation of the Deed of
Sale executed by the late Trinidad Quijada
in favor of Defendant Regalado Mondejar
as well as the Deeds of
Sale/Relinquishments executed by
Mondejar in favor of the other Defendants;
4) ordering Defendants to remove their
improvements constructed on the
questioned lot;
5) ordering the Defendants to pay Plaintiffs,
jointly and severally, the amount
of P10,000.00 representing attorney's fees;
6) ordering Defendants to pays the amount
of P8,000.00 as expenses of litigation; and
7) ordering Defendants to pay the sum
of P30,000.00 representing moral damages.
SO ORDERED."[2]
On appeal, the Court of Appeals reversed and
set aside the judgment a quo[3] ruling that the sale
made by Trinidad Quijada to respondent Mondejar
was valid as the4 former retained an inchoate
interest on the lots by virtue of the automatic
reversion clause in the deed of
donation. Thereafter, petitioners filed a motion for
[4]
reconsideration. When the CA denied their
motion,[5] petitioners instituted a petition for review
to this Court arguing principally that the sale of the
subject property made by Trinidad Quijada to
respondent Mondejar is void, considering that at
that time, ownership was already transferred to the
Municipality of Talacogon. On the contrary, private
respondents contend that the sale was valid, that
they are buyers in good faith, and that petitioners'
case is barred by laches.[6]
We affirm the decision of the respondent court.
The donation made on April 5, 1956 by
Trinidad Quijada and her brother and sisters[7] was
subject to the condition that the donated property
shall be "used solely and exclusively as a part of the
campus of the proposed Provincial High School in
Talacogon."[8] The donation further provides that
should "the proposed Provincial High School be
discontinued or if the same shall be opened but for
some reason or another, the same may in the future
be closed" the donated property shall automatically
revert to the donor.[9] Such condition, not being
contrary to law, morals, good customs, public order
or public policy was validly imposed in the
donation.[10]
When the Municipality's acceptance of the
donation was made known to the donor, the former
became the new owner of the donated property --
donation being a mode of acquiring and
transmitting ownership[11] - notwithstanding the
condition imposed by the donee. The donation is
perfected once the acceptance by the donee is made
known to the donor.[12] Accordingly, ownership is
immediately transferred to the latter and that
ownership will only revert to the donor if the
resolutory condition is not fulfilled.
In this case, that resolutory condition is the
construction of the school. It has been ruled that
when a person donates land to another on the
condition that the latter would build upon the land a
school, the condition imposed is not a condition
precedent or a suspensive condition but a resolutory
one.[13] Thus, at the time of the sales made in 1962
towards 1968, the alleged seller (Trinidad) could
not have sold the lots since she had earlier
transferred ownership thereof by virtue of the deed
of donation. So long as the resolutory condition
subsists and is capable of fulfillment, the donation
remains effective and the donee continues to be the
owner subject only to the rights of the donor or his
successors-in-interest under the deed of
donation. Since no period was imposed by the
donor on when must the donee comply with the
condition, the latter remains the owner so long as he
has tried to comply with the condition within a
reasonable period. Such period, however, became
irrelevant herein when the donee-Municipality
manifested through a resolution that it cannot
comply with the condition of building a school and
the same was made known to the donor. Only then -
when the non-fulfillment of the resolutory condition
was brought to the donor's knowledge - that
ownership of the donated property reverted to the
donor as provided in the automatic reversion clause
of the deed of donation.
The donor may have an inchoate interest in the
donated property during the time that ownership of
the land has not reverted to her. Such inchoate
interest may be the subject of contracts including a
contract of sale. In this case, however, what the
donor sold was the land itself which she no longer
owns. It would have been different if the donor-
seller sold her interests over the property under the
deed of donation which is subject to the possibility
of reversion of ownership arising from the non-
fulfillment of the resolutory condition.
As to laches, petitioners' action is not yet
barred thereby. Laches presupposes failure or
neglect for an unreasonable and unexplained length
of time, to do that which, by exercising due
diligence, could or should have been done
earlier;[14] "it is negligence or omission to assert a
right within a reasonable time, thus, giving rise to a
presumption that the party entitled to assert it either
has abandoned or declined to assert it."[15] Its
essential elements of:
a) Conduct on the part of the defendant, or of
one under whom he claims, giving rise to
the situation complained of;
b) Delay in asserting complainant's right after
he had knowledge of the defendant's
conduct and after he has an opportunity to
sue;
c) Lack of knowledge or notice on the part of
the defendant that the complainant would
assert the right on which he bases his suit;
and,
d) Injury or prejudice to the defendant in the
event relief is accorded to the
complainant."[16]
are absent in this case. Petitioners' cause of action to
quiet title commenced only when the property
reverted to the donor and/or his successors-in-
interest in 1987. Certainly, when the suit was
initiated the following year, it cannot be said that
petitioners had slept on their rights for a long
time. The 1960's sales made by Trinidad Quijada
cannot be the reckoning point as to when
petitioners' cause of action arose.They had no
interest over the property at that time except under
the deed of donation to which private respondents
were not privy. Moreover, petitioners had
previously filed an ejectment suit against private
respondents only that it did not prosper on a
technicality.
Be that at it may, there is one thing which
militates against the claim of petitioners. Sale, being
a consensual contract, is perfected by mere consent,
which is manifested the moment there is a meeting
of the minds[17] as to the offer and acceptance
thereof on three (3) elements: subject matter, price
and terms of payment of the price.[18] ownership by
the seller on the thing sold at the time of the
perfection of the contract of sale is not an element
for its perfection. What the law requires is that the
seller has the right to transfer ownership at the time
the thing sold is delivered.[19] Perfection per se does
not transfer ownership which occurs upon the actual
or constructive delivery of the thing sold.[20] A
perfected contract of sale cannot be challenged on
the ground of non-ownership on the part of the
seller at the time of its perfection; hence, the sale is
still valid.
The consummation, however, of the perfected
contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter
to the buyer when the seller or her successors-in-
interest subsequently acquires ownership
thereof. Such circumstance happened in this case
when petitioners -- who are Trinidad Quijada's heirs
and successors-in-interest -- became the owners of
the subject property upon the reversion of the
ownership of the land to them. Consequently,
ownership is transferred to respondent Mondejar
ands those who claim their right from him. Article
1434 of the New Civil Code supports the ruling that
the seller's "title passes by operation of law to the
buyer."[21] This rule applies not only when the
subject matter of the contract of sale is goods,[22] but
also to other kinds of property, including real
property.[23]
There is also no merit in petitioners' contention
that since the lots were owned by the municipality
at the time of the sale, they were outside the
commerce of men under Article 1409 (4) of the
NCC;[24]thus, the contract involving the same is
inexistent and void from the beginning. However,
nowhere in Article 1409 (4) is it provided that the
properties of a municipality, whether it be those for
public use or its patrimonial property[25] are outside
the commerce of men. Besides, the lots in this case
were conditionally owned by the municipality. To
rule that the donated properties are outside the
commerce of men would render nugatory the
unchallenged reasonableness and justness of the
condition which the donor has the right to impose as
owner thereof. Moreover, the objects referred to as
outsides the commerce of man are those which
cannot be appropriated, such as the open seas and
the heavenly bodies.
 With respect to the trial courts award of
attorneys fees, litigation expenses and moral
damages, there is neither factual nor legal basis
thereof. Attorneys fees and expenses of litigation
cannot, following the general rule in Article 2208 of
the New Civil Code, be recovered in this case, there
being no stipulation to that effect and the case does
not fall under any of the exceptions.[26] It cannot be
said that private respondents had compelled
petitioners to litigate with third persons. Neither can
it be ruled that the former acted in gross and evident
bad faith in refusing to satisfy the latters claims
considering that private respondents were under an
honest belief that they have a legal right over the
property by virtue of the deed of sale. Moral
damages cannot likewise be justified as none of the
circumstances enumerated under Articles
2219 and 2220 of the New Civil Code concur in
[27] [28]
this case.
WHEREFORE, by virtue of the foregoing, the
assailed decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.
SECOND DIVISION
[G.R. No. 137290. July 31, 2000]
SAN MIGUEL PROPERTIES
PHILIPPINES, INC., petitioner,
vs. SPOUSES ALFREDO HUANG and
GRACE HUANG, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the
decision, dated April 8, 1997, of the
[1]
Court of Appeals which reversed the
decision of the Regional Trial Court,
Branch 153, Pasig City dismissing the
complaint brought by respondents against
petitioner for enforcement of a contract of
sale.
The facts are not in dispute.
Petitioner San Miguel Properties
Philippines, Inc. is a domestic corporation
engaged in the purchase and sale of real
properties. Part of its inventory are two
parcels of land totalling 1, 738 square
meters at the corner of Meralco Avenue
and General Capinpin Street, Barrio
Oranbo, Pasig City, which are covered by
TCT Nos. PT-82395 and PT-82396 of the
Register of Deeds of Pasig City.
On February 21, 1994, the properties
were offered for sale for P52,140,000.00
in cash. The offer was made to Atty.
Helena M. Dauz who was acting for
respondent spouses as undisclosed
principals. In a letter dated March 24,
[2]
1994, Atty. Dauz signified her clients
interest in purchasing the properties for
the amount for which they were offered by
petitioner, under the following terms: the
sum of P500,000.00 would be given as
earnest money and the balance would be
paid in eight equal monthly installments
from May to December, 1994. However,
petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote
another letter proposing the following
[3]
terms for the purchase of the
properties, viz:
This is to express our interest
to buy your-above-mentioned
property with an area of 1,
738 sq. meters. For this
purpose, we are enclosing
herewith the sum
of P1,000,000.00
representing earnest-deposit
money, subject to the
following conditions.
1. We will be given the
exclusive option to purchase
the property within the 30
 days from date of your
acceptance of this offer.
2. During said period, we will
negotiate on the terms and
conditions of the purchase;
SMPPI will secure the
necessary Management and
Board approvals; and we
initiate the documentation if
there is mutual agreement
between us.
3. In the event that we do not
come to an agreement on this
transaction, the said amount
of P1,000,000.00 shall be
refundable to us in full upon
demand. . . .
Isidro A. Sobrecarey, petitioners vice-
president and operations manager for
corporate real estate, indicated his
conformity to the offer by affixing his
signature to the letter and accepted the
"earnest-deposit" of P1 million. Upon
request of respondent spouses,
Sobrecarey ordered the removal of the
"FOR SALE" sign from the properties.
Atty. Dauz and Sobrecarey then
commenced negotiations. During their
meeting on April 8, 1994, Sobrecarey
informed Atty. Dauz that petitioner was
willing to sell the subject properties on a
90-day term. Atty. Dauz countered with
an offer of six months within which to pay.
On April 14, 1994, the parties again met
during which Sobrecarey informed Atty.
Dauz that petitioner had not yet acted on
her counter-offer. This prompted Atty.
Dauz to propose a four-month period of
amortization.
On April 25, 1994, Atty. Dauz asked for
an extension of 45 days from April 29,
1994 to June 13, 1994 within which to
exercise her option to purchase the
property, adding that within that period,
"[we] hope to finalize [our] agreement on
the matter." Her request was granted.
[4]
On July 7, 1994, petitioner, through its
president and chief executive officer,
Federico Gonzales, wrote Atty. Dauz
informing her that because the parties
failed to agree on the terms and
conditions of the sale despite the
extension granted by petitioner, the latter
was returning the amount of P1 million
given as "earnest-deposit." [5]
On July 20, 1994, respondent spouses,
through counsel, wrote petitioner
demanding the execution within five days
of a deed of sale covering the properties.
Respondents attempted to return the
"earnest-deposit" but petitioner refused on
the ground that respondents option to
purchase had already expired.
On August 16, 1994, respondent spouses
filed a complaint for specific performance
against petitioner before the Regional
Trial Court, Branch 133, Pasig City where
it was docketed as Civil Case No. 64660.
Within the period for filing a responsive
pleading, petitioner filed a motion to
dismiss the complaint alleging that (1) the
alleged "exclusive option" of respondent
spouses lacked a consideration separate
and distinct from the purchase price and
was thus unenforceable and (2) the
complaint did not allege a cause of action
because there was no "meeting of the
minds" between the parties and,
therefore, no perfected contract of sale.
The motion was opposed by respondents.
On December 12, 1994, the trial court
granted petitioners motion and dismissed
the action. Respondents filed a motion for
reconsideration, but it was denied by the
trial court. They then appealed to the
Court of Appeals which, on April 8, 1997,
rendered a decision reversing the
[6]
judgment of the trial court. The appellate
court held that all the requisites of a
perfected contract of sale had been
complied with as the offer made on March
29, 1994, in connection with which the
earnest money in the amount of P1
million was tendered by respondents, had
already been accepted by petitioner. The
court cited Art. 1482 of the Civil Code
which provides that "[w]henever earnest
money is given in a contract of sale, it
shall be considered as part of the price
and as proof of the perfection of the
contract." The fact the parties had not
agreed on the mode of payment did not
affect the contract as such is not an
essential element for its validity. In
addition, the court found that Sobrecarey
had authority to act in behalf of petitioner
for the sale of the properties.
[7]
Petitioner moved for reconsideration of
the trial courts decision, but its motion
was denied. Hence, this petition.
Petitioner contends that the Court of
Appeals erred in finding that there was a
perfected contract of sale between the
parties because the March 29, 1994 letter
of respondents, which petitioner
accepted, merely resulted in an option
contract, albeit it was unenforceable for
lack of a distinct consideration. Petitioner
argues that the absence of agreement as
to the mode of payment was fatal to the
perfection of the contract of sale.
Petitioner also disputes the appellate
courts ruling that Isidro A. Sobrecarey
had authority to sell the subject real
properties. [8]
Respondents were required to comment
within ten (10) days from notice.
However, despite 13 extensions totalling
142 days which the Court had given to
them, respondents failed to file their
comment. They were thus considered to
have waived the filing of a comment.
The petition is meritorious.
In holding that there is a perfected
contract of sale, the Court of Appeals
relied on the following findings: (1)
earnest money was allegedly given by
respondents and accepted by petitioner
through its vice-president and operations
manager, Isidro A. Sobrecarey; and (2)
the documentary evidence in the records
show that there was a perfected contract
of sale.
With regard to the alleged payment and
acceptance of earnest money, the Court
holds that respondents did not give
the P1 million as "earnest money" as
provided by Art. 1482 of the Civil Code.
They presented the amount merely as a
deposit of what would eventually become
the earnest money or downpayment
should a contract of sale be made by
them. The amount was thus given not as
a part of the purchase price and as proof
of the perfection of the contract of sale
but only as a guarantee that respondents
would not back out of the sale.
Respondents in fact described the
amount as an "earnest-deposit."
In Spouses Doromal, Sr. v. Court of
Appeals, it was held:
[9]
. . . While the P5,000 might
have indeed been paid to
Carlos in October, 1967,
 there is nothing to show that
the same was in the concept
of the earnest money
contemplated in Art. 1482 of
the Civil Code, invoked by
petitioner, as signifying
perfection of the sale. Viewed
in the backdrop of the factual
milieu thereof extant in the
record, We are more inclined
to believe that the
said P5,000.00 were paid in
the concept of earnest money
as the term was understood
under the Old Civil Code, that
is, as a guarantee that the
buyer would not back out,
considering that it is not clear
that there was already a
definite agreement as to the
price then and that petitioners
were decided to buy 6/7 only
of the property should
respondent Javellana refuse
to agree to part with her 1/7
share.[10]
In the present case, the P1 million
"earnest-deposit" could not have been
given as earnest money as contemplated
in Art. 1482 because, at the time when
petitioner accepted the terms of
respondents offer of March 29, 1994, their
contract had not yet been perfected. This
is evident from the following conditions
attached by respondents to their letter, to
wit: (1) that they be given the exclusive
option to purchase the property within 30
days from acceptance of the offer; (2) that
during the option period, the parties would
negotiate the terms and conditions of the
purchase; and (3) petitioner would secure
the necessary approvals while
respondents would handle the
documentation.
The first condition for an option period of
30 days sufficiently shows that a sale was
never perfected. As petitioner correctly
points out, acceptance of this condition
did not give rise to a perfected sale but
merely to an option or an accepted
unilateral promise on the part of
respondents to buy the subject properties
within 30 days from the date of
acceptance of the offer. Such option
giving respondents the exclusive right to
buy the properties within the period
agreed upon is separate and distinct from
the contract of sale which the parties may
enter. All that respondents had was just
[11]
the option to buy the properties which
privilege was not, however, exercised by
them because there was a failure to
agree on the terms of payment. No
contract of sale may thus be enforced by
respondents.
Furthermore, even the option secured by
respondents from petitioner was fatally
defective. Under the second paragraph of
Art. 1479, an accepted unilateral promise
to buy or sell a determinate thing for a
price certain is binding upon the promisor
only if the promise is supported by a
distinct consideration. Consideration in an
option contract may be anything of value,
unlike in sale where it must be the price
certain in money or its equivalent. There
is no showing here of any consideration
for the option. Lacking any proof of such
consideration, the option is
unenforceable.
Equally compelling as proof of the
absence of a perfected sale is the second
condition that, during the option period,
the parties would negotiate the terms and
conditions of the purchase. The stages of
a contract of sale are as follows:
(1) negotiation, covering the period from
the time the prospective contracting
parties indicate interest in the contract to
the time the contract is perfected;
(2) perfection, which takes place upon the
concurrence of the essential elements of
the sale which are the meeting of the
minds of the parties as to the object of the
contract and upon the price; and
(3) consummation, which begins when
the parties perform their respective
undertakings under the contract of sale,
culminating in the extinguishment
thereof. In the present case, the parties
[12]
never got past the negotiation stage. The
alleged "indubitable evidence" of a
[13]
perfected sale cited by the appellate court
was nothing more than offers and
counter-offers which did not amount to
any final arrangement containing the
essential elements of a contract of sale.
While the parties already agreed on the
real properties which were the objects of
the sale and on the purchase price, the
fact remains that they failed to arrive at
mutually acceptable terms of payment,
despite the 45-day extension given by
petitioner.
The appellate court opined that the failure
to agree on the terms of payment was no
bar to the perfection of the sale because
Art. 1475 only requires agreement by the
parties as to the price of the object. This
is error. In Navarro v. Sugar Producers
Cooperative Marketing Association,
Inc., we laid down the rule that the
[14]
manner of payment of the purchase price
is an essential element before a valid and
binding contract of sale can exist.
Although the Civil Code does not
expressly state that the minds of the
parties must also meet on the terms or
manner of payment of the price, the same
is needed, otherwise there is no sale. As
held in Toyota Shaw, Inc. v. Court of
Appeals, agreement on the manner of
[15]
payment goes into the price such that a
disagreement on the manner of payment
is tantamount to a failure to agree on the
price. In Velasco v. Court of
[16]
Appeals, the parties to a proposed sale
[17]
had already agreed on the object of sale
and on the purchase price. By the buyers
own admission, however, the parties still
had to agree on how and when the
downpayment and the installments were
to be paid. It was held:
. . . Such being the situation,
it can not, therefore, be said
that a definite and firm sales
agreement between the
parties had been perfected
over the lot in
question. Indeed, this Court
has already ruled before that
a definite agreement on the
manner of payment of the
purchase price is an essential
element in the formation of a
binding and enforceable
contract of sale. The fact,
therefore, that the petitioners
delivered to the respondent
the sum of P10,000 as part of
the down-payment that they
had to pay cannot be
considered as sufficient proof
of the perfection of any
purchase and sale agreement
between the parties herein
under Art. 1482 of the new
Civil Code, as the petitioners
themselves admit that some
essential matter - the terms of
the payment - still had to be
mutually covenanted. [18]
Thus, it is not the giving of earnest
money, but the proof of the concurrence
of all the essential elements of the
contract of sale which establishes the
existence of a perfected sale.
In the absence of a perfected contract of
sale, it is immaterial whether Isidro A.
Sobrecarey had the authority to enter into
a contract of sale in behalf of petitioner.
This issue, therefore, needs no further
discussion.
WHEREFORE, the decision of the Court
of Appeals is REVERSED and
respondents complaint is DISMISSED.
SO ORDERED.
THIRD DIVISION
[G.R. No. 112212. March 2, 1998]
GREGORIO FULE, petitioner,
vs. COURT OF APPEALS,
NINEVETCH CRUZ and JUAN
BELARMINO, respondents.
DECISION
ROMERO, J.:
This petition for review
on certiorari questions the affirmance by the
Court of Appeals of the decision[1] of the
Regional Trial Court of San Pablo City, Branch
30, dismissing the complaint that prayed for the
nullification of a contract of sale of a 10-hectare
property in Tanay, Rizal in consideration of the
amount of P40,000.00 and a 2.5 carat
emerald-cut diamond (Civil Case No. SP-
2455). The lower courts decision disposed of
the case as follows:
WHEREFORE, premises considered, the
Court hereby renders judgment
dismissing the complaint for lack of merit
and ordering plaintiff to pay:
1. Defendant Dra. Ninevetch M. Cruz the
sum of P300,000.00 as and for moral
damages and the sum of P100,000.00 as
and for exemplary damages;
2. Defendant Atty. Juan Belarmino the
sum of P250,000.00 as and for moral
damages and the sum of P150,000.00 as
and for exemplary damages;
3. Defendant Dra. Cruz and Atty.
Belarmino the sum of P25,000.00 each as
and for attorneys fees and litigation
expenses; and
4. The costs of suit.
SO ORDERED.
As found by the Court of Appeals and the
lower court, the antecedent facts of this case
are as follows:
Petitioner Gregorio Fule, a banker by
profession and a jeweler at the same
time, acquired a 10-hectare property in
Tanay, Rizal (hereinafter Tanay property),
covered by Transfer Certificate of Title
No. 320725 which used to be under the
name of Fr. Antonio Jacobe. The latter
had mortgaged it earlier to the Rural Bank
of Alaminos (the Bank), Laguna, Inc. to
secure a loan in the amount
of P10,000.00, but the mortgage was later
foreclosed and the property offered for
public auction upon his default.
In July 1984, petitioner, as corporate
secretary of the bank, asked Remelia Dichoso
and Oliva Mendoza to look for a buyer who
might be interested in the Tanay property. The
two found one in the person of herein private
respondent Dr. Ninevetch Cruz. It so happened
that at the time, petitioner had shown interest
in buying a pair of emerald-cut diamond
earrings owned by Dr. Cruz which he had seen
in January of the same year when his mother
examined and appraised them as genuine. Dr.
Cruz, however, declined petitioners offer to buy
the jewelry for P100,000.00. Petitioner then
made another bid to buy them for US$6,000.00
at the exchange rate of $1.00 to P25.00. At this
point, petitioner inspected said jewelry at the
lobby of the Prudential Bank branch in San
Pablo City and then made a sketch
thereof. Having sketched the jewelry for twenty
to thirty minutes, petitioner gave them back to
Dr. Cruz who again refused to sell them since
the exchange rate of the peso at the time
appreciated to P19.00 to a dollar.
Subsequently, however, negotiations for
the barter of the jewelry and the Tanay
property ensued. Dr. Cruz requested herein
private respondent Atty. Juan Belarmino to
check the property who, in turn, found out that
no sale or barter was feasible because the
one-year period for redemption of the said
property had not yet expired at the time.
In an effort to cut through any legal
impediment, petitioner executed on October
19, 1984, a deed of redemption on behalf of Fr.
Jacobe purportedly in the amount
of P15,987.78, and on even date, Fr. Jacobe
sold the property to petitioner
for P75,000.00. The haste with which the two
deeds were executed is shown by the fact that
the deed of sale was notarized ahead of the
deed of redemption. As Dr. Cruz had already
agreed to the proposed barter, petitioner went
to Prudential Bank once again to take a look at
the jewelry.
In the afternoon of October 23, 1984,
petitioner met Atty. Belarmino at the latters
residence to prepare the documents of
sale.[2] Dr. Cruz herself was not around but
Atty. Belarmino was aware that she and
petitioner had previously agreed to exchange a
pair of emerald-cut diamond earrings for the
Tanay property. Atty. Belarmino accordingly
caused the preparation of a deed of absolute
sale while petitioner and Dr. Cruz attended to
the safekeeping of the jewelry.
The following day, petitioner, together with
Dichoso and Mendoza, arrived at the residence
of Atty. Belarmino to finally execute a deed of
absolute sale. Petitioner signed the deed and
gave Atty. Belarmino the amount
of P13,700.00 for necessary expenses in the
transfer of title over the Tanay property.
Petitioner also issued a certification to the
effect that the actual consideration of the sale
was P200,000.00 and not P80,000.00 as
indicated in the deed of absolute sale. The
disparity between the actual contract price and
the one indicated on the deed of absolute sale
was purportedly aimed at minimizing the
amount of the capital gains tax that petitioner
would have to shoulder. Since the jewelry was
appraised only at P160,000.00, the parties
agreed that the balance of P40,000.00 would
just be paid later in cash.
As pre-arranged, petitioner left Atty.
Belarminos residence with Dichoso and
Mendoza and headed for the bank, arriving
there at past 5:00 p.m. Dr. Cruz also arrived
shortly thereafter, but the cashier who kept the
other key to the deposit box had already left
the bank. Dr. Cruz and Dichoso, therefore,
looked for said cashier and found him having a
haircut. As soon as his haircut was finished,
the cashier returned to the bank and arrived
there at 5:48 p.m., ahead of Dr. Cruz and
Dichoso who arrived at 5:55 p.m. Dr. Cruz and
the cashier then opened the safety deposit
box, the former retrieving a transparent plastic
or cellophane bag with the jewelry inside and
handing over the same to petitioner. The latter
took the jewelry from the bag, went near the
electric light at the banks lobby, held the
jewelry against the light and examined it for ten
to fifteen minutes. After a while, Dr. Cruz
asked, Okay na ba iyan? Petitioner expressed
his satisfaction by nodding his head.
For services rendered, petitioner paid the
agents, Dichoso and Mendoza, the amount of
US$300.00 and some pieces of jewelry. He did
not, however, give them half of the pair of
earrings in question which he had earlier
promised.
Later, at about 8:00 oclock in the evening
of the same day, petitioner arrived at the
residence of Atty. Belarmino complaining that
the jewelry given to him was fake. He then
used a tester to prove the alleged
fakery. Meanwhile, at 8:30 p.m., Dichoso and
Mendoza went to the residence of Dr. Cruz to
borrow her car so that, with Atty. Belarmino,
they could register the Tanay property. After
Dr. Cruz had agreed to lend her car, Dichoso
called up Atty. Belarmino. The latter, however,
instructed Dichoso to proceed immediately to
his residence because petitioner was there.
Believing that petitioner had finally agreed to
give them half of the pair of earrings, Dichoso
went posthaste to the residence of Atty.
Belarmino only to find petitioner already
demonstrating with a tester that the earrings
were fake. Petitioner then accused Dichoso
and Mendoza of deceiving him which they,
however, denied. They countered that
petitioner could not have been fooled because
he had vast experience regarding
jewelry. Petitioner nonetheless took back the
US$300.00 and jewelry he had given them.
Thereafter, the group decided to go to the
house of a certain Macario Dimayuga, a
jeweler, to have the earrings tested. Dimayuga,
after taking one look at the earrings,
immediately declared them counterfeit. At
around 9:30 p.m., petitioner went to one Atty.
Reynaldo Alcantara residing at Lakeside
Subdivision in San Pablo City, complaining
about the fake jewelry. Upon being advised by
the latter, petitioner reported the matter to the
police station where Dichoso and Mendoza
likewise executed sworn statements.
On October 26, 1984, petitioner filed a
complaint before the Regional Trial Court of
San Pablo City against private respondents
praying, among other things, that the contract
of sale over the Tanay property be declared
null and void on the ground of fraud and deceit.
On October 30, 1984, the lower court
issued a temporary restraining order directing
the Register of Deeds of Rizal to refrain from
acting on the pertinent documents involved in
the transaction. On November 20, 1984,
however, the same court lifted its previous
order and denied the prayer for a writ of
preliminary injunction.
After trial, the lower court rendered its
decision on March 7, 1989. Confronting the
issue of whether or not the genuine pair of
earrings used as consideration for the sale was
delivered by Dr. Cruz to petitioner, the lower
court said:
The Court finds that the answer is definitely in
the affirmative. Indeed, Dra. Cruz delivered
(the) subject jewelries (sic) into the hands of
plaintiff who even raised the same nearer to
the lights of the lobby of the bank near the
door. When asked by Dra. Cruz if everything
was in order, plaintiff even nodded his
satisfaction (Hearing of Feb. 24, 1988). At that
instance, plaintiff did not protest, complain or
beg for additional time to examine further the
jewelries (sic). Being a professional banker and
engaged in the jewelry business plaintiff is
conversant and competent to detect a fake
diamond from the real thing. Plaintiff was
accorded the reasonable time and opportunity
to ascertain and inspect the jewelries (sic) in
accordance with Article 1584 of the Civil Code.
Plaintiff took delivery of the subject jewelries
(sic) before 6:00 p.m. of October 24,
1984. When he went at 8:00 p.m. that same
day to the residence of Atty. Belarmino already
with a tester complaining about some fake
jewelries (sic), there was already undue delay
because of the lapse of a considerable length
of time since he got hold of subject jewelries
(sic). The lapse of two (2) hours more or less
before plaintiff complained is considered by the
Court as unreasonable delay.[3]
The lower court further ruled that all the
elements of a valid contract under Article 1458
of the Civil Code were present, namely: (a)
consent or meeting of the minds; (b)
determinate subject matter, and (c) price
certain in money or its equivalent. The same
elements, according to the lower court, were
present despite the fact that the agreement
between petitioner and Dr. Cruz was principally
a barter contract. The lower court explained
thus:
x x x. Plaintiffs ownership over the Tanay
property passed unto Dra. Cruz upon the
constructive delivery thereof by virtue of
the Deed of Absolute Sale (Exh. D). On
the other hand, the ownership of Dra.
Cruz over the subject jewelries (sic)
transferred to the plaintiff upon her actual
personal delivery to him at the lobby of
the Prudential Bank. It is expressly
provided by law that the thing sold shall
be understood as delivered, when it is
placed in the control and possession of
the vendee (Art. 1497, Civil Code;
Kuenzle & Straff vs. Watson & Co. 13
Phil. 26). The ownership and/or title over
the jewelries (sic) was transmitted
immediately before 6:00 p.m. of October
24, 1984. Plaintiff signified his approval
by nodding his head. Delivery or tradition,
is one of the modes of acquiring
ownership (Art. 712, Civil Code).
Similarly, when Exhibit D was executed, it
was equivalent to the delivery of the Tanay
property in favor of Dra. Cruz. The execution of
the public instrument (Exh. D) operates as a
formal or symbolic delivery of the Tanay
property and authorizes the buyer, Dra. Cruz to
use the document as proof of ownership
(Florendo v. Foz, 20 Phil. 399). More so, since
Exhibit D does not contain any proviso or
stipulation to the effect that title to the property
is reserved with the vendor until full payment of
the purchase price, nor is there a stipulation
giving the vendor the right to unilaterally
rescind the contract the moment the vendee
fails to pay within a fixed period (Taguba v.
Vda. De Leon, 132 SCRA 722; Luzon
Brokerage Co. Inc. vs. Maritime Building Co.
Inc. 86 SCRA 305; Froilan v. Pan Oriental
Shipping Co. et al. 12 SCRA 276).[4]
Aside from concluding that the contract of
barter or sale had in fact been consummated
when petitioner and Dr. Cruz parted ways at
the bank, the trial court likewise dwelt on the
unexplained delay with which petitioner
complained about the alleged fakery. Thus:
x x x. Verily, plaintiff is already estopped to
come back after the lapse of considerable
length of time to claim that what he got was
fake. He is a Business Management graduate
of La Salle University, Class 1978-79, a
professional banker as well as a jeweler in his
own right. Two hours is more than enough time
to make a switch of a Russian diamond with
the real diamond. It must be remembered that
in July 1984 plaintiff made a sketch of the
subject jewelries (sic) at the Prudential
Bank. Plaintiff had a tester at 8:00 p.m. at the
residence of Atty. Belarmino. Why then did he
not bring it out when he was examining the
subject jewelries (sic) at about 6:00 p.m. in the
banks lobby? Obviously, he had no need for it
after being satisfied of the genuineness of the
subject jewelries (sic). When Dra. Cruz and
plaintiff left the bank both of them had fully
performed their respective prestations. Once a
contract is shown to have been consummated
or fully performed by the parties thereto, its
existence and binding effect can no longer be
disputed. It is irrelevant and immaterial to
dispute the due execution of a contract if both
of them have in fact performed their obligations
thereunder and their respective signatures and
those of their witnesses appear upon the face
of the document (Weldon Construction v. CA
G.R. No. L-35721, Oct. 12, 1987).[5]
Finally, in awarding damages to the
defendants, the lower court remarked:
The Court finds that plaintiff acted in
wanton bad faith. Exhibit 2-Belarmino
purports to show that the Tanay property
is worth P25,000.00. However, also on
that same day it was executed, the
propertys worth was magnified
at P75,000.00 (Exh. 3-Belarmino). How
could in less than a day (Oct. 19, 1984)
the value would (sic) triple under normal
circumstances? Plaintiff, with the
assistance of his agents, was able to
exchange the Tanay property which his
bank valued only at P25,000.00 in
exchange for a genuine pair of emerald
cut diamond worth P200,000.00
belonging to Dra. Cruz. He also retrieved
the US$300.00 and jewelries (sic) from
his agents. But he was not satisfied in
being able to get subject jewelries for a
song. He had to file a malicious and
unfounded case against Dra. Cruz and
Atty. Belarmino who are well known,
respected and held in high esteem in San
Pablo City where everybody practically
knows everybody. Plaintiff came to Court
with unclean hands dragging the
defendants and soiling their clean and
good name in the process. Both of them
are near the twilight of their lives after
maintaining and nurturing their good
reputation in the community only to be
stunned with a court case. Since the filing
of this case on October 26, 1984 up to the
present they were living under a pall of
doubt. Surely, this affected not only their
earning capacity in their practice of their
respective professions, but also they
suffered besmirched reputations. Dra.
Cruz runs her own hospital and defendant
Belarmino is a well respected legal
practitioner.
The length of time this case dragged on
during which period their reputation were (sic)
tarnished and their names maligned by the
pendency of the case, the Court is of the belief
that some of the damages they prayed for in
their answers to the complaint are reasonably
proportionate to the sufferings they underwent
(Art. 2219, New Civil Code). Moreover,
because of the falsity, malice and baseless
nature of the complaint defendants were
compelled to litigate. Hence, the award of
attorneys fees is warranted under the
circumstances (Art. 2208, New Civil Code).[6]
From the trial courts adverse decision,
petitioner elevated the matter to the Court of
Appeals. On October 20, 1992, the Court of
Appeals, however, rendered a
decision affirming in toto the lower courts
[7]
decision. His motion for reconsideration having
been denied on October 19, 1993, petitioner
now files the instant petition alleging that:
I. THE TRIAL COURT ERRED IN
DISMISSING PLAINTIFFS
COMPLAINT AND IN HOLDING THAT
THE PLAINTIFF ACTUALLY
RECEIVED A GENUINE PAIR OF
EMERALD CUT DIAMOND
EARRING(S) FROM DEFENDANT
CRUZ x x x;
II. THE TRIAL COURT ERRED IN
AWARDING MORAL AND
EXEMPLARY DAMAGES AND
ATTORNEYS FEES IN FAVOR OF
DEFENDANTS AND AGAINST THE
PLAINTIFF IN THIS CASE; and
III.THE TRIAL COURT ERRED IN
NOT DECLARING THE DEED OF
SALE OF THE TANAY PROPERTY
(EXH. `D) AS NULL AND VOID OR
IN NOT ANNULLING THE SAME,
AND IN FAILING TO GRANT
REASONABLE DAMAGES IN
FAVOR OF THE PLAINTIFF.[8]
As to the first allegation, the Court
observes that petitioner is essentially raising a
factual issue as it invites us to examine and
weigh anew the facts regarding the
genuineness of the earrings bartered in
exchange for the Tanay property. This, of
course, we cannot do without unduly
transcending the limits of our review power in
petitions of this nature which are confined
merely to pure questions of law. We accord, as
a general rule, conclusiveness to a lower
courts findings of fact unless it is shown, inter
alia, that: (1) the conclusion is a finding
grounded on speculations, surmises or
conjectures; (2) the inference
is manifestly mistaken, absurd and impossible;
(3) when there is a grave abuse of discretion;
(4) when the judgment is based on a
misapprehension of facts; (5) when the findings
of fact are conflicting; and (6) when the Court
of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary
to the admission of both parties.[9] We find
nothing, however, that warrants the application
of any of these exceptions.
Consequently, this Court upholds the
appellate courts findings of fact especially
because these concur with those of the trial
court which, upon a thorough scrutiny of the
records, are firmly grounded on evidence
presented at the trial.[10] To reiterate, this
Courts jurisdiction is only limited to reviewing
errors of law in the absence of any showing
that the findings complained of are totally
devoid of support in the record or that they are
glaringly erroneous as to constitute serious
abuse of discretion.[11]
Nonetheless, this Court has to closely
delve into petitioners allegation that the lower
courts decision of March 7, 1989 is a ready-
made one because it was handed down a day
after the last date of the trial of the
case.[12] Petitioner, in this
regard, finds it incredible that Judge J.
Ausberto Jaramillo was able to write a 12-page
single-spaced decision, type it and release it
on March 7, 1989, less than a day after the last
hearing on March 6, 1989. He stressed that
Judge Jaramillo replaced Judge Salvador de
Guzman and heard only his rebuttal testimony.
This allegation is obviously no more than a
desperate effort on the part of petitioner to
disparage the lower courts findings of fact in
order to convince this Court to review the
same. It is noteworthy that Atty. Belarmino
clarified that Judge Jaramillo had issued the
first order in the case as early as March 9,
1987 or two years before the rendition of the
decision. In fact, Atty. Belarmino terminated
presentation of evidence on October 13, 1987,
while Dr. Cruz finished hers on February 4,
1989, or more than a month prior to the
rendition of the judgment. The March 6, 1989
hearing was conducted solely for the
presentation of petitioner's rebuttal
testimony.[13] In other words, Judge Jaramillo
had ample time to study the case and write the
decision because the rebuttal evidence would
only serve to confirm or verify the facts already
presented by the parties.
The Court finds nothing anomalous in the
said situation. No proof has been adduced that
Judge Jaramillo was motivated by a malicious
or sinister intent in disposing of the case with
dispatch. Neither is there proof that someone
else wrote the decision for him. The immediate
rendition of the decision was no more than
Judge Jaramillos compliance with his duty as a
judge to dispose of the courts business
promptly and decide cases within the required
periods.[14] The two-year period within which
Judge Jaramillo handled the case provided him
with all the time to study it and even write down
its facts as soon as these were presented to
court. In fact, this Court does not see anything
wrong in the practice of writing a decision days
before the scheduled promulgation of judgment
and leaving the dispositive portion for typing at
a time close to the date of promulgation,
provided that no malice or any wrongful
conduct attends its adoption.[15] The practice
serves the dual purposes of safeguarding the
confidentiality of draft decisions and rendering
decisions with promptness. Neither can Judge
Jaramillo be made administratively answerable
for the immediate rendition of the decision. The
acts of a judge which pertain to his judicial
functions are not subject to disciplinary power
unless they are committed with fraud,
dishonesty, corruption or bad faith.[16] Hence, in
the absence of sufficient proof to the contrary,
Judge Jaramillo is presumed to have
performed his job in accordance with law and
should instead be commended for his close
attention to duty.
Having disposed of petitioners first
contention, we now come to the core issue of
this petition which is whether the Court of
Appeals erred in upholding the validity of the
contract of barter or sale under the
circumstances of this case.
The Civil Code provides that contracts are
perfected by mere consent. From this moment,
the parties are bound not only to the fulfillment
of what has been expressly stipulated but also
to all the consequences which, according to
their nature, may be in keeping with good faith,
usage and law.[17] A contract of sale is
perfected at the moment there is a meeting of
the minds upon the thing which is the object of
the contract and upon the price.[18] Being
consensual, a contract of sale has the force of
law between the contracting parties and they
are expected to abide in good faith by their
respective contractual commitments. Article
1358 of the Civil Code which requires the
embodiment of certain contracts in a public
instrument, is only for convenience,[19] and
registration of the instrument only adversely
affects third parties.[20] Formal requirements
are, therefore, for the benefit of third parties.
Non-compliance therewith does not adversely
affect the validity of the contract nor the
contractual rights and obligations of the parties
thereunder.
It is evident from the facts of the case that
there was a meeting of the minds between
petitioner and Dr. Cruz. As such, they are
bound by the contract unless there are reasons
or circumstances that warrant its
nullification. Hence, the problem that should be
addressed in this case is whether or not under
the facts duly established herein, the contract
can be voided in accordance with law so as to Moreover, petitioner did not clearly allege
compel the parties to restore to each other the mistake as a ground for nullification of the
things that have been the subject of the contract of sale. Even assuming that he did,
contract with their fruits, and the price with petitioner cannot successfully invoke the
interest.[21] same. To invalidate a contract, mistake must
refer to the substance of the thing that is the
Contracts that are voidable or annullable,
object of the contract, or to those conditions
even though there may have been no damage
which have principally moved one or both
to the contracting parties are: (1) those where
parties to enter into the contract.[25] An example
one of the parties is incapable of giving
of mistake as to the object of the contract is the
consent to a contract; and (2) those where the
substitution of a specific thing contemplated by
consent is vitiated by mistake, violence,
the parties with another.[26] In his allegations in
intimidation, undue influence or
the complaint, petitioner insinuated that an
fraud.[22] Accordingly, petitioner now stresses
inferior one or one that had only Russian
before this Court that he entered into the
diamonds was substituted for the jewelry he
contract in the belief that the pair of emerald-
wanted to exchange with his 10-hectare
cut diamond earrings was genuine. On the
land. He, however, failed to prove the fact that
pretext that those pieces of jewelry turned out
prior to the delivery of the jewelry to him,
to be counterfeit, however, petitioner
private respondents endeavored to make such
subsequently sought the nullification of said
substitution.
contract on the ground that it was, in fact,
tainted with fraud[23] such that his consent was Likewise, the facts as proven do not
vitiated. support the allegation that petitioner himself
could be excused for the mistake. On account
There is fraud when, through the insidious
of his work as a banker-jeweler, it can be
words or machinations of one of the
rightfully assumed that he was an expert on
contracting parties, the other is induced to
matters regarding gems. He had the
enter into a contract which, without them, he
intellectual capacity and the business acumen
would not have agreed to.[24] The records,
as a banker to take precautionary measures to
however, are bare of any evidence manifesting
avert such a mistake, considering the value of
that private respondents employed such
both the jewelry and his land. The fact that he
insidious words or machinations to entice
had seen the jewelry before October 24, 1984
petitioner into entering the contract of
should not have precluded him from having its
barter. Neither is there any evidence showing
genuineness tested in the presence of Dr.
that Dr. Cruz induced petitioner to sell his
Cruz. Had he done so, he could have avoided
Tanay property or that she cajoled him to take
the present situation that he himself brought
the earrings in exchange for said property.On
about. Indeed, the finger of suspicion of
the contrary, Dr. Cruz did not initially accede to
switching the genuine jewelry for a fake
petitioners proposal to buy the said jewelry.
inevitably points to him. Such a mistake
Rather, it appears that it was petitioner,
caused by manifest negligence cannot
through his agents, who led Dr. Cruz to believe
invalidate a juridical act.[27] As the Civil Code
that the Tanay property was worth exchanging
provides, (t)here is no mistake if the party
for her jewelry as he represented that its value
alleging it knew the doubt, contingency or risk
was P400,000.00 or more than double that of
affecting the object of the contract.[28]
the jewelry which was valued only
at P160,000.00. If indeed petitioners property Furthermore, petitioner was afforded the
was truly worth that much, it was certainly reasonable opportunity required in Article 1584
contrary to the nature of a businessman- of the Civil Code within which to examine the
banker like him to have parted with his real jewelry as he in fact accepted them when
estate for half its price. In short, it was in fact asked by Dr. Cruz if he was satisfied with the
petitioner who resorted to machinations to same.[29] By taking the jewelry outside the bank,
convince Dr. Cruz to exchange her jewelry for petitioner executed an act which was more
the Tanay property. consistent with his exercise of ownership over
it. This gains credence when it is borne in mind
that he himself had earlier delivered the Tanay
property to Dr. Cruz by affixing his signature to
the contract of sale. That after two hours he
later claimed that the jewelry was not the one
he intended in exchange for his Tanay
property, could not sever the juridical tie that
now bound him and Dr. Cruz. The nature and
value of the thing he had taken preclude its
return after that supervening period within
which anything could have happened, not
excluding the alteration of the jewelry or its
being switched with an inferior kind.
Both the trial and appellate courts,
therefore, correctly ruled that there were no
legal bases for the nullification of the contract
of sale. Ownership over the parcel of land and
the pair of emerald-cut diamond earrings had
been transferred to Dr. Cruz and petitioner,
respectively, upon the actual and constructive
delivery thereof.[30] Said contract of sale being
absolute in nature, title passed to the vendee
upon delivery of the thing sold since there was
no stipulation in the contract that title to the
property sold has been reserved in the seller
until full payment of the price or that the vendor
has the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed
period.[31] Such stipulations are not manifest in
the contract of sale.
While it is true that the amount of
P40,000.00 forming part of the consideration
was still payable to petitioner, its nonpayment
by Dr. Cruz is not a sufficient cause to
invalidate the contract or bar the transfer of
ownership and possession of the things
exchanged considering the fact that their
contract is silent as to when it becomes due
and demandable.[32]
Neither may such failure to pay the
balance of the purchase price result in the
payment of interest thereon. Article 1589 of the
Civil Code prescribes the payment of interest
by the vendee for the period between the
delivery of the thing and the payment of the
price in the following cases:
(1) Should it have been so
stipulated;
(2) Should the thing sold and
delivered produce fruits or income;
(3) Should he be in default, from
the time of judicial or extrajudicial
demand for the payment of the
price.
Not one of these cases obtains here. This case
should, of course, be distinguished from De la
Cruz v. Legaspi,[33] where the court held that
failure to pay the consideration after the
notarization of the contract as previously
promised resulted in the vendees liability for
payment of interest. In the case at bar, there is
no stipulation for the payment of interest in the
contract of sale nor proof that the Tanay
property produced fruits or income. Neither did
petitioner demand payment of the price as in
fact he filed an action to nullify the contract of
sale.
All told, petitioner appears to have elevated
this case to this Court for the principal reason
of mitigating the amount of damages awarded
to both private respondents which petitioner
considers as exorbitant. He contends that
private respondents do not deserve at all the
award of damages. In fact, he pleads for the
total deletion of the award as regards private
respondent Belarmino whom he considers a
mere nominal party because no specific claim
for damages against him was alleged in the
complaint. When he filed the case, all that
petitioner wanted was that Atty. Belarmino
should return to him the owners duplicate copy
of TCT No. 320725, the deed of sale executed
by Fr. Antonio Jacobe, the deed of redemption
and the check alloted for expenses. Petitioner
alleges further that Atty. Belarmino should not
have delivered all those documents to Dr. Cruz
because as the lawyer for both the seller and
the buyer in the sale contract, he should have
protected the rights of both parties. Moreover,
petitioner asserts that there was no firm basis
for damages except for Atty. Belarminos
uncorroborated testimony.[34]
Moral and exemplary damages may be
awarded without proof of pecuniary loss. In
awarding such damages, the court shall take
into account the circumstances obtaining in the
case and assess damages according to its
discretion.[35] To warrant the award of damages,
it must be shown that the person to whom
these are awarded has sustained injury. He
must likewise establish sufficient data upon
which the court can properly base its estimate
of the amount of damages.[36] Statements of
facts should establish such data rather than
mere conclusions or opinions of
witnesses. Thus:
[37]
x x x. For moral damages to be
awarded, it is essential that the
claimant must have satisfactorily
proved during the trial the existence of
the factual basis of the damages and
its causal connection with the adverse
partys acts. If the court has no proof or
evidence upon which the claim for
moral damages could be based, such
indemnity could not be outrightly
awarded. The same holds true with
respect to the award of exemplary
damages where it must be shown that
the party acted in a wanton, oppressive
or malevolent manner.[38]
In this regard, the lower court appeared to
have awarded damages on a ground
analogous to malicious prosecution under
Article 2219(8) of the Civil Code[39] as shown by
(1) petitioners wanton bad faith in bloating the
value of the Tanay property which he
exchanged for a genuine pair of emerald-cut
diamond worth P200,000.00; and (2) his filing
of a malicious and unfounded case against
private respondents who were well known,
respected and held in high esteem in San
Pablo City where everybody practically knows
everybody and whose good names in the
twilight of their lives were soiled by petitioners
coming to court with unclean hands, thereby
affecting their earning capacity in the exercise
of their respective professions and besmirching
their reputation.
For its part, the Court of Appeals affirmed
the award of damages to private respondents
for these reasons:
The malice with which Fule filed this
case is apparent. Having taken
possession of the genuine jewelry of
Dra. Cruz, Fule now wishes to return a
fake jewelry to Dra. Cruz and, more
than that, get back the real property,
which his bank owns. Fule has
obtained a genuine jewelry which he
could sell anytime, anywhere and to
anybody, without the same being
traced to the original owner for
practically nothing. This is plain and
simple, unjust enrichment.[40]
While, as a rule, moral damages cannot be
recovered from a person who has filed a
complaint against another in good faith
because it is not sound policy to place a
penalty on the right to litigate,[41] the same,
however, cannot apply in the case at
bar. The factual findings of the courts a quo to
the effect that petitioner filed this case because
he was the victim of fraud; that he could not
have been such a victim because he should
have examined the jewelry in question before
accepting delivery thereof, considering his
exposure to the banking and jewelry
businesses; and that he filed the action for the
nullification of the contract of sale with unclean
hands, all deserve full faith and credit to
support the conclusion that petitioner was
motivated more by ill will than a sincere
attempt to protect his rights in commencing suit
against respondents.
As pointed out earlier, a closer scrutiny of
the chain of events immediately prior to and on
October 24, 1984 itself would amply
demonstrate that petitioner was not simply
negligent in failing to exercise due diligence to
assure himself that what he was taking in
exchange for his property were genuine
diamonds. He had rather placed himself in a
situation from which it preponderantly appears
that his seeming ignorance was actually just a
ruse. Indeed, he had unnecessarily dragged
respondents to face the travails of litigation in
speculating at the possible favorable outcome
of his complaint when he should have realized
that his supposed predicament was his own
making. We, therefore, see here no semblance
of an honest and sincere belief on his part that
he was swindled by respondents which would
entitle him to redress in court. It must be noted
that before petitioner was able to convince Dr.
Cruz to exchange her jewelry for the Tanay
property, petitioner took pains to thoroughly
examine said jewelry, even going to the extent
of sketching their appearance. Why at the
precise moment when he was about to take
physical possession thereof he failed to exert
extra efforts to check their genuineness despite
the large consideration involved has never
been explained at all by petitioner.His acts thus
failed to accord with what an ordinary prudent
man would have done in the same situation.
Being an experienced banker and a
businessman himself who deliberately skirted a
legal impediment in the sale of the Tanay
property and to minimize the capital gains tax
for its exchange, it was actually gross
recklessness for him to have merely conducted
a cursory examination of the jewelry when
every opportunity for doing so was not denied
him. Apparently, he carried on his person a
tester which he later used to prove the alleged
fakery but which he did not use at the time
when it was most needed. Furthermore, it took
him two more hours of unexplained delay
before he complained that the jewelry he
received were counterfeit.Hence, we stated
earlier that anything could have happened
during all the time that petitioner was in
complete possession and control of the
jewelry, including the possibility of substituting
them with fake ones, against which
respondents would have a great deal of
difficulty defending themselves. The truth is
that petitioner even failed to successfully prove
during trial that the jewelry he received from
Dr. Cruz were not genuine. Add to that the fact
that he had been shrewd enough to bloat the
Tanay propertys price only a few days after he
purchased it at a much lower value. Thus, it is
our considered view that if this slew of
circumstances were connected, like pieces of
fabric sewn into a quilt, they would sufficiently
demonstrate that his acts were not merely
negligent but rather studied and deliberate.
We do not have here, therefore, a situation
where petitioners complaint was simply found
later to be based on an erroneous ground
which, under settled jurisprudence, would not
have been a reason for awarding moral and
exemplary damages.[42] Instead, the cause of
action of the instant case appears to have
been contrived by petitioner himself. In other
words, he was placed in a situation where he
could not honestly evaluate whether his cause
of action has a semblance of merit, such that it
would require the expertise of the courts to put
it to a test. His insistent pursuit of such case
then coupled with circumstances showing that
he himself was guilty in bringing about the
supposed wrongdoing on which he anchored
his cause of action would render him
answerable for all damages the defendant may
suffer because of it. This is precisely what took
place in the petition at bar and we find no
cogent reason to disturb the findings of the
courts below that respondents in this case
suffered considerable damages due to
petitioners unwarranted action.
WHEREFORE, the decision of the Court of
Appeals dated October 20, 1992 is hereby
AFFIRMED in toto. Dr. Cruz, however, is
ordered to pay petitioner the balance of the
purchase price of P40,000.00 within ten (10)
days from the finality of this decision. Costs
against petitioner.
SO ORDERED.
FIRST DIVISION
[G.R. No. 122544. January 28, 1999]
REGINA P. DIZON, AMPARO D.
BARTOLOME, FIDELINA D.
BALZA, ESTER ABAD DIZON
and JOSEPH ANTHONY DIZON,
RAYMUND A. DIZON, GERARD
A. DIZON, and JOSE A. DIZON,
JR., petitioners, vs. COURT OF
APPEALS and OVERLAND
EXPRESS LINES,
INC., respondents.
[G.R. No. 124741. January 28, 1999]
REGINA P. DIZON, AMPARO D.
BARTOLOME, FIDELINA D.
 BALZA, ESTER ABAD DIZON
and JOSEPH ANTHONY DIZON,
RAYMUND A. DIZON, GERARD
A. DIZON, and JOSE A. DIZON,
JR., petitioners, vs. COURT OF
APPEALS, HON. MAXIMIANO C.
ASUNCION, and OVERLAND
EXPRESS LINES,
INC., respondents.
DECISION
MARTINEZ, J.:
Two consolidated petitions were filed before us
seeking to set aside and annul the decisions and
resolutions of respondent Court of Appeals. What
seemed to be a simple ejectment suit was
juxtaposed with procedural intricacies which finally
found its way to this Court.
G. R. NO. 122544:
On May 23, 1974, private respondent Overland
Express Lines, Inc. (lessee) entered into a Contract
of Lease with Option to Buy with
petitioners[1] (lessors) involving a 1,755.80 square
meter parcel of land situated at corner MacArthur
Highway and South "H" Street, Diliman, Quezon
City. The term of the lease was for one (1) year
commencing from May 16, 1974 up to May 15,
1975. During this period, private respondent was
granted an option to purchase for the amount
of P3,000.00 per square meter. Thereafter, the lease
shall be on a per month basis with a monthly rental
of P3,000.00.
For failure of private respondent to pay the
increased rental of P8,000.00 per month effective
June 1976, petitioners filed an action for ejectment
(Civil Case No. VIII-29155) on November 10, 1976
before the then City Court (now Metropolitan Trial
Court) of Quezon City, Branch VIII. On November
22, 1982, the City Court rendered
judgment ordering private respondent to vacate
[2]
the leased premises and to pay the sum
of P624,000.00 representing rentals in arrears and/or
as damages in the form of reasonable compensation
for the use and occupation of the premises during
the period of illegal detainer from June 1976 to
November 1982 at the monthly rental of P8,000.00,
less payments made, plus 12% interest per annum
from November 18, 1976, the date of filing of the
complaint, until fully paid, the sum of P8,000.00 a
month starting December 1982, until private
respondent fully vacates the premises, and to
pay P20,000.00 as and by way of attorney's fees.
Private respondent filed a certiorari petition
praying for the issuance of a restraining order
enjoining the enforcement of said judgment and
dismissal of the case for lack of jurisdiction of the
City Court.
On September 26, 1984, the then Intermediate
Appellate Court[3] (now Court of Appeals) rendered
a decision[4] stating that:
"x x x, the alleged question of
whether petitioner was granted an
extension of the option to buy the
property; whether such option, if any,
extended the lease or whether petitioner
actually paid the alleged P300,000.00
to Fidela Dizon, as representative of
private respondents in consideration of
the option and, whether petitioner
thereafter offered to pay the balance of
the supposed purchase price, are all
merely incidental and do not remove
the unlawful detainer case from the
jurisdiction of respondent court. In
consonance with the ruling in the case
of Teodoro, Jr. vs. Mirasol (supra), the
above matters may be raised and
decided in the unlawful detainer suit as,
to rule otherwise, would be a violation
of the principle prohibiting multiplicity
of suits. (Original Records, pp. 38-39)."
The motion for reconsideration was denied. On
review, this Court dismissed the petition in a
resolution dated June 19, 1985 and likewise denied
private respondent's subsequent motion for
reconsideration in a resolution dated September 9,
1985.[5]
On October 7, 1985, private respondent filed
before the Regional Trial Court (RTC) of Quezon
City (Civil Case No. Q-45541) an action for
Specific Performance and Fixing of Period for
Obligation with prayer for the issuance of a
restraining order pending hearing on the prayer for a
writ of preliminary injunction. It sought to compel
the execution of a deed of sale pursuant to the
option to purchase and the receipt of the partial
payment, and to fix the period to pay the balance. In
an Order dated October 25, 1985, the trial court
denied the issuance of a writ of preliminary
injunction on the ground that the decision of the
then City Court for the ejectment of the private
respondent, having been affirmed by the then
Intermediate Appellate Court and the Supreme
Court, has become final and executory.
Unable to secure an injunction, private
respondent also filed before the RTC of Quezon
City, Branch 102 (Civil Case No. Q-46487) on
November 15, 1985 a complaint for Annulment of
and Relief from Judgment with injunction and
damages. In its decision[6] dated May 12, 1986, the
trial court dismissed the complaint for annulment on
the ground of res judicata, and the writ of
preliminary injunction previously issued was
dissolved. It also ordered private respondent to
pay P3,000.00 as attorney's fees. As a consequence
of private respondent's motion for reconsideration,
the preliminary injunction was reinstated, thereby
restraining the execution of the City Court's
judgment on the ejectment case.
The two cases were thereafter consolidated
before the RTC of Quezon City, Branch 77. On
April 28, 1989, a decision[7] was rendered
dismissing private respondent's complaint in Civil
Case No. Q-45541 (specific performance case) and
denying its motion for reconsideration in Civil Case
No. 46487 (annulment of the ejectment case). The
motion for reconsideration of said decision was
likewise denied.
On appeal,[8] respondent Court of Appeals
rendered a decision[9] upholding the jurisdiction of
the City Court of Quezon City in the ejectment
case. It also concluded that there was a perfected
contract of sale between the parties on the leased
premises and that pursuant to the option to buy
agreement, private respondent had acquired the
rights of a vendee in a contract of sale. It opined
that the payment by private respondent
of P300,000.00 on June 20, 1975 as partial payment
for the leased property, which petitioners accepted
(through Alice A. Dizon) and for which an official
receipt was issued, was the operative act that gave
rise to a perfected contract of sale, and that for
failure of petitioners to deny receipt thereof, private
respondent can therefore assume that Alice A.
Dizon, acting as agent of petitioners, was authorized
by them to receive the money in their behalf. The
Court of Appeals went further by stating that in fact,
what was entered into was a "conditional contract of
sale" wherein ownership over the leased property
shall not pass to the private respondent until it has
fully paid the purchase price. Since private
respondent did not consign to the court the balance
of the purchase price and continued to occupy the
subject premises, it had the obligation to pay the
amount of P1,700.00 in monthly rentals until full
payment of the purchase price. The dispositive
portion of said decision reads:
"WHEREFORE, the appealed
decision in Case No. 46487 is
AFFIRMED. The appealed decision in
Case No. 45541 is, on the other hand,
ANNULLED and SET ASIDE. The
defendants-appellees are ordered to
execute the deed of absolute sale of the
property in question, free from any lien
or encumbrance whatsoever, in favor of
the plaintiff-appellant, and to deliver to
the latter the said deed of sale, as well
as the owner's duplicate of the
certificate of title to said property upon
payment of the balance of the purchase
price by the plaintiff-appellant. The
plaintiff-appellant is ordered to
pay P1,700.00 per month from June
1976, plus 6% interest per annum, until
payment of the balance of the purchase
price, as previously agreed upon by the
parties.
SO ORDERED."
Upon denial of the motion for partial
reconsideration (Civil Case No. Q-45541) by
respondent Court of Appeals,[10] petitioners elevated
the case via petition for certiorari questioning the
authority of Alice A. Dizon as agent of petitioners
in receiving private respondent's partial payment
amounting to P300,000.00 pursuant to the Contract
of Lease with Option to Buy. Petitioners also assail
the propriety of private respondent's exercise of the
option when it tendered the said amount on June 20,
1975 which purportedly resulted in a perfected
contract of sale.
G. R. NO. 124741:
Petitioners filed with respondent Court of
Appeals a motion to remand the records of Civil
Case No. 38-29155 (ejectment case) to the
Metropolitan Trial Court (MTC), then City Court of
Quezon City, Branch 38, for execution of the
judgment[11] dated November 22, 1982 which was
granted in a resolution dated June 29, 1992. Private
respondent filed a motion to reconsider said
resolution which was denied.
Aggrieved, private respondent filed a petition
for certiorari, prohibition with preliminary
injunction and/or restraining order with this Court
(G.R. Nos. 106750-51) which was dismissed in a
resolution dated September 16, 1992 on the ground
that the same was a refiled case previously
dismissed for lack of merit. On November 26, 1992,
entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-
parte motion for execution of the decision in Civil
Case No. 38-29155 with the MTC of Quezon City,
Branch 38. On September 13, 1993, the trial court
ordered the issuance of a third alias writ of
execution. In denying private respondent's motion
for reconsideration, it ordered the immediate
implementation of the third writ of execution
without delay.
On December 22, 1993, private respondent
filed with the Regional Trial Court (RTC) of
Quezon City, Branch 104 a petition
for certiorari and prohibition with preliminary
injunction/restraining order (SP. PROC. No. 93-
18722) challenging the enforceability and validity
of the MTC judgment as well as the order for its
execution.
On January 11, 1994, RTC of Quezon City,
Branch 104 issued an order[12] granting the issuance
of a writ of preliminary injunction upon private
respondent's posting of an injunction bond
of P50,000.00.
Assailing the aforequoted order after denial of
their motion for partial reconsideration, petitioners
filed a petition[13] for certiorari and prohibition with
a prayer for a temporary restraining order and/or
preliminary injunction with the Court of Appeals. In
its decision,[14] the Court of Appeals dismissed the
petition and ruled that:
"The avowed purpose of this
petition is to enjoin the public
respondent from restraining the
ejectment of the private
respondent. To grant the petition
would be to allow the ejectment of
the private respondent. We cannot
do that now in view of the decision
of this Court in CA-G.R. CV Nos.
25153-54. Petitioners' alleged right
to eject private respondent has been
demonstrated to be without basis in
the said civil case. The petitioners
have been shown, after all, to have
no right to eject private respondents.
WHEREFORE, the petition is
DENIED due course and is accordingly
DISMISSED.
SO ORDERED."[15]
Petitioners' motion for reconsideration was
denied in a resolution[16] by the Court of Appeals
stating that:
"This court in its decision in CA-
G.R. CV Nos. 25153-54 declared that
the plaintiff-appellant (private
respondent herein) acquired the rights
of a vendee in a contract of sale, in
effect, recognizing the right of the
private respondent to possess the
subject premises. Considering said
decision, we should not allow
ejectment; to do so would disturb
the status quo of the parties since the
petitioners are not in possession of the
subject property. It would be unfair and
 unjust to deprive the private respondent
of its possession of the subject property
after its rights have been established in
a subsequent ruling.
WHEREFORE, the motion for
reconsideration is DENIED for lack of merit.
SO ORDERED."[17]
Hence, this instant petition.
We find both petitions impressed with merit.
First. Petitioners have established a right to
evict private respondent from the subject premises
for non-payment of rentals. The term of the
Contract of Lease with Option to Buy was for a
period of one (1) year (May 16, 1974 to May 15,
1975) during which the private respondent was
given an option to purchase said property
at P3,000.00 per square meter. After the expiration
thereof, the lease was for P3,000.00 per month.
Admittedly, no definite period beyond the one-
year term of lease was agreed upon by petitioners
and private respondent. However, since the rent was
paid on a monthly basis, the period of lease is
considered to be from month to month in
accordance with Article 1687 of the New Civil
Code.[18] Where the rentals are paid monthly, the
lease, even if verbal may be deemed to be on a
monthly basis, expiring at the end of every month
pursuant to Article 1687, in relation to Article 1673
of the Civil Code.[19] In such case, a demand to
vacate is not even necessary for judicial action after
the expiration of every month.[20]
When private respondent failed to pay the
increased rental of P8,000.00 per month in June
1976, the petitioners had a cause of action to
institute an ejectment suit against the former with
the then City Court. In this regard, the City Court
(now MTC) had exclusive jurisdiction over the
ejectment suit. The filing by private respondent of a
suit with the Regional Trial Court for specific
performance to enforce the option to purchase did
not divest the then City Court of its jurisdiction to
take cognizance over the ejectment case. Of note is
the fact that the decision of the City Court was
affirmed by both the Intermediate Appellate Court
and this Court.
Second. Having failed to exercise the option
within the stipulated one-year period, private
respondent cannot enforce its option to purchase
anymore. Moreover, even assuming arguendo that
the right to exercise the option still subsists at the
time private respondent tendered the amount on
June 20, 1975, the suit for specific performance to
enforce the option to purchase was filed only on
October 7, 1985 or more than ten (10) years after
accrual of the cause of action as provided under
Article 1144 of the New Civil Code.[21]
In this case, there was a contract of lease for
one (1) year with option to purchase. The contract
of lease expired without the private respondent, as
lessee, purchasing the property but remained in
possession thereof. Hence, there was an implicit
renewal of the contract of lease on a monthly
basis. The other terms of the original contract of
lease which are revived in the implied new lease
under Article 1670 of the New Civil Code[22] are
only those terms which are germane to the lessees
right of continued enjoyment of the property
leased.[23] Therefore, an implied new lease does
not ipso facto carry with it any implied revival of
private respondent's option to purchase (as lessee
thereof) the leased premises. The provision entitling
the lessee the option to purchase the leased premises
is not deemed incorporated in the impliedly
renewed contract because it is alien to the
possession of the lessee. Private respondents right to
exercise the option to purchase expired with the
termination of the original contract of lease for one
year. The rationale of this Court is that:
This is a reasonable construction of the
provision, which is based on the presumption
that when the lessor allows the lessee to
continue enjoying possession of the property
for fifteen days after the expiration of the
contract he is willing that such enjoyment
shall be for the entire period corresponding to
the rent which is customarily paid in this case
up to the end of the month because the rent
was paid monthly.Necessarily, if the
presumed will of the parties refers to the
enjoyment of possession the presumption
covers the other terms of the contract related
to such possession, such as the amount of
rental, the date when it must be paid, the care
of the property, the responsibility for repairs,
etc. But no such presumption may be indulged
in with respect to special agreements which
by nature are foreign to the right of occupancy
or enjoyment inherent in a contract of lease.[24]
Third. There was no perfected contract of sale
between petitioners and private respondent. Private
respondent argued that it delivered the check
of P300,000.00 to Alice A. Dizon who acted as
agent of petitioners pursuant to the supposed
authority given by petitioner Fidela Dizon, the
payee thereof. Private respondent further contended
that petitioners filing of the ejectment case against it
based on the contract of lease with option to buy
holds petitioners in estoppel to question the
authority of petitioner Fidela Dizon. It insisted that
the payment of P300,000.00 as partial payment of
the purchase price constituted a valid exercise of the
option to buy.
Under Article 1475 of the New Civil Code, the
contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object
of the contract and upon the price. From that
moment, the parties may reciprocally demand
performance, subject to the provisions of the law
governing the form of contracts. Thus, the elements
of a contract of sale are consent, object, and price in
money or its equivalent. It bears stressing that the
absence of any of these essential elements negates
the existence of a perfected contract of sale. Sale is
a consensual contract and he who alleges it must
show its existence by competent proof.[25]
In an attempt to resurrect the lapsed option,
private respondent gave P300,000.00 to petitioners
(thru Alice A. Dizon) on the erroneous presumption
that the said amount tendered would constitute a
perfected contract of sale pursuant to the contract of
lease with option to buy. There was no valid
consent by the petitioners (as co-owners of the
leased premises) on the supposed sale entered into
by Alice A. Dizon, as petitioners alleged agent, and
private respondent. The basis for agency is
representation and a person dealing with an agent is
put upon inquiry and must discover upon his peril
the authority of the agent.[26] As provided in Article
1868 of the New Civil Code,[27] there was no
showing that petitioners consented to the act of
Alice A. Dizon nor authorized her to act on their
behalf with regard to her transaction with private
respondent. The most prudent thing private
respondent should have done was to ascertain the
extent of the authority of Alice A. Dizon. Being
negligent in this regard, private respondent cannot
seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of
Appeals,[28] we explained the rule in dealing with an
agent:
Every person dealing with an agent is put
upon inquiry and must discover upon his peril
the authority of the agent. If he does not make
such inquiry, he is chargeable with knowledge
of the agents authority, and his ignorance of
that authority will not be any excuse. Persons
dealing with an assumed agent, whether the
assumed agency be a general or special one,
are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the
agency but also the nature and extent of the
authority, and in case either is controverted,
the burden of proof is upon them to establish
it.
For the long years that private respondent was
able to thwart the execution of the ejectment suit
rendered in favor of petitioners, we now
write finis to this controversy and shun further delay
so as to ensure that this case would really attain
finality.
WHEREFORE, in view of the foregoing, both
petitions are GRANTED. The decision dated March
29, 1994 and the resolution dated October 19, 1995
in CA-G.R. CV No. 25153-54, as well as the
decision dated December 11, 1995 and the
resolution dated April 23, 1997 in CA-G.R. SP No.
33113 of the Court of Appeals are hereby
REVERSED and SET ASIDE.
Let the records of this case be remanded to the
trial court for immediate execution of the judgment
dated November 22, 1982 in Civil Case No. VIII-
29155 of the then City Court (now Metropolitan
Trial Court) of Quezon City, Branch VIII as
affirmed in the decision dated September 26, 1984
of the then Intermediate Appellate Court (now
Court of Appeals) and in the resolution dated June
19, 1985 of this Court.
 However, petitioners are ordered to REFUND
to private respondent the amount of P300,000.00
which they received through Alice A. Dizon on
June 20, 1975.
SO ORDERED.
[G.R. No. 127692. March 10, 2004]
FORTUNATO GOMEZ and AURORA
GOMEZ, petitioners, vs. COURT
OF APPEALS, ADOLFO
TROCINO and MARIANO
TROCINO, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for
review on certiorari under Rule 45 of the
Rules of Court assailing the decision of [1]
the Court of Appeals dated September
30, 1996, in CA-G.R. SP No. 40067,
nullifying the decision and orders of
the Regional Trial Court of Cebu City (Bra
nch 10) in Civil Case No. CEB-11103, for
want of jurisdiction.
Civil Case No. CEB-11103 is an
action for specific performance and/or
rescission filed by herein petitioners,
spouses Fortunato and Aurora Gomez,
against the heirs of Jesus J. Trocino, Sr.,
which include herein respondents and
their mother Caridad Trocino. [2]
Filed on December 16, 1991, the
complaint alleges: Some time in 1975, the
spouses Jesus and Caridad Trocino
mortgaged two parcels of land covered by
TCT Nos. 10616 and 31856 to Dr.
Clarence Yujuico. The mortgage was
subsequently foreclosed and the
properties sold at public auction on July
11, 1988, and before the expiry of the
redemption period, the spouses Trocino
sold the property to petitioners
on December 12, 1989, who in turn,
redeemed the same from Dr. Yujuico. The
spouses Trocino, however, refused to
convey ownership of the properties to
petitioners, hence, the complaint.
On January 10, 1992, the trial courts
Process Server served summons on
respondents, in the manner described in
his Return of Service, to wit:
Respectfully returned to the Branch Clerk of
Court, Regional Trial Court of Cebu, Branch
10, the herein attached original summons
issued in the above-entitled case with the
information that on January 8, 1992 summons
and copies of the complaint were served to the
defendants Jacob, Jesus Jr., Adolfo, Mariano,
Consolacion, Alice, Racheal thru defendant
Caridad Trocino at their given address at
Maria Cristina Extension (besides Sacred
Heart School for Girls), Cebu City, evidence
by her signature found at the lower portion of
the original summons. [3]
WHEREFORE I, respectfully return the
original summons duly served to the court of
origin.
Cebu City, Philippines, January 10, 1992.
(
signed)
D
ELFIN D. BARNIDO
RTC
Process Server
On January 27, 1992, the defendants,
through their counsel Atty. Expedito P.
Bugarin, filed their Answer. Defendant
Caridad A. Trocino, respondents mother,
verified said pleading. [4]
 After trial on the merits, the RTC
rendered its decision on March 1993, with
the following disposition:
WHEREFORE, premises considered,
judgment is hereby rendered in favor of the
plaintiffs and against the defendants.
The latter are hereby ordered to jointly and
severally execute a Deed of Sale in favor of
the plaintiffs and to deliver the owners
duplicate copies of TCT Nos. 10616 and
31856, covering the properties sold, to the
plaintiffs within ten (10) days from the
finality of the judgment, after which plaintiffs
shall pay in turn to the defendants the balance
of P2,000,000.00. Otherwise, the sale is
rescinded and revoked and the defendants are
directed to return to the plaintiffs the amount
of P500,000.00, with interest of 12% per
annum computed from December 6, 1989,
until the full amount is paid.
In addition thereto, defendants are to pay
jointly and severally to the plaintiffs, the
amount of P50,000.00 as moral
damages; P20,000.00 as exemplary
damages; P40,000.00 by way of attorneys
fees; and P10,000.00 as litigation expenses.
SO ORDERED. [5]
Due to the defendants failure to
deliver the owners duplicate of TCT Nos.
10616 and 31856, the RTC issued an
order on August 29, 1995 declaring said
titles null and void, and ordering the
Register of Deeds of Cebu City to issue
new titles in the name of herein
petitioners.[6]
Thereafter, or on March 13, 1996,
respondents Adolfo and Mariano Trocino
filed with the Court of Appeals, a petition
for the annulment of the judgment
rendered by the RTC-Cebu (Branch 10) in
Civil Case No. CEB-11103. Private
respondents alleged that the trial courts
decision is null and void on the ground
that it did not acquire jurisdiction over
their persons as they were not validly
served with a copy of the summons and
the complaint. According to them, at the
time summons was served on them,
Adolfo Trocino was already
in Ohio, U.S.A., and has been residing
there for 25 years, while Mariano Trocino
was in Talibon, Bohol, and has been
residing there since 1986. They also
refuted the receipt of the summons by
Caridad A. Trocino, and the
representation made by Atty. Bugarin in
their behalf. Respondents also contended
that they have a meritorious
defense. Petitioners
[7]
filed their
Comment/Answer to the petition. [8]
On September 30, 1996, the Court of
Appeals issued the assailed Decision
granting the petition and annulling the
decision of the RTC-Cebu (Branch
10). The decretal portion of the decision
reads:
WHEREFORE, the decision of
the Regional Trial Court of Cebu City, Branch
10, in Civil Case No. CEB-11103 as well as
all Orders issued to implement the same are
hereby ANNULLED AND SET ASIDE. The
Register of Deeds of Cebu City is hereby
ENJOINED from cancelling Transfer
Certificates of Title Nos. 10616 and
31856. No pronouncement as to costs.
SO ORDERED. [9]
Their motion for reconsideration
having been denied by the Court of
Appeals, petitioners filed the present
petition, setting forth the following
assignment of errors:
I. THE COURT OF APPEALS ERRED IN
FINDING LACK OF PRIOR
KNOWLEDGE ON THE PART OF
 RESPONDENTS TROCINO,
REGARDING THE PROCEEDINGS
BEFORE THE RTC
OF CEBU CITY AND IN NOT
DISMISSING THE PETITION FOR
VIOLATION OF SUPREME COURT
CIRCULAR 04-94.
II. THE COURT OF APPEALS ERRED IN
DECLARING THE NEED FOR
PERSONAL AND/OR
EXTRATERRITORIAL SERVICE OF
SUMMONS, DESPITE THE NATURE
OF THE CAUSE OF ACTION BEING
ONE IN REM.
III. THE COURT OF APPEALS ERRED IN
ANNULLING THE JUDGMENT,
CAUSING FURTHER USELESS
LITIGATION AND UNNECESSARY
EXPENSE ON PETITIONERS AND
RESPONDENTS, ESPECIALLY SINCE
RESPONDENTS HAVE NOT SHOWN
ANY VALID DEFENSE AS GROUND
FOR REVERSAL OF JUDGMENT OF
THE RTC.
IV. THE COURT OF APPEALS ERRED IN
RULING THAT ITS JUDGMENT IS
APPLICABLE IN FAVOR OF CARIDAD
TROCINO.[10]
Summons is a writ by which the
defendant is notified of the action brought
against him. Service of such writ is the
means by which the court acquires
jurisdiction over his person. Any
[11]
judgment without such service in the
absence of a valid waiver is null and
void.[12]
The resolution of the present petition
hinges on the issue of whether or not
summons was effectively served on
respondents. If in the affirmative, the trial
court had validly acquired jurisdiction over
their persons and therefore its judgment
is valid.
To resolve whether there was valid
service of summons on respondents, the
nature of the action filed against them
must first be determined. As the Court
explained in Asiavest Limited vs. Court of
Appeals, it will be helpful to determine
first whether the action is in personam, in
rem, or quasi in rem because the rules on
service of summons under Rule 14 of the
Rules of Court of the Philippines apply
according to the nature of the action. [13]
In actions in personam, summons on
the defendant must be served by handing
a copy thereof to the defendant in person,
or, if he refuses to receive it, by tendering
it to him. This is specifically provided in
Section 7, Rule 14 of the Rules of
Court, which states:
[14]
SEC. 7. Personal service of summons.-- The
summons shall be served by handing a copy
thereof to the defendant in person or, if he
refuses to receive it, by tendering it to him.
If efforts to find defendant personally
makes prompt service impossible,
substituted service may be effected by
leaving copies of the summons at the
defendant's dwelling house or residence
with some person of suitable age and
discretion then residing therein, or by
leaving the copies at the defendant's
office or regular place of business with
some competent person in charge
thereof. In substituted service, it is
[15]
mandated that the fact of impossibility of
personal service should be explained in
the proof of service. [16]
When the defendant in an action in
personam is a non-resident who does not
voluntarily submit himself to the authority
of the court, personal service of summons
within the State is essential to the
acquisition of jurisdiction over his
person. This cannot be done if the
defendant is not physically present in the
country, and thus, the court cannot
acquire jurisdiction over his person and
therefore cannot validly try and decide the
case against him. An exception was
[17]
accorded in Gemperle vs.
Schenker wherein service of summons
through the non-residents wife, who was
a resident of the Philippines, was held
valid, as the latter was his representative
and attorney-in-fact in a prior civil case
filed by the non-resident, and the second
case was merely an offshoot of the first
case.[18]
Meanwhile, in actions in rem or quasi
in rem, jurisdiction over the person of the
defendant is not a prerequisite to confer
jurisdiction on the court provided that the
court acquires jurisdiction over the res,
although summons must be served upon
the defendant in order to satisfy the due
process requirements. Thus, where the
[19]
defendant is a non-resident who is not
found in the Philippines, and (1) the
action affects the personal status of the
plaintiff; (2) the action relates to, or the
subject matter of which is property in the
Philippines in which the defendant has or
claims a lien or interest; (3) the action
seeks the exclusion of the defendant from
any interest in the property located in the
Philippines; or (4) the property of the
defendant has been attached in the
Philippines, summons may be served
extraterritorially by (a) personal service
out of the country, with leave of court; (b)
publication, also with leave of court; or (c)
any other manner the court may deem
sufficient. [20]
In the present case, petitioners cause
of action in Civil Case No. CEB-11103 is
anchored on the claim that the spouses
Jesus and Caridad Trocino reneged on
their obligation to convey ownership of
the two parcels of land subject of their
sale. Thus, petitioners pray in their
complaint that the spouses Trocino be
ordered to execute the appropriate deed
of sale and that the titles be delivered to
them (petitioners); or in the alternative,
that the sale be revoked and rescinded;
and spouses Trocino ordered to return to
petitioners their down payment in the
amount of P500,000.00 plus
interests. The action instituted by
petitioners affect the parties alone, not the
whole world. Hence, it is an action in
personam, i.e., any judgment therein is
binding only upon the parties properly
impleaded. [21]
Contrary to petitioners belief, the
complaint they filed for specific
performance and/or rescission is not an
action in rem. While it is a real action
because it affects title to or possession of
the two parcels of land covered by TCT
Nos. 10616 and 31856, it does not
automatically follow that the action is
already one in rem. In Hernandez vs.
Rural Bank of Lucena, Inc., the Court
made the following distinction:
In a personal action, the plaintiff seeks the
recovery of personal property, the
enforcement of a contract or the recovery of
damages. In a real action, the plaintiff seeks
the recovery of real property, or, as indicated
in section 2(a) of Rule 4, a real action is an
action affecting title to real property or for the
recovery of possession, or for partition or
condemnation of, or foreclosure of a mortgage
on, real property.
An action in personam is an action against a
person on the basis of his personal liability,
while an action in rem is an action against the
thing itself, instead of against the person.
Hence, a real action may at the same time be
an action in personam and not necessarily an
action in rem. [22]
The objective sought in petitioners
complaint was to establish a claim against
respondents for their alleged refusal to
convey to them the title to the two parcels
of land that they inherited from their
father, Jesus Trocino, who was one of the
sellers of the properties to
petitioners. Hence, to repeat, Civil Case
No. CEB-11103 is an action in
personam because it is an action against
persons, namely, herein respondents, on
the basis of their personal liability. As
such, personal service of summons
upon the defendants is essential in
order for the court to acquire of
jurisdiction over their persons. [23]
A distinction, however, must be made
with regard to service of summons on
respondents Adolfo Trocino and Mariano
Trocino. Adolfo Trocino, as records show,
is already a resident of Ohio, U.S.A. for
25 years. Being a non-resident, the court
cannot acquire jurisdiction over his
person and validly try and decide the
case against him.
On the other hand, Mariano Trocino
has been in Talibon, Bohol since
1986. To validly acquire jurisdiction over
his person, summons must be served on
him personally, or through substituted
service, upon showing of impossibility of
personal service. Such impossibility, and
why efforts exerted towards personal
service failed, should be explained in the
proof of service. The pertinent facts and
circumstances attendant to the service of
summons must be stated in the proof of
service or Officers Return. Failure to do
so would invalidate all subsequent
proceedings on jurisdictional grounds. [24]
In the present case, the process
server served the summons and copies of
the complaint on respondents Jacob,
Jesus, Jr., Adolfo, Mariano, Consolacion,
Alice and Racheal, through their mother,
[25]
Caridad Trocino. The return did not
[26]
contain any particulars as to the
impossibility of personal service on
Mariano Trocino within a reasonable
time. Such improper service renders the
same ineffective.
Due process of law requires personal service
to support a personal judgment, and, when the
proceeding is strictly in personam brought to
determine the personal rights and obligations
of the parties, personal service within the state
or a voluntary appearance in the case is
essential to the acquisition of jurisdiction so
as to constitute compliance with the
constitutional requirement of due process. [27]
Moreover, inasmuch as the sheriffs
return failed to state the facts and
circumstances showing the impossibility
of personal service of summons upon
respondents within a reasonable time,
petitioners should have sought the
issuance of an alias summons. Under
Section 5, Rule 14 of the Rules of Court,
alias summons may be issued when the
original summons is returned without
being served on any or all of the
defendants. Petitioners, however, did
[28]
not do so, and they should now bear the
consequences of their lack of diligence.
The fact that Atty. Expedito Bugarin
represented all the respondents without
any exception does not transform the
ineffective service of summons into a
valid one. It does not constitute a valid
waiver or even a voluntary submission to
the trial courts jurisdiction. There was not
even the slightest proof showing that
respondents authorized Atty. Bugarins
appearance for and in their behalf. As
found by the Court of Appeals:
While Caridad Trocino may have engaged the
services of Atty. Bugarin, it did not
necessarily mean that Atty. Bugarin also had
the authority to represent the defendant
heirs. The records show that in all the
pleadings which required verification, only
Caridad Trocino signed the same. There was
never a single instance where defendant heirs
signed the pleading. The fact that a pleading is
signed by one defendant does not necessarily
mean that it is binding on a co-
defendant. Furthermore, Caridad Trocino
represented herself as the principal defendant
in her Motion to Withdraw Appeal. (Rollo, p.
80)
Since the defendant heirs are co-defendants,
the trial court should have verified the extent
of Atty. Bugarins authority when petitioners
failed to appear as early as the pre-trial stage,
where the parties are required to appear. The
absence of the defendant heirs should have
prompted the trial court to inquire from the
lawyer whether he was also representing the
other petitioners. As co-defendant and co-
heirs over the disputed properties, the
defendant heirs had every right to be present
during the trial. Only Caridad Trocino
appeared and testified on her own behalf. All
the defenses raised were her own, not the
defendant heirs. [29]
Consequently, the judgment sought to
be executed against respondents were
rendered without jurisdiction as there was
neither a proper service of summons nor
was there any waiver or voluntary
submission to the trial courts
jurisdiction. Hence, the same is void, with
regard to private respondents except
Caridad Trocino.
It must be pointed out that while it was
the spouses Jesus and Caridad Trocino
who sold the properties to petitioners,
their right to proceed against Jesus
Trocino when he died was passed on to
his heirs, which includes respondents and
Caridad Trocino. Such transmission of
right occurred by operation of law, more
particularly by succession, which is a
mode of acquisition by virtue of which the
property, rights and obligations to the
extent of the value of the inheritance of a
person are transmitted. When the [30]
process server personally served the
summons on Caridad Trocino, the trial
court validly acquired jurisdiction over her
person alone. Hence, the trial courts
decision is valid and binding with regard
to her, but only in proportion to Caridad
Trocinos share. As aptly stated by the
Court of Appeals:
This Courts decision is therefore applicable to
all the defendant heirs with the exception of
defendant Caridad Trocino considering that it
was the latter who entered into the alleged
sale without the consent of her husband. She
is therefore estopped from questioning her
own authority to enter into the questioned
sale. Moreover, Caridad Trocino was validly
served with summons and was accorded due
process. [31]
WHEREFORE, the petition for review
is DENIED. The decision of the Court of
Appeals in CA-G.R. SP No. 40067
is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 135634 May 31, 2000
HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA)
and SALVACION S. TRIA, petitioners,
vs.
VICENTE RODRIGUEZ, respondent.
MENDOZA, J.:
This is a petition for review on certiorari of the
decision of the Court of Appeals 1 reversing the
decision of the Regional Trial Court, Naga City,
Branch 19, in Civil Case No. 87-1335, as well as the representing an advance payment for
appellate court's resolution denying reconsideration. a residential lot adjoining his
previously paid lot on three sides
The antecedent facts are as follows: excepting on the frontage with the
agreed price of Fifteen (15.00) Pesos
Juan San Andres was the registered owner of Lot No. per square meter and the payment of
1914-B-2 situated in Liboton, Naga City. On the full consideration based on a
September 28, 1964, he sold a portion thereof, survey shall be due and payable in
consisting of 345 square meters, to respondent five (5) years period from the
Vicente S. Rodriguez for P2,415.00. The sale is execution of the formal deed of sale;
evidenced by a Deed of Sale. 2 and it is agreed that the expenses of
survey and its approval by the Bureau
of Lands shall be borne by Mr.
Upon the death of Juan San Andres on May 5, 1965,
Rodriguez.
Ramon San Andres was appointed judicial
administrator of the decedent's estate in Special
Proceedings No. R-21, RTC, Branch 19, Naga City. Naga City, September 29, 1964.
Ramon San Andres engaged the services of a
geodetic engineer, Jose Peero, to prepare a
consolidated plan (Exh. A) of the estate. Engineer
Peero also prepared a sketch plan of the 345-square
meter lot sold to respondent. From the result of the
survey, it was found that respondent had enlarged the
area which he purchased from the late Juan San
Andres by 509 square meters. 3

Accordingly, the judicial administrator sent a

letter, 4 dated July 27, 1987, to respondent
demanding that the latter vacate the portion allegedly
encroached by him. However, respondent refused to
do so, claiming he had purchased the same from the
late Juan San Andres. Thereafter, on November 24,
1987, the judicial administrator brought an action, in
behalf of the estate of Juan San Andres, for recovery
of possession of the 509-square meter lot.

In his Re-amended Answer filed on February 6, 1989,

respondent alleged that apart from the 345-square
meter lot which had been sold to him by Juan San
Andres on September 28, 1964, the latter likewise
sold to him the following day the remaining portion of
the lot consisting of 509 square meters, with both
parties treating the two lots as one whole parcel with
a total area of 854 square meters. Respondent
alleged that the full payment of the 509-square meter
lot would be effected within five (5) years from the
execution of a formal deed of sale after a survey is
conducted over said property. He further alleged that
with the consent of the former owner, Juan San
Andres, he took possession of the same and
introduced improvements thereon as early as 1964.
Noted:
As proof of the sale to him of 509 square meters,
respondent attached to his answer a receipt (Exh. (Sgd.)
2) 5 signed by the late Juan San Andres, which reads
in full as follows: VICENTE
RODRIGUEZ
Received from Vicente Rodriguez the
sum of Five Hundred (P500.00) Pesos
 Vende Penafrancia Subdivision, Naga City
e
P.S.
Respondent also attached to his answer a
letter of judicial administrator Ramon San You can let bearer Enrique del Castillo
Andres (Exh. 3), 6asking payment of the sign for the amount.
balance of the purchase price. The letter
reads: Receiv
ed One
Dear Inting, Hundre
d Only
Please accommodate my request for
Three Hundred (P300.00) Pesos as I
am in need of funds as I intimated to
you the other day.

We will just adjust it with whatever

balance you have payable to the
subdivision.
RAMO
Thanks. N SAN
ANDR
ES
S
i
n
3/30/66
c
e
Respondent deposited in court the balance of the
purchase price amounting to P7,035.00 for ther
aforesaid 509-square meter lot. e
l
While the proceedings were pending, judicial y
administrator Ramon San Andres died and was,
substituted by his son Ricardo San Andres. On the
other band, respondent Vicente( Rodriguez died on
S
August 15, 1989 and was substituted by his heirs. 7
g
d two witnesses. The
Petitioner, as plaintiff, presented
first witness, Engr. Jose Peero, . 8 testified that based
on his survey conducted sometime ) between 1982 and
1985, respondent had enlarged the area which he
purchased from the late Juan San Andres by 509 R
square meters belonging to the latter's estate. A
According to Peero, the titled property (Exh. A-5) M of
respondent was enclosed with a fence with metal O
holes and barbed wire, while the expanded area N was
fenced with barbed wire and bamboo and light
materials. S
A
The second witness, Ricardo San N
Andres, 9 administrator of the estate, testified that
respondent had not filed any claim before Special A
Proceedings No. R-21 and denied knowledge of N
Exhibits 2 and 3. However, he recognized the D
R
signature in Exhibit 3 as similar to that of the former
administrator, Ramon San Andres. Finally, he E
declared that the expanded portion occupied by S the
family of respondent is now enclosed with barbed wire
Vicente Rodriguez fence unlike before where it was found without fence.
On the other hand, Bibiana B. Rodriguez, 10 widow of stipulated by them during the trial of
respondent Vicente Rodriguez, testified that they had this case; and
purchased the subject lot from Juan San Andres, who
was their compadre, on September 29, 1964, at 4. to pay the costs of the suit.
P15.00 per square meter. According to her, they gave
P500.00 to the late Juan San Andres who later affixed SO ORDERED.
his signature to Exhibit 2. She added that on March
30, 1966; Ramon San Andres wrote them a letter
Hence, this petition. Petitioner assigns the following
asking for P300.00 as partial payment for the subject
errors as having been allegedly committed by the trial
lot, but they were able to give him only P100.00. She
court:
added that they had paid the total purchase price of
P7,035.00 on November 21, 1988 by depositing it in
court. Bibiana B. Rodriquez stated that they had been I. THE HON. COURT
in possession of the 509-square meter lot since 1964 OF APPEALS ERRED
when the late Juan San Andres signed the receipt. IN HOLDING THAT
(Exh. 2) Lastly, she testified that they did not know at THE DOCUMENT
that time the exact area sold to them because they (EXHIBIT "2") IS A
were told that the same would be known after the CONTRACT TO SELL
survey of the subject lot. DESPITE ITS
LACKING ONE OF
THE ESSENTIAL
On September 20, 1994, the trial court 11 rendered
ELEMENTS OF A
judgment in favor of petitioner. It ruled that there was
CONTRACT,
no contract of sale to speak of for lack of a valid
NAMELY, OBJECT
object because there was no sufficient indication in
CERTAIN AND
Exhibit 2 to identify the property subject of the sale,
SUFFICIENTLY
hence, the need to execute a new contract.
DESCRIBED.
Respondent appealed to the Court of Appeals, which
II. THE HON. COURT
on April 21, 1998 rendered a decision reversing the
OF APPEALS ERRED
decision of the trial court. The appellate court held
IN HOLDING THAT
that the object of the contract was determinable, and
PETITIONER IS
that there was a conditional sale with the balance of
OBLIGED TO HONOR
the purchase price payable within five years from the
THE PURPORTED
execution of the deed of sale. The dispositive portion
CONTRACT TO SELL
of its decision's reads:
DESPITE NON-
FULFILLMENT BY
IN VIEW OF ALL THE FOREGOING, RESPONDENT OF
the judgment appealed from is hereby THE CONDITION
REVERSED and SET ASIDE and a THEREIN OF
new one entered DISMISSING the PAYMENT OF THE
complaint and rendering judgment BALANCE OF THE
against the plaintiff-appellee: PURCHASE PRICE.

1. to accept the P7,035.00 III. THE HON. COURT

representing the balance of the OF APPEALS ERRED
purchase price of the portion and IN HOLDING THAT
which is deposited in court under CONSIGNATION WAS
Official Receipt No. 105754 (page VALID DESPITE NON-
122, Records); COMPLIANCE WITH
THE MANDATORY
2. to execute the formal deed of sale REQUIREMENTS
over the said 509 square meter THEREOF.
portion of Lot 1914-B-2 in favor of
appellant Vicente Rodriguez; IV. THE HON. COURT
OF APPEALS ERRED
3. to pay the defendant-appellant the IN HOLDING THAT
amount of P50,000.00 as damages LACHES AND
and P10,000.00 attorney's fees as PRESCRIPTION DO
 NOT APPLY TO
RESPONDENT WHO
SOUGHT
INDIRECTLY TO
ENFORCE THE
PURPORTED
CONTRACT AFTER
THE LAPSE OF 24
YEARS.
The petition has no merit.
First. Art. 1458 of the Civil Code provides:
By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership of and to
deliver a determinate thing, and the
other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or
conditional.
As thus defined, the essential elements of sale are
the following:
a) Consent or meeting of the minds,
that is, consent to transfer ownership
in exchange for the price;
b) Determinate subject matter; and,
c) Price certain in money or its
equivalent. 12
As shown in the receipt, dated September 29, 1964,
the late Juan San Andres received P500.00 from
respondent as "advance payment for the residential
lot adjoining his previously paid lot on three sides
excepting on the frontage; the agreed purchase price
was P15.00 per square meter; and the full amount of
the purchase price was to be based on the results of
a survey and would be due and payable in five (5)
years from the execution of a deed of sale.
Petitioner contends, however, that the "property
subject of the sale was not described with sufficient
certainty such that there is a necessity of another
agreement between the parties to finally ascertain the
identity; size and purchase price of the property which
is the object of the alleged sale." 1 He argues that the
"quantity of the object is not determinate as in fact a
survey is needed to determine its exact size and the
full purchase price therefor" 14In support of his
contention, petitioner cites the following provisions of
the Civil Code:
Art. 1349. The object of every contract
must be determinate as to its kind.
The fact that the quantity is not
determinable shall not be an obstacle
to the existence of a contract,
provided it is possible to determine the
same without the need of a new
contract between the parties.
Art. 1460. . . . The requisite that a
thing be determinate is satisfied if at
the time the contract is entered into,
the thing is capable of being made
determinate without the necessity of a
new and further agreement between
the parties.
Petitioner's contention is without merit. There is no
dispute that respondent purchased a portion of Lot
1914-B-2 consisting of 345 square meters. This
portion is located in the middle of Lot 1914-B-2, which
has a total area of 854 square meters, and is clearly
what was referred to in the receipt as the "previously
paid lot." Since the lot subsequently sold to
respondent is said to adjoin the "previously paid lot"
on three sides thereof, the subject lot is capable of
being determined without the need of any new
contract. The fact that the exact area of these
adjoining residential lots is subject to the result of a
survey does not detract from the fact that they are
determinate or determinable. As the Court of Appeals
explained: 15
Concomitantly, the object of the sale is
certain and determinate. Under Article
1460 of the New Civil Code, a thing
sold is determinate if at the time the
contract is entered into, the thing is
capable of being determinate without
necessity of a new or further
agreement between the parties. Here,
this definition finds realization.
Appellee's Exhibit "A" (page 4,
Records) affirmingly shows that the
original 345 sq. m. portion earlier sold
lies at the middle of Lot 1914-B-2
surrounded by the remaining portion
of the said Lot 1914-B-2 on three (3)
sides, in the east, in the west and in
the north. The northern boundary is a
12 meter road. Conclusively,
therefore, this is the only remaining
509 sq. m. portion of Lot 1914-B-2
surrounding the 345 sq. m. lot initially
purchased by Rodriguez. It is quite
difined, determinate and certain.
Withal, this is the same portion
 adjunctively occupied and possessed
by Rodriguez since September 29,
1964, unperturbed by anyone for over
twenty (20) years until appellee
instituted this suit.
Thus, all of the essential elements of a contract of
sale are present, i.e., that there was a meeting of the
minds between the parties, by virtue of which the late
Juan San Andres undertook to transfer ownership of
and to deliver a determinate thing for a price certain in
money. As Art. 1475 of the Civil Code provides:
The contract of sale is perfected at the
moment there is a meeting of minds
upon the thing which is the object of
the contract and upon the price. . . .
That the contract of sale is perfected was confirmed
by the former administrator of the estates, Ramon
San Andres, who wrote a letter to respondent on
March 30, 1966 asking for P300.00 as partial
payment for the subject lot. As the Court of Appeals
observed:
Without any doubt, the receipt
profoundly speaks of a meeting of the
mind between San Andres and
Rodriguez for the sale of the property
adjoining the 345 square meter portion
previously sold to Rodriguez on its
three (3) sides excepting the frontage.
The price is certain, which is P15.00
per square meter. Evidently, this is a
perfected contract of sale on a
deferred payment of the purchase
price. All the pre-requisite elements for
a valid purchase transaction are
present. Sale does not require any
formal document for its existence and
validity. And delivery of possession of
land sold is a consummation of the
sale (Galar vs. Husain, 20 SCRA 186
[1967]). A private deed of sale is a
valid contract between the parties
(Carbonell v. CA, 69 SCRA 99 [1976]).
In the same vein, after the late Juan
R. San Andres received the P500.00
downpayment on March 30, 1966,
Ramon R. San Andres wrote a letter
to Rodriguez and received from
Rodriguez the amount of P100.00
(although P300.00 was being
requested) deductible from the
purchase price of the subject portion.
Enrique del Castillo, Ramon's
authorized agent, correspondingly
signed the receipt for the P100.00.
Surely, this is explicitly a veritable
proof of he sale over the remaining
portion of Lot 1914-B-2 and a
confirmation by Ramon San Andres of
the existence thereof. 16
There is a need, however, to clarify what the Court of
Appeals said is a conditional contract of sale.
Apparently, the appellate court considered as a
"condition" the stipulation of the parties that the full
consideration, based on a survey of the lot, would be
due and payable within five (5) years from the
execution of a formal deed of sale. It is evident from
the stipulations in the receipt that the vendor Juan
San Andres sold the residential lot in question to
respondent and undertook to transfer the ownership
thereof to respondent without any qualification,
reservation or condition. In Ang Yu Asuncion v. Court
of Appeals, 17 we held:
In Dignos v. Court of Appeals (158
SCRA 375), we have said that,
although denominated a "Deed of
Conditional Sale," a sale is still
absolute where the contract is devoid
of any proviso that title is reserved or
the right to unilaterally rescind is
stipulated, e.g., until or unless the
price is paid. Ownership will then be
transferred to the buyer upon actual or
constructive delivery (e.g., by the
execution of a public document) of the
property sold. Where the condition is
imposed upon the perfection of the
contract itself, the failure of the
condition would prevent such
perfection. If the condition is imposed
on the obligation of a party which is
not fulfilled, the other party may either
waive the condition or refuse to
proceed with the sale. (Art. 1545, Civil
Code).
Thus, in. one case, when the sellers declared in a
"Receipt of Down Payment" that they received an
amount as purchase price for a house and lot without
any reservation of title until full payment of the entire
purchase price, the implication was that they sold
their property. 18 In People's Industrial Commercial
Corporation v. Court of Appeals, 19 it was stated:
A deed of sale is considered absolute
in nature where there is neither a
stipulation in the deed that title to the
property sold is reserved in the seller
until full payment of the price, nor one
giving the vendor the right to
 unilaterally resolve the contract the
moment the buyer fails to pay within a
fixed period.
Applying these principles to this case, it cannot be
gainsaid that the contract of sale between the parties
is absolute, not conditional. There is no reservation of
ownership nor a stipulation providing for a unilateral
rescission by either party. In fact, the sale was
consummated upon the delivery of the lot to
respondent. 20 Thus, Art. 1477 provides that the
ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery
thereof.
The stipulation that the "payment of the full
consideration based on a survey shall be due and
payable in five (5) years from the execution of a
formal deed of sale" is not a condition which affects
the efficacy of the contract of sale. It merely provides
the manner by which the full consideration is to be
computed and the time within which the same is to be
paid. But it does not affect in any manner the
effectivity of the contract. Consequently, the
contention that the absence of a formal deed of sale
stipulated in the receipt prevents the happening of a
sale has no merit.
Second. With respect to the contention that the Court
of Appeals erred in upholding the validity of a
consignation of P7,035.00 representing the balance of
the purchase price of the lot, nowhere in the decision
of the appellate court is there any mention of
consignation. Under Art. 1257 of this Civil Code,
consignation is proper only in cases where an existing
obligation is due. In this case, however, the
contracting parties agreed that full payment of
purchase price shall be due and payable within five
(5) years from the execution of a formal deed of sale.
At the time respondent deposited the amount of
P7,035.00 in the court, no formal deed of sale had yet
been executed by the parties, and, therefore, the five-
year period during which the purchase price should
be paid had not commenced. In short, the purchase
price was not yet due and payable.
This is not to say, however, that the deposit of the
purchase price in the court is erroneous. The Court of
Appeals correctly ordered the execution of a deed of
sale and petitioners to accept the amount deposited
by respondent.
Third. The claim of petitioners that the price of
P7,035.00 is iniquitous is untenable. The amount is
based on the agreement of the parties as evidenced
by the receipt (Exh. 2). Time and again, we have
stressed the rule that a contract is the law between
the parties, and courts have no choice but to enforce
such contract so long as they are not contrary to law,
morals, good customs or public policy. Otherwise,
court would be interfering with the freedom of contract
of the parties. Simply put, courts cannot stipulate for
the parties nor amend the latter's agreement, for to do
so would be to alter the real intentions of the
contracting parties when the contrary function of
courts is to give force and effect to the intentions of
the parties.
Fourth. Finally, petitioners argue that respondent is
barred by prescription and laches from enforcing the
contract. This contention is likewise untenable. The
contract of sale in this case is perfected, and the
delivery of the subject lot to respondent effectively
transferred ownership to him. For this reason,
respondent seeks to comply with his obligation to pay
the full purchase price, but because the deed of sale
is yet to be executed, he deemed it appropriate to
deposit the balance of the purchase price in court.
Accordingly, Art. 1144 of the Civil Code has no
application to the instant case. 21 Considering that a
survey of the lot has already been conducted and
approved by the Bureau of Lands, respondent's heirs,
assign or successors-in-interest should reimburse the
expenses incurred by herein petitioners, pursuant to
the provisions of the contract.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the modification that respondent is
ORDERED to reimburse petitioners for the expenses
of the survey.
SO ORDERED
G.R. No. 100776 October 28, 1993
ALBINO S. CO, petitioner,
vs.
COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES, respondents.
Antonio P. Barredo for petitioner.
The Solicitor General for the people.
NARVASA, C.J.:
In connection with an agreement to salvage and
refloat asunken vessel and in payment of his share
of the expenses of the salvage operations therein
stipulated petitioner Albino Co delivered to the
salvaging firm on September 1, 1983 a check drawn
against the Associated Citizens' Bank, postdated
November 30, 1983 in the sum of P361,528.00. 1 The
check was deposited on January 3, 1984. It was
dishonored two days later, the tersely-stated reason
given by the bank being: "CLOSED ACCOUNT."
A criminal complaint for violation of Batas Pambansa
Bilang 22 2 was filed by the salvage company against
Albino Co with the Regional Trial Court of Pasay City.
The case eventuated in Co's conviction of the crime
charged, and his being sentenced to suffer a term of
imprisonment of sixty (60) days and to indemnify the
salvage company in the sum of P361,528.00.
Co appealed to the Court of Appeals. There he
sought exoneration upon the theory that it was
reversible error for the Regional Trial Court to have
relied, as basis for its verdict of conviction, on the
ruling rendered on September 21, 1987 by this Court
in Que v. People, 154 SCRA 160 (1987) 3 i.e., that a
check issued merely to guarantee the performance of an
obligation is nevertheless covered by B.P. Blg. 22. This
was because at the time of the issuance of the check
on September 1, 1983, some four (4) years prior to the
promulgation of the judgment in Que v. People on
September 21, 1987, the delivery of a "rubber" or
"bouncing" check as guarantee for an obligation was not
considered a punishable offense, an official
pronouncement made in a Circular of the Ministry of
Justice. That Circular (No. 4), dated December 15, 1981,
pertinently provided as follows:
2.3.4. Where issuance of bouncing
check is neither estafa nor violation of
B.P. Blg. 22.
Where the check is issued as part of
an arrangement to guarantee or
secure the payment of an obligation,
whether pre-existing or not, the drawer
is not criminally liable for either estafa
or violation of B.P. Blg. 22 (Res. No.
438, s. 1981, Virginia Montano vs.
Josefino Galvez, June 19, 1981; Res.
No. 707, s. 1989; Alice Quizon vs.
Lydia Calingo, October 23, 1981, Res.
No. 769, s. 1981, Alfredo Guido vs.
Miguel A. Mateo, et. al., November 17,
1981; Res. No. 589, s. 1981, Zenaida
Lazaro vs. Maria Aquino, August 7,
1981).
This administrative circular was subsequently
reversed by another issued on August 8, 1984
(Ministry Circular No. 12) almost one (1) year after
Albino Co had delivered the "bouncing" check to the
complainant on September 1, 1983. Said Circular No.
12, after observing inter alia that Circular No. 4 of
December 15, 1981 appeared to have been based on
"a misapplication of the deliberation in the Batasang
Pambansa, . . . (or) the explanatory note on the
original bill, i.e. that the intention was not to penalize
the issuance of a check to secure or guarantee the
payment of an obligation," as follows: 4
Henceforth, conforming with the rule
that an administrative agency having
interpreting authority may reverse its
administration interpretation of a
statute, but that its review
interpretation applies only
prospectively (Waterbury Savings
Bank vs. Danaher, 128 Conn., 476; 20
a2d 455 (1941), in all cases involving
violation of Batas Pambansa Blg.
22 where the check in question is
issued after this date, the claim that
the check is issued as a guarantee or
part of an arrangement to secure an
obligation collection will no longer be
considered a valid defense.
Co's theory was rejected by the Court of Appeals
which affirmed his conviction. Citing Senarillos
v. Hermosisima, 101 Phil. 561, the Appellate Court
opined that the Que doctrine did not amount to the
passage of new law but was merely a construction or
interpretation of a pre-existing one, i.e., BP 22,
enacted on April 3, 1979.
From this adverse judgment of the Court of Appeals,
Albino Co appealed to this Court on certiorari under
Rule 45 of the Rules of Court. By Resolution dated
September 9, 1991, the Court dismissed his appeal.
Co moved for reconsideration under date of October
2, 1991. The Court required comment thereon by the
Office of the Solicitor General. The latter complied
and, in its comment dated December 13, 1991,
extensively argued against the merits of Albino Co's
theory on appeal, which was substantially that
proffered by him in the Court of Appeals. To this
comment, Albino Co filed a reply dated February 14,
1992. After deliberating on the parties' arguments and
contentions, the Court resolved, in the interests of
justice, to reinstate Albino Co's appeal and adjudicate
the same on its merits.
Judicial decisions applying or
interpreting the laws or the
Constitution shall form a part of the
legal system of the Philippines,"
according to Article 8 of the Civil
Code. "Laws shall have no retroactive
effect, unless the contrary is
provided," declares Article 4 of the
same Code, a declaration that is
echoed by Article 22 of the Revised
Penal Code: "Penal laws shall have, a
retroactive effect insofar as they favor
 the person guilty of a felony, who is
not a habitual criminal . . . 5
The principle of prospectivity of statutes, original or
amendatory, has been applied in many cases. These
include: Buyco v. PNB, 961 2 SCRA 682 (June 30,
1961), holding that Republic Act No. 1576 which
divested the Philippine National Bank of authority to
accept back pay certificates in payment of loans, does
not apply to an offer of payment made before
effectivity of the act; Largado v. Masaganda, et al., 5
SCRA 522 (June 30, 1962), ruling that RA 2613, s
amended by RA 3090 on June, 1961, granting to
inferior courts jurisdiction over guardianship cases,
could not be given retroactive effect, in the absence of
a saving clause; Larga v. Ranada, Jr., 64 SCRA 18,
to the effect that Sections 9 and 10 of Executive
Order No. 90, amending Section 4 of PD 1752, could
have no retroactive application; People v. Que Po
Lay, 94 Phil. 640, holding that a person cannot be
convicted of violating Circular No. 20 of the Central,
when the alleged violation occurred before publication
of the Circular in the Official Gazette; Baltazar v. C.A.,
104 SCRA 619, denying retroactive application to
P.D. No. 27 decreeing the emancipation of tenants
from the bondage of the soil, and P.D. No. 316
prohibiting ejectment of tenants from rice and corn
farmholdings, pending the promulgation of rules and
regulations implementing P.D. No. 27; Nilo v. Court of
Appeals, 128 SCRA 519, adjudging that RA 6389
whichremoved "personal cultivation" as a ground for
the ejectment of a tenant cannot be given retroactive
effect in the absence of a statutory statement for
retroactivity; Tac-An v. CA, 129 SCRA 319, ruling that
the repeal of the old Administrative Code by RA 4252
could not be accorded retroactive effect; Ballardo
v. Borromeo, 161 SCRA 500, holding that RA 6389
should have only prospective application; (see
also Bonifacio v. Dizon, 177 SCRA 294 and Balatbat
v. CA, 205 SCRA 419).
The prospectivity principle has also been made to
apply to administrative rulings and circulars, to
wit: ABS-CBN Broadcasting Corporation v. CTA, Oct.
12, 1981, 108 SCRA 142, holding that a circular or
ruling of the Commissioner of Internal Revenue may
not be given retroactive effect adversely to a
taxpayer: Sanchez v. COMELEC, 193 SCRA 317,
ruling that Resolution No. 90-0590 of the Commission
on Elections, which directed the holding of recall
proceedings, had no retroactive
application; Romualdez v. CSC, 197 SCRA 168,
where it was ruled that CSC Memorandum Circular
No. 29, s. 1989 cannot be given retrospective effect
so as to entitle to permanent appointment an
employee whose temporary appointment had expired
before the Circular was issued.
The principle of prospectivity has also been applied to
judicial decisions which, "although in themselves not
laws, are nevertheless evidence of what the laws
mean, . . . (this being) the reason whyunder Article 8
of the New Civil Code, 'Judicial decisions applying or
interpreting the laws or the Constitution shall form a
part of the legal system . . .'"
So did this Court hold, for example, in Peo. v. Jabinal,
55 SCRA 607, 611:
It will be noted that when appellant
was appointed Secret Agent by the
Provincial Government in 1962, and
Confidential Agent by the Provincial
commander in 1964, the prevailing
doctrine on the matter was that laid
down by Us in People
v. Macarandang (1959) and People
v. Lucero (1958). 6Our decision
in People v. Mapa, 7 reversing the
aforesaid doctrine, came only in 1967.
The sole question in this appeal is:
should appellant be acquitted on the
basis of Our rulings
in Macarandang and Lucero, or should
his conviction stand in view of the
complete reverse of the Macarandang
and Lucero doctrine in Mapa? . . .
Decisions of this Court, although in
themselves not laws, are nevertheless
evidence of what the laws mean, and
this is the reason why under Article 8
of the New Civil Code, "Judicial
decisions applying or interpreting the
laws or the Constitution shall form a
part of the legal system . . ."The
interpretation upon a law by this Court
constitutes, in a way, a part of the law
as of the date that law was originally
passed, since this Court's construction
merely establishes the
contemporaneous legislative intent
that the law thus construed intends to
effectuate. The settled rule supported
by numerous authorities is a
restatement of the legal maxim "legis
interpretation legis vim obtinet" the
interpretation placed upon the written
law by a competent court has the
force of law. The doctrine laid down
in Lucero and Macarandang was part
of the jurisprudence, hence, of the
law, of the land, at the time appellant
was found in possession of the firearm
in question and where he was
arraigned by the trial court. It is true
that the doctrine was overruled in the
 Mapa case in 1967, but when a
doctrine of this Court is overruled and
a different view is adopted, the new
doctrine should be applied
prospectively, and should not apply to
parties who had relied on, the old
doctrine and acted on the faith thereof.
This is especially true in the
construction and application of
criminal laws, where it is necessary
that the punishment of an act be
reasonably foreseen for the guidance
of society.
So, too, did the Court rule in Spouses Gauvain and
Bernardita Benzonan v. Court of Appeals, et al. (G.R.
No. 97973) and Development Bank of the Philippines
v. Court of Appeals, et al (G.R. No 97998), Jan. 27,
1992, 205 SCRA 515, 527-528: 8
We sustain the petitioners' position, It
is undisputed that the subject lot was
mortgaged to DBP on February 24,
1970. It was acquired by DBP as the
highest bidder at a foreclosure sale on
June 18, 1977, and then sold to the
petitioners on September 29, 1979.
At that time, the prevailing
jurisprudence interpreting section 119
of R.A. 141 as amended was that
enunciated in Monge and Tupas cited
above. The petitioners Benzonan and
respondent Pe and the DBP are
bound by these decisions for pursuant
to Article 8 of the Civil Code "judicial
decisions applying or interpreting the
laws or the Constitution shall form a
part of the legal system of the
Philippines." But while our decisions
form part of the law of the land, they
are also subject to Article 4 of the Civil
Code which provides that "laws shall
have no retroactive effect unless the
contrary is provided." This is
expressed in the familiar legal
maxim lex prospicit, non respicit, the
law looks forward not backward. The
rationale against retroactivity is easy
to perceive. The retroactive
application of a law usually divests
rights that have already become
vested or impairs the obligations of
contract and hence, is unconstitutional
(Francisco vs. Certeza, 3 SCRA 565
[1061]).
The same consideration underlies our
rulings giving only prospective effect
to decisions enunciating new
doctrines. Thus, we emphasized
in People v. Jabinal, 55 SCRA 607
[1974]" . . . when a doctrine of this
Court is overruled and a different view
is adopted, the new doctrine should be
applied prospectively and should not
apply to parties who had relied on the
old doctrine and acted on the faith
thereof.
A compelling rationalization of the prospectivity
principle of judicial decisions is well set forth in the oft-
cited case of Chicot County Drainage Dist. v. Baxter
States Bank, 308 US 371, 374 [1940]. The Chicot
doctrine advocates the imperative necessity to take
account of the actual existence of a statute prior to its
nullification, as an operative fact negating acceptance
of "a principle of absolute retroactive invalidity.
Thus, in this Court's decision in Taada
v. Tuvera, 9 promulgated on April 24, 1985 which
declared "that presidential issuances of general
application, which have not been published,shall have
no force and effect," and as regards which declaration
some members of the Court appeared "quite
apprehensive about the possible unsettling effect . . .
(the) decision might have on acts done in reliance on the
validity of these presidential decrees . . ." the Court
said:
. . . . The answer is all too familiar. In
similar situation is in the past this
Court, had taken the pragmatic and
realistic course set forth in Chicot
County Drainage District vs. Baxter
Bank (308 U.S. 371, 374) to wit:
The courts below have proceeded on
the theory that the Act of Congress,
having found to be unconstitutional,
was not a law; that it was inoperative,
conferring no rights and imposing no
duties, and hence affording no basis
for the challenged decree. Norton vs.
Shelby County, 118 US 425, 442;
Chicago, I. & L. Ry. Co. v. Hackett,
228 U. S. 559, 566. It is quite clear,
however, that such broad statements
as to the effect of a determination of
unconstitutionality must be taken with
qualifications. The actual existence of
a statute, prior to such a
determination, is an operative fact and
may have consequences which
cannot justly be ignored. The past
cannot always be erased by a new
 judicial declaration. The effect of the
subsequent ruling as to invalidity may
have to be considered in various
aspects with respect to particular
conduct, private and official.
Questions of rights claimed to have
become vested, of status, of prior
determinations deemed to have finality
and acted upon accordingly, of public
policy in the light of the nature both of
the statute and of its previous
application, demand examination.
These questions are among the most
difficult of those who have engaged
the attention of courts, state and
federal, and it is manifest from
numerous decisions that an all-
inclusive statement of a principle of
absolute retroactive invalidity cannot
be justified.
Much earlier, in De Agbayani v. PNB, 38 SCRA 429
concerning the effects of the invalidation of
"Republic Act No. 342, the moratorium legislation,
which continued Executive Order No. 32, issued by
the then President Osmea, suspending the
enforcement of payment of all debts and other
monetary obligations payable by war sufferers," and
which had been "explicitly held in Rutter v. Esteban
(93 Phil. 68 [1953] 10 . . . (to be) in 1953 'unreasonable
and oppressive, and should not be prolonged a minute
longer . . ." the Court made substantially the same
observations, to wit: 11
. . . . The decision now on appeal
reflects the orthodox view that an
unconstitutional act, for that matter an
executive order or a municipal
ordinance likewise suffering from that
infirmity, cannot be the source of any
legal rights or duties. Nor can it justify
any official act taken under it. Its
repugnancy to the fundamental law
once judicially declared results in its
being to all intents and purposes
amere scrap of paper. . . . It is
understandable why it should be so,
the Constitution being supreme and
paramount. Any legislative or
executive act contrary to its terms
cannot survive.
Such a view has support in logic and
possesses the merit of simplicity. lt
may not however be sufficiently
realistic. It does not admit of doubt
that prior to the declaration of nullity
such challenged legislative or
executive act must have been in force
and had to be compiled with. This is
so as until after the judiciary, in an
appropriate case, declares its
invalidity,, it is entitled to obedience
and respect. Parties may have acted
under it and may have changed
theirpositions, what could be more
fitting than that in a subsequent
litigation regard be had to what has
been done while such legislative or
executive act was in operation and
presumed to be valid in all respects. It
is now accepted as a doctrine that
prior to its being nullified, its existence
is a fact must be reckoned with. This
is merely to reflect awareness that
precisely because the judiciary is the
governmental organ which has the
final say on whether or not a
legislative or executive measure is
valid, a, period of time may have
elapsed before it can exercise the
power of judicial review that may lead
to a declaration of nullity. It would be
to deprive the law of its quality of
fairness and justice then, if there be
no recognition of what had transpired
prior to such adjudication.
In the language of an American
Supreme Court decision: 'The actual
existence of a statute, prior to such a
determination [of unconstitutionality],
is an operative fact and may have
consequences which cannot justly be
ignored. The past cannot always be
erased by a new judicial declaration.
The effect of the subsequent ruling as
to invalidity may have to be
considered in various aspects, with
respect to particular relations,
individual and corporate, and
particular conduct, private and official
(Chicot County Drainage Dist. v.
Baxter States Bank, 308 US 371, 374
[1940]). This language has been
quoted with approval in a resolution in
Araneta v. Hill (93 Phil. 1002 [1953])
and the decision in Manila Motor Co.
Inc. v. Flores (99 Phil. 738 [1956]). An
even more recent instance is the
opinion of Justice Zaldivar speaking
for the Court in Fernandez v. Cuerva
and Co. (L-21114, Nov. 28, 1967, 21
SCRA 1095).
Again, treating of the effect that should be given to its
decision in Olaguer v. Military Commission No
34, 12 declaring invalid criminal proceedings
conducted during the martial law regime against
civilians, which had resulted in the conviction and
incarceration of numerous persons this Court, in Tan
vs. Barrios, 190 SCRA 686, at p. 700, ruled as follows:
In the interest of justice and
consistently, we hold that Olaguer
should, in principle, be applied
prospectively only to future cases and
cases still ongoing or not yet final
when that decision was promulgated.
Hence, there should be no retroactive
nullification of final judgments,
whether of conviction or acquittal,
rendered by military courts against
civilians before the promulgation of the
Olaguer decision. Such final
sentences should not be disturbed by
the State. Only in particular cases
where the convicted person or the
State shows that there was serious
denial of constitutional rights of the
accused, should the nullity of the
sentence be declared and a retrial be
ordered based on the violation of the
constitutional rights of the accused
and not on the Olaguer doctrine. If a
retrial is no longer possible, the
accused should be released since
judgment against him is null on
account of the violation of his
constitutional rights and denial of due
process.
xxx xxx xxx
The trial of thousands of civilians for
common crimes before the military
tribunals and commissions during the
ten-year period of martial rule (1971-
1981) which were created under
general orders issued by President
Marcos in the exercise of his
legislative powers is an operative fact
that may not just be ignored. The
belated declaration in 1987 of the
unconstitutionality and invalidity of
those proceedings did not erase the
reality of their consequences which
occurred long before our decision in
Olaguer was promulgated and which
now prevent us from carrying Olaguer
to the limit of its logic. Thus did this
Court rule in Municipality of Malabang
v. Benito, 27 SCRA 533, where the
question arose as to whether the
nullity of creation of a municipality by
executive order wiped out all the acts
of the local government abolished. 13
It would seem then, that the weight of authority is
decidedly in favor of the proposition that the Court's
decision of September 21, 1987 in Que v. People,
154 SCRA 160 (1987) 14 that a check issued merely to
guarantee the performance of an obligation is
nevertheless covered by B.P. Blg. 22 should not be
given retrospective effect to the prejudice of the
petitioner and other persons situated, who relied on the
official opinion of the Minister of Justice that such a
check did not fall within the scope of B.P. Blg. 22.
Inveighing against this proposition, the Solicitor
General invokes U.S. v. Go Chico, 14 Phil. 128,
applying the familiar doctrine that in crimes mala
prohibita, the intent or motive of the offender is
inconsequential, the only relevant inquiry being, "has
the law been violated?" The facts in Go Chico are
substantially different from those in the case at bar. In
the former, there was no official issuance by the
Secretary of Justice or other government officer
construing the special law violated; 15 and it was there
observed, among others, that "the defense . . . (of) an
honest misconstruction of the law under legal
advice" 16 could not be appreciated as a valid defense. In
the present case on the other hand, the defense is that
reliance was placed, not on the opinion of a private
lawyer but upon an official pronouncement of no less
than the attorney of the Government, the Secretary of
Justice, whose opinions, though not law, are entitled to
great weight and on which reliance may be placed by
private individuals is reflective of the correct
interpretation of a constitutional or statutory provision;
this, particularly in the case of penal statutes, by the very
nature and scope of the authority that resides in as
regards prosecutions for their violation. 17 Senarillos
vs. Hermosisima, supra, relied upon by the respondent
Court of Appeals, is crucially different in that in said
case, as in U.S. v. Go Chico, supra, no administrative
interpretation antedated the contrary construction placed
by the Court on the law invoked.
This is after all a criminal action all doubts in which,
pursuant to familiar, fundamental doctrine, must be
resolved in favor of the accused. Everything
considered, the Court sees no compelling reason why
the doctrine of mala prohibita should override the
principle of prospectivity, and its clear implications as
herein above set out and discussed, negating criminal
liability.
WHEREFORE, the assailed decisions of the Court of
Appeals and of the Regional Trial Court are reversed
and set aside, and the criminal prosecution against
the accused-petitioner is DISMISSED, with costs de
oficio.
SO ORDERED.
THIRD DIVISION
 [G.R. No. 103577. October 7, 1996]
ROMULO A. CORONEL, ALARICO A.
CORONEL, ANNETTE A.
CORONEL, ANNABELLE C.
GONZALES (for herself and on
behalf of Floraida C. Tupper, as
attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A.
ALMONTE, and CATALINA
BALAIS
MABANAG, petitioners, vs. THE
COURT OF APPEALS,
CONCEPCION D. ALCARAZ and
RAMONA PATRICIA ALCARAZ,
assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in
a complaint for specific performance to
compel herein petitioners (except the last
named, Catalina Balais Mabanag) to
consummate the sale of a parcel of land
with its improvements located along
Roosevelt Avenue in Quezon City entered
into by the parties sometime in January
1985 for the price of P1,240,000.00.
The undisputed facts of the case were
summarized by respondent court in this
wise:
On January 19, 1985, defendants-appellants
Romulo Coronel, et. al. (hereinafter referred
to as Coronels) executed a document entitled
Receipt of Down Payment (Exh. A) in favor
of plaintiff Ramona Patricia Alcaraz
(hereinafter referred to as Ramona) which is
reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz
of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No.
119627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our
names from our deceased father, Constancio
P. Coronel, the transfer certificate of title
immediately upon receipt of the down
payment above-stated.
On our presentation of the TCT already in or
name, We will immediately execute the deed
of absolute sale of said property and Miss
Ramona Patricia Alcaraz shall immediately
pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale
are the following:
1. Ramona will make a down payment of
Fifty Thousand (P50,000.00) pesos upon
execution of the document aforestated;
2. The Coronels will cause the transfer in their
names of the title of the property registered in
the name of their deceased father upon receipt
of the Fifty Thousand (P50,000.00) Pesos
down payment;
3. Upon the transfer in their names of the
subject property, the Coronels will execute the
deed of absolute sale in favor of Ramona and
the latter will pay the former the whole
balance of One Million One Hundred Ninety
Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985),
plaintiff-appellee Concepcion D. Alcaraz
(hereinafter referred to as Concepcion),
mother of Ramona, paid the down payment of
Fifty Thousand (P50,000.00) Pesos (Exh. B,
Exh. 2).
On February 6, 1985, the property originally
registered in the name of the Coronels father
was transferred in their names under TCT No.
327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the
property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag
(hereinafter referred to as Catalina) for One
Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00)
Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and
rescinded the contract (Exh. A) with Ramona
by depositing the down payment paid
by Concepcion in the bank in trust for
Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al.,
filed a complaint for a specific performance
against the Coronels and caused the
annotation of a notice of lis pendens at the
back of TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the
annotation of a notice of adverse claim
covering the same property with the Registry
of Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a
Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject
property was issued in the name of Catalina
under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings
before the trial court (Branch 83,
RTC, Quezon City) the parties agreed to
submit the case for decision solely on the
basis of documentary exhibits.Thus,
plaintiffs therein (now private
respondents) proffered their documentary
evidence accordingly marked as Exhibits
A through J, inclusive of their
corresponding submarkings. Adopting
these same exhibits as their own, then
defendants (now petitioners) accordingly
offered and marked them as Exhibits 1
through 10, likewise inclusive of their
corresponding submarkings.Upon motion
of the parties, the trial court gave them
thirty (30) days within which to
simultaneously submit their respective
memoranda, and an additional 15 days
within which to submit their corresponding
comment or reply thereto, after which, the
case would be deemed submitted for
resolution.
On April 14, 1988, the case was
submitted for resolution before Judge
Reynaldo Roura, who was then
temporarily detailed to preside over
Branch 82 of the RTC of Quezon
City. On March 1, 1989, judgment was
handed down by Judge Roura from his
regular bench at Macabebe, Pampanga
for the Quezon City branch, disposing as
follows:
WHEREFORE, judgment for specific
performance is hereby rendered ordering
defendant to execute in favor of plaintiffs a
deed of absolute sale covering that parcel of
land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon
City, together with all the improvements
existing thereon free from all liens and
encumbrances, and once accomplished, to
immediately deliver the said document of sale
to plaintiffs and upon receipt thereof, the
plaintiffs are ordered to pay defendants the
whole balance of the purchase price
amounting to P1,190,000.00 in cash. Transfer
Certificate of Title No. 331582 of the Registry
of Deeds for Quezon City in the name of
intervenor is hereby canceled and declared to
be without force and effect. Defendants and
intervenor and all other persons claiming
under them are hereby ordered to vacate the
subject property and deliver possession
thereof to plaintiffs. Plaintiffs claim for
damages and attorneys fees, as well as the
counterclaims of defendants and intervenors
are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March
1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed
by petitioners before the new presiding
judge of the Quezon City RTC but the
same was denied by Judge Estrella T.
Estrada, thusly:
The prayer contained in the instant motion,
i.e., to annul the decision and to render anew
decision by the undersigned Presiding Judge
should be denied for the following
reasons: (1) The instant case became
submitted for decision as of April 14, 1988
when the parties terminated the presentation
of their respective documentary evidence and
when the Presiding Judge at that time was
Judge Reynaldo Roura. The fact that they
were allowed to file memoranda at some
future date did not change the fact that the
hearing of the case was terminated before
Judge Roura and therefore the same should be
submitted to him for decision; (2) When the
defendants and intervenor did not object to the
authority of Judge Reynaldo Roura to decide
the case prior to the rendition of the decision,
when they met for the first time before the
undersigned Presiding Judge at the hearing of
a pending incident in Civil Case No. Q-46145
on November 11, 1988, they were deemed to
have acquiesced thereto and they are now
estopped from questioning said authority of
Judge Roura after they received the decision
in question which happens to be adverse to
them; (3) While it is true that Judge Reynaldo
Roura was merely a Judge-on-detail at this
Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on
any pending incident submitted before this
Court during his incumbency. When he
returned to his Official Station at Macabebe,
Pampanga, he did not lose his authority to
decide or resolve cases submitted to him for
decision or resolution because he continued as
Judge of the Regional Trial Court and is of
co-equal rank with the undersigned Presiding
Judge. The standing rule and supported by
jurisprudence is that a Judge to whom a case
is submitted for decision has the authority to
decide the case notwithstanding his transfer to
another branch or region of the same court
(Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for
reconsideration of the Decision dated March
1, 1989 rendered in the instant case, resolution
of which now pertains to the undersigned
Presiding Judge, after a meticulous
examination of the documentary evidence
presented by the parties, she is convinced that
the Decision of March 1, 1989 is supported by
evidence and, therefore, should not be
disturbed.
IN VIEW OF THE FOREGOING, the Motion
for Reconsideration and/or to Annul Decision
and Render Anew Decision by the Incumbent
Presiding Judge dated March 20, 1989 is
hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an
appeal, but on December 16, 1991, the
Court of Appeals (Buena, Gonzaga-
Reyes, Abad-Santos (P), JJ.) rendered its
decision fully agreeing with the trial court.
Hence, the instant petition which was
filed on March 5, 1992. The last pleading,
private respondents Reply Memorandum,
was filed on September 15, 1993. The
case was, however, re-raffled to
undersigned ponente only on August 28,
1996, due to the voluntary inhibition of the
Justice to whom the case was last
assigned.
While we deem it necessary to
introduce certain refinements in the
disquisition of respondent court in the
affirmance of the trial courts decision, we
definitely find the instant petition bereft of
merit.
The heart of the controversy which is
the ultimate key in the resolution of the
other issues in the case at bar is the
precise determination of the legal
significance of the document entitled
Receipt of Down Payment which was
offered in evidence by both parties. There
is no dispute as to the fact that the said
document embodied the binding contract
between Ramona Patricia Alcaraz on the
one hand, and the heirs of Constancio P.
Coronel on the other, pertaining to a
particular house and lot covered by TCT
No. 119627, as defined in Article 1305 of
the Civil Code of the Philippines which
reads as follows:
Art. 1305. A contract is a meeting of minds
between two persons whereby one binds
himself, with respect to the other, to give
something or to render some service.
While, it is the position of private
respondents that the Receipt of Down
Payment embodied a perfected contract
of sale, which perforce, they seek to
enforce by means of an action for specific
performance, petitioners on their part
insist that what the document signified
was a mere executory contract to sell,
subject to certain suspensive conditions,
and because of the absence of Ramona
P. Alcaraz, who left for the United States
of America, said contract could not
possibly ripen into a contract of absolute
sale.
Plainly, such variance in the
contending parties contention is brought
about by the way each interprets the
terms and/or conditions set forth in said
private instrument. Withal, based on
whatever relevant and admissible
evidence may be available on record, this
Court, as were the courts below, is now
called upon to adjudge what the real
intent of the parties was at the time the
said document was executed.
The Civil Code defines a contract of
sale, thus:
Art. 1458. By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership of and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
Sale, by its very nature, is a
consensual contract because it is
perfected by mere consent. The essential
elements of a contract of sale are the
following:
a) Consent or meeting of the minds, that is,
consent to transfer ownership in exchange for
the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell
may not be considered as a
Contract of Sale because the first
essential element is lacking. In a contract
to sell, the prospective seller explicitly
reserves the transfer of title to the
prospective buyer, meaning, the
prospective seller does not as yet agree
or consent to transfer ownership of the
property subject of the contract to sell
until the happening of an event, which for
present purposes we shall take as the full
payment of the purchase price. What the
seller agrees or obliges himself to do is to
fulfill his promise to sell the subject
property when the entire amount of the
purchase price is delivered to him. In
other words the full payment of the
purchase price partakes of a suspensive
condition, the non-fulfillment of which
prevents the obligation to sell from arising
and thus, ownership is retained by the
prospective seller without further
remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741
[1980]), this Court had occasion to rule:
Hence, We hold that the contract between the
petitioner and the respondent was a contract to
sell where the ownership or title is retained by
the seller and is not to pass until the full
payment of the price, such payment being a
positive suspensive condition and failure of
which is not a breach, casual or serious, but
simply an event that prevented the obligation
of the vendor to convey title from acquiring
binding force.
Stated positively, upon the fulfillment
of the suspensive condition which is the
full payment of the purchase price, the
prospective sellers obligation to sell the
subject property by entering into a
contract of sale with the prospective
buyer becomes demandable as provided
in Article 1479 of the Civil Code which
states:
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 of the promise is
supported by a consideration distinct from the
price.
A contract to sell may thus be defined
as a bilateral contract whereby the
prospective seller, while expressly
reserving the ownership of the subject
property despite delivery thereof to the
prospective buyer, binds himself to sell
the said property exclusively to the
prospective buyer upon fulfillment of the
condition agreed upon, that is, full
payment of the purchase price.
A contract to sell as defined
hereinabove, may not even be considered
as a conditional contract of sale where
the seller may likewise reserve title to the
property subject of the sale until the
fulfillment of a suspensive condition,
because in a conditional contract of sale,
the first element of consent is present,
although it is conditioned upon the
happening of a contingent event which
may or may not occur. If the suspensive
condition is not fulfilled, the perfection of
the contract of sale is completely abated
(cf. Homesite and Housing Corp. vs.
Court of Appeals, 133 SCRA 777
[1984]). However, if the suspensive
condition is fulfilled, the contract of sale is
thereby perfected, such that if there had
already been previous delivery of the
property subject of the sale to the buyer,
ownership thereto automatically transfers
to the buyer by operation of law without
any further act having to be performed by
the seller.
In a contract to sell, upon the
fulfillment of the suspensive condition
which is the full payment of the purchase
price, ownership will not automatically
transfer to the buyer although the
property may have been previously
delivered to him. The prospective seller
still has to convey title to the prospective
buyer by entering into a contract of
absolute sale.
It is essential to distinguish between a
contract to sell and a conditional contract
of sale specially in cases where the
subject property is sold by the owner not
to the party the seller contracted with, but
to a third person, as in the case at
bench. 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.
In a conditional contract of sale,
however, upon the fulfillment of the
suspensive condition, the sale becomes
absolute and this will definitely affect the
sellers title thereto. In fact, if there had
been previous delivery of the subject
property, the sellers ownership or title to
the property is automatically transferred
to the buyer such that, the seller will no
longer have any title to transfer to any
third person. Applying Article 1544 of the
Civil Code, such second buyer of the
property who may have had actual or
constructive knowledge of such defect in
the sellers title, or at least was charged
with the obligation to discover such
defect, cannot be a registrant in good
faith. Such second buyer cannot defeat
the first buyers title. In case a title is
issued to the second buyer, the first buyer
may seek reconveyance of the property
subject of the sale.
With the above postulates as
guidelines, we now proceed to the task of
deciphering the real nature of the contract
entered into by petitioners and private
respondents.
It is a canon in the interpretation of
contracts that the words used therein
should be given their natural and ordinary
meaning unless a technical meaning was
intended (Tan vs. Court of Appeals, 212
SCRA 586 [1992]). Thus, when
petitioners declared in the said Receipt of
Down Payment that they --
Received from Miss Ramona Patricia Alcaraz
of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No.
1199627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
without any reservation of title until full
payment of the entire purchase price, the
natural and ordinary idea conveyed is that
they sold their property.
When the Receipt of Down payment is
considered in its entirety, it becomes
more manifest that there was a clear
intent on the part of petitioners to transfer
title to the buyer, but since the transfer
certificate of title was still in the name of
petitioners father, they could not fully
effect such transfer although the buyer
was then willing and able to immediately
pay the purchase price. Therefore,
petitioners-sellers undertook upon receipt
of the down payment from private
respondent Ramona P. Alcaraz, to cause
the issuance of a new certificate of title in
their names from that of their father, after
which, they promised to present said title,
now in their names, to the latter and to
execute the deed of absolute sale
whereupon, the latter shall, in turn, pay
the entire balance of the purchase price.
The agreement could not have been a
contract to sell because the sellers herein
made no express reservation of
ownership or title to the subject parcel of
land. Furthermore, the circumstance
which prevented the parties from entering
into an absolute contract of sale pertained
to the sellers themselves (the certificate
of title was not in their names) and not the
full payment of the purchase price. Under
the established facts and circumstances
of the case, the Court may safely
presume that, had the certificate of title
been in the names of petitioners-sellers at
that time, there would have been no
reason why an absolute contract of sale
could not have been executed and
consummated right there and then.
Moreover, unlike in a contract to sell,
petitioners in the case at bar did not
merely promise to sell the property to
private respondent upon the fulfillment of
the suspensive condition. On the
contrary, having already agreed to sell the
subject property, they undertook to have
the certificate of title change to their
names and immediately thereafter, to
execute the written deed of absolute sale.
Thus, the parties did not merely enter
into a contract to sell where the sellers,
after compliance by the buyer with certain
terms and conditions, promised to sell the
property to the latter.What may be
perceived from the respective
undertakings of the parties to the contract
is that petitioners had already agreed to
sell the house and lot they inherited from
their father, completely willing to transfer
ownership of the subject house and lot to
the buyer if the documents were then in
order. It just so happened, however, that
the transfer certificate of title was then still
in the name of their father. It was more
expedient to first effect the change in the
certificate of title so as to bear their
names. That is why they undertook to
cause the issuance of a new transfer of
the certificate of title in their names upon
receipt of the down payment in the
amount of P50,000.00. As soon as the
new certificate of title is issued in their
names, petitioners were committed to
immediately execute the deed of absolute
sale. Only then will the obligation of the
buyer to pay the remainder of the
purchase price arise.
There is no doubt that unlike in a
contract to sell which is most commonly
entered into so as to protect the seller
against a buyer who intends to buy the
property in installment by withholding
ownership over the property until the
buyer effects full payment therefor, in the
contract entered into in the case at bar,
the sellers were the ones who were
unable to enter into a contract of absolute
sale by reason of the fact that the
certificate of title to the property was still
in the name of their father. It was the
sellers in this case who, as it were, had
the impediment which prevented, so to
speak, the execution of an contract of
absolute sale.
 What is clearly established by the
plain language of the subject document is
that when the said Receipt of Down
Payment was prepared and signed by
petitioners Romulo A. Coronel, et. al., the
parties had agreed to a conditional
contract of sale, consummation of which
is subject only to the successful transfer
of the certificate of title from the name of
petitioners father, Constancio P. Coronel,
to their names.
The Court significantly notes that this
suspensive condition was, in fact, fulfilled
on February 6, 1985 (Exh. D; Exh.
4). Thus, on said date, the conditional
contract of sale between petitioners and
private respondent Ramona P. Alcaraz
became obligatory, the only act required
for the consummation thereof being the
delivery of the property by means of the
execution of the deed of absolute sale in
a public instrument, which petitioners
unequivocally committed themselves to
do as evidenced by the Receipt of Down
Payment.
Article 1475, in correlation with Article
1181, both of the Civil Code, plainly
applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at
the moment there is a meeting of minds upon
the thing which is the object of the contract
and upon the price.
From that moment, the parties may
reciprocally demand performance, subject to
the provisions of the law governing the form
of contracts.
Art. 1181. In conditional obligations, the
acquisition of rights, as well as the
extinguishment or loss of those already
acquired, shall depend upon the happening of
the event which constitutes the condition.
Since the condition contemplated by
the parties which is the issuance of a
certificate of title in petitioners names was
fulfilled on February 6, 1985, the
respective obligations of the parties under
the contract of sale became mutually
demandable, that is, petitioners, as
sellers, were obliged to present the
transfer certificate of title already in their
names to private respondent Ramona P.
Alcaraz, the buyer, and to immediately
execute the deed of absolute sale, while
the buyer on her part, was obliged to
forthwith pay the balance of the purchase
price amounting to P1,190,000.00.
It is also significant to note that in the
first paragraph in page 9 of their petition,
petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound
themselves to effect the transfer in our
names from our deceased father
Constancio P. Coronel, the transfer
certificate of title immediately upon
receipt of the downpayment above-
stated". The sale was still subject to
this suspensive condition. (Emphasis
supplied.)
(Rollo, p. 16)
Petitioners themselves recognized
that they entered into a contract of sale
subject to a suspensive condition. Only,
they contend, continuing in the same
paragraph, that:
. . . Had petitioners-sellers not complied with
this condition of first transferring the title to
the property under their names, there could be
no perfected contract of sale. (Emphasis
supplied.)
(Ibid.)
not aware that they have set their own
trap for themselves, for Article 1186 of the
Civil Code expressly provides that:
Art. 1186. The condition shall be deemed
fulfilled when the obligor voluntarily prevents
its fulfillment.
Besides, it should be stressed and
emphasized that what is more controlling
than these mere hypothetical arguments
is the fact that the condition herein
referred to was actually and
indisputably fulfilled on February 6,
1985, when a new title was issued in the
names of petitioners as evidenced by
TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on
January 19, 1985, as evidenced by the
document denominated as Receipt of
Down Payment (Exh. A; Exh. 1), the
parties entered into a contract of sale
subject to the suspensive condition that
the sellers shall effect the issuance of
new certificate title from that of their
fathers name to their names and that, on
February 6, 1985, this condition was
fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in
accordance with Article 1187 which
pertinently provides -
Art. 1187. The effects of conditional
obligation to give, once the condition has been
fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligations to do or not to do, the courts
shall determine, in each case, the retroactive
effect of the condition that has been complied
with.
the rights and obligations of the parties
with respect to the perfected contract of
sale became mutually due and
demandable as of the time of fulfillment or
occurrence of the suspensive condition
on February 6, 1985. As of that point in
time, reciprocal obligations of both seller
and buyer arose.
Petitioners also argue there could
been no perfected contract on January
19, 1985 because they were then not yet
the absolute owners of the inherited
property.
We cannot sustain this argument.
Article 774 of the Civil Code defines
Succession as a mode of transferring
ownership as follows:
Art. 774. Succession is a mode of acquisition
by virtue of which the property, rights and
obligations to the extent and value of the
inheritance of a person are transmitted
through his death to another or others by his
will or by operation of law.
Petitioners-sellers in the case at bar
being the sons and daughters of the
decedent Constancio P. Coronel are
compulsory heirs who were called to
succession by operation of law.Thus, at
the point their father drew his last breath,
petitioners stepped into his shoes insofar
as the subject property is concerned,
such that any rights or obligations
pertaining thereto became binding and
enforceable upon them. It is expressly
provided that rights to the succession are
transmitted from the moment of death of
the decedent (Article 777, Civil
Code; Cuison vs. Villanueva, 90 Phil. 850
[1952]).
Be it also noted that petitioners claim
that succession may not be declared
unless the creditors have been paid is
rendered moot by the fact that they were
able to effect the transfer of the title to the
property from the decedents name to their
names on February 6, 1985.
Aside from this, petitioners are
precluded from raising their supposed
lack of capacity to enter into an
agreement at that time and they cannot
be allowed to now take a posture contrary
to that which they took when they entered
into the agreement with private
respondent Ramona P. Alcaraz. The Civil
Code expressly states that:
Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the
person making it, and cannot be denied or
disproved as against the person relying
thereon.
Having represented themselves as the
true owners of the subject property at the
time of sale, petitioners cannot claim now
that they were not yet the absolute
owners thereof at that time.
Petitioners also contend that although
there was in fact a perfected contract of
sale between them and Ramona P.
Alcaraz, the latter breach her reciprocal
obligation when she rendered impossible
the consummation thereof by going to the
United States of America, without leaving
her address, telephone number, and
Special Power of Attorney (Paragraphs
14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint,
p. 2; Rollo, p. 43), for which reason, so
petitioners conclude, they were correct in
unilaterally rescinding the contract of sale.
We do not agree with petitioners that
there was a valid rescission of the
contract of sale in the instant case. We
note that these supposed grounds for
petitioners rescission, are mere
allegations found only in their responsive
pleadings, which by express provision of
the rules, are deemed controverted even
if no reply is filed by the plaintiffs (Sec.
11, Rule 6, Revised Rules of Court). The
records are absolutely bereft of any
supporting evidence to substantiate
petitioners allegations. We have stressed
time and again that allegations must be
proven by sufficient evidence (Ng Cho
Cio vs. Ng Diong, 110 Phil. 882 [1961];
Recaro vs. Embisan, 2 SCRA 598
[1961]). Mere allegation is not an
evidence (Lagasca vs. De Vera, 79 Phil.
376 [1947]).
Even assuming arguendo that
Ramona P. Alcaraz was in the United
States of America on February 6, 1985,
we cannot justify petitioners-sellers act of
unilaterally and extrajudicially rescinding
the contract of sale, there being no
express stipulation authorizing the sellers
to extrajudicially rescind the contract of
sale. (cf. Dignos vs. CA, 158 SCRA 375
[1988]; Taguba vs. Vda. De Leon, 132
SCRA 722 [1984])
Moreover, petitioners are estopped
from raising the alleged absence of
Ramona P. Alcaraz because although the
evidence on record shows that the sale
was in the name of Ramona P. Alcaraz as
the buyer, the sellers had been dealing
with Concepcion D. Alcaraz, Ramonas
mother, who had acted for and in behalf
of her daughter, if not also in her own
behalf. Indeed, the down payment was
made by Concepcion D. Alcaraz with her
own personal Check (Exh. B; Exh. 2) for
and in behalf of Ramona P.
Alcaraz. There is no evidence showing
that petitioners ever questioned
Concepcions authority to represent
Ramona P. Alcaraz when they accepted
her personal check. Neither did they raise
any objection as regards payment being
effected by a third person. Accordingly, as
far as petitioners are concerned, the
physical absence of Ramona P. Alcaraz
is not a ground to rescind the contract of
sale.
 Corollarily, Ramona P. Alcaraz cannot
even be deemed to be in default, insofar
as her obligation to pay the full purchase
price is concerned. Petitioners who are
precluded from setting up the defense of
the physical absence of Ramona P.
Alcaraz as above-explained offered no
proof whatsoever to show that they
actually presented the new transfer
certificate of title in their names and
signified their willingness and readiness
to execute the deed of absolute sale in
accordance with their
agreement. Ramonas corresponding
obligation to pay the balance of the
purchase price in the amount
of P1,190,000.00 (as buyer) never
became due and demandable and,
therefore, she cannot be deemed to have
been in default.
Article 1169 of the Civil Code defines
when a party in a contract involving
reciprocal obligations may be considered
in default, to wit:
Art. 1169. Those obliged to deliver or to do
something, incur in delay from the time the
obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs
in delay if the other does not comply or is
not ready to comply in a proper manner
with what is incumbent upon him. From the
moment one of the parties fulfill his
obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal
basis to rescind the contract of sale
between petitioners and respondents.
With the foregoing conclusions, the
sale to the other petitioner, Catalina B.
Mabanag, gave rise to a case of double
sale where Article 1544 of the Civil Code
will apply, to wit:
Art. 1544. If the same thing should have been
sold to different vendees, the ownership shall
be transferred to the person who may have
first taken possession thereof in good faith, if
it should be movable property.
Should it be immovable property, the
ownership shall belong to the person
acquiring it who in good faith first recorded it
in the Registry of Property.
Should there be no inscription, the ownership
shall pertain to the person who in good faith
was first in the possession; and, in the absence
thereof to the person who presents the oldest
title, provided there is good faith.
The record of the case shows that the
Deed of Absolute Sale dated April 25,
1985 as proof of the second contract of
sale was registered with the Registry of
Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the
name of Catalina B. Mabanag on June 5,
1985. Thus, the second paragraph of
Article 1544 shall apply.
The above-cited provision on double
sale presumes title or ownership to pass
to the buyer, the exceptions being: (a)
when the second buyer, in good faith,
registers the sale ahead of the first buyer,
and (b) should there be no inscription by
either of the two buyers, when the second
buyer, in good faith, acquires possession
of the property ahead of the first
buyer. Unless, the second buyer satisfies
these requirements, title or ownership will
not transfer to him to the prejudice of the
first buyer.
In his commentaries on the Civil
Code, an accepted authority on the
subject, now a distinguished member of
the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore,
potior jure (first in time, stronger in
right). Knowledge by the first buyer of the
second sale cannot defeat the first buyers
rights except when the second buyer first
registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA
33). Conversely, knowledge gained by the
second buyer of the first sale defeats his rights
even if he is first to register, since knowledge
taints his registration with bad faith (see
also Astorga vs. Court of Appeals, G.R. No.
58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129
SCRA 656), it was held that it is essential, to
merit the protection of Art. 1544, second
paragraph, that the second realty buyer must
act in good faith in registering his deed of sale
(citing Carbonell vs. Court of Appeals, 69
SCRA 99, Crisostomo vs. CA, G.R. No. 95843,
02 September 1992).
(J. Vitug, Compendium of Civil Law and
Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice
of lis pendens in the case at bar was
annotated on the title of the subject
property only on February 22, 1985,
whereas, the second sale between
petitioners Coronels and petitioner
Mabanag was supposedly perfected prior
thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner
Mabanag, the second buyer, bought the
property under a clean title, she was
unaware of any adverse claim or previous
sale, for which reason she is a buyer in
good faith.
We are not persuaded by such
argument.
In a case of double sale, what finds
relevance and materiality is not whether
or not the second buyer in good faith but
whether or not said second buyer
registers such second sale in good faith,
that is, without knowledge of any defect in
the title of the property sold.
As clearly borne out by the evidence
in this case, petitioner Mabanag could not
have in good faith, registered the sale
entered into on February 18, 1985
because as early as February 22, 1985, a
notice of lis pendens had been annotated
on the transfer certificate of title in the
names of petitioners, whereas petitioner
Mabanag registered the said sale
sometime in April, 1985. At the time of
registration, therefore, petitioner Mabanag
knew that the same property had already
been previously sold to private
respondents, or, at least, she was
charged with knowledge that a previous
buyer is claiming title to the same
property. Petitioner Mabanag cannot
close her eyes to the defect in petitioners
title to the property at the time of the
registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale
after he has acquired knowledge that there
was a previous sale of the same property to a
third party or that another person claims said
property in a previous sale, the registration
will constitute a registration in bad faith and
will not confer upon him any right. (Salvoro
vs. Tanega, 87 SCRA 349 [1978]; citing
Palarca vs. Director of Land, 43 Phil. 146;
Cagaoan vs. Cagaoan, 43 Phil. 554;
Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of
land between petitioners and Ramona P.
Alcaraz, perfected on February 6, 1985,
prior to that between petitioners and
Catalina B. Mabanag on February 18,
1985, was correctly upheld by both the
courts below.
 Although there may be ample
indications that there was in fact an
agency between Ramona as principal and
Concepcion, her mother, as agent insofar
as the subject contract of sale is
concerned, the issue of whether or not
Concepcion was also acting in her own
behalf as a co-buyer is not squarely
raised in the instant petition, nor in such
assumption disputed between mother and
daughter. Thus, We will not touch this
issue and no longer disturb the lower
courts ruling on this point.
WHEREFORE, premises considered,
the instant petition is hereby DISMISSED
and the appealed judgment AFFIRMED.
SO ORDERED.
THIRD DIVISION
[G.R. No. 119178. June 20, 1997]
LINA LIM LAO, petitioner, vs. COURT
OF APPEALS and PEOPLE OF
THE PHILIPPINES, respondents.
DECISION
PANGANIBAN, J.:
May an employee who, as part of her
regular duties, signs blank corporate
checks -- with the name of the payee and
the amount drawn to be filled later by
another signatory -- and, therefore, does
so without actual knowledge of whether
such checks are funded, be held
criminally liable for violation of Batas
Pambansa Bilang 22 (B.P. 22), when
checks so signed are dishonored due to
insufficiency of funds? Does a notice of
dishonor sent to the main office of the
corporation constitute a valid notice to the
said employee who holds office in a
separate branch and who had no actual
knowledge thereof? In other words, is
constructive knowledge of the
corporation, but not of the signatory-
employee, sufficient?
These are the questions raised in the
petition filed on March 21, 1995 assailing
the Decision of Respondent Court of
[1]
Appeals promulgated on December 9,
[2]
1994 in CA-G.R. CR No. 14240
dismissing the appeal of petitioner and
affirming the decision dated September
26, 1990 in Criminal Case Nos. 84-26967
to 84-26969 of the Regional Trial Court of
Manila, Branch 33. The dispositive portion
of the said RTC decision affirmed by the
respondent appellate court reads: [3]
WHEREFORE, after a careful consideration
of the evidence presented by the prosecution
and that of the defense, the Court renders
judgment as follows:
In Criminal Case No. 84-26969 where no
evidence was presented by the prosecution
notwithstanding the fact that there was an
agreement that the cases be tried jointly and
also the fact that the accused Lina Lim Lao
was already arraigned, for failure of the
prosecution to adduce evidence against the
accused, the Court hereby declares her
innocent of the crime charged and she is
hereby acquitted with cost de oficio.
For Criminal Case No. 84-26967, the Court
finds the accused Lina Lim Lao guilty beyond
reasonable doubt of the crime charged and is
hereby sentenced to suffer the penalty of ONE
(1) YEAR imprisonment and to pay a fine
of P150,000.00 without subsidiary
imprisonment in case of insolvency.
For Criminal Case No. 84-26968, the Court
finds the accused Lina Lim Lao guilty beyond
reasonable doubt of the crime charged and is
hereby sentenced to suffer the penalty of ONE
(1) YEAR imprisonment and to pay a fine
of P150,000.00 without subsidiary
imprisonment in case of of (sic) insolvency.
For the two cases the accused is ordered to
pay the cost of suit.
The cash bond put up by the accused for her
provisional liberty in Criminal Case No. 84-
26969 where she is declared acquitted is
hereby ordered cancelled (sic).
With reference to the accused Teodulo Asprec
who has remained at large, in order that the
cases as against him may not remain pending
in the docket for an indefinite period, let the
same be archived without prejudice to its
subsequent prosecution as soon as said
accused is finally apprehended.
Let a warrant issue for the arrest of the
accused Teodulo Asprec which warrant need
not be returned to this Court until the accused
is finally arrested.
SO ORDERED.
The Facts
Version of the Prosecution
The facts are not disputed. We thus lift
them from the assailed Decision, as
follows:
Appellant (and now Petitioner Lina Lim Lao)
was a junior officer of Premiere Investment
House (Premiere) in its Binondo Branch. As
such officer, she was authorized to sign
checks for and in behalf of the corporation
(TSN, August 16, 1990, p. 6). In the course of
the business, she met complainant Father
Artelijo Pelijo, the provincial treasurer of the
Society of the Divine Word through Mrs.
Rosemarie Lachenal, a trader for
Premiere. Father Palijo was authorized to
invest donations to the society and had been
investing the societys money with Premiere
(TSN, June 23, 1987, pp. 5, 9-10). Father
Palijo had invested a total of P514,484.04, as
evidenced by the Confirmation of Sale No.
82-6994 (Exh A) dated July 8, 1993. Father
Palijo was also issued Traders Royal Bank
(TRB) checks in payment of interest, as
follows:
Check Date Amount
299961 Oct. 7, 1993 (sic) P150,000.00 (Exh.
B)
299962 Oct. 7, 1983 P150,000.00 (Exh. C)
323835 Oct. 7, 1983 P 26,010.73
All the checks were issued in favor of Artelijo
A. Palijo and signed by appellant (herein
petitioner) and Teodulo Asprec, who was the
head of operations. Further evidence of the
transaction was the acknowledgment of
postdated checks dated July 8, 1983 (Exh . D)
and the cash disbursement voucher (Exh. F,
TSN, supra, at pp. 11-16).
When Father Palijo presented the checks for
encashment, the same were dishonored for the
reason Drawn Against Insufficient Funds
(DAIF). Father Palijo immediately made demands
on premiere to pay him the necessary amounts. He
first went to the Binondo Branch but was referred to
the Cubao Main Branch where he was able to talk
with the President, Mr. Cario. For his efforts, he
was paid P5,000.00. Since no other payments
followed, Father Palijo wrote Premiere a formal
letter of demand. Subsequently, Premiere was
placed under receivership (TSN, supra, at pp. 16-
19).[4]
Thereafter, on January 24, 1984,
Private Complainant Palijo filed an
affidavit-complaint against Petitioner Lina
Lim Lao and Teodulo Asprec for violation
of B.P. 22. After preliminary
investigation, three
[5]
Informations
charging Lao and Asprec with the offense
defined in the first paragraph of Section 1,
B.P. 22 were filed by Assistant Fiscal
Felix S. Caballes before the trial court on
May 11, 1984, worded as follows:
[6]
1. In Criminal Case No. 84-26967:
That on or about October 7, 1983 in the City
of Manila, Philippines, the said accused did
then and there wilfully and unlawfully draw
and issue to Artelijo A. Palijo to apply on
account or for value a Traders Royal Bank
Check No. 299962 for P150,000.00 payable to
Fr. Artelijo A. Palijo dated October 7, 1983
well knowing that at the time of issue he/she
did not have sufficient funds in or credit with
the drawee bank for full payment of the said
check upon its presentment as in fact the said
check, when presented within ninety (90) days
from the date thereof, was dishonored by the
drawee bank for the reason:Insufficient
Funds; that despite notice of such dishonor,
said accused failed to pay said Artelijo A.
Palijo the amount of the said check or to make
arrangement for full payment of the same
within five (5) banking days from receipt of
said notice.
CONTRARY TO LAW.
2. In Criminal Case No. 84-26968:
That on or about October 7, 1983 in the City
of Manila, Philippines, the said accused did
then and there wilfully and unlawfully draw
and issue to Artelijo A. Palijo to apply on
account or for value a Traders Royal Bank
Check No. 299961 for P150,000.00 payable to
Fr. Artelijo A. Palijo dated October 7, 83 well
knowing that at the time of issue he/she did
not have sufficient funds in or credit with the
drawee bank for full payment of the said
check upon its presentment as in fact the said
check, when presented within ninety (90) days
from the date thereof, was dishonored by the
drawee bank for the reason:Insuficient Funds;
that despite notice of such dishonor, said
accused failed to pay said Artelijo A. Palijo
the amount of the said check or to make
arrangement for full payment of the same
within five (5) banking days from receipt of
said notice.
CONTRARY TO LAW.
3. And finally in Criminal Case No. 84-
26969:
That on or about July 8, 1983 in the City of
Manila, Philippines, the said accused did then
and there wilfully and unlawfully draw and
issue to Artelijo A. Palijo to apply on
account for value a Traders Royal Bank
Check No. 323835 for P26,010.03 payable to
Fr. Artelijo A. Palijo dated October 7, 1983
well knowing that at the time of issue he/she
did not have sufficient funds in or credit with
the drawee bank for full payment of the said
check upon its presentment as in fact the said
check, when presented within ninety (90) days
from the date thereof, was dishonored by the
drawee bank for the reason: Insufficient
Funds; that despite notice of such dishonor,
said accused failed to pay said Artelijo A.
Palijo the amount of the said check or to make
arrangement for full payment of the same
within five (5) banking days from receipt of
said notice.
CONTRARY TO LAW.
Upon being arraigned, petitioner
assisted by counsel pleaded not
guilty. Asprec was not arrested; he has
remained at large since the trial, and even
now on appeal.
After due trial, the Regional Trial Court
convicted Petitioner Lina Lim Lao in
Criminal Case Nos. 84-26967 and 84-
26968 but acquitted her in Criminal Case
No. 84-26969. On appeal, the Court of
[7]
Appeals affirmed the decision of the trial
court.
Version of the Defense
Petitioner aptly summarized her
version of the facts of the case thus:
Petitioner Lina Lim Lao was, in 1983, an
employee of Premiere Financing Corporation
(hereinafter referred to as the Corporation), a
corporation engaged in investment
management, with principal business office at
Miami, Cubao, Quezon City. She was a junior
officer at the corporation who was, however,
assigned not at its main branch but at the
corporations extension office in (Binondo)
Manila. (Ocampo, T.S.N., 16 August 1990, p.
14)
In the regular course of her duties as a junior
officer, she was required to co-sign checks
drawn against the account of the
corporation. The other co-signor was her head
of office, Mr. Teodulo Asprec. Since part of
her duties required her to be mostly in the
field and out of the office, it was normal
procedure for her to sign the checks in blank,
that is, without the names of the payees, the
amounts and the dates of maturity. It was
likewise Mr. Asprec, as head of office, who
alone decided to whom the checks were to be
ultimately issued and delivered. (Lao, T.S.N.,
28 September 1989, pp. 9-11, 17, 19.)
In signing the checks as part of her duties as
junior officer of the corporation, petitioner
had no knowledge of the actual funds
available in the corporate account. (Lao,
T.S.N., 28 September 1989, p. 21) The power,
duty and responsibility of monitoring and
assessing the balances against the checks
issued, and funding the checks thus issued,
devolved on the corporations Treasury
Department in its main office in Cubao,
Quezon City, headed then by the Treasurer,
Ms. Veronilyn Ocampo. (Ocampo, T.S.N., 19
July 1990, p. 4; Lao, T.S.N., 28 September
1989, pp. 21-23) All bank statements
regarding the corporate checking account
were likewise sent to the main branch in
Cubao, Quezon City, and not in Binondo,
Manila, where petitioner was holding
office. (Ocampo, T.S.N., 19 July 1990, p. 24;
Marqueses, T.S.N., 22 November 1988, p. 8)
The foregoing circumstances attended the
issuance of the checks subject of the instant
prosecution.
The checks were issued to guarantee payment
of investments placed by private complainant
Palijo with Premiere Financing
Corporation. In his transactions with the
corporation, private complainant
dealt exclusively with one Rosemarie
Lachenal, a trader connected with the
corporation, and he never knew nor in any
way dealt with petitioner Lina Lim Lao at any
time before or during the issuance of the
delivery of the checks. (Palijo, T.S.N., 23
June 1987, pp. 28-29, 32-34; Lao, T.S.N., 15
May 1990, p. 6; Ocampo, T.S.N., p.
5) Petitioner Lina Lim Lao was not in any
way involved in the transaction which led to
the issuance of the checks.
When the checks were co-signed by
petitioner, they were signed in advance and in
blank, delivered to the Head of Operations,
Mr. Teodulo Asprec, who subsequently filled
in the names of the payee, the amounts and
the corresponding dates of maturity. After Mr.
Asprec signed the checks, they were delivered
to private complainant Palijo. (Lao, T.S.N., 28
September 1989, pp. 8-11, 17, 19; note also
that the trial court in its decision fully
accepted the testimony of petitioner
[Decision of the Regional Trial Court, p. 12],
and that the Court of Appeals affirmed said
decision in toto)
Petitioner Lina Lim Lao was not in any way
involved in the completion, and the
subsequent delivery of the check to private
complainant Palijo.
At the time petitioner signed the checks, she
had no knowledge of the sufficiency or
insufficiency of the funds of the corporate
account. (Lao, T.S.N., 28 September 1989, p.
21) It was not within her powers, duties or
responsibilities to monitor and assess the
balances against the issuance; much less was
it within her (duties and responsibilities) to
make sure that the checks were
funded. Premiere Financing Corporation had a
Treasury Department headed by a Treasurer,
Ms. Veronilyn Ocampo, which alone had
access to information as to account balances
and which alone was responsible for funding
the issued checks. (Ocampo, T.S.N., 19 July
1990, p. 4; Lao, T.S.N., 28 September 1990,
p. 23) All statements of account were sent to
the Treasury Department located at the main
office in Cubao, Quezon City.Petitioner was
holding office at the extension in Binondo
Manila. (Lao, T.S.N., 28 September 1989, p.
24-25) Petitioner Lina Lim Lao did not have
knowledge of the insufficiency of the funds in
the corporate account against which the
checks were drawn.
When the checks were subsequently
dishonored, private complainant sent a notice
of said dishonor to Premier Financing
Corporation at its head office in Cubao,
Quezon City. (Please refer to Exh. E; Palijo,
T.S.N., 23 June 1987, p. 51) Private
complainant did not send notice of dishonor to
petitioner. (Palijo, T.S.N., 24 July 1987, p.
10) He did not follow up his investment with
petitioner. (Id.) Private complainant never
contacted, never informed, and never talked
with, petitioner after the checks had
bounced. (Id., at p. 29) Petitioner never had
notice of the dishonor of the checks subject of
the instant prosecution.
The Treasurer of Premiere Financing
Corporation, Ms. Veronilyn Ocampo testified
that it was the head office in Cubao, Quezon
City, which received notice of dishonor of the
bounced checks. (Ocampo, T.S.N., 19 July
1990, pp. 7-8) The dishonor of the check
came in the wake of the assassination of the
late Sen. Benigno Aquino, as a consequence
of which event a majority of the corporations
clients pre-terminated their investments. A
period of extreme illiquidity and financial
distress followed, which ultimately led to the
corporations being placed under receivership
by the Securities and Exchange
Commission. (Ocampo, T.S.N., 16 August
1990, p. 8, 19; Lao, T.S.N., 28 September
1989, pp. 25-26; Please refer also to Exhibit
1, the order of receivership issued by the
Securities and Exchange
Commission) Despite the Treasury
Departments and (Ms. Ocampos) knowledge
of the dishonor of the checks, however, the
main office in Cubao, Quezon City never
informed petitioner Lina Lim Lao or anybody
in the Binondo office for that
matter. (Ocampo, T.S.N., 16 August 1990, pp.
9-10) In her testimony, she justified her
omission by saying that the checks were
actually the responsibility of the main
office (Ocampo, T.S.N., 19 July 1990, p.
6) and that, at that time of panic withdrawals
and massive pre-termination of clients
investments, it was futile to inform the
Binondo office since the main office was
strapped for cash and in deep financial
distress. (Id., at pp. 7-9) Moreover, the
confusion which came in the wake of the
Aquino assassination and the consequent
panic withdrawals caused them to lose direct
communication with the Binondo
office. (Ocampo, T.S.N., 16 August 1990, p.
9-10)
As a result of the financial crisis and distress,
the Securities and Exchange Commission
placed Premier Financing Corporation under
receivership, appointing a rehabilitation
receiver for the purpose of settling claims
against the corporation. (Exh. 1) As he
himself admits, private complainant filed a
claim for the payment of the bounced check
before and even after the corporation had been
placed under receivership. (Palijo, T.S.N., 24
July 1987, p. 10-17) A check was prepared by
the receiver in favor of the private
complainant but the same was not claimed by
him. (Lao, T.S.N., 15 May 1990, p. 18)
Private complainant then filed the instant
criminal action. On 26 September 1990, the
Regional Trial Court of Manila, Branch 33,
rendered a decision convicting petitioner, and
sentencing the latter to suffer the aggregate
penalty of two (2) years and to pay a fine in
the total amount of P300,000.00. On appeal,
the Court of Appeals affirmed said
decision. Hence, this petition for review.[8]
The Issue
In the main, petitioner contends that
the public respondent committed a
reversible error in concluding that lack of
actual knowledge of insufficiency of funds
was not a defense in a prosecution for
violation of B.P. 22. Additionally, the
petitioner argues that the notice of
dishonor sent to the main office of the
corporation, and not to petitioner herself
who holds office in that corporations
branch office, does not constitute the
notice mandated in Section 2 of BP 22;
thus, there can be no prima
facie presumption that she had
knowledge of the insufficiency of funds.
The Courts Ruling
The petition is meritorious.
Strict Interpretation of Penal Statutes
It is well-settled in this jurisdiction that
penal statutes are strictly construed
against the state and liberally for the
accused, so much so that the scope of a
penal statute cannot be extended by good
intention, implication, or even equity
consideration. Thus, for Petitioner Lina
Lim Laos acts to be penalized under the
Bouncing Checks Law or B.P. 22, they
must come clearly within both the spirit
and the letter of the statute. [9]
The salient portions of B.P. 22 read:
SECTION 1. Checks without sufficient
funds. -- Any person who makes or draws and
issues any check to apply on account or for
value, knowing at the time of issue that he
does not have sufficient funds in or credit with
the drawee bank for the payment of such
check in full upon its presentment, which
check is subsequently dishonored by the
drawee bank for insufficiency of funds or
credit or would have been dishonored for the
same reason had not the drawer, without any
valid reason, ordered the bank to stop
payment, shall be punished by imprisonment
of not less than thirty days but not more than
one (1) year or by a fine of not less than but
not more than double the amount of the check
which fine shall in no case exceed Two
hundred thousand pesos, or both such fine and
imprisonment at the discretion of the court.
The same penalty shall be imposed upon any
person who having sufficient funds in or
credit with the drawee bank when he makes or
draws and issues a check, shall fail to keep
sufficient funds or to maintain a credit or to
cover the full amount of the check if presented
within a period of ninety (90) days from the
date appearing thereon, for which reason it is
dishonored by the drawee bank.
Where the check is drawn by a corporation,
company or entity, the person or persons who
actually signed the check in behalf of such
drawer shall be liable under this Act.
SECTION 2. Evidence of knowledge of
insufficient funds. -- The making, drawing and
issuance of a check payment of which is
refused by the drawee because of insufficient
funds in or credit with such bank, when
presented within ninety (90) days from the
date of the check, shall be prima
facie evidence of knowledge of such
insufficiency of funds or credit unless such
maker or drawer pays the holder thereof the
amount due thereon, or makes arrangements
for payment in full by the drawee of such
check within five (5) banking days after
receiving notice that such check has not been
paid by the drawee.
This Court listed the elements of the
offense penalized under B.P. 22, as
follows: (1) the making, drawing and
issuance of any check to apply to account
or for value; (2) the knowledge of the
maker, drawer or issuer that at the time of
issue he does not have sufficient funds in
or credit with the drawee bank for the
payment of such check in full upon its
presentment; and (3) subsequent
dishonor of the check by the drawee bank
for insufficiency of funds or credit or
dishonor for the same reason had not the
drawer, without any valid cause, ordered
the bank to stop payment. [10]
Justice Luis B. Reyes, an eminent
authority in criminal law, also enumerated
the elements of the offense defined in the
first paragraph of Section 1 of B.P. 22,
thus:
1. That a person makes or
draws and issues any check.
2. That the check is made or drawn and
issued to apply on account or for value.
3. That the person who makes or draws
and issues the check knows at the time
of issue that he does not have sufficient
funds in or credit with the drawee
bank for the payment of such check in
full upon its presentment.
4. That the check is subsequently
dishonored by the drawee bank for
insufficiency of funds or credit, or would
have been dishonored for the same
reason had not the drawer, without any
valid reason, ordered the bank to stop
payment.[11]
Crux of the Petition
Petitioner raised as defense before
the Court of Appeals her lack of actual
knowledge of the insufficiency of funds at
the time of the issuance of the checks,
and lack of personal notice of dishonor to
her. The respondent appellate court,
however, affirmed the RTC decision,
reasoning that the makers knowledge of
the insufficiency of funds is legally
presumed from the dishonor of his checks
for insufficiency of funds. (People vs.
Laggui, 171 SCRA 305; Nieras vs. Hon.
Auxencio C. Dacuycuy, 181 SCRA
1) The Court of Appeals also stated that
[12]
her alleged lack of knowledge or intent to
issue a bum check would not exculpate
her from any responsibility under B.P.
Blg. 22, since the act of making and
issuing a worthless check is amalum
prohibitum. In the words of the Solicitor
[13]
General, (s)uch alleged lack of knowledge
is not material for petitioners liability
under B.P.Blg. 22. [14]
Lack of Actual Knowledge of
Insufficiency of Funds
 Knowledge of insufficiency of funds or
credit in the drawee bank for the payment
of a check upon its presentment is an
essential element of the offense. There
[15]
is a prima faciepresumption of the
existence of this element from the fact of
drawing, issuing or making a check, the
payment of which was
subsequently refused for insufficiency of
funds. It is important to stress, however,
that this is not a conclusive presumption
that forecloses or precludes the
presentation of evidence to the contrary.
In the present case, the fact alone that
petitioner was a signatory to the checks
that were subsequently dishonored
merely engenders the prima
facie presumption that she knew of the
insufficiency of funds, but it does not
render her automatically guilty under B.P.
22. The prosecution has a duty to prove
all the elements of the crime, including
the acts that give rise to the prima
facie presumption; petitioner, on the other
hand, has a right to rebut the prima
facie presumption. Therefore, if such
[16]
knowledge of insufficiency of funds is
proven to be actuallyabsent or non-
existent, the accused should not be held
liable for the offense defined under the
first paragraph of Section 1 of B.P.
22. Although the offense charged is
a malum prohibitum, the prosecution is
not thereby excused from its responsibility
of proving beyond reasonable doubt all
the elements of the offense, one of which
is knowledge of the insufficiency of funds.
After a thorough review of the case at
bar, the Court finds that Petitioner Lina
Lim Lao did not have actual knowledge of
the insufficiency of funds in the corporate
accounts at the time she affixed her
signature to the checks involved in this
case, at the time the same were issued,
and even at the time the checks were
subsequently dishonored by the drawee
bank.
The scope of petitioners duties and
responsibilities did not encompass the
funding of the corporations checks; her
duties were limited to the marketing
department of the Binondo
branch. Under
[17]
the organizational
structure of Premiere Financing
Corporation, funding of checks was the
sole responsibility of the Treasury
Department. Veronilyn Ocampo, former
Treasurer of Premiere, testified thus:
Q Will you please tell us whose (sic)
responsible for the funding of checks
in Premiere?
A The one in charge is the Treasury
Division up to the Treasury
Disbursement and then they give it
directly to Jose Cabacan, President of
Premiere.[18]
Furthermore, the Regional Trial Court
itself found that, since Petitioner Lina Lim
Lao was often out in the field taking
charge of the marketing department of the
Binondo branch, she signed the checks in
blank as to name of the payee and the
amount to be drawn, and without
knowledge of the transaction for which
they were issued. As a matter of
[19]
company practice, her signature was
required in addition to that of Teodulo
Asprec, who alone placed the name of
the payee and the amount to be drawn
thereon. This is clear from her testimony:
q x x x Will you please or will you be able
to tell us the condition of this check
when you signed this or when you first
saw this check?
Witness
a I signed the check in blank. There were
no payee. No amount, no date, sir.
q Why did you sign this check in blank
when there was no payee, no amount
and no date?
a It is in order to facilitate the transaction,
sir.
xxxxxxxxx
COURT
(to witness)
q Is that your practice?
Witness
a Procedure, Your Honor.
COURT
That is quiet (sic) unusual. That is why
I am asking that last question if that is
a practice of your office.
a As a co-signer, I sign first, sir.
q So the check cannot be encashed
without your signature, co-signature?
a Yes, sir.
Atty. Gonzales
(to witness)
q Now, you said that you sign first, after
you sign, who signs the check?
a Mr. Teodoro Asprec, sir.
q Is this Teodoro Asprec the same
Teodoro Asprec, one of the accused
in all these cases?
a Yes, sir.
q Now, in the distribution or issuance of
checks which according to you, as a
co-signee, you sign. Who determines
to whom to issue or to whom to pay
the check after Teodoro Asprec signs
the check?
Witness
a He is the one.
Atty. Gonzales
q Mr. Asprec is the one in-charge
in . . . are you telling the Honorable
Court that it was Teodoro Asprec who
determines to whom to issue the
check? Does he do that all the time?
Court
q Does he all the time?
(to witness)
a Yes, Your Honor.
q So the check can be negotiated? So, the
check can be good only upon his
signing? Without his signing or
signature the check cannot be good?
a Yes, Your Honor.
Atty. Gonzales
(to witness)
q You made reference to a transaction
which according to you, you signed
this check in order to facilitate the
transaction . . . I withdraw that
question. I will reform.
COURT
(for clarification to witness)
Witness may answer.
q Only to facilitate your business
transaction, so you signed the other
checks?
Witness
a Yes, Your Honor.
q So that when ever there is a transaction
all is needed . . . all that is needed is
for the other co-signee to sign?
a Yes, Your Honor.
COURT
(To counsel)
Proceed.
Atty. Gonzales
(to witness)
q Why is it necessary for you to sign?
a Because most of the time I am out in the
field in the afternoon, so, in order to
facilitate the transaction I sign so if I
am not around they can issue the
check.[20]
Petitioner did not have any knowledge
either of the identity of the payee or the
transaction which gave rise to the
issuance of the checks. It was her co-
signatory, Teodulo Asprec, who alone
filled in the blanks, completed and issued
the checks. That Petitioner Lina Lim Lao
did not have any knowledge or
connection with the checks payee, Artelijo
Palijo, is clearly evident even from the
latters testimony, viz.:
ATTY. GONZALES:
Q When did you come to know the
accused Lina Lim Lao?
A I cannot remember the exact date
because in their office Binondo, --
COURT: (before witness could finish)
Q More or less?
A It must have been late 1983.
ATTY. GONZALES:
Q And that must or that was after the
transactions involving alleged checks
marked in evidence as Exhibits B and
C?
A After the transactions.
Q And that was also before the transaction
involving that confirmation of sale
marked in evidence as Exhibit A?
A It was also.
Q And so you came to know the accused
Lina Lim Lao when all those
transactions were already
consummated?
A Yes, sir.
Q And there has never been any occasion
where you transacted with accused
Lina Lim Lao, is that correct?
A None, sir, there was no occasion.
Q And your coming to know Lina Lim Lao
the accused in these cases was by
chance when you happened to drop
by in the office at Binondo of the
Premier Finance Corporation, is that
what you mean?
A Yes, sir.
Q You indicated to the Court that you were
introduced to the accused Lina Lim
Lao, is that correct?
A I was introduced.
xxxxxxxxx
Q After that plain introduction there was
nothing which transpired between you
and the accused Lina Lim Lao?
A There was none.[21]
Since Petitioner Lina Lim Lao signed
the checks without knowledge of the
insufficiency of funds, knowledge she was
not expected or obliged to possess under
the organizational structure of the
corporation, she may not be held liable
under B.P. 22. For in the final analysis,
penal statutes such as B.P. 22 must be
construed with such strictness as to
carefully safeguard the rights of the
defendant x x x. The element of
[22]
knowledge of insufficiency of funds
having been proven to be absent,
petitioner is therefore entitled to an
acquittal.
This position finds support in Dingle
vs. Intermediate Appellate Court where[23]
we stressed that knowledge of
insufficiency of funds at the time of the
issuance of the check was an essential
requisite for the offense penalized under
B.P. 22. In that case, the spouses Paz
and Nestor Dingle owned a family
business known as PMD
Enterprises. Nestor transacted the sale of
400 tons of silica sand to the buyer
Ernesto Ang who paid for the
same. Nestor failed to deliver. Thus, he
issued to Ernesto two checks, signed by
him and his wife as authorized signatories
for PMD Enterprises, to represent the
value of the undelivered silica
sand. These checks were dishonored for
having been drawn against insufficient
funds. Nestor thereafter issued to Ernesto
another check, signed by him and his wife
Paz, which was likewise subsequently
dishonored. No payment was ever made;
hence, the spouses were charged with a
violation of B.P. 22 before the trial court
which found them both guilty. Paz
appealed the judgment to the then
Intermediate Appellate Court which
modified the same by reducing the
penalty of imprisonment to thirty
days. Not satisfied, Paz filed an appeal to
this Court insisting on her innocence and
contending that she did not incur any
criminal liability under B.P. 22 because
she had no knowledge of the dishonor of
the checks issued by her husband and,
for that matter, even the transaction of her
husband with Ang. The Court ruled
in Dingle as follows:
The Solicitor General in his
Memorandum recommended that petitioner be
acquitted of the instant charge because from
the testimony of the sole prosecution witness
Ernesto Ang, it was established that he dealt
exclusively with Nestor Dingle. Nowhere in
his testimony is the name of Paz Dingle ever
mentioned in connection with the transaction
and with the issuance of the check. In fact,
Ang categorically stated that it was Nestor
Dingle who received his two (2) letters of
demand. This lends credence to the testimony
of Paz Dingle that she signed the questioned
checks in blank together with her husband
without any knowledge of its issuance, much
less of the transaction and the fact of
dishonor.
In the case of Florentino Lozano vs. Hon.
Martinez, promulgated December 18, 1986, it
was held that an essential element of the
offense is knowledge on the part of the maker
or drawer of the check of the insufficiency of
his funds.
WHEREFORE, on reasonable doubt, the
assailed decision of the Intermediate
Appellate Court (now the Court of Appeals) is
hereby SET ASIDE and a new one is hereby
rendered ACQUITTING petitioner on
reasonable doubt."[24]
In rejecting the defense of herein
petitioner and ruling that knowledge of the
insufficiency of funds is legally presumed
from the dishonor of the checks for
insufficiency of funds,Respondent Court
of Appeals cited People vs.
Laggui and Nierras
[25]
vs.
Dacuycuy. These,
[26]
however, are
inapplicable here. The accused in both
cases issued personal -- not corporate --
checks and did not aver lack of
knowledge of insufficiency of funds or
absence of personal notice of the checks
dishonor. Furthermore, in People vs.
Laggui the Court ruled mainly on the
[27]
adequacy of an information which alleged
lack of knowledge of insufficiency of funds
at the time the check was issued and not
at the time of its presentment. On the
other hand, the Court in Nierras vs.
Dacuycuy held mainly that an accused
[28]
may be charged under B.P. 22 and Article
315 of the Revised Penal Code for the
same act of issuing a bouncing check.
The statement in the two cases --
that mere issuance of a dishonored check
gives rise to the presumption of
knowledge on the part of the drawer that
he issued the same without funds -- does
not support the CA Decision. As observed
earlier, there is here only a prima
facie presumption which does not
preclude the presentation of contrary
evidence. On the contrary, People vs.
Laggui clearly spells out as an element of
the offense the fact that the drawer must
have knowledge of the insufficiency
of funds in, or of credit with, the drawee
bank for the payment of the same in full
on presentment; hence, it even supports
the petitioners position.
Lack of Adequate Notice of Dishonor
 There is another equally cogent
reason for the acquittal of the
accused. There can be no prima
facie evidence of knowledge of
insufficiency of funds in the instant case
because no notice of dishonor was
actually sent to or received by the
petitioner.
The notice of dishonor may be sent by
the offended party or the drawee
bank. The trial court itself found absent a
personal notice of dishonor to Petitioner
Lina Lim Lao by the drawee bank based
on the unrebutted testimony of Ocampo
(t)hat the checks bounced when
presented with the drawee bank but she
did not inform anymore the Binondo
branch and Lina Lim Lao as there was no
need to inform them as the corporation
was in distress. The Court of Appeals
[29]
affirmed this factual finding. Pursuant to
prevailing jurisprudence, this finding is
binding on this Court. [30]
Indeed, this factual matter is borne by
the records. The records show that the
notice of dishonor was addressed to
Premiere Financing Corporation and sent
to its main office in Cubao, Quezon
City. Furthermore, the same had not been
transmitted to Premieres Binondo Office
where petitioner had been holding office.
Likewise no notice of dishonor from
the offended party was actually sent to or
received by Petitioner Lao. Her testimony
on this point is as follows:
Atty. Gonzales
q Will you please tell us if Father Artelejo
Palejo (sic) ever notified you of the
bouncing of the check or the two (2)
checks marked as Exhibit B or C for
the prosecution?
Witness
a No, sir.
q What do you mean no, sir?
a I was never given a notice. I was never
given notice from Father Palejo (sic).
COURT
(to witness)
q Notice of what?
a Of the bouncing check, Your Honor.[31]
Because no notice of dishonor was
actually sent to and received by the
petitioner, the prima facie presumption
that she knew about the insufficiency of
funds cannot apply. Section 2 of B.P. 22
clearly provides that this presumption
arises not from the mere fact of drawing,
making and issuing a bum check; there
must also be a showing that, within five
banking days from receipt of the notice of
dishonor, such maker or drawer failed to
pay the holder of the check the amount
due thereon or to make arrangement for
its payment in full by the drawee of such
check.
It has been observed that the State,
under this statute, actually offers the
violator a compromise by allowing him to
perform some act which operates to
preempt the criminal action, and if he opts
to perform it the action is abated. This
was also compared to certain
laws allowing illegal possessors of
[32]
firearms a certain period of time to
surrender the illegally possessed firearms
to the Government, without incurring any
criminal liability. In this light, the full
[33]
payment of the amount appearing in the
check within five banking days from
notice of dishonor is a complete
defense. The absence of a notice of
[34]
dishonor necessarily deprives an accused
an opportunity to preclude a criminal
prosecution. Accordingly, procedural due
process clearly enjoins that a notice of
dishonor be actually served on
petitioner. Petitioner has a right to
demand -- and the basic postulates of
fairness require -- that the notice of
dishonor be actually sent to and received
by her to afford her the opportunity to
avert prosecution under B.P. 22.
In this light, the postulate of
Respondent Court of Appeals that
(d)emand on the Corporation constitutes
demand on appellant (herein
petitioner), is erroneous. Premiere has
[35]
no obligation to forward the notice
addressed to it to the employee
concerned, especially because the
corporation itself incurs no criminal
liability under B.P. 22 for the issuance of
a bouncing check. Responsibility under
B.P. 22 is personal to the accused;
hence, personal knowledge of the notice
of dishonor is necessary. Consequently,
constructive notice to the corporation is
not enough to satisfy due
process. Moreover, it is petitioner, as an
officer of the corporation, who is the
latters agent for purposes of receiving
notices and other documents, and not the
other way around. It is but axiomatic that
notice to the corporation, which has a
personality distinct and separate from the
petitioner, does not constitute notice to
the latter.
Epilogue
In granting this appeal, the Court is
not unaware of B.P. 22s intent to
inculcate public respect for and trust in
checks which, although not legal tender,
are deemed convenient substitutes for
currency. B.P. 22 was intended by the
legislature to enhance commercial and
financial transactions in the Philippines by
penalizing makers and issuers of
worthless checks. The public interest
behind B.P. 22 is thus clearly palpable
from its intended purpose. [36]
At the same time, this Court deeply
cherishes and is in fact bound by duty to
protect our peoples constitutional rights to
due process and to be presumed
innocent until the contrary is
proven. These rights must be read into
[37]
any interpretation and application of B.P.
22. Verily, the public policy to uphold civil
liberties embodied in the Bill of Rights
necessarily outweighs the public policy to
build confidence in the issuance of
checks. The first is a basic human right
while the second is only proprietary in
nature. Important to remember also is
[38]
B.P. 22s requirements that the check
issuer must know at the time of issue that
he does not have sufficient funds in or
credit with the drawee bank and that he
must receive notice that such check has
not been paid by the drawee. Hence, B.P.
22 must not be applied in a manner which
contravenes an accuseds constitutional
and statutory rights.
There is also a social justice
dimension in this case. Lina Lim Lao is
only a minor employee who had nothing
to do with the issuance, funding and
delivery of checks. Why she was required
by her employer to countersign checks
escapes us. Her signature is completely
unnecessary for it serves no fathomable
purpose at all in protecting the employer
from unauthorized
disbursements. Because of the pendency
of this case, Lina Lim Lao stood in
jeopardy -- for over a decade -- of losing
her liberty and suffering the wrenching
pain and loneliness of imprisonment, not
to mention the stigma of prosecution on
her career and family life as a young
mother, as well as the expenses, effort
and aches in defending her
innocence.Upon the other hand, the
senior official -- Teodulo Asprec -- who
appears responsible for the issuance,
funding and delivery of the worthless
checks has escaped criminal prosecution
simply because he could not be located
by the authorities. The case against him
has been archived while the awesome
prosecutory might of the government and
the knuckled ire of the private
complainant were all focused on poor
petitioner. Thus, this Court exhorts the
prosecutors and the police authorities
concerned to exert their best to arrest and
prosecute Asprec so that justice in its
pristine essence can be achieved in all
fairness to the complainant, Fr. Artelijo
Palijo, and the People of the
Philippines. By this Decision, the Court
enjoins the Secretary of Justice and the
Secretary of Interior and Local
Government to see that essential justice
is done and the real culprit(s) duly-
prosecuted and punished.
WHEREFORE, the questioned
Decision of the Court of Appeals affirming
that of the Regional Trial Court, is
hereby REVERSED and SET
ASIDE. Petitioner Lina Lim Lao
is ACQUITTED. The Clerk of Court is
hereby ORDERED to furnish the
Secretary of Justice and the Secretary of
Interior and Local Government with
copies of this Decision. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 107207 November 23, 1995
VIRGILIO R. ROMERO, petitioner,
vs.
HON. COURT OF APPEALS and ENRIQUETA
CHUA VDA. DE ONGSIONG, respondents.
VITUG, J.:
The parties pose this question: May
the vendor demand the rescission of a contract for the
sale of a parcel of land for a cause traceable to his
own failure to have the squatters on the subject
property evicted within the contractually-stipulated
period?
Petitioner Virgilio R. Romero, a civil engineer, was
engaged in the business of production, manufacture
and exportation of perlite filter aids, permalite
insulation and processed perlite ore. In 1988,
petitioner and his foreign partners decided to put up a
central warehouse in Metro Manila on a land area of
approximately 2,000 square meters. The project was
made known to several freelance real estate brokers.
A day or so after the announcement, Alfonso Flores
and his wife, accompanied by a broker, offered a
parcel of land measuring 1,952 square meters.
Located in Barangay San Dionisio, Paraaque, Metro
Manila, the lot was covered by TCT No. 361402 in the
name of private respondent Enriqueta Chua vda. de
Ongsiong. Petitioner visited the property and, except
for the presence of squatters in the area, he found the
place suitable for a central warehouse.
Later, the Flores spouses called on petitioner with a
proposal that should he advance the amount of
P50,000.00 which could be used in taking up an
ejectment case against the squatters, private
respondent would agree to sell the property for only
P800.00 per square meter. Petitioner expressed his
concurrence. On 09 June 1988, a contract,
denominated "Deed of Conditional Sale," was
executed between petitioner and private respondent.
The simply-drawn contract read:
DEED OF CONDITIONAL SALE
KNOW ALL MEN BY THESE
PRESENTS:
This Contract, made and executed in
the Municipality of Makati, Philippines
this 9th day of June, 1988 by and
between:
ENRIQUETA CHUA
VDA. DE ONGSIONG,
of legal age, widow,
Filipino and residing at
105 Simoun St.,
Quezon City, Metro
Manila, hereinafter
 referred to as the Currency, is to be paid
VENDOR; upon signing and
execution of this
-and- instrument.

VIRGILIO R. 2. The balance of the

ROMERO, married to purchase price in the
Severina L. Lat, of amount of ONE
Legal age, Filipino, MILLION FIVE
and residing at 110 HUNDRED ELEVEN
San Miguel St., THOUSAND SIX
Plainview Subd., HUNDRED PESOS
Mandaluyong Metro (P1,511,600.00) ONLY
Manila, hereinafter shall be paid 45 days
referred to as the after the removal of all
VENDEE: squatters from the
above described
W I T N E S S E T H : That property.

WHEREAS, the VENDOR is the 3. Upon full payment of

owner of One (1) parcel of land with a
total area of ONE THOUSAND NINE
HUNDRED FIFTY TWO (1,952)
SQUARE METERS, more or less,
located in Barrio San Dionisio,
Municipality of Paraaque, Province of
Rizal, covered by TCT No. 361402
issued by the Registry of Deeds of
Pasig and more particularly described
as follows:
xxx xxx xxx
WHEREAS, the VENDEE, for (sic)
has offered to buy a parcel of land and
the VENDOR has accepted the offer,
subject to the terms and conditions
hereinafter stipulated:
NOW, THEREFORE, for and in
consideration of the sum of ONE
MILLION FIVE HUNDRED SIXTY
ONE THOUSAND SIX HUNDRED
PESOS (P1,561,600.00) ONLY,
Philippine Currency, payable by
VENDEE to in to (sic) manner set
forth, the VENDOR agrees to sell to
the VENDEE, their heirs, successors,
administrators, executors, assign, all
her rights, titles and interest in and to
the property mentioned in the FIRST
WHEREAS CLAUSE, subject to the
following terms and conditions:
1. That the sum of
FIFTY THOUSAND
PESOS (P50,000.00)
ONLY Philippine
the overall purchase
price as aforesaid,
VENDOR without
necessity of demand
shall immediately sign,
execute,
acknowledged (sic)
and deliver the
corresponding deed of
absolute sale in favor
of the VENDEE free
from all liens and
encumbrances and all
Real Estate taxes are
all paid and updated.
It is hereby agreed, covenanted and
stipulated by and between the parties
hereto that if after 60 days from the
date of the signing of this contract the
VENDOR shall not be able to remove
the squatters from the property being
purchased, the downpayment made
by the buyer shall be
returned/reimbursed by the VENDOR
to the VENDEE.
That in the event that the VENDEE
shall not be able to pay the VENDOR
the balance of the purchase price of
ONE MILLION FIVE HUNDRED
ELEVEN THOUSAND SIX HUNDRED
PESOS (P1,511,600.00) ONLY after
45 days from written notification to the
VENDEE of the removal of the
squatters from the property being
purchased, the FIFTY THOUSAND
PESOS (P50,000.00) previously paid
 as downpayment shall be forfeited in
favor of the VENDOR.
Expenses for the registration such as
registration fees, documentary stamp,
transfer fee, assurances and such
other fees and expenses as may be
necessary to transfer the title to the
name of the VENDEE shall be for the
account of the VENDEE while capital
gains tax shall be paid by the
VENDOR.
IN WITNESS WHEREOF, the parties
hereunto signed those (sic) presents
in the City of Makati MM, Philippines
on this 9th day of June, 1988.
(Sgd.) (Sgd.)
VIRGILIO R.
ROMERO
ENRIQUETA CHUA
VDA.
DE ONGSIONG
Vendee Vendor
SIGNED IN THE PRESENCE OF:
(Sgd.) (Sgd.)
Rowena C. Ongsiong Jack M. Cruz 1
Alfonso Flores, in behalf of private
respondent, forthwith received and
acknowledged a check for P50,000.00 2 from
petitioner. 3
Pursuant to the agreement, private respondent filed a
complaint for ejectment (Civil Case No. 7579) against
Melchor Musa and 29 other squatter families with the
Metropolitan Trial Court of Paraaque. A few months
later, or on 21 February 1989, judgment was rendered
ordering the defendants to vacate the premises. The
decision was handed down beyond the 60-day period
(expiring 09 August 1988) stipulated in the contract.
The writ of execution of the judgment was issued, still
later, on 30 March 1989.
In a letter, dated 07 April 1989, private respondent
sought to return the P50,000.00 she received from
petitioner since, she said, she could not "get rid of the
squatters" on the lot. Atty. Sergio A.F. Apostol,
counsel for petitioner, in his reply of 17 April 1989,
refused the tender and stated:.
Our client believes that with the
exercise of reasonable diligence
considering the favorable decision
rendered by the Court and the writ of
execution issued pursuant thereto, it is
now possible to eject the squatters
from the premises of the subject
property, for which reason, he
proposes that he shall take it upon
himself to eject the squatters,
provided, that expenses which shall
be incurred by reason thereof shall be
chargeable to the purchase price of
the land. 4
Meanwhile, the Presidential Commission for the
Urban Poor ("PCUD"), through its Regional Director
for Luzon, Farley O. Viloria, asked the Metropolitan
Trial Court of Paraaque for a grace period of 45 days
from 21 April 1989 within which to relocate and
transfer the squatter families. Acting favorably on the
request, the court suspended the enforcement of the
writ of execution accordingly.
On 08 June 1989, Atty. Apostol reminded private
respondent on the expiry of the 45-day grace period
and his client's willingness to "underwrite the
expenses for the execution of the judgment and
ejectment of the occupants." 5
In his letter of 19 June 1989, Atty. Joaquin Yuseco,
Jr., counsel for private respondent, advised Atty.
Apostol that the Deed of Conditional Sale had been
rendered null and void by virtue of his client's failure
to evict the squatters from the premises within the
agreed 60-day period. He added that private
respondent had "decided to retain the property." 6
On 23 June 1989, Atty. Apostol wrote back to explain:
The contract of sale between the
parties was perfected from the very
moment that there was a meeting of
the minds of the parties upon the
subject lot and the price in the amount
of P1,561,600.00. Moreover, the
contract had already been partially
fulfilled and executed upon receipt of
the downpayment of your client. Ms.
Ongsiong is precluded from rejecting
its binding effects relying upon her
inability to eject the squatters from the
premises of subject property during
the agreed period. Suffice it to state
that, the provision of the Deed of
Conditional Sale do not grant her the
option or prerogative to rescind the
contract and to retain the property
 should she fail to comply with the
obligation she has assumed under the
contract. In fact, a perusal of the terms
and conditions of the contract clearly
shows that the right to rescind the
contract and to demand the
return/reimbursement of the
downpayment is granted to our client
for his protection.
Instead, however, of availing himself
of the power to rescind the contract
and demand the return,
reimbursement of the downpayment,
our client had opted to take it upon
himself to eject the squatters from the
premises. Precisely, we refer you to
our letters addressed to your client
dated April 17, 1989 and June 8,
1989.
Moreover, it is basic under the law on
contracts that the power to rescind is
given to the injured party.
Undoubtedly, under the
circumstances, our client is the injured
party.
Furthermore, your client has not
complied with her obligation under
their contract in good faith. It is
undeniable that Ms. Ongsiong
deliberately refused to exert efforts to
eject the squatters from the premises
of the subject property and her
decision to retain the property was
brought about by the sudden increase
in the value of realties in the
surrounding areas.
Please consider this letter as a tender
of payment to your client and a
demand to execute the absolute Deed
of Sale. 7
A few days later (or on 27 June 1989), private
respondent, prompted by petitioner's continued
refusal to accept the return of the P50,000.00
advance payment, filed with the Regional Trial Court
of Makati, Branch 133, Civil Case No. 89-4394 for
rescission of the deed of "conditional" sale, plus
damages, and for the consignation of P50,000.00
cash.
Meanwhile, on 25 August 1989, the Metropolitan Trial
Court issued an alias writ of execution in Civil Case
No. 7579 on motion of private respondent but the
squatters apparently still stayed on.
Back to Civil Case No. 89-4394, on 26 June 1990, the
Regional Trial Court of Makati 8 rendered decision
holding that private respondent had no right to rescind
the contract since it was she who "violated her obligation
to eject the squatters from the subject property" and that
petitioner, being the injured party, was the party who
could, under Article 1191 of the Civil Code, rescind the
agreement. The court ruled that the provisions in the
contract relating to (a) the return/reimbursement of the
P50,000.00 if the vendor were to fail in her obligation to
free the property from squatters within the stipulated
period or (b), upon the other hand, the sum's forfeiture
by the vendor if the vendee were to fail in paying the
agreed purchase price, amounted to "penalty clauses".
The court added:
This Court is not convinced of the
ground relied upon by the plaintiff in
seeking the rescission, namely: (1) he
(sic) is afraid of the squatters; and (2)
she has spent so much to eject them
from the premises (p. 6, tsn, ses. Jan.
3, 1990). Militating against her
profession of good faith is plaintiffs
conduct which is not in accord with the
rules of fair play and justice. Notably,
she caused the issuance of
an alias writ of execution on August
25, 1989 (Exh. 6) in the ejectment suit
which was almost two months after
she filed the complaint before this
Court on June 27, 1989. If she were
really afraid of the squatters, then she
should not have pursued the issuance
of an alias writ of execution. Besides,
she did not even report to the police
the alleged phone threats from the
squatters. To the mind of the Court,
the so-called squatter factor is simply
factuitous (sic). 9
The lower court, accordingly, dismissed the
complaint and ordered, instead, private
respondent to eject or cause the ejectment of
the squatters from the property and to execute
the absolute deed of conveyance upon
payment of the full purchase price by
petitioner.
Private respondent appealed to the Court of Appeals.
On 29 May 1992, the appellate court rendered its
decision. 10 It opined that the contract entered into by
the parties was subject to a resolutory condition, i.e., the
ejectment of the squatters from the land, the non-
occurrence of which resulted in the failure of the object
of the contract; that private respondent substantially
complied with her obligation to evict the squatters; that it
was petitioner who was not ready to pay the purchase
price and fulfill his part of the contract, and that the
provision requiring a mandatory return/reimbursement of
the P50,000.00 in case private respondent would fail to
eject the squatters within the 60-day period was not a
penal clause. Thus, it concluded.
WHEREFORE, the decision appealed
from is REVERSED and SET ASIDE,
and a new one entered declaring the
contract of conditional sale dated June
9, 1988 cancelled and ordering the
defendant-appellee to accept the
return of the downpayment in the
amount of P50,000.00 which was
deposited in the court below. No
pronouncement as to costs. 11
Failing to obtain a reconsideration, petitioner filed this
petition for review on certiorari raising issues that, in
fine, center on the nature of the contract adverted to
and the P50,000.00 remittance made by petitioner.
A perfected contract of sale may either be absolute or
conditional 12 depending on whether the agreement is
devoid of, or subject to, any condition imposed on
the passing of title of the thing to be conveyed or on
the obligation of a party thereto. When ownership is
retained until the fulfillment of a positive condition the
breach of the condition will simply prevent the duty to
convey title from acquiring an obligatory force. If the
condition is imposed on an obligation of a party which is
not complied with, the other party may either refuse to
proceed or waive said condition (Art. 1545, Civil Code).
Where, of course, the condition is imposed upon
the perfection of the contract itself, the failure of such
condition would prevent the juridical relation itself from
coming into existence. 13
In determining the real character of the contract, the
title given to it by the parties is not as much significant
as its substance. For example, a deed of sale,
although denominated as a deed of conditional sale,
may be treated as absolute in nature, if title to the
property sold is not reserved in the vendor or if the
vendor is not granted the right to unilaterally rescind
the contract predicated
on the fulfillment or non-fulfillment, as the case may
be, of the prescribed condition. 14
The term "condition" in the context of
a perfected contract of sale pertains, in reality, to the
compliance by one party of an undertaking the
fulfillment of which would beckon, in turn, the
demandability of the reciprocal prestation of the other
party. The reciprocal obligations referred to would
normally be, in the case of vendee, the payment of
the agreed purchase price and, in the case of the
vendor, the fulfillment of certain express warranties
(which, in the case at bench is the timely eviction of
the squatters on the property).
It would be futile to challenge the agreement here in
question as not being a duly perfected contract. A
sale is at once perfected when a person (the seller)
obligates himself, for a price certain, to deliver and to
transfer ownership of a specified thing or right to
another (the buyer) over which the latter agrees. 15
The object of the sale, in the case before us, was
specifically identified to be a 1,952-square meter lot in
San Dionisio, Paraaque, Rizal, covered by Transfer
Certificate of Title No. 361402 of the Registry of
Deeds for Pasig and therein technically described.
The purchase price was fixed at P1,561,600.00, of
which P50,000.00 was to be paid upon the execution
of the document of sale and the balance of
P1,511,600.00 payable "45 days after the removal of
all squatters from the above described property."
From the moment the contract is perfected, the
parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the
consequences which, according to their nature, may
be in keeping with good faith, usage and law. Under
the agreement, private respondent is obligated to
evict the squatters on the property. The ejectment of
the squatters is a condition the operative act of which
sets into motion the period of compliance by petitioner
of his own obligation, i.e., to pay the balance of the
purchase price. Private respondent's failure "to
remove the squatters from the property" within the
stipulated period gives petitioner the right to either
refuse to proceed with the agreement or waive that
condition in consonance with Article 1545 of the Civil
Code. 16This option clearly belongs to petitioner and not
to private respondent.
We share the opinion of the appellate court that the
undertaking required of private respondent does not
constitute a "potestative condition dependent solely
on his will" that might, otherwise, be void in
accordance with Article 1182 of the Civil Code 17 but a
"mixed" condition "dependent not on the will of the
vendor alone but also of third persons like the squatters
and government agencies and personnel
concerned." 18 We must hasten to add, however, that
where the so-called "potestative condition" is imposed
not on the birth of the obligation but on its fulfillment,
only the obligation is avoided, leaving unaffected the
obligation itself. 19
In contracts of sale particularly, Article 1545 of the
Civil Code, aforementioned, allows the obligee to
choose between proceeding with the agreement or
waiving the performance of the condition. It is this
provision which is the pertinent rule in the case at
bench. Here, evidently, petitioner has waived the
performance of the condition imposed on private
respondent to free the property from squatters. 20
In any case, private respondent's action for rescission
is not warranted. She is not the injured party. 21 The
right of resolution of a party to an obligation under Article
1191 of the Civil Code is predicated on a breach of faith
by the other party that violates the reciprocity between
them. 22 It is private respondent who has failed in her
obligation under the contract. Petitioner did not breach
the agreement. He has agreed, in fact, to shoulder the
expenses of the execution of the judgment in the
ejectment case and to make arrangements with the
sheriff to effect such execution. In his letter of 23 June
1989, counsel for petitioner has tendered payment and
demanded forthwith the execution of the deed of
absolute sale. Parenthetically, this offer to pay, having
been made prior to the demand for rescission, assuming
for the sake of argument that such a demand is proper
under Article 1592 23 of the Civil Code, would likewise
suffice to defeat private respondent's prerogative to
rescind thereunder.
There is no need to still belabor the question of
whether the P50,000.00 advance payment is
reimbursable to petitioner or forfeitable by private
respondent, since, on the basis of our foregoing
conclusions, the matter has ceased to be an issue.
Suffice it to say that petitioner having opted to
proceed with the sale, neither may petitioner demand
its reimbursement from private respondent nor may
private respondent subject it to forfeiture.
WHEREFORE, the questioned decision of the Court
of Appeals is hereby REVERSED AND SET ASIDE,
and another is entered ordering petitioner to pay
private respondent the balance of the purchase price
and the latter to execute the deed of absolute sale in
favor of petitioner. No costs.
SO ORDERED.
THIRD DIVISION
[G.R. No. 111743. October 8, 1999]
VISITACION GABELO, ERLINDA
ABELLA, PETRA PEREZ,
ERLINDA TRAQUENA, BEN
CARDINAL, EDUARDO
TRAQUENA, LEOPOLDO
TRAQUENA, MARIFE
TUBALAS, ULYSIS MATEO,
JOCELYN FERNANDEZ,
ALFONSO PLACIDO,
LEONARDO TRAQUENA,
SUSAN RENDON AND MATEO
TRINIDAD, petitioners, vs. COURT
OF APPEALS, URSULA
MAGLENTE, CONSOLACION
BERJA, MERCEDITA FERRER,
THELMA ABELLA, ANTONIO
NGO, and PHILIPPINE REALTY
CORPORATION, respondents.
DECISION
PURISIMA, J.:
This is a Petition for Review
on Certiorari under Rule 45 of the Revised Rules of
Court, of the decision of the Court of Appeals,
dated April 29, 1993, in CA-G.R. CV No. 33178,
affirming the decision of the Regional Trial Court
of Manila, Branch 38, in Civil Case No. 89-48057,
entitled Philippine Realty Corporation vs. Ursula
Maglente, et al., declaring the defendants (herein
respondents) as the rightful party to purchase the
land under controversy, and ordering the plaintiff,
Philippine Realty Corporation (PRC, for brevity), to
execute the corresponding Contract of Sale/Contract
to Sell in favor of the defendants aforenamed.
The antecedent facts culminating in the filing
of the present petition are as follows:
On January 15, 1986, Philippine Realty
Corporation, owner of a parcel of land at 400
Solana Street, Intramuros, Manila, with an area of
675.80 square meters, and covered by Transfer
Certificate of Title No. 43989, entered into a
Contract of Lease thereover with the herein private
respondent, Ursula Maglente. The lease was for a
period of three (3) years at a monthly rental
of P3,000.00 during the first year, P3,189.78 per
month in the second year and P3,374.00 monthly
for the third year. The lease contract stipulated:
12. That the LESSOR shall have the right to
sell any part of the entire leased land for any
amount or consideration it deems convenient,
subject to the condition, however, that the
LESSEE shall be notified about it sixty (60)
days in advance; that the LESSEE shall be
given the first priority to buy it; and in the
event that the LESSEE cannot afford to buy,
the final buyer shall respect this lease for the
duration of the same, except in cases of
exproriation.
It also prohibited the lessee to cede, transfer,
mortgage, sublease or in any manner encumber the
whole or part of the leased land and its
improvements or its rights as LESSEE of the leased
land, without the previous consent in writing of the
LESSOR contained in a public instrument.
However, after the execution of the lease
agreement, respondent Maglente started leasing
portions of the leased area to the herein petitioners,
Visitacion Gabelo, Erlinda Abella, Petra Perez,
Erlinda Traquena, Ben Cardinal, Eduardo Traquena,
Leopoldo Traquena, Marife Tubalas, Ulysis Mateo,
Jocelyn Fernandez, Alfonso Placido, Leonardo
Traquena, Susan Rendon and Mateo Trinidad, who
erected their respective houses thereon.
On March 9, 1987, when the lease contract was
about to expire, the Philippine Realty Corporation,
through its Junior Trust and Property Officers, Mr.
Leandro Buguis and Mr. Florentino B. Rosario, sent
a written offer to sell subject properties to
respondent Ursula Maglente. The said letter stated:
We wish to inform you that the Archdiocese
of Manila has now decided to open for sale
the properties it own (sic) in the District of
Intramuros, Manila. However, before we
acccept offers from other parties we are of
course giving the first priority to our tenants
or lessees of Intramuros lots.
Responding to such written offer, Maglente
wrote a letter, dated February 2, 1988, to the Roman
Catholic Archbishop of Manila manifesting an
intention to exercise her right of first priority to
purchase the property as stipulated in the lease
contract.
On February 15, 1988, a Memorandum on the
offer of Maglente to purchase the property was
prepared and presented to Msgr. Domingo Cirilos,
president of Philippine Realty Corporation, at the
offered price of P1,800.00 per square meter or for a
total amount of P1,216,440.00, with a
downpayment of P100,000.00; the balance of the
purchase price payable within ten (10) years with
interest at the rate of eighteen (18%) percent per
annum. Msgr. Cirilos found the offer acceptable and
approved the same.
On May 11, 1988, Maglente gave a partial
downpayment of P25,000.00 and
additional P25,000.00 on May 20, 1988. In a letter,
dated January 28, 1989, Maglente informed the said
corporation that there were other persons who were
her co-buyers, actually occupying the premises,
namely: Consolacion Berja, Mercedita Ferrer,
Thelma Abella and Antonio Ngo within their
respective areas of 100, 50, 60 and 400 square
meters.
On January 30, 1989 Maglente paid her back
rentals of P60,642.16 and P50,000.00 more, to
complete her downpayment of P100,000.00.
On February 1989, Philippine Realty
Corporation (PRC) received copy of a letter sent by
the herein petitioners to the Archbishop of Manila,
Jaime Cardinal Sin, expressing their desire to
purchase the portions of subject property on which
they have been staying for a long time. And so,
PRC met with the petitioners who apprised the
corporation of their being actual occupants of the
leased premises and of the impending demolition of
their houses which Maglente threatened to
cause. Petitioners then asked PRC to prevent the
demolition of their houses which might result in
trouble and violence.
On February 23, 1989, in order to resolve
which group has the right to purchase subject
property as between the petitioners/sublessees of
Maglente, and respondent Maglente, and her co-
buyers, PRC brought a Complaint in Interpleader
against the herein petitioners and private
respondents, docketed as Civil Case No. 89-48057
before Branch 38 of the Regional Trial Court of
Manila.
On March 11, 1991, after trial on the merits,
the lower court of origin rendered judgment in favor
of respondent Maglente and her group, disposing
thus:
WHEREFORE, premises considered,
judgment is hereby rendered as follows:
 1. Declaring the defendants Ursula Maglente,
Consolacion Berja, Mercedita Ferrer,
Thelma Abella and Antonio Ngo as the
rightful party to purchase the land in
controversy; and
2. Ordering plaintiff Philippine Realty
Corporation to execute the corresponding
contract of sale/contract to sell in favor of
the defendants aforementioned in
accordance with this Decision within thirty
(30) days from notice thereof.
Dissatisfied with the aforesaid decision below,
the Gabelo group (petitioners here) appealed to the
Court of Appeals, which affirmed the disposition of
the trial court appealed from.
Undaunted, petitioners found their way to this
Court via the present petition, assigning as sole
error the ruling of the Court of Appeals upholding
the right of the private respondents, Consolacion
Berja and Antonio Ngo, to purchase subject
property.
Petitioners theorize that they are tenants of
Ursula Maglente on the land in dispute, which they
are occupying, and as such actual occupants they
have the preferential right to purchase the portions
of land respectively occupied by them; that the
private respondents, Thelma Abella and Antonio
Ngo, have never been occupants of the contested
lot, and that, as defined in the Pre-trial
Order[1] issued below, the issue for resolution should
have been limited to whether or not Berja and Ngo
actually occupied the premises in question because
occupation thereon is the basis of the right to
purchase subject area.
Petitioners contention is untenable. There is no
legal basis for the assertion by petitioners that as
actual occupants of the said property, they have the
right of first priority to purchase the same.
As regards the freedom of contract, it signifies
or implies the right to choose with whom to
contract. PRC is thus free to offer its subject
property for sale to any interested person. It is not
duty bound to sell the same to the petitioners simply
because the latter were in actual occupation of the
property absent any prior agreement vesting in them
as occupants the right of first priority to buy, as in
the case of respondent Maglente. As a matter of
fact, because it (PRC) contracted only with
respondent Maglente, it could even evict the
petitioners from the premises occupied by them
considering that the sublease contract between
petitioners and Maglente was inked without the
prior consent in writing of PRC, as required under
the lease contract. Thus, although the other private
respondents were not parties to the lease contract
between PRC and Maglente, the former could freely
enter into a contract with them.
So also, the contract of sale having been
perfected, the parties thereto are already bound
thereby and petitioners can no longer assert their
right to buy. It is well-settled that a contract of sale
is perfected the moment there is a meeting of the
minds of the contracting parties upon the thing
which is the object of the contract and upon the
price.[2] From the time a party accepts the other
partys offer to sell within the stipulated period
without qualification, a contract of sale is deemed
perfected.[3]
In the case under consideration, the contract of
sale was already perfected - PRC offered the subject
lot for sale to respondent Maglente and her group
through its Junior Trust and Property
Officers.Respondent Maglente and her group
accepted such offer through a letter addressed to the
Roman Catholic Archbishop of Manila, dated
February 2, 1988, manifesting their intention to
purchase the property as provided for under the
lease contract. Thus, there was already an offer and
acceptance giving rise to a valid contract. As a
matter of fact, respondents have already completed
payment of their downpayment
of P100,000.00. Therefore, as borne by evidence on
record, the requisites under Article 1318 of the Civil
Code[4] for a perfected contract have been met.
Anent petitioners submission that the sale has
not been perfected because the parties have not
affixed their signatures thereto, suffice it to state
that under the law, the meeting of the minds
between the parties gives rise to a binding contract
although they have not affixed their signatures to its
written form.[5]
WHEREFORE, the petition is hereby
DENIED for lack of merit and the decision of the
Court of Appeals in CA-G.R. CV No. 33178
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 97347 July 6, 1999
JAIME G. ONG, petitioner, 1983,
vs. as
THE HONORABLE COURT OF APPEALS, stipulat
SPOUSES MIGUEL K. ROBLES and ALEJANDRO ed
M. ROBLES, respondents. under
the Cer
tificatio
n of
YNARES-SANTIAGO, J.: underta
king da
ted
Before us is a petition for review on certiorari from the
March
judgment rendered by the Court of Appeals which,
22,
except as to the award of exemplary damages,
1983
affirmed the decision of the Regional Trial Court of
and
Lucena City, Branch 60, setting aside the "Agreement
covere
of Purchase and Sale" entered into by herein
d by a
petitioner and private respondent spouses in Civil
check
Case No. 85-85.
of even
1wphi1.nt

date.
On May 10, 1983, petitioner Jaime Ong, on the one
hand, and respondent spouses Miguel K. Robles and
2. That
Alejandra Robles, on the other hand, executed an
the
"Agreement of Purchase and Sale" respecting two
sum of
parcels of land situated at Barrio Puri, San Antonio,
P496,5
Quezon. The terms and conditions of the contract
00.09
read:"
shall
be paid
1. That for and in consideration of the directly
agreed purchase price of TWO by
MILLION PESOS (P2,000,000.00), the BU
Philippine currency, the mode and YER to
manner of payment is as follows: the
Bank of
A. The initial payment Philippi
of SIX HUNDRED ne
THOUSAND PESOS Islands
(P600,000.00) as to
verbally agreed by the answer
parties, shall be for the
broken down as loan of
follows: the SE
LLERS
1. which
P103,4 as of
99.91 March
shall 15,
be 1983
paid, amount
and as ed to
already P537,3
paid by 10.10,
the BU and for
YER to the
the SE interest
LLERS that
on may
March accrue
22, d (sic)
 from (P350,000.00), the first
March to be due and payable
15, on June 15, 1983, and
1983, every quarter
up to thereafter, until the
the whole amount is fully
time paid, by these
said presents promise to
obligati sell to said BUYER the
on of two (2) parcels of
the SE agricultural land
LLERS including the rice mill
with and the piggery which
the are the most notable
said improvements thereon,
bank situated at Barangay
has Puri, San Antonio
been Quezon, . . .
settled,
provide 2. That upon the payment of the total
d purchase price by
howev the BUYER the SELLERS bind
er that themselves to deliver to the former a
the good and sufficient deed of sale and
amount conveyance for the described two (2)
in parcels of land, free and clear from all
excess liens and encumbrances.
of
P496,5 3. That immediately upon the
00.09, execution of this document,
shall the SELLERS shall deliver, surrender
be and transfer possession of the said
charge parcels of land including all the
able improvements that may be found
from thereon, to the BUYER, and the latter
the shall take over from the SELLER the
time possession, operation, control and
deposit management of the RICEMILL and
of PIGGERY found on the aforesaid
the SE parcels of land.
LLERS
with
4. That all payments due and payable
the
under this contract shall be effected in
aforesa
the residence of the SELLERS located
id
at Barangay Puri, San Antonio,
bank.
Quezon unless another place shall
have been subsequently designated
B. That the balance of by both parties in writing.
ONE MILLION FOUR
HUNDRED
xxx xxx xxx 1
THOUSAND
(P1,400,000.00)
PESOS shall be paid On May 15, 1983, petitioner Ong took possession of
by the BUYER to the subject parcels of land together with the piggery,
the SELLERS in four building, ricemill, residential house and other
(4) equal quarterly improvements thereon.
installments of THREE
HUNDRED FIFTY Pursuant to the contract they executed, petitioner paid
THOUSAND PESOS respondent spouses the sum of P103,499.91 2 by
depositing it with the United Coconut Planters Bank.
Subsequently, petitioner deposited sums of money with
the Bank of Philippine Islands (BPI), 3 in accordance with
their stipulation that petitioner pay the loan of
respondents with BPI.
To answer for his balance of P1,400,000.00 petitioner
issued four (4) post-dated Metro Bank checks payable
to respondent spouses in the amount of
P350,0000.00 each, namely: Check No. 157708
dated June 15, 1983, 4Check No. 157709 dated
September 15, 1983, 5 Check No. 157710 dated
December 15, 1983 6 and Check No. 157711 dated
March 15, 1984. 7 When presented for payment,
however, the checks were dishonored due to insufficient
funds. Petitioner promised to replace the checks but
failed to do so. To make matters worse, out of the
P496,500.00 loan of respondent spouses with the Bank
of the Philippine Islands, which petitioner, as per
agreement, should have paid, petitioner only managed
to dole out no more than P393,679.60. When the bank
threatened to foreclose the respondent spouses'
mortgage, they sold three transformers of the rice mill
worth P51,411.00 to pay off their outstanding obligation
with said bank, with the knowledge and conformity of
petitioner. 8 Petitioner, in return, voluntarily gave the
spouses authority to operate the rice mill. 9 He, however,
continued to be in possession of the two parcels of land
while private respondents were forced to use the rice mill
for residential purposes.
On August 2, 1985, respondent spouses, through
counsel, sent petitioner a demand letter asking for the
return of the properties. Their demand was left
unheeded, so, on September 2, 1985, they filed with
the Regional Trial Court of Lucena City, Branch 60, a
complaint for rescission of contract and recovery of
properties with damages. Later, while the case was
still pending with the trial court, petitioner introduced
major improvements on the subject properties by
constructing a complete fence made of hollow blocks
and expanding the piggery. These prompted the
respondent spouses to ask for a writ of preliminary
injunction. 10 The trial court granted the application and
enjoined petitioner from introducing improvements on
the properties except for repairs. 11
On June 1, 1989 the trial court rendered a decision,
the dispositive portion of which reads as follows:
IN VIEW OF THE FOREGOING,
judgment is hereby rendered:
a) Ordering that the contract entered
into by plaintiff spouses Miguel K.
Robles and Alejandra M. Robles and
the defendant, Jaime Ong captioned
"Agreement of Purchase and Sale,"
marked as Exhibit "A" set aside;
b) Ordering defendant, Jaime Ong to
deliver the two (2) parcels of land
which are the subject matter of Exhibit
"A" together with the improvements
thereon to the spouses Miguel K.
Robles and Alejandro M. Robles;
c) Ordering plaintiff spouses, Miguel
Robles and Alejandra Robles to return
to Jaime Ong the sum of P497,179.51;
d) Ordering defendant Jaime Ong to
pay the plaintiffs the sum of
P100,000.00 as exemplary damages;
and
e) Ordering defendant Jaime Ong to
pay the plaintiffs spouses Miguel K.
Robles and Alejandra Robles the sum
of P20,000.00 as attorney's fees and
litigation expenses.
The motion of the plaintiff spouses
Miguel K. Roles and Alejandra Robles
for the appointment of receivership is
rendered moot and academic.
SO ORDERED. 12
From this decision, petitioner appealed to the Court of
Appeals, which affirmed the decision of the Regional
Trial Court but deleted the award of exemplary
damages. In affirming the decision of the trial court,
the Court of Appeals noted that the failure of
petitioner to completely pay the purchase price is a
substantial breach of his obligation which entitles the
private respondents to rescind their contract under
Article 1191 of the New Civil Code. Hence, the instant
petition.
At the outset, it must be stated that the issues raised
by the petitioner are generally factual in nature and
were already passed upon by the Court of Appeals
and the trial court. Time and again, we have stated
that it is not the function of the Supreme Court to
assess and evaluate all over again the evidence,
testimonial and documentary, adduced by the parties
to an appeal, particularly where, such as in the case
at bench, the findings of both the trial court and the
appellate court on the matter coincide. There is no
cogent reason shown that would justify the court to
discard the factual findings of the two courts below
and to superimpose its own. 13
The only pertinent legal issues raised which are
worthy of discussion are (1) whether the contract
entered into by the parties may be validly rescinded
under Article 1191 of the New Civil Code; and (2)
whether the parties had novated their original contract 2. Those agreed upon
as to the time and manner of payment. in representation of
absentees, if the latter
Petitioner contends that Article 1191 of the New Civil suffer the lesion stated
Code is not applicable since he has already paid in the preceding
respondent spouses a considerable sum and has number;
therefore substantially complied with his obligation.
He cites Article 1383 instead, to the effect that where 3. Those undertaken in
specific performance is available as a remedy, fraud of creditors when
rescission may not be resorted to. the latter cannot in any
manner collect the
A discussion of the aforesaid articles is in order. claims due them;

Rescission, as contemplated in Articles 1380, et seq., 4. Those which refer to

of the New Civil Code, is a remedy granted by law to things under litigation if
the contracting parties and even to third persons, to they have been
secure the reparation of damages caused to them by entered into by the
a contract, even if this should be valid, by restoration defendant without the
of things to their condition at the moment prior to the knowledge and
celebration of the contract. 14 It implies a contract, approval of the litigants
which even if initially valid, produces a lesion or a or of competent judicial
pecuniary damage to someone. 15 authority;

On the other hand, Article 1191 of the New Civil Code 5. All other contracts
refers to rescission applicable to reciprocal specially declared by
obligations. Reciprocal obligations are those which law to be subject to
arise from the same cause, and in which each party is rescission.
a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of Obviously, the contract entered into by
the other. 16 They are to be performed simultaneously the parties in the case at bar does not
such that the performance of one is conditioned upon fall under any of those mentioned by
the simultaneous fulfillment of the other. Rescission of Article 1381. Consequently, Article
reciprocal obligations under Article 1191 of the New Civil 1383 is inapplicable.
Code should be distinguished from rescission of
contracts under Article 1383. Although both presuppose
May the contract entered into between
contracts validly entered into and subsisting and both
require mutual restitution when proper, they are not
the parties, however, be rescinded
entirely identical. based on Article 1191?

While Article 1191 uses the term "rescission," the A careful reading of the parties'
original term which was used in the old Civil Code, "Agreement of Purchase and Sale"
from which the article was based, was "resolution. 17" shows that it is in the nature of a
Resolution is a principal action which is based on breach contract to sell, as distinguished from
of a party, while rescission under Article 1383 is a a contract of sale. In a contract of
subsidiary action limited to cases of rescission for lesion sale, the title to the property passes to
under Article 1381 of the New Civil Code, which the vendee upon the delivery of the
expressly enumerates the following rescissible contracts: thing sold; while in a contract to sell,
ownership is, by agreement, reserved
1. Those which are in the vendor and is not to pass to the
entered into by vendee until full payment of the
guardians whenever purchase price. 18 In a contract to sell,
the wards whom they the payment of the purchase price is a
represent suffer lesion positive suspensive condition, the failure
by more than one of which is not a breach, casual or
serious, but a situation that prevents the
fourth of the value of
obligation of the vendor to convey title
the things which are
from acquiring an obligatory force. 19
the object thereof;
Respondents in the case at bar bound
themselves to deliver a deed of
absolute sale and clean title covering
the two parcels of land upon full
payment by the buyer of the purchase
price of P2,000,000.00. This promise
to sell was subject to the fulfillment of
the suspensive condition of full
payment of the purchase price by the
petitioner. Petitioner, however, failed
to complete payment of the purchase
price. The non-fulfillment of the
condition of full payment rendered the
contract to sell ineffective and without
force and effect. It must be stressed
that the breach contemplated in Article
1191 of the New Civil Code is the
obligor's failure to comply with an
obligation. 20 Failure to pay, in this
instance, is not even a breach but
merely an event which prevents the
vendor's obligation to convey title from
acquiring binding force. 21 Hence, the
agreement of the parties in the case at
bench may be set aside, but not
because of a breach on the part of
petitioner for failure to complete
payment of the purchase price. Rather,
his failure to do so brought about a
situation which prevented the obligation
of respondent spouses to convey title
from acquiring an obligatory force.
Petitioner insists, however, that the
contract was novated as to the
manner and time of payment.
We are not persuaded. Article 1292 of
the New Civil Code states that, "In
order that an obligation may be
extinguished by another which
substitutes the same, it is imperative
that it be so declared in unequivocal
terms, or that the old and the new
obligations be on every point
incompatible with each other."
Novation is never presumed, it must
be proven as a fact either by express
stipulation of the parties or by
implication derived from an
irreconcilable incompatibility between
the old and the new
obligation. 22 Petitioner cites the
following instances as proof that the
contract was novated: the retrieval of
the transformers from petitioner's
custody and their sale by the
respondents to MERALCO on the
condition that the proceeds thereof be
accounted for by the respondents and
deducted from the price of the contract;
the take-over by the respondents of the
custody and operation of the rice mill;
and the continuous and regular
withdrawals by respondent Miguel
Robles of installment sums per
vouchers (Exhs. "8" to "47") on the
condition that these installments be
credited to petitioner's account and
deducted from the balance of the
purchase price.
Contrary to petitioner's claim, records
show that the parties never even
intended to novate their previous
agreement. It is true that petitioner
paid respondents small sums of
money amounting to P48,680.00, in
contravention of the manner of
payment stipulated in their contract.
These installments were, however,
objected to by respondent spouses,
and petitioner replied that these
represented the interest of the
principal amount which he owed
them. 23 Records further show that
petitioner agreed to the sale of
MERALCO transformers by private
respondents to pay for the balance of
their subsisting loan with the Bank of
Philippine Islands. Petitioner's letter of
authorization reads:
xxx xxx xxx
Under this authority, it is mutually
understood that whatever payment
received from MERALCO as payment
to the transfromers will be considered
as partial payment of the
undersigned's obligation to Mr. and
Mrs. Miguel K. Robles.
The same will be utilized as partial
payment to existing loan with the Bank
of Philippine Islands.
It is also mutually understood that this
payment to the Bank of Philippine
Islands will be reimbursed to Mr. and
Mrs. Miguel K. Robles by the
undersigned. [Emphasis supplied] 24
It should be noted that while it was.
agreed that part of the purchase price
in the sum of P496,500.00 would be
directly deposited by petitioner to the
Bank of Philippine Islands to answer
for the loan of respondent spouses,
petitioner only managed to deposit
P393,679.60. When the bank
threatened to foreclose the properties,
petitioner apparently could not even
raise the sum needed to forestall any
action on the part of the bank.
Consequently, he authorized
respondent spouses to sell the three
(3) transformers. However, although
the parties agreed to credit the
proceeds from the sale of the
transformers to petitioner's obligation,
he was supposed to reimburse the
same later to respondent spouses.
This can only mean that there was
never an intention on the part of either
of the parties to novate petitioner's
manner of payment.
Petitioner contends that the parties
verbally agreed to novate the manner
of payment when respondent spouses
proposed to operate the rice mill on
the condition that they will account for
its earnings. We find that this is
unsubstantiated by the evidenced on
the record. The tenor of his letter
dated August 12, 1984 to respondent
spouses, in fact, shows that petitioner
had a "little misunderstanding" with
respondent spouses whom he was
evidently trying to appease by
authorizing them to continue
temporarily with the operation of the
rice mill. Clearly, while petitioner might
have wanted to novate the original
agreement as to his manner of
payment, the records are bereft of
evidence that respondent spouses
willingly agreed to modify their
previous arrangement.
In order for novation to take place, the
concurrence of the following requisites
is indispensable: (1) there must be a
previous valid obligation; (2) there
must be an agreement of the parties
concerned to a new contract; (3) there
must be the extinguishment of the old
contract; and (4) there must be the
validity of the new contract. 25 The
aforesaid requisites are not found in the
case at bench. The subsequent acts of
the parties hardly demonstrate their
intent to dissolve the old obligation as a
consideration for the emergence of the
new one. We repeat to the point of
triteness, novation is never presumed,
there must be an express intention to
novate.
As regards the improvements
introduced by petitioner to the
premises and for which he claims
reimbursement, we see no reason to
depart from the ruling of the trial court
and the appellate court that petitioner
is a builder in bad faith. He introduced
the improvements on the premises
knowing fully well that he has not paid
the consideration of the contract in full
and over the vigorous objections of
respondent spouses. Moreover,
petitioner introduced major
improvements on the premises even
while the case against him was
pending before the trial court.
The award of exemplary damages
was correctly deleted by the Court of
Appeals in as much as no moral,
temperate, liquidated or compensatory
damages in addition to exemplary
damages were awarded.
WHEREFORE, the decision rendered
by the Court of Appeals is hereby
AFFIRMED with the MODIFICATION
that respondent spouses are ordered
to return to petitioner the sum of
P48,680.00 in addition to the amounts
already awarded. Costs against
petitioner.
1wphi1.nt
SO ORDERED.
[G.R. No. 143286. April 14, 2004]
PROCOPIO VILLANUEVA, NICOLAS
RETUYA and PACITA
VILLANUEVA, petitioners, vs.
COURT OF APPEALS and THE
HEIRS OF EUSEBIA NAPISA
RETUYA, respondents.
DECISION
CARPIO, J.:
 This petition for review
on certiorari seeks the reversal of the
[1]
Court of Appeals Decision dated 31
January 2000 as well as its Resolution
dated 25 April 2000 in CA-G.R. No. CV-
46716. The assailed Decision dismissed
petitioners appeal of the Decision of the
Regional Trial Court, Branch 55,
Mandaue City (trial court).
On 13 October 1988, Eusebia Napisa
Retuya (Eusebia) filed a complaint before
the trial court against her husband
Nicolas Retuya (Nicolas), Pacita
Villanueva (Pacita), and Nicolas son with
Pacita, Procopio Villanueva
(Procopio). Eusebia sought the
reconveyance from Nicolas and Pacita of
several properties listed in paragraph 2 of
the complaint (subject properties),
claiming the subject properties are her
conjugal properties with Nicolas. Eusebia
also prayed for accounting, damages and
the delivery of rent and other income from
the subject properties.
Antecedent Facts
The facts as found by the trial court
are as follows:
Plaintiff Eusebia Napisa Retuya, is the legal
wife of defendant Nicolas Retuya, having
been married to the latter on October 7,
1926. Out of the lawful wedlock, they begot
five (5) children, namely, Natividad, Angela,
Napoleon, Salome, and Roberta. Spouses
Retuya resided at Tipolo, Mandaue
City. During their marriage they acquired real
properties and all improvements situated in
Mandaue City, and Consolacion, Cebu, more
particularly described as follows:
1. A parcel of land located at Pulpugan,
Consolacion, Cebu under tax dec. No. 24951;
2. A parcel of land located at Pulpugan,
Consolacion, Cebu under tax dec. No. 24952;
3. A parcel of land located at Pulpugan,
Consolacion, Cebu under tax dec. No. 24953;
4. A parcel of land located at Pulpugan,
Consolacion, Cebu under tax dec. No. 24954;
5. A parcel of land located at Pulpugan,
Consolacion, Cebu under tax dec. No. 24956;
6. A parcel of land located at Pulpugan,
Consolacion, Cebu under tax dec. No. 24957;
7. A parcel of land located at Pulpugan,
Consolacion, Cebu under tax dec. No. 24958;
8. A parcel of land located at Tipolo,
Mandaue City, covered by tax dec. No.
01042;
9. A parcel of land located at Tipolo,
Mandaue City, covered by tax dec. No.
01043;
10. A parcel of land located at Tipolo,
Mandaue City, covered by tax dec. No.
01046;
11. A parcel of land located at Tipolo,
Mandaue City, covered by tax dec. No.
01041;
12. A parcel of land located at Nawanao-
Subangdaku, Mandaue City covered by tax
dec. No. 01488;
13. A parcel of land located at Baklid,
Mandaue City, covered by tax dec. No.
00492;
14. A parcel of land located at Tipolo,
Mandaue City covered by tax dec. No. 01044;
15. A residential house located at Tipolo,
Mandaue City covered by tax dec. No. 01050;
16. A parcel of land located at Tipolo,
Mandaue City covered by tax dec. No. 01048;
17. A parcel of land located at Tipolo,
Mandaue City covered by tax dec. No. 01051;
18. A parcel of land located at Tipolo,
Mandaue City covered by tax dec. No. 01047;
19. A parcel of land located at Banilad,
Mandaue City covered by tax dec. No. 02381;
20. A parcel of land located at Tipolo,
Mandaue City covered by tax dec. No. 01049;
21. A parcel of land located at Tipolo,
Mandaue City covered by tax dec. No. 01045;
22. A parcel of land located at Tipolo,
Mandaue City covered by tax dec. No. 01450
(in the name of Pacita Villanueva).
Also, defendant, Nicolas Retuya, is co-owner
of a parcel of land situated in Mandaue City
which he inherited from his parents Esteban
Retuya and Balbina Solon as well as the
purchasers of hereditary shares of
approximately eight (8) parcels of land in
Mandaue City.
Some of these properties above-mentioned
earn income from coconuts and the other
lands/houses are leased to the following:
a) Mandaue Food Products Company for Lot
121-F, Lot 121-G and Lot 121-H under TCT
No. 11300 at an annual rental of P10,800.00;
b) Barben Wood Industries, Inc. for Lot 148
covered by TCT No. 1731 for an annual rental
of P21,600.00;
c) Metaphil, Inc. parcel of land consisting of
2,790.51 sq. meters at the rate of P2,700.00
annually for the first five (5) years,
and P3,240.00 for the second years;
d) Benedicto Development Corp. for a portion
of Lot 148 covered by TCT No. 1731 for a
period of 20 years at an annual rate
of P3,500.00 renewable for another 20 years
after April 1, 1995 at an annual rate
of P4,000.00;
e) Benedicto Development Corporation for a
portion of Lot No. 148 covered by Certificate
of Title No. 1731 over an area of 6,000 sq.
meters for an annual rental of P9,500.00 for a
period of 2 years from June 1, 1982;
f) Visayan Timber and Machinery Corp. over
a parcel of land at Nawanaw, Mandaue City,
for a period of 2 years from June 1, 1987 and
renewable for another 12 years at an annual
income of P4,000.00;
g) House lessees listed in Exhibit 13 with total
monthly rentals of P1,975.00 a month for the
24 lessees or P24,700.00 annually. (Exhs. 7 to
13)
In 1945, defendant Nicolas Retuya no longer
lived with his legitimate family and cohabited
with defendant, Pacita Villanueva, wherein
defendant, Procopio Villanueva, is their
illegitimate son. Nicolas, then, was the only
person who received the income of the above-
mentioned properties.
Defendant, Pacita Villanueva, from the time
she started living in concubinage with
Nicolas, has no occupation, she had no
properties of her own from which she could
derive income.
In 1985, Nicolas suffered a stroke and cannot
talk anymore, cannot walk anymore and they
have to raise him up in order to
walk. Natividad Retuya knew of the physical
condition of her father because they visited
him at the hospital. From the time defendant
Nicolas Retuya suffered a stroke on January
27, 1985 and until the present, it is defendant
Procopio Villanueva, one of Nicolas
illegitimate children who has been receiving
the income of these properties. Witness
Natividad Retuya went to Procopio to
negotiate because at this time their father
Nicolas was already senile and has a childlike
mind. She told defendant, Procopio that their
father was already incapacitated and they had
to talk things over and the latter replied that it
was not yet the time to talk about the matter.
Plaintiff, then, complained to the Barangay
Captain for reconciliation/mediation but no
settlement was reached, hence, the said
official issued a certification to file
action. Written demands were made by
plaintiff, through her counsel, to the
defendants, including the illegitimate family
asking for settlement but no settlement was
reached by the parties.
Further, plaintiffs witness, Natividad Retuya,
testified that the parcel of land covered by tax
declaration marked Exhibit T was the property
bought by her father from Adriano Marababol
for at the time of purchase of the property,
defendant Pacita Villanueva had no means of
livelihood (TSN, p. 6).
The trial court rendered its Decision
on 16 February 1994 in favor of
Eusebia. The dispositive portion of the
Decision states:
WHEREFORE, in view of the foregoing
considerations, judgment is rendered in favor
of the plaintiff Eusebia Napisa Retuya and
against defendants Procopio Villanueva,
Nicolas Retuya and Pacita Villanueva:
1. Declaring the properties listed in paragraph
2 of the amended complaint as conjugal
properties of the spouses plaintiff Eusebia
Retuya and the defendant Nicolas Retuya;
2. Ordering the transfer of the sole
administration of conjugal properties of the
spouses Eusebia Retuya and Nicolas Retuya
in accordance with Art. 124 of the Family
Code to the plaintiff Eusebia Napisa Retuya;
3. Ordering defendant Procopio Villanueva to
account and turnover all proceeds or rentals or
income of the conjugal properties from
January 27, 1985 when he took over as
administrator thereof and until he shall have
ceased administering the same in accordance
with the judgment of this Court;
4. Ordering defendants jointly and severally to
reconvey the parcel of land situated at Tipolo,
Mandaue City now in the name of defendant
Pacita Villanueva under tax dec. No. 01450
and transfer the same into the names of the
conjugal partners Eusebia N. Retuya and
Nicolas Retuya;
5. Ordering the City Assessors Office of
Mandaue City to cancel tax declaration No.
01450 in the name of Pacita Villanueva and
direct the issuance of a new title and tax
declaration in the names of Eusebia Napisa
Retuya and Nicolas Retuya;
6. Ordering defendants jointly and severally to
reconvey that certain building of strong
materials located at Tipolo, Mandaue City
under tax dec. No. 01450 into the names of
Eusebia Retuya and Nicolas Retuya;
7. Ordering defendants jointly and severally to
pay plaintiff the sum of P50,000.00 by way of
attorneys fees and expenses of litigation in the
sum of P5,000.00 plus the costs.
SO ORDERED.
Petitioners appealed the trial courts
decision to the Court of Appeals. Eusebia
died on 23 November 1996. Thereafter,
Eusebias heirs substituted her pursuant
to the resolution of the Court of Appeals
dated 7 April 1997. The Court of Appeals solidity to support her claim that she
eventually upheld the Decision of the trial bought Lot No. 152 exclusively with her
[2]

court but deleted the award of attorneys own money.

fees, ruling in this wise:

WHEREFORE, the decision dated February The Court of Appeals Ruling

16, 1994 is AFFIRMED with the modification
that the award of attorneys fees of P50,000.00
is deleted.
SO ORDERED.
Petitioners filed a Motion for
Reconsideration on 23 February 2000
which the Court of Appeals denied in a
Resolution dated 11 May 2000.
Hence, this petition.
The Court of Appeals concurred with
the findings of the trial court. The
appellate court found that Pacita failed to
rebut the presumption under Article 116
of the Family Code that the subject
properties are conjugal. The appellate
court dismissed Pacitas defense of
prescription and laches since she failed to
have the issue included in the pre-trial
order after raising it in her answer with
her co-petitioners.

The Trial Courts Ruling

The Issues
The trial court applied Article 116 of
the Family Code, which reads: Petitioners Nicolas, Pacita and
Procopio contend that both the trial and
Art. 116. All property acquired during the appellate courts erred in ruling in favor of
marriage, whether the acquisition appears to Eusebia. They seek a reversal and raise
have been made, contracted or registered in the following issues for resolution:
the name of one or both spouses, is presumed
conjugal unless the contrary is proved. 1. WHETHER THE COURT OF
APPEALS ERRED IN
The trial court ruled that the SUSTAINING THE
documents and other evidence Eusebia DECLARATION OF THE
presented constitute solid evidence which TRIAL COURT THAT THE
proved that the subject properties were PROPERTIES LISTED IN
acquired during her marriage with PARAGRAPH 2 OF THE
Nicolas. This made the presumption in COMPLAINT ARE
Article 116 applicable to the subject CONJUGAL PROPERTIES OF
properties. Thus, the trial court ruled that NICOLAS RETUYA AND
Eusebia had proved that the subject EUSEBIA RETUYA
properties are conjugal in nature. On the ALTHOUGH THIS WAS NOT
other hand, the trial court found that ONE OF THE CAUSES OF
petitioners failed to meet the standard of ACTION IN EUSEBIAS
proof required to maintain their claim that COMPLAINT.
the subject properties are paraphernal
properties of Nicolas. The trial court 2. WHETHER THE COURT OF
added that Pacita presented no factual APPEALS ERRED IN
 APPLYING THE
PRESUMPTION THAT
PROPERTIES ACQUIRED
DURING THE EXISTENCE OF
THE MARRIAGE OF
NICOLAS RETUYA AND
EUSEBIA RETUYA ARE
CONJUGAL.
3. WHETHER THE COURT OF
APPEALS ERRED IN NOT
APPLYING INSTEAD THE
PRESUMPTION UNDER
ARTICLE 148 OF THE
FAMILY CODE IN FAVOR OF
CO-OWNERSHIP BETWEEN
NICOLAS RETUYA AND
PACITA VILLANUEVA.
4. WHETHER THE COURT OF
APPEALS ERRED IN NOT
DECLARING THAT THE
ACTION FOR
RECONVEYANCE OVER LOT
NO. 152 IS ALREADY
BARRED BY PRESCRIPTION
OR LACHES. [3]
The Ruling of the Court
The petition lacks merit.
First Issue: On the Alleged Failure
To Claim that the Properties are
Conjugal
Petitioners contention that Eusebias
complaint failed to state that the subject
properties are conjugal is absolutely
without basis. A cursory reading of the
complaint readily shows that the
complaint maintains that the subject
properties are conjugal. The
[4]
first
sentence of the second paragraph of the
complaint states:
2. The plaintiff Eusebia Retuya and
defendant Nicolas Retuya are husband and
wife and conjugal owners of real
properties and all improvements thereon
situated in Mandaue City and Consolacion,
Cebu more particularly described as follows:
(Emphasis added)
The same claim is restated and repleaded
throughout the complaint. Petitioners
should know better than to clutter their
appeal with useless arguments such as
this.
The other issues petitioners raise
contest in essence the finding that the
subject properties are conjugal in
nature. Apart from this, the only other
issue raised is whether prescription or
laches bars Eusebias complaint. We shall
resolve first the issue of prescription and
laches.
Second Issue: Prescription and
Laches
We agree with the Court of Appeals
observation that while petitioners did raise
the issue of prescription and laches in
their Answer, they failed to have the
[5]
same included in the pre-trial order for
consideration during the trial. Now,
petitioners wish to raise the issue on
appeal by relying on Section 1, Rule 9 of
the Rules of Court, which provides:
Section 1. Defenses and objections not
pleaded. Defenses and objections not pleaded
either in a motion to dismiss or in the answer
are deemed waived. However, when it appears
from the pleadings or the evidence on record
that the court has no jurisdiction over the
subject matter, that there is another action
pending between the same parties for the
same cause, or that the action is barred by a
prior judgment or by statute of limitations, the
court shall dismiss the claim.
Petitioners are mistaken.
The determination of issues during the
pre-trial conference bars the
consideration of other questions, whether
during trial or on appeal. Section 1 of
[6]
Rule 9 covers situations where a defense
or objection is not raised in a motion to
dismiss or an answer. What we have
before us is the exact opposite. Here,
petitioners in fact raised in their answer
the defense of prescription and
laches. However, despite raising the
defense of prescription and laches in their
answer, petitioners failed to include this
defense among the issues for
consideration during the trial. The non-
inclusion of this defense in the pre-trial
order barred its consideration during the
trial. Clearly, Section 1 of Rule 9 does not
apply to the present case.
Pre-trial is primarily intended to insure
that the parties properly raise all issues
necessary to dispose of a case. The [7]
parties must disclose during pre-trial all
issues they intend to raise during the trial,
except those involving privileged or
impeaching matters. Although a pre-trial
[8]
order is not meant to catalogue each
issue that the parties may take up during
the trial, issues not included in the pre-
trial order may be considered only if they
are impliedly included in the issues raised
or inferable from the issues raised by
necessary implication. The basis of the
[9]
rule is simple. Petitioners are bound by
the delimitation of the issues during the
pre-trial because they themselves agreed
to the same. [10]
Petitioners argue that in past
instances we have reviewed matters
raised for the first time during appeal.
True, but we have done so only by way of
exception involving clearly meritorious
situations. This case does not fall under
[11]
any of those exceptions. The fact that the
case proceeded to trial, with the
petitioners actively participating without
raising the necessary objection, all the
more requires that they be bound by the
stipulations they made at the pre-
trial. Petitioners were well aware that
[12]
they raised the defense of prescription
and laches since they included it in their
answer. However, for reasons of their
own, they did not include this defense in
the pre-trial.
Able counsels represented both
parties. We see no claim that either
counsel erred or was negligent. This
could only mean that petitioners counsel
chose to waive, or did not consider
important, the defense of prescription and
laches. Petitioners are bound by their
counsels choice. Other than arguing that
it is allowable to raise the issue for the
first time on appeal, we have no
explanation from petitioners why they
suddenly decided to change their mind.
Parties are not allowed to flip-flop. Courts
have neither the time nor the resources to
accommodate parties who choose to go
to trial haphazardly. Moreover, it would be
grossly unfair to allow petitioners the
luxury of changing their mind to the
detriment of private respondents at this
late stage. To put it simply, since
petitioners did not raise the defense of
prescription and laches during the trial,
they cannot now raise this defense for the
first time on appeal.
[13]
Third Issue: Whether the Subject
Properties Are Conjugal
 We proceed to the crux of this petition. The question of whether the subject
properties were acquired during the
We reiterate the basic rule that a
marriage of Nicolas and Eusebia is a
petition for review should only cover
factual issue. Both the trial and appellate
questions of law. Questions of fact are
[14]

courts agreed that the subject properties

not reviewable. The exceptions apply only
were in fact acquired during the marriage
in the presence of extremely meritorious
of Nicolas and Eusebia. The tax [22]

circumstances. None exists in this case.

[15]

declarations covering
[23]
the subject
We note with disfavor that most of the
properties, along with the unrebutted
issues raised in this petition are factual.
testimony of Eusebias witnesses,
We caution the petitioners that this
establish this fact. We give due deference
practice of deluging the Court with factual
to factual findings of trial
issues in defiance of well-settled rule, in
courts, especially when affirmed by the
[24]

the hope of having them reviewed, is

unacceptable.
The only issue proper for resolution is
the question of whether the subject
properties are conjugal. Petitioners claim
that the subject properties are exclusive
[16]
appellate court. A reversal of this finding
can only occur if petitioners show
sufficient reason for us to doubt its
correctness. Petitioners in the present
case have not.

Moreover, on whether Lot No. 152 is

properties of Nicolas except for Lot No.
conjugal or not, the answer came from
152, which they claim is Pacitas exclusive
petitioners themselves. Nicolas and
property. This issue is easily
Eusebia were married on 7 October 1926.
resolved. The Family Code provisions on
Nicolas and Pacita started cohabiting in
conjugal partnerships govern the property
1936. Eusebia died on 23 November
relations between Nicolas and Eusebia
1996. Pacita and Nicolas were married on
even if they were married before the
16 December 1996. Petitioners
effectivity of Family Code. Article [17]

themselves admit that Lot No. 152 was

105 of the Family Code explicitly
[18]

purchased on 4 October 1957. The date

[25]

mandates that the Family Code shall

apply to conjugal partnerships established
before the Family Code without prejudice
to vested rights already acquired under
the Civil Code or other laws. Thus, under
the Family Code, if the properties are
acquired during the marriage, the
presumption is that they are
conjugal. The burden of proof is on the
[19]
party claiming that they are not
conjugal. This is counter-balanced by
[20]
the requirement that the properties must
first be proven to have been acquired
during the marriage before they are
presumed conjugal. Petitioners argue
[21]
that Eusebia failed to prove this pre-
requisite. We disagree.
of acquisition of Lot No. 152 is clearly
during the marriage of Nicolas and
Eusebia.
Since the subject properties, including
Lot No. 152, were acquired during the
marriage of Nicolas and Eusebia, the
presumption under Article 116 of the
Family Code is that all these are conjugal
properties of Nicolas and Eusebia. The
burden is on petitioners to prove that the
subject properties are not conjugal. The
presumption in Article 116, which subsists
unless the contrary is proved, stands as
an obstacle to any claim the petitioners
may have. The burden of proving that a
property is exclusive property of a spouse
rests on the party asserting it and the
evidence required must be clear and
convincing. Petitioners failed to meet
[26]
this standard.
Petitioners point out that the deed of
sale, the transfer certificate of title and the
tax declaration of Lot No. 152 are all in
the name of Pacita. Petitioners maintain
mistaken. The tax declarations are not
sufficient proof to overcome the
presumption under Article 116 of the
Family Code. All property acquired by the
spouses during the marriage, regardless
in whose name the property is registered,
is presumed conjugal unless proved
otherwise. The presumption is not
[30]

that this can only mean that Pacita is the

rebutted by the mere fact that the
real owner of Lot No. 152. We disagree.
certificate of title of the property or the tax
The totality of the evidence reveals that
declaration is in the name of one of the
this was merely just one of the several
spouses only. Article 116 of the Family
[31]

schemes Nicolas employed to deprive

Code expressly provides that the
Eusebia of their conjugal
presumption remains even if the property
property. Ironically, petitioners
is registered in the name of one or both of
themselves submitted in evidence a
the spouses.
decision rendered by the Regional Trial
Court of Cebu, Branch IV, in Civil Case In some of the documents that
No. R-9602 involving the acquisition of
[27]
petitioners presented, Nicolas
Lot No. 152. misrepresented his civil status by claiming
that he was single. Petitioners point to
The decision in Civil Case No. R-9602
this as proof of Nicolas desire to exclude
stated that Tranquiliana Marababol
Eusebia from the properties covered by
Remulta testified that the one who offered
the documents. Petitioners further claim
[32]

to buy the lot from her was none other

that this supports their stand that the
than Nicolas Retuya. Tranquiliana
[28]

subject properties are not conjugal. This

narrated that at first she refused to sign
argument is baseless. Whether a property
the deed of sale because the buyer
is conjugal or not is determined by law
placed in the deed was Pacita and not
and not by the will of one of the
Nicolas, her understanding being that the
spouses. No unilateral declaration by one
buyer was Nicolas. We find that the trial
spouse can change the character of
court in the present case correctly took
conjugal property. The clear intent of
into consideration the decision in Civil
Nicolas in placing his status as single is to
Case No. R-9602. Considering that the
[29]

exclude Eusebia from her lawful share in

decision in Civil Case No. R-9602 has
the conjugal property. The law does not
become final and executory, its findings of
allow this.
fact involving the sale of Lot No. 152 to
Nicolas and Pacita are conclusive and Petitioners point out that Pacita had
binding on petitioners who introduced in the means to buy Lot No. 152. Even if
evidence the decision. Pacita had the financial capacity, this
does not prove that Pacita bought Lot No.
Petitioners also point out that all the
152 with her own money. To rebut the
other tax declarations presented before
presumption that Lot No. 152 is conjugal,
the trial court are in the name of Nicolas
petitioners must prove that Pacita used
alone. Petitioners argue that this serves
her own money to pay for Lot No.
as proof of Nicolas exclusive ownership of
152. Petitioners failed to prove this.
these properties. Petitioners are
 Petitioners further argue that since sharing. Petitioners failed to show proof of
Nicolas and Pacita were already actual contribution by Pacita in the
cohabiting when Lot No. 152 was acquisition of Lot No. 152. In
acquired, the lot cannot be deemed short, petitioners failed to prove that
conjugal property of Nicolas and Pacita bought Lot No. 152 with her own
Eusebia.Petitioners keep belaboring this money, or that she actually contributed
point in their petition and memorandum. her own money to acquire it.
Petitioners argument is flawed. WHEREFORE, we DENY the
petition. The Decision of the Court of
The cohabitation of a spouse with
Appeals dated 31 January 2000 in CA-
another person, even for a long period,
G.R. CV No. 46716 is AFFIRMED.
does not sever the tie of a subsisting
previous marriage. Otherwise, the law
[33]
SO ORDERED.
would be giving a stamp of approval to an
act that is both illegal and immoral. What
petitioners fail to grasp is that Nicolas and
Pacitas cohabitation cannot work to the
detriment of Eusebia, the legal spouse.
The marriage of Nicolas and Eusebia
continued to exist regardless of the fact
that Nicolas was already living with
Pacita. Hence, all property acquired from
7 October 1926, the date of Nicolas and
Eusebias marriage, until 23 November
1996, the date of Eusebias death, are still
presumed conjugal. Petitioners have
neither claimed nor proved that any of the
subject properties was acquired outside
or beyond this period.
Finally, petitioners reliance on Article
148 of the Family Code is misplaced. A
[34]

reading of Article 148 readily shows that

there must be proof of actual joint
contribution by both the live-in partners
before the property becomes co-owned
by them in proportion to their
contribution. The presumption of equality
of contribution arises only in the absence
of proof of their proportionate
contributions, subject to the condition
that actual joint contribution is proven
first. Simply put, proof of actual
contribution by both parties is required,
otherwise there is no co-ownership and
no presumption of equal